The Official Blog of Matthew L. Adler

The Official Blog of Matthew L. Adler

Posts Tagged ‘progressive capitalist’

Too Big to Fail

Wednesday, October 28th, 2009

I just read the excerpt of Andrew Ross Sorkin’s new book Too Big to Fail in this month’s Vanity Fair.  I can’t wait to read the entire book.  Sorkin seems to have written one of the great works of investigative journalism. While reading, I had to keep reminding myself that this isn’t historical fiction and these events actually took place.  It was fascinating to read the inside story of how giants such as Goldman Sachs and Morgan Stanley were led to the brink only to be pulled back primarily by government intervention.

The panic and potential domino effect that many believed was happening during the week following the collapse of Lehman Brothers was perfectly encapsulated by Sorkin.  A perfect example of this fear is seen in a section about then Treasury Secretary Hank Paulson; “The entire economy, he said, was on the verge of collapsing. Paulson was no longer worried about just investment banks; he was worried about General Electric, the world’s largest company and an icon of American innovation. Jeffrey Immelt, G.E.’s C.E.O., had told him that the conglomerate’s commercial paper, used to fund its day-to-day operations, could stop rolling. Paulson had also heard murmurs that JPMorgan Chase had stopped lending to Citigroup; that Bank of America had stopped making loans to McDonald’s franchisees; that Treasury bills were trading for less than 1 percent interest, as if they were no better than cash, as if the full faith of the government had suddenly become meaningless.”

I was immediately drawn to this book because I am fascinated by the proposterous notion of “too big to fail” and I oppose the entire concept. As a capitalist, I believe companies should succeed (or fail) based on their own merits. Yet as a progressive, I understand the need for regulation to protect the entire society from a company either gaining a monopoly or becoming so expansive that their failure would cause irreparable harm to the entire society.

Ironically, the same people who demanded banking reform with little regulation were forced to ask for government handouts. Striking the balance between oversight and an independent private sector isn’t easy. Clearly, the balance got out of control in the last decade. Hopefully, we have not lost momentum on banking reform with the Dow hovering around 10,000 and over a year removed from the height of the crisis. We have to find a new balance, one where we encourage innovation and incentivize success, but we also demand oversight, transparency and protection from any one company becoming so large that their failure would begin a ripple effect that could bring down our entire economy.

Reform Healthcare?

Thursday, September 10th, 2009

I am very fortunate that I had the opportunity to be in the Gallery last night for the President’s speech on healthcare. It was a historic evening and I am confident we heard the outline for legislation that will become law.

As a business owner, I understand our healthcare system is broken. Every year we go through a lengthy process of bidding our coverage to the insurance companies. Year after year, the results of that process place a greater burden on both our employees and our company. The fact is, our employees’ healthcare expense has grown significantly more than their incomes and our employer contribution each year grows as a large percentage of our corporate expenses.

I am surely not a healthcare expert, but I am certain that we need to reform our system or risk further economic crisis. We cannot continue to spend over 15 percent of GDP on healthcare and expect to be an economic superpower.

Now, the difficult part is what do we do to improve the system? This issue is so complicated that I have been nervous to comment as I admit I don’t understand all the causes and effects. After hearing the President last night, I want to discuss a few issues that particularly impressed me.

First, the President made a passionate case for the “progressive capitalist”. He spoke for the vast middle of this Country who want free markets but require accountability and action. The President so eloquently reminded us:

“You see, our predecessors understood that government could not, and should not, solve every problem. They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom. But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited. And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter — that at that point we don’t merely lose our capacity to solve big challenges. We lose something essential about ourselves.”

Second, the President kept a government option on the table but only as a means to an end, to cover all Americans. If the private sector were to take responsibility for this, then the government option would not be required. From an economic perspective we all pay for those that go uncovered but only at the most tragic and expensive times, at the emergency room. I am involved in Mount Sinai Medical Center on Miami Beach and the amount of uncompensated care the hospital provides on an annual basis is mind blowing.

Third, the President truly reached across the isle. As a progressive capitalist, I was excited to hear him put medical malpractice reform on the table. In this process neither Republicans or Democrats can have their sacred cows. There is no question the practice of defensive medicine is one of the contributing factors to our broken system. However, reform must be responsible and address the true problems not merely penalize trial attorneys.

I was inspired by the President last night. Healthcare is such a sensitive issue that impacts all or our lives in the most profound ways. I hope partisanship and fear do not stop reform that is so badly needed.

Why the Progressive Capitalist?

Thursday, August 27th, 2009

I certainly have a lot to say when it comes to the intersection of business and politics. In this space I will share with you my take on the happenings affecting South Florida, the country and the world. I look forward to hearing your feedback as well.

So…why the Progressive Capitalist?

Somehow, we have lost the “middle” in this country. It seems in our current economic crisis, you are either a free market investment banker who does not believe in regulation or a socialist. I promise I am neither. I also believe that the vast majority of Americans are neither as well.

If America is going to begin its economic recovery, our business community needs to accept that much needed regulation is approaching. They also need to recognize that investment products were created and securitized that were not understood or rated appropriately. Finally, the term “too big to fail” should be stricken from the lexicon. The public needs to welcome change.

Additionally, if we are going to return to economic growth, liberals need to recognize all bankers are not bad. Bankers, analysts and traders are needed to create products that will return liquidity to the system. Even more difficult to accept is that, eventually, successful bankers will need to be compensated generously for their efforts.

This country was built on entrepreneurial business. We need to stop trying to determine blame for our economic condition and work to optimize our recovery. Unfettered capitalism is as unrealistic an economic system as socialism. Common sense solutions will improve our capitalist society and better position us for the future.