Lawrence Scott

The Witch is Not Dead Yet

Jamie Dimon at JPMorgan is now a fitting successor to J Pierpont Morgan, or so says the NY Times on Wednesday, March 18. He's now known as James Dimon, a perhaps more fittingly formal moniker to a true "financial statesman" as he was described. But I digress.

Attended a Financial Times sponsored event on the financial markets today. Wow. George Pataki and Jerry Corrigan in the same morning. For those of you waking up on the other side of the world (figuratively or literally), that's the former governor of New York and the former chairman of the New York Federal Reserve Bank. Yup, some seriously big hitters. So sit a spell and take a load off. I'll be brief. It's not pretty.

I could wax poetic about interest rate policy (failures), credit analysis (blunders), or a financial institution (collapse). Instead, I'll spend two paragraphs (count 'em) on what happened next.

The morning started with the CEO of an esteemed French bank advocating that the US banking system assign all of its dubious assets to a new asset class, reclass them on the balance sheet, and with full Fed backing, finance them with new debt. Hmmm. I smell bailout like my hero Paul Krugman. Chief economists from two very high end financial institutions then opined about pro-cyclical (or not) fiscal policy (aka interest rate) adjustments. And an esteemed West Coast academic institution weighed in. For those of you unfamiliar with macro or even microeconomic policy, I can only say I was glad I was paying partial attention during undergraduate classes. And then the fun started. Punctuated by some poor guys pushing a climate change (and trading) agenda. Never saw two guys pushed off stage faster...

The esteemed former chairman of the New York Fed gave us a quick primer on what happens when the stuff hits the fan. But much more importantly, he indicated that he was offering his services to help solve this credit crisis contagion. And no one should kid themselves - this is now a full blown contagion. It has hit the fan, the wall, gone out the window, spattered innocent women and children, and now threatens the livelihood of far too many innocents. What struck me was that despite the Fed's 75 b.p. cut and the attendant and variously exuberant effect on financial names, we still have a very serious problem. Good news though - adults are stepping up to sort the problem. Adults with 40 years (or more) of experience. And that's a really good thing. I have only two words for the professionals: thank you. (And why did you wait so *&%$@# long?)

Okay, off that soap box. Heard some great examples of Web 2 in action in the FS market. First, how about using Facebook as your distribution channel for investment research? Is that Gen Y (or Z) or what? Second, why not move from the airport currency exchange kiosks to retail FX trading? I pushed a VC on meaty examples of transactional Web 2.0 and this was one popularized in Asia. Lastly, how about social lending in the peer to peer model? Sites like zoppa.com are growing like crazy. Finally, and here's a real stretch: Islamic finance as a play on the democratization of capitalism? Yes friends, you heard it here. PE groups being approached by Islamic finance units to promote a more equitable distribution of risk and reward. Traditional capitalism take note. Web 2.0 teams with your social networks and democratization of the Internet, take note too. You most certainly have kindred spirits in perhaps a corner of the world I have NEVER thought of.

Oh yeah, and the title. It was catchy, but perhaps not terribly relevant. Figured I was too obtuse with some of the others. Gotta figure out how to get more Google hits via their web crawlers...

Posted at 10:50AM Mar 19, 2008 by lscott97 in Sun  |  Comments[0]