“Fix financial system – radical openness” follow up
December 20, 2008

(This is a follow-up to the original post: How to fix the financial system? Introduce radical openness.)

Why radical openness is needed so badly?

 

Take the Madoff case, and the latest news about SEC.

 

If the community is given all the information government agencies have (and even more),

– according to the behavior of the agency – 

the community can

 

a) – if an agency open to innovation and to the wisdom of the crowds –

HELP the agency deliver a better job

e.g. crunching data in innovative ways that is not part of the agencie’s daily routine or in territories, where the agency has a sort of night blindness

 

b) – if the agency is reluctant to listen to the outer world –

PUSH agencies work better

same as above, but not only complementing in scope the work of the agency, but also competing with it in its core business

 

c) – if the agency is denying any outside influence or help –

DO THE JOB INSTEAD of a failing agency

covering the whole spectrum of the work of the agency. In this case, it is then rightful to ask, why is the named agency paid for from taxpayers’ money

 

What do you think, had the policy of radical openness been in vigor, what behavior would SEC show?

We know now, that the SEC has consistently neglected the warning signs

One whistleblower, a former exec at a rival firm, wrote the SEC as early as 1999 to warn that Madoff was running the “world’s largest Ponzi Scheme.” He repeated his warnings to the SEC through this past April. There were other critics and naysayers, including a 2001 article in Barron’s questioning Madoff’s unrealistically consistent returns. (Paul Kiel in ProPublica)

And we also heard, that – in spite the fact, that Madoff controlled 17.1 billion USD in assets with five employees – SEC has never inspected him, because the lack of resources. Fine, but if we, the community had all the data that SEC gets in raw form, real-time, there would have been quite a few biz data geeks, who would load them into a database, and run some not-too-complicated algorithms, and shoot up the red signal seeing one person handling 3.6 billion USD on the average.

How to fix the financial system? Introduce radical openness.
December 2, 2008

Poor Alan Greenspan – his blunder at the congress hearing makes him look like the dumbest person on the planet. To trust that the Internet would make the financial markets safer and more transparent? What a naïve idea!

(more…)