It is curious that physical courage should be so common in the world and moral courage so rare.  ~Mark Twain

Are my expectations about leadership too high?  Am I living in the past?  Should I just give in and accept it?

These thoughts are going through my head as I read that CitiBank will pay the Securities & Exchange Commission $285 million to settle charges of misleading investors. ” The SEC charges that Citi’s broker-dealer subsidiary Citigroup Global Markets marketed a structured portfolio of collateralized debt obligation tied to the housing market in which it selected the assets, sold them to investors, then bet short against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to the investors its role in picking the assets or that it took a short position against them.”

(Now, in plain English. The bank sold mortgages to investors, mortgages that they chose, knowing they were poor quality, then bet that the assets would decline in value.  So, your “trusted banker” sold you a pile of crap, got your money, and all the while he was betting against you.  Does this sound slightly dishonest or is it just me?)

I kept on reading, incredulous.  ”Quickly the market value of the bundled assets dropped, the investors lost virtually all their money, while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position.”

Investors, zero.  Bankers $160 million.  Sounds more like a mafia-run casino than a bank.

Enter the SEC to help. I continued reading. “The $285 million settlement will be returned to the investors, and as is custom in such settlements, Citi is not admitting or denying any wrongdoing.”  

That’s the part where I almost had an epileptic fit. Did not admit or deny any wrongdoing?  They paid out $285 million (they are still alive thanks to taxpayers bailout money) against SEC charges and admitted nothing? And banks want us to trust that they are vital to the economy and too big to fail?  Are they too big to stand up and tell the truth as well?

So, lets talk about leadership and brand image.  Currently, the brand image of banking is at an all time low.  Have you been watching the Occupy Wall Street demonstrations that have spread around the globe?  They are trying to call attention to the rest of the world, (those who believe it’s useless to fight the system) that the culture of banking is broken.

Let’s see.  If one of your neighbors paid a fine to the police and neither admitted or denied guilt, what would you think? How trustworthy would you consider that neighbor?  Would you loan them your car or let them watch your children?

 It’s a global neighborhood now and what I think is that the Board of Directors and shareholders of big banks need to think hard about the damage their “so-called” leaders are doing to the institution of banking.

I guess in one way the culture of banking does work rather well.  You can be a senior executive without having any courage or values, just show up and admit nothing! But keep the money rolling in.

Tight Lines . . .

John R Childress

E | john@johnrchildress.com      T | +44 207 584 3774      M | +44 7833 493 999