Friday, February 25, 2011

Dick Fuld's Fuzzy Memory, and Thoughts on the FCIC

1. This is a totally random, largely inconsequential discrepancy that I just happened to notice in Dick Fuld's testimony to the FCIC. But since this is, after all, my blog, I'm going to point it out anyway. After telling of a failed attempt to call Tim Geithner on Saturday, September 13th, Fuld told the FCIC (per Dealbook):

“From that weekend to this day I have not had a conversation with Chairman Geithner,” Mr. Fuld told examiners.
Oh Dick, you know they keep records of these things, right? What about your call to Geithner after the AIG bailout later that week, when you begged him to "undo" the Lehman bankruptcy (as recounted in Hank Paulson's book)? That call shows up in Geithner's call logs from the crisis, on the morning of Friday, September 19th:

Don't try to slip anything by me, Dick. I have a mind that remembers completely random and useless factoids like a steel trap.

2. As to the FCIC more generally, they obviously had several flaws. Not surprisingly, given my earlier post, I didn't find the final report to be terribly useful or reliable. I've listened to a bunch of the FCIC interviews (great for listening to on the train), and I agree with Yves Smith, who noted that "far too many of the well known individuals included in the roster were economists who were simply not close enough to what happened to provide much in the way of new perspective." What did they really expect to learn about the crisis from Arthur Laffer, or Bob Kuttner?

There were also some glaring omissions in the interviews. Honestly, how is it possible that the FCIC didn't interview Dan Jester? Jester was the point man for the government from Lehman Weekend on, and was probably one of the most important figures in the entire financial crisis. Ken Wilson, another hugely important Paulson adviser at the Treasury, was also somehow not interviewed. Inexplicable.

In general, I think the interviewers tended to waste a lot of time learning how major dealer banks work — which meant that they were often interviewing the wrong person. They also had a structured products expert who frankly didn't seem to know that much about structured products, and was easily confused by structured finance jargon. The main interviewer (at least in the interviews I've listened to), Chris Seefer, usually had a pretty decent grasp of the markets and financial instruments the FCIC was focusing on, but he was often clearly trying to fit the evidence into a pre-conceived narrative, which wasn't always accurate. Overall, though, Seefer was the most competent interviewer the FCIC had.

As far as I can tell so far, the FCIC didn't unearth very many important documents (although there's a multi-thousand-page SEC submission that looks like it contains some great raw data). So it's the interviews, rather than the underlying documents or the report itself, which will likely be the FCIC's most lasting contribution.

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