Banks that are too big to fail or TBTF are by definition also too big to manage or TBTM. What does this tell us about the state and the mindset of senior management in our major banks?
In a 2009 article entitled A House Built On Sandy (Sandy, meaning Sandy Weill, the main architect of the modern Citigroup) The Economist describes the decline of Citi in terms which are less than flattering. The following extracts tell the tale:
“TOO big to fail, too shit to buy” is the way some Citigroup insiders describe their employer… Acquisitions were poorly integrated. Cultures overlapped rather than melded)… It may be inevitable that some banks are too big to fail; but the lesson of Citi is that they can also be too big to manage.
Posted in Banking, Business, People
Tagged Banks, Business, Citigroup, Derivatives, economy, Financial Crisis, Fred Goodwin, Management, politics, RBS, Risk, TBTF
We can never legislate or regulate our way to sustainable banking—the industry needs to adopt a new strategic business model
Déjà vu All Over Again
“They came on in the same old way and we sent then back in the same old way”.
They were the words the Duke of Wellington used to describe the repeated and futile attempts by Napoleon’s Grand Armée to break through the British defenses at Waterloo.
They can equally be used to describe the current prescriptions for the subprime crisis.
We remain mired in the unenviable position where those who know about banking are firmly wedded to the same old solutions, while those who don’t know about banking i.e. some in the mass media and certain politicians, resort to populist rhetoric. Sadly, the debate on the subprime crisis has generated more heat than light.
It is time for something different. However, before we move forward with a new prescription we need to better define the problem.
Posted in Banking
Tagged Audit, Bank of England, banking, Clearing The Bull, Credit, Dick Fuld, Federal Reserve, Finance, Financial Crisis, Fred Goodwin, FSA, Investment Banking, Junk Bonds, LDC Debt, Legislation, Regulations, Risk, Risk Management, SEC, SOX, Subprime