Published In CommPRO,biz 2013.12.10

 

The Banksters Walk Free

In a breathtakingly clueless comment last month (2013.11.12 SIFMA) at an industry conference, Lloyd Blankfein, Goldman Sachs CEO, is reported to have expressed regret that they were part of the problem leading up to the recession. Not regret that his company’s actions helped to crash the world economy ruining thousands, putting millions out of work and causing unimaginable suffering. He expressed no regret for that at all. He just wishes they hadn’t engaged in “trading practices” that created an image problem for his firm.

Blankfein is reported to have told the conferees, “I wish the organization hadn't done complex CDOs circa '06 and '07." A CDO (collateralized debt obligation) is a fancy name for bundling up a bunch of mortgages and such and hustling them as investments. Goldman sold them to pension plans, banks and the like. After all, what could go wrong? Housing always goes up; even if the mortgage holders fail to make their payments, the property will cover the loss, right? We all know the answer to that now. It seems that Goldman Sachs knew the answer back then. They knew their CDOs were full of “Crap” (their terminology), and at the same time they were hawking them, Goldman was betting they would fail. Worse, when they failed the American taxpayers paid off on that bet. And all Lloyd Blankfein sees in this is a PR problem? 

The SEC saw fraud and brought civil charges against Goldman. The agency settled for a paltry $500 million, with no admission of guilt. For Goldman Sachs that’s pocket change. According to some reports they cleared well north of $10 billion double-dealing CDOs. Poor Lloyd, Goldman Sachs took a public relations hit while their actions destroyed the lives of millions. If there was any justice Blankfein and a flock of other money-changers like him would be in jail. Considering the suffering their fraudulent actions brought down on millions around the world, they should face prosecution. 

Surprisingly, only a few of these modern day money-changers have faced prosecution over the last few decades. A bunch of minor league hustlers were jailed in the 1980s and early 1990s over the Savings & Loan crisis, alongside closing down close to 800 S&Ls with assets in the $400 billion dollar neighborhood. Since then not much has happened to the banksters, mostly because our Justice Department has some illusion that these crooks are too-big-to-jail. In case after case the DOJ has allowed blatant criminal behavior on the part of big league banksters to go unpunished because they believe that jailing the top guys at these banks might rock the boat and cause problems in our economy. 

That shows an unimaginable lack of business knowhow. Nobody is irreplaceable, that’s especially true when it comes to replacing corporate leaders engaged in illegal activities. There are good people, honest people in most organizations ready to move up and do the right thing. If not, there are topnotch folks ready to come in and put them on the straight and narrow. Folks who understand that the ethical business model is not only the right path; it is the surest path to profitability.

Published In CommPRO,biz 2013.11.26

 

Ignoring the Obvious

We are five years into a worldwide recession. And while the United States is very sluggishly gaining ground, much of the rest of the world is sliding further into the abyss. Germany has parlayed a heavily subsidized manufacturing sector into the best of a bad lot. The rest of the Euro block is gasping for air. Yet many in Europe and in the United States seem determined to defy history in dealing with this downturn.

The only folks in America who are doing well are at the top; up and running on the no-strings-attached-taxpayer-funded bailouts. The stock market is soaring, the too-big-to-fail banks that triggered the recession, the super rich, big business, they’re all singing happy days are here again. Meanwhile, the middle class, small business, and the poor are left struggling. The solution, we are told, is austerity, a focus on our nation’s deficit. This plan from the folks who created the deficit with the first wars in our history that we made no effort to pay for as they were fought, and a tax cut.

The economic cancer we gave Europe has ravaged the continent. Especially those who have entered the job market in the five years since its onset. Youth in some European nations face 50% unemployment, and even those who are working are grotesquely underemployed. They are in a way a lost generation. Many who have advanced degrees, masters, even doctorates, are lucky to find menial work. Many are in their late twenties, some in their thirties; robbed of their future, their hopes for career and family lost.

History teaches a very different lesson. Every single economic downturn since the modern economic age dawned with the industrial revolution has been overcome by government intervention. Let’s look at recent history. America went into WW2 deep in debt. The debt had increased by the war’s end in spite of astronomical wartime taxes. Then we spent on the GI bill, educating returning veterans and subsidizing their home ownership. We rebuilt our former enemies’ homelands and hardly took a breath before the war in Korea. After he got us out of that war President Eisenhower went on a spending spree building our interstate highway system. At the time he made it out to be needed in case we had to move a lot of troops around in a hurry, but it was really a way to boost the economy. High end tax rates for the very rich soared to 90%. And America boomed.

In contrast we are allowing our roads and infrastructure to decay. Education is the last thing on our minds; we are forgoing the future, following a path of proven failure. Those few who are benefitting from this folly will find that it can’t go on forever, it is unsustainable. As our roads and bridges break down, as the economy decays, they too will find their positions in decline. They’ll discover – perhaps too late – that the ethically and morally wanting path they have chosen, is economically wanting for them as well.

Published 2013.11.12 CommPRO.biz

Let The Seller Beware!

Cohn & Wolfe, a division of international communications giant WPP, just released From Transparency to Full Disclosure, a study they commissioned to find marketplace hot buttons. They polled 3,000 consumers in Great Britain, China and the United States on what opens their wallet. Price and quality were the overall winners with honesty (AKA ethics) coming in third place, except in China where quality and honesty beat out price. 

The transparency part comes from consumers’ interest in the values adhered to by the companies they do business with. They want the goods they buy created and sold by folks striving to do as they would do, folks who put their customers, workers, vendors, their communities and the environment ahead of profits. They worry most about the food they buy, that it is what it’s claimed to be and that it is produced with the buyers’ safety and health foremost.

You know what they hate most? A cover-up. They understand that we all goof-up now and then, but they expect us to fess-up immediately and do right by those who may have been misled or injured as a result of the error. What’s more, they have a clear view of where the buck stops, it stops at the top. The Cohn & Wolfe study found that “84% of UK and US consumers and 90% of Chinese consumers believe that if you are the leader of a company you cannot claim ignorance about something bad happening in your business, showing that there are no excuses for today’s leader.” They summed it up succinctly: “CEO = Chief Ethics Officer.” A point missed by the leaders of too many corporate entities of late.

The results of this study read like “Basic Communications 101.” Isn’t this what we’ve been telling our leaders or our clients?” Isn’t this what has been shown as the most profitable business model? Isn’t this what attracts and builds the most talented team in communications or any business? Of course it is. It’s the kind of team we all want surrounding us. The kind of team we all want to be a part of. If you are a leader, if you are the Chief Executive Officer (AKA Chief Ethics Officer), what are you waiting for? If your CEO doesn’t understand how interchangeable that title needs to be, what are you waiting for?

It all comes down to “Why would you work for, or do business with a crook?” While that quote sounds like Will Rogers, it isn’t and it doesn’t matter who said it, it’s a simple truth; one that only a few shortsighted business leaders choose to ignore. Actually people expect more than someone who just walks a line between lawful and criminal. We expect the businesses we trust with our hard earned cash to do right by us, to do the right thing. When they misrepresent their offerings, or dance around the truth, they betray us. And usually we simply never do business with them again — never.

Published 2013.10.31 CommPRO.biz

Do No Harm

The Hippocratic Oath is a widely edited set of guidelines credited to a long-ago Greek medical practitioner. It is estimated that 98% of medical students swear some form of oath, as do a large percentage of dental graduates. These oaths are focused on ethics and are often condensed into, “Do no harm.” Recent reports of predatory lending practices by doctors and dentists give us a picture of the other two percent.

Patients who lack insurance and those who need or want procedures not covered by their insurer, are being herded into various medical credit cards that are little more than tools created to ripoff the unwary by the monster banks and their lackeys. Wells Fargo and Citibank seem directly involved while others hide in the shadows providing the funds for the smaller credit card issuers. It’s the same set of scams and scammers that created the sub-prime mortgage disaster and more recently the on-going payday loan racket. They seem to be betting on the Justice Department giving them another get-out-of-jail-free card no matter how or who they ripoff.

The unwary –Who doesn’t trust their doctor or dentist?– sign up for these cards right in the doctor’s or dentist’s office. They are told that they will pay no interest if the card is paid off in three or four easy payments. What the docs don’t say is that you will be slapped with interest charges –close to 30% in some cases– if you don’t pay up before the end of the interest free period.

Let’s say you owe $1,000, about average for extensive dental work or plastic surgery. And let’s say you haven’t been able to make any payments over the four month interest free period. In most cases you’ll owe interest from the first month on the entire $1,000, plus the compound interest for the additional three months. You’ll be in hock for a lot more when the fourth month comes around. You can see that this is not going to end well when you start adding on late payments etc.

One of the independent card companies specializing in healthcare credit cards is said to have between five and ten million card holders. In addition to the medical practitioners who swear to do no harm, there are medical device hustlers, selling everything from power scooters and chairs, to hearing aides. These people aren’t even restrained by a “Do no harm” oath. Although, when bucks are at stake some doctors and dentists don’t seem able to recall that phrase.

These practices are beyond unethical, beyond immoral. Doctors and dentists who lead people into these scams may not be breaking any laws, but they are certainly –or should be– on shaky ground with state licensing agencies. A few suspensions would slow down this racket A couple revocations for the worst cases might stop it dead in its tracks. It’s a shame when a few scammers can cast a shadow over a largely principled group of professionals pledged to do no harm.

Published 2013.10.24 CommPRO.biz

Shareholders Come Last!

Corporate America, particularly the Monster Too-Big-To-Fail Banks, have it all backwards. A crazy concept, Shareholder Value, conceived as a business strategy in the late 1980s by college professor Dr. Alfred Rappaport, continues to ravage our economy even though it has been thoroughly discredited. One of its early advocates, Jack Welch, sang its praises back then when he was CEO of General Electric. He touted shareholder value for all to hear. Twenty years later in 2009 Welch turned around and said in a newspaper interview, “Shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy; your main constituencies are your employees, your customers and your products".

Welch isn’t the only one to see the light. Jim Collins of Good to Great fame has been pointing to what makes great companies and the importance of long-term strategies rather than the quarter-to-quarter madness obsessing our corporate world today. It is especially dangerous in the case of the Monster Too-Big-To-Fail banks. Striving for short term goals, empowered by immunity from gambling laws, FDIC protected depositors, seemingly unlimited interest-free money from the FED, and the knowledge that there’s a taxpayer bailout waiting if they go too far, leads them to take wildly reckless chances. And the Monster Banks are doing just that, they are going too far.

Back in the real world where corporations are coming to the new Jack Welch, Jim Collins view, they understand that sky-high executive compensation encourages greed, not leadership. Measure after measure shows a different parameter on the road to success. Perhaps most dramatic is the work of two Professors Rajendra Sisodia and Jagdish Sheth. They set out looking for companies that met a list of standards that at first glance seem out of reach, companies that focused on their customers, their employees, their vendors, their communities, the environment and finally last in line, their shareholders; companies striving to serve all their stakeholders. They call them “Firms of Endearment.”

The professors partnered with writer David Wolfe who suggested that before they got too excited when they actually found more than two dozen such companies, that they had better check to see if any of these companies made any money. You know, the “result” where Jack Welch pointed out that shareholder value comes into play. To everyone’s surprise the public companies that made the Firms of Endearment list returned eight times the S&P average over the ten years prior to the list compilation.

Clearly this shows beyond any doubt that all things being equal, the Firms of Endearment high road is far superior even to the taxpayer supported route the Monster Banks inflict on our society. The whole idea that if you take care of the basic stakeholders, your bottom line will take care of itself is lost on these folks. David Wolfe wrote a great book, Firms of Endearment, that details the high road research and results. If you are holding your breath waiting for the Monster Bank CEOs to read it, forget it.

Published – CommPRO.biz 2013.10.18

Shortages That Kill

It seems that every time we try to get something right, some scumbag figures out a way to game the system. While this fact of life is annoying wherever it shows up, it’s deadly when it rears its viperous head in life and death situations. So it is with generic drugs. Once we get past the inflated profits Big Pharma reaps -based on the phonied-up costs to develop a truly new drug- our expectation is that generic versions will serve us at reasonable costs.

We know all about the inexplicably legal game Big Pharma plays where they get to pay off the generic manufacturers to hold off production until they can squeeze the last drop of bloated profit out of the original patented version. As if that isn’t bad enough, it turns out there’s another equally ridiculous legal loophole allowing drug buying groups to bribe their way to higher profits at a cost of billions (out of our pockets) and -more important- at the cost of life itself.

This situation, according to published reports from medical and pharmaceutical practitioners, has its roots in 1987. You remember the “eighties” when “K” Street lobbyists seemed able to write any crazy thing into a law and find one of those we elected to serve us, willing to serve their special interest – for cash. Well, in 1987 Congress passed the “Medicare Safe Harbor Act” giving pharmaceutical buying groups a get-out-of-jail-free card to take vendor kickbacks (AKA bribes).

Since then these huge entities have controlled the manufacturers of generics that are mostly injectables used in hospital settings, antibiotics, pain meds, chemo drugs and anesthetics among others. These buying groups have in some cases limited manufacture to a single company. They have driven pricing so low, that eventually no competitors to their “Favored One” are left standing.

How are low prices bad for us? When a dominant buyer is able to drive pricing below the level of reasonable profits for the producers, there is no longer a truly competitive marketplace. That’s exactly what’s happened in the generic pharma world, resulting in unacceptable and dangerous shortages. A buying group source claims that they “encourage the free market by competitive bidding and multiple rewards for the best supplier performance.” We are with him until the multiple rewards part (sounds like bribes to us).

All of this was thought to be addressed in a 2012 law. Instead by mid-2013 drugs in short supply had soared from near two hundred to near three hundred, a fifty percent surge in one year. How did that happen? While we have no details, we’re betting it had to do with the buying group lobbyists. While we don’t pick up these drugs from our family drug store, we all have a vital stake. It is past time for this perverse law, the innocent sounding 1987 “Medicare Safe Harbor Act,” to have its quarter century of greed driven rule brought to an end. It is time to restore ethics and a true free market to this vital healthcare sector.

Published CommPRO.biz 2013.10.11

Reputation – A Road to Profitability

 

In the run up to its 2013 COMMIT!Forum this week (2013.10.8-9), CR Magazine released the results of a piece of research it commissioned on the effect corporate responsibility and reputation have on recruiting. They had a pollster ask people if reputation would impact their thinking before they took a job. These days you wouldn’t think it would be a big deal. Surprise! 69% said they would pass up a job offer from a smarmy company. This was true of those who have a job and those who are unemployed.

When asked what it would take to get them to take a job with a less than top rate company, the answer was a huge raise, at least 50%, more and in some cases they would not move unless their pay was doubled. On the other hand, 84% would move to a more reputable company if offered as little as 1% to 10% more pay. It seems pretty clear that a quality workforce is easier to hire and less costly for reputable companies. And your best people are at risk if your reputation is shaky.

More than their workforce is at risk for financial organizations with a less than stellar reputation, according to the 2013 Makovsky Wall Street Reputation Study. Communications firm Makovsky commissioned this study to measure the impact of reputation on financial companys’ revenues. We know this segment enjoyed a robust recovery thanks to the bailouts and zero interest FED loans. Their smarmy reputation is costing them revenue, however.

The researchers contacted communications professionals in the sector and asked a range of questions about revenues and what their companies are doing to deal with customers’ negative views. On average, revenues are down 9%, a hefty price to pay. Lost revenues total hundreds of millions. Six in ten companies believe it will take five more years to catch up to where their reputations were before the crash. Only one in four say their firm has already reached that level; obviously that may include wishful thinkers.

Study after study show that firms working to do the right thing see a positive impact on their bottom line. The CR Magazine study shows that most people are focused on working for companies with a reputation for doing the right thing. The Makovsky Reputation Study shows that even Wall Street firms can profit by doing the right thing. Makes you wonder why people like Jamie Dimon at Chase and Lloyd Blankfein at Goldman Sachs keep pushing a culture of profits before any thought about doing the right thing.

Too many business leaders confuse compliance with ethics. Blankfein is a lawyer, trained to see the edge of the law as defining right and wrong; that’s compliance, not ethics. Doing the right thing has nothing to do with compliance. Compliance is what you can get away with, not the right thing. Reputation is about the right thing. Research shows if you strive to do the right thing, profit takes care of itself.

Published CommPRO.biz 2013.10.03

Wall Street Ethics

Mid-September (2013.09.15) marked five years since Lehman Brothers, one of the largest investment banks ever, filed the largest bankruptcy ever, sending sky rockets up all over the world and marking the beginning of what we’ve come to call the “Great Recession.” Lehman’s implosion triggered a serious of herculean bailouts of the rest of our banking sector by the American taxpayers.

Hank Paulson, who became Treasury Secretary after a career at Goldman Sachs, saw a danger of another depression if the banking sector collapsed. He hurriedly threw together the bailouts. However, he failed to impose the controls needed to keep the banks from abusing these funds, leaving them free to award themselves over the top bonuses. The Federal Reserve kicked in billions more, throwing open the doors to the risky gambling (see London Whale) that caused the collapse.

Lehman wasn’t the only bank gone wild; all of the dozen or so monster banks were behaving badly. Lehman was just pushing the limits of the regulation-free climate the banking lobby created over the preceding two decades. Repo 105 was the accounting gimmick of choice at Lehman. The tricksters there would sell off billions of their really bad stuff before each quarterly reporting period, making their books look as though they were sound when in fact they were anything but. Emails, written just before the bankruptcy, show that senior management pushed their subordinates to cover their tracks.

On May 18, 2008, almost exactly two months before the bankruptcy filing, Senior Vice President Matthew Lee had a letter hand delivered to four of Lehman’s top executives with a copy to their house counsel. In it he detailed these practices and questioned both their legal and ethical grounds. Management responded by firing him. Later, Lee identified Repo 105 as one source of the collapse for the federal investigators. Matthew Lee is still out of a job today; nobody on Wall Street has hired this honest man.

Not so most of the schemers who played fast and loose with the financial facts at Lehman. According to a Huffington Post tally, three quarters of the Lehman folks -47 of 63 involved in the Repo 105 scam- are employed in the financial world and doing just fine thank you. In fact, while most Americans are struggling to recover from the crash and millions are unemployed, the Wall Street banksters are fine.

And why shouldn’t they be –aside from ethics and stuff like that– the banks know if they overplay their hand again, Repo 105 or whatever, a taxpayer bailout is just around the corner. So they gamble with your savings, secure in the knowledge that the FDIC will cover their losses and that we’ll loan them whatever they need to get back on their feet. Just don’t ask them to support the small businesses that create jobs or anything like that. Leave that to the suckers who run the regional and community banks.

Published in CommPRO.biz 2013.09.24

The Beat Goes On & On & ON

Remember the scene in a Pirates of the Caribbean movie where Captain Jack is gazing from a crow’s nest soon disclosed to be on the mast of a sinking vessel as it approaches a dock where the never-say-die pirate leader steps off and heads off into another hilarious adventure? That must be how Jamie Dimon, the captain at JP Morgan Chase, is feeling these days. Problem is, there is no dock in sight for this buccaneer; he’s up to his neck in trouble and nobody is laughing.

Dimon just can’t seem to catch a break, or more appropriately dodge a bullet. The slowly unraveling London Whale loss of billions involves at least three Chase minions, two of whom are facing criminal charges. The third has to be bothering the folks in carpetland back at Chase headquarters in New York City. Bruno Iksil has not been charged, apparently because he is supplying information on the two guys who have been charged. Bruno is a Chase Vice President. Nonetheless, since Chase has tens-of-thousands of VPs, Bruno is still a grunt. You know your bank is too big when you count the VPs by the tens-of-thousands.

We all know what’s going to happen when one guy starts pointing fingers, it won’t be long until others join in. That fact, along with reports that all these guys kept pointing up the line when this disaster started to unfurl, has to be unsettling. It played out in London, but the players there pointed to headquarters in New York City time and again when the losses were skyrocketing; at last report well north of six billion dollars. The finger pointing is going to spread up the food chain. The London traders claim they acted on guidance from headquarters. That could get very ugly for all the players right up to Jamie Dimon.

As if all that wasn’t enough, The New York Times broke a story about Chase bank hiring practices in China. The bottom line is that Chase seems to have a history of giving jobs to the off-spring of high ranking individuals in the Communist Party who head state owned businesses. Often businesses that have no relationships with Chase, at least not until they hire somebody’s kid. Reports say the Feds have a spreadsheet showing how hires connect to deals Chase was chasing.

Any one of these could be dismissed –as Chase is depicting them– as the acts of lower level rogue employees. Taken together it seems clear that the employees at JP Morgan Chase are under pressure to maximize profit by any means necessary by a management that knows that the taxpayers are on the hook to bail them out again. A management that reflects its leader’s ethics, Jamie Dimon’s ethics. 

Published in CommPRO.biz 2013.09.17

Good News “IS” News, Occasionally

We find ourselves largely focused on a minority. The majority, most of us, are trying to do the right thing everyday. By nature we are an honest hard-working people. And most businesses understand that an ethical model is a roadmap to long-term strong profitability. Take care of your customers, employees, vendors, community, and the environment; and the bottom line takes care of itself.

In our weekly pursuit of ethical issues, we find ourselves largely commenting on players who choose to ignore the ethical model. Those not interested in long-term growth. Then there are those who operate in a non-competitive market. A market that is structurally immune to competition such as healthcare. When was the last time someone struck a deal with a surgeon whilst headed for the operating room?

More disturbing are those made immune to failure through their lobbying efforts. Take the monster banks. They have created a world where they are not only too-big-to-fail; they are permitted to take part in unimaginably outrageous practices. They make huge bets –outright gambling– on anything they can label “investing;” even with depositors’ funds insured by the United States taxpayers. Worse, our Department of Justice is afraid to go after these scumbags; a monumental failure.

So between big pharma, predatory healthcare entities, and smarmy bankers, we have lots of unethical issues. We aren’t forgetting that the scumbags make up a tiny minority. Most folks in healthcare are there for the right reasons, executing herculean efforts everyday. Most bankers focus on depositors and businesses in their community. They guard depositors’ savings; make loans to keep businesses growing, homes building, and dreams evolving.

However, good news rarely makes “The” news. That’s what we like when we find a major story about a newsworthy ethical happening. IBM, a pioneer in personal computers, sold that business in 2005 to Lenovo, a Chinese company most of us never heard of. Since then Lenovo has grown their share of the home computer market, recently surpassing Hewlett-Packard. Ninety days ago Lenovo opened an assembly plant in North Carolina. 

All of that is nice, but the icing on the cake came earlier this month (2013.09.02) when Lenovo CEO, Yang Yuanqing, announced that he was splitting $3.25 million –most of his annual bonus– with his workers. For the workers in North Carolina the $300 bucks they received was a nice surprise. For the vast majority in China the $300 is roughly a month’s pay.

Hats off to Yang. He gave away $3 million of his bonus last year. It wasn’t news here until Lenovo built their plant and Yang announced that he would split his time between two headquarters in Beijing and Morrisville, NC. Those who see this as a marketing ploy may have a point, but the impact on Lenovo workers in twenty countries is still there. Unlike other big players, Lenovo produces their computers, phones, laptops and tablets in their own factories. And we’ll bet they don’t have nets stretched around them to prevent the workers from jumping to their death.

Published in CommPRO.biz 2013.09.04

Too Small to Ignore?

It appears that Darryl Layne Woods may spend a year in jail and have to cough up a hundred grand in fines. Woods is the majority owner and former Chairman and CFO of the Mainstreet Bank in Ashland, Missouri; the bank has branches in Bunceton and Prairie Home. The three small towns with a total population of a little over 4,300 are in the Columbia, Missouri area. In addition to likely jail time and the fine, Darryl has been barred from ever again having any role in banking.

You see when the government was passing out money to support the banking sector following the crash, Mainstreet was given a little over a million dollars. Darryl “invested” about a third of that in a luxury condo in Florida. When asked what they had done with the money, the bank was not totally forthcoming about the condo. Darryl signed that document and is taking the fall. Part of the plea deal absolved his wife from any involvement. The bank will, of course, have to pay back all of the TARP funds if they haven't already. It turns out that the bank sold the condo in Florida this spring and made a few bucks on their investment.

A statement on the Mainstreet website from the bank’s Board seems to indicate that it’s all some big misunderstanding and that the bank had been making real estate investments of this nature for some time. The government claimed that the Florida condo was intended for use by Darryl and other bank executives.

Mainstreet Bank has been around for ninety years. It’s the kind of community bank that’s vital to small town America. Darryl Woods is 48 years old and listed as “majority owner.” That could mean anything from 51% up; a local newspaper just referred to him as the bank’s “owner.” We would guess he was used to doing whatever he felt like and this time he went too far, or was careless with the paper work.

It’s hard to understand how this differs from the banks taking billions in TARP and subsequent billions from the Federal Reserve while somehow managing to pay $140 billion in bonuses to their executives in 2009 alone. That’s the same year Darryl Woods spent $381,487 to buy a condo in Florida. Did the big banks just do a better job filling out paper work than the Mainstreet Bank in small town Missouri?

Last week (2013.08.27) Bush era Treasury Secretary Hank Paulson, the architect of TARP, said he was very disappointed with the bonuses. That would seem to be about five years too late. Paulson went on to claim that he could not have made bonuses a part of the deal for TARP funds or the banks would have backed away. If that was true, why were those same big banks desperately sucking up hundreds of billions from the Fed month after month even after they took the TARP funds? The Mainstreet Bank folks -being from Missouri- have to be saying, “Show Me.”

Published in CommPRO.biz 2013.08.28

The Customer Is Not Always Right

Let’s review – America has been struggling to rise out of what has been called the Great Recession. A recession brought on by a systematic dismantling of safeguards that protected us for decades after the Great Depression. Engineered by lobbyists working for Wall Street banks and the super rich –the 1% of the 1%– this tearing down of the walls was not intended to cause a recession, just to allow those at the top to make more money.

The recession was an unintended consequence. The big banks had been buying up mortgages to create bundles that investors, pension funds and the like could stash away and collect interest on month after month. What could be safer, we all know real estate never loses value; it always goes up, right? Besides, the banks had these packages checked out; the credit rating services marked them AAA.

This new idea caught on like wildfire. Pretty soon the supply of mortgages wasn’t keeping pace with the need. So the banks pushed the mortgage brokers down the line for more and more mortgages. The brokers urged people to buy, coaching them and fudging the numbers when they didn’t qualify. The banks learned to pile the mortgages with the not-so-nice on the bottom. The rating services were overwhelmed. Under intense pressure from the banks to anoint the investment packages with top ratings, it appears that the services buckled. Soon packages the bankers were calling “Crap” were gaining AAA ratings and being sold by those same bankers to trusting customers.

To understand why the rating services would hang a AAA on what the bankers called “Crap,” we have to look at their business model. The banks asking for AAA ratings paid for them. The banks are the rating service’s customers. They feared that saying no to the banks would just send them to another rating service. They anointed the “Crap” AAA to keep the bucks coming through the door.

That’s pretty much what the Justice Department is saying that Standard & Poor’s did when they sued the rating agency for $5 billion. The DOJ and 14 states are suing S&P, the largest of the rating services. The other two, Moody’s and Fitch, are likely to be next. The $5 billion suit is moving through the California court of District Judge David Carter. S&P rated $4 trillion in various bank investment vehicles over the four years leading up to the collapse.

While S&P is facing the $5 billion lawsuit, keep in mind that the real bad guys are the handful of monster banks that put together the piles of crap and coerced an AAA out of the rating services. What’s more the same banks are back at it– gambling wildly secure in the knowledge that we will have to bail them out again when they stumble. We like to think that doing the right thing is easy. It’s not, what’s easy is taking that first step in the wrong direction

Published in CommPRO.biz 2013.08.22

Greedy Hospitals

Nothing illustrates the runaway cost of medical care in America quite as starkly as the rush to build proton therapy centers. Hospitals and even private entities are racing to build these facilities that run better than $200 million bucks, $100+ million on the cheap. While it is true that for some cancers proton therapy shows real promise, the number of patients who might benefit is tiny. None are in need of this treatment at the emergency room level.

So why are hospitals across the land rushing to invest this kind of money when it doesn’t serve many patients? Well, it turns out that while there are only a few that can really benefit, there are lots of patients who can be convinced that this latest most-up-to-date medical gadget will help them. Patients that impartial studies show can be as effectively treated on existing proton radiation equipment at half the cost.

There is certainly a need for proton therapy. Studies show it is “Promising” for youngsters with rare tumors in their brain and on their spine. Its focused beam is not as likely as standard radiation to damage their tiny developing organs near the cancer. Beyond that, proton therapy has not been shown to be better than proton radiation. That has not stopped hospitals across America from rushing to sink hundreds of millions into proton therapy centers.

Nothing illustrates better why America spends more on healthcare than anybody and we still rank way down the list in almost every measurable. According to the World Health Organization we rank first in expenditures per-capita and 38^th in outcomes. The latest (2008) per-capita number comes in at $7,538.00 and rising; close to double in the eight years following 2000. Growth in healthcare costs has slowed over the last two years; some see the effects of the Affordable Care Act -others see the recession. In either case we are still spending tons of money and not getting our money’s worth.

The proton therapy issue illustrates the cause perfectly. The Washington, DC – Baltimore area has three proton therapy centers on track at a cost of well over a half billion dollars. One in Baltimore is already under construction, a football field sized dome that will house a 90-ton machine. The docs there have offered to share their proton therapy monster with the docs in the Washington area just 40 miles away. Not a chance. Why? Could it be the estimate by one of the hospitals in DC that their proton center will generate nearly $16 million dollars a year in profits by the end of this decade?

Take a look at NY City; with a vastly larger population base they will have one proton therapy center, more than enough to meet the need. There, the NY State Hospital Review and Planning Council held the region to a single unit. In the Washington area two hospitals three miles apart and 40 miles from the proton therapy center in Baltimore, are adding unneeded and unnecessary treatment equipment. Disgusting! Ethically inexcusable.

Published in CommPRO.Biz 2013.08.16

 

Jamie’s Bad, Bad Month

Poor Jamie Dimon. These are defiantly not “Happy Days” for the Chase Bank chief and Fonzie wannabe with his 1970s retro ducktail hairstyle. With the cloud of the bank’s huge loss known as the “London Whale” looming over him and federal authorities issuing arrest warrants against two bank underlings involved in that loss – a loss much more likely the result of the culture of risk and greed Dimon has installed in the bank’s DNA –  it was bad enough.

Then an insider publication, Bank Director Magazine, released its 2013 “Bank Performance Scorecard.” The magazine has an outside independent organization rank banks on a broad scale of markers for its target audience as “An information resource for senior executives and directors of financial institutions.” It would have been an interesting “fly-on-the-wall” moment to see Dimon’s reaction when told that America’s biggest bank – his bank – came in 14^th among all banks with assets north of $50 billion dollars.

You would think it would shake even an ego the size of Dimon’s to discover that his gargantuan bank came in way down a list with two regional banks a fraction of the size of Chase in the #1 & #2 slots. And Chase didn’t just lose in some of the markers, they lost in all of them. Actually almost all of the monster banks looked pretty anemic given the advantages they enjoy. With tons of free money from the Fed to gamble on anything they please, you would think they could trounce those regional banks. Makes you wonder what members of the monster bank boards of directors who read Bank Director are thinking. More important, what of the regulators we entrust to protect us against the economic impact of these too-big-to-fail banks, what are they thinking?

This study puts the lie to Eric Holder’s thinking that criminal charges against the top executives of these monster banks could threaten their stability and therefore our economy. It seems obvious that the executives of the smaller banks that led the Performance study outperformed the monsters; and that all these banks have executives in place who could easily replace those above them.

It is also obvious that it’s past time to literally cut these monsters down to size. It is past time to return the controls installed early in the 1930s that the bank lobby conned the Congress into removing; the controls that would have prevented the current recession. The monster banks are engaged in exactly the same nonsense that triggered this recession. Nonsense that threatens our economy and that the Bank Director study indicates is of little benefit to the bank’s shareholders.

The monster banks are a looming threat to every American. Arrogant bankers epitomized by Jamie Dimon lecturing members of Congress, flashing cufflinks with the Presidential seal, secure in the knowledge that his lobbyists have bought and paid for their support. It’s time to put an end to this ethically challenged era.

Published in CommPro.biz 2013.08.08

Anything Goes

The Monster Banks’ best investment over the last few decades has been the tens of millions they poured into the pockets of the Congress through their “K” Street lobbyists. It paid off, billions in profits that come right out of the pockets of every American. The bankers’ big score was the Financial Services Modernization Act of 1999, AKA the Gramm–Leach–Bliley Act (GLB) named for three members of our Congress who giggled all the way to their banks.

GLB gutted the Glass/Steagall Act; legislation written in the early 1930s limiting banks to the business of banking: taking deposits, making loans, supporting our economy. As a reward we agreed to insure the money of the bank’s depositors, so that should the bank go bust, the money you had in the bank would be safe (up to $10,000). GLB took down the fences, but left the taxpayers on the hook should the banks fail.

That and another gift from Congress, a law exempting Wall Street from gambling laws, opened the door to the crazy stuff that drove our economy off the cliff. The Monster Banks could use your deposits to bet on almost anything, always backed by America’s taxpayers. There are less than a dozen banks in this arena, the To-Big-To-Fail (TBTF) banks that we bailed out when the derivative fueled house of cards they created collapsed. Your corner neighborhood bank didn’t play this game. Unfortunately they suffered along with the rest of us, worse because the TBTF banks buoyed by gambling profits held a competitive edge. 

The TBTF Monster Banks are right back at it. Taking zero interest bucks from the Fed to gamble instead of investing in our economy. There’s a new game in town, commodities. Ten years ago the TBTF Banks got the Federal Reserve to set up a “Temporary” ruling allowing them to deal in commodities. When their mortgage game evaporated, the Monster Banks jumped into this marketplace. With all the free money at their disposal they bought grain and oil, even oil wells and tankers. They are into power, manipulating your electric bill, Enron redux.

Metals -steel, aluminum, copper- all commodity markets they can manipulate; a buck on a new car, a few pennies on a cell phone, a tenth of a penny on your soft drink can. Goldman Sachs, the mother of all TBTF Monster Banks, owns a couple dozen warehouses in Detroit full of aluminum bars. They shuffle them around from one warehouse to another in a dance that allows them to circumvent the law and jack up the cost of aluminum. Anything goes, ethics walks the plank.

The “Temporary” commodity games regulations expire next month. The Monster Banks are working hard to extend it. It better not happen. More important, we must get these banks out of the other gambling halls we have allowed them to create. We have to stop this nonsense and cut these big banks -quite literally- down to size. If we fail, it’s just a matter of time until we have to bail them out again.