Neither Delicious Nor Animal; Important Nonetheless

This New York Times op-ed piece has generated considerable interest in the financial and government communities since it appeared over the weekend. Michael Lewis and David Einhorn* collaborated to write it, so it's in a style (snark and pith) that won't suit everyone. Take a few minutes to read it -- the implications of Lewis and Einhorn laying bare systematic flaws will significantly impact how global finance is reshaped. It's a lengthy but quick read. Be sure you click the link to continue reading when you reach the bottom of page four; the piece was published as two separate articles for some reason.

Issues raised in the article are not new -- Einhorn publicly disclosed many of the credit rating agency problems in 2002 and has testified before Congress about difficulties of excess leverage at investment banks -- though I'd suggest they are unknown by the general public and only vaguely understood by many finance people. Mainstream press outlets will further explore these issues in the months ahead. You might as well be ahead of the curve.

One great quote:

SAY what you will about our government’s approach to the financial crisis, you cannot accuse it of wasting its energy being consistent or trying to win over the masses. In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers.

And here’s the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.

Sadly, the fact that politicians and the American public are just beginning to become aware of these issues means we're not probably close to the end of current pain. I'm hoping for public equity markets and the US economy to bottom this calendar year, but certainly not holding my breath for either.
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* Full disclosure: I like David Einhorn. My team used to cover Greenlight and each time I met with Einhorn I found him intelligent, inquisitive, and darkly humorous. His view is sound, but the fact that I agree with his conclusions and like him as an individual probably means I give the article greater importance than many people would.