Home > Uncategorized > Paul Volcker on Greedy Bankers, the Ryan Plan, and the Fed – Newsweek and The Daily Beast

Paul Volcker on Greedy Bankers, the Ryan Plan, and the Fed – Newsweek and The Daily Beast

September 18, 2012 Leave a comment Go to comments

Gelb: Are the troubles in banking and finance—the illegal trading, the possibly illegal LIBOR-rate setting, the sky-high risk taking, the supposed difficulties bank heads have being able to control their subordinates—really something new?

Volcker: I believe it is something new in degree. I say that with some reluctance, thinking maybe it’s just that I’m an old man and didn’t know what was going on before. But I am struck by the number of not just friends but other observers who share the belief that there has been a real change in the mental approach of people in markets. They used to be more customer-oriented, with some sense of fiduciary responsibility that’s been very much reduced into an impersonal, “you’re a counterparty, you’re not a customer” caveat emptor.

That attitude lies behind a lot of these difficulties and has been spurred by enormous changes in compensation practices that have tempted people to cut corners. I’m afraid that the temptation now becomes greater—that if I can, as they say, cut some corners, maybe I’ll get some of this magic dust myself in proportions that seemed unimaginable a few years ago.

When they cut corners, is the head of the bank in a position to know and stop it, or have operations become so big and complex that bank heads can’t know what’s going on?

They can’t know what’s going on in detail, but the important thing is setting the tone and standards at the top to which people are expected to adhere—and if they don’t, then action will be taken. All these banking institutions have fine statements of their ethical practices on paper, but how much it’s really enforced, how much is in the instincts of staff, and particularly the traders, up and down the ranks, is difficult to say.

via Paul Volcker on Greedy Bankers, the Ryan Plan, and the Fed – Newsweek and The Daily Beast.

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