Published CommPRO.biz 2014.04.30

Sticky Arena Floor Ethics

 

The Staples Center in Los Angeles may be different from other arenas, but in most such sports palaces the floor is usually a little sticky, scummy if you will. It’s that kind of feeling that this whole Donald Sterling mess leaves us with. Ethically it is so far out of bounds that it’s out of sight. Sterling is still the owner of the LA Clippers, but he has been sent to the woodshed, the door has been slammed and he doesn’t even have a knothole to peek out at his club.

The brand new NBA Commissioner Adam Silver took swift action banning the long time Clipper’s owner from anything to do with his basketball franchise or anything else connected to the NBA, “forever.” And he slapped him with the maximum fine under NBA rules $2.5 million; pocket change for Sterling.

It’s not that Sterling hasn’t been in a woodshed before. He has a history as a bad boy who has managed to buy his way out of one mess after another. When you are a billionaire you can do that sort of thing. In Sterling’s case everything about him and his fortune leaves the bottom of your shoes sticky. He is a lawyer who started out in the Barracuda Bar, suing for a big share of the settlements. But that wasn’t enough. He moved into the landlord business, and that’s how he got into the “Ten Digit Club” – a billion dollars is a thousand million dollars.

Sterling has never been convicted of serious wrongdoing. However, he is certainly not the kind of landlord most of us would choose. He has been hauled into court for refusing to rent to minorities, blacks and Hispanics. All of these actions were settled before the court imposed a penalty; one even eclipsed the NBA fine a discrimination suit that settled for $2.765-million dollars; still pocket change.

Reckless, would describe a lot of Donald Sterling’s public life. His parading the women money buys for him in public. He seems to have left his moral compass in pieces somewhere along the road. You wonder how someone can fall to this level. Surprisingly it is easy. We have no idea how Donald Sterling lost his way. But those who wander from the life most of the rest of us strive to maintain have no intention of ending up like the sticky scum on an arena floor.

It begins easily enough; it’s just a little thing. Any number of emotions can trigger it: fear, jealousy, envy; the emotions we all feel and on occasion have allowed to turn our heads. It’s those who can’t turn back who are in danger of following a path that ends up in the rejection and degradation that Donald Sterling has on his head. It’s our guess that Sterling is so far down that path that he doesn’t care. Be sure that you don’t let that easy first step off the path lead you to a place you never intended to find yourself. 

Published CommPro.biz 2014.04.29

Ethics, Easy, Right? Wrong!!

Nothing to it, ethics is simple. All you have to do, is do “The Right Thing.” The problem comes when “The Right Thing” is not all that simple. It isn’t easy to speak up when your job is on the line. It isn’t even easy to speak up when a friend drops an inappropriate “F-Bomb” or worse makes an always inappropriate racist joke. A lot has to do with personality. Some are gifted with the ability to speak up in such situations. Others, who would never behave unethically, are just not able to speak out against unethical behavior. Some don’t want to alienate anyone.

And while the day-to-day situations we face are important, there are other cases where we must act; especially in the workplace. We have to act if a fellow worker is taking shortcuts that could endanger others, or just not providing service at the level promised. We have to act when we know the company is cooking the books as they did at Enron, or in the Libor scandal. When millions are being ripped off as they were when Enron manipulated energy costs. Even worse, hundreds of millions were hurt when a handful of traders manipulated Libor, impacting every entity and every person paying interest in every corner of the globe.

Some of these examples are illegal, others are unethical. Too often people fail to understand that the ethical line is drawn far from the legal line. Compliance and ethics get mashed together; corporate responsibility for ethics is given to legal counsel. Bad move, attorneys are trained to stay inside legal bounds. Some companies never learn. Hewlett Packard hired another lawyer to oversee ethics replacing Kevin Hunsaker, a lawyer who narrowly escaped jail time when he advised that a witch hunt for a Board of Directors leak was legal. It wasn’t legal and it was miles from ethical. If Hunsaker had based his advice on ethics, it would have saved all those involved worlds of trouble.

High speed trading, the practice of literally manipulating the stock markets could not be more unethical. Its practitioners dart in and out in milliseconds seeking those about to buy a stock, beating them to it and jacking up the price the buyer ultimately pays. Grandma’s pension fund and others lose. These buccaneers of our capital seas cry out that what they do is legal. At the moment so it is, however, it is far from ethical.

It is not always easy to see the ethical line and sometimes it is not easy to hew to that line. It takes practice and sometimes courage. It takes a willingness to risk everything from the loss of a friend to the loss of a career. You will likely find other friends, but you may not find another job. However, if you remain silent to keep a job, you will forever wish you had spoken out. And that job will grow heavy and seem sour every day when you cross over the threshold to your workplace.

 Published CommPro.biz 2014.04.24

Another Wall Street Scam

Do you remember way back in the 1990s and early 2000s, when the monster banks came up with new investment deals that bundled mortgages together, stamped AAA by compliant rating agencies and sold to the suckers, remember? Then remember what happened next? It turned out that the bundles were really a bunch of crappy AAA. The banks had tricked unsophisticated wannabe home buyers into signing mortgages they couldn’t afford.

We’re sure you remember what happened next; the world economy collapsed. In America we bailed out the monster banks to avoid a depression. But, we neglected to put conditions on the bailouts. So the big banks went right back to gambling with our money instead of helping small businesses where the jobs are created. The fat-cat banks and their bonus hungry executives are fine, while folks who lost their jobs and the rest of us are still suffering.

Nothing like that could happen these days because we’ve made it so hard to get a mortgage that even people who can afford to buy a home have a tough time. The monster banks are doing great with the interest free bucks the Fed has been feeding them, but the number of high-stakes gambling deals –oops when banks gamble the law of the land calls it “investing”– is so limited. They got into commodities, speculating on nearly everything we use. Who cares if they were raising the prices we pay at the pump or the grocery check out? But there wasn’t enough quick and easy money. They are working their way out of that game.

What now to roll the dice on? Enter the private equity folks. Guess what they’ve been doing? They’ve been buying up hundreds of thousands of those homes that ended up on the market dirt cheap after the crash. They are renting them, often to the same people who lost them to foreclosure. But the hefty rents they are collecting are not enough, and too many of the houses are empty. What to do?

So they got together with their buddies in the monster banks and came up with a new investment vehicle, Rental Backed Securities (RBS). Same as the mortgage deals but this time rental deals. Just how long will it be before the empty houses they can’t rent fill up with people who can’t afford them? However, the package of homes in the RBS will look good; every home rented.

After the RBS packages have been sold to the suckers, how long will it be before the renters fall behind in their rent and the whole house of cards collapses? If this sounds familiar, it is.  It’s the whole 2007-2008 nightmare all over again. The crappy toxic investment packages collapse, we have to bailout the banks again, they come out great and we suffer. Congress? Not a chance they are too deep in campaign contributions from the banks. We’ll be out in the cold, again.  

Published CommPro.biz 2014.04.08

Too Big To Manage, Not Too Big To Fail

In an effort to forestall another “Too Big Too Fail” recession, our Federal Reserve established the so-called Stress-Tests. The Fed looks at a number of aspects of a bank’s operations and determines its potential to go belly-up, requiring another taxpayer bailout, even triggering another recession. Frankly, none of the monster banks are stable. They engage in what would be illegal gambling except for the exemption the Congress gave them to label risky behavior as “Investments.” The eight largest banks have all been told to beef up; to add close to $70 billion in fresh capital.

The latest stress-test dealt a blow to Citicorp. The sprawling giant failed for the second time in two years. The last stress-test failure in 2012 led to a change in leadership, unseating the CEO. This is the second blow Citi has suffered in recent months; in February its Mexican operation was hit with a $400 million fraud. Basically the Fed found that Citi is out of control, not just too big to fail, but too big to manage. It’s clearly time to break up Citi’s operations; it’s time for Citi to become a bank again.

It’s obviously time for all the monster banks to break up their uncontrollable global operations. They’re all clearly too big to manage. When banks count their Vice Presidents by the tens of thousands, that alone should indicate that the same conditions that led to the breakup of the monster banks of the day in the 1930s are in place again today.  It’s also apparent that these behemoths serve no real purpose in our society.

Quite the opposite, the monster banks disrupt the banking sector. Aside from the role they play in manipulating interest rates and other hanky-panky, they make it more than difficult for our community banks. Take credit cards for instance. With the revenue from their legalized gambling operations, they can make offers that a legitimate community bank cannot match. They suck off the checking and savings accounts as well.

But unlike the community banks they don’t use the funds harvested from these sources to provide small business loans. They pour this cash into risky gambling ventures with no social benefit. That leaves the small businesses that create most of the new jobs in our economy starved for operating cash and our economy the worse for it. In addition to Citi, the Fed failed three international banks with operations in the United States including British giant HSBC which our Justice Department considered too big to jail when they were exposed as facilitating international criminal enterprises.

There are a host of reasons why the monster banks should become a thing of the past. Problem is they pour cash into the pockets of our legislators and thwart any effort to restrict or control them. Arrogant CEOs like Chase über kommandant Jamie Dimon strut and lecture our Congressional leaders, flashing cuff links with the Presidential Seal. Those sent to take care of the people’s business are instead increasingly beholden to those with the cash to dictate to them, among others the monster banks.

 
"Am I wrong?"--"Am I crazy?"

"What do you think?"

"Do you agree?"

 Published CommPro.biz 2014.04.08

GM Too Blind To See

Mary Barra’s “Woman’s Touch” 

may be just what General Motors needs 

Eleven weeks to the day after she stepped into the CEO slot at General Motors, Mary Barra was undergoing a second day of grilling on Capitol Hill. In full attack mode the members of a Senate Committee seemed determined to outdo a House Committee that had at her the day before. Over and over again they demanded an answer to the question that so often dominates these situations, “What did you and your people know and when did you know it?”

Unlike many under that kind of fire, Ms. Barra remained calm and collected; in most cases responding that she wants all the answers to that question more than anyone. So far as how the facts about the sure-to-fail-ignition-switches could be widely known in the company and not to those up in Carpet Land, she pointed to GM’s “Silo Culture” with lousy communications from group to group. We would add that in the late 2000s GM was collapsing into bankruptcy. Nobody wanted to add the “last straw” –another dime to their costs– even an inexpensive fix seemed to loom large.

None of this excuses what happened. But it perhaps explains what kept people in the know from sounding the alarm. Ms. Barra apologized again and again. She promised to get the answers. She promised to compensate the victims, even though under the terms of its bankruptcy GM might not be legally responsible. It would be hard to imagine a more contrite and responsible corporate leader. On the other hand the government bureaucrats who should have set off alarms were throwing up their hands claiming ignorance. Time will tell, but their story seems a lot harder to swallow.

GM had already made some moves in line with Ms. Barra’s declarations to “Do the right thing.” They’ve hired Washington attorney Kenneth Feinberg to figure out how to take care of those harmed by GM’s inaction. He administered the September 11^th victims’ funds. BP hired him to sort out the complex financial issues surrounding their Gulf Oil disaster. He is also administering the Boston Marathon funds. Ms. Barra has brought in über attorney Anton Valukas, to head up GM’s internal investigation on how this could have happened. He led the investigation into the Lehman Brothers collapse, the first shoe to fall in the 2008 financial disaster.

So far Mary Barra is on the proper path. We hope she digs out how this tragic series of events occurred. And who ducked when they should have set off alarm bells. There were GM people who knew that innocent people were dying because they were afraid to do the right thing. Ms. Barra needs to find out who failed and who pushed them to put costs first. She needs to clean house. Should she reach that goal, she will set the bar into the rest of this century and beyond for executives in every sector in our economy. May ethics be the wind under her wings.

"Am I wrong?"--"Am I crazy?"

"What do you think?"--"Do you agree?"

Published CommPro.biz 2014.04.01

High-Speed Trading 

Too Fast To Lose

Let's trim the Buccaneer's sails

 

Financial whiz turned best-selling author Michael Lewis, explains in The Big Short how greed-driven monster banks ran the world economy over the cliff. Why not? They knew that if anything went wrong they had nothing to worry about; they were “Too Big To Fail.” In his new book Flash Boys Lewis explains how high-speed traders make suckers out of large and small investors, rigging the markets in a we-win-you-lose game.

Sunday night (2014.03.30) on CBS 60 Minutes, Lewis explained how these buccaneers of the financial seas fly in and out of the markets in milliseconds, picking up pennies on zillions of trades. By purchasing advance information, they know where you’re headed and are able to buy target stocks split seconds before you do. By the time investors –the funds where your 401K resides, or the pension fund caring for grandma’s life savings– get to the market, the high-speed traders have jacked up the price, sold to the suckers and made off with their plunder.

The 60 Minutes Lewis interview follows tight on the heels of New York State Attorney General Eric Schneiderman’s launch of an investigation into the data sources high-speed traders lay big bucks on to get this jump on investors. Traders are just that, traders with no interest in supporting the markets. Currently all this is legal; it’s what drives the number of daily trades into rarified atmosphere. However, it has nothing to do with the purpose of the markets. In fact high-speed traders serve no social purpose whatsoever. They will tell you that they have reduced the cost of trades. While that is true, any savings long-term investors see are lost to the increased stock prices they pay. High-speed trading is miles beyond unethical and amoral.

The big exchanges, NYSE and Nasdaq, profit mightily; the latter reported tens of millions from selling data last year. That doesn’t include the rent they pocketed for allowing the high-speed traders to locate their computer servers side-by-side with exchange servers giving them another edge. What’s even worse, these high-speed buccaneers play the markets virtually risk free. One firm bragged that they have seen but a single day in the last five years when they lost money. They are literally “Too Fast To Lose.”

Lewis and Schneiderman are shining a light on these slime bags. Now it’s time for the Congress to act. There is a simple way to return the markets to their purpose, “The provision of capital for our economy.” Adjust our tax structure to collect 99% of profits on property held for less than an hour. And 90% on property held less than a week, 80% less than six months, 70% less than a year, 25% less than five years, 15% less than 25 years, and tax free on any property held over 25 years. That would fit in nicely with Warren Buffett’s declaration that “never” is the best time to sell a stock.

It would be good for capitalism; it would be good for Americans, for all of us.

"Am I wrong?"-"Am I crazy?"

"Do you agree?"-"What's your view?"