Put a Cataloger in Charge of Wall Street!

Catalogers rank their customers in quintiles (or deciles). The top quintile is  the top echelon of buyers in terms of R-F-M.  In the bottom quintile are the dogs. You promote to the top quintile frequently--mailing once a month or more. The bottom quintile gets a Christmas catalog, period.

Seattle direct marketing guru Bob Hacker's advice to any cataloger who wants to turn a quick profit: "Don't mail the bottom quintile--or maybe even the lowest two quintiles."

Solving the great Wall Street crisis of September 2008 should have begun with what catalogers do all the time--dig into the performance of each individual customer. In the subprime mess, it's imperative to find out how each customer behaved, and then chase that mortgage down to the current holder and into the derivatives that were sold around the world. Only then can banks, investors and the Treasury discover which loans are still profitable and which have gone south, and thus the actual value of the various derivatives.

From where I sit, the single most horrifying paragraph in the avalanche of analysis in yesterday's news was this from The New York Times:

The draft legislation, which will be put to a House vote on Monday, gives Treasury Secretary Henry M. Paulson Jr. and his successor extraordinary power to decide how the $700 billion bailout fund is spent. For example, if he thinks it wise, he may buy not only mortgages and mortgage-backed securities, but any other financial instrument.

The other situation that should make the world queasy is the makeup of the Financial Stability Oversight board:

* Chairman of the Board of Governors of the Federal Reserve System
* Secretary of the Treasury
* Director of the Federal Home Finance Agency
* Chairman of the Securities Exchange Commission
* Secretary of Housing and Urban Development

Here's the e-mail that a reader of this e-zine, former client and sailing buddy Steve Warsaw, sent to John McCain:

Of all the incredibly stupid clauses in this bailout, the list of members of the Oversight Committee is the worst. Not a single member is a qualified CFO. Not a single member has ever run a productive business (swapping bucks on Wall Street doesn't count). Just another gaggle of political hacks, who will be given the authority to say yea or nay on subjects that they do not understand. Jack Welsh should be on that committee. Donald Trump, who certainly knows everything there is to know about mortgages, should be there. Volker might be well qualified, and Kissinger, while not an economist or businessman, understands the geopolitical implications and should have a voice. You have chosen to project your image as a maverick. Why, then, are you doing the 'go along to get along' dance on such an important issue? Your country, which you redundantly claim to love, will suffer mightily if this illogicality survives in its present form. You have the media pedestal, use it.