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Home Publications Blogs Beat the Press Andrew Ross Sorkin Sheds Tears for Socially Minded Wall Street Chieftains

Andrew Ross Sorkin Sheds Tears for Socially Minded Wall Street Chieftains

Tuesday, 16 October 2012 04:30

Andrew Ross Sorkin uses his column today to highlight the troubles of those suffering the most from the downturn: the CEOs of major banks who bought up failing competitors in the midst of the financial crisis. Jamie Dimon, J.P. Morgan's CEO, get center stage for having to deal with Bear Stearns' legal liabilities, but Sorkin also has some tears for Wells Fargo, which bought up Wachovia, and Bank of America, which took over Merrill Lynch.

While Sorkin apparently feels sorry for the burdens imposed on these banks and their bosses, those of us who are less sentimental might remember that these are people who all draw 8 figure paychecks. They are supposed to know what they are doing. For example, Sorkin presents Dimon's perspective:

"Mr. Dimon is clearly frustrated. Had Bear Stearns filed for bankruptcy, he said, there 'would be no money. There would be no lawsuits. There would be no stock-drop lawsuits, there would be no class actions, there would be no mortgage lawsuits because there would be no money. But we bought it.' ....

"'When the government helped save General Motors by providing money and guarantees as part of its bankruptcy, 'they absolved G.M. of all prior legal liability,' Mr. Dimon said in an earnings conference call with investors and analysts on Friday. 'So the government’s being a little inconsistent here.'"

Actually, there is no inconsistency here whatsoever. Mr. Dimon negotiated the terms under which he took over Bear Stearns. He did not arrange for a bankruptcy of the latter or some other measure that would have absolved J.P. Morgan from the companies' legal liabilities. Presumably Dimon understood this fact at the time of the takeover, as did the CEOs of the other banks.

If CEOs of our largest banks do not understand such simple concepts perhaps the remedy is remedial education. Maybe we should require CEOs of banks with more than $500 billion in assets to take course on legal liabilities for acquired companies. Or, perhaps they need the equivalent of a Consumer Financial Products Protection Bureau which will ensure that they do not stumble into deals that turn out to be bad for them.

One last point that is worth remembering. Had it not been for the special assistance provided by the Fed, the Treasury, and the FDIC at the peak of the financial crisis, it is likely that all of the major Wall Street bank CEOs would be among the nation's unemployed today. It is understandable that they would want more from the government ("job creators" always do), but it can be a bit difficult for those who are less sentimental than Mr. Sorkin to take their whining seriously. 

Comments (8)Add Comment
Fallen Takers Shall Have No Fear, For They Are Saved By Makers of Moral Hazard
written by Last Mover, October 16, 2012 6:46
Another slur by Baker against Makers painting them as Takers.

Sorkin obviously understands that CEOs in the financial sector are deeply religious and required to abide by the Good Samaritin Creed of Trickle Down as dictated in the biblical passages below, embellished as necessary to paint Makers as the Saints they are to all who fall before them on their economic knees for mercy.

The Bible teaches that Makers do not discriminate or show favoritism to fallen competitors. (Acts 10:34). Every competitor is a unique creation of His Monopoly Maker, and He loves each one. (John 3:16; 2 Peter 3:9). Rich and poor have this in common, The Lord is Monopoly Maker of all Makers below Him and Competitive Taker of none. (Proverbs 22:2).

The Bible gives strict warnings against abusing one's monopoly maker power to take advantage of the poor and downtrodden competitors who are equal in the eyes of the Lord Maker: He who oppresses the poor and fallen competitors with forced bankruptcy shows contempt for the sacred role of Maker, but whoever so trickles on them with buyouts and handouts to preserve their role as The Taken honors that role. (Proverbs 14:31).
Yet another fine whine...
written by Richard, October 16, 2012 7:26
Geez, is there any group of bigger WATBs than the bank CEOs?
Sorkin and Dimon conveniently omit mention of Wells Fargo Rule
written by Robert Salzberg, October 16, 2012 8:35
The Wells Fargo Rule is why Wells Fargo suddenly outbid Citi for acquisition of Wachovia in 2008. The government, through the IRS, allowed banks who acquired troubled banks to write off all the loses right away instead of limiting them to a billion a year, saving Wells Fargo an estimated 20 billion in taxes.

In the end, Wells Fargo, Citi and other big banks netted around a hundred billion in write-offs which more than makes up for the lawsuits discussed in the article.

The absence of any discussion of the Wells Fargo Rule in Sorkin's article is a blatant error of omission.

Sorkin should read the NYT
written by Robert Salzberg, October 16, 2012 8:57
Here's a link to the NYT article about the sudden shady deal to buy Wachovia.

Whoops!!! Sorkin helped on article about origin of Wells Fargo Rule
written by Robert Salzberg, October 16, 2012 9:25
I just noticed that one Andrew Ross Sorkin contributed to the article detailing how Wells Fargo got a huge taxpayer subsidy to acquire Wachovia.

So Sorkin doesn't need to read his own paper about this since he helped write the article.

Elmer Fudd and the Ostrich...
written by Donald Pretari, October 16, 2012 1:15
The funniest aspect of this CEO twostep is that when their corporations are making money they tell us they are geniuses from the most exclusive universities...as soon as they are looking at some litigation directed at them they become Morons with gross memory lapses.
Best educational initiative for the Obama White House yet:
written by T.M. Scruggs, October 16, 2012 6:09
"If CEOs of our largest banks do not understand such simple concepts (as thinking about their debt when buying out a bank) perhaps the remedy is remedial education."
written by Jay, October 16, 2012 10:43
According to the Wall Street Journal, remember you need to pay millions to get the talented to work on wall street and create cool things like "synergies."

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.