What do you think our new financial law will be? What piece of legislation will be enacted by our government to protect us from the greed that caused this current financial crisis? Last time it was Sarbanes-Oxley. Who will be the poster child for our current financial crisis? Who will be the “Keating 5” this time around? You know it is coming. It has every other time greed has torpedoed our economy. And it is an easy target for any politician when there is only one side to an issue. I mean, how many voters are pro-financial crisis?
I am actually asking this as a serious question. I am really at a loss for a plan of action that would be effective in stopping financial institutions from making bad loans, or how the government could effectively regulate and enforce. The typical downside to bad business practices (falling stock value, bankruptcy) have been nullified with mergers and government funding. In this case the greed seemed to be evident from top to bottom, and not just within a company or region, but the entire industry. Financial institutions to the buyer and most of the parties in between. Yes, lenders skirted process and sanity checks to be competitive, but it took more than one party to create this mess. Buyers wanted more than they could afford, and eagerly took loans that led to financial ruin. Real estate agents writing the deals as fast as they could. Mortgage brokers looking for any angle to get a loan or re-fi done. Underwriters in absentia. Appraisers ‘making value’ to keep business flowing their way. You name it, everyone was bending the rules.
So that is really is the question on my mind: what will comprise the new regulation? How do you keep businesses from saying ‘no’ to new business? How do you keep competitive forces at bay to reduce this type of activity from happening again? My guess about this (and why I am blogging about it) is that enforcement of this yet-to-be-named law will become an IT issue. Like Sarbanes-Oxley, much of the enforcement, controls and systems, along with separation of duties necessary to help with fraud deterrence and detection, will be automated. Auditors will play a part, but the document control and workflow systems that are in place today will be augmented to accommodate.
Let’s play a game of ‘trifecta’ with this … put down the name of the company who you think will who will be the poster child for this debacle, the name of the politician who will sponsor the bill, and the law that will be proposed. I’ll go first:
Poster Child: CountryWide
Politician: John McCain
Law: 3rd party creditworthiness verifications and audit of buyers
If you win I will get you a Starbuck’s gift card or drinks at RSA 2010, but something.