CFO Blog: Commentary and Opinion

For one of the most lucid and compelling takes I've seen from the glass-half-empty macro perspective, see this Q&A with Pimco's Chris Dialynas.

While much is a familiar rant about financial imbalances, underpriced risk, and the perils of leverage (the bottom line being that Bernanke's savings-glut theory is unsupported by the facts), Dialynas makes an interesting observation about monetary policy under Greenspan and why it has bought so heavily into the derivatives-are-good assumption. It's worth quoting in full:

"The Clinton and Bush administrations, as well as the Greenspan Fed, have relied upon many internal and external advisors. Without doubt, most of these advisors are of Ivy League vintage. It is particularly noteworthy to understand that the endowments of most of those universities — endowments that substantially accrue to the benefit of the respective professors — are primarily invested in very high-risk assets and high-risk strategies (as are numerous other investors in their quest for high returns in a low interest rate world). It is, consequently, of little surprise that policy advice has tended to aggressive stimulus. A disciplined, 'take-your-medicine/rebalance-the-economy' set of policies would most likely be detrimental to the endowments of many of this country's leading educational institutions. As long as these institutions maintain high-risk portfolios, the policy advice from the ivory towers will be highly stimulative based upon new, bizarre economic ideas. The global imbalances will grow."

Scrushy didn't need to break a sweat in reprising his ''Sergeant Schultz'' defense — that he ''knew nothing'' while his rogue underlings, including five former chief financial officers, committed a $2.7 billion fraud at HealthSouth.

The pathetic bipartisan duo allowed Scrushy to say things like "the buck stops with people who were guilty," to compare his innocence to the person who is unaware of their spouse's transgressions even though they share a bed, and to assert that the government didn't spend that much time investigating his case.

I know, a jury of his peers found Scrushy not guilty. But his pitiful interviewers could have made more of an effort to bring forth some of the compelling evidence that made many observers shake their heads when Scrushy was acquitted.

They could have asked Scrushy about the statements of his first finance chief, Alan Beam Jr., who reportedly told Scrushy that there was nothing they could do with the numbers to meet Wall Street expectations — and who testified that Scrushy told him and former CFO William Owens to ''fix'' the numbers. Or about Beam's testimony that Scrushy once told him, "If we are ever caught, I'm going to deny everything, and you guys are on your own." Or about the testimony that in discussions with Scrushy about the fraud, his former boss reportedly promised to help out Owens's family if the scheme ever fell apart? Or about the testimony of another former CFO, Michael Martin, who said that after describing a new accounting technique to Scrushy, the CEO replied: "Damn, you guys are good."

I could go on and on. If only Oprah had lost a bundle of her own money on HealthSouth stock.