Saturday, December 06, 2008

"Unprofitable, unpleasant, and politically inconvenient to know"

There is a pronounced unwillingness to take responsibility and to recognize that many of the factors that went into creating and sustaining the bubble weren’t so much unknowable but more likely, for those in a position to do something about it at the time, either unprofitable, unpleasant or politically inconvenient to know.

Take, for example, Robert Rubin, former U.S. Treasury Secretary and current board member at Citigroup.

“Nobody was prepared for this,” Rubin told the Wall Street Journal. He has been paid $115 million, excluding stock options, since 1999 and was advising Citigroup when it decided to mimic its peers and take on more risk.

“… What came together was not only a cyclical undervaluing of risk (but also) a housing bubble, and triple-A ratings were misguided,” said Rubin, who believes he along with Alan Greenspan has taken an unwarranted knock to his reputation. “There was virtually nobody who saw that low-probability event as a possibility.”

There is simply no doubt that a number of people were raising red flags about risk, about the use of ratings, about issues around securitization, and most certainly about an emerging real estate bubble. But it proved impossible for those risks to get a proper hearing within a system that was throwing off so much life-changing money.
That's James Saft writing for Reuters about the financial crisis. But the process he describes, of shrugging off warnings that are "either unprofitable, unpleasant, or politically inconvenient to know" surely applies to that other elite as well, the Washington foreign-policy groupies. Shrugging off of obvious risks in finance proved fatal, and we are supposed to expect that shrugging off US collusion in the step-by-step annihilation of 1.5 million Arab Palestinians in the Gaza Strip will be cost-free?


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