Published CommPro.biz 2014.02.20

A Bribe Is A Bribe Is A Bribe

A recent (2/09) New York Times story detailed the hiring of a young woman at the behest of a family friend. A job was created for her at JP Morgan Chase. Her family friend just happens to hold a powerful position in a Chinese agency that oversees insurers. The bank was looking to snag business deals with a number of the insurers that her benefactor holds sway over. There is nothing unusual about arrangements of this nature. What makes this one stand out is, that the “ask” was in the ear of Jamie Dimon, top dog at Chase. The young woman was not only in the room, she was serving as the official’s translator.

First off, the young woman was an outstanding candidate; Chase was lucky to get her. And Dimon was careful to distance himself from the hire. However, Chase did get a bunch of deals right quick from companies under the regulator’s gaze. It seems clear that in addition to getting a first rate employee, Chase made a ton of money from her family friend’s ”contacts”. Because a government official is at the center of this arrangement, a case might be made that hiring the young woman at his behest constitutes a bribe. That’s a big “No-No” under United States law.

This is not an isolated case. Chase has a history of jobs for deals as do most all of the monster banks; Goldman Sachs, Citi, and all the usual suspects. Legally they are likely inside the safe zone; ethically they are not even close. While Dimon was careful to give himself cover on this hire, it doesn’t change the underlying truth. These deals –especially in light of their frequency– indicate that they are part of the culture of these banks. The culture of any organization reflects the ethical and moral compass of its leader; in this case Jamie Dimon.

These monster banks slithering around making backroom deals to gain the favor of business or government officials are ethically pathetic. A good business leader knows to back away from any deal that is not a good deal for everyone involved. Cash under the table or hiring somebody’s kid, either way it’s a bad deal for the buyer and the seller. It’s an admission by the seller that what they’re selling isn’t worth the price, and/or it means the buyer didn’t get the best deal for their bucks.

These banks are too-big-to-fail and way too-big-to-manage. They’ve created a greed driven culture that does anything to keep the bucks rolling. They’ve trampled the real bankers in our community banks, using ill gotten profits gained by gambling with their depositors’ funds; all insured by the FDIC (that’s us). The solution is to break these monsters up before they trigger another crash. We did it in the 1930s  and set up rules that kept us safe for the better part of a century. Lesson learned? It’s time to repeat; break up the too-big-to-fail banks before they fail again. How hard is that to understand?

"Am I wrong?"--"Am I Nuts?"

"What do you think?"--"Do you agree?"

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 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 2013.08.16

 

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.

The Clock is Ticking

If ever there was a moment illustrative of the need to restore Glass-Steagall, enforce the Volcker Rule, and repeal the foolish gambling exemption Congress gave Wall Street, it is now. JPM Chase CEO Jamie Dimon’s culture of Wild West saloon gambling was outed when the loss side of the bank’s bets was exposed by a huge bet gone bad in their London trading office (AKA gambling hall). The $2 billion loss is quickly ramping up and will likely be double that or more.

Fast forward to the JPM Chase annual meeting last week (05.15.12) where we find a visibly irritated and agitated Dimon facing questions on the multi-billion dollar losses and a shareholders’ challenge to his dual role as both Board Chair and CEO. He managed to hold on to his grip at the top with 60% of the shares voting to defeat the move to unseat and replace him as Chairman. While that sounds good, you must keep in mind that prior to corporate meetings companies routinely include as part of the meeting notice a request to hand over the voting rights to the management if you do not plan to attend and vote in person. Most shareholders comply and so you can figure that Dimon walked into the meeting with the votes in his pocket. You can bet he was shaken by the margin; to have 40% opposed is too close for comfort in that game.

Turning to the “snake eyes” that is piling up billions in losses, Dimon, according to the New York Times, came up with this gem: “We are going to manage it to maximize economic value for shareholders.” That has to be one of the wildest -let’s flip the conversation to my favorite subject- “Shareholder Value” moves in history. We’d guess that Dimon’s point is that shareholders benefit from the JP Morgan Chase gambling hall because they win more often than lose, and besides in the unlikely event that we drive off the cliff we are “too big to fail” and so the suckers (that’s us, taxpayers) will bail us out again. There’s no way we can lose.

Shareholder Value -as former GE CEO Jack Welch pointed out- is an outcome; as a strategy Welch famously dubbed it, ”the dumbest idea in the world." Dimon and his ilk love it as a strategy; it enables them to parlay their gambling culture into monster bonuses, with the ultimate backup, taxpayer bucks. Shareholder Value is a meaningless term the way Jamie Dimon and others use it these days. And it will come around to bite the taxpayers unless we force the too-big-to-fail banks back into their corners. We need to get them out of high stakes gambling. We need to make them choose: either create capital as an investment bank, or take deposits and make loans as a commercial bank. Anything less leaves all of us outside the game at their mercy. It’s time for Congress to act, restore Glass-Steagall, enforce the Volcker Rule and repeal the foolish gambling exemption Congress gave them. 

“Round One,” The Banks vs. The Rest of Us

“Round One,” The Banks vs. The Rest of Us

Within a month Federal District Judge Jed Rakoff has launched what may be the beginning of the end for rapacious behavior on the part of our banking sector. Earlier this month he refused once again to rubberstamp an under-the-table deal the Security and Exchange Commission (SEC) made with a “Too Big To Fail” Bank, this time Citi. Unlike earlier deals that came before him, he is apparently not going to agree to any settlement without all the gory details being revealed.

As you may recall from our 11.15.11 OP-ED, Citi has been charged with fraud. With selling their customers a bundle of crappy investment vehicles while at the same time betting against them. Of course the crappy stuff turned out to be crappy and when they failed, Citi’s customers took a hit somewhere north of $700 million bucks and Citi collected on their bet. Judge Rakoff questioned the settlement -$95 million- and the fact that only one individual was charged with criminal behavior. In an earlier case (Bank of America) Rakoff signed off when the SEC upped the penalty. Two other Federal Judges signed off on similar deals with Goldman Sachs and J.P. Morgan Securities, as many judges have over the years.

After mulling over the Citi deal for a couple weeks, Rakoff took a very different tack. This time he rejected the premise that Citi could walk away with a fine and a promise to never do it again. He wants all the gory details out on the table. A path that drew a snarky headline, “Rakoff Cements Status as Populist Firebrand”, on the American Lawyer Magazine website’s report on his ruling. Basically saying that his failure to play “go along to get along” would end any chance of promotion for the judge.  But isn’t that what ethics is all about, doing the right thing without regard for self interest?

An end may be at hand to the age of repeated SEC “Peanuts and a promise” deals for those who pull off massive ripoffs. As Steve Denning noted in a recent Forbes article, What Shall We Do With The Big, Bad Banks, “Over the last 15 years, some 19 large major financial institutions have been found by the SEC to have broken anti-fraud security laws at least 51 times—laws  that they agreed ‘never again to breach’. The group of offenders included Citigroup, Bank of America, JPMorgan Chase, UBS, Goldman Sachs, Wachovia, and AIG. In this period, the Securities and Exchange Commission has never once brought a contempt of court citation against any of the banks for repeated offences.”

The leaders of these behemoths, the Lloyd Blankfeins and Jamie Dimons and their minions who hide behind these “Don’t Ask, Don’t Tell” deals with the SEC, may be called to task if it turns out that they were aware of the double dealings underlying the SEC charges. An outcome sure to be cheered by the State Attorney Generals across the country that have been pursuing the culprits who triggered the financial collapse we are enduring; looking for someone to jail.

Wouldn’t that be nice? Three cheers for Judge Jed Rakoff.

Take Off The Kid Gloves

Take Off The Kid Gloves

The Securities & Exchange Commission (SEC) ended its fiscal year in September having filed a record number of cases (735), up almost 10% from their pace (677) last year. They collected nearly $3 billion in penalties both years. Meanwhile the annual Johnson Associates’ “Executive Compensation Study” shows an alarming drop in pay for the folks on Wall Street, as much as 20% - 30%. Alarming perhaps to the Wall Street types, but to those who are trying to make ends meet the Wall Street pay scale, that begins at a hundred grand and can escalate into seven or eight figures, still looks really good. 

Reuters reports that over the last two years the SEC has removed a management layer and restructured their enforcement division. And, they have created a new whistleblower bounty program alongside other incentives to encourage witnesses to cooperate. Given the two record years they have registered, it must be working.

Or is it? It appears that the SEC is still treading softly with the big banks and the individuals behind the misdeeds (AKA CEOs etc.).  A Federal District Judge, Jed Rakoff, doesn’t seem convinced that a proposed settlement with Citibank is tough enough on the bank. Citi is charged with fraud; selling customers crappy financial instruments at the same time the bank was betting they would fail. The very same double dealing that triggered the financial collapse we are enduring.

In a hearing last week Judge Rakoff questioned the SEC on the settlement: $95 million when the investors Citi ripped off lost $700 million. The judge has taken a similar position with several lowball settlements the SEC proposed in the past. Rakoff also questioned why only one individual in this case has been charged with wrongdoing.

We –along with many others, including State Attorney Generals across the country– have been wondering about the SEC slap-on-the-wrist penalty proclivity. A concern the Attorney Generals also direct toward the Justice Department; why has it not zealously prosecuted bankers who triggered the recession? We know who they are and what they did. Instead, after bailing them out we are forced to watch as they go back to the same risky stuff all over again, sure that we will bail them out again when it collapses. All the while taking home eight-figure bucks.

The banks’ reaction to the relatively mild restraints of the Dodd/Frank Act is to pile new fees on their customers. They have grown so accustomed to inflated profits from what are nothing more than risky gambling schemes that when a little of that revenue stream is cut off, they sock it to their customers instead of living lean. In the meantime we have to listen to Jamie Dimon, JPMorgan Chase “Whiner in Chief,” and Goldman Sachs CEO, Lloyd Blankfein (AKA The Artful Dodger) complain. They are so misunderstood and unappreciated after all they do for us, poor babies.

Alan Johnson, managing director of Johnson Associates, the firm that carried out the Wall Street wage study, put the ethical issue very succinctly, “Wall Street executives,” he said, “haven’t gotten the memo at all.”

CEO Meltdown

What is it with these people? The banking class seems to forget how we got into this mess and who is primarily responsible. Wholesale stripping away of the rules of the road –read banking regulations–over the last few decades opened the doors to unbelievable levels of greed.

Now that the rather mild (after the lobbyists beat it down) Dodd-Frank Act is in place, they are whining about too much regulation. In truth that unregulated playground where greed-monger bankers frolicked, it’s still open. They are playing the same game with reckless abandon. While the law says we won’t bail them out again, they know we can not allow “too-big-to-fail” banks to fail.

The mere mention of restraint triggers an explosive response. Take the reports leaked from a meeting of the Financial Stability Forum in Washington. Mark Carney, Governor of the Bank of Canada, endured a hissy fit from JP Morgan Chase Honcho, Jamie Dimon. Dimon found suggested changes to the Basel III banking standards, “anti-American.”  

When banks like Chase were fighting for their lives and begging our taxpayers to bail them out, Canada’s banks were fine. Carney’s response to Dimon’s attack was measured: "If some institutions feel pressure today, it is because they have done too little for too long, rather than because they are being asked to do too much, too soon." Based on sixteen attributes worldwide, 42,000+ respondents to The Reputation Institute's 2011 annual study ranked Canada #1. Is it any wonder the US came in 23^rd – behind even Greece?

It’s not as though JP Morgan Chase is a “Poster Child.” They are mired in a smarmy Jefferson County, Alabama bribery mess where political types have been convicted of pocketing $8 million. Birmingham’s mayor went down for taking $235,000. As part of the settlement, Chase eats $647 million in fees, pays Jefferson County $50 million, plus a $25 million SEC penalty. This does the county little good; it is still drowning in over $3 billion in derivative based financial instruments.

The ethical no-man’s-land JP Morgan Chase seems to inhabit extends to our fighting men and women as well. The law is crystal clear when it comes to mortgage holders and the military. But, Chase may have missed that memo. In just one case, a Marine captain flying F-18 missions overseas suffered an ongoing nightmare. He and his wife did everything right. To their surprise Chase ignored their on-time mortgage payments, began foreclosure proceedings, and set collection agency dogs on them. The captain’s wife was raising their small children on her own, one with health issues, all the while the Chase collection goons are ringing her telephone around the clock.

When Chase finally recognized the string of goof-ups on the military that included the Marine Captain, a mid-level banker apologized. That – is – pathetic! JP Morgan Chase and its spoiled brat CEO, Jamie Dimon, that’s who is “anti-American” in this sad tale.