[Marxism] Glenn Hubbard Took $1200 an Hour to Be Countrywide's Expert Witness
lnp3 at panix.com
Thu Dec 20 16:51:23 MST 2012
Politics: Glenn Hubbard, Leading Academic and Mitt Romney Advisor, Took
$1200 an Hour to Be Countrywide's Expert Witness
December 20, 2012 | 11:10am EST
Karma is a bitch. Just ask Glenn Hubbard.
A few months ago, the Dean of Columbia's business school was a leading
economic advisor to Mitt Romney and a rumored (perhaps even consensus)
candidate for the Treasury Secretary job.
Now Romney's out of the presidential picture and Hubbard – well, he's
just yet another grasping jobholder who's been exposed as a paid
mouthpiece in a court proceeding.
Anyone who's seen the movie Inside Job will recall the stupendously
angering scene in which Hubbard pissily snaps at his interviewer for
asking about his outside relationships with financial services industry.
In the movie, renowned filmmaker Charles Ferguson pointed out that,
among other things, Hubbard had co-authored a paper with former Goldman
chief economist William Dudley in which he praised credit derivatives as
having improved the "allocation of risk" and helped produce "enhanced
stability." It was fair to ask how much Goldman's "Global Markets
Institute" had to pay one of the Ivy League's leading minds to endorse
the giant daisy chains of credit default swaps and collateralized debt
obligations that led to the crisis – it was quite a coup, after all,
like getting the Dean of Harvard Medical School to pose in public
smoking a pack of Kools.
Anyway, when asked if he did consulting work for big banks, Hubbard
refused to answer. And when asked if he just didn't remember who was
writing checks to him when he wasn't overseeing the education of
American youth, he fumed.
"This isn't a deposition, sir," he hissed. "I was polite enough to give
you time, foolishly I now see. Give it your best shot."
Again, there's just nothing like karma. If your answer to a perfectly
sensible question is going to be, "Screw you, this isn't a deposition,"
exactly how long do you think it'll be before you end up actually
getting deposed? And forced to answer, under oath, just how much your
A couple of years, as it turns out.
Hidden among the reams of material recently filed in connection with the
lawsuit of monoline insurer MBIA against Bank of America and Countrywide
is a deposition of none other than Columbia University's Glenn Hubbard.
And boy, is it a wild deposition. It's like Inside Job, only Hubbard has
to answer the questions he doesn't want to answer. Reading it is like
watching a man try to avoid breathing in a gas chamber.
At issue here is the fact that Hubbard testified on behalf of
Countrywide in the MBIA suit. He conducted an "analysis" that
essentially concluded that Countrywide's loans weren't any worse than
the loans produced by other mortgage originators, and that therefore the
monstrous losses that investors in those loans suffered were due to
other factors related to the economic crisis – and not caused by the
serial misrepresentations and fraud in Countrywide's underwriting.
In other words, the Dean of the Columbia University business school
testified that the fact that Countrywide claimed to have conducted
thorough due diligence when in fact it was pressuring underwriters to
approve 60 to 70 mortgage applications a day and failing to verify any
income levels or other key information (to say nothing of the outright
falsification of such data, which also went on on a mass scale) – he
testified that these issues were irrelevant.
Investors in Countrywide loans, he reported, in specifically rebutting
MBIA's claims of fraud, were probably victims of macroeconomic factors,
among other things the expansion of lending guidelines by "the
government-sponsored entities," i.e. Fannie and Freddie. You know, that
So how much does it cost to get the Dean of Columbia Business School to
say that Countrywide customers weren't injured by fraud? Well, MBIA's
lawyer, David Freeburg, asked Hubbard that very question:
Q. How are you being compensated?
A. I'm being compensated at an hourly rate for my work.
Q. Do you know your hourly rate?
A. Yes, it's $1200 an hour.
For comparison's sake, $1200 an hour is about what Natalia, the woman
New York Magazine called "America's #1 escort" in a famous profile many
years ago, made early on in her career working for Jason Itzler, the
self-described "King of All Pimps." It's not the top-end rate for the
kind of Mercedes-class prostitute you'd romp with from an outfit like
the Emperors Club, but according to the L.A. Times, it's still more than
you'd have to pay for the usual "vanilla sex" or "Republican sex."
Twelve hundred dollars an hour in America buys high-end companionship
that can run a little bit kinky, if that's where your needs lay. And
that's exactly what MBIA got with Hubbard's research.
So how did Hubbard manage to analyze Countrywide and conclude that mass
fraud in its underwriting procedures wasn't problematic? Easy: He didn't
look at the underwriting! All Hubbard did was take a group of
Countrywide loans and compare them to a group of other loans from the
same time period.
When that comparison revealed that Countrywide's loans failed at about
the same rate as the non-Countrywide loans, he smartly concluded that
fraud wasn't the problem and that macroeconomic factors must have been
Except for one thing: He left out the fact that about half of the loans
in the "non-Countrywide" pool he selected for his analysis were
originated by companies that were also being sued for underwriting fraud
and other irregularities. What Hubbard did is compare a bunch of bad
loans to a bunch of bad loans.
What's fascinating in the deposition is the way Hubbard repeatedly tries
to avoid answering the question about what kind of research he did, or
didn't do, in his Countrywide analysis. His sneering annoyance shines
through as brightly as it did in Inside Job, but this time he couldn't
just say, "You've got three more minutes." Here, for instance, he
actually tries to play dumb when asked if he looked into Countrywide's
Q. Did you make any inquiry into how Countrywide actually originated its
A. I'm not sure exactly what you mean by that.
Awesome. Hubbard here is just being intentionally obtuse: he's trying to
see how much of an appetite MBIA's lawyers have for fighting through his
dickishness. They press on:
Q. You understand there was a process by which Countrywide originated
the loans that it included in the securitizations?
Q. And there was also a process by which Countrywide examined the loans
that it purchased from other originators inclusion in securitizations?
Q. Did you make any factual inquiry into the nature of either the
process of origination or the process of due diligence by Countrywide?
A. I'm not an underwriter in this proceeding, so neither of the
assignments that I told you would require such.
He knows it's a yes or no question, but he's letting them know they're
going to have to beat it out of him:
Q. And it's fair to say that you gave your opinions without any inquiry
into how Countrywide actually originated its loans or how Countrywide
examined the characteristics of the loans that it purchased from other
A. I'm not an underwriter. As an economist, what I can do is look at the
implications of the claims made by MBIA and its experts.
Q. So is that a yes in response to my question?
A. You have to tell me the question again.
Yikes! If I was Freeburg I would have pulled out the sponge and the car
battery at this point. Fortunately, the MBIA lawyer is more mature, and
went on calmly:
Q. It's a fairly simple question. You gave your opinions without any
inquiry into how Countrywide actually originated its loans, correct?
A: I did not underwrite.
That's as close as they got to getting Hubbard to admit that for $1200
an hour, he swore that Countrywide's underwriting practices were
irrelevant – without investigating Countrywide's underwriting practices.
As for the question of how Hubbard managed to omit the fact that the
loans he compared Countrywide loans to also had underwriting problems,
there was this exchange:
Q. So in the aggregate, more than half of your entire population in the
control group was affected by litigation?
A. I think, well, yes, by number of pools, yes.
Q. And in neither your initial report nor your rebuttal report did you
disclose that fact for the benefit of the court?
A. Well I've already told you I didn't think it was relevant from my –
Q. I'm aware that's what you said today. But the fact is in neither your
initial report nor your rebuttal report did you disclose that more than
half of all the securitizations in your so-called control group were
affected by litigation?
A. If I don't think something is a relevant fact, why would I have
Q. You're agreeing with me, you didn't disclose it, right?
A. That's a factual question. You had innuendo attached to it.
Q. Well, sir, I do think it's significant that you didn't disclose that
fact, that's why it's in my question. I just wanted to confirm you did
not disclose that fact, right?
A. I didn't disclose the fact.
Hubbard must be a very inquisitive thinker. He took $1200 an hour
specifically to not learn how subprime loans were created. Moreover, he
did this non-learning for Countrywide years after the financial
collapse, long after the truth about that company had already become
common knowledge pretty much everywhere in the world outside Hubbard's
office, long after Countrywide CEO Angelo Mozilo had been charged by the
SEC with deliberately misleading investors (and insider trading, to
boot), and long after the Attorney General of California had concluded
that Countrywide was essentially a giant scheme to use mass fraud to
dump pools of bad loans on unsuspecting marks on the secondary market.
Given the great masses of information that was out there about
Countrywide, Hubbard in other words had to perform a labor of Hercules
to avoid letting the truth about the company slip through a crack in his
skull. Naturally, this awesome ability to non-absorb information makes
him qualified to be one of America's leading academics. Way to go,
On a personal note, I'm bummed by this Hubbard news, because it ruins
one of my favorite quotes of all time – Henry Kissinger saying that
"University politics are so vicious precisely because the stakes are so
That was always a fantastic joke, but now that Wall Street is
subsidizing the imperious academic administrators whose only reward used
to be blocking the careers of the more brilliant teachers and professors
they secretly envied, it doesn't work anymore.
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