in the middle of the night

“The events of the past months have shaken the foundation of our global financial system … And they’ve made clear the need for profound change to that system. At Morgan Stanley, we’ve dramatically brought down our leverage, increased transparency, reduced our level of risk and made changes to how we pay people…. We didn’t do everything right. Far from it. And make no mistake: as the head of this firm, I take responsibility for our performance.” – John Mack, CEO of Morgan Stanley before a Congressional Hearing, February 2009

John Mack has been one of the few banking CEOs to publicly acknowledge that his company’s business went off the rails in recent years. CEOs of failed firms (Bear, Lehman, Merrill) continue to deny that any of the problems were their fault- it was a tsunami in the market! Certainly the remaining solvent firms have declined to take any responsibility.

Maybe real self-directed change only comes about through a near death experience. After all, Morgan Stanley is the only investment banking firm which has come close to failing without actually doing so.

Financial market success is like doing drugs – the longer the fat profits continue, the more bankers and traders seem to think that the good times will never end. And the current generation of players has never experienced the pain of withdrawal – until now.

Wall Street could benefit from Andy Grove’s advice – Only the Paranoid Survive. Unfortunately, a high proportion of addicts forced off drugs cold turkey eventually revert to their former habits.