If you need further confirmation that the financial crisis has passed with no humbling effect on Wall Street, look no further than Max Ableson’s article in this week’s New York Observer.
Ableson gets a trio of former Lehmanites to talk to him about the Repo 105 transactions. What they tell him is that only unsophisticated people who have no idea what they are talking about think Repo 105 matters. One of them describes those concerned about the transactions as “yappers who know nothing.”
“It’s just not that big of an event. But that’s not what people want it to be, so they’ll make it not that way if they can,” one executive tells Ableson. “They just want to be mad and don’t know what they’re talking about and want to be outraged.” After the interview, that executive sent a follow-up email comparing the furor over Lehman Brothers to the “groupthink” that sent America into Iraq after Sept. 11.
It is exactly this kind of arrogance—this sense of superiority over outsiders who cannot possibly understand sophisticated financial transactions—that contributed to the doom of Lehman Brothers. All doubts about the value of assets held by the firm were dismissed as the concerns of unsophisticates. David Einhorn, the money manager who publicly challenged Lehman’s accounting practices, was dismissed as someone who didn’t understand investment banking.
You would think that the terrible ending to that story would have changed the mental self-image of these guys. Apparently it hasn’t.