Fraud and Failure: Bo Cutter’s Indictment of the Finance Industry (Part 1)
by ilene - December 6th, 2009 2:50 pm
Fraud and Failure: Bo Cutter’s Indictment of the Finance Industry (Part 1)
By William Black, courtesy of New Deal 2.0
Bill Black explains how Bo Cutter’s defense of Tim Geithner reveals the fraud and failure that plagued the financial sector long before the crisis.
Bo Cutter has presented the best possible defense of Treasury Secretary Geithner.
It is a remarkable defense because it is premised on a scathing indictment of Wall Street, theoclassical economics, modern finance, and the sycophants that the financial community installed as anti-regulators. Indeed, Bo’s account is sometimes particularly credible because it is a confession. Bo was a managing partner of Warburg Pincus, a major global private equity firm and led President Obama’s Office of Management and Budget (OMB) transition team. His defense of Geithner provides so rich a vein of ore that I will mine it in three installments: (1) Bo’s indictment of the finance industry, Greenspan, Geithner, Paulson and Bernanke, (2) the martyrdom of Geithner, and (3) Geithner as Bo’s Last Action Hero.
Bo’s explanation of Geithner’s unique virtues begins the indictment.
It comes down to this: the combination of brains, guts, calmness, and a willingness to act are virtually non-existent in Washington in any era, but particularly in this one. When you find the combination in a significant cabinet level job, you should value it.
[T]his crisis was long in coming and it was a totally integrated failure of intellectual traditions, global macro-economic imbalances, government policy making, regulatory supervision, financial sector greed, incomprehensible boards of directors, absences without leave, and breath-taking management short-sightedness. No one and no institution put together an understanding of the set of factors that triggered this particular debacle. Tim [Geithner] is included in this “no one”, but so is everyone else.
I think the last two years have revealed the single largest failure of senior management in the financial sector, and of the board system in American history. I think I am correct in saying that there was not a single independent director in America who stood up on this issue. I do not understand why every board of every institution that failed was not asked to resign immediately.
Bo’s indictment is compelling, but his logic proves a deeper failure. There is no reason to restrict his indictment to “the last two years.” The senior managers’ and directors’ failure did not begin with the recession.…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.