With a new administration in the White House, different approaches to address the persistent financial crisis are on the table, once more.  Over the last week there's been some talking about the creation of an "aggregator bank" -also called 'bad' bank- that will buy troubled assets with part of the remaining bailout funds (TARP), aiming to take toxicity off financial institutions' balance sheets. 

An aggregator bank that eats all of the junk in the financial sector is expected to finally unfroze credit markets, and gives new life to the idea of a bailout a la Swedish.  However, the Nordic country's experience draws some specific governance lessons that go beyond separating good and bad assets, and that are applicable regardless of the technicalities, features and context that make both cases different.

Mary Shapiro, unquestionably a highly qualified choice, was confirmed by the US Senate and is expected to be sworn in the next days as the new chairman of the Securities Exchange Commission (SEC).  She would literally be moving from a chief self-regulator to a chief government regulator.  Her previous position was as CEO of the Financial Industry Regulatory Authority, FINRA, the largest independent and non-governmental regulator for securities firms in the US.  In her Senate hearings, Shapiro indicated that she would give priority to the regulatory problem in the country and that she will reinvigorate the SEC enforcement divisions.  But according to a Wall Street Journal article, Shapiro showed a light regulatory touch at FINRA.

The financial crisis exposes emperors with no clothes.  Witness Madoff.  But naked truths are not only emerging for those dealings with obscure financial instruments.  Dramatic exposure in the corporate business sector is also taking place. 

Last month we discussed the corruption scandal surrounding Siemens, the multinational giant, which has agreed to pay billions in fines and fees.  With the holiday came a short truce.  New Year had not even taken place and we are hit by the enormity of the Satyam’s corporate fraud, labelled as India's Enron.

Bribery and fraud by business corporations is not new, of course.  And in fact the Siemens bribery case is a longstanding one, preceding the financial crisis.  Corporate fraud and corruption are not unique to developing or to industrialized countries, obviously.  They can take place anywhere.  They do.

The magnitude and timing proximity between the Siemens and Satyam corporate scandals may tempt some to rush and generalize, lumping such corporate scandals together as belonging to the same kilt.  That would be unfortunate.  There is a fundamental difference between those two cases.  It relates to “Ponzinomics.”  While Satyam shows clear features of a Ponzi scheme, the Siemens case doesn’t.  This difference matters.

Very recently we witnessed political and social unrest in Colombia due to the implosion of the DMG pyramid scheme (named after the scammer, David Murcia Guzman).  And now we got Madoff in Wall Street.  These cases today show how difficult it is sometimes to learn from the past.  Especially when past events are far way in space and time…

I have received articles from experts in Colombia who found parallels in their current case with the analysis I made long time ago on the Mavrodi’s MMM pyramid scheme collapse, which inflicted major pain on so many Russian citizens in 1994.  The focus of my old article was on the MMM Russian case.  But there were other such financial collapses caused by pyramid schemes at that time, including in Romania, and then the tragic case of Albania, in which 2,000 citizens died during the civil war that ensued.

Siemens just settled on a major international corruption case.  It turns out that over the past decade Siemens and some of its subsidiaries made at least 4,283 payments either to public officials or “agents” to secure or retain contracts.  The estimated amount of the payments made in more than ten countries surpassed $1.4 billion.  During the current case, the criminal damages from Siemens were calculated to amount for up to $2.7 billion.  Now fines totaling $1.6 billion have been charged; Siemens cooperation with the authorities is cited as reason for the somewhat reduced fine...

The new corruption scandal embroiling Illinois Governor Blagojevich is already resulting in sweeping generalizations about the hopelessly corrupt state of that State.  And commentators from other States are jumping in to suggest that their State can compete with Illinois in having such high levels of corruption. 

Wait a second.  First, let us take a world-wide perspective.  Granted, the US in general is not a model for the world in terms of control of corruption.  Countries like New Zealand and the Nordics are closer to being a model of integrity instead.  There are 18 countries rating better than the US in controlling corruption according to the Worldwide Governance Indicators.     Yet there are about 190 countries rating worse.   

Today the world celebrates the International Anti-Corruption Day.  This has become a tradition since 2003, when 129 countries signed the United Nations Convention against Corruption (UNCAC) in Merida, Mexico, after working several years towards the creation of an international legal document against corruption.  Even though an anti-corruption spirit must be embraced at all places and times, today is a good moment to raise awareness about some of the vast and remaining challenges of corruption not only developing countries, but also in the most developed world.

Update: If you could not follow Dani Kaufmann's Farewell Lecture on December 9th, here is the link to the B-SPAN video and a brief summary of the presentation.

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For those who cannot attend in person to Dani Kaufmann's Farewell Lecture , tomorrow, but who would like to follow it online, the event will be webstreamed live and accessible to all at http://worldbank.org/wbi/   The transmission will start a few minutes before 9a.m. -Washington DC time.

So Dani Kaufmann is leaving us after all. Since he’s made that announcement a few weeks ago, our small Global Governance unit at the World Bank Institute has had trouble coming to terms with the reality. I guess what finally made the news sink in were the posters and messages announcing his Farewell Lecture tomorrow December 9^th, 9.00 a.m. at the World Bank’s Preston Auditorium.

As many of you already know, Dani Kaufmann is moving on to the Brookings Institution, where he will continue his valuable work in the field of governance and anti-corruption. Fortunately, we will still hear a lot from him -inside and outside the Bank- in the coming future.  In the meantime, please join him this coming Tuesday, December 9th, for a special farewell lecture, in which he will share his reflections, experiences and thoughts on current governance and corruption challenges.  Please find the official invitation and details of the event in the rest of the entry.  If you cannot attend in person, you can follow the lecture virtually through webstreaming and participate by posting comments and questions.