The Power of Yes?

After reading the NY Times story on WaMu do you get the feeling that they were running the business, a business funded by shareholders, with the capital is scarce motto I subscribe to?

Scarcity requires choice, choice means there are two options, yes and no. At WaMu no was removed from the equation.

To treat shareholder's and bondholder's capital the way they did is disgusting. The consequence to the shareholders is clear, the consequences to management and the board of directors are also clear.

There are none. At least not yet.

In Canada we have had the Minister of Finance and the Bank of Canada Governor telling the Canadian banks to lend more money. My response to those two gentlemen, as a shareholder of two of those banks, would not be fit to print.

I find it odd that with all the trouble in the financial system we still have not seen any reforms put in place. Other than the U.S. investment banks converting to commercial banks and lowering their leverage ratios there has been no change to the regulatory system that I know of.

There could be many changes I'm sure but two I would implement immediately are removing off balance sheet accounting and changing CEO compensation to include a claw back feature.

The off balance sheet accounting issues were at the heart of Enron's collapse and there is no reason for it to be allowed. All assets and all liabilities must be on the balance sheet with the rational used to arrive at their values fully explained in the notes.

CEO compensation must include recourse by the company to take back compensation paid over, say the previous 5 years, net of taxes paid. This recourse would be triggered based on the company's losses incurred in the current year.

We must stop CEOs from raping the company for their own compensation and then leaving the burnt out hulk behind, with shareholders and employees destroyed, while they sit back and enjoy the millions they took in the previous years.

Mr Kerry K. Killinger past CEO of WaMu would be a prime example.

"Flexible lending rules", LOL.



9/26/2008 post