Marketplace Scratch Pad

Morning Reading

Scott Jagow Jan 14, 2010

Good morning. Let’s start with a look back at the first day of the financial crisis hearings in Congress and some great stuff from Jon Stewart.

Wall Street ethos revealed at financial crisis hearing (New York Times) I also noticed this moment at yesterday’s hearing when Financial Crisis Inquiry Commission chairman Phil Angelides asked Goldman Sachs CEO Lloyd Blankfein to explain how Goldman could sell bundles of bad mortgages and then turn around and place bets against those bundles.

“These are professional investors who want this exposure,” Mr. Blankfein said.

But Mr. Angelides had his comeback: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”

The exchange was particularly revealing because it laid bare an essential truth about the Wall Street ethos: if there’s a buyer — no matter how sophisticated — there’s always a seller.

Maybe that’s fine within the confines of Wall Street. But it didn’t work so well when people wanted to buy homes they clearly could not afford and banks were quick to provide them with mortgages.

But the hearing focused too much on Goldman Sachs (Bloomberg)

The panel members also should lob questions at the right targets. It was surprising that Commissioner Brooksley Born aimed questions about over-the-counter derivatives at Blankfein and Mack, rather than Dimon, whose bank is the biggest player in the area.

Let’s also be less solicitous of those testifying. The group’s stance should be adversarial, forcing witnesses to answer tough questions and cough up the names of individuals who contributed to the crisis.

Holding individuals in government and on Wall Street accountable may well prove one of the commission’s toughest tasks. Yet it can’t shy away from it. And doing so means more than just playing pin the tail on Blankfein.

A tax on the largest banks won’t work (New York Post)

Normally, when you tax something, you get less of it. And Obama & Co. will likely claim they want to tax the borrowings of too-big-to-fail banks to make them smaller.

But the rule won’t work here: All imposing this fee will do is hammer home the idea in bondholders’ minds that the firms — reportedly the nation’s top 20 financial companies — are too big to fail, that the government will bail them out again the next time they screw up.

Mad Men haven’t changed much since the 60’s (NPR)

How job numbers stack up across Patchwork Nation (PBS NewsHour)

Jon Stewart on Wall Street bonuses and bailouts (The Daily Show) As usual, a sadly hilarious classic:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Clusterf#@k to the Poor House – Wall Street Bonuses
www.thedailyshow.com
Daily Show
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