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business newsUS and Oil Industry Only One of Many 'Cozy' Relationships
By
Peter Atwater
May 18, 2010 9:20 am
Obama denounced the "cozy relationship" between the oil industry and the federal government. Here are more contributing to the downfall of the American financial dream.
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Don't stand so close to me..."
-- The Police
Last week, in response to the Gulf oil disaster, President Obama denounced the "cozy relationship" between the oil industry and the federal government.
And this weekend, I noticed the same phrase -- “cozy relationship” -- being used (with a similarly pejorative tone) to describe the ties between Wall Street and the rating agencies.
While I'm not trying to usurp William Safire’s position as the official arbiter of the American lexicon, it sure feels to me like the days of “cozy” are clearly numbered.
But in reflecting on the word over the past several days, I can’t think of a better way to capture what may have been the single largest risk factor contributing to the downfall of the American financial dream:
Congress and Fannie Mae (FNM) and Freddie Mac (FRE) -- cozy.
Home appraisers and mortgage originators -- cozy.
Wall Street Political Action Committees (PACs) and Congress -- cozy.
Corporate CEOs and Wall Street analysts -- cozy.The banking industry and The Federal Reserve -- cozy.
Credit card issuers and Visa (V) and MasterCard (MA) -- cozy
Goldman Sachs (GS) and [reader's choice] -- cozy.
Cozy, cozier, coziest? You choose, but each one is an example of a relationship in which clear conflicts of interest were disregarded to mutual benefit.
Unfortunately, at least for those involved, it appears that mutual benefit is quickly being replaced by self-interest, and I have to say that it's fascinating to watch each day how one side of these formerly cozy relationships throws the other side under the bus.
I don’t profess to know where this all leads, although the other day, I offered to a friend that the problem with the break up of all these cozy relationships is that both sides went to the same bachelor party and they have the pictures to show for it. Worse, they're not afraid to use them.
Mutually-assured self-destruction.
From an economic perspective, I suspect that at a minimum, cozy-less commerce is going to be a modest drag on corporate earnings. But if financial-services reform is any indicator of what's really ahead, I suspect it could be much worse as it increasingly appears that Hell hath no fury like a regulator (or, dare I suggest, Congressperson) scorned.
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