Tuesday, December 29, 2009

Janet Tavakoli Responds to FT's Perception of Widely Held Views Among the Financial Elite

FT writes:
What has been the most useful innovation from the financial world in recent decades? That is a question Paul Volcker, the former head of the US Federal Reserve, likes to pose to investors and bankers.

His slightly tongue-in-cheek answer might make some financiers seethe: instead of highlighting any derivative or complex financial product, Mr Volcker nominates the automatic teller machine (ATM)...His scepticism is echoed in the political and regulatory world. "Wall Street was chiefly responsible for the 'financial innovation' that did massive damage to the US economy," says Janet Tavakoli, a structured finance consultant, expressing a widely held view.
In an email Tavakoli comments:
Most of the attendees at the Wall Street Journal's Future of Finance Conference at which Paul Volker made his remarks were oblivious to this "widely held view," as I mentioned in my comments on the conference.

If this is now a widely held view, it is also news to many reporters at the Financial Times. Gillian Tett was one of the first journalists to follow the saga of questionable financial practices. We disagree on the need for widespread investigations and felony indictments. I am for them, she is against. The problem is much more profound than shattered faith in a flawed product; the manufacturers knew or should have known they poisoned the global financial food supply.

In late 2008, John Gapper told me he was the first and best stop to review an advance copy of Dear Mr. Buffett, my book on the financial crisis. He never wrote a word, and buried it. In late February 2009, Paul Davies, an FT reporter who was in the forefront of exposing dodgy financial products, wrote a good review shortly after I sent him the already published book. I clearly state that the relationship between imploded mortgage lenders and Wall Street's securitization and sales process was the largest Ponzi scheme in the history of the capital markets. Ponzi schemes are illegal in the United States. Problems were not limited to mortgage products and numerous players were involved: investment banks, certain banks and thrifts, credit rating agencies, hedge funds, CDO "managers,” monoline insurers, mortgage brokers, regulators, and Congress.

I do not know whether the book's content had anything to do with John Gapper's not writing a review. I am well aware that for the past several years, my views have not been widely held. Perhaps as Gapper claimed, he was busy with a new project. John Gapper recently authored a hagiography of Goldman CEO Lloyd Blankfein and dubbed him "Man of the Year" without mentioning what Tett labeled a "widely held view." Christopher Whalen cancelled his FT subscription after reading Gapper’s profile of Blankfein.

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