Felix Salmon, an Audit contributor, asked for an arbiter to look into the complaints of a writer named Sean Olender. Olender had e-mailed Salmon in May about a Market Mover blog Salmon wrote in 2007, attacking an opinion piece by Olender in the San Francisco Chronicle a few days before.
“I was certainly too bullish on lots of things back in 2007, so, if I was unfair to this chap I should probably say so,” Salmon wrote, asking whether he owed Olender an apology.
Over the past two years, I’ve served as The Arbiter for The Audit, looking into claims by businesses about whether they had been fairly covered by the financial press, so this job fell to me.
First, a disclaimer: Although Salmon and I both write for The Audit and have exchanged group e-mails about a project on which we are both working, we have never met nor even spoken. I’ve read Salmon and listened to him on the radio over the past couple of years, but that’s the extent of our relationship.
The crux of the dispute is an article that Olender wrote in December, 2007, expressing skepticism about something called the Master Liquidity Enhancement Conduit, or MLEC. Don’t remember it? Don’t feel bad. It was a short-lived idea that came and went in a matter of months during the chaos of the economy falling apart. And we don’t really need to examine it in much detail to address Olender’s complaint.
Olender e-mailed Salmon on May 18, 2011, with a subject line that said: “Still think that buying only ‘high quality loans’ was the purpose of the MLEC?”
He said, in part: “In retrospect you were quite a bull on mortgage securities and you believed that the investment banks did nothing wrong and the mortgage bonds were just peachy good stuff and only subprime was a problem.”
He went on to say:
Your article about my article was very mean and unprofessional. It’s one thing to have a problem with a person’s position, but it’s another to make a personal attack on a person you don’t know. That was a sign you have not been adequately trained as a journalist.
One reason this rankled Olender so many years later, he said, is that “my life is not defined by this single issue, but my Google search results have your insulting article calling me an insane person as the number two entry.”
He’s right. A Google search of his name does turn up Salmon’s attack as the second item. Olender is an attorney who manages a California law firm specializing in immigration and employment law and is an occasional writer.
And he is right, too, that Salmon owes him an apology. Let’s start with the language Salmon used in his critique, in which he discussed what he called “a grossly irresponsible opinion piece…..this incendiary and meretricious column.” He attacks Olender for suggesting that a mortgage-freeze plan was a fraud, aimed at protecting the banks from being sued by investors, and defends the banks as innocent middlemen, a view that has fallen apart in the investigations that followed the real estate collapse and the blow-up of mortgage investment vehicles that were so integral to creating the housing bubble.
Salmon wrote: “The real problem here is that Olender never makes the crucial distinction between subprime mortgage originators, on the one hand, most of whom were not banks at all, and the investment banks, on the other hand, who pooled and tranched and sold off the subprime mortgages to bond investors.” The originators were responsible for the fraudulent loans, he wrote. “The investment banks are just middlemen…”
And again: “But the investment banks were just the middlemen, funneling supbprime mortgages from originators to investors who were desperate or yield.” While we still don’t know the full story of who knew what about the quality of the investments that the banks were selling their customers, we know enough now—including the fact that Goldman Sachs was betting that the investments would fail at the same time it was still marketing them—to view the investment banks with a jaundiced eye.
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.