Back in June of this year, I wrote this post concerning an excellent editorial by Brian Wesbury in the Wall Street Journal. Wesbury's focus was that one current Presidential candidate's call for 'change' is, actually disingenuous, given the real economic change all around us.
However, I wanted to highlight something Wesbury noted at the end of his piece,
"Americans have had it so good, for so long, that they seem to have forgotten what government's heavy hand does to living standards and economic growth. But the same technological innovation that is causing all this dislocation and anxiety has also created an information network that is as near to real-time as the world has ever experienced.
Decades ago the feedback mechanism was slow. The unintended consequences of the New Deal took too long to show up in the economy. As a result, by the time the pain was publicized, the connection to misguided government policy could not be made. Today, in the midst of Internet Time, this is no longer a problem. So, despite protestations from staff at the White House, most people understand that food riots in foreign lands and higher prices at U.S. grocery stores are linked to ethanol subsidies in the U.S., which have sent shock waves through the global system.
This is the good news. Policy mistakes will be ferreted out very quickly. As a result, any politician who attempts to change things will be blamed for the unintended consequences right away.
Both Mr. McCain and Mr. Obama view the world from a legislative perspective. Like the populists before them, they seem to believe that government can fix problems in the economy. They seem to believe that what the world needs is a change in the way government attacks problems and fixes the anxiety of voters. This command-and-control approach, however, forces a misallocation of resources. And in Internet Time this will become visible in almost real-time, creating real political pain for the new president."
My own observation regarding Wesbury's contentions was to concisely restate his several points as,
"Thus, Wesbury notes that because of recent rapid change, originally economic-based, in information technology, boneheaded governmental changes will be quickly penalized in the next election cycle, rather than, as in the last century, 30-40 years later."
I thought of this as I watched S&PIndex futures go to limit-down before the market open this morning.
It looks like global understanding of economic repercussions of the recent financial market crises has morphed to 'internet time,' as well. Financial equity markets are now digesting and reacting to economic news in hours, rather than months, as they may have in decades past.
So, as steep and swift as the evaporation of value in the equity markets has been in the past month, it's quite possible that any resulting snap-back, once bad news abates, will be similarly faster and further upward than what has been historically experienced.
I suspect that Wesbury's observation about internet time is influencing how quickly global perceptions of various interdependencies among economic players affect the value of debt and equity.
We haven't seen this sort of speed and volume of reaction in prior financial market crises or the now-probably onset of a recession.
Right now, we're seeing the more-sudden plunge into financial market and economic gloom. Could it be that the ensuing emergence into the light will be just as unexpected and fast?
I suspect so.
Friday, October 24, 2008
Holman Jenkins On Detroit's Federally-Mandated Failure
Holman Jenkins wrote an interesting piece in Wednesday's Wall Street Journal. In it, he contended that Washington's latest sop to the auto industry, in the form of $25B in loans, isn't the start of Federal intervention in the industry. It's more like nearing the end.
Among the more salient points Jenkins makes are,
"The talk is of synergies and cost-cutting, of tapping new lodes of cash to ride out the storm. Don't believe it. These negotiations are about one thing: creating a political last stand of American auto making that a Democratic Congress and president won't be able to resist bailing out.
All parties to the Chrysler talks have adopted Election Day as a deadline, the better to trap both presidential campaigns into committing to support a deal. But it also slipped out that iconic Ford had been GM's first choice of partner -- a prospect that could yet be resurrected now that superinvestor Kirk Kerkorian has withdrawn his vote of confidence in Ford's survival.
Congress has already agreed to provide the Big Three with $25 billion in loans to help with a shift to green cars -- likely to become plain survival cash in the event. And Congress's very nature requires throwing good money after bad, specifically financing a GM-Chrysler merger if Michigan Sen. Carl Levin has his way. Don't be surprised if President-elect Obama is dropping hints in two weeks that this also would be a good use of the $125 billion Washington just injected into J.P. Morgan, Citigroup and friends. The government could even end up owning a car company directly before it's over, as the U.K. government once owned British Leyland.
Banking in fact illustrates what might be called the GM Effect, for both industries have been around long enough to have accrued an almost incalculable baggage of government intervention, which explains why more intervention is demanded today.
Why don't the auto makers limit themselves to paying competitive wages and benefits in line with what workers could earn elsewhere? Because, in the 1930s, Congress passed the Wagner Act with the nearly explicit purpose of imposing a labor monopoly on Detroit to keep wages at higher-than-competitive levels.
Why doesn't Detroit rationalize its musty brand lineups and dealer networks? Because, in the 1950s, legislatures across the country imposed franchising laws, including the federal "dealer day-in-court clause," to make such rationalization prohibitively expensive.
Why don't the auto giants do as Whirlpool and other manufacturers have done, and move their production to cheaper offshore locales? Because, in the 1970s, Congress enacted fuel economy rules to penalize homegrown auto makers if they don't build the lion's share of their cars in high-wage, UAW-staffed domestic factories.
No, Detroit's troubles don't arise because its executives are morons. Look today at the desirable, fuel-efficient cars that GM and Ford sell in large numbers in Europe. Does anybody imagine the U.S. public derives any benefit from keeping these cars out of our country? Yet they are kept out to preserve the amour propre of the regulators who enforce our emissions and safety standards, however trivially different from Europe's standards.
Cerberus, stars in its eyes, perhaps didn't quite understand all this about the auto industry when it bought Chrysler thinking it would be free to make business-like decisions. Now it does.
Any rescue mounted today in Washington won't be so much a "rescue" as a final admission that the industry can no longer bear its regulatory burdens without direct subsidies. Any life supports GM, Ford and Chrysler are hooked up to now, for that reason, will have to be permanent."
Throughout my 3+ years of writing this blog, I have spared no sympathy for the US auto makers. My judgment has been that they've been incompetent.
Now, Jenkins offers a different view. And, to be truthful, I give him credit for making the points he has made.
Somehow, though, I don't think that means management is blameless. Rather, I view them as having decided to become willing accomplices, rather than vigorously fight and expose what was slowly done to them, law by law.
If anything, this demonstrates why real executive talent, rather than more of the usual bean-counting variety, e.g., Rick Wagoner, was required to give shareholders any chance at all of not being wiped out in bankruptcy, or, frozen into permanent government partnership.
In our mixed economy, sooner or later, every large employer has to either fend off Washington and/or unions, or proactively trudge to Washington and maneuver to set its own terms of competition before Congress and competitors, unions, or somebody else does it for them.
I just think the auto executives didn't work sufficiently hard to make it clear under what sort of restrictive regulatory burdens they have been forced to labor. If they had, either a governmental solution would have developed earlier, before so much shareholder value was destroyed, or perhaps they could have received dispensation from many of those ill-considered laws that so affected their ability to profitably operate in the US for these past decades.
Among the more salient points Jenkins makes are,
"The talk is of synergies and cost-cutting, of tapping new lodes of cash to ride out the storm. Don't believe it. These negotiations are about one thing: creating a political last stand of American auto making that a Democratic Congress and president won't be able to resist bailing out.
All parties to the Chrysler talks have adopted Election Day as a deadline, the better to trap both presidential campaigns into committing to support a deal. But it also slipped out that iconic Ford had been GM's first choice of partner -- a prospect that could yet be resurrected now that superinvestor Kirk Kerkorian has withdrawn his vote of confidence in Ford's survival.
Congress has already agreed to provide the Big Three with $25 billion in loans to help with a shift to green cars -- likely to become plain survival cash in the event. And Congress's very nature requires throwing good money after bad, specifically financing a GM-Chrysler merger if Michigan Sen. Carl Levin has his way. Don't be surprised if President-elect Obama is dropping hints in two weeks that this also would be a good use of the $125 billion Washington just injected into J.P. Morgan, Citigroup and friends. The government could even end up owning a car company directly before it's over, as the U.K. government once owned British Leyland.
Banking in fact illustrates what might be called the GM Effect, for both industries have been around long enough to have accrued an almost incalculable baggage of government intervention, which explains why more intervention is demanded today.
Why don't the auto makers limit themselves to paying competitive wages and benefits in line with what workers could earn elsewhere? Because, in the 1930s, Congress passed the Wagner Act with the nearly explicit purpose of imposing a labor monopoly on Detroit to keep wages at higher-than-competitive levels.
Why doesn't Detroit rationalize its musty brand lineups and dealer networks? Because, in the 1950s, legislatures across the country imposed franchising laws, including the federal "dealer day-in-court clause," to make such rationalization prohibitively expensive.
Why don't the auto giants do as Whirlpool and other manufacturers have done, and move their production to cheaper offshore locales? Because, in the 1970s, Congress enacted fuel economy rules to penalize homegrown auto makers if they don't build the lion's share of their cars in high-wage, UAW-staffed domestic factories.
No, Detroit's troubles don't arise because its executives are morons. Look today at the desirable, fuel-efficient cars that GM and Ford sell in large numbers in Europe. Does anybody imagine the U.S. public derives any benefit from keeping these cars out of our country? Yet they are kept out to preserve the amour propre of the regulators who enforce our emissions and safety standards, however trivially different from Europe's standards.
Cerberus, stars in its eyes, perhaps didn't quite understand all this about the auto industry when it bought Chrysler thinking it would be free to make business-like decisions. Now it does.
Any rescue mounted today in Washington won't be so much a "rescue" as a final admission that the industry can no longer bear its regulatory burdens without direct subsidies. Any life supports GM, Ford and Chrysler are hooked up to now, for that reason, will have to be permanent."
Throughout my 3+ years of writing this blog, I have spared no sympathy for the US auto makers. My judgment has been that they've been incompetent.
Now, Jenkins offers a different view. And, to be truthful, I give him credit for making the points he has made.
Somehow, though, I don't think that means management is blameless. Rather, I view them as having decided to become willing accomplices, rather than vigorously fight and expose what was slowly done to them, law by law.
If anything, this demonstrates why real executive talent, rather than more of the usual bean-counting variety, e.g., Rick Wagoner, was required to give shareholders any chance at all of not being wiped out in bankruptcy, or, frozen into permanent government partnership.
In our mixed economy, sooner or later, every large employer has to either fend off Washington and/or unions, or proactively trudge to Washington and maneuver to set its own terms of competition before Congress and competitors, unions, or somebody else does it for them.
I just think the auto executives didn't work sufficiently hard to make it clear under what sort of restrictive regulatory burdens they have been forced to labor. If they had, either a governmental solution would have developed earlier, before so much shareholder value was destroyed, or perhaps they could have received dispensation from many of those ill-considered laws that so affected their ability to profitably operate in the US for these past decades.
Thursday, October 23, 2008
Greenspan's Shocking Admission In Today's Congressional Testimony
This morning's business news featured live feeds of former Fed Chairman Alan Greenspan defending himself during testimony before a House Banking committee.
Although video of this historic moment is not yet on YouTube, I'd bet it is by tomorrow morning.
In a stunning series of remarks, Greenspan alleged surprise that individual, self-interested players in the financial markets did not have an explicit sense of, and desire to maintain, the overall health of those markets as they knowingly engaged in risky activities, e.g., securitizing subprime and Alt-A mortgages.
To cap off his inane comments, Greenspan defended his beliefs and inaction by claiming that his 40+ year "ideology" regarding capital markets turned out to be wrong.
According to Alan, his correctly-functioning model of how markets worked went wrong in the past few years, so it's not his fault.
Moreover, in earlier remarks this morning, he asserted that he believed the operating models of various financial markets competitors were correct, but they just used 'bad data,' and, when replaced with proper data, would result in appropriate decisions and actions regarding risks.
I will be the first one to say that anyone, especially a Fed Chairman, who believes that individual players in financial markets ever look out for the system, or the 'other guy,' is an idiot.
If any sector requires careful and effective regulation, it is our financial sector. My own recommendations for reforming the current financial mess, written on September 23rd of this year, featured three prescriptions for stiffer regulations concerning leverage, exchange-based trading, and retention of securities on an underwriter's balance sheet. Only one recommendation involved loosening a current regulation, and that was to reverse Congress' misguided mandate for all firms to strictly adhere to a narrow usage of 'mark-to-market' pricing of assets, while overlooking the real value inherent in a performing, if untraded security.
Nobody who has been involved with actual banking, securities or the markets can possibly believe they need no regulation, or that any player gives a hoot about systemic issues. That is always 'someone else's' problem.
Thus my posts regarding greed and stupidity, here and here.
Here's a good example.
Back in 1990, I ran a small internal consulting group at Chase Manhattan Bank. It was also given the task of commercializing the tools we used internally. With the forced retirement of my mentor and SVP of Corporate Planning & Development, I reported to the bank's CFO.
As such, I was included in a lunch for all the CFO's direct reports in late 1990 to discuss the brewing commercial real estate problems at the bank.
What I heard was shocking. The CFO wondered aloud if we could have afforded not to compete for all these soured loans, at the height of the lending frenzy. He was fixated on revenues and market share, and seemed genuinely ignorant of the looming large chargeoffs from the excessive lending.
Later, I learned from some colleagues working directly for the CFO that when a post-mortem on the Real Estate Finance division was conducted, many loan documentation folders were literally either empty, or contained a few mostly-blank pieces of paper.
The minimum necessary paperwork for review and approval by loan committees and internal credit audit functions was nonexistent.
Nobody could explain this violation and failure of basic internal bank lending practices. But we all knew why it had happened. Bonuses for the senior management and loan officers of the unit were huge for the last two years of the lending boom.
Nobody gave them back. The bank bore the losses, while the former employees walked off with millions of dollars of 'performance' bonuses.
It's simply human behavior. Salespeople and managers will maximize that behavior which pays them the most money. They will short-circuit, corrupt or remove any checks and balances they can which interfere with that profit-maximizing behavior.
To assume otherwise, either at the business-unit level, corporation level, or among players in banking and financial markets, is to be naive and stupid.
Although video of this historic moment is not yet on YouTube, I'd bet it is by tomorrow morning.
In a stunning series of remarks, Greenspan alleged surprise that individual, self-interested players in the financial markets did not have an explicit sense of, and desire to maintain, the overall health of those markets as they knowingly engaged in risky activities, e.g., securitizing subprime and Alt-A mortgages.
To cap off his inane comments, Greenspan defended his beliefs and inaction by claiming that his 40+ year "ideology" regarding capital markets turned out to be wrong.
According to Alan, his correctly-functioning model of how markets worked went wrong in the past few years, so it's not his fault.
Moreover, in earlier remarks this morning, he asserted that he believed the operating models of various financial markets competitors were correct, but they just used 'bad data,' and, when replaced with proper data, would result in appropriate decisions and actions regarding risks.
I will be the first one to say that anyone, especially a Fed Chairman, who believes that individual players in financial markets ever look out for the system, or the 'other guy,' is an idiot.
If any sector requires careful and effective regulation, it is our financial sector. My own recommendations for reforming the current financial mess, written on September 23rd of this year, featured three prescriptions for stiffer regulations concerning leverage, exchange-based trading, and retention of securities on an underwriter's balance sheet. Only one recommendation involved loosening a current regulation, and that was to reverse Congress' misguided mandate for all firms to strictly adhere to a narrow usage of 'mark-to-market' pricing of assets, while overlooking the real value inherent in a performing, if untraded security.
Nobody who has been involved with actual banking, securities or the markets can possibly believe they need no regulation, or that any player gives a hoot about systemic issues. That is always 'someone else's' problem.
Thus my posts regarding greed and stupidity, here and here.
Here's a good example.
Back in 1990, I ran a small internal consulting group at Chase Manhattan Bank. It was also given the task of commercializing the tools we used internally. With the forced retirement of my mentor and SVP of Corporate Planning & Development, I reported to the bank's CFO.
As such, I was included in a lunch for all the CFO's direct reports in late 1990 to discuss the brewing commercial real estate problems at the bank.
What I heard was shocking. The CFO wondered aloud if we could have afforded not to compete for all these soured loans, at the height of the lending frenzy. He was fixated on revenues and market share, and seemed genuinely ignorant of the looming large chargeoffs from the excessive lending.
Later, I learned from some colleagues working directly for the CFO that when a post-mortem on the Real Estate Finance division was conducted, many loan documentation folders were literally either empty, or contained a few mostly-blank pieces of paper.
The minimum necessary paperwork for review and approval by loan committees and internal credit audit functions was nonexistent.
Nobody could explain this violation and failure of basic internal bank lending practices. But we all knew why it had happened. Bonuses for the senior management and loan officers of the unit were huge for the last two years of the lending boom.
Nobody gave them back. The bank bore the losses, while the former employees walked off with millions of dollars of 'performance' bonuses.
It's simply human behavior. Salespeople and managers will maximize that behavior which pays them the most money. They will short-circuit, corrupt or remove any checks and balances they can which interfere with that profit-maximizing behavior.
To assume otherwise, either at the business-unit level, corporation level, or among players in banking and financial markets, is to be naive and stupid.
Wednesday, October 22, 2008
Celebrity Investors: Kerkorian vs. Buffett
Kirk Kerkorian made major headlines yesterday and today by announcing the reduction of his stake in Ford Motor Company.
According to most stories, the seasoned investor has lost about 70% of the value of his Ford position, or roughly $690 million on a $1B investment earlier this year.
Kerkorian's Tracinda Corporation, his investment vehicle, is privately held, so we can't really know his, or its performance over the decades during which he has been a prominent investor. He's been at it for quite some time, though. I vividly recall a problem in a graduate accounting course which featured an article detailing Kerkorian's transformation of MGM into his personal money machine. He ended up controlling the company's voting shares in such a way that he could use it as an ATM, declaring a dividend payable largely to himself, at will.
The other celebrity investor who comes to mind, of course, is Warren Buffett. Buffett works through the publicly-held Berkshire Hathaway, and maintains a high profile. He has made himself the darling of the CNBC set, publicly jumping on the Obama bandwagon, and no doubt enjoyed being mentioned by both candidates in a debate earlier this fall.
Nearby is a 5-year price chart for Berkshire and the S&P500 Index. It's easy to see that, despite all Buffett's publicity, you'd have been better off, on a risk-adjusted basis, owning the S&P for most of the past five years. Since 2003 market the onset of the most recent period of an up market for equities, this chart tells you that Buffett, no matter what he might have once done, is no longer a serious outperformer in healthy equity markets.
The accompanying 2-year view of the same series gives a closer look at the split, whereupon Berkshire parted company with the index and began to outperform it.When the very beginning of the current financial crisis began to be noticeable, in August of last year, Berkshire rose, while the S&P flattened, then, of course, began to significantly slide in the spring of this year.
Looking at just the past six months, in this chart, we see that, even recently, Berkshire tracked the index almost perfectly until the carnage in September. In fact, in the brief period of a 'false positive' in May, Berkshire actually underperformed the index.My point is that, on evidence of the past five years, Buffett's Berkshire is hardly the paragon of investing prowess that so many believe when referring to him as the "Oracle of Omaha."
Even in recent months, his bets have been focused on lending money, at very high interest rates, to better-quality US firms, e.g., Goldman Sachs and GE. It's a bit galling to hear Buffett mentioned in Congressional hearings by our elected representatives as if he's some sort of investment deity, when, in fact, his record is actually so inconsistent, or, at best, usually mediocre.
Because Tracinda leaves no long term footprints, it's impossible to show a comparative chart of Buffett's and Kerkorian's performance. But I can't help suspecting that Kerkorian has a better, more consistent track record over time.
Call it my innate scepticism, but I'm leery of Buffett's obvious use of his own public image as the best investor on the planet to draw attention away from his firm's actual performance, versus the market, over time.
Ironically, I'm more impressed with the entire Kerkorian saga of investing in the auto sector. I wrote about it, and Buffett's Mars-Wrigley investment, in this post, back in May of this year.
While Kerkorian didn't realize his objectives with his Ford stake, you cannot criticize him for a lack of appetite for risk. A Wall Street Journal article attributed some of Kerkorian's motivation for selling his Ford stake to the recent departures of the CFO and a board member, raising the specter of increased control by the Ford family.
Whatever the reasons, I sense, in Kerkorian's shunning of the public spotlight, a more hard-nosed, focused approach to finding opportunities for investing. I wish we all knew more about his investment performance over the years.
It would be a fascinating comparison.
Tuesday, October 21, 2008
Bernanke On Yet Another Pointless Congressional "Stimulus" Package
Did you see Fed Chairman Ben Bernanke's testimony on Capitol Hill yesterday?
An editorial in today's Wall Street Journal characterized it as Ben's application for another term as Fed Chair.
I'm referring, of course, to his fawning and eager agreement that Congress should pass another multi-hundred billion dollar 'stimulus' package.
Surely Bernanke doesn't think we saw any lasting effects of the last stimulus, does he? Other than increasing a deficit with which Congressional Democrats have tarred President Bush for years, it didn't make any difference.
Am I the only person left who believes that only permanent tax rate cuts have a quick and lasting effect on economic behavior?
Or, having passed a $700B 'urgent' TARP bill that has been dwarfed by the Treasury buying equity in our nation's banks, has Congress simply decided it no longer matters what deficits we create by paying citizens to spend now?
This just makes no sense whatsoever. It seems that any sense of self-reliance in our country has vanished.
An editorial in today's Wall Street Journal characterized it as Ben's application for another term as Fed Chair.
I'm referring, of course, to his fawning and eager agreement that Congress should pass another multi-hundred billion dollar 'stimulus' package.
Surely Bernanke doesn't think we saw any lasting effects of the last stimulus, does he? Other than increasing a deficit with which Congressional Democrats have tarred President Bush for years, it didn't make any difference.
Am I the only person left who believes that only permanent tax rate cuts have a quick and lasting effect on economic behavior?
Or, having passed a $700B 'urgent' TARP bill that has been dwarfed by the Treasury buying equity in our nation's banks, has Congress simply decided it no longer matters what deficits we create by paying citizens to spend now?
This just makes no sense whatsoever. It seems that any sense of self-reliance in our country has vanished.
Must Bankers Always Be Stupid and Overly Opportunistic?
I wrote a post about a month focusing on how regulation won't ever prevent stupidity and excessive opportunism, from running amok in business- even financial services.
This came to mind because of a discussion I had with my business partner and several acquaintances on Saturday morning. We are all involved in some facet of the financial sector, and were discussing the origins of the current crisis, and what would eventually resolve it.
One salient topic was the 'too big to fail' nature of US commercial banks. My acquaintances felt that had to somehow be remedied by the spread of banking assets among other organizations. I, to the contrary, felt that technology has made banking concentration inevitable, as I wrote here, recently,
"With technology and market concentration of banking, we have probably crossed an important Rubicon years ago. Ben Bernanke's answer to a question at yesterday's lunch at the Economic Club of New York, where he spoke, did not, to me, seem to acknowledge the obvious.
At this point, I think Bernanke would do well to accept that the speed with which financial markets can process data and trade, and, thus, the degree to which they have relied on large investments in information technology systems and software have been a significant factor in the concentration of financial assets in just a handful of large US banks.
This will not change now. So, yes, I believe, contrary to Bernanke's assertion, that each of those banks into which Treasury has invested some of its initial $250B is, indeed, 'too big to fail.'"
Perhaps the scariest moment of the conversation on Saturday, however, was when we discussed bank lending officer stupidity in making mortgage loans based on marginal borrower capacities to repay or, worse, no data.
How, I asked, are we to prevent future systemic problems like we are now experiencing, if bankers are too stupid to know what kind of loan to deny?
My colleagues alleged that, if a given banker said "no," another one at the next bank would simply say "yes."
Thus, my argument, which I then voiced, for Federal regulation of core bank lending so heavy as to put the sector on the equivalent of thorazine. They laughed, but then they actually agreed.
You have to ask yourself, how can we ever design and operate a 'safe' banking system if we have to constantly worry that misguided, stupid bank CEOs will push for growth in a sector in which that always means taking excessive risks?
I think it is by clamping down on core, insured and quasi-government-owned banks with inflexible guidelines for loan qualifications.
This came to mind because of a discussion I had with my business partner and several acquaintances on Saturday morning. We are all involved in some facet of the financial sector, and were discussing the origins of the current crisis, and what would eventually resolve it.
One salient topic was the 'too big to fail' nature of US commercial banks. My acquaintances felt that had to somehow be remedied by the spread of banking assets among other organizations. I, to the contrary, felt that technology has made banking concentration inevitable, as I wrote here, recently,
"With technology and market concentration of banking, we have probably crossed an important Rubicon years ago. Ben Bernanke's answer to a question at yesterday's lunch at the Economic Club of New York, where he spoke, did not, to me, seem to acknowledge the obvious.
At this point, I think Bernanke would do well to accept that the speed with which financial markets can process data and trade, and, thus, the degree to which they have relied on large investments in information technology systems and software have been a significant factor in the concentration of financial assets in just a handful of large US banks.
This will not change now. So, yes, I believe, contrary to Bernanke's assertion, that each of those banks into which Treasury has invested some of its initial $250B is, indeed, 'too big to fail.'"
Perhaps the scariest moment of the conversation on Saturday, however, was when we discussed bank lending officer stupidity in making mortgage loans based on marginal borrower capacities to repay or, worse, no data.
How, I asked, are we to prevent future systemic problems like we are now experiencing, if bankers are too stupid to know what kind of loan to deny?
My colleagues alleged that, if a given banker said "no," another one at the next bank would simply say "yes."
Thus, my argument, which I then voiced, for Federal regulation of core bank lending so heavy as to put the sector on the equivalent of thorazine. They laughed, but then they actually agreed.
You have to ask yourself, how can we ever design and operate a 'safe' banking system if we have to constantly worry that misguided, stupid bank CEOs will push for growth in a sector in which that always means taking excessive risks?
I think it is by clamping down on core, insured and quasi-government-owned banks with inflexible guidelines for loan qualifications.
Monday, October 20, 2008
More Debate On Glass-Steagall
This past weekend's Wall Street Journal published an editorial by Charles W. Calomiris, a Columbia Business School professor, entitled, "Most Pundits Are Wrong About the Bubble."
In his piece, Calomiris contends,
"As for the evils of deregulation, exactly which measures are they referring to? Financial deregulation for the past three decades consisted of the removal of deposit interest-rate ceilings, the relaxation of branching powers, and allowing commercial banks to enter underwriting and insurance and other financial activities. Wasn't the ability for commercial and investment banks to merge (the result of the 1999 Gramm-Leach-Bliley Act, which repealed part of the 1933 Glass-Steagall Act) a major stabilizer to the financial system this past year? Indeed, it allowed Bear Stearns and Merrill Lynch to be acquired by J.P. Morgan Chase and Bank of America, and allowed Goldman Sachs and Morgan Stanley to convert to bank holding companies to help shore up their positions during the mid-September bear runs on their stocks."
I disagree. Calomiris' retroactive judgment of the repeal of Glass-Steagall suggests that, even if it was a mistake, its absence let the mess which developed in its absence be cleaned up in a manner which would not have been quite so neat without its absence.
Sound like circular reasoning to you? Me, too.
No, as I wrote here in March of this year, the true effects of Glass-Steagall's repeal were slower to observe. But Gerry Weiss, my boss and one-time SVP and Chief Planning Officer of Chase Manhattan Bank for David Rockefeller, noted this in the 1980s. As I wrote in that post,
"My long-ago mentor at Chase Manhattan Bank, then-SVP of Corporate Planning & Development, Gerry Weiss, was fond of saying, when asked about working to remove Glass-Steagall, something like,
'Are you kidding? We'll just find some new ways to lose a lot of money on badly risk-managed positions. Not to mention that, being commercial bankers, once we get into these businesses- M&A, underwriting, equity trading- we'll cut prices to gain share and ruin the business' profitability for all concerned.'
Judging by the behavior of Citigroup and BofA in last summer's CDO, SIV and other fixed income messes, I'd say he was right on the money, as it were, as usual.
Commercial banks appear to be no better off in terms of profitability, risk management or total return after the repeal of Glass-Steagall."
It was this effect of the repeal of Glass-Steagall on the commercial banks, not the investment banks, which began the slide into our current mess.
In fact, to illustrate that investment and commercial banks were misbehaving, and losing money, with respect to mortgages long before our current financial crisis, consider what happened with Norwest Bank's large mortgage business, in conjunction with Salomon Brothers, back in the 1980s.
Norwest ran a huge mortgage lending and securitization pipeline, or 'conduit.' The latter was known as "RFC," for Residential Funding Corporation. Norwest owned RFC, but Salomon distributed the resulting securities because, at the time, it was illegal for Norwest to do the securities underwriting itself.
As such, Salomon enjoyed a sweet margin on the securitization, with no asset risk on the pipeline. But it was largely understood throughout the industry that RFC was structured and operated with guidance from Salomon.
At some point, RFC mishedged its enormous inventory of mortgages, and doubled up on an interest rate bet, rather than hedged it. Subsequent losses sank Norwest as an independent bank, while Salomon managed to scoop up RFC for a pittance.
Calomiris goes on to contend,
"Even more to the point, subprime lending, securitization and dealing in swaps were all activities that banks and other financial institutions have had the ability to engage in all along. There is no connection between any of these and deregulation. On the contrary, it was the ever-growing Basel Committee rules for measuring bank risk and allocating capital to absorb that risk (just try reading the Basel standards if you don't believe me) that failed miserably. The Basel rules outsourced the measurement of risk to ratings agencies or to the modelers within the banks themselves. Incentives were not properly aligned, as those that measured risk profited from underestimating it and earned large fees for doing so."
Once again, I disagree with his contention regarding the effect of deregulation on various activities.
Why do you suppose, prior to the repeal of Glass-Steagall, no investment banks engaged in buying and operating mortgage underwriting banks? Or creating large, highly-leveraged mutual funds investing in mortgage-backed securities?
Again, I point to Weiss' prescience on the consequences of removing that regulatory barrier. The subsequent thinning of investment bank profit margins led to these non-deposit funded companies boosting leverage to previously-unheard-of levels, in an attempt to maintain profit margins and growth.
Ironically, the lenders of this highly-leveraged money were.....commercial bank broker-dealer desks!
So Calomiris is wrong to suggest that all of what has transpired since the repeal could or would have happened anyway.
Structurally, investment banks could always do what commercial banks did, except for having access to the Fed window and offering DDA accounts. The repeal of Glass-Steagall drove the weaker-capitalized players, i.e., investment banks, to take more risks.
Calomiris ends with the contention,
"The single most important reform that is needed is the restoration of discipline in the measurement of risk within the banking system."
He's probably correct in this sentiment. The problem, of course, is how to define, measure and calibrate 'risk' in such a broad context.
Particularly when so much of the time, 'risk' can morph from, say, instrument to counterparty risk in the blink of an eye.
We're a long, long way from being able to rely on risk measurement on the panacea to solve our financial market problems.
In his piece, Calomiris contends,
"As for the evils of deregulation, exactly which measures are they referring to? Financial deregulation for the past three decades consisted of the removal of deposit interest-rate ceilings, the relaxation of branching powers, and allowing commercial banks to enter underwriting and insurance and other financial activities. Wasn't the ability for commercial and investment banks to merge (the result of the 1999 Gramm-Leach-Bliley Act, which repealed part of the 1933 Glass-Steagall Act) a major stabilizer to the financial system this past year? Indeed, it allowed Bear Stearns and Merrill Lynch to be acquired by J.P. Morgan Chase and Bank of America, and allowed Goldman Sachs and Morgan Stanley to convert to bank holding companies to help shore up their positions during the mid-September bear runs on their stocks."
I disagree. Calomiris' retroactive judgment of the repeal of Glass-Steagall suggests that, even if it was a mistake, its absence let the mess which developed in its absence be cleaned up in a manner which would not have been quite so neat without its absence.
Sound like circular reasoning to you? Me, too.
No, as I wrote here in March of this year, the true effects of Glass-Steagall's repeal were slower to observe. But Gerry Weiss, my boss and one-time SVP and Chief Planning Officer of Chase Manhattan Bank for David Rockefeller, noted this in the 1980s. As I wrote in that post,
"My long-ago mentor at Chase Manhattan Bank, then-SVP of Corporate Planning & Development, Gerry Weiss, was fond of saying, when asked about working to remove Glass-Steagall, something like,
'Are you kidding? We'll just find some new ways to lose a lot of money on badly risk-managed positions. Not to mention that, being commercial bankers, once we get into these businesses- M&A, underwriting, equity trading- we'll cut prices to gain share and ruin the business' profitability for all concerned.'
Judging by the behavior of Citigroup and BofA in last summer's CDO, SIV and other fixed income messes, I'd say he was right on the money, as it were, as usual.
Commercial banks appear to be no better off in terms of profitability, risk management or total return after the repeal of Glass-Steagall."
It was this effect of the repeal of Glass-Steagall on the commercial banks, not the investment banks, which began the slide into our current mess.
In fact, to illustrate that investment and commercial banks were misbehaving, and losing money, with respect to mortgages long before our current financial crisis, consider what happened with Norwest Bank's large mortgage business, in conjunction with Salomon Brothers, back in the 1980s.
Norwest ran a huge mortgage lending and securitization pipeline, or 'conduit.' The latter was known as "RFC," for Residential Funding Corporation. Norwest owned RFC, but Salomon distributed the resulting securities because, at the time, it was illegal for Norwest to do the securities underwriting itself.
As such, Salomon enjoyed a sweet margin on the securitization, with no asset risk on the pipeline. But it was largely understood throughout the industry that RFC was structured and operated with guidance from Salomon.
At some point, RFC mishedged its enormous inventory of mortgages, and doubled up on an interest rate bet, rather than hedged it. Subsequent losses sank Norwest as an independent bank, while Salomon managed to scoop up RFC for a pittance.
Calomiris goes on to contend,
"Even more to the point, subprime lending, securitization and dealing in swaps were all activities that banks and other financial institutions have had the ability to engage in all along. There is no connection between any of these and deregulation. On the contrary, it was the ever-growing Basel Committee rules for measuring bank risk and allocating capital to absorb that risk (just try reading the Basel standards if you don't believe me) that failed miserably. The Basel rules outsourced the measurement of risk to ratings agencies or to the modelers within the banks themselves. Incentives were not properly aligned, as those that measured risk profited from underestimating it and earned large fees for doing so."
Once again, I disagree with his contention regarding the effect of deregulation on various activities.
Why do you suppose, prior to the repeal of Glass-Steagall, no investment banks engaged in buying and operating mortgage underwriting banks? Or creating large, highly-leveraged mutual funds investing in mortgage-backed securities?
Again, I point to Weiss' prescience on the consequences of removing that regulatory barrier. The subsequent thinning of investment bank profit margins led to these non-deposit funded companies boosting leverage to previously-unheard-of levels, in an attempt to maintain profit margins and growth.
Ironically, the lenders of this highly-leveraged money were.....commercial bank broker-dealer desks!
So Calomiris is wrong to suggest that all of what has transpired since the repeal could or would have happened anyway.
Structurally, investment banks could always do what commercial banks did, except for having access to the Fed window and offering DDA accounts. The repeal of Glass-Steagall drove the weaker-capitalized players, i.e., investment banks, to take more risks.
Calomiris ends with the contention,
"The single most important reform that is needed is the restoration of discipline in the measurement of risk within the banking system."
He's probably correct in this sentiment. The problem, of course, is how to define, measure and calibrate 'risk' in such a broad context.
Particularly when so much of the time, 'risk' can morph from, say, instrument to counterparty risk in the blink of an eye.
We're a long, long way from being able to rely on risk measurement on the panacea to solve our financial market problems.
Anna Schwartz' Thoughts On The Current Financial Crisis
The weekend Wall Street Journal carried two interesting editorials regarding economics and banking.
The first was a thought-provoking interview with Anna Schwartz, co-author of "A Monetary History of the United States," with the late Milton Friedman.
In the half-page piece, Schwartz, now 92 years old, maintained that current Fed chairman Bernanke is 'fighting the last war,' against illiquidity, when today's problem is counterparty risk and market valuation uncertainty.
What's troubling to me is these passages,
"Ms. Schwartz won't say so, but this is the dirty little secret that led Secretary Paulson to shift from buying bank assets to recapitalizing them directly, as the Treasury did this week. But in doing so, he's shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down."
Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."
Instead, we've been hearing for most of the past year about "systemic risk" -- the notion that allowing one firm to fail will cause a cascade that will take down otherwise healthy companies in its wake.
Ms. Schwartz doesn't buy it. "It's very easy when you're a market participant," she notes with a smile, "to claim that you shouldn't shut down a firm that's in really bad straits because everybody else who has lent to it will be injured. Well, if they lent to a firm that they knew was pretty rocky, that's their responsibility. And if they have to be denied repayment of their loans, well, they wished it on themselves. The [government] doesn't have to save them, just as it didn't save the stockholders and the employees of Bear Stearns. Why should they be worried about the creditors? Creditors are no more worthy of being rescued than ordinary people, who are really innocent of what's been going on."
It takes real guts to let a large, powerful institution go down. But the alternative -- the current credit freeze -- is worse, Ms. Schwartz argues.
"I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc -- you'll do this today but you'll do something different tomorrow. And the market respects people in supervisory positions who seem to be on top of what's going on. So I think if you're tough about firms that have invested unwisely, the market won't blame you. They'll say, 'Well, yeah, it's your fault. You did this. Nobody else told you to do it. Why should we be saving you at this point if you're stuck with assets you can't sell and liabilities you can't pay off?'" But when the authorities finally got around to letting Lehman Brothers fail, it had saved so many others already that the markets didn't know how to react. Instead of looking principled, the authorities looked erratic and inconstant."
Ms. Schwartz provides a clear counterpoint to the effective message given to investors and banking executives in the past year. That is, rather than consistent, understandable, principled action, Bernanke, Paulson & Bair have seemingly lurched from crisis to crisis.
Viewing the past 15 months in the financial markets from Schwartz's perspective, we should have seen, beginning with the failure of the two Bear Stearns highly-leveraged mutual funds, a concerted, consistent philosophy in action by the Fed, Treasury, FDIC and SEC.
If that philosophy were to let imprudent institutions fail, and this were clearly articulated in advance, maybe counterparty would have remained at levels of early last year. Or, maybe the explicit promise to let institutions fail would have sparked the recent credit freeze-up 15 months ago.
While I personally share Ms. Schwartz's belief that moral hazard has to remain a credible force in financial markets, our current, consolidated banking sector, with its 3-4 super-sized institutions, might not sustain a strict expression of her preferred philosophy.
I do believe, however, that, back in July of last year, the modification- and I stress that word, rather than 'suspension'- of 'mark-to-market' valuation rules would have avoided at least $150B of asset evaporation among securities which were not all non-performing.
But that wasn't done. And Ms. Schwartz's conjecture about Paulson not realizing that buying distressed CDOs at market values would destroy bank capital is truly frightening. Surely this was not a mystery. I even wrote about it in this post, nearly a month ago.
The interview ends with this passage,
"But perhaps this is actually Mr. Bernanke's biggest problem. Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. "I don't see that they've achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job." "
It leaves me thinking that Schwartz is right, even if we don't know precisely how her recommendations would have had an impact on the financial markets.
If mark-to-market were modified, but regulators warned of forced closures of insolvent institutions, would this not have provided for the avoidance of needless destruction of value in performing, but untradeable, securities, while also providing a less-capricious process for treating troubled institutions?
Perhaps there would have been a quicker consolidation of overly-leveraged investment banks with commercial banks, while weaker commercial banks would have merged before the regulators closed them.
As Schwartz theorizes, the remaining fewer, stronger institutions might have resulted in the avoidance of a credit freeze, as only healthy institutions remained, with performing assets so valued.
Further, her approach would have required no draconian actions last summer or fall, when the lack of drastic market behaviors would have failed to support a public understanding of a need for radical action.
On this basis, her judgment of the Fed's performance might, indeed, be correct.
The first was a thought-provoking interview with Anna Schwartz, co-author of "A Monetary History of the United States," with the late Milton Friedman.
In the half-page piece, Schwartz, now 92 years old, maintained that current Fed chairman Bernanke is 'fighting the last war,' against illiquidity, when today's problem is counterparty risk and market valuation uncertainty.
What's troubling to me is these passages,
"Ms. Schwartz won't say so, but this is the dirty little secret that led Secretary Paulson to shift from buying bank assets to recapitalizing them directly, as the Treasury did this week. But in doing so, he's shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down."
Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."
Instead, we've been hearing for most of the past year about "systemic risk" -- the notion that allowing one firm to fail will cause a cascade that will take down otherwise healthy companies in its wake.
Ms. Schwartz doesn't buy it. "It's very easy when you're a market participant," she notes with a smile, "to claim that you shouldn't shut down a firm that's in really bad straits because everybody else who has lent to it will be injured. Well, if they lent to a firm that they knew was pretty rocky, that's their responsibility. And if they have to be denied repayment of their loans, well, they wished it on themselves. The [government] doesn't have to save them, just as it didn't save the stockholders and the employees of Bear Stearns. Why should they be worried about the creditors? Creditors are no more worthy of being rescued than ordinary people, who are really innocent of what's been going on."
It takes real guts to let a large, powerful institution go down. But the alternative -- the current credit freeze -- is worse, Ms. Schwartz argues.
"I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc -- you'll do this today but you'll do something different tomorrow. And the market respects people in supervisory positions who seem to be on top of what's going on. So I think if you're tough about firms that have invested unwisely, the market won't blame you. They'll say, 'Well, yeah, it's your fault. You did this. Nobody else told you to do it. Why should we be saving you at this point if you're stuck with assets you can't sell and liabilities you can't pay off?'" But when the authorities finally got around to letting Lehman Brothers fail, it had saved so many others already that the markets didn't know how to react. Instead of looking principled, the authorities looked erratic and inconstant."
Ms. Schwartz provides a clear counterpoint to the effective message given to investors and banking executives in the past year. That is, rather than consistent, understandable, principled action, Bernanke, Paulson & Bair have seemingly lurched from crisis to crisis.
Viewing the past 15 months in the financial markets from Schwartz's perspective, we should have seen, beginning with the failure of the two Bear Stearns highly-leveraged mutual funds, a concerted, consistent philosophy in action by the Fed, Treasury, FDIC and SEC.
If that philosophy were to let imprudent institutions fail, and this were clearly articulated in advance, maybe counterparty would have remained at levels of early last year. Or, maybe the explicit promise to let institutions fail would have sparked the recent credit freeze-up 15 months ago.
While I personally share Ms. Schwartz's belief that moral hazard has to remain a credible force in financial markets, our current, consolidated banking sector, with its 3-4 super-sized institutions, might not sustain a strict expression of her preferred philosophy.
I do believe, however, that, back in July of last year, the modification- and I stress that word, rather than 'suspension'- of 'mark-to-market' valuation rules would have avoided at least $150B of asset evaporation among securities which were not all non-performing.
But that wasn't done. And Ms. Schwartz's conjecture about Paulson not realizing that buying distressed CDOs at market values would destroy bank capital is truly frightening. Surely this was not a mystery. I even wrote about it in this post, nearly a month ago.
The interview ends with this passage,
"But perhaps this is actually Mr. Bernanke's biggest problem. Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. "I don't see that they've achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job." "
It leaves me thinking that Schwartz is right, even if we don't know precisely how her recommendations would have had an impact on the financial markets.
If mark-to-market were modified, but regulators warned of forced closures of insolvent institutions, would this not have provided for the avoidance of needless destruction of value in performing, but untradeable, securities, while also providing a less-capricious process for treating troubled institutions?
Perhaps there would have been a quicker consolidation of overly-leveraged investment banks with commercial banks, while weaker commercial banks would have merged before the regulators closed them.
As Schwartz theorizes, the remaining fewer, stronger institutions might have resulted in the avoidance of a credit freeze, as only healthy institutions remained, with performing assets so valued.
Further, her approach would have required no draconian actions last summer or fall, when the lack of drastic market behaviors would have failed to support a public understanding of a need for radical action.
On this basis, her judgment of the Fed's performance might, indeed, be correct.
Sunday, October 19, 2008
Immelt's GE Continues To Struggle
Having recently talked with some friends who read this blog, I am now aware that there are readers who consider some of my posts to be 'rants.' Such as this recent one about Jamie Dimon's wrong-headedness regarding the current, strict application of a narrowly-specified 'mark-to-market' accounting rule.
It's safe to say that my attitude toward CEOs and other grandees tends to be, well, sceptical.
Perhaps because I've met enough of them in my career to know that the bulk of them did not rise due to merit. Or maybe it was due to my boss at Chase Manhattan Bank, Gerry Weiss, making sure that colleagues of mine, and I, had lots of exposure to senior bank executives, the better to learn just how mediocre most of them were.
In any case, I'm not especially reverent to just anyone who heads a large company, but a CEO who can consistently outperform the market's total return usually gets positive remarks from me. In contrast, a CEO who can't usually gets negative remarks.
Thus, I'm not particularly impressed with the current CEOs of Chase or Citigroup. Both Dimon and Pandit seem to have lucked into their positions, rather than earned them via long and consistently superior management of some other business or company. Neither is the sort of CEO I'd prefer to be at the helm of one of the largest US commercial banks during this time of extreme stress in that sector.
Today, I touch, again, upon a similar, frequent topic on my blog: GE's hapless, inept CEO, Jeff Immelt.
This time, following on my last post about him and his company less than a month ago, once again, GE's financial business exposure has cost its shareholders plenty.
As I wrote last month,
"Suffice to say, though, that if GE didn't have its huge financial unit, it would not have experienced such a severe recent decline in its stock price and, its total return."
Sadly, judging by the nearby, 5-day price chart for GE and the S&P500 Index, it's true all over again.
In only five days, GE's stock price dropped almost 10%, while the index held steady. It seems that continuing troubles in the financial services sector have exposed all of GE, due to its needlessly-diversified structure, directly to the consequences of the current credit market woes.
Looking at the last 12 months of price performance, as depicted by the second chart, GE has lost about half of its value, while the S&P managed to drop by a lesser amount, 40%.
As I've written frequently in prior posts, if Immelt had broken up GE sometime during his futile, value-destroying 6+ year reign, most of GE's businesses would not have been tarred so heavily with the financial sector brush.
Good job, Jeff.
Once again, your stodgy, 'play it safe' mentality has seriously hurt your shareholders.
How much more of this will it take before GE shareholders push the company's board to oust this underperforming CEO?
It's safe to say that my attitude toward CEOs and other grandees tends to be, well, sceptical.
Perhaps because I've met enough of them in my career to know that the bulk of them did not rise due to merit. Or maybe it was due to my boss at Chase Manhattan Bank, Gerry Weiss, making sure that colleagues of mine, and I, had lots of exposure to senior bank executives, the better to learn just how mediocre most of them were.
In any case, I'm not especially reverent to just anyone who heads a large company, but a CEO who can consistently outperform the market's total return usually gets positive remarks from me. In contrast, a CEO who can't usually gets negative remarks.
Thus, I'm not particularly impressed with the current CEOs of Chase or Citigroup. Both Dimon and Pandit seem to have lucked into their positions, rather than earned them via long and consistently superior management of some other business or company. Neither is the sort of CEO I'd prefer to be at the helm of one of the largest US commercial banks during this time of extreme stress in that sector.
Today, I touch, again, upon a similar, frequent topic on my blog: GE's hapless, inept CEO, Jeff Immelt.
This time, following on my last post about him and his company less than a month ago, once again, GE's financial business exposure has cost its shareholders plenty.
As I wrote last month,
"Suffice to say, though, that if GE didn't have its huge financial unit, it would not have experienced such a severe recent decline in its stock price and, its total return."
Sadly, judging by the nearby, 5-day price chart for GE and the S&P500 Index, it's true all over again.
In only five days, GE's stock price dropped almost 10%, while the index held steady. It seems that continuing troubles in the financial services sector have exposed all of GE, due to its needlessly-diversified structure, directly to the consequences of the current credit market woes.
As I've written frequently in prior posts, if Immelt had broken up GE sometime during his futile, value-destroying 6+ year reign, most of GE's businesses would not have been tarred so heavily with the financial sector brush.
Good job, Jeff.
Once again, your stodgy, 'play it safe' mentality has seriously hurt your shareholders.
How much more of this will it take before GE shareholders push the company's board to oust this underperforming CEO?
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