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?"

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.”