Never Having to Say You’re Sorry

Why Wall Street has a hard time with contrition

“Every great general regrets the loss of even one of his soldiers,” the chief of communications for a major New York finance firm said this week. “But the loss of soldiers is inevitable.”

Wall Street’s regret for its role in the financial crisis—what contrition looks like, how it’s expressed, why it exists in the first place, and then why it doesn’t—has come to the forefront this week. That’s thanks to sorely differing performances at the Financial Crisis Inquiry Commission from two former Citigroup executives on April 8, not to mention statements from former Federal Reserve chairman Alan Greenspan and a rare shareholder letter from Goldman Sachs the day before.

“Let me start by saying I’m sorry. I’m sorry the financial crisis has had such a devastating impact for our country,” Chuck Prince, Citi’s former chief executive, said. “I’m sorry about the millions of people, average Americans, who lost their homes.”

But Bob Rubin, the former chairman of the executive committee board at the same bank (where he made more than $100 million), said he did not have much control at Citi. What’s more, he said, nearly everyone else failed to foresee the crisis, too. His defiance, and Prince’s careful explanation of what went wrong and how it can change, are two prototypes for how Wall Street looks at its past.

Now that the Dow closed above 11,000 for the first time in 18 months on April 12, is there a point to forcing leading executives to explain past mistakes? “And what if, after all that vitriol,” The New York Times’ Andrew Ross Sorkin wrote, naming skeptical economists like Nouriel Roubini, Joseph Stiglitz and Times columnist Paul Krugman, who the next day explained why an apology was in order, “it turned out that taxpayers might actually lose nothing, or even make a profit? Could it be?” The message from Wall Street, in other words: Move along.

Mild semi-regret is more common than non-apologies and passionate atonement. On the day before the Citibank testimony, Greenspan said he’d been wrong 30 percent of the time, but would not elaborate, and he opened his remarks by blaming foreign historic events, like the Berlin Wall’s fall, on where we are today.

In November, likewise, Goldman Sachs chief Lloyd Blankfein said the firm had “participated in things that were clearly wrong and we have reasons to regret and apologize for,” but did not explain what the things or the reasons were. On the morning of Greenspan’s speech, Goldman released a letter to shareholders that said the bank did not “‘bet against’ our clients.”

On April 9, the investigative newsroom ProPublica released a massive profile of the hedge fund Magnetar, a hedge fund that created and bet against massive bundles of subprime mortgage investments that soon became worthless. Responding to that report, the hedge fund denied that it had any intent or reason to believe that its subprime securities were built to fail.

The next day, Frank Rich’s column was headlined “No One Is to Blame for Anything.” But, to be fair, there have been dozens of apologies from financiers, just odd ones. Wall Street, after all, has become savvier since William Vanderbilt’s “the public be damned” and J.P. Morgan’s “I owe the public nothing.”

“We’ve said repeatedly that we are disappointed in our performance and that it wasn’t up to our standards,” Ed Sweeney, spokesperson for the credit-rating agency S&P, said this week. “I think, frankly, that people—I’m trying to think of the word here—ratings are only one piece of the investment-decision-making process, and the investment-research process, and that’s how we think they should be used.”

“Among our disappointments has been the ratings of mortgage-backed securities issued between 2005 and 2007,” S&P president Deven Sharma told Congress in September. “Over the course of 150 years, however, our track record is something in which our people can take pride.”

The Morgan Stanley chairman John Mack stands alone as the only big Wall Street boss who has consistently said otherwise, though he stepped down this year as CEO.

JPMorgan’s chief, Jamie Dimon, even if he doesn’t have a reputation for unabashed pride, has not been as forthcoming. “We did make mistakes,” he said at the first crisis commission hearing in January, “and there were things we could have done better.”

“What should we apologize for?” the New York Post wrote the next day, quoting a JPMorgan insider. “I’ll tell you this much, we do a lot more for America than Congress does.”

To the extent that Wall Street apologizes, with a few exceptions, it gives the sense that the crisis was caused by a regrettable combination of rivals’ incompetence, some bad judgment that’s since been remedied, a great deal of historic bad luck and gruesome regulatory failures that make them look relatively blameless. Life goes on.

James Kwak, who wrote the book 13 Bankers (Tantor Media, 2010) with the former International Monetary Fund chief economist Simon Johnson, said that’s part of an “intellectual cover-up.” What he means is that when Rubin or Greenspan describes the crisis as an unforeseeable natural disaster, despite the evidence to the contrary, it distracts from the man-made causes.

“There was a conscious intention to break down the regulatory system and to make sure that the banks were essentially allowed to do whatever they wanted to do, especially when it came to new products,” he said. “The second level of intention, I think, is people consciously pushing the rules as hard as they could.”

Barbara Kellerman, a lecturer at Harvard’s John F. Kennedy School of Government who has written about leaders’ contrition, says that what’s important about apologies are timeliness and sincerity, and what comes along with them. “Nobody begrudges the right people have to make a profit, and the more profit the better,” she said, “but in a way that’s reasonably fair and adhering to the law, and not corrupt, and not greedy to the point of nausea.”

“The issue is,” said the Wall Street firm’s chief of communications source, pointing to rivals who were more heavily leveraged, “if we were to say we were sorry, what would we say we’re sorry for?”



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