‘THE CEOS ARE CLUELESS’: The FCIC staff interviewed Steve Eisman of FrontPoint LLC — who figured in “The Big Short.”
“He said that CDOs and CDS `are an important story,’ but not necessarily the central story to the financial crisis. He said that fundamental causes of the crisis started in the 1990s with two big events: 1) the shift to measuring leverage on a risk-weighted basis, and 2) the creation of the shadow banking system….
“Mr. Eisman added that `Alan Greenspan is the worst Chairman of the Fed in history,’ and that he allowed `basically no regulation whatsoever and basically allows a shadow banking system [to grow] which is a way, really, to get things off balance sheets, to hide risk, to keep risk away from regulators.’ Kim asked how Mr. Eisman defined shadow banking, and he replied that `anything not on a bank balance sheet’ is shadow banking….
“Kim asked if he recommended talking to anyone else. Mr. Eisman said, `I know for a fact people went to Greenspan and said, “these loans are really bad and will one day have really bad social results.” [Link]