While those on Wall Street and Washington pretend to listen to the needs and concerns of middle America, they have been shown to be ineffective time and time again in developing and implementing sound financial practices and regulations. America is increasingly aware of just how deeply embedded and incestuous the Wall Street-Washington relationship has become. Who within this Wall Street-Washington circle “gets it?” Paul Volcker.
Volcker called out our financial and political operatives a few months back in calling for an effective reinstitution of Glass-Steagall to separate commercial and investment banking activities. I highlighted that call by writing, “Volcker Launches Bombshell on Wall Street and Washington.”
Although Wall Street and Washington may pretend not to hear Volcker’s shots across the bow, they do so at their own peril. Why? America listens and hears Volcker loud and clear.
What is Volcker saying now? Volcker spared nobody in the course of a recent tongue lashing of the financial establishment. Volcker bellowed, “Wake up, gentlemen, ” in a recent Wall Street Journal sponsored financial symposium. The WSJ highlights Volcker’s alarm this morning in writing, Paul Volcker: Think More Boldly:
Does financial innovation contribute to economic growth?
That became a hot debate at the Future of Finance Initiative after former Federal Reserve Board Chairman Paul Volcker chastised the largely private-sector group for the timidity of its proposals, and said the ATM was the only financial innovation he can think of that has improved society.
What about the boards charged with overseeing these financial behemoths? Volcker weighs in:
You want boards of directors to be informed about all of these innovative new products and to understand them, but I do not know what boards of directors you are talking about. I have been on boards of directors, and the chance that they are going to understand these products that you are dishing out, or that you are going to want to explain it to them, quite frankly, is nil.
How about Wall Street leadership and compensation? Volcker pulls no punches in drilling those charged with running our banks. He offers:
If it is really true that financial weaknesses brought us to the brink of a great depression that would have ended your livelihood and destroyed a lot of the global economy, then let me explain.
You concluded with financial-services executives showing cultural sensitivity and responsible leadership. Well, I have been around the financial markets for 60 years, and how many responsible financial leaders have we heard speaking against the huge compensation practices?
America hears Volcker loud and clear. Those in Washington and Wall Street may want to adjust their hearing aids so they too can pick up on Volcker’s warning, appreciate his wisdom, and take real action.