What determines a hero? Some noble act that compels a person to become greater than they imagined they could be –to go beyond the ordinary to become extraordinary.
Plato wrote, “A hero is born among a hundred, a wise man is found among a thousand, but an accomplished one might not be found even among a hundred thousand men.”
If you looked at a crowd of 100 firefighters, you might find many heroes. If you examined a large investment bank of 30,000 employees, you might find few or none.
Typically heroes go into heroic trades. Wall Street is not one of these. There are far too few heroes in the world of high finance. The industry is full of people who want to make the big bucks, the fast bucks—at any cost. But are there any heroes on Wall Street?
Perhaps surprisingly, there are a few. Maybe not heroes like a firefighter or medic on a battlefield, perhaps just persons of quality and courage.
Over the past decade leading to our financial system’s collapse, a few errant professionals stand out—“errant” meaning off the beaten track.
A top managing director, “Joe,” at a major firm consistently stood up at every mortgage division meeting and voiced his objections to risky subprime. At the expense of his own compensation, he insisted, “We shouldn’t be securitizing these loans; the default rates will be high.” “Sit down.” they told him at every meeting and each time he stood up. After the collapse of his firm, he was tapped by another firm to head their securities division.
There was the Lehman commercial real-estate manager who warned that firm was growing too large, too fast. “We used to know each other’s families when I started here. Now there is a sea of strangers all posting profits for their immediate gain.” Referring to executive compensation, he famously remarked, “Isn’t $3m enough? Do we really need $6m?”
There was another Lehman analyst who warned that top execs didn’t understand the dangerous risks of derivatives. He encouraged management to school themselves and was fired for his effort.
The structured finance guy “Jason,” who shocked his team by taking a bad trade off the books. A bond quickly soured causing his pension fund client to suffer huge losses. When the client called him to complain about his perceived dishonesty, he said, “You son of a bitch, you f***ed me.” The bond salesman responded, “Tear up the ticket.” “What?” asked the incredulous investor. “You heard me. Tear up the ticket. I don’t want to make money this way.”
The senior manager at another major firm routinely used responsible risk measures to underwrite loans and credit. He was replaced for his caution by ex-Lehman cowboys after the financial system collapsed.
The Ivy League analyst who warned the head mortgage trader that the loans he was trading were faulty. He was repeatedly ignored and left to go to another firm that might value his view more. The new firm did value his view and substantially diminished their future losses.
A PhD quant at Wachovia questioned the bank’s most costly deals. Before the purchase of the soon-to-fail bucket shop lender Golden West, Wachovia asked the quant to finagle the ”numbers” so the deal would go through. The analyst refused saying the company was loaded with faulty loans and not worth the purchase price. Wachovia managers ignored his counsel and went ahead with the doomed acquisition. The analyst left the firm citing untenable ethics violations as Wachovia crumbled under the weight of the new merger.
The Merrill Lynch top equity manager that believed people were more important than profits. When asked why he trusted his people so much he said, “I hire guys that hate to lose, but don’t need to win.” Unfortunately for him, his counterparts in fixed income didn’t feel the same way.
The star distressed debt manager who promised that no matter what, he would never “screw” a client. He was often met with great opposition from upper management for his integrity, but continued to stand his ground.
Then there are those individuals of some conscience who can’t quite find the courage to stand up. Glen, a CDO trader at one of the big commercial banks, was told by his employers to ramp up securitizing bad loans. When he objected, his superiors said, “Either you do it or we get someone else.” The father of four opted to stick it out and continued flooding the market with toxic debt. Glen complained of many dark nights of the soul. “I haven’t slept in months,” he said in the weeks prior to his firm’s collapse. He is most likely “sleeping fine” these days since his income has been securitized by the U.S. government.
Unfortunately, for insiders and outsiders, there are many more “Glens” and far less “Joes and Jasons” to be found in the financial industry. The Courage to Stand Up is left for the rare few. The important thing however, is they do exist.
For the rest of the mere mortals, those with a conscience but without the conviction to follow through on their beliefs like Glen, find that fighting the tide of unethical behavior in the financial industry is an impossible task. There is virtually no support for it. Quite the contrary. More often than not there is aggressive opposition to it.
Ethics on Wall Street often amounts to a ten minute survey, once a quarter, over a computer screen. Too little, too late, too shocking. There are no real ethics endemic to Wall Street that any normal working person would recognize. The industry is predicated upon getting over and getting even.
Yet there are thousands (really) of individuals who are otherwise honorable in their personal lives; they are decent friends and spouses, dedicated philanthropists, and pillars of their community. They secretly yearn for the business of money to be founded on more honor and less scam. One former head of a now defunct investment bank said, “85% of the business would work for less if they knew that the industry and senior management supported them in ethical practices.” But they don’t. Top Brass at big and small firms not only don’t support it, they don’t care to. Are they all without character? Or is it simply that in the words of one disheartened hedge fund partner, “the game is fixed. We can’t change it even if we wanted to.” (He wants to.)
Managers are concerned with being outmaneuvered by rivals. They can’t chance ignoring the rules of an entire industry and be left in the dust. It would take a brave firm indeed to be the first to step up and out and say, “We are changing the rules of finance and producing value, not fluff. “
If senior management doesn’t set new boundaries, how can we expect the supporting troops to do so? In war, you are only as brave as your commander. It is up to the generals to improve the battlefield conditions and to establish the rules of the game.
So what do we do to change a system that is believed to be “fixed?” The Big Buys at the top of the firms must find the courage (or simple savvy) to stand up and do things differently. They have to take matters in their own hands and bring back prestige and honor to the business of finance. Waiting for Congress to find its Cahungas could take years or even decades.
Yet our lawmakers should not be allowed to continue to put their heads in the sand. It is up to our lawmakers to stem the tide of outsized corruption and begin to make laws in the bond markets that mirror those in the equity markets. The culture of excess and deceit is flourishing again in the financial industry for want of a sound replacement. In order for any constructive change to take place in the financial industry, an environment of ethical business must be created to support it.
Who will take the first plunge to right the wrongs of the past? Who will be the first maverick firm to bring “real ethics” (not perfunctory “best practice” surveys) to the industry?
Those questions are unanswered as we review the landscape of national and global economic destruction and read the headlines of record bonuses earmarked for the most flagrant ethics violators.
One person stands out among the fray. He is attempting to civilize an industry that does not wish to be civilized. He is bringing “ethics” to an industry that often mistakes pushing the edge of the law for “best practices.” He believes he can bring back in vogue the once Holy Grail of “My Word is My Bond.”
He believes it is possible to create a kinder, gentler Wall Street, because he claims, “There are a lot of good ‘guys’ in the business.” I don’t know–maybe there are. I remain as skeptical as the rest of America.
That one person is Peter Ressler, the Sage of Wall Street and one of the co-founders of Good Business International, Inc. He is a business ethics expert. Peter writes a column for GoodB called, “Ressler on the Street.”
Peter has created an innovative Ethics Program specifically geared to financial institutions. The program is unlike anything else out there- not software, not surveys, not “best practices,” not leadership coaching. The program addresses real ethical challenges faced by thousands of industry professionals and provides solutions for bridging the gap between ethics and profits.
Ironically, Peter is both a volunteer firefighter and a 30 year Wall Street veteran. He is that one in a hundred, and perhaps that one in one hundred thousand. If we don’t have many heroes in the financial industry, at least we have a few. If we don’t have a few, at the very least we have one.
A hero, according to mythologist Joseph Campbell, is one who gives his or her life over “to something bigger than oneself.” Perhaps, we can’t all be heroes. Yet each of us can find the courage somewhere deep in our souls to stand up when we see a wrong we can right. Especially since we now understand the high cost of turning the other way.
Ethics on Wall Street should not be an oxymoron. It is up to all of us, within the industry and without, to answer the call of a more honorable and just financial system. Let the process begin…
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