The New York Observer‘s Max Abelson opens a piece quoting three former Lehman Brothers executives on the Repo 105 scam, noting that the first of two ways to react to the Lehman Brothers’ bankruptcy examiner is to lose faith in man. The second reaction is, of course, to shrug. And the third reaction — which could theoretically be to the quotes Abelson wrangled from said bankers — would be to throw your computer across the room. Outrage, merited:
Two former senior Lehman executives did just that this week, telling The Observer that the examiner’s autopsy, especially its news that about $50 billion was quietly scooted off the firm’s balance sheet for each of the first two quarters of 2008, was simply not a big deal…The idea, a year and a half after the biggest bankruptcy in American history began, is that criticism of the firm is the domain of unsophisticates. “When I read this, I giggle a little bit. Because $50 billion is a shitload of money, but in the grand scheme of things,” said a third source, a former managing director in England — where the accounting gimmick, named Repo 105, was given a legal endorsement that it couldn’t get here, “$50 billion is a drop in the ocean.”
Another banker said it just wasn’t “that big of an event,” and then compared the supposedly unnecessary outrage at Lehman to the leadup to the American invasion of Iraq. This is infuriating for a number of reasons, primarily:
1. That “drop in the ocean” could’ve gone to good use. A lot of it. In about $50B different ways.
2. The continuing viewpoint that a layman’s criticism of banks, bailouts, or the banking crisis, without understanding the scale on which they operate or being fairly coherent about the mass chaos that necessitates that they operate the way they do, somehow lacks validity and only stems from outrage. This is akin to telling victims of terrorism that, because they’re not up to date on their Chomsky and don’t understand the complexities of how terrorist cells form, breed, and function in the greater geopolitical picture, they probably shouldn’t think too hard (or feel too much) about it. Which is fucking stupid, and also, a pretty pedestrian stripe of elitism, as they run.
3. Someone using an opposition standpoint to the invasion of Iraq as a basis for comparison to the outrage against banks. If you’re intelligent enough to understand why the outrage building up to Iraq was so ridiculous, why’re you still working at a bank making the world worse?
The answer, obviously, is cash, and because “worse” is a very subjective term in this context, and probably invokes Ayn Rand at some point. As Felix Salmon pointed out in his Reuters column today:
These shops deliberately go out to hire psychopaths, and then they fire the ones who go soft, while promoting the most aggressive assholes, keeping a few smooth-talking client-relationship types on hand to preserve some semblance of a respectable public face. (Fuld was never particularly good at that part of the job.) This is something that regulatory reform can’t even come close to addressing, unless it deals head-on with the question of compensation.
He may be referring to something like a salary cap! You know, the kinds of things NBA teams have to limit themselves from spending insanely unfair amounts of money to monopolize the best talent in the world…even though they mostly do, anyway, and that the NBA salary cap is filled with any number of ridiculous loopholes teams and players can find their way through to be overpaid, regardless. That said, at least there’s some kind of symbolic effort being made on the NBA’s part. And at least you get to be entertained for feeding into that shitshow. This one, you don’t get to watch anything but the score, and once it’s done, you just get written off by the players for not understanding how the plays are made.