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. 

Chickens Roost

We sure are glad we haven’t been holding our breath waiting for those who drove our economy off the cliff to be called into account. While there is still not a lot of action on that front, various folks are finally going after the bad guys. Federal and some state prosecutors -notably the New York State Attorney General- are on the move. And the shoes are beginning to fall in the civil courts.

The American Civil Liberties Union (ACLU) filed a suit last week (2012.10.15) against Morgan Stanley.  The investment bank loaned billions to New Century, an outfit that specialized in sub-prime loans. Morgan Stanley pushed New Century to generate more and more of those high risk loans, then packaged them up and sold them -at astronomically high margins- to pension funds and other “suckers” as they were referred to. These toxic loan packages, along with similar packages peddled by other investment banks, went sour and were the major factor in the collapse of the world economy. An exercise in ethical ignorance.

What made the New Century loans particularly smarmy were the mortgage company’s targets. Poor folks, mostly black, who were not sophisticated enough to understand what they were signing up for. According to published reports the ACLU’s class action suit on behalf of these folks is based on “claims that Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act.”

This suit joins a host of others by investors and government entities aimed at finally bringing to task the banks whose reckless behavior has caused incredible pain all around the world. In addition to the Morgan Stanley suit, Wells Fargo is facing an action claiming that their reckless lending practices ended up dumping bad loans on the taxpayers’ backs by sticking a government insurance program with the tab. Bear Stearns & Company, now a part of JP Morgan Chase, fell into the sights of the Justice Department earlier this month for reckless housing boom activities. One-by-one the guys who rolled the dice and hollered for help from the taxpayers when they came up snake eyes, have the law knocking on their door.

But where are the individuals, the executives who pushed to keep the bucks flowing from their subprime mortgage scams? Where are the big shots who took hundreds of millions in bonuses while the taxpayers suffered from the recession triggered by their reckless actions? People like Lloyd Blankfein, Goldman Sachs’ CEO who had his people betting against their own customers in a heads-we-win, tails-you-lose game that only Goldman Sachs could win. Unbelievable!

The same “Pants on Fire” Blankfein who mocked a Congressional Committee by denying knowledge of activities at Goldman Sachs when internal communications from the bank show clearly that he was in the loop. How come Blankfein has not been charged with lying to Congress, a felony? After all, we went after a baseball player for lying with little or no evidence, why not a banker with solid evidence?

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.