Tuesday, September 23, 2008

No Karma

Bill Syron got $38MM. Jamie Gorelick, an attorney general from the Clinton era who joined Fannie's executive ranks for her fixed income and credit perspicacity, pocketed more. David A. Andrukonis, who was fired for standing in the way of Syron's mortgage innovations, left Freddie for teaching in 2004.

One might blame the greed of the markets, but what about the divergent careers of Alicia Munnell, the lead author of the initial Boston Fed study that 'proved' there was rampant racial discrimination. Well, this 20 year staffer at the Fed then became extremely successful by economist standards: her paper became published in the American Economic Review, the leading publication of economists, member of the NBER, part of the Council of Economic Advisors to the President, and is a full professor at Boston College business school. Her antagonist, Stan Liebowitz, is having a fine career at the University of Texas, Dallas, but clearly lacking the blue plated accolades of Ms. Munnell. His rebuttal of Munnell only made the Economic Inquiry, a good journal, but ranked 36th in one study.

The incentives for this mess, encouraging home ownership by eviscerating underwriting standards, was deep, and academics and regulators were just as wrong as the big banks; indeed, they provided the intellectual arguments. Who were you, as a mere risk manager, to disagree with such august authority? To think 'more regulation' would have prevented this problem is wrong because the regulators thought this was a cure, not a disease.

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