25 People to Blame for the Financial Crisis
There is a strange and strangely interesting list of people to blame for the Financial crisis from Time magazine. It is quirky and odd and in more than a few places, misguided and ignorant.
Despite its deep flaws, it is still kinda interesting.
I normally don’t link to this sort of click bait — you must click through each individual adding 25 phony pages in an obnoxious attempt to improve traffic readings – but there is this interesting variation: Readers get to vote on each culprit. Surprisingly, they move Clinton, Bush and Greenspan way down the list.
A few strange issues with the list: Why is Bernie Madoff here? He is a common thief (perhaps uncommon thief given the amounts he claimed to have stolen) but he had nothing whatsoever to do with the Financial crisis afflicting the global economy. What journalist would add him to the list of causes of the crisis? (Strike that moron from your reading list).
The American Consumers are on the list, but not the irresponsible home buyers? Isn’t painting with an overly broad brush ? And Wen Jiabao, the premiere of China? How dare you buy our debt! Its all your fault!
And where are Robert Rubin and Larry Summers on the list? MIA. They worked for President Bill Clinton, who I note in Bailout Nation signed both the Repeal of Glass Steagall, and the Commodities Futures Modernization Act on their advice.
I give a lot of blame to Clinton — but even more to Bush. He was Captain of the ship when it hit the iceberg, and while many risk factors were already in place on January 20th, 2001, it was he and his team of incompetent SEC chairmen and other deregulators that made a bad situation much much worse.
Regular readers of this blog know I think former NAR chief economist David Lereah is a lying jackass, a festering hemorrhoid on the fields of both economics and real estate. But he was merely a lying cheerleader. As much as I detest his syphilitic-addled unfunctional brain, I cannot blame him for what happened.
Same for HGTV. Go figure that Home & Garden Television did shows about homes and gardens. Blaming television for bad decision making by lenders, regulators, and borrowers is absurd. But if you are going to blame HGTV, why not blame CNBC also? (I think both are ridiculous to hold culpable, but at least be consistent). Perhaps it would be more appropriate to blame the Conspiracy of Optimism that exists, especially in financial television.
Of all the people to put at the top of the list, the Man with the Tan is not the guy — sure, he’s a putz who advocated no money down mortgages as he extracted 400 million dollars from Countrywide as it went down the tubes — but he was only one of the many jackasses who made totally irresponsible loans. Why is he the symbol for this sector, and not the 300 plus mortgage originators who went belly up? Its an entire industry, not one or two companies at fault.
And placing Jimmy Cayne, Bear Stearn’s CEO at the bottom is similarly absurd. Bear was the single biggest player in the Mortgage Backed Securities industry, and the first major iBank to go ka-boom. Why isn’t he at least in the top 10? Certainly, he deserves more blame than the hapless Stan O’Neal of Merrill and Lehman’s Fuld ? And where is the CEO of Morgan Stanley? (Gee, I guess they had nothing whatsoever to do with this).
And while the former CEO of the ratings agency Standard & Poors is on the list, where is the even bigger Moody’s? (and Fitch, also).
None of the monoline bond insurers are included: MBIA, Ambak, FGIC. When they collapsed, they utterly disrupted municipal finance. They must be included on a list that seeks to assess blame.
Finally, holding Lew Ranieri – the father of mortgage-backed securities — to blame for what happened is like blaming Oliver Winchester, the inventor of the repeating rifle, for WWI. He merely invented a tool, and it was subsequently misused by others. I guess this means that the farmers who grow corn are responsible for obesity also.
~~~
Here is the flawed Time list:
1. Angelo Mozilo – Co-founder and former head of Countrywide
2. Phil Gramm – Chairman of the Senate Banking Committee from 1995 through 2000
3. Alan Greenspan – Former chairman, Federal Reserve
4. Chris Cox – Former chairman, Securities and Exchange Commission
5. American Consumers
6. Hank Paulson – Former Secretary of the Treasury
7. Joe Cassano – Founding member, AIG’s financial-products unit
8. Ian McCarthy – CEO, Beazer Homes
9. Frank Raines – Former chairman and CEO, Fannie Mae
10. Kathleen Corbet – Former CEO, Standard & Poor’s
11. Dick Fuld – Former CEO, Lehman Brothers
12. Marion and Herb Sandler – Former heads, World Savings Bank
13. Bill Clinton – Former U.S. President
14. George W. Bush – Former U.S. President
15. Stan O’Neal – Former CEO, Merrill Lynch
16. Wen Jiabao – Premier, China
17. David Lereah – Former chief economist, National Association of Realtors
18. John Devaney – Hedge fund manager
19. Bernie Madoff – Ponzi scheme orchestrator
20. Lew Ranieri – Father of mortgage-backed securities
21. Burton Jablin – Programmer at Scripps Networks, which owns HGTV
22. Fred Goodwin – Former chairman and CEO, Royal Bank of Scotland
23. Sandy Weill – Former chairman and CEO, Citigroup
24. David Oddsson – Former Prime Minister, Iceland
25. Jimmy Cayne – Former chairman and CEO, Bear Stearns
>
Source:
25 People to Blame for the Financial Crisis
Time, February 10, 2009
http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html
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February 13th, 2009 at 7:39 am
If David Lereah were suffering from tertiary syphilis affecting his brain, perhaps he’s neither detestable nor a liar, but merely worthy of pity as he would be suffering from a disease.
February 13th, 2009 at 8:06 am
social mood of the country,,,,,
February 13th, 2009 at 8:22 am
The list has the feel of one of those “Best Rock Albums of All-time” lists. It can never be all-inclusive and everyone has their favorite that’s going to just miss making the list.
I agree with one of the posters yesterday though that suggested allocating blame –
Greenspan – 7%
Mozilo – 3%
Consumers – 13%
etc.
February 13th, 2009 at 8:25 am
Barry, I agree, the list is flawed and seems to have been written by one serious person and one comedy writer (HGTV…c’mon!)
Here’s My List:
1. Alan Greenspan
(end of list)
as for David Lereah…see “Great Moments in Willful Ignorance”
http://thereformedbroker.com/2009/02/12/great-moments-in-willful-ignorance/
February 13th, 2009 at 8:31 am
People love to have someone to blame on the way down, just like the love to have someone to worship on the way up. Tapping into that is a great way to capture eyeballs, as you noted.
February 13th, 2009 at 8:36 am
more telling might be noting the last time Time emitted anything resembling critical thinking faculties, leading one to the *Truth..
btw, back from the expeditionary intake of *exhaust fumes..LSS: the ‘twain between micro- and macro- has seldom been broader..
February 13th, 2009 at 8:42 am
Interesting that no journalists, publications or other media make the Time list.
“We report, you decide” my tuchus.
February 13th, 2009 at 8:49 am
The UK’s Guardian has a rather better list
http://www.guardian.co.uk/business/2009/jan/26/road-ruin-recession-individuals-economy
And also held a poll of reader, which came to conclusion similar to yours:
http://www.guardian.co.uk/business/poll/2009/jan/26/road-to-ruin-recession
Greenspan gets almost a third of the vote with Bush, Clinton, Brown and the american public featuring prominently
although I am more inclined to are with one of the comments posted to this article:
(1). MILTON FRIEDMAN.
(2). Von Hayek
(3). The Chicago School of Economics
(4). Margaret Thatcher. (specific to the UK)
(5). Ronald Regan. (speific to the USA )
(6). The Bankers who authored the Basle Accord. ( Basle 1) [they are responsible for the use of off balance sheet accounting]
(7). The entire governments of the 1980′s to the present day. They all took the bait of untold riches and wealth thanks to globalisation and neoliberalism.
(8). Alan Greenspan
(9). Tony Blair and Gordon Brown for removing the last remnants of regulation in the financial sector in the UK
http://www.guardian.co.uk/business/2009/jan/26/road-ruin-recession-individuals-economy?commentid=52aad084-e719-4af7-b6d5-d71823356a52
I have removed the 10th culprit, on the grounds of insanity
February 13th, 2009 at 8:51 am
Playing the blame game is a dangerous, and highly politicized, distraction from the policy lessons we need to learn from this fiasco. Please, Barry, focus less on the who and more on the what.
We know, for example, that regulatory oversight, or the lack thereof, played a role in this crisis, but we could stand to do a bit more investigation into the factors that lead to an astonishingly high demand for collateralized debt obligations. Can we simply chalk that up to a loose monetary policy, or do we also need to rethink the conventional wisdom about the incentives involved with various forms of tax cuts? Is a growth in real GDP without an attendant growth in real NFP a true danger sign that some form of bubble is headed our way?
These are the kinds of questions we should be asking ourselves.
February 13th, 2009 at 8:52 am
Re: “23. Sandy Weill – Former chairman and CEO, Citigroup”
What about Chuck Prince?!?
____________________________________________________________________
P.S. Barry, since you are a naive fan of Chanos, believing that Chanos is “an honest” short seller.
What do you think about the evidence suggesting that Chanos is the crook?
“Jim Chanos’s Kynikos Associates Ltd., a short seller of Fairfax Financial Holdings Ltd., learned of negative analyst research on that company before it was published, according to unsealed court documents.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=ai9xJ42wz7fk
February 13th, 2009 at 9:00 am
This list is another branch of the US entertainment industry. Putting Lereah in there is like blaming Fredo for the crimes of the Corleone family. He was a bit player. The real culprits are a set of economic beliefs, not all of them wrong btw, that were slavishly implemented by a group of doctrinaires some of whom didn’t even understand the doctrines. Those that did like Greenspan and Cox need to be held to a higher level of accountability than people like Lereah. As for the assorted group of basically crooks like Mozilo and Neil they just took advantage of a situation as in truth most of us would. If you shut down the police dept of Philly and take out all the commercial and home alarms then crime is going to go up. Either way it’s water over the dam. I hope they catch up with some of these folks but I’m not hopeful particularly since there’s a body of thought that would be quite happy to do it all over again.
February 13th, 2009 at 9:11 am
I would add Cramer on the list…the way he screamed for rate cuts the last decade everytime the market tanked and suckered the public into thinking fighting the Fed was a losing proposition.
February 13th, 2009 at 9:12 am
From my perspective (which “dumbmoney” pretty well sums up: rural Maine, self-employed, not a professional trader, don’t make my living in finance, etc.) the poster boy for this entire debacle is Hank Paulson. How can you go from being the Chairman/CEO of Goldman to Treasury Secretary and either not have had any clue this was coming, or knew and chose not to do anything until it had become what he presented as armageddon. He should be in jail.
February 13th, 2009 at 9:20 am
Nice to see Franklin Raines on here, but why are none of the Congressmen that Fannie & Freddie bought included? How the hell is Barney Frank not on this list?
Oh, right. He wants lots of regulation now so that makes him a good guy and excuses all past sins.
Where the hell *is* Franklin Raines anyway?
February 13th, 2009 at 9:24 am
What about Barney Frank and Chris Dodd , the enablers of FNM and FRE ???
and Maxine Waters and her ilk , who pushed banks into lending to below prime homeowner prospects who had poor credit ratings and are now the biggest percent of foreclosure failures ???
and the U.S. Congress for pushing GSE’s and Banks to lend to below prime consumers….and passing legislation which allowed leverage to expand for banks and brokers and off balance sheet users ???
Just like the flawed Telecom Act of 1996 triggered the Internet and Telecom bubble , most Real Estate legislation passed in the 1990′s-2000′s was flawed and enabled the current environment
…. all of the actors on the top 25 list , couldn’t do what they did without the legislative environment that Congress pushed upon all of us
February 13th, 2009 at 9:26 am
I suppose we should be happy it’s not just a long list of short sellers.
February 13th, 2009 at 9:31 am
I did like one thing on the list, the consistent use of the word ‘Former’.
February 13th, 2009 at 9:31 am
P.S. Barry, since you are a naive fan of Chanos, believing that Chanos is “an honest” short seller.
What do you think about the evidence suggesting that Chanos is the crook?
“Jim Chanos’s Kynikos Associates Ltd., a short seller of Fairfax Financial Holdings Ltd., learned of negative analyst research on that company before it was published, according to unsealed court documents.”
Please explain how having early, possibly unsolicited access to an analyst report makes Chanos a crook. Can you even say for sure whether Chanos would not have shorted Fairfax more aggressively without receiving the support? Or are you just jumping at chances to pronounce anyone on Wall Street a crook?
It’s not like he had insider information about the company itself. If the stock traded lower as a result of the report, it was because the sellers believed its analysis of the company, not manipulation.
At worst, the analyst defrauded his subscribers by giving Chanos earlier access to his writing, but I certainly don’t see anything approaching a good case that Chanos is a crook here.
February 13th, 2009 at 9:32 am
“without receiving the support” should read “without receiving the report“
February 13th, 2009 at 9:50 am
I love this line from the Guardian article linked earlier:
“Only a couple of years ago the long-serving chairman of the Fed, a committed free marketeer who had steered the US economy through crises ranging from the 1987 stockmarket collapse through to the aftermath of the 9/11 attacks”
A “committed free marketeer” who “steered” the economy from his perch in Washington. HOooooo-kay.
February 13th, 2009 at 9:50 am
I love the folks who still insist it is in any way the fault of the CRA and Democrats like Frank and Dodd.
To them I say:
1. Ronald (get the government off my back) Reagan, and all other proponents and implementers of deregulation)
end of list.
February 13th, 2009 at 9:52 am
1. Ronald (get the government off my back) Reagan, and all other proponents and implementers of deregulation)
You know, I’m not saying he’s blameless at all, but you would think that 20 years would have been enough time to correct whatever alleged grievous errors Reagan had foisted on us.
February 13th, 2009 at 9:54 am
I second Rubin/Summers, Prince and Chanos (see below), but Madoff is no rube, Barry – he’s the author and namesake of the “Madoff Exception”, an SEC rule exempting him and his buddies from its other rules. Madoff is at the epicenter of the NSS/FTD scandal, which is a right lot bigger than you might think – DTCC is a bottomless pit. Go to deepcapture for more.
This financial wart has deep roots: Michael Milken, Ivan Boesky, Michael Steinhardt, Steve Cohen, Leon Black, Felix Sater, David Rocker & the Belzbergs, Jim Cramer, Herb Greenberg, Larry Kudrow…
February 13th, 2009 at 9:55 am
I blame it on I.
February 13th, 2009 at 9:56 am
Calculated Risk reminded me of someone who should be in that list:
Office of Thrift Supervision Chairman John Reich
He’s leaving, by the way.
http://www.calculatedriskblog.com/2009/02/ots-chairman-reich-steps-down.html
February 13th, 2009 at 9:57 am
There was some excellent Bloomberg interview with Jim Grant and Chanos a couple months back where Grant indignantly said, “You know, Jim Chanos didn’t show up in 2007 with his balance sheet leveraged 35:1 with MBS. That was Bear Stearns.” Seems an appropriate rejoinder to the Chanos bashers here. If you lost money in his shorts, get over it.
February 13th, 2009 at 10:00 am
Graphite Says:
February 13th, 2009 at 9:20 am
1001 Says:
February 13th, 2009 at 9:24 am
For all the members of the Barney Frank Appreciation Society please note the housing bubble started sometime in 2002 and ended in late 2006. Anyone disagree? Frank became chairman of the House Financial Services Committee in January 2007. Who had control of this committee from January 1995 to January 2007? Who was responsible for oversight of F/F during the housing bubble…It certainly wasn’t Frank any more than it was the Gore and Kerry administrations. Do try and separate fact from prejudices ….I know it’s hard
February 13th, 2009 at 10:02 am
Perhaps this is what @I-Man meant when he says “I blame it on I,” but we would have had a garden-variety problem had there not been a demand for the securitization tranches.
The professional investment managers who bought the crap kept the machinery going. Without them (Us? Although I wasn’t a buyer, I am an investment professional), we wouldn’t be here.
February 13th, 2009 at 10:08 am
Graphite Says:
February 13th, 2009 at 9:52 am
1. Ronald (get the government off my back) Reagan, and all other proponents and implementers of deregulation)
You know, I’m not saying he’s blameless at all, but you would think that 20 years would have been enough time to correct whatever alleged grievous errors Reagan had foisted on us.
Graphite I agree with you entirely on this. There aught to be a statute of limitations on how long we can carry on holding long extinct presidents responsible for today’s problems. But what your missing here is that from 2001 the Bush admin and it’s allies who controlled congress doubled down on Reaganomics if I can call them that as a sort of shorthand in a way that even the Reagan admin backed off from doing. Even the sainted Ronnie adjusted course a bit when he could see it was required, the Bush crowd didn’t want a gyroscope.
February 13th, 2009 at 10:15 am
I actually respect Barney Frank a lot for his work on civil rights and his willingness to question the “Fed as a permanent benevolent fixture in the U.S. economic landscape” orthodoxy. But I do fault him now for his support for bailouts and ongoing interventionism of all kinds, but I guess that’s more of a “top 25 people responsible for the bungled response to the financial crisis” list. To be fair, Chris Dodd did a lot more to earn his place on the list than Frank.
February 13th, 2009 at 10:22 am
Bush II administration was really Reagan III – if not the same exact cast of characters (Cheney et al…) then certainly the philosophy.
February 13th, 2009 at 10:25 am
P.S. “Please explain how having early, possibly unsolicited access to an analyst report makes Chanos a crook.”
Well…
1. A crook is a person who engages in illegal activities.
2. Four criteria need to be established to prove in the court of law that Chanos is the crook that was engaged in illegally trading stocks.
- Was the information “material”? — *YES*
- Was it “non-public information”? — *YES*
- Was Chanos “in possession” of material non-public information? — *YES* — “Just got off the phone with Gwynn at Morgan Keegan — his piece that rips FFH apart is supposed to be published tomorrow”
- Was Chanos trading on this information? — *YES* — “Chanos had been covering his positions up until the point when he received the tip that Gwynn is going to issue his report” Bowe said. “And between that time and the time of the report coming out, he shorts over five million worth of Fairfax shares, half of which he shorts the day before the report comes out”.
3. Did Chanos meet the criteria to be the crook? Yes, yes, yes, and yes.
If Chanos is not “the crook” then who is?
February 13th, 2009 at 10:26 am
If Jim Rogers told me he was going to go on CNBC tomorrow and tell everybody to short the ruble, would I be a crook if I front-ran that trade?
February 13th, 2009 at 10:28 am
Wow, welcome back Hoffer. There’s a lot of blame to go around but of course an MSM outlet gets much of it wrong. The irony of that is rich.
February 13th, 2009 at 10:30 am
Saying Madoff doesn’t belong on the list overlooks one of the largest contributors to this crisis: Lack of Confidence. When people see this sort of thing happening in the investment community, its just another reason not to trust financial, investment or government people.
February 13th, 2009 at 10:34 am
I-Man Says:
I-man has the only answer that will lead us from this ‘desert’..
contra to this: “Without them (Us? Although I wasn’t a buyer, I am an investment professional), we wouldn’t be here.”–tom brakke
We were All buyers, if drawing breath at any time over, the last ~38 years–alluding to, of course, Nixon’s shift to the Petro$..in ’71..as a, singular, nearer time, reference pt. ..
February 13th, 2009 at 10:36 am
IMO, the problem is not people like Madoff. The existence of people like him is a given. They’re only able to sucker so many people and so much money when there’s way too much investor confidence. He was a symptom of overconfidence, not a cause for the loss of confidence.
Why was there so much overconfidence? 20 years of the Greenspan Put, I figure.
February 13th, 2009 at 10:38 am
@deanscamaro: And there are more Madoff’s coming that could destroy what’s left of that trust & confidence.
February 13th, 2009 at 10:53 am
OT:
@Jeff,
good to see you, too, hope all is meeting you well..
@BR
way to keep on keepin’ on~
and, for my own sense, I’d like to hear answers to the Q: “Who does a better job of assembling an antidote to the Plague, that is the MSM, than Ritholtz?”
February 13th, 2009 at 11:21 am
There is a strange and strangely interesting list of people to blame for the Financial crisis from Time magazine. It is quirky and odd and in more than a few places, misguided and ignorant.
——————
Speaking of lists, Barry can you (or anyone) post your list of what you consider the primary culprits behind the housing/credit bust? Searching turned up lots of stuff, but not the list that I recall being posted here at one time. thx
February 13th, 2009 at 12:31 pm
@Rick Schaut:
you’re wrong dude- you can talk about regulatory oversight all day long but the fact that no-one was watching does not make it right. If there is not enough poilce on the street does not excuse me from breaking into someone’s home and stealing their TV. There is always a decision to be made and a person has the abilty to choose which path to follow.
February 13th, 2009 at 1:25 pm
Time, USN&WR, Newsweek…. When was the last time any of these magazines were GOOD? Who still reads them? The quality of their articles doesn’t come close The Economist, thank the brits that there’s at least one news mag still worth reading. The best social commentary articles these days are in Vanity Fair, which tells you something about the state of our media.
In other news today:
Judges Plead Guilty in Scheme to Jail Youths for Profit
http://www.nytimes.com/2009/02/13/us/13judge.html?hp
The world just made me even sicker. After reading this watch the movie “Let’s go to Jail”, a movie I’d recommend for any Arrested Development fans.
February 13th, 2009 at 1:41 pm
Well, I guess we can deduce that European participation in this poll was minimized; as a Jew would at least crack the top two.
Also: really?
http://www.ynetnews.com/articles/0,7340,L-3669706,00.html
February 13th, 2009 at 1:48 pm
Fred Goodwin was not Chairman of Royal Bank of Scotland, was he?
February 13th, 2009 at 6:02 pm
Where’s Geithner on the list? He wasn’t Fed Chair, but he was NY Fed head, no? And certainly not nearly as vocal as Yellen about the excesses of the recent past. More on his bubble credentials here:
http://bacalasbrain.blogspot.com/2009/02/on-geithner-and-bubbles.html
February 14th, 2009 at 6:05 pm
Graphite and ottovbvs don’t seem to realize the importance of Ronald Reagan to the “government is the problem” crowd. His election and eight years of rule made what had been previously thought of as a far-right oddball idea (the Milton Friedman notion that Keynes was wrong, and that only the markets should allocate resourses, without any regulation by the government) the new standard economic model of the Republican party. Rather than having twenty years to correct his errors, the government “of the rich” has spent the last two decades continually enlarging the power of the no-control crowd, and decreasing the regulatory power of the government. This ridulously insane idea has brought us to our current situation.
February 26th, 2009 at 12:04 pm
Barry, what ever came of your Financial 9-11 angle?
http://bigpicture.typepad.com/comments/2008/09/terror-attack-o.html