Wells Fargo chairman offers insights on economy
2009 -- Richard Kovacevich, the chairman of the board of Wells Fargo and Company, shared his views on the economy and traced the causes of the U.S. economic troubles in a wide-ranging talk hosted by the College of Business on Nov. 19.
Kovacevich told a capacity crowd at the Downtown Campus that as opposed to past economic downturns, this time, the fault rested with financial institutions.
"This problem was caused by a total disregard by the management of a dozen large financial institutions who were heavily involved in investment banking, a serious lapse in ethical behavior," Kovacevich said. "It was fueled by greed, unchecked by regulatory authorities and reached an unprecedented scale by the breakdown of previously reliable third party safety valves."
Kovacevich noted that he was going through the sixth recession in his career, and said that the crisis in the 1980s that saw 13 percent inflation was actually worse than today's troubles. Though similar inflation levels have been avoided, many investors took dramatic losses to their retirement savings. "For many Americans, their 401ks looked like 201ks," he said.
The cure, he said, is for companies to establish corporate cultures that encourage managers to know what to do without being told, decentralize accountability and encourage long-term growth instead of short-term profit margins. "Companies must work as a team, not take shortcuts and not do dumb things for short-term gain," Kovacevich said.
Before taking questions from the audience, Kovacevich provided a brief overview of where he saw the economy heading in the coming months. Noting that productivity is at an all-time high, and that low inventories will soon need to be replaced by new goods, Kovacevich said he saw the economy rebounding relatively soon. He said that governments across the globe have shown they are willing to ensure that economies get going again by any means possible, and that betting against the global economy is a risky proposition.
"The biggest risk is not that we don't start growing again, but that we'll have to pay for the stimulus two or three years down the road," he said. "If you think the economic crisis won't end, remember these three important words, 'whatever it takes.'"
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