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Clifford Asness: Appalled in Greenwich, CT

Posted by Larry Doyle on January 26, 2010 4:06 PM |

We were first introduced to Clifford Asness in the midst of the Chrysler bailout last May. At that point, Mr. Asness unabashedly took on President Obama in penning, “Unafraid In Greenwich, CT.”  To highlight his piece, I wrote “Hedge Fund Manager Responds to Barack’s Bullying.”

Today we are revisited once again by Mr. Asness as he rails on the White House for the populist pandering provided by our President. I am all for real reform promoting truth, transparency, and integrity, but when an administration and the Congress are not capable of addressing their own house and exposing their own shortcomings, then I believe they lose the bully pulpit. Obama should fully expose Mary Schapiro and her tenure at FINRA and then take on Wall Street.

Asness is again not bashful in bashing the administration. Thank you to the Future of Capitalism for providing the following summary of Mr. Asness’ published piece:

Appalled In Greenwich, Connecticut

The founder of AQR Capital Management, Clifford Asness, has sent along by e-mail an early version of his latest commentary to be published on his Stumblingontruth.com Web site. This one replies to President Obama’s attacks on the bankers. Some highlights: “When a failing government with totalitarian impulses needs help, it’s pretty standard strategy to call down a pogrom against an unpopular class of citizens. The bankers are nothing if not unpopular. Unfortunately for this President, he will, I hope, find the financial community not cowering from his Cossacks on a shtetl in the Pale of Settlement (Greenwich, CT), but meeting his accusations with logic and patriotism.”

And: “Although the stated reason for punishing banks is the false accusation that they wrecked the economy all on their lonesome, much of the populist resonance of this libel springs from the inconsistent argument that bankers are socially useless parasites skimming money from real transactions. This doublethink is very old. The belief is moneylenders and speculators are powerful enough to cause all our economic problems, but not useful enough to deserve a share of our economic successes. Where this power without usefulness derives from is never clear. In fact, highly skilled bankers (in the broad sense, including lenders, traders, asset managers and deal makers) are essential to an efficient modern economy and some of them will therefore earn very large amounts of money. What they create is as real as a shoemaker, as a modern economy would produce a lot less shoes if instead of banking we relied on something closer to the barter system. If you penalize these services, or legislate away the freedom to innovate and to get rich by doing them better than anyone else, you destroy both a fundamental economic freedom and a key component of economic growth.”

Some people will say Mr. Asness is over the top in comparing Mr. Obama’s proposal of a 0.15% tax on liabilities of firms with assets of $50 billion or more to a pogrom, in which Jews were thrown from rooftops, raped, and had their homes were looted. And they may be correct. Still, something about the way the term “bloodsucker” is being thrown around in this discussion has certain people familiar with Jewish history (like, well, me) just a little bit sensitive.

Anyway Mr. Asness is worth reading on far more than just the Jewish angle. He doesn’t let his Ph.D. get in the way of clear writing: “So, how do you fix too-big-to-fail? Well, this is complicated, give me a moment. I got it. You let them fail.” Mr. Asness says he opposed the bailout, differing with the many writers and officials who spoke of how fragile the global economic system was. “I think Capitalism is very robust,” he writes.

The gloves remain off. I will be the first to call out those within the financial system deserving total excoriation. That said, as a nation we are better than to merely generalize about an industry. Having worked in the financial sector for 23 years and also having many friends, family members and former colleagues who work within this industry, I believe the overwhelming number of people in the financial sector are outstanding individuals, both professionally and personally.

Asness gives us reason to ponder and review where we are as a country and, equally as important, where we are going.

For those who care to read the full 8-page commentary, ScribD provides a link here.

Asness is not likely to get invited to the next state dinner but I do believe he provides a healthy balance to some of the generalized bashing emanating from Washington.

What do you think?

LD

  • TML

    There are people appalled all over the country at what has gone on between Washington and Wall Street over the last year. Regrettably this situation has been developing for years if not decades.

    Asness makes some good points. We do not need bravado. We need leadership.

  • Mike

    Indeed some good points.

    Wall St. mentality is kind of like NY Yankees mentality. You’ve got the money, use it. Yankees buy all the best players, Wall St. buys all the congressmen.

    Is it still capitalism if you’ve got the nations lawmakers in your pockets?

    Maybe Mr. Asness isn’t at fault, but all the firms that were not allowed to fail certainly deserve a finger pointed at them. The ones who aren’t allowed to fail, who spent TAXPAYER MONEY ON LOBBYING!!!!!, and the leaders who go along with their bribes need to be removed from Earth.

  • Atlas

    Asness doesn’t absolve the banks, not close. If you read the piece that’s very clear. He just makes it abundantly clear that their being blamed on their own has become the “narrative” as he calls it, and is dead wrong, and is intentional as it’s an easy answer that blames an unpopular gropu.

    Also, he goes a bit crazy with the pogrom analogy, but I don’t think he’s seriously comparing these two events on a moral basis. He’s certainly not comparing the proposed bank tax to a pogrom, but rather the demonization of an unpopular class as a tool of an authoritarian state. The analogy is too extreme, and I’d guess he’d agree with that, but it’s meant to be directionally accurate, and it seems so to me.

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