Analysis of a Financial Crisis

The United States has been plunged in a very acute financial meltdown since the fall of 2008. Discussions on the causes have had more than their fair share of coverage in the local and international media
There seems to be some consensus around the country amongst informed observers that one of the major causes of the problem was the predatory lending practices of the past several years. During this period, the Bush Administration actively encouraged middle class Americans to own homes. Fannie Mae and Freddie Mac were encouraged to purchase huge quantities of mortgages from lenders who gave them out with little regard for the repayment prospects of the borrowers. Housing prizes soared during this period and homeowners used their homes to borrow lines of equity hoping the value of their homes would appreciate.
Then came the summer of 2007, when banks and other mortgage lenders began noticing that many people who had received loans could not make their payments. Foreclosures skyrocketed across the country and consumer spending came to a standstill.
The second part of the problem has more to do with core of the financial service companies. Because of the very light regulation of the sector and the millions of new mortgages being generated daily, they began looking for ways to make a quick buck. They created very complex investment instruments, some so complex they themselves could not control. One of such instruments is the mortgage-backed securities. These were bundled up and sold to unsuspecting investors only for them to find out years later that these securities were so complex that no one really knew how much they were worth.

Both issues combined have had two very devastating effects. First, the credit market is clogged, and banks have tightened their lending criteria. Secondly, stock prices of almost all US businesses have fallen, some as much as 90%, driving them out of business and into bankruptcy. Unemployment is at an all-time high and this period is being compared to the Great Depression era of 1929.

Because the US economy drives global business, this crisis was reverberated all over the world. Europe, Asia and South America are now experiencing similar troubles and there’s beginning to be a concerted effort to stop the downward spiral.

There are three observations I can make of the situation;
From a Managerial Accounting point of view, there seems to have been an over-emphasis on profits by all businesses so much so that they lost sight of the big picture. They failed to do strategic planning for their businesses. Instead, they became greedy and concentrated on accumulating huge profits and bonuses. This resulted in unethical behavior and other malpractices on the part of lower, middle, and upper management.
Secondly, because of this overemphasis on profits, and bonuses, the shareholders were not protected. I believe the biggest losers of this crisis are the shareholders who have seen their money disappear before their very own eyes. Companies like Lehmann Brothers, Circuit City, or Linens N’ Things just to name a few have gone bankrupt and shareholders have seen their life savings wiped out. I think this is a very serious ethical concern. Business managers should know that shareholders have trusted them with their hard-earned money and they are responsible to make sure that money produces profits. It is unacceptable that a retired person invests their entire retirement fund with a company like Lehmann brothers, only to find out in September of 2008 that the company is filling for bankruptcy and its assets are being auctioned
Finally, I think the government missed the ball on this particular crisis. The financial service companies were pretty much left to themselves in the name of free market. Everyone, including hard-line free-market proponents like Larry Kudlow of CNBC now agree that the government could have done a better job of regulating the sector. The hands-off approach has clearly brought us disaster and I hope we learn from it
The new administration seems to have gotten the message that free market capitalism doesn’t mean the government should be absent from the picture. Rather, it means the market needs strong and powerful government entities keeping watch over the activities, and safeguarding the interests of the shareholders. President Obama announced a major overhaul of the US financial services industry in the coming days. I hope the outcome of such an endeavor will be strong and relevant enough to insulate average Americans from the devastating effects of any future crisis.
In addition, I believe that the massive American Recovery and Re-investment Act recently passed by Congress and signed into Law by the President will go a long way to get the US economy back on track. The tax cuts to low income Americans and small businesses, as well as increases in federal spending should stop the monthly increase in unemployed Americans. The billions of dollars in direct aid to States should also serve as a lifeline for them to keep basic social services running until the economy recovers.
To avoid such a recession/depression/financial meltdown from happening again, we as Americans must accept our own part of the blame. We were spending more than we earned and bought things we could not afford. This should be an opportunity to reset the clock to zero and start a new journey to a different kind of American Dream where businesses do not chase profits to the detriment of the shareholders and consumers do not demand excessive dividends on investments.
The world is watching to see how we recover from this crisis and as President Obama said in his address to Congress on February 24, 2009, the world is waiting for the US to lead again and this begins with the way in which he rebound from the crisis.

Wanted: President of the United States of America

Job Description

Equal Opportunity Employer ( Applicants will be judged solely on their merits, not Planet or Universe of Origin)
Primary duties will include (but not limited to)

• Fix an Economic Depression, greater than the Great Depression of 1929 (!*!*)


• Balance the budget from a current deficit of 1.2 Trillion (1.2 000 000 000 000)


• Pay off the National Debt which stands at 10.6 Trillion (10.6 000 000 000 000)


• Cut the cost of Healthcare ( 2 Trillion spent in 2006) Highest amount of money spent on healthcare worldwide but ranked only 37th in terms of quality and service


• Get America off dependence on foreign oil and fossil fuels


• Develop renewable forms of energy


• Actively combat global warming


• Rebuild America's Infrastructure Network


• Find a lasting resolution to the Israelo-Palestinian conflict


• Contain the nuclear ambitions of hostile Countries (Iran, North Korea and Venezuela)
  
• Stabilize the Middle East

Interested applicants should forward their resumes and salary requirements (not to exceed $500,000) to weareintrouble@pleasesaveus.com

Wilson, Stop Feeling sorry for Mr Obama

For the past couple of months, over 500,000 jobs have been lost monthly in the US. Guess what happens when 2.6 million people are out of work within 4 or 5 months....less taxes paid to Cities, and States, more money paid out in unemployment benefits, ( only last week it was reported on CNN that because of the large volume of people trying to file for unemployment benefits, the computer system of the organization crashed...). and the vicious cycle rolls on and on culminating in huge budget deficits for eveyone involved.

So as we prepare to witness the inauguration of "44", I sometimes find myself feeling sorry for the guy. This is definitely not the job Mr Obama set out to get back in February 2007 in Springfield, IL when he informed the country of his intention to run for the Presidency. Come on, who wouldn't cringe at the sheer enormity of the tasks at hand.

And the unemployement problems is just one of the hot issues on his White House menu. There's the Financial Crisis which has turned into a modern day "Deep Sea" where you keep throwing money in with the hope that some day, by some stroke of magic or Divine intervention, the sea will fill up.....

Then there's the insanely high cost of healthcare here in the USA. Coming from an entirely different culture, I am always awed by how the system works. The costs of simple procedures quickly run up for no apparent reason (alright, the hospital facilities are top of the line, but must they be?).. In my native land of Cameroon (West Africa), about 40% of the healthcare system is State-run with the rest being handled by private groups and religious organizations for the most part. In my opinion, they accomplish quite alot with very little. This is America, I would have expected that to happen here of all places...efficiency! anyone?

Therefore something significant has to be done about this especially given the very high life expectancy here in the US or no administration will ever be able to balance any budget , I mean ever.

This is why I don't expect Mr Obama to do anything significant about it in his first term, but I hope he keeps it in the back of his mind as he tries to jumspart the economy because the price might just be too high to pay if another White House administration overloooks the issue YET AGAIN

But again, I don't think our 44th president should get any sympathy from anyone. Who has forgotten how vigorouly he campaigned for the job (an how strongly I supported and volunteered for him...) .

I was almost going to forget mentioning maybe the hardest battle Mr Obama wil have to fight day in day out; with opposition so strong and powerful, it might undermine all his good intentions and judgement; The Congress, yes the US Congress will play the most significant role in how quickly and how effective the country can be turned around. I'll leave a discussion on the role of Congress for another day

So much for Bail Out Nation

The buzz word these days is "Bailout". Everything starts or ends with it. It is one of those words thats gets into your vocabulary never to depart.I'm sure the White House and Congress would love to have it confined to encyclopedias and dictionaries given the amount of money it's use is costing. Come to think of it, almost 2 trillion dollars have been spent since September 20008 under the umbrella of some kind of a bailout deal. AIG, Citi, TARP etc...
I was thinking the other day about how the government would respond if every organized industry in the US closed ranks and flew, drove, biked, walked or even paddled to Congress for their share of bail out money
My employer is a private university and I am beginning to see palpable results of the financial crisis. Students who rely for the most part on student loans to pay for tuition are finding it more and more difficult to get approved for private loans. This is a frightening prospect for private universities which don't have large endowments like mine because if their primary source of revenue-tuition dries up or is threatened to say the least, that would be it for them.

As for my two cents, I just wish to know what happened to the famous TARP program and the $700 billion. Back at the time, I or let me say the American people were made to believe that the money would be used to buy back toxic mortgages and mortgage backed securities from banks and other financial institutions so that this would un-clog the credit market which had gotten clogged with these assets. Did this ever happen, I mean were these bad securities ever bought and taken off the books of these banks? What is the value of mortgage backed securities that have been bought, which banks have benefited.....? So many questions, so few answers
Please Obama, give us some answers for a CHANGE...come January 20, 2009

My Thoughts on Leadership

The United States just emerged from the longest and most extraordinary presidential campaign in its history. Unprecedented amounts of money were raised by the candidates and millions of people who had never participated in elections became engaged and to top it all three minorities (at least in politics) a woman, a black man and a Hispanic were serious contenders for the Presidency.

And at the end of it all, the first black man was elected President with more than 53% of the popular vote. While the victory of Barack Obama can be analyzed from various prisms, it is credited in part to his promise for a different kind of politics. Throughout his campaign, he promoted the idea of being able to give America a different style of leadership, void of pettiness, partisan bickering and self interest.

Many wondered what Barack Obama meant by this when he started running over two years ago. However, from the Democratic primary campaign, then to the general election, he demonstrated some attributes that led Fred Barnes of the Weekly Standard to write in the November 3rd Issue that "Obama put together one of the most impressive campaign operations of all time. And for a rookie candidate to make so few mistakes (and no major ones)--that's quite amazing". There must have been something different about him and his style or philosophy to have made his campaign operation so successful.

This paper will present the components of my outlook on life, people and organizations. It will also talk about my overall philosophy about leadership and the things or people from which I draw inspiration

Definition:

A leadership philosophy is a set of beliefs, values and principles that influence how we interpret reality. It is the way we understand leadership, our philosophy about life, and organizations that determines how we react to people, and events around us. Steven Covey describes the context in which we are called upon to utilize this philosophy

“Between stimulus and response, there is a space. In that space is our power to choose our response. In our responses lie our growth and our freedom.” –

This quote clearly demonstrates what a leadership philosophy is supposed to do. The way in which we chose to respond as leaders to a stimulus is greatly affected by our understanding of what leadership is about. Outlined below are the values and beliefs that have and will continue to shape my thinking as well as the principles that guide my decision making.

Inspiring Values and Beliefs

Having been raised in a Christian home and culture, the Bible is a very significant source of my values and beliefs about life and about leading others. Values such as humility, compassion, honesty and love for your neighbor, usually determine how I respond to many situations. They assist me when faced with uncertainties and help keep me from deviating to unethical paths even when tempted to so. However, the one single value I pride myself with is tolerance. It enables me accommodate different opinions, perspectives and outlooks.

Guiding Principles

The One Minute Manager

I totally embrace the concepts outlined in the book “The One Minute Manager” by Ph.D. Kenneth Blanchard and M.D. Spencer Johnson. The three ideas promoted by this book are the need to establish clear-cut goals, the need to praise good performance, and the need to reprimand people when their performance fails to contribute to the attainment of commonly agreed goals. These ideas then transform into the three secrets of the one-minute manager, namely: one-minute goals, one-minute praises and one-minute reprimands. Beyond one minute and the effect becomes marginal. I strongly believe that a leader needs to be comfortable identifying good work, as well as mediocre work, and quickly doing something about it.

Personal Responsibility

I believe that people are ultimately responsible for their actions, be it in their personal lives or in public. Even though the Bible says sinners will go to hell and the righteous will inherit the kingdom of God, I hold a more moderate view of accountability. I like giving second or third chances because i consider failures as learning experiences

Decisiveness

One of the most important character traits I posses is decisiveness. When I have to make a decision, both in my personal and professional lives, I methodically seek out a lot of information. I can take more than two thirds of my time to gather and analyze information, and contemplate options, and then I make a very quick decision. I think that leaders need to demonstrate their ability to take control of situations and make difficult decisions, then rally others to that decision

To help me better crystallize my beliefs and principles, I have developed my seven pillars of leadership called Willars (the W for Wilson)

7 Willars of Leadership

1. "Where there is no vision, the people perish". (Proverbs 29, vs.18)

Written over 2000 years ago, the Bible contains some very good passages that are in line with contemporary management theories. This passage in the book of Proverbs to me represents the most significant role of a leader. Formulating and communicating a compelling vision of the future can have dramatic effects on team member. Take the "I have a Dream” speech by Martin Luther King Jr. in 1963, it energized the civil rights activists of the 1960's and became the battle cry for the civil rights movement across the world from the 1970's and 1980's to this very day. His dream or vision of the possibilities open to black people in America has inspired scores of African Americans and other people of color long after his death.The first duty of a leader therefore has to be that of laying out their vision. In order for this vision to achieve its mission, it should be realistic and credible, well articulated, easily understood, and responsive to change. It also needs to be consistent with the organization's values.

Robert Greenleaf in Leadership Crisis writes that "It is the idea (vision) that unites people in the common effort, not the charisma of the leader”. This further underscores the importance of a strong vision in the philosophy of any leader. Going back to the presidential campaign, I think one other reason why Barack Obama was so successful is because his vision for a renewed role of America in the world resonated with the country and as a result made it easier for them to rally around him.

2. Crystallize the vision in a slogan or mantra

Many organizations are confronted with the problem where employees do not know the direction in the company is headed. Since there are no clear, bright shining goals, it is often difficult for them to choose between several options which one best serves organizational interests. Therefore, the second most important thing a leader must do is communicate the intent of the vision to the team in clear and concise language so that everyone understands. This is known as strategic intent. In this way, employees always have a common frame of reference when faced with making a difficult choice in a crisis. When Jeffrey Immelt took over from Jack Welch as Chairman and CEO of General Electric, he immediately communicated his vision for the company. Welch tended to grow GE though acquisition, Immelt choose to grow the company through innovation. To crystallize this, Jeff Immelt dropped the 25 year old company slogan “We bring good things to life" and replaced it with "Innovation at work" clearly communication the new direction the company would take.

3. Pick the right people, not the best people

The word "best" is identified with competition, with wining, with individual achievement, all good attributes. However, my idea of leadership makes me sought for the right people. The word right goes along with moral values, responsibility, greater good, and integrity. Therefore, in picking my team, I want people who are right for the job in terms of cultural fit and emotional intelligence. The best skilled person might not necessarily share the same value system as the organization. Also, the particular job might require someone who has certain traits or qualities that are not be the best but which are very useful in accomplishing the task at hand. In the Television show called 24 that is broadcast on News Corps’ FOX network, consider Jack Bauer's role in CTU. To some, he is the best person at stopping the bad guys before they strike the United States, but the case can be made that he is not always the right person. He usually gets the job done but at the end of the day his methods are very questionable.

4. Give Unto Cesar what belongs to Cesar

I am a believer in performance based rewards. These can be formal with trophies and gifts or as informal as a sincere word of thanks from the right person at the right time. The power of such rewards comes from the fact that someone actually took the time to notice the good work, sought out who did it and took time out to express their appreciation. Research by Dr. Gerald Graham revealed that most American workers prefer personalized spur-of-the-moment recognition from their bosses versus any other kind. It is however important to formally recognize certain types of outstanding work. For Rosabeth Moss Kanter, this has the effect of creating role models or heroes and also communicates the standards the company is promoting.

5. Ask not why, but why-not

In their book Conquer the Brain Drain: 52 Ways to Pump up Productivity, Judi Moreo and Fiona Carmichael make the point that the greatest challenge facing today's managers is how to capture the creativity of team members as well as unleashing the resulting mental energy. I think one way to make this less challenging for these managers would be to make it okay to challenge the status quo. Just like the Greek philosopher, Socrates believed that true knowledge was derived from true dialogue and systematic questioning; the leader has to encourage managers and their team members to question popular convention and dare new styles, to have a why-not mindset. If there is one thing that is built-in to creative and innovative endeavors, it is risk. They are inherently risky and therefore have significant chances for failure. However, organizations that want to outperform their competition must be ready to accept failure because great ideas are sometimes born from such circumstances. This therefore calls for the leader to effectively communicate to the team that it is ok to fail as long as the lessons are learned. Looking at the history of General Electric since 1896, the company has had such remarkably continuity in part because new leaders consistently abandoned the most treasured ideas of their predecessor and changed the company's course. The transition of power at GE from Jack Welch and Jeffrey Immelt is a good example. Given that the only constant in every organization is change, I believe that managers have to be comfortable managing change and innovation especially in this very uncertain world

6. Empower Them

I believe that an organization is most productive when all its employees are empowered to make and take decisions on their own, when authority is devolved down to all levels of the organization. This idea is most associated with Rosabeth Moss Kanter. In her book "When Giants Learn to Dance", she argues that large companies need to liberate their employees from stultifying hierarchies if they are going to be able to “dance” in the flexible, fast-changing future. In this light, employee empowerment seems a logical step for a leader if he/she effectively defines his vision and then lays out the strategic intent behind it in a slogan or mantra, on which these empowered employees can fall back on to guide them in their actions.

7. Keep Communication Lines Open

If it wasn't clear from the previous Willars that i don't appreciate bureaucracy, I'll make it more evident. I believe none of the above Willars would work well without open communication lines in organizations. Conventional management theory would decry this kind of organization in the fear that the leader would be flooded with too much information or requests thereof which in turn would make the leader less effective. But I think that if the leader defines their vision, picks the right people, and empowers them, they will have less "need" for him/her around them and this will give the leader more time to focus on emerging opportunities.

This is a working document and as I encounter challenges in my professional and personal lives, there will be additions or subtractions to this philosophy. This will be guided by Reinhold Niebuhr's Serenity Prayer

"God, give me grace to accept with serenity the things that cannot be changed, Courage to change the things which should be changed, and the Wisdom to distinguish the one from the other.

Notes

Bob Nelson: 1001 ways to reward employees

Judi Moreo & Fiona Carmichael: Conquer the Brain Drain: 52 Ways to Pump up Productivity,

Robert Greenleaf, Leadership Crisis

Rosabeth Moss Kanter: When Giants Learn to Dance

My American Dream
The USA since proclaiming its independence after the war with the British Empire , have been the subject of alot on envy on the part of many of the peoples of the world. They come in search of the liberties, the freedom, the democratic culture, the equitable judicial system, the opportunities all towards fulfilling the ....American DreamIn the 70's, this dream was summarized as follows ' a chicken in every american pot, a television in every american home and a car in every american garage'. Today, this dream has been transformed, it is becoming lesser and lesser as popular. but why?i have come in pursuit of that dream. i dont want to believe i have missed out on this. i know dreams last only the time of a nights sleep but i also know from Benjamin E. Mays that"The tragedy of life doesn't lie in not reaching your goal. The tragedy lies in having no goal to reach. It isn't a calamity to die with dreams unfilled, but it is a calamity not to dream.It is not disgrace to reach the stars, but it is a disgrace to have no stars to reach for"So even though day dawn seems to be fast approaching - implying the end of my dream, i am determined to wake up with a Lexus in my garage, a black berry in by pocket, an iPod in my jacket, an HP notebook on my laps, an xbox 360 for my kid brother, an invitation to the Emmy Awards and an appointment for a talk with Larry King on CNN
posted by Wilson @ 3:59 PM 0 c

WMD

Weapons of mass Distruction or Disinformation?seems like the answer to this question depends on so may factors!, you race, culture, social class or even gender....yes gender( i'm not sure how though)Ask me that question in the morning and i might have a different answer than i would have had had you questioned me at night