Friday, November 15, 2013

Dudley: "Do Right" !....

Becoming Fed up - finally?
William C. Dudley is the President of the Federal Reserve Bank of New York, a position considered to be the second most powerful within the Federal Reserve System.  Experienced, tactful, discreet, Mr. Dudley, as you might imagine, is measured and careful whenever publicly expressing his views on the American banking system.  His opinions matter, he is always "on the record".

Which makes his remarks last week before the Global Economic Forum in New York City of particular note.  Mr. Dudley's topic of choice was: "Ending Too Big To Fail".  Much was not new in Mr. Dudley's analysis of the on-going problem of TBTF U.S. banks, but what brought the house down was the following comment:

Egregiously and wantonly piggish !
"Some argue that what I proposed - higher capital, requirements and better incentives that reduce the probability of failure combined with a resolution regime that makes the prospect of failure fully credible - are insufficient.  After all, collectively these enhancements to our current regime may not solve another important problem evident within some large institutions - the apparent lack of respect for law, regulation, and the public trust. There is evidence of deep-seated cultural and ethical failures at many large financial institutions. Whether that is due to size and complexity, bad incentives, or some other issues is difficult to judge, but it is another critical problem that needs to be addressed.  Tough enforcement and high penalties will certainly help focus management's attention on this issue."


(Whaddaya say ABA? CU's need to be taxed is your most pressing industry problem?)



Anonymous said...

I would like to humbly submit for your credit union reader to consider the sagacity of those much wiser than I who suggest that people who live in glass houses refrain from naked parties. said...

Mr. Dudley is correct about the TBTF banking institutions and Mr. Anonymous needs to take a 'chill pill'. Business ethics is an oxymoron at many of those institutions and the community bankers and credit unions have paid dearly to pick up the tab. Keep on posting Jim.
M. Boutwell

Jim Blaine said...

About naked parties..perhaps... but there is a substantial difference in the scale of debauchery in the big glass houses.

And, at least credit unions are still surprised and, more importantly, still embarrassed when it happens in our house...

Nobody is surprised anymore about the banks... and the ABA hasn't issued any apologies to date!

Anonymous said...

My chill pills must not be working, because the scale of the ethical failure leads to some interesting considerations? On what scale should we get upset about the ethical lapse? I am almost willing to bet that on a percentage of assets level, credit union ethical lapses are considerably greater than many bank ethical lapses. I can pretty much justify anything except coming up with a good reason to do the wrong thing.

The credit union model is broken! The internal controls systems that are the base of the credit union model no longer exist. Credit unions present themselves as something they no longer truly are. This is a very special fraud that is talked about in every auditing text book. It is the fraud of someone presenting themselves to the public that they are not.

The fact that the ethical failures have not yet happened does not excuse the allowance of a system lacking proper internal controls to prevent them.

Thank you! The pills are starting to kick in! said...

The 'chill pill' was a placebo and your brain is not influenced by anything other than the real stuff. The losses visited upon this nation by the TBTF institutions were in the trillions of $$$ not billions. that far exceeds the total assets of credit unions and community banks combined. Try that on for 'SCALE'.