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Janet Yellen Needs a Lesson in Culture

6 | By Shah Gilani

The interesting news coming out of Federal Reserve Chairwoman Janet Yellen’s Q&A yesterday was her response to a question about bad bank “culture.”

Apparently, it’s not the Fed’s concern.

Yellen said, “While changing the culture of organizations is not something that we can achieve through supervision, we will make sure that the banks that we supervise have appropriate compliance regimes in place.”

So far, the Fed’s “appropriate compliance regimes” let big banks get away with manipulating Libor, foreign exchange markets, metals markets and energy prices.

And that’s just a few of the big cheating regimes banks have lorded over.

Today I’ll reveal a few more of those cheats – and I’ll show you how the Fed, if it wanted to, could change bank culture with a single stroke of a pen…

It’s So Easy

Those “regimes” also created space for big banks to hide liabilities off their balance sheets. And they allowed banks to use derivatives and swaps to aid and abet Greece lying and cheating its way into the Economic and Monetary Union of the European Union (EMU) to exploit the eurozone to leverage itself up to the point of insolvency.

The Fed’s supervision should demand that banks identify, specifically, who broke or breaks what laws or regulations. And there should be a minimum mandatory sentencing regime in place to guarantee that violators are jailed.

How hard is that?

The criminal culture that pervades banks – and this isn’t an indictment of all bankers or the majority of bank employees – is mostly concentrated in the upper echelons of big banks where compensation is directly tied to revenue generation that sometimes spawns illegal profiteering schemes.

Most of the charges levied are against the banks themselves, not the responsible individuals – and they’re usually civil charges, not criminal charges.

That’s a good place to start when setting up a new supervision regime. The Fed and other regulatory agencies should have the power to levy criminal charges in conjunction with U.S. Justice Department prosecutors.

How hard is that?

In The Wall Street Journal’s Risk & Compliance Journal yesterday Gregory J. Millman wrote that “the talk about culture is too vague and lacks specific, practical calls to action that might lead to a different and better way of doing business.”

Millman’s article cites a speech last October by William Dudley, the president of the Federal Reserve Bank of New York, who said, “How will a firm know if it is making real progress? Not having to plead guilty to felony charges or being assessed large fines is a good start. Firms should also pay closer attention to how they and the industry are broadly viewed by the public.”

According to Millman’s piece, “Another regulator who has spoken and written on the need for culture change, Comptroller of the Currency Thomas J. Curry, remarked, ‘I’ve had some bank executives and directors say “I’m not a damn sociologist,” and I say we don’t expect you to be. We are really looking at this from a risk management standpoint. We’re really talking about accountability and how the CEO and management drive that home.'”

The good news for bank executives is they don’t need to be sociologists or culture club do-gooders if they don’t want to be.

All these bankers have to do is be willing to go to jail – of, if they have no direct responsibility or knowledge of lawbreaking, conning or scheming going on under them, they should give up suspected perps and be willing to have their own compensation clawed back if they benefited from their underlings’ crimes.

How hard is that?

P.S. I encourage you all to “like” and “follow” me on Facebook and Twitter. Once you’re there, we’ll work together to uncover Wall Street’s latest debaucheries – and then we’ll bank some sky-high profits.

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6 Responses to Janet Yellen Needs a Lesson in Culture

  1. Hoonahman says:

    Seriously. You really expect one Mafia family to police another Mafia family? The question should not be “How hard is that?”‘ but ” How realistic is that?” And the answer is moot, because the Federal Reserve is itself a private bank, owned by some of the very same corrupt banks you expect the Fed to police? Come on! The Fed and Banksters are two wings of the same vulture. The bankers will get their just rewards after the whole system crashes and the “peasants with pitchforks” get their hands on the slime balls.

  2. William Fenton says:

    More of the same; “We see the enemy, we know the enemy; but we do nothing. the enemy is SELF”

  3. Dennis Jenkinson says:

    I like the “peasants with pitchforks” comment but let`s be honest. Well placed bribes have kept the system going and will continue to do so. Who will be prepared to be directly responsible for a banking crash that will make the 1929 Depression look like a Sunday School picnic? Those that don`t take a bribe will simply be made to walk the plank off some nice high building.

  4. douglas says:

    You don’t’ have to have a nuclear bomb drop to create genocide. Under our current system everyone knows there are far to many people in the world to feed, including America. The very people we scream about have their underground fortresses, or islands stocked with everything required to last a very, very long time. And to think, they built it with your money. However, with that being said it really has never been about money, but survival of the most informed and smartest. Yes, civil wars are breaking out all around us, but we are to blind to acknowledge the inevitable, and no country will be exempt. Some of us will also survive the purge, and when the rats come out of their hole, start the same charade all over again. That is the human condition.

  5. Chris Frederisen says:

    I don’t see where Yellen can do all that much with the stroke of a pen.

    “The Fed and other regulatory agencies should have the power to levy criminal charges in conjunction with U.S. Justice Department prosecutors.”

    That power would have to come from Congress, and with the present Congress, good luck…

    Those of us who agree that the Banking system should be better regulated should decide whether the Fed can be a part of the solution or is by nature part of the problem. I for one, think that despite its genesis, it should be part of the solution. The problem today is a Congress that likes the problem, or rather sees the situation as no problem at all.

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