Steve Eisman | Wall Street Debate | Opposition (4/8)

The Motion: This House Regrets Blaming Wall Street For The Global Financial Crisis.

Steve Eisman continues the case for the opposition, as the fourth speaker of eight in the debate.

Motion Defeated.

Transcript:

[Music] you know to Steve Eisman to continue the case the opposition it’s been my experience that most people even extremely educated people don’t fully understand what the financial why the financial crisis happened so rather than throw Thunderbolts let me spend most of my time trying to explain what happened because I think in the explanation the answer to the question will be fairly clear the financial crisis is due really to four major interlocking factors too much leverage a large asset class known as subprime mortgages that blew up systemically important banks owning the asset class and derivatives tying balance sheets all over the world let me start with the leverage between 1997 and 2007 leveraging the large banks in both Europe and the United States tripled that’s only the stated leverage if you add on top of it the shadow banking system and all the off balance sheets stuff that was really on balance sheet the amount of leverage went up four to five times it’s a lot of leverage now there are a lot of reasons for why this happened I could probably spend the next two hours discussing why let me discuss just one aspect of it that most people don’t have never really read about and that is psychological there is an entire generation of Wall Street executives my age and up who had a very strange experience in the 1990s in the early aughts they made more money every single year now the reason why they made more money every single year was that their firms made more money every single year but their firms made more money every single year because the leverage of their firms was going up every single year and really what was happening was they mistook leverage for genius and the problem that will emerge was that if you had gone to any of the executives of these firms and I did and said to them listen the entire paradigm of your career is wrong the response would have been listen kid I made fifty million dollars last year what did you make it’s very hard to tell someone who thinks he’s God that he’s wrong subprime mortgages you know people today not even remember really what a subprime mortgage was all about it was a mortgage that had a two or three year teaser rate and then was Reese price up for it for the next 27 or 28 years and most mortgages originated between 2002 and August of 2007 had a teaser rate of 3% and a go to rate of 9% 3 % 9% the industry and Wall Street under wrote the loans to the teaser rate which is a fancy term that means that the underwriters knew that the consumer could only afford to pay the 3% for the two to three years he or she could not afford to pay the 9% now why would anyone write a loan a 30-year loan where the customer can only afford to pay the teaser rate for the first two to three years and here’s the second great lesson of the financial crisis incentives Trump ethics almost every time the reason why this happened was that the consumer would take out a loan and would pay three to four points upfront for the privilege of getting the loan and because he or she could not afford to go to rates after two to three years the consumer had to refinance and would pay three to four points for the privilege of doing so which meant that the consumer could not afford the loan and would have to refinance and would never be able to pay off his or her principal from a societal perspective this was a disaster but from an economic perspective for the people who were writing the loans the subprime mortgage companies and for the Wall Street securitization departments that were buying them packaging him and securitizing him and selling him all over planet Earth it was a boondoggle because it meant they got to make they got to redo the loans and re-securitizing every two to three to four years and make their bonuses over and over again as the underwriting deteriorated and the credits began to get worse as was became very obvious in 2006 no one neither the underwriters or Wall Street said there’s something wrong here our underwriting is bad let’s do less securitize less and tighten our standards and the reason for that is no one has ever begun a sentence in the English language where they say I think this year I’ll make less money because it would have meant they would make less money and they didn’t want to make less money they wanted to make more money so they let the underwriting standards deteriorate with full knowledge that they were deteriorating and that’s the story of subprime third systemically important firms owned the asset class this is a bit of an irony the model of Wall Street is to buy it and sell it not buy it and hold it and here Wall Street bought it sold some of it and kept some of it something they never ever did why well over the years between 2002 and 2007 it did become more difficult to find investors to buy all of the product because so much was being generated now if we lived in a rational ethical world and we don’t but if we did then what would have happened is Wall Street and the underwriters would have tightened standards and underwritten less because there was if there was not enough end-users but instead they convinced their firms to hold the paper and invest in it with the rationale of how bad can it be it’s rated triple-a and now derivatives this is one of the more important parts of the story if I own debt and GE and I want to mitigate my risk I can buy a credit default swap from goldman sachs pay a certain fee for that and if GE goes bankrupt goldman sachs pays me so I have now mitigated my risk by owning a credit default swap credit default swaps reduce risk for individual transactions but the problem is that the only works in this example when GE goes bankrupt if Goldman Sachs is not is not not bankrupt and essentially what has happened is my balance sheet has been tied to Goldman Sachs is balance sheet multiply that transaction by trillions and you can see balance sheets all over the world were tied together and that’s the crisis Wall Street created the leverage it securitized and sold subprime mortgages all over the world and it created the derivatives that tied balance sheets together who should be blamed is there anyone else well there are two alternatives that people like to propogate first we should blame the regulators and there there is some blame from the early 1990s the regulatory apparatus of the United States adopted a position that was different from the position that had adopted before which is we were gonna let the large banks manage their own risks because we trust them essentially in the 1990s of the 2000s the US and European financial systems had the trappings of regulation but in reality they were completely unregulated institutions you know there are many good books about the financial crisis but there’s one that I think has the best title that captures the essence of the crisis which is a book by Judge Richard Posner the title of which is a failure of capitalism and that’s what happened in the financial crisis it shouldn’t be a surprise unregulated banking systems fail all the time they go boom and bust the difference this time was the fact that the sheer size of the global banking system and its interconnectedness because of derivatives created a bust that had planet earth burned and the last thesis and is sometimes propagated it’s not Wall Street’s fault it’s not the regulator’s fault its Fannie Mae’s fault Fannie Mae and Freddie Mac you know I have a little history with Fannie Mae and Freddie Mac I began analyzing him in 1994 I think I was probably on the next 55 conference calls quarterly conference calls I analyzed them extensively I didn’t like them I thought they took too much risk I thought they manipulated the the political system but I like to blame people for what they actually did Fannie Mae and Freddie Mac did not cause the financial crisis this is a Shibboleth that is propagated by ideologues who were unwilling to admit that the financial system crashed because of the people who ran it Fannie Mae did buy some subprime mortgages it did cause a partially caused the demise of Fannie Mae but trust me on one thing if Fannie Mae and Freddie back had bought zero subprime mortgages the exact same thing would have happened because there were people lined up all over planet earth to buy them I thank you for your time and there’s a pleasure you

The 3 Problems Debating an INTJ

An INFJ discusses the issues he’s noticed during arguments with INTJs.

Admittedly, there were a few problems with the script on this one, so it’s a little rough around the edges. If it leads to any confusion, I’m happy to provide more depth and clarification on any one of my statements in this video. Just comment, yo.

But if you’re just gonna make fun of me for saying “symporting” instead of “supporting” near the end of the video, just keep your comment to yourself. For the love of God, I’m embarrassed enough as it is.

Is Bitcoin the Future of Money? Peter Schiff vs. Erik Voorhees

On July 2, 2018, Reason and The Soho Forum hosted a debate between Erik Voorhees, the CEO of ShapeShift, and Peter Schiff, CEO and chief global strategist of Euro Pacific Capital. The proposition: “Bitcoin, or a similar form of cryptocurrency, will eventually replace governments’ fiat money as the preferred medium of exchange.”

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It was an Oxford-style debate in which the audience votes on the resolution at the beginning and end of the event, and the side that gains the most ground is victorious. Voorhees won by changing the minds of 15 percent of attendees.

The Soho Forum is held every month at the SubCulture Theater in Manhattan’s East Village. At the next debate, which will be held on August 27, William Easterly, professor of economics at NYU, and Joseph Stiglitz, a Nobel Prize Winner in economics and professor at Columbia, will discuss whether free markets or government action is the best way to eliminate global poverty. You can buy tickets here.

MMT vs. Austrian School Debate

A public debate on macroeconomic theory and policy with leading thinkers from Modern Monetary Theory (MMT) and the Austrian School. Warren Mosler represents MMT, Robert Murphy, Ph.D, represents the Austrian School, and John Carney moderates.

 

WARREN MOSLER is an early developer of Modern Monetary Theory (MMT), the President of Valance Co, Inc., and Senior Financial Advisor to Senator Ronald E. Russell, President of the 29th Legislature of the U.S. Virgin Islands. He is the founder and current manager of the III Funds, which peaked at over $5 billion AUM in 2007 and currently manages about $1.5 billion, as well as the Founder and President of Mosler Automotive, which manufactures the MT900 sports car in Riviera Beach, Florida. Mr. Mosler has written a number of academic papers on issues relating to macroeconomics and monetary policy, and is the author of Seven Deadly Innocent Frauds of Economic Policy (2010). He maintains a personal blog, The Center of the Universe (http://moslereconomics.com), and can be followed on Twitter at http://moslereconomics.com.
ROBERT MURPHY, Ph.D, is a Senior Economist with the Institute for Energy Research and an Associated Scholar at the Ludwig von Mises Institute, where he teaches at the Mises Academy. He is also an adjunct scholar at the Mackinac Center for Public Policy. From 2003 until 2006, Murphy was Visiting Assistant Professor of Economics at Hillsdale College in Michigan, U.S. From 2006 until early 2007, he was employed as a research and portfolio analyst with Laffer Associates, an economic and investment consultancy in New York. He runs the blog Free Advice (http://consultingbyrpm.com/blog) and writes a column for Townhall.com and has also written for LewRockwell.com. He is the author of a number of books including The Politically Incorrect Guide to Capitalism and Lessons for the Young Economist. MODERATOR JOHN CARNEY is a senior editor at CNBC.com, covering Wall Street, hedge funds, financial regulation and other business news. Prior to joining CNBC.com, Carney was the editor of Business Insider’s Clusterstock.com and DealBreaker.com. He has also written for The Wall Street Journal, The New York Times, The New York Sun, Page Six Magazine, Gawker, TheAtlantic.com, The Daily Beast, Time Out New York, Fortune and New York magazine. Carney practiced corporate law at firms such as Skadden, Arps, Slate, Meagher & Flom and Latham & Watkins, primarily representing banks, hedge funds and private equity firms. He received his law degree from the University of Pennsylvania.

 

Why Debating Sucks (According To A Competitive Debater)

Why “debate me” is such a cursed demand, in 30 minutes. Go to http://curiositystream.com/sarahz and get a free 31 days of thousands of exciting documentaries and access to the streaming service Nebula ( http://watchnebula.com )!

When James Baldwin Squared Off Against William F. Buckley Jr.

In 1965, the year of the Selma-to-Montgomery marches and the Watts riots, an ancillary skirmish played out across the Atlantic. James Baldwin, then at the height of his international reputation, faced off against William F. Buckley Jr., the “keeper of the tablets” of American conservatism, in the genteel confines of the Cambridge Union. The proposition before the house was: “The American dream is at the expense of the American Negro.” For Baldwin, who would roll his eyes more than once during the debate, the question indicated glaring ignorance. The American dream was a nightmare from which he was trying to wake. For Buckley, the American dream was a giant bootstrap that American blacks refused to employ. “We will fight … on the beaches and on the hills, and on mountains and on landing grounds,” he told the audience of students that evening, channeling Winston Churchill. Only Buckley invoked the imagery of plucky guerrilla resistance not against a Nazi invasion of the British Isles, but against Northern radicals bent on uprooting the Southern way of life.

Nicholas Buccola’s “The Fire Is Upon Us” is both a dual biography of Buckley and Baldwin and an acute commentary on a great intellectual prizefight. Baldwin and Buckley were, to put it mildly, from opposite sides of the tracks. Buckley was the son of an oil speculator who grew up in a Connecticut mansion stocked with tutors and servants. He honed his debating skills at the family dinner table and at Yale, where he was triggered by the presence of secular, left-leaning faculty members on campus, and later, in “God and Man at Yale,” called for a ban on hiring them.

Lack of godliness was less of a problem in Harlem. James Baldwin learned how to lock and load the English language as a child prodigy storefront preacher. Buckley’s postcollege trajectory included a stint in the C.I.A., while Baldwin’s extra-literary activities earned him a thick F.B.I. file. By the early 1960s, Buckley had gathered disparate right-wing tribes together in his magazine, National Review. Baldwin, despite his growing renown, would remain more of a loner. By the time he reached the Cambridge Union, he was already at odds with both the separatist agenda of the Nation of Islam and the arid progressivism of the Johnson White House.

Enshrined on YouTube and in countless documentaries, the Baldwin-Buckley debate remains an uncanny exchange. The grainy black-and-white BBC footage shows an overpacked Cambridge Union, with a sea of mostly young white men in jackets. The way Baldwin swings his body and thrusts his hands in his pockets and barely refers to his prepared notes makes him seem much closer to our moment than to the one that surrounds him. When he finally stands up after the two brittle speeches on either side of the motion by Cambridge undergraduates, he twists his eyes to the upper gallery where his sister Gloria was seated. Slowly, then quickly, he makes the alien hall his own.

Buccola, a professor of political science at Linfield College, deftly guides the reader through the rhetorical and philosophical moves of Baldwin’s speech. Baldwin adopted the tone of a preacher — “a kind of Jeremiah,” as he put it — who wants to readjust his audience’s “system of reality.” He tries to get them to imagine the black American experience from the inside. “It comes as a great shock to discover that Gary Cooper killing off the Indians — when you were rooting for Gary Cooper — that the Indians were you.” Did the American dream come at the expense of the American Negro? For Baldwin, the obtuseness of the question demanded a pronoun switch: “I am stating this very seriously, and this is not an overstatement, I picked the cotton, and I carried it to market, and I built the railroads, under someone else’s whip, for nothing. For nothing.

“The Fire Is Upon Us” becomes revelatory in its interpretation of Buckley’s performance. We learn, for instance, that the Cambridge students had first tried to get Strom Thurmond or Barry Goldwater to debate Baldwin, only later settling on Buckley, who seems to have been eager for the publicity. We also learn that Buckley’s speech that evening was based on an article he had commissioned for National Review by Garry Wills. Wills, a young Catholic ultra, who would later break with Buckley over racial questions and become an indispensable interpreter of the American scene, drafted a fierce response to Baldwin’s famous New Yorker essay, “Letter From a Region in My Mind.” Part of the trouble with Baldwin for Wills was that he was treated as a savior by his white liberal readership and not afforded the dignity of scrutiny that he would have received if he were white. Wills believed that Baldwin went too far in his condemnation of the West. “When a Dachau happens,” Wills wrote, “are we — as Baldwin suggests — to tear up all the Bibles, disband the police forces, take crowbars to the court buildings and the libraries?” This was a selective reading of Baldwin, who, as his Cambridge speech makes clear, was if anything more committed to upholding the legacy of the Enlightenment than National Review’s editorial board was. But what would come to gall Wills even more than Baldwin was that his boss Buckley not only lifted from his piece (before it was published) for one of his own columns but also distorted Wills’s honest reckoning with Baldwin in the interest of his own, more facile and racialist prong of attack.

Buccola shows how Buckley in his Cambridge speech was developing a new kind of conservative maneuver. In his war on the New Left, Buckley’s method — both on his television show “Firing Line” and in other public appearances — was less to engage than to expose. (The method backfired on occasion, as when Huey Newton, a founder of the Black Panther Party, began a segment of “Firing Line” by out-Buckley-ing Buckley with a loyalty oath question:During the Revolution of 1776 … which side would you have been on?”) Charm, wit, eye-twinkling and rapid deployment of stray factoids were among Buckley’s chief rhetorical assets. His main form of reasoning consisted of forced analogies. The Freedom Riders were compared to National Socialists in the pages of National Review.

In the Cambridge speech, Buckley dialed the comparison down, comparing the Irish in England to American blacks. Had the Irish gotten the vote because of, or in spite of, English civilization? Buckley asked. “The engines of concern are working in the United States,” he assured his audience. “The presence of Mr. Baldwin here tonight is in part a reflection of that concern.” The full force of Buckley’s argument was that blacks should aspire to the condition of whiteness, however unattainable that might turn out to be. The suffering and humiliations of blacks were real, he conceded, but this was more a testament to the fallen state of man than something that could be corrected swiftly. “I am asking you not to make politics as the crow flies,” Buckley told his audience, quoting the philosopher Michael Oakeshott. Buckley’s stress on the gradualness of any accommodation told Baldwin all he needed to know: Why, after 400 years of being in America, did blacks not have access to the same bounty as their fellow Americans, including those who, like the Kennedys, “only got here yesterday?”

Baldwin’s views of race relations seesawed considerably in the ’60s, from a kind of cosmic resignation that, in the words of Ta-Nehisi Coates, “perhaps struggle is all we have.” But on that February night in Cambridge, Baldwin envisioned a different endgame. “We are trying to forge a new identity for which we need each other,” he told his audience. He suggested it might be possible to create a new political synthesis if white Americans were prepared to recognize what they had done, both to blacks but also, crucially, to themselves. Alongside his more apocalyptic visions, Baldwin harbored a wary utopian presentiment that Buckley believed ignored man’s true nature and endangered America’s delicate hierarchies.

It is tempting to view the Baldwin-Buckley debate as a small victory for the idea of racial equality: Baldwin carried the floor vote 544 to 164. But part of the wisdom of “The Fire Is Upon Us” is that it leaves the import of the evening open to question. The debate, and his subsequent encounters with Buckley, left Baldwin with a bitter taste: “He’s the intellectuals’ James Bond,” he once said.

Buckley believed he had gained much more from their night in Cambridge: “the most satisfying debate I ever had.” He would lose again, badly, later that year when he ran for mayor of New York. Curiously, his main support came not from the WASP establishment of Manhattan but from white voters in the outer boroughs. Buckley’s knack for historical analogies continues to flourish. The money manager Stephen Schwarzman compared an Obama administration proposal to raise taxes on hedge funds to the Nazi invasion of Poland. After the last presidential election, Buckley’s son, Christopher, took to Vanity Fair to argue that his father’s politics had nothing to do with those of the outer-borough vulgarian who had landed in the White House. It would have been more becoming had he simply tipped his hat to one of the shrewder authors of our predicament.

Israel is destroying itself with its settlement policy

Patriacide. Nationcide. Whatever you want to call it, that is what Israel is doing with its settlement policy: it is killing itself. If ever greater numbers of Jewish settlers are installed on land regarded by Palestinians as the basis for a state of their own, the possibility of a two-state solution grows ever more remote. Yet the single state alternative, involving annexation of the West Bank, would result in a country where Arabs vastly outnumber Jews and then you won’t have a one-state or a two-state solution: you’ll have a no-state solution. For those who love Israel and wish to preserve a democratic Jewish homeland, as much as for those who hate it, the settlements must stop. That’s what many left-wing Israelis and their friends say. But defenders of the settlements see things very differently. The two-state solution has long been a dead letter in their view: why stop building settlements in the name of a peace plan that is frankly unattainable? Whatever the eventual solution — it could even be a West Bank jointly governed by Jordan and Israel — there is no good reason why both Israelis and Palestinians shouldn’t both expand their settlements in the interim before an eventual peace deal.