Greenlight's deservedly praised David Einhorn spoke at the recent Ira Sohn Conference (notes from which we broke first to the blogosphere) on "The Curse of the Triple A."
In it he discusses our current economic dilemma and official policy approach, why he thinks we're here, the mistakes the government is making, and what he would do if given the power.
He goes on to discuss how every financial institution that had a AAA rating, excepting for Berkshire, abused that rating during the credit inflation which contributed to the dire circumstances we face today.
That dilution of the AAA brand leads him into his short Moody's thesis.
He concludes with a $6 million charitable donation generated from his profits shorting Allied Capital: $3 million to the Tomorrows Children's Fund (the beneficiary of the Ira Sohn Conference) and $3 million divided between two of his own charities.
Here is a snippet from the speech:
Hope is a nice human emotion, but does not make for good public policy.Click here to read the whole speech.
Now we have the Obama administration, which disappointingly seems to be following the same path as the Bush administration. The basic strategy appears to be to try to bring us back to 2006 by propping up asset prices and reflating the credit bubble, subsidizing bank creditors and shareholders, and delaying needed bank recapitalizations, while hoping for an economic recovery.
The official view is that what is good for banks is good for the economy. I question this view..."
While we do not agree with every statement Einhorn makes, it is excellent overall and deserves ten minutes of your time.
Read it and let us know what you think.