Friday, June 26, 2009

Thursday, June 25, 2009

Yeah, What HE Said: Dave Matthews Edition

When you don't talk, the big things become little things and the little things become big things.
- Dave Matthews on Charlie Rose 6/11/09

Friday, June 19, 2009

The Good, the Bad and the Ugly 2: Financial Re-regulation

All of the below come from Geithner's testimony at the Senate Banking Panel, followed by snark from me.

The Good:
Tim: We think that the best way to keep the system safe for innovation is to have stronger protections against risk with stronger capital buffers, greater disclosure so investors and consumers can make more informed financial decisions, and a system that is better able to evolve as innovation advances and the structure of the financial system changes.
Me: Exactly! More capital, more disclosure to investors and consumers so that they can make their own informed decisions (as opposed to the government telling them what they should do).

Tim: We do not believe that you can build a system based on banning individual products because the risks will simply emerge in new forms. Our approach is to let new products develop, but to bring them into a regulatory framework with the necessary safeguards. America’s tradition of innovation has been central to our prosperity.
Me: Bingo! Couldn'ta said it better myself.

Tim: This agency will be able to write rules that promote transparency, simplicity and fairness, including defining standards for “plain vanilla” products that have straightforward pricing.
Me: Hallelujah transparency. By that, he needs to mean, transparency to shareholders and customers, not to the government. Hallelujah simplicity. Financials have long made an art of turning something simple into something apparently complicated in order to eke out a few more basis points. Fairness ... well life's not fair. But he did save himself by giving regulators the task of "defining standards" as opposed to flat-out regulating these vanilla products.

Tim: We propose a new resolution authority ... that will reduce moral hazard by allowing the government to resolve failing institutions in ways that impose the costs on owners, creditors and counterparties, making them more vigilant and prudent.We must also minimize the moral hazard of institutions considered too big or too interconnected. No one should assume that the government will step in to bail them out if their firm fails.
Me: Can anyone be against reducing moral hazard? Yes, the cost should be on owners, you hypocrite.

The Bad:
Tim: lack of oversight led millions of Americans to make bad financial decisions that emerged at the heart of our current crisis.
Me: Totally disagree. It allowed perhaps, but then again many Americans (apparently excluding the current administration) believe that people are responsible for their own actions. If you believe that, then you do not believe laws should be made to save people from themselves.

The Ugly:
Tim: Most importantly, it will have the power to gather information from any firm or market to help identify emerging risks.
Me: Big Brother has achieved new heights. We need to be honest with ourselves: regulators already have access to a VAST sea of information from banks. Financials face a daily barrage of invasive info requests from various aspects of the government. Some is mandatory, but the really sticky bits are often given voluntarily by Financials in the name of fostering a good regulatory relationship. Firms are aware that that those who say "show me a subpoena" too often find themselves facing suffocating levels of government scrutiny in subsequent years. That cozy relationship is part of what got us into this mess. Its a sad statement on our lawmakers that financial regulation is worded soo ambiguously that enforcement is a matter of personal interpretation. Moreover, it's repugnant that the level of enforcement is based on how much a firm kisses their regulator's ass (ahem Chase!) rather than any objective criteria. What makes Tim's line so scary to me is that he's tossing aside any pretense that financials have any property rights over their own intellectual property (data). For any reason, from any firm, the government can gather any information. Period.

Photo credits:,,

Tuesday, June 16, 2009

The Good the Bad and the Ugly

This one's short, sweet, and perhaps a little rough around the edges ...

The Good:
Geithner finally says something logical ... executive pay standards can be set by regulators but must be enforced by shareholders and boards.

He even said something smart: the US financial industry regulatory patchwork must be overhauled. The Fed should be put in the lead.

More generally, and as I will cover in detail in an upcoming blog, a sea change is coming in corporate accountability, focused, as I've always said it should, on the board.

Politicians are suddenly less paranoid about discussing healthcare.

The worst recession in 70 years turns out not to be the end of the world for most folks.

The Bad:
Promptly after saying something smart, Geithner proceeded to say something stupid. The holy grail of financial industry regulation most certainly is NOT a "council" of regulators. WTF good is this politicized talk-shop? Put someone in charge for chrissake. Make them independent for the love of God. I'm all for competition, even within government services, but it depends on what they're competing for. What are their incentives? How are they measured? The current incentive framework for these schmucks is: bloat their budget, cozy to the institutions they regulate, and kiss as much ass on the banking and FS committees in Congress as possible. Does he really think that the FDIC and OTS would have been any less of a joke as regulators if they had simply had more touchy-feely time with their fellow bureaucrats? How about getting out into the field and figuring out what's going on in the industry ... and then actually DOING something about the ugliness under the covers.

Worldwide equity and bond markets are turning around. We'll give back at least a third of what we've gained since January.

The Ugly:
This week we saw news of an "inquest" in Canada to figure out why a woman languished, entirely ignored, screaming and pushing the emergency button in a hospital for 4 hours before her husband had to single-handedly midwife her through birth. Duh.

In response, Obama decided that we should adopt the Canadian system. No lawsuits allowed, just like Canada. No guarantee of service levels, just like Canada. No responsible party, just like Canada. Obama's healathcare proposal is dreamware. Instead of injecting some reality, his crew and Congress have launched threats against anyone daring to speak reality (Elmendorf hang in there).

He was so busy thinking up this nugget that he forgot to check on those silly Iranian elections. Or maybe he saw the violations of basic human rights, international law, and his own past blathers ... and just didn't think they were important enough to disturb the lovely peace he's cultivating with his new Muslim BFFs. Maybe he's just being cooooool. Like he has been about the Dear Leader.

MLB players get to buy performance. NFL players get to buy their ay out of murder.

The Post Script:
There's a common thread to many of the "new" solutions that are being trotted out: the idea that more talk is the solution to every problem. I'm a massive fan of communication and information, but neither is an end in itself. These are means. These are methods. A car may need gas to get you from A to B ... but a can of gas is pretty damn pointless without a car ... or a road ... or the ability to drive ... or any of the other co-requisites.

Let's not take our eye off the ball.

Wednesday, June 10, 2009

What He Said: ReaganagaeR on Government Borrowing

The problem, the consequences, and the solution as he saw it in his 1981 Inaugural Address ... eerily applicable again today (especially in light of this and this type of thing):

You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why then should we think that collectively, as a nation, we are not bound by that same limitation?

... For decades we have piled deficit upon deficit, mortgaging our future and our children’s future for the temporary convenience of the present. To continue this long trend is to guarantee tremendous social, cultural, political, and economic upheavals.

Inflation ... distorts our economic decisions, penalizes thrift, and crushes the struggling young and the fixed-income elderly alike. It threatens to shatter the lives of millions of our people. Idle industries have cast workers into unemployment, human misery and personal indignity.

We are a nation that has a government -- not the other way around. And this makes us special among the nations of the earth. Our Government has no power except that granted it by the people. It is time to check and reverse the growth of government which shows signs of having grown beyond the consent of the governed.


Oh, and looking back a bit further to 1964:

This is the issue: ... Whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves ... No government ever voluntarily reduces itself in size.


Friday, June 05, 2009

Corporate Newspeak 5

Kangaroo Manager: (n) A manager or executive who improves their job title, reputation, and compensation by hopping from company to company every 1 to 2 years. Through this pattern of activity, individuals avoid remaining in any position long enough to be held accountable for the results of their decisions and thus entirely obfuscate their track record. This is in contrast to the frequently maligned "traditional manager" strategy of improving title, reputation, and compensation via a consistent stream of successful accomplishments and recognitions.
Also: Up-and-Comer, Executive Material, Chosen One, Fast Tracker.

Critical: (adj) Belonging to the class of things which encompasses everything in the known universe.

Gaps: (n) Fuck-ups.
Also: Pain Points, Failures.
Note: the singular form exists only hypothetically.

Deferred: (adj) Belonging to the class of actions and events which will never happen. Not in a billion years.
Usage: "Phase 1 of the project has been deferred so resources can focus on the pain points of Phase 3 while planning activities for Phases 2 and 5 continue."

: (adj) A euphemism for the class of people, processes, technologies, and decisions which existed prior to a merger, for which nobody (even those originally involved and still present) currently takes responsibility, and on which any current pain points can be blamed. Contrast with "Kangaroo Managers."
Also: Heritage.

Efficiencies: (n) The class of actions and decisions which is characterized by either self-evidence or abolishment of business controls, people, and/or processes put in place previously to address a pain point which occurred prior to the tenure of the current decision-maker(s). Typically used to justify destructive or risky decisions made by Kangaroo or Pelican Managers.
Also: Short Cuts.
Note: the singular form exists only hypothetically.

Metrics: (n) A mystery-meat confab of general goals, explicit targets, a methodology for computing performance relative to those goals and targets, the act of computing, and the current result of those computations for a given individual or group. Contrast with "carrots."
Note: in typical usage, the speaker is referring to only a subset of the above concepts, but desires to remain ambiguous about which.

Good Progress: (n) A euphemism for activities which are behind schedule or below desired metrics. Used in order to distract from said deficiency.

Aligned to: (adj) Perceived to be at least partially in compliance with a strategy and/or policy which is too vague, contradictory, or nonsensical to be followed literally.

Day-to-Day: (n) Metonymy (look it up, people) representing the class of actions and events necessary to actually run a business but which are too boring, unpleasant, and/or complicated for executives to trifle with or comprehend.
Also: in the weeds, on the ground, in the trenches

Operations: (noun) Doers. Usually abbreviated "ops." Often carries a negative connotaion of someone who is too obsessed with making a business function to comprehend strategy, policy, and "the big picture."
Also: little people
Usage: "The execs have established the strategy and laid out governance. Finance is tracking the metrics. And the little people in Ops are in the trenches handling the day-to-day."

Established: (v) Decided by default without any human effort by those responsible for the decision, often by the most junior staff involved due to a vacuum of action by the designated leadership.
Usage: "The Board have established a framework of critical metrics and governance which will prevent such a crisis in the future."
Note: can only be used in the past-participle tense (look it up, people).

So What I'm Hearing You Say...: (ic) You're clearly wrong and I wish you had said ...

Wednesday, June 03, 2009

The "New" Creative Destruction

You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people's initiative and independence.
And you cannot help people permanently by doing for them, what they could and should do for themselves.

- Ronald Reagan, 1992 Republican Convention, quoting William Boetcker