I am starting to think that this market snaps back quicker then people think. Fed Speak last week signaled, to me at least, that no rate cut was coming April 30. Inflation is very worrisome. Inflation plus no growth is more to.
Tanta - what makes you think that examiners are mostly male, or that they don't hire those female back office refugees?
Well, actually, I'm not making the claim that they're mostly male; I'm responding to Yves here.
However, in my own personal experience the women on the examiner teams are mostly 1) young or 2) accountants. I think accounting is a "special case" here. It is certainly "back room," but it is also a degreed-with-professional-certification track, one that has in my experience been much more open to women than, say, pricing or risk management ever has been. Again, my own experience (outside HUD field offices, again another "special case") is that these younger women with accounting or general finance backgrounds are working for the government to earn some experience that will get them into better-paying jobs in industry.
HUD field offices are mostly the same kind of pink-collar enclaves that the rest of the business is, in my experience.
I will say that it has been a long time since I ran into a member of an on-site examination team I couldn't bluff had I wanted to. They know the CAMELS manuals inside and out, being bright persons, but they have very little idea how the operations are structured.
I was actually thinking along those lines when I broke down and read the U.S. Bankruptcy Trustee's report thingy on New Century the other day. There's some damning stuff in there, but it would be a lot more damning if the investigator had had any experience with operations. Did you happen to read it? All that long analysis of repurchases and default metrics and so on, and never once did it seem to occur to the investigator to ask whether those loans were serviced by NEW or not. Really. Some people were, apparently, claiming to the investigator that they were totally taken by surprise by this pipeline of FPD and EPD repurchase requests (implicitly, that some senior manager had withheld from the accounting and audit group). Yet NEW was a big servicer--surely they didn't sell every one of those loans released? How could they not know about EPDs until the investor managed to kick out a repurchase request a year later? As I was reading it I began to suspect that the investigator's innocence of certain operational realities was being taken advantage of. And that, I think, often happens with regulatory examiners.
Tanta - I think your experience of examiners may be a bit outdated. Especially in ops risk, but really throughout examination, I'd say the gender ratio is not too far from 50-50 (certainly within 60-40), and many have industry experience.
Examiners can certainly be bluffed. Consider the odds. An institution with 10,000 employees may be regulated by a staff of about 20. The chance that any given examiner, even with industry experience, will know about the functions of the particular staff person being interviewd are less than 1 in 100. OK - less than 1 in 10 if you factor in the fact that the regulated entity may have a dozen people doing exactly the same thing. But you get my point. But you also may have thought you were successful even when you weren't. I've been plenty of examiner/auditor types who just quietly collect interviews and documents, and then line them up against each other, and find the holes. When different people in different parts of the operation are trying to bamboozle in different ways, it becomes obvious that someone is bamboozling in pretty short order.
I didn't read the New Century report. Couldn't find time for hundreds of pages. But your report doesn't surprise me. These special report type things are dominated by lawyers and accountants much more than routine exam functions are. It's a combination of big picture and try to find the smoking gun documents, but there's very little analysis involved.
Bingo! I predict that the surviving main street businesses, in whatever industry, will have many managers and quasi-managers wearing faded rose colored blouses. We will neither want nor need regulator jobs. But I've got some well-trained "producers" who, I'm afraid, are going to be available come fall.
But you also may have thought you were successful even when you weren't. I've been plenty of examiner/auditor types who just quietly collect interviews and documents, and then line them up against each other, and find the holes.
How often have you been these types?
I appreciate your faith in my naivete, but one of my jobs was to handle the final report. Some of these examiner/auditor types were so quiet about their detective work that they never even mentioned it in the report. Now, that's subtle.
I know I'm not the only person who got busted on the little stuff while the big stinking wretched ops-wide problems blazed along. Come on. I have been called on the carpet because examiners found that--sit down--there were historical rate sheets in the files that had not been initialled by the manager! And on three separate trading days the buyup ratios were wrong! And twice we picked up the TSY contract instead of the CMT index! Busted, I tell you, we were.
But did they notice that very highly-paid production managers were allowed to come into meetings and overrule policy recommendations? That complaints about "bad attitude" from loan officers whose loans had just gotten repriced were allowed to find their way into the poor pipeline clerk's human resources file? Not hardly.
The difference between a lot of things I saw in that report on NEW and what you see in a regulated depository were only of degree, not kind. And I have already gone on record as opining that a lot of this "stated income" stuff, as an example, arose as a way to make those "exception reports" look better to the regulators. If you're going to tell me they saw through that before about last year, you're telling me news. A lot of institutions got written up for making high DTI exceptions, so they changed that to taking more stated income loans where the DTI always looked great. And while they may have had some concern about stated income loans, I didn't notice any of them less willing to praise us for our "improvement" on exception management.
In any case it's not about numbers of women and men. At least, not for me. I knew that would be one of the "pitfalls" of this subject, getting sucked into those silly debates about numerical parity. Yves was suggesting that a certain kind of person be more strongly recruited as regulatory material, and I was trying to suggest that it's a class issue as much as a gender issue. There are huge class distinctions within the industry that mirror those in the culture at large: a few grotesquely-well-paid very powerful people at the top, a smaller cadre of relatively well-paid relatively-powerful people in the precarious "middle class," and a big rank and file of order-takers and elves. If you think regulatory examiners particularly notice that dynamic--let alone draw any useful conclusions about how it might distort incentives or derail risk management--you're seeing a side of it I don't see.
Jackie is just speeding away
thought she was James Dean for a day
Then I guess she had to crash
valium would have helped that dash
She said, hey babe, take a walk on the wild side
A mighty read - you do The Blogs proud, yet again.
The irony of the "bacon bringers" is that they are utter slaves to their own high-pressure environments. You'd think one of these alpha males could grow enough of a pair to speak out when they saw their firms begin to self-destruct. And I have no doubt they could see it. I bet more than a few of them wanted to chew through their muzzles and side with you "back room" note-takers but didn't dare disturb the Glengarry Glen universe.
Don't get me wrong - I love hunting --but bringing back a poisoned, rancid carcass and passing it off as bacon is first homicide, then suicide.
Any business culture that doesn't get that spears itself, eventually.
bacon dreams is right. Nowadays you would embed an animated avatar with a laser pointer within your power point slide.
Yes, and those of us who stopped paying attention to that shit right around the 90s are noticeable by our dated references.
Of course it's been a few years since I was dragged into a dog and pony show. But that's rather my point, I guess. I know that a huge percentage of what gets said (and animated) there is either wishful thinking or just nonsense, but by god the rest of the world has been taking it pretty seriously. How'd we get to this pass if the regulators were so attuned to operational risk?
Let's go back to these big regulated banks showing up in court having lost their notes. Big regulated custodial trust institutions having lost notes and assignments and shit. What clever mild questions designed to trap the unwary were their regulators asking?
I don't doubt that a lot of bamboozling has been successful. Note my comments about the odds of even an experienced examiner having just the right kind of experience. I'm just noting that it might be common, but it isn't universal.
We probably spend more and regulate more due to men, too.
No wonder we never got Federal spending cuts from the "daddy party." And you think they'd ever do a tax cut for women? Trying to telling to fellow who perambulates like Bush.
Bacon is! You can artfully cause the pointer in the slide to move in exact concert with what you're saying, which is good because those at the board level are usually distracted by shiny objects and things that move. The technique is best used on slides where you think they are going to immediately turn down a rat hole, and start discussing things you have no intention of ever disscussing with them, like the current year's plans.
Tanta, ipodius' first job was in banking, a very progressive bank at the time and one of the first to embrace the new-fangled ATM. His first boss was a woman that fits your description as someone who found herself in a job she never planned on being in. She was SVP of regional administration. I think of her a lot, actually, because she was an amazing person...stong, intelligent, and able to glide through what was at the time a males-only club with ease. I imagine that she was a limiting force in many decisions. She took me under her wing back then and I didn't know why, perhaps she saw something. She was one of those imperious, intimidating women that everyone talked about but when you got to know her, was one of the most caring people you could know. As I've read your posts I can't help but think there must be similarties. The business world needs more of these types...male and female.
Examiners probably weren't asking any questions of trust institutions about lost documents before they started getting press attention about court claims of lost documents. I'll bet they are now. If it turns out that lots of institutions have lost lots of documents it will prove a serious failing. But if it turns out that very few docs were lost, and lawyers were just lazy, it will be interesting ammo for future defendant's lawyers, but not a regulatory failing at all.
"You mean you didn't find out that they weren't losing documents???" Let's see how common disappearing docs really turns out to be first.
I think the sentiment -- that men don't listen to female co-workers -- of this post can be applied to any industry...
At least I've found this exceptionally true of many younger male workers. They know it all and leave a disaster to clean up behind them constantly and their respect for female co-workers is disgraceful.
But then, I remember when I was university I did some volunteer work for a group called "Women in Science and Technology," and we'd go into school to encourage girls into science and technology. My physics university professor had encouraged me to get involved and had invited me to a meeting. Well, the meeting was casual, two women had their very small children with them, everyone was dressed casually, like heading for a slumber party. I did a double take at my own perceptions as I walked in that this was a meeting of the housewives as opposed to a meeting of a group of highly professional women who mostly held master and Ph.D degrees...
Despite all the talk of equality in the workplace these psychological perceptions exist. I have found with older males you prove your competence to them once and they treat you with respect but it seems an ongoing battle with younger male workers.
If it turns out that lots of institutions have lost lots of documents it will prove a serious failing. But if it turns out that very few docs were lost, and lawyers were just lazy, it will be interesting ammo for future defendant's lawyers, but not a regulatory failing at all.
No, I think it's just a different regulatory issue. Then you move from the custodian to which set of high-ranking morons hired these FC mills in order to "control costs," the latter of which not only brought the institution to serious reputation risk, but that also brought its equity capital to risk from class-action looting.
But that's my thing: suggesting that we not, in fact, take these things always at face value.
Did you see Freddie's latest announcement regarding default law firms? They're now getting involved in that subject. I can only think they're doing so because they don't think the regulators have been on top of it (including possibly their own).
This is the kind of personal reflection I LOVE to read, to enter the world of another, long enough to see it through HER eyes, for awhile.
Makes me realize how much we superficially blovulate online, no matter how important and necessary the topics, and a touch of depth like this really makes my Sunday morning.
No one should shy from sharing their personal accounts with us who will never have those experiences firsthand, but have always been curious...
tanta - I think you really want miracles from that staff of 20. Not only should they be looking at the policies for commercial loans and mortgage loans and construction loans, the interest rate risk limit process, the daily measurements of interest rate risk limits, the document handling processes. You also want them examining the policies and contracts with the outsourced lawyers. What else would you like to put on their plate, and how many nights and weekends do you want out of them?
I agree with the premise that we need more cautious folk... male or female i don't care so much...
In my life, I've run across a lot of hyper-agressive risk takers that I'll call the alpha males and alpha females... and back in the day all the females that "made it" were no better/worse than the alpha males, because the only way to get up to the glass ceiling was to be an alpha female.
meanwhile, the cautious worry warts had no idea that there even was a ceiling since it was so far above them...
as more and more women are entering and staying in the workforce that seems to be changing... you don't need to be an alpha female to rise up... so hopefully it'll change the inner workings...
BTW: I work in healthcare, so obviously that has been more gender-kind for some time... but not that long!
When I was in grad school the running joke was "having CEO hair", which we figured was the only way some of these people got the job. That works for women too...that sort of modified astronaut's wife do...
I remember giving a presentation in appelate court when I was younger and cuter and one of the appellate judges was looking at me with this isn't she cute look. Blechh.
I remember reading lately that the sex centers of the male brain light up when confronted with financial risk taking. Successful risky behaviour result in more testosterone produced--really. And
vice versa. Which produces more, and more risky behavior. This may be a good idea in the realm of reproducing your genes, but not in the financial world.
Younger men really should not be put in positions of power like this. They are not capable of it--for gender reasons. When the old testosterone dribbles down, then, well, ok.
What on earth did the business world do when everybody in it was male???
FWIW:
one of the problems with getting women into the highest levels is unfortunately societal and biologic.... childcare.
at least in my field, there is little to no glass ceiling.
but there is a disparity of women in certain areas (like surgery, orthopedics, etc) and also certain levels of management.
but almost all of it is related to childcare. if a woman foregoes having a child and raising that child, then the sky is the limit.
or if they are willing/able to have the child and be back to work in 2 weeks, and then have a stay-at-home dad or at least a nanny to do day to day stuff so that they're not missing so much work.
but often a woman is "going places" and then she has a child. During the 9 months of pregnancy they are (understandably) often missing work and not as tip-top as they need to be... then the next 5 years they also miss a lot due to their child's healthcare needs. (physicals, ear infections, pinkeye, that sort of thing).
in sum, 5-6 years of decreased productivity. hard to make up for that.
if you took a man, and made him primarily responsible for childcare, his career would equally suffer.
BTW: I'm not saying it's "right", just that this is what is happening in my field. and obviously healthcare is different than finance.
You also want them examining the policies and contracts with the outsourced lawyers. What else would you like to put on their plate, and how many nights and weekends do you want out of them?
I want them to follow the thread wherever it ends up. If that means we need more than 20, well go find someone who has been blustering on about the evils of "big government" for years. That wasn't me.
And I'm sorry, but the class of women managers I'm thinking about today would just throw back their grizzled heads and hoot over that. The story of their lives is one more thing to do they don't have "time" for! They developed a lot of the expertise they have by exactly having that shit that no one else "had time for" dumped in their laps! Nights and weekends??? No!!! I know what you mean, and I'm not advocating exploiting examiners, but in context that's just too easy to mock.
Frankly, one of the biggest risks I know of in any operation is siloage and specialization that dangerously reduces the number of people who can capably follow the whole process and connect dots that aren't obviously connected. (Like, who cares about the obvious ones?) This is a long, old problem. And why the hell can't the people who can look at loan policies and interest rate risk and document handling also read outsourcing policy or examine contracts?
At some level, what you are suggesting, it seems to me, is that regulators have to stick to those issues they already know are risks--that have a long history of being risks--and ignore the "new ones" like outsourcing or contract-writing that are not yet "classic" regulatory responsibilities. Does that not just guarantee that the regulators will not look at them until they blow up?
Back to the NEW report: the first thing I'd have done was head right for those PSAs and accompanying investor information sheets to find out which exact officers were named in the "notices to be given" sections. Because for damned sure it looked like whoever was getting those notices at NEW was the wrong party. I might even have suggested that the CAMELS manual incorporate a review of such things on a going-forward basis.
Sure, it's more work. But don't go holding me responsible for the fact that we seem to be limited to only 20, regardless of whether we might need 21 or 22 or 23 these days.
An example of testosterone foolishness in middle aged men.
Got a case settled. Minor issue of some concrete blocks on the property worth $1-3,000. Both attys female. All clients male. Males wanted to fight over blocks. Yes, there was a mildly realistic reason for my clients to want the blocks to stay. But I'm absolutely sure that between the 2 attys we charged more than what the blocks were worth to settle this. But a lot of testosterone got spewed, and I guess that was, emotionally speaking, the important thing.
Um, lawyerliz, I hate to say this but i've had the same thing happen in reverse. from both females and males. i think it is just sort of natural when confronted with someone that you find attractive. although i do think that one ought to be able to control that to some degree in the workplace. and some people (both male and female) find risk attractive, that's why there are about a 50/50 mix of male and female skydivers. I know because i am one.
yearning has it correct that women, historically, have been the ones to bear the responsibility of child-rearing. so their career goes on hold when this happens. from a corporate point of view, this is career limiting, as you don't want someone popping up pregnant and then taking 5 years off after you've invested in them and put them on a track. I must say that's probably going to change as now many males are the ones to stay at home. but, speaking about reality, that has honestly been the issue, and not one of gender specifically. just in practice. and i think that's why education and health-care have been choices traditionally. they are flexible enough to be able to do both.
Tanta,I always enjoy your posts that include discussions of the class distinctions in financial institutions.I my experience they are as rigid as early 19th century england...and the power of the sales staff is something you do not overstate,I well remember being told to sign off on a loan or clean out my desk after the sales manager took my refusal up the chain of command.I heard later that the deal didn't go sour for a whole quarter.
Tanta -- you have made a lot of sense for a long time. I am surprised that you have not been interviewed a lot on TV, and/or recruited to the boards of some of the financial institutions.
Oh, and as per my many posts on other threads, the NOTES ARE NOT LOST.
And the foreclosure mills are not to blame for this. The lenders want them to snap to attention for their measely fees. The lenders don't want to hire enough people to find the notes. The lenders will not hire foreclosing attys who tell they they are not doing it right and they should find the notes. The foreclosing law firms of course don't know what they are doing and don't know how to handle a contested foreclosure, but as to the lost note, angle, it isn't their fault.
I don't think you can blame the examiners for only having 20 examiners, either. "Nights and weekends!" You do know that a lot of people pick examiner over a Wall Street career because they have explicitly chosen to forego Wall Street salaries in return for not wokring Wall Street hours. One of the reasons for accepting the GS wage schedule is that it is more family friendly. If they were worked 80 hour weeks, why wouldn't they just leave for Wall Street where they could earn a commensurate salary?
Obviously most of those 20 have to be devoted to known risks (I write this with the fear of sounding too much like a former SecDef). Imagine the fallout if known risks caused a blow up because they were ignored, in addition to the obvious fact that known risks are known risks, and hence should not be ignored. That might leave you with 3 or 4 out of the 20 to work on the nearly infinite number of unknown risks that could blow up. A lot of ground for a few to cover.
You said they should go wherever a trail leads them. What trail would lead to 'lawyer outsourcing in REO' before it started to blow up? I agree with the general principle 'new ways of doing business lead to risks that should be explored' but my question is more direct. Of all the different ways in which work is being altered by technology, outsourcing, off-shoring, what would have led your intreped staff of 3 or 4 devoted to 'unknown unkowns' to look specifically at the lawyer outsourcing? What trail should have been followed that wasn't?
You could get me to jump out of an airplane only if it was on fire AND there was someone behind me pushing.
ha! people say "why would you want to jump out of a perfectly good airplane" lawyerliz. The proper answer is "there is no such thing as a perfectly good airplane"
You do know that a lot of people pick examiner over a Wall Street career because they have explicitly chosen to forego Wall Street salaries in return for not wokring Wall Street hours. One of the reasons for accepting the GS wage schedule is that it is more family friendly. If they were worked 80 hour weeks, why wouldn't they just leave for Wall Street where they could earn a commensurate salary?
Do you really believe that everyone in this industry who works 80 hour weeks gets paid like the Wall Street princes? Do you really? You sound like you're living in exactly the world I was trying to suggest most of the Main Street middle managers don't live on.
I am not interested in exploiting anyone. Nor am I generally impressed by a lot of people who like to natter on about how many nights and weekends they work, as if that were some sort of merit badge. A lot of those folks have productivity problems, in my experience. Too much "networking" during the day leading to too much "working working" at night.
I am not suggesting that anyone could necessarily have found the problem with default legal work outsourcing long before it blew up. For starters, we just went through a long boom were there weren't that many foreclosures. It was hard for even the worst of these firms to fuck up the three cases a month they got.
So now the problem arises when FCs dramatically rise. But isn't that supposed to be the point of risk management, to anticipate that the landscape might change, and to ask if our current practices will be enough if it does? In any case, as soon as those first opinions came down about the missing docs, someone should simply have been all over those custodians right away. On that, I think you and I agree. However, if they do decide that it isn't the custodian, it's the law firm, they're already in it enough to decide that! I'm not even sure why you think of this as "extra work." How could you rely on an examiner who said "well, we looked at the custodian and it's clean, so we're just guessing it's the lawyers."
And if you want an answer to your last question, it's like the same point I made in reference to NEW. Nobody in the servicing department needs to wait for some reporter to write some breathless article about Judge Boyko to know that FC motions are being dismissed on a bunch of their cases! If the servicing department didn't investigate the problem, that is the risk management failure that the examiners are there to deal with! And if the servicing department did investigate, and came to the conclusion that they were dealing with incompetent local counsel, then surely any examiner not born yesterday has to ask, "So what are you going to do about that?" and follow up to see that it is done?
Lawyerliz writes:
An example of testosterone foolishness in middle aged men.
From a vendorÂ’s perspective, worst to best lawyers*:
1) Named male partners in big city firms
2) Male attorneys less then 5 years out law school
3) Female partners in big city firms (sorry, if I offend)
4) Every other lawyer not covered by 1 through 3, or 5 and 6.
5) Female associates in big city law firms less then 5 years out law school
6) Small town male sole practioners who have been at it at least 15 years
The cards I hated to see played were outsourcing and automation - those two and a software update could be trusted to neutralize back office functions for a time when the combat became serious.
Since audit is often the only rebuttal available short of the Baker Act, it's good to see you take this up.
Do you really believe that everyone in this industry who works 80 hour weeks gets paid like the Wall Street princes?
Not everyone who buys lottery tickets or becomes an "actor" cough waiter makes it either. At some level, the payscales at these firms are structured to incentivize risk takers. The way to best motivate alot of strivers is to create a few winners. Most of 'em end up with steak knives, but they've been dreaming of the Cadilac. There certainly is alot of self selection for both risk aversion and lifestyle in the job market.
So you accept that it would have been difficult to spot the problem before it surfaced? And your issue is whether or not the issue was followed after it surfaced? How do you know that it isn't being followed now? Not much that's done in examination is made public.
Forget Wall St. 7 figure salaries. I talk to people all the time faced with the difference between $90K at a regulator vs. $120K at a regulated institution. You have to offer something to get them to accept $90k. That something is often family-friendliness. And that was more true when we were talking 'could it have been found proactively?' At this stage all regulatory agencies are working flat out. And they aren't losing people (yet). Could staff have been worked like that when loan default rates were near zero? I doubt it.
"To return to Yves' suggestion, there's certainly a lot to be said for regulators recruiting from this pool of women mortgage managers. We know where the bodies are buried. We know how they got to be buried. We know how they died. We've got the reports in our lower-left desk drawer"
At some level, the payscales at these firms are structured to incentivize risk takers.
I am trying really hard to point out that not everyone in these firms is on the "sales side."
From my perspective, we don't "incentivize" risk-takers as much as we "innoculate" them from the risks. They do not fear layoffs; they do not fear the company folding. Why should they? Have you seen their bank account balances?
And besides that, these "risk-takers" don't actually sign off on any of the risks, you know. We have underwriters and closers and pipeline clerks to put their unglamorous little signatures next to the official risk-taking. You think the best-paid people in a mortgage outfit are these? Not on your life. Not in a house, not with a mouse, not in a box, not with a fox. We've had commissioned loan officers, brokers, account executives, and their managers making a half a million dollars a year, but the underwriter who had to sign the transmittal would, in large parts of this country, have been way lucky to make $90K. And the very first stop when a loan goes bad is the underwriter, the processing staff, the closing documents preparer. Not the EVP of Mortgage Production.
There has been, by and large, zero loyalty to these people on the part of the corporations. They get laid off at whim; their bennies and pensions cut; their daily working life continually dumbed down by ill-thought-out automation projects. Yet the only "incentive" they are offered is the health of the company: no underwriter gets a bonus for denying a bad loan. (It is in fact a violation of the regs to pay any underwriter by approval or denial, since that's so obviously corrupting.) So you ask people to look at the health of the company, not what makes it easier for them to put up with the incessant demands from the sales side. Then the company treats them like disposables. Meanwhile, the ones who have been about running the damned company into the ground don't much care, since they've been well-paid enough for long enough to survive it.
So you accept that it would have been difficult to spot the problem before it surfaced?
It is indeed difficult to predict what risks will occur, and what risks will remain mere frightened possibilities in a risk manager's nightmares. That's one of the chronic problems with that job. You get worked up about something, and some glib jerk always asks you if you are guaranteeing that some evil result will come from the proposed policy. No, you say, I cannot forsee the future. I simply say that the risk is there and I think it's not worth the savings. Well, says glib jerk, thanks for sharing your opinions with us.
I'm not at all sure what we're arguing about. My point was that I fear we guarantee that some risks will be detected only after they've blown up. As opposed to having a fighting chance of catching on first.
Your message rings a bell.
My wife works in health care down in the bat cave with the lab techs.
She comes home boiling over at the stupidities perpetrated by management.
When she went per diem, they had to hire 4 temps to take her place and get the same daily output. The problem is that those temps make enough mistakes that their productivity is less than hers was.
Management hires "consultants" on a regular basis. They are the usual "seagull" consultants who come in squawk loudly, shit all over everyone and flyaway. They write reports that no one reads and if management reads them they do nothing to implement the good ideas and often implement the bad ones.
It is a wonder that large organizations don't implode on a more regular basis.
I'm not sure that I understand. Since there are an infinite number of possible risks, both the statements 'we have a fighting chance of detecting the risks' and 'we can guarantee that some risks will not be caught' can be true simultaneously. I would argue that there is a fighting chance that unknown risks will be caught. There usually are 3 or 4 people out of a staff of 20 looking for the unknown unknowns. Even though any one risk, or set of risks, has a fighting chance of being caught, it is still the case that with finite resources and near infinite potential for mischief that something will slip through.
And I'd argue that too deep a focus on the weeds is not the best way to proceed. The risk management and audit functions of an institution will be much closer to the risks, the new and untested risks especially, then will an outside regulator. Regulatory time is generally better spent on giving those functions a fighting chance, and discovering whether or not they do have a fighting chance by looking at how they've behaved in a few cases of 'getting down into the weeds.' A regulator that devoted most of the staff time to looking at the documents would rapidly get swamped. A regulator that makes sure that risk committees, auditors, etc. devote their time to looking at the documents, and makes sure that this is the case by looking at a limited subset of all the possible ways that things can go wrong, will have much better odds of a successful outcome.
I think the actual danger is that regulators appointed by political leaders to clean up the mess will come, as usual, from the ranks of out-of-work apparatchiks and lobbyists.
Somehow, there needs to be an incentive to get it right, this time. I can see how someone who actually -wants- to get it right would look to people who know what they're doing-- but that should be an effect of doing the incentives right.
I would say it's generally very easy to see where the next problem is going to arise, you just follow the 25-35 year old hyper aggressive alpha males, particularly if they have an MBA. Also look for signs of adulation by the press.
Or anomalies where 1 company or section is making far more money on a product than their competitors or has historically been the case.
The problem is you need people with balls to take on the risk-takers and to be backed up, which isn't normally the case judging by most comments here.
And I'd argue that too deep a focus on the weeds is not the best way to proceed.
You are entitled to that opinion. I have never personally encountered a regulatory regime that was ever allowed to try it. It is hard to quantify failures or risks that were successfully averted, since they were averted. So perhaps your model has many successes to its account. But I see no grounds for claiming that it is preferable to an approach that has never really been tried.
A regulator that devoted most of the staff time to looking at the documents would rapidly get swamped.
I don't know what documents you're talking about any longer. Would I expect every contract to be reviewed in detail in every examination? Of course not. Everything is sampled anyway, and rotated in the examination types.
I was trying to suggest that knowing that crucial information that might be of importance to a risk-management examination can be found on a PSA would, well, help. I know you haven't read the NEW report I'm talking about, but it was a situation in which the accounting and internal audit people were telling the investigator that they never received word of pending repurchase requests. In my experience, such a thing has to be either a lie or terrifying mismanagement. Asking someone to produce the contract so that you can see who is on the "notice given" list on page 47 doesn't take all that long, and no, I don't think that's "getting into the weeds." If you see the CFO's name there, you have just improved your list of examination tasks. If you see only the national sales manager's name on there, you have done so as well.
In any case, I was trying to bring up an example of exactly a scenario in which a regulator was told that auditors, risk committees, etc. were not looking at documents--in this case, repurchase requests--because they had just said so!
At some point this argument becomes circular. How does an examiner know that the audit and risk committees are looking at everything? If you ask them if they are, they'll usually tell you that it is so. In the NEW case, nobody admitted to not looking at the repurchase requests until after the BK had been declared. It gets to be a case of the dog that didn't bark: you need examiners who recognize what topics or reports or problems are not showing up in the meeting minutes.
And frankly, I think examiners who occasionally demand to see the actual contract--or whatever document we're talking about--put more fear of more God into the people they're dealing with than an examiner who makes it clear he or she will never check up to see if you answered the question correctly.
I'm puzzled by your claim that NEW represents a case in which a regulator was told something. I thought that NEW didn't have a regulator, and that was part of the problem.
I also agree that never asking to see a document would be a very bad way to regulate. Fortunately, I've never encountered a regulator who never asks to see a document.
My point is that the 'sampling' of documents to review would often be tied to the question "are the institution's own controls working' rather than trying to substitute for the institution's own controls. In other words, do the tantas of the insitution have a little power (which is usually the best that can be hoped for) or no power at all?
mort_fin, you do know that the staff is always clearly instructed to answer any and all questions the examiners might have fully and honestly, but never to volunteer anything that wasn't asked about. You know the examiners know that these are the standing orders.
At some point, that means the examiners are responsible for knowing what questions to ask, or else they just won't find out the right things.
I've even worked for a financial institution at which, in the week before an examination, a big "clean up your desk" campaign was held. It wasn't from any fear that some pedantic schoolmarmish examiner would mark us down for being messy. It was quite patently a fear that someone would leave that Repurchase Requests Pending Report (or whatever) sitting out in plain sight. If they ask you for it, you have to produce it, but if they don't, it can stay hidden in the drawer.
my business partner and wife has many times saved me from expansionist follies. She is also more knowledgeable and harder working than me. Me? I lift heavy things.
I'm puzzled by your claim that NEW represents a case in which a regulator was told something. I thought that NEW didn't have a regulator, and that was part of the problem.
Sigh.
I just used that as an example. As I explained, it came to mind as I had read it recently. I did note that it was prepared by the BK trustee, and that it was NEW, and I think I even contrasted it explicitly with practices at regulated institutions.
I apologize for having tried to use a publically available concrete example. If you can find me a depository's examination report online, by all means link away and we'll find better examples. But you know as well as I do that those are not available to the public. And I don't think it's very helpful to talk about hypotheticals that may never have happened. Of course I could come up with a big list of concrete examples, but I have my own non-disclosure contraints to worry about.
NEW didn't have a regulator. I was wondering if a regulator would have caught on to the problem any better than the BK trustee did. But as that is mere speculation on my part, feel free to ignore it and assume that the regulators we have would have been up to the task of examining NEW if they had been empowered to do so. I give up.
But that's my point exactly. You're speculating about what's happening in examinations, but examinations aren't public. NEW wasn't an examination, and I've already noted that these special report type things are usually prepared by people with a different focus than examiners. It's public, but it isn't particularly germane to the subject of how exams of financial institutions are done.
Look, if you want to argue that all or most examiners already have the background, skills, and experience that I am asking that they have, then fine. That's an empirical matter that we won't settle today.
If you're just discussing a True Scotsman, then we'd best go on to something else.
I, uh, thought you were making a much less painfully obvious point than that. I'd have conceded long ago if I'd been aware that your objection to the example was that it came up in the trustee's report on NEW instead of a banking examination.
wow. All these years I thought I was educated, but you've just forced me to wikipedia to look up 'true Scotsman.' I learn something new everyday.
So far as I can tell, it is empirical. You keep insisting that in your experience documents are often not requested. I keep telling you that in my experience they are. Since I don't think you've claimed that they are never requested, and I've never claimed that they are always requested, we're arguing degree.
I've also pointed out that it will never be the case, given limited staffing, that exam staff will have the same level of experience, and hence the ability to ask for all the right documents of the staff of the institution. Hence, the focus on the extent to which the insitution itself is handling risk.
"Meanwhile, the ones who have been about running the damned company into the ground don't much care, since they've been well-paid enough for long enough to survive it"
There is a word for these kinds of high-level players: Parasites.
I'd imagine the only thing that threatens them is bright lights. If I were driving the bug van, I'd get the brightest lights I know (hint) to come up with some type of code that eliminates this buck-passing and puts their parasitic skin squarely in the game.
Don't know if you'd even need to have govt make it a regulatory code. You put it out there as voluntary, and make the investing public well aware of who's on board and who's not. If it was clear to the public how easy it is for these guys to scam and run, who would want to invest in them?
I am trying to suggest that there may well be highly skilled and experienced people in the industry for whom a regulator's salary would be a promotion, not a demotion. They are not the highest-paid officers or front-end rainmakers in the business. Obviously.
LOL at doing networking during the day and having to do work work in the evenings. I remember when I worked at a fast-paced company of a different sort and I puzzled about all the people around me who said they were working really hard, but what I saw was them spending a few hours a day bullshitting with each other. I like to bullshit as much as the next person, but I don't mistake it for working.
Mort_fin: "wow. All these years I thought I was educated, but you've just forced me to wikipedia to look up 'true Scotsman.' I learn something new everyday."
Yeah, me too. And another thing. I have seen the word bricolage twice since Tanta taught it to us. Weird, huh?
Beautiful piece, Tanta. I've gone through the same in one of the dotcom software engineering companies, eventually getting canned for speaking up about all the crap going on while everyone wanted to pretend the party would never end.
My favorite moment from this was the call from the lawyer representing the shareholders a year after I got canned to get my deposition for the shareholder's lawsuit against the corporate management for the rapid decline in their stock price.
After working my whole life in male dominated industries, (25+ years in aerospace/military, Asian automotive, high end electronic manufacturing)and rising to V.P level, I have found the fact that I am tall, thin, blonde/blue eyed, has caused me to spend an certain amount of time "proving myself" to those I first meet in a business setting (especially in the Asian world). Now in my 50's and still working, as I look back I can honestly say that even in our modern times, sex discrimination exists. In most cases it is subtle and without going into the whole "Mars/Venus" thing I feel that in many cases, the intuitive, relational skills that many women posess actually prove to be more effective when measuring successful business acomplishments. Sometimes it worked to my advantage but overall it seemed to be a handicap. I suspect the world of finance is different but we still have a long way to go baby! Thanks Tanta
Management hires "consultants" on a regular basis. They are the usual "seagull" consultants who come in squawk loudly, shit all over everyone and flyaway. They write reports that no one reads and if management reads them they do nothing to implement the good ideas and often implement the bad ones.
It is a wonder that large organizations don't implode on a more regular basis.
It's not limited to financial companies.
I work in an food factory and we have a USDA inspection coming up. We know when they will be here, what they will be looking for, and we know how to make sure they will find only what we want them to find so we pass inspection and keep on running. All our customers insist on the right to inspect at any time, day or night, weekends included and they sometimes do. So we mostly stay within regs and requirements as much as possible while still getting product out the door. If we adhered to everynitpicking* regulation of the USDA and everypetty* customer requirement, we would have gone out of business decades ago.
Tanta, I think that the real problem you address here is what I call the "MBA-ization of Everything". It's not that I discount the degree - it's just that the degree applied without industry-specific context developed from knowledge creates a giant horde of Sebastians randomly applying analytical models in a pyramiding triumph of the Dunning Effect. I have examples from multiple industries that make people who understand those industries clutch their sides and double over with laughter. It's not just banking.
I don't think this is a class issue. I think it is an example of ivory tower syndrome on the part of educators, and an extreme willingness and perhaps an ardent desire on the part of top management to employ the people who justify taking the type of risks you have to take to make the type of money you want to make. The dumbest true believer wins the argument in those conditions. It all depends on management's preferred horizon. We probably won't fix this until the style changes to fix top management pay on the basis of longer term performance.
As for regulation and examination, there are two problems. The first is that there are not nearly enough of them to get the job done when the risk environment shifts rapidly, and the second is that when so much of the mortgage industry was taken over by the non-regulated institutions, it created a rapidly changing environment with vastly increased non institution-specific risks.
The very best regulators can't effectively operate in this environment. First, by their very nature they concentrate on institution-specific risks. Second, when you are in effect regulating less than half the loan generation in an area, the bad money is going to run out the good money no matter what you do if it is highly profitable to do so. The changes in industry practice were so rapid that any risk matrix was outmoded before it was deployed. The conservative institutions lost control of the environment, so they adapted to compete on a higher level of risk or basically got substantially out of the business. And the controls on commercial lending collapsed nearly in lock-step with consumer lending and mortgages, so it was very difficult for most institutions to set a conservative course.
I'm insistent on this. There were parts of the nation in which no institution with a five-year risk policy could lend. The risk of not lending was more than the risk of lending on a two-year risk policy, writing up your book, and selling out to some foolish bank which ultimately sells to an even more foolish Canadian bank.
How the bleep do regulators function when you have people writing prime loans on homes surrounded by other homes funded by 35% subprimes with teaser rates, or lunatic Alt-As? Such an environment makes fools out of everybody.
Business is rife with unfair discrimination, targeted often at gender, sometimes at youth, sometimes at age, sometimes at ethnic group, and always, always at those who do not run with the pack and kowtow to the hierarchy. There's a lot of pressure to be a "team player" and know when to shut up--to lie, actually.
I've worked in small companies and large, from entry level to Fortune 500 executive. Amazing how fast you can go from "too young to get it" to "too old to get it" without changing much. Still, you can earn respect in any situation with enough people savvy and patience.
Understanding people's true value, regardless of gender, age, race, etc. is a very valuable competitive advantage. And in a startup or small company the feedback on such advantages is very quick. I wish more women and minorities would work for small companies, or start their own, but for whatever reason there's a worship of large, established corporations--the bastions of discrimination and suboptimal thinking. These inefficiencies will eventually cost corporations dearly, but if you think markets can stay irrational for a long time...
MaxedOutMama wrote: ...a giant horde of Sebastians randomly applying analytical models in a pyramiding triumph of the Dunning Effect
LOL! OMG, one MBA in a position of power, say with a VC board seat, can destroy a good company in a matter of months, all very innocently and with the best of intentions. I've seen it happen at close range.
I can only imagine that a horde of such people with sufficient access to capital could do trillions of dollars of damage. Wait, they have!
"It is indeed difficult to predict what risks will occur, and what risks will remain mere frightened possibilities in a risk manager's nightmares. That's one of the chronic problems with that job. You get worked up about something, and some glib jerk always asks you if you are guaranteeing that some evil result will come from the proposed policy. No, you say, I cannot foresee the future. I simply say that the risk is there and I think it's not worth the savings. Well, says glib jerk, thanks for sharing your opinions with us."
Said glib jerk might (just might) now understand why Goldman Sachs was able to save their ass compared to the other IBs, during the current debacle.
Turns out that GS has embedded risk management very deeply into their business processes. The head of risk management team always had the attention of the higher-ups. If he/she says: "I think we might have a problem with that." ears perk up, the discussion is thorough, and decisions are taken ASAP.
It goes without saying that traders and other risk-takers don't like it one bit, but with the Bosses fully backing up risk management, the alpha creatures suddenly realize they might have more beta genes than previously thought.
I wish more women and minorities would work for small companies, or start their own, but for whatever reason there's a worship of large, established corporations--the bastions of discrimination and suboptimal thinking.
So many of these women are working for the large corporation to get the group health policy for the family, allowing the husband to work for the small company or become an entrepreneur. Or they're single women who simply do not have the kind of safety margin that allows them to take such risks. Yes, I know only too well how risky employment in the large corporations has become, but the myth lingers on that the jobs are more stable and the benefits more reliable. Surely I know few small companies that offer much in the way of decent inexpensive health insurance or 401(k) matching.
In any case, the women I am thinking about today started these jobs in these corporations quite some time ago, when there were still "defined benefit pensions" and things like that. Over the years they've watched pensions disappear, other benefits erode, and their salaries fail to keep up with inflation, but what are they to do now? Compete with the younger, healthier, and better-educated? Or hang on to the job they have, hoping that 20-30 years service will be rewarded with employment until retirement age?
Banking is never going to become the province of start-ups and small companies in this country. To discourage women and minorities from pursuing jobs at banks is to then cede the banks to white males.
To discourage women and minorities from pursuing jobs at banks is to then cede the banks to white males.
I think zero's point wasn't to discourage this, but to broaden the thinking. As someone who came from a ahem rather large blue company to forge out into the startup world, I can toss the same feeling out there. Actually the best jobs, and the most flexible ones are in startups and smaller companies. Forget about pensions and protection...gone forever. It's not that banking isn't a good field, it's just that what is required (time and inflexibility) might not be for everyone. Neither is large corporate stupidity as outlined so well by MOM.
I'm much happier, and better utilized in start-ups and smaller companies looking to grow. I'm also very attentive to my staff's personal needs for family, flexing time, working from home, etc. Perhaps that's why many women and men are choosing that over corporate drone drugery these days.
Btw, one of the common sayings in these types of companies is "if you want to come in and do the same thing every day, and work from 9 to 5 there are places you can. They're called banks and insurance companies".
"I work in an food factory and we have a USDA inspection coming up. We know when they will be here, what they will be looking for, and we know how to make sure they will find only what we want them to find so we pass inspection and keep on running."
Do you think the FDA inspector doesn't know that you tidy up for him and that he is looking the other way on the more ridiculous nit picking stuff (if he wants to to gain your cooperation on the stuff that matters)? Did you ever consider that he's on your turf, makes under 50K and that writing you up is a bitch he has to contend with (because upper management has pretty much managed to assigned him the conflicting roles of adversary and educator/problem-solver.)
I think sometimes you have to say we are going to be out of this business for a while.
Totally agree that bad money runs out good. If you want to be around in 5 years, and you know you won't be if you do what everyone else is doing then you have to stop doing it and either do nothing or find something else to do.
Having no loyalty to your employees has bad consequences which hopefully will be punished.
Totally agree with the poster that said don't be in a business which has too many young alpha males. They are psychologically unable not to compete. That's what their whole biology is telling them to do.
Finally commissions should be awarded after the loan is seasoned. Even if the person who generated the loan has gone to greener pastures. Is that so hard to do? Is that so hard to think up? I just thought is up now; I doubt I am the first one to think of it.
This will give a longer time frame than next week. If somebody doesn't want to accept that condition, that is an excellent reason not to hire him or her. The money could be put in escrow, and divvied out gradually.
Finally if Newton had lived in the late 20th century, would he have been part of Long Term Capital Management??
I understand he was deeply into mysticism too, but nobody reads that gibberish.
I have had both male and female bosses. I would much rather work for a man. Although the female managers I have worked with have been generally more reliable, harder working, and more honest than their male counterparts, they have also been less fair and generated less revenue.
It seems to me that women do hold grudges while men are more willing to let bygones be bygones and not get wrapped up in petty personality disputes.
That said, I would get angrier when a woman would yell at us as opposed to a man, so perhaps I am less accepting of a woman supervisor than a man. I can say unequivocally, however, that I was much, MUCH happier having a male boss.
"LOL! OMG, one MBA in a position of power, say with a VC board seat, can destroy a good company in a matter of months, all very innocently and with the best of intentions. I've seen it happen at close range."
Also, one MBA, George Bush, has just about destroyed a country in a matter of a few years.
Do you think the FDA inspector doesn't know that you tidy up for him and that he is looking the other way on the more ridiculous nit picking stuff (if he wants to to gain your cooperation on the stuff that matters)? Did you ever consider that he's on your turf, makes under 50K and that writing you up is a bitch he has to contend with (because upper management has pretty much managed to assigned him the conflicting roles of adversary and educator/problem-solver.)
I am sure the whole inspection team is aware of these issues. And they are probably not too happy to be working all day Sunday (to fit our production/cleanup needs) either. But I don't care about the feelings of some regulator, I care about getting a regular paycheck.
In our food safety classes, the instructors regularly bring up the cases of several companies in recent years that have been forced out of business because of food safety issues. If I pay attention to GMPs, my job/paycheck is more secure
Getting back to Tanta' point about regulatory work being a cost center, it is. And the grunt work of it is done by relatively low-level people of both genders. However, that cost center can keep your company in business. As long as upper-level management understands the purpose of following the rules and having auditors from both inside the company and outsiders (with shut-down-the-company enforcement power) is good for the company in the long run, life is much better.
If you still wonder about the value of the cost center, ask the 4 people who died and the 700 made sick by poor compliance with GMPs at Jack-in-the-Box back in 1993.
Could the regulatory process be made better by hiring people with industry experience? Possibly. But how do you insure the former underwriter/machine operator/whatever will transfer their loyalty from the old company to the new agency? How do you get the experience you are looking for but maintain the independence you need to do an honest job?
Tanta - I don't think it would've mattered if you were male or female, degreed or not. Something tells me you would have succeeded in just about any endeavor.
Maxed out Momma the "Ivory Towerization," isn't limited to the business schools. There is a general emphasis on PROCESS rather than KNOWLEGE. Like many things, this isn't a bad thing per se, but is often taken to a nonfunctional extreme. Since I went to a liberal arts college,* I had a ringside seat at some of the little culture wars generated by modern literary criticism, even if I wasn't taking those classes.
Other Jim But how do you insure the former underwriter/machine operator/whatever will transfer their loyalty from the old company to the new agency? Of course this is one of the problems that the FAA is going through right now. IIRC that the supervisor who was directing inspectors to go easy on Southwest on 737 fueslage inspections** used to work there.
*I didn't have to look up bricolage.
**google "aloha air 243" for WHY those inspections are mandated
What still amazes me is how many men here in the U.S. are sexists who do not view themselves as such. Many male writers exhibit their sexual prejudice out in their columns and they DONT EVEN REALIZE IT.
Take for example today's car column by Ed Wallace titled "Every Man for Himself." What hasn't sunk in to Mr Wallace is that every example of bad ethics he has used is a woman.
Other than his personal baggage, I consider Ed Wallace an informed writer regarding automobiles and their history.
I just recently completed an experiment. For two months, I posted under a male name. Wow, what
easy sailing and comraderie!
NOT the sometimes nasty and sexist remarks received under my female name.
So, women have come a long way, baby,
but still a ways to go.
OMG, I just realized you can't spell dumba** without MBAs.
I always thought I was alone in thinking the biggest problem with the US economy was the reliance on Harvard MBAs. Not that the top of the class wasn't very good, but on balance, well, just look!
Tanta: "Take it from she who can see IP addresses: they're not missing this. They're just lurking."
Or they have better things to do on Sundays, and don't see posts like this until after all the conversation has died down. Oh well. I am admittedly from a different corner of the regulatory world that only tangentially deals with mortgage finance, but I suspect things are not so different that I can't provide some comments.
On the issue of gender, the unspecified agency I work for is a relatively even mix of women and men, regulating an industry that is infamously male-dominated. I don't have any commentary on why that might be, but that's my observation. The real old-timers are, not surprisingly, mostly men (I think we've got a few who were around during the Panic of 1893), but the leadership has both women and men.
One important distinction is the regulators' role in preventing non-compliance vs. what I call stupid behavior. The regulator has a specific mandate of what they can regulate, and outside of that, companies have wide latitude in their decision-making, and are generally not prevented from making a decision simply because it's a bad one. I have heard a lot of questions about where the regulators were when companies were writing stupid loans--I suspect the regulators were there, looking over their shoulders, saying "yep, that's a stupid loan", but as it turns out lending your money to a terrible credit risk is not, in and of itself, a violation of statute.
That gets into a gray area when you're talking about Federally insured institutions, where the additional burden of ensuring the company's solvency brings business decisions into the realm of regulatory compliance. Private lenders, of course, do not have that burden, and can (and do) lend themselves right into bankruptcy court, but it's a much more complex situation when it's an FDIC or GSE organization.
The limitation of what the regulators can and cannot review is very real, and unlike an enforcement team with a search warrant, they cannot ransack the place and bring people in for questioning indiscriminately. Institutions know perfectly well what the regulators can and cannot do, and prepare for it. Regulators have to stick to what they are allowed to ask for, and generally hope that they will be able to detect issues from what materials and interviews they are allowed to gather in the examination process. It's a matter of looking for loose threads and pulling--it's why good examiners know to do things like have informal "off the record" (hehehe) chats with low-level people from operations while they're just sitting around, or rifle through papers on desks when no one's looking (tee-hee!)
But the reality is that in some cases there aren't any loose threads. Many companies, especially the big-money big-name companies, pay big bucks for compliance consultants (many of them former regulators with years of experience) to come in and keep everything sewn up and looking perfect. That's fine, and that's not a problem--as long as they really are following the regulations, and not covering up problems. But if industry veterans working with regulatory veterans put their minds to hiding problems, it becomes very, very difficult for exam staff to find them.
One final point, and that is on hiring from the industry, as opposed to hiring direct out of school or from other sources--as it turns out, my corner of the regulatory world has a slight bias against industry veterans. I honestly don't know all the reasons for it--we do have several industry veterans, but there is an inclination to try and train regulatory staff fresh, and without industry biases. I know that sounds odd, but I think there is something to it--the regulators want people who will have a fresh perspective on regulations, and not simply dismiss them with "well that's not how things get done in the real world."
I appreciate Tanta's post, and I'm very interested in attitudes from the other side of the regulatory fence. If there's something we can agree on, though, it's that the regulatory side needs more of the right kind of people, preferably the fastidious and detail-oriented types. If this financial mess results in more solid people knocking on the regulators' door, that will be a positive.
"Take for example today's car column by Ed Wallace titled "Every Man for Himself." What hasn't sunk in to Mr Wallace is that every example of bad ethics he has used is a woman."
Typical. Another example: watch the gender neutral sentences that journalists write regarding molesters, serial killers and mass murderers when 99.9% if them are male.
Another example: Watch the gender neutral sentences that journalists write regarding molesters, serial killers and mass murders when 99.9% of them are male.
Now that you mention it, you are close to the truth!
I just recently completed an experiment. For two months, I posted under a male name. Wow, what
easy sailing and comraderie!
NOT the sometimes nasty and sexist remarks received under my female name.
Just curious what blogs you were posting on and whether there were any discernible patterns.
I was posting on a very well known market/stock board that often rivaled
Yahoo finance as to how rude and crude posters could be.
From what I could tell, very few women posted and so it was very much
a "boy's club." You could say anything you wanted and the monitors idea of severe banishment never lasted more than a week. After all, these male posters were investors and nothing stands between money and big business. So it was like a green light to behave like six year olds on viagra.
Several months ago this company and their site was bought out and there has been a huge change as posts are removed that do not meet their guidelines. Its a much better board now, but I doubt that I will ever choose a female name again. Life is so much easier to pose and navigate as "male".
One really doesnt have to travel through very many blogs to find some evidence of what I say or a similar situation. But there are always those surfers who are oblivious to what goes on.
What amazes me is that these same male posters have daughers and granddaughers. And I do believe in six degrees of separation. What goes around, comes around.
So when their daughters and granddaughters are held back with that famous glass ceiling, lower pay, verbal abuse or molested at work or worse-- I wonder wouldnt it be ironic
if the culprit turned out to be one of their posting buddies or a son of their posting buddy. Karmic action tends to be ironic and spot-on.
I hope I gave everyone somethng to think about. More than just gender differences but the condition of the human race.
" "But if they do, I've still got all the stuff from last time in the lower left drawer of my credenza. If it's not worth doing, it's certainly not worth not plagiarizing.""
Ha. I've experienced it and I wouldn't call it plagiarism. I would call it recycling, and it saved a lot of time.
In a cyclical business, I'm not sure that anyone could have stopped people that had huge incentives to lose other people's money (or what they thought would be other people's money). Markets regulate with a viciousness that is that is breathtaking. No one is clamoring for the raw material for subprime or alt a CDO's this year. Relying on markets guarantees collateral damage, unfortunately.
Basically, trying to stop this freight train from within the business would have been brutally painful, thankless, and futile as well as a career limiting experience.
This is based on my experience in another industry, so my comments are very general. Nevertheless, unless you can get the incentives right, nothing else will work. And the incentives have to reflect long term cyclical reality.
I'm not sure I agree with the point Yves was making to being with.
Regulator "grunts" still wind up working for alpha types like Spitzer (with Spitzer being an extreme alpha). And when you couple that with the typical job/pay classifications that government work always has, people with skill and determination in those jobs eventually get sick of being taken for suckers and find other employment.
To Yves' final point: "Think of the FSA being run by a British equivalent of Tanta" - Tanta would probably be even more fed up in a regulatory position than she would be in a dysfunctional private organization.
Thank you Tanta. Now let me go into my backyard and beat the subliminal feelings of gender superiority out of my head repeatedly with a blunt object. Thanks for keeping an eye out for the kids. What can I say?
The failure of the regulators wasn't competence. It was ideology.
They were placed in their positions as saboteurs to fulfill the right-wing "movement conservatives" bidding. Their purpose and intent was to destroy the regulatory system because their backers believed regulation was intrinsically evil, being an intinsically governmental function, which also happened to get in the way of powerful people's paychecks.
I call it, "Crony capitalism dressed up in Ayn Rand's trampsuit".
In addition to putting worker-bees in charge instead of slippery snakes, we have to change the ideology that the role of a police chief is to keep the officers in the donut shop during the bank robberies.
I am starting to think that this market snaps back quicker then people think. Fed Speak last week signaled, to me at least, that no rate cut was coming April 30. Inflation is very worrisome. Inflation plus no growth is more to.
Banker
Why Banker, it has been a while since I've seen you around.
Were you not perhaps meaning to post that comment on a prior thread?
Banker pokes his head out of the Bankerdome! Is it safe for the rest of us?
Tanta - what makes you think that examiners are mostly male, or that they don't hire those female back office refugees?
Tanta - what makes you think that examiners are mostly male, or that they don't hire those female back office refugees?
Well, actually, I'm not making the claim that they're mostly male; I'm responding to Yves here.
However, in my own personal experience the women on the examiner teams are mostly 1) young or 2) accountants. I think accounting is a "special case" here. It is certainly "back room," but it is also a degreed-with-professional-certification track, one that has in my experience been much more open to women than, say, pricing or risk management ever has been. Again, my own experience (outside HUD field offices, again another "special case") is that these younger women with accounting or general finance backgrounds are working for the government to earn some experience that will get them into better-paying jobs in industry.
HUD field offices are mostly the same kind of pink-collar enclaves that the rest of the business is, in my experience.
I will say that it has been a long time since I ran into a member of an on-site examination team I couldn't bluff had I wanted to. They know the CAMELS manuals inside and out, being bright persons, but they have very little idea how the operations are structured.
I was actually thinking along those lines when I broke down and read the U.S. Bankruptcy Trustee's report thingy on New Century the other day. There's some damning stuff in there, but it would be a lot more damning if the investigator had had any experience with operations. Did you happen to read it? All that long analysis of repurchases and default metrics and so on, and never once did it seem to occur to the investigator to ask whether those loans were serviced by NEW or not. Really. Some people were, apparently, claiming to the investigator that they were totally taken by surprise by this pipeline of FPD and EPD repurchase requests (implicitly, that some senior manager had withheld from the accounting and audit group). Yet NEW was a big servicer--surely they didn't sell every one of those loans released? How could they not know about EPDs until the investor managed to kick out a repurchase request a year later? As I was reading it I began to suspect that the investigator's innocence of certain operational realities was being taken advantage of. And that, I think, often happens with regulatory examiners.
Tanta, I salute you for daring to be you.
Welcome back Tanta, we missed you !
Tanta - I think your experience of examiners may be a bit outdated. Especially in ops risk, but really throughout examination, I'd say the gender ratio is not too far from 50-50 (certainly within 60-40), and many have industry experience.
Examiners can certainly be bluffed. Consider the odds. An institution with 10,000 employees may be regulated by a staff of about 20. The chance that any given examiner, even with industry experience, will know about the functions of the particular staff person being interviewd are less than 1 in 100. OK - less than 1 in 10 if you factor in the fact that the regulated entity may have a dozen people doing exactly the same thing. But you get my point. But you also may have thought you were successful even when you weren't. I've been plenty of examiner/auditor types who just quietly collect interviews and documents, and then line them up against each other, and find the holes. When different people in different parts of the operation are trying to bamboozle in different ways, it becomes obvious that someone is bamboozling in pretty short order.
I didn't read the New Century report. Couldn't find time for hundreds of pages. But your report doesn't surprise me. These special report type things are dominated by lawyers and accountants much more than routine exam functions are. It's a combination of big picture and try to find the smoking gun documents, but there's very little analysis involved.
Bingo! I predict that the surviving main street businesses, in whatever industry, will have many managers and quasi-managers wearing faded rose colored blouses. We will neither want nor need regulator jobs. But I've got some well-trained "producers" who, I'm afraid, are going to be available come fall.
flicking their laser pointers at too many garish hockey-stick-laden PowerPoint slides.
laser pointerts? that is like so 90s.
bacon dreams is right. Nowadays you would embed an animated avatar with a laser pointer within your power point slide.
But you also may have thought you were successful even when you weren't. I've been plenty of examiner/auditor types who just quietly collect interviews and documents, and then line them up against each other, and find the holes.
How often have you been these types?
I appreciate your faith in my naivete, but one of my jobs was to handle the final report. Some of these examiner/auditor types were so quiet about their detective work that they never even mentioned it in the report. Now, that's subtle.
I know I'm not the only person who got busted on the little stuff while the big stinking wretched ops-wide problems blazed along. Come on. I have been called on the carpet because examiners found that--sit down--there were historical rate sheets in the files that had not been initialled by the manager! And on three separate trading days the buyup ratios were wrong! And twice we picked up the TSY contract instead of the CMT index! Busted, I tell you, we were.
But did they notice that very highly-paid production managers were allowed to come into meetings and overrule policy recommendations? That complaints about "bad attitude" from loan officers whose loans had just gotten repriced were allowed to find their way into the poor pipeline clerk's human resources file? Not hardly.
The difference between a lot of things I saw in that report on NEW and what you see in a regulated depository were only of degree, not kind. And I have already gone on record as opining that a lot of this "stated income" stuff, as an example, arose as a way to make those "exception reports" look better to the regulators. If you're going to tell me they saw through that before about last year, you're telling me news. A lot of institutions got written up for making high DTI exceptions, so they changed that to taking more stated income loans where the DTI always looked great. And while they may have had some concern about stated income loans, I didn't notice any of them less willing to praise us for our "improvement" on exception management.
In any case it's not about numbers of women and men. At least, not for me. I knew that would be one of the "pitfalls" of this subject, getting sucked into those silly debates about numerical parity. Yves was suggesting that a certain kind of person be more strongly recruited as regulatory material, and I was trying to suggest that it's a class issue as much as a gender issue. There are huge class distinctions within the industry that mirror those in the culture at large: a few grotesquely-well-paid very powerful people at the top, a smaller cadre of relatively well-paid relatively-powerful people in the precarious "middle class," and a big rank and file of order-takers and elves. If you think regulatory examiners particularly notice that dynamic--let alone draw any useful conclusions about how it might distort incentives or derail risk management--you're seeing a side of it I don't see.
Jackie is just speeding away
thought she was James Dean for a day
Then I guess she had to crash
valium would have helped that dash
She said, hey babe, take a walk on the wild side
I love chicks who love guys who love chicks who love chicks.
A mighty read - you do The Blogs proud, yet again.
The irony of the "bacon bringers" is that they are utter slaves to their own high-pressure environments. You'd think one of these alpha males could grow enough of a pair to speak out when they saw their firms begin to self-destruct. And I have no doubt they could see it. I bet more than a few of them wanted to chew through their muzzles and side with you "back room" note-takers but didn't dare disturb the Glengarry Glen universe.
Don't get me wrong - I love hunting --but bringing back a poisoned, rancid carcass and passing it off as bacon is first homicide, then suicide.
Any business culture that doesn't get that spears itself, eventually.
bacon dreams is right. Nowadays you would embed an animated avatar with a laser pointer within your power point slide.
Yes, and those of us who stopped paying attention to that shit right around the 90s are noticeable by our dated references.
Of course it's been a few years since I was dragged into a dog and pony show. But that's rather my point, I guess. I know that a huge percentage of what gets said (and animated) there is either wishful thinking or just nonsense, but by god the rest of the world has been taking it pretty seriously. How'd we get to this pass if the regulators were so attuned to operational risk?
Let's go back to these big regulated banks showing up in court having lost their notes. Big regulated custodial trust institutions having lost notes and assignments and shit. What clever mild questions designed to trap the unwary were their regulators asking?
"I've been" / "I've seen" - a typo.
I don't doubt that a lot of bamboozling has been successful. Note my comments about the odds of even an experienced examiner having just the right kind of experience. I'm just noting that it might be common, but it isn't universal.
Regulations are mostly there to contain risk-taking and over-optimism, not to encourage it.
It dovetails with the economic analysis that shows it is more efficient for us guys to have higher marginal tax rates than the ladies.
FT.com / Comment / Opinion - Why women should pay less tax
We probably spend more and regulate more due to men, too.
No wonder we never got Federal spending cuts from the "daddy party." And you think they'd ever do a tax cut for women? Trying to telling to fellow who perambulates like Bush.
Bacon is! You can artfully cause the pointer in the slide to move in exact concert with what you're saying, which is good because those at the board level are usually distracted by shiny objects and things that move. The technique is best used on slides where you think they are going to immediately turn down a rat hole, and start discussing things you have no intention of ever disscussing with them, like the current year's plans.
Tanta, ipodius' first job was in banking, a very progressive bank at the time and one of the first to embrace the new-fangled ATM. His first boss was a woman that fits your description as someone who found herself in a job she never planned on being in. She was SVP of regional administration. I think of her a lot, actually, because she was an amazing person...stong, intelligent, and able to glide through what was at the time a males-only club with ease. I imagine that she was a limiting force in many decisions. She took me under her wing back then and I didn't know why, perhaps she saw something. She was one of those imperious, intimidating women that everyone talked about but when you got to know her, was one of the most caring people you could know. As I've read your posts I can't help but think there must be similarties. The business world needs more of these types...male and female.
Examiners probably weren't asking any questions of trust institutions about lost documents before they started getting press attention about court claims of lost documents. I'll bet they are now. If it turns out that lots of institutions have lost lots of documents it will prove a serious failing. But if it turns out that very few docs were lost, and lawyers were just lazy, it will be interesting ammo for future defendant's lawyers, but not a regulatory failing at all.
"You mean you didn't find out that they weren't losing documents???" Let's see how common disappearing docs really turns out to be first.
I think the sentiment -- that men don't listen to female co-workers -- of this post can be applied to any industry...
At least I've found this exceptionally true of many younger male workers. They know it all and leave a disaster to clean up behind them constantly and their respect for female co-workers is disgraceful.
But then, I remember when I was university I did some volunteer work for a group called "Women in Science and Technology," and we'd go into school to encourage girls into science and technology. My physics university professor had encouraged me to get involved and had invited me to a meeting. Well, the meeting was casual, two women had their very small children with them, everyone was dressed casually, like heading for a slumber party. I did a double take at my own perceptions as I walked in that this was a meeting of the housewives as opposed to a meeting of a group of highly professional women who mostly held master and Ph.D degrees...
Despite all the talk of equality in the workplace these psychological perceptions exist. I have found with older males you prove your competence to them once and they treat you with respect but it seems an ongoing battle with younger male workers.
I am also short.
Do Male Bosses Underestimate their Female Subordinates' Skills? A Comparison of Employees' and Line Managers' Perceptions of Job Skills
University of Florida News - Workplace Rewards Tall People With Money, Respect, UF Study Shows
If it turns out that lots of institutions have lost lots of documents it will prove a serious failing. But if it turns out that very few docs were lost, and lawyers were just lazy, it will be interesting ammo for future defendant's lawyers, but not a regulatory failing at all.
No, I think it's just a different regulatory issue. Then you move from the custodian to which set of high-ranking morons hired these FC mills in order to "control costs," the latter of which not only brought the institution to serious reputation risk, but that also brought its equity capital to risk from class-action looting.
But that's my thing: suggesting that we not, in fact, take these things always at face value.
Did you see Freddie's latest announcement regarding default law firms? They're now getting involved in that subject. I can only think they're doing so because they don't think the regulators have been on top of it (including possibly their own).
This is the kind of personal reflection I LOVE to read, to enter the world of another, long enough to see it through HER eyes, for awhile.
Makes me realize how much we superficially blovulate online, no matter how important and necessary the topics, and a touch of depth like this really makes my Sunday morning.
No one should shy from sharing their personal accounts with us who will never have those experiences firsthand, but have always been curious...
Thank you.
tanta - I think you really want miracles from that staff of 20. Not only should they be looking at the policies for commercial loans and mortgage loans and construction loans, the interest rate risk limit process, the daily measurements of interest rate risk limits, the document handling processes. You also want them examining the policies and contracts with the outsourced lawyers. What else would you like to put on their plate, and how many nights and weekends do you want out of them?
Deborah writes:
I am also short.
I'm tall, have great hair, and people will believe most anything I tell them- in person. Online I get no respect.
It's a weird world that we live in...
I agree with the premise that we need more cautious folk... male or female i don't care so much...
In my life, I've run across a lot of hyper-agressive risk takers that I'll call the alpha males and alpha females... and back in the day all the females that "made it" were no better/worse than the alpha males, because the only way to get up to the glass ceiling was to be an alpha female.
meanwhile, the cautious worry warts had no idea that there even was a ceiling since it was so far above them...
as more and more women are entering and staying in the workforce that seems to be changing... you don't need to be an alpha female to rise up... so hopefully it'll change the inner workings...
BTW: I work in healthcare, so obviously that has been more gender-kind for some time... but not that long!
I'm tall, have great hair
When I was in grad school the running joke was "having CEO hair", which we figured was the only way some of these people got the job.
That works for women too...that sort of modified astronaut's wife do...
I remember giving a presentation in appelate court when I was younger and cuter and one of the appellate judges was looking at me with this isn't she cute look. Blechh.
I remember reading lately that the sex centers of the male brain light up when confronted with financial risk taking. Successful risky behaviour result in more testosterone produced--really. And
vice versa. Which produces more, and more risky behavior. This may be a good idea in the realm of reproducing your genes, but not in the financial world.
Younger men really should not be put in positions of power like this. They are not capable of it--for gender reasons. When the old testosterone dribbles down, then, well, ok.
What on earth did the business world do when everybody in it was male???
FWIW:
one of the problems with getting women into the highest levels is unfortunately societal and biologic.... childcare.
at least in my field, there is little to no glass ceiling.
but there is a disparity of women in certain areas (like surgery, orthopedics, etc) and also certain levels of management.
but almost all of it is related to childcare. if a woman foregoes having a child and raising that child, then the sky is the limit.
or if they are willing/able to have the child and be back to work in 2 weeks, and then have a stay-at-home dad or at least a nanny to do day to day stuff so that they're not missing so much work.
but often a woman is "going places" and then she has a child. During the 9 months of pregnancy they are (understandably) often missing work and not as tip-top as they need to be... then the next 5 years they also miss a lot due to their child's healthcare needs. (physicals, ear infections, pinkeye, that sort of thing).
in sum, 5-6 years of decreased productivity. hard to make up for that.
if you took a man, and made him primarily responsible for childcare, his career would equally suffer.
BTW: I'm not saying it's "right", just that this is what is happening in my field. and obviously healthcare is different than finance.
You also want them examining the policies and contracts with the outsourced lawyers. What else would you like to put on their plate, and how many nights and weekends do you want out of them?
I want them to follow the thread wherever it ends up. If that means we need more than 20, well go find someone who has been blustering on about the evils of "big government" for years. That wasn't me.
And I'm sorry, but the class of women managers I'm thinking about today would just throw back their grizzled heads and hoot over that. The story of their lives is one more thing to do they don't have "time" for! They developed a lot of the expertise they have by exactly having that shit that no one else "had time for" dumped in their laps! Nights and weekends??? No!!! I know what you mean, and I'm not advocating exploiting examiners, but in context that's just too easy to mock.
Frankly, one of the biggest risks I know of in any operation is siloage and specialization that dangerously reduces the number of people who can capably follow the whole process and connect dots that aren't obviously connected. (Like, who cares about the obvious ones?) This is a long, old problem. And why the hell can't the people who can look at loan policies and interest rate risk and document handling also read outsourcing policy or examine contracts?
At some level, what you are suggesting, it seems to me, is that regulators have to stick to those issues they already know are risks--that have a long history of being risks--and ignore the "new ones" like outsourcing or contract-writing that are not yet "classic" regulatory responsibilities. Does that not just guarantee that the regulators will not look at them until they blow up?
Back to the NEW report: the first thing I'd have done was head right for those PSAs and accompanying investor information sheets to find out which exact officers were named in the "notices to be given" sections. Because for damned sure it looked like whoever was getting those notices at NEW was the wrong party. I might even have suggested that the CAMELS manual incorporate a review of such things on a going-forward basis.
Sure, it's more work. But don't go holding me responsible for the fact that we seem to be limited to only 20, regardless of whether we might need 21 or 22 or 23 these days.
I am officially promoting my wife from cootie headed spendthrift to pink collar cost center.
Great thoughts have you.
An example of testosterone foolishness in middle aged men.
Got a case settled. Minor issue of some concrete blocks on the property worth $1-3,000. Both attys female. All clients male. Males wanted to fight over blocks. Yes, there was a mildly realistic reason for my clients to want the blocks to stay. But I'm absolutely sure that between the 2 attys we charged more than what the blocks were worth to settle this. But a lot of testosterone got spewed, and I guess that was, emotionally speaking, the important thing.
Men are soooo emotional.
Tanta:
would it be possible perhaps to have someone write/contact the appropriate regulator and help them see the thread they're missing?
I can't think of anyone off the top of my head... but perhaps someone with a penchant for typing in bunny slippers with a cup o' joe in hand?
Um, lawyerliz, I hate to say this but i've had the same thing happen in reverse. from both females and males. i think it is just sort of natural when confronted with someone that you find attractive. although i do think that one ought to be able to control that to some degree in the workplace. and some people (both male and female) find risk attractive, that's why there are about a 50/50 mix of male and female skydivers. I know because i am one.
yearning has it correct that women, historically, have been the ones to bear the responsibility of child-rearing. so their career goes on hold when this happens. from a corporate point of view, this is career limiting, as you don't want someone popping up pregnant and then taking 5 years off after you've invested in them and put them on a track. I must say that's probably going to change as now many males are the ones to stay at home. but, speaking about reality, that has honestly been the issue, and not one of gender specifically. just in practice. and i think that's why education and health-care have been choices traditionally. they are flexible enough to be able to do both.
would it be possible perhaps to have someone write/contact the appropriate regulator and help them see the thread they're missing?
Take it from she who can see IP addresses: they're not missing this. They're just lurking.
Tanta,I always enjoy your posts that include discussions of the class distinctions in financial institutions.I my experience they are as rigid as early 19th century england...and the power of the sales staff is something you do not overstate,I well remember being told to sign off on a loan or clean out my desk after the sales manager took my refusal up the chain of command.I heard later that the deal didn't go sour for a whole quarter.
Tanta -- you have made a lot of sense for a long time. I am surprised that you have not been interviewed a lot on TV, and/or recruited to the boards of some of the financial institutions.
Oh, and as per my many posts on other threads, the NOTES ARE NOT LOST.
And the foreclosure mills are not to blame for this. The lenders want them to snap to attention for their measely fees. The lenders don't want to hire enough people to find the notes. The lenders will not hire foreclosing attys who tell they they are not doing it right and they should find the notes. The foreclosing law firms of course don't know what they are doing and don't know how to handle a contested foreclosure, but as to the lost note, angle, it isn't their fault.
You could get me to jump out of an airplane only if it was on fire AND there was someone behind me pushing.
I don't think you can blame the examiners for only having 20 examiners, either. "Nights and weekends!" You do know that a lot of people pick examiner over a Wall Street career because they have explicitly chosen to forego Wall Street salaries in return for not wokring Wall Street hours. One of the reasons for accepting the GS wage schedule is that it is more family friendly. If they were worked 80 hour weeks, why wouldn't they just leave for Wall Street where they could earn a commensurate salary?
Obviously most of those 20 have to be devoted to known risks (I write this with the fear of sounding too much like a former SecDef). Imagine the fallout if known risks caused a blow up because they were ignored, in addition to the obvious fact that known risks are known risks, and hence should not be ignored. That might leave you with 3 or 4 out of the 20 to work on the nearly infinite number of unknown risks that could blow up. A lot of ground for a few to cover.
You said they should go wherever a trail leads them. What trail would lead to 'lawyer outsourcing in REO' before it started to blow up? I agree with the general principle 'new ways of doing business lead to risks that should be explored' but my question is more direct. Of all the different ways in which work is being altered by technology, outsourcing, off-shoring, what would have led your intreped staff of 3 or 4 devoted to 'unknown unkowns' to look specifically at the lawyer outsourcing? What trail should have been followed that wasn't?
You could get me to jump out of an airplane only if it was on fire AND there was someone behind me pushing.
ha! people say "why would you want to jump out of a perfectly good airplane" lawyerliz. The proper answer is "there is no such thing as a perfectly good airplane"
You do know that a lot of people pick examiner over a Wall Street career because they have explicitly chosen to forego Wall Street salaries in return for not wokring Wall Street hours. One of the reasons for accepting the GS wage schedule is that it is more family friendly. If they were worked 80 hour weeks, why wouldn't they just leave for Wall Street where they could earn a commensurate salary?
Do you really believe that everyone in this industry who works 80 hour weeks gets paid like the Wall Street princes? Do you really? You sound like you're living in exactly the world I was trying to suggest most of the Main Street middle managers don't live on.
I am not interested in exploiting anyone. Nor am I generally impressed by a lot of people who like to natter on about how many nights and weekends they work, as if that were some sort of merit badge. A lot of those folks have productivity problems, in my experience. Too much "networking" during the day leading to too much "working working" at night.
I am not suggesting that anyone could necessarily have found the problem with default legal work outsourcing long before it blew up. For starters, we just went through a long boom were there weren't that many foreclosures. It was hard for even the worst of these firms to fuck up the three cases a month they got.
So now the problem arises when FCs dramatically rise. But isn't that supposed to be the point of risk management, to anticipate that the landscape might change, and to ask if our current practices will be enough if it does? In any case, as soon as those first opinions came down about the missing docs, someone should simply have been all over those custodians right away. On that, I think you and I agree. However, if they do decide that it isn't the custodian, it's the law firm, they're already in it enough to decide that! I'm not even sure why you think of this as "extra work." How could you rely on an examiner who said "well, we looked at the custodian and it's clean, so we're just guessing it's the lawyers."
And if you want an answer to your last question, it's like the same point I made in reference to NEW. Nobody in the servicing department needs to wait for some reporter to write some breathless article about Judge Boyko to know that FC motions are being dismissed on a bunch of their cases! If the servicing department didn't investigate the problem, that is the risk management failure that the examiners are there to deal with! And if the servicing department did investigate, and came to the conclusion that they were dealing with incompetent local counsel, then surely any examiner not born yesterday has to ask, "So what are you going to do about that?" and follow up to see that it is done?
Lawyerliz writes:
An example of testosterone foolishness in middle aged men.
From a vendorÂ’s perspective, worst to best lawyers*:
1) Named male partners in big city firms
2) Male attorneys less then 5 years out law school
3) Female partners in big city firms (sorry, if I offend)
4) Every other lawyer not covered by 1 through 3, or 5 and 6.
5) Female associates in big city law firms less then 5 years out law school
6) Small town male sole practioners who have been at it at least 15 years
*Real estate related matters only
As someone who works in a pink collar field, I'll recount the following conversation.
MY BOSS; Do you always interrupt us because we're women?
ME: No, you NOTICE because you're women.
Tanta,
The cards I hated to see played were outsourcing and automation - those two and a software update could be trusted to neutralize back office functions for a time when the combat became serious.
Since audit is often the only rebuttal available short of the Baker Act, it's good to see you take this up.
Do you really believe that everyone in this industry who works 80 hour weeks gets paid like the Wall Street princes?
Not everyone who buys lottery tickets or becomes an "actor" cough waiter makes it either. At some level, the payscales at these firms are structured to incentivize risk takers. The way to best motivate alot of strivers is to create a few winners. Most of 'em end up with steak knives, but they've been dreaming of the Cadilac. There certainly is alot of self selection for both risk aversion and lifestyle in the job market.
So you accept that it would have been difficult to spot the problem before it surfaced? And your issue is whether or not the issue was followed after it surfaced? How do you know that it isn't being followed now? Not much that's done in examination is made public.
Forget Wall St. 7 figure salaries. I talk to people all the time faced with the difference between $90K at a regulator vs. $120K at a regulated institution. You have to offer something to get them to accept $90k. That something is often family-friendliness. And that was more true when we were talking 'could it have been found proactively?' At this stage all regulatory agencies are working flat out. And they aren't losing people (yet). Could staff have been worked like that when loan default rates were near zero? I doubt it.
Someday I may be able to write with the force and clean crisp logic that Tanta uses. What a great piece of work!
What on earth did the business world do when everybody in it was male???
South Sea Bubble. I heard Isaac Newton lost a lot of money in it.
There was also this thing with tulips.
If you let your pink-collar "cost" center do its job, it will more than pay for itself by saving your bacon.
Yes, and look what all these sausage makers made the last 5 years. Pink or blue.
"To return to Yves' suggestion, there's certainly a lot to be said for regulators recruiting from this pool of women mortgage managers. We know where the bodies are buried. We know how they got to be buried. We know how they died. We've got the reports in our lower-left desk drawer"
Yea, so that makes them liars too.
At some level, the payscales at these firms are structured to incentivize risk takers.
I am trying really hard to point out that not everyone in these firms is on the "sales side."
From my perspective, we don't "incentivize" risk-takers as much as we "innoculate" them from the risks. They do not fear layoffs; they do not fear the company folding. Why should they? Have you seen their bank account balances?
And besides that, these "risk-takers" don't actually sign off on any of the risks, you know. We have underwriters and closers and pipeline clerks to put their unglamorous little signatures next to the official risk-taking. You think the best-paid people in a mortgage outfit are these? Not on your life. Not in a house, not with a mouse, not in a box, not with a fox. We've had commissioned loan officers, brokers, account executives, and their managers making a half a million dollars a year, but the underwriter who had to sign the transmittal would, in large parts of this country, have been way lucky to make $90K. And the very first stop when a loan goes bad is the underwriter, the processing staff, the closing documents preparer. Not the EVP of Mortgage Production.
There has been, by and large, zero loyalty to these people on the part of the corporations. They get laid off at whim; their bennies and pensions cut; their daily working life continually dumbed down by ill-thought-out automation projects. Yet the only "incentive" they are offered is the health of the company: no underwriter gets a bonus for denying a bad loan. (It is in fact a violation of the regs to pay any underwriter by approval or denial, since that's so obviously corrupting.) So you ask people to look at the health of the company, not what makes it easier for them to put up with the incessant demands from the sales side. Then the company treats them like disposables. Meanwhile, the ones who have been about running the damned company into the ground don't much care, since they've been well-paid enough for long enough to survive it.
So you accept that it would have been difficult to spot the problem before it surfaced?
It is indeed difficult to predict what risks will occur, and what risks will remain mere frightened possibilities in a risk manager's nightmares. That's one of the chronic problems with that job. You get worked up about something, and some glib jerk always asks you if you are guaranteeing that some evil result will come from the proposed policy. No, you say, I cannot forsee the future. I simply say that the risk is there and I think it's not worth the savings. Well, says glib jerk, thanks for sharing your opinions with us.
I'm not at all sure what we're arguing about. My point was that I fear we guarantee that some risks will be detected only after they've blown up. As opposed to having a fighting chance of catching on first.
BTW- the Banker at the top is the "second" Banker (he's got a Homepage), not the Banker from the Bankerdome.
Your message rings a bell.
My wife works in health care down in the bat cave with the lab techs.
She comes home boiling over at the stupidities perpetrated by management.
When she went per diem, they had to hire 4 temps to take her place and get the same daily output. The problem is that those temps make enough mistakes that their productivity is less than hers was.
Management hires "consultants" on a regular basis. They are the usual "seagull" consultants who come in squawk loudly, shit all over everyone and flyaway. They write reports that no one reads and if management reads them they do nothing to implement the good ideas and often implement the bad ones.
It is a wonder that large organizations don't implode on a more regular basis.
I'm not sure that I understand. Since there are an infinite number of possible risks, both the statements 'we have a fighting chance of detecting the risks' and 'we can guarantee that some risks will not be caught' can be true simultaneously. I would argue that there is a fighting chance that unknown risks will be caught. There usually are 3 or 4 people out of a staff of 20 looking for the unknown unknowns. Even though any one risk, or set of risks, has a fighting chance of being caught, it is still the case that with finite resources and near infinite potential for mischief that something will slip through.
And I'd argue that too deep a focus on the weeds is not the best way to proceed. The risk management and audit functions of an institution will be much closer to the risks, the new and untested risks especially, then will an outside regulator. Regulatory time is generally better spent on giving those functions a fighting chance, and discovering whether or not they do have a fighting chance by looking at how they've behaved in a few cases of 'getting down into the weeds.' A regulator that devoted most of the staff time to looking at the documents would rapidly get swamped. A regulator that makes sure that risk committees, auditors, etc. devote their time to looking at the documents, and makes sure that this is the case by looking at a limited subset of all the possible ways that things can go wrong, will have much better odds of a successful outcome.
I think the actual danger is that regulators appointed by political leaders to clean up the mess will come, as usual, from the ranks of out-of-work apparatchiks and lobbyists.
Somehow, there needs to be an incentive to get it right, this time. I can see how someone who actually -wants- to get it right would look to people who know what they're doing-- but that should be an effect of doing the incentives right.
Nice thoughtful insightful post, T-.
May prudence and reasoned judgement come to the fore, again!
I would say it's generally very easy to see where the next problem is going to arise, you just follow the 25-35 year old hyper aggressive alpha males, particularly if they have an MBA. Also look for signs of adulation by the press.
Or anomalies where 1 company or section is making far more money on a product than their competitors or has historically been the case.
The problem is you need people with balls to take on the risk-takers and to be backed up, which isn't normally the case judging by most comments here.
And I'd argue that too deep a focus on the weeds is not the best way to proceed.
You are entitled to that opinion. I have never personally encountered a regulatory regime that was ever allowed to try it. It is hard to quantify failures or risks that were successfully averted, since they were averted. So perhaps your model has many successes to its account. But I see no grounds for claiming that it is preferable to an approach that has never really been tried.
A regulator that devoted most of the staff time to looking at the documents would rapidly get swamped.
I don't know what documents you're talking about any longer. Would I expect every contract to be reviewed in detail in every examination? Of course not. Everything is sampled anyway, and rotated in the examination types.
I was trying to suggest that knowing that crucial information that might be of importance to a risk-management examination can be found on a PSA would, well, help. I know you haven't read the NEW report I'm talking about, but it was a situation in which the accounting and internal audit people were telling the investigator that they never received word of pending repurchase requests. In my experience, such a thing has to be either a lie or terrifying mismanagement. Asking someone to produce the contract so that you can see who is on the "notice given" list on page 47 doesn't take all that long, and no, I don't think that's "getting into the weeds." If you see the CFO's name there, you have just improved your list of examination tasks. If you see only the national sales manager's name on there, you have done so as well.
In any case, I was trying to bring up an example of exactly a scenario in which a regulator was told that auditors, risk committees, etc. were not looking at documents--in this case, repurchase requests--because they had just said so!
At some point this argument becomes circular. How does an examiner know that the audit and risk committees are looking at everything? If you ask them if they are, they'll usually tell you that it is so. In the NEW case, nobody admitted to not looking at the repurchase requests until after the BK had been declared. It gets to be a case of the dog that didn't bark: you need examiners who recognize what topics or reports or problems are not showing up in the meeting minutes.
And frankly, I think examiners who occasionally demand to see the actual contract--or whatever document we're talking about--put more fear of more God into the people they're dealing with than an examiner who makes it clear he or she will never check up to see if you answered the question correctly.
I'm puzzled by your claim that NEW represents a case in which a regulator was told something. I thought that NEW didn't have a regulator, and that was part of the problem.
I also agree that never asking to see a document would be a very bad way to regulate. Fortunately, I've never encountered a regulator who never asks to see a document.
My point is that the 'sampling' of documents to review would often be tied to the question "are the institution's own controls working' rather than trying to substitute for the institution's own controls. In other words, do the tantas of the insitution have a little power (which is usually the best that can be hoped for) or no power at all?
mort_fin, you do know that the staff is always clearly instructed to answer any and all questions the examiners might have fully and honestly, but never to volunteer anything that wasn't asked about. You know the examiners know that these are the standing orders.
At some point, that means the examiners are responsible for knowing what questions to ask, or else they just won't find out the right things.
I've even worked for a financial institution at which, in the week before an examination, a big "clean up your desk" campaign was held. It wasn't from any fear that some pedantic schoolmarmish examiner would mark us down for being messy. It was quite patently a fear that someone would leave that Repurchase Requests Pending Report (or whatever) sitting out in plain sight. If they ask you for it, you have to produce it, but if they don't, it can stay hidden in the drawer.
that's why a good regulator asks for it.
my business partner and wife has many times saved me from expansionist follies. She is also more knowledgeable and harder working than me. Me? I lift heavy things.
lift heavy things... and lurk here.
I'm puzzled by your claim that NEW represents a case in which a regulator was told something. I thought that NEW didn't have a regulator, and that was part of the problem.
Sigh.
I just used that as an example. As I explained, it came to mind as I had read it recently. I did note that it was prepared by the BK trustee, and that it was NEW, and I think I even contrasted it explicitly with practices at regulated institutions.
I apologize for having tried to use a publically available concrete example. If you can find me a depository's examination report online, by all means link away and we'll find better examples. But you know as well as I do that those are not available to the public. And I don't think it's very helpful to talk about hypotheticals that may never have happened. Of course I could come up with a big list of concrete examples, but I have my own non-disclosure contraints to worry about.
NEW didn't have a regulator. I was wondering if a regulator would have caught on to the problem any better than the BK trustee did. But as that is mere speculation on my part, feel free to ignore it and assume that the regulators we have would have been up to the task of examining NEW if they had been empowered to do so. I give up.
But that's my point exactly. You're speculating about what's happening in examinations, but examinations aren't public. NEW wasn't an examination, and I've already noted that these special report type things are usually prepared by people with a different focus than examiners. It's public, but it isn't particularly germane to the subject of how exams of financial institutions are done.
that's why a good regulator asks for it.
Look, if you want to argue that all or most examiners already have the background, skills, and experience that I am asking that they have, then fine. That's an empirical matter that we won't settle today.
If you're just discussing a True Scotsman, then we'd best go on to something else.
But that's my point exactly.
I, uh, thought you were making a much less painfully obvious point than that. I'd have conceded long ago if I'd been aware that your objection to the example was that it came up in the trustee's report on NEW instead of a banking examination.
wow. All these years I thought I was educated, but you've just forced me to wikipedia to look up 'true Scotsman.' I learn something new everyday.
So far as I can tell, it is empirical. You keep insisting that in your experience documents are often not requested. I keep telling you that in my experience they are. Since I don't think you've claimed that they are never requested, and I've never claimed that they are always requested, we're arguing degree.
I've also pointed out that it will never be the case, given limited staffing, that exam staff will have the same level of experience, and hence the ability to ask for all the right documents of the staff of the institution. Hence, the focus on the extent to which the insitution itself is handling risk.
"Meanwhile, the ones who have been about running the damned company into the ground don't much care, since they've been well-paid enough for long enough to survive it"
There is a word for these kinds of high-level players: Parasites.
I'd imagine the only thing that threatens them is bright lights. If I were driving the bug van, I'd get the brightest lights I know (hint) to come up with some type of code that eliminates this buck-passing and puts their parasitic skin squarely in the game.
Don't know if you'd even need to have govt make it a regulatory code. You put it out there as voluntary, and make the investing public well aware of who's on board and who's not. If it was clear to the public how easy it is for these guys to scam and run, who would want to invest in them?
I am trying to suggest that there may well be highly skilled and experienced people in the industry for whom a regulator's salary would be a promotion, not a demotion. They are not the highest-paid officers or front-end rainmakers in the business. Obviously.
You disagree. Fine.
If that's the case they should apply. usjobs.gov There are openings.
LOL at doing networking during the day and having to do work work in the evenings. I remember when I worked at a fast-paced company of a different sort and I puzzled about all the people around me who said they were working really hard, but what I saw was them spending a few hours a day bullshitting with each other. I like to bullshit as much as the next person, but I don't mistake it for working.
Mort_fin: "wow. All these years I thought I was educated, but you've just forced me to wikipedia to look up 'true Scotsman.' I learn something new everyday."
Yeah, me too. And another thing. I have seen the word bricolage twice since Tanta taught it to us. Weird, huh?
If that's the case they should apply. usjobs.gov There are openings.
You know, I really don't want to argue with you all day.
But I was trying to talk about how the regulators recruit, not who applies. At least, Yves was talking about recruitment and I was riffing off that.
He: My branch generated $45MM in gross revenues this quarter!
She: Well, my underwriters tried to stop you.
ROTFLOL. Priceless.
then start recruiting. tell them to go apply. it's better to light one candle ...
bricolage - yeah, I had to look that one up, too.
Beautiful piece, Tanta. I've gone through the same in one of the dotcom software engineering companies, eventually getting canned for speaking up about all the crap going on while everyone wanted to pretend the party would never end.
My favorite moment from this was the call from the lawyer representing the shareholders a year after I got canned to get my deposition for the shareholder's lawsuit against the corporate management for the rapid decline in their stock price.
Good times.
After working my whole life in male dominated industries, (25+ years in aerospace/military, Asian automotive, high end electronic manufacturing)and rising to V.P level, I have found the fact that I am tall, thin, blonde/blue eyed, has caused me to spend an certain amount of time "proving myself" to those I first meet in a business setting (especially in the Asian world). Now in my 50's and still working, as I look back I can honestly say that even in our modern times, sex discrimination exists. In most cases it is subtle and without going into the whole "Mars/Venus" thing I feel that in many cases, the intuitive, relational skills that many women posess actually prove to be more effective when measuring successful business acomplishments. Sometimes it worked to my advantage but overall it seemed to be a handicap. I suspect the world of finance is different but we still have a long way to go baby! Thanks Tanta
Management hires "consultants" on a regular basis. They are the usual "seagull" consultants who come in squawk loudly, shit all over everyone and flyaway. They write reports that no one reads and if management reads them they do nothing to implement the good ideas and often implement the bad ones.
It is a wonder that large organizations don't implode on a more regular basis.
It's not limited to financial companies.
I work in an food factory and we have a USDA inspection coming up. We know when they will be here, what they will be looking for, and we know how to make sure they will find only what we want them to find so we pass inspection and keep on running. All our customers insist on the right to inspect at any time, day or night, weekends included and they sometimes do. So we mostly stay within regs and requirements as much as possible while still getting product out the door. If we adhered to everynitpicking* regulation of the USDA and everypetty* customer requirement, we would have gone out of business decades ago.
Tanta, I think that the real problem you address here is what I call the "MBA-ization of Everything". It's not that I discount the degree - it's just that the degree applied without industry-specific context developed from knowledge creates a giant horde of Sebastians randomly applying analytical models in a pyramiding triumph of the Dunning Effect. I have examples from multiple industries that make people who understand those industries clutch their sides and double over with laughter. It's not just banking.
I don't think this is a class issue. I think it is an example of ivory tower syndrome on the part of educators, and an extreme willingness and perhaps an ardent desire on the part of top management to employ the people who justify taking the type of risks you have to take to make the type of money you want to make. The dumbest true believer wins the argument in those conditions. It all depends on management's preferred horizon. We probably won't fix this until the style changes to fix top management pay on the basis of longer term performance.
As for regulation and examination, there are two problems. The first is that there are not nearly enough of them to get the job done when the risk environment shifts rapidly, and the second is that when so much of the mortgage industry was taken over by the non-regulated institutions, it created a rapidly changing environment with vastly increased non institution-specific risks.
The very best regulators can't effectively operate in this environment. First, by their very nature they concentrate on institution-specific risks. Second, when you are in effect regulating less than half the loan generation in an area, the bad money is going to run out the good money no matter what you do if it is highly profitable to do so. The changes in industry practice were so rapid that any risk matrix was outmoded before it was deployed. The conservative institutions lost control of the environment, so they adapted to compete on a higher level of risk or basically got substantially out of the business. And the controls on commercial lending collapsed nearly in lock-step with consumer lending and mortgages, so it was very difficult for most institutions to set a conservative course.
I'm insistent on this. There were parts of the nation in which no institution with a five-year risk policy could lend. The risk of not lending was more than the risk of lending on a two-year risk policy, writing up your book, and selling out to some foolish bank which ultimately sells to an even more foolish Canadian bank.
How the bleep do regulators function when you have people writing prime loans on homes surrounded by other homes funded by 35% subprimes with teaser rates, or lunatic Alt-As? Such an environment makes fools out of everybody.
Business is rife with unfair discrimination, targeted often at gender, sometimes at youth, sometimes at age, sometimes at ethnic group, and always, always at those who do not run with the pack and kowtow to the hierarchy. There's a lot of pressure to be a "team player" and know when to shut up--to lie, actually.
I've worked in small companies and large, from entry level to Fortune 500 executive. Amazing how fast you can go from "too young to get it" to "too old to get it" without changing much. Still, you can earn respect in any situation with enough people savvy and patience.
Understanding people's true value, regardless of gender, age, race, etc. is a very valuable competitive advantage. And in a startup or small company the feedback on such advantages is very quick. I wish more women and minorities would work for small companies, or start their own, but for whatever reason there's a worship of large, established corporations--the bastions of discrimination and suboptimal thinking. These inefficiencies will eventually cost corporations dearly, but if you think markets can stay irrational for a long time...
MaxedOutMama wrote: ...a giant horde of Sebastians randomly applying analytical models in a pyramiding triumph of the Dunning Effect
LOL! OMG, one MBA in a position of power, say with a VC board seat, can destroy a good company in a matter of months, all very innocently and with the best of intentions. I've seen it happen at close range.
I can only imagine that a horde of such people with sufficient access to capital could do trillions of dollars of damage. Wait, they have!
Tanta wrote:
"It is indeed difficult to predict what risks will occur, and what risks will remain mere frightened possibilities in a risk manager's nightmares. That's one of the chronic problems with that job. You get worked up about something, and some glib jerk always asks you if you are guaranteeing that some evil result will come from the proposed policy. No, you say, I cannot foresee the future. I simply say that the risk is there and I think it's not worth the savings. Well, says glib jerk, thanks for sharing your opinions with us."
Said glib jerk might (just might) now understand why Goldman Sachs was able to save their ass compared to the other IBs, during the current debacle.
Turns out that GS has embedded risk management very deeply into their business processes. The head of risk management team always had the attention of the higher-ups. If he/she says: "I think we might have a problem with that." ears perk up, the discussion is thorough, and decisions are taken ASAP.
It goes without saying that traders and other risk-takers don't like it one bit, but with the Bosses fully backing up risk management, the alpha creatures suddenly realize they might have more beta genes than previously thought.
(I do not own, nor did I ever owned GS stock)
I wish more women and minorities would work for small companies, or start their own, but for whatever reason there's a worship of large, established corporations--the bastions of discrimination and suboptimal thinking.
So many of these women are working for the large corporation to get the group health policy for the family, allowing the husband to work for the small company or become an entrepreneur. Or they're single women who simply do not have the kind of safety margin that allows them to take such risks. Yes, I know only too well how risky employment in the large corporations has become, but the myth lingers on that the jobs are more stable and the benefits more reliable. Surely I know few small companies that offer much in the way of decent inexpensive health insurance or 401(k) matching.
In any case, the women I am thinking about today started these jobs in these corporations quite some time ago, when there were still "defined benefit pensions" and things like that. Over the years they've watched pensions disappear, other benefits erode, and their salaries fail to keep up with inflation, but what are they to do now? Compete with the younger, healthier, and better-educated? Or hang on to the job they have, hoping that 20-30 years service will be rewarded with employment until retirement age?
Banking is never going to become the province of start-ups and small companies in this country. To discourage women and minorities from pursuing jobs at banks is to then cede the banks to white males.
To discourage women and minorities from pursuing jobs at banks is to then cede the banks to white males.
I think zero's point wasn't to discourage this, but to broaden the thinking. As someone who came from a ahem rather large blue company to forge out into the startup world, I can toss the same feeling out there. Actually the best jobs, and the most flexible ones are in startups and smaller companies. Forget about pensions and protection...gone forever. It's not that banking isn't a good field, it's just that what is required (time and inflexibility) might not be for everyone. Neither is large corporate stupidity as outlined so well by MOM.
I'm much happier, and better utilized in start-ups and smaller companies looking to grow. I'm also very attentive to my staff's personal needs for family, flexing time, working from home, etc. Perhaps that's why many women and men are choosing that over corporate drone drugery these days.
Btw, one of the common sayings in these types of companies is "if you want to come in and do the same thing every day, and work from 9 to 5 there are places you can. They're called banks and insurance companies".
"I work in an food factory and we have a USDA inspection coming up. We know when they will be here, what they will be looking for, and we know how to make sure they will find only what we want them to find so we pass inspection and keep on running."
Do you think the FDA inspector doesn't know that you tidy up for him and that he is looking the other way on the more ridiculous nit picking stuff (if he wants to to gain your cooperation on the stuff that matters)? Did you ever consider that he's on your turf, makes under 50K and that writing you up is a bitch he has to contend with (because upper management has pretty much managed to assigned him the conflicting roles of adversary and educator/problem-solver.)
I think sometimes you have to say we are going to be out of this business for a while.
Totally agree that bad money runs out good. If you want to be around in 5 years, and you know you won't be if you do what everyone else is doing then you have to stop doing it and either do nothing or find something else to do.
Having no loyalty to your employees has bad consequences which hopefully will be punished.
Totally agree with the poster that said don't be in a business which has too many young alpha males. They are psychologically unable not to compete. That's what their whole biology is telling them to do.
Finally commissions should be awarded after the loan is seasoned. Even if the person who generated the loan has gone to greener pastures. Is that so hard to do? Is that so hard to think up? I just thought is up now; I doubt I am the first one to think of it.
This will give a longer time frame than next week. If somebody doesn't want to accept that condition, that is an excellent reason not to hire him or her. The money could be put in escrow, and divvied out gradually.
Finally if Newton had lived in the late 20th century, would he have been part of Long Term Capital Management??
I understand he was deeply into mysticism too, but nobody reads that gibberish.
I have had both male and female bosses. I would much rather work for a man. Although the female managers I have worked with have been generally more reliable, harder working, and more honest than their male counterparts, they have also been less fair and generated less revenue.
It seems to me that women do hold grudges while men are more willing to let bygones be bygones and not get wrapped up in petty personality disputes.
That said, I would get angrier when a woman would yell at us as opposed to a man, so perhaps I am less accepting of a woman supervisor than a man. I can say unequivocally, however, that I was much, MUCH happier having a male boss.
"LOL! OMG, one MBA in a position of power, say with a VC board seat, can destroy a good company in a matter of months, all very innocently and with the best of intentions. I've seen it happen at close range."
Also, one MBA, George Bush, has just about destroyed a country in a matter of a few years.
Do you think the FDA inspector doesn't know that you tidy up for him and that he is looking the other way on the more ridiculous nit picking stuff (if he wants to to gain your cooperation on the stuff that matters)? Did you ever consider that he's on your turf, makes under 50K and that writing you up is a bitch he has to contend with (because upper management has pretty much managed to assigned him the conflicting roles of adversary and educator/problem-solver.)
I am sure the whole inspection team is aware of these issues. And they are probably not too happy to be working all day Sunday (to fit our production/cleanup needs) either. But I don't care about the feelings of some regulator, I care about getting a regular paycheck.
In our food safety classes, the instructors regularly bring up the cases of several companies in recent years that have been forced out of business because of food safety issues. If I pay attention to GMPs, my job/paycheck is more secure
Getting back to Tanta' point about regulatory work being a cost center, it is. And the grunt work of it is done by relatively low-level people of both genders. However, that cost center can keep your company in business. As long as upper-level management understands the purpose of following the rules and having auditors from both inside the company and outsiders (with shut-down-the-company enforcement power) is good for the company in the long run, life is much better.
If you still wonder about the value of the cost center, ask the 4 people who died and the 700 made sick by poor compliance with GMPs at Jack-in-the-Box back in 1993.
Could the regulatory process be made better by hiring people with industry experience? Possibly. But how do you insure the former underwriter/machine operator/whatever will transfer their loyalty from the old company to the new agency? How do you get the experience you are looking for but maintain the independence you need to do an honest job?
Tanta - I don't think it would've mattered if you were male or female, degreed or not. Something tells me you would have succeeded in just about any endeavor.
Atty. actually springs to my mind, but whatever.
Maxed out Momma the "Ivory Towerization," isn't limited to the business schools. There is a general emphasis on PROCESS rather than KNOWLEGE. Like many things, this isn't a bad thing per se, but is often taken to a nonfunctional extreme. Since I went to a liberal arts college,* I had a ringside seat at some of the little culture wars generated by modern literary criticism, even if I wasn't taking those classes.
Other Jim But how do you insure the former underwriter/machine operator/whatever will transfer their loyalty from the old company to the new agency? Of course this is one of the problems that the FAA is going through right now. IIRC that the supervisor who was directing inspectors to go easy on Southwest on 737 fueslage inspections** used to work there.
*I didn't have to look up bricolage.
**google "aloha air 243" for WHY those inspections are mandated
What still amazes me is how many men here in the U.S. are sexists who do not view themselves as such. Many male writers exhibit their sexual prejudice out in their columns and they DONT EVEN REALIZE IT.
Take for example today's car column by Ed Wallace titled "Every Man for Himself." What hasn't sunk in to Mr Wallace is that every example of bad ethics he has used is a woman.
Other than his personal baggage, I consider Ed Wallace an informed writer regarding automobiles and their history.
I just recently completed an experiment. For two months, I posted under a male name. Wow, what
easy sailing and comraderie!
NOT the sometimes nasty and sexist remarks received under my female name.
So, women have come a long way, baby,
but still a ways to go.
celtic
OMG, one MBA in a position of power
OMG, I just realized you can't spell dumba** without MBAs.
I always thought I was alone in thinking the biggest problem with the US economy was the reliance on Harvard MBAs. Not that the top of the class wasn't very good, but on balance, well, just look!
Tanta: "Take it from she who can see IP addresses: they're not missing this. They're just lurking."
Or they have better things to do on Sundays, and don't see posts like this until after all the conversation has died down. Oh well. I am admittedly from a different corner of the regulatory world that only tangentially deals with mortgage finance, but I suspect things are not so different that I can't provide some comments.
On the issue of gender, the unspecified agency I work for is a relatively even mix of women and men, regulating an industry that is infamously male-dominated. I don't have any commentary on why that might be, but that's my observation. The real old-timers are, not surprisingly, mostly men (I think we've got a few who were around during the Panic of 1893), but the leadership has both women and men.
One important distinction is the regulators' role in preventing non-compliance vs. what I call stupid behavior. The regulator has a specific mandate of what they can regulate, and outside of that, companies have wide latitude in their decision-making, and are generally not prevented from making a decision simply because it's a bad one. I have heard a lot of questions about where the regulators were when companies were writing stupid loans--I suspect the regulators were there, looking over their shoulders, saying "yep, that's a stupid loan", but as it turns out lending your money to a terrible credit risk is not, in and of itself, a violation of statute.
That gets into a gray area when you're talking about Federally insured institutions, where the additional burden of ensuring the company's solvency brings business decisions into the realm of regulatory compliance. Private lenders, of course, do not have that burden, and can (and do) lend themselves right into bankruptcy court, but it's a much more complex situation when it's an FDIC or GSE organization.
The limitation of what the regulators can and cannot review is very real, and unlike an enforcement team with a search warrant, they cannot ransack the place and bring people in for questioning indiscriminately. Institutions know perfectly well what the regulators can and cannot do, and prepare for it. Regulators have to stick to what they are allowed to ask for, and generally hope that they will be able to detect issues from what materials and interviews they are allowed to gather in the examination process. It's a matter of looking for loose threads and pulling--it's why good examiners know to do things like have informal "off the record" (hehehe) chats with low-level people from operations while they're just sitting around, or rifle through papers on desks when no one's looking (tee-hee!)
But the reality is that in some cases there aren't any loose threads. Many companies, especially the big-money big-name companies, pay big bucks for compliance consultants (many of them former regulators with years of experience) to come in and keep everything sewn up and looking perfect. That's fine, and that's not a problem--as long as they really are following the regulations, and not covering up problems. But if industry veterans working with regulatory veterans put their minds to hiding problems, it becomes very, very difficult for exam staff to find them.
One final point, and that is on hiring from the industry, as opposed to hiring direct out of school or from other sources--as it turns out, my corner of the regulatory world has a slight bias against industry veterans. I honestly don't know all the reasons for it--we do have several industry veterans, but there is an inclination to try and train regulatory staff fresh, and without industry biases. I know that sounds odd, but I think there is something to it--the regulators want people who will have a fresh perspective on regulations, and not simply dismiss them with "well that's not how things get done in the real world."
I appreciate Tanta's post, and I'm very interested in attitudes from the other side of the regulatory fence. If there's something we can agree on, though, it's that the regulatory side needs more of the right kind of people, preferably the fastidious and detail-oriented types. If this financial mess results in more solid people knocking on the regulators' door, that will be a positive.
"Take for example today's car column by Ed Wallace titled "Every Man for Himself." What hasn't sunk in to Mr Wallace is that every example of bad ethics he has used is a woman."
Typical. Another example: watch the gender neutral sentences that journalists write regarding molesters, serial killers and mass murderers when 99.9% if them are male.
.
Lawyerliz:
Men are soooo emotional.
Lawyerliz | 04.20.08 - 10:34 am
Nonsense. We are perfectly, rationally in control, the epitomes of restraint and... HOLY COW, did you see the TA-TAs on HER?
Another example: Watch the gender neutral sentences that journalists write regarding molesters, serial killers and mass murders when 99.9% of them are male.
Now that you mention it, you are close to the truth!
I just recently completed an experiment. For two months, I posted under a male name. Wow, what
easy sailing and comraderie!
NOT the sometimes nasty and sexist remarks received under my female name.
Just curious what blogs you were posting on and whether there were any discernible patterns.
sdtfs,
I was posting on a very well known market/stock board that often rivaled
Yahoo finance as to how rude and crude posters could be.
From what I could tell, very few women posted and so it was very much
a "boy's club." You could say anything you wanted and the monitors idea of severe banishment never lasted more than a week. After all, these male posters were investors and nothing stands between money and big business. So it was like a green light to behave like six year olds on viagra.
Several months ago this company and their site was bought out and there has been a huge change as posts are removed that do not meet their guidelines. Its a much better board now, but I doubt that I will ever choose a female name again. Life is so much easier to pose and navigate as "male".
One really doesnt have to travel through very many blogs to find some evidence of what I say or a similar situation. But there are always those surfers who are oblivious to what goes on.
What amazes me is that these same male posters have daughers and granddaughers. And I do believe in six degrees of separation. What goes around, comes around.
So when their daughters and granddaughters are held back with that famous glass ceiling, lower pay, verbal abuse or molested at work or worse-- I wonder wouldnt it be ironic
if the culprit turned out to be one of their posting buddies or a son of their posting buddy.
Karmic action tends to be ironic and spot-on.
I hope I gave everyone somethng to think about. More than just gender differences but the condition of the human race.
Thank you for asking.
" "But if they do, I've still got all the stuff from last time in the lower left drawer of my credenza. If it's not worth doing, it's certainly not worth not plagiarizing.""
Ha. I've experienced it and I wouldn't call it plagiarism. I would call it recycling, and it saved a lot of time.
In a cyclical business, I'm not sure that anyone could have stopped people that had huge incentives to lose other people's money (or what they thought would be other people's money). Markets regulate with a viciousness that is that is breathtaking. No one is clamoring for the raw material for subprime or alt a CDO's this year. Relying on markets guarantees collateral damage, unfortunately.
Basically, trying to stop this freight train from within the business would have been brutally painful, thankless, and futile as well as a career limiting experience.
This is based on my experience in another industry, so my comments are very general. Nevertheless, unless you can get the incentives right, nothing else will work. And the incentives have to reflect long term cyclical reality.
In 2006, the Economist magazine noted a 40% drop in female senior managers in London's corporate world.
The Economist speculated causes for this dramatic drop, but gave no solid reasons.
Of course, competition in London's corporate world is singularly intense, and has been for the last few years.
I'm not sure I agree with the point Yves was making to being with.
Regulator "grunts" still wind up working for alpha types like Spitzer (with Spitzer being an extreme alpha). And when you couple that with the typical job/pay classifications that government work always has, people with skill and determination in those jobs eventually get sick of being taken for suckers and find other employment.
To Yves' final point: "Think of the FSA being run by a British equivalent of Tanta" - Tanta would probably be even more fed up in a regulatory position than she would be in a dysfunctional private organization.
Thank you Tanta. Now let me go into my backyard and beat the subliminal feelings of gender superiority out of my head repeatedly with a blunt object. Thanks for keeping an eye out for the kids. What can I say?
The failure of the regulators wasn't competence. It was ideology.
They were placed in their positions as saboteurs to fulfill the right-wing "movement conservatives" bidding. Their purpose and intent was to destroy the regulatory system because their backers believed regulation was intrinsically evil, being an intinsically governmental function, which also happened to get in the way of powerful people's paychecks.
I call it, "Crony capitalism dressed up in Ayn Rand's trampsuit".
In addition to putting worker-bees in charge instead of slippery snakes, we have to change the ideology that the role of a police chief is to keep the officers in the donut shop during the bank robberies.