Elizabeth Warren Exposes Wall Street’s Top Banker

How is it that some people are able to aggressively promote the virtues of truth, transparency, and integrity within our financial system while others would seem to talk a good game but do not truly walk the walk? The key, in my mind, is that the former are not beholden to a constituency focused on short term maximization of profits and revenues. Who is distinguishing herself as a leader in this category? Elizabeth Warren, the current chair of the Congressional Oversight Panel to investigate the U.S. banking bailout.

Warren writes in today’s Wall Street Journal of Wall Street’s Race to the Bottom. This race is very much a function of implementing strategies and developing products that have served to maximize the short term revenues of these firms, while eroding the very foundation of the financial system itself.

Of particular interest in Warren’s article is her comment on Congressional efforts to develop a consumer finance protection effort and the response of Wall Street’s CEOs to this effort. Warren derisively singles out JP Morgan’s Jamie Dimon, Wall Street’s top banker. She writes:

The consumer agency is a watchdog that would root out gimmicks and traps and slim down paperwork, giving families a fighting chance to hang on to some of their money. So far, Wall Street CEOs seem determined to stop any kind of watchdog. They seem to think that they can run their businesses forever without our trust. This is a bad calculation.

It’s a bad calculation because shareholders suffer enormously from the long-term cost of the boom-and- bust cycles that accompany a poorly regulated market. J.P. Morgan CEO Jamie Dimon recently explained this brave new world, saying that crises should be expected “every five to seven years.”

He is wrong.

Dimon seems to accept the fact that markets and economies will tend to excess as a normal order of business. The fact is our economy and markets have ballooned every five to seven years since the late ’80s. But, is this normal? No. What drove the ballooning was the willingness and desire on behalf of both borrowers and lenders to implement excessive leverage across a wide array of asset classes, utilizing both sides of the balance sheet, and even moving off-balance sheet as well.

Wall Street pushed the leverage because it drove short term revenues.

Who failed?

1. Wall Street management.

2. Wall Street’s boards of directors.

3. Regulators of all stripes, including the SEC, FINRA, OCC (Office of the Comptroller of the Currency), FHFA (Federal Housing Finance Agency), and OTS (Office of Thrift Supervision).

4. Congressional oversight.

Warren is right. Dimon is wrong.

Blaming the market and economy for excesses in the natural ebb and flow of capital is shirking responsibility.

The aforementioned CEOs, boards, and regulators have a responsibility to protect and promote prudent and wise use of capital. If that practice hits short term profits, so be it. This obligatory prudence is their charge and it will promote long term fiscal health and free market capitalism.

When will Jamie Dimon, his fellow CEOs, the members of the boards, and the regulators have the balls to call for real transparency and take a stand for true capitalism in the process? America is waiting.

Thank you, Elizabeth Warren.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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1 Comment on Elizabeth Warren Exposes Wall Street’s Top Banker

  1. Wow, in just 833 words, Elizabeth Warren nails it AND them! How’d she sneak her way onto the WSJ Op Ed Page? Don’t they know her proposed reforms would cost Wall Street billions in lost revenues and put those billions back in the pockets of middle class families??

    Elizabeth Warren in 2012, we should be so lucky.

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