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  • GM: More Bailout-Worthy than Citigroup
    The banks should not have been bailed out ... it was a mistake

    It makes zero sense to argue that, because Bush & Co made a terrible mistake, Pelosi/Obama & Co are somehow justified in repeating the mistake

    Bailing out society's failures at the expense of its successful taxpayers is a clear recipe to ensure our children and grandchildren never see what used to be called the American Dream
    Dec 09 16:15 pm |Rating: +1 0 |Link to Comment |View article
  • More Trouble in Store for Citigroup
    You are supposed to be a journalist, so why do you mindlessly buy into Wall Street thinking:
    "Not sure dismissing the highly paid producers is the way to go..."

    Labeling traders and salespeople "producers" and the rest of the staff "cost centers" is the sort of thinking that got many banks into the situation they are in.

    Many otherwise good sports players have fallen under the delusion that they (singularly) are the team, and all the other players are dead weight. Better coaches quickly rid these divas of their thinking before they mess up the entire team.

    Without good back office people, trades won't clear and clients will get upset. Without good IT software, traders have trouble tracking all their trades -- the manual "T-sheets" of yester-year would never handle today's volumes.

    And without a competent risk management department, banks would end up -- well, like they did end up. Over-emphasis on so-called "producers", while ignoring all the other producers that make the traders/salespeople's job possible -- is just another example of poor management on the part of CEOs.

    If your bank has more than one employee (never mind 300K) -- it is a team sport. If the line guys don't do their job well, your star quarterback is just a target waiting to be sacked. Tell your linemen they are an expendable "cost center" and prepare to carry your quarterback out on a stretcher and loose the game.

    And in the case of most banks, a lot of what the "producers" supposedly produced was really garbage. If the risk management department hadn't been gutted, the CEO might have known the difference.
    Nov 17 14:55 pm |Rating: +2 -2 |Link to Comment |View article
  • On Recent Financial Stories
    Regarding Citi (and most banks) -- its standard MO for lame CEOs and their management consultants to suggest trimming costs by slashing the IT and back office budgets. What is really surprising is that anyone outside the company would give a shred of credence to the idea.
    1) It was the CEO and the "profit" centers who got over-levered on mortgage debt they didnt understand
    2) It was the CEO's earlier decisions to ignore risk management and not develop proper risk management software... its far from obvious how cutting these areas further will do anything but hurt
    3) Exactly how many traders does it take to go out and buy assets they clearly don't understand and on absurd leverage? Any janitor who dropped out of high school could lose billions just as fast -- and a lot cheaper
    4) Does Citi need thousands of securitization lawyers and deal makers considering the market is all but shut down? Do any of the banks need this?
    5) Why is management overly concerned with approving first class business airline tickets? If there was actual business activity occurring, a multi-billion dollar corporation really shouldn't care between $300 and $3000... the real question is "Why are you flying at all?" Since there is no business going on, don't fly at all. Get rid of the managers who want to fly first class -- and while you are at it, get rid of the manager who does the approving.
    6) This one is a no brainer: save millions by getting rid of all the McKinsey people or else all the Citi managers. If the Citi managers don't know what they are doing, why are they there? If they do know what they are doing, why is McKinsey there? Two completely redundant management structures

    But even with two redundant management structures, the best plan they can come up with is to make cuts in risk management and IT? How many McKinsey people did it take to conclude that firing people who had nothing to do with the mistakes that caused the bank's collapse won't result in lower staff morale?
    Aug 27 09:55 am |Rating: 0 0 |Link to Comment |View article
  • The Credit Bubble: Deregulation Gone Wild
    Deregulation is the big lie here. Government is MUCH bigger now than when Reagan took office. The Fed knew perfectly well what was happening, and on several occasions issued warnings. They had, and still have, the authority to regulate lending practices at the money center banks (and the little banks tend to follow). The other lending is done by FNMA and FHLMC, which are completely government controlled.

    Before you start expanding regulatory power, you need to ask why the regulators made almost no use of their existing powers. You need to establish that existing powers are insufficient -- as opposed to just unused.

    Even if you make the Fed into an absolute dictator, what good would it do if they don't use their powers (for good)?

    The problem isn't deregulation (which never happened except on paper). The problem is the regulations we already have were not enforced.

    The government had to choose between collecting higher taxes on bubble homes, or enforcing the existing rules. The government repeatedly chose higher taxes by turning a blind eye to a problem they knew about all to well.
    Apr 06 17:22 pm |Rating: 0 0 |Link to Comment |View article

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