Michael Osinski, software, and the financial crisis

1 04 2009

This is a must read for anyone interested in the current crisis.  I have read about Michael Osinski in other articles, namely Michael Lewis’ piece in New York Magazine.  He is the guy who wrote most of the software that divvied up all the toxic assets into bonds and helped securitize them.  To me he was always one of the silent villians lurking behind the crisis, easy to sum  up and no desire to understand.  He fucked up, profited from it and leftuss all to pay for it.  It turns out, as it usually does with this kind of thing, he is a much more thoughtful multi-dimensional character.  The only one who, as far as I know, has apologized for his role in the crisis.

And, if you read the piece, you quickly learn that it wasn’t his software but the people who used it that screwed up so royally.  He is deeply honest about his culpability and his drive to make money without thinking of the consequences.  But he was small-fry.  So I personally take him off the hook.  Also, beyond writing about his role in the mess, he also has a fascinating take on Wall Street.  Very revealing about human nature and excess.  Here may be my favorite quote:

We had to lay off half of research. After a day of bloodletting, one of the bosses cornered me in the hallway. Did I get a sexual thrill out of firing people, he wanted to know, because it had always worked for him, big time.

For somebody who is a fairly recent transplant to NYC and has had the privilege to witness a lot of the behavior described, that quote sums up this fair city for me.  He is now an oyster farmer in Long Island, long retired, and a pretty decent guy.  Far more decent than all the assholes he worked for.


Maurice Clarett – philosopher king

25 03 2009

Maurice Clarett, the former Ohio State running back and current felon serving three and a half years of a seven year sentence, has a blog going from inside the walls of his correctional facility.  He orally transcribes his musings to his friends outside of prison who (must) correct for grammatical errors and then post it for him on his blog, “The Mind of Maurice Clarett“.  I am only posting this because it seems this guy had some sort of transformational epiphany.  You would think that this kind of blog would follow all the usual cliches coming out of the mouth of a caught criminal – “Oh I screwed up, I’m a changed man, I found Jesus, I’m wasting my life and it’ll be different when I get out, I appreciate the little things in life, the birds, the trees, showering without ten dudes who haven’t seen a woman in a decade soaping themselves up uncomfortably close to me.”  And then when they get out they are just the same asshole they were before they got in.  As the Misfit, a character in Flannery O’Connnor’s most read short story, says “she would have been a good woman if it had been somebody there to shoot her every minute of her life.”

And it is full of all those cliches.  But there is something else there too.  Even the most pappy formulaic movies can be considered masterpieces if the execution is flawless (“The Godfather”).  And reading his blog you come away kind of awed at the guy’s maturity and surprisingly intelligent view of the world.  Its self-help mumbo jumbo but its finely tuned and gleaming:

You don’t have to respect someone to show them respect. I used to be under the impression that respect was to be earned. I don’t see it that way anymore. I picked up that observation here in prison. You have people inside these walls who probably cannot stand each other for one reason or another but respect is still given for the purpose of keeping order and respecting personal space and boundaries. I believe trust is something that should be earned and not given away but I can’t say that respect falls into that category anymore.

When I make observations like that I try to think back to when I was free. I ask myself, “Was respect given all of the time no matter how I felt about whomever personally?” The answer is usually, “N0.” when I go down memory lane with those people in mind (those I did not show respect to), I can vividly see where unnecessary problems took place. Fundamentally, I think that the destruction of most of my relationships came from a lack of respect on my behalf. I used to think that the whole world had to bow down and pay homage to me because of whom I was and where I came from. Crazy, huh?

Showing respect to others no matter how you feel about them personally goes a long way. Ninety-nine percent of the time people will give you the same respect you give to them. It is a natural feeling to want to be treated like a human being. Respect keeps order and order is necessary in every culture. It is my suggestion to those with attitudes like I had, prior to incarceration, make showing respect to everyone mandatory. Life is a little easier to manage that way.

You can’t really argue with any of that.

David Foster Wallace and Boredom

24 03 2009

David Foster Wallace, who committed suicide this past September, was stuck on the subject of his new novel, which was ten years in the making.  It seems he was trying to create a new reality, one where people should be  “conscious and aware enough to choose what you pay attention to and to choose how you construct meaning from experience.”  The novel, “The Pale King”, revolve around how his characters, IRS agents working in a Midwestern office, attempt to overcome the “intense tediousness” of their jobs.  In a word, boredom.  An in depth and engrossing read can be found here in the New Yorker.

Today I read a post on Jonah Lehrer’s blog that dissects the neurological implications of boredom.  Its fascinating to read these two side by side and to see how Wallace was really onto something.  Its beyond sad that he wasn’t able to read these reports (who knows, maybe he did?) and be able to utilize it for his work.   It seems that if you attempt to describe a new reality with a new type of literature and go off your meds, well, your head breaks.

Follow up to Bubble post:

24 03 2009

In a post on Mark Thoma’s blog, Steve Waldman comments that while Thoma’s assessment of the current crisis is probably financially correct (it may work in the end) he is absolutely embittered, as I am, by the fairness and equity of the situation:

Unfortunately, I have a darker temperament, a spirit less generous and optimistic than Mark’s. I am filled with despair, not because what we are doing cannot “work”, but because it is too unjust. This is not my country.

I mean really – what kind of country are we building?  I really hate to sound like an anti-american nutball who sees evil lurking under every policy or include the picture to the right with its stupid slogan….but fucking hell, this is beyond ridiculous.

My only hope is that Waldman is right when he says this (and that Geithner and Summers are serious when they say they want real regulation after all of this settles):

My guess is that behind the scenes, Geithner has arranged a kind of J.P. Morgan moment. You know the story. During the Panic of 1907, J.P. Morgan locked a bunch of bankers in a room and insisted they lend to stave a panic. We’ve already seen one twisted parody of this event, when Henry Paulson locked a bunch of bankers in a room and insisted they borrow money from the Treasury. This second one is more clever. I don’t think the scandal of the Geithner plan is going to turn out to be the subsidy to well-connected investors embedded in the non-recourse loan put option. On the contrary, I think that Treasury has already lined up participants for the “Legacy Securities Public-Private Investment Fund” and persuaded them to offer prices so high that despite the put, investors will expect to take a major loss. My little conspiracy theory is that the Blackrocks and PIMCOs of the world, the asset managers who do well by “shaking hands with the government, will agree to take a hit on relatively small investments in order first to help make banks smell solvent, and then to compel and provide “good optics” for a maximal transfer from government to key financial institutions. …

But really I say hang them all.  They made off with the bulk of the profits the last ten years so they should now pay with clawbacks and their jobs because their bets not only lost but they took down the US fiancial system with them.  Time to reset the entire industry….without them.  They are losers in every sense of the word….a word I am sure they used quite freely for people like you and me.

New Bubble

24 03 2009

I have to say that I agree with this assessment wholeheartedly.  Aren’t we just creating a new bubble from the old bubble that just burst?  Using leverage to buy bundled mortgages only this time we KNOW they are toxic?  Don’t get me started on the unfairness of rewarding the douches that got us into this (Mike Morgan in the linked post addresses that better than I can).  Kleptocracy, kleptocracy, kleptocracy.  Fuck me.

Another prescient quote:

22 03 2009

James Galbraith’s article No Return to Normal, that all the pundits have been talking about, has this quote that sums up what Geithner’s plan will result in – I wish us all luck:

The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?

From Professor Michael Gordon:

22 03 2009

“….as someone who has done a fair amount of work in the past on comparative economic development across countries, it’s the institutional nature of each that explains largely why some are very rich and advanced, some are growing fairly fast, and most don’t grow much at all . . . those latter dominated by predatory and corrupt elites, whose advancement upon various public and private hierarchies depends not on achievement but rather mutual back-scratching in patron-crony networks largely closed to outsiders. By contrast, good, flexible, and adaptive institutions help us cope with uncertainty by helping us to develop and apply new knowledge to reduce and maybe even master the new challenging changes and reorient our behavior, individual and collective, in new and more effective manner.” (It. mine)

So which model do we more resemble today?

(you can find more of Gordon’s musings on his website)