I like to think I’ve been as good as almost anyone in pointing out the limitations of financial models. I can trace my first published article about so-called model risk to no later than early 1996. If you google “financial model risk” several of the first links that come up refer to that article.
I say the above in order to justify my attempt below to dampen the tendency to say wilder and wilder things in what are desperate times.
Someone pointed me to a speech by Paul Volcker in which he says:
‘A year or so ago, my daughter had seen something in the paper, some disparaging remarks I had made about financial engineering. She sent it to my grandson, who normally didn’t communicate with me very much. He sent me an email, “Grandpa, don’t blame it on us! We were just following the orders we were getting from our bosses.” The only thing I could do was send him back an email, “I will not accept the Nuremberg excuse.”’
I think Volcker’s grandson’s remark is a bit pathetic, but I think Volcker’s response –-showing his righteousness at the expense of excerpting once sentence, perhaps out of context, out of a private letter from his grandson, (who will no doubt communicate with him more frequently after this) –– is a bit cheap.
There may be too many financial engineers. There are certainly way too many MBAs and economists by orders of magnitude. But let’s not destroy the language. There are true holocausts, past and present, and most of us have been complicit or silent about most of them. Even Merrill Lynch and John Thain haven’t been putting Jews and gypsies in concentration camps yet.