Things to remember about the Nigerian terror suspect

Poor Nigeria. As if it didn't already have a terrible reputation, the alleged terror attempt by a 23-year-old Abdul Farouk Abdulmutallab yesterday on a flight from Amsterdam to Detriot seals the deal. But as you're reading the news, a few caveats to remember: 

First, much of the information coming out about the suspect's origin comes from the Nigerian newspaper This Day.  While often a good source of initial information, this report probably shouldn't be taken as fact without other confirmation. The press in Nigeria, while vibrant, growing, and home to countless incredible journalists, has still been known to exagerate or assume at times. I have no reason to believe that is the case this time, but skepticism is warranted. 

Second, if the suspect does indeed come from a family of means, as his residence in London suggests (forgive a generalization, but anyone who is anyone in Nigeria has got a house in London), it says much about where the real terror "threat" is (and is not) coming from in Nigeria. Security analysts have been worrying about Nigeria since the Sept 11. attacks -- fearing that this about half-Muslim country of 140 million people would be a potential host to extremists. But at the end of the day, something that I've learned about Nigeria is that it takes money and connections to get things done. Just think back to the violence earlier this summer by the Boko Haram sect. The mostly-impoverished members of the group raised hell in the local context ... but that was it. Taking "jihad" international from Nigeria is still a long ways and a lot of financing off (if it is on the way at all).

Which brings me to one more point about extremism in Nigeria. Much of the religious violence that the country has seen in recent years has been less about religion and more about a country rife with corruption and wanting for institutions. When sharia law was introduced in the North earlier this decade, most analysts believe that it had more to do with a desire for the law -- any law -- to function. Since the secular government had failed for years, many sought refuge in the laws of religious fundamentalism.

And that brings us back to the alleged terrorist in questioning today. His grievances are different from these, one might imagine, since the lack of rule of law often works in favor of (rather than against) the elite. In short, what I'm trying to say is that there are two different phenomena going on here: mass dissatisfaction among many impoverished in the country's Muslim North, and the different brand of extremism that would incite a well-off 23-year-old to blow up a plane in Detroit. 

Finally, in the time that I've written this blog post, I have recieved several requests from news agencies and papers to help me connect them with reporters in Nigeria. An unfortunate reminder that the press in my former-resident country is drying up. And with each correspondent that leaves, it is trickier and trickier to piece together developments that unfold. For the last two years, editors have asked me why Nigeria matters. Case and point.


Goldman always wins

Goldman Sachs CEO Lloyd Blankfein

P.T. Barnum, the great American circus showman, may or may not have actually said of his customers, "there's a sucker born every minute," but it's a maxim that could just as well have applied to the recent financial crisis.

I'm reminded of the apocryphal quote after reading Gretchen Morgenson and Louise Story's somewhat convoluted, but nonetheless interesting report in today's New York Times on how the investment bank Goldman Sachs allegedly played both sides of the market for mortgage-backed securities and is now being scrutinized by various regulators looking to determine whether any laws or industry rules were broken:

While the investigations are in the early phases, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then bet against the clients who purchased them, people briefed on the matter say.

One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.

Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.

I'm no lawyer, but my take is that it's not Goldman's fault if its customers were suckers; the bank correctly saw that the U.S. housing sector was headed south and adjusted accordingly, while less prudent financial institutions were still making big bucks on complex securities tied to mortgages and couldn't wean themselves away in time to save themselves from disaster. As the firm's spokesman says in the story, it's not like these customers, pension funds and insurance companies, were rubes who didn't know what they were getting into. They were sophisticated financial players looking for high returns and willing to take risks.

Still, Goldman stands accused of some breathtakingly cyncial behavior here: selling products it didn't believe were worthy investments and then betting against them. It's as if McDonald's were caught investing in defibrillators and plus-size clothing companies. Nobody can deny, however, that Goldman made very smart moves and has come out far ahead of its competitors.

One thing I'm struck by in recent accounts of the financial crisis is the extent of "Goldman envy" among other Wall Street firms. Executives at J.P. Morgan, Lehman Brothers, Merrill Lynch, Bear Stearns, Morgan Stanley, and other big banks were obsessed with emulating Goldman's huge profits and resented its employees' reputation for being the smartest, boldest players on Wall Street. In some cases, the interfirm jealously was kind of like that of the character Jan on The Brady Bunch; just replace "Marsha, Marsha, Marsha!" with "Goldman, Goldman, Goldman!"

Yet somehow, with the possible exception of J.P. Morgan, which avoided the worst of the mortgage junk thanks to smart risk management by CEO Jamie Dimon, the other banks didn't follow Goldman's lead when in December 2006 the firm turned bearish on the mortgage sector. Why didn't they catch on?

UPDATE: Be sure to read Felix Salmon's informed analysis. Money quote:

The real lesson here isn’t that Goldman did anything scandalous. It’s just that if you’re making a bet and Goldman is your bookmaker, don’t be surprised if you end up losing.

See also Goldman's response and Salmon's custom answer to my last question.

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