The End…of Hubris?

Michael Lewis’ fantastic article “The End” [December/January] describes something that can be difficult for market outsiders to grasp: how the subprime-mortgage fiasco and nearly impossible-to-track derivatives have driven Wall Street to collapse. His article should be distributed at every business school. What’s surprising is the lack of consideration—and integrity—by executives who have benefited from delivering these instruments to the market.

They should acknowledge the problem, admit they were wrong, and stand up to face the consequences. I think Wall Street ­executives could regain a lot of respect by returning bonuses and pay packages to shareholders.

Martin Abrahamsson
Geneva, Switzerland

Lewis’ article should be mandatory reading for every member of Congress. I’d like to read his take on the auto industry and the United Auto Workers too.

Carl Miller
Leadville, Colorado

When you wrote in December/January’s Commentary that Lewis’ article “shows how the hubris and recklessness that shocked him as a young man 20 years ago grew into a far more astonishing system,” you omitted the more important adjectives: stupid, criminal, and immoral.

David Hill
Mill Valley, California

Lewis quotes short-seller Steve Eisman, who asserts that in rating residential mortgage-backed securities, Standard & Poor’s assumed that “home prices would keep going up” and that our models “had no ability to accept a negative number.” Both assertions are false. Our model has always incorporated the assumption that home prices will decline. Our market-value-decline assumptions are disclosed in our published criteria. When new information is available, Standard & Poor’s incorporates the information into its analysis, and we may decide it is appropriate to change the rating or the rating outlook.

Vickie A. Tillman
Executive vice president
Standard & Poor’s
New York, New York

The Conversation In his December/January article, “The Hedge Fund Collapse,” our Wall Street editor, Jesse Eisinger, made a stark prediction: Within months, thousands of hedge funds will go out of business. Eisinger has been prescient in his forecasts so far, but some readers continue to take exception to his dire warnings. “Wrong wrong wrong wrong wrong,” SimplifyItSomeMore wrote. “There are 47 firms in the U.S. alone, each managing more than $10 billion. Where do you think all the pension money is going to go?”

Other readers weren’t disturbed by the hedge fund industry’s potential demise. “I’m inclined to think a thinning of the ranks won’t be such a bad thing,” RmB wrote. “If it means fewer mini-tyrant investment managers and more doctors in the world, that’s a bonus in ­itself.” And a few feel, well, apocalyptic: “They are going to go from stockbrokers to stock boys,” Hephasteus wrote. “Current financial-management systems are going to be as effective as a Hanes T-shirt against a destroyer round.”