Takeaway: The recommended steps amount to a “sensible” reform agenda “focused on fixing the party system and addressing the roots and the weapons of political partisanship.”
--Kenneth Jost, Associate Editor
Pay No Attention to That Man Behind the Curtain
Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in “Naked Short Selling”
Synopsis: Evidence keeps emerging that shows big banks engaged -- and continue to engage – in much riskier business than they acknowledge, according to longtime finance-industry critic Taibbi and Angelides, former chair of the government’s Financial Crisis Inquiry Commission.
Takeaway: “All of the five behemoth banks rely on sophisticated financial models to gauge their trading risk,” writes Angelides. “However, time and time again, these models have proven to be woefully inadequate in modeling human behavior, recognizing that the marketplace often defies neat statistical patterns, and predicting the black swan events that inevitably shake the financial markets. When Paul Volcker spoke to the Financial Crisis Inquiry Commission of ‘the hubris of financial engineers,’ he undoubtedly had in the mind these models, which bankers construct to rationalize the risky behavior that led to the financial crisis and that evidently persists today.”
For background and related material, see, Kenneth Jost, “Financial Misconduct,” Jan. 20, 2012; Marcia Clemmitt, “Financial Industry Overhaul,” July 30, 2010; and Thomas J. Billitteri, Financial Bailout, Oct. 24, 2008, updated July 30, 2010.
--Marcia Clemmitt, Staff Writer