ABA Banking Journal - April 2008 - (Page 4)

Editor’s Column WILLIAM W. STREETER Editor-in-Chief Banking ABA JOURNAL USPS-544-030 APRIL 2008, VOL. C, NO. 4 Editorial and Executive Offices: 345 Hudson Street, New York, N.Y. 10014-7115 Phone: (212) 620-7210 Fax: (212) 633-1165 E-mail: ababj@sbpub.com Internet: http://www.ababj.com Published monthly for the American Bankers Association by Simmons-Boardman Publishing Corp. and copyrighted 2008 by ABA; Edward L. Yingling, President, 1120 Connecticut Ave., N.W.,Washington, D.C. 20036, (202) 663-5000. Title registered in U.S. Patent Office. With the exception of official Association announcements, the American Bankers Association disclaims responsibility for opinions expressed and statements made in articles or advertisements published in ABA Banking Journal. Wisdom of markets. Really? THERE’S AN EXPRESSION USED IN connection with the internet, “wisdom of crowds.” It comes from a 2004 book of the same name by James Surowiecki. In the context of the web, the message is, essentially, don’t think you’re smarter than the people who surf the web. But the concept is much broader than that. It basically describes the dynamics of a free-market economy. “Wisdom of markets,” in other words. The markets do decide (or at least react) regarding inventions, elections, etc., and maybe eight times out of ten the result over time is good in terms of economic growth and improved standard of living. But crowds turn ugly on occasion— become a mob, basically. And then, in anger—or panic—they can quickly wreak havoc. The employee/owners of Bear Stearns learned this very painful truth firsthand a few weeks ago. As Alan Schwartz, Bear Stearn’s chief executive, was quoted as saying, “We here are a collective victim of violence.” You may have your own views as to whether the characterization of “victim” is appropriate to a firm that was involved so heavily in mortgage-related finance, but it is fair to say that Bear Stearns was hardly the only one. But “violence” is an apt word, for when a panic begins, it crushes indiscriminately whatever lies between it and perceived relief. If you’ve ever tasted real fear, you can relate to its power to paralyze clear thinking. Faced with the prospect of a panic, it’s hard to see how any person in a position of authority would not take steps to prevent, slow, or stop it—and take them quickly. Once fully under way, panics run their destructive course. The Federal Reserve and the Treasury Dept. have come in for both praise and sharp criticism for their interventions in the markets up to and including the startling events of the weekend of March 15-16. That’s when the Bear Stearns marriage to JPMorgan Chase was arranged and when the Treasury offered to back its primary dealers to the tune of hundreds of billions of dollars. Some critics of these and other moves raise the specter of rekindled inflation—a real danger, to be sure (see The Economy, p. 60). Others lament the loss of moral hazard, or simply decry the hubris of policymakers vis a vis “the markets.” One thing is certain: even in this era of instant communication and “analysis,” nobody has all the facts. First of all, some things simply cannot be seen until the dust has settled. And, in fact, the gale of media coverage contributes to the dust. Second, many sources would have you believe that they have the inside scoop on what went down. More likely they have a piece of the story based on hearsay. Theodore Roosevelt—not one to stand by and watch things unfold—observed in his autobiography that in almost all cases of government intervention during his term, “…there followed the criticisms of alleged illegality and haste which are so easy to make after results have been accomplished and the need for the measures…has gone by.” We’re with Teddy on that score. In a panic, we’d prefer intelligent intervention over doing nothing. Selling off a big investment bank for a fraction of its earlier trading price is hardly a bailout for shareholders. It was a preventative measure and a bold step, which, at least as of this writing, seemed to resonate, although the deal may yet unravel. In these unusual circumstances, we’d say, better to make a mistake, than to hesitate. bstreeter@sbpub.com Editor-in-Chief Executive Editor Senior Editor Editorial Assistant Art Director Associate Art Director Art Production Manager Contributing Editors Leslie T. Callaway Lucy Griffin Kenneth Kehrer Orla O’Sullivan Advisory Committee Jeffrey S. Owen Production Director Circulation Director Publisher William W. Streeter bstreeter@sbpub.com Steve Cocheo scocheo@sbpub.com Lauren Bielski lbielski@sbpub.com Andrea Rovira arovira@sbpub.com Wendy Williams wwilliams@sbpub.com Phil Desiere pdesiere@sbpub.com Todd M. Blanchard tblanchard@sbpub.com Ed Blount Nancy Derr-Castiglione Karen Kahler Holliday Bill Orr Lisa Valentine Edward L. Yingling Virginia Dean Mary Conyers-Brown mbrown@sbpub.com Maureen Cooney mcooney@sbpub.com Gus Blumberg gblumberg@sbpub.com Subscriptions: Call 1-800-895-4389; or write to: Subscription Dept., ABA Banking Journal, P.O. Box 10, Omaha, NE 68101-0010 Subscription rates: PRINT OR DIGITAL VERSION: One Year Commercial Banks/Holding Companies FREE to qualified subscribers in the US; Commercial Banks/Holding Companies (Canada) $50.00; Other Businesses (U.S. & Can.) $70; Foreign (Air Mail) $380; Two Years Commercial Banks/Holding Companies (Canada) $85.00; Other Businesses (U.S. & Can.) $115; Foreign (Air Mail) $710; BOTH PRINT AND DIGITAL VERSIONS: One Year Banks, Holding Cos., Financial Insts. - US & Can $75.00; Other Businesses - US & Can $105.00 Foreign - Air Mail Delivery $570.00; Two Years Banks, Holding Cos., Financial Insts. - US & Can $128.00; Other Businesses - US & Can $173.00 Foreign - Air Mail Delivery $1065.00 Single copy rate: $25.00 (U.S. & Canada) $100.00 (Foreign) : Reprints: PARS International Corp. phone: 212-221-9595 / fax: 212-221-9195 e-mail: SBPCreprints@parsintl.com. : Research: full text of ABA Banking Journal is available on Nexis, a proprietary electronic database http://www.nexis.com. ABA Banking Journal (ISSN 01945947, USPS 544-030) is published monthly by Simmons-Boardman Publishing Corp., 345 Hudson St., NY, N.Y. 10014-4502. Periodical Class postage paid at New York, N.Y. and additional mailing offices. Canada Post Cust. #7204564; Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2; Agreement #41094515. POSTMASTER: Send address changes to ABA Banking Journal, P.O. Box 10, Omaha, NE 68101-0010. 4 APRIL 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.ababj.com http://www.ababj.com http://www.nexis.com http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - April 2008

ABA Banking Journal - April 2008 Contents Editor's Column You Can't Beat Wal-Mart: Or Can You? Snapshot: Non-Interest Income Shoulders More Weight ABA National Conference for Community Bankers Report 100th Anniversary: Then & Now ABA Resources ABA Chairman's Position Banks Plus Insurance: How to Make It Work Pass the Aspirin 2008: Year of Rich Internet Apps? Tough Time For That IPO Your Audience Needs to Know Who You Are Telepresence: Costly But Very Cool Webnotes Better Websites Mean Tougher Compliance Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - April 2008

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