Alan “Ace” Greenberg, a few days ago, gave an interview to Newsweek’s Nancy Cook. The former head of Bear-Stearns, took time from his busy schedule in order to enlighten and engage with us. It was everything that poor unlettered blogger like myself could have hoped for. The pearls of wisdom fell on me like a warm, summer rain.

When asked if he had any regrets about his time at Bear-Stearns, he had none. (During his tenure, the price of Bear Stearns stock went from a 52 week high of 133.20 to the ten dollars a share it finally sold for, although strangely enough, not as low as the two dollars that Bear Stearns originally agreed to.)

When asked if he had learned anything from the financial collapse, he said, “Nothing that I didn’t know before.” (Could the concept that maybe your company shouldn’t acquire notional contract amounts of approximately $13.40 trillion in derivative financial instruments, of which $1.85 trillion were listed futures and option contracts, be something new to you?)

When asked about a remark in his new book that the presidents of companies never really know what’s going on, he said, “I don’t care how much you watch things or how acutely involved you are, there are probably bad things that happen.” (Is this the same thing as saying that the president of a company is never really at fault?)

The interview continued in this manner. Let me sum up for Mr. Greenberg. “I did nothing wrong. I did not exercise poor judgment. Banking institutions are already regulated enough. No new regulations are needed. Derivatives are good. Derivatives make money; how then can they be bad? People don’t understand derivatives. Bad loans made to people who couldn’t pay for the homes they bought are responsible for the crisis. Bear Stearns was in no way whatsoever at fault.”

It is interesting to contrast the interview with reports of what happened at Bear Stearns. They seem to be two different versions of reality. I remember reading in philosophy that attitude is a key element in happiness. Mr. Greenberg has an excellent attitude in regard to his personal happiness.

Unfortunately, reality is not easily mocked.

Karl Jaspers wrote in his book, General Psychopathology that a delusion has three central characteristics. The first is certainty. The belief is held with absolute conviction. The second is incorrigibility. That is, the belief is not subject to change by argument or facts. The third is the impossibility of the content. Bizarre, implausible or patently untrue.

Let’s go through the elements. Let’s begin with certainty. Was there any self doubt or questioning at any point in the interview? Let me quote Greenberg from the article: “Certainly at Bear Stearns, I think that I didn’t make many mistakes. But, you know, you have to keep in mind that the only people who don’t make mistakes are the ones who don’t do anything.” That’s as close as we’re going to get to self doubt in the interview.

The second element is that the belief is not subject to change by counter argument or facts. In the excerpt from the full interview, we don’t see Nancy Cook press very hard. However, I would point out that Greenberg says clearly that he learned nothing from what happened” Let’s look at the exchange –

(Nancy Cook) Do you feel like you, as a businessman, learned anything following the financial collapse?

His belief system did not change under enormous pressure from contrary events. This is a good argument for incorrigiblity but not conclusive argument, I would like to see him challenged with facts in a tough interview. That may very well happen in the larger Newsweek article.

The third element is impossibility or falsity of content. Well, the idea that Bear Stearn’s only error was too much trust in other banks is a difficult concept considering the massive evidence of poor judgment, poor management and poor leadership.

Greenberg lives in a world where he is faultless, the economic system works fine and whether or not you make money is the only measure of human accomplishment. I tend to believe that a great many of those leading both the government of the United States and, more in particular, the “titans” of industry, believe these things. There is a problem with hubris here.

Once again quoting from wiki: Hubris often indicates being out of touch with reality and overestimating one’s own competence or capabilities, especially for people in positions of power.

Believing in your own infallibility has only limited potential for damage in isolated settlements, in a giant metropolis or a great nation, the possibilities of overreach and massive damage are far more likely. The worst and deadliest of the characteristics we see here is that even after financial catastrophe unrivaled since the Great Depression, there is no feeling of guilt or mistake. If you don’t acknowledge a mistake, you cannot change your behavior.

What will the next acts of these individuals be and where will they take us?

James Pilant