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Tuesday, February 10, 2009

Humility

Lloyd Blankfein, CEO of Goldman Sachs, is quite literally intent on surviving the recession. From his op-ed in the FT.
More generally, we should apply basic standards to how we compensate people in our industry. [...] An individual’s performance should be evaluated over time so as to avoid excessive risk-taking. To ensure this, all equity awards need to be subject to future delivery and/or deferred exercise. Senior executive officers should be required to retain most of the equity they receive at least until they retire, while equity delivery schedules should continue to apply after the individual has left the firm.

For policymakers and regulators, it should be clear that self-regulation has its limits. We rationalised and justified the downward pricing of risk on the grounds that it was different. We did so because our self-interest in preserving and expanding our market share, as competitors, sometimes blinds us – especially when exuberance is at its peak. At the very least, fixing a systemwide problem, elevating standards or driving the industry to a collective response requires effective central regulation and the convening power of regulators.

[...] Regulators should consider the regulatory inputs and outputs needed to ensure a regime that is nimble and strong enough to identify and appropriately constrain market excesses, particularly in a sustained period of economic growth. [...] To increase overall transparency and help ensure that book value really means book value, regulators should require that all assets across financial institutions be similarly valued. [...]

[...] Regulators should implement more robust information sharing and harmonised disclosure, coupled with a more systemic, effective reporting regime for institutions and main market participants. Without this, regulators will lack essential tools to help them understand levels of systemic vulnerability in the banking sector and in financial markets more broadly.
In other words, thank you, sir, may I have another!

Wall Street douches take note. This is how you grovel. Such a welcome departure from the whiny, defensive, self-serving, tone-deaf dissonance we've been hearing. Everyone kindly spare Lloyd Blankfein's family in the upcoming unemployment riots.

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