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Wall Street Execs Who Cashed In on the Crisis

25 points by gnosis 15y ago

winestock 15y ago
Robert Rubin is on that list. Quote: CLAIM TO FAME: As Clinton's treasury secretary, he pushed to overturn regulations prohibiting finance-bank hybrids such as...Citigroup. QUOTE: Wishes he could have reined in Citi but "I don't know what I could have done" as just a board member. HIS HAUL, 1999-2009: $124 million When I was in high school, I read Liar's Poker. I came to despise Rubin based on that book. Everything which I have heard of him thereafter has confirmed my opinion. While he was at Solomon Brothers during the 1980s, Rubin's demands for compensation shocked even the greediest traders. Rubin then joined the Clinton administration, the same administration whose electoral campaign decried "the decade of greed." Then he played a part in the current crash, getting yet another obscene pile of money for himself courtesy of the American taxpayer (or the Treasury Department printing press, take your pick). We are ruled by fools and phonies.
- asto 15y ago
  And they are ruled by pools of monies.
salem 15y ago
It would be more interesting to see which execs got huge compensation while getting big government handouts that have _not_ been repaid, and/or did not make the government money.
- potatolicious 15y ago
  Urgh, HN should let you take back downvotes. My bad, my mouse slipped :(
grandalf 15y ago
The cause of the crisis was unexpected systemic risk. There are thousands of other systemic risks which would have an equal impact on our economy which we have no protection against. This is the nature of systemic risk. In some cases it's just ignored (such as an asteroid landing on NYC) and in other cases it just turns out to be inaccurate (the probability of average housing prices dropping more than x% (edit, originally had 8 which may be low) in a single year was considered close enough to 0 to effectively not exist... effectively on par with an asteroid strike -- though we know both do not have a probability of zero. In the context of complex financial products, the impact of the low probability event is magnified, since in each case the assumption that the event won't happen is repeated. When it does happen, the result is catastrophic. It's naive to think that housing prices were somehow special. Consider that our laws require only fractional underwriting of risk capital. The amount set by law effectively a threshold for how paranoid to be about various risks (including systemic ones). It is hardly a cautious approach. The market prices in this risk to some extent, but there is one factor that significantly harms its ability to do so, especially in the case of housing prices -- government involvement. Consider that Fannie and Freddie (government sponsored housing lenders) did not submit financials to wall street during much of the Bush administration. Normally, private firms would be delisted and shut down for such behavior. If anything, a proper accounting of their books might have led to greater caution on the part of investors. Instead, the government's decision to look the other way emboldened investors to bet on high housing prices and made investors confident that the government would step in to bail out these entities if housing prices fell. Clearly, if the public had thought that housing prices were likely to fall in 2002 the US would not have gone into two expensive wars. Bush had a clear motive to hide this from the public. Even Greenspan urged the administration to make its stance on Fannie and Freddie clear, and was rebuked for his meddling in the buildup to the wars. So the claim that these financial execs (who went along with the falsehoods crafted by government in order to sell a war) are obviously unworthy of compensation for their managerial skill is in my opinion absurd. Some may not deserve their salaries, but nor do many who are paid $100K+ as engineers and nor do many who sweep the floor at WalMart. There will be some bad apples. But this does not mean that these individuals did anything wrong. They simply went along with government policy. If they bore any responsibility it was to back Greenspan in his remarks about Fannie and Freddie, to try to prevent subterfuge and malfeasance on the part of the executive branch and/or inaction by congress. But frankly, everyone believed that the probability of housing prices falling more than 8% was effectively zero. To speak out in a contrarian way about this would have been viewed as a tinfoil hat endeavor.
- ajkessler 15y ago
  I'm not sure who "everyone" is... Since housing prices had dropped more than 8% a few times over the last 80 years, anyone who thought there was zero probability of it happening again was clearly a moron. As for the tinfoil hat crowd, I guess John Paulson, Steve Eisman, Michael Burry, Charles Ledley and James Mai weren't believed by the mainstream, but a lot of people saw what was coming. Those guys were just a few of the ones who were lucky enough to time it just right. There were many, many more who simply bet that the crash would come a few months earlier than it did.
  - grandalf 15y ago
    I agree with all of your points. Maybe the figure was greater than 8% for the price drop -- there is some percentage that represents the worst case that was typically considered in all the contracts. I realize many foresaw the crisis. My main point is that we had a government program to keep housing prices high/rising, which led to much of the perception that the risk of a housing price drop was low. When considering who is to blame, we should blame our government at least as much as the financial executives.
    - ajkessler 15y ago
      Minor correction: it's not that we "had" a government program... we "have": FHA is still handing out 3.5% down loans to people with 580 FICO scores. It's like 2008 never even happened. People actually sued about this last year: http://www.washingtonpost.com/wp-dyn/content/article/2010/12/03/AR2010120302784.html http://www.washingtonpost.com/wp-dyn/content/article/2010/12...
      - grandalf 15y ago
        Quite true. Arguably though, the programs are part of the overall short/medium term "solution" for the crash. Yet nobody seems concerned that the same thing could happen again.

25 points by gnosis 15y ago

Robert Rubin is on that list. Quote: CLAIM TO FAME: As Clinton's treasury secretary, he pushed to overturn regulations prohibiting finance-bank hybrids such as...Citigroup. QUOTE: Wishes he could have reined in Citi but "I don't know what I could have done" as just a board member. HIS HAUL, 1999-2009: $124 million When I was in high school, I read Liar's Poker. I came to despise Rubin based on that book. Everything which I have heard of him thereafter has confirmed my opinion. While he was at Solomon Brothers during the 1980s, Rubin's demands for compensation shocked even the greediest traders. Rubin then joined the Clinton administration, the same administration whose electoral campaign decried "the decade of greed." Then he played a part in the current crash, getting yet another obscene pile of money for himself courtesy of the American taxpayer (or the Treasury Department printing press, take your pick). We are ruled by fools and phonies.

asto 15y ago
And they are ruled by pools of monies.

salem 15y ago

It would be more interesting to see which execs got huge compensation while getting big government handouts that have _not_ been repaid, and/or did not make the government money.

potatolicious 15y ago
Urgh, HN should let you take back downvotes. My bad, my mouse slipped :(

grandalf 15y ago

The cause of the crisis was unexpected systemic risk. There are thousands of other systemic risks which would have an equal impact on our economy which we have no protection against. This is the nature of systemic risk. In some cases it's just ignored (such as an asteroid landing on NYC) and in other cases it just turns out to be inaccurate (the probability of average housing prices dropping more than x% (edit, originally had 8 which may be low) in a single year was considered close enough to 0 to effectively not exist... effectively on par with an asteroid strike -- though we know both do not have a probability of zero. In the context of complex financial products, the impact of the low probability event is magnified, since in each case the assumption that the event won't happen is repeated. When it does happen, the result is catastrophic. It's naive to think that housing prices were somehow special. Consider that our laws require only fractional underwriting of risk capital. The amount set by law effectively a threshold for how paranoid to be about various risks (including systemic ones). It is hardly a cautious approach. The market prices in this risk to some extent, but there is one factor that significantly harms its ability to do so, especially in the case of housing prices -- government involvement. Consider that Fannie and Freddie (government sponsored housing lenders) did not submit financials to wall street during much of the Bush administration. Normally, private firms would be delisted and shut down for such behavior. If anything, a proper accounting of their books might have led to greater caution on the part of investors. Instead, the government's decision to look the other way emboldened investors to bet on high housing prices and made investors confident that the government would step in to bail out these entities if housing prices fell. Clearly, if the public had thought that housing prices were likely to fall in 2002 the US would not have gone into two expensive wars. Bush had a clear motive to hide this from the public. Even Greenspan urged the administration to make its stance on Fannie and Freddie clear, and was rebuked for his meddling in the buildup to the wars. So the claim that these financial execs (who went along with the falsehoods crafted by government in order to sell a war) are obviously unworthy of compensation for their managerial skill is in my opinion absurd. Some may not deserve their salaries, but nor do many who are paid $100K+ as engineers and nor do many who sweep the floor at WalMart. There will be some bad apples. But this does not mean that these individuals did anything wrong. They simply went along with government policy. If they bore any responsibility it was to back Greenspan in his remarks about Fannie and Freddie, to try to prevent subterfuge and malfeasance on the part of the executive branch and/or inaction by congress. But frankly, everyone believed that the probability of housing prices falling more than 8% was effectively zero. To speak out in a contrarian way about this would have been viewed as a tinfoil hat endeavor.

ajkessler 15y ago
I'm not sure who "everyone" is... Since housing prices had dropped more than 8% a few times over the last 80 years, anyone who thought there was zero probability of it happening again was clearly a moron. As for the tinfoil hat crowd, I guess John Paulson, Steve Eisman, Michael Burry, Charles Ledley and James Mai weren't believed by the mainstream, but a lot of people saw what was coming. Those guys were just a few of the ones who were lucky enough to time it just right. There were many, many more who simply bet that the crash would come a few months earlier than it did.
- grandalf 15y ago
  I agree with all of your points. Maybe the figure was greater than 8% for the price drop -- there is some percentage that represents the worst case that was typically considered in all the contracts. I realize many foresaw the crisis. My main point is that we had a government program to keep housing prices high/rising, which led to much of the perception that the risk of a housing price drop was low. When considering who is to blame, we should blame our government at least as much as the financial executives.
  - ajkessler 15y ago
    Minor correction: it's not that we "had" a government program... we "have": FHA is still handing out 3.5% down loans to people with 580 FICO scores. It's like 2008 never even happened. People actually sued about this last year: http://www.washingtonpost.com/wp-dyn/content/article/2010/12/03/AR2010120302784.html http://www.washingtonpost.com/wp-dyn/content/article/2010/12...
    - grandalf 15y ago
      Quite true. Arguably though, the programs are part of the overall short/medium term "solution" for the crash. Yet nobody seems concerned that the same thing could happen again.