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This Andrew Ross Sorkin vignette on âTwo Myths and One Realityâ five years after the fall of Lehman Brothers is must-see TV.
Sorkin looks pained, for once, to be apologizing for Wall Street all the time. If you turn off the sound, it looks like an R&B video produced by Brooks Brothers:
But letâs leave aside the Timesâs overly dramatic treatment and Sorkinâs hamming it up and look at his âtwo myths and one realityâ about the financial crisis, which reveal a lot about how this highly influential journalist thinks. Barry Ritholtz had an apt one-word critique of Sorkinâs piece: âBULLSHIT.â Itâs useful to know why. Hereâs the video:
Sorkinâs first myth is that âthe bankers walked away with boatloads of money in bonuses and the rest of the country didnât. And why would we spend $700 billion bailing out these banks without putting some kind of new rules or restrictions or strings to prevent this from happening?â
First of all, thatâs not a myth. The bankers really did walk away with boatloads of money and people really did question why we didnât put any restrictionsânone at allâwhen handing out those bailouts.
Sorkin just wants to tell us the truth we donât want to know, which is part of his concern-troll shtick: âIâm on your side, seekers of justice, I really am. But, sadly, let me tell you why, sadly, youâre wrongâ:
And thereâs an explanation, but itâs unsatisfying and itâs this: That ultimately we needed to save all the banksâwe needed to recapitalize the entire system and we needed everybody to participate on a voluntary basis. As crazy as it sounds today, there are banks that probably would have actually said ânoâ that they didnât want the money if there were strings attached.
And? Letting them failâor nationalizing themâwould have been fine with most of us.
But anyway, itâs just false that the banks even had a choice. Here are Treasury Secretary Henry Paulsonâs talking points from the critical October 13, 2008 meeting (emphasis mine):
We donât believe it is tenable to opt out because doing so would leave you vulnerable and exposed.
If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.
In other words, the Bush administration explicitly told the banks they would be taking TARP capital from the government voluntarily or by force, so if thereâs a myth here itâs Sorkinâs claim that banks could have refused the bailouts.
Sorkin Myth No. 2:
If thereâs one question I get just about more than any other, itâs âWhy didnât anybody go to jail, and did nobody try?â And thereâs an answer to that too.
Thatâs also not a myth, but whatever.
Perhaps Sorkin is referring to his own newspaper. You know, the non-DealBook side, whose Gretchen Morgenson and Louise Story led off an epic piece two years ago with these paragraphs:
It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?
Answering such a question â the equivalent of determining why a dog did not bark â is anything but simple.
Ahem. Thatâs a lesson worth remembering as newspapers follow the CPMs to the shallows of video journalism.
Sorkin lists all the people with incentives to get scalps on Wall Street: prosecutors, regulators, journalists, etc. âWeâve triedâall of us have triedâto find that criminal element,â he says.
You mean like with the SECâs supposedly exhaustive investigation of wrongdoing at Lehman Brothers? The one where the subpoena-powered regulators talked to three dozen people, two-thirds fewer than Sports Illustrated did for its series on Oklahoma State football cultureâand which DealBook wrote up an access special?
Return to that Morgenson/Story piece for this on Tim Geithner advising Andrew Cuomo to back off on his Wall Street probes:
Friendly since their days in the Clinton administration, the two met in Mr. Cuomoâs office in Lower Manhattan, steps from Wall Street and the New York Fed. According to three people briefed at the time about the meeting, Mr. Geithner expressed concern about the fragility of the financial system.
His worry, according to these people, sprang from a desire to calm markets, a goal that could be complicated by a hard-charging attorney general.
And:
The Securities and Exchange Commission adopted a broad guideline in 2009 â distributed within the agency but never made public â to be cautious about pushing for hefty penalties from banks that had received bailout money
Read the whole thing. Itâs one of the best pieces of the crisis. And it makes Sorkinâs excuse-making look that much worse.
Finally, Sorkinâs âRealityâ:
The banks, the financial institutions themselves, theyâre probably not going to accept a bailout the next time. And I worry that when the next domino fallsâŚit will fall, and when it does, Iâm not sure we know whoâs going to be there to catch it.
Does anyone actually believe that banks wonât be demanding bailoutsâand getting themâthe next time they get into trouble?
Come on.
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