MGT585 – TUESDAY, JANUARY 24, 2012, CLASS #3

Jeffrey Garten:

There are four things that I would like to do this evening and before I start I

would like to say that Steve is at Davos this week and he’s going to start the next class

with a debrief of all that happened there and particularly how it relates to our classes.

He plays a really big role at the annual meeting of the World Economic Forum. He’s

asked to be on virtually every panel, so he’ll be really well plugged in.

Tonight the theme is “regulatory issues” and I’m going to start with an overview

of some key concepts and then we’re going to go right into a movie (“The Warning”); it’s

a shorter movie, but it’s a really good documentary about the regulation of derivatives,

or I should say lack of regulation of derivatives. But I think it’ll be a good set-up for the

two presentations that we have – one on Dodd-Frank and domestic regulation, and one

on international regulation. And then I want to start the discussion about the trips and

we have the itinerary for the New York trips, and I’m just going to give you a little

glimpse of that and explain how they work and next week we’ll go into that in more

detail.

For everyone who’s making a presentation, please make sure to check with

Caitlin first – send her your outline several days in advance. I’ve asked her not to be shy

about contacting you if you don’t. That’s really important.

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Let me start now with this introduction. In the first class we talked a little bit

about history. And the main point that I want to recall is that regulation has arisen

almost every time in relationship to a crisis or to some very sharply defined event. And

you can see on this slide that if it wasn’t a war, it was a banking crisis of one sort or

another; and the very last one, in Sarbanes-Oxley, it wasn’t really a banking crisis, but it

was a corporate crisis that resulted in a huge spate of regulation as you all know,

Sarbanes-Oxley, that spilled over into banking.

If you took away these events, you would find virtually no significant banking

regulation in the U.S. except the tweaking of what already exists. So it is, in the best of

worlds, in fact I would say in 2006, the Treasury under Hank Paulson, put out a concept

paper for Reform of the Financial System – this is before there was any financial. The

Treasury had been working on it for a couple of years. That got about a nanosecond of

attention – there was just nobody interested. Why? Because it was exactly the rational

and sensible thing to do. Write regulations when there isn’t a crisis; think it through;

send it around to everybody and get a year’s worth of comments. If there was ever a

demonstration of how that doesn’t work in the real world, that was it.

Also when you think about history, realize that when you regulate in a crisis, it

means a lot of things. One, it means that you probably almost surely don’t have the

objective information you need because it takes a long time to figure out what actually

caused the crisis. You’re regulating in the heat of emotion; you’re pushed by political

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forces. It is the exact opposite of a precise calibration, but it happens every time. Also,

you’re constantly fighting the last war. You figure out what happened, you try to plug

the holes, it’s as though the financial system was static, but by the regulations actually

unfold and they’re passed, the financial system has moved on and even if you did plug

the right holes, they’re not the right holes any longer.

Also, historically, regulation has been done – to understate the case – with a silo

mentality. That is, banks were regulated by one agency, securities firms by another.

There were a lot of turf battles. And the silos did not recognize the interaction. They did

not encompass the shadow banking system of which there has always been one, and

they didn’t encompass one other thing which I’m going to come back to which is…

when I say silos, there was a domestic and an international silo. And until this last crisis,

it is very hard to define any time national regulation was actually done with a very

strong presumption that there would be international coordination or international

harmonization. Always lip service to that, but in fact, in part because the US and the EU

were so dominant, they went their own way and then put a gloss on it.

There was a presumption that the silos were separate, stemming from the 1930’s

regulation, but there was also just a lot of turf grabbing and also the way it works in the

US is that every one of these regulatory agencies is backed by a congressional

committee and actually the congressional committees wanted the silos because it gave

each one of them control over something. And control, especially in the finance area,

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translated into financial support. So if you were the agriculture committee, you didn’t

want commodities in the SEC because there was another committee that actually

oversaw the SEC. But I think it’s not just in the US; it has been a fact of life in the

financial arena up until recently that people didn’t worry so much about the silos. In

academic discussions, they’d say they were bad, but it just wasn’t that big an issue. As

I’ll come to in a minute, it’s a really big one.

Now I want to go through 10 key challenges that we face today in terms of global

regulation. And I’m just going to go through these fairly quickly. The first is national vs.

international vs. global. That is that there are some regulations that are purely national.

I’ll give you an example from today would be the Volcker Rule. There are some that are

international; that is, that lots of countries actually implement them, or several

countries implement them, and they try to coordinate that. I’d say derivatives is an

example of that where everyone recognizes there’s a big issue and there is a major

effort to coordinate derivatives regulation. Not so Volcker because the big European

banks, they don’t believe in a separation between the investment banking and

commercial banking. And then there’s global which is sort of a rule that applies to

everybody and that would be bank reserves. So the challenge is which of these

categories should be in effect and how do you actually get from one to the other on the

theory that the financial system is truly global and at some point that’s where you want

to end up?

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A second challenge is what I would call the historic regulatory pendulum. That is,

we have periods of no regulation and then periods of intense regulation. And that

pendulum swings all the way and then it swings back. But what we see now is that it’s

swinging in both directions at the same time. Think of it – we had this major financial

crisis. In the heat of it, there was a spade of massive regulations, not just in the US but

in Europe as well. And no sooner was that regulation being debated than there was

another debate about the size of government, the inefficiency of government. And so if

you ask today where is that pendulum, you can’t really tell. Is it for more regulation, or

is that pendulum coming back very fast that already the financial system is too

regulated? So we’re seeing something that we haven’t seen before which is, at a

minimum, a very quick swing, but maybe a constant swinging back and forth as

governments and society at large really don’t know where that pendulum should be.

Not to be cynical, I think it’s the result of people trying to do the right thing but

being pushed by all kinds of pressures and saying to themselves, well this is better than

it was. It’s filled with holes, it has a lot of defects, but we have to do something, and

we’ve done more than just sit still. There is something called the regulatory bias, the

bias to action, which is much broader than anything we’re talking about in this course.

But basically, when there’s a crisis, you don’t sit there; you do something. And even if

it’s very imperfect, your judgment is better to do something that’s imperfect than to do

nothing. The interesting thing about this pendulum is that here we have this financial

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crisis with reverberations that continue, right? With the recession, with huge

unemployment, and there is a major debate as to whether or not the financial system is

overregulated. So if anyone would have said this is where we would be politically two

years ago, you just wouldn’t have believed it. And nobody can say where we’ll be a year

from now.

The third big challenge is the link between financial and macroeconomic, and

here I want to come back to the issue of silos. Virtually all regulation, financial

regulation has been done historically as if it isn’t linked to the economy. That is, when

you have a banking crisis you try to fix it. But what is clear now is that there’s a very

strong link between finance and macroeconomics. And to put it simply, if the banking

system fails, or when the banking system fails, we go into a recession. The recession

worsens the situation of banks. The banks are not in a position to lend, and so the

recession gets worse. The only way to get out of this is to loosen up on the banks, not

put so many restraints on it, allow them, basically, to be profitable and require capital so

that they can lend and get us out of the recession. It’s a circular thing and nobody quite

knows how to break it or how to deal with it, but it is a key fixture of the situation that

we’re in now and makes it much different, at least from the standpoint of what

regulators and economic officials are thinking about and talking about and are worried

about than the past crises.

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There’s another link which is also very important. And that is at the heart of this

course; it’s the link between banking and government. And you see this most clearly in

Europe, where you have a recession and you have a banking crisis. The central bank of

Europe lends money to the banks so the banks can purchase European sovereign debt.

The banks then are loaded with paper that is shaky at best, but the paper doesn’t go

bankrupt because the banks keep buying it. And why do the banks keep buying it?

Because the government keeps lending the banks money to buy it. So here you have a

very strong incestuous relationship between banking and government and we’ve never

quite seen it on a global scale the way that it exists right now, which makes it very, very

difficult to say how do you regulate? And what should you regulate? Because everybody

is in bed together. And just to give you the US counterpart – right now US treasuries are

in great demand and they’re in great demand in part because everyone else is in such

big trouble. So interest rates remain low and the US fiscal problems are pulled further

out. The rest of the world is buying treasuries just to be safe. But if that were to stop,

what the US government would have to do is to find somebody to buy these treasuries.

And the history of financial crisis is that the government will never admit that it’s doing

this, but it will engage in something which economists call financial repression. That is,

the first thing it will do is look at all of the rules, all of the laws regulating pension funds

and make it so that pension funds have to have more US debt and less foreign debt. Or

let’s put it this way - make foreign debt much more costly. The point is that when you

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have so many countries in such deep debt, they are obsessed with the financial system

buying their paper, buying their bonds, and they’ll do everything they can in order to

make sure that continues. And the banks or insurance companies, pension funds, the

financial system, the domestic financial system, is right on the front line and the

government will induce the purchase of their own bonds by their own financial

institutions through many different mechanisms. It could be moral suasion, it could be

taxes, it could be regulations. So this kind of interaction makes what you regulate, how

you regulate exceedingly complicated.

[STUDENT QUESTION]

Jeffrey Garten:

You’re talking about the last thing I was talking about? Well, in Europe it didn’t

take very long at all because the central bank lent money to the banks, the government

said to the banks each, individual government, you want our support, you know what’s

involved. And so the Portuguese banks bought the Portuguese debt. And because,

don’t forget, every one of these banks is beholden to their central government for all

kinds of support. And in the US it wouldn’t take that much time because you could pass

a regulation; it doesn’t even require a congressional vote, which says for example state

pension funds can’t hold more than (I’m making the number up) 10% foreign bonds in

their portfolio, when bonds from foreign countries are doing much better and the

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economic activity outside the US is so great. So it wouldn’t happen in 24 hours, but it

wouldn’t take two years either.

I don’t think the private sector is necessarily playing less of a role; it’s having a

massive impact on the effectiveness of regulation. It is unlikely to say wipe away let’s

say the Volcker Rule. But through all kinds of pressure they can create so many

loopholes that it is effectively neutered. And I think that going to the second point, we

are in a very curious position where you would have thought that after the financial

crisis, the governments would call all the shots and in fact the financial markets are

driving policy, in my view, as much as they ever have. They’re certainly determining the

entire restructuring scene in Europe. The central banks are keying on what the private

financial system is doing. The need for private investment, the need for private lending,

the ability of private banks to push interest rates in one way or another; it’s all really

massive. So we’re kind of in a position while governments say we’re in the driver’s seat,

if you actually watch what’s happening, not clear at all.

There are a lot of reasons why the domestic institutions would buy domestic

debt. What really matters is on the margin and that’s where the government can say

you need to take up a larger share of the subscription. The government’s not going to

get them to go from 0 to 60, but in the all-important last couple of basis points or

stepping in as a purchaser of last resort, they have that option. In terms of banks

moving outside, well we’ll ask Jamie Dimon that question. I think that there’s a lot of

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talk about it; it hasn’t happened very often, and in Europe the German banks have been

talking about it for years and they haven’t done it. So, technically could they? Possibly.

Psychologically would they, I don’t know. They tend to use it as a threat. They use it all

the time, you know, if we’re over-regulated, we’re going to move somewhere else. But

the grass is always greener until you actually examine the kind of regulation we don’t

have, the tax rates, or the limitations on … people would say, we’re going to move to

Singapore, they’re very accommodating, very good regulation, but low taxes until they

start seeing that you don’t have any freedom of expression. So I don’t think it’s around

the corner. Plus, there’s more and more at least international coordination. And if it

isn’t happening now, that’s the trend, so you could move and then all of a sudden find

five years from now you’re in a very similar situation and you’d have a very hard time

probably coming back.

The link between regulators and the markets is a function of a lot of different

factors. But one of them certainly is the movement of people back and forth. When we

go to Washington we’re going to meet several people like this, but one of them is the

head of the Commodities Futures Trading Corporation who was a partner at Goldman

and a major trader of derivatives and is now the big champion of regulating derivatives –

Gary Gensler. And I personally think there are a lot of people who are going back and

forth and certainly the conventional wisdom is they tend to favor the industry that they

were in. From my experience and as someone who’s gone back and forth, I think it

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works the other way, often, at least at the higher levels where there’s something

psychological where you don’t want to appear that you were captive. Now at lower

levels where you may go back and forth and you’re looking for the next rung in the

ladder, that could be a little bit different. In any event, here is my bottom line, I think

that in this past crisis there was a huge amount of attention to Goldman and the reason

was that traditionally Goldman’s top guys went to Washington and at one point here

they were the last two Secretaries of Treasury, they were head of CFTC, they were all

over the White House and there was quite a backlash. And it created quite a bit of

public focus, especially when Goldman got into trouble. So my guess is that the days of

people moving back and forth from very senior levels is ending. And so the bigger

question to me is, well what does that do to the spread of the knowledge, because it’s

very, very difficult for regulators to understand the complexity of some of these markets

given one, their lack of resources and two, their lack of exposure. So I think it’s a big

issue.

Well that gets me to this question of speed and complexity. I mean this is a really

big challenge. Speed – I think you’re all familiar with flash trading which is a surrogate

for the speed of which markets is moving is faster than the human brain can conceive.

It has to be done by computer and if you look at the New York Stock Exchange, the

London Stock Exchange, the Tokyo Stock Exchange, the big market makers are moving

physically closer; imagine that, in today’s world with the internet you’d think that

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distance wouldn’t matter but they are physically moving, literally hundred yards away

and paying a huge amount of money for that extra nanosecond that they would get all

the information. And that kind of mentality is filtered throughout … the complexity part

is very difficult to describe. But this is really large scale systemic complexity. How the

markets are linked, how the financial instruments are linked. Nobody really can

understand how this complexity works and so when you talk about regulation, you have

to have a certain degree of humility and sympathy for the regulators because they don’t

have the luxury of talking about this or pontificating like I’m doing; they actually have to

come up with a law or regulation that somehow takes into account both the speed and

the complexity.

Now the regulations themselves have become enormously complex. In fact

there’s something called regulatory risk and that is the risk that the regulations are so

complex the markets can’t read them. If you take Sarbanes Oxley, it’s close to 3,000

pages. And that’s before any of the specific regulations. That’s just the kind of the

chapeau, the legal framework. If you take the Volcker Rule, the Volcker Rule started as

one paragraph and if you ask Paul Volcker what was in your mind he can explain it in 3

or 4 sentences. It’s now up to 300 pages and the 300 pages have been sent out for

comment and there are some 1500 questions that the government is asking thousands

of people to comment. So you can imagine what starts out as a paragraph, it blows up

into that, this is just a microcosm of the kind of regulatory complexity. So you get the

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market complexity and the regulatory complexity and you’ve got complexity to the nth

power – a major, major challenge for the regulatory system to put it mildly.

Contagion – everybody is worried about contagion. I think this fear really started,

especially on a global scale, with the Asian financial crisis when the foreign exchange

issue in Thailand spread like fire throughout Asia, jumped to Russia, jumped to Brazil.

But how do you deal… the challenge is not defining contagion, but figuring out how to

build the firewalls. I think in the movie that we saw last week there was a really

interesting illustration of a ship and George Soros was talking about an oil ship and you

build compartments so that if there’s a fire in one part it can’t spread. But it’s not

exactly clear how you create these firewalls in a global financial system when the money

is so liquid and so fungible. And capital jumps these walls. The easy answer is that you

want bigger financial cushions but that alone is very unlikely to do it.

Stability vs. innovation. You know the essence of a capitalist market system is the

ability to take risk and the essence of the system is also creative destruction. That is,

you’ve got to be able to fail; you should be able to win, but also should be able to fail.

That’s what the market system is. And yet there’s a craving for stability so the question

is where on the spectrum does regulation settle? How do you decide what is stability

because in the old Soviet Union they wanted stability; in China before 1978 they wanted

stability, but they got no innovation and they had no dynamism. So this is a great

challenge to try and figure out how to try and balance the two.

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Enforcement. Well, how can you have a regulatory system unless you have very

clear enforcement and very tough penalties for violating the rules? There is a massive

debate going on in the US now about what constitutes adequate enforcement. You

know there is a big court case just recently with Citigroup pleading that it was neither

guilty nor innocent, but agreed to pay a fine. That has been the way that the SEC has

operated. In part because a fear that if a financial institution in the US admits guilt, it is

then open to lawsuits from shareholders and every constituency. Remember in the

Enron case, the government indicted Arthur Anderson? It was the biggest of all the

accounting firms? It just liquidated. No financial institution could withstand a verdict of

guilty, even an indictment. So we’re in a kind of Never-neverland here with

enforcement because it is very possible for financial players, especially big ones, to

violate the laws and the rules, pay a fine which may sound like a big number but totally

deminimus in terms of its capital, and move on. And again, no one really has an answer

to what constitutes the right kind of enforcement.

We talked a little bit about regulatory talent in terms of people coming and going,

but the question I want to raise is whether regulators – and I know a lot of them and

they’re really dedicated and they’re really smart and they’re every bit as smart as their

counterparts –have the requisite experience in the markets. And maybe even more

debilitating is the fact that the regulatory agencies are being starved for resources.

When we go to see Mary Schapiro who runs the SEC or Gensler at the CFTC, I’d be very

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surprised if they don’t explain that they have been given enormous mandates to

regulate as a result of the financial crisis and yet their budgets are being cut back. And

so when you combine the talent issue, the resources of the agency and as we were

talking before, people going back and forth which I think is going to end, you’ve got

some real problems when it comes to just the capability of regulators let alone

structure.

And finally in my ten challenges – money, politics and influence. When all is said

and done, Congress controls the regulatory process. And when all is said and done, it is

heavily influenced by political contributions. So every congressman and every senator

wants to be on one of the financial committees – banking committee, finance

committee, financial services committee – because this is the ticket for massive

financing from private financial contributors. And if you want the answer to the

question how much influence does the private financial sector really have, we can

theorize that the answer here is that they have almost a trump card in that they can if

not overturn a regulation, they can create such loopholes through technicalities that

virtually nobody understands including the senators and the congressmen and their

staffs, so that they can get around the regulation or go through it.

I just want to go through a couple concepts I think we really ought to know.

Systemic risk, you know, that’s a risk of the whole system coming down and macro

prudential oversight means that you look at regulation from the standpoint of the whole

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global system. It’s exactly the opposite of a silo look. And one of the undercurrents of

all the new regulation is what’s called macro prudential; that is, trying to see the

connections, trying to look at the linkages and seeing how that actually affects the

financial system and the global economy.

Moral hazard I think everybody knows but basically you have to be free to fail.

And if you think you can’t, this changes all the incentives and we’re in a system with a

lack of moral hazard for anyone who’s too big to fail. And in too big to fail, the

international institutions are in the process of identifying who is too big to fail. It is a

very difficult process because it isn’t just about size; in fact, it may not be about size at

all, it’s about connections – too connected to fail. But once they identify these

companies they are going to demand that these companies hold the level of reserves

that are much higher than other institutions. So you have this strange phenomenon of

companies saying oh no, we’re not that big, we’re not that connected, because they

obviously want to avoid the burden of additional regulation.

Resolution authority stems from the collapse of Lehman Bros. The Treasury and

the Federal Reserve in the Lehman Bros. case said, “We can’t rescue Lehman Bros.; we

don’t have the legal authority. We can do that with a commercial bank, but we can’t do

that with another kind of institution.” And resolution authority means the opposite of

that. That’s authority to wind up a financial institution; that’s part of Dodd Frank as I

hope we’ll hear, and living wills goes to the complexity… it’s one thing to wind up an

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institution, but you have to know what the impact is going to be. And only that

institution really has the complete picture of who it owes money to or what its liabilities

are. And so resolution authority and living wills are really two sides of the same coin.

You have the legal authority to manage a bankruptcy in an orderly way and you have

the roadmap of what has to be wound up because the banks are providing these

roadmaps and they’re supposed to provide it in advance of any problem. Now all this is

a bit problematic because the resolution authority in the US legislation does not give the

government authority over foreign operations. So it’s not international. So if you’re

going to wind up a Citigroup or a Goldman and you don’t have authority to go after the

international stuff, it may be worse than half the loaf, and living wills, it’s not clear that a

lot of these institutions actually know their entire picture. This may be one of those

areas over time gets stronger in that there’d be an international resolution authority

and the government will force these living wills and examine them and send them back

for revision. But right now it’s quite partial.

Capital is another big issue. A huge fight going on over how much capital banks

should hold, how do you define the capital, how much time do they have to raise it, and

banks are fighting a fierce battle here on this, saying that the more capital cushion you

impose, the less profitable we’ll be. The less profitable we’ll be, the less we’re going to

lend. The less we lend, the slower the world economy grows, and it’s just a downward

cycle. And this is a big fight going on between international agencies and the banks over

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just exactly where those reserve levels should be, how they should be classified, and

over what period of time.

The Volcker Rule and ring fencing, I’ll skip that because we’re going to hear about

that today.

Consumer protection – you’d think this would not be so controversial, but in fact

it has turned out to be one of the most controversial issues in financial regulation in part

because the banks feel that this enhances their liability, that if you have a very sharp

focus on consumer protection by definition the consumer protection agency is going to

be doing nothing but filing lawsuits against egregious practices. And then on the other

side you have people who say the consumer protection agency is too weak; the

legislation which was a result of a big debate in congress, put the consumer protection

agency inside the Federal Reserve. The Federal Reserve is friendly to banks, so even

though it’s supposed to be independent inside the Federal Reserve, it already smacks of

a compromise. So this satisfies nobody, but it is a big deal because the number of

products that were foisted on consumers, both retail and wholesale, was really

egregious. And how do you actually get at that question? How do you prevent financial

institutions from peddling products which are totally defective? In theory we don’t

accept that in industrial products; I mean, it happens but as a matter of principle… it

used to be that financial institutions would claim they did self-regulation, but self-

regulation is dead to put it mildly. And so this hangs there.

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Procyclical vs. countercyclical – big issue. If you’re in a period of prosperity, in

the past banks were allowed to operate with far less financial cushion. They were

making a lot of profits, nobody was worried about a credit crisis or a liquidity crisis, and

so the regulators let banks operate with much less cushion. The new theory,

countercyclical, is when times are good, that’s exactly when they ought to be amassing

the reserves. Because when times are bad, it’s too tough to do and besides you need

them when there’s a downturn as there always is. And this is another issue that is being

hotly debated because the banks have a reason for not wanting to hold high reserves,

and they’re very, very concerned that in a countercyclical system when the next upturn

comes, they’re not going to be able to participate in it because they’ll be forced to

accumulate a lot of reserves.

Regulatory capture – this is the concept that the regulators and the institutions

they regulate basically see the world through the same lens. That it’s a kind of closed

community and so regulators are really never tough enough or objective enough. And

part of that relates to the people going back and forth; they know one another, they see

mutual career opportunities, and so it’s just too harmonious. And in the US at least, and

I think this is true everywhere, regulators tend to be captured it by the institutions that

they regulate. If not 100%, certainly much more than an objective public interest

distance would presume.

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And finally cost-benefit analysis. Now here’s something that you would think

makes a huge amount of sense. Before you establish a new regulation, why not do a

cost benefit analysis? Why not ask the question is the cost of this regulation, does the

cost exceed the benefit? We’re not close. We’re not close to being able to do that

because costs and benefit are really politically loaded concepts and the budget office is

supposed to do that but they do it through their own, whatever the political lens of the

administration is, and then they’re challenged by the other party. So of all of Dodd-

Frank, there’s been virtually no cost-benefit analysis that’s worth anything. And it’s

probably impossible to do given political polarization.

These are things that really have not been dealt with in the plethora of

international and domestic regulation. And the shadow banking system, I know a lot of

you studied that; very little about what’s happened deals with that. For example,

money market funds, ETFs, hedge funds. The whole housing finance, regulation of

housing finance and how you deal with the big government housing agencies, Fannie

Mae and Freddie Mac, that’s been left to deal with. And the impact on the regulatory

overlap and sprawl – you know, everybody agreed at the beginning that one of the

things that should come out of the crisis is a regulatory consolidation. There are two

dozen regulatory agencies. As far as I can tell only one was eliminated, and all the rest

are still there and they’re put under a coordinating committee, and everybody here

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knows that a coordinating committee is not the same as consolidation, and so it was

really a missed opportunity.

So these are the questions that I think are worth considering, none of which have

any answers. Can regulation prevent crises? My instinct is it can’t. It can prevent

maybe the number of crises, the frequency, but in our capitalist system, we’re going to

continue to have crises. The big ones are going to come on matter what the regulatory

system is.

Is there an answer to the complexity question in the real world? We can make

the diagrams and stuff, but can regulators rise to the occasion of financial complexity

and can regulation be simple so that it’s understandable? I’m not sure it can. Where

does that regulatory pendulum settle? It’s inherently a political judgment; there’s no

precise answer.

Can we prevent contagion, if not, what are the implications? I don’t think we

can. And obviously the answer in my view is in having a resiliency, having enough

cushions so that you bounce back and you bounce back fast. But I don’t think we know

enough. If I put all these things in a timeframe of 5 or 10 years, there’s going to be

contagion simply because of the way the system is so interconnected.

Still, we can aspire. Preventing the crisis from being acute or shortening the

length of it or being able to respond to the crisis with increasing rapidity; having the

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tools at least to deal with it even if the tools aren’t totally effective, but not throwing up

your hands and saying, as in the Lehman Bros. case, there’s nothing we can do. We

should aim for that!

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