Fox News reported recently that banks having been routinely fiddling their books for the past 40 years. Dick Bove, of Rochdale Securities, said he wasn’t bothered by it because it had been going on for such a long time; but the reporter suggested that the average person might be unwilling to invest in bank stocks in view of the recent fiasco involving the behavior of those in this industry.
Notwithstanding the complexity involved in analyzing the financial health of banks, I find it remarkable that “tweaking” the accounts in their favor at critical investment times is legal. It says much about those who passed the laws governing banks in the first place.
Einstein said famously that “We can’t solve problems by using the same kind of thinking we used when we created them.” But, isn’t that precisely what’s happening? More than 80% of the bank executives who promised to quit have decided to stay, and the CEOs of others have actually received raises.
I’ve felt compelled to write about this because the use of different styles of leadership, for example, are no substitute for stupid decisions made by selfish people. If CEOs are behaving unethically, then the answer to the problem is to replace them. Unfortunately, the largest blocks of stocks (shares) are held generally by these same senior executives, and the contact details for all of the other stockholders are protected by the Privacy Act. So even if you wanted to call a special meeting to oust the current ones, you’d have to know enough of the others to fulfill the rules for doing so under the bank’s charter.
So, where does that leave us? Let me ask you something? Do you know the simplest way to drive down a stock price? By selling your stocks. I appreciate that your investment may have taken such a beating that this is not an option. It maybe that you have to wait until you recover your investment.
Pundits are predicting the banks stocks could double or quadruple in the next few years; so it will be tempting to surf to the top of the crest. But, if enough people lose faith in the appalling behavior of banks and fail to invest in them, or sell their investments, then the stock price will go down; and because many CEOs are evaluated against stock price, there’s a real chance that you could influence their future at your bank.
It’s a tragedy when an entire industry becomes corrupt. It’s not as if we can just change banks, since they all seem to be in it together, though credit unions seem to be a safer bet. Boycotts of companies have worked in the past. There’s no reason why it shouldn’t work in this case as well.
Bruce Hoag, PhD, CPsychol
Tags: bailout, banks, different styles of leadership, Einstein, FoxNews