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CauseWired: Unwinding the Financial Crisis

By Tom Watson on September 21, 2008No Comment

Will it be tougher to raise money for crucial causes over the next couple of years, online and off? The jury’s out: for one thing, the services non-profits now provide will continue to be vital as government faces tighter budgets. For another, down economic cycles rarely smack philanthropy numbers down as a product of GDP; we’re almost always around 2%. (For some numbers, download this Changing Our World pdf authored by my brother Chris on historical philanthropy numbers – it may calm you down). Clearly, the most compelling causes will still move people to get involved.

But is there an opportunity to press for more transparency as the U.S. government moves ever closer to a centrally-controlled economy and dabbles in the buy-out business with our tax dollars? I think so – and now, with everything seemingly on the table, may be the time to push. One of the books that influenced me in writing CauseWired was Don Tapscott’s terrific Wikinomics, a crowd-sourced view of our world in which group-controlled entities build massive societal values. Tapscott spoke last week at the Sibos conference in Austria, and this bit really caught my attention:

“We can’t afford the almost two decades that it took for Japan to recover from its 1990 financial implosion. The US industry requires fresh capital and updated regulations, but that’s not enough to reboot the system. Investors have been burnt badly, and some won’t fully trust Wall Street for many years, possibly a generation.

“Bankers and business leaders should be looking to collaborate around a private sector solution to the chronic problems undermining the financial services marketplace. They need to rethink many assumptions of the basic modus operandi of the financial services marketplace.

“For example, investors should be able to ‘fly over’ and ‘drill down’ into a Collateralized Debt Obligation’s underlying assets. With full data, they could readily graph the payment history, and correlate information such as employment histories, recent appreciation (or depreciation), location, neighborhood pricings, delinquency patterns, and recent neighborhood offer and sales activities. Now that AAA ratings have proved worthless, currently investors don’t have a glimmer of what they are being asked to buy. And they won’t start buying until they fully understand what they are purchasing and know that the price is fair.

Clearly, trillions of dollars leveraged in back-room deals unregulated by the very citizens whose tax dollars secure much of the rest of the banking system is a recipe for disaster.

UPDATE: Jeff Jarvis has some interesting thoughts about what $700 billion could buy – and how it could change this country.

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