Lack Of Leadership Has Resulted In Foreclosure Crisis

December 23rd, 2008 | Tags: Foreclosure Crisis

Russell Palmer of Wharton has authored a book named Ultimate Leadership in which he explains how lack of leadership has resulted in the foreclosure crisis and how it is proper leadership that will guarantee against future failures.

Those who perpetrated the sub-prime fiasco knew very well its consequences and yet Wall Street with its hedge funds pushed on ahead propelled by greed. Nobody with sense could really believe that the bubble would not burst. Greed blinded them to madness. Only proper leadership could have prevented this derailment.

There have been hefty discussions about whether the Federal Reserve under the stewardship of Ben Bernanke and the Treasury Department under Henry Paulson took the right step in allowing JP Morgan to take over Bear Stearns. Although many quarterbacks will criticize loudly Palmer feels that they did the right thing.

Paulson has suggested many sweeping reforms since then. With time some of the suggestions have been somewhat watered down but what is clear is that more transparency is the call of the hour. Hedge funds, for example, are far from transparent. Investors continue to pump money into these expecting more than high returns. Today they are seeing what the outcome of hedge funds can be. They have become more cautious and need to be exposed to more transparency. Only if they could clearly see the road ahead will they take the risk to come forward. The banking, trading and hedge funds have become too complicated – more transparency is required to avoid another foreclosure crisis.

Some overall controls are the call of the hour. This can be given either by the current regulatory entities or new bodies with power to supervise the activities that are going on. At the end of the game it is the investor that has to take the decision but before that the investor has a right to adequate information.

For Wall Street certain leadership lessons can be learnt. The key to leadership is integrity. This is sadly lacking in Wall Street. Lying to each other is a common procedure. Each side bluffs the other by saying they have better offers from other parties. There are idle threats of walking away that never materialize. It is not that all the firms in Wall Street lack integrity but those who do not have this quality seems to dominate right now. Such an important thing as the financial system and edifice of the country must be founded on integrity and trust for the country to move along the proper tracks.