There’s talk of a master list being created that would list Wall Street bankers who’ve run into ethical issues on the job.
It could develop into a pretty long list. And then what next? Which other group would be targeted? Supposedly the purpose of this list would be to help companies avoid hiring the repeat offenders who move from firm to firm. New York Federal Reserve President William Dudley recently floated the idea to a gathering of bankers and regulators, in an ongoing effort to improve Wall Street’s culture, which Dudley has called “an apparent lack of respect for law, regulation, and public trust that persists within some large financial institutions.”
Yes, absolutely there is cause for concern; the issues are ongoing. The article goes on to say that a survey conducted by Labaton Sucharow, earlier this year, pointed out that one in four bankers “said they knew co-workers who had run afoul of the law.” Nearly a third of those surveyed said bonus and compensation incentives encouraged malfeasance, something I’ve written about before and experienced myself when I was with Citigroup.
[tweetthis]”Bonus and compensation incentives encourage malfeasance.” ~@RichardMBowen #ethics #wallstreet[/tweetthis]
According to the survey, significant numbers of financial professionals admit that their industry has issues with culture and compliance. The survey asked financial professionals:
- Would you use nonpublic information to make a guaranteed $10 million with no chances of getting caught? On insider trading, 25% said yes.
- Does the compensation or bonus structure of your firm create incentives to break the law or violate ethical standards? 32% said yes.
- Has Wall Street improved since the financial crisis? 33% said no!
This survey and the issues involved reminded me of Dan Ariely’s work on honesty. His recent documentary, (Dis)Honesty shows that the further away you are from a source of money, the greater the chances of lying and cheating. If money matters are transacted though credit cards, insurance, stocks, bonds, sureties, and mortgages, the less those involved can personally relate to what these instruments represent, the greater the chance of corruption.
The documentary also asks the question: who lies more, politicians or bankers? The bankers won!
This was no surprise to me. I have written about studies which have shown that employees of banks may cheat more than employees of other organizations. When you look at the many crises and scandals we have had in this century, many of which are still fresh on our minds, dishonesty is the root cause; greed follows closely. We may be incentivizing dishonesty!
Neil Cavuto, of Fox News says bankers have found it easy to dupe. It’s been a culture of winks and nods and jobs for the boys, where too many people making bad decisions have gotten where they are for reasons other than excellence.
He challenges society for wanting to punish the bankers in question. According to Cavuto, it was the Fed and our own government who helped create the crisis by encouraging the kind of behavior that now needs to be punished.
We should have real concerns here. There’s a legitimate fear that this so called list could be abused. A case in point is how banks retaliate against brokers and others for blowing the whistle, definitely a sore spot with me as you might imagine. A similar registry to the one under discussion is used by the Financial Industry Regulatory Authority (FINRA). A negative mark against you assures you will not work in that industry again.
One such case involves a former JPMorgan broker, Johnny Burris. Burris raised a red flag, publicizing his concerns over the bank’s disclosure practices surrounding conflicts of interest in investment advice. Subsequently two damaging client complaints appeared on his record. It’s interesting that the complaints in question were signed by former clients of the broker, but as the New York Times later reported, it was JPMorgan employees who actually wrote them. One of the clients told the New York Times that she had “no problems whatsoever” with Burris and signed the complaint without even reading it, at the behest of the bank.
In a May 2009 article, Anne Sibert, speaking of the 2008 debacle, asks: why did the bankers behave so badly? The bubble situation, inflated prices, mortgages continuing to be given regardless of the cost involved huge incentives for little effort, all of which fueled the fire. Ms. Sibert tells us that studies support the theory that the human brain arrives at outcomes – such as confirming one’s own beliefs that promote the positive and minimize negative emotional responses. Overconfidence? Greed? Belief the good times would last forever?
As Dr. Ariely says, this is human nature! Yet human nature or not, are we rewarding finger pointing? Is a list going to cure the problem? Maybe we should be paying attention to what needs to happen in financial institutions to stop the continuation of lying, cheating and stealing.
[tweetthis]Would a “bad bankers” list be helpful? #tbtf #leadershipethics #wallstreet[/tweetthis]
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
