Thursday, December 18, 2008

Banking revisited - real value

Since Christine Lagarde, the French minister of economy and finance, expressed officially in the early days of November 2008, that nobody could have imagined three months earlier that such a mess would pop up from anywhere, I’ve been nagged by more questions than I could manage to find the answers for.

The ordinary thinking goes like this: if a person like Mr Alan Greenspan or Mme Christine Lagarde says a thing there is no way to suppose the contrary. But if the thinking is not that ordinary ? If we are all extraordinary with the exception of the bankers who just need same Microsoft patch to see things better.
Abuse of a position could be a simplified response to the void statements by both of the above mentioned luminaries.

If only somebody could give me a helping hand in finding any responses to the questions that blur my thinking.
Are they blind to evidences thrown into their faces?
Are they convinced that the rest the folk is not allowed to imagine a different scenario ?
Don’t they manage seeing large enough to spot the black spots on the white snow ?
And many, many other questions that you may ask yourself.

Victor Niederhoffer in his “Practical Speculation” (2003) explains why he and his team say such awful things about Fed Chairman Alan Greenspan. Now it’s up to you to digest his straight and unambiguous remark about Mr Alan Greenspan “ … as an old-hearted, destructive villain who caused the 2000-2001 market crash.”
Hmm … , I like that one especially as it was WRITTEN a couple of years ago and all what Victor Niederhoffer says in his book is of an acute and poignant validity to the present.

Charles Schwab interviewed by Goeff Colvin (C-SUITE STRATEGIES , December 22, 2008, Fortune ) with regard to Wall Street firms says “ … somebody’s hands should be slapped, frankly.” By no means is Mr Alan Greenspan targeted by that remark, but what he says about the recent piling on Mr Alan Greespan is far from “Glory, Glory Alleluia”.

It concerns as well Mme Christine Lagarde and a full wagon of others who abuse the position attributed to them by us. We must be as bad voters as they are managers.
“I don’t think that he watched television, but every day you could see those adds offering mortgages at a teaser rate, 2 %, no tax, returns required , no down payments required, no this, no that, no everything. That was there on television every day through 2004, 2005, 2006, and 2007. It was unbelievable. Right in the face of our regulatory people. What were they doing ? ”, says Charles Schwab.

What I may say is that you could read about the very real danger looming behind the mortgage speculation on the pages of the Fortune Magazine already some four years ago.
Even if neither Greenspan nor Lagarde read the printed paper, what were their close collaborators doing then. I’m afraid they are vociferating their “leaders” who become less ours and who were proved to become an inadequate choice for our policies. Perhaps it’s easy to spill it out like that but a common citizen is paying the price.
Having the markets that are supposed to be competitive, fair and transparent (three pillars) doesn’t work anymore and giving it the third or forth chance to prove itself makes less sense nowadays if the catastrophe is to be avoided.

For years we hear about these three pillars of our economy and our minds start developing an aversion towards these empty phraseology.

As Ken Griffin (Citadel under siege, December 22, 2008, Fortune) reminds us through Hamlet quote that you could’ve learned during the secondary school classes:
“There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.”
Make that phrase a morning prayer for all finances actors. Perhaps it’s the imagination that they miss. I let the others appreciate their pertinence to what they preach.
“With banks promoting real value and long term growth” is what Sheila Bair advocates (Making sense of the madness, December 22, 2008, Fortune).

But what we really forget is that banks should stay rather utility and service companies and let the aerospace, electronics, building, research, education and all of the others not listed here, all but by no means the Banks, to create a real value.