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Ackman
Versus Wall Street's Ponzi Scheme
Huffington Post - May 4, 2010
By Janet Tavakoli
When nobody seems to be losing money,
nobody cares. If a corrupt scheme is “making
money,” everyone involved—from
the culprits to the dupes—viciously
attacks anyone who tries to expose it.
Bill Ackman, manager of hedge fund Pershing
Square Capital Management, L.P., learned
this lesson the hard way.
In
2002, Ackman used credit derivatives to place a “short” bet
against MBIA, the largest of municipal bond insurers. (Ackman
later bet against other bond insurers.) Joseph “Jay” Brown,
then MBIA’s Chairman and CEO, met with Ackman in 2002 about
a negative report Ackman was about to release. In Christine Richard’s
new book, Confidence
Game: How a Hedge Fund Manager Called Wall Street's Bluff,
Ackman recalls this power-play:
“You’re a young guy, early in your career. You should
think long and hard before issuing the report. We are the largest
guarantor of New York state and New York City bonds. In fact,
we’re the largest guarantor of municipal debt in the country.
Let’s put it this way: We have friends in high places.”
Ackman published the report on his fund’s web site: “Is
MBIA Triple-A?” Among other issues, Ackman questioned MBIA’s
foray into credit derivatives and synthetic CDOs.
END OF EXCERPT
Janet
Tavakoli is the president of Tavakoli
Structured Finance, a Chicago-based firm
that provides consulting to financial institutions
and institutional investors. Ms. Tavakoli
has more than 20 years
of experience in senior investment banking
positions, trading, structuring and marketing
structured financial products. She
is a former adjunct professor of derivatives
at the University of Chicago's Graduate
School of Business. She is the author of: Credit
Derivatives & Synthetic
Structures (John
Wiley & Sons,
1998, 2001), Structured
Finance & Collateralized
Debt Obligations (John
Wiley & Sons,
2008).
Janet
Tavakoli's book on the global financial meltdown is Dear
Mr. Buffett: What An Investor
Learns 1,269 Miles From
Wall Street (Wiley 2009)
Clients
of Tavakoli Structured Finance
have the benefit of proprietary consultation, which is
not available in any other paid or public forum. Clients
also commission proprietary research and analysis.
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