Tag: Lehman Brothers

Slabbed takes the Regulatory Challenge Part 3: Incompetent is as incompetent does. Tim Geithner and Peter Principle.

The Peter Principle is the principle that “In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.” It was formulated by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, a humorous treatise which also introduced the “salutary science of Hierarchiology”, “inadvertently founded” by Peter. It holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain, being unable to earn further promotions. This principle can be modeled and has theoretical validity.[1] Peter’s Corollary states that “in time, every post tends to be occupied by an employee who is incompetent to carry out his duties” and adds that “work is accomplished by those employees who have not yet reached their level of incompetence”.

The Peter Principle is a special case of a ubiquitous observation: anything that works will be used in progressively more challenging applications until it fails. This is “The Generalized Peter Principle.” It was observed by Dr. William R. Corcoran in his work on Corrective Action Programs at nuclear power plants. He observed it applied to hardware, e.g., vacuum cleaners as aspirators, and administrative devices such as the “Safety Evaluations” used for managing change. There is much temptation to use what has worked before, even when it may exceed its effective scope. Dr. Peter observed this about humans. Continue reading “Slabbed takes the Regulatory Challenge Part 3: Incompetent is as incompetent does. Tim Geithner and Peter Principle.”

No ch

McClatchy DC’s Greg Gordon has done a bang up job dissecting Goldman Sachs’ huge profits after the bailout.  This topic represents the intersection of TARP, the Wall Street investment banks and the offshore reinsurance industry. With subprime mortgages stuffed inside insurance linked securities that were peddled both domestically and overseas, the securitized reinsurance contained a derivative based financial guarantee which was likely made good by TARP (my posts on Allstate’s Willow Re, which was not bailed out can be found here in general with my “bell cow post” here. With a tip of the hat to our good friend Mr CLS I can short cut the exhaustive written series of articles by Greg Gordon that focuses on bailed out Goldman Sachs with a recent Youtube interview he gave.

As an aside I continue to believe the collapse of this glorified pyramid scheme explains more on the recent volatility of the costs of RE than anything you’ll hear from the paid shills at their tradegroups (Ol’ Eli is so proud of his work there his Bio is access restricted). I think after a fair read of the information open-minded folks would tend to agree. Or put another way the tail risk associated with Hurricanes does change over time but not overnight. And those that could game the system made out like bandits. The Youtube embed is below the fold. Continue reading “No ch”

Wall Street paternalism and disconnect at it’s finest and on display. A Skadden partner writes about shareholder ignorance and displays plenty in the process.

I’ve written a series of posts on the disconnect from reality between the Wall Street fantasy land and Main Street, which has made modern day Wall Street possible. The problem is systemic in my opinion, from trade publications like the National Underwriter whose editor in chief believes spending yet more money on public relations is the answer to bad faith insurer claims handling, to their trade groups and shills like Robert Hartwig that try to convince the fleeced taxpaying public that insurers really didn’t screw people here after Katrina. As is his custom, however, it was Mr CLS who gives us almost more googling to do than time but in this instance a post of his on Yahoo Allstate provided me the catalyst to author this post which will illustrate again the disconnect of which I speak and it is there we begin:

sop, check out the “Winners” of the 4th Annual U.S. Securitization Awards…….

Don’t know what happened to the 5th Annual U.S. Securitization Awards, guess they cancelled and took “the 5th”.

The links he gave listing the winners was 404, no doubt broken on account of the financial crisis but undaunted I did a quick search and found them. This of course resulted in one of those patented Ah Ha moments for me but before I connect the paternalistic dots lets examine some of those that Wall Street honored back in April 2008 at the 4th annual U.S. Securitization Awards:

Deal of the Year: IHOP Corp./ Applebee’s International Securitization. Underwriter: Lehman Brothers

Deal of the Year – CMBS: Equity Office Properties Securitization Financing. Underwriters: Bear Stearns, Goldman Sachs and Bank of America

Deal of the Year – CDO: Genesis CLO 2007-1 and Genesis CLO 2007-2. Underwriters: Genesis 2007-1: CDO manager: Ore Hill Partners, Underwriter: Deutsche Bank. Genesis 2007-2: CDO manager: Levine Leichtman Capital Partners, Underwriter: Deutsche Bank

ABS Firm of the Year: Goldman Sachs

Outstanding Contribution Award: The American Securitization Forum / Dept. of the Treasury

As if these ironies aren’t delicious enough the final one is over the top.

Lifetime Achievement Award Recipient: C. Thomas Kunz, Retired Head of Structured Finance, Skadden, Arps, Slate, Meagher & Flom

We are well familiar with State Farm’s main US based law firm Skadden, Arps, Slate, Meagher & Flom from their great work revising the history of the Katrina litigation planting falsehoods such as the oft repeated meme that Jim Hood used his criminal investigation of State Farm to assist Dickie Scruggs in cramming the first big settlement down State Farm’s throat (with help of ignorant bloggers such as Mississippi’s own Tom Freeland  who still repeats such propaganda on occasion despite reams of contemporaneous press reports to the contrary). Our readers will also no doubt recall I once lamented the impact of layoffs at Skadden on our daily readership earlier this year.

While reading the award winners and the Skadden connection to the toxic paper industry (makes one wonder how much work the boys at Skadden did on State Farm’s Merna Re) a recent post on Greenbackd came to mind that featured the work of Skadden partner John Carney who evidently is in charge of shilling for the firm and it is to the Greenbackd post we go next: Continue reading “Wall Street paternalism and disconnect at it’s finest and on display. A Skadden partner writes about shareholder ignorance and displays plenty in the process.”

SLABBED Daily – April 5

A must for your Sunday reading is Steve’s excellent post on the history of AIG .  It lends context to the remarkable story Sop told in AIG and CV Starr: The spies who shagged us and Russell’s insightful  Where Insurance finally meets the big bailout. AIG a massive ponzi scheme?

Next, a thank you to Y’all Politics for picking up It’s all just a game to State Farm – Response in Rigsby qui tam tips hand.

Tis the season for Peeps – which leads to a peep at the Peeps’ Risk Analysis before taking a peep at Sunday stories.

In an editorial today, Clarion Ledger Executive Editor Ronnie Agnew blasts Judge Swan Yearger’s decision to close a hearing in Eaton v Frisby.

How can the public have confidence in the judicial system when Continue reading “SLABBED Daily – April 5”

Worldwide Markets Are Tanking

According to the Wall Street Journal the FTSE 100 is down 3.92%, the Nikkei is down 4.71%. The DAX closed down 2.74% as of 7:55 Central time.

The current feature story in the Wall Street Journal special coverage section runs under the headline AIG, Lehman Shock Hits World Markets:

The U.S. stock market suffered its worst daily point plunge since the Sept. 11, 2001, terrorist attacks. Financial markets were rattled by the rushed sale Sunday of Merrill Lynch & Co. and the bankruptcy-court filing of Lehman Brothers Holdings Inc., which scrambled Monday to sell its most-prized businesses before too many employees and customers walk out the door………. Continue reading “Worldwide Markets Are Tanking”