Does Financial Services Demand Good Management?

There was an interesting quotation at the end of King of Capital. Authors Stone and Brewster wrote:

"A list of the most influential corporate leaders of the twentieth century-Lee Iacoccca, Roberto Goizueta, Jack Welch, Sam Walton-would include very few financial services professionals.

One of the reasons for this dearth is that, for the most part, banks and brokerages have traditionally offered little incentive for the development of managerial skills. Within financial services, there has been so much opportunity for short-term gain that true executive development has never been emphasized." p282

There is truth to this comment. The industry generally does not laud management like manufacturing/operating companies. My question: is this rational, or is there just as large a need for managerial skills in finance (perhaps even a larger need given the 2007-08 swoon), but because of industry mores and culture management has not been emphasized to the same extent?

Financial Crisis Inquiry Commission

Just a quick link here. Click only if you're really geeked out on this stuff like me...

Genesis of the Financial Crisis

We're a year past the financial crisis, but I still am fascinated by it. The more I read about it -- from House of Cards to Too Big to Fail and Gods at War -- the more I am amazed at how close our nation came to collapse of its financial plumbing. The people that were most familiar with the arcane and exotic intracacies of our modern financial system (such as Jamie Dimon, John Mack, and Hank Paulson) were seriously concerned about its collapse.

Depending on what your political stripes are, you are likely to blame the crisis on the Community Reinvestment Act ("CRA") (a Republican gripe) or you blame it on the Gramm-Leach-Bliley "Financial Modernisation Act" of 1999 ("FMA" - which ended the 1933 post-Depression Glass-Steagall act) (a Democrat gripe). I've heard both arguments. Each has their merit, but neither is sufficient to explain the events of 2008. Rather, both rationales appear to be a conclusion that drives one's determination of relevant facts. It should be the other way around.

So when I was reading King of Capital (biography of Sandy Weill) on my train ride home today, I was pleasantly surprised to learn of the interwoven nature of the CRA and the FMA. The strengthening of the CRA (it was originally legislation of 1977) was part-in-parcel of the FMA legislation:

• Amidst horse trading in October 1999, "several last-ditch compromises were made addressing bank compliance with the CRA, and an agreement was reached on [FMA]." p257
  
• "Early in 1999, conservative politicians and commentators began worrying that President Clinton would veto the reform legislation. Clinton at one point decided to support an element of the legislation that called for protecting CRA." p255

It's also interesting to read how glowingly the author speaks of Citigroup's "impenetrable" business model that is "so big and so global" that it's nearly immune from any economic downturn.

Of course all things are obvious in hindsight.