China Syndrome: It's Our Fault They Don't Trust Us
Financial Times- February 5, 2009
by Janet Tavakoli

Pundits trying to inflate their own bubbles of self-credit put the blame on unsound models. But such fools for randomness are a distraction from the key issue: malfeasance.

The problem was not the models’ failure to capture probability outliers but the industry’s failure to rein in the liars.

There were no black swans or swans of any colour involved. Like Black Bart, the 19th-century Californian stage coach robber, Wall Street bankers made off with the loot without firing a shot. They were enabled by Washington overseers and financial regulators who – when not beneficiaries of the good times – behaved like ostriches.

There is no innocent explanation for many of the securitised bonds made and sold by investment banks. They were a conduit for shifting losses.

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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), and
Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street (John Wiley & Sons January 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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