Sunday, May 31, 2009

Campaign against Greed : HBS and CBS show the way

It is reported in the NewYork Times that at Columbia Business School, all students must pledge to an Honour Code to the effect that "As a lifelong member of the CBS community, I adhere to the principles of truth, integrity and respect. I will not lie, cheat, steal or tolerate those who do".

The newspaper also reveals that graduates of Harvard Business School have started voluntarily signing the "M.B.A.Oath" that promises that Harvard M.B.A.s will act responsibly, ethically and refrain from advancing their own narrow ambitions at the expense of others.

Very good, isn't it? It is a pity that business graduates have in the recent past become so unscrupulous that it requires a pledge or an oath to remind them the basic requirement of ethical behaviour and truthful conduct.

Will solemn pledges really impact behaviour? Will violation of the oath attract any action from the business schools? It is worth noting that no business school has taken /been able to take any action against its deviant alumni so far.

Wednesday, May 27, 2009

Global Economic Crisis

Dr.Krishna Srinivasan of IMF delivered a comprehensive lecture (I wonder why it was called a seminar) at IMFR on 27th May. He subtly put across the view that the US is not the sole offender since greed is manifesting globally. Asset bubbles occurred in various countries though the epicentre was in the US.
He was emphatic that inflation risk is not imminent now (one may rightfully differ). He criticised dilution of accounting standards as a step in the wrong direction.

Monday, May 25, 2009

"Educated" Cabinet

Alongwith Dr.Manmohan Singh, 19 ministers have been sworn in. Of these 19, 11 are graduates in Law, one an ex-IFS officer and another holds an enviable combination of PhD in Psychology and MSc in Physics. One is an MBA from Harvard, a breed not very much trusted these days.

Saturday, May 23, 2009

Rent-seeking Ministers

In a wise edit on "Don't give in to blackmail", the Economic Times of date reminds that "the ministries run by the DMK members were widely castigated for their brazenly rent-seeking style of governance". This is an euphemistic understatement. It is a pity that ministers are not 'accountable' for their behaviour.

Friday, May 22, 2009

Principled politics

It is nice to know that the Congress party is keen that tainted parliamentarians will not be inducted as ministers. One only hopes that the keenness will not get diluted by any force of circumstances.

Sunday, May 17, 2009


There is no doubt that India has an able Prime Minister in Manmohan Singh. However, the ease with which he turns obsequious to the Gandhi family causes a lot of unease. He has recently observed that Rahul Gandhi deserves to be our Prime Minister. It is also reported that Singh had earlier turned down a recommendation to make Raghuram Rajan as RBI Governor saying that he was not experienced enough. Rajan is too callow in his own field, but Rahul is mature enough to be PM ! The nation deserves better utterances from its Prime Minister.

Election results

Results of parliamentary elections are pleasantly intriguing. They are a tribute to maturity of Indian voters. There is certainly a 'goldilocks' attribute to the final tally. UPA is tantalisingly close to a simple majority. Voters have been decisive enough to keep the UPA in power, but also sceptical enough not to make the alliance unbridled. Prakash Karat has paid for his intellectual hubris and BJP for its flop-flop fundamentalism. Congress should be sane enough to ensure good governance so that it can face the next elections confidently.

Saturday, May 09, 2009

Stress tests on American banks

The Fed has released details of stress tests conducted on American banks and its own conclusions. In its view, there is need for additional common equity to the extent of $75 billion as against the requirement of $185 bn as on 31st December 2008. Apparently, the situation is improving.

What is causing concern is that there continues to be understatement of risk and capital requirement. Fed is targetting only 4% of risk-weighted assets as common equity requirement which is 50% of total capital requirement. Actual assets are 160% of risk-weighted assets. (Common equity requirement is stated as 2.5% of actual assets and hence this derivation.) In other words, a typical asset carries a risk-weight of 62.5% only. Fed continues to have total trust in risk-management capacity of the banks! Some institutions never seem to learn!

European banks have nearly 7% of risk-weighted assets in the form of common equity, that is way above the American banks.