Will Wall Street ever apologize?
When former White House counterterrorism adviser Richard Clarke testified to the 9/11 Commission, he used his moment in the spotlight to deliver a heartfelt mea culpa for his role in not preventing the terrorist attacks. "Your government failed you, and I failed you," he told the families of the victims. "I would ask, once all the facts are out, for your understanding and forgiveness."
Compare that to Goldman Sachs CEO Lloyd Blankfein facing the Senate Permanent Subcommittee on Investigations this April. Only weeks after the SEC sued Goldman, alleging that it had acted fraudulently by failing to disclose material facts to a client in connection with a CDO (collateralized debt obligation) transaction, Blankfein dug in his heels and refused to acknowledge that Goldman's relationships with its clients -- or counterparties, in his parlance -- were anything other than impeccable, or that the firm played any role in the financial crisis. "I heard nothing today that makes me think anything went wrong," Blankfein insisted.
That's actually a step back from Blankfein's rather feeble efforts to deliver an apology late last year. Some people, he told a forum for corporate directors last November, feel "that there's some meaningful things where may have -- not may have, certainly our industry is responsible for things. And we're a leader in our industry, and we participated in things that were clearly wrong, and we have reasons to regret and apologize for." What things? Blankfein didn't elaborate.
Perhaps success means never having to apologize coherently. But even Alan Schwartz and Jimmy Cayne of Bear Stearns and Dick Fuld of Lehman Brothers have failed to offer their clients and former employees convincing expressions of their sadness and regret that any errors led to the demise of both venerable investment banks. Meanwhile, to hear Citigroup's Bob Rubin testify to the Financial Crisis Inquiry Commission, he was simply an ordinary board member. That claim flies in the face of dozens of current and former Citigroup bankers who vividly recall him sitting in on meetings and inquiring how the bank was going to meet or exceed its quarterly earnings targets.
Just as Rubin's claims of being too far away from the action to understand the magnitude of the risks Citigroup was running struck FCIC chairman Phil Angelides as disingenuous - "You were not a garden variety board member," Angelides scolded -- so the lack of any kind of expression of regret continues to fuel populist outrage in Washington and on Main Street.
It's not surprising: even as the profits at many Wall Street firms -- Goldman Sachs among them -- have rebounded, the average American is still struggling to cope with the consequences of the financial crisis. Bankers aren't the sole culprits, but their too-glib denials of responsibility and the occasional vague and waffling expression of regret don't go far enough to deflect anger. No one expects Blankfein and his peers to commit ritual suicide to express contrition, but even some former Goldman Sachs partners wish it were possible for the firm's current leadership to lead the industry not only in generating profits but in accepting a kind of accountability.
Part of the problem is that many Wall Streeters don't believe they did anything wrong. They were following the logic of their business: to do deals and make money, in the conviction that if they backed away from a transaction, one of their rivals would swoop in and pick up the fees instead. Clients like German bank IKB, the purchaser of the Abacus securities at the heart of the SEC's fraud case, are simply "counterparties" -- grownups, sophisticated investors able to do their own due diligence when it comes to the investment they make or trades they choose to conduct. And that perception isn't too far out of sync with reality: Wall Street has no fiduciary duty to most of its clients of the kind that it has toward its shareholders.
For now, we may have to content ourselves with comments like John Mack's infamous comment last winter that more regulation may be needed on Wall Street because "we cannot control ourselves." But until the multitude of lawsuits filed by shareholders and regulators against nearly every major firm and there are resolved, an apology will be viewed by those plaintiffs as tantamount to an admission of guilt.
Still, it should be galling for Wall Street, which has long crowed about its dominance over the City, London's financial district, to realize that in the City there's at least one banker who has managed to do what no one at Goldman has managed to as yet: deliver a heartfelt apology, a la Richard Clarke.
Johnny Cameron, former head of investment banking at Royal Bank of Scotland Group, announced as part of a deal with British regulators that he had agreed never to work in the financial services industry again and that "I recognize that it is appropriate that I take my share of responsibility." Don't worry, Mr. Cameron; there's a lot more left to go around.
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