One of Lewis’s points is that the SEC’s rating system used to determine the safety of investments it regulates is woefully inaccurate. Bond ratings like “Triple A” grade are based on politics, not reality.

Further, the $700 billion in TARP funds approved by congress is being doled out without oversight and doesn’t address the root of our financial problems: financial organizations and businesses that acted irresponsibly should be allowed to fail, albeit with government help to ensure an orderly sale of their healthy assets, rather that propped up with the same management and business models.

I’ve interviewed Lewis on TV and found that his positions are based on research, not personal philosophy. And his article brings me to an experience I’d like to share. 

2001: I sold my company to a firm called AppliedTheory, which was listed on the NASDAQ, and because of the amount of stock I accepted in the deal, I was legally considered an “insider,” privvy to inside information that restricted my ability to trade its stock.

But behind the scenes, what I saw involved smoke and mirrors. Every analyst who covered AppliedTheory gave us a “Buy” rating, essentially assuring investors that we were safe. As an insider, however, I knew we were coasting downhill fast. Among other things, we were classifying certain types of revenue as “recurring,” which Wall Street craved, when in reality the revenues were much less sustainable.

AppliedTheory filed Chapter 11 just after I bought back the assets I had sold them. As many other companies in the dot-com industry tanked, I figured that outrage from investors would lead to regulations designed to prevent this sort of thing from happening again.

But as Michael Lewis points out in the New York Times piece, little has changed. Lewis’s point is that lack of oversight, the politics and relentless short-term focus on profits represent a far greater danger to our financial future than the Bernard Madoff scheme that’s getting the bulk of our attention. The government can’t protect us from ourselves, but it can demand transparency so our investment decisions are based more on facts than mirrors.

You’re seething, right? Outrageous! 

Well, maybe. This brings to mind a lunch I had recently with one of my valued employees. The topic: He wants to make more money (”We all do!”, to quote Sally Struthers) because his student loans are coming due. My advice was to expand his skill set.

I explained that people don’t earn salaries…jobs pay salaries. What it all comes down to is that his pay is based on how much revenue he means to the company. 

Which brings me to the pay structure of CEOs. Whether you’re seething or not, CEOs of large companies represent quite a bit more more than 500 times the revenue of the typical employee. Their salaries are justified based on what they contribute…as long as the company is performing. 

To me, the real issue is what happens when the company doesn’t perform. If the company’s performance is poor, the pay for that CEO should be cut in proportion.

As outrageous as Bob Nardelli’s performance has been at Home Depot and Chrysler, there are other CEOs who get it. Like AFLAC’s Dan Amos, who voluntarily reduced the perks of his employment agreement by millions of dollars this fall…without even being asked by the Board.

Most news originates at newspapers, since they employ the most reporters. But with 30,000 media job cuts in 2008, you’re going to see continued decline of dailies and local TV news operations…and the emergence of hyperlocal press (your neighborhood newspaper and the accompanying Web site)…and more outlets that cater to liberal or conservative viewpoints.

This is the way the British press has operated for years: we may even see growth of the (lowest common denominator) tabloid format, also popular in Britain.

No easy answers. Clearly GM needs to restructure, revisit its culture and reduce some of its brands. Buick is a well-built car, has a solid customer base of retirees and a fast growing market in China. Chevys are a solid brand, as is Cadillac.  In fairness to GM, which has slowly been remaking itself, no business can plan for or survive a 50% drop in sales that come from external market forces. And given the economy, a collapse of auto companies would take a serious unemployment and consumer confidence situation and make them worse. How much worse, no one knows because the collapse of a car company would result in higher sales at other companies.

What I do know is that GMs products and innovation fell behind decades ago and management hubris prevented it from catching up. The unions negotiated ever more generous packages that the marketplace couldn’t support. (Warner’s law: whenever a company or organization says, “where else you gonna go?,” an alternative will appear.) Management rationalized.

I think bankruptcy will eventually be GM and Chrysler’s best option, because it will cost many billions to shut down brands that need to go; rework union agreements that match the marketplace; close plants to bring capacity in line with demand. Another reason I think bankruptcy will happen because people simply won’t buy cars from Chrysler or GM in the same numbers as before given this relentless negative attention.

The CEOs of GM and Chrysler should be replaced as part of government loan programs, and if not, they should invest a significant amount of their own money in GM stock. But of course, I strongly believe that retirement (and health care) weren’t “perks”…they represent deferred compensation. There should be/should have been strong federal regulations in place that guaranteed protection for the recipients. This group should be a focus of government attention.

It’s tough, but this American tragedy has been coming for a long, long time. One line in a NY Times article summed up an important sidebar: that this mess represents the end of one aspect of the American Dream — the one company “womb to tomb” relationship between employer and employee that began with Henry Ford and has caught an entire generation of American retirees in its wake. 

You may have heard of this site, Reddit, where users post links to interesting stories; it’s habit forming. 

Great desktop wallpapers and artwork here, at WeFindTheStuff.com.

Got any of your own to share?

As Jack Welch writes in BusinessWeek, “Being acquired and getting laid off are experiences that can hit you like a death in the family. The shock, sadness, anger, and confusion can make you want to enter into a period of protracted mourning. Such a response is only normal. But career-wise, such a response can be disastrous.” It took me a year to get over hearing, “we’re terminating your employment.” 

But how about Ted Turner? The billionaire who at one point was AOL Time Warner’s biggest single shareholder, with 10% of the company, told a sold-out Atlanta Press Club audience, “I got fired by Jerry Levin (at Time Warner). They said they were simply not going to honor my contract to oversee CNN. Basically said, sue us! Well, I couldn’t do that. I loved CNN too much. But I gotta tell you, if I could make billions of dollars for a company and get fired, anybody can get fired. There is no such thing as job security, particularly in this economy.”