Why Can't We Get Anyone to Ask a Wall St. CEO the Hard Questions?

[eridani]

http://www.alternet.org/workplace/145153/why_can%27t_we_get_anyone_to_ask_a_wall_st._ceo_the_hard_questions/?page=entire

As a result, all we got was a friendly show of collaboration - what do you think should be done about compensation? What do you think was the role of risk? Do you think derivatives played a role? Indeed, Goldman CEO, Lloyd Blankfein, said that derivatives did better during the crisis than ‘we had a right to expect.' No one even interrupted him with a – WHAT? REALLY? WHAT?

Rather, questions had less teeth than any police or federal agent inquisition over simple daily crimes – they existed, but in a tepid format. It was sadly clear that the Financial Crisis Inquiry Committee has no clear idea what constitutes bank risk from their questions, or banking for that matter, and the CEOs are dancing rings around them. Notice how none of them advocated reducing their reliance on government subsidies, or splitting themselves up into risky vs. non-risky entities. Indeed, when Blankfein was asked a related question, he said that if there was a repeat crisis, he assumed the government would step in given the ‘fragility' of the system. That says it all. We might as well just watch the Bachelor rather than waste time with this - it is equally vacuous, but has a slightly higher chance of a conclusive outcome.

Moreover, when a child gets the runaround, his or her follow-up is - why?

It should've gone like this:

We don't have those leverage figures handy.

Why?

We don't know how many of our derivatives positions are standard vs. customized.

Why?

We don't have the details of our trading revenues.

Why?

[sandnsea]

1. BofA Moynihan was a bit better

I was particularly interested in his comments on the Global Credit Crisis and that he was pretty upfront about its cause. The recession, however, he takes no responsibility for, which is bullshit. They still don't get that people can't live on their salaries.

From Moynihan's Testimony:

Global Credit Crisis
The financial crisis spread far beyond the investment banks that underwrote and held mortgage-backed securities, destabilizing financial institutions and non-financial corporations across the globe that had nothing to do with the U.S. mortgage market. Note that the global credit crisis did not neatly follow the mortgage crisis and then the investment banking in crisis in turn; they overlapped in time and reinforced each other.
Widespread credit disruptions began after BNP Paribas suspended redemptions on three investment funds on August 9, 2007, and credit markets were highly unsettled for the rest of 2007 and 2008.
Also, over time, those like AIG who collected the premiums on CDS began to face the prospect of having to pay on the insurance, undermining investor confidence in those firms.
Another large risk to the system came from money market funds, which held trillions of dollars in commercial and personal cash, and were viewed as riskless as to principal. Some funds, in an attempt to pay a higher yield, had invested in entities holding mortgage-related assets, including SIVS, and also had exposure to financial obligations on commercial paper. Those funds began experiencing losses that created the risk of eating into principal, and pushing the net asset value of the funds below the traditional $1 per share. Nervous investors began to flee such funds, forcing the funds to sell assets to fund redemptions; these sales further depressed prices in those assets.
These problems on the liability side of money market funds created more significant problems on the asset side. Money market funds were the dominant purchasers of commercial paper – basically short-term debt – issued by American corporations of all type. As money market funds were forced to shrink their assets, the demand for corporate paper shrunk.
Between 2007 and 2009, numerous fund managers, including Bank of America, supported their cash funds, purchasing illiquid assets and providing support for these funds. We provided more than $2.1 billion in support to our funds. But problems continued, as investors began to fear that money market funds would not be able to sustain a net asset value of $1 per share. As a result investors redeemed their shares in those funds and shifted their assets to money market funds that held treasuries or to bank deposits.
For financial markets, September 2008 was a very scary time, and the closest the system came to collapse. On September 15, Lehman Brothers failed, and Merrill Lynch was acquired by Bank of America. On September 16, the Federal Reserve announced a facility to lend AIG up to $85 billion, in recognition that it was on the brink of failure and that such a failure would have seismic consequences, given its role in the CDS market, among others.
And also on September 16, the net asset value of the Reserve Primary Money Fund fell below $1, also known as “breaking the buck.” This development had immediate and serious consequences, as investors accelerated their flight from money market funds, provoking a funding crisis for corporate America.FINAL 1.11.10 5:00 p.m. 9
While much attention has been focused on the TARP investment made by the Treasury Department, I believe other actions, which are far less known, were at least as significant in terms of stabilizing the system. For by September 2008, the issue was a full liquidity crisis.
• On September 14, the Federal Reserve Bank of New York expanded the collateral eligible for pledging to its Primary Dealer Credit Facility.
• On September 19, the Treasury Department announced that it would guarantee investments in money market mutual funds, in return for a fee paid by the fund sponsor.
• On September 19, the Federal Reserve announced the creation of its Asset-backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) to fund bank purchases of asset-backed commercial paper from money market funds.
• On September 21, the Federal Reserve approved applications by Goldman Sachs and Morgan Stanley to become bank holding companies.

As noted, in November, Treasury injected preferred stock into the nation’s largest 19 largest banks through the Troubled Asset Relief Program, or TARP – a decision that will be debated for a generation. We believe the creation of the TARP was an important step to restore confidence in our financial and prevent systemic consequences that would have affected every company and individual in the country. We in the financial services industry are humbled that such support was needed, and grateful that it was provided.


http://www.fcic.gov/hearings/pdfs/2010-0113-Moynihan.pdf

[eridani]

2. I liked the Angelides analogy also

Maybe the author of the OP switched off too early.

[whattheidonot]

3. CEO'S

These guys are CEO'S. They get all kinds of information on the economy. They have been doing this their whole lives. They are CEO'S because they know banking. They had all the information they needed to know what was going on. They can figure this stuff better than anyone. I high school kid , given the facts could have figured out that things were not going to add up. They did not stop anything. They were making money. These guys are full of it.

[blue97keet]

4. Somebody should ask how much actual bad mortgage debt there

was there in proportion to all the "toxic assets" on paper value that resulted from everybody charging a fee up the securitization food chain. Would it have been possible to bail out all of the mortgage holders (deserving or not) at a fraction of the cost of bailing out the banks?