Must-read stories I couldn't put down.
My apologies for no "weekend reading" Friday or Saturday, but, heck, in this neck of the woods the weather (finally) was so magnificent I hope you were out enjoying it rather than doing what always irked Dad: "David, you always have you nose stuck in a book. Go out, play ball with the boys!"
I did spend profitable weekend time in cyberspace, though, and offer these finds for your consideration:
Atul Gawande (left), the Boston surgeon who's the WH must-read on medical reform, has another New Yorker piece, as usual on the common-sense best practices essential to more effective, less costly healthcare. I'll repeat that about common sense. My own family doc, who introduced me to Gawande a couple of years ago, recalled the several occasions in his earlier life as a hospital internist when success in the OR was followed the next day by news that the patient had died. In the night, he'd rolled out of bed, and in crashing onto the floor the delicate work on his internal organs had been instantly ruptured three ways to Sunday. An orderly had forgotten to raise the protective guard rail on his bed. Gawande's latest report - the man reports, he visits hospitals, clinics and so on and interviews patients, nursing staff, docs - is about the indispensability of teamwork. You might, like me, be outraged to that doctors, especially, resist this most basic requirement of getting things done in the world. One of my favorite sports moments was the benching of a $7-million-a-year slugger in the ALCS by the coach of the Chicago White Sox because the of the slugger's refusal be a team player. The requirment to coordinate - to not play your own game out there in isolation - as been standard operating procedure at Yankee Stadium and the local sandlot since time immemorial. But prima donna docs still are too proud for that - or even to wash their hands between surgeries - in a medical realm that has been more resistant to progress than just about any field of human endeavor. Gawande and people who think like him are the cure - saving lives, improving quality of life, and saving a lot of money and frustration for both loved ones and nurses and other medical practitioners who do "get it."
In Freakonomics, business-ethics professor Ann Tanbrunset has a brilliant insight from revisiting the 1986 Challenger tragedy (shown left, AP). You'll recall from that time that engineers had warned well before lift-off that the now infamous "O-rings" sealing fuel on the rocket had a 99% change of failing given especially unfavorable weather conditions. Milder inclement weather had degraded O-ring performance in the past. But NASA was furious at the prospect of a delayed launch, and the O-ring maker, Morton Thiokol (MT), was determined not to infuriate its customer. MT managers met with the firm's engineers, stressing that a "management decision" was required, not an engineering, safety-first or ethical one. Here's the devasting result of Tanrunset's research on this and other disasters - and you can see distinct parallels with the mindset of those of Wall Street who triggered the global credit crisis and resulting Great Recession: "We found that when individuals saw a decision through an ethical frame, more than 94% behaved ethically; when individuals saw the same decision through a business [or "management-decision"] frame, only about 44% did so." If the lives of the seven crew members who died when the shuttle disintegrated just 73 seconds after liftoff are to mean anything, as obviously they must, it's this finding: that when you subordinate "doing the right thing" to business considerations, you are courting disaster. You're also, in a way, playing God. As a sad sidenote for a pro-government person like me, it's hurtful in the extreme to learn how complicit NASA was in this wholly man-made tragedy. Until now, the blame has fallen mostly on the O-ring maker, Morton Thiokol, which certainly deserved its fate of subsequently disintegrating as the Challenger itself had. It was that company's managers that strong-armed and then over-ruled its own safety-first engineers. But NASA exerted enormous pressure on MT for a recommendation to launch the next day, notwithstandingg what the MT engineers had told NASA directly as well as MT management about the near-certainty of a launch disaster.
Next is a "heads-up" on why another banking crisis with severely damaging implications for the U.S. economy is almost certain. Why? Because it's business as usual on Wall Street given that the post-crash "reforms" are so lame. You already know this from the reports of continued outrageous bonuses the folks who almost brought down the global economy are still paying themselves. You'll find all this in the latest annual CEO's letter from the 77-year-old banker who's headed Buffalo-based M&T Bank Corp. for the past three decades. It's a remarkable piece of work, succinctly argued but comprehensive in its detailed proof of the case made by M&T CEO Robert Wilmers (left, courtesy M&T Bank Corp.). Skip to page 6, past the 2010''s operating performance at M&T, to CEO Wilmers' scathing condemnation of sky-high pay for Wall Street bank CEOs, and how that has warped them in pursuit of short-term gains, making them put aside safety-first considerations just as NASA and Morton Thiokol did 25 years ago. There's no question of Wilmers' credentials: M&T is one of America's 20 largest banks, and it has been one of the world's most consistently profitable banks during Wilmers' long tenure. During that time, M&T notably has stuck to the high road. M&T even got through the global credit crisis without reporting a loss. And during that time it also has been the #1 small-business lender in most of the major cities it serves, including Washington, D.C. and Baltimore.
This chart, prepared by M&T for an investors conference, politely fails to identify the "peer" banks with less adequate cushions for losses than M&T. It's important to know that among M&T much more vulnerable peers are far larger banks than M&T, whose failure has the potential to bring down the entire system. Hence the "too-big-to-fail" status of America's Big Six banks (M&T is not one). These giants are bigger than ever post-crisis due to Washington-arranged forced mergers of weak players into the biggest ones in 2008-09. A crippled Bear Stearns Cos., for instance, was ushered into the arms of J.P. MorganChase & Co.. The failing Wachovia Corp., a regional "superbank," went to Wells Fargo & Co. And Bank of America Corp. absorbed an insolvent Merrill Lynch Inc., world's biggest stock brokerage. One could take comfort only in knowing that each of the newly created Big Six, with a combined 52% of U.S. banking assets, had the same large amount of reserves set aside to cover bad loans as M&T.
This at a time when America's big six banks, now with an alarming 52% of total U.S. banking assets, have still not resumed lending even to the most creditworthy prospective borrowers. Putting prudence first also has not inhibited M&T's expansion from its Western New York base into the seven states it now serves. Or from rewarding shareholders - including the 70% of employees who own M&T stock - with one of the best stock-market performances of any commercial bank in the world. I recommend this highly unusual CEO's to you, in which Wilmer calls out his peers (he should have been asked to testify at Carl Levin's Wall Street inquiry) because it's packed with unassailable facts. For instance, Wilmers contrasts Wall Street CEO pay past and present, and documents the financial sector's unhealthy growth as a portion of the total U.S. economy. Wilmers, who describes himself as someone who loves banking and regards it as a "noble calling" (I agree) acknowledges, as I've also always felt, that banking and high finance are at best a mere supporting actor in the "real economy," which Wall Street's failure of 2008-09 has done so much to impair. This is one of those essays that should be mandatory study material at B-mills, and especially those like Wharton to which aspiring Wall Street careerists head. Also have a read of New York Times columnist Joe Nocera - always a must-read - on his schlepp up to M&T Plaza in Buffalo to see if this Wilmers guy is the real deal. (Nocera hadn't heard of Wilmers until a colleague brought to Norcera's attention Wilmers' sadly unnoticed CEO's letter). Norcera gives us a telling comparison between "The Good Banker," as the NYT headlines Norcera's profile of Wilmers, and the intransigent and over-rated CEO of the vastly larger J.P. MorganChase, Jamie Dimon. Dimon is regarded inside the Beltway as Wall Street's savviest operator and on the cover of the New York Times Magazine as America's "least-hated banker." Hmm. M&T is the better performer an almost every "metric." M&T shares have gained 12.6% over the past decade, while J.P. MorganChase shares have lost 14.9% of their value in that time. Wilmers is calling for genuine reforms while Dimon has employed an army of lobbyists that has succeeded in scuttling the more substantive reforms discussed on the HIll. For good measure, the ingrate Dimon has denigrated the federal bailout that saved his firm and his industry, claiming it was unnecessary. (Dimon would be selling apples on street corners had Bush and then Obama not quickly injected $700 billion into America's abruptly comatose banking system). And, you saw this coming, Dimon pocketed more than $20 million in pay last year to Wilmers' $2 million. Note this also, that the banks and brokerages that required rescuing or died outright - including Citigroup, Bank of America, Wachovia, Merrill Lynch, Lehman Brothers and Bear Stearns - are either headquartered in New York or, like the Charlotte-based B of A and San Francisco-based Wells Fargo, have most of their key operations in Gotham. And the sense of greed entitlement in that city is something to behold, not to be found in Kansas City, Seattle...or Buffalo, N.Y. It won't surprise you that Warren Buffett has been the longtime biggest minority shareholder of M&T, not mentioned in either of the above reports. Buffett has a thing for Buffalo, America's ninth-largest city at its zenith in the early 1950s, having built his Berkshire Hathaway fortune largely on the profits of the monopoly Buffalo News, the town's lone surviving daily.