Thursday, May 6, 2010

To Misters Cayne, Schwartz, Fuld: shut up.

The idea that Bear Stearns, Lehman Bros, and possibly other investment banks came under "speculative attack" as a result of some inability of market regulatory institutions to control such attacks (exhibited, for example, in the absence of an "uptick rule") is crap. Your businesses imploded because they were built on the precarious business model of borrowing to the hilt in short term markets to buy risky illiquid assets. Your cries of conspiracy serve to underline the point (obviated in 2008, I think) that you don't understand the markets well enough to operate these things prudently. Where regulation may have failed is in preventing you and your ilk from getting into that position in the first place!

Surely, your accumulated bonuses save you from the economic consequences you deserve to suffer; the (low, low, low) reputation you have earned through the episode is some consolation to those of us who firmly believe that you brought this on yourselves. In the end, it is very little consolation: given a chance, I have no doubt that any of you would do it all again if you were given the chance. In fact, I don't blame you for that. Given the same opportunities and incentives, I would do the same. But what I wouldn't do is bitch about how the market screwed me over. It's time for you to pretend to some humility!

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