Bestseller

The Financial Crisis Inquiry Commission report just released has become a bestseller.

So much for inevitability

From the forthcoming Financial Crisis Inquiry Commission report, according to the New York Times:

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire

So, stuff doesn't just happen, after all.

Not quite out of the mud

In my last post I was letting Bill Daley, Obama's new chief of staff, off the hook somewhat for JP Morgan Chase's ethical lapses in the run up to the financial crisis. It has been pointed out to me that from May 2004 until he took on the corporate responsibility role in June 2007, Bill Daley was the Chairman for the same bank's Midwest Region, which means that part of the buck for irresponsible lending in that parish stopped with him.

Daley's corporate responsibility mantle was, in any event, a bit of a red herring. Part of his portfolio was government relations. While the bank was always a big political spender, the lobbying and political contributions watchdog OpenSecrets.org notes that on Bill Daley's watch JP Morgan Chase was:

a company that spent $5.8 million on federal lobbying -- and hired dozens of well-connected lobbyists -- during the first nine months of 2010. 

For more background on JP Morgan Chase's lobbying and political contributions go here.

Daley's role at JP Morgan Chase could come under further scrutiny when the Financial Crisis Inquiry Commission delivers its final report tomorrow, if the banks in general, JP Morgan Chase in particular and the money-backed friendliness between Wall Street and DC come in for criticism.

The New York Times appears to have received an advance look at the Commission's report.

Bill Daley's record on corporate responsibility

As previously noted, Bill Daley - President Obama's pick for chief of staff - was until last week head of corporate responsibility at JP Morgan Chase.

The chart above shows Covalence's EthicalQuote score for JP Morgan Chase over the last five years. The data is based on positive versus negative news items commenting on the bank's ethical performance. In a way, it is more a measure of the bank's PR than actual ethical performance, but clearly JP Morgan Chase's PR people have struggled to cope with its central role in generating the worst financial crisis since the Great Depression.

Does this chart reflect on Bill Daley's performance in the corporate responsibility role? Not as such. The damage attributable to debt securitization was already essentially done by the time he came on board, and must figure massively in the downward trend. Secondly, there is the question of how much influence would Daley have had in setting core strategy such as that continuing to lend irresponsibly or to securitize poor quality debt as high quality securities. Most bank corporate responsibility departments - judging by their corporate responsibility reports - have influence at best on the periphery of core banking practice.

It might be more interesting to track Daley's influence through the company's corporate responsibility reports, and through the accumulated evidence of lobbying expenditure and political contributions made by the bank. If I get a moment...

Scruples

President Obama's new Chief of Staff is currently the head of corporate responsibility at JPMorgan Chase & Co., a key player in the investment banking activities that helped create the global financial crisis.

Makes me think of the line from Paper Moon (this video at 3:10):

Moses Pray: I've got scruples too, ya know. You know what that is... scruples?

Addie Loggins: No, I don't know what it is but if you've got 'em, it's a sure bet they belong to somebody else! 

The World Justice Cup: USA vs Germany

Striking differences are becoming apparent in the way respective national justice systems are handling the question of responsibility for the global financial crisis.

In Germany, the former CEO over at German's IKB Deutsche Industriebank AG, Stefan Ortseifen, has been found guilty of market manipulation. He was found guilty of misleading the market about the true impact of the sub-prime crisis on his institution, effectively manipulating the market.

By contrast, in the USA, Goldman Sachs is said to be in negotiation with the Securities and Exchange Commission to obtain a settlement that would simultaneously eliminate the fraud lawsuit against the bank as well as some of the SEC’s lower-profile probes of the firm’s mortgage department.

As the Wall Street Journal reports:

The settlement idea was floated by Goldman, which is eager to end the bad publicity swirling around the New York company ever since the SEC sued it in April over a collateralized debt obligation called Abacus 2007-AC1, these people said. Combining a settlement of the Abacus lawsuit with a resolution of related SEC probes could soothe Goldman clients and investors, while shielding the firm from the release of information that could be used against Goldman in private litigation.

With Bhopal still fresh in my mind, it reminds me of other successful corporate strategies to buy themselves cheaply out of a whole lot of trouble.

Underscoring the importance of banking reform

If people haven't lobbied their lawmakers yet on banking reform, some articles from today you might want to read:

• Signs of Risky lending emerge
• Bank mortgage securities desks in hiring spree
• GOP sees political advantage opposing bank reform bill - Senator Bob Corker expresses doubt that Americans are still mad at Wall St

You may be unable to reach your lawmakers because they are out collecting contributions from the financial sector. Seriously.