Category Archives: Finance

Michael Hudson On The Basic Problem Of the EU

Posted on by

From an interview of economist Michael Hudson at iTulip:

“EJ: Who wins the political battle shaping up here between the PIIGS and their creditors? Within the structure of the euro?

MH: I guess whoever has the most guns politically. The Greeks are out on the streets. The French are out on the streets. They’re not like Americans. They’re really protesting and the class war is back in business over there. Same thing in Ireland.

EJ: My French friends will tell me they’re barbarians over there. We’re very civilized here in the United States.

MH: That’s our problem, as Freud said in “Civilization and its Discontents.”

EJ: I remember reading that book in college. He explained the conflict between the demands of society for individuals to stifle the animalistic behavioral foundations of human nature. Is there a way to diffuse the conflict? A muddle-through option? The IMF has been in and out of the Greek rescue.

Debtor versus creditor nations split the EU

MH: The IMF cannot be part of the solution. It’s part of the problem. The EU basically is part of the problem because it’s pro-financial. So the whole way in which the European Union is structured, basically in a centralized way to be run by the financial lobbyists, obviously isn’t working. The EU isn’t really like the United States. It doesn’t really have it’s own parliament and systematic taxes. The Germans are saying today that in the old days, a century ago, if a problem like this came up in, say, Latin America, the United States would send in the marines. They’d occupy the custom’s houses and as these governments made most of their money on charging customs on imports and exports the marines would collect it and pay the creditors.

But now what are the creditors going to do today? Are, let’s say, the Germans going to take over in Greece? Who will act as the equivalent of the Internal Revenue Service to collect the money? The Germans would have to promote not a military dictatorship as the colonel powers did in the old days but a popular government that would tax the rich and the Germans aren’t going to do that. The European Union, the creditors, because they support the right wing not the left wing, are preventing these governments from collecting taxes progressively to balance the budget and pay the debts. That’s the problem: it’s a right-wing versus left-wing problem. Unfortunately, there isn’t really a left wing in Europe to make this case very well. The social democrats have more or less abandoned what used to be an economic policy at the outset. They are now concerned more with political and social issues than economic issues. So there isn’t really a party in Europe that is taking the side of progressive economic policies. They’ve left economics and finance, and debt and credit policy, to the right wing to discuss among each other rather than making it a left-wing topic like it used to be a hundred years ago.

EJ: Isn’t that something of a global phenomenon?

MH: Yes.

EJ: I don’t see it as being terribly different here in the US.

MH: Or in Australia. The Labor Parties all over the world. The most right-wing parties that you can see are the labor parties of Australia and New Zealand where they were leading the privatization sell-offs and leading the tax shift favoring the financial sector. And they didn’t even realize it! They’ve somehow “decoupled” financial analysis from the social analysis that characterizes social democratic and labor parties from their outset a hundred years ago.”

My Comment:

Hudson is always interesting to read, as long as you keep in mind his basic Marxist orientation. So he gets the details right, and then he goes on about the old demon “right-wing” in rhetoric that doesn’t make sense to me, and that even his own writing betrays.

“So Old Europe is quite culpable for having promoted a kind of neo-liberalism that was so right-wing as never to have been able to get a foothold at all either in Western Europe or in the United States. In Latvia there is a flat tax on labor of over 50% and less than a 1% tax on property.”

But right-wingers are the ones arguing the hardest to abolish taxes, especially in this country….

So, with the acknowledgment that I’m an alert student of economics who’s been reading/researching the economic crisis for a few years, but whose main training is in history and politics, let me note the puzzling discrepancies I find in the writing of a man whose knowledge and industry experience are said to be impeccable by even people who don’t agree with him:

1. Why does MH blame “right wingers,” when it was Austrians and right-wingers who were vehemently opposed to the bail-out and to TARP that saddled the country with the banks’ debts? Since when are social-democrats right-wingers?

2. Monetarism and monetary intervention are uniformly advocated by all economists, from the so-called left to the so-called right. Indeed, it’s only the extreme right (to the right of the statist Chicago school) that criticizes all monetary intervention.

3.  Why does Hudson argue against deflation? Deflation is the one thing that will ultimately put the economy back on track. All those overpriced houses would fall in price to within reach of the average citizen. Deflation might reduce wages but it will save pensioners and support savers (who have taken the brunt of the damage done by the boom).

4. A default by Greece would have helped the Euro, ultimately.

5. Why does Hudson think that inflating away a country’s debt is good for the working man or for pensioners or for small business? Inflation will whittle away at the currency, at savings, and at real income. None of which is good for ordinary people.

6. Hudson is right that Social Security and Medicare in the US are not entitlements, since people have all contributed to them. One solution to funding them is to dismantle the war machine. Convert all bases to peaceful uses. That requires no extra funding. Why is it that Hudson doesn’t raise that as an option?

7. Hudson claims that Latvian taxes are of a kind no Western nation would levy (50%) on labor. Really? Adding up all income taxes and sales taxes, taxes in the northern European countries are surely that high, and taxes in the US and UK are well on their way there.

8. Despite talking about “social culture” Hudson says nothing about whether the Eastern European countries have the same kind of business and social culture that have made the northern countries creditor countries. What are the rates of savings, of corruption, of business creation? What are the laws regarding property rights? What are the incentives, or lack thereof, for business?

Rahm And The Killer Hedgie

Posted on by

Yves Smith has a piece at naked capitalism related to the extended Pro Publica (http://www.propublica.org/special/the-timeline-of-magnetars-deals) report by Jake Bernstein, Jesse Eisinger, and Krista Kjellman Schmidt that describes how hedgies manipulated subprime CDOs:

“Magnetar

1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies
2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created Continue reading →

More On Einhorn’s Rumor-Mongering About Lehman

Posted on by

Matthew Goldstein and Steven Eder

(Hat-tip to Sean at Deep Capture):

“In forwarding Starr’s email to the SEC, former Lehman General Auditor Beth Rudofker wrote: “I phoned you earlier to review and pass on some recent rumor activity and information that is concerning to us.”

In June, Rudofker sent another email to lawyers at the SEC, pointing out additional “rumors” about Lehman that she said “continue to be destructive.” In her long email to the SEC, she said: “We have been able to prevent 3 stories containing these specific rumors that were set to run.”

Also included in the documents is a back-and-forth email exchange between Einhorn and Callan, in which Callan accused him of being “very disingenuous.” Callan said she would not have talked to Einhorn if she knew he was going to make a speech criticizing the firm’s finances.

“I can only feel that you set me up and you will now cherry pick what you like out of the conversation to your thesis,” she wrote in an May 19, 2008 email.

Einhorn defended himself in a lengthy response, saying that Callan knew Greenlight was “short” the stock when she reached out to talk to him.

“You had no reason to expect that our discussion was confidential in any way,” Einhorn wrote in response. “In fact, you knew that I do not want to be restricted in trading the stock and I did not request any information that you would not provide to any other investor who asked.”

A few days later, Einhorn gave another speech blasting the email exchange.

A spokesman for Einhorn declined to comment on Wednesday evening.

For his part, Starr now says, “obviously I was wrong” about Lehman. But he isn’t backing down on his criticism of Einhorn.

“I still stand by those words,” said Starr, who noted that his fund has $50 million under management. “I think that manipulating the market and running a high publicity business is just not appropriate behavior and disruptive to free and open markets.”

My Comment:

Goldstein is the excellent Reuters reporter whose story on Steven Cohen was reportedly spiked…

(more later)

Refuting Kucinich’s Funny Money Platform

Posted on by

Kaj Grussner, a tax-adviser in Finland, has a piece at the Mises blog that responds to Stephen Zarlenga. Zarlenga is the director of the American Monetary Institute and the author of “The Lost Science of Money.” He had previously criticized the Austrian position at Gnostic Media.

The critique is important because Zarlenga’s ideas have been adopted by Dennis Kucinich and they may very well bear fruit in policies (the American Monetary Act) that could make things worse (if you can imagine that). Here’s Grussner:

“Zarlenga criticizes economists for many things. One of these is that economists have taken morality out of the science of economics. He also says that economists have tried to hide this exclusion of morality, because if people were told about this atrocity they would be outraged.

Of course, morality has no place in the science of economics.

[Lila: I see where Grussner is coming from, but actually he’s mistaken, mainly because economics isn’t a science, but also for other reasons].

Science is, by its very nature, value-free.

[Lila: Actually, this too isn’t quite right. Science has a different set of values, but I take his point].

When you try to explain why action A had consequence B, you should examine theory and fact. It is only when you start too advocate certain actions or programs, such as the 100-percent-reserve solution, that morality comes into play. Let us therefore examine the moral aspects of Zarlenga’s monetary reform.

From the very outset, printing dollars out of thin air, declaring them legal tender, and purchasing goods and services with them is tantamount to theft. The printer acquires property without giving anything of real value in return. After all, the money is merely ink on paper with no value of its own except what it derives from the violent force of the government.

In addition, it is always those who get the new money first who benefit the most. In this instance, it would be the government. But those who are second in line will benefit too, while the new money still has most of its value. The recipients of the new money can turn around and again acquire something for nothing. The amount that can be acquired diminishes over time, so those who get the money last are the ones who pay for the early recipients’ gains.

Zarlenga explicitly mentions healthcare and education as being areas of government spending, as this would benefit the masses, who otherwise couldn’t afford such services. What he fails to understand is that it isn’t the students and patients who benefit, but the hospitals and universities. It is the medical professionals and academics who are the true recipients of the money. It is to them that the money is paid for the services they provide, and the constant influx of new money into these sectors will of course raise prices significantly over time.

[Lila: All this is true, and, in addition, cheapening will actually strengthen big business, because it is big business that takes on the most debt. This is an act that will win the approval of the underclass that doesn’t pay taxes; debtors, who get to see their debts diluted;  the governing class and all its clients, who live on public money; and the corporate class that pays taxes, but extracts much more back from the government in the form of subsidies and the use of infrastructure].

Every bout of new money will draw value from the existing amount of money, which means that after the initial theft of property by the government and its preferred interest groups, the debasement of the currency will continue at an ever-increasing rate; the more devalued the dollar gets every year, the more dollars must be printed every year to pay for the same things. For people far away from the printing press, this means that the value of their savings and income is transferred to the money printers and first recipients of the new money, much as it is today.

Another obvious problem with having the government print money is that it creates rent-seeking behavior. With fresh supplies of money coming from the government at an increasing rate, it becomes more and more reasonable for private corporations to lobby for a part of the public-spending cake than to appeal to consumers. In the long run, this means that an ever-increasing part of the private sector will become dependent on the influx of new government money.

From a moral point of view, it makes no difference who counterfeits the money and acquires property for nothing. It is still fraud and theft.
Conclusion

There is no point in making the Austrian case for commodity money here. There are many easily read books that do that. The purpose of this article is to explain that no matter how bad a system is, it can always get worse. Not all reforms are improvements. As we have seen, the 100-percent-reserve solution is ripe with unintended consequences.

When this economic crisis evolves into a currency crisis, which it most probably will, reform will become inevitable. The question then is what ideas for reform are lying around for the people and the politicians to choose from.

The reform advocated by Zarlenga and introduced to the Congress by Dennis Kucinich may very well appeal to politicians and bureaucrats. Also, the increasing animosity toward both the Fed and the banking establishment as a whole will likely encourage ordinary Americans to support Zarlenga and Kucinich’s initiative. On the face of it, the solution sounds rather reasonable and has the support of a very popular congressman.

Just think about it. It would strip the banks of their privileges and put the money power back into the hands of the people through their elected representatives; it would break the bankers’ secretive monopoly racket, which enables them to pay out billions in bonuses while ordinary people suffer. Doesn’t that sound familiar? Isn’t that how the Federal Reserve system was sold to the American public following the Panic of 1907?

For Austrians, it is easy to dismiss Zarlenga as a crank, which, based on the ridiculous claims he makes, he undoubtedly is. So why should we pay attention to someone like him? Because if we don’t, we increase the risk of him being successful in making the American Monetary Act become law. After all, similar monetary systems have been tried before.

This is why Austrians need to expose the real dangers of such a system. It would be a mistake to simply assume that that everyone will recognize its inherent problems and reject it. If the government can pass a constitutional amendment to sign the Federal Reserve Act into law and thus create a private central bank, they can certainly do this too.

So in addition to making the case for the free-market solution in money and banking, Austrians need to take up the debate with all their intellectual opponents. Zarlenga is one of them, and he should not be taken lightly.”

I’m posting a response to Grussner I saw  here.

I can’t say I was impressed by Zarlenga’s original criticism of the Austrians or the response to Grussner. The monetarists seem completely mistaken on fundamental economic principles, and I’m appalled that they are being taken so seriously.

In the first place, Zarlenga does not seem to understand that both money and debt represent claims to real goods. But while debt is a claim to real goods not yet produced, money is a claim to those goods in the present. That is, money represents production.

If a bank (either private or public) issues money without sufficient real goods to back that, the money is essentially “funny money” and it represents a theft from people who have savings based on real production. That’s what’s happened already. Savers have lost the high interest rate they ought to have received for the past two decades, and have subsidized an orgy of debt and spending by other people. Now the “other people” are using the force of the law (the gun, really) to make the savers give up more, so that the debtors can walk away from their debts. If the debts were fraudulently contracted, the defrauders should pay, not innocent savers who had nothing to do with the fraud. And if the debts were fairly contracted, the debtors should pay up.

Invoking imaginary golden ages where “the people” simply gave themselves whatever they wanted doesn’t cut it. Ain’t no such thing. Proof? Look at countries where there is “public” money. Inflation runs even higher in India than in the US. Corruption is rampant. A resource-laden, skilled and manpower-rich country has a per capita income no better than some of the poorest countries in sub-Saharan Africa.

The banking mafia is a symptom, not the root cause of our problems. The root cause is the state, and the philosophy that allows the state to set aside natural law because it is “the lawgiver.”

Peter Schiff said it in a nice way:

“We Americans also must be honest with ourselves and recognize that we have been living beyond our means and that our lifestyle has been largely financed by austerity in China.”

And here, Peter Gorenstein (who, amazingly, seems to approve) states the obvious – the Fed wants to inflate away debt because it believes it will grow the economy (I kid you not):

“The Fed can’t admit that one reason it wants high inflation is to reduce the real burden of our debt, but you can bet that that’s one of its objectives.  What’s more, says Nobel-winning economist Paul Krugman, inflation should be one of the Fed’s objectives.  Because that’s how we’ve gotten out from under debt burdens in the past.

Here’s Krugman:

So how did the U.S. government manage to pay off its [World War 2] wartime debt? Actually, it didn’t. At the end of 1946, the federal government owed $271 billion; by the end of 1956 that figure had risen slightly, to $274 billion. The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up, roughly doubling in dollar terms over the course of a decade.

In other words, after World War 2, we didn’t “pay down” our debt.  We grew into it.

And, importantly, this growth came from a combination of real growth AND inflation:

The rise in G.D.P. in dollar terms was almost equally the result of economic growth and inflation, with both real G.D.P. and the overall level of prices rising about 40 percent from 1946 to 1956.

So inflation is an important tool in getting us out of this mess.  It’s painful and unfair–those who have been responsible and saved money will pay the price for those who borrowed money, racked up huge debts, and spent more than they could afford.  But it’s what the Fed is (quietly) aiming for.”

Someone might say that the system where I do the borrowing and spending, and you do the saving and working is a version of slavery.

[That isn’t an anti-American statement either. It was made by a rather plain-speaking CEO of an American company…]

Debtors are demanding that savers work for them, through foregoing their own consumption and the market- price of money. Monetarists are demanding that people walk away from the obligations of their government with a slow-motion dilution of the currency. People on fixed income will be destroyed. People dependent on wages in industries where wages are not rising (nearly every industry) will find prices rising beyond them. Responsible workers and savers, here and around the world, will get stiffed. Future borrowing costs will soar. The US will suffer retaliatory treatment from foreign countries. Other countries will default on their debt or renege on their contracts. So will citizens everywhere. Corruption will rise. Gamblers in the stock market will benefit, as their portfolios of cash now get plumped up.  That is banana-republicanism.

Possible Mossad Links to Killing of Syrian Man In Hungary?

Posted on by

Last, week there was another killing suspected to be the work of the Israeli intelligence agency, Mossad. This one was in Budapest, Hungary. The dead man was supposedly involved in money laundering. Hungarian officials have since played down the connection, but it was widely reported there, as well as in Israel and Russia.

“On Wednesday March 17, just after seven in the morning, Dr Bassam Trache, a 52-year-old veterinary surgeon with dual Syrian and Hungarian citizenship, was shot dead in his black Mercedes at a junction in Budapest’s 16th district. The killer grabbed a black briefcase from the car and made off on foot.

Dr Trache, it was revealed, operated a money-changing business. A few years ago he was acquitted in court of attempting to bribe – with jewellery and Arab cakes – the head of the Budapest police’s money-changing investigation division.

At first, his murder was regarded as yet another killing connected with the shady world of money-changing; in the past ten years, there have been no fewer than 123 murders connected with the business in Budapest.

But then a more fantastic theory to explain Dr Trache’s murder emerged.

It transpired that on the very day that Trache was killed, two Israeli Gulfstream V-type jets were spotted flying low over the Hungarian capital, leading to speculation that, just two months after the assassination in Dubai of Hamas commander Mahmoud al-Mabhouh, the Syrian might have been the victim of a Mossad hit…..”

That’s from The First Post ( UK), which goes on to list some of the puzzling inconsistencies in the government’s statements that have been fueling the rumor.

“Last week, however, it was announced that a leading official of the NKH had been sacked, with a further four members of staff disciplined, over their failure to consult Hungary’s secret services before issuing a permit for the Israeli aircraft to enter Hungarian airspace.

And while Szollar claimed that Israel’s flying manoeuvres were merely “routine”, Hungary’s transport minister, Peter Honig, conceded that they were not fully in line with Hungarian laws. Then the Hungary’s HirTV claimed that the Israeli ambassador to Hungary, though denying the term “spy planes”, had referred to the planes as reconnaissance jets.”

The New York Post has reported that the Israeli ambassador told the Hungarian news agency MTI that the jets were on a diplomatic mission and were not spying. The NY Post said the Hungarian government had declined to comment on this response.

Another newspaper, MY Sun, reported that it was Hungarian officials who claimed the jets were on a diplomatic mission.

In a Reuters report, Hungarian spokesman Domokos Szollar stated that the jets were in “routine training” and Israel had cleared the overflights with Hungary two months in advance. Szollar explained the earlier confusion by officials as a case of bad internal communications. Apparently, the Hungarian defense department hadn’t been notified, and so, on first hearing of the flights, PM Gordon Bajnai had ordered an investigation.

The head of Budapest’s criminal investigations team, Zsolt Bodnar, reportedly dismissed allegations about a Mossad link as “fiction.”

I’m going ahead, nonetheless, and posting this video, because it happens to follow two far more substantial stories I’m also watching: the story about documented Mossad links to the murder of a Hamas operative in Dubai, as well as the possible Mossad ties of David Headley, the CIA operative who admitted to being guilty of the Mumbai terror attack of November 2008, at the time blamed on Islamicists. All three events together form a news story that’s quite riveting, especially since it accompanies the continual drum-beat for war with Iran. This story also suggests that any arrests for domestic terrorism need to be looked at with a great deal of skepticism, at this point.

At this point, I should repeat, the forgery of the passports in the killing of the Hamas official is documented; any ties to Headley are very plausible but so far unproven (and have not been reported in the mainstream press, for that’s worth); and the Hungarian story seems to be still in the “allegations” stage.

Arms and Mark Thatcher..

Posted on by

Mark Thatcher, son of the former UK PM, seems to have been dogged with accusations of financial impropriety. I bring him up, because of a comment on this blog about his direct involvement in an international conspiracy to cover up the manipulation of precious metals that was apparently outed in 2002 in the UK, but was covered up. In researching the comment, I began with some background on Mark Thatcher.

Here’s a brief summary of some financial “improprieties” as they show up in a Guardian article from 2004.

“But hit controversy in 1984 when the Observer alleged that he benefited from his mother’s position when a large construction deal in Oman was awarded to a building firm, Cementation, with which he was involved, after Mrs Thatcher visited the tiny Gulf state. The accusations were never proven.

Further controversy dogged him through his friendship with the Middle East businessman Wafic Said – a quiet-spoken Syrian with close links with Saudi royalty.

Among other business ventures in the 1980s, he was involved in several large-scale arms deals, most notably a £20bn contract between British Aerospace and Saudi Arabia.

Although rumours of impropriety have dogged his business career, he largely disappeared off Fleet Street’s radar after moving to the US.

But it is recorded that his wealth grew to the point where he spent periods as a tax exile in Switzerland.

In the 1990s he helped secure the multimillion pound contract for his mother’s Downing Street memoirs, but after the failure of a security alarm business in the US and a prosecution for tax evasion, Mark, his wife and their two children moved again – this time to South Africa.

Three years after the move to Cape Town, in 1998, he was investigated by South African police over a money-lending business to police officers. He counter-claimed that officers working for him as agents had defrauded him and the investigation was eventually dropped.

He returned to the UK last July for the funeral of his father, Sir Denis, a former oil businessman, who died aged 88. He inherited his father’s hereditary baronetcy to become Sir Mark.

Sir Mark, who was known as “Thickie Mork” among other nicknames at Harrow and who has been criticised for his lack of charm, was once described by the Financial Times as “a sort of Harrovian Arthur Daley with a famous Mum”.

A devoted Lady Thatcher, however, has always had faith in him. “Mark could sell snow to the Eskimos, and sand to the Arabs,” she is reported to have said.

His notoriety was not welcomed by Sir Bernard Ingham, Lady Thatcher’s former press secretary.

Asked by Sir Mark how he could best help his mother win the 1987 general election, Ingham reportedly replied: “Leave the country.”

Roubini: Significant Risks Of Gold Correction

Posted on by

Downside risks to gold, writes Nouriel Roubini at The Globe and Mail:

“But, since gold has no intrinsic value, there are significant risks of a downward correction. Eventually, central banks will need to exit quantitative easing and zero-interest rates, putting downward pressure on risky assets, including commodities. Or the global recovery may turn out to be fragile and anemic, leading to a rise in bearish sentiment on commodities – and in bullishness about the U.S. dollar.

Another downside risk is that the dollar-funded carry trade may unravel, crashing the global asset bubble that it, with the wave of monetary liquidity, has caused. And since the carry trade and the wave of liquidity are causing a global asset bubble, some of gold’s recent rise is also bubble-driven, with herding behaviour and “momentum trading” by investors pushing gold higher and higher. But all bubbles eventually burst. The bigger the bubble, the greater the collapse.

Gold’s rise is only partially justified by fundamentals. And it is not clear why investors should stock up on gold if the global economy dips into recession again and concerns about a near depression and rampant deflation rise sharply. If you truly fear a global economic meltdown, you should stock up on guns, canned food and other commodities that you can actually use in your log cabin.”

Harvard Undergrad & Perlman Student, Intern Beats Wall Street Whizzes

Posted on by

Update (March 30):

If anyone claims that looking at gender and the way it inflects culture is inherently collectivist, I’d say they need to define collectivism more accurately. The way libertarians define it now, it’s more a term of abuse than a credible unit of analysis, unless it’s qualified pretty heavily.

There is a body of evidence that males are over-represented in highly aggressive behaviors of certain kinds. That isn’t an argument that men are “less moral” or that women are “more moral.” Not at all. For instance, women predominate in certain other kinds of crimes. In studies of child-killing/infanticide, women killers are often represented more heavily when considering certain age groups. Why? Perhaps because children are weaker than women physically and because women spend more time around them and usually have primary care of them. On the other hand, there are fewer female serial killers than male.

The richest financiers in the world are males. That’s a fact. Males are heavily over-represented in the financial industry and it’s a very male-dominated culture. There are complex reasons for that.

But they’re irrelevant to this post.

Do women benefit from welfare-state programs and set-asides and does that affect voting patterns, consumer culture, tax policy, and welfare policy? I’d say, with some caveats, probably yes.

[But conversely, men might benefit from crony capitalism on Wall Street and defense boondoggles, and indirectly, through set-asides from women that benefits families].

But, again, that doesn’t have much to do with this post…

For all I know, some of these financiers were pushed into reckless behavior because their wives were shopaholics or suing them for everything they had.

But, once again, that’s not this post.

So, this isn’t gender bigotry. It’s simply one way of looking at the influence of our own collectivist tendencies (masculinity as it’s constructed, as well as masculinity as a biological reality) on Wall Street culture.

Original Post

Deal Journal tracks down another outsider who spotted Wall Street’s corrupt practices ahead of the pros. Turns out she’s a woman too. There’s something about estrogen that doesn’t lend itself to mega financial swindles. We’re waiting for the Harvard thesis on the gender behind Wall Street’s agenda.

I hate to come to this conclusion, but a lot of the hot-air, recklessness, ego, hype, aggression, and cut-throat competition really does sound like the product of a culture that conflates masculinity with viciousness and braggadocio. Paulson, Weill, Rubin, Dimon…no women in the top sharks. But when you look at whistle-blowers and expose writers, women stand out: Ann Williamson, Padma Desai (both on the Russian crisis) Lucy Komisar, Meredith Whitney, Janet Tavakoli….

“Deal Journal has yet to read “The Big Short,” Michael Lewis’s yarn on the financial crisis that hit stores today. We did, however, read his acknowledgments, where Lewis praises “A.K. Barnett-Hart, a Harvard undergraduate who had just written a thesis about the market for subprime mortgage-backed CDOs that remains more interesting than any single piece of Wall Street research on the subject.”

“Barnett-Hart’s interest in CDOs stemmed from a summer job at an investment bank in the summer of 2008 between junior and senior years. During a rotation on the mortgage securitization desk, she noticed everyone was in a complete panic. “These CDOs had contaminated everything,” she said. “The stock market was collapsing and these securities were affecting the broader economy. At that moment I became obsessed and decided I wanted to write about the financial crisis.”

Back at Harvard, against the backdrop of the financial system’s near-total collapse, Barnett-Hart approached professors with an idea of writing a thesis about CDOs and their role in the crisis. “Everyone discouraged me because they said I’d never be able to find the data,” she said. “I was urged to do something more narrow, more focused, more knowable. That made me more determined.”

She emailed scores of Harvard alumni. One pointed her toward LehmanLive, a comprehensive database on CDOs. She received scores of other data leads. She began putting together charts and visuals, holding off on analysis until she began to see patterns–how Merrill Lynch and Citigroup were the top originators, how collateral became heavily concentrated in subprime mortgages and other CDOs, how the credit ratings procedures were flawed, etc.

“If you just randomly start regressing everything, you can end up doing an unlimited amount of regressions,” she said, rolling her eyes. She says nearly all the work was in the research; once completed, she jammed out the paper in a couple of weeks.”

More here about the young lady whose research probably played a big part in Michael Lewis’ new book, “The Big Short.”

[At least, Lewis acknowledged the research. That puts him several rungs above most celebrity authors].

Meanwhile, I really like that a violinist was involved in this. My own father was a very gifted amateur violinist and Perlman, Zukerman, Oistrakh, Elman, Kreisler, Menuhin and many others defined my childhood.

Perhaps a lifetime of being immersed in real virtuosity and creativity left Barnett-Hart immune to the glamor of the phony maestros of Wall Street …