Joseph H. Moglia, chairman of TD Ameritrade Holding Corp., used a humorous approach in addressing the current economic situation Friday afternoon in one part of a twice-a-year speaking series at the University of Nebraska-Lincoln’s Jeffrey S. Raikes School of Computer Science and Management.
Moglia lectured on three main topics: How the economy got where it is, his personal journey and where you are headed.
Moglia said an aspiring business leader has to know how America got into its worst economic situation since the Great Depression, and that would make up around 90 percent of his lecture.
“You can read dozens of books and thousands of pages, but nothing is easier than this,” Moglia said.
Moglia began building his perspective on Wall Street and the economic situation during the three-year period when the dot-com bubble burst, from March 2000 to March 2003. Moglia said this was a period when business that previously did not exist came to be.
Central banks injected liquidity by driving interest rates. This led to unprecedented lending practices.
With interest rates so low, banks were not able to make as much money, which lead to tremendous competition. The financial industry was under tremendous pressure, and one good became available: houses.
In order to compete, banks had to begin lending more. They did this with greater yield and investment but with greater risk.
“This was the real estate boom, but I consider it real estate bump,” Moglia said.
People started to leverage themselves. Moglia put himself in Wall Street’s position when explaining the huge real estate speculation that came next: “We are Wall Street, we’re smart. When it starts to crack, I’ll get out, I’ll sell.”
But there were problems. Everyone had the same trade, and there was tremendous leverage. Then the real estate market started to crack. Firms could not get out, and there was no liquidity.
The reality was toxic assets were trading at 20 cents on the dollar and losing as much as 80 percent of their value. Suddenly, companies were finding themselves out of business.
Moglia injected some optimism into the audience saying, “I do absolutely believe that the worst is over.”
Moglia said that communicating to clients, associates and shareholders early and often is important for keeping a company strong and avoiding problems such as these because there is no business if there is no client.
He explained how Ameritrade operates differently from Wall Street in this regard.
“Everything we do at TD Ameritrade, everyone in the room recognizes the three priorities,” Moglia said. “If somebody in the room doesn’t see the benefit to one of three sectors, stop the conversation. The reason why we made the mistake is the concept of leverage. … If the risk is jeopardy, you can never make that decision. Wall Street ignored that.”
Moglia then told the audience about his experiences and asked them to assess if it was worth listening to his lecture.
Moglia grew up in the streets of New York where he lost his best friend. His parents never went to high school. He eventually got out of the neighborhood, and his dream was to play football.
However, when his girlfriend got pregnant, he had to support his family by driving a cab and working in a store.
In college, Moglia majored in economics and focused on Wall Street. Upon graduation, he pursued coaching for 16 years.
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