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Yahoo Finance, January 25, 2010

Over the past few months, arguments have raged about whether it is “immoral” for homeowners to send banks the keys to their houses and walk away from mortgages that don’t make sense for them to keep paying (since many times the mortgage is greater than the fair market value of the home).

Recently, Tishman Speyer and BlackRock Reality, the owners of the huge New York residential real estate complex Stuyvesant Town, have decided to hand over the keys and walk away, dumping the depressed property on lenders who provided some $4.4 billion in loans.

Stuyvesant Town is now estimated to be worth less than half of what Tishman and BlackRock paid for the property four years ago. Tishman will be feeling much less pain since they only put up $112 million of equity (less than 3%) when they purchased the property. Other investors, such as California Public Employees’ Retirement System, a Florida pension fund, the Church of England, and the bondholders, will suffer the vast majority of the loss.

In none of the articles reporting this decision was the question of “morality” ever mentioned or discussed. It was simply assumed, as it usually is with corporate transactions, that the parties had reached their agreement at arms-length and that default was always a possibility.

Much of the mortgage industry usually tries to convince homeowners that they have a “moral obligation” to pay up when corporate borrowers many times don’t, since this sense of responsibility and guilt induce more homeowners to pay. But it’s not fair. There are dozens of good reasons not to default on your mortgage, but “morality” isn’t normally considered.

Comment: This argument kind of reminds me of the old saying, “what’s good for the goose is good for the gander.” The discussion above can also be applied to going bankrupt.

Many people say to just file for bankruptcy and start over. Of course this leaves the lenders and/or creditors with little or nothing. Doesn’t the person filing bankruptcy also have a “moral” obligation to pay the lenders back over time? It’s always amazed me how little capital many real estate operators put in a new project. It’s certainly a lot less risky to use other people’s money. Of course these operators usually share heavily in the upside, if any.

SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good by Rosabeth Moss Kanter.
New York: Crown Business, 2009. 322 pp.

Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor at Harvard Business School, where she chairs the Harvard Advanced Leadership Initiative . She is the author of numerous books and articles, including several New York Times bestsellers. The London Times named Rosabeth one of the “50 most powerful women in the world.”

There are many people in the world who are giving up on business as a source of transformation and service. This outcome seems to be heightened by the recent financial crisis and growing public disillusionment that has resulted from yet another round of catastrophic ethical breaches in business. In this important book, and based on a three-year study of more than 350 key leaders at about 15 major companies around the world, Kanter challenges this idea. Rather than pessimism, the author contends that the best performing, most agile and innovative companies in the world will be the most progressive and socially responsible. In the author’s own words:

Vanguard companies are ahead of the pack and potentially the wave of the future. The best of the breed aspire to be big but human, efficient but innovative, global but concerned about local communities. The best have business prowess and clout with partners and governments but try to use their power and influence to develop solutions to problems the public cares about.

The book is structured in four parts: The first section deals with the pressing challenges of globalization (and anti-globalization sentiment) that are forcing a change in existing models of business. Vanguard companies — such as Banco Real, Digitas, IBM, Proctor & Gamble, Shinhan Financial Group [LINK ], and Nokia — are successful because they are learning how to respond to four powerful forces:

1. Increasing uncertainty and volatility
2. Growing complexity
3. Need for greater work diversity
4. Intensifying pressure for transparency and responsibility

The second and third parts deal with how Vanguard companies align values, strategic priorities, people, and societal needs to achieve business excellence. And in doing so, how this positively influences supply chains, communities and countries in which they operate. The final part looks to the future, addressing some of the challenges that loom and characteristics that will be needed for transformative leadership.

There are many things I appreciate about this book. Kanter chronicles interesting stories of diverse companies doing well while serving society. For example, in response to Hurricane Katrina in New Orleans and the surrounding region in 2005, IBM codified innovations for NGOs into a kind of “disaster relief in a box,” which featured an open-source disaster management software. The author also presents a convincing argument for how for-profit business can contribute to human flourishing. Vanguard companies and their leaders see business and technology as a powerful force for making the world a better place. And while addressing unmet social needs with technology, not “charity or hand-me-downs,” they strengthen their own processes of innovation.

There are other helpful insights, especially related to changes in present-day workplaces and changing motivations for work, as well as helpful examples of how Vanguard companies partner with other societal institutions, like NGOs, governments, educational institutions, and the like, to magnifying their impact in the world.

Unfortunately, I found the book to be a bit repetitive and cumbersome. I would only recommend it if you are highly interested in the topics examined and want to stay current with the author’s latest research. I wasn’t convinced that Kanter had truly broken new ground and differentiated her work from insights coming from other streams within business management and education, such as social responsible business, conscious capitalism, and corporate social responsibility movements.

The Checklist Manifesto: How to Get Things Right by Atul Gawande. New York: Metropolitan Books, 2009. 209 pp.

Atul Gawande is a general and endocrine surgeon at the Brigham and Women’s Hospital in Boston, a staff writer for The New Yorker, an associate professor at Harvard Medical School, and leads the World Health Organization’s “Safe Surgery Saves Lives” program. He is author of two previous books Better and Complications.

The premise of the book is quite simple, starting with the area of surgery. As surgical teams come together in the operating room, they usually are made up with different participants (surgeon, nurses, anesthesiologists) and need to go through the surgery as a team without forgetting anything (particulars about the patient, the surgery, the equipment, and medicines needed).

Often, the surgery is conducted under less than ideal conditions (interruptions for the surgeon, emergency situations for the patient). How does all this get done well each time for each new team and each new patient, even on something that may have been done many times before? The unfortunate answer is that it doesn’t always get done well.

Gawande wanted to see if creating common checklists for the process could indeed save lives. The short answer is yes, often with startling results. The key is getting the right checklist: not too complicated so that it adds to the work, hitting on all of the vital steps; and adaptable to many situations.

The results of small experiments were extended around the world through the World Health Organization project Gawande led. This means that checklists are used everywhere in surgery? Unfortunately they are not widely used, in part because it is very difficult to get expert and arrogant surgeons to use them. Part of the reason for this is the surgeons believes they know what they are doing, and another part is because of the shift in the team dynamics, sometimes putting the nurses in position of authority on a surgery.

The book may sound simple, boring, and only applicable to surgery. It is none of these. Getting a checklist right is surprisingly difficult, and Gawande spends time showing some of his false starts in producing checklists that seemed good but could not work. Gawande is an excellent writer, and his stories and applications pull the reader through the book. He develops the comparison with the construction of large buildings, and draws on the construction management world for insight. He also suggests the application to other areas. I was constantly thought of business applications of his ideas as I read the book.

Don’t confuse the seemingly simple, straightforward, well-written books as something to breeze through. It is vastly deeper and more thoughtful than that. I highly recommend this book.

And coming soon in Issue 69…

The March 2010 Conversation with Greg Page, CEO of Cargill, has been completed. You’ll see the first part here in mid-March. Food is the theme of that issue (growing, processing, and distributing). A controversial subject we have learned. We will also review books offering differing perspectives on the food business. To pick up the organic side of this equation, we will interview an organic farmer from Idaho. We welcome your ideas as we put this issue together.

Lord Griffiths of Fforestfach was educated, and later taught, at the London School of Economics and then became dean of the City University Business School. He was a director of the Bank of England and served at No. 10 Downing Street as head of the prime minister’s Policy Unit from 1985 to 1990 with responsibility for domestic policy, including economics policy.

Since 1991, Lord Griffiths has been vice chairman and a board member of Goldman Sachs International. He is chairman of the Audit Business Practice and Compliance Committee.

He is a non-executive director of Times Newspaper Holdings Ltd. and Herman Miller Inc., and was on the boards of ServiceMaster, and the English, Welsh, and Scottish Railway and chairman of Land Securities Trillium. He was chairman of Westminster Health Care from 1999 to 2002.

He was appointed to the House of Lords and has been a member of various Select Committees in the House of Lords and is at present a member of the Select Committee on Economic Affairs.

Lord Griffiths is chairman of the Archbishop of Canterbury’s Lambeth Fund and Christian Responsibility in Public Affairs. He has written and lectured extensively on economic issues and the relationship of the Christian faith to politics and business, and has published various books on monetary policy and Christian ethics.

This Conversation took place Lord Brian Griffiths home in Westminster, England, July 14, 2009, and was updated in November 2009. Participating were Brian Griffiths, Al Erisman, and Al’s wife Nancy Erisman. Because Lord Griffiths role at Goldman Sachs is a board position rather than an executive leadership position, we agreed to stay away from questions related specifically to Goldman Sachs.

Read Part 1 and Part 2 of the Conversation with Lord Griffiths

Government Regulation of Business

You mentioned earlier about not wanting too much regulation from government. And yet if you have too little regulation, you have other kinds of problems. What is the right balance?

“Governments are essential to ensure that businesses operate within a boundary of social justice.”

Government is essential for business, no question about that. Indeed the right of business to exist is because democratically elected congresses and parliaments allow them to function. So, in that sense, business depends for its very existence on government giving it legitimacy in society.

Government must ensure that there is a proper legal system and a necessary regulatory framework. If you look at what happened in the 19th century in Britain, with small children working in coal mines or cotton mills, and so on, it was a disgrace. Governments are essential to ensure that businesses operate within a boundary of social justice. I think governments have an important role to play in protecting the environment and in setting a regulatory framework for financial markets. People forget, despite this crisis, that the financial sector is one of the most regulated sectors of any in our economies.

Transparency is very important. The greater the transparency in what business does, the less need there is for government regulation.

Public/Private Roles

You played a significant role, under Margaret Thatcher, in privatizing business in England. In reflecting on this, do you think that privatization can go too far? The U.S. privatized security at airports, for example, and pulled back from that. Some countries have privatized water supplies for a period of time. Could you comment on how you see what functions, if any, should remain in government?

The weight of evidence from the U.S. suggests that businesses are much better run in the private sector than when owned by governments. State-owned enterprises tend to be over-manned (roughly in our case by one third) and make pricing and investment decisions not on the basis of commercial criteria but to satisfy their political market. Two key issues for privatized companies are to ensure greater competition if at all possible and if they are monopolies that there is appropriate regulation. With these caveats I would pursue privatization as far as possible.

The Role of Technology

You mentioned earlier that this economic crisis had come on very quickly, and I wonder if in part that isn’t due to technology, which enables the creation of these complex instruments that can change the world very, very rapidly. How do you see technology playing a role in this system of economics, government, and private enterprise?

I think you are right. Technology has affected the capital markets over a period of three or four decades. It’s really extraordinary what’s happened. Today we have 24-hour instantaneous banking, trading. I think how a society manages technology is difficult, because technology is like a tiger with a life of its own. It’s is not easy to manage it for the social good. You see that in lots of fields. You see it in food, you see it in infertility, you see it in alternative technologies, you see it in banking. Technological change is a tough issue. As a general principle, we have to be the masters of technology, not its servants. Technology has to be within a moral and ethical framework, which is why in our various countries we have ethics committees sponsored by government, which advise on technological change.

Yes, these committees will tend to look at things in bioethics for example, in food ethics, but I wonder if they really looked at the derivative securitization markets and the debt packaging and all of this kind of things that were made possible by technology?

That raises an interesting issue. I don’t think incidentally that derivatives and securitization were the root of the problem. Securitization in the U.S. was started by Fannie Mae a few decades ago because they wanted to increase mortgage lending in order to increase home ownership. There is nothing fundamentally wrong with that. But with the exception of the dot-com boom and bust, we had three decades of sustained economic growth. To me the real problem was not that the banking system was introducing new products, but that it didn’t have the ability to manage the innovation they were creating. The innovation outran their ability to manage the change.

“Professor Hindsight” is wonderful. Always right, but as you look back, it was very clear that boards of some banks and other institutions did not understand the products their firms were selling or the implications they had for the management of risk.

I went down this path, because of something that you said about needing more transparency. In an age of incredible complexity because of the technology, you can hide under this complexity. How does that fit with transparency? Enron created some of these off-balance sheet things that almost nobody understood, for example.

When we talk about the banking system, clearly all banks are not the same. There was a difference in the recognition of the problem in certain banks but not in others. It was the same technology, but with a different response. Greater transparency would put the searchlight on complexity

Short-Term Thinking

Another implication of the technology is how it can lead to short-term thinking because of the availability of data. The path to long-term performance is not necessarily through a series of short-term performance gates. How do we deal with this short-termism that is happening in our market?

In their trading books, investment banks mark to market on a daily basis. Not all banks do. One issue which has come out of this crisis is the accounting policies of banks. Fair value accounting, is not just making assets to market prices on a daily basis, it also introduces discipline in the business. If you have to mark to market each day then as you see asset prices falling you have to act immediately and do something, whereas if you look at some banks, which were really caught out badly in the crisis, they didn’t do that.

Too Big to Fail?

We have heard in this crisis about institutions that are too big to fail. The society fundamentally depends on them and yet they are private. What do you recommend going forward?

It was Allan Meltzer [LINK ] from Carnegie-Mellon who said, if institutions are too big to fail they are too big. I have a lot of sympathy with that, because if institutions are too big to fail then the taxpayer has a right to say that government, as their representative, should have some role in regulating what that institution does.

I think there are three options.

One would be for very large banks which are too big to fail to be brought into public ownership. This is not an attractive option as these institutions will suffer from all the weaknesses of nationalized industries.

A second option would be to divide banks into two types: utility banks and risk-taking institutions, pejoratively called “casino” banks. In the U.S. the Glass-Steagall legislation of the 1930s did this. This meant that some institutions (commercial banks) were more regulated. I would be cautious about re-introducing a Glass-Steagall regime because it was market forces which drove the U.S. government under Clinton to remove the legislation.

That is the third alternative. There is an important difference between investment banking and commercial banking. Even if it takes place under one roof, there is a case for saying that from a regulatory point of view, there should be a different treatment of those two activities. The challenge is how to regulate a bank, which does both commercial and investment banking activities that is one which takes deposits from the general public, and is at the same time involved in investment banking capital market activities. With proper regulation I am sure it can be done.

How do you think it should be done?

Certainly the regulatory capital you need for the two different kinds of activities would be different. It would come down, in my judgment, to the particular capital requirements that you were to impose as a regulator on the different aspects of banking, how much capital banks should hold in relation to investment banking activities and how much capital they should hold in relation to straightforward lending activities.

The Role of Values

You’ve spoken a lot on the importance of values in a business. What do you mean by “values” and why do you think they are so important for a business?

Values are essential to a business. Setting out your values is a way of saying who you are and what you stand for as a business. You are inviting the public, whether they are consumers, investors, or suppliers to have confidence in your business. By saying that you are an honest bank doing honest business and that you are a corporation that treats people well you are making a statement about who you are. The way you market in the third world, the way you treat employees, the way you handle R&D — all these really ultimately depend on your values. When you report your quarterly earnings, are these figures really the right figures, have they been massaged to give a better appearance? If you say you have integrity at the heart of your business, then it should show in all of the ways, not least in your financial reporting.

To me, being involved in a bank, or any sort of corporation, is being involved in a community. There are good communities and bad communities. A corporation with good values make going into work every day really enjoyable. It creates a culture where people feel they are respected and honored and can contribute. That matters to me a great deal.

So, you are making a distinction between a value statement and actual values of a company. If the values statement says one thing and the company acts a different way, that’s a problem.

Yes, that’s a critically important distinction. If corporate executives want to sail close to the wind, then I think its best not to make any statement on values at all. The worst thing you can do is to say you believe one thing and do the opposite. That’s sheer hypocrisy. I think that’s one reason why there is such public anger at the banks at present, because so many banks have said through their values statements that they have high principles, but then they have acted differently. I think the perception of the public is that they just haven’t lived up to their business principles and that makes people very angry. And I don’t blame them.

How does a business go about setting values and speaking about them in a way that is meaningful and not destructive?

That’s an interesting question. I have had experience on the boards of two companies in the U.S., Herman Miller and ServiceMaster. Both companies have had very strong values. Then I was asked to help set up a company here not unlike one of these. Being explicit about the values of a company seemed more like an American thing and something not too common in Europe at the time. But I thought it would be great if we could have clear values in this new company, since we were starting with a clean sheet of paper. Some of the executives said it was a great idea and that we should try to involve a large number of people across the firm to explore what exactly the values of the company should be. That’s what we did. I think one of the most amazing things in this particular example is that these values weren’t related to anyone’s faith or to people of faith, as we had people of all faiths and no faith. But the values reflected our common humanity. I am proud of the fact that this company was awarded the government’s largest outsourcing project. Values really matter in the way a firm does business.

C.S. Lewis wrote a very interesting book just after World War II called The Abolition of Man. It’s about the teaching of English in schools, what he called “the Tao of values.” He said that if you looked across all cultures and religions there are basic common human values. If the values are respect for the individual, integrity, competence, accountability, and responsibility — whether it is to the community, to the environment, your shareholders, to your employees and so on — they ring true across cultures. That to me is something very practical. By putting these values into business principles or a mission statement, what you are doing ultimately is taking the huge well of experience that there is in the human conscience and codifying it for your commitment.

But no human being is perfect. So, as a result when you establish a set of values and you do something that is counter to those values, then what do you do to restore credibility. How do you deal with that?

Doing something counter to the values can happen and will happen at many levels. In any business, you are going to get bad apples. I think if somebody really transgresses the rules and behaves dishonestly, they have to be fired. If you believe in your values there has to be zero tolerance of willful transgression.

The values should be a part of promotion, evaluation, and all these things?

Absolutely, and the values should be key to hiring. Character should matter as much as competence.

A problem arises if you have somebody in a senior leadership position, like the CEO, who is prepared to turn a blind eye to someone who is brilliant and produces enormous revenue for the firm, but sails very close to the wind and yet promotes that person. That becomes a serious problem because it is not just a bad apple which has to be removed. What you’re saying is that there is a lack of integrity in the way the values are being used in the firm, and that’s very serious because it ultimately undermines the values of the company.

Margaret Thatcher

You worked with Margaret Thatcher for a period of time. Can you tell us about her?
I worked very closely with her for five-and-a-half years and she lives just opposite us here in this square. She had a deep humanity, which came from her early childhood and upbringing; she was fantastic to work for and in five-and-a-half years working for her, we had no more than a handful of disagreements. She had a strong belief in the important of principles and in policy always returned there.

We went to see the play Billy Elliot in London last evening, and that play painted Margaret Thatcher as the villain in the coal strikes. How do you see this?

By the time Mrs. Thatcher became prime minister, the trade unions had become very powerful and the leader of the miners in particular, Arthur Scargill, who was an out and out Communist who wanted to turn Britain into a Euro-communist state. That’s not my interpretation, he said it himself. He dressed it up in the language of economic justice. He was prepared to use power in any way to achieve his objective.

Mrs. Thatcher believed that in a democracy no one group was above the rule of law. Hence the miners strike. The union leaders really terrorized their people, and ultimately the Nottingham Miners stood up and said, “No, we want to go back to work. We really disagree with our union leaders.” The hardship that individual families suffered in these communities was shocking. So I think she had no alternative. It was not simply about the coal industry; it was really about who ruled Britain. She stood up for democracy, for liberty, and for the rule of law. I think she was totally justified in doing what she did, not least on the basis of Christian ethics.

It is very difficult for me to say this because both my grandparents were injured underground in coal mines, and my father worked most of his life in the coal mining industry. I come from Wales, which has a radical culture, and when I was a boy in school and in university I was left wing. But I came to see that the sort of socialism of the late 20th century in Britain was very different from the socialism which grew out of the Christian faith in the 19th century. This was a secular socialism, hell-bent on obtaining power.

Could she have done things differently? I doubt it. I well remember that when I went into Downing Street in August of 1985 unemployment was rising. I had just been there a week or two, and I said to her, “Shouldn’t you be saying something about unemployment and your concern about people who are unemployed?” and she said, “Brian, if I did, people just wouldn’t believe me.” She felt as deeply about the issue as others did but recognized that leaders have to make tough decisions for the longer term common good.

But then we did develop a policy to deal with rising unemployment. We started various schemes to retrain people. We focused on the long-term unemployed, particularly youth unemployed. We wanted to do what we could to create more enterprise. We created special-enterprise zones, in which tax was much less. We developed one initiative after another and of course ultimately Margaret Thatcher was seen as someone who turned the British economy around, who saved Britain from real tragedy.

Reviewed by Al Erisman

Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System-and Themselves by Andrew Ross Sorkin. New York: Viking (Penguin Group). xx, 600 pp.

Andrew Ross Sorkin is mergers and acquisitions reporter and columnist for The New York Times. The World Economic Forum named him a young global leader.

In Too Big To Fail, Sorkin provides the account of what happened in the world economic crisis involving the key players including AIG, Goldman Sachs, Lehman Brothers, Bear Stearns, the federal government, etc. He chooses his starting point of July 2008, and 600 pages later the clock has advanced one year. Most of the events of the book take place between July and September 2008.

Through interviews and the work of a team, Sorkin gives dates, times, and people involved in meetings and phone conversations during the frantic period, recreating the dialogue of who said what to whom. By the end, you feel like you have gotten to know many of the prominent financial figures from New York and Washington. The frantic pace of the book matches what was going on as the reader is pulled from meeting to meeting, watching a world that was filled with greed, risk, and isolation. On one level, this is a fascinating account.

But I found a lot of weaknesses in the book as well. I will specifically identify a few of them. By focusing on the small geographic area in a crisis that reached across the world, it gave focus to the book, but also limited its scope. The largest bank failure in the United States coming from this period was Washington Mutual, based in Seattle, and its demise was given barely a footnote in the story. Bankers from Japan and England were brought into the story only as they related to New York banks.

Second, with recreated dialogue, it is very difficult to separate fact from fiction. The author may well have gained lots of insight from interviews, but the quotes throughout the book have to be considered suspect. A great story, but how close to reality I kept asking myself?

But the weakest, from my point of view, was when he tries to analyze why the failures occur. Several places in the book he summarizes his conclusions, and in each place he offers a different perspective on the role of the regulators, the legislators, the bank leaders, the mortgage companies, etc. I concluded that even he didn’t know for sure what he believed. Further, these events were rooted in policies and practices that went back much before all of this broke. A humorous explanation by British comedians John Bird and John Fortune was filmed in February 2008 offering more insight into the factors leading to the crisis.

In spite of these criticisms, this sobering walk through the events makes the news come alive in a remarkable way. It’s a long read, but I got many miles on the treadmill reading it, and I found it offered good insight into the social events of the period.

The New York Times, January 18, 2010

Can a bank be too big? This question has been asked many times in the last couple years as many banks have suffered financial set-backs during the down economy. The question was raised again during the Financial Crisis Inquiry Commission hearing in early January. “Some have suggested that size alone, or the combination of investment banking and commercial banking, contributed to the crisis,” Jamie Dimon, J.P. Morgan CEO, said to the commissioners. Dimon argues that there was no clear correlation between size and problems. But there is a loud chorus of people that disagree with Diamond arguing that the sheer size of the banks (and worries about the effect of any of them failing) helped bring about the financial crisis.

Dimon believes, “The solution is not to cap the size of the financial firms. We need a regulatory system that provides for even the biggest bank to be allowed to fail, but in a way that does not put taxpayers of the broader economy at risk.”

The concern of size alone, have led many people to question the 1999 repeal of the Glass-Steagall Act, the law enacted during the depression era to prevent investment and commercial banks from combining. Alan Greenspan has argued that a simple test should settle should settle issue, “if they’re too big to fail, they’re too big.” Greenspan also has stated that “private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.”

Shrinking the size of these companies may create other problems for the economy, particularly for huge corporations. Examples given are, If Pfizer needs to raise $20 billion for a takeover bid, or Verizon needs to raise billions to lay fiber optic cable for its FIOS service, they cannot efficiently go to 20 different banks to raise the money. Many large U.S. companies operate globally employing millions of people. These companies need banking partners that also operate globally and can offer a full range of products and services and provide financing in the billions of dollars.

Comment: The question of “can a bank be too big ‘ is very difficult to answer. When a large bank fails, then many people think it was obviously too big, but that’s hindsight and may have nothing to do with the size but rather the quality of management. A piece of legislation currently in Congress involves “resolution authority,” which would give the government the ability to put a too-big-to-fail financial company into a conservatorship in much the same way the Federal Deposit Insurance Corporation is able to unwind a commercial bank without putting it into bankruptcy. If adopted, a failed bank’s shareholders would lose their value, and unsecured creditors would be a risk and might be wiped out. A regulator might also be able to terminate management and boards and liquidate assets.

Such a “solution” would probably come with a high cost, especially to responsible banks. Since financial institutions would have to be assessed fees to cover costs associated with failures, responsible banks would be paying for the failure of irresponsible banks. This has been the case for many years for the insurance industry where well run companies pay for failed insurance companies. The end result is that these increased costs eventually have to be borne by their customers.