Hold the Spinach
There have been some twisted metaphors to describe the financial crisis — mostly comparing it to some kind of virus — but Bill Thomas, a member on the Financial Crisis Inquiry Commission, sought new ground last week when he evoked rock-climbing, fresh produce, fake sheep and tortoises, and crows.
At first the imagery was easy to follow. Speaking to former Treasury Secretary Henry Paulson about banks' interconnectedness, Thomas said it was like "five men climbing a mountain: they're all roped together, one falls, he pulls the other four with him."
Things got murkier when Thomas tried to define contagion and common shock.
"My argument is … if you told me that spinach, packaged spinach … had E. coli, you can go ahead and eat lettuce," Thomas said, noting that an infection in one wouldn't necessary spread to the other. "You don't have to worry about getting E. coli because it isn't the spinach."
Thomas was attempting to figure out how problems in the subprime mortgage market (presumably the spinach) spread to the prime market (the lettuce).
From there, it just got stranger, involving an experiment with faux sheep placed out in the desert along with Styrofoam tortoises, and finally crows that preyed on the tortoises.
"Until and unless you controlled the crows, you were never going to solve the problem," Thomas said. "Everyone argues that we didn't have a model that could tell us what was happening. I just don't understand."
That makes a lot of us.
New Chief at CUNA
Bill Cheney will succeed Dan Mica as chief executive of the Credit Union National Association.
Mica, a former congressman, announced in August that he would be stepping down this year; he's run the CUNA since 1996.
Cheney leads the California and Nevada Credit Union Leagues and has worked in the business for 25 years, including nine as president of California's Xerox Federal Credit Union (now Xceed Federal Credit Union).
In an interview, Cheney said he will push to give credit unions flexibility to extend services to members.
He said he'd like to work with bankers on goals that banks and credit unions have in common, such as cutting red tape.
"Credit unions don't lobby against banks, we don't try to restrict what banks are doing," he said.
"We think there's a place for both banks and credit unions in the marketplace."
Like many of his banking trade group peers, Cheney said peeling back regulation is the biggest challenge facing his industry. In particular, he wants Congress to raise credit unions' business lending cap.
"Credit unions are the most highly regulated financial institutions in the country," Cheney said. "We're in need of regulatory relief."
Humility Mandate
The Securities and Exchange Commission is finally getting serious about cracking down on excessive executive compensation — at least according to The Onion. A story in the satirical newspaper said the SEC had passed a rule requiring CEOs of major banks to "humbly shrug and smile sheepishly before accepting huge salary bonuses."
The rule, the story said, will force CEOs to "raise and then lower their shoulders in a manner that conveys a mild sense of humility or a sense of 'Aw, shucks. Who? Me?'"
