After Enron, we all developed fetish for openness, transparency and “good governance”, but apparently that was entirely for naught. Just look where we are today! Part of the problem is that we always look backwards.
We recently heard a suggestion that in order to avoid the next crisis, we should set up a commission to examine every quant-based structured debt product that gets sold. But we feel fairly confident that the next great financial crisis — and there will be one, for sure — won’t originate out of that. It will be something totally new and unexpected.
It also turns out that those who yell the loudest about good governance had their own fires smouldering at home. Larry Ribstein runs down a partial list:
- The SEIU, a major critic of private equity shops, is getting tightly drawn into the Blagojevich scandal.
- CALPERS. The activist state pension fund got drawn into extremely risky bets, potentially passing billions onto taxpayers.
- The SEC, which spent its time pursuing Mark Cuban and figuring out how to make executive compensation clearer corporate filings, missed the biggest fraud over the last several decades (Madoff).
- Lehman. It was held up as en exemplar of open governance.
- Eliot Spitzer. Goes without saying.
You might add the New York Times itself. Its business section has been a big grenade thrower on behalf of shareholder democracy, though of course its dual class structure has been maintained even as the ship slowly sinks.
Bottom line: Anyone can yell about the perceived wrongs commited by others. But it doesn’t mean we should listen to them, just because they happen to be yelling over everyone else. And there’s no reason to think that their pet issues will represent the timebombs we need to watch out for.