Many of us received presents on Christmas Day, December 25, 2022. Lars Toomre was fortunate to have received a very significant professional gift a few days earlier this year.
Back at the 2019 MIT Chief Data Officer / Information Quality Symposium (“MIT CDOIQ”), Lars was interviewed by the Cube, a Silicon Valley media firm, about something then called “The Financial Transparency Act” (“FTA”). A copy of that interview has been available on YouTube since July 2019 with only about 350 views.
Since about 2016, Lars had worked with Steven MacLaird and John Tierney (Object Management Group/Brass Rat Capital LLC team members) and others to improve the technical aspects of the H.R. 2989 Financial Transparency Act and other OPEN data acts. For instance, BRC FinTech (“Brass Rat Capital”, “BRCF”) and the technology standards consortium Object Management Group (“OMG”) ensured that the final Financial Data Transparency Act (“FDTA”) language included terms such as “Voluntary Consensus Standard Body”, “Taxonomy” and “Ontology.”
Several people have already commented about the inclusion and use of the term “ontology”. Its inclusion is very significant. To this author’s knowledge, the FDTA is the first piece of U.S. Federal legislation that includes both Taxonomy and Ontology as terms used to define the concept “Semantic Data.” As the FDTA language states:
“to enable high quality data through schemas, with accompanying metadata (as defined under section 3502 of title 44, United States Code) documented in machine-readable taxonomy or ontology models, which clearly define the data’s semantic meaning as defined by the underlying regulatory information collection requirements.”
This year, in December 2022 after seven years of repeated effort, the U.S. Congress moved forward with new Financial Data Reporting Standards. The Senate introduced a slightly modified bill and renamed the text “The Financial Data Transparency Act of 2022” (“FDTA”). It was reconciled with the House version and approved by the House with a 350-80 vote on December 8th. The Senate also approved the reconciled bill with an 83-11 affirmative vote on December 15th.
On Friday, December 23rd, President Biden signed the 2023 National Defense Authorization Act (“NDAA 2023”) which included The Financial Data Transparency Act as part of its legal text. In short, what this means is that FDTA is now the law of the land and cannot be changed by either the Federal financial regulators or those financial institutions that they regulate without another act of Congress.
There is much buried in this law and I will explain much more in the coming days. However, in short, the Digital Transformation of the American (and likely global) financial regulatory system has begun. Machine-readable Reporting (“MRR”) is now required of both the regulators and those they regulate.
America, by the will of its representatives, is proceeding to upgrade Federal financial regulation from version 1.0 to 2.0, so to speak. It is going to be messy and ugly for a couple of years as so many systems issues are resolved. However, we are going to boil the proverbial “entire Pacific Ocean.”
The rocket "candle" (or "can" as some engineers refer to an Apollo moon rocket) has been lit. Or put another way, our proverbial American jets are kicking in our after-burners. America is about to go vertical. America is about to fly and as a son of perhaps one of MIT's best Aero / Astro engineers from the late 1950s, let me assure you I mean FLY!!
Tree of Knowledge, Glossary, Taxonomy, Ontology, and Knowledge Graphs will all be part of a future financial engineering education. Future Lars Toomre’s will know about the concept of Near-Real-Time Enterprise Risk Management (“NRTERM”) and how to properly use Semantic Analytics to manage large financial institutions, like the global Systemically Important Financial Institutions ("gSIFIs") or like Lehman Brothers, Citibank, UBS, MetLife and even Munich Re.
Horrible, selfish individuals, like former Lehman Brothers President Joseph Gregory who is one of the central characters of Vicky Ward’s book “The Devil’s Casino” no longer will be able to threaten the global financial system, like they did during the Great Financial Crisis of 2008.
I swore after being one of the first people to be “Gregorized” neither he nor his like would ever come so close to destroying the American capital markets. This year I truly received a Christmas present that starts to make that vow a reality.
Watch out Joe, payback in the Capital Markets really can be vicious, deep, and unforgiving, especially for someone, whom supposedly the head of credit research for Lehman Commercial Paper Incorporated ("LCPI") referred to being the equivalent of "a bag of rocks." Joe, how can you live with yourself for turning on Chris Pettit in 1995 or so? How can you, Joe? Legend has it you only got to Lehman Brothers because you were Lew Glucksman's lawn boy. Maybe Joe you should have left the Risk Management of the firm to people who have a brain. Maybe, Joe, it was not me and everyone else you "Gregorized" that was the problem? Maybe it was you? Ever consider that and start making apologies you WIMP?
EDIT: Since this was posted, several fixed-income clients of the 1988 Lehman Brothers CMO Trading unit have reached out. They have asked if I would share this post with several groups:
- a) the Lehman employee alumni network,
- b) with the members of the financial press (and particularly Andrew Barry of the Dow Jones news wire fame), and
- c) to the extent possible the individuals who did business with Lehman Brothers particularly in that late 1980s period.
After all, Joe Gregory proved that it was not the seat that was worth the bonus, but the individual. These portfolio managers hope that some sunlight can shine now on the GFC Crisis since we seem to be entering another crisis point.
P.S. – For those interested in learning more about the Great Financial Crisis, Lars suggests to his younger interns a closer reading of the following books:
- How To Trade In Stocks by Jesse Livermore
- The Devil’s Casino by Vicky Ward,
- Gangsters of Capitalism by Jonathan M. Katz,
- Greed and Glory on Wall Street by Ken Auletta,
- Liar’s Poker by Michael Lewis,
- Cult of The Dead Cow by Joseph Menn,
- Everyday Emotional Intelligence by Harvard Business Review,
- Master Your Emotions by Thibaut Meurisse,
- Understanding The Financial Industry Through Linguistics by Richard C. Robinson,
- Risk Management: Approaches for Fixed Income Markets By Ben Golub,
- The Glory and The Dream, Volume One by William Manchester
- The Liar’s Ball by Vicky Ward
- Too Big To Fail by Andrew Ross Sorkin, and
- Finance Monsters by Howard B. Hill.