How many Wall Street CEO’s does it take to screw in a light bulb?
By becoming the punch line of other’s jokes, the financial services industry makes itself less and less relevant, as mortgage lending, brokerage, insurance and banks bleed red ink. Earnings scares at the nation’s top financial institutions lay bare the ugly fact that no one who sits atop these megaliths has the power to stop an avalanche of bad economic news. Nor does he/she have the integrity to admit that synthetic products and manufactured strategies are anything more than money-making schemes for the institution, itself.
It’s about trust.
In many ways the public trust in, and perception of, financial services is being eroded because these institutions are not standing as allies of the consumer when they need them most. Instead, I believe that lenders, insurers, bankers and brokers are losing touch with their public and straying far away from their “public trust” mandates.
As a spate of weather related crises has recently shown, the “good hands” analogies are just hype and marketing, not a statement of fact.
Many services which have utilitarian responsibilities are being shown to be like any other business, a means for profit for shareholders. Now, this observer has no qualm with corporate profitability. No, my complaint is about profitability at the expense of the common good and public trust. The sacrifice is being borne, unreasonably I believe, by the persons who most expect corporate responsibility in the marketplace.
Toymakers, automobile manufacturers, public utilities, insurance companies, and others who profess to providing a “service” need to keep their pledge and look at profit as a by-product of producing a better mousetrap. Indeed, any business can become profitable if it succeeds at giving the public what it wants and needs, and doing so responsibly.
Companies are in the midst of transforming themselves during these troubled times into isolationist entities, allowing their boards of directors and product origination personnel to concoct schemes for driving revenue, but at the expense of comprehending its impact upon client needs, expectations, and performance.
The latest economic data suggest that slowdowns and crises create layoffs in large proportion. When money needs to be raised, the labor market pays. Write-downs and leveraged borrowing exist for them, the corporations, not for the average consumer.
Concurrent with sales slowdowns, evidence suggests that companies are “buying back” shares of stock to reduce their exposure to market volatility. Under intense pressure to manufacture profits, companies whose “utility” is to the public, are creating, instead, new derivative strategies designed to ask you for more money. The unwinding of these products is the predicate to the avalanche which follows.
Don’t mess with the trend.
Markets and economies are cyclical. If these cycles are artificially interrupted, there ensues a reaction of disproportionate consequences. It’s simple mathematics. If an unsustainable vector is created, the result on the back-end is a rush of acceleration from forces that have been pent-up, or redirected.
If consumers get wind of the scheming that is directed at them, they will stop buying from those suppliers. Therefore, dishonesty and unprofessionalism creates the very slowdown and intransigence that the companies are trying to avoid in the first place.
Debt, deceit and dishonesty all have to be paid off at some point. As savings and liquidity become stretched, it would be wise to expect, or hope for, a change in tactics from financial institutions during which they acknowledge their responsibilities as a public utility.
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