The Big Story – today it’s the terrible loss of life and widespread injuries in Haiti following the earthquake. For much of 2010, as in other years, there will be a number of Big Stories that briefly dominate the news and pass by as the 24/7 news cycle moves on to other stories. But one Big Story that at times dominate the news and [that] will be covered almost continuously will be about Wall Street and the rage that the American People feel towards the investment bankers, commercial bankers, brokers – everyone who did “this” to them (our neighbors), to us, to the nation.
Think of RAGE this way: At its root it is about the apparent lack of Responsibility and Accountability [effective Governance] and Ethical behavior on the part of Wall Street leadership brought the economy to the brink of financial disaster. We may have moved back from the edge of that steep cliff – some of us, anyway – but there are still 7 million plus Americans who have lost jobs; millions more are underemployed or have quit looking for a job; 3 million home mortgages have been foreclosed; small business is being starved for capital; and now, commercial real estate is following the disaster that occurred in the resident real estate market…need we go on?
And who is to blame? In the minds of many Americans, Wall Street leadership. Government regulators who took their eye off the ball are a close second. If you define the public as voters, constituents, investors, employees, borrowers, homeowners, public officials, entrepreneurs – then all have been impacted by the risky and at times reckless behavior of the leaders of the nation’s largest financial services organizations. The rising public outrage is finally being heard loud and clear in the halls of congress and in the White House. (We have been hearing in conversations with family members and friends and business associates – where is the public outrage? It’s here.)
Here are some of the reasons why Wall Street will continue to be the Big Story long into 2010:
- The Financial Crisis Inquiry Commission hearings are getting underway. The first chieftains of finance were in Washington today being questioned by members of Congress. There will be much, much more drama to come in these proceedings, which will continue out to year-end when a report is due. C-Span and the financial and news channels will have much content to share through the months of 2010.
- Once the commission’s report is out at year-end, as in the case of the September 11 Commission, we will be hearing about the findings for a long time to come. Short term, the answers to questions raised – and the long introductions to the questions by lawmakers (speeches, really) will be the stuff of The Big Story all through 2010.
- The public rage will fuel the debate about the appropriate measures needed to effectively regulate Wall Street firms, commercial banks, and other market players (like hedge funds and derivative instruments). There is comprehensive draft legislation moving through the Congress and fierce lobbying by financial firms is underway as well.
- President Obama and members of Congress are proposing special taxes on the big banks that received government funds as the crisis deepened (a number of firms have paid the funds back) – the $120 billion number of the starting point (the amount the US government is said to have lost in the rescue effort to date).
- The Big Story within this Big Story: 2010 Wall Street bonuses. Buckle your seatbelts – with big banks (those “too big to fail”, and receiving federal funds with almost no strings attached) are about to announce the bonuses paid to their leaders, and to the rank & file. The numbers will be in the tens of billions – because the banks are reporting profits once again. (Thanks to government aid, critics say – but that will be another part of The Big Story.) The President and Congress have talked up a possible 50% tax on the bonuses paid by banks that received federal funds. Wall Street firms will not understand the rage at the grassroots level as struggling families hear about multi-million dollar payouts at banks that were on the brink of failure (or so it was presented as rationale by the Bush Administration for the rushed bailout) now flush with cash for bonuses.
- There will be many lawsuits filed (in addition to those working through the system right now) against Wall Street organizations – public employees’ pension funds are among the prominent plaintiffs, aided by the state attorneys general. The crisis commission revelations are sure to fuel a number of these legal actions.
That’s a beginning list of why The Big Story of 2010 promises to be a long string of stories about what happened and why in 2007-2009. And who did what to whom.
Remember the public rage – RAGE – this is about the failure of Responsibility (to stockholders and stakeholders, as fiduciaries), Accountability (to employees, stockholders, customers, various stakeholders, and to the nation), lack of effective Governance (and oversight) by boards and executives, and un-Ethical behavior by a number of capital market players. (Some large investment bankers now stand accused of marketing Collateralized Debt Obligations to investor-customers while themselves shorting the same instruments – one more element of The Big Story coming to light as emails are surfacing).
We’ll stop here with the thought expressed by Sir Winston Churchill as events during WW II seemed to be turning in favor of the western allies in November 1942 “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” When we look back, we may see the Big Story of 2010 as the beginning of real changes in the capital markets and in financial services regulation.
Again paraphrasing the Great Orator, WC: “Never have so few done so much damage to so many in such a short period of time.” Stay Tuned to The Big Story in 2010 – underlying all, the public outrage at what and how much has been done to the many by the few.