Reproduced from Huffington Post.
In upcoming posts I will comment on the specifics of the legislation, but first I need to make a point.
We have something in common, BP and I. It is a culture we share. I’m a banker for a large TARP bank. My bank’s culture seems sadly familiar as I read about BP.
On this eve of the Financial Regulation Conference Committee, the folly of BP has taken over the news cycle, highlighted daily for six weeks. Externalizing risks. Manslaughter. Fishslaughter. Greed. Lying.
Over four long years, the folly of the Financial Services industry has been highlighted in uncountable articles, studies, books, and anecdotes. So many that we have become numb, like at the end of a long war. The pronouns could fill pages. Some sound like they were a long time ago. Bear Stearns, GMAC, AIG, Lehman, Wamu, Indymac, Goldman, Auction Rate Securities, CDS, Derivatives, Financial WMD, Dick Fuld, Angelo Mozillo, Alan Greenspan, Robert Rubin, Ken Lewis, Bernie Madoff, TARP, TALF, Unlimited FDIC Insurance… it goes on, and on, and on.
BP and the Deepwater Horizon do us a favor by serving as a likeness of big finance. Big oil. Big finance. We have a lot in common. When I read this week about BP having fishermen sign a contract prohibiting them from speaking to the media, I was not surprised. The contract and other stipulations attempt to control BP employees and they work pretty well. Why did no BP employee leak about the magnitude of the leak? Perhaps if one had, the government would not have been faster to respond. Consequences?
scientists need to know is precisely how much oil and gas has leaked. Neither BP nor the Obama administration have been forthcoming on that front. Joye wrote:
It is virtually impossible to understand or quantify the ecological consequences of the BP blowout on the Gulf of Mexico ecosystem without knowing how much oil and gas has leaked from the wellhead. These numbers need to be estimated and corroborated independently based on available observational data. Unfortunately, the leak rate was not quantified robustly during the first month of the spill (at least that information has not been made publically available). Unless we know how much oil is leaking from the wellhead, we cannot gauge the full extent of the ecological consequences in deepwater or surface water environments. For example, how much deepwater water column oxygen consumption will be fueled by this influx of oil and gas? Which water column microbial communities will be stimulated by oil and gas? What is the time scale of this response? How will surface water microbial communities respond to surface oil and gas inputs? Potential fishery, marine mammal, and wildlife consequences of the BP blowout cannot be properly predicted until we know the magnitude of the disaster. To put it bluntly, the scientific community is hamstrung until we know precisely how much oil and gas has leaked and is leaking from the wellhead.
Like deep water drillers, banks are supposed to be good at risk management. Truth is a risk. As long as truth can be managed, leaked as it were, into a vast ocean at a steady trickle, maybe it won’t be noticed so much. Maybe banks can reduce the accountability. That little trickle can seem like disconnected events. Just look at the trickle from the last month or so.
This is a trickle of news, but it represents a flow, which represents a culture, which represents a problem. I have shown you one square mile of surface area. There is a lot more on the surface and deep underwater plumes that are not big or sensational enough to make the press. Regulation can fix a problem if it can fix an attitude.
So when Congress convenes the Conference Committee to deal with Financial Regulation, it should be under no illusions. All these items linked above have to do with regulations already in existence or enforcement actions pertaining to the same. While the goals of the regulation are directionally correct and helpful in a number of ways, let them not create an illusion of control. The technicalities of the regulation, while very important, are less important than the demonstration that the spirit of the law is more powerful than its letter. In other words, in the enacting of this legislation, the Congress must provide a powerful kick in the soft parts, as a down payment on another one should it become necessary.
Finally, changing an attitude may not be possible if you don’t change some people. To do that, Boards must be put on notice that if they do not clean up the industry over the resistance of their CEOs, they will also be accountable. Change requires governance in more than name.