We are in the tax business primarily, however I would like to bring some other issues that will definitively affect Tax policies, such as the current state of affairs in the Global Financial Markets.
It is now evident that the root of the turmoil in the Financial markets is inside the system. Governments are required to use great doses of innovation in dealing with the Financial institutions, money market regulations and tax policies.
The most recent news show how the US Government is now clearly intervening in the Free Market Economy. In Europe, Banco Santander has been called by the UK Government to try helping on the Bradford & Bingley crisis by buying the £20 billion deposit business and the network of 200 branches as reported by The Times
With some doses of electoralism Wall Street, Investment Banks and the Financial institutions have been demonized in the last few days by the press and some politicians.
Obviously they have made big mistakes, but we should not be naif and think that Government intervention by itself is going to help. The complexities of the Financial markets need a collaboration of the Governments, Financial Institutions, Businesses and the citizens.
What does the Academy say about this?.
In the last issue of Working Knowledge from Harvard Business School there is an interesting article titled , Financial Crisis Caution Urged by Faculty Panel, where the School faculty represented by Jay Light, Robert C Merton, David Moss, Nicolas Retsinas and Clayton Rose are interviewed to discuss this issue.
Robert C. Merton is the John and Natty McArthur University Professor at Harvard Business School and a winner of the 1997 Nobel Memorial Prize in Economic Sciences. I would like to bring some of his comments in this article.
“…..Merton expressed concern about potential unintended consequences of efforts to confront the crisis. He reminded the audience that banks and insurance companies, the sources of some of these problems, are among the most regulated entities other than hospitals in the United States. While regulation is important and needed, “it’s not magic,” he said. Poorly done regulation could have a long-term negative effect.
“I hope we’ll have careful analysis and pathology before we start to set the regulations,” Merton continued, suggesting the creation of the equivalent of the National Transportation Safety Board for examining financial crises in a technical, determined way.
Finance as a profession does not look bright, he acknowledged. It will be tough to get jobs on Wall Street. But the good news is that innovation will continue.
“The financial functions of the system, whether providing for retirement or transactions, still have to be performed. This is a global and growing business, and it’s one that can have very significant impact on economic development and growth.
“Some commenters say, ‘We have to get financially sophisticated people out of the system.’ The worst is to say ‘financial engineer.’ I suggest it’s just the opposite. The problem, in part, is that senior managers, regulatory overseers, and members of boards of these financial institutions don’t have a good understanding of all of this. And it would be perverse if the solution was to dumb down or limit what the institutions can do in terms of what they develop, to fit the existing managers. I think the longer-run solution is that general managers have to become far savvier.”
The finance job market is global, and there remains a strong need for talent. People skilled in general management combined with highly technical training to develop a functional perspective are best equipped to navigate the changes ahead, Merton concluded….”
