It is time for a new financial language that the common man and even the man on Wall Street can understand and trust.
Financial institutions all over the world speak in code. No one understands; even those within the sector don’t even fully understand it. Does anyone really know or understand what CDOs (Collateralised Debt Obligations) or Credit-default Swaps, or Naked Wagers are?
Even Allan Greenspan, the once revered Chairman of the Federal Reserve, confessed “some of the complexities of some of the instruments that were going into CDOs bewilders me. I didn’t understand what they were doing or how they actually got the types of returns that they did… and if I didn’t understand it and I’ve got some fairly heavy background in mathematics and access to a couple hundred PhDs, how the rest of the world is going to understand it sort of bewildered me.”
To many, they were and still are black boxes of the subprime era. Byzantine creations of the brightest minds on Wall Street that made – and then lost – vast fortunes. I wonder how many investors would have really put their money into Collateral Debt Obligations if they knew that the underlying collateral were a group of mortgages with a 90% probability of defaulting. And naked wagers? Not much more sophisticated than showing up at a craps table in Las Vegas and rolling the dice, playing against the bank and hoping to yield a 300% return on an original investment. Yes…billions were made…but also lost. Who actually lost the most is another blog subject in and of itself.
The consequence has been absolutely devastating for the major financial brands that were once reverd as the pillars of western capitalism. No amount of PR and marketing spin is going to change people’s entrenched views.
You only trust what you understand. What will slowly change people’s perceptions is a new language that everyone comprehends. The financial institution that gets this and adopts a simpler and more layman way of describing who they are, what they do, and how they do it will at least be on the road to striking a new emotional chord with the audiences that need to fall back in love with them again. A loss of trust in financial institutions ultimately hurts all of us everywhere.
What do you think?
