The Future of the Euro

The fire and brimstone clouding the European sky is not the volcanic ash from Iceland but rather the bleak outlook for a unified currency. To put it mildly the Euro is doomed, it is just a just a question of how the entire scenario unfolds.

Currencies only work for a nation when their own central government has control over the money. A country using a currency while ceding control of the exchange mechanism simply makes the nation a victim of all the other entities using the notes. Germany and other northern European nations recently learned this harsh lesson. The Euro worked while all the economies across the continent were rising, but quickly imploded when a recession occurred. The southern European nations with poor financial controls that that have historically defaulted multiple times are now in a position to collectively drag down the entire collection of economies due to the common currency. Prior the Euro these countries would default and their individual currencies would be devalued.

It is true that the more people that use a currency then the stronger the value. Witness the strength of the deutschemark after the inclusion of East Germany. However a country must have sole control over their currency and not yield power to a central authority in order to be successful. I found that the Germans were very supportive of the merger of East and West Germany despite concerns over the poverty in the East at the time. Today, Germans are outright furious that the country is bailing out Greece and other nations. Most of the people on the street recognize what is going to happen next which is why they are lining up at banks to demand Euro notes with X’s in the serial numbers that are associated with Germany and not other countries.

While the entire situation can play out in multiple scenarios; there are two obvious ones. The first is that the Euro will divide into two segments, the stronger northern European nations with one version of the Euro and the southern European nations with a version of the Euro which is next to worthless. This explains why German citizens are lined up demanding “their national Euro notes”. It is likely that outside notes will soon be devalued.

The second possible scenario involves individual countries withdrawing from the Euro exchange mechanism and reinstituting their own national currencies. A good number of barriers and political negotiations will have to be overcome to allow this type of withdrawal. On the other hand people rioting in the streets generally has the tendency to make central union decision making to move with more haste.

Another likely scenario involving individual nations withdrawing from the Euro focuses on the central union giving countries with debt problems the boot and demanding that they withdraw from the Euro. As the size and scope of the debt issues become more apparent there will be a greater howl across the continent for the offending nations to withdraw.

In the long term where will this leave the Euro? It would be best if it was used as a basket of currencies for international trade as it was originally intended – 23% franc, 34% deutschemark, etc. rather than being used as a universal note in retail trade across the entire EU block. The disbanding of the common Euro is the best solution and the obvious path for continent.

Today's Cartoon

Analysis: SEC vs. Goldman

The civil fraud charges filed by the Securities and Exchange Commission Friday accused Goldman Sachs of "defrauding investors by misstating and omitting key facts". These financial charges also mark a new era of government regulatory enforcement of Wall Street. No longer will the SEC simply come to consent decrees with financial firms where they do not admit guilt and in most cases pay a small fine viewed as a cost of doing illegal business.

One immediate question is how do the SEC charges filed against Goldman Sachs change the playing field? Do these charges even mean anything in a broader regulatory context? In my opinion, the actions from the SEC on Friday defines a new playing field by Washington marked with the following game-changing alterations:

a) A broader effort to get the derivatives market properly regulated to minimize the possibility of future meltdowns.
b) The Goldman Sachs charges are expected to be the first of a lengthy string of government actions against multiple firms that contributed to the financial meltdown. The lack of accountability by firms which accepted bailouts is no longer acceptable to main street and their representatives in Washington.
c) A dismantling by regulation of firms that are "too big to fail"; including the scaling back of previous government legislation that allowed the merger of commercial and investment banks.
d) The teeth of the SEC are back in place. For the last twenty years the SEC has been a toothless enforcement entity; forcing state AGs to take a leading prosecution role in financial malfeasance. This is likely to be the start of a change where the federal government will have deep roots in the policing of problems involving large financial firms.

The roll out of these regulatory reforms are expected to take years; however as noted by an AFP news article "We suspect that after Friday, others on Wall Street may have a harder time sleeping."

Another good clip is Ratigan on MSNBC where he compares Goldman Sachs to an automobile manufacturing company that deliberately took critical component from the inside of cars (CDOs) and then sold the cars as being great investments while betting on the side that the cars they created would all blow up spectacularly. An apt analogy - watch it here.

WaMu Execs dragged before Congress today

There will be excitement in Washington today as former WaMu Execs are dragged before Congress kicking and screaming. Now that a Senate panel has had over 18 months to gather information, hopefully some sharp questions will be asked about Washington Mutual's abusive and illegal practices.

Allow me to urge the Congressional panel headed by Senator Carl Levin to refer the entire situation to the Justice Department for criminal prosecution.

'Washington Mutual "was one of the worst," Levin told reporters Monday. "This was a Main Street bank that got taken in by these Wall Street profits that were offered to it."'

Top ex-WaMu executives come before Congress
http://news.yahoo.com/s/ap/20100413/ap_on_bi_ge/us_washington_mutual_investigation

Trillion Dollar Bailout

Come play the game: Trillion Dollar Bailout

"Punish greedy fat cats and save honest peoples! Hand out moneys to homeowners. Put the hurt on dudes in suits! Do it right and save the world!"

Drag the slap symbol to deny a bailout and drag the cash bag to provide assistance to the various characters that pop-up.

Here are some hints - don't give the money to banks & only give to homeowners who are not in foreclosure. Go to the Addicting Games site to play.

Fannie and Freddie

Obviously the biggest news on Wall Street this week was the Federal Government seizing Fannie Mae and Freddie Mac before both of these mortgage giants failed in a catastrophic manner. These companies have been faltering for many months while looking for lines of credit to bail them out, the government went one step further and completely took over the firms while giving top executives the boot.

The entire situation is also another example of intervention not allowing proper capitalism to play out in the market. The term “moral hazard” comes to mind in which businesses do not take responsibility for their risky behavior; this only entices other businesses to take poor risks. Especially in an environment where it appears that “gains for privatized and losses are socialized”.

While the government takeover may have buffered the mortgage market in the short term and cheered up Wall Street on Monday, the long term picture is much less clear. The U.S. tax payer is going to be stuck with the tab. The question remains on just how big the tab will be – estimates range from $250 billion to $5 trillion. The actual cost is very dependent on how the housing market and associated credit recovers. One recent article outlined how the seizure of these mortgage giant is the taxpayer’s risk (If takeover tanks, we're holding bag).

Similar too many previous government interventions, this action with Freddie and Fannie may help alleviate the short term crisis, but the toll down the road will be much greater and more painful.

WaMu CEO given the Boot

Past HingeFire articles have outlined in detail the issues at Washington Mutual and urged banking customers to pull out funds over the FDIC limit. News today shows that Washington Mutual has ousted CEO Kerry Killinger. WM stock is down over 15% in mid-day trading.

It is also interesting that Washington Mutual agreed to further oversight by the Office of Thrift Supervision concerning aspects of its operations. This demonstrates the high level of concern regarding the solvency of the institution from a regulatory perspective.

Wachovia: Turning the corner

The recent press headlines for Wachovia have been bleak recently; auction-rate security investigation raids, analyst downgrades, and sliding share prices. It seems that the bank can't catch a break from the negative media coverage. This is on top of all the earlier problems that led many to question the underlying integrity of the entire institution which in the past has joined telemarketers to scam it's own customers, and was fined $145 million from the Feds.

Despite all the difficult news there is a bright spot -- and his name is new CEO Robert Steel . Right from the initial conference call it appears that he is on the right track. He is going to first evaluate the "challenges" faced by the bank with particular focus on the residential mortgage portfolio and exposure to commercial real estate. Steel promises to outline his strategy on July 22, when the bank is slated to report its second quarter earnings. In a couple days we will be able to see how Wall Street reacts to the earnings and the vision of the new leadership.

Based on his reputation in both capital markets and government; Steel is likely to restore what is most important to Wachovia - a reputation for integrity.

Global Inflation: The New Crisis

A new monster has raised its ugly head to spook investors. Inflation is accelerating at a rapid pace providing policy makers with a new set of ulcers. Unfortunately basic antacid tablets will not cure the unsettled guts of national regulators.

The spike in inflation gives flashbacks to the dreaded 1970s with stagflation era. Many older investors do not enjoy reminiscing about interest rates above 14%, food rising in price each week, investors hoarding gold coins, and long gas lines. The dilemma is that all the statistics indicate that we are heading towards a scenario with run-away rising inflation worldwide.

Regulators have commented on rising inflation, raised interest rates in hopes of moderation, and are shocked to see the numbers running upward like an out-of-control train down the tracks. With rising commodity costs, pent up wage increase requirements, and tightening credit; there is not very much the regulators will be able to do to apply the brakes.

Certainly the news flow has not been encouraging, the ECB raised lending rates today amid record inflation, while U.S. Treasury Secretary Henry Paulson said inflation was becoming the top economic focus of many countries.

Inflation is a global phenomenon; impacting countries as diverse as Iran (with 26% inflation), the Philippines, Brazil, India, Russia, South Korea, Mexico, and Indonesia. No country is immune and no market is safe. Rapidly increasing inflation is the top concern in most nations, and the situation rapidly appears to be heading towards stagflation.

The immediate question becomes how should an investor prepare for this situation? The first emphasis is that a greater portion of your portfolio needs to be placed in commodities and precious metals, or in stocks focused on these industries. There is also a need to have your income oriented investments placed in vehicles which are inflation indexed in regards to interest rates. The other alternative is the keep cash in shorter term CDs as inflation and interest rates rise, allowing an investor to ride the rising curve.

Successful investing in a rising inflationary environment is difficult. Usually the stock market returns are dismal and many other investments are also victims of an inflationary spiral. Still it is best to keep your focus on the long term, and maintain a diversified portfolio of stocks that have wide economic moats. These companies invariably become stronger in downturns as competitors fall by the wayside.

Investors should pay close attention to news about inflation during the remainder of 2008 and start making appropriate adjustments to their portfolio to ride out the storm.

Sticking it to investors: SEC does not want to hold Credit Rating agencies accountable for their ratings

So what does a regulator do went they find out that the credit ratings applied to money market accounts are basically meaningless? Do they:

A) Get tough with the credit rating agencies and demand that they properly evaluate and grade interest bearing instruments.

B) Open the credit rating market up to new companies, hoping that the competition fosters an improvement in credit ratings.

C) Propose reducing reliance on credit ratings, including proposing to eliminate a requirement that money market funds hold highly-rated securities.

If you selected C then congratulations - you are a winner. The SEC is moving forward with a policy of weaning investors and Wall Street institutions from over-reliance on credit ratings, instead of fixing the credit rating firms. While the proposal does require that fund managers assess a security's liquidity and inform investors, we have seen quickly a formerly-liquid credit market can lock up. The major focus is to deemphasize credit rating agencies and effectively get them off-the-hook for the terrible job they have done in terms of properly rating securities. There is no need for the agencies to reform their processes.

Worst yet, investors are now basically being told that they are on their own when if comes to evaluating the safety of money market funds and interest-bearing funds. This is setting the table for a future crisis. At some point in the future there will be a large number of grandmothers spread across the nation who will be quite unhappy with this change in regulatory mindset.

SEC proposes reduced reliance on credit raters

Dark Pools: A Regulatory Tangle

An increasing vocal chorus is asking when regulators are going to step into Dark Pools. The Dark Pool market represents the wild frontier in equity trading. Dark pools now represent over 10% of stock market volume and over 20% of all trades in NYSE stocks.

In years past, ECNs represented the upstarts that were edging in on the business of the exchanges. The proliferation of electronic exchange networks fractured the market and siphoned trades off the major markets. ECNs were seen as a threat to the orderly operation of the market according to many older-schoolers. Over the past years the ruckus died down as many ECNs were merged out of existence; many being acquired by the very exchanges that squealed about the menace they posed. One glaring example is the Archipelago ECN, famous for making fun of Wall Street exchange floor market makers, being acquired by the NYSE.

In comparison the major exchanges seem to be awfully quiet today about all the trading volume appearing on Dark Pool networks. These exchange mechanisms were created by major brokerage firms to move large blocks of stock.

One primary concern is the lack of transparency in the market. Exchanges and ECNs provide details of every trade. These venues allow all the participants in the market to discover pricing and be fully included in the overall market. The hidden fractioning of price information with Dark Pools has led to gaming of the market within Dark Pool networks, as traders utilize the mechanism as a profit driving instrument rather than simply as a tool to execute large orders without moving price.

Regulators appear to be absolutely confused in regards to the proper way to address the Dark Pool phenomenon. At most they mention the subject in speeches without outlining any policy or actions. The lack of action is disturbing considering the requirement for proper transparency in the markets in order to maintain the confidence of the investing public.

With the increasing number of Dark Pools, there is the expectation that consolidation is coming. The proliferation of dark pool networks has led brokerages to offer interfaces that link dark pool and “light pool” networks, or offer access to multiple dark pools. These offerings have simply increased the gaming of the system and the utilization of algorithmic trading over the networks.

At some point the news media will start focusing on the abuse of Dark Networks causing regulators angst, and leading Congress to demand more transparency for the investing public. This day may not be far off --- as the Dark Networks continue to quickly grow in market share and an increasing number of trades are hidden from investors.

Wall Street’s Graveyard

Bear Stearns was not the first firm to implode and float belly up on Wall Street. Portfolio.com takes us through the colorful history of other firms that have gone kaput since 1970.

Greed and lack of risk control is not a new story. However the danger in the modern era is that many of the firms are built on a mountain of derivatives and the collapse of one can lead to a cascading failure of others. Increased regulation of the derivatives market is needed to prevent this type of event.

Phishing risk rises

Banks and brokerage firms continue to have problems with sophisticated phishing schemes targeting their customers. Many brokerage firms have released records on the amounts that they had to pay back to account holders who have been cleared out electronically. The numbers persistently grow at a staggering rate each year.

Recently a large international cybercrime ring was taken down. These crooks used the internet to facilitate the theft and misuse of credit and bank card numbers. Spam that sent account holders to fraudulent websites was the common starting point in clearing out the victims accounts.

Two recent articles discussed the situation. The Information week article provides a list of impacted institutions; if you have credit cards or accounts with these firms then you should be on alert. The SC Magazine article focuses on technical measures such as SPF, and DomainKeys which can be used by the industry to reduce the problem.

International Cybercrime Ring Busted

Hot or Not: Winning against the phishing assault

Your Tax Dollars at work: Housing Bailout

Want to know where $1.7 Billion of your tax dollars are going? Thanks to Congress your money is going directly to bail out speculators and irresponsible lenders.

The Senate leaders moved closer today to passing a bill that would provide $300 billion in direct mortgages to homeowners; requiring a reduction in principal and cost basis so these homeowners will not be under-water. The majority of these homeowners would never have received loans under traditional lending criteria. Many will still go into foreclosure eventually even under a government financing program, leaving taxpayers holding the bag.

This Senate bill will be merged with an earlier bill passed in the House, Congressional analysts have estimated the House version of the bill would cost taxpayers $1.7 billion. It is an open question of how much the Senate measure would tack on to this.

Despite the twisting of words from politicians that Fannie Mae and Freddie Mac are actually “funding” the mortgage measure, the reality is that every last dime of this measure is backed by your tax dollars. So much for moral hazard, the only lesson learned in the housing fiasco will be that it pays to speculate in the housing market for both gamblers and financial institutions. Washington will always be happy to bail you out of your mistakes.

Dodd, Shelby Agree on $300 Billion Mortgage-Insurance Measure

Social Security: Some basic points

While my teenagers may think that I am ancient. I am still more than 20 years away from retirement age. Despite this I still get queries from people close to retirement about social security benefits, so I have an active interest in this government program.

Social Security is a “pay-as-you-go” system. Money paid in by current taxpayers is spent to pay benefits to current retirees. The system is not a “trust fund” in which portions of your paycheck goes earning interest until you retire and are ready to withdraw the funds. This demonstrates why the Social Security system is under stress. As the number of baby boomers retire while at the same time the number of current workers drop, there will be less people paying into the system as a larger number make withdrawals. This, of course, is a recipe for disaster. If I ran a private retirement fund like this, the government would label it as a “pyramid scheme” and promptly toss me in prison. For some reason in the public sector, managing retirement funds in this manner appears to be acceptable.

While politicians in Washington often debate the matter, no concrete reform steps have been taken. Most other leading nations, including Britain and the “socialist” Scandinavian countries have privatized their social security systems. Workers manage their own funds, similar to a 401K, and select from an allowed list of bond and equity instuments offered by the administration.

This is the best path for the U.S., a complete and immediate conversion to a privatized system. Existing retires would have to be paid out via borrowing from the U.S Treasury each year, something the government is already fond of doing. The reality is this type of radical proposal would not make it through Washington and most retiree groups such as the AARP would oppose it. Or oppose it until they woke up one day and found no checks arriving as the current system flounders.

Investopedia touches on these subjects and some Social Security basics in a recent article that is worth reading - 10 Common Questions About Social Security.

Conflicts entangle Auction Rate Market

“Safe as cash,” proclaimed the brokers as they sold billions of auction rate securities to investors. Now the market is locked up. Both investors and issuers have taken a big hit.

Have the investment bankers felt any pain? No! In fact they still make out like bandits even as the market refuses to thaw. Any way you slice it, the end game in the auction rate market for Wall Street firms is “heads I win, tails you lose.”

The entire market is rife with conflicts of interest. First the investment bankers marketed the securities as safe as cash in their own internal auction market and refuse to step in to keep the market liquid as over 70% of the weekly auctions fail. The Wall Street firms are still paid for their “services”, even though no securities are sold. Furthermore the bankers make big money when issuers directly redeem the auction rate notes.

To pour more pain on the fire, the investment bankers for the most part refuse to allow the notes to trade on a secondary market and demand that the auction rate securities be marked to face value. The places issuers in a situation where they can not buy back their own securities at a discount, at a time no investors will purchase them for face value. Of course, a wholesale discounted market would force the Wall Street firms to mark down similar securities on their own books; leading to billions more in losses.

At some point, local and state governments are going to demand action to fix this situation, and refuse to be held hostage by the Wall Street firms. The first step is to demand a transparent auction market where these securities can be sold for a discount or premium from face value. This is the only way to unfreeze the auction rate market and restore investor confidence.

Bring back Glass Steagall

The Great Depression brought about many needed regulatory reforms. These acts served to curb excess speculation, and to keep the funds of bank depositors safe. One of the primary reasons for the insolvency of many commercial banks in the 1930s was the loaning of money for stock market speculation in a market that allowed absurd levels of leverage. Many of these banks owned brokerage security operations, and found an easy path to executive riches by pressing these loans on depositors prior the 1929 crash.

The Glass-Steagall Act tamed this circus by prohibiting banks from owning financial companies. This created a wall that stopped the ridiculous activities of banks that were not in the best interest of customers. Coupled with the creation of the FDIC and other reforms included in the act, the Glass-Steagall legislation protected both bank account customers and investors. The act prohibited a commercial bank from offering investment and insurance services while maintaining better regulatory scrutiny on capital ratios.

Unfortunately, the provisions that separated cross-ownership were over-turned by the Gramm-Leach-Bliley Act of 1999. Financial companies spent more than $300 million in lobbying over 20 years in their attempts to repeal Glass-Steagall.

Not merely content to simply mine the riches offered by the combination of insurance underwriting, securities underwriting, and commercial banking; Wall Street championed unregulated derivatives. The securities industry claimed that these contracts would distribute risk and regulating derivatives would impede economic development. Supported by the Federal Reserve the merged financial industry drove the wide-scale introduction of derivatives into traditional commercial banking markets such as mortgages.

Since 1999, the derivatives have grown on a parabolic curve. There are now over $516 trillion in derivatives outstanding.

In a short eight years, the rapid proliferation of derivative contracts has become the Trojan horse that is likely to undermine the entire modern banking system. The collapse of Bear Stearns should act as a warning for the entire financial market. It is time for regulators to step in and properly unwind the most troubled instruments, while providing concrete oversight to the entire derivatives industry. Obviously the lunatics have been found unfit to run the derivative financial asylum. Deregulation has run amok, and financial checks and balances must be restored to protect the economies of major nations.

Investment banks’ culture of risk is diametrically opposed to the purpose of commercial savings banks which is the preservation of customers’ assets. The introduction of derivatives as the primary under-pinning for the mortgage industry with little regulatory oversight was an event that was obviously going to end in a calamity; similar to giving liquor and a car to a chronic drunk.

The continuous reduction of the protections of Glass-Steagall, by politicians in Washington driven by banking PAC money, is the root cause of the current painful credit crunch which is undermining the entire U.S. economy. In order to fix the core problems, the protections created by Glass-Steagall after the harsh lessons of the Great Depression must be restored by Congress. A clear separation of commercial and investment banking must be reestablished.

A recent PBS Frontline outlined The Long Demise of Glass-Steagall.

The Feds take Wachovia to the woodshed

In punishment for scheming with telemarketers to steal vast amounts of money from the accounts of thousands of victims, Wachovia will be paying nearly $145 million in fines and restitution. The bank supported the plundering in order to earn a substantial amount in fees, amounting into millions of dollars.

An earlier HingeFire article (see Banks Behaving Badly: Wachovia) outlines the scam perpetuated by the bank and telemarketers. Wachovia (WB) did not admit or deny wrongdoing as part of the settlement. In a statement, the bank said this "situation was unacceptable and we regret it happened."

The size of the penalties does not align with the obscene profits made by the bank in this telemarketer partnership scheme, which was fully supported by executives at Wachovia. The bank's actions were "part of a pattern of misconduct that resulted in" Wachovia collecting millions of dollars in fees, regulators wrote. Once again, a banking institution’s executives were not held criminally liable for their actions, and the penalties are a pittance when compared to the profits.

The settlement is disappointing because the victims do not automatically receive their money back. The duped, many of them elderly, will be required to file complex paperwork in order to claim their money. Many critics in Congress are demanding that the Office of the Comptroller of the Currency (OCC) directly mail checks to the victims, which was done in the past instead of requiring the account holders to file claims. The impacted account holders will have to submit forms through a complex bureaucracy. “Because many of the victims are elderly or poorly educated, it is likely many of them will stymied by these obstacles”, according to Rep. Edward J. Markey. This makes it likely that full compensation from Wachovia will never be paid.

While clearly this “settlement” takes Wachovia to the woodshed, the sting of the Federal switch will only last for a short period of time. After which the bank can romp, play, and continue to eat the candy it has stolen, while conniving its next scheme to slip a hand into the customers’ cookie jars.

Getting Robbed by your Broker

I had an interesting mailing from Fidelity today regarding “Important legal information for Fidelity clients”. With a banner that bold, I figured it was time to read the small print.

One of the most precarious situations for the customer of a brokerage firm is when the company operates it own clearing firm where the broker routes the customers' orders to. In my mind, this is worst than the simple payment-for-order flow set-ups with third party firms. A set-up where your order is routed to an affiliated company is the worse case scenario for an investor - a recipe for abuse.

In the case of Fidelity, the FBS routes your orders to their clearing firm affiliate, National Financial Services (NFS). The statement goes on to state that NFS looks at a number of factors when executing the order. The next section informs the reader that the order routing policies are designed to result in transaction processing that is favorable to its “customers”. Remember that the “customer” here is FBS, not you - the retail investor.

The next paragraph clearly states that FBS and/or NFS receives remuneration, compensation, and other considerations for directing orders to certain market centers. This allows the firms to get financial credits, monetary payments, rebates, volume discounts, or reciprocal business. Obviously the entire set-up is focused on making Fidelity money rather than getting the investor the best price for their trades.

Due to recent regulatory action, they now have to disclose these facts to investors who have accounts at Fidelity, and state the company will provide details of the compensation received in connection of the routing of a particular order upon request during the previous six month period.

In the past, the cross-ownership of brokerage and clearing/routing firms was not allowed. Unfortunately regulation got lax, setting the table in the 1990s for a significant amount of abuse. The recent notices coming from brokerage firms (Fidelity is not the only one) are a small step in informing investors of this conflict. The next proper step for the SEC is to force the separation of brokerage and clearing/routing activity. The utilization of related affiliate firms when routing brokerage customers’ orders should be strictly disallowed in the financial industry – it is the 21st century form of highway robbery.

Keep in mind that, despite this notice, I am a happy Fidelity customer for my retirement accounts. These funds are rarely traded and kept primarily in mutual funds that are part of their NTF family. I find Fidelity’s customer service generally to be excellent.

Financial Regulatory Reform

A lot of ink in Washington has been wasted recently mapping out proposed Finanicial Regulatory Reforms to prevent another subprime meltdown. The crux of the issue is not that the reform is desperately needed, but the nonsense being churned out of Washington is nearly worthless, more reflective of a turf battle than meaningful reform.

The first reasonable step should undo any of the changes done to the Glass-Steagull act, a bill that was implemented during the Great Depression to reform banking. Pressured by the banking industry, the Gramm-Leach-Bliley Act of 1999 unwound this earlier bill, allowing the cross-ownership of investment & commercial banks. This absurd change -- which allowed the financial industry to run amok with greed -- is one of the root causes of the current credit crisis.