Four ways to fix banks (summary)

Purpose- summarize the given article using common language

Audience- a regular person with normal knowledge of economy.

Genre- summary

Stance- neutral, just reporting information

Media - Internet

The article talks about the present economical and finantial crisis. Specifically it focus on how to avoid bad banks boards managment in order to keep them out from too risky positions.

The central idea of the text is using new and simplier tools to monitorize the real situation of a bank. As it defends, it would allow independent analysts, administrations and the whole society knows exactly about the health of this key industry. But also the bank boards would take profit of this proposal, it would help them to assess about the work of their CEO.

The alternative tools proposed by the writer in order to control the bank's risk behavior in general, and their CEO in particular are the following:

-Limit stock executives earnings in their wages. With that measure, they may not just direct the bank looking for rising the stock value, which usually means taking risky decisions.

-Link dividend policy with company benefits. It's a good way to limit costs when benefits get down, which means to reduce the stockholders' retribution at the same proportion that the company's results. But it's also a proper manner to reward stockholders and executives in good times, increasing their payouts gradually to the company's benefits. It increase the sense of being part of the same project.

-Add other values to decide about the strenghth of a bank. If we just take care of the earnings indicators, we'are looking at the short therm. Good benefits today doesn't assure the company is working properly, for example with costumer service, or with their employees, or even with a correct policy of investment and research policy.

-Optimize boards meetings. Park formal and administrative meetings and reports that are made just as a custom. Instead, spend more time in profitable themes and businesses, specially in that products and services that give today more benefits to the company, or have the potential to be key businesses in the future.

The autor claims to simplify the indicators used by bank boards, not only to control their own managers, but also to understand clearly both chances and dangers of their organisation and their industry. He also defends a more sensible way of manage banks, not just based in benefits and the short therm, but coherent and honest with the aim to add value with the company activity, both clients and stockholders.

The secret history of the credit card

The importance of this product to our life style is obvious. It helps us with our daily transactions, but also allow people to do some purchases, specially high price products or services. Whitout that instant finantiation, those persons probably couldn't ever afford. But credit cards have also a dark side, which not only depends on how costumers use them, also on how credit card companies are treating their clients and managing their business.

In one hand, we have the fact that that help to buy thanks to finantiation could become a danger to that people who aren't able to control themselves when go shopping. Defering the payment make some people feel free to buy more than if they had to pay at the same time they are purchasing. But this is not an issue, like many other things, a bad use doesn't mean that the product or service is bad.

However, in the other hand, as we can see in the documentary, dishonest measures and practices that credit card companies have been performing since the early years that product were born, must be ilegal. In my opinion, one of the worst is the "Universal Default" practice. It's just an expression to explain how companies modify, by their own, the conditions of the contract they dealt previously with their costumers. I can't imagine any other industry where this way of act couldn't be banned by the authorities. This and other tricks are focused on rise the interest and fees costumers have to pay for the credit card debt. The lobby of this industry has a lot of power in the federal administration, no matter if republican or democratic, this is the reason why few regulation has been created to limit the greed of these companies.

From my point of view, key industries like finantial one, as well as the educational and the welfare, must be more regulated than the rest.They are basics for the well-running of society.If not, there's always the chance for shark companies to act fraudulently. Unfortunatelly, history is plenty of examples for any kind of industry. However, the difference is that in basic services like these are, if people who suffered frauds doesn't see their goverment helping them , there is not only economical losses and damage, the whole democratic system gets hurts.

Compositon - The Madoff Fraud

Few cases are so representative about how economy depens on truth than Madoff's fraud. Bernard Madoff took profit of a vey deep and closed community which he is a member, as it can be the jewish.


One fact could be incredible or not depending on who is involved in it, and it was what happened with the Ponzi Scheme founded by this person. He offered very good returns to investors, theoretically without any risk and guaranteed during so many time. It must be an attractive option for the last years, when stock markets and the whole economy didn't show any interesting chance to invest. But nobody suspected against him or his method to assure that returns, people who trust their money to this person just believe in his reputation and that his returns were effectively paid each month.


In my opinion, this fraud was worst than Enron's or than the subprime loans due to two facts. Firstly because it was started as it was, a fraud; Madoff created that business based on a lie, instead, Enron's and subprime's cases, people who act dishonestly, just take profit of the structure or system they found running. Secondly, he abused of the confidence of his own people, not only jewish members of his own community, but also friends and far relatieves. In the last phases of his busniess, he even robbed money from charity organizations.


However, I see a same point of coincidence in all that cases: short therm view. In all cases, people involved didn't think about how to get out the business before they were caught within it. They prefered to continue robbing and making the lie, and the structutre, bigger. What's worst for me with Madoff fraud is that, as all Ponzi Scheme, he should have known that it must be really well controlled in order to don't grow too much. As it was, increase in this business needs to obtain more money in order to pay the new returns, and be sure to avoid crashes of liquidity, like important withdraws made by customers or by himself.

At the end, he got caught by his own false life, he wasn't able to plan an exit from his fraud because he became too big and important to fled without noise. He just realized that his monster was hungrier every day and he felt he just couldn't fed it forever. Finally, he probably have lived a rich life thanks to that fact, and even have hidden the major part of the money he got throught decades. But at the end, he will die in jail, and what's more important, he has lost drammatically one of his sons due to this whole history. In my opinion, it doesn't worth all the money you can enojy.