The End of Ethics and A Way Back How To Fix A Fundamentally Broken Global Financial System

by Malloch, Theodore Roosevelt; Mamorsky, Jordan D.

• ISBN13: 9781118550175
• ISBN10: 111855017X
• Format: Hardcover
• Copyright: 2013-04-29
• Publisher: Wiley

Summary

The saturation of economic vice in our culture and resistance to reform is why this book is entitled The End of Ethics. On a systemic level, the allure of "vice" has captured the human spirit and even after the Great Credit Crisis, Wall Street, regulators and other oversight personnel have failed to effectively reform the financial system. On Wall Street, traders still concoct complex structured credit derivative products with the sole goal of making boatloads of artificial excess cash to increase the short-term bottom line of the company. On Main-Street, investors still clamor for enhanced returns to fuel a continuing addiction to real and personal credit agreements. Prior to the real estate bubble, there was no tea party movement, no "occupy wall street" protest, only homeowners who signed no-doc mortgage agreements to "own" homes they could not afford. Ponzi schemes victimize new and old investors alike in large part because investors do not raise red flags with the consistent returns they are glad to stuff into their wallets. Overwhelming pressure is placed on modern-day corporations. Heroics are expected in quarterly conference calls announcing earnings. Business news talking heads dissect every stock movement, every executive business judgment. Without warning, a company's reputation on the "street" can take a nosedive. Counter-party liquidity can evaporate in seconds. Reputations must be delicately cultivated and protected. In order to do so, more and more corporations turn to economic vice. We are witnessing the end of ethics. This book will first examine the most recent failures of business virtue, prudence and governance to harness the evils of economic vice through a series of compelling case studies beginning with Jon Corzine and MF Global. Then, the authors will suggest structural and holistic solutions to our current business ethical dilemmas and analyze the effects of Dodd-Frank regulation.

Author Biography

Theodore Roosevelt Malloch is Research Professor for the Spiritual Capital Initiative at Yale University. He was Chairman and Chief Executive Officer of The Roosevelt Group, a leading strategic management and thought leadership company. He has served on the executive board of the World Economic Forum-Davos; has held an ambassadorial-level position at the United Nations in Geneva, Switzerland; worked in the U.S. State Department and Senate; worked in the capital markets at Salomon Brothers on Wall Street; and has sat on a number of corporate, mutual fund, and not-for-profit boards, including the University of Toronto International Governing Council, a Pew Charitable Trust board, and the Templeton Foundation. Ted earned his PhD in international political economy from the University of Toronto.

Jordan D. Mamorsky is an experienced attorney specializing in business regulation, corporate governance, and compliance. He was a postdoctoral fellow at Yale University where his research focused on the legal, financial, and ethical failures that contribute to financial crisis, corporate illegality, and breach of legal fiduciary duties. Jordan formerly worked at the U.S. Treasury Department, where he received the "special act award" in recognition of his recommendations detailing the dangers of predatory subprime lending in low-income communities. He is a contributor to Morningstar Advisor. He is an active practicing attorney and has represented Fortune 500 companies, global investment banks, insurance companies, hedge fund managers, health services corporations and an international sports league, among other clients.

Table of Contents

Foreword
Acknowledgments
Introduction
Prologue

Part One: Economic Vice

Chapter 1
The Selfish Betrayal of The Global Investor: Libor & Its Consequences
The Calculation of Libor
The Rise and Fall of the World’s Financial Benchmark
Knowingly Asleep At The Wheel
A Troubling New Normal
Endnotes

Chapter 2
Jon Corzine’s Fallen Empire of Risk: MF Global
History of MF Global
Jon Corzine’s Midwestern Roots
The Rise of “Fuzzy”
The Establishment of MF Global
Rogue Trader Scandal
From Gubernatorial Disgrace to MF Global CEO
MF Global Under Corzine
Risk Governance Failures
Endnotes

Chapter 3
The Continued Rating Agencies Game: Will Rating Agencies Be Reined In For the Sake of Global Market Stability?
History of Rating Agencies
Mortgages and The Ratings Boondoggle
Endnotes

Chapter 4
Belligerent Leadership And the Demise Of Lehman Brothers
History of Lehman
Brewing Anger
Un-caging The “Animal”
Culture of Anger
Increasing Risk and Authority
Walsh’s Rise
A Gorilla Bursting The Bubble
Extreme Leverage
The Deception of Repo 105
Fuld’s Marginalization of Risk Management
Fuld’s Last Chance To Save Lehman
Endnotes

Chapter 5
How Out Of Control Pride Brought Down Bear Stearns
History of Bear
A Different “PSD”
Greenberg’s Vision Of Corporate Thrift At Bear Stearns
Bridge Bum Turned Bear Salesman & CEO
A Casino Culture
BSAM: Bear Stearns’ Kryptonite
 “Never A Losing Month”
The End Of Bear Stearns: The Importance Of Golf & Bridge During A Liquidity Crisis
JP Morgan & The Take Over Of Bear
Endnotes

Chapter 6
Tyco: Exceptional Greed and the Destruction of a Billion Dollar Company
Tyco History
The Makings of a “Bad” CEO
Seeds of Greed
Kozlowski’s Culture of Fear at Grinnel
Looting the Company
Kozlowski’s Accomplices
A Convicted “Piggy”
Endnotes

Chapter 7
Insatiable Lust & Two Of the Most Destructive Ponzi Schemes In American History
Another Tragic Example, Tom Petters
The Ponzi Scheme & Society
The Seeds Of Lustful Temptations
Madoff’s Culture of Sexual, Criminal & Moral Deviance
Tom Petters, The High School Drop Out
Birth of the Ponzi Scheme, Petters Company Inc.
Succumbing to Uncontrollable Lust
Madoff’s Cast of Characters
Petters Cast of Characters
Will We Witness Another Madoff?
Endnotes

Chapter 8
Health South & WorldCom: How a Gluttonous Appetite For Expansion Resulted in Accounting Fraud and Failed Corporations
HealthSouth
Bernie Ebbers & World Com
Blunting Future Accounting Fraud
Endnotes

Part Two: Recommendations

Chapter 9
Why Financial Regulation Has Failed, And What To Do About it
The Failed Promises of Dodd-Frank
The New Rules Of The Game That Reinforce Vice
A Dummies Guide to Save the SEC
The Regulatory Reforms Necessary To Reverse The End Of Ethics
The Need For Heightened and Streamlined Fiduciary Rules
Endnotes

Chapter 10
The Case For Reintroducing Governance and Morality
The Important Demand For Corporate Governance
The Importance of Corporate (Social) Responsibility
The Importance of Reputation & Avoiding Long-Term Litigation Costs
Bonuses Redux: Corporate Welfare Reform & Cutting Golden Parachutes
The Need To Morally Re-Define Ourselves On the Macro-Level
Rebuilding Our Character
How To Remedy The Evils In Modern Day Consumerism
Virtue and the Moral Life
The Consequences of Modern Selfishness
Modern Theories and Institutions
Democratic Morality and our Present Crisis
Endnotes

Chapter 11
The Way Back

Appendix
About the Authors
Index