It is hard to believe now but there was a time before the credit crisis that the culture of investment banks had not always been linked to reckless greed and buccaneering.
Yes their darker dealings, regulatory failings and rising conflicts of interest were apparent to anyone with a passing familiarity with Wall Street or even the film of the same name. But there was also a positive side.
Good, clear analysis from author Michael Lewis on last night on 60 Minutes on how Wall Street is currently coining it, taking advantage of the largesse of government support for markets.
This is hardly new for FT readers but as always, but the writer of Liar’s Poker was in typically trenchant form on the banks:
In the Hitchhiker’s Guide to the Universe series, the character Zaphod Beeblebrox wore a nifty pair of “Joo Janta 200 Super-Chromatic Peril Sensitive Sunglasses”, which had been specially designed to help people develop a relaxed attitude to danger. At the first hint of trouble they turned totally black, preventing the wearer from seeing anything that might alarm.
The UK pension industry now seems to want to adopt the accounting equivalent. The National Association of Pension Funds has called for an overhaul of accounting rules that govern the disclosure of company retirement liabilities, arguing that these are intellectually flawed and partly to blame for the widespread closure of schemes.
The move is hugely significant, not only for the UK but around the globe. The UK led the big revolution in pension fund accounting over the past 10 years to value assets and liabilities of a scheme at a snapshot of current market values.
Sooner or later the law of averages has to apply to how Goldman Sachs deals with its conflicts of interest. More than most of its peers, Goldman has embraced a world where the lines between client and competitor often seem to be blurred.
But controversies such as the flurry of criticism over its dealings with Greece expose a vulnerability of the model.
In the new Goldman world, where trading has become the dominant revenue force, a client can be advised by the bank on a deal or on a trade. But at other times, the same client could find Goldman’s private equity arm bidding against it for an asset or it could find itself on the losing side of a trade with the bank.
Now John Mack, Morgan Stanley chairman, has undercut much of the banking industry’s attempts to justify big bonuses at a time of economic pain largely caused by the financial sector.
All through the current bank earnings season, banks have sought to defend bonuses by saying the ratio of compensation to overall revenues has been cut back. That might be true, but in absolute terms bonuses rose sharply on Wall Street while people were losing jobs on Main Street.
“I still don’t think the industry gets it,” Bloomberg reported the veteran banker as saying yesterday during an appearance in Charlotte, North Carolina (hat tip Huffington Post). “The issue is not structure, it is amount.”
Four down, more to come? The decision by Eric Daniels, Lloyds chief executive, to waive his bonus must have been inevitable after his peers Stephen Hester at RBS and John Varley and Bob Diamond at Barclays gave way and surrendered their payouts. The top bankers have taken a hit for the team.
These sacrifices should not be considered too cynically even if the alternative was public infamy. A multi-million pound hit to the bank account must hurt even the richest banker. But the trouble is that the pay restraint should have reached further down the ranks.
Whoever is advising Akio Toyoda, Toyota chief executive, on PR has not exactly covered themselves in glory. Toyota has widely been seen to be slow in responding to the unfolding safety disaster. That view is only going to be compounded by news that Mr Toyoda does not plan to appear before US congressional committees investigating the defects that have led the troubled Japanese automakers to recall of millions of vehicles. Mr Toyoda said Yoshimi Inaba, head of Toyota’s US business, would represent the company at the hearings.
This can only end badly for Toyota. It gives a bad impression that Toyota’s top management are ducking the issue or not taking it seriously enough or trying to hide something. Worse, it is an untenable position. If Mr Toyoda seeks to dodge the hearings, such will be the public backlash that he will inevitably be forced to backtrack and go to the hearings. If Toyota is serious about rebuilding its franchise in the US, Mr Toyoda has no alternative. He must go to Washington.
Everything happens in private equity in slow motion compared with public markets. The cycles of accountability are so extended. It takes a long time to raise funds, invest and then realise profits or losses that the deal disasters can take years to emerge.
In the old days, it was called PR. Now it is the narrative. A big theme in business culture in recent years has been the rise of corporate narrative – the push by companies to shape the story of their business and culture for internal and external audiences. It is a corporate recognition of the old Gabriel Garcia Márquez line that: “What matters in life is not what happens to you but what you remember and how you remember it.”