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.