I was a young reporter working for USA Today the first time I heard the term “self police” in the same breath as “Wall Street.” That was 1986. I may have been new to high finance, but even then with so much money in play the concept seemed comical. It’s no less hilarious today, as a new survey makes plain.
The late ‘80s were rife with financial scandal. Self police? Some guy named Milken was luring investors into his junk-bond deals with questionable tactics and thought to be raking in as much as $50 million a year for himself. This was astronomical compensation in the day, and to avoid later embarrassment we on the beat cut the figure in half before reporting the rumor. It turned out adjustments were warranted, only the other direction. Milken made a staggering $550 million one year—otherworldly even by today’s standards.
Back then Ivan Boesky would exchange suitcases of cash for stock-moving information, and as his intricate web of illegal white-collar activity eventually came to light, so did at least one contemplated murder and other silver-spooned fears of being whacked. Yet that wasn’t the kind of policing bankers feared most.
Wall Street worried that the scandals would give rise to crushing government regulation—and eat into their ability to mint massive paydays. So they rushed to beef up internal controls and tried to convince lawmakers they could take care of their own house. Self-policing, they argued, would be so much more effective than clumsy regulations, which would have the side effect of putting America’s money machine at a competitive disadvantage in the global market.
Somehow, despite the Giuliani and Spitzer crusades to clean up Wall Street, the notion of self-policing in finance has never really gone away. And somehow, the greed that feeds this industry has never really abated.
Nearly one in four denizens of The Street—traders, portfolio managers, investment bankers, hedge fund professionals, financial analysts, and investment advisers—say “they had observed or had firsthand knowledge of wrongdoing in the workplace.” This is according to a survey released Tuesday by the law firm Labaton Sucharow and first reported by The New York Times.
According to the survey:
- Only 36% of those in the industry feel that Wall Street has changed for the better since financial reform in 2010.
- 24% say they would engage in Boesky-like activity to make $10 million if they could get away with it.
- 28% feel that the financial services industry does not put client interests first.
- 52% feel it is likely that their competitors have engaged in unethical or illegal activity; 24% feel employees at their own company likely have done so.
- 29% believe that financial services professionals may need to engage in unethical or illegal activity to be successful.
- 26% believe the compensation plans at their companies encourage unethical or illegal activity.
Internal controls and beefed up compliance be damned, this is the nature of many who are called to the financial services field and there is no shutting it down. Thirty years of reform have helped, but fallen far short of changing a culture that made Gordon Gekko a household name.
We need The Street. It finances our bridges and roads and homes and businesses. But we also need to be wary when dealing with the folks who work there. Too many are only concerned with their own short-term success.