Opinion

The Great Debate

Three principles for a new Wall Street

By Don Tapscott
The view expressed here are his own.

Protesters set up the “Occupy Wall Street” base camp in New York a month ago because the location epitomizes the economic forces that control the U.S. and global economies. As one sign read: “This is not a recession. It’s a robbery.” To many it feels like just that. The financial services industry is in desperate need of reform. Many bankers have behaved as secretive corporate titans serving only their own interests, and insist the devastating consequences are not their fault. They are failing to fulfill their obligations to society—in some cases, even to shareholders–and a growing number of critics view the day-to-day behavior of the financial services industry as unacceptable. If the industry doesn’t initiate reform from within then it will eventually have more extreme reform imposed from outside.

In 2008, the routine gambles of Wall Street almost brought down global capitalism and yet, so far, nothing fundamentally has changed. Restoring long-term confidence in the financial services industry requires more than individual banks changing their behavior or even governments intervening with new rules. The industry needs a new modus operandi, where all of the key players (banks, insurers, investment brokers, rating agencies and regulators) adopt the three facets of collaboration: integrity, transparency, and embracing the commons.

Integrity. Trust is the expectation that the other party will act with integrity – be honest, considerate, and abide by its commitments. To re-establish trust, the financial services industry needs to have integrity as part of its DNA. But the cavalier manner in which many banking executives violated integrity was stunning. For example they sold sub-prime mortgages to people who could never make the payments; bundled them into securities and convinced rating agencies to classify them as AAA, and insurance companies to insure them.  They then sold these to unsuspecting investors. They violated all the values of Integrity. Everyone in the process suffered and the global economy was sent into a tailspin.

The 2008 meltdown and the Euro crises we face today illustrate how interconnected our world has become. Organizations must be much more aware of what is going on around them. It’s important to know the behavior of others and the potential impacts of the actions of distant third parties. If there is anything Wall Street should have learned from the mess they created it was that business cannot succeed in a world that is failing.

In everything from motivating employees, negotiating with partners, disclosing financial information, or explaining the environmental impacts of a new factory, companies and other organizations must tell the truth, be considerate of the interests of others, and be willing to be held accountable for delivering against their commitments.

Foreclosures, capital and sickening cures

-James Saft is a Reuters columnist. The opinions expressed are his own-

A dilemma at the heart of the response to the financial crisis is that the antidote to so many ills actually causes the symptoms to worsen.

Take for examples bank capital levels and the chaos surrounding home mortgage foreclosures.

Both issues are the fruit of the same tree: the desire to do things quickly, cheaply and with minimal safeguards.
And both, if you want to fix them, are probably going to slow the economy and lower asset prices in the short term.

from The Great Debate UK:

Why UK financial blogging lags behind the U.S.

Edward Croft is CEO of Stockopedia, a UK-based website which aggregates research, commentary and analysis for investors, and offers social networking opportunities. The opinions expressed are his own.

In the U.S., online financial information and investing media has exploded in recent years. Where once there were just online replicas of offline newspaper/TV commentary and anonymous spam-ridden bulletin boards, there is now a proliferation of stimulating and diverse financial content written by both professional and amateur investors.

These include professional blog sites (like Naked Capitalism, Credit Writedowns and The Kirk Report), aggregator sites like SeekingAlpha (who handpick articles from the world's top market blogs and investment newsletters), expert investment communities like Covestor and Social Picks, crowd-sourcing sites like piqqem, to name just a few...

from The Great Debate UK:

Punishing investment bankers: the nanny-state goes global

Laurence_Copeland- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

In a previous blog, I expressed the fear that in the aftermath of the financial crisis we were going to see either the innocent punished or guilty men convicted of the wrong crimes, or maybe both.

A topical case is Goldman Sachs, an investment bank which weathered the crisis better than most, only taking Fed money when all the other dominos had already fallen, repaying it extremely quickly, and facing accusations ever since of having been too clever for its own good.

from Commentaries:

‘Living wills’ easier said than done

In the wake of the widespread chaos that accompanied the bankruptcy of Lehman Brothers last September, regulators have sought to find a better way to unwind global financial giants. One approach is that the banks themselves should prepare for their own orderly demise -- a kind of "living will".

That idea has been gathering steam of late. The G20 group of finance ministers and central bankers meeting in London over the weekend agreed to require "systemic firms to develop firm-specific contingency plans."

The concept has wide appeal. The crisis has convinced politicians and regulators of all colours that even large financial institutions must be allowed to fail without imposing a huge burden on taxpayers. Many bankers see such a regime as a preferable alternative to more intrusive regulation.

from Commentaries:

Delaying the moment of truth

Procrastination is not a virtue, except when it involves billions of dollars of debt.

A mantra has taken hold of lenders sitting on loan piles: amend and extend. Or as lawyers involved in negotiations between borrowers and lenders say: delay and pray.

The $6.7 trillion U.S. commercial real estate market has been a standout for such tactics and in part explains why, despite the rapid deterioration in property prices and cash flow, delinquencies and defaults so far have been relatively low.

from The Great Debate UK:

Women entrepreneurs to dispel micro myth

090301_glenda_pic- Glenda Stone is chief executive and founder of Aurora, a recruitment advertising and market intelligence company, and co-chairs the UK Women's Enterprise Taskforce established by Prime Minister Gordon Brown. The opinions expressed are her own. -

Most venture capital and angel investment tend to go to a specific breed of entrepreneur - innovative, well networked, intelligent, confident ... male. Is this the result of deep-rooted discrimination or is this simply an issue of supply and demand? Women-owned businesses are largely under-capitalised and this leads to inhibited growth.

Access to finance is cited by numerous sources as the greatest barrier to the growth of women's enterprise but "access" is only the consequence and "education" is the cause. More women need to participate in business education addressing business growth, technology, revenue models, and securing correct types of finance.

Davos debate: How to fix finance?

The credit crunch has left little of the globe unaffected and few sectors of the world economy untouched. The interlinkages between economics and finance are at the core of discussions at the World Economic Forum in Davos. Reuters News asked delegates for their analysis of the roots of the problem and prescriptions for recovery.

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