Beyond the CRUNCH
Date: Apr 3rd, 2009 5:31:06 am - Subscribe
Mood: enlightened


Dear Friends.

Once more we enter a period of uncertainty and discomfort.

What did YOU do to cause it?

As I have sat back and watched the events in the financial markets unfold, I am reminded of the time (almost five years ago to the day) that colleagues of mine were made redundant in a period that was supposed to be at the heart of the good times.
Everything was on the way up, house prices were rising, business was expanding, all things were affordable.

Why redundancies then, of all times?

Inevitably these situations relate to egos.
As I recall it, my team were a buffer, control, constraint against the gung ho “do away with all manual controls and overview” brigade.
“Let systems manage the risk” they cried.

Various system weaknesses were, and had been, identified over several months and years.
A mature business will have anomalies that cannot be systemised perhaps without disproportionate investment.
Some of these may not have been profitable in a strict monetary case by case comparison but maybe represented the ethics of an organisation that wasn’t solely driven by larger and larger profits.
If something (a methodology in this case) isn’t broken, why change it?
“Automation makes things quicker and easier,” is the response.
(It also diminishes robust protection of risks and controls.)

Anyway, to get back to the point, the controls team after a management reshuffle ended up being managed by one of the “everything old is rubbish, everything new is brilliant” mob.
Similar to a “poacher” managing a gamekeeper, there was only ever going to be one outcome.
To stop all the system failures being highlighted the obvious solution was to do away with those who knew how to find them.
Amazingly, the problems disappeared like a thief into the night……

Justification was that boom and bust cycles had been confined to history.
New markets allowed “smoothing” of short term cash flow management (wholesale funding).
Why pay people to suggest this might not be the case?

“Show us the smoking ruins” was a memorable pronouncement!

Have you seen enough yet?

The man who signed off the redundancies trousered a hefty short term bonus for reducing staffing costs within the financial year (redundancy pay outs being transferred to a different pot).
The guy who suggested it received a promotion.

The motivation behind it all?
Greed?
Self aggrandisement?

Probably both.

The right thing to do? Perhaps history will show otherwise.

On a small scale this may not have created the current crises, but multiply this arrogance across many departments across many large financial organisations and you can start to see why (with so many egos competing for more and more theoretical successes) it has all gone wrong.

What did I do to try and stop it?

I am still here.
I reported the corruption behind the management decisions behind choosing to make the original people redundant (both senior managers responsible left within two years), once my colleagues had banked their money having all decided to take it.
I continue to remind people that remedial, retrenchment actions and decisions could have been taken many months before they were. I remind people that the system wasn’t broken before others tried to fix it (and provide the evidence to prove this has been pointed out several times over).

Does that make me feel better?
No.
I think about all those who have lost their jobs or homes because of corporate greed and avarice ruining small businesses and decimating communities.
I think about how the children of my generation will still be paying for the mistakes of today when they have children of their own.

Although I am a lucky one (at the moment) should I, could I, have done more?

I was appalled at the taunting of the protesters by city workers waving wads of money out of their office windows.
I do not agree or subscribe to the “rent a mob” crowd which invariably hi jacks peaceful protests, but even so that taunting epitomises all that is wrong in the banking world – no consideration for the greater good.

I hope the world recovers (it will take more than Mr Brown to save it).
I hope lessons from this recession are learned – they clearly weren’t from the early 1990’s.


If you would like to comment on this piece and contribute to a “credit crunch podcast” for Radio Lutterworth (www.radiolutterworth.co.uk), please email webbmeister@radiolutterworth.co.uk who can arrange for recordings and credit crunch soundtracks.



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