Nightmare Come True on Wall Street
Wed, Aug 5, 2009
Leaders In the News: Bad News, Leaders in the News: Good News, The Economy/Financial Crisis
On January 31, 2008 I wrote about the sub-prime mess predicting the formation of the IPA, the investor protection agency (IPA sounded more interesting than CPA, though I believed consumer protection would be in its charter). I feared that a significant number of powerful CEOs intolerant of their own risk-management professionals would bring regulation upon themselves. Making bets with insufficient reserve capital, firing dissidents including those responsible for risk management, selling a product with one hand and selling it short with the other for their own account, making loans to people with bad credit histories, luring the ignorant with teaser rates, persuading boards to provide large incentives for what were phantom earnings and large severance packages for those who drove their firms into a ditch, then laying off thousands of small-fry in the back office and elsewhere to save the firms — a long list of deeds of questionable ethics.
Now the Congress is toying with giving the Fed more oversight powers and establishing a separate C.P.A. I say toying because it is clear that Congress does not understand the money business and is outgunned in the current battle to make sure this does not happen again for some time (history teaches it will happen again). But I do hope that Congress is unerring in its intuition that we rewarded the scoundrels and the irresponsible with tax-payer dollars in order to save the system,
And there is the possibility that the new Pecora-commission-like investigatory body may bring about a better public understanding of all the mechanisms and behaviors that enabled or permitted the global crisis to develop. Here too, it appears that the Congress has its eye less on the public well-being than political gain. The new commission is already gerry-rigged to make truth-telling most difficult.
I’d like to see more courage in the Administration’s hires from Wall Street (who have presumably changed uniforms) to set up the right mechanisms. I’d like to see the new commission use what few teeth it has to get at the truth. And most of all, I would like to see a few Wall Street leaders help the Administration, the Congress and the Commission get to a better solution rather than stonewall or tout the party line.
That’s just my view. What’s yours?
Tags: Consumer Protection Agency, economic crisis, financial system reform, Pecora Commission, wall street
Countless more ordinary people of equal talent never developed the leadership core required to run the show. Why not?
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