Reviews for Dubya In The Headlights

The average rating for Dubya In The Headlights based on 2 reviews is 3 stars.

Review # 1 was written on 2018-07-11 00:00:00 Lucas Dawson This book of essays, compiled after the the wave of business scandals which rocked the nation in the early 2000s, hearkens back to a quaint, simpler time when corporate executives actually had to break the law in order to rig the market. The first half of the book is dedicated to biographies of corporate scandals, Enron, Worldcom, ImClone, etc., stories often reflected in the meteoric rise of their chief corporate officers, followed by their equally meteoric collisions with the Earth. These are not the tales of a few bad apples, however, so much as a few of the many examples of the corruption and lack of oversight which pervades our investment economy. The theme which all these different stories seem to have in common is that of corporate officers unable to resist the lucrative and virtually risk-free temptation to engage in self-dealing at the expense of their company and the investors. Adam Smith first identified this issue in the 18th century as the Agency Problem. When a company is not run by its owners, but rather by a CEO and a cadre of corporate officers, how do you ensure that they act in a way so that their interests aligns with the owners? The answer corporations came up with to this problem was stock options. To compensate its officers with stock, and in doing so, make them owners. On the surface, it sounds like a good idea, until you realize that most corporate officers view their jobs as short term gigs, three or four years on average, a decade at most. The result is that the officers frequently engage in pump-and-dump scams, making decisions designed to temporarily boost the value of the stock, so they can unload their stock options at peak value. Unfortunately, these maneuvers usually come at the expense of the longterm health of the corporation, leaving the company and its investors holding the bag. The opportunities for this sort of self-enrichment hardly end there, though. Dennis Kozlowski availed himself of hundreds of millions of Tyco's dollars in the form of personal "loans." I put loans in scare quotes loans because the Board of Directors quietly waived repayment when Kozlowski threatened to flood the market with Tyco stock in order to repay them. Hey, sometimes when your CEO sees a $6000 shower curtain he's just got to have, it's worth it to keep him happy. The second half of the book is devoted to essays detailing the systemic nature of such self-dealing and the utter inadequacy of our regulatory infrastructure in preventing it. One essay illustrates how the SEC is hopelessly outgunned by rogue corporations (Of all the criminal complaints they lodge with the Justice Department, less than 5% actually result in prosecution. Of course, this book was written ten years ago, but given the events of 2008, it seems to be reasonable to conclude that any reduction in criminal activity is likely the result of such activities no longer being illegal) and their allies in Washington. But perhaps even more troubling than the futility of the SEC is the fact that accounting firms, rating agencies and investment banks, the independent bodies tasked with keeping the market honest have been co-opted so that not only do they fail to act as lighthouses, warning investors of rocks and sand bars in the market, but they are actually incentivized to steer them directly towards these dangers. Corporations are allowed to hire their own auditors and the major accounting firms, i.e. Arthur Anderson, PricewaterhouseCoopers, etc. treat their corporate auditing as a loss leader to establish a relationship with these clients and put themselves in line for the much more lucrative consulting contracts these corporations offer. In essence, they have very little financial incentive to blow the whistle on a client and a huge incentive to make them happy. Investment banks make far more money from commissions paid for steering investors to a corporation than they do in fees from the investor, so there seems to be little incentive among these "independent" agencies to be honest with investors, whereas their own bottom line depends squarely on acting as facilitators and procurers for these companies, regardless of whether they are actually sound investments. Enron defrauded investors for years, claiming decades long service contracts as quarterly sales, creating shell companies to facilitate trades and listing liabilities as assets to make a company in decline look like the investment of the century. In the aftermath of Enron's inevitable bankruptcy, when people asked where Arthur Anderson, the ratings agencies and other watchdogs were when Enron's corporate executives were feasting on the money of lied-to investors, they need only have looked under the table to see them eating the scraps handed to them. Right up until the very end, even as the writing was on the wall, Arthur Anderson continued to sign off on Enron's fantasy accounting and investment firms were lining investors up at Enron's doorstep. It's hard to regard this state of affairs as anything but insane, a fact which becomes immediately clear the second you try to picture this scenario in any other context. Imagine if the New York Jets suggested to the NFL that they should be able to hire their own referees, or that they should be allowed to pay NFL referees million dollar salaries during the off-season for "consulting work." Would anyone think that's a recipe for fair competition? And yet, this is precisely the system which governs Wall Street investment and which Washington has repeatedly failed to reform. So basically the sanctity of your pension fund lies somewhere beneath that of an AFC East title as a societal priority. The essays are well researched and clearly written, even for people who don't have a background in finance. My major criticism of this book is that the essays pay too much attention to the personal biographies of the corporate officers, perhaps as a means of humanizing these stories and making them more readable, but given the seriousness of the subject matter and the dire nature of the situation they describe, reading about Bernie Ebbers' horse ranch just feels a little indulgent and inconsequential. Otherwise, an eye-opening read. I would love to see an updated edition with essays written in the aftermath of the 2008 financial collapse.

Review # 2 was written on 2016-06-17 00:00:00 Dave Douglass I wished they had continued the series, informative and engaging.