Where is the bank leadership?
In the midst of an economic maelstrom, why haven't the bank CEOs stepped up to say anything? Scott Jagow talks to economics correspondent Chris Farrell about one financial leader who has come out through everything.
Economics editor Chris Farrell (American Public Media)
More on America's Financial Crisis
TEXT OF INTERVIEW
Scott Jagow: Time to visit with our economics correspondent Chris Farrell. Chris, we've been getting a lot of e-mails, asking why we aren't hearing from bank CEOs on this whole mess. Where is the bank leadership?
Chris Farrell: What leadership? Where are they? There's only one leader in the private sector that's involved with money that's taken a stand and is being reassuring to the American public.
Jagow: I think I know who that might be. And when our people went out on the road last week, we heard from a lot of people about Warren Buffett. They were pointing to Warren Buffett as being a person they trusted the most.
Farrell: And it's even made me almost start to admire the Japanese custom -- and I always thought there was a little bit of hypocrisy there, where the head of the organization or the company that had gotten into trouble, you know, will apologize before the nation and take responsibility. You know what, I think it's a good practice. I'd like to see Lloyd Blankfein and John Thain and John Mack and James Diamond and Robert Kelly and all these heads of these banks that are getting a capital infusion from the U.S. government to take some responsibility. I think that Ben Bernanke has taken responsibility, I think Paulson has taken responsibility. You and I can have a discussion, an argument about whether they've done the right thing. But there's no question that they've been exercising leadership.
Jagow: Why do you think that is? Why do you think that these bank leaders are keeping their mouth shut?
Farrell: The main reasons are they don't know the scale and the scope of the problems that they're dealing with that they oversaw. And I think that they're genuinely worried about their own pocketbooks -- that's what they're most worried about, I now believe that. It's the only way to explain the actions that they're taking. I don't see any of them putting their own money into these companies. That's one of the reasons why people are admiring Warren Buffett -- he's putting money into GE, he's putting money into Goldman Sachs. He's taking a risk, and he's saying "I believe we're going to be OK, I believe we're going to come out of this."
Jagow: What really chased me, Chris, about this whole situation is they made all this money and they did a terrible job at their job, OK.
Farrell: Terrible!
Jagow: And now, we heard there was a big meeting with a bunch of bank leaders on Wall Street, and all they seem to talk about is deregulating, things like that. Tax breaks. I mean give me a break!
Farrell: And we don't want those class-action lawsuits, you know we gotta have . . . what universe are they living in? Who are they talking to? One of the ironies of this whole sitiuation is that there are many people in government who have stood up and exercised leadership in the private sector, which we have worshipped for the past three decades. We're not finding a whole lot of leaders out there.
Jagow: All right, well you've got the juices going this morning, Chris.
Farrell: Yes I do.
Jagow: Chris Farrell, our economics correspondent.
Farrell: Thanks a lot.
Comments
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From Bridgewater, NJ, 10/17/2008
In 2004 five US investment banks, namely Goldman, Lehman, Merrill, Bear-Stearns and Morgan Stanley prevailed upon the Securities and Exchange Commission (SEC) to allow them to increase their leverage. The SEC relaxed its three-decade-old rule, which restricted debt to net capital ratios to 12:1 and allowed these five banks to increase their leverage ratios to 30 and even 40:1. If leverage is around 30:1, a reduction in the value of a bank’s assets by a little over 3 per cent will wipe out its entire equity capital.
http://www.business-standard.com/india/storypage.php?autono=337592
From MD, 10/16/2008
The financial leaders you refer to are not leaders, they are managers. There is a vast difference between a manager and a leader. A leader creates a vision and strives to make that vision concrete. A Manager s concerned with mitigating risks. The best approach for a manager is to take no risks. One reason why the brokerage firms and investment banks get paid on both the buy and sell sides of a stock or investment transaction. Same principle apples to the bailout the wall street managers take no risks by capitalizing debt and failure and socializing the associated risks.
From NC, 10/16/2008
Hey Randy Wilson (below):
if you want your comments read, please take the time to include punctuation. And better spelling would help also.
Thanks.
From Colorado Springs, CO, 10/16/2008
I'd like to suggest that the bank leadership avail themselves of another fine Japanese custom: seppuku - ritual suicide by disembowelment.
From CA, 10/16/2008
the greedy banker mismanaged his business which in turn mess up the lazy greedy car maker which had been living of his past for years. So the greedy banker went to the senator he purchased and asked for cash. At first the Senator said no! but the banker reminded him or her how he got his job. Well soon the senator open the purse strings and let out all the cash. The greedy banker got his running the business running again and the greedy car maker will soon be again selling his old junk at a premium to make up for time lost and he to will make a great bonus. Brainless consumer purchased the giant SUV now at top dollar, so that he or she can take two kids to a baseball game and skip the grocery store because all the money has groan on gas and car and home and taxes. However all is not dark the greedy banker got his bonus for running the business into the ground and got a new yacht in the Caribbean, the lazy Car maker got his big bonus for once again selling junk to the brainless consumer , the paid off senator got another Bahamas vacation courtesy of the banker and car maker.
10/16/2008
Why the surprise that the leadership is coming from the public sector? The public sector (government) is responsible for the welfare of the people. Its role is to maintain the public good. The private sector has the opposite role -- self interest. Businessmen lack the ability to lead in the public realm. So why would/should we turn to them for leadership. We see what our country's first M.B.A. president has done and his minions of C.E.O.s, first with the wars, then with Katrina, and now with financial crisis. A leader in the public realm must understand relationships among our institutions and must act to keep our institutions healthy and vigorous. This is beyond the scope of the businessman's intellect. That's why when it comes to leadership for the public good, those who can, lead; those who can't, write books about leadership.
From Newnan, GA, 10/16/2008
Where is the bank leadership? John Allison and Branch Banking & Trust (BB&T). John Allison as a leader has voiced his opinion on several issues including eminent domain. His leadership and the leadership of his executive staff have installed a clear vision and values. Check out John Allison and BB&T records and you will know where real leadership is. Lets talk about the good guys every once in a while. While a few really messed up, there are a whole lot that did not!!
From orlando, FL, 10/16/2008
when the politicians say we need to drill whos the we? big oil i suppose not me i dont drill oil . fact is the oil will never belong to we it will be the property of big oil no matter where they drill and they will make a huge profit and most likely get subsidies it just big oil using the media to get what they want if oil is in such short supply i think we should save ours for the future and use up theres first then ours would be worth more. opps there i go calling it ours its not mine its not yours it will never be it will belong to the oil company just like now so why do we call it our oil
From orlando, FL, 10/16/2008
the truth is that the only people that cannot get credit are those who do not qualify for a loan. that includes bussinesses why would any bank loan money to another bank if they have proven that they cannot manage there money . liquity is not the problem the problem lies in the fact that most people just cannot qualify for a loan because of there income. and if they do qualify there just not in the market these days to spend. so the only way this bail out will work is if they start loaning to unqualified buyers again and start the cycle all over inginious
From orlando, FL, 10/16/2008
two comments why does warren buffet get so much respect he has the ear of the government thus his investments are a shoe in obama partnering with him just shows that big business is really in charge. you can add the other billionair boone pickins to the party these guys are positioning themselfs for billions is subsidies and with the ear of the gov and the power of the press there will be no stoping them they are market makers and breakers and no friend of the public
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