Jim Chanos On AIG, Or Why We Need Shorts

Short-seller Jim Chanos warns on CNBC that the immediate response to the collapse and Bear Stearns was a push in Washington to loosen accounting standards, repeating his belief that the push to change mark-to-market rules are simply pleas to "bubble-wrap financial statements."

He writes in the WSJ (sub. req.) today:

We have a sorry history of the banking industry driving statutory and regulatory changes. Now banks want accounting fixes to mask their recklessness. Meanwhile, there has been no acknowledgment of culpability in what top management in these financial institutions did -- despite warnings -- to help bring about the crisis. Theirs is a record of lax risk management, flawed models, reckless lending, and excessively leveraged investment strategies. In the worst instances, they acted with moral indifference, knowing that what they were doing was flawed, but still willing to pocket the fees and accompanying bonuses.

Here's Chanos on CNBC:

These guys were the villains back when the bank stocks were sinking. But they're also the canary in the coalmine for spotting trouble early. It's worth remembering when the shorts get pilloried by the likes of the Daily Show.