You may remember Columbia University 's business school Dean Glenn Hubbard from Charles Ferguson's fantastic documentary "Inside Job." He was said to be Mitt Romney's choice for Treasury. Oh, how the mighty have fallen! You really have to read the whole thing to appreciate what a weasel he is:
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 old saw. 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 the cause.
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 origination practices:
Q. Did you make any inquiry into how Countrywide actually originated its loans?
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 originators, correct?
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.