Thursday, May 7, 2009


Before we get into the leadership question, we should step back and revisit the mission of regulators. Let's at least address the SEC and the Federal Reserve. According to their websites, the mission are as follows:

The mission is to protect investors; maintain fair, orderly , efficient markets; and facilitate capital formation necessary to sustain economic growth.

The central bank of the US provides the nation with a safe, flexible & stable monetary and financial system.

I think it is safe to say that both regulators and many others in countries all over the world failed to achieve their mission resulting in this global financial disaster. No need to beat this drum any more. The question is where do we go from here to correct the problems.
Leaders have a responsibility to look forward, to be able to prioritize and allocate resources, and to stay laser focused. Leaders have many demands on their time and attention. One of the important skills for a leader to possess is to properly set priorities and then stay focused to resolve the issues.

There are three articles in today's WSJ to read:
SEC Squanders a Shot at Overhaul
SEC Policing Some New Beats
Bank Stress Tests

I do not see the regulators stating their priorities and then staying focused to resolve the issues. Now don't get me wrong, many regulatory reactions are really political window dressing that often cost much more than they are worth. Think Sarbannes Oxley. But clearly we need some changes. The current bank stress tests are a good start. Even if you disagree with the process of the metrics, it is a start. But isn't that what we thought the Federal Reserve was doing all along? What are the capital requirements that have existed for many years if not to make sure the banks were adequately capitalized? What have they learned in the stress test process that should be included in the ongoing capital requirements?

Oh, and let's not forget AIG. Has anyone heard any news about the insurance regulators looking at any required improvements? The only thing I am hearing from the National Association of Insurance Commissioners (NAIC) is about testimony about national health care. Why not? They did such an outstanding job with AIG let's give them more responsibility.

Leadership. We are in desperate need of leadership everywhere in the world. Regulatory bodies are no exception. I do not want them to restrict growth as the global economy needs help not more problems but we need reform and follow through. The balance in setting the rules and the focus on follow through is critical. That takes strong leadership skills. So far, I see no leadership. Let us all hope leaders emerge.
Until next time,

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