What a week. Not that we haven’t gotten accustomed to news of scandal upon scandal among our business leaders and the frequently useless regulators who are supposed to be keeping business in line. This week, though, was a doozey.
Though it was mostly a week of in-your-face reminders of ethical lapses and outright wrongdoing by movers and shakers, it began with news from New York City officials that 70 students at an elite high school had been involved in a cheating scandal.
In my column yesterday for The Huffington Post, I said it was little surprise that kids would be cheaters when cheating is all they see around them.
News of the student cheating scandal was quickly followed by word of serious problems among their grown-up role models in business and government.
– Wells Fargo – while denying it had done anything wrong — paid $175 million to settle accusations that it had charged blacks and Latinos higher interest rates and fees on mortgages.
– After attempting suicide, the founder of the collapsed brokerage firm Peregrine Financial Group said that, over a period of nearly 20 years, he’d defrauded clients out of more than $100 million.
–JP Morgan Chase & Co.’s CEO Jamie Dimon told investors that what had begun as nothing more than a “tempest in a teapot,” and then progressed to a $2 billion loss, was now in fact a $5.8 billion loss from derivatives trading gone sour. On top of that, it looks like traders at JP Morgan had been trying to hide their misguided trades.
– Trust me, this list is far from all-inclusive, but another highlight – or lowlight – of the week is the jaw-dropping trove of documents that The Federal Reserve Bank of New York released on Friday showing some of what they knew about the rigging of Libor – a key benchmark interest rate – back in 2007.
I recommend you take a few minutes to go through the amazing cache of Fed documents on your own, but if you ever wondered how much regulators might have to learn to catch up with the regulated, consider this telephone exchange between a Barclays Bank guy and an employee at the New York Fed: After explaining to the Fed employee which buttons to push on her Bloomberg terminal, the Fed woman, whose name is Peggy, winds up looking at the same screen of Libor rates that the Barclays guy is looking at. This, it appears, is not something she’d previously known how to do. “Oooh wow!!” she says. “Okay. Oh this is great.”
How did we get to this point? Here’s some weekend reading.
– We’ve let business leaders shirk responsibility by giving them a way to stay out of the harsh glare of court. Here’s a look at how arbitration has – for 20 years – let business off the hook.
– We have regulations we don’t enforce.
– We put the wrong people on pedestals – and when I say “we,” I mean it. People in my business ought to knock it off with all the stupid “best CEO” and “most-admired companies lists.”
– We are too easily sucked in to the dumb idea that we need to lower our standards to compete with other countries.
– We pick the wrong regulators.
– And we sit back and do nothing even after we see evidence that our regulators are falling down on the job.
It wasn’t all bad this week. At least the Yankees won last night.