OP-ED | Gordon Gekko Lives
by Sarah Darer Littman | May 17, 2012 10:27pm
(10) Comments | Commenting has expired
Posted to: Opinion
Last weekend I accompanied my significant other to his business school reunion at Wharton. During one of the “Thought Leader” breakout sessions, we learned from Prof. Don Huesman, director of the Wharton Innovation Group, that immediately following the 2008 meltdown, the faculty met and posed the question: “Are we responsible or are we irrelevant?”
Given Wall Street’s failure to properly analyze and assess risk, Wharton, as one of the top business schools in the country, decided to go with the assumption that it bore some responsibility. As such, they’ve been revising the curriculum to ensure that future graduates are better prepared and more responsible.
As we sat outside Jon M. Huntsman Hall, I mentioned to boyfriend how impressed I was that unlike the wider business community, the school appeared to have used the 2008 debacle as an opportunity for introspection and accountability.
He laughed. A graduate of the Class of ‘92, he entered when Wharton was clouded by the indictment of one of the school’s best-known graduates — Michael Milken, the “Junk Bond King” of the 80’s — on 98 charges of racketeering and fraud. Milken’s indictment, combined with other mismanagement, sent the firm of Drexel Burnham Lambert, where Milken headed the high-yield department, into Chapter 11 a year later.
At the time of the bankruptcy, more than 5,000 employees lost their jobs. Milken served only two years of a 10-year prison sentence.
When my boyfriend started at Wharton, a hastily arranged ethics course had been added to the curriculum in response to the Milken affair, scheduled opposite the Thursday afternoon pub hour. This was a temporary fix until the faculty could build ethics into the curriculum on a more permanent basis.
I now share my my boyfriend’s cynicism after going to the school’s website and finding that Milken is lauded as one of the 125 Influential People and Ideas celebrating the inception of the business school.
Seriously, Wharton?
According to the school’s own PR, since being founded it “has graduated nearly 100,000 business leaders.” Out of all those high-powered successful people they couldn’t find one to replace the guy who served jailtime for fraud and racketeering? Perhaps even more disturbing, in Milken’s profile, they’ve white-washed his crime to one mild and ambiguous sentence: “Milken became a magnet for controversy in the late 1980s.”
Is it any wonder that graduates — not to mention the rest of us — get a mixed message? If we’re talking risk/reward, what are 98 counts of fraud and racketeering if you’re only going to spend 22 months in prison, walk away with $700 million, and come away with your alma mater lauding you as one of its stellar alumni? Gordon Gekko is alive and well and living in America, folks.
It was an interesting time to be contemplating this because yet another bank, this time JP Morgan Chase, had just lost more than $3 billion on a large position taken by what was supposed to be its risk mitigation unit.
Chase’s CEO, Jamie Dimon, has been an outspoken critic of the proposed Volcker Rule of the Dodd-Frank Act, which restricts proprietary trading by banks with federally insured deposits, even going so far as to say that “Volcker doesn’t understand capital markets.” He met with Treasury Secretary Timothy Geithner on March 6 to discuss the issue, according to records recently released after prompting by the Sunlight Foundation. Dimon is also one of the three bankers who sit on the Board of the New York Federal Reserve Board, the organization that allegedly supervises the banks.
Why do we continue to let the foxes guard the henhouse?
Thanks to the Supreme Court’s disastrous Citizen United decision, money speaks louder than ever in the political process. If we are not a complete plutocracy yet, we are well on the way. If legislatures continue to pass laws restricting votes, the poor and disadvantaged will lose their only voice.
Both parties have their snouts in the trough, but if we don’t want to see more of the same, we have to pin down our 2012 candidates. Like most voters without multiple zeros in their bank account, I’m sick to death of “meet the new boss, same as the old boss” politics.
Tags: Gordon Gekko, Sarah Darer Littman, Wharton, JP Morgan Chase, Volcker, dh
(10) Comments
posted by: brutus2011 | May 18, 2012 1:43pm
Ms. Littman offers another interesting viewpoint.
I could not help thinking of the current school reform movement and the push to privatize public schools.
It seems like finagling back-room deals, shameless propaganda, a “if you can’t dazzle ‘em with brilliance, then baffle them with bulls^*t” mentality, and lots of cash to lobby legislatures, is the way of education managers as well.
Gordon Gekko indeed lives on.
posted by: GoatBoyPHD | May 19, 2012 9:05am
If you were President Obama would you want Jon Corzine acting as a fund raiser bundler for your 2012 campaign?
In the wake of the junk bond fiasco there were some criminal charges, there were some new regulations and the FASB Board did pass new auditing standards.
This time around there’s the feeling that the whole exercise is futile. Insider Trading? Ok. Those guys get some jail time.
Irresponsible and illegal hedging? No one seems to much care. Certainly not the FASB. The joke that was the auditing engagement is now even more laughable. Derivatives risk and internal controls are too complex for mere auditors to properly quantify as the story goes. After all, that’s why auditors are Accountants and not Finance majors.
Dimon is the typical Teflon executive. I was shocked to see his loyalists on CNBC actually disparage the man and his facile reaction.
Everyone knows there are problems with technology and speed trading and the rapid development of increasingly complex derivative vehicles. That doesn’t mean anything will be done.
When’s the next Flash Crash?
posted by: saramerica | May 20, 2012 10:07am
I disagree that “no-one seems to care much.” The Occupy Wall Street movement was a sign that people do care. But particularly post Citizens United, the reps in DC inhabit their Bubble on the Potomac and listen to the people who can contribute the most to their next campaign. Money is the only thing that appears to have a voice in the United States in the 21st Century. The corporate folks tell us that we have to hold teachers accountable and single mothers accountable. But when they have major screw-ups? We’re lucky if there’s a slap on the wrist. White collar crime is different - just look at the good folks at Wharton. A big enough donation will diminish your felony down to a “controversy.”
posted by: gutbomb86 | May 20, 2012 2:18pm
The next flash crash is likely going to occur when the fiber-optic cable is completed between New York and London, enabling a small group of firms to trade 5 milli-seconds faster than the rest of the market, according to the top item in this recent Advocate piece.
posted by: GoatBoyPHD | May 20, 2012 3:10pm
Occupy is meaningless.
When the FASB and SEC step up, when the CPA profession steps up, then we have decision makers who care. Until then the oversight will continue to rest on retroactive standards that fail to address rapidly evolving markets.
At least Enron cost one of the Big 6 auditors their place at the table.
Citizen’s United? Isn’t that Democratic code for “Here’s out public record of corruption and special interest owners and masters. Don’t touch it corporate America!”
The Open Secrets top 100 Heavy Hitters list from 1989-2010.
http://www.opensecrets.org/orgs/list.php
And who are the top 20 heavy hitters? Dominated by Democratic leaning groups and corrupt public sector unions.
You say the Citizens United decision? I say the Emily’s List decision was the set up.
It’s all corporate. Let’s face it: the non-profit is the new corporate special interest mudslinger acting as hired guns.
posted by: Reasonable | May 20, 2012 3:50pm
Wharton School grad, and former Derby Mayor, and state representative Alan Schlesinger, was treated badly by the Republican hierarchy, when he made a run for a U. S. Senate seat. The clincher for his defeat was when former Pres.George W. Bush, kissed opposing candidate Joseph Lieberman on national TV, “to ad insult to injury.”
george
w. Bush
posted by: newview | May 21, 2012 8:01am
HA!! 2-3 Billion is nothing compared to the real indebtedness JPM is holding. This initial figure is going to double or triple soon, and that is BEFORE “they” call in the naked short silver position JPM holds. That number will make the current untold billions look like a 2-year old’s college fund. My advice to you…and I’ve been saying it for months…review your portfolios…and get out of anything JPM as soon as possible. DO NOT DELAY! Down 18% in a week…cut your losses and flee!
posted by: sightover | May 21, 2012 10:56am
Besides shock (!) that people sometimes act unethically, a passing shot at Citizens United (corporations’ limited liability allowed for our modern lifestyle), and a call for more voter fraud, what exactly is this author’s point?
posted by: saramerica | May 22, 2012 8:02am
“This author’s” point is that if we don’t start prosecuting white collar crime as seriously as we do the crimes of the folks with less zeros in their bank accounts, nothing is going to change. And I’m not sure where in this piece you saw a call for more “voter fraud” except in your heated imagination.