Needed: Major Financial Reform

BNET TalkbackShare your ideas and expertise on this topic

Subscribe to this discussion via Email or RSS

•  
  1

  petriedn

  02/29/08 | Report as spam

  Financial Reform - Governance Component

  The corporate governance of the largest financial institutions still hasn?t been fixed. Yes, Citigroup dumped Chuck Prince and Merrill got rid of Stanley O?Neal, but I?m not convinced that a really effective check and balance system has been created between the new CEOs and their boards.

  
  
  to be truly effective, governance has to be cultural within the organization, and more broadly-focused rather than just (or primarily) financially-focused. Imposing rules and setting up structures may be a start, but in the long term it becomes self-defeating. The banks need a reason to adopt good governance practices and entrench them so they become part of banking culture. Unless and until that happens, governance at the big banks will continue to be "broken".

•  
  2

  hongell

  02/29/08 | Report as spam

  Corporate Governance and Moral Hazards

  Financial accountability and responsibility are important issues; ones that requires checks and balances, and there should be standards and mandates in business. (There are for individuals.) This is an ethical issue, should be part of cultural responsibility, and needs to be monitored and adhered to by business, government, and the individual taxpayer.
  
  The moral hazard issue rears its ugly head yet again. Insane risks were taken because banks and financial institutions were not responsible nor held accountable. So, the feds have to bail them out while the taxpayer is paying for it as well. A similar scenario occurred when the Fed bailed the airline industry out a few years ago. We know who is still paying for that and why. The reason it happened is different but wasn't anything learned? That was forced upon us, too. When will it end?

•  
  3

  LWeller2

  02/29/08 | Report as spam

  When will it end

  It will end when individuals' are held personally and financially liable. The government may still bail out the institition, but the individuals who caused the mess should be heavily, heavily fined and maybe even spend jail time. This will serve to motivate such individuals that the goal is not wealth at the expense of personal responsibility to taxpayers.

•  
  4

  RickSchultz

  02/29/08 | Report as spam

  Yes, but...

  While I agree with the points, I certainly hope the folks in Congress learned from SOX and don't create a bunch of new, difficult-to-enforce and costly-to-implement laws. That only makes matters worse.

•  
  5

  Trichard

  02/29/08 | Report as spam

  RE: Needed: Major Financial Reform

  The players in the subprime crisis all behaved exactly as their incentives drove them too. Brokers sold loans to get commissions and were not well regulated, banks offered commissions to sell sub-prime loans because their shareholders wanted growth so the banks chased growth the only place they could in a highly competitive market, investment bankers packaged loans and resold them because they got big bonuses to do it (banks weren't supposed to be left holding the stuff, their teams were supposed to sell it quickly to investors who didn't understand the risks), investors bought the packaged debt because they were chasing yield in a low interest rate environment (and didn't do enough due diligence on the risk) and rating agencies rated loans but get paid by the issuer - that is nuts! All the incentives worked too well! When everybody is making money, people turn a blind eye, even the shareholders.
  
  You know what underlies everyone item there - greed, chasing work that earns big bonuses and commissions and worrying about the potential consequences later. It is surprising that regulators didn't pick up on it. Even simply banning issuers from paying the credit rating agencies might have made a vast difference in what ratings were assigned to packaged loans.
  
  But regulation and new CEO's won't make greed go away. That will be with us as long as we are human.