Kass: Blame the Blamers

This blog post originally appeared on RealMoney Silver on Sept. 18 at 8:37 a.m. EDT.

"We believe that to err is human. To blame it on someone else is politics."

-- Hubert Humphrey

Several weeks ago, I wrote an op-ed column in the Financial Times that spelled out my view that short sellers shouldn't be restricted in their activity and shouldn't be blamed for the abuses in lending, credit formation and in the growth of the unregulated derivative markets that got us into the mess that we are in today.

Indeed, history has shown -- Enron, Tyco (TYC Quote), Sunbeam and so on -- that market participants should be attentive in listening to the analytical warnings of the short-selling community.

A few seem to be coming to their senses -- in certain cases from surprising corners. For example, here is an email exchange I had with Ben Stein (for whom I now have newfound respect) last night:

Ben Stein: I am bound to say after all this time that you understood this so much better than I did, especially the mentality on Wall Street that would lead to this that it is profoundly humbling.

Doug Kass: Thank you, Ben. My Grandma Koufax would call you a "mensch." My constant proddings were not meant to be ad hominem attacks against you but rather to deliver my analysis and underscore my sense of foreboding that was based on my analysis of the abuses and egregious risk taken in the credit, housing and derivatives markets.

Some observers, like Bloomberg's Michael Lewis get it.

Others recognize that the blame lies squarely on the shoulders of regulators, borrowers (and lenders), banks (did the shorts tell Citigroup's (C Quote) Chuck Prince to "keep on dancing?"), brokerages (did the short sellers OK obscene compensation packages in the "heads I win, tails I win" culture on Wall Street in which those monies earned were withdrawn out of the firms while levering their capital to 32-1?) and The Three Stooges of 21st Century Finance (who reside in the Administration, Treasury and Federal Reserve and proved, once again, to be reactive not proactive). All of these players gleefully and drunkenly drank from the bowl of credit excess over the past decade, believing in another new paradigm (and uninterrupted growth) for the housing and credit markets, but failed to have a vision of the dangers associated with their careless risk-taking and lack of due diligence.