Tuesday, March 24, 2009

IT'S A WONDERFUL LEBANON?

This morning on PRI's "The Take Away" radio show, the host, John Hockenberry (sp?) interviewed the head of banking in Lebanon.

In 2005, he made a decision to get out of any investments in those subprime mortgage derivative hedge funds etc. (or whatever they're called) and as a result, the banking system in Lebanon is sound and growing, with credit still flowing, unlike in the land of the so-called "Masters of the Universe" the good old USA.

Listening to his explanations as to why he didn't follow the lead of the world's major financial institutions, he sounded not only practical and clearheaded, he also sounded like a good old fashioned "American" banker, or like George Baily in IT'S A WONDERFUL LIFE with his small Savings & Loan business.

First of all, I understood everything he said, because he spoke in regular, conversational, English, even though it's not his first language, unlike the financial wizards in our own country. Second of all, he didn't see himself as wise or better than anyone else, he just thought it didn't make sense to invest in things you couldn't really look at and evaluate, nor did he think it right to use depositor's money to take big financial risks.

When asked why he didn't have faith in the ratings companies that gave these toxic (as we now know) investments such high ratings ("triple A" as they say), he said, very practically, that these ratings companies were taking part in shaping a lot of these financial systems and products they were rating and therefore obviously couldn't be all that objective. Only he said it much simpler and without seeming to lay blame anywhere, just doing what he thought was the safer and more prudent thing to do.

As a result, not only are Lebanon's banks thriving, but the country is projecting four per cent growth this year, as opposed to our negative projection. And all this in a nation torn up only recently by a real war on their own land! And still divided in ways that threaten political stability, and in which more powerful neighbors and outside nations continue to try to exert influence and cause problems.

And on top of that, he did all this without receiving any bonuses, and on a salary of 250,000 dollars a year.

So what's our excuse?

2 comments:

Butch in Waukegan said...

This sounds like an interesting interview. I’ve downloaded the file here - http://www.thetakeaway.org/stories/2009/mar/24/man-behind-lebanons-stable-economy-riad-salame/ - and plan to listen to it in the car tomorrow. (It’s in the 4th hour.)

Unfortunately I will have to endure a segment with the dreadful Ben Stein. Take a look at this if you think this fellow has any credibility as an economist (let alone an evolutionary biologist): http://www.youtube.com/watch?v=-x01rhPtMLQ

Reading your post I was reminded of a radio story I heard several weeks ago about a Spanish bank that was doing well, based on similar principles. This gives a brief description. Unfortunately transcripts are for members only.

http://news.prnewswire.com/ViewContent.aspx?ACCT=109&STORY=/www/story/03-03-2009/0004981962&EDATE=

Curtis Faville said...

THere isn't any excuse.

Warren Buffett's old saw about "only investing in what you can understand" is sweet, but ultimately nonsense.

During the dot-com boom, my wife and I made hundreds of thousands of dollars. But then lost an equal amount by not getting out in time (too greedy). One day, we made $45,000--it was the day I signed my lease for a bookstore "office" in Berkeley--and I said to her "we should just cash out now, before the bottom falls out" but we decided not to--two months later we'd lost over two hundred grand, and that wasn't the end by any means.

Smart investors bet big with small amounts, then get out when all the news is good. They may miss the "top" but they'll miss the "bottom" too. That's smart investing.

It was greed that drove the banking debacle. Greed facilitated by lax regulation and people wanting to be fooled.