Here you go, Moustache. It's much better than a star.

His columns make it clear he's one of those guys that thinks he can convince readers by manipulating the numbers - because he believes he's so smart that no one can call him on it.

So, yeah, I've been on the Krugman backlash for a few years already!

 Reply

Just my opinion, he's smart enough to let his tendencies - liberal and doomsday - lead his analysis, and still have his analysis be credible.

 Reply

Rubin has built his own jail. C'mon Rubin, you had the uber career - chairman, Goldman Sachs, Secretary, U.S. Treasury. Then you blow your entire reputation to get an extra $100m? For what?

Men at these levels think about their standing in history. Rubin just became 5' 0".

 Reply

If anything, the securitization of loans effectively diffused mortgage-default risks throughout the economy, didn't it -- even to overseas markets in many cases.

While I realize that even widely-spread risks can have catastrophic effects when the rate of defaults reaches historic levels...I just can't account for all the current trouble in the economy using just this one (rather specialized) market. I'm waiting for some enterprising financial journalist to do an analysis that shows MBS can explain maybe a fourth or a fifth of all the losses that were sustained in 4Q08, and that other types of financial mismanagement are just as rampant but have been obscured by the mortgage-default boogeyman.

 Reply

While there are losses in other areas, look at your typical investment bank by graphic profitable by business unit. Picture green bars for each profitable division, and red bars for the areas taking losses. In most of them, with a decent advisory/wealth management business? You'd wind up with a bunch of green bars (albeit shrinking 3Q-4Q) dwarfed by the Marianas Trench of the investment banking division. If you looked at divisional profitability in your Citi's, your BofA's etc. as agnostic datapoints in an array you'd discard whichever poor desks were tied to CDO/CDS/MBS performances.

The idea that banking is mostly profitable except for concentrated, horrible risk taking in one asset class is why TARP is justifiable - we'll be fine once we can write off 2002-2007's mortgage securities.

 Reply

Thus my skepticism retreats a click or two. Still, I think the original model of securitization was that no one was supposed to take a position in the securities large enough to capsize their whole portfolio. Least of all the i-banks, who should have shuffled all that paper right out the door as soon as it was created.

Michael Lewis' recent article, though, suggests that i-banks got so greedy that they started synthesizing the securities when there weren't enough actual mortgages to meet market demand. From there I guess it might have been a small additional step to damning the torpedoes and holding some of the toxic tranches in-house, for the sake of making commissions on sales of the rest. Which is a point for your side, I suppose.

 Reply

Well, I would have laughed.

Or chuckled, anyway.

 Reply

I thought he did the right thing by Mexico when the peso blew up at the end of 1994.

He had my highest admiration.

It's down the tubes.

Why does someone who has accomplished everything ruin a life of accomplishment? He really did not need the extra $100m.

Maybe to stay relevant?

Sad. He's too old and it's too late to rescue his reputation. His obit will read something like. Rubin, disputed.

 Reply

To whoever said statistics ought to be taught in j-school, that's like teaching dolphins to count on their fingers.

 Reply

That PR aspect of life is why the toughest, most knowledgeable bankers retire en-masse in the bad times. The ostentatious analysts you read about and caricature are nothing like the guys who run these banks - they lead private lives, quiet lives, until the turmoil of a down market calls them uncomfortably into the light. It's why you have a thousand Gawker stalker entries regarding the medium-wealthy bankers, socialites, and media personalities of New York City and approximately none of its billionaire architects. I knew the crisis had reached its apex when people sent in an entry about Hank Paulson, stalking him days after TARP had been announced.

It may seem hard to understand, but these people are stuffy academics and technocrats for the most part. They don't like the spotlight, and they're pretty awful performers in it. The worst part is, there's no easy way to explain most of this, and the shouting starts long before the patient complication of a banker's explanation has run its course. We're too reviled to be trusted or taken seriously - and no amount of PR can change that. Rubin is just finally recognizing his odds in lights and bowing out.

 Reply