Survey of Bankers Unintentionally Documents their Depravity

By William K. Black

Makovsky is a PR group that specializes in representing banks.  Because of that dual specialization they should be the most skilled shills for fraudulent bankers that money can buy.  This fact makes their annual “reputation” survey delectable.  Each year, the survey unintentionally documents how depraved senior bankers are as a group.  They come to praise Caesar, but end up burying him in a garbage dump.

Here are key findings of their 2014 survey:

“The study showed that financial services firms continue to be pummeled by negative perception and regulatory overhaul and action, with the biggest drags on company reputation being negative public perception (64%) of the financial services industry and regulatory actions (55%) including investigations, lawsuits and fines.

Financial marketing and communications executives report that new regulations put in place after the financial crisis have wreaked havoc on corporate image, operations and performance.

‘The 2014 study findings question how far financial services brands have advanced since the financial crisis,’ said Scott Tangney, Executive Vice President at Makovsky.  ‘The industry is walking on a tightrope with the combination of negative perception, regulator actions and greater risk sapping reputation and financial performance.’

More than three-quarters are worried (with 55% “Very Worried”) concerning executive compensation, an 18% increase over 2013 results.”

Here is how these results compare with those of the 2013 survey.

“Executive compensation issues remain a major reputation risk in the financial services industry. About two-thirds (65%) of executives told us they are worried (very or somewhat) about negative public reaction to executive compensation. While still high, concern about compensation and public perception is down considerably compared to 81% in 2012.  It will be interesting what happens this year with bonuses and compensation on Wall Street starting to increase across the board.

66% of executives agree that increased regulator actions in the past 12 months have made it harder for the entire industry to rebuild reputation.”

Finance executives are not worried that the financial industry’s senior officers have led the three fraud epidemics that caused the Great Recession, that they followed that up through massive foreclosure fraud, that they laundered over a billion dollars for one of the most violent drug cartels in the world, created the world’s largest cartel that to manipulate prices on $350 trillion in financial derivatives, fixed prices related to public bond issuances, helped tens of thousands of the ultra-wealthy illegally evade paying taxes, or eagerly busted sanctions on a genocidal regime.  The financial executives are not concerned that almost none of these bank officers have been prosecuted and in virtually every case they were allowed to keep the proceeds of their crimes.      Two-thirds of the finance executives are concerned that the banks were sometimes sued civilly for committing these crimes.  The title of Makovsky’s PR release about its 2014 survey results reveals this logical disconnect:  “Wall Street’s Chronic Image Troubles Tied to Greater Risk, Consumer Distrust, and Regulatory Actions.”  See, it has nothing to do with Wall Street’s actions.  It’s just an “image” trouble caused by others.

Similarly, finance executives are not upset that modern executive and professional compensation for financial executives creates such perverse incentives that it is a major contributor to the criminogenic environments that generate the epidemics of fraud that caused our three modern financial crises, or that even when they do not lead to insider fraud they create perverse incentives to cut R&D expenditures or take excessive risks.  The finance executives are not upset that financial executive compensation is exceptionally large.  No, finance executives are upset that the populace is upset about financial executive compensation.  Their overarching fear is that the regulators, legislators, or the President of the United States might act to limit their compensation.


The common denominator is that the financial executives are not upset about the things that actually harm a bank’s reputation – things like its senior officers leading fraud and becoming obscenely wealthy through fraud.  Their reputational worry is that they will be held even partially accountable for these frauds.  They are terrified that a President might be elected who would actually prosecute them and claw back the proceeds of their frauds.  The way many of the most elite bankers gained their positive reputations was through the extreme wealth gained by leading frauds.  Reputation is far more complex and unreliable than economists understand.  Note that morality disappears from the finance industry’s discussion of its massive crimes.

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