The time for smoke and mirrors has passed

It was interesting to read yesterday that the top 7 executives at Goldman Sachs are going to forgo their bonuses for 2008, but that move seems like more of an optical illusion to dispel the inevitable picture of bankers as hogs feeding at the trough than helpful in a macro-economic sense. The top 3 of those executives, including CEO Blankenfield, each earned about $65 million last year because Goldman's 2007 financial year apparently earned the firm its largest profits ever. It's easy to be a Monday-morning quarterback, but, its hard not to argue that those profits were illusory and ill-gotten gains that leveraged the wider economy into a precipitous fall. Not only should these people forgo their 2008 bonuses, and many more firms should follow Goldman's lead, because a better illusion, um, solution would be for all those executives (including traders and money managers) at Wall Street firms (not geographically defined) that earned in excess of $1 million in 2007 to give back 60% (or more) of those 2007 earnings to a fund that can dovetail with the government's efforts, and can be used to aid the funding of TARP (the bailout plan) or certain additional issues now swirling around or expected to descend upon us in the near future, i.e. the automobile industry in Detroit, or the commercial real estate loan workouts that are on our agenda for 2009. It would be difficult to legislate something like this, but use this suggestion as a starting point, or a building block toward conceptualizing a way to make this idea more palatable, and perhaps even beneficial. Perhaps the IRS could issue a Revenue Procedure whereby a fund created in this manner could entitle those returning their 2007 bonuses to the fund to get tax credits against income going forward in predetermined amounts (dollar for dollar, or some alternative formulation). Clearly there would have to be an analysis of whether the money the government would forgo in tax revenue would be offset by the money that the fund could receive, and the economic benefit it could generate.

Essentially, this plan calls for private people to take cash assets held now in banks, assets that the banks are not lending against, and they would be transferring those assets to a giant fund that would re-invest the money into the economy and give those private people a tax credit, as well as a philanthropic or community purpose. Such an endeavor would present an enormous logistical challenge, but that endeavor would require creative consulting, money management and investment advice, as well as other trickle-down benefits for professional service providers, investors, and even, banks. Merely criticising the government, or blaspheming the Wall Street hogs, enjoyable as it is, is not truly productive. President-elect Obama said in his acceptance speech on November 4, 2008, that we should think about cooperation and collaboration, and this could be a good start. As a more than tangential benefit, efforts like this may stimulate areas of the market unrelated to the genesis of these economic issues, such as the rental, or the distressed asset areas that are suffering from capital failures due to the trickle-down effects of the economic storm we are now weathering. Economically, we are facing a shutdown in the availability of capital, as investors and banks are holding a disproportional amount of assets in cash, making little, if any, capital available for loans, lines, and credit facilities.

The only way to really change the game, is to actually get in the game!

It's so complex, it's simple

A couple of years ago, my now 11 year old daughter asked me where I thought the world was heading, given the speed with which life, dictated, of course by computers, iPods, and PDA's was hurtling along. I said that I thought it was all going to blow up, and we'd land up back in the horse and buggy times. I think that was more of a sentiment rather than a prognostication, however, it's amazing what a few short years can do. I never really thought it would all blow up, but sometimes that's just what we need. Amusingly, there are a number of well known mainstream journalists that have graciously identified for us what caused the financial meltdown, what went wrong, and exactly how the whole system exploded. Strangely enough though, they didn't see this coming, and they didn't really know how the system worked BEFORE the meltdown. They did get one thing right, however -- it's a lot easier to be a genius after the fact.

I have a simple point for this post. Sometimes we make things a lot lot more complicated than they ought to be. We do this with our actions, inactions, miscommunications, lack of focus, and by generally getting ahead of ourselves. I watched a story on the news this morning about a school in Georgia that is having success in educating autistic children; children that the mainstream educational system has no idea how to deal with. Their solution is to focus on the children's emotional needs in order to connect with, and get through to the children. Once this connection is made they find it easier to then attend to the children's educational and behavioral issues. I don't know if this is the silver bullet, but it is a simple idea, based upon a core human need. It does seem to be working, albeit in a limited sense, as it involves private education and is very expensive. Nevertheless, I am sure there are thinkers with more depth than those that introduced this educational approach who will figure out how to lower the cost of these services and generate them on a mass-consumption basis, in order to roll the program out to a larger population. Nevertheless, the idea itself, although visionary, relies on simple human interaction and connection, suggesting that we may have lost the art of actually connecting with each other. Therein lies my point --- sometimes the answers can be relatively simple, but still we just don't see them.

I realize these are difficult times, and I am as caught up in the tailspin as anyone else is; I worry that our business will not survive these torrid times, but I have realized something really simple through all of this. Dinner time is my most important time of the day, and I am going to try to make that meeting every night. I find it to be an amazing time of coming together, bonding, and discovery. I haven't figured out much else about how to addreess the issues we're facing, but I do know that I am going home tonight to have dinner, laugh, and be in a special place, and I think that you should all do that too.