Tuesday, February 10, 2009

Ten questions the House Financial Services Committee could use from the NY Times

GREAT stuff here....Andrew Sorkin provides 10 questions that those receiving bail out money should answer. The questions are great, but even more than that, he sets the stage well with his lead in. Indeed, some of them might make the basis for some good essay test questions ;)

DealBook Column - Up Next for Big-Shot Bankers - A Public Flogging - NYTimes.com: "
"On Wednesday, eight chief executives of big banks will make their way to Washington...to appear at a Congressional hearing in front of ...the House Financial Services Committee. Here are 10 questions members of the committee might consider asking":
From question number 5:
"Much has been made of the subprime debacle. But few seem to be willing to talk about another looming crisis: credit card debt. People like Nouriel Roubini, the professor who has predicted much of this crisis, have estimated that you could have losses of as much as $3.6 trillion, which would bankrupt the industry. What do you make of that number? And since credit card defaults are correlated to employment, what happens if unemployment goes as high as 10 percent or more? What is the highest unemployment level that you’ve used in your forecasting models? And do you have adequate reserves for your worst-case situation? If your assumptions are wrong, what happens?"
From question number 7 which seems to call for the same type of partnerships that my colleague Mark Wilson has been saying are needed:
"Your compensation structure has been “heads I win, tails I win” for you and many of your employees, despite putting your firm and the nation’s fiscal health in jeopardy. What’s the right model? And how do you feel about forcing your employees to risk their own money, not just the firm’s, when they make a trade or participate in a transaction that puts shareholder capital at risk?"
I also really like questions 1,2,8 but find question number 4 is horribly scary and why I fear government bailouts/equity stakes etc.

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