I like Charlie Gasparino. I really do. He used to be a sharp elbowed, hard nosed WSJ reporter that dug for stories. Blood on the Street: The Sensational Inside Story of How Wall Street Analysts Duped a Generation of Investors remains a great read.

But like many pundits on the right, he simply has a hard time imagining that companies could blow themselves up. Its an anathema, a violation of deeply held beliefs that companies do not any need rules or regulations, and that markets somehow can self-regualte.

Here’s Charlie:

“In reality, his work as AG was profoundly uneven. He brought a few good cases, but (as I wrote in Tuesday’s Post) never won in court — not a single one against a major player, Grasso included. He went after headlines, not substance, which is why his record in court was so lousy. He cut deals, allowing big banks to pay fines and escape real reform. Does anyone really believe he “reformed” Wall Street research?

And [Spitzer] he might have actually abetted the crisis. He drove out Hank Greenberg as CEO of AIG over accounting irregularities; it was new management put in place to appease Spitzer that let one unit take insane risks, digging the hole that led to AIG’s downfall — a key ingredient in the broader financial collapse.” (emphasis added)

That is simply a false and misleading statement. AIG had been in the business of writing risky derivatives for a long time. Hank Greenberg’s hand picked Joseph Cassano, the executive that ran AIG FP (immortalized as The Man Who Crashed the World). And keep in mind that in 2003, the big credit mania that drove the housing boom and bust was still in its early innings.

The list of false issues that ostensibly caused the crisis continues to grow longer and longer . . .

>

Previously:
The Crisis Was Caused by [Insert Pet Peeve Here] (January 2011)

Source:
Gunning for Eliot
Grasso v. Spitzer for mayor?
NY Post, March 2, 2011
http://www.nypost.com/p/news/opinion/opedcolumnists/gunning_for_eliot_RIntMklaH0MpY5j1fvT9oK

Category: Bailouts, Derivatives

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

35 Responses to “Gasparino: Spitzer Caused the Financial Crisis”

  1. franklin411 says:

    He strikes me as an arrogant d-bag who yells over people, goes on on-screen rampages, and has a hot temper (the mark of a truly small man). Are you saying “like” where you mean “respect?”

  2. None of Spitzer’s claims against Greenberg ever went to court. Is it not fair to say that if Spitzer had not been tilting at windmills like Greenberg but instead focusing on mortgage fraud (or perhaps keeping his personal life within bounds) that there would at least have been some result from his efforts?

    Gasparino may be incorrect in his assertion that the crisis would have been abetted, but correct in the sentiment that Spitzer’s Ahab-like pursuit of Moby Greenberg was certainly not productive.

  3. Fitgerald says:

    Charlie what have you got?

    Is there a possibility that Charlie G and Rick Santelli could open a fruit stand somewhere and just banter back and forth with each other?

  4. carleric says:

    Gasparino is just another tiresome permabull raised on the mother’s milk of CNBC. He didn’t have anything worthwhile to say then and nothing now….why quote this moron?

  5. DeDude says:

    He has his dogma and tries desperately to mold the world around it. Standard procedure for people who are mostly wrong.

  6. Detroit says:

    Sure, Spitzer was and is a media hound, but he shined a light on rampant bid-rigging in the insurance business whereby brokers and carriers (AIG prominently) mutually screwed their customers. Also, let’s not forget that Gen Re (subsidiary of Berkshire) employees were prosecuted and went to jail for conspiring with AIG to falsify it’s balance sheet via sham reinsurance transactions. The idea that Greenberg was somehow a victim is absurd.

  7. Lyle says:

    But All the Devils are Here, explains that Sullivan did not have the internal stroke to confront Cassano, because Greenberg was the sole power at AIG. So when Sullivan would ask a question FP would delay as much as possible. For example why was Sullivan not briefed on the worst case possible scenario when he became CEO.
    The big problem with AIG, Bear Stearns, and Lehman was that their CEO’s had been in the job far to long, the more one sees the more one thinks that CEOs need a 10 year term limit. (Even if they found the company) because after that they surround themselves with people who tell the CEOs what they think the CEOs want to hear.

  8. It’s a few years since I read Maggie Mahar’s “Bull,” but the part about Spitzer being more interested in grabbing headlines than in doing the difficult work that would have been necessary to change Wall Street rings a bell. Strikes me as pure b.s. to say that he was a showboat who did very little of actual importance as AG, but he did do enough to help cause the crisis. That sounds like pure b.s.

  9. louis says:

    Sorry Charlie, having someone at the helm of the NY Fed who does not know what regulation is might be a bigger problem. AIG was a a sleep on this. Plus no one gave a shit. How many times did Cassano feed them bullshit on how they would never lose a dime?

    Is there a chance Elliot did not let you meet some of the girls?

  10. Bill Wilson says:

    “…a violation of deeply held beliefs that companies need rules and regulations, and that markets somehow can self-regulate.”

    Did you mean “companies don’t need rules and regulations”? I don’t mean to be a wise guy. I just want to make sure I’m following your logic.

    I think corporations can and do blow themselves up, courtesy of their own stupidity, but the government should do nothing to stop it. Rules and regulations are important to protect consumers, not to protect companies from their own bad decisions.

    ~~~

    BR Doh! Fixed above:

  11. b_thunder says:

    another News Corp attack “dog” uses News Corp owned newspaper to throw a jab at a “democrat” who uses a competitor (CNN) as a launchpad…

    “His fantasies have been buttressed, I also hear, by his ego-inflating experience as a CNN host (despite its lousy ratings) and the favorable treatment he got in “Client 9,” – Charlie, why don’t you do some real reporting and tell us who the Clients 1 through 8 were?

    In Italy or France a person with Spitzer’s “Street cred” could have been easily elected President or Prime Minister… well, if he wasn’t also Jewish… But unlike “the old europe,” in this country the infamous blue dress caused at least one unnecessary war, thousands of dead soldiers, $5 trillion of additional debt, near-total economic collapse, and many many other wonderful things. Indeed, USA is quite unique among the “developed” countries.

  12. sumo says:

    Alaric Investments wrote:

    “Is it not fair to say that if Spitzer had not been tilting at windmills like Greenberg but instead focusing on mortgage fraud (or perhaps keeping his personal life within bounds) that there would at least have been some result from his efforts?”

    No, it’s not fair. You can thank the Bush administration and the OCC for cheering on the predatory lending orgy and stopping AGs like Spitzer from doing anything about it:

    http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html

    “…In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

    But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation… “

  13. MacroEconomist says:

    Barry, facts are inconvenient in today’s soundbyte media. Thanks for keeping it straight.

  14. Petey Wheatstraw says:

    “Its an anathema, a violation of deeply held beliefs that companies do not any need rules or regulations, and that markets somehow can self-regualte.”
    ___________

    It’s more than deeply held beliefs, it’s 13 year-old mentalities trapped in middle aged bodies masturbating to Ayn Rand. I honestly believe that they believe they’ll go blind if they stop.

  15. DonF says:

    I probably spend a good portion of every day refuting free-marketers who try to put the crisis on “too much regulation”, public policy, Fannie/Freddie or anything but fraud, greed, and recklessness. Thank you for setting people straight. This is outrageous. So the collateral calls wouldn’t have been written in under Greenberg? I think they were. It isn’t even worth getting into. That is such a misleading statement.

    But one thing not mentioned here, that I also find disgusting is the insinuation that these “accounting irregularities” were nothing to have been worried about. Didn’t they reduce earnings by about $3 billion? Now I realize that, yes, compared to the bailout, $3 billion doesn’t seem like much, but is he really saying that the accounting irregularities were not a big deal?

  16. bobmitchell says:

    Gasbag might have a reason for a career, I have never seen it.

    What was Spitzer talking about in the days before the hooker came running out of the closet? Asking why NYS was still paying into bond insurers when it was very clear that the only people who would be insured by them were the CDO’s, and their brilliant buyers.

    And one more thought, a pol that is shamed by ONE hooker? Make him prez for life.

    Gasbag, still reporting live from under the table and in between the legs of the biggest names on Wall St.

  17. JimRino says:

    I think it’s: Capitalism has no ability to do Risk Management once a system [ or company ] starts to make money.

    We are living in very dangerous times.
    Not only the financial sector can bring us down.
    Here’s a few other ways we can have Disaster Capitalism.
    - GM crops become Mono crops, and all die from the same plague.
    - Business-Government “Partnership”: Weakly tested insecticide kills all Bees.
    - Frackers destroy New York and Pennsylvania water supply.
    - Oil goes to $200, oil industry making record profits, invests nothing in Wind, Solar or Thorium Nuclear.
    - Health Insurance & Private Hospital care become so expensive the bottom 60-90% of the US population can’t afford it.

  18. beaufou says:

    Greenberg settled for $15 million. Hardly a testament of innocence, it shows even the justice system has been corrupted to the core when an AG can’t nail you on criminal charges.
    But then again, it was “only” a $500 million fraud, very weak when you compare it with the $180 billion bailout AIG got from taxpayers.
    The devil is in the details and you should tell your mate Gasparino that waiting for the big one is the perfect recipe for we saw happened in 2008.
    Regulations now or we will see it again but worse.

  19. Seth says:

    Bankers win coming and going. Who else on planet Earth can blame the cops for their misdeeds and actually convince anyone?

  20. Jim Greeen says:

    I admit this is off topic but I just watched “Client 9: Rise and Fall of Eliot Spitzer” on Netflix. Very interesting inside look, had the ring of authenticity with plenty of after the fact interviews with Spitzer. Verys urprised by that!!

    Eliot became an uncontrollable cannon, his failings were discovered by those hire to find something, anything and the rest is history.

    Worth a watch!!

  21. Andy T says:

    Pretty SAD comment section Barry….

    Like moths to the flame, you’ve got a pretty strong group of leftists who regularly contribute to the “comment-bait” posts…

    Even though Gasparino is an ass-hat, you’re doing a good job of making him a sympathetic figure.

    Way to go.

    ~~~

    BR: Sorry, but there is an objective reality, and Gasparino studiously avoids it. Why you feel the need to defend his silliness by critiquing the comments here is beyond my understanding.

  22. holulu says:

    Barry, this is why I love you.

    YOU HAVE INTEGRITY TO SPEAK TRUTH.

  23. Sam Z says:

    Andy T:

    I have never read a positive comment from you here EVER.

    I don’t know if you are angry or jealous or just losing money by ignoring BR, but jeebus, you simply never have anything nice to say.

    Ever.

  24. anonymouse says:

    As Gasparino now “reports” for FOX, I’m surprised he didn’t blame the “greedy WI public sector unions” instead of only going after Spitzer. Has Charlie forgotten how the unbridled economic power of poor people triggered the financial crisis through the CRA?

    http://www.huffingtonpost.com/2011/03/01/jon-stewart-critiques-wis_n_829618.html

    You’ll notice Gasparino appears at the 4:18 point briefly telling us teachers are over-compensated relative to the rest of us.

    I like Spitzer.

    Leftists? Channelling Tailgunner Joe McCarthy?

  25. DeDude says:

    I don’t see Andy defending anybody, he is attacking with personal negative remarks. He is attacking those who suggest that the rich peoples unrelenting predation on poor people should be stopped. I presume he is a predator himself but not so good at it – and then it is just natural to blame other people (blocking predation with their opinions) rather than taking personal responsibility for his own sh!tty carma.

  26. Moss says:

    Once again we see how a bias disregards facts to strengthen a certain belief. The preponderance of the belief influences any sort of objective analysis. CG is simply reinforcing the belief he holds as well as that of his employer.

  27. Ed789 says:

    It is clear that Gasparino contention that Spitzer’s actions that caused Greenberg to resign resulted in a weaker CEO at the helm of AIG is true. While it is also true that the FP division was up and running while Greenberg was CEO, it was at a much smaller level. The demand for the products ramped up after the IB’s wanted to short the housing market and duped AIG into being on the other side of the trade. What is unknowable is how Greenberg would have reacted. My own view is he would have seen the ruse and reduced his company’s position. For him good risk management would equal good business and he is a good businessman.

    ~~~

    BR: Your comment is inaccurate. Your conclusion is both false and misleading, to wit:

    It was Tom Savage, the President of AIG’s Financial Products from 1994 to 2001, who embraced the free lunch mantra:

    “The models suggested that the risk was so remote that the fees were almost free money. Just put it on your books and enjoy the money.”

    Hence, the mindset was there LONG BEFORE HANK LEFT. The trajectory of AIG FP was an increasing proportion of AIG’s profits for more than a decade prior to the housing boom.

    If you have any evidence, any reason to believe that there was going to be a significant break from this approach during the CDO/CDS era, please provide it.

  28. AHodge says:

    right
    this stuff is more than a list of false issues
    its a complete interlocking self supporting BS narrative of what happened, including greenie above
    a fantasy of economic history
    that ensures nothing gets fixed and totally suits wall st.

    as for greenberg he totally deserved being chased. AIG is the lowest.
    i have a friend who ran their biggest sub in the 90s
    has stories that would curl your hair.
    Forced to resign
    his boss was literally taken out in handcuffs 6 mo later
    but had his freedom bought by the greenbergs

  29. beaufou says:

    Thou shall not steal from your masters, you will be send to jail unexpectedly.
    http://dealbook.nytimes.com/2011/03/02/judge-unexpectedly-imprisons-goldman-programmer/?ref=global
    Remember him?

  30. GrafSchweik says:

    It’s pretty clear Andy T has never spent any length of time in Europe, unless it was in English only enclaves such as American military bases. Conservative governments over there like Merkel’s and Sarkozy’s are to the left of the Obama administration.

    Given that the Cold War ended over 20 years ago, we can assume that Andy’s capacity for further education/cognitive development had reached its maximum potential by then and remains frozen in time, his rhetoric merely selective recitations from the First Book of The Profit Raygun [circa 1964 CE]…

    Barry, you have my ongoing thanks for your blog. I shall probably be writing you in on my presidential ballot next year.

    ps Andy, 10 years from now Europe, regardless of the Euro, will look a lot better than the US of A. Keep the Faith; it’s all you’ve got! :-)

  31. mgflaw says:

    Here is a very bright, talented writer with all of the ability in the world to be a fine journalist. Unfortunately, he cannot seem to put his extreme right-wingnut political views aside and get to the hard truth, like a true journalist would. So he trades in the one thing that journalists need- his credibility – in exchange for the freedom to espouse his nasty, bitter, mean-spirited, right-wing nonsense.

    What’s left is not a journalist – but another in a long line of angry right wing commentators who is willing to do or say anything that fits within his narrow political ideology.

    Quite pathetic, really.

  32. BWysong says:

    Robert Teitelman over here at The Deal wrote a response, Barry, to your article. I thought I’d share the link:

    http://www.thedeal.com/thedealeconomy/gasparino-on-spitzer-and-grasso.php

    ~~~

    BR: Tx for the heads up — I commented there

  33. Andy T says:

    “Why you feel the need to defend his silliness by critiquing the comments here is beyond my understanding.”

    Pretty sure nothing I said was in “defense” of Chaz Gasparino. In fact, I referred to him as an ass-hat. He made one very small comment in the article: “he might have actually abetted the crisis.” It was one line in an article and he used the words “might have.”

    So, then you “jump on it” and make an ENTIRE post analyzing some stupid line in a stupid article….

    Then, the left wing acolytes of this blog (Beafeau, Petey, DeDude, etc…) wax on about Fox News and the right wing folks and Ayn Rand and blah, blah, blah…

    I just think there are “headier” things to discuss.

  34. beaufou says:

    What you call right wing folks are not right wing, they’re extremists bred by the likes of Mc Carthy and the John Birch society who labeled Eisenhower a communist.
    Extremists who despise reality and those who disagree with them even more.

  35. StatArb says:

    Chaz spends too much time at San Pietro , brown-nosing John Mack and Dick fuld