I had a few, quick thoughts today that I find of interest. Perhaps you will, too.
Sandy Weill has once again achieved notoriety in the press for his interview this week suggesting that big banks don’t work, and should be broken up.
English: Sanford Weill at the 2009 premiere of the Metropolitan Opera in New York City. Photographer’s blog post about event and photograph. (Photo credit: Wikipedia)
This is the same Sandy Weill that as CEO and Chairman of CitiBank, lobbied for the overthrow of Glass-Steigal, a depression era law that prevented banks and investment companies from being conjoined, and created the first mega-bank by merging Citi with Travelers, creating CitiGroup. Of course less than 10 years later, it was a key player, along with a long list of fellow gang members, including Lehman Brothers, Merrill Lynch, Bank America, Bear Stearns, etc that caused the destruction of the world’s economy.
Jamie Dimon had been Weill’s right-hand man for a number of years, and was a key player in the merger. It was only after Weill saw Dimon as a possible competitor that he fired him. As we know, Dimon landed on his feet at JP Morgan.
Weill was ultimately forced out of CitiGroup, followed by a list of even more incompetent leaders, such as Chuck Prince.
Not one of the infamous leaders of the banks that created the recession we are all living through has seen the inside of a jail cell. In fact, most left their plush offices with $6,000 wastebaskets under their arms and obscene bonuses in their pockets.
Now, with chutzpah beyond all reason, some of these characters are attempting comebacks, and some, such as Weill and a few others, are now climbing up on the opposite side of the horse, decrying big banks and through big eyes and innocent grins, claiming they should be broken up.
Hypocrites, all.
Jamie Dimon – Caricature (Photo credit: DonkeyHotey)
Speaking of banking and lack of leadership: Jamie Dimon at first belittled the London Whale Trade in JP Morgan as a non-issue, then announced it would be about a $2 billion hit, but of no material impact, followed up in July that it might be as high as $5.7 million. But to this day, nobody seems able to determine an exact figure.
“We took our eyes off the ball,” he claimed. Subsequently he has said that Morgan would attempt to claw back a few million bonus dollars from the manager and players involved.
Who is “We?” Should not this be the singular pronoun, “I”?
A simple question, Mr Dimon: since you are paid your grand sum in excess of $25 million in salary and bonus for being the leader of Morgan, for sitting behind the desk where the buck supposedly stops, should not a goodly portion of your salary and bonus also be clawed back to the company?
But that’s just me…
Related articles
- Mega-bank creator Sandy Weill reverses course, says break ‘em up (finance.yahoo.com)
- The Sandy Weill–Jamie Dimon War Continues (economicpolicyjournal.com)
Isn’t there sort of cycle of merger leads to consolidations which leads to spinning off and selling off “assets” which leads to independent companies which leads to mergers… with an occasional leveraged by out in the mix? And, at each stage the same group of people make money from each transactions?
Yup! Pretty much.
In this case, Glass-Steigal act prevented banks from also trading. The goal then was to lend money and make the profits on the spread. Then Weil, along with several others, including Republican Senator Phil Grahmm (Remember him? “You’re all a nation of whiners” in Sept ’07, just days before the crash) pushed to abolish the law. Weill then went on a buying spree, including Travelers Insurance, mostly for their trading skills. Thats how CitiGroup became CitiCorp. Now the banks were less focused on lending, more on trading. At the height of the crash, some banks were leveraged up to 60-80 times or more, and when the margin calls came, and ultimately the market collapsed, they had no capital to pay for the calls.
Voila! Great Recession, 2008.
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I think we need to send a list of all of the indiscretions made by bank leadership to Senator Richard Shelby (BofA had another settlement yesterday) and ask a simple question – do you still believe banks and financial entities do not need to be regulated? The fact of the matter, there are some former and current leaders in the industry that need to go to jail for some of their activities and I do not say this lightly.
Unfortunately, our list to Shelby, like other lists to other bank defenders, would be lost at the bottom of the incoming mail box, buried under the mounds of cash supplied by the banking lobbyists. As for your going to jail comments, it seems that a great deal of American citizens feel the same way. Unfortunately, the SEC, DOJ, and other agencies lack the backbone to enforce the laws and go to trial. They’d rather collect miniscule fines, with no admissions of guilt, and call that a victory.
Case in point? The recent HSBC money laundering investigation and its management’s mea culpa. They did the same thing, for the same type of charges, back in 2003 and again in 2007. Hello??? Whats different this time, and whats to prevent it again in another 4 years? Nothing.
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It really makes you wonder where all this is going to end. Keep up the good (make that great) work.
Like most every generation before us, I say I’m glad that we’re handing off the baton to the new kids.
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