Thursday, September 25, 2008

The Absence of Leadership

The New York Times has it right this morning. There is an absence of leadership in this country. See the lead editorial, “Absence of Leadership”:

Over the past six or seven months I have tried to emphasize two things. First, leadership must begin at the very top of an organization. The leader determines the culture and he or she must project this culture in everything that the leader says or does. My experience in business, government, and the not-for-profit sector is that if there is a leadership void at the top, even though others in the organization attempt to pick up the leadership reins, they cannot completely succeed. This is because there are others that will not go along because there is no one to “hold them in line” if they don’t follow those that are trying to pick up the leadership. Thus, things just don’t get done efficiently or effectively…and morale deteriorates.

Last night, the President referred several times to what “his” administration has been trying to do under “his” guidance. Yet, as the Times editorial points out, the whole rescue effort led by Hank Paulson has been highlighted by the fact that the President has been no where in sight. The President was pulled out of his bunker last week to speak to the press about the need for a bailout package, but his performance was like a puppet on strings and the voice that came out of his mouth was not his own. (See my post of September 22, 2008.)

Last night, with the whole Congressional effort lagging, the President was pulled out again to tell the American people that the thing we need to fear is fear itself and if the bailout bill was not passed quickly, Congress…not the administration…would be held responsible.

Again, the performance was less than believable, put on by someone that has no credibility.

In fact the show looked like a feeble re-run of past claims of impending disaster.

And, what does the absence of leadership get us? A bailout bill with little or no specifics; A Congress that is not cowered anymore by the idle threats of a lame duck; A nation that is not rallying to the call and is more against the bailout bill than for it; A brewing class war…the common man on main street and the greedy predator on Wall Street; and a market that has no idea where to go.

And, this is the second point I have tried to make…the increase in uncertainty faced by the financial markets. Yes, there are very wide swings in the stock market on a day-by-day basis. Yes, there has been a rush to quality and shorter term bonds. Yes, lending has dried up. This is what happens to markets that have little or no idea about what the future holds for them. Greater and greater volatility!!!

This, to me, is the bottom line of the current situation: there is little hope that we will get any leadership from the White House and the leadership of the Secretary of the Treasury does not substitute for the leadership of the President. There is a void in terms of “the leader of the people.” Hence, any bailout package that is forthcoming at this time will be less than satisfactory…and I believe that this is an understatement. And, this will mean continued uncertainty for the financial markets which can only lead to more volatility surrounding a weakening economy.

I fear that the pain is far from over.

And, I guess, what further disturbs me is that I don’t see the candidates for president “stepping up to the plate” to fill the void in leadership. They, of course, have to be careful in what they say with the pending bailout bill before Congress. However, people are claiming that the time is the worst since the Great Depression…that we are heading for a Second Great Depression…that those living have never faced anything like this…and so on and so on. The President says that times could get really, really bad. And, the responses we have gotten from our potential “Leader” leave us sadly with little confidence that the role will be adequately filled come January 20, 2009.

Financial markets…and the economy…thrive on confidence and trust. Confidence and trust allow market participants to make projections about the future and then confidently commit on an action plan. Without this confidence and trust, the future looks extremely hazy leading to only a tepid willingness to commit resources to any possible action plan.

The consequence of this…in general, stay as risk free as possible and as short as possible.

People may argue that this is not in the common interest. My answer is that, no, it is not in the common interest but our leaders have brought us to this point.

This is the same answer that I bring to the comment that “unbridled greed” brought us to the chaos that we are now experiencing. The leaders that set the economic policy of this country created the environment that rewarded people for acting in the way they did.

People respond to the incentives that are created by those individuals that determine the culture in which we live. It is always good to refresh ones’ mind on this point by reading and re-reading “Freakonomics”. It is also good to refresh ones’ mind to the fact that it is as normal for human beings to respond to ‘negative’ incentives as it is for them to respond to ‘positive’ incentives. See, for example, why Sumo wrestlers are like grade school teachers in Chicago!

Until we get some real leadership at the top in this country, my prediction is…hang on for the swings!

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