Corrente

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Recovering bankster Tom Adams at Yves place:

After Lehman and AIG blew up, however, suddenly, everyone was talking about my industry and how horrible it was. I had already concluded that I had failed at the business I had worked at for over twenty years. I blamed myself for rationalizing taking credit risks that, with each passing month, were becoming more obvious and acute.

I was not alone in the many mistakes I had made....

As this realization began to sink in, I began to wonder how I had made such mistakes. I began to look into the parties and transactions and the connections between them and what they knew, should have known or had no way of knowing. I pulled the loose threads of some questions I had about how the problems were so widespread and how so many people could have made such large mistakes.

The more I pulled on these threads, the more I discovered that much of what I thought I knew was based on things that weren’t really true. ...

As jaded as I have now become, I must confess that I am still surprised at just how blatant and casual some of the thievery in the CDO market appears to have been. As an example, I look to the SEC’s complaint against a company called ICP. ...

Over the course of diligence visits, meetings and dinners, I had formed the impression that the people at ICP were knowledgeable, smart and reputable. Mr. Priore, ICP’s founder, was held in high regard in the industry and occasionally spoke about his views on the market to reputable news organizations such as Bloomberg Television, the New York Times and Reuters. He was listed by Investment Dealers Digest magazine as one of the 40 under 40 worth watching. So not only was I completely taken in by his knowledge and interpersonal skills, so were many others. In fact, given his sterling reputation, voicing suspicion of him would have been seen as paranoia rather than well founded skepticism. ...

As described in the SEC’s complaint, ICP stole from my old company and from AIG and caused millions of dollars of losses, the loss of many jobs, the misapplication of taxpayer funds and contributed to the destruction of the economy. They did so while smiling and shaking our hands, vowing to protect our interests and then asking about our children and our families. They did so while taking that money and paying themselves millions of dollars of misappropriated fees and bonuses, even as our companies ran out of money and struggled to understand why.

What is most interesting about the ICP case to me is not that the people involved were unusual or evil, but rather how common and normal they seemed. They seemed to be knowledgeable and reasonable people; above average, by my assessment of the industry. As the CDO manager was allegedly committing its fraudulent activities they probably believed that their actions were justifiable and, indeed, were a normal way to conduct CDO business. I would agree: their behavior was likely commonplace, not extraordinary, and part of the acceptable course of business.

Investors purchased CDO bonds based in large part on the expertise, experience and reliability of the CDO managers to create and manage safe bonds. As it turns out, investors were foolish to hold such beliefs.

Our political economy, as it is now structured, selects for sociopaths. The scum also rises....

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