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Diagnosing the Financial Crisis' Root Causes

This is an introduction and background for my new multi-part research series on diagnosing the root causes of the Financial Crisis.

  • For the last several months I have been researching this huge question out of concern that policymakers are not able to "see the world whole" because the problem is so extremely complex, severe, and urgent that the need for action understandably has policymakers in "triage mode" -- treating the most pressing wounds and symptoms like a medic in a disaster zone, but not able to diagnose and cure the real underlying root causes of the Financial Crisis.
  • My overriding concern is that if we collectively do not understand and fix the real root causes of the Financial Crisis and economic downturn, it will happen again and again -- until we do.
  • As an expert that was early in foreseeing and calling the bursting of the tech bubble, and explaining its causes to Congressional subcommittees, I have a bad feeling of deja vu.
    • No matter how much the financial destruction, the real root causes of the financial mayhem in our capital markets system seem to continue to keep escaping attention and fixing.
  • The old adage is true. Those who don't learn from the past are doomed to repeat it.
  • I am also concerned that by focusing on symptoms and effects and not causes, the Government and industry response is getting distracted from what I call "first purposes:" i.e. functional capital markets, alignment of interests, investment, economic growth and fundamental value creation.
    • I believe there is too much focus on derivative or second/third purposes that may be beneficial in isolation, but can be highly destructive if they undermine first purposes.

The value of this series is that it will be forward-looking, wholistic, and practical... and also accessible through the copious use of word pictures, analogies and metaphors to help people better understand the complexity. I believe it is easier to figure out and communicate the complex by analogizing it to the familiar.

My target audience for this research series is the new Financial Crisis Inquiry Commission, all relevant policymakers, and anyone else truly interested in getting to the real bottom of this financial and economic mess.

What credibility do I have in this research endeavor?

My professional "Precursor" specialty is anticipating, figuring out and explaining complex change/problems before others do.  Seven different Congressional Subcommittees have tapped my expertise to help sort out complex questions. For example, I was:

  • The first congressional expert witness asked to explain what went systematically wrong with Enron days after its surprise devastating bankruptcy;
  • Asked to explain the array of financial and accounting problems that helped cause the Tech bubble and the consequent telecom debt spiral; and
  • Asked to explain how systemic Wall Street conflicts of interest helped cause the tech bubble and its bursting.

As an entrepreneur, I built my predecessor firm, Precursor Group Inc. from scratch with my partner, into the top independent investment research broker dealer in telecom-tech in the U.S., in 2004 and 2005 per Institutional Investor Magazine.

As a research leader, I conceived and was the founding Chairman of the Investorside Research Association, the first and only association of independent investment research providers.

My extensive government experience is also relevant to the research question. I started my career as a budget examiner at OMB covering among other accounts: the SEC, CFTC and the Treasury Department. I was Director of Legislative Affairs at the U.S. Treasury Department during Black Monday, the Stock Market Crash of 1987. And I have broad international experience and understanding having been a former Deputy Assistant Secretary of State and Deputy U.S. Coordinator for International Communications Policy.

In closing, I trust you will find my research series on diagnosing the root causes of the Financial Crisis, eye-opening, useful and practical.

  • None of us can afford for the real root causes of the Financial Crisis to go unaddressed so they can wreak hovoc on the world again.

 

 

I specialize in the most complex difficult analysis that cuts

 

 

 

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