The conventional wisdom is that Wall Street has got off Scot free – that those responsible for the financial crisis never had to atone for their wrongdoing. The conventional wisdom is, in other words, greed pays.
The conventional wisdom is right – but only to a point. It’s true that most individuals who played a part in the debacle – whether on Wall Street, or in Washington, or along any of the other corridors of power – never had to pay a personal price for the errors of their ways. But it’s also true that some in the financial services industry have been, will be penalized for their voracious appetites.
I have no pity for the industry. Still, let’s get real. During any given week – during the last one, for example – it’s plain to see financial services is paying the piper, at least to a degree. Here three recent examples:
First, Morgan Stanley announced it would eliminate some 1,600 jobs. CEO James Gorman had cautioned some months ago that the entire industry was suffering from “way too much capacity,” and that compensation that was “way too high.” The cull conveyed this week was on top of one last year, which already cost some 4,000 Morgan Stanley their jobs. Moreover Morgan Stanley is hardly alone. Last year Citigroup said it would eliminate 11,000 jobs, and UBS said it would cut 10,000.
Not incidentally, among those hardest hit are leaders and managers high in earnings and high on the corporate ladder. Wall Street veterans are particularly vulnerable, with banks and securities firms looking to cut costs by bringing in younger, less-experienced, and cheaper employees.
Second, the legendarily successful hedge-fund group SAC, led by legendarily successful trader and founder Steven A. Cohen, let it be known, if not yet publicly, that it was bracing itself for monstrously large client withdrawals, possibly totaling some 17% of assets from outside investors. Why has this threat come to pass? Not because of a sudden rash of poor performance. Rather it is that SAC recently has been an obvious target of government investigators, ready to pounce on charges of insider trading. In fact, some lower level types at SAC have already been charged, in hopes of, among other things, ultimately snagging, nailing, Cohen himself.
Finally there’s this nasty message – or, if you prefer, cautionary note – from the CEO of UBS (formerly Union Bank of Switzerland), Andrea Orcel. Orcel warned that bankers were too “arrogant.” They were “too self-convinced that things were correct they way they were – I think the industry has to change.” He added that UBS was itself now “trying to recover the honor and standing that the organization had in the past.”
So why now Orcel’s incantation? Maybe, just maybe, it’s because UBS has had a dreadful time of it in recent years: putrid publicity, serious scandals, and large losses.
I’m not claiming that there has been punishment enough. All I’m saying is that to insist that Wall Street has got off Scot-free is to insist wrong.