The Big Short_ Inside the Doomsday Machine - Michael Lewis [130]
* There is some dispute about the conversations between Hubler and Cruz. The version of events offered by people close to Zoe Cruz is that she was worried about the legal risk of doing business with Bear Stearns's troubled hedge funds, and that Hubler never completely explained the risk of triple-A-rated CDOs to her, and led her to believe that Morgan Stanley stood no chance of suffering a huge loss--probably because Hubler himself didn't understand the risk. Hubler's friends claim that Cruz seized effective control of Hubler's trade and prevented him from ditching some large chunk of his triple-A CDOs. In my view, and in the view of Wall Street traders, Hubler's story line is far less plausible. "There's no fucking way he said, 'I have to get out now' and she said no," says one trader close to the situation. "No way Howie ever said, 'If we don't get out now we might lose ten billion dollars.' Howie presented her with a case for not getting out." The ability of Wall Street traders to see themselves in their success and their management in their failure would later be echoed, when their firms, which disdained the need for government regulation in good times, insisted on being rescued by government in bad times. Success was individual achievement; failure was a social problem.
* It's too much to expect the people who run big Wall Street firms to speak plain English, since so much of their livelihood depends on people believing that what they do cannot be translated into plain English. What John Mack's trying to say, without coming right out and saying that no one else at Morgan Stanley had a clue what risks Howie Hubler was running, is that no one else at Morgan Stanley had a clue what risks Howie Hubler was running--and neither did Howie Hubler.
+ Another way to put the same question: How could Howie Hubler's bonds plunge from 100 to 7 and the reports you received still suggest that they were incapable of dramatic movement?
* It's interesting to imagine how the disaster might have played out if AIG FP had simply continued to take all the risk. If Wall Street, following Goldman Sachs's lead, had dumped all of the risk of subprime mortgage bonds into AIG FP, the problem might well have been classified as having nothing to do with Wall Street and as being the sole responsibility of this bizarre insurance company.
* Later revised to about $10 a share.
* The case brought by the U.S. Department of Justice against Cioffi and Tannin sought to prove that the two men had knowingly deceived their investors, overlooking the possibility that they simply had no idea what they were doing, and failed to grasp the real risk of a triple-A-rated subprime-backed CDO. The case was weak, and turned on a couple of e-mails obviously ripped from context. A member of the jury that voted to acquit the Bear Stearns subprime bond traders told Bloomberg News afterward not only that she thought they were innocent as charged but that she would happily invest money with them.