What’s more, we forget, but investment banks actually bought subprime originators themselves, precisely, in fact, to cut out the middleman, in this case, originators: Merrill Lynch owned First Franklin, Lehman Brothers owned BNC, Bear Stearns owned Encore Credit, Citigroup owned CitiFinancial, and so on. To call the I-banks mere middlemen is wrong on more than one level.
In general, I think Salmon’s view of the banks, even for 2007, erred on the side of trust. But I don’t fault him for holding that view. I fault him for the lack of respect he had for someone with a different view—that, and for the “non-sophisticates-keep-out” attitude of the piece.
I remember, in the early days of blogging, questions raised about how far journalists could go in this different form of writing. There was pressure to be over the top, to be outrageous, to turn yourself into an attitude-propelled superbrand. And some journalists went too far, as I think Salmon did here.
This is where Olender reveals that he’s really living in cloud-cuckoo land: he simply doesn’t grok [to understand thoroughly and intuitively, according to the definitions I had to look up] the difference between a loan modification — which is the centerpiece of the mortgage-freeze plan — and a refinance.
But wait—Olender isn’t done yet. No column as crazy as this one would be complete without taking a page from Ben Stein’s book and drawing out the Paulson-Goldman connection.
That would be former Goldman Sachs chief Henry Paulson, who was then the U.S. Secretary of the Treasury. Olender had raised a question in his piece:
If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?
What a thought. Not the clean-hands investment banks! It is enough to send Salmon into his final tirade (with my emphasis):
The whole piece suffers from an acute case of conspiracytheoryitis, shot through with some very damaging misunderstanding about where the legal liability lies in the securitization process. It’s the kind of thing which would be easily ignorable on a blog somewhere, and I’m not surprised that something along these lines has been written. But I am extremely surprised that the editors of the San Francisco Chronicle, whose job is to filter out the nutcases, somehow let this one through and printed it on the front page of the C section on Sunday. Shame on them.
As a reader and listener, I’ve admired Salmon’s intellect and his journalism. So I was surprised at how vicious an ad hominem attack he made of his critique of Olender’s article. He would have benefited from an editor who might have helped him walk it back. On the other hand, it was three and a half years ago, and we all live and learn. And I give him credit for asking us to look into this.
That said, however, Felix: You owe the guy an apology.