In a hair-raising moment last Halloween, investors learned that hundreds of millions of dollars at MF Global mysteriously vanished. "Pop goes the evil," gone. That super-chilling circumstance wasn't an isolated event. There's a seemingly endless barrage of financial firm faults. We need a financial sector collective culture shift.
People are fed up with the Gordon Gekko "greed is good" mentality on Wall Street. Since then, Bank of America and 12 others that overcharged for debit and overdraft fees settled with the Department of Justice for hundreds of millions. Wells Fargo, with $175 million, settled regarding loan discrimination where minorities were charged higher fees and given higher loan rates than others.
Barclays tried to manipulate Libor — a benchmark interest rate impacting about everything purchased on credit. Peregrine Financial Group appears to have been a $200 millionish house of horrors. Goldman Sachs and Citi established "fake-out funds" where they pressed customers into investments, only to then place opposing bets (psyche!) for themselves.
Recently, we've learned JP Morgan and Wells accepted billions in federal mortgage relief funds, but didn't extend the assistance to consumers. It would be negative "from a profit perspective."
The numbers of frightening financial fiascoes are numerous. Some have become numb. Others want to bury their dough in the back yard. If it were just a few financial evil ghouls, we could blow it off as idiosyncratic, but it isn't; it's embedded in much of the financial sector. This shouldn't be the new normal.
What's to be done? Government can't regulate corporate culture. It can, however, help. Fines shouldn't be a cost of doing business. Do a crime, pay a hefty fine. If severe, do the time.
Firms themselves possess the real remedies. Compensation and bonus structures should transform, rewarding risk professionals instead of spine-tingling traders making cowboy-style gambles. The suits should offer a different corporate conscience, and have conviction in that charge. Captains of the Street should believe they are beholden to customers first, and for the long term — not just next quarter's statement.
Character and culture go together. It's no wonder many believe some firms have proven unworthy of trust. But the country's financial system is too important for the status quo to continue. It's time for honest play. It's time for a financial culture shift.
Bart Chilton is a commissioner on the U.S. Commodity Futures Trading Commission (www.cftc.gov) and author of "Ponzimonium: How Scam Artists Are Ripping Off America."