Market Talk

Gonna get to the bottom of this financial crisis...

Here’s few of our favorite moments from the first two sessions of today’s Financial Crisis Inquiry Commission panel hearing:

- Goldman Sachs CEO Lloyd Blankfein confirming that he was never asked if his firm would take less than 100 cents on the dollar to pay off their CDS contracts with AIG. He mentioned, in fact, the question was raised with a lower level Goldman employee, at some point well after AIG was bailed out, but Blankfein made it sound as if it wasn’t a serious request. It “at least contained the inference…would you be willing to take less,” Blankfein said. The employee said he couldn’t say for sure himself, and then Blankfein said the question never came back up.

- Morgan Stanley’s John Mack, in response to a panel member’s suggestion that securities underwriters hold a meaningful stake in the stuff they bring to market, in effect “eat their own cooking.” Mack said “we ate our own cooking, and we choked on it.”

- Commission chairman Phil Angelides, pointing out to an analogy-challenged Lloyd Blankfein that hurricanes are acts of god — “These were acts of men and women. These were controllable,” Angelides said, in reference to events that precipitated the financial crisis.

- Hayman Advisors’ J. Kyle Bass, recounting pre-crisis visits to his former firm, Bear Stearns, in September of 2006, and the Federal Reserve to present his take on the mounting disaster in mortgage credit. Bear’s top risk manager told him, in so many words, to worry about his own risk management, “and we’ll worry about ours.”

Reception by Fed officials wasn’t much different. Bass said he met with a Fed board member. Their answer to his presentation was to look at charts of income growth and jobs growth, and say “we don’t see what your talking about because incomes are still growing and jobs are still growing,” Bass remembered. ”And I said, well, you obviously don’t realize where the dog is and where the tail is and what’s moving what, but again it was my opinion, which, you know, they disregarded.”

The whole second session, with Bass, Calyon’s Mike Mayo and Peter Solomon is worth watching.