Monday Readings

Paul Krugman miseducates the public.  One point of Leigh Drogan’s post yesterday was that the media needs to get their facts straight.  Authors as influential as Krugman shouldn’t be making simple mistakes like the one he made in today’s op-ed:
“But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.”
Ummm – no. As we’ve been over many times already, the SEC is NOT charging GS with creating and marketing securities that were deliberately designed to fail. There’s probably a good reason that’s not the charge: it’s much harder to prove.  The SEC is charging GS with fraud for withholding material information regarding the construction of the underlying synthetic CDO portfolio.
Eric Falkenstein does an excellent job calling out ACA: “Empty Suits of the Week: ACA.”
“Anyone working for this bunch of boobs should have a huge black mark. I know that in any large failure, executives all blame someone else, and usually end up unscathed, but this deal highlights they were not doing what they advertised, assessing the collateral’s credit quality. If they did, they would have noted that a high profile short gave them a bunch of credits that had an adverse sample of low FICO, adjustable rate mortgages. They clearly didn’t do the most basic analysis of the portfolio they were managing, nothing.
ACA was a big player, and their business strategy was purportedly to ‘assume, manage and trade credit risk’. Their action on this deal highlights their credit risk assessment appears to have merely been checking the agency ratings. That’s understandable if you are a retail investor, not an institutional investor managing a $1B transaction. ACA probably was rubber stamping its portfolio collateral since inception, a strategy that worked until it didn’t. These are the guys who should be inducted into the ‘Empty Suit Hall of Fame'”
The only tiny flaw in there is that back when these trades were done, Paulson may not have yet been a “high profile short.”
The volcanic eruption in Iceland is no laughing matter, and I only wish I had more time to focus on it instead of this GS story, but this satire passed on by MISH is funny:
“Inquiring minds are reading a letter from the Icelandic Parliament to Gordon Brown regarding Icesave
Dear United Kingdom
In response to your demand to send cash immediately …
Please note the Icelandic Alphabet does not contain the letter “C”.
We have complied with your request as best as our language allows.
It’s not easy to conjure up a volcano at will to spew tons of ash.
Please consider our debt paid in full.
Respectfully yours
Also via Mish, the CrackShack or Mansion game.  Is Vancouver real estate seriously this bubbly?  Really?  Fuel55 where are you – I need to know if these listings are real!  Related story:  Paul Kedrosky from last week.  Readers can check out this amazing site which amalgamates anecdotal Vancouver real estate stories.  I can’t believe it – it’s like they have our blueprint, because we JUST lived through this, yet they are ignoring it.
I have one more great MISH link from last week:  Easter Comes Twice a Year
“Last week, 47 out of 47 economists were overly optimistic and 44 out of 44 were overly optimistic this week. Both times, Easter was to blame.
I am wondering how Easter came two weeks in a row and every economists missed it both times.”
Jeff Matthews writes a terrific piece about how IKB is no poor rube in the whole Goldman Sachs saga.


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