Opinion

The Great Debate

from Breakingviews:

Memo to Wall Street: more Ace Greenberg please

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Wall Street needs more leaders like Alan “Ace” Greenberg. The onetime Bear Stearns boss, famed for his pithy missives to staff, died on Friday. He was 86. Though he was no longer in charge, the firm’s 2008 collapse is a notable blemish on an otherwise illustrious career. The industry could use more of Greenberg’s scrappy PSD: poor, smart and driven.

The shorthand was how he described the people he wanted to work for Bear, perhaps in his own image. Even after he became chief executive in 1978, and until 1993, his office was the trading floor not the executive suite. And unlike most bosses, he answered his own calls. Greenberg also believed in sharing at least some of the wealth, insisting that his senior managing directors donate at least 4 percent of their income to charity.

As CEO, he had a nose for sniffing out risk, and largely avoiding it. Greenberg scrutinized trading reports each morning, congratulating the moneymakers and dissecting the underperformers. Bear prospered in 1994, when Greenberg was still an active chairman and whipsawing rates landed other banks in trouble.

Greenberg’s cost controls are the stuff of investment banking lore. He once distributed one of his single-page memos explaining that the bank would no longer be buying paper clips. He also once chided employees: “This may come as a surprise to some of you, but Federal Express is not a wholly owned subsidiary of Bear Stearns.” Such pointed attention to the bottom line would be useful at today’s earnings-challenged institutions.

from Breakingviews:

German soccer glory was predictable – with luck

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Brazil’s World Cup was first-rate entertainment thanks to its many surprising results. For its part Breakingviews, also somewhat surprisingly, predicted that Germany would win the competition as long ago as last Christmas.

Many media pundits, and some respected financial institutions such as investment bank Goldman Sachs or global accountant PricewaterhouseCoopers, also braved the World Cup prediction challenge. They deployed a dizzying variety of sporting and non-sporting criteria. The consensus was that Brazil, the host nation, would triumph.

Servicing the underbanked

A new report from the United States Postal Service inspector general proposes that the agency offer non-bank financial services, including payday loans. Opinion pieces and blog posts praised this idea as a way for the post office to solve its fiscal woes while reaching a portion of Americans outside the traditional banking system. A Reuters “Great Debate” piece, “Transforming Post Offices into banks”), called the proposal a “win-win.”

These pieces overlook some practical problems, however, and leave numerous questions unanswered about implementation. While government and charitable-sponsored financial services should play a role in consumer lending, they cannot replace market-based solutions.

Notably, the USPS proposal underestimates the challenge of offering consumer financial services in an increasingly competitive marketplace regulated by complex federal and state laws. Without a sizable government subsidy, the report’s suggested interest rate for small-dollar loans would not even cover basic operating expenses.

Transforming Post Offices into banks

The U.S. postal service inspector general put out a report last week suggesting an intriguing way to shore up the ailing institution’s finances: Let the mailman double as a bank teller.

The plan? The post office would offer services designed to appeal to America’s unbanked and under-banked — the more than 50 million adults who either have no checking or savings account, or use high-cost, predatory services like payday loans to supplement traditional banking needs.

This sounds like a win-win. Americans — particularly low-income Americans — clearly need greater access to low-cost financial services. At the same time, many financial institutions have been complaining for years that providing banking services to low-income Americans is costing them money. So much so that they can barely bring themselves to open bank branches in anything less than well-heeled neighborhoods.

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