Posts Tagged ‘derivatives’

Warren Buffett defends snake-oil sales

4 May 2010

That’s my interpretation of this column, anyway.  The NYT‘s Andrew Ross Sorkin and all the other apologists for Goldman Sachs take a different view.

Buffett says the institutions who bought the reeking mortgage derivatives from Goldman have only themselves to blame.  They just got outsmarted.

Um, couldn’t we say the same about the lady who bought the kerosene-soaked sugar from the local grocer?

Why was Goldman selling toxic products in the first place?  If they knew they were toxic, isn’t that fraud?  Isn’t that the basis of the lawsuit?

I’d always liked Warren Buffett prior to reading this column, but now it’s hard not to conclude that he’s just like all the rest who would maintain that nobody on Wall Street bears any blame whatsoever for the financial crisis.  Buffett famously said a while back that derivatives were financial weapons of mass destruction.  Caveat emptor — said destruction can only be the buyer’s fault.

UPDATE, 7 May 2010:  Les Leopold, author of The Looting of America, says all this, and more, right here.

Obligatory song link:

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Bill Clinton accepts some blame for the crisis

27 May 2009

It’s part of a lengthy cover story in Sunday’s New York Times Magazine.  There’s a good synopsis of it here in The New Republic online, and another one by NYT economics writer David Leonhardt, with annotations, here on the Times‘s Economix blog.  Some highlights:

Clinton says he totally blew it in acceding to Greenspan’s call that derivatives should be unregulated.

He also says that his backing of Gramm-Leach-Bliley (i.e., allowing banks and investment banks and insurance companies to merge) would have been wise only if, as he expected, there was going to be appropriate regulation and oversight of the new financial supermarkets.  Had he known there would be none in the next two presidential terms, he would have opposed it.

Very interesting.  He’s a lot more open about his administration’s shortcomings in this department than, say, Larry Summers has been.  Just in the little bits I saw, Clinton is thoughtful and persuasive.

He also touches on the important distinction between regulations/prohibitions and oversight, with financial supermarkets as a case in point.  When you can count on having good regulators who provide adequate oversight, then you can allow certain activities that might otherwise better be prohibited.  Then again, is “deregulation with proper oversight” too clever by half (not to mention oxymoronic)?  We shouldn’t be learning about this policy approach a decade after these deregulatory policies were put in place.  Who was speaking up for proper oversight during the Bush years?

Blinder on blunders

2 February 2009

Alan Blinder has long been both one of the best policy economists and one of the best writers in the profession, so it’s no surprise that his recent New York Times column, “Six Blunders En Route to a Crisis,” has great pith.   He is fair-minded enough to “omit mistakes that became clear only in hindsight.”  The list, in his words:

wild derivatives, sky-high leverage, a subprime surge, fiddling on foreclosures, letting Lehman go, TARP’s detour.

For quick insights on the current crisis, it’s a great resource.

(Note:  The title I provide is the one from the print edition.  The online edition employs a more prosaic title that does not allude to either Pirandello or Nixon.)