Introduction:
When a crisis of any type and one as significant and serious as the recently experienced financial one has been experienced, style versus substance comes into play because of the implications, politically and otherwise. There is general agreement that something needs to be done, but what? This is where style over substance comes enters the picture. Style “says” let’s do something to demonstrate that the problem is addressed while substance “says” let’s wait until the underlying causes are better known before rushing into an ad hoc approach. Needless to say, the worst path is the style methodology and rush into “comprehensive” legislation, which in reality isn’t “comprehensive” after all. A previous discussion on this subject of adequate addressing the issues involved in financial crisis was included in the post “HAVE LESSONS REALLY BEEN LEARNED FROM THE RECENT FINANCIAL DISASTER (EDITED)?” that provides a discussion about various areas where additional measures to those in the “comprehensive” legislation could further enhance the existing rules. An unrestrained root cause is a must in an attempt to discover where all the critical issues (or contributing factors). While I am not aware if such has been completed, I will assume so. There has been general agreement that the roots of the crisis lay in the subprime mortgage market and while I have heard and read that various investigations were taking place, I have not seen any result. Maybe some were published and I did not read them but that’s beside the point, which is that there has been general agreement that various factors were at fault as discussed below.
Credibility lost as a regulator cannot be regained and when such issues as:
When a crisis of any type and one as significant and serious as the recently experienced financial one has been experienced, style versus substance comes into play because of the implications, politically and otherwise. There is general agreement that something needs to be done, but what? This is where style over substance comes enters the picture. Style “says” let’s do something to demonstrate that the problem is addressed while substance “says” let’s wait until the underlying causes are better known before rushing into an ad hoc approach. Needless to say, the worst path is the style methodology and rush into “comprehensive” legislation, which in reality isn’t “comprehensive” after all. A previous discussion on this subject of adequate addressing the issues involved in financial crisis was included in the post “HAVE LESSONS REALLY BEEN LEARNED FROM THE RECENT FINANCIAL DISASTER (EDITED)?” that provides a discussion about various areas where additional measures to those in the “comprehensive” legislation could further enhance the existing rules. An unrestrained root cause is a must in an attempt to discover where all the critical issues (or contributing factors). While I am not aware if such has been completed, I will assume so. There has been general agreement that the roots of the crisis lay in the subprime mortgage market and while I have heard and read that various investigations were taking place, I have not seen any result. Maybe some were published and I did not read them but that’s beside the point, which is that there has been general agreement that various factors were at fault as discussed below.
These are the General Details:
The March 2, 2010 edition of that Business Street
Daily/Weekend Publication (C1) in an article entitled “Regulatory Fixes Miss
The Mark(et” emphasized that symptoms and not causes are being addressed as a
result of the crisis and the example used was the limitations imposed on the
short selling of stocks introduced in February 2010. and in the opinion of the
Writer, it was dismissed by Wall Street types as ineffective. This dismissive
attitude occurred since Regulators found them ineffective an “economically
relevant restraint”, scrapped the same measures in 2007. The bigger picture in
the opinion of the Writer is that Regulators lose credibility by adopting an ad
hoc approach to a serious crisis before even grappling the serious issues in
need of addressing and then finding out that the “stomach” for fixing the serious
issues have been dealt a serious blow and I agree. Credibility lost as a regulator cannot be regained and when such issues as:
- establishing a methodology for monitoring systemic risks,
- “safely” winding down large complex financial holding companies (see the discussion previously included in the post HAVE LESSONS REALLY BEEN LEARNED FROM THE RECENT FINANCIAL DISASTER (EDITED)? on this subject),
- handling the trading of credit default swaps (CDSs) and
- minimizing the unintended consequences of government owned Fannie May and Freddie Mac, are in need of addressing.
In the
Writer’s opinion, measures were also needed to ensure that high frequency
technologically driven trades, which were (at the writing of the article)
becoming increasingly complex with the potential to destabilize the markets
without human oversight, were not allowed to go unchecked.
To its credit, the industry appears to be taking some of
the criticisms to heart in the matter of pay as depicted in the February 2,
2011 edition of the above referenced Publication in a discussion of the trends/indicators
from the 2010 compensation revealed even buried in the numbers were “signs of
how Wall Street’s pay culture is bending in response to pressure from
regulators and shareholders”. Examples of this shift were evident in the deferring
a larger percentage of compensation than they used to, in order to counter the
criticism that the large bonuses helped to fuel the culture of unbridled risk
taking in the hopes of a big payday by executives, traders and other employees.
The issues at Hand:
Those issues in need of addressing in the opinion of the writers are as follows:- An effective coordinated “big picture” “substance” approach is needed when addressing complex issues instead of the rush to fix or “style” approach before seeking all the contributing factors involved, which results in a loss of credibility to those whose cooperation is needed to comply with what is being enacted, (this position is irrelevant in instances where those involved are part of the problem). Rushing into an ad hoc approach to problem solving generally and specifically where complicated issues are involved misses the mark, earns ridicule from those whose industry is being regulated; and does not demonstrate THOROUGHNESS to their industry.
- A truly comprehensive approach after fact-finding (not before) may include tougher measures, but the respect of those in the industry will be earned instead of derision for half steps. FOOD FOR THOUGHT, TODAY THAT'S STILL RELEVANT WITH TIME, BECAUSE UNLESS IT CONVEYS WHAT AND JUST AS IMPORTANT, WHEN IMPLEMENTATION OCCURS (OR OCCURRED) AS THE CASE MAY BE, IN ADDITION TO CONSISTENCY ON THE PART OF REGULATORS, FOR PURSUING THEIR OBJECTIVES, RESPECT STILL WILL BE DIFFICULT TO FOSTER!
NOTE: this post was updated by the discussion included in the bulleted listing in The Highlights of the FCICs Findings are Described Here section of the post, THE FINANCIAL INQUIRY COMMMISSIONS's (FCIC's) REPORT IN ADDITION TO TIME, ALSO VINDICATES A CRUSADER! - UPDATED documenting the complex issues involved in the shadow banking system that contributed significantly to the crisis but, which were not addressed by the recommending of any specific action to address it and by following this course of action, loosing an excellent opportunity to seek real answers to the existence of a "cottage" industry that no one apparently knew of its existence yet it had a $36 trillion impact on this Nation's financial system and contributed significantly to the recent crisis.
4 comments:
When an overhaul in any industry, an entity or even in the life of an individual in needed, one example that can be drawn from is smoke cessation programs previously conducted and documented in the post THE BEST METHOD FOR OVERCOMING AN ADDICTION (link on COMMENTS Page) because similar issues are involved. As documented there, the two pathways involved are “cold turkey” versus step by step appoaches. Naturally, the cold turkey method is better but involves some upfront trauma, which is offset usually by long-term gains as opposed to a gradual more painful approach due to the fact that such measures involve attempting to get the best of two situations, freedom from the addiction while remaining involved in the activity (or the nicotine patch approach). This approach is also vindicated by the ONLY successful overhaul of a major company on record to use as our example and that is F.W. Woolworth’s overhaul from its previous business model into the completely different entity Foot Locker (as documented in the post COMPREHENSIVE PROBLEM SOLVING AND CHANGING PATTERNS - link on COMMENTS Page). In such circumstances, as the post points out, a turn-around mindset is needed to achieve success and that is why there are so few examples, because such an approach involves total removal from existing circumstances, which only will serve as reminders of the past from, which “freedom” is being sought. Next a new outlook is required, such as a new occupation or in the case of a business a new focus, (ironically such as Conservery’s change in its business offerings from the previous various offerings to compliance type ALONE, what a “coincidence”). A new location is a necessity, to ensure the freedom to start anew can achieve its desired objectives without past “hindrances” that will only serve to keep the turn-around object, “hobbled” to the past confinements. To pick on this from Conservery’s perspective, the current focus is in two locations primarily Florida and Barbados of, which Barbados will require the most ground-floor activity to achieve recognition and success because it’s a totally new market in, which workplace compliance is now getting off the ground and the challenges and likewise the opportunities are the most significant there. As a result, a great deal of time and resources will have to be invested there initially to achieve success over the long-term, which at this time is difficult to quantify, but perfect for the type of investment for anyone with a new outlook mindset, which should have been already in stage two or three but due to circumstances beyond my control is still at stage zero. From this outline it’s possible to get an idea of what is involved in overhauling and/or turning-around a structure for the record and at the same time use the Proprietorship’s current status as a useful example for the case in point.
Supportive roles for any individual central to the core business and/or an adult individual in an overhaul/turn-around situation is a fact-of-life and may include: 1) being understanding enough to maintain very, very limited input role to give the turn-around a chance for success; 2) no role for some "central" individual(s) who may be part of the problem in some instances and as a result, a turn-around is intended to limit past links as much as possible in the hope that out of concern for success and whose role going forward is not included for obvious reasons, 3) no roles for any in the "big picture" because the focus is on the central overhaul objective adult target in the case of an individual instead of the needs of supporting parties and this should not be forgotten and 4) the well being going forward of the turn-around “adult” target is essential and as long as progress is being made in a occupation that is of interest; this is what’s important and ultimately all that matters not what others (even with he “best” of intentions may desire for the adult target in the case of an individual).
The restating of the plan of approach being adopted is in order as follows as long as the applicable details can be resolved accordingly to the satisfaction of all: supportive roles for any individual central to the core business and/or an adult individual in an overhaul/turn-around situation is a fact-of-life and may include: 1) being understanding enough to maintain very, very limited input role to give the turn-around a chance for success; 2) no role for some "central" individual(s) who may be part of the problem in some instances and as a result, a turn-around is intended to limit past links as much as possible in the hope that out of concern for success and whose role going forward is not included for obvious reasons, 3) no roles for any in the "big picture" because the focus is on the central overhaul objective adult target in the case of an individual instead of the needs of supporting parties and this should not be forgotten and 4) the well being going forward of the turn-around “adult” target is essential and as long as progress is being made in a occupation that is of interest; this is what’s important and ultimately all that matters not what others (even with he “best” of intentions may desire for the adult target in the case of an individual).
No issue of "VITAL" long-term importance to those involved in the turn-around effort is left unaddressed in the approach outlined in comment 3 on this post/comment # 1 from 4/24/2013 on THIS Page. This excludes those "road blocks" type issues magnified by some with more concerned with "style' over substance. As previously conveyed, give those who will be the primary beneficiaries a voice in the decision/outcome for their input and let the matter rest there because this is a matter of opinion, without due consideration for the "VITAL" long-term issues effecting those at the center of the cause. Try it, and abide by the outcome even if in disagreement, because this is a time-wasting exercise, when progress could be well underway to an eventual outcome, instead of "kicking critical decision-making down the road", which in my opinion is the current path.
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