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Our financial crisis is the result of bad business methods

Traveling in Europe, there is a range of newspapers and interviews with business leaders that we don’t have regular access to in the United States. And, since the foreign press is actually probing instead of cut and pasting from press releases given out like confetti on Wall Street, sometimes the printed comments over there are very revealing.

First off, journalism is not dead in Europe. Journalists actually have to justify their salaries by getting in-your-face comments from the heads of companies. Just before I left, Diane Sawyer passed the mike to their chief financial journalist on ABC World News who claimed to have interviewed the head of Bank of America. There he was, the CEO of B of A, getting out of his limo, refusing to say one word, scuttling into their office in Manhattan.

Interview? Not one response. And this is world news? Compare that to the French newspaper Le Monde’s on-the-fly interview with the head of the IMF.

The Le Monde journalist had actually been on a probe for weeks, gathering damning information which linked the upper echelon of the IMF with some nefarious or at best dubious financial dealings. The journalist could not be avoided as the head of the IMF was going to be outed anyway. Christine Lagarde has been linked to the President’s illegal acquisition of journalists’ conversations (cell phones) and personal data from newspaper computer files.

When did this happen? When she was in government. So while her previous boss of the IMF was abusing women, Ms. Lagarde apparently was abusing rights. The flow-over to these probes will play out in the rest of Europe as governments seek to deal with the financial crisis sweeping across the continent ... in other words, she’s compromised as is France (a bit), so Germany may get its way (and bail out Greece). Journalists do make a difference.

Meanwhile, in the United States, the Wall Street Journal, even if the rest of the world’s press catches these people out with solid journalism and probing, doesn’t even cover it as front page news. Why should they, it would just give people too much information and further erode their confidence in Wall Street (as if it could get any lower)?

And there is another problem in America. The infection of Wall Street’s need for instant profit and instant financial security (the opposite of good investors’ position, like that of Warren Buffett), is bleeding across the Atlantic and Pacific.  This is really poor practice for business solidity.

Look, if you are Ford and want to build a new plant, the day you announce a new plant (as just happened in Kentucky), your stock drops because the cost of that plant may, I say may, reduce the immediate profits of the company for, I don’t know, a week? So the stock dips and people lose confidence, your loan rating wobbles. This happens across America all the time and is one of the reasons banks are hoarding money.

Oh, and Moody and Standard & Poor (those bastions of poor judgment who knew banks were dealing in junk bonds they rated AA) have initiated in America the European practice of weekly corporate ratings. Weekly! Can you imagine if you went into your boss every week and received a rating: fired or re-hired for a week?

People are risk averse; I see that, it makes sense. But how is the investor supposed to know what to avoid if “ratings” are coming out based on such short-term thinking? Short-term thinking is really what got us in this mess in the first place. And it will keep us there if investors hoard money (and in banks, who also sit on it) instead of investing in business and stocks.

So, what to do? Fire up the journalists to get off their respective rears and then allow their reports to make the real news. And if you have anything you can invest, simply ask yourself this: what is it Americans cannot live without? What product or service will always be atop your list of needs?

Then call the company directly (yes, they have departments that sell company stocks) and buy shares directly from them. Skip Wall Street all together.

And take the national news with a huge grain of salt. Remember always: The nation is not broke, countries cannot go broke.

A New Mexico resident, Mr. Riva formerly lived in Amenia Union.
 

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