G2
KLMNO
MELINA MARA/THE WASHINGTON POST
Supreme Court nominee Elena Kagan is a former dean of Harvard Law School, but she has not served as a judge.
On Leadership What qualifies a leader?
In choosing a Supreme Court nominee to replace Justice John Paul Stevens, President Obama was seeking someone who could provide intellectual and personal leadership of the liberal bloc. His gamble in nominating Elena Kagan is bringing in someone from outside the “priesthood” of appellate judges. What are the advantages and disadvantages of selecting a leader with nontraditional qualifications?
Lisa Caputo is chief marketing officer at Citi. She is also chief executive of Citi’s Women & Co.
Leaders come from all walks of life but have a number of traits in common: integrity, common sense, tenacity, the ability to inspire the best work from others, and (as exemplified by this nomination) the courage to challenge received wisdom and look beyond the obvious. Experience is a core element of leadership, but the best leaders have the ability to transcend the particulars of their resumes.
Elena Kagan has never before worn a judge’s robes. Given her wealth of experience, however, if confirmed to the Supreme Court she will have the opportunity to accomplish what all real leaders must do: Define the role for herself.
Slade Gorton is a former U.S. senator and Washington state attorney general.
Picking someone
without judicial experience was a wise move on the president’s part, because contemporary experience in the real world is a vitally important qualification for a Supreme Court justice. The court’s world is so divorced from reality that its members become frozen as of the date on which they ascend to its august precincts. The problem with the Kagan nomination is that she will not be moving from the real world but will simply reinforce a group already overwhelmingly composed of those from a single academic background that has given them not the slightest inkling of how the vast majority of Americans think and live. Nor has a single one of them ever run for office and thus had to concern himself or herself with what citizens think about public affairs. For those reasons alone, it is a poor nomination.
John Baldoni is a leadership
consultant, coach and speaker.
As a member of the high court,
Kagan will experience a learning curve, but her ability to work with colleagues including those who disagree with her should hold her in good stead. Consider the example of outside leaders running businesses in which they had no previous hands-on experience. Alan Mulally became chief executive of Ford Motor Co. after a career at Boeing. Ford was in serious trouble when Mulally came aboard in September 2006. The company was in precarious financial shape, its product line was ragged, and morale was dispirited.
Although Mulally was new to the auto industry, he was not new to manufacturing. Mulally knew the virtue of a single focus and with his team developed the One Ford plan. After 3 1
⁄2 years, Ford is making
money, new products are succeeding in the marketplace and employees are feeling more confident. Ford is now considered one of America’s most respected companies, in part because it took no federal dollars. An executive running an unfamiliar business will experience a learning curve, and in the process he may miss things; subtlety and nuance morph into gray that may hinder informed decision making. Only years of running the business will bring true discernment. But a savvy leader will be a quick study. Good leaders know from
experience what it takes to get a team to pull together for a common goal. They know how to sublimate their ego when necessary and delegate responsibility and authority to others. And they know when to crack the whip.
Juana Bordas is
president of Mestiza Leadership
International, a company focusing on leadership,
diversity and organizational change.
Being a Supreme Court justice is a lifelong calling. Elena Kagan has the experience, the moxie, the devotion to public service and the intellectual firepower to follow in Sandra Day O’Connor’s footsteps. She is young, brilliant and an eminently qualified choice. While she has never been a judge, as a former dean of Harvard Law School she understands the complex and changing issues the court will decide. As the first woman U.S. solicitor general, she has been the “10th justice.”
Michael
Ellenbogen is a graduate student at Columbia University in a leadership course
taught by panelist Todd Henshaw.
Though she has a lack of judicial
bench experience compared with her esteemed potential fellow justices, and has not yet been put into the battlefield, Kagan has had many successful firsts in her lifetime.
Coming up the ranks
traditionally may be safe. But we are not living in a safe world where safe still works. We need to take chances, make changes and truly think outside of the box.
Excerpts from On Leadership, a Web feature exploring vision and motivation by Steven Pearlstein and Raju Narisetti. To see videos and read the entire panel’s comments, go to
www.washingtonpost.com/leadership.
Chats on
washingtonpost.com/discussions
TUESDAY How to Deal, Lily Garcia, 11 a.m. FRIDAY: Cars columnist Warren Brown, 11 a.m.
EZRA KLEIN
Kagan’s opinions key in court’s pivotal moment
exercise if it so chose. And the conservative effort to persuade the court to rule that the individual mandate — requiring people to buy and maintain health insurance — is unconstitutional suggests that there’s more where that came from. I called Bruce Ackerman, a legal scholar at Yale, to ask what issues are likely to define the court in decades to come. “For sure,” he said, “the status of undocumented aliens is going to be much more salient in American law. We’re going to have 10 or 15 million people or more who’ll find themselves in a position increasingly like black people before 1954. That will be a terribly serious issue, and the court will have to decide how to respond.” Ackerman also thought the sustainability of the entitlement state — programs such Medicare and Social Security — could end up before the Supremes. “What happens when promised benefits are cut back dramatically?” he said. “Will the court protect the weak, or not?” Simon Lazarus, public-policy counsel at the National Senior Citizens Law Center, was more pessimistic. “We are in an era where the issue is whether the court will become a conscious agent overturning progressive laws, the way it was before the New Deal,” he said.
Citizens United grabbed headlines
for its audacity, but Lazarus says it’s
just one example of the Roberts Court legislating — or, more to the point, de-legislating — from the bench. “They’ve been in the legal underbrush,” he said, “narrowly construing laws so they’re not workable or eliminating remedies so they can’t be enforced or stopping consumers and businesses from getting into court with claims in the first place.” Take Lilly Ledbetter’s case. She was an employee at Goodyear Tire and Rubber who learned, after 19 years there, that she was paid far less than men in the same job. So she sued under the Equal Pay Act of 1963. Her case reached the Supreme Court, which ruled that she should have filed her suit within 180 days of the first paycheck showing a discrepancy. Ledbetter, of course, had not known there was a discrepancy — nor do most people who suffer pay discrimination. The ruling didn’t repeal the Equal Pay Act, but it made it virtually useless to the workers it was meant to protect. We’re talking about an institution with power over credit card regulation, so where does Kagan fit into all this? You’ll have to ask her. Or, more to the point, the Senate will. And hope she’ll answer. Chief Justice John Roberts’s famous “umpire speech” showed the political appeal of judge espousing a philosophy of not having a
philosophy. But his activist streak on the bench has shown how little we actually learned from his confirmation process. In reality, the world is made of players, not umpires, and we deserve to know who we’re drafting. In past years, Kagan has argued
that confirmation hearings should be a straightforward affair. “It is an embarrassment that senators do not insist that any nominee reveal what kind of justice she would make, by disclosing her views on important legal issues,” Kagan wrote. The White House has been walking
that view back. “The passage of time and her perspective as a nominee [have] given her a new appreciation and respect for the difficulty of being a nominee, and the need to answer questions carefully,” said Ron Klain, one of the administration officials charged with shepherding Kagan’s nomination. Maybe that’s what Obama meant when he said he wanted an “empathetic” nominee? But we’re talking about a lifetime appointment to a body with power over everything from credit card regulations to campaign-finance reform to immigration. Kagan might have a new appreciation for the difficulty of being a nominee, but she should retain her old respect for the Senate’s right — and our need — to know the opinions of all nominees.
kleine@washpost.com
5
by Heidi N. Moore
On Tuesday, the House Financial
Services Committee held a hearing to find out what happened May 6 to send the Dow Jones industrial aver- age diving nearly 1,000 points in a matter of minutes. Here’s what we learned: There was no one and nothing to blame. We were led to believe that everyone and everything was doing its job and that the market crash was an ef- fect of too much efficiency. The truth of what happened will remain buried among records of bil- lions of Thursday trades. The New York Stock Exchange and Nasdaq, unable to publicly explain the cause, chose a “kill them all and let God sort them out” approach, canceling thousands of trades. To solve the is- sue, the exchanges will use the same approach, imposing circuit breakers on everyone. The theme of the hearings was unsatis- fying: All for one, and one for all. The days after the
plunge were plagued with conflicting news reports, widespread suspicion about the power of com- puters, allegations of cy- berterrorism, and other species of rampant theorizing — all great ma- terial for conspiracy theorists and fans of “The Matrix,” but not as great for people trying to piece together why the markets spiraled out of con- trol.
Five mysteries remain surround- ing the market rout.
1. What caused it?
It is surprising that this mystery was not solved quickly, considering that the New York Stock Exchange, Nasdaq and the “dark pools” all run mostly on computers, which should make it easy to scan for an errant trade or evidence of a glitch. Almost everyone agrees that, at some point, computers programmed to trade at certain prices took over and magni- fied the problem. But as a Wall Street Journal headline so eloquent- ly put it, “regulators can’t name cause of market slide.” Worse than not knowing: the
vastly conflicting accounts. The only real piece of information after five days of investigations was this: It probably started with “aberrations” in Chicago. The Chicago Mercantile Exchange, however, said it recorded no glitches or unusual activity. The White House doesn’t know what caused it, either, but is somehow sure it wasn’t a cyberattack. Initially, rumors held that a trader
(in Chicago, perhaps) mistakenly sold off an unusually large number of “e-minis,” a type of futures based on the Standard & Poor’s 500-stock index. During the hearings, Com- modity Futures Trading Commis- sion head Gary Gensler said that there were 250 trades in e-minis. Only one trade, however, was selling for a full 20 minutes — from 2:32 p.m. to 2:50 p.m., accounting for 9 percent of all of the volume in e-minis. Yet Securities and Ex- change Commission Mary Schapiro insisted that a “fat finger,” or single mistaken trader, could not have caused the crash. The e-mini case sounds compelling, even so. Unfortunately, in a vacuum, every case sounds compelling. The Wall Street Journal took a stab at creat- ing a thorough forensic timeline and traced it back to several big trades in Procter & Gamble stock. But later, “government officials” and those “familiar with the in- vestigation” told the New York Times that trading in Procter & Gamble was almost certainly not the cause. Similarly, Politico report- ed that the e-mini explanation was in vogue with regulators. Later, the Journal theorized that a hedge fund associated with “Black Swan” au- thor Nassim Taleb caused the crash. Few in the markets embraced the all-too-poetic explanation. By Friday, reports emerged that
Waddell & Reed, a brokerage and mutual-fund firm in Kansas, was identified as the mystery trader that sold a large order of e-mini con- tracts during the market plunge. However, the impact the trading in e-minis had on stock prices during the plunge remains unclear. It’s also impossible to find out
when exactly the crash started. Was it 2:40 p.m.? Or 2:45? Maybe 2:30?
The Big Money is a financial news and analysis Web site from the Slate Group.
SUNDAY,MAY 16, 2010
things we still don’t know about the market plunge
2:37? Considering there are hun- dreds of thousands of trades each minute, that seemingly small dis- tinction is important.
2. Why has no one come forward
to take responsibility?
The problem with the “fat-finger
trade” theory is this: No firm or per- son has claimed that the trade was theirs. In fact, several firms, includ- ing Citigroup and Terra Nova Finan- cial, issued categorical denials. Re- fusing to take responsibility is high- ly unusual behavior for trading firms: Especially in a market crash, it looks particularly craven. To some, the blankness of the faces in- volved is a good argument for more regulation of “dark pools” that trade securities far away from the prying eyes of the exchanges. But this is also the primary reason that some suspect market manipulation or a cyberattack.
3. Why did the exchanges can- cel trades if they insist there was no glitch?
The New York Stock Ex-
change and Nasdaq de- nied that there was any technological glitch in their trading, meaning that the bizarre trades were due to forces outside their control. The ex-
changes could be telling the abso- lute truth, or they could be avoiding some embarrassing assumptions people might make in light of past, similar technological problems. (Both exchanges have histories of pricing glitches and blackouts.) Nonetheless, both exchanges unilat- erally decided that they would can- cel all trades in stock whose prices changed more than 60 percent — the largest single cancellation of stock trades in history. To traders, this makes no sense: If there were a provable glitch, the cancellations would be fine. But if there was no technical glitch and the system as a whole was just doing its job, then the exchanges inter- fered with bargain shopping.
4. Why can’t the exchanges get their stories straight?
The New York Stock Exchange
and Nasdaq are losing market share to electronic exchanges and upstart competitors. They also compete with each other and have a long his- tory of smack-talking on the court. It’s probably no wonder, then,
tween the stocks that crashed?
There are almost no common
that the first reaction of each was to get into a hand-flapping tizzy blam- ing the other. Nasdaq blamed the NYSE for walking away from stock trading. The NYSE blamed Nasdaq and others for not jumping in when its own systems slowed down trad- ing. The NYSE, resentful about the loss of many of its floor traders in the rush to technology, also used the excuse as an occasion to settle some scores, strangely insisting that the problem with all these computers is exactly why the NYSE needs to have floor traders. Perhaps true, but saying “we need humans because our computers don’t work” is not a solid defense. Besides, people didn’t do great a job of reining things in, either.
5. What is the connection be-
characteristics among the biggest stock movers that day: Procter & Gamble is a consumer stock, Accen- ture is a financial stock; Boston Beer Company sells Sam Adams beer. The e-minis theory partially explains the connections because it’s possible for unrelated stocks to appear in a sin- gle trading “basket.” In addition, it’s unclear why ex-
change-traded funds, or ETFs, made up the majority, or 69 percent, of the canceled trades. That’s too high a number to be a coincidence, but why these funds? It might be be- cause most ETFs are created to track particular indexes, such as the Dow or S&P 500, which experienced wild swings. But as usual on this subject, answers — not guesses — are in short supply.
Bonus: Can this happen again?
We’re assuming it can. But it would be nice to know for sure. If Tuesday’s congressional hear- ing could have clarified even one or two of these issues, it would have been a success. Instead, yet another hearing is being scheduled.
Heidi N. Moore, a financial journalist in New York City, is a former reporter for the Wall Street Journal.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166