Wonderful Matters

Last night PBS’s Nova had a broadcast titled “Mind over Money” about the ways psychology affects economic decision-making. It was a standard World take on the latest in behavioral economics, namely that there is really no such thing as a rational market. The typical proponents of this view were favorably interviewed, Robert Shiller and Richard Thaler among them, stridently advancing the idea that emotions play such an important role in decision-making that few people are truly rational about the decisions they make. This is all played out in the market, and with the financial markets recently demonstrating how hosed people got, it must be true. Nah. Sorry. Everything anyone does is always and perfectly rational, every time. The reason is simple, and has a bit to do with a portion of the show that featured a scientist doing experiments to graphically see how much of a certain part of the brain is activiated when a subject is offered money. It turns out it is stimul...

The biggest news on Wall Street is that the Securities and Exchange Commission is coming after Goldman Sachs. They've been hit with fraud charges, so significant that today the Dow took its first hit in a while. Everyone who watches what's going on there at street level isn't surprised that Goldman Sachs is in the crosshairs, and some are a bit surprised that the SEC is actually standing up and pointing its shaky finger at the behemouth. Slate writer Heidi Moore got through a manhole and looked around a bit underneath the street, and saw some very interesting things. Among all the stories in the web aggregate I look at, my attention was drawn to her piece: "It's Not Just Goldman--It's the Clients." Sure enough, you'll find that all of our huffing and puffing about rich guys being eeevil is woefully misplaced. We need to do a lot more huffing and puffing about Ourselves . The fault, dear Brutus, lies with ourselves. Wait, I'm getting ahead o...

The Financial Crisis Inquiry Commission is holding hearings this week and whenever, calling all sorts of really official finance officials to the table to 'splain themselves. Today's featured showman was Daniel Mudd, at the helm of Fannie Mae when she started sinking. (Fortunately just before she went completely under, millions of taxpayers with buckets started bailing feverishly to get her back into fine sailing form.) He said something interesting today, I think. He said that if Fannie Mae were allowed to diversify, they'd have been better off. Now, what precisely does this mean? Please, do enlighten me, I want to get it straight. Tell me if I'm wrong, please, I mean it, I invite your comments. But does this not mean that if Fannie Mae were able to suck the blood from other sources, they'd have been able to cover their asses when the blood they'd been sucking from home mortgages ran dry? After all, they were required by law apparently to have "all t...

Harry Markopolos has a new book out, the one you’d think: “Bernie and Me.” Well, that’s not the title, but that is essentially what it’s about. If you don’t remember who in blazes Harry Markopolos is, he’s the mid-level high-finance seer who eagerly wondered how investment genius Bernard Madoff made bazillions in the markets when he really shouldn’t have. Markopolos then tried like crazy to duplicate Madoff’s success and discovered that it was not only impossible but certifiably criminal. He blew the whistle a number of times only to find he was blowing a dog whistle, you know the kind, completely inaudible to human beings fully immersed in keeping their human sacrifice humming along smoothly. Thus, the real title of the book: “No One Would Listen.” Sure Markopolos is making the key point that incessantly screeching about bad things and shoving gobs of veritable numbers in the faces of those humming “Camptown Races” with their eyes closed and ears plugged by fingers makes a compellin...