The Goldman Drama
By DAVID BROOKS
NYT
Between 1997 and 2006, consumers, lenders and builders created a housing bubble, and pretty much the entire establishment missed it. Fannie Mae and Freddie Mac and the people who regulate them missed it. The big commercial banks and the people who regulate them missed it. The Federal Reserve missed it, as did the ratings agencies, the Securities and Exchange Commission and the political class in general.
It’s easy to see why this happened. People who make it into the establishment work and play well with others. They are part of the same overlapping social networks, and inevitably begin to perceive the world in similar, conventional ways. They thrive in institutions where people are not rewarded for being cantankerous intellectual bomb-throwers.
Outside the establishment herd, on the other hand, there were contrarians who understood the bubble (which was the easy part) and who figured out how to take counteraction (which was hard). Michael Burry worked at a small hedge fund in Northern California. John Paulson ran an obscure fund in New York. Eventually, there were even a few traders at the big investment banks who also foresaw the imminent collapse. One of them was “Fabulous” Fabrice Tourre of Goldman Sachs.
If this were a Hollywood movie, the prescient outsiders would be good-looking, just and true, and we could all root for them as they outfoxed the smug establishment. But this is real life, so things are more complicated. According to Gregory Zuckerman’s book, “The Greatest Trade Ever,” Burry was a solitary small-time operator far away. Paulson was cold and diffident.
(More here.)
NYT
Between 1997 and 2006, consumers, lenders and builders created a housing bubble, and pretty much the entire establishment missed it. Fannie Mae and Freddie Mac and the people who regulate them missed it. The big commercial banks and the people who regulate them missed it. The Federal Reserve missed it, as did the ratings agencies, the Securities and Exchange Commission and the political class in general.
It’s easy to see why this happened. People who make it into the establishment work and play well with others. They are part of the same overlapping social networks, and inevitably begin to perceive the world in similar, conventional ways. They thrive in institutions where people are not rewarded for being cantankerous intellectual bomb-throwers.
Outside the establishment herd, on the other hand, there were contrarians who understood the bubble (which was the easy part) and who figured out how to take counteraction (which was hard). Michael Burry worked at a small hedge fund in Northern California. John Paulson ran an obscure fund in New York. Eventually, there were even a few traders at the big investment banks who also foresaw the imminent collapse. One of them was “Fabulous” Fabrice Tourre of Goldman Sachs.
If this were a Hollywood movie, the prescient outsiders would be good-looking, just and true, and we could all root for them as they outfoxed the smug establishment. But this is real life, so things are more complicated. According to Gregory Zuckerman’s book, “The Greatest Trade Ever,” Burry was a solitary small-time operator far away. Paulson was cold and diffident.
(More here.)
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