Matt Taibbi writes:
Glenn Hubbard, Leading Academic and Mitt Romney Advisor, Took $1200 an Hour to Be Countrywide’s Expert Witness . . . Hidden among the reams of material recently filed in connection with the lawsuit of monoline insurer MBIA against Bank of America and Countrywide is a deposition of none other than Columbia University’s Glenn Hubbard. . . . Hubbard testified on behalf of Countrywide in the MBIA suit. He conducted an “analysis” that essentially concluded that Countrywide’s loans weren’t any worse than the loans produced by other mortgage originators, and that therefore the monstrous losses that investors in those loans suffered were due to other factors related to the economic crisis – and not caused by the serial misrepresentations and fraud in Countrywide’s underwriting.
That’s interesting, because I worked on the other side of this case! I was hired by MBIA’s lawyers. It wouldn’t be polite of me to reveal my consulting rate, and I never actually got deposed so it’s not in the public record, but I will tell you that it was exactly half of Hubbard’s. On the other hand, it seems possible Hubbard did at least twice as much work per hour as I did, so his rate may well have been fair. More on this below.
Taibbi writes of Hubbard’s consulting work:
So how did Hubbard manage to analyze Countrywide and conclude that mass fraud in its underwriting procedures wasn’t problematic? Easy: He didn’t look at the underwriting! All Hubbard did was take a group of Countrywide loans and compare them to a group of other loans from the same time period.
When that comparison revealed that Countrywide’s loans failed at about the same rate as the non-Countrywide loans, he smartly concluded that fraud wasn’t the problem and that macroeconomic factors must have been the cause.
Sounds good. But there was a problem with the control group:
Except for one thing: He left out the fact that about half of the loans in the “non-Countrywide” pool he selected for his analysis were originated by companies that were also being sued for underwriting fraud and other irregularities. What Hubbard did is compare a bunch of bad loans to a bunch of bad loans.
Taibbi then provides some deposition transcript which he characterizes as Hubbard being “intentionally obtuse”:
Q. Did you make any factual inquiry into the nature of either the process of origination or the process of due diligence by Countrywide?
A. I’m not an underwriter in this proceeding, so neither of the assignments that I told you would require such. . . .
Q. So is that a yes in response to my question?
A. You have to tell me the question again.
And then this bit:
Q. So in the aggregate, more than half of your entire population in the control group was affected by litigation?
A. I think, well, yes, by number of pools, yes.
Q. And in neither your initial report nor your rebuttal report did you disclose that fact for the benefit of the court?
A. Well I’ve already told you I didn’t think it was relevant from my –
Q. I’m aware that’s what you said today. But the fact is in neither your initial report nor your rebuttal report did you disclose that more than half of all the securitizations in your so-called control group were affected by litigation?
A. If I don’t think something is a relevant fact, why would I have disclosed that?
Q. You’re agreeing with me, you didn’t disclose it, right?
A. That’s a factual question. You had innuendo attached to it.
Q. Well, sir, I do think it’s significant that you didn’t disclose that fact, that’s why it’s in my question. I just wanted to confirm you did not disclose that fact, right?
A. I didn’t disclose the fact.
I don’t want to discuss any of the specifics of the case—if you read the above carefully, you can see that all I’m doing is quoting from Taibbi and revealing the non-secret that I consulted on the case too. But I do want to make some comments based on my general experiences of legal consulting in previous cases.
First, not having seen the details of the deposition, I can’t really say for sure, but I think Taibbi is perhaps being too hard on Hubbard for giving evasive answers. I gave a deposition as an expert witness once (on a different case) and what I recall is the lawyer on the other side asking many many pointless-seeming questions, every once in a while coming up with a gotcha-type question that seemed completely off base. So it’s possible that a response that looks evasive is merely careful. There’s no point in giving a more complete answer; the lawyer will come back at you with more in any case.
Second, I was struck by how invested Hubbard seemed to be in this proceeding. When I was deposed, several years ago, it was the mellowest experience ever. This lawyer was sitting across from me asking a bunch of pointless questions, and meanwhile the clock was ticking: I was being paid for every minute. I felt the same warm glow your taxi driver would feel, stuck in midtown traffic—if he were being paid hundreds of dollars per hour of waiting time. I knew what I’d done, we had nothing to hide, there was no statistical funny stuff, all I had to do was answer the questions as they came, one at a time, and not get cute. It was actually entertaining watching the opposing lawyer trying to trap me, cos there was really nothing for him to grab on to. I’n not saying I’m some sort of legal superhero, I’m sure I could get trapped in some settings, and I expect that a sharp lawyer could take some of the innocuous statistical things I do and make them look bad, but the real story here was I didn’t really care. My goal was just to do my job. I’d done the statistical analysis, I’d written my report, and then at that point I was getting deposed. It wasn’t my job to win the case; that was the lawyers’ job. All I had to do was answer the questions honestly; that’s what I was being paid for.
In contrast, Hubbard in his deposition seems really agitated. He does not seem to be answering questions with the calm demeanor of someone who’s being paid $1200 an hour, win or lose. When he says, “That’s a factual question. You had innuendo attached to it,” he really seems to care. I wonder what the background was there, by which Hubbard and the lawyers decided not to disclose in their report where the loans in the control group came from, and how it was they decided that it was not “a relevant fact.” One reason I think that Hubbard legitimately might be worth twice the consulting fee as me, is that often when I consult, it’s just a job, but when Hubbard consults, he’s more invested in the case. For their $1200, his clients are getting an emotional as well as an intellectual commitment.
To put it another way: in my deposition in that other case, I was Bugs Bunny. When Hubbard was being deposed, he was Daffy Duck. Not that I’m always so cool, calm, and collected: in fact, I’d guess that Hubbard is much more Bugs-like and I more Daffy-like in our everyday lives (that’s just a conjecture, I don’t think I’ve ever actually met Glenn Hubbard). As the psychologists tell us, personality traits vary strongly on context.
P.S. When I say that consulting is “just a job,” I don’t mean that I would lie or do anything unethical, merely that in such job-like settings I will try to do my best as a statistician, while letting the lawyers worry about how to win the case.