Thursday, May 17, 2012

Remember when Banking was Boring?

The current JP Morgan Chase scandal makes me think – and it also makes me angrier than hell!
by Charlie Leck

“Bankers – pillars of society who are going to hell if there is a God and He has been accurately quoted.” [John Ralston Saul*]

I’ve given thought to writing a short story about a banker who is extremely outgoing, humorous and terribly friendly to all. It would likely fail as a tale because of it incredibility and silliness.

My wife’s paternal grandfather (Lyman Jr.) and great-grandfather (Lyman Sr.) were bankers, the latter a rather significant and well-known one (at least, famous as bankers go). Her great-grandfather was one of the founders of The First Bank Corporation here in Minneapolis and its first president (now owned by US Bank). In the state history museum, I found a wonderful photograph (above) of Senior sitting down with a companion on a fishing excursion. One fellow is decked out in proper fishing attire while Senior is wearing a three-piece suit. To be fair and honest, however, both Junior and Senior had remarkable senses of humor. Also however, in both of them lurked the serious souls of bankers.

Remember when bankers were boring? They’ve always been made fun of in literature and film. They were always a bit on the pudgy side and that characteristic was emphasized by the pin-striped suits they always wore. They were also always nervous and cantankerous and downright ornery when a customer was late on a debt payment or had an over-drawn checking account. They never seemed to make a loan willingly or cheerfully, but always grudgingly and arduously.

In the great fifties, when my teenage years began, no young boy dreamed of one day being a banker. Oh, Lord no! Deliver and save me from such a life!

“I went to the bank and proposed that they lend money to the poor people. The bankers almost fell over.” [Muhammad Yunus**]
“In America, before Reganomics, banking was dull!” [Harold Meyerson]

Harold Meyerson has written in this morning’s Washington Post: “In America, before Reganomics, banking was dull.” Indeed, it was, and nothing excited my father-in-law more than its dullness. Were he with us today, he would be turning 24 different shades of purple over the state and condition of banking in our nation today. Junior didn’t like banking regulations and he didn’t like regulators and banking inspectors; however, grudgingly, he admitted to their necessity. Bankers, he knew, controlled a lot of money and the temptations were great to be a little bit loose with those funds. He would often point to some of the speculating bankers of his time and shake his head in incredulity about their gambles with bank money. Most of those fellows he pointed out to me were soon no longer considered bankers – removed by conservative and extremely cautious boards of directors.

Senior had to be a little less cautious and found bank gambling somewhat necessary. With a few of his friends, he put First Bank Corporation together during the height of the Great Depression in America. Without bank investment, thousands and thousands of small, family farms could have disappeared in that era. In this part of the country – the great grain belt – Senior’s banking company and Northwestern National Bank Corporation were heroic in their efforts to save small town banks and small town farmers. As the country clawed its way back to economic health when the Second World War ended, banking here and around the country returned to its earlier form of ultra-conservatism.

“What in hell are bankers doing gambling in derivatives?” That’s the question Junior would be asking about JP Morgan Chase’s current horrible losses. “That’s gambling,” Junior would shout, his face turning purple. He had seen it happen to one of our biggest, local investment houses. He thought lessons had been learned.

I think both Senior and Junior would buy into what Myerson is selling in his Washington Post column. I think they just might agree to stronger regulation.

With a group of bankers I always had the feeling that success was measured by the extent one gave nothing away. [Francis Aungier***]

Jamie Dimon, Chief Executive Officer at JP Morgan Chase
Myerson points out that Jamie Dimon has been one of the biggest opponents of stiff banking regulation over the years, arguing that it’s not needed. He’s been especially loud in opposing the proposed Volker Rule that would disallow risky investments by banks.

“Which, I suspect, may be one reason JPMorgan Chase chief executive Jamie Dimon — a man who could give hubris classes to Oedipus — went out of his way not simply to criticize the “Volcker rule,” which would restrict banks from making risky proprietary trades and swaps, but to attack Paul Volcker personally. Volcker, 84, is an old-school banker unimpressed by the financial “innovations” that led to Wall Street’s ascent over the rest of the economy. Its sole innovation that actually helped real people, he famously remarked in 2009, was the ATM.
“After the 2008 crash, Volcker proposed legislation restricting depositor banks from funneling their own funds into chancy investments. Wall Street erupted. Well, it would have erupted if it had had any credibility left, but Dimon — the one banker who came out of the panic with his bank and his credibility intact — erupted on behalf of his bank and the street. In recent months, as JPMorgan lobbyists sought to weaken the Volcker-derived provisions of the Dodd-Frank financial reform, Dimon fairly oozed contempt for Volcker, whom he depicted as an old duffer out of his depth.”

There’s more good stuff in the Myerson column that makes it a worthwhile read. [Click here to read it!]

Now Jamie Dimon is crying in his beer. A few months ago he was publically calling Paul Volker’s regulation ideas “infantile.” Today he is having to admit that his bank has lost nearly three billion dollars in derivative investments.

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” [Robert Frost]

Oh, for dull, boring banking! Personally, I’d regulate the hell out of them. The stupid bastards need it.

*John Ralston Saul is a Canadian and author of a number of books, including Voltaire’s Bastards and Unconscious Civilization. He holds degrees from McGill University and King’s College.
**Muhammad Yunus is generally regarded as the founder of Micro-Banking. He is an economist from Bangladesh and the founder of the Grameen Bank that provides microcredit to clients who would not qualify for credit from standard banking institutions.
***Francis Aungier was the first Earl of Longford (died in 1700).
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1 comment:

  1. Every banker should be taught to play a harmonica ala George Kaufman's , "You Can't Take It With You".