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Kimball Corson
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I am both an economist (three year M.A., Univ. of Chicago, 1968, in economics PhD program) and a lawyer (J.D., Univ. of Chicago, 1971). I had a Woodrow Wilson National Fellowship in economics and the good fortune to study at Chicago under seven Nobel Laureates in economics (received before or... More
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Wandering the Oceans
  • Let the Wall Street Show Begin! 5 comments
    Jan 12, 2010 2:17 PM

    The Financial Crisis Inquiry Commission is holding its first hearing on Wednesday. The big boys of banking are preparing to testify. I wonder if each has a really good defense lawyer or five stashed in the wings. Each should. In any event, the show is likely to be better than Monday night football, even if we don’t get straight answers. We will surely get to hear how these guys were at all times driven by altruism and an abiding love of their fellow man.

    Yes, we will get to hear from Goldman Sach’s Lloyd Blankfein, who might explain to us exactly how he was doing God’s work, or exactly why he was selected by the Financial Times of London, as Man of the Year or, perhaps and better yet, why Goldman shorted its own CDO’s while it peddled them to others with a smiling face, and maybe how it leaned on the rating agencies for good ratings, just like Blankfein leaned on his Goldman buddy, Paulson at the Treasury, to bail out AIG to protect Goldman’s CDS with AIG. The skinny here should be really interesting. Too bad, the Blankfein-Paulson multiple telephone calls daily in this time frame were not taped.

    Too, what did Goldman tell Standard & Poors and Moodies about the credit worthiness of Goldman’s CDO’s at the very time Goldman was busy shorting those same CDO’s? Many of those who bought Goldman’s CDO are now suing for fraud and misrepresentation.  Too, which very select clients of Goldman were tipped off to join Goldman in shorting those CDO’s? Blankfein might also tell us how the fraud suits against Goldman are coming along. Have the defense lawyers tied plaintiffs’ discovery efforts in a knot yet? 

    As the master of putting “lipstick on a pig,” Goldman’s testimony should be most interesting. Now, Sir, Blankfein will be told, 'tell us the truth, the whole truth and nothing but the truth, so help you God.' That’s a pretty high standard for these boys. Maybe they’ll just dispense with the oath or better yet, relax it a bit like the mark to market rule, so the defense lawyers in the wings can relax a bit.
     And that is just for starters on Goldman. 

    We'll get to hear from other galactic saviors, too. Morgan Stanley’s John Mack will be there as well. We might get to hear about why Morgan Stanley put in its big collateral call to Lehman and what he thought that might do for Lehman and indeed, the rest of Wall Street. Did he really think Lehman would pay up and life would go on as usual, with so many other of Lehman’s clients asking for refunds of their money.  Didn’t he really know better?  Doesn’t the grapevine work pretty well on Wall Street? 

    We should get to hear from Jamie Dimon of J.P. Morgan Chase as well. Maybe he will tell us about how he called around to his buddies in the other houses, including John Mack at Morgan Stanley, John Thain at Merrill Lynch, and Andy DeChellis at Credit Suisse Group, among many others, to tell they that they should not being hiring brokers who were bears because it was bad for business. At the least, they should lay off from it for a while. The clear implication here was brokers needed to be good at selling “blue sky,” and bearish dispositions put a dampener on that. Again, it was bad for business.

    Too, maybe Dimon can tell us why J.P. Morgan Chase asked Lehman, in the same time frame, to post a billion dollars in collateral and threatened to stop Lehman’s trades if Lehman didn’t do that. Was it more than, ‘we were just trying to protect ourselves’ -- by putting them out of business? Or was the government supposed to step in and make everybody whole here and Dimon misjudged the situation?

    Brian Moynihan, then of Merril Lynch might just explain to us why the firm did not tell stockholders ahead of a major shareholder vote in December of 2008, that Merrill was sustaining rapidly mounting losses, including a 4.5 billion loss the company got hit with in October. Too, Mr. Moynihan might give us a hint about why then, when he became General Counsel for Bank of America as it acquired Merrill, he decided to fess up, this time to the government, about Merrill’s losses. Why then, but not earlier? Was it the government’s promise of help and to find and force a buyer, namely, BOA?

    Of course, all of these firms were very busy making proprietary trades sort of like hedge funds. But why, gentlemen -- each of these guys should be asked -- should the U.S. government be your guarantor in these endeavors? Don't you get to keep the upside and Main Street gets the downside? Do you think that is fair?

    Too, Mr. Mack of Morgan Stanley might be asked to explain why, in a truly rare burst of candor, he said during the whole mess 

    “Regulators have to become much more involved [in what we are doing] . . . We cannot control ourselves”  

    It might help Congress to know so as to get the message that regulatory and structural reform of the Banking industry is imperative, even if members of Congress – Republicans and Democrats alike --  have been already been bought off against it. A little public hue and cry here might really help. 

    At the very least, we should get a grand show, loaded with theater and lots and lots of back peddling and after-the-fact rationalizations. Also, we might actually learn something new. Stay tuned.

    Disclosure: none relevant

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Comments (5)
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  • lower98th
    , contributor
    Comments (1411) | Send Message
    I do not recall
    That depends on what "is" is
    I was never informed of that by my subordinates
    Could you repeat the question?
    12 Jan 2010, 02:31 PM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6879) | Send Message
    "Legally accurate, but not volunteering information."
    12 Jan 2010, 04:47 PM Reply Like
  • Kimball Corson
    , contributor
    Comments (876) | Send Message
    Author’s reply » Not likely truthful or accurate, if we could get inside their brains.
    12 Jan 2010, 05:17 PM Reply Like
  • Kimball Corson
    , contributor
    Comments (876) | Send Message
    Author’s reply » How about, "may I be excused to use the restroom?" It worked in grade school.
    12 Jan 2010, 02:34 PM Reply Like
  • Northern Dancer
    , contributor
    Comments (733) | Send Message
    It's gonna be fun to order a truckload of champagne, pull up a chair and relax, and watch the sharks eat each other.
    12 Jan 2010, 02:54 PM Reply Like
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