’New Morality’ at Barclays Is Same Old Wall Street
Is there suddenly a “new morality” on Wall Street? There is, if you believe Antony Jenkins, the chief executive officer of Barclays Plc.
It’s tempting to trust this sweet-talking British banking executive, still in the flush of his new appointment to run the scandal-ridden institution. He is understandably anxious to distance himself and his bank from the atrocious behavior rampant at Barclays during the absolute monarchy of his predecessor, Robert Diamond.
On Feb. 12, Jenkins announced a $1.3 billion fourth-quarter loss (replete with the requisite mention of “one-time” losses that have become a staple of bank earnings these days) and “a major reorganization” that would cut 3,700 jobs, including 1,800 employees in the bank’s Asian and non-British European investment-banking units.
Yet he had more on his mind than balance sheets and head counts. “There will be no going back to the old way of doing things,” Jenkins said. “We will never be in a position again of rewarding people for activities inconsistent with our values. . . . The old ways weren’t the right way to behave, nor did they deliver the right results.” He then mentioned one of my favorite credos: “Individuals must take responsibility for their own behavior.”
The source of Jenkins’s religious conversion is not clear. It’s not like he parachuted into Barclays from a Tibetan monastery to enlighten the masses. He has been at Barclays since 1983 (with a period away at Citigroup Inc.) and in 2009 became a member of the bank’s executive committee and CEO of its retail and business banking division.
During that time, among other indiscretions, the good folks at Barclays manipulated the London interbank offered rate, shredded unflattering reports about the U.S. wealth-management division and, according to British authorities, may have fraudulently loaned money to Qatar to invest back in the bank to help Barclays avoid a government bailout in 2008.
One of the core businesses Jenkins plans to build the new Barclays around just happens to be something that Diamond picked up for a song in September 2008: the carcass of Lehman Brothers Holding Inc.’s U.S. investment-banking business. Last October, Hugh “Skip” McGee III, who as a Lehman employee negotiated that sale with Diamond after Lehman filed for bankruptcy in September 2008, was promoted to chief executive of Barclays’s corporate and investment banking in the Americas. Helping McGee run the business is another former Lehman executive, Gerald Donini. McGee was a top and trusted aide to former Lehman CEO Richard Fuld, who ran the bank into the ground.
In a somewhat esoteric but illuminating side drama, McGee was also the author of an infamous November 2009 letter to the board of trustees of the Kinkaid School, a private academy in Houston where his son, John Edward, was a student and football player. It turned out that John Edward, along with his buddies, wanted to perform a skit at a pep rally while wearing girls’ cheerleader outfits.
McGee was furious that, because of a desire to be “politically correct,” the pep rally was canceled. He wanted the teacher who led the anti-rally effort fired, incensed by her “leftist agenda” and criticisms of investment banking. And he had some charmingly regressive thoughts on sexual identity. “Why is a married, heterosexual coach considered an oddity at Kinkaid?” he asked. “Why is a gay female coach telling high school girls on her team that she was disappointed in them for belonging to the spirit club (SOK) and that by doing so they are just pandering to the football team?”
What kind of message does it send to the troops when, in one of his first acts, Jenkins promotes a Skip McGee? Expecting such people to change their behavior because the boss decreed it in a public-relations blitz is like asking a scorpion to stop stinging. The only way people on Wall Street will change is if it’s in their self-interest to do so, which means holding them financially accountable, up to their entire net worth, when things go wrong.
There hasn’t been that kind of accountability on Wall Street in more than a generation. And there certainly has been nothing like it at Barclays since Jenkins took over from Diamond last August. Far from taking responsibility for wrongdoing, last month a group of employees (unsuccessfully) petitioned a British judge to keep their names secret in advance of the first trial over the interbank-rate manipulation scheme.
In an interview with the British Broadcasting Corp. on Feb. 12, just after he rolled out his morality tale, Jenkins was asked how he expected to change the culture at Barclays. “You do it by really embedding a sense of purpose and values that we live by every day,” he said. He then rattled off his list of five core values -- “respect, integrity, service, excellence and stewardship” -- and then, sensing the interviewer’s incredulity, he said, “People could be cynical about that.” And with very good reason, he might have added.
(William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres, Merrill Lynch and JPMorgan Chase. The opinions expressed are his own.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Tobin Harshaw at email@example.com