Showing posts with label Icahn. Show all posts
Showing posts with label Icahn. Show all posts

Tuesday, February 10, 2009

Professor Paul Romer on Banks.

First of all Professor Romer is someone we follow pretty closely here at People, Ideas & Objects. His new growth theories are short listed each year for the Nobel Prize in Economics. In a nutshell those new growth theories provide the replacement for the old growth theories of investing in Communications, Transportation and Financial infrastructure to expand an economy. His new growth theories are none other then simply People, Ideas and Things. The precursor to the name of this project.

As one of the chief architects of "New Growth Theory," Paul Romer has had a massive and profound impact on modern economic thinking and policy-making. New Growth Theory shows that economic growth doesn't arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a "dismal science" that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer's formulation, really do have consequences. Big ones.
Professor Romer is in the February 6th version of the Wall Street Journal with an interesting article entitled "Lets Start Brand New Banks" and in the February 6th Economist Magazine with "Lets Start a Bank". Romer suggests that instead of investing to recapitalize the banking system, it would be more effective to start new banks, and capitalize them with the remaining $350 billion in TARP funds. Noting that with the fresh cash in new banks, the ability to fund up to $3.5 trillion in new lending would occur under existing banking legislation.

This type of thinking resonates with me. Why not skip the failed capital restructuring? The first half of the TARP funds did nothing to spur lending, its intended purpose. Throwing more money at the banks will only provide the same results. Doing the same thing over and over, expecting different results is ...

I have another suggestion. Lets invest in new oil and gas companies. Firms like CNRL can be picked over by those that prefer to kick dead horses for a living. What we need is new organizations based on new and more innovative organizational constructs. Just as the Joint Operating Committee is the legal, financial, operational decision making, cultural and communication frameworks of the industry. Lets build a system that provides the software and services to support the Joint Operating Committee. A system that moves the hierarchies compliance, governance, tax, royalty and SEC requirements and aligns it to the Joint Operating Committee and its frameworks. The investors would then have the tools to manage the assets that they can cherry pick off the CNRL asset auctions. Providing as clean a break as Romer suggests for the banking system. Resurrecting old dinosaurs may make for great story lines in Hollywood, but not at this time and place in terms of the future capabilities of old organizations vs. new.

The investors that are disenchanted with the treatment and results of the previous managements, should fund these software developments and build these new organizations to make them profitable and productive for themselves and society. Carl Icahn was in the Wall Street Journal on Saturday, commenting on the topic of "Capitalism Should Return to Its Roots".  Mr Icahn states:
I have initiated United Shareholders of America to empower shareholders to institute changes, and I encourage you to join our cause. A majority of the U.S. population owns shares. Their voices need to be heard -- now -- on Capitol Hill and in the boardrooms of corporate America.
Mr Icahn's difficulties in dealing with management are well documented. I can assure you that I have faced many of the same difficulties in presenting the ideas around People, Ideas & Objects to the management of oil and gas concerns. Their attempts to steal these ideas and obstruct them from being developed is known by myself, and I can assure you I do not have the scope of Mr. Icahn's resources. 

Nonetheless I think we are in a time, and have a need that makes this software development project real and timely. Please join me here

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