Wall Street is in deep financial crisis. Lehman filed for Chapter 11, Merill Lynch was rescued by Bank of America and AIG is restructuring its organization. The root cause of it all is the sub prime mortgage debts. I don't know which company will find itself in shambles but expect those engage highly in the mortgage business to follow suit.
The reason why I brought up this glaring financial issue is that one of the big financial firms hold office in the Philippines. And has been in operations, if my memory serves me right, since the early 1900's. In the mid-2000, the company's top honcho was caught in a debacle involving disclosure-related issues. The local office's financial position was questioned and they vehemently denied that there was an "issue" in the first place. Soon, the parent company's top honcho was booted out of office unanimously by the board of directors. Despite the controversies, the local office remained silent. They claimed that they are operating independently.
In the local scene, the Philippine company remained aggressive in beefing up their portfolio. They have snatched a few accounts from the company I've worked for previously. It was business, as usual.
I don't know what's in store for the big boys' local counterparts. If they are streamlining their organization and selling off assets, the bad performing ones are expected to close shop. The local office is still doing well. So, I surmise, they are here to stay.
Lastly, the ripple effect is felt in Asia especially in the BPO sector in India where Lehman, AIG and Merill have outsourced part of its business processes. The impact of the financial crisis in the BPO industry would depend on the size of their contracts. If one of these boys comprise more than 50% of the total portfolio, then the vendor would soon find itself in hot water, too, unless a new account would replace the troubled one.
Monday, September 15, 2008
The big boys in hot water
Labels: BPO sector, Wall Street crisis
Posted by Mari at 9/15/2008
2 comments:
What is happening to American banks right now is very similar to what happened to Japan's banks in the early 1990s. Banks in both countries were heavily invested in overpriced real estate and once the real estate boom went bust, the banks in both countries suddenly found themselves with hundreds of billions of dollars of losses in worthless real estate. In Japan, the situation led to a recession that lasted for more than 10 years. I hope it doesn't last that long in America. By letting some banks die or fail, America is wisely letting the market forces decide who deserves to survive the current downturn.
Aside from the banks who got so greedy extending huge loans to people who can hardly afford to pay them back, Former Fed Chairman Alan Greenspan should also be blamed for the current crisis. It was under his watch when the prime rates he kept low spurred uncontrolled speculation in real estate properties. He hardly lifted a finger to control the situation, in much the same way that he hardly lifted a finger when his low interest rates also spurred the dotcom busts in the late 1990s.
Thus, in his last 10 years as Chairman of the Federal Reserve, Mr. Greenspan simply stood by when the economic environment he helped foster led to two recessions. History won't and shouldn't be kind to this man.
thanks for the inputs. i hope the financial crisis would be ironed out soon. america's financial position is critical to the global economy.
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