From Financial Chaos to Financial Order

Transparency is a powerful antidote for what ails our capital markets.
Christopher Cox
Chairman
SEC

In view of the globalization of our financial markets, shouldn’t we form an international body that, if not a regulatory group, at least a watchdog alert system which helps prevent transactions in one sector or country from negatively affecting other areas. As Tom Friedman noted in his New York Times October 19th column: “We’re all connected and nobody is in charge.” Is my proposal too wild a dream?

The British were invested to the tune of $1.8 billion – according to Friedman -- in Icelandic banks that went under, and which the Icelandic government finally seized control of. Among the investors were 120 British municipalities, as well as universities, hospitals and charities. Of course, this is most likely a footnote to the billions in mortgages which were bundled and sold up the global financial ladder, the root cause of this international credit crunch.

In the same New York Times issue and across the page, Christopher Cox, SEC Chairman, comments on the lack of regulations on credit default swaps, which are like insurance on assets that default, in this case, mortgage-related securities. $440 billion in AIG – issued credit default swaps, have been put at risk. Cox notes that the total market for these swaps -- $55 trillion, bigger than the GDP of all nations on earth – operated in the shadows, without public disclosure or any legal requirements for these contracts to be reported to the SEC. Therefore, says Cox, “So government regulators have no way of assessing how much risk is in the system” – and how others may be threatened.

If we know what is going on and report it accurately, then investors will have confidence in the markets, can assess risk and know where to put their money.

However, I do recognize that this will be no easy undertaking given the differences in regulations and market philosophies throughout the world. For example, while the U.S. capital markets are “rules-based,” markets in the UK are “principles-based.” In addition, there are varying accounting standards throughout the world that would have to be meshed in some way.

Cox argues for Congress to set up such a regulatory system. Let’s do that. But I say take it another step forward. Since internationally we are all each other’s clients (key global economies are already tied together), why not set up a transparency system that at least watchdogs the world, and assesses the possibility of establishing global regulations that will change worldwide chaos to worldwide order? As difficult as this may be, it is worth a try. The management of this intricate global economic system may also yield peace dividends.

How Newspapers Can Adapt to the Internet Age

I’m intrigued by an idea I’ve recently read about called “community funded journalism.” A website called Spot.us seeks ideas for investigative articles that people feel should be done and then asks the community to provide the funds to pay journalists to do the work … the end result of which is published on the site. Obviously, if there is no response, the story dies.

Why am I intrigued? Because if properly handled, it could be a very democratic and collaborative way to save newspapers and one that, but for the Internet, could not happen. It also offers public relations professionals an alternative to a relevant editor in the print media who is holding back a commitment to cover a client story that desperately needs to be told. We, of course, all realize that this “Spot.us innovation” has come about because the rise of the internet has resulted in a decline in advertising support of newspapers.

The good news is that an article that flies via Spot.us truly has the support of various groups; in fact, that support (or lack of it) adds an element of measurement before the article is even printed. Furthermore, anyone can propose a story about anything. This further empowers citizens. Newspapers can develop their own website version of Spot.us, setting it up as a supplement to their print editions.

What are the possible downsides of this creative idea? The New York Times notes: (1) If an organization with an agenda sponsors an article, the piece could be biased. Therefore, Spot.us limits every contributor to no more than 20 percent of the total cost. It also seems Spot.us should cite the profiles of the contributors, if not the names themselves. (2) This approach enables journalism to be bought by the highest bidder. But, once again, limiting the percent any one contributor makes can offset this problem. (3) Newspapers have a right to purchase these stories from Spot.us but then they would need to disclose that they did so and perhaps even reveal the profile of the underwriter. (4) News that is important may not get the support it should, and key stories could be lost.

This “crowdfunding” approach is worth thinking about because it is another example of how newspapers might adapt their model to the Internet age, and help solve their financial problems. Of course, their profits would have to be taken into account and when arriving at a price, many journalists would become free agents, receiving assignments from multiple news organizations, thereby employing many of those who are now out of work.



Technorati Tags: newspapers, internet, community funded journalism, Spot.us, community, The New York Times, crowdfunding, business, communications, public relations

What If the Whole World Could Vote?

The U.S. is one of the most powerful countries in the world, so it’s not surprising that there are lots of non-Americans who share our intense interest in the U.S. presidential election. The Economist is giving them a voice through a nifty web-based global version of the U.S. Electoral College.

The fact that the Economist is doing this speaks to the world impact of our government — an interesting point in view of the almost universal “U.S.-bashing” over the past eight years. It also underscores the financial magazine's recognition of the importance of its nearly 700,000 U.S. subscribers and the need for continued growth here.

In an interview with Ad Age, the Economist’s Ron Diorio is quoted as saying, “We're trying to recognize that the U.S. has a significant role in the world's economy and politics and offer people a way to get a little bit off their chest.”

The authentic U.S. Electoral College is comprised of 538 electors, the equivalent of the total membership of both Houses of Congress (435 Representatives and 100 Senators) plus 3 electors allocated to Washington, DC. Each state has as many electors as it has Representatives and Senators in Congress. Since the most populous states have the most seats in the House, they also have the most electors.

The Economist’s version gives 195 of the world's countries — including, of course, the U.S. — a say in the election, by allocating a minimum of three electoral-college votes to each, plus one vote for every 700,000 citizens in the country. For example, China, with a population of more than 1 billion, has 1,900 votes; the Bahamas has 3. The U.S. has been allocated 432 votes out of the 9,875 vote total.

Voting in the Economist's Global Electoral College will close at midnight London time on November 1, when the candidate with most votes will be declared the winner.



Technorati Tags: U.S. presidential election, Economist, U.S. Electoral College, U.S.-bashing, Ad Age, Ron Diorio, Congress, Global Electoral College, business, communications, public relations

An Urgent Transparency Concern

I have an urgent transparency concern that impacts all political parties, our government, the entire nation and the world.

It is brought to mind by the current publicity noting whether McCain's health records have been fully exposed, that only 20 reporters were invited to a three-hour only session last May to review 1,173 pages of these records without the ability to take copies. Of course, the records refer just to McCain's physical health, and the review time allotted and the number of reporters involved seem inappropriate in view of the gravity of the situation.

But why pick on McCain? True, his melanoma history is an issue, but what about the physical health records of all four candidates running? Further, what about their mental health records? Why aren't they vetted and presented in an organized way simultaneously for all to see?

Shouldn't there be an election law requiring that certain standards be met in the release of both physical and mental health records to the media? And once elected shouldn't presidents and vice presidents have a required mental health check up the same way it is now traditional to have a physical health check up--with results reported to the public?

According to NYU’s Scienceline blog — which is produced by graduate students in the university’s Science, Health and Environmental Reporting Program — the medical records of presidential candidates are shielded by federal law. No candidate for commander-in-chief is legally required to disclose any medical conditions. Nevertheless, I feel strongly that the public has a right to know if a candidate suffers from any physical or mental condition that impedes his or her ability to govern … and that includes the ability to make a rational decision.

For 20years, mental conditions were hushed up, insurance did not cover psychiatrist visits, and the voting public would tag anyone as "crazy" if he or she had a psychological consultation. Many remember the removal of Tom Eagleton as a Democratic VP candidate in 1972 because it was discovered that he once had had shock treatments. Yet, according to a 2006 study in the Journal of Nervous and Mental Disease, 18 US Presidents suffered from a variety of psychiatric disorders, including depression, anxiety, bipolar disorder and alcohol abuse.

Fortunately, times have progressed, we are more sophisticated and understand the wonderful miracles that can be wrought by medical treatments of many kinds. That does not mean that certain conditions may not, indeed, warrant removal. On the other hand disclosure should not necessarily mean termination of a candidacy. But standards for disclosure should be set, and the degree of detail that is required. The 20 reporter, 3-hour limit McCain imposed should not be at his discretion. Today, sitting presidents customarily go through an annual physical with personal physicians, but the examination is not legally required. And even in this enlightened age, there is no law requiring a public report that our leaders are still of sound mind and body.

It was shocking for me to learn in Doris Kearn Goodwin's book, No Ordinary Time, which focused on the domestic impact of World War II, that Franklin Roosevelt had not had a complete physical checkup for years during his presidency, and only did so at the insistence of his daughter, as he became increasingly listless during the latter part of his third term. His physical showed that he had been suffering from an increasingly serious case of congestive heart failure over three years---undetected until that checkup. If my memory serves me correctly, the book revealed that this information was never released to the American public. Roosevelt was reelected for a fourth term---and then died within a year after the election.

Our nation's survival may be dependent on legislated transparency when it comes to the health condition of our candidates and leaders.


Technorati Tags: transparency, McCain, health records, presidential election, election law, Scienceline blog, Science, Health and Environmental Reporting Program, Tom Eagleton, mental health, Journal of Nervous and Mental Disease, Doris Kearn Goodwin, Frankin Roosevelt, business, communications, public relations