Why bankers are more mistrusted than ever

Matthew Gwyther on the reputation of the banker, and why it is becoming more toxic with every passing day.

by Matthew Gwyther
Last Updated: 01 Jun 2012

Springsteen is in Europe and he’s having a go at capitalism and, more specifically, the bankers. The mouthpiece of the down-trodden New Jersey blue collar guy has been appearing in front of 58 000 members of the faithful in Berlin.  The Boss noted: "In America, a lot of people have lost their jobs. But also in Europe and in Berlin, times are tough. This song is for all those who are struggling.

"Then he gave them "Jack of All Trades," an attack on bankers that includes the lyrics: "The banker man grows fat, working man grows thin." If it had been Bob Dylan in his prime protest period it would have been phrased slightly more lyrically but we all get the message. 

Trust of bankers really is in the shortest supply I’ve known it at the moment. Bearing in mind how bad things have been since 2007 that really is saying something. But  after the Facebook debacle it’s not hard to see why. As the honeymooning Zuckerberg fails to leave tips at Italian restaurants and then opts for a Big Mac in Rome. (What do you expect from a guy who’s sat in a room coding non-stop since he was 13?) So, the Facebook float and its aftermath looks seedier and seedier by the day. 

Now James Gorman the CEO of Morgan Stanley which was the lead underwriter on the float has described investors as "naïve" for having bought Facebook stock "under the wrong pretences." What were the pretences, James? That it was an A1 solid gold bet, with excellent growth prospects, as you were shouting from the rooftops when you were punting it very, very hard in the months leading to the off?   That it was a business you believed in in your heart of hearts. What did your organisation know about the state of Facebook that the rest of us did not? (One thing I knew is that I’ve used it to bung up pictures of the kids for years without them ever making a penny from me. If anyone tries to sell me anything on the site I run a mile.) 

We all know that IPOs require a massive dose of high pressure salesmanship. Like those Swiss Tony’s who flog second hand 5 series BMWs with 200,000 miles on the clock that need a little bit of economy with the truth to shift the metal. But investment banks have gamed the IPO show to such an extent that people are showing increasing reluctance to have anything to do with them anymore. Little wonder that the FT today quotes a man from IPO Boutique called Scott Sweet who notes – "Anything that makes it seem as though it [the Facebook float] wasn’t that bad is wrong. This does not happen with deals like this. This happens with 4th tier underwriters." Welcome to the club, Morgan Stanley. 

The only consolation one can see for Western capitalism this morning is the news from Russia that BP has finally had enough of its calamitous relationship with TNK-BP. Because if you thought European and American investment banks were a rum lot just try getting into bed with the Russians on a deal. 

Russia is as bent as the proverbial nine bob note or jockey’s jockstrap. It’s a state kleptocracy that is rapidly demonstrating it is not really interested in the international capital markets and their tedious rules and regulations. It is happy to go it alone under its own mafia-like rules and get all its oil and gas out on its own. As a nation it simply doesn’t care about its reputation abroad and neither does it need to. Maybe Bruce the boss has a few lines about Putin up his sleeve. The story of a leader whose idea of a great PR image is of him shirtless in combat trousers while strangling a live bear. Call it Badlands Part Two.  

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