Third World America - Arianna Huffington [60]
In late 2002, Charles Prince was put in charge of Citigroup’s corporate and investment bank.142 The banking giant was already knee-deep in toxic paper and aggressively looking the other way.143 Prince was so successful at averting his eyes that, five years later, when he was told that his bank owned $43 billion in mortgage-related assets, he claimed it was the first he’d heard of it. Isn’t that something he should have known? Or did he prefer not knowing?
Prince had plenty of help ignoring the obvious, particularly from Robert Rubin. According to a former Citigroup executive, despite ascending to the top of the Citi food chain, Prince “didn’t know a CDO from a grocery list, so he looked for someone for advice and support.144 That person was Rubin.”
But when it all came tumbling down, both Rubin and Prince portrayed themselves as helpless victims of circumstance, because, well … who could have known?
“I’ve thought a lot about that,” Rubin said when asked if he made mistakes at Citigroup.145 “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.” What he means, of course, is the facts as he chose to know them at the time.
Former Fannie Mae CEO Franklin Raines suffered from the same affliction.146 According to Raines, he can’t be blamed for what happened at Fannie Mae because mortgage stuff is so, well, complicated. In fact, he can’t even understand his own home mortgage: “I know I can’t and I’ve tried,” Raines told a House committee. “To this day, I don’t know what it said.… It’s impossible for the average person to understand.” In other words, who could have known?
But isn’t it interesting that the complexity and opacity of these things somehow always redounds to the benefit of those in charge?
We saw a familiar insistence on ignoring all warnings in the Bernie Madoff scandal.147 “We have worked with Madoff for nearly twenty years,” said Jeffrey Tucker, a former federal regulator and the head of an investment firm that lost billions to Madoff. “We had no indication that we … were the victims of such a highly sophisticated, massive fraudulent scheme.” Who could have known?
Well, financial fraud investigator Harry Markopolos, for one. Not only did he know, he did everything he could to make sure everybody else knew as well.148 In 1999, after researching Madoff’s methods, Markopolos wrote a letter to the SEC saying, “Madoff Securities is the world’s largest Ponzi Scheme.” He pursued his claims with the feds for the next nine years, with little result.
One would think the “Who Could Have Known?” excuse has been exposed as a sham enough times to render it obsolete, but there are always new incentives to not know.
In the wake of 9/11, Condoleezza Rice assured us nobody “could have predicted” that someone “would try to use an airplane as a missile.”149 Except, of course, the 1999 government report that said “Suicide bomber(s) belonging to al-Qaeda’s Martyrdom Battalion could crash-land an aircraft packed with high explosives (C-4 and semtex) into the Pentagon, the headquarters of the Central Intelligence Agency (CIA), or the White House.”150
After Katrina, the Bush White House read from the “Who Could Have Known?” hymnal: No one could have predicted that the storm would be a Category 5, and that this could result in the levees being breached.151 We now know, of course, that plenty of people knew that the levees could be breached and said so before the storm hit.
Then there is the high priest of “Who Could Have Known?”, Alan Greenspan, who, looking back in October 2008 on the makings of the financial crisis he helped create, delivered this “Who Could Have Known?” classic: “If all those extraordinarily capable people were unable to foresee the development of this critical problem … we have to ask ourselves: Why is that? And the answer is that