December 3, 2009
Just a week before the Senate banking committee was to begin confirmation hearings on President Obama’s nomination of Ben Bernanke to a second term as chairman of the Federal Reserve, one of the most important watchdogs of the Fed died at the age of 52. Mark Pittman was the reporter at Bloomberg News whose work was responsible for the lawsuit, brought under the Freedom of Information Act, against the Federal Reserve, seeking disclosure of the identities of those financial firms benefiting from the Fed’s eleven emergency lending programs. The suit, Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, (U.S. District Court, Southern District of New York) resulted in a ruling last August by Judge Loretta Preska, who rejected the Fed’s defense that disclosure would adversely affect the ability of those institutions to compete for business. The suit also sought disclosure of the amounts loaned to those institutions as well as the assets put up as collateral under the Fed’s eleven lending programs, created in response to the financial crisis. The Federal Reserve is pursuing an appeal of that decision.
Since September of 2008, we have been overexposed to the specious claims by politicians, regulators and other federal officials, that the financial crisis was “unforeseeable”. The veracity of such statements is undercut by the fact that on June 29 of 2007, Mark Pittman provided us with this ominous warning from his desk at Bloomberg News:
The subprime meltdown is sending shock waves through the capital markets in part because mortgage bonds are the world’s biggest debt market, according to the Securities Industry Financial Markets Association.
Pittman’s groundbreaking work on the havoc created by the subprime mortgage-backed securities market resulted in his receiving the Gerald Loeb Award in 2008, which he shared with his fellow Bloomberg reporters, Bob Ivry and Kathleen Howley, for a five-part series entitled “Wall Street’s Faustian Bargain”.
On November 30, Bob Ivry wrote what many have described as the “definitive obituary” for Mark Pittman. Ivry disclosed that although the actual cause of death was not yet known, Pittman had suffered from “heart-related illnesses”. In addition to providing us with his colleague’s impressive biography, Ivry shared the reactions to Pittman’s death, expressed by several prominent individuals:
“He was one of the great financial journalists of our time,” said Joseph Stiglitz, a professor at Columbia University in New York and the winner of the 2001 Nobel Prize for economics. “His death is shocking.”
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“Who sues the Fed? One reporter on the planet,” said Emma Moody, a Wall Street Journal editor who worked with Pittman at Bloomberg News. “The more complex the issue, the more he wanted to dig into it. Years ago, he forced us to learn what a credit- default swap was. He dragged us kicking and screaming.”
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“He’s been on this crisis since before the crisis,” said Gretchen Morgenson, the Pulitzer Prize-winning financial columnist for the NewYork Times. “He was the best at burrowing into the most complex securities Wall Street could come up with and explaining the implications of them to readers of all levels of sophistication. His investigative work during the crisis set the standard for other reporters everywhere. He was a giant.”
Congressman Brad Miller of North Carolina wrote an informative remembrance of Pittman for The Huffington Post. This statement is one of the highlights from that piece:
The financial crisis is a result of a failure of every institution of our democracy. Regulators failed. Congress failed. And the financial press failed abysmally. Mark was an exception. Mark’s irreverence allowed him to see the crisis coming when other financial reporters accepted uncritically what the industry said. Mark’s irreverence was what made him a great reporter.
Mark Pittman was featured in the recent film American Casino, a documentary which analyzed the subprime mortgage catastrophe and the resulting financial crisis. In September of 2008, when the crisis had most people in the world scratching their heads in confusion, Pittman provided a roadmap to the initial bailouts, shortly after they were distributed.
The interview with Mark Pittman, conducted by Ryan Chittum for the Columbia Journalism Review in February of 2009, gave Pittman the opportunity to share his experiences during the onset of the financial crisis. The interview is especially informative as to what we can expect to find out about this mess in the future, as the investigations begin to unfold. Passages like these reveal the magnitude of the loss resulting from Pittman’s death:
TA: Does there need to be regulation just to simplify things to where it makes sense to more people?
MP: If it was all transparent the complexity wouldn’t matter. If the CDO market had had publicly available prospectuses with the contents of the CDO disclosed, we wouldn’t have this issue, because Bloomberg probably would have made fun of anybody who bought anything like this. But there was this enormous shadow banking system going on. We did a series about that, too. A lot of times people don’t see what we do.
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The thing that people don’t realize is that the Fed is now the “bad bank.” That’s just something that people don’t understand. They’ve taken collateral, and they refuse to tell us how they valued it …
We have numerous banks — dozens, maybe hundreds that are insolvent. And they become more insolvent every day because more people quit paying their mortgage loans, and more guys move out of the shopping center, and more people quit paying their credit cards. But nobody wants to have the adult conversation. We need to be honest about what the problem is here, how big it is, and how we’re going forward to clean it up, and who’s going to pay for it.
* * *
Hopefully, we will be able to inform the people enough to know how badly we’re getting screwed (laughs). We need to know how to prevent it from happening again, and we need to know who did it. There’s renewed energy on this front because we’ve staffed up the people who cover banks, the securities firms. We have a lot more people going at real estate and a bunch of different areas that this involves. That was a conscious move from meetings we started having in 2007. We hired people and we moved people from one area to another area.
Pittman’s final statement during the interview underscores the fact that one of the greatest fighters for an informed public has been lost:
This is a big deal and it’s going to be going on — I swear to God I’m going to retire on this story, because it’s just going to keep happening.
Tragically, Mark Pittman was forced to “retire” on terms that were not satisfactory to any of us. We can only hope that others will be inspired by his work and follow his lead.
This Fight Is Far From Over
December 24, 2009
On November 26, I mentioned how apologists for controversial Wall Street giant, Goldman Sachs, were attempting to characterize Goldman’s critics as “conspiracy theorists” in the apparent hope that the use of such a term would discourage continued scrutiny of that firm’s role in causing the financial crisis. The name-calling tactic didn’t work. Since that time, my favorite reporter for The New York Times — Pulitzer Prize winner, Gretchen Morgenson — has continued to dig down into a dirty, sickening story about how Goldman Sachs (as well as some other firms) through their deliberate bets against their own financial products, known as Collateralized Debt Obligations (or CDOs) caused the financial crisis and ruined the lives of most Americans. Ms. Morgenson had previously discussed the opinion of derivatives expert, Janet Tavakoli, who argued that Goldman Sachs “should refund the money it received in the bailout and take back the toxic C.D.O.’s now residing on the Fed’s books”. Although the Goldman apologists have been quick to point out that the firm repaid the bailout money it received under TARP, the $13 billion received by Goldman Sachs as an AIG counterparty by way of Maiden Lane III, has not been repaid.
On December 23, The New York Times published the latest report written by Gretchen Morgenson and Louise Story revealing how Goldman and other firms created those Collateralized Debt Obligations, sold them to their own customers and then used a new Wall Street index, called the ABX (a way to invest in the direction of mortgage securities) to bet that those same CDOs would fail. Here’s a passage from the beginning of that superb Morgenson/Story article:
Wait a minute! Let’s pause for a moment and reflect on that. “Turbo” Tim Geithner has retained a “special counselor” whose responsibilities included oversight of Tricadia’s parent company. Tricadia has the dubious honor of having helped cause the financial crisis by creating CDOs and then betting against them. What’s wrong with this picture? Our President apparently sees nothing wrong with it. At this point, that’s not too surprising.
Anyway . . . Let’s get back to the Times article:
We can only hope that the investigations by Congress, the SEC and FINRA might result in some type of sanctions. At this juncture, that sort of accountability just seems like a wild fantasy.
Janet Tavakoli did a follow-up piece of her own for The Huffington Post on December 22. She is now more critical of the November 17 report prepared by the Special Inspector General of Tarp (SIGTARP) and she continues to demand that Goldman should pay back the billions it received as an AIG counterparty:
It was refreshing to read the opinion of someone who felt that Janet Tavakoli was holding back on her criticism of Goldman Sachs in the above-quoted piece. Thomas Adams is a banking law attorney at Paykin, Kreig and Adams, LLP as well a former managing director of Ambac Financial Group, a bond insurer that is managing to crawl its way out from under the rubble of the CDO catastrophe. Mr. Adams obviously has no warm spot in his heart for Goldman Sachs. I continue to take delight in the visual image of a Goldman apologist, blue-faced with smoke coming out of his ears while reading the essay Mr. Adams wrote for Naked Capitalism:
The backlash against the repugnant activities of Goldman Sachs has come a long way from Matt Taibbi’s metaphor describing Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” With three investigations underway, the widely-despised icon of Wall Street greed might have more to worry about than its public image.
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