The dark clouds seem to be spreading over government financing throughout the western world. These clouds have been observed in Europe during the debt crisis that occurred there earlier this year. Now the clouds are becoming darker and darker in the United States.
We get a picture of this in the article by Mary Williams Walsh in the New York Times this morning, “Cities in Debt Turn to States, Adding Strain,”
“Harrisburg, the capital of Pennsylvania, dodged financial disaster last month by getting money from the state to make a payment to its bondholders.
Now Harrisburg is calling on the state again. On Friday, the city said it could not meet its next payroll without money from the state’s distressed cities program.”
But, we learn that there are 19 more cities in Pennsylvania that are in the distressed-cities program. Michigan has 37 in its program; New Jersey has seven; Illinois, Rhode Island and California have at least one. And, this is on top of the troubled housing programs (see Philadelphia), power efforts, and hospital authorities.
And, this doesn’t include anything about the problems that states are having. Let’s highlight California, Illinois, Nevada, and New Jersey as a beginning. And, this is on top of the underfunded state pension programs that exist throughout the country.
Let’s see…if the states pick up the financial shortfalls in the municipalities…and the federal government picks up the financial shortfalls in the states…who picks up the financial shortfalls in the federal government?
Like I said earlier, the dark clouds seem to be spreading over government financing throughout the western world.
Showing posts with label University of Pennsylvania. Show all posts
Showing posts with label University of Pennsylvania. Show all posts
Tuesday, October 5, 2010
Friday, October 23, 2009
Wall Street Smarts
After I posted my comment on “Do we Really Need to Break up the Banks?” yesterday (http://seekingalpha.com/article/168514-do-we-really-need-to-break-up-the-banks), I remembered an anecdote from my time in the Finance Department at the Wharton School, University of Pennsylvania. It relates to commercial banks moving from “utilities” to “casinos” in the words of Mervyn King, Governor of the Bank of England.
What brought this incident back to my mind was the recent op-ed piece by Calvin Trillin in the New York Times with the title “Wall Street Smarts.” (See http://www.nytimes.com/2009/10/14/opinion/14trillin.html?scp=2&sq=calvin%20trilin&st=cse.) In this piece Trillin runs into a person who reflects on something a speaker who had just been to a college reunion had shared with him.
“One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”
He goes on, “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”
I joined the Finance Department at the Wharton School in the fall of 1972. At the time they had one course related to commercial banking, but the course was structured to discuss banking structure and regulation.
I was interested in running banks so I made the suggestion that we offer a course in bank management that was similar to the courses in the financial management of corporations, only make it specifically related to the issues and concerns of the banking industry.
The response I received from some of the administration was that they were unsure that a course like that would attract many students, particularly at the MBA level. The reason being, that except for hiring several people that were interested in running bond portfolios, the large money center banks did not recruit from the Finance Department at Wharton.
Well, I knew that there were a lot of people from the University of Pennsylvania that worked at the large money center banks so I asked a stupid question: “Where did these banks recruit Penn grads?”
The response: “Oh, they recruit from the History Department, or the English Department or areas like that. What the banks really want are people that get along with others, enjoy social drinking, playing golf or playing tennis, who belong to social clubs and things like that. They don’t want someone that is mathematically trained or otherwise quantitatively orientated. They want someone to help establish or build relationships.”
Well, not that there weren’t smart people that graduated from History, or English, or areas other than math, statistics, physics, and finance. It’s just that, at the time, banks didn’t consider that these were the people they wanted working with their customers. I guess there is a bit of truth to Trillin’s op-ed piece.
Anyway, we did create the course in the financial management of commercial banks. In my last semester at Wharton the graduate class was held in a large auditorium and was completely filled. The textbook written for the course, The Financial Management of Commercial Banks can still be found on Amazon.com. (See http://www.amazon.com/Financial-management-commercial-banks-Mason/dp/0882623095/ref=sr_1_1?ie=UTF8&s=books&qid=1256315167&sr=1-1.)
What brought this incident back to my mind was the recent op-ed piece by Calvin Trillin in the New York Times with the title “Wall Street Smarts.” (See http://www.nytimes.com/2009/10/14/opinion/14trillin.html?scp=2&sq=calvin%20trilin&st=cse.) In this piece Trillin runs into a person who reflects on something a speaker who had just been to a college reunion had shared with him.
“One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”
He goes on, “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”
I joined the Finance Department at the Wharton School in the fall of 1972. At the time they had one course related to commercial banking, but the course was structured to discuss banking structure and regulation.
I was interested in running banks so I made the suggestion that we offer a course in bank management that was similar to the courses in the financial management of corporations, only make it specifically related to the issues and concerns of the banking industry.
The response I received from some of the administration was that they were unsure that a course like that would attract many students, particularly at the MBA level. The reason being, that except for hiring several people that were interested in running bond portfolios, the large money center banks did not recruit from the Finance Department at Wharton.
Well, I knew that there were a lot of people from the University of Pennsylvania that worked at the large money center banks so I asked a stupid question: “Where did these banks recruit Penn grads?”
The response: “Oh, they recruit from the History Department, or the English Department or areas like that. What the banks really want are people that get along with others, enjoy social drinking, playing golf or playing tennis, who belong to social clubs and things like that. They don’t want someone that is mathematically trained or otherwise quantitatively orientated. They want someone to help establish or build relationships.”
Well, not that there weren’t smart people that graduated from History, or English, or areas other than math, statistics, physics, and finance. It’s just that, at the time, banks didn’t consider that these were the people they wanted working with their customers. I guess there is a bit of truth to Trillin’s op-ed piece.
Anyway, we did create the course in the financial management of commercial banks. In my last semester at Wharton the graduate class was held in a large auditorium and was completely filled. The textbook written for the course, The Financial Management of Commercial Banks can still be found on Amazon.com. (See http://www.amazon.com/Financial-management-commercial-banks-Mason/dp/0882623095/ref=sr_1_1?ie=UTF8&s=books&qid=1256315167&sr=1-1.)
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