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Board of Health Condemns Due to Moral Hazards

By Larry Doyle on April 14, 2009 at 7:00 AM in Economy, Sense on Cents (Larry Doyle blog), Toxic Assets

danger-toxic-hazard The best organizations are managed not only for today but for tomorrow. What do I mean by that? Great organizations assess risks, develop talent, diversify products, and grow market share. Aside from those basic business tenets, the best organizations respond well in times of crisis.

Every business and organization is ultimately a reflection of its people. To that end, the depth and quality of the people are the single greatest factors in the long term success of the organization.

Any individual or organization would relish developing a system that generates untold success and then automates the process. Neither business nor life works that way. Change is constant. How organizations proactively stay ahead of change and respond to change is paramount in succeeding in business and life.

The best sports organizations have developed a deep bench of talent both on and off the field. When players or executives leave – as they always do – the general manager moves another body in and the team does not miss a beat. The same scenario occurs in the best companies. This transition process is part of the culture of the organization.

Regrettably, we do not have enough change in the halls of Congress. The power of incumbency has created an odor due to the stagnation in key personnel turnover. The same stagnation is prevalent at many weak organizations. As a result, a strong “bench” with the ability to adapt is lacking.

What happens when an organization such as the federal government intersects with failed or failing enterprises also without a deep bench? The failed approach is multiplied. Welcome to the world of finance 2009.

With all due respect, the best people want to work for the best organizations. Failed enterprises (Citi, AIG, Freddie, Fannie, GM, Chrysler) have not developed a culture which attracts the depth and breadth of talent necessary to adapt to change. Additionally, failed policies are not scrapped but are managed. Failure begets failure.

Attracting qualified executives into these organizations to manage businesses that are for sale or on life support is extremely difficult. Secretary Geithner asserts in an FT article, U.S. Prepared to Oust Bank Chiefs:

Tim Geithner warned on Sunday that the US government would consider ousting board members at American banks as a condition for giving the institutions “exceptional” assistance in the future.

The Treasury secretary said the Obama administration would be prepared to force out senior management to protect US taxpayers, and ensure accountability, as a condition for providing money to help banks restructure. “If, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions,” Mr Geithner told CBS television.

While I have no interest in supporting executives or boards that have literally driven their companies and our economy into the ditch, I also have little interest in supporting government officials and regulatory bodies that were in the passenger seat at the time.

While Turbo-Tim and Barack are polishing up the “Under New Management” signs, I wonder if we might be better off calling in the Board of Health and shutting them down. How about “Condemned: Filled with Toxic Assets.“ On the other side of the building we should tack up, “STAY AWAY: MORAL HAZARD!!”

Another name for this process . . . Capitalism.

kenoshamarge

“Government officials and regulatory bodies that were in the passenger seat at the time.”

The clowns were not only in the passenger seat they were cheering on the skills of the drivers.

Granted many of the CEO’s need to go. But not nearly as much as the pinheads in the government that aided and abetted. After all the CEO’s weren’t elected to serve the American People. The nitwits in government were.

Thank you for a very clear and concise appraisal. I actually understood it.
Tuppence411

LOL Larry. Here – let me rummage thru my desk and find you some more placards:
” Danger: Contagious Disease. Do not Enter”
” Embargo: Unfit for Consumption”
How about an oldie, but goodie? “$50 fine for public urination”
And my personal favorite for the Timmy G ofice-”Report All Workplace Deaths Immediately”
mountainaires

Bank Stress Tests

You know this is just getting ridiculous. Obama needs to get rid of Summers and Geithner NOW, or he’s going to regret it. This is a prime example of inexperienced leaders and their chosen “counsel” being a bad mix. Bush choosing Cheney; Obama choosing Summers/Geithner, etc.

Geithner’s Stress Test “A Complete Sham,” Former Federal Bank Regulator Says

http://finance.yahoo.com/tech-ticker/article/225897/Geithners-Stress-Test-%22A-Complete-Sham,%22-Former-Federal-Bank-Regulator-Says

The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program’s failings go way beyond such technical issues. “There is no real purpose [of the stress test] other than to fool us. …

Yeah, I know. You already heard about Black’s comments. But now Roubini is chiming in with his mockery of these “stress tests” which he calls “fudge tests.”

Nouriel Roubini

April 13, 2009

Stress Tests Fail Before They Even Get Started!

The spin machine about the banks’ stress test is already in full motion; some banking regulators have already leaked to the New York Times the spin that all 19 banks who are subject to the stress test will pass it, i.e. none of them will fail it.

But if you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009.

Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.

Read the rest of Roubini’s column here:

http://www.rgemonitor.com/blog/roubini/
wodiej

What they need to do is LET THE ASSHOLES BURY THEMSELVES AND THEN TRY TO DIG THEIR WAY OUT. Then this SHIT WOULD STOP!! I don’t want the government bailing out these assholes with my tax dollars then holding a gun to their head because they loaned them my money. They need to keep their damn tax fraud asses out of capitalism, let them fail and the market will right itself. Cripes, these people are purposely making things worse and THEY HAVE NO CLUE WHAT THEY ARE DOING!! Or maybe they do and they are sucking on a power high.
choo choo magoo

Excellent piece Larry. As always.