March 17, 2008
A New Rant - People Asleep at the Wheel
Where were the Audit Committees, CFO's and Risk Managers at ALL of these companies at the start, and more importantly, before the mortgage-related security mess got started? Where were they at Bear Stearns, and every investment banking house for that matter? Where were they at the banks that have written off hundreds of billions of dollars, thus far? Where were they at the Rating Agencies? Where were they at EVERY institution that purchased any single mortgage-related security? And, where are they NOW at the corporations that have their cash balances invested in money market mutual funds that are just littered with mortgage-related securities THAT AREN'T CASH OR CASH EQUIVALENTS? That's a bomb just waiting to go off.
The biggest, baddest risk of them all and EVERY single Audit Committee, CFO and Risk Manager, and all of their minions ignored it. Forget the fact that the Rating Agencies never should have given the mortgage-related securities investment grade ratings. EVERY entity has the fiduciary obligation to examine what they are getting themselves into regardless of the rating. What does this say about the quality of individuals that comprise the Board of Director's Audit Committees, or about the quality of a firm's CFO (or the CEO that hired him) and what does it say about the entire profession of risk management? It says that too many entities subscribe to the notion that there's safety in numbers (i.e., the old everyone's doing it so it must be OK) and that there's a severe shortage of unique, critical thinking about items that the corporate fiduciaries should be looking at. It says that entities spend entirely too much time on feel good measures like Sarbanes-Oxley crap that is totally worthless (sure didn't help one iota here), but is costing billions and billions of dollars. If you have lost money in an institution because of this mess and get the opportunity, go to the Annual Meeting. And in the Q and A session, if they are brave enough to have one, ask the Board members and Officers these questions. Then watch them squirm and come up with excuses, if they don't ignore your question as being overtly hostile and not pertinent.