There was a memorable “mother-in-law-moment” at the Women in Investment Conference (February 2009 in
). A MILM is when a woman (expressing her opinions from years of frustration with the status quo) says something outrageous; eyes roll among the men in the audience, while the women quietly and deferentially shrivel into the wallpaper, wishing they could just say, “MO-ther, please!!” Sacramento, CA
The MILM quote of the day stemmed from an op-ed piece penned by New York Times columnist, Nicholas D. Kristof, about his observations at the Davos, Switzerland World Economic Forum. Kristof said,
“We wouldn’t be in this financial mess, today, if Lehman Brothers had been Lehman Brothers and SISTERS.”
Nicholas D. Kristof, “Mistresses of the Universe” February 7, 2009, New York Times
The tales that mothers tell tend to take on a life of their own, so we continue to hear this opinion bandied about in otherwise legitimate forum where we would expect to hear in-depth analysis of the realities of the financial meltdown. At The Women in Investment Conference, a woman speaker from one of the sponsoring organizations (CalPERS, CalSTRS, and the California Legislative Women’s Caucus) repeated the comment to 500 financial women in attendance.
Do women in investment really believe that there were zero women in the halls and gatherings of Lehman Brothers, their accountants/auditors, ratings agencies, transaction partners, commercial and subprime real estate brokers and lenders, or government oversight agencies during the years leading up to the financial meltdown? Do women in investment really believe that there were no women at CalPERS, CalSTRS or in
oversight entities (mortgage, finance, or pension funds) during this era? California
A little over a year later, on March 10, 2010, Anton R. Valuka, the court-appointed Bankruptcy Examiner, released nine volumes of analysis and appendix material in the matter of Lehman Brothers in the U.S. Bankruptcy Court for the Southern District of New York. The witness list alone identifies a host of women in positions of responsibility in compliance offices, human resources, accounting, general counsel, boards of directors and auditors to the company as well as inside governmental agencies. Women were there in spades. Our hands are no cleaner than anyone else’s.
The Lehman Bankruptcy Report is a powerful assessment of where things went wrong. Recent headlines from Bank of America, doing exactly the same accounting gimmickry -- shuffling debt on and off books just-in-time to meet end of month or quarter reporting -- affirms that we have not solved these problems.
The Bankruptcy Report is must reading for anyone trying to understand her responsibilities: (1) within an organization charged with a fiduciary duty, (2) within management reporting to auditors, accountants and boards of directors, (3) serving on boards charged with oversight of management, accountants, and auditors, and (4) as shareholders who should demonstrate fundamental financial literacy before parting with one’s investment dollars (your own or that of your employees).
Examiner Valuka’s Lehman Report (http://lehmanreport.jenner.com/)
Sections I and II: Introduction, Executive Summary and Procedural Background
Section III: detailed analyses, covering
A.4 Repo 105
A.5 Secured Lenders
A.5 Secured Lenders
B Avoidance Actions
C. Barclay’s Transactions
1-34 Including names and employment of witnesses
What we learn from this comprehensive assessment is that there was more than enough blame to paint everyone, man and woman, bright scarlet red. A few highlights would include:
1. relaxation of internal risk controls so as to accommodate excessive growth of the commercial real estate business;
2. Lehman executives showed errors of judgment and possibly actionable balance sheet manipulation;
3. an investment bank business model that fostered excessive risk taking and leverage;
4. Lehman’s own accounting people called Repo 105 “an accounting gimmick;”
5. government agencies failed to anticipate or mitigate adverse outcomes;
6. ratings agencies evidenced a strong propensity to over-focus on net leverage, fostering excessive use of debt or accounting devices, with full knowledge of auditors;
7. outdated and incompatible technology systems weakened internal controls of accounting systems.
We know that women constitute 46% of the workforce. So, women must also accept responsibility and accountability for our share of the errors and oversights. Women could have done a great deal more to identify the red flags, warning signals, problems, and gamesmanship that were visible inside Lehman Brothers, the auditors, the investment partners, ratings agencies, and governmental offices before the collapse.
Somehow, we are supposed to believe there were no women in commercial real estate; subprime residential mortgages; mortgage brokers; mortgage loan originations; securitization; appraisals; audits; accounting or executive financial positions; investment; executive compensation; compensation consultants; banks, hedge funds or private equity; municipal bonds; regulatory oversight positions in government; access to whistleblower procedures; ratings agencies; governance analysis and proxy firms; technology; compliance or internal controls.
When women are ready to accept the burden of that failure, and begin instead to address the fundamental causes, then women will have a role to play in ensuring a more viable financial future for ourselves and our children.