Magazine

Credit Crunch: BusinessWeek Missed The Call, Too


In "Not so smart" (News & Insights, Sept. 3), BusinessWeek does a great (and easy) job of pointing out how all the pundits thought the world had changed and missed seeing the credit crunch. I would remind BusinessWeek of the old adage "people in glass houses shouldn't throw stones" and refer you to your article "It's a low, low, low, low-rate world" (News & Insights, Feb. 19). Even the best sometimes call it wrong.

William M. Walker

President and CEO

Walker & Dunlop Inc.

Bethesda, Md.

Editor's Note: For the record, the interest rate on 10-year Treasury bonds as of Sept. 4 was 4.55%, compared with 4.73% on the day that the February cover appeared.

Perhaps I am showing my age, but I remember when the goal was zero defects ("Why good enough' is good enough," News & Insights, Sept. 3). I needed zero defects when I worked on the Lunar Lander and helped put a man on the moon. I would like to think that it also applies to the people building the airplanes I fly in. There are many instances where "good enough" is not good enough. The wisdom lies in knowing when "good enough" is an acceptable risk. We also tend to discount the hidden costs associated with systems that are not 99.99% dependable. There is the added anxiety that comes from dealing with the emergencies that are generated when "good enough" lets us down.

Your commentary on the virtues of imperfect technology concludes with the assumption that "Success, in the good-enough economy, means racing aheadParagraph .." Like racing ahead to create the home mortgage bubble where zero down payment was good enough, and a poor credit rating was good enough, and the security rating of the bonds generated was good enough? And now we have to deal with bridges that were not maintained because their condition was declared good enough. "Good enough" is what you end up with when perfection eludes you. It is not a goal.

Henry Wiebking

Bangor, Pa.

A sidebar to the story "A history of hubris" (News & Insights, Sept. 3) incorrectly links junk bonds—one of the strongest investments of the past quarter century—to the problems of savings and loan institutions in the late 1980s. Junk bonds were not the cause of the S&L problems. In fact, a Government Accounting Office study at the time noted that the S&Ls benefited from the strength of their high-yield investments, which nevertheless represented a minuscule portion of the industry's portfolios. The underlying asset that caused the problem was real estate, not junk bonds. The S&Ls' situation was exacerbated by regulatory delay in closing or restructuring insolvent institutions, restrictions on investments, and unnecessarily high deposit insurance. In 2003, former Fed Chairman Alan Greenspan told the Senate Banking Committee: "The 1980 increase in deposit insurance significantly increased the taxpayer cost of bailing out bankrupt thrift institutions."

Glenn Yago

Pacific Palisades, Calif.

I hope this article ("Main Street is fed up," News & Insights, Sept. 3) has been read by Treasury Secretary Henry M. Paulson Jr., the SEC, and Senator Barney Frank. It clearly pinpoints the reason for investor disenchantment with the American financial markets investment scene. It's not Sarbanes-Oxley, which they love to blame. Dishonesty and greed by our CEO-MBA crowd is the culprit in the disintegration of America's financial leadership role. The rating agencies are also not to blame for the thieves our Ivy League schools are turning out. Maybe we do need a revolution or takeover by a good dictator. Democracy as we know it seems incapable of handling this mess it has allowed to be created.

John P. Maruzewsky

Honesdale, Pa.

I am intrigued by the comments of FAA official Nicholas Sabatini (Readers Report, Sept. 3) regarding your story "Danger in the repair shop" (Global Business, July 30). In one breath, Mr. Sabatini assures us that the agency "investigates reports" of counterfeit replacement parts, "fully cooperates" with law enforcement in case of violations, and has "procedures in place" to identify bad parts. The next time my travel is delayed due to aircraft maintenance issues, I'll take comfort in the knowledge that the FAA is likely "considering action" to correct the problem.

Brad A. Hoffman

Solon, Ohio

I read with interest the article "The comeback of consulting" (The Corporation, Sept. 3). Based on my 12 years' experience as a consultant, consulting manager, and practice leader with three of the larger firms, I could not help but laugh myself silly from this piece.

At the three firms I worked for, we had all or most of these so-called ethics-ensuring processes in place. They became a rich vein of humor, and the partners responsible for presenting and administrating these processes did so with many winks of the eye.

The malignant culture and bizarre values of the audit side, which spill over and infect the consulting side of the house, lead directly to situations like Enron. Many audit partners will dishonor themselves and go to almost any extreme to keep the client and the stream of fees being generated. Many audit partners will pressure the consultants to change a report to ensure that the audit client does not end the audit relationship based on the bad news that is rightly in the report. I have seen this behavior up close, including the crash and burn of Laventhol & Horwath and the associated conflicts which fly in the face of every ethical precept to which this group of so-called professionals subscribes.

Since the power of greed in human nature is as constant as the speed of light, I am sure nothing has changed since my time with the public accounting firms, irrespective of the good news preached by Deloitte & Touche USACEO Barry Salzberg, which, of course, he wants us all to believe. As long as auditors and consultants are tied together in the same firm, nothing will change.

Fredric J. Kessler

Fountain Hills, Ariz.

As an occupational hygienist, I was interested in the articles in "The future of work" edition (Aug. 20/27). But I was disappointed by the article "How to heal a sick office." The claims that synthetic materials are bad, plant-based materials are nontoxic, carpets and fabrics harbor molds and fungi, and glues emit fumes are misleading. Plant-based cleaning compounds are not necessarily less toxic than those from nonplant sources—they are all chemicals, after all. All carpets and fabrics will contain mold and fungal spores. But these won't become a problem unless the materials get wet and stay wet. In fact, synthetic materials are less prone to mold growth than natural materials. While it is likely that employees working in a properly ventilated, clean, and well-lighted environment will be more productive, the vast majority of typical offices are not "sick" due to the presence of particle-board furniture and carpet glued to the floor. Unwarranted fear of nonexistent hazards is a potential source of stress in employees. And this can affect productivity and create a "sick office."

Coreen A. Robbins

Veritox Inc.

Redmond, Wash.


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