Robert Diamond, who just walked away from a disgraced Barclays bank with a 2-million-pound kiss-off, is really angry. And distressed.
Diamond’s problem? Nobody, including most members of Britain’s Parliament, believes him when he says he’s dumb. The former Barclays boss (and by former, I mean until last week—when the UK learned that his bank, as was known or suspected for years, including by Diamond himself, had been manipulating key international interest rates) is, according to himself, “dismayed” that his word isn’t his … um … bond. He worries, he says, about the “terribly unfair impact on my reputation.” He swears he felt “physically sick” on reading e-mails from his own traders, indicating they had rigged the international borrowing and lending system.
“As soon as we recognized [the problem] three years ago,” Diamond recalled during testimony, “we said let’s get to the bottom of this.”
Now, in the normal competitive world of capitalism, getting “to the bottom of this” doesn’t necessarily take three years—not when times are good, anyway. Say you’re a bank: you found a great investment opportunity in the Caymans, or a wealthy pigeon anxious to sock his cash and Impressionists in your vaults rather than report them to the tax authorities—would it take you very long to wrangle these targets? Probably not. In the normal capitalist world, vaunting your stupidity, procrastination, and incompetence doesn’t usually get you a job as bank teller, or, for that matter, a McFlipper.
But during times of economic stress, big-time international banking doesn’t, as the rest of us have long learned, run by the harsh Darwinian rules that govern the lower orders. JPMorgan CEO Jamie Dimon, for instance, was the highest paid corporate chieftain in the United States last year, earning more than $21 million in cash and stock.
Was he worth every penny? Yes, if you consider what he had to do to earn his keep: hide $6 billion in JPMorgan losses, the result of an errant trade in derivatives by a person Dimon couldn’t control. Fancy footwork and accounting tricks aren’t just well-honed Hollywood assets. Unlike Diamond, Dimon still has a job.
In other words, banking is kind of a rich man’s socialist paradise. Lose billions because you had no idea what your underling was doing in derivatives? Nobody’s really going to hold your incompetence against you. Feel the current interest rates are, as Diamond would say, “terribly unfair,” when you’re trying to raise funds privately in the Middle East? Simply change them singlehandedly so they become a lot fairer. But not to the folks in the Middle East. To you. Get caught? You’ll be fined maybe 290 million pounds, which is the Libor equivalent of a parking ticket.
The attorneys general of Connecticut and New York are currently investigating Barclays and its whimsical way with Libor (some of Barclays traders are based in New York—and any number of banks have offices in Connecticut). You see, no one really believes the interest rate setting allegations either began or ended with one bank, just as no one is honestly surprised at the financial tricks deployed by JPMorgan to hide its huge losses. We’re talking here about a rich man’s special ed world, where failure is coddled.
In the bankers’ socialist Eden, stuff that would normally land you in prison gets you a bonus. Hard work, success, a balance sheet really and honestly in the black—those are the dusty dreams of the lower classes, a nice read for the history books, but essentially not worth the effort.
Photo Credit: David Jones