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Normally, I don't devote this Sunday evening blog to a single issue, but the current "credit crisis" seems to demand it. We're headed for a patch of rough water and we're just beginning to be able to hear the roar of the rapids around the bend.

From my viewpoint this is not a credit issue or even a finance issue. This is about hubris.

Every decade or so we get the idea that we're smarter than the universe and that, with just a little slick manipulation, we can negate the laws of nature, human nature and economics. It hasn't worked yet. We were wrong, again.

The Bible warned us that "Pride goes before destruction, a haughty spirit before a fall." And the Greeks warned us that Hubris is always followed by Nemesis. They're both right, again.

I'm pointing you to articles on a predicted consumer credit crunch, on America's vulnerable economy, on the effect of loss of faith in companies like Merrill Lynch and Citi. There's also an article on securitization and one on an interesting US Federal Court ruling on the foreclosure process.

Last week's newsletter was "When the crisis comes, it's too late." As usual there were pointers to Web and Reading Resources, too.

From Business Week: The Consumer Crunch
"The long-awaited, long-feared consumer crunch may finally be here. That might not mean an economywide recession, but the pain for American households will be deep. In recent years the U.S. mostly has seen narrowly focused downturns, where a few sectors are hit hard while the rest of the economy and financial markets remain relatively unscathed. In the dot-com bust of 2001, for example, tech companies and stocks took it on the chin, while consumer spending and borrowing sailed through without a pause. This time the positions will be reversed, as consumers tank while much of the corporate sector stays on track.

From the Economist: America's vulnerable economy
"IN 1929, days after the stockmarket crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability”. In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort. Our latest assessment (see article) suggests that the United States may well be heading for recession.

From Fortune: Wall Street's money machine breaks down
"Two things stand out about the credit crisis cascading through Wall Street: It is both totally shocking and utterly predictable. Shocking, because a pack of the highest-paid executives on the planet, lauded as the best minds in business and backed by cadres of math whizzes and computer geeks, managed to lose tens of billions of dollars on exotic instruments built on the shaky foundation of subprime mortgages. Predictable because whether it's junk bonds or tech stocks or emerging-market debt, Wall Street always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money, then hands back, in a sudden, unforeseen spasm, a big chunk of the profits it booked in good times. "

From MarketWatch: Subprime test: Did securitization work?
"Securitization, hailed as the greatest financial innovation of the 20th century, isn't getting such rave reviews anymore after this summer's subprime mortgage crisis exposed some weaknesses. With global credit markets still in crisis, experts have already begun debating the benefits and the drawbacks of the process. Some say upheaval shows that the securitization concept has failed its first major test because it fueled excesses in subprime lending. Others argue that the long-term benefits of selling securities backed by assets like mortgages and auto loans are so important that they justify the pain that comes with an occasional crisis. Securitization helps lenders finance their business more efficiently by selling the loans they've originated, rather than keeping the assets on their balance sheets. Advocates of the concept say that in theory, by spreading the risk of defaults among a broad range of investors, securitization makes the financial system more stable."

From the New York Times: Judge Demands Documentation in Foreclosures
"After the recent dismissal of 14 foreclosure cases by a federal judge in Cleveland, another federal judge in Ohio has given lenders 30 days to prove that they own the properties they intend to seize from troubled homeowners in 27 other cases. The second judge, Thomas M. Rose of Federal District Court, in Dayton, ruled Thursday that while the lawyer filing 26 of the cases had claimed his clients owned the properties at the time the foreclosures began, he had not submitted the necessary proof to the court. 'Failure in the future by this attorney to comply with the filing requirements,' Judge Rose said, 'may only be considered to be willful.' Taken with Judge Christopher A. Boyko’s dismissal of 14 cases in Cleveland last month, the latest ruling indicates that some courts are growing tougher on lenders foreclosing on delinquent borrowers without providing proof of ownership. It has long been a common practice for lenders to bring foreclosure proceedings without attaching proof of ownership of the underlying note. Tracking down such documentation may be more challenging because of securitization, the pooling of mortgages into trusts that are subsequently sold to investors."

Wally's Working Supervisor's Support Kit is a collection of information and tools to help working supervisors do a better job. It's based on what Wally's learned in over twenty years of supervisory skills training. Click here to check it out.

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Wally Bock has helped people learn to be great bosses for more than a quarter century. His latest book, Performance Talk: The One-on-One Part of Leadership, makes learning key leadership principles almost effortless by teaching through a story and providing lists of resources for further growth.

Click here to find out more about Wally's coaching services.

For weekly tips and resources pointers, check our Wally Bock's Three Star Leadership Letter.

Click here to find out more about having Wally speak to your company or convention.