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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Dirty Banks

Sometimes it causes me to wonder… wonder!
by Charlie Leck

Hope some of you got hold of a copy of THE BIG SHORT and read it. It tells a remarkable story of America’s financial industry out of control. And here’s more…

"LAST month, a federal district judge approved a deal to allow Barclays, the British bank, to pay a $298 million fine for conducting transactions with Cuba, Iran, Libya, Myanmar and Sudan in violation of United States trade sanctions. Barclays was discovered to have systematically disguised the movement of hundreds of millions of dollars through wire transfers that were stripped of the critical information required by law that would have enabled the world to know that for more than 10 years the bank was moving huge sums of money for enemy governments. Yet all federal prosecutors wanted to settle the problem was a small piece of the action.

"When Judge Emmet Sullivan of federal district court in Washington, who ultimately approved the deal with Barclays, asked the obvious question, “Why isn’t the government getting rough with these banks?” the remarkable response was that the government had investigated but couldn’t find anyone responsible."
[from an editorial in the 13 September 2010 New York Times]

My god!

The quotation above is from an extraordinary editorial in today’s (Monday) New York Times. I urge you to read it.

My wife was cussing the other night about America’s banks. She grew up in a respectable and proud banking family. Her grandfather, Lyman E. Wakefield, Sr., was pretty illustrious in the business as one of the founders of First Bank Corporation here in Minnesota. He served as the CEO of the Corporation for many years before his death in 1945. He started at the lowest possible level on the ladder when he was assigned to work as a clerk in a First Bank in Austin, Minnesota. His duties included janitorial responsibilities. Her father (Junior) went to work for the Corporation right after graduating from Dartmouth and put in hard-time in North Dakota and Montana before being called back to duties in St. Paul. He was one of the founders in the 70s of a creative bank and wealth management company (Resource Trust Company) that was eventually swallowed up by U.S. Trust and eventually by Bank of America.

“I feel so ashamed of America’s banking industry,” my wife said to me one evening. “Whatever happened to honest, conservative banking?”

Of course, I had no answer for her – only a consoling hug.

Slowly, over the years, the Republican Party won over a lot of people to the idea that American banking and investment companies were far too regulated. Restrictions and curbs were loosened and much more freedom and flexibility was given to the industry. Go back and reread the paragraphs from the New York Times quotation above. It was bad and it was dirty, but no one seems to know who was responsible.

Whatever happened to corporate responsibility? It isn’t that difficult to figure out! Barclays was responsible! Who was in control of Barclays at the time? Part of getting all that big time money to run a company like that is too take on the risks of something like this and to be responsible for it.

Let me be clear. The New York Times editorial is really an hard slap at federal law enforcement agencies for allowing so many banks to get away with this (and take a look at some of the incredible things that banks have pulled off by looking at the editorial).

We’ve got to get the financial industry under control in this nation and that means tougher and stiffer regulations and strict enforcement. It won’t happen under current Republican philosophies and politics. The price we’ll pay for reinstalling Republican control over the Congress will be devastating.

I’m not kidding!

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