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(Economic) Armament, Oops, Armageddon and I


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John Tamny John Tamny, Forbes PersonnelJe couvre l'intersection de l'économie et la politique.+ Suivez sur Forbes

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09/07/2011 @ 20h41 | 7312 vues

Book Review: Endangerment Reckless par Gretchen et Joshua Rosner Morgenson


WASHINGTON - Le 21 octobre: ​​Le siège de ... Image par Getty Images via @ daylife
Cato Institute président Ed Crane a une histoire drôle sur Fannie Mae, du milieu des années 1990. Un jour, une lettre arrive dans le courrier l'alertant de grandes nouvelles que Caton, un think tank libertarien fondé sur les principes de la limite, la gouvernance constitutionnelle, serait le bénéficiaire d'un don important d'une entité (Fannie Mae) et qui a ensuite été est maintenant un exemple effrayant d'un gouvernement fédéral qui ne connaît pas de limites.
Crane, un homme de Barbarie, mais aussi des principes élevés (divulgation complète: Je suis associé à l'Institut Cato à titre non-politique), a envoyé une belle lettre Retour à Fannie affaires gouvernementales officier lui alertant politique stricte de Caton de ne pas accepter de l'argent à partir organismes gouvernementaux. Peu de temps après de grue a reçu une réponse de l'individu blessé, a vigoureusement protesté sa description de l'EGE. Comme on le sait désormais, en vertu d'un renflouement fédéral de Fannie Mae, dont le coût ne cesse de croître, la description de Crane a été trop correcte.
La hausse des grotesques de Fannie Mae, avec Washington et le culte bipartisane et politiquement correcte de Wall Street de la figure accession à la propriété en bonne place dans Gretchen Morgenson et Joshua Rosner Endangerment Reckless: Comment surdimensionnés ambition, cupidité et la corruption Led to Armageddon économique . L'histoire qu'ils racontent est sûrement révoltant, mais pas très bien motivé. Le pire de tout, les auteurs essentiellement raté la vraie histoire derrière la pointe la plus récente au logement.
Le livre plaira aux extrêmes. La droite dure aimeront Reckless donné leur croyance - en dépit des preuves de base - que la ruée de récession au logement a été causé par Fannie, Freddie, et les démocrates sous l'emprise de deux. La gauche dure sera acclamé par Reckless en raison de leur point de vue tout aussi sombres que Wall Street, la déréglementation et l'avidité a conduit le boom immobilier. Les deux parties vont finir le livre regorge de faits et de citations qui ne font que confirmer vues détenait déjà profondément. Quant à ceux qui sont encore en quête de réponses pour expliquer ce qui vient de se passer, ils ne seront toujours pas savoir.
Reckless s'ouvre sur une citation d'un discours du président Bill Clinton a donné en 1994. Avec le taux d'accession à la propriété à 64%, Clinton a prêché que «Plus les Américains devraient posséder leur propre maison». Un partenariat public / privé prendrait la forme pour atteindre cet objectif horrible, et alors qu'aujourd'hui nous avons malheureusement pris l'habitude de gouvernement et les entreprises travaillent main dans la main, les auteurs ont noté que, au moment du moins, un tel partenariat bordée impair.
Mais du discours de Clinton (les quelques premières mentions de Clinton étaient aussi «Clinton William Jefferson", qui inutilement prêté le livre d'une qualité effrayante) a émergé un plan pour démocratiser accession à la propriété grâce à des normes de prêt réduite qui a commencé "avec la suppression des exigences que l'emprunteur déposer un montant substantiel d'argent dans une propriété, vérifier son revenu, et démontrer une capacité à servir ses dettes. "Substance effrayante pour sûr, et beaucoup de poids sur la croissance économique.
En effet, il convient de préciser que malgré la myriade de problèmes avec Reckless, l'idée de subventionner le logement du gouvernement est vraiment horrible. Du point de vue de croissance, un investissement dans le logement ne nous rendent plus productifs, ne sera pas guérir le cancer ou conduire à des innovations logicielles améliorant l'efficacité, ni l'ouvrir les marchés étrangers. Logement sur son meilleur jour est un élément de la consommation - même si elle est nécessaire - qui a peu à voir avec la croissance économique réelle.
Plus précisément, les aides au logement, en particulier pour les pauvres, sont tout simplement cruel. Dans un monde où les capitaux se déplacent au clic d'une souris, la dernière chose que les gouvernements devraient faire, c'est de subventionner l'achat qui rend ceux qui en profitent moins mobiles dans la poursuite des travaux.
Dans ce cas, il faut reconnaître que la croissance puissante de Fannie et Freddie dans les années 90 a fait accéder à des prêts pour acheter un logement plus facile à enlever. Prêteurs fortement réglementé que dans une certaine mesure doivent leur existence à un gouvernement fédéral qui a lourdement subventionnés leurs activités avaient une plus grande incitation à prêter sans égard aux moyens de l'emprunteur, et ce fut encore facilitée par un Congrès qui a assoupli les normes imposées à Fannie et Freddie quand il est venu à l'achat de ces prêts.
La hausse de Fannie Mae à la proéminence grande est une vilaine histoire, et sans doute prévisible que les auteurs semblent faire un bon travail de la narration. Comme ils le soulignent, par le milieu des années 90 "Fannie Mae avait perfectionné l'art de manipuler les législateurs, l'éviscération de ses organismes de réglementation et d'enrichir ses dirigeants."

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    • ODR ODR il ya 5 mois
      Intéressant et prenez un effort courageux essayant de trouver l'origine de la débâcle de logement au-delà de Wall Street et la politique.
      Cependant, rien n'a été mentionné au sujet de la Loi allègement pour les contribuables de 1997, qui a rendu possible la naissance d'une nouvelle classe de spéculateurs dans un déchaînement de violence: les palmes maison. Un puissant incitatif a été ajouté à vendre des maisons dans un laps de temps beaucoup plus court. Les gains en capital sur les maisons, exemptés fois dans une vie à un taux de 125K $ avant la loi de 1997, a été transformé en un événement unique tous les-deux-ans, avec des dérogations à 500K $ pour un couple marié conjointement. Imaginez faire un demi-million d'impôts gratuitement, tous les 2 ans, encore et encore!
      Évidemment, le changement profond et la vraie viande était au marché haut de gamme luxe. Cela va un long chemin à expliquer une grande partie de l'inadaptation qui est arrivé tard dans l'immobilier.
      Je vais devoir donner crédit à l'auteur original de cette idée (http://mindonmoney.wordpress.com/2010/01/18/destructive-oscillation/) où des choses plus intéressantes peuvent être lus.
    • normaward normaward il ya 5 mois
      Certains analystes estiment que l'utilisation des terres sur-réglementation par les différentes municipalités à travers les Etats-Unis ont également contribué au développement et à la déflation de la bulle immobilière. En créant des pénuries de faux de terres disponibles pour le développement, en particulier dans certains marchés, le prix des lots ont augmenté bien au-delà ce qui serait normalement attendu. En général, les prix des logements ont été beaucoup moins abordables dans les marchés avec un environnement normatif de régulation qui ont tenté de contrôler le développement; les trois pires des marchés aux États-Unis étant Portland, Oregon, le coût des terrains ajoutée de 76 200 $, Washington-Baltimore avec les coûts des terrains ajoutée de 90 700 $ et de San Diego avec les coûts des terrains ajoutée de 239 100 $.
      Voici un examen de la question de l'utilisation des terres sur-réglementation:
      http://viableopposition.blogspot.com/2011/06/land-use-overregulation-is-it-to-blame.html
    • pakelag pakelag il ya 5 mois
      Je suis avec vous tout le chemin jusqu'à la partie où l'or devient le deus ex machina de la hausse des prix des logements (et la chute de l'administration Nixon d'une colonne ou deux auparavant). Revenons à la déréglementation. La dérégulation ultime est simplement de permettre aux entités de l'échec. Alors que faire si faillite de Bear Stearns, avec Lehman. Pourquoi soutenir Citi, Merrill et BOA? Si toutes ces entreprises auraient échoué, l'ensemble too big to fail question serait résolue être maintenant. Certains affirment que, cela nous aurait envoyé dans une dépression que ces faillites bancaires auraient causé l'offre de monnaie s'effondrer comme ce fut le début des années 1930. N'est-ce pas ce que la Fed est pour? Entre un tribunal des faillites et imprimerie de la Fed, le secteur bancaire pourrait avoir été reconsolidé et l'offre de l'argent aurait pu être stabilisé.
      En ce qui concerne les prix des logements sont concernés, je ne vois pas le lien avec l'or. Les taux longs, qui la Fed ne contrôle pas (du moins à l'époque) a réduit 30 - taux hypothécaire année de 25% à 30%. Dans les années Clinton, je payais plus de 8%, et en 2004 j'ai été en mesure de refinancer à 5,75%. Marchés étant ce qu'elles sont, l'augmentation des prix des logements pourrait être largement expliquée par la baisse des taux hypothécaires qui stimulent la demande plus élevée. Certes, la tenue des taux courts à 1% de l'huile sur le feu, mais avait soulevé la Fed du taux des fonds à un niveau naturel, qui est de dire que l'or, du pétrole et à long terme de bons du Trésor n'aurait pas tous tombés dans la précipitation, de ce fait chauffer le marché du logement encore plus loin?
    • sobriquet sobriquet il ya 4 mois
      Révision complète de snark incohérente préconçues qui n'a rien à voir avec le conte illuminant Morgenson-Rosner du gouvernement / Wall Street en cas de catastrophe financière conçu. Ce livre est le portrait définitif de l'alliance impie des acteurs corrompus qui coincé Main Street avec l'onglet pour le parti de Wall Street. Je vois que M. Tammy travaille sur Wall Street. Il ne peut donc pas voir la paille dans l'œil.
      Wall Street repartent avec Fannie / Freddie processus de l 'non réglementée, la titrisation hypothécaire. La déréglementation n'est pas toujours belle, Caton-Forbes dogme nonobstant. Pur le darwinisme non réglementée n'est pas la solution politique à toutes choses. Nous avons des lois, elles sont de longue date, et leur importance. La déréglementation n'est pas belle quand le jeu vous permet de déréglementer vous mettre à pied, immédiatement, tous les risques que vous prenez, sur les autres, et avec zéro protections anti-fraude. À savoir, les règles de divulgation complète de tous les faits importants, des règles contre les délits d'initiés, et les règles que le type d'actifs échangés sont fongibles suffisamment d'exactitude des prix telle que est à tout moment facilement déterminable, et négociés sur un large et ouverte (non privé propriétaires) d'échange. Lorsque Wall Street repartent avec Fannie / Freddie 's les processus d'un programme de développement du gouvernement qui n'avait pas de telles règles, car il était un programme-Mur, rue Government, qui contient toute l'expertise de la nation a sur les titres, commis une fraude sur le peuple américain et ses dirigeants. Wall Street et ses avocats savaient parfaitement ce qu'ils faisaient, et parfaitement bien comment la rhétorique du marché alors en vogue de la «déréglementation» de tromper et de con Congrès et les régulateurs, en lui passant une série de volumes de ventes lucratives énormement raquettes, que n'aurait pas naturelle interne "du marché" checks and balances en leur sein, à tous.
      La déréglementation est un objectif politique parfaitement honorables dans certaines régions, mais pas dans la vente de titres. Wall Street ne sont pas la marche des personnifications de «libre marché». Wall Street ne pense qu'à bien des marchés parce que les règles de son jeu de valeurs mobilières fonctionne tellement moins bien moins pour l'achat d'actions conventionnelles et les marchés obligataires, que les hommes de la 30s et 40s a écrit les règles de ces jeux pour. Mais quand Wall Street invente la marque de nouveaux jeux pour jouer avec lui-même, en utilisant l'argent des autres, il a besoin de règles calibré pour la nature de la nouvelle partie. Règles d'effet de levier, les règles de transparence, des règles qui tiennent la liquidité des actifs et priceability en compte, et les règles qui garantissent l'intégrité transactionnelle et de l'inspection diligente, dûment, de toute entreprise ou d'un processus de conditionnement unitaire.
    • hazel3923 hazel3923 ya 1 jour
      surnom: yep, il était assez important que ces «investissements» qui ont été de soutenir autant dans leur présent et plus-âge sont saines, ou au moins sondeur alors ils s'est avéré être. Maintenant, ce sont ces gens censés faire?
      et aussi
      ... Conned et de tromper le Congrès? Sûrement pas, cela voudrait dire que le Congrès est stupide, mal informé, ou peut-être (peut-il être vrai?) Corrompus, et que nous ne pouvons pas compter sur elle à tout?
    • franviser franviser il ya 4 mois
      Utilisez insinuations boiteuse pour discréditer Morgenson et Rosner, si seulement elle n'avait pas précisé William Jefferson Clinton, son écriture ne serait pas si bizarre. Je ne lui avait offert plus de preuves que l'administration Reagan a favorisé une vague de conservatisme et de la déréglementation. (Avez-vous besoin de preuves que le soleil s'est levé hier?) Vous pensez qu'elle n'a pas cloué les causes? De mon point de vue ici en compte de Lancaster PA Morgenson reflète les événements comme ils se sont produits. J'ai été désolé de voir tant de démocrates aspiré, mais si elle avait juste nommé républicains, ce qui aurait été surprenant à ce sujet? Comment rafraîchissant de vous entendre blâmer les victimes-des centaines de milliers d'entre eux qui vient de se lever un jour et a décidé qu'ils avaient essayer de prêts au-delà de leurs moyens. Il n'avait rien à voir avec les vendeurs de marée.
    • sideviliam sideviliam vient de poster
      Mon cher John Tammy,
      Je suis Sid Harth.
      (Divulgation complète: Je ne suis pas associé à l'Institut Cato à titre non-politique), Oups, je suis pas associé avec le magazine Forbes dans toute politique et / ou non-politique de capacité, comme une question de fait, je ne même pas lire, abonnez-vous ou d'une ligne ma cage avec ce chiffon.
      Je plaisante. J'aime FORGES, Oups, Forbes. Seul Dieu sait pourquoi. S'il vous plaît ne pas appeler Dieu, il est un libertaire, je pense. Certainement pas un imbécile, Oups, un outil de capitalistes. Je le jure. Cross My Heart saignements et espérons die_and aller au ciel capitalistes.
      Assalam aleikum.
      Habituez-vous à moi. Vous ne va pas nulle part, quand je la pluie sur votre défilé de goules, les gobelins, anti-christs, anti-Diable, Oups, anti-démocrates et pro-taxe-et-dépensiers, Oups, anti-impôts-et-dépensiers, prêteurs, Oups, prêteurs d'argent, des règles cintreuses, tas de PAC-hommes, païens, Rayguns, Oups, Reaganiens, Neo-Cons, Oups, Cons, Dons, Oups, Don Quichotte, le chargement vétustes, obsolètes, les fantômes de moulins à vent, avec leurs arcs et leurs flèches, Oups, lances.
      Assez dit, pour l'instant.
      ... Et je suis Sid Harth@topcogitoergosum.com

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John Tamny John Tamny, Forbes StaffI cover the intersection of economics and politics.+ Follow on Forbes

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7/09/2011 @ 8:41PM |7,312 views

Book Review: Reckless Endangerment by Gretchen Morgenson and Joshua Rosner


WASHINGTON - OCTOBER 21: The headquarters of ...Image by Getty Images via @daylife
Cato Institute President Ed Crane has a funny story about Fannie Mae from the mid 1990s. One day a letter arrived in the mail alerting him to the great news that Cato, a libertarian think tank founded on the principles of limited, constitutional governance, would be the recipient of a large donation from an entity (Fannie Mae) that was then and is now a frightening example of a federal government that knows no limits.
Crane, a prickly but also highly principled man (full disclosure: I’m associated with the Cato Institute in a non-policy capacity), sent a nice letter back to Fannie’s government affairs officer alerting him to Cato’s strict policy of not accepting money from government organizations. Not long after Crane received a hurt reply from the individual, vigorously protesting his description of the GSE. As is well known now by virtue of a federal bailout of Fannie Mae the cost of which continues to grow, Crane’s description was all too correct.
The grotesque rise of Fannie Mae, along with Washington and Wall Street’s bipartisan and politically correct worship of homeownership figure prominently in Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon. The story they tell is surely revolting, but not very well reasoned. Worst of all, the authors mostly missed the real story behind the most recent rush to housing.
The book will appeal to extremes. The hard right will love Reckless given their belief – despite basic evidence – that the recessionary rush to housing was caused by Fannie, Freddie, and Democrats in thrall to both. The hard left will be cheered by Reckless owing to their equally dim view that Wall Street, deregulation and greed drove the housing boom. Both sides will finish the book bursting with facts and quotes that will merely confirm views already held deeply. As for those still searching for answers to explain what just happened, they still won’t know.
Reckless opens with a quote from a speech President Bill Clinton gave in 1994. With the rate of home ownership down to 64%, Clinton preached that “More Americans should own their own homes”. A public/private partnership would take shape to achieve this horrid goal, and while today we’ve sadly grown used to government and business working hand in hand, the authors noted that at the time at least, such a partnership bordered on odd.
But from Clinton’s speech (the first several mentions of Clinton were as “William Jefferson Clinton”, which needlessly lent the book a creepy quality) emerged a plan to democratize homeownership through reduced lending standards that started “with the elimination of the requirements that a borrower put down a substantial amount of cash in a property, verify his income, and demonstrate an ability to service his debts.” Scary stuff for sure, and very much a weight on economic growth.
Indeed, it should be made clear that despite the myriad problems with Reckless, the idea of government subsidizing housing is truly horrifying. From a growth perspective, an investment in housing doesn’t make us more productive, won’t cure cancer or lead to efficiency-enhancing software innovations, nor will it open up foreign markets. Housing on its best day is an item of consumption – albeit a necessary one – that has little to do with real economic growth.
More to the point, housing subsidies, particularly for the poor, are quite simply cruel. In a world where capital moves at the click of a mouse, the last thing governments should be doing is subsidizing a purchase that renders those who take advantage of it less mobile in pursuit of work.
In that case, it should be acknowledged that the powerful growth of Fannie and Freddie in the ‘90s made accessing loans to purchase housing easier to pull off. Heavily regulated lenders that to some degree owed their existence to a federal government that heavily subsidized their activities had a greater incentive to lend without regard to the means of the borrower, and this was made even easier by a Congress that relaxed the standards imposed on Fannie and Freddie when it came to purchasing those loans.
The rise of Fannie Mae to great prominence is an ugly, and arguably predictable story that the authors seemingly do a good job of retelling. As they note, by the mid ‘90s “Fannie Mae had perfected the art of manipulating lawmakers, eviscerating its regulators, and enriching its executives.”
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    • rros rros 5 months ago
      Interesting take and a brave effort trying to find the origin of the housing debacle beyond Wall Street and politics.
      However, nothing has been mentioned about the Taxpayer Relief Act of 1997, which made possible the birth of a new class of speculators in a rampage: the house flippers. A powerful incentive was added to sell houses in a much shorter time span. The capital gains tax on houses, exempted once in a lifetime at a rate of $125K prior to the 1997 Act, was transformed into a once-every-two-years event with exemptions up to $500K for a married couple filing jointly. Just imagine making half a million tax free, every 2 years, over and over again!
      Evidently, the deep change and the real meat was at the high-end, luxury market. This goes a long way to explain much of the maladjustment that happened later in real estate.
      I will have to give credit to the original author of this idea (http://mindonmoney.wordpress.com/2010/01/18/destructive-oscillation/) where more interesting stuff can be read.
    • normaward normaward 5 months ago
      Some analysts feel that land use over-regulation by various municipalities across the United States also contributed to the development and deflation of the housing bubble. By creating false shortages of land available for development, particularly in certain markets, the price of lots rose far beyond what would normally be expected. In general, housing prices were far less affordable in markets with a prescriptive regulatory environment that attempted to control development; the three worst markets in the United States being Portland, Oregon with added land costs of $76,200, Washington-Baltimore with added land costs of $90,700 and San Diego with added land costs of $239,100.
      Here is an examination of the issue of land use over-regulation:
      http://viableopposition.blogspot.com/2011/06/land-use-overregulation-is-it-to-blame.html
    • pakelag pakelag 5 months ago
      I’m with you all the way up to the part where gold becomes the deus ex machina for the rise in housing prices (and the fall of the Nixon administration a column or two ago). Let’s go back to the deregulation. The ultimate deregulation is simply allowing entities to fail. So what if Bear Stearns failed, along with Lehman. Why prop up Citi, Merrill and BOA? If all of these companies would have failed, the whole too big to fail issue would be resolved be now. Some would aver that this would have sent us into a depression as these bank failures would have caused the money supply to collapse as it did in the early 1930′s. Isn’t that what the fed is for? Between a bankruptcy court and the fed’s printing press, the banking industry could have been reconsolidated and the supply of money could have been stabilized.
      As far as housing prices are concerned, I don’t see the connection with gold. Long term interest rates, which the fed doesn’t control (at least back then) reduced 30- year mortage rates by 25% to 30%. In the Clinton years, I was paying over 8%, and in 2004 I was able to refinance at 5.75%. Markets being what they are, the increase in housing prices could largely be explained by falling mortgage rates driving demand higher. Granted, holding short term interest rates at 1% added fuel to the fire, but had the fed raised the funds rate to a natural level, who is to say that gold, oil and and long term treasuries wouldn’t have all fallen precipitously, thereby heating the housing market even further?
    • soubriquet soubriquet 4 months ago
      Incoherent review full of preconceived snark that has nothing to do with Morgenson-Rosner’s illuminating tale of government/Wall Street engineered financial disaster. This book is the definitive portrait of the unholy alliance of corrupt actors who stuck Main Street with the tab for Wall Street’s party. I see that Mr. Tammy works on Wall Street. He thus cannot see the mote in his own eye.
      Wall St. walked off with Fannie/Freddie’s unregulated process, mortgage securitization. Deregulation is not always lovely, Cato-Forbes dogma notwithstanding. Pure unregulated darwinism is not the policy solution to all things. We have laws, they are of longstanding, and they matter. Deregulation is not lovely when the game you are deregulating allows you lay off, immediately, all risks you take, on others, and with zero anti-fraud protections. To wit, rules of full disclosure of all material facts, rules against insider trading, and rules that the type of asset being traded be fungible enough such that accurate pricing is at all times readily determinable, and traded on a broad, open (not private proprietary) exchange. When Wall Street walked off with Fannie/Freddie’s process–a government development program which had no such rules because it was a government program–Wall Street, which contains all of the expertise the nation has about securities, perpetrated a fraud on the American people and its leaders. Wall Street and its lawyers knew perfectly well what they were doing, and perfectly well how to market the then-popular rhetoric of “deregulation” to mislead and con Congress and the regulators, into handing it a series of hugely lucrative volume sales rackets, that would have no natural internal “market” checks and balances within them, at all.
      Deregulation is a perfectly honorable policy goal in some areas, but not in the sales of securities. Wall Streeters are not walking personifications of “the free market.” Wall St. only thinks well of markets because the rules of its securities game works so well–at least for the conventional stock and bond markets, that the men of the 30s and 40s wrote the rules of those games for. But when Wall St. invents brand new games to play with itself, using other people’s money, it needs rules calibrated to the nature of the new game. Rules of leverage, rules of transparency, rules that take asset liquidity and priceability into account, and rules that ensure the transactional integrity, and duly diligent inspection, of any enterprise or unit packaging process.
    • hazel3923 hazel3923 1 day ago
      sobriquet: yep, it was pretty important that those “investments” that were to support so many in their present-and-older-age be sound, or at least sounder then they turned out to be. Now what are those folks supposed to do?
      and also
      …Conned and mislead Congress? Surely not; that would mean that Congress is stupid, badly informed, or perhaps (can it be true?) corrupt, and that we can’t count on it at all?
    • franviser franviser 4 months ago
      Use lame innuendo to discredit Morgenson and Rosner; if only she hadn’t spelled out William Jefferson Clinton, her writing wouldn’t be so weird. I only she had offered more evidence that the Reagan administration fostered a wave of conservatism and deregulation. (Do you need evidence that the sun came up yesterday?)You think she hasn’t nailed the causes? From my vantage here in Lancaster PA Morgenson’s account reflects the events as they occurred. I was sorry to see so many Dems sucked in, but if she had just named Republicans, what would have been surprising about that? How refreshing to hear you blaming the victims–hundreds of thousands of them who just rose up one day and decided they’d try for loans far beyond their means. It had nothing to do with slick salesmen.
    • sideviliam sideviliam Just posted
      My dear John Tammy,
      I am Sid Harth.
      (full disclosure: I’m NOT associated with the Cato Institute in a non-policy capacity), Oops, I’m NOT associated with Forbes Magazine in any policy and/or non-policy capacity, as a matter of fact, I do not even read, subscribe or line my birdcage with that rag.
      Just kidding. I love FORGES, Oops, FORBES. Only God knows why. Please don’t call God, he is a libertarian, I think. Definitely not a fool, Oops, a tool of capitalists. I swear. Cross my bleeding heart and hope to die_and go to the capitalists heaven.
      Assalam aleikum.
      Get used to me. You ain’t going nowhere, when I rain on your parade of ghouls, goblins, anti-Christs, anti-Devil, Oops, anti-Democrats, pro-Tax-and-spenders, Oops, anti-Tax-and-Spenders, lenders, Oops, money lenders, rules-benders, bunch of PAC-men, Pagans, Rayguns, Oops, Reaganites, Neo-Cons, Oops, Cons, Dons, Oops, Don Quixotes, charging dilapidated, outdated, ghosts of windmills, with their bows and arrows, Oops, lances.
      Enough said, for now.
      …and I am Sid Harth@topcogitoergosum.com



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Columnist Biography: Gretchen Morgenson

Gretchen Morgenson is assistant business and financial editor and a columnist at the New York Times. She has covered the world financial markets for the Times since May 1998 and won the Pulitzer Prize in 2002 for her "trenchant and incisive" coverage of Wall Street.

Fred R. Conrad/The New York Times
Gretchen Morgenson.
Ms. Morgenson joined The Times as assistant business and financial editor in May 1998. Previously, she was assistant managing editor at Forbes magazine since rejoining the magazine in March 1996. Before that, she was the press secretary for the Forbes for President campaign from September 1995 to March 1996.
From August 1993 to August 1995, Ms. Morgenson was the executive editor at Worth magazine. As the number two editor, she oversaw all financial coverage. She also wrote an investigative "Full Disclosure" column monthly.
From November 1986 to August 1993, she was an investigative business writer and editor at Forbes magazine. She broke the story of anti-investor practices on the Nasdaq stock market that was followed by Justice Department and SEC investigations. Earlier, she oversaw several Forbes investing sections and their Washington bureau.
From January 1984 to November 1986, she was a staff writer at Money magazine.
Ms. Morgenson was a stockbroker for Dean Witter Reynolds in New York from September 1981 to January 1984.
She began her career at Vogue magazine as an assistant editor in August 1976. By the time she left the magazine in July 1981, she was a writer and financial columnist.
Born in State College, Penn., on January 2, 1956, Ms. Morgenson received a B.A. degree in English and history from Saint Olaf College, Northfield Minn., in 1976.
She is the author of "Forbes Great Minds Of Business," published by John Wiley & Co., in 1997 and co-author of "The Woman's Guide to the Stock Market," published by Harmony Books in 1981.
She is married, has a son and lives in New York City.

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'Reckless Endangerment': An Exclusive Excerpt From Gretchen Morgenson And Joshua Rosner's New Book

 
First Posted: 05/23/11 09:21 AM ET Updated: 07/23/11 06:12 AM ET
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This is an adaptation from "Reckless Endangerment", an exploration of the origins of the recent financial crisis, by Gretchen Morgenson and Joshua Rosner. The book will be published Tuesday by Times Books. This excerpt examines Wall Street's role in the crisis and the relationship between Goldman Sachs, a leading investment bank, and Fremont, a freewheeling mortgage lender. Goldman declined to respond to detailed interview requests for this book.
Of all the partners in the homeownership push, no industry contributed more to the corruption of the lending process than Wall Street. If mortgage originators like NovaStar or Countrywide Financial were the equivalent of drug pushers hanging around a schoolyard and the ratings agencies were the narcotics cops looking the other way, brokerage firms providing capital to the anything-goes lenders were the overseers of the cartel.
Just as drug lords know that their products pose hazards to their customers, the Wall Street firms packaging and selling mortgage pools to investors knew well before their customers did that the loans inside the securities had begun to go bad.
It was a colossal breakdown in the duty Wall Street owed to its investing customers.
Years after the meltdown, investors began to understand how badly they'd been burned by Bear Stearns, Merrill Lynch, Lehman Brothers, Deutsche Bank, Greenwich Capital, Morgan Stanley, Goldman Sachs, and other smaller firms. Lawsuits against these firms alleging a dereliction of duty started cropping up in 2010 as investors began to realize that Wall Street's secret loan assessments had identified severe problems in mortgages well before they stopped selling them.
Unlike many other firms, Goldman Sachs went negative on the mortgage market in the fall of 2006, well before others in its industry. Using its own money, the firm began amassing major bets against the same dubious loans it was peddling to investors at that time. Goldman, therefore, profited immensely from the losses its clients absorbed, losses its own practices helped to create.
It is unclear whether Goldman put on its hugely profitable and negative mortgage trades because of proprietary information turned up in its due-diligence reports. If that was indeed what happened, its failure to tell clients of the problems in the loans it was selling is even more disturbing.

Wall Street had financed questionable mortgages before, of course. But it was during the mania's climactic period of 2005 and 2006 that these firms' activities as the primary enablers to freewheeling lenders really went viral. No longer were the firms simply supplying capital to lenders trying to meet housing demand across America. Now Wall Street was supplying money to companies making increasingly poisonous loans to people with no ability to repay them. And the firms knew precisely what they were doing.
The relationship forged by Wall Street's most prestigious firm, Goldman Sachs, with one of the nation's most wanton mortgage originators -- Fremont Investment & Loan -- is a case in point. Fremont, a company with a regulatory rap sheet and a history of aggressive lending, received $1 billion in financing from Goldman in 2005, fully one-third of the total it received from all of its Wall Street enablers.
Goldman had begun financing Fremont's workers' compensation insurance unit in 2003 with a credit line of $500 million, but as the mortgage spree ramped up, it doubled that commitment. Goldman did so in spite of a serious run-in Fremont's insurance unit had had with regulators just five years earlier.
With one of its units in operation since 1937, Fremont was no upstart lender like New Century or many of the other mortgage companies cropping up all over Southern California. Based in Santa Monica, Fremont boasted $8 billion in assets and declared its 100th consecutive quarterly cash dividend in November 2001.
The company was something of a family business, overseen by founder and patriarch Lee McIntyre, who had launched the company in 1963 with $800,000 in capital. Lee brought his two sons, David and James, into the business in the 1960s. David ran Fremont's insurance operations while James ran the banking unit.
In 1969, James took up the task of decorating the company's headquarters. He commissioned the world- renowned photographer/naturalist Ansel Adams to print 121 of his silver gelatin photographs of American parks and monuments to hang on Fremont's walls. Some were massive, the size of murals, and Adams worked closely with McIntyre on the installation over five years. It was the largest private collection -- much bigger than that of any museum -- of Adams photographs.
The photographs sent a message to Fremont's visitors that this was not just any financial concern -- this was a classy enterprise that paid close attention to detail. When Fremont failed almost 40 years later, the artwork would become enmeshed in a fierce battle over the company's assets.
Wall Street firms helped Fremont sell its loans and they were happy to further the company's efforts to become one of the heavyweights of the subprime world. By 2000, Fremont was a giant in that world, originating $2.2 billion in mortgages. But this was only the beginning; in 2006, when the home-loan frenzy was peaking, Fremont would originate $28 billion in mortgages.
Although California insurance regulators accused Fremont executives of a scheme that boosted their pay but contributed directly to the collapse of its workers' comp insurance unit's collapse, few on Wall Street appeared to care about such problems.

* * * * *
Even as Fremont's executives were sparring with the California insurance regulator, the company was rushing to get in front of the highly lucrative parade involving subprime mortgage securitization.
In 2001, mortgage lenders like Fremont understood that the low-interest-rate environment was driving investors to securities that yielded more than Treasury bonds and other relatively conservative fixed-income instruments. The Federal Reserve Board's decision to slash interest rates to propel the economy was hurting investors who lived on the income generated by their holdings. Mortgages, with their relatively higher yields, provided a handy answer to this problem. Many investors still believed that home loans were relatively conservative instruments. Ratings agencies, blessing the majority of these securities with triple-A ratings, only confirmed this rosy view.
Teaming up with lenders, major brokerage firms like Bear Stearns, Lehman Brothers, Morgan Stanley, and Goldman Sachs pressed them for loans to feed the mortgage securities machine. It didn't hurt that the fees generated by these securities made up for stagnant businesses -- such as investment banking and stock trading -- that were generating only paltry revenues on Wall Street.
With yield-hungry investors on the prowl for profits, and Wall Street eager to please, the subprime mortgage market started to rouse. The billions of dollars being dangled before cash-strapped lenders were mighty alluring; they knew that tapping those funds could juice their volumes and their profits.
In a world of tough sells, this wasn't one. The race to the bottom had begun.
With the Fed on a rate-cutting rampage, demand for adjustable-rate mortgages with relatively low initial interest costs had become incendiary. One of a raft of "affordability" products that Countrywide and other lenders were peddling to counter the effects of the housing bubble, adjustable-rate mortgages with their low rates allowed borrowers who'd previously been shut out of homeownership to join the party.
It is not surprising then that 2003 was the year to remember in mortgage originations. A record 13.6 million mortgages worth $3.7 trillion were written that year; Wall Street's issuance of mortgage-backed securities also peaked, reaching $463 billion in 2003. The top 25 lenders underwrote most of these loans. While these companies had accounted for only 28 percent of new mortgages written in 1990, by 2003, the top 25 were responsible for generating 77 percent of the $3.7 trillion in loans.
The bad news -- for Wall Street, anyway -- was that the blistering pace simply could not continue. Mortgage originations had been propelled by the Fed's rate cuts, but with prevailing rates at 1 percent, there was little room for further declines. This was meaningful because borrowers who had reached for more home than they could afford would no longer be able to lower their costs by refinancing when rates fell again.
As 2004 dawned, therefore, it had become more and more evident that the mortgage lending machine was sputtering. By midyear, Citigroup, Bear Stearns, and Morgan Stanley had all reported serious declines in their mortgage-backed securities deals. Lehman's volumes had fallen 35 percent from the previous year while Goldman Sachs's had plummeted by more than 70 percent. But instead of serving as a warning to the banks, this hiccup in loan origination only made them redouble their efforts in the subprime arena.
It was a moment of truth for Wall Street, an industry not known for veracity. The firms that had made so much money on the American dream of homeownership were faced with a decision. Recognizing that the easy money days were over, the firms knew that continuing down the path of big mortgage profits was going to require a more concerted effort, greater creativity. Wall Street, always at the ready for such duty, concocted new types of loans to be offered to borrowers as well as new entities that would buy them.
But keeping the mortgage machine humming would also require that investment banks ignore numerous signs of wrongdoing along the way. This meant putting their own interests ahead of their clients' at every turn.

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Jeanmarielsb Charlie Rose - Economic Slowdown / Amory Lovins (July 15, 2008): A conversation with Gretchen Morgenson of the N... http://t.co/Ql3u5loS
eaanders Gretchen Morgenson http://t.co/j5BSgkR1To stay abreast of the shinanigans going on amongst the TBTF banks and regulators find it here.
RecklessEndange RT @rotmanschool New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/O3KYw1na
GrandmaJSilver RT @RecklessEndange: RT @rotmanschool New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/O3KYw1na
Books_web 【Business & Investing】Reckless Endangerment by Gretchen Morgenson http://t.co/wg5al2W
Books_web 【Business & Investing】Reckless Endangerment by Gretchen Morgenson http://t.co/iS9zHnK
RecklessEndange RT @rotmanschool New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/O3KYw1na
WilsonSchool I uploaded a @YouTube video http://t.co/pB7K0DlQGretchen Morgenson 12 12 11
RonSupportsYou MT @RecklessEndange Gretchen Morgenson of #NYTimes, video on avoiding another financial meltdown & failure to prosecute http://t.co/uNFKozmS
appraisernews RT @RecklessEndange: RT @rotmanschool New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/O3KYw1na
RecklessEndange RT @rotmanschool New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/O3KYw1na
RecklessEndange RT @rotmanschool: New Rotman video with Gretchen Morgenson of @nytimes on avoiding another financial meltdown http://t.co/JsU6hWpV
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HUFFPOST SUPER USER
robrtl

12:02 PM on 07/05/2011
Fremont could not become a wanton mortgage lender without help of congress


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HUFFPOST SUPER USER
Paul Sta

08:49 AM on 06/16/2011
Its not considered "reckless" knowing you have Govt and forced tax payer bailouts to cut your losses, when the reckless speculatio­n of banks and WS results in a crash.

09:40 PM on 05/29/2011
The regulators at the SEC are typically lawyers who want to work for Wall St firms so there is an obvious conflict of interest.

09:07 AM on 05/25/2011
I admire this author for her honest reporting on the criminal class in congress and on wall street and Anyone that believes that corruption begins and ends with only one party will not want to read this book because it exposes so many corrupt characters that are very close to the president right now. The bipartisan corruption that Gretchen Morgenson talks about in this book is so much a part of our revolving door culture in Washington it is hard to imagine it ever going away. I am positive the author will never be invited to a roundtable discussion on the Soviet style sunday talk shows put on by the corporate media.

12:46 AM on 05/25/2011
Wow! I had to listen twice to Gretchen Morgenson’­s 38 minute interview on NPR’s website. I recommend you do too and then buy her book. What research into the evils in Congress for which you and I are paying plenty! I wish I could influence Congress into changing the method of calculatin­g the Annual Percentage Rate listed in appendix J (b)(1) of the Truth in Lending Act of 1968 from the Mathematic­ally-UNTRU­E, Simple- Interest method to the Financiall­y, Mathematic­ally-TRUE, Compounded method, which is used in the Truth in Savings Act of 1991. After listening to her quest, I think mine will be Sisyphusia­n. If the Republican­s do prevail in having a Council over the director, I hope it is not the entirely federal heads listed for the Advisory Council listed in the Dodd-Frank act. It should be consumer advocates as Ms Morgenson and others chosen by the National Consumer Law Center, the Consumer Federation of America, Consumer Reports, US PIRG, and others.

11:15 AM on 05/24/2011
The greediest people in world are found with their heads in the wine barrel, and say they were washing their hair. Grow up america


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Vendetta101
Pitchfork..check,Torches..check
06:11 AM on 05/24/2011
What do these criminals need to do to go to jail,touch off a nukke?

photo
Loxinabox
I live in a van down by the river
02:55 PM on 05/24/2011
New York and Washington that a bit much isn't it?

01:07 AM on 05/24/2011
America is the number 1 corrupt country in the world.

photo
Loxinabox
I live in a van down by the river
02:56 PM on 05/24/2011
Ever been to Mexico? Or just New Orleans? It is bad but it is not the worst.

09:27 PM on 05/23/2011
Rip away every penny and gold stocks as restitutio­n. Let them know what it feels to start over.

08:47 PM on 05/23/2011
I say we let Hank bunk with Bernie!

This user has chosen to opt out of the Badges program

ruleoflaw66
And I'd opt out of 'fans' too if I could.
07:27 PM on 05/23/2011
wow, looks like Obama needs a 'rapid response team' for this, too.
11:26 PM on 05/23/2011
And what would he do with that "rapid response team" other than assign them some
charming speech writing while quickly finding other ways to avoid doing anything
on behalf of citizens and our government like he has been doing all along for the
banks & finance industry?


photo
Loxinabox
I live in a van down by the river
02:56 PM on 05/24/2011
'rapid response team' Lawyers?



photo
HUFFPOST SUPER USER
youknowwhat
Conservatism is socialism for the rich and wealthy
06:30 PM on 05/23/2011
And yet, not one of them has even had to show up in court for all of the crimes they've committed. These guys on Wall St have proven over and over, that crime does pay.


peowlemeow
Democrat,non-military,undereducated,overworked
05:50 PM on 05/23/2011
Goldman-Sa­chs still sucking.


photo
intotheabyss
Imperialism is a form of insanity.
05:33 PM on 05/23/2011
It looks like most here have been wise to the crony predatory capitalist game for a while. What's even more disturbing on some level is the complicity of the fourth estate. Our media system is as ethically bankrupted as Wall St. and the government that serves it. The coup is complete. Every institutio­n in this country has been bought off. The only task left for the criminal class is to take over the net. If we allow that to happen, we're sunk.
11:31 PM on 05/23/2011
Yes, fourth estate, ethically impoverish­ed through and through, is very disturbing­.
But I find it more disturbing that so many citizens keep voting for the horror even
though we all know, or should know, that neither of the two major parties will
ever do anything decent in public interest unless they have no alternativ­e
short of falling on their re-electio­n swords.

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Felix Salmon

A slice of lime in the soda

CDS conspiracy theory du jour, Gretchen Morgenson edition

Nov 20, 2011 13:14 EST
Why oh why does Gretchen Morgenson insist on writing about credit default swaps as though she understands them? She’s done it again today, with an article about Greece which ratchets the conspiracy theorizing up to frankly bonkers levels:
The money managers with whom I spoke said BNP Paribas seemed to be motivated either by its desire to generate fees from the exchange or, perhaps, by worries about its own exposure to Greece. They wondered, for instance, if BNP Paribas has written a lot of insurance on Greek debt. If so, getting people to unwind such swaps now would be less costly for BNP than having the insurance pay off.
Note the levels of deniability here: if you look at how BNP’s actions “seem” to be motivated, they are “perhaps” being driven by BNP’s own exposure, which could be reduced “if” it has a lot of CDS exposure to Greece. And, of course, the whole thing is wrapped up in its own invisible quote marks — it’s all the opinion of anonymous money managers, without Morgenson giving us any indication at all of why we should be listening to them in the first place, or what their conflicts might be.
(There is actually a truth to the matter, here, as Peter Thal Larsen points out: BNP Paribas had €5 billion of direct exposure to Greek debt at the end of 2010, and a mere €0.1 billion of indirect exposure.)
The other explanation of BNP’s actions in this passage is simultaneously obvious and very weird: the bank, says Morgenson, might be “motivated by its desire to generate fees from the exchange”. Which is pretty much the most prejudiced possible way of saying, simply, that BNP has a job to do, and it’s doing that job.
BNP, you see, has been hired by the government of Greece to gin up interest in Greece’s bond exchange and try to ensure it goes smoothly. That’s a smart move by Greece, because BNP is one of the largest holders of Greek government debt. And this is quite an elegant way of Greece ensuring that BNP, rather than having to be persuaded to go along with the deal, will in fact be trying to persuade everybody else to go along with the deal.
But that obvious and true explanation of what BNP is doing isn’t good enough for Morgenson, who instead indulges anonymous money managers in flights of fancy about how BNP might have “written a lot of insurance on Greek debt”. There’s no evidence for this whatsoever — and I don’t believe for a minute that it’s true. In fact, I can’t think of any bank which has ever amassed a significant long position in any given name, through the CDS market, for any significant length of time. The poster children for that kind of misbehavior were the big insurers, including AIG, who ended up with long positions in highly-bespoke CDS. The closest thing I can think of at a bank was Howie Hubler’s disastrous mortgage-bond trade at Morgan Stanley, where a relative-value play blew up in his face. But the one thing all those blow-ups had in common was that their long position was in super-senior debt which was considered ultra-safe.
And in any case, if BNP had indeed written a lot of protection on Greece, it’s very hard to see how (a) it could manage to get the Greek government’s mandate because it had that position; or (b) how having the mandate would actually help the bank at all with respect to its position. Morgenson makes a very big deal out of the fact that one of the BNP bankers — Belle Yang — is on ISDA’s determinations committee for Europe, and can therefore help influence whether Greece’s CDS pay out or not — but that would be the case whether or not BNP had the mandate.
What’s more, Morgenson is objecting to some extremely unexceptional statements by Yang. Here’s Morgenson:
The BNP Paribas bankers have been telling bond holders that their credit insurance may not pay off down the road, because after the restructuring is completed, the terms of the old debt might be changed, these money managers said.
Normally, investors would shrug off such an argument…
According to one of the money managers, Ms. Yang told the investors that one potential hitch would be if Greece were to change the terms of its old bonds…
If investors think debt terms can be changed by fiat, they will flee the market. Ditto if they find that their insurance can be made worthless. Indeed, some of the volatility in European debt recently may be attributed to investor fears about these issues.
Morgenson’s saying, here, that it’s unthinkable for Greece to unilaterally change the terms of its old bonds, and that no one even considered such an eventuality until recently, when “some of the volatility” we’ve been seeing of late might be a result of investors suddenly realizing that it’s possible and that one of the ISDA committee members might somehow allow it to happen.
This is ludicrous. Everybody knows that Greece can and should take some kind of tactical advantage of the fact that most of its debt has been issued under Greek domestic law. Never mind the fact that a BNP banker sits on an obscure ISDA committee: why not look instead at what’s been written by the dean of sovereign-debt lawyers, Lee Buchheit, on this very subject? Buchheit works for Cleary Gottlieb, and is working directly for the Greek government. And more than 18 months ago he laid out Greece’s options very clearly, in a paper which was posted freely on the internet and which has been downloaded thousands of times, not to mention being passed around in PDF or printed-out form to pretty much everybody who’s involved in making decisions about Greek bonds. Yang, it turns out, was saying nothing which Buchheit wasn’t saying in May 2010:
The greatest advantage that Greece would enjoy in a restructuring of its debt derives from the fact that so much of the debt stock is expressly governed by Greek law. This raises the possibility, discussed in more detail below, that the restructuring could be facilitated in some way by a change to Greek law…
International investors are often leery of buying debt securities of emerging market sovereign issuers that are governed by the law of the issuing state. Why? Because investors fear that the sovereign might someday be tempted to change its own law in a way that would impair the value or the enforceability of those securities. Such changes in local law would normally be respected by American and English courts if the debt instruments are expressly — or otherwise found to be — governed by that local law.
Buchheit proposes one action that Greece could take — a “Mopping-Up Law” which would essentially change the payment terms on untendered bonds so that they were the same as the payments being received by bondholders who tendered into the exchange. There are many others: a sovereign country can change its own law pretty much any way it likes. And although there would surely be legal challenges if it tried to do so, I don’t think there’s anybody who’s optimistic such challenges would succeed.
If there were any investors out there, 18 months ago, who didn’t realize that Greece’s debt terms can be changed by fiat, there weren’t any after Buchheit’s paper came out. So when Morgenson says that investors “will” flee the market when they work this out, she’s at least 18 months behind the curve. And indeed one of the big reasons why Greece’s debt is held overwhelmingly by banks rather than by institutional bond investors is precisely this one.
More generally, Morgenson’s simply wrong when she says that the treatment of CDS is a “a big point of contention” in this restructuring. She’s been talking to an unknown number of “investors” and “money managers”; the only one she names is David Kotok, of Cumberland Advisors. But as everybody involved in the Greece deal knows, institutional investors in general, and American institutional investors in particular, are essentially an afterthought here; the deal will succeed or fail based entirely on the degree to which it’s embraced by Europe’s banks.
The funniest part of Morgenson’s article is this:
Investors who own Greek debt and have bought insurance on it, in the form of credit default swaps, wonder why they should accept the offer that’s on the table…
The discussions with BNP Paribas confirm the view of some investors that credit default swaps are not insurance at all.
Does Morgenson really believe that CDS is an insurance product and used that way by investors? That there’s a bunch of bond investors out there who bought Greek bonds, and then, rather then selling those bonds, bought protection on them instead, using that protection as insurance against a bond default?
The truth of the matter is that the set of “investors who own Greek debt and have bought insurance on it, in the form of credit default swaps” is utterly minuscule, and that every single member of that set is a highly sophisticated player who knows all about issues surrounding Greek domestic law and the potential problems with this kind of basis trade. The last thing that any of them need or want is Gretchen Morgenson going to bat for them on the front page of the Sunday business section of the NYT. And their plight is certainly not of interest to the NYT’s readership as a whole.
Update: Just when you thought this whole thing couldn’t get any sillier, it now emerges that BNP might not actually be advising the Greek government after all! Athens News reported on November 6 that Greece “has terminated its collaboration” with BNP, Deutsche Bank, and HSBC.

Comments

18 comments so far | RSS Comments RSS
Nov 20, 2011
3:00 pm EST
Oh, Felix…Gretchen is more of a man–and, yes, a journalist–than you could ever hope to be. And we’re still waiting for your apology to Egan.
Posted by Taguba | Report as abusive

Nov 20, 2011
3:15 pm EST
I stopped reading Gretchen Morgenson a long time ago due to her penchant for seeing conspiracies and malicious motives behind normal financial transactions. The worst are the NYT page 1 collaborations between her and Louise Story. The standard has a far-reaching conspiratorial headline with almost no substance backing it up.
Posted by ZJA | Report as abusive

Nov 20, 2011
4:30 pm EST
Setting aside the merits of her underlying argument, your criticism of the underlying journalism seems a bit unfair. What’s wrong with hedging her comments with words like perhaps–would you prefer she state with certainty something that could be wrong, as most journalists do? Further, what’s wrong with talking to a number of sources and drawing some conclusion from that? Should rather be a one of the coward journalists that blindly quotes a single source and than when it’s wrong just attributes it to the “objective” delivery of news.
Posted by AngryKrugman | Report as abusive

Nov 20, 2011
4:30 pm EST
Setting aside the merits of her underlying argument, your criticism of the underlying journalism seems a bit unfair. What’s wrong with hedging her comments with words like perhaps–would you prefer she state with certainty something that could be wrong, as most journalists do? Further, what’s wrong with talking to a number of sources and drawing some conclusion from that? Should rather be a one of the coward journalists that blindly quotes a single source and than when it’s wrong just attributes it to the “objective” delivery of news.
Posted by AngryKrugman | Report as abusive

Nov 20, 2011
4:45 pm EST
Felix, I think you’re being a bit harsh. There are flaws in Gretchen Morgenson’s piece but, inter alia, she has exposed a massive conflict of interest in the dual role of Belle Yang.
Posted by IanFraser | Report as abusive

Nov 20, 2011
5:08 pm EST
Perhaps the bondholders should be aware there’s a chance of Greece changing the law, and shenanigans at ISDA.
However, for a banker and ISDA person to tell bondholders if they don’t take the haircut, there will be shenanigans at ISDA seems a mite unseemly.
At a minimum, having been engaged by Greece to deliver this message, BNP should have to be recused from ISDA proceedings regarding Greece.
Posted by Curmudgeonly | Report as abusive

Nov 20, 2011
5:58 pm EST
I basically stopped reading her, for exactly the reasons/examples you have cited. With the bully pulpit she has at the NYT, I could never understand why she was often sloppy, and at time just flat out wrong.
Posted by datascientist | Report as abusive

Nov 20, 2011
8:17 pm EST
As part of the swap, the new 30 year bonds will no longer be held under Greek law. That needs to be noted both by Morgenstern and Reuters.
Posted by DanAllen | Report as abusive

Nov 20, 2011
11:50 pm EST
You’re my fave, my hero, Felix, but this line:
“And their plight is certainly not of interest to the NYT’s readership as a whole.”
is a strange argument, one you don’t need, and one that you can’t support.
Can you defend every thing you’ve published in the past year (month, week) on the basis of its being of interest to Reuters’ readership as a whole?
Should you be asked to?
How many dissidents have been muzzled with language like that?
I’m not defending Gretchen’s article (I don’t have the competence to judget it, and I highly respect yours), but this final phrase undermines you, by painting you as emotional. Wanting to hurt.
This is, however, a rare blip in your brilliant career. Your output is usually informative and entertaining. Exceedingly well written.
Thanks for it all.
Posted by gsignoret | Report as abusive

Nov 20, 2011
11:56 pm EST
@IanFraser — what exactly is Yang’s conflict here? I have to say I don’t see it.
Posted by FelixSalmon | Report as abusive

Nov 21, 2011
5:06 am EST
As a “highly sophisticated player”, I find it highly disturbing that a member of a supposedly impartial ISDA committee is using her position to influence investors’ actions, whatever her motivations may be. Whether this belongs on the front page of the NYT is arguable, but Morgenson deserves credit for breaking the news. Will be interesting how the ISDA blog spins this.
Posted by prk11 | Report as abusive

Nov 21, 2011
5:24 am EST
I have read your review of Morgenson’s piece and, on due consideration, believe that you didn’t like it, Felix.
Posted by ottorock | Report as abusive

Nov 21, 2011
9:30 am EST
Because she sits on the IDSA “determinations committee” that will decide what constitutes a “credit event” in both Greece and elsewhere in Europe, at the same time as being part of the BNP Paribas team appointed by the Greek government to help persuade investors to accept circa 50% haircuts on their bonds. A third conflict arises since BNP Paribas is, I believe, one of the biggest holders of Greek government debt, with about €5bn worth. Presumably in role 1, Yang has a vested interest in avoiding a “credit event”, as she does in role 2 (though for different reasons), but in role 3?
see also:- http://wallstreetpit.com/86248-how-do-yo u-cover-up-your-failure-the-greek-case
Posted by IanFraser | Report as abusive

Nov 21, 2011
10:45 am EST
It has been widely reported that the BNP contract with the greek govt. was ended in late october, (you would never guess that from the Morgenson piece). (I posted a link on twitter about this)
In addition, BNP has no material net position in greek CDS and no incentive either way for or against a default, also BNP has taken a large hit reflecting a 60% haircut on its greek bond holdings (more than €2.5 bln) , all of this is public knowledge but again none of this is mentioned by Morgenson.
And Poor “Belle Yang” is allegedly sitting on the ISDA DC, big deal! BNP doesn’t run ISDA, it’s certainly much better for investors to hear about what could happen from a DC member rather than from some ultracrepidarian at the NYT.
Posted by alea | Report as abusive

Nov 21, 2011
12:15 pm EST
Thanks @alea_
Posted by IanFraser | Report as abusive

Nov 21, 2011
3:20 pm EST
Face it Felix, Gretchen is much more pleasant to watch on video than you.
Posted by ARJTurgot2 | Report as abusive

Nov 21, 2011
3:37 pm EST
I agree that it’s unseemly if a member of an ISDA committee is browbeating parties to accept a “voluntary” restructuring by making a veiled threat that CDS may not be triggered. The broader question, however, is then whether any employee of a large financial institution should be on these committees. After all, in any sizable default one it’s essentially inevitable that a large money center bank or investment bank is going to have some financial interest, whether a long or short position.
Posted by realist50 | Report as abusive

Nov 24, 2011
2:13 am EST
alea, she gets these details wrong so often one has to wonder if it is stupidity, ignorance, carelessness or whether she is actively fabricating the stories.
Posted by Danny_Black | Report as abusive


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Gretchen Morgenson

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Crisis In The Housing Market

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May 24, 2011 Pulitzer Prize-winning financial reporter Gretchen Morgenson chronicles the failings of Wall Street regulators in Reckless Endangerment: How Outsized Ambition, Greed and Corruption led to Economic Armageddon.
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