So should we be worried that Alan Grayson of the House Financial Services Committee, got taken in by a ponzi scheme? Does this render him unfit for the position, as I've seen some conservative commentators claim?
You heard a lot of this during the Edmund Andrews brouhaha, and I don't think it's useful in either case. Certainly, their personal feelings about regulation might be influenced by their history, but that's true of everyone. The more prevalent claim was that badly managing their personal finances somehow disqualified them from having opinions on financial policy.
But being good at analyzing policy, and being good at managing your personal finances, are not at all the same thing, just as you can report on the science of obesity, and nonetheless find yourself unable to risk that second eclair. Having impulse control problems, or being excessively trusting, in one area of your personal life doesn't really have much to do with your ability to analyze the macroeconomy. I don't know whether Ben Bernanke's a spendthrift or a tightwad. But I'd still rather have him in charge of the Federal Reserve than the CouponMom.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
Totally agree. I know finance, both theory and practice, much better than my girlfriend. However, if I were to pick any of us to manage a household budget, it would be her. I would just advise her, but not manage.
I wouldn't downplay the impact that his own personal embarassment will have here, and how that could easily lead to an overly cautious spin on a very influential position.
An obese reporter might or might not be able to provide an ubiased report on obesity, but the end result is a report. Influential, yes, but not directly linked to policy making.
Grayson's influence will be much larger, making the risk's here much greater.
I'm not disagreeing with the general point, and it's very possible that Grayson will retain a balanced view around what needs to be done (and a lot has to be done). Even so, I'd be cautious.
Megan -
Unfortunately, I think your stance you are taking here is similar to academia or journalism taking the stance that their political beliefs do not influence their decisions.
On a very individual basis, that may be right. But as a general rule, we use our experiences to guide our decisions and belief in what is right and wrong (policy). That's commonly called pragmatism.
Being taken in by a brilliant ponzi scheme is not much to be embarassed over, IMHO, and it may sway his policy thinking in a dramatic new direction.
But that's common of all such experiences, most of which we don't know about. It's definitely not a disqualifying thing in a policy-making role, as no one can say that being influenced into a more demanding politician may or may not be a bad thing.
Just my .02
Joe
Random, but why are house financial committee members allowed to invest in programs such as this? Doesn't their role require them to enter into blind investments in, hopefully, reputable and solid institutions?
I'm not demanding they can't choose what type of investment strategy they want to pursue, but that perhaps they shouldn't be able to choose WHO they invest with....
Joe
There is no rule requiring investment through a blind trust.
A couple years ago there was some study that purported to find evidence of trading on insider information among members of Congress, although the conclusion was drawn from statistical analysis of a largish data set and didn't make any specific claims (e.g., "Rep. Smith bought stock X the day before he voted to approve contract Y.").
A couple of years ago there was some attention paid to the fact that Bill Frist's family had significant ownership in one of the nation's largest hospital chains. My recollection is that no credible allegation of wrongdoing was made.
Well, that depends entirely upon how good an analyst of the macroeconomy Ben Bernanke happens to be. From 2000-2008 the U.S. economy's fortunes depended largely on the housing sector. Here was Bernanke, October 2005, on the 25% gain in housing prices: "But these increases largely reflect strong economic fundamentals, such as strong growth in jobs, incomes and the number of new households." Yeah. That stunning gain in incomes, which have stagnated since the mid-1980's. Whose incomes was he looking at? Those of investment bankers?
Here's what Bernanke told Congress in a closed-door meeting in February 2008: "He let us believe that the housing situation should begin to ameliorate by the end of the year," said Sen. Pete Domenici, a New Mexico Republican, told reporters. Ummm, ok, how did that turn out?
Are we talking about the Ben Bernanke who's exploded the Fed balance sheet by $2 trillion, much of it in mortgage-backed securities that the taxpayers will eat the losses for (and that weren't legal for the Fed to purchase in the first place), all paid for by borrowed and printed money? The same Bernanke who is one of the principal architects of the "hide the bad debt and stimulate through yet more debt" federal response to the crisis?
Given that stellar record, for all we know the Coupon Mom might very well have done a better job.
Of all the stories to not quote, the one behind the firewall isn't it... Obviously you can't reproduce the entire story, but a few choice quotes along with an explanation would be nice. Or a link to a non-firewalled source.
http://www.news-press.com/article/20090710/NEWS01/90710029
Thanks for that link. One of the things that jumps out from the story is how utterly corrupt the financial / political class is in this country.
One of the ways trial lawyers get rich is by suing anyone or anything that might have "deep pockets". So the response is for rich people and businesses to squirrel their wealth away in offshore accounts and trusts, to protect it from the trial lawyers. Grayson, a trial lawyer, intends to sue Wachovia (deep pockets, I guess), i.e., "punish" those whom he says are in part responsible for the fraud he suffered.
But where did Grayson put the cash that the ponzi scheme "loaned" him in exchange for his stock? Why, the AMG Trust that he set up in the Cook Islands, that's where.
Unbelievable. But I guess you can't fault the guy for knowing the score of the game.
I would never trust a financial advisor/regulator who got taken in by a ponzi scheme.
I would never trust a skinny chef.
I would never trust a dentist with bad teeth.
I would never trust a pediatrician without kids.
I would never trust a mechanic whose car didn't run well.
Would you trust an educated doctor who once wrote a meta-analysis that turned out to be very wrong?
It depends on their reasoning at the time of the analysis.
Earlier this year I sold put options on Wells Fargo, because I received $5 per share, the strike was $10 and I thought that the odds of them going bankrupt were far below 50% (conservatively about $10). So in EV, I was getting a very good value.
If they had actually gone bankrupt and I had lost money, I think that still would have been a good trade. I just lost on the probabilistic lottery.
So it depends.
I had open heart surgery performed by a cardiac surgeon who, as far as I know, had never had open heart surgery.
But I would be pretty reluctant to have open-heart surgery performed by a doctor who didn't have a heart.
The only one of those I agree with you on is the mechanic, because it's exactly the same job to fix your own car as someone else's. A skinny chef could be a fitness freak. A dentist with bad teeth, well, if he's the only one around with bad teeth that implies he's probably the best dentist. A pediatrician without kids, sure - I don't have kids myself, so this might be one of those "parenting makes you crazy" things, but skill as a doctor seems unrelated to whether you have an extra patient or two at home.
And while a ponzi scheme might be a bad sign for a regulator, it's hardly in "will never trust again" territory - I'm not going to call people taken in by, e.g., Madoff, total fools unworthy of ever being respected again.
Isn't a dentist with bad teeth like a barber with a bad haircut? If you have a dentist with fantastic teeth, shouldn't you go to his dentist instead of him?
This analysis also ignores how oral health and the quality of one's teeth is significantly affected by genetics.
Well I presume a good dentist would know how to evaluate and ask for good service. They might go to somebody sub-par once, but should not over an extended period of time.
Genetics certainly play a role, but I was referring more towards cleanliness and general hygeine, i.e. factors that can be controlled.
I was reminded of the old story about the town with two barbers: one ran a perfectly clean and orderly shop and had a very sharp haircut, the other was a slob with a messy shop and a terrible haircut.
So which one do you go to for your haircut? The slob, obviously. He gave the neat barber his snappy haircut. The neat barber gave the slob his crappy one.
We're not talking about opinions - everybody's got an opinion. We're talking about a man whose opinions are backed by the full force of law (when in concert with a majority, to be fair).
Experience keeps a dear school, but a fool will learn in no other. B. Franklin. At least this guy paid his own tuition, rather than receiving a public education.
On the other hand.
You can't cheat an honest man. The whole point of this "Ponzi scheme" was to evade the margin lending rules which apply to legitimate brokers. If the Congressman had not been so eager to evade the law he would not have exposed himself to being victimized by a smarter crook. Naive stupidity is usually much less dangerous than stupidity combined with a willingness to cheat. My observation is that the latter tendency is usually acquired early and is very hard to unlearn.
I happen to have known Alan Grayson professionally, and he's as dumb as a sack of hammers. I always thought Congress was a perfect fit for him.
So how did he make his money? (though, one doesn't have to be smart to get rich...)
I have opined that this recession is due to the stacking of stupidity many levels deep within organizations and government. Too many years of good times when no decision was a bad one.
It will be over when the stupidity is gone.
It's obviously going to be a long one.
Derek