The Amazing Zandi


What new brainstorms are brewing under this receding hairline?

How many times can you be wrong about your subject before they stop treating you like an expert?

If your answer was "An infinite number of times," you'll love ritholz.com's list of picks, prognostications and tall tales from Moody's Mark Zandi.

Zandi defines the lethal center. He has regular access to the House, the Senate, Department of the Treasury, the Federal Reserve Bank, and the destination media. Could the pressure to please those five institutions account for a trail of error that dwarfs similar bad-guess highlight reels detractors have compiled for Paul Krugman and Ben Bernanke?

List builder XXX, an independent banking analyst, describes Zandi as "collegial, considerate, considered and smart. But his optimism is helping Washington avoid addressing the reality of our economic problems and the structural issues that must be addressed before our economy can sustain renewed growth."

Bad guesses are an occupational hazard for any pundit—though Moody's, a person of interest in the real estate bubble, the commercial real estate bubble, and the long delay in downgrading public debt, has an institutional responsibility not to be wrong repeatedly. Zandi's zeros are not terribly shocking: He has been expecting a real estate rally since 2007. He called a foreclosure peak that has since been outpaced by more than 200 percent (and foreclosures are still going up). And as for falsely seeing the end of the troubles, well, Zandi has given us more bottoms than the Eulenspiegel Society.

But the most disturbing quotes are not bad predictions. They're things Zandi seems to believe are just good ideas on principle:

"By paying interest rates on reserves, the Fed is able to provide so much cash to financial institutions that there will be no reason for them not to lend to one another and, by extension, to business and households."

USA Today – Oct. 30, 2008

He said extending unemployment benefits would yield $1.64 of GDP, a temporary increase in food stamps $1.73, aid to state governments $1.36, and increased infrastructure spending $1.59. "The bang for the buck is very high," Zandi said of extended jobless benefits.

CNN – Feb 21, 2009

Yeah, [the Home Affordable Modification Program] will help. It'll help stem the declining in housing values — house prices are going to decline further but this should help put a floor under prices and hopefully bring forward the day when we find a bottom in pricing."

CNN Money – April 2, 2009

That to-the-penny scruple on GDP? That counterintuitive call that banks would begin lending money they're already collecting a safe interest rate on, just because that's what D.C. has decided a reasonable person should do? That complete Hail Mary on HAMP? I agree that Zandi's sharp, and he has a gift for explaining concepts in plain English. But this man has been inside the institution for too long. Zandi wants to be free.