Each day the stock markets trend lower, seeking floors, comfort. A sense of how bad it could get leads to further erosions of global equity values and banks unwilling to lend. Already Silicon Valley VC funds are sounding the alarm to portfolio companies: tighten up on spending, pare plans, boost revenue-production.
A week after its approval, Washington's $700 billion bailout did nothing to halt the rapid unraveling of global stock and bond markets, and in fact those markets slid nearly 20% in the first week after the "bailout". Political expediency, a Presidential Election, a country divided between red and blue contributed to a tide of partisan fear-mongering, notwithstanding the common wisdom on how to protect commonwealth against the gargantuan appetite Wall Street has for free government funding when the word "crisis" can be politically rallied to their lobbyists' cause and their politicians' coffers.
And I'm an optimist. I'm working to form an "ethical bank." I'm an Ashoka Fellow. What's the silver lining here?
When I moved to Silicon Valley in August 2005, the Dow was at 10,600, the NASDAQ was at 2,130 and Google was at 280. People on both coasts asked me "Bruce, why are you trying to start an 'ethical' bank in SIlicon Valley?" I tried all sorts of explanations, from "the social sector needs a bank that gives it credit for doing good," to "conscious consumers deserve better credit scores and cheaper interest rates," to "Silicon Valley encourages innovators who want to use social affinity tools for social impacts." Silence, blank stares, "oh that sounds interesting" politeness.
Until now. The Credit Crisis. Subprime. Collateralized mortgage obligations. Credit swaps and other exotic derivatives. Wachovia. Washington Mutual. Merrill Lynch. Goldman Sachs. Lehman. IndyMac, Countrywide. A $700 Billion bailout. Comparisons to the Great Depression. Every media outlet in the modern world explaining Finance 101 principles, and how our money works for purposes we wouldn't fathom, passing through hands some never knew existed, making bets we didn't know were legal, under the eyes of regulators one always believed could and would sort it all out, paid by politicians we never thought could bend the financial system in such ways.
Now Treasury Secretary Paulson will be investing taxpayer funds in picking banks too big to fail, with seemingly little investment in local and community banks.
So how would Silicon Valley help? How would Semantic Web tools offer transparency beyond what exists under regulatory accounting today? I see many ways that a Semantic web might enable a much more transparent banking system, so as to let the system, regulators and public see through even the most nuanced investment bank structured investment: map the collateral or right in collateral.
One of the biggest hurdles in transparency is determining what can be released for public viewing, without enabling the competition to gain the upper hand.
I live in Cleveland, Ohio. Honestly, there are many National City Bank employees that would have enjoyed more information. But in this case, the information was distorted. Employees were under the illusion that the bank was strong enough to survive. Little did they know that behind the scenes PNC was negotiating a taxpayer funded bailout to gobble up this regional bank. Like Enron, National City Bank employees were heavily invested in their employer. One could argue that the employees were entitled to such information because they were actual investors in the company.
I agree the Internet can be used for better transparency. A great place to start would be providing complete and detailed information regarding how the $700 billion bailout is being spent.
~ Bill Woosley
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