Janet Tavekoli Responds to Mish’s Post on Amazing Arrogance of Munger

23 Sep

It’s hard to say just how we feel about Janet Tavekoli without sounding gushy. We really love her. We think she is the ‘cat’s meow’ as they say – a real analysts’ analyst and a true blue honest and straight from the bulls eye writer, commenter and speaker. Here she lays it out as she responds to Mish’s post on the Amazing Arrogance of Mr. Berkshire Hathaway Munger.

Go JANET! If we could put the right people in charge they would be:
Bill Black, Elizabeth Warren, Janet Tavekoli and Yves Smith. YES! Go Team!
This is a superb and VERY DIRECT HIT of a piece.

Janet Tavakoli on the “Myth of the Immoral Debtor”; An email from a Charlie Munger student; “Business as Usual”

Emails continue to fly in regarding Amazing Arrogance.

I would like to share a few of them including a second email from Janet Tavakoli regarding bankers’ sense of entitlement and “the myth of the immoral debtor”, a term Tavakoli attributes to Elizabeth Warren.

From Janet Tavakoli:

Hello Mish,

Bankers have an enormous, unjustified, sense of entitlement. These people work for failed institutions, yet they feel they are entitled to bonuses that far exceed those of bankers and investment bankers of one or two decades ago.

Note that Berkshire Hathaway owns a big chunk of Wells Fargo, which bought Wachovia, which in turn bought Golden West, the very seat of a lot of fraudulent lending.

Of course, we bailed out Wells Fargo and relaxed accounting rules, so no one knows the true size of the hole in that balance sheet. Charles Munger’s remarks are all the more bizarre in this context.

Here in Illinois, people were lied to and deceived with phony docs. Among many other frauds, people would show up at a closing for a fixed rate loan and be presented with docs for an option ARM. All sorts of variations occurred.

Lisa Madigan, the Illinois Attorney General was first to file the suit against Countrywide, and beat California by minutes. Countrywide settled for $8+ billion on the combined suits, but that was way too low. Madigan publicly stated: “Borrowers didn’t break the law; Countrywide broke the law.”

Of course, some borrowers committed fraud, overreached, or got in over their heads, and there are certainly cases of irresponsibility. However, the reality of the mortgage lending market is that it was rife with fraud by mortgage lenders–from even before the first huge Ameriquest fraud.

I was on CNBC a few months ago and Kudlow, Santelli, and others shouted me down when I brought up predatory lending. Columbia Journalism Review and others took CNBC to task. Widespread predatory lending is well documented. This isn’t a matter of opinion, it’s a matter of fact.

You’d think Munger had been living under a rock. Yet, he hasn’t been, and I believe he knows better. Buffett knows better, too. Unfortunately, instead of using their positions to tell the truth, they are using their positions to propagate what Elizabeth Warren calls “the myth of the immoral debtor.”

I’m no bleeding heart; I’m all about the cash flows.

Investment banks knew the cash flows from these loans wouldn’t be there, but they went ahead anyway. Thus, they are responsible for widespread securities fraud. To keep it going, they created more complex securitizations and got more people involved to cover up the mounting losses that were coming down the pike. This was all known and knowable in advance.

I didn’t “forsee” anything. I have no psychic ability. I’m not prescient. I am, however, an analyst, and I know my stuff. So did they. It was fraud.

So, just what sort of “civilization” is Munger trying to preserve?

Warren Buffett has made statements that he doesn’t see the purpose of going after people. That’s ridiculous.

I am in complete agreement with William K. Black that thorough investigations are long overdue. The crimes aren’t in doubt, but one has to go through the arduous task of collecting evidence even though delays have made the trail cold. That was deliberate.




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