♠ Posted by Emmanuel in Credit Crisis,CSR
at 2/26/2009 07:55:00 AM
In the course of maintaining this blog, I've subscribed to countless newsletters. Although most are quite interesting, their sheer volume has led me to prune my Inbox with extreme prejudice. Fortunately, though, I was about to zap a recent entry from John Mauldin's newsletter (highly recommended, BTW; you can subscribe here) when I caught sight of its title about "Saving Capitalist Banking and a Speech by Paul Volcker." The latter contained this very interesting excerpt concerning the former Fed chairman's views about his quant grandson's choice of profession:Compensation practices had gotten totally out of hand and spurred financial people to aim for a lot of short-term money without worrying about the eventual consequences. And then there was this obscure financial engineering that none of them understood, but all their mathematical experts were telling them to trust. These two things carried us over the brink.Maybe I should invoke Godwin's Law here, but the comparison is apt in some respects: Hitler's acolytes spread military mayhem across the globe, just as financial engineering's acolytes spread financial mayhem across the globe. Both are now claiming that they were "just following orders."
One of the saddest days of my life was when my grandson – and he's a particularly brilliant grandson – went to college. He was good at mathematics. And after he had been at college for a year or two I asked him what he wanted to do when he grew up. He said, "I want to be a financial engineer." My heart sank. Why was he going to waste his life on this profession?
A year or so ago, my daughter had seen something in the paper, some disparaging remarks I had made about financial engineering. She sent it to my grandson, who normally didn't communicate with me very much. He sent me an email, "Grandpa, don't blame it on us! We were just following the orders we were getting from our bosses." The only thing I could do was send him back an email, "I will not accept the Nuremberg excuse."
One of the admirable things about Americans is their willingness to let their own relatives hang out to dry if they did wrong. (There are exceptions, like the Bush family.) Especially in Catholic cultures, there's a prevalence of "amoral familism"--a perversion of filial concern. Basically, it involves an attitude of "my family, right or wrong." Dr. Volcker shows the correct example in telling it like it is. He never did like financial WMD for reasons we are now becoming painfully aware of. That his grandson packaged financial WMD doesn't change his opinion one iota. I like to contrast this with pointless financial services industry bellyaching. It's a good lesson in business ethics, methinks; let Paul Volcker show us the way.
