[Frank]

Here is the key point in my opinion.

Ethical business is long-term good business. If a company strays from that and bends its standards because it is playing for short-term market share, it will end up being bad business and will hurt itself long-term. The bullshit is that all the CEOs and executives that did terrible jobs all got rich anyway -- even if a lot less rich than they could have been.

Credit must go to those who did a good job this cycle -- namely JP Morgan and Wells Fargo.

[james_gsx]

Originally Posted by Frank »

Here is the key point in my opinion.

Ethical business is long-term good business. If a company strays from that and bends its standards because it is playing for short-term market share, it will end up being bad business and will hurt itself long-term. The bullshit is that all the CEOs and executives that did terrible jobs all got rich anyway -- even if a lot less rich than they could have been.

Credit must go to those who did a good job this cycle -- namely JP Morgan and Wells Fargo.

I agree about the ethics piece, Harvard Business Review wrote about it a few years ago if I remember correctly. But here's a problem, if it's accepted as "ethical" in the industry to do fancy accounting would you do it? You could say it's unethical, but if everyone is doing it but you refuse, chances are you'll lose your position. Is that good? Well, it depends on who you talk to I guess. If Sarbanes Oxley doesn't deem the practice ethical (I'm not accountant so don't take my word for it) then how do you tell your board it's unethical and keep your job over a sustained time frame?

Ethics seems to be a fuzzy area. I can't speak for all the big accounting firms, but I do know first hand that Price Waterhouse Coopers required their employees to take regular ethics courses.

That's not to say there weren't a slew of unethical behaviors abundant in the business. I mean, look how easy it was for the credit agencies to take a bunch of subprime loans and dub them AA or AAA debt. Then you even had some data plugged into the models that didn't include an entire business cycle, so the assumption housing prices would never fall seemed more like a fact. They took one of the safest credit products and turned them into the exotic flavor of the decade.

[DugDug]

Hi Dinero - I figured that might touch a nerve - always good for discussion
(While I dont actually blame accountants)
It does show that its the mechanisms that will allow or not allow such behaviour that has recently occurred.
You will always find ethics to be an issue, however ethics are a far harder area to police, monitor and even measure and define. And even then.... you will never be able to stop someone who is going to be fraudulent. Thats why you are meant to have the checks and balances in a system.

The point Dinero made about the complexity is very important, it implies that these things are too complex and really should be simplified....or if you dont understand them, dont trade them. When you have the banking lawyers writing these documents and deliberately making them complex, and then people actually buying into things they dont understand then you can expect a disaster. (I have seen a good study from about ten years ago showing more mining companies have gone broke due to complex financial hedging of their own products than other reasons - food for thought)

However ultimately if am a reductionist and believe that everything can be boiled down to some simple concepts (so bear with me here)
Everything ultimately is either an asset or a liability (and to an extent, either a future or an option) - and if people are allowed to inflate assets and hide liabilities they will. (think about it in terms of everyday events, even in someones resume) Its only natural.....so when you have an industry being paid to come with accounting rules to suit the companies they are being paid by - as opposed to the actual end users - the investors....then ultimately there will be a problem.

Why dont the regulators actually appoint pay the auditors? (I know this has its own issues)
This is not the first time this has occurred, and whilst everyone is blaming the bankers and the hedge funds and the regulators, I just prefer to go straight to the source. (Just for the sake of discussion and a slightly different take on it)
I guess you could always ask Harry Markopoulos about why the regulators are not much help either.

(ultimately its a combination of a lot of things (regulators, human nature, accounts, too much leverage, public v private money), but the knee jerk reaction to say its just greed misses the point that the vast majority of people if given the same opportunities will see a few bad apples doing it because they can)