'A Tsunami of Excuses'

William D. Cohan's op-ed today in the New York Times, "A Tsunami of Excuses," needs to be committed to memory by members of Congress considering an overhaul of financial regulation--and, above all, needs to be read and, if possible, understood by President Obama's bad choice for SEC chairman, Mary Schapiro.

They've been blaming the destruction of their firms on circumstances beyond their control, such as short selling. Cohan stomps out those excuses for the bullfeathers that they are.

The tsunami of excuses began shortly after the Bear Stearns collapse, continued through the Lehman Brothers debacle and has continued through today, promoted by the CEOs of both companies and exploited by conspiracy theorists, con men and hustlers like Overstock.com CEO Patrick Byrne (who is a bit of each). Cohan, who has written a well-received book on the debacle, "House of Cards," observes as follows:

It’s been a year since Bear Stearns collapsed, kicking off Wall Street’s meltdown, and it’s more than time to debunk the myths that many Wall Street executives have perpetrated about what has happened and why. These tall tales — which tend to take the form of how their firms were the “victims” of a “once-in-a-lifetime tsunami” that nothing could have prevented — not only insult our collective intelligence but also do nothing to restore the confidence in the banking system that these executives’ actions helped to destroy.

. . .In fact, although they have not chosen to admit it, many of these top bankers, as well as Stan O’Neal, the former chief executive of Merrill Lynch (who was handed $161.5 million when he “retired” in late 2007) made decision after decision, year after year, that turned their firms into houses of cards.

I've dealt with all of these themes in this blog and in two of my articles on the financial crisis: my profile of Tim Geithner last June and my recent article on John Paulson, in which I described how Bear Stearns CEO Alan Schwartz tried to get short seller Jim Chanos to appear on CNBC to vouch for his firm just before the collapse.

Cohan concludes by saying that "there can be no restoration of confidence in the banking system — and therefore no hope for an economic recovery — until Wall Street comes clean. If the executives responsible for what happened won’t step forward on their own, perhaps a subpoena-wielding panel along the lines of the 9/11 commission can be created to administer a little truth serum."

I agree but would go further, as I argued here. The difference is that I think there should be a 9/11-type commission whether the bankers come clean or not.

© 2009 Gary Weiss. All rights reserved.