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Over the past few years, Wall Streets collapse has led to a crackdown thats put many wrongful practices off limits, but it remains a place where a lot of very bad behavior continues to take place out in the open.
October 18 -
When it comes to financing the average middle-class American, our government-backed mortgage entities will accept nothing but the most pristine standards. Except when it comes to the millions of home loans for which the feds want lenders to toss standards out the window.
September 26 -
Theres no question that that banking industry owes a solid to government policymakers for bailing them out of the crisis. Whats still much in dispute is whether the Dodd-Frank Act and the various other salves that have been applied to stave off another calamity will work as intended.
September 23
Editor's note: A version of this post originally appeared on
What do HealthCare.gov, JPMorgan Chase, the National Security Agency and
Recent events suggest that leaves giants predisposed to engage in reprehensible behavior and to get away with it, even in a society supposedly guided by the rule of law. History suggests that unchecked giants are, in fact, so prone to behave badly as to render trivial by comparison the many recent misdeeds of our government, corporations and banks.
The historian David McCullough drove home that fact for me in
McCullough describes how, when Harry Truman was a U.S. senator from Missouri, his Truman Commission built a reputation for unflinching but measured and bipartisan investigations of World War II-era military contractors.
One hearing involved Glenn Martin Corp., the maker of the B-26 bomber and a predecessor of Lockheed Martin Corp. (LMT). When Truman asked why the company had failed to fix a known flaw with wings that weren't wide enough to provide lift, its namesake replied that plans were already too far along "and besides he already had the contract." Truman told Martin to widen the wings or have the contract yanked.
Another egregious case involved a newly launched tanker called the Schenectady. Built by shipbuilding magnate Henry J. Kaiser (now the moniker of a leading philanthropy), the ship broke in two because officials at a Carnegie-Illinois rolling mill had falsified tests of the steel used in the vessel. A chief specifications examiner named Murray Stewart admitted to the Truman Commission that workers would in some cases just "make up" data when the real numbers weren't known. Such bogus figures were given the prefix "F" to denote the four-letter word "fake."
A metallurgist from another plant testified that one company tester was caught by a Navy inspector falsifying data because "he cheated more than he was supposed to cheat." The man was demoted but eventually given a better-paying job.
"I don't know anything about the steel business and don't expect to know anything about it," said Truman, "but I can tell you when the books have been tampered with and when there is a bunch of crookedness going on."
With the Schenectady, who was ultimately responsible for what went on was never really answered. Nor were any muckety-mucks ever punished.
Sound familiar?
We now know that just like with the Schenectady's steel, an "F" could be affixed to much of the data used in mortgage securities (
Modern giants are likely to behave at least as badly as their World War II counterparts. To put their own pecuniary interests above all else (JPMorgan Chase). To wastefully mismanage projects paid for with other people's money and then
To Truman, the answer was a Jeffersonian vision of democracy, McCullough writes. One where power was wrested away from giant organizations and entrusted to an agrarian population. That's undoubtedly a bridge too far for our modern society. But there are plausible ways we can fight back. One is to cut our biggest banks down to size. If instead we persist in allowing them to remain too big to fail, we'll have only ourselves to blame when, invariably, they again abuse their power.
Neil Weinberg is the editor-in-chief of American Banker. The views expressed are his own.