Our demand for financial news.

One thing that I find very interesting with the ongoing financial crisis is the seemingly constant, and increaseing, demand for news concerning the financial "melt down". Every day we are bombarded with the "newest updates" on what has happened, and certainly so here in the Scandi-area. What I get frustrated about is the lack of actual analysis that comes from different Scandi newspapers, such as Swedish DN and SvD.

Let me give you a very concrete example of irrational exuberance that strikes news desks at this hour: Nothing is happening, market forces develop over time - the only thing we can do is wait and hope that large governmental offices do what they must to salvage the financial system (so we can pay our bills and transfer money in a safe and sound way). Suddenly, the financial crisis seems uninteresting and highly complicated. It is just too much "noise" in the engine to actully understand - hence; we write about bonuses and the system about variable pay. Our demand for news - in any direction - causes the suppliers (journalists and traditional media) to write about fund managers and managers who have received substantial bonuses, and that this is horrible, wrong and nearly punishable by death. Well, lets tie someone to the cross and call an angry mob. I am not so sure that we are doing a good thing by denying good people a variable pay. If payment systems are developed in a good way, that are tied to a sound strategy and you manage to control your employees in a good manner (through a balanced scorecard of some sort), then where is the corporate risk of excessive risk taking? and value damaging behavior?

The root of this problem has to be somewhere else. If Lehman Brother's was a fantastic and sound franchise, then why did it tank? Didn't they have a quant department themselves that could look at the probable risk? or was there a culture of greed and lust for excessive risk - that no one wanted to talk about - that was the cause of failure? If this was a bet, I would place mine on the latter. And this, analyzing data, going back and forth and talking to people, and analyzing variable pay agreement is hard, difficult to get ahold of and tiresome. And in my opinion, it does not make good news.

Hank Greenberg was the CEO of AIG for almost 40 years and built AIG into one of the most impressive insurance franchises in the world. Now, after some clumsy management - the corporation is dead (See the clip on the top of this post). Interesting to see that the financial stimulus plan for the EU is going absolutely nowhere and it is quite a sight to look at Lehman's homepage.. talk about meltdown with big "M". (My classmate Anja sent me this article about AIG - interesting read).

Here are some other very interesting movie-clips with Hank Greenberg (Clip 1, Clip 2)