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Amar Bhide Questions Wall Street’s Criminal Enterprise

Posted by Larry Doyle on June 21, 2011 8:08 AM |

bhide_2008_small Are proposed banking regulations and capital standards too stringent as JP Morgan’s CEO Jamie Dimon would have us believe? Are they not strict enough and has Washington properly addressed the critical issues within these topics for the future health and well being of our overall economy?

Why is it that the American populace is forced to view this regulatory debate as an either/or situation, that is too much regulation vs not enough. The fact is, we have allowed both the Wall Street and Washington camps to frame this debate.

That error in judgment and in practice means we will continue to encounter many of our current problems as we navigate our future economic landscape. I broached this reality two years ago in writing, Future Financial Regulation: Not a Question of Sufficiency, But of Transparency and Integrity.

This morning I witnessed Amar Bhide, Thomas Schmidheiny Professor at Tufts University Fletcher School of Law and Diplomacy, pull no punches in hitting the same nerve. Let’s navigate.

I wrote in May 2009,

The media often frame the debate in political terms between laissez-faire proponents and those favoring increased government intervention. Both camps are missing the bigger picture, because both camps are feeding from the same trough. Allow me to expound.

The critical regulatory question facing our markets is not of sufficiency but is one of transparency. Regrettably, both ends of the regulatory spectrum do not want to address this glaring shortcoming because it exposes the very nature of the incestuous relationship between Wall Street and Washington.

Will the media give the Wall Street, Washington, and regulatory triumvirate a pass as they pander about sufficiency when in fact the real regulatory question is one of transparency? In my opinion, the very future of capitalism and free markets lie in the wake.

Professor Bhide stands out from the crowd in hitting on points which fully resonate here at Sense on Cents. I commend him for his aggressive posture and for openly questioning the likelihood of criminal activities within our large Wall street banking behemoths.

Further adding insult to injury, Bhide opines that banking executives, (he specifically references JP Morgan’s CEO Jamie Dimon), are not aware of much that transpires within their organizations.

Too big to fail starts with too big to understand and thus too big to manage!! Amar Bhide gets this. Let’s watch and learn from this short 4-minute Bloomberg best…

With his performance today, Amar Bhide gains immediate induction into the Sense on Cents Hall of Fame.

Larry Doyle

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Please get your friends and colleagues to do the same. Thanks!! I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Peter S.

    CEO’s of the big investment banks are allowed to be purposely unaware of the risk facing their firms. It is by design that when the “sh#t hits the fan” they remain well insulated from being held accountable. That is unless they give less than truthful testimony before congress (Lloyd Blankenfeld) – though most must be slicker than Roger.

  • Mark

    Standard managerial practice. Create the internal wall for protective purposes.

    The key question though is WHY do the boards allow these internal walls and questionable criminal enterprises to occur? The failure of real corporate governance on the part of the boards of directors is a topic which has gotten insufficient attention throughout this crisis.

    More corporate cronyism at work.

  • Tom

    Bhide’s point is well taken. Banks are too big to understand and manage. This very point was highlighted last week in an American Banker article, JPM’s Retail Unit Proved Too Big To Manage,

    After the flurry of role changes at JPMorgan Chase & Co. this week, it is easy to dwell on the relative power of executives and their career trajectories.

    Don’t stop there.

    The real lesson may be that even the retail operations of JPMorgan Chase — presumably one of the better-run banks overall — has grown too cumbersome to manage and now has to be carved up. It is one that should be heeded by anyone interested in the future of big banks and the economic recovery.

  • Joe

    What does Paul Volcker have to say about Mr. Bhide’s thoughtful analysis?

    “Events have raised large questions about the academic theories supporting the concept that our heavily ‘engineered’ financial markets are self-disciplined and efficiently allocate capital. Amar Bhidé’s skeptical analysis should stimulate basic reconsideration”
    Paul Volcker, former chairman of the Federal Reserve

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