NEW YORK, NY – IBM made two obscure, yet significant acquisitions in 2016 to cement its leadership in the burgeoning Artificial Intelligence (AI) space. In January of that year, it closed on its purchase of The Weather Company – a massive weather data and media firm, best known for its cable show, The Weather Channel. The popular TV program was left out of the deal, but was signed to a long term contract to license its weather data forecasts and analytics from IBM, which assumed ownership of the all-important data science.
Later in the fall of 2016, IBM acquired a large big data and financial services company called Promontory Financial Group (PFG), which had “amassed a collection of regulatory and compliance data” over the years and built relationships with some of the largest financial and banking institutions. Founded in 2001 by Clinton’s former Comptroller of the Currency, Eugene Ludwig, PFG went on to open 18 subsidiaries from Tokyo to Paris on its way to becoming one of the top banking regulation consultancy firms in the world.
The treasure trove of data from both of these companies were incorporated into IBM’s financial services AI platform, Watson Financial Services, marking the beginning of the tech giant’s foray into risk management and so-called ‘RegTech’ or regulation technology driven by algorithms. In addition, the weather science data was folded into IBM’s cognitive solutions division, which focuses on leveraging AI, machine learning (ML) and natural language processing (NLP) “to drive efficiencies in systems and processes” in markets ranging from education, healthcare and gaming.

On Tuesday, another major step was taken to consolidate the rules of the brave new world of cloud-based interoperable data revenue streams with the publication of the Cloud Data Management Capabilities (CDMC) framework, which was developed over the last 18 months by leading tech firms like Google, Amazon, Microsoft and IBM in concert with Morgan Stanley and the London Stock Exchange Group (LSEG) to issue the first comprehensive guidance to cloud service providers and FinTech companies.
The Ghosts of Subprime Past
The document was produced by an EDM (Electronic Data Management) Council workgroup comprised of the aforementioned Big Tech companies, who represented the only cloud service providers as well as PayPal, Citi Bank, Fannie Mae, HSBC, Deutsche Bank and many others from the banking and financial industry. Accounting and consultancy goliaths KPMG and Accenture also contributed to its creation, while London-based technology consulting firm, Capco, led the core working group’s team along with Morgan Stanley’s Richard Perris as the working group’s co-chair.
In fact, the Manhattan investment bank at the center of the 2008 subprime mortgage crisis was the project’s originator when it ‘donated’ its own best practices framework for data management to the EDM Council in May 2020, followed by Perris appointment, along with LSEG’s head of data analytics (and long-time, former Morgan Stanley executive) Oli Bage, to lead the development of the CDMC framework.
In the foreword to the CDMC framework’s first iteration, former Lehman Brothers VP and current EDM Council president, John Bottega, writes that “data is now the life-blood of our industry and our personal lives” and that CDMC standards are designed to be adopted across every industry in order “to ensure information is accurate, timely, trusted, and protected” (emphasis added).

The “overall objective is to build trust, confidence and dependability for the adoption of cloud technologies, offering benefits to each of the constituencies within the cloud ecosystem”, according to the framework’s introduction. The EDM Council – itself founded by the former CEO of an IBM enterprise data management company in 2005 – will rely on the CDMC framework to issue certifications to private and public entities surrounding its data management policies and implementations, making the Council a king-maker of the digital economy.
IBM, in particular, seems to be playing a considerably larger role than any of the other participants in the execution of the framework and stands to benefit in equally larger measure, not only as a result of their control of significant portions of the data itself, but also through its level of access to regulators around the world through its risk and compliance division, IBM Promontory (formerly PFG), which will sell the CDMC framework to the international regulatory authorities.
The Shadow Regulators
Eugene “Gene” Ludwig was one of the co-authors of the Wall Street Journal op-ed in 2008 credited with turning the tide in Congress to open the floodgates of what was, at that point, the largest government bailout in history. The subprime mortgage lending crisis was made possible, in large part, due to Ludwig’s own efforts during his tenure as Comptroller of the Currency (OCC) in the Clinton administration. The OCC oversees national banks and it was Ludwig who spearheaded modernization of the banking industry and encouraged the repeal of the Glass-Steagall Act, that allowed banks to enter the financial speculation business.

Ludwig co-founded PFG after his 5-year stint in the federal government and a long, twenty-year career prior to that as partner in the famously Wall Street-friendly law firm, Covington & Burling. Founded six years before the 2008 financial crises with fellow partner Alfred Moses, PFG would be selected by federal banking regulators to review the foreclosures of Bank of America, PNC Financial Services and Wells Fargo in the aftermath of the subprime lending debacle at a cost of nearly $1 Billion. In 2012, ProPublica reported that Promontory had received millions in compensation from Bank of America to avoid paying out many millions more to homeowners who filed claims of fraudulent mortgage loans. Documents revealed that BofA had successfully denied those payments by letting PFG submit them to their review process.
PFG became banking’s “shadow regulator” dealing with money laundering cases in for the Vatican and making headlines for corrupt practices, like the $15 Million settlement it was forced to pay for loosening compliance regulations for UK banking powerhouse Standard Chartered Bank in 2015.
Despite all of these scandals, IBM came calling just a year later to buy PFG outright and make it part of its suite of AI tools. “You need to care about who trains what you use. In a serious business environment, you need to care,” said Ginni Rometty, then CEO of IBM, about the acquisition of PFG.
Now a wholly-owned subsidiary of IBM, the company’s “expertise” is being used to train IBM’s AI around regulatory compliance in the financial sector, betting that banks will come to “rely on an artificial intelligence program that is shared across the industry, rather than building specialized compliance expertise within each institution.”
The very people and institutions that took the world to the brink of complete economic collapse only a few years ago and profited handsomely from it want us to trust them to build the next generation of regulatory compliance systems through the CDMC framework. At least the CDMC certifications issued by the EDM Council will make it clear to us who we can’t trust with our data.