How Wall Street Is Like Penn State

How to Make Government Work
July 13 2012 4:51 PM

How Wall Street Is Like Penn State

147348928
The Canary Wharf headquarters of Barclays Bank, who have been fined 290 million GBP for manipulating the Libor inter-bank lending rate.

Photo by Oli Scarff/Getty Images

The week's carnage on the Wall Street fraud front: LIBOR investigations ensnare almost all the major banks—estimates of damages of more than $20 billion are front page news. JPMorgan Chase now says its London derivatives trades cost nearly $6 billion in losses, and were a major failing in oversight and management. HSBC admits major failures permitting large-scale money laundering. Wells Fargo admits it discriminated in issuance of mortgages, charging minorities more than it should have. And this is just one week.

And how does Wall Street respond? By refusing to admit there's a problem, by clinging to power, and by frantically dodging blame. What to make of all of this?

Advertisement

Wall Street has the same mentality as the Penn State leadership: Brush things aside, ignore first principles, avoid the tough ethical choices, go for the short-term money and profit. That has been corrosive to the ethic of our economy and the trust that should undergird our financial sector.

We need a fresh start—new leaders, since the current crop has failed. Just as we every now and again vote out the entire political leadership, now is a good time to say to the folks on Wall Street: Bring in a new team.

There is something honorable about the Japanese approach: When something goes wrong, the leader steps aside. But we're not the Japanese. Corporate leaders in America and Europe have shown time and time again that they do not possess that same sense of honor. A leadership change will have to be forced, as it was at Penn State, as England is doing with its banking leaders, as shareholders could do with the companies they own.

There's a reason we regulate companies, why we watch out for malfeasance, and why we have to limit monopolies and oligarchies. If a company is too big to fail, it's probably also too big to manage.

Eliot Spitzer, the former governor of the state of New York, hosts Viewpoint on Current TV. Follow @eliotspitzer on Twitter.

TODAY IN SLATE

Politics

Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Cheez-Its. Ritz. Triscuits.

Why all cracker names sound alike.

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

The Afghan Town With a Legitimately Good Tourism Pitch

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Photography
Sept. 21 2014 11:34 PM People’s Climate March in Photos Hundreds of thousands of marchers took to the streets of NYC in the largest climate rally in history.
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Tv Club
Sept. 21 2014 1:15 PM The Slate Doctor Who Podcast: Episode 5  A spoiler-filled discussion of "Time Heist."
  Arts
Television
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
  Technology
Future Tense
Sept. 21 2014 11:38 PM “Welcome to the War of Tomorrow” How Futurama’s writers depicted asymmetrical warfare.
  Health & Science
The Good Word
Sept. 21 2014 11:44 PM Does This Name Make Me Sound High-Fat? Why it just seems so right to call a cracker “Cheez-It.”
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.