Janet Tavakoli Writes In
Do you wonder why SIGTARP put out a couple of interesting facts yet missed the really damaging information: Goldman’s underwriting of CDOs that had suspect collateral, Blackrock’s history of CDO management failure, mismarking of the assets in Maiden Lane III, previous settlement by a French bank for ten cents on the dollar, and so on? These reports are designed to miss.
FCIC is already engaging in the type of advance information asymmetry engaged in previously by the Senate Banking Committee (I have first hand experience with both).
In response to a query for information, I responded to FCIC staffers with links to information on my web site (free and publicly available), and recommended Dear Mr. Buffett, wherein I provide notes and references to public documents, which should help with the final report due in December 2010 (these people are much too slow, and DMB is a good playbook to begin their investigation. It’s easier than Structured Finance, but how they will investigate without that background is anyone’s guess. Expect a watered down, whitewashed report similar to SIGTARP’s November 17 effort).
They will have a future hearing at which they will question Jamie Dimon (CEO JPM Chase), Lloyd Blankfein (CEO of Goldman), Mack from Morgan Stanley and a representative from Bank of America. It is a preliminary meeting on why all these banks needed TARP. But they aren’t going to discuss AIG or Merrill and so on. Well, one cannot discuss systemic risk and TARP funds without covering that, can one? [But let’s not grill them too hard before bonus time. In fact, let’s give the public the impression that individually these banks didn’t really need TARP after all.]
A key staffer presented himself as negative on the banks. Yet he was just hired by the committee and admits he is not familiar with the facts. It seems he is pandering to ingratiate himself with people he thinks may be hostile to a Wall Street point of view. That way, he gets all of those thoughts in advance. Inevitably any really damaging advance information will get leaked to the banks. He claimed the banks are supposed to give him testimony three days in advance, but that won’t be available, because the banks will actually submit at the last minute (that way, you get no information, but any damaging information you hand over will be leaked to the banks’ huge staffs to prepare for the committee hearing). The banks somehow will be very well prepared for whatever the committee will throw at them, and any subsequent witnesses will be marginalized and ignored. By the way, this is exactly how the Senate Banking committee operated when it was “grilling” the rating agencies. How did that work out?
Credit derivatives have been criticized for information asymmetry, so why not criticize how these committees operate? I am happy to publicly state that they are rigged. [emphasis ours]
Naturally I won’t agree to these made-up “rules.” I responded that I decline to give free consulting advice to the committee or to make free consulting a quid pro quo for the “honor” of testifying. I pointed out that the committee could have hired my services months ago if they were interested in actual expertise, he responded that I might do it for free because it is my “patriotic duty.” Ignoring how manipulative and offensive that is, I responded that he is welcome to the information I put in the public domain for free. (Between the committee and the banks, I am the only one providing transparency, at least with what I have made public so far.)
I wrote in an email that if they want my testimony without the quid pro quo of helping them in advance to formulate questions and strategy for the hearing, I will consider testifying and will give them an answer in a couple of days. If their questions are weak, I can address it in my testimony, and I may have new facts and information not yet in the public domain that I wish to present myself. I have not heard back from them, and I do not expect I will.
P.S. The staffer who spoke to me said they wished they could have found me sooner. Let’s see, type in “structured finance” on Amazon….or type it into Google.