26-Jun-10 News -- Speculation about an Israeli strike on Iran - 26-Jun-2010 - Generational Dynamics

Tom Adams, a former financial executive in an unnamed firm posted a kind of confessional on Friday in the NakedCapitalism blog. A few excerpts are worthwhile:

"When the financial crisis hit, I was in the direct line of fire. My company blew up very early in the crisis, giving me the dubious opportunity to see how bad things were going to get long before most of the rest of the world, including other banks, insurers, investors, administration officials or Federal Reserve members, were able to perceive the trajectory of the crisis. ... 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. My competitors, including the largest and savviest banks and investors had made the same errors on an even grander scale. If you were to take them at the word, the highest ranking regulators, officials and economists had failed to anticipate the decline in home prices and its impact on mortgage bonds and, even worse, the impact of such declines on the US and global economy.

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. And by that I don’t mean assumptions about housing prices, I mean information people like me had been provided about specific deals by other parties to those transactions. While many of the failings of the structured credit market were due to unsound reliance on historical data, some were not mistakes in judgment but were the result of bad actors, misinformation and wrongdoing. ...

While some of these parties have managed to stay within the boundaries of the law, it’s become clear that the CDO market itself was filled with dubious participants, misaligned incentives and damaging activities. ...

Thanks in large part to the CDO managers own assertions of expertise, investors trusted in their ability to wisely select safe mortgage bonds while avoiding the increasing risks that were appearing in the mortgage market. By 2008 it was obvious that the faith that investors had in these highly skilled and highly paid managers was misguided.

After several months of analyzing the deals and participants in the market, I began to suspect that the CDO managers, had ample opportunity and motivation to knowingly or negligently contribute the collapse of the deals under their charge.

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."

The purpose of Adams' posting is to expose the role of CDO managers in perpetrating the financial crisis. These personal stories are important to establish a record of what actually happened.

As I've been saying for years, you can prove by circumstantial evidence that much of this fraud occurred.

The standard excuse that we hear from CDO managers, politicians, journalists, bankers and regulators is that they didn't know that there would be a credit crisis that would bring everything down. In other words, their defense is, "I may be an expert, but I'm way too stupid to have known I was doing anything wrong." This defense is absurd on its face, but as I've said many times, it might be correct in 2002, in 2003, in 2004, and maybe even in early 2006, but certainly not in 2007. And yet, the rate of fraud only increased during the 2006-2007 period, and the journalists kept gleefully reporting on it, and the regulators kept ignoring it. There's no way that these experts didn't know that fraud was going on, but they all had much to gain by ignoring the fraud, and even propelling it forward. And the same thing is still going on today, perpetrated by the same people.

Adams' story is special only because he's confessing it. There are a million stories like this out there, by people who were supposed to be "experts," but instead turned out to be incompetent or crooks. And being incompetent or a crook in the financial industry was (and is) the norm, not the exception.

"5 minutes of attention by anybody who cared would have unravelled this thing back in 2001. We weren’t paid to raise questions about this kind of thing, and because we were monoline, really shouldn’t have been expected to.

The main reason I bring up my role, is that by late 2001 (in the months following 9-11), it was clear that my largest customer was producing loans that went bad at a rate of 30-40%. A year later, that number was easily 50%.

I’m not going to cop to anything more than that by the time I figured out the many ways that I was likely to get screwed, I had also seen the massive upline CYA systems in place with lots of infomation systems that, while I knew my “day of screw” was ahead of me, I didn’t feel that bad for the upline. It did everything possible to avoid the obvious. Didn’t wanna know, didn’t care. Just keep the money flowing our way.

I never got rich. I never had a second house. I never had a mansion and a yacht. I did work 15 hours a day to keep my part from imploding, and I did have a conscience that kept me from chasing the more lucrative business that more explicitly asked for my complicity in routine screw jobs, that simply asked I check my conscience at the door. I was the greater fool."

Some fraud occurs all the time, but from the point of view of Generational Dynamics, this kind of massive fraud is only occurring now because the survivors of the Great Depression and World War II have almost completely disappeard.

Both of these stories are examples of how greedy, nihilistic, destructive, self-destructive Generation-Xers, working for greedy, incompetent Boomer senior managers, brought about a financial crisis which is only just beginning.

Speculation increases about an Israeli military attack on Iran

For about six or seven years now, I've been receiving regular inquiries from web site readers asking about a coming attack by the US military or the Israeli military on Iran. During the Bush administration, Seymour Hersh, the ultra left wing writer for New Yorker Magazine, almost made a career out of regularly predicting an imminent attack on Iran.

The latest warnings of an imminent attack on Iran actually come from Iran itself. According to Ynet, the Iranian news agency Fars published a report under the title, "Suspicious military activity of the Zionist regime in Saudi Arabia." According to the Fars report, Israeli Air force aircraft landed during the past weekend at a military base in Saudi Arabia and unloaded large quantities of military gear, in preparation for a strike on Iran.

According to a report in Debka, whose editors have contacts in Israeli intelligence, the Iranians have declared an internal "state of war," and they're massing Revolutionary Guards troops in the Caspian Sea region, preparing for a US and Israeli attack from Azerbaijan.

According to the article, Iran is viewing regular US war games with France and Israel as additional support for their war alert.

As I've written in the past, Iran is a schizophrenic nation, with a hardline government of survivors of the 1979 Great Islamic Revolution who are anti-American, and a younger generation of Iranians who are largely pro-American and pro-West. It's quite possible that all stories of Israeli threats are coming from the Iranian hardliners in a vain attempt to keep the country unified behind the hardliners.

Additional links

Until a few months ago, Kevin Rudd was Australia's most popular prime minister in decades. But economic and policy issues causes his popularity rating to fall like a stone in the last few weeks. On Thursday, he was forced to resign, and Julia Gillard was sworn in as the country's first female prime minister. Australia thus joins other countries, including Japan, Britain, Belgium and the U.S., in political chaos. CS Monitor

The war that never ended, the Korean War, began 60 years ago Friday. It was essentially a proxy war between the U.S. and United Nations forces on one side, and China and Russia on the other side. After three years, an armistice was agreed to, but the war has never ended. Today, tensions are still extremely high between North and South Korea. But today's younger generation in Korea know little or nothing about the war. JoongAng

Generational Dynamics Web Log for 26-Jun-2010
26-Jun-10 News -- Speculation about an Israeli strike on Iran

Tom Adams, financial executive, posts confessional in NakedCapitalism

Speculation increases about an Israeli military attack on Iran

Additional links

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	Generational Dynamics
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Generational Dynamics Web Log for 26-Jun-2010 26-Jun-10 News -- Speculation about an Israeli strike on Iran

Tom Adams, financial executive, posts confessional in NakedCapitalism

Speculation increases about an Israeli military attack on Iran

Additional links

Web Log Pages

Generational Dynamics Web Log for 26-Jun-2010
26-Jun-10 News -- Speculation about an Israeli strike on Iran