Noah denkt™  -
    Project for Philosophical Evaluations of the Economy
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Markopolos, RBS and others
Bullet Points on this week's parliamentary finance hearings, published on Feb. 14, 2009
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  • C-Span’s welcome re-run of the US House Finance Committee Hearing on the Madoff scandal (held on
    Feb. 4 and broadcast again on Feb. 8) has inspired Noah denkt™ to make the following comment: As
    tempting as it is to side with the dramatic anti-SEC allegations of Mr. Markopolos, it is only prudent to wait
    until the report of the SEC’s Inspector General has been published, before reaching a final verdict on the
    agency’s effectiveness. After all, there is still a possibility of criminal negligence and corruption on the part
    of some SEC employees. And so it may ultimately turn out to be exaggerated to blame the SEC in such a
    wholesale manner as Mr. Markopolos has done it.

  • The RBS/HBOS Hearing of the British Select Finance Committee (Feb. 10) has made it painstakingly clear
    that very good management distinguishes itself from simply good management by acting on a sense of
    caution and reserve that at the time is not necessarily supported by hard data. As a matter of fact, it is
    quite credible when RBS’ ex-CEO Sir Fred Goodwin points out that judging from the available book-keeping
    figures at the time, Royal Bank of Scotland had nothing to fear from the markets even as late as when
    BearStearns collapsed. The problem however is that a very good management should have had an uneasy
    feeling about the development of the world economy long before that. And not only should it have had this
    skepticism, but it should also have decisively acted upon it. That such undoubtedly brilliant minds as Sir
    Fred Goodwin and Sir Tom McKillop (RBS-Chairman at the time) failed to read the signs on the wall
    correctly though may have something to do with the fact, that their judgment was clouded by a lack of
    institutional independence. After all, it is much harder to get the big picture right, if you are part of it. In this
    respect, no one should underestimate the subversive effect that a recognized membership in a community
    has on that community’s members to adequately question the mainstream thinking that is prevalent at the
    time in this very community. In deed, Noah denkt™ can easily conceive that it may have been due to that
    this rather inevitable insider mission blindness that the SEC did not manage to uncover the Madoff fraud,
    but that it took an independent outsider, like Harry Markopolos, to do just that.

  • The almost 400 point drop of the Dow Jones Index on the day (Feb.10), that Sec. Geithner announces his
    TARP2- plan leads Noah denkt™ to draw the following conclusion: There is a reasonable argument to be
    made about the fact that Tim Geithner’s leadership does not inspire a lot of confidence. (See also our “poser”-
    bullet point from week 6 (in German)). The bad reception that his TARP2-outline has received on Wall Street
    though may also have something with the fact that a primarily Republican-orientated Wall Street is a lot less
    inclined to give the benefit of doubt to a flimsy Democrat plan than it is to pardon a half-baked Republican
    idea. (Remember in this context the one-page, short on detail TARP1-plan that then Sec. Paulson
    presented to the Hill?) In other words, it is quite amazing to see how much Wall Street’s judgment is guided
    by simple party preferences, when, only a few weeks ago, that very Wall Street kept praising the then
    Republican administration for not being ideologically boxed in at a time when, in their mind,  counter-
    intuitive Keynesian responses were required to rescue the economy.

  • On France 2’s “Mots Croisés”-program (Feb. 10), the French Budget Minister Eric Woerth dismissed a
    trade union demand for pay raises by pointing out that under present circumstances such a measure would
    unnecessarily weaken the position of  French enterprises. This leads Noah denkt™ to ask itself  whether
    the same argument cannot equally  be made about the bonus expectation, that the “best and brightest” in
    the financial sector seem to naturally hold for themselves? After all, this bonus money saps companies’
    coffers too. -  Now, obviously, the proponents of the Wall Street system claim, that contrary to union
    demands their compensation expectation is performance based and that hence their approach serves only
    to strengthen the overall employer position. A benevolent observer however might likewise argue that
    complying with the aforementioned union demands (- perhaps by including a performance-based
    component into the overall salary package- ) would only lead to a more motivated workforce and that this
    would just as well strengthen the company’s overall competitiveness.  

  • On the day, that CEOs of leading British and US banks had to report to their respective parliamentary
    finance committees, Noah denkt™ asks itself, why there has not been a similar televised hearing in the
    German parliament so far? After all, German taxpayer money has been used too to prop up national banks.
    Should it therefore not be in the first interest of German politics to bring a public transparency to the
    situation that has apparently made such government intervention necessary?

  • Question: Weren’t you surprised by Barclays better than expected Q4 results? Noah denkt™ reminds its
    readers to not forget that  Barclays PLC thus joins a list of companies that include Lufthansa, Amazon,
    Siemens, Hammerson, Coca-Cola, Marsh&McLellan.
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Conflict of Interest Statement with respect to the companies mentioned above

Q: Does Wil Leonards hold shares in any of the companies mentioned above?               
A:  No

Q: Has Wil Leonards done consulting work for any of the companies mentioned above?
A: Not really

Q: Do members of Wil Leonards' family hold shares in any of the companies mentioned above?               
A:  No

Q: Have members of Wil Leonards' family done consulting work for any of the companies mentioned above?
A: No