The gold coast

Big article in the Wall Street Journal today over the guru who designed the risk management framework around AIG's book of CDS swaps, for which we've now extended $123 billion in credit, of which $83 bln has taken drawn. The guy's name is Gary Gorton, and he now teaches at Yale.

One big lesson is that the keys to the castle shouldn't be entrusted to academic quants who have not historically shown that they really care about earning money. The article tells us about his Gorton's collection of jazz records and other eccentricities, and how he fell into earning a million a year. Someone who's not concerned about earning money really doesn't have the instinct to be realistic about protecting it.

Certainly you shouldn't combine this type of guy with a couple of sharks from Drexel and stick them in a cozy Connecticut suburb. We have seen the havoc that region may wreak.