The Joris Luyendijk Banking BlogFormer treasurer at a collapsed bank: 'Right and wrong became blurry'Joris Luyendijk talks to a former banker who grew afraid of what he was becoming and decided it was time to get out======
• This monologue is part of a series in which people across the financial sector speak about their working lives
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Why aren't there more whistleblowers in finance? A former treasury manager at a major bank was prepared to meet for a chat. He is medium build in his late 40s, with a quick laugh. He orders a black coffee.
City of London"I was in a bank that collapsed due to the risks we had taken on. Why did virtually nobody speak out? Well, you get sucked into the corporate culture. And you know that if you take something public, they'll find a way of getting back at you. They won't sack you right away but when there's a new round of redundancies … You isolate yourself when you act against the institution you're part of. So the only people to do so are those with very high morals, and those who just don't care.
"Bankers work in teams, and the ethic there is: you are with us or you're against us. Speaking out makes you vulnerable. If you have a guilty secret hidden somewhere, they'll find it and expose you. At one time I had this boss who was typically ruthless. At some point a woman accused him of discrimination – some stupid thing he said in a bar that a bloke, in that situation, wouldn't have had the same reaction to.
"She filed a complaint, landed an inquiry and those who had been present in that bar were summoned. My boss came up to me and warned me: don't say anything against me. Otherwise I'll tell them about that one time in the strip bar. I was thinking, what is he talking about, then I remembered that very early when I started working for him, he had taken me to a strip bar. Many people are made subtly complicit.
"I was in treasury. Outsiders have this idea that banks take on deposits and then they go and look for a way to lend them out again, making a margin in the process. In reality it's the other way around. Banks embark on projects for which they need money, and they find it with banks that take on deposits. The process is what we call 'asset-driven'.
"At the end of each day there will always be banks with money left on their books, and banks that are short of money. Everyone needs to balance out and supply and demand meet in the short-term market for money. This is where banks lend and borrow from each other. I was working in that. I was benefiting from the banks' practices. I was making between £250,000 and £500,000 a year.
"Since we were taking so much risk, we were making a lot of money. And all these profits meant we were on top of the world. The markets rewarded risky behaviour. Risk produces profits, profits lead to a higher share price, and executive pay was linked to that. It was so fucking easy to manipulate the share price; simply take some more risk.
"I was having a great time – travelled around the world, feted by people. I used to be invited to every major sporting event in the world … Everyone is nice to you because you represent a chance for them to make money. It becomes very tempting to think that actually all these people like you for who you are.
"I stressed internally the risk we were taking. But you have to understand, nobody likes a prophet of doom. We were doing long-term mortgages, which were very profitable because we borrowed the money for them in the short-term markets – where the rates are lower. I wanted to borrow in the less risky mid-term markets, if only because it was more challenging and would give me more to do. But I was overruled as borrowing mid-term was less profitable.
"In some ways I was always an anomaly, in finance. In a way I always thought of it as a game. I didn't take it that seriously. I would be thinking, what the hell, it's not my money is it? I suppose that's why I could cope with the stress reasonably well. I always saw it as a bit of a laugh. I had gathered this band of anti-establishment people around me and we would mock the seriousness of the banking world.
"Right and wrong became blurry and hard to define. If you shaft people and get a very good deal, this is considered the greatest thing there is. What I mean is that in business when you deliberately, consciously make money out of someone, that's what it's all about isn't it? Excessive profitability is deemed cause for promotion. Somewhere in the back of your mind, you realise that somebody is paying for what is going into your bonus pot. But then you're kidding yourself that you're making the world a better place, grease the wheels of capitalism and all that.
"Finance is not alone in this. Drug companies try to get you to take as many medicines as they can, while thinking of themselves as being in the business of curing disease. Having said that, the City is an extraordinary working environment and as such it is in my view fundamentally different from other business sectors and the civil service. I am sure the things we're talking about are happening there, too.
"What makes the City so special is that historically the sector has been very close together. There are all these pubs and bars close by where you can meet discretely. It becomes a huge playground, a social network at very close proximity. You can bond very easily, and become bonded to like-minded people. Colleagues become buddies. Throw in the alcohol and the client entertainment and you get an explosive mix. Boundaries are crossed very easily, leading to massive conflicts of interest. Brokers and traders are friends, but one also gives business to the other. 'I'll get tickets for rugby for you if you do that trade with me', that sort of thing happens very easily.
"I never thought I was stressed. There just wasn't any time for self-reflection. I ended up drinking huge amounts. Alcohol is a quick mood changer, it stops you from thinking and dulls you down. Not that I was aware of that at the time.
"You need to hide the stress, from yourself but also from others. You cannot admit it because if you let on about being stressed, it makes you look unreliable. So much in banking depends on taking quick decisions, daily, hourly. Do we do this deal or not? It's rarely a clear cut decision, there's never time to establish the situation, intellectually.
"Every decision that is made about the markets is an impossible call on the future. Imagine having to make decisions like that regularly every day. You simply can't be right all the time; if you are you're just lucky. It becomes impossible to have self-doubt, you have to create an image to the world where you maximise your successes and minimise your failures.
"Inevitably that makes you less humble, more arrogant and it will spill over into all areas of your life. You become lonely in your responsibility, in all that's resting on your shoulders. As your career progresses, you become responsible for more people than you're capable of influencing. You need to protect yourself, stay within your zone.
"This isn't just the bonus culture. This is about tribal bonding, about belonging and sticking with your mates. Your sense of worth begins to be formed by what you do. It is often the first question people ask you, right? What do you? In that time, when I answered that question, I was a superstar.
"If you go public about something in the bank you believe to be wrong, in one stroke you place yourself outside of that world. It's not just your job. It's your identity.
"I can't say that one day I woke up and I realised … There was no tipping point and it took me a long time to untangle myself. There were a trillion reasons. A general feeling of malaise, corporate and personal. There was fear, absolutely: the fear of fucking something up big time. Because I wasn't taking things seriously I wasn't doing everything I could to prevent that. And that made me afraid. Then the personal malaise: what was I becoming? My marriage was in trouble. What helped me get on with things was therapy, and I was very lucky to have earned so much money, meaning I was insulated from financial trauma.
"Friends in the bank said: 'Why would you leave? Just stay around, get paid well, do nothing.' I couldn't. It had become existential: what's this all for? Am I really enjoying this?
"It's weird how your perspective changes once you are out. I realised I had lost all pleasure in life. The birds singing, mucking about with the kids … When you're working so hard you just don't expose yourself to these things and over time you forget they exist. I know now that I had become not a nice person. The kindness you show to your parents … I stopped doing that. And I wasn't aware that I had stopped doing that. I had my mates. They were like me. I was like them.
"The substance abuse was huge, really, and everyone was enabling everyone else. There were so many reinforcers to keep me drinking; physical, mental, peer group pressures …
"You have these discussions: 'Are we drinking too much?' People would say, yes but I can stop any day if I want to. At the same time we'd ostracise people who didn't drink. Actually, no we wouldn't, not deliberately. But they wouldn't be there with us, miss out on the bonding.
"I don't regret my years there. I am not going to give this massive apology – well maybe I should? If I am sorry for anything, it's for what I became in those years. God, I am beginning to sound incredibly selfish.
"For this system ever to get truly better, you'd have to untangle the inherent tendency to amorality. And that tendency is embedded in the system. Regulation to keep the City in check? Don't hold your breath. No matter what rules you put in place, they'll always find ways around it. It's like prohibition.
"Anybody can get out. You might say, I was weak for jumping out. You might say, I was strong in making this point. What would I say to somebody reading this who is in the position I was in for a long time? Look in the mirror and ask yourself: 'Is the City turning me into a nasty person?' Then again, since people lose the ability for self-reflection, I wonder if anybody would look in that mirror."
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•
Following comments are interesting:
31 comments, displaying
first:
trevorgleet
12 March 2012 12:51PM
Interesting. Leaves me wanting to know lots more: where did he go? What was 'drying out', returning to normality like? Did he manage to repair the damage to his family life? What does he do now?
Please could we have a follow up?
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TempleCloud
12 March 2012 12:59PM
Blurry with Furry and Fuzzy thinking. Went by in a Blur
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MrGLDavis
12 March 2012 1:06PM
This is an interesting piece to be fair. But like the last one, none of this is wholly typical to finance, or the City.
Most of know someone who is promoted or lands a job a level beyond what they are really capable and/or willing to do, and how this f*cks them up eventually.
The above story is a good description I know of a young teacher, lawyer, and construction site manager who are batting too high in the order. Whose values are now wrecked by what they do every day.
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mikedow
12 March 2012 1:09PM
You are nothing if you don't have a career; you are nothing if you don't own a house; you are nothing if you don't own an automobile. Once you're made to value the worthless, you are worthless.
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nansikom
12 March 2012 1:21PM
Excellent interview, Joris, that shows the fundamental problem with financial services. I was especially struck by:
"For this system ever to get truly better, you'd have to untangle the inherent tendency to amorality. And that tendency is embedded in the system".
Your interviewee gets to the core of it with this point. The quaint old-fashioned City of London of 'my word is my bond' is long gone with the financial deregulation of the '80's. The beast is simply too big to care about the rest of the world.
We will not get out democracy back until we have realised that it is fundamentally immoral to create a 'castles-in-the-air' financial services sector that is delinked from and out of all proportion to the real economy.
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KK47
12 March 2012 1:23PM
"Well, you get sucked into the corporate culture. And you know that if you take something public, they'll find a way of getting back at you. They won't sack you right away but when there's a new round of redundancies … You isolate yourself when you act against the institution you're part of. So the only people to do so are those with very high morals, and those who just don't care"
And
"What makes the City so special is that historically the sector has been very close together. There are all these pubs and bars close by where you can meet discretely. It becomes a huge playground, a social network at very close proximity. You can bond very easily, and become bonded to like-minded people. Colleagues become buddies. Throw in the alcohol and the client entertainment and you get an explosive mix. Boundaries are crossed very easily, leading to massive conflicts of interest. Brokers and traders are friends, but one also gives business to the other. 'I'll get tickets for rugby for you if you do that trade with me', that sort of thing happens very easily"
These two statements tell you exactly what is wrong - this individual, this class of people and the institutions they work for operate in an environment that ENGENDERS GROUPTHINK which leads to the next question: how can individuals be rational in such an environment amidst the euphoria of financial booms and the despair of financial contraction if those with a contrary/devil's-advocate views are castigated if they don't conform to the groupthink? Is it any wonder why Joris that financial whistleblowers are so few and far between?
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MCollins
12 March 2012 1:29PM
The bankers had the money but they used our political leaders to steal the peoples money to bail them out. No banker had to hand over their bonus money to save their bank or take cuts. The whole weigt of the state should have been used to punish them instead of destroying the lives of others to pay for the "cuts".
You losse your house, your job while they keep theirs and laugh at how stupid we are!!!
As someone once wrote " Everyone talks about the weather. We dont!!!"
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harmonyfuture
12 March 2012 1:33PM
Response to MrGLDavis, 12 March 2012 1:06PM
Staff highlight
Hello MrGLDavis, either you are on the inside offering a defence of a culture those on the outside would find a bit of a shock or you don't really know what you are talking about.
Myself I would say that the hubris combined with stimulants and a lack of any grounding factors makes this class of person a very dangerous individual indeed. I know several who fit into the above profile very neatly and I will avoid contact wherever possible. It hasn't always been this way but much like premiership footballers, the cult of excessive reward and over egging of egos that have left us with some talented individuals who seem to make an appalling national team and I always thought football was a team game.
Unlike football, which I can choose not to support, banking has required me to dip into my pocket in support of this culture, I applaud the gentleman above for 'seeing the light' but wish a few more would do the same and instead of bailing out, stay on board and try to effect some change from within because external regulation isn't going to work.
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muscleguy
12 March 2012 1:36PM
Response to nansikom, 12 March 2012 1:21PM
I agree the big investment banks seem to have forgotten or not bothered to think about what they are there for, other than simply to make more money for the sake of making money which is sterile. It's like growing corn to enable you just to grow more corn endlessly.
This is why hosting The City is bad for the overall economy, spectacularly so as the crash made obvious. We are in this economic mess because they fucked up big time and we had to bail them out.
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Grattan
12 March 2012 1:37PM
Nothing we hadn't already figured out for ourselves. You can add self-pity to this guy's problems. He should think of himself as no better than the mindless thugs, who went on a looting spree last autumn . The only difference being that this chap burned people in their houses , while he robbed them blind. As nauseating bunch you would only find in pinstriped suits. The nuance being that this is greed fueled by fear and ignorance. God help us if this is what is coming out of universities and the fake universities of Labour's fevered imagination. We might be better off with the old money of the aristocracy. No fear and better attitude and to be fair, they like a good party.
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facsimile
12 March 2012 1:41PM
Response to KK47, 12 March 2012 1:23PM
I think all human organisations engender groupthink to some extent, and it's not limited to the private sector. In the House of Commons, too, right and wrong became blurry and it became 'normal' to claim expenses which were unjustifiable to anyone looking from outside. And what happened at Stafford Hospital? Did the groupthink there somehow see the abuse and neglect as normal?
Maybe groupthink is part of human nature. If so, it's human duty to see it for what it is, and challenge it, and expose it when necessary, which the NHS and Care Quality Commission didn't do at Stafford and elsewhere, and Parliament didn't do to itself, and the financial regulators didn't do to the banks. Too difficult?
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facsimile
12 March 2012 1:43PM
We were doing long-term mortgages, which were very profitable because we borrowed the money for them in the short-term markets – where the rates are lower.
Northern Rock?
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Nayrbite
12 March 2012 1:45PM
Thanks for this - great article
Could this be further evidence that the financial/banking world is toxic and hollows out morals and all normal human feeling in the people involved?
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grumpyoldman
12 March 2012 1:48PM
It's sad, but the more I read threads like this, the more I realize that a light tap on the wrist and the threat of re-regulation will do absolutely nothing to reform a system that has become irredeemably corrupt, criminal even.
The only thing that will give these people pause is the threat of the wretched masses rising up and murdering them in their beds.
I say this without pleasure and in the sure and certain knowledge that revolutions of this nature are like Goya's Cronos - they end up devouring their own.
We're between a rock and a hard place, and no mistake.
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Rabbit8
12 March 2012 1:49PM
Right and wrong became blurry and hard to define. If you shaft people and get a very good deal, this is considered the greatest thing there is.
After reading this the first question that came to mind was "Is this going to be the pinnacle of our evolutionary process"
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JorisLuyendijk
12 March 2012 1:53PM
Response to trevorgleet, 12 March 2012 12:51PM
Hi Trevorgleet, thank you for very much. I will pass these questions on to the interviewee. The thing is, interviewees have had to sign redundancy clauses banning them from speaking to the press. So there can't be any identifiable details about his life now. My sense is that yes, he did repair the damage, being able to speak about that period with this measure of distance seems an indication of how far he's come. Best, Joris
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RodneyM72
12 March 2012 1:57PM
Some of this doesn't make sense. There's no way you could get away with doing all your funding in short-term markets. Even before the crash the FSA had pretty tight liquidity contraints (though probably not tight enough). Small banks aren't excluded from this. Banks are obliged to stick to these liquidity restraints but will obviously run it tight because (as the article says) liquidity reduces profits. The FSA set these liquidity constraints based on (amongst other things) size of balance sheet, mix of funding, quality of assets etc. All commercial businesses aim to maximise shareholder value whilst staying within regulator limits - so I don't understand what this guy's 'moral' problem is. Who were they shafting? Is there something he isn't telling us?
Also at the top it says he was the Treasurer but then it says Treasury Manager. Judging by the article I think it's pretty unlikely he was the Treasurer.
Finally any banker that's worth his salt knows that bankers and brokers are NEVER friends. Brokers don't do friends in the markets.
The drink and drug stuff makes perfect sense. In fact most of the second half of the article is very similar to my own experience. When you've been banging your head against a wall for that many years you don't realise how much it hurt until you stop...!
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richkid
12 March 2012 1:59PM
A skyscraper is an upright slaveship.
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Miogarar
12 March 2012 2:18PM
Psychosis.
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gerard3161
12 March 2012 2:26PM
This is a very interesting interview ,and it makes us clear that our behaviour depends on our environment.
Reading this article it seems that he got swallowed up in a place where nobody cares about the wellbeing of other people,I think we cant critizise that because we were not in his situation and in some way we are all born with egoistic qualities In the end we see that he asked himself the question "What is the meaning of my life"?
By realizing that he took advantage of many other people to get rich and use this for his own benefit made him feel guilty.
In fact on our own level in we are more or less the same.
We also like to benefit from other people in order to live a comfortable life.
the currant crisis shows us that we depend on eachother and we are so close connected that every action we do against humanity has effect on the rest of the world. The world became global and we are one family.
Only a change in mentality can cause big changes,and if we reset our mind from
"Me" into "We" its possible to bring back the balance we used to feel.
This is not only a task for politics or bankers but if we want to change something ,then lets start working on ourselves...................after all a crisis is a springboard to something higher and a new level of existance.
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RodneyM72
12 March 2012 2:33PM
I've just noticed this was a major bank not a small bank. It's not impossible (especially for a small bank - much harder for a large bank) but I find it hard to believe that they were able to manipulate the share price purely based on profits from funding mismatches. What is impossible is that you would be able to hide this from anyone. Banks have their own risk departments as well as an external regulator. On top of this auditors and accountants would know if the bank's P&L was too centre-weighted in one particular area. And on top of this all the information would be available to shareholders and investors (and the general public) via their Report and Accounts.
Truth never goes down very well in the Guardian but banks are no different from any other commercial organisation in that they aim to maximise shareholder value either by increasing income or reducing costs. Regulators (as well as internal risk mechanisms - with conflicts of interest closely monitored) are there to ensure this is done within limits. Assuming these people stayed within their limits (FSA warnings are also made public) surely the fault has to lie at the door of the regulator for not setting them tight enough?
I find the first half of this article very Guadianesque in that it makes it look like a small handful of people are making decision and taking action that had a catastrophic effect. People outside of banking will love this. People inside banking will know that is not how it works.
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WorkForIdlehands
12 March 2012 2:45PM
I recognise a lot of myself in this piece.
I work in the CofL
I never drink
I do speak my mind
My promotion prospects are zero - though I wouldn't want it anyway.
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shugsy
12 March 2012 3:25PM
"In some ways I was always an anomaly, in finance. In a way I always thought of it as a game. I didn't take it that seriously. I would be thinking, what the hell, it's not my money is it? I suppose that's why I could cope with the stress reasonably well. I always saw it as a bit of a laugh. I had gathered this band of anti-establishment people around me and we would mock the seriousness of the banking world.
Was he really an anomaly? Wasn't part of reason for the recession because too many bankers played around with it like it wasn't real money?
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BenCaute
12 March 2012 3:41PM
Response to RodneyM72, 12 March 2012 1:57PM
Staff highlight
Finally any banker that's worth his salt knows that bankers and brokers are NEVER friends. Brokers don't do friends in the markets.
Sorry?
You'll have to explain that one to the FSA.
Here's a true scenario: chappy mcbanker is advising megacorp on an new bond issue. Megacorp already has numerous and varied term bonds on the market. Considering he needs to know how to price it, he phones up his old mate on the bond trading desk and asks casually how Megacorp bonds are trading.
Now bond trader has noticed everytime his mate phones the corp in question issues bonds in the short term. This time he thinks I'll put a little bet that bonds will fall as the market is flooded with the new issue.
In the scenario in question bond trader was caught - but only because he was unlucky. He placed his bet and the bonds were issued the very next day. The temporal proximity was too obvious for the FSA.
Speaking of suspicions: I find your attempts to denigrate the above article with pseudo-knowledge of what occurs very questionable.
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warmachineuk
12 March 2012 4:30PM
Having studied how the banking crisis happened, none of this surprising. Groupthink isn't uncommon in other industries, it's just more intense. Banking doesn't have to be dispersed around a nation unlike, say, bridge building, so now it's concentrated in the City where everyone knows each other. Worse, in banking, groupthink defines reality unlike in, say, bridge building. If most think an sound investment vehicle is junk, few will invest in it, making it junk. Whereas if most think a safe bridge is unsafe, the few that use it don't fall into the river.
Of course, the money for groupthink to disregard financial reality must eventually run out and when it does, it, as well as leverage borrowing, goes into reverse. Modern banking is now so interconnected, a crash of a decent sized bank would crash the entire banking system. The whole lot must be bailed out or none at all, unlike bridges where some can be closed without the fixed bridges failing.
This is why banking regulation must be strong and pro-active. After all, bridges are inspected and unsafe ones are closed until they're fixed.
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streetphotobeing
12 March 2012 4:39PM
For many years I had to put up with a relative who was high up in banking, he is now one of those with the million plus bonus for skills in tax avoidance. Nobody in my family could stand him - arrogance and smugness beyond belief .
"banking has required me to dip into my pocket in support of this culture, I applaud the gentleman above for 'seeing the light' but wish a few more would do the same and instead of bailing out, stay on board and try to effect some change from within because external regulation isn't going to work."
Stop giving money to a bank and education of how banksters work - this is the best way at the moment to deal with banksters.
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RodneyM72
12 March 2012 4:50PM
Response to BenCaute, 12 March 2012 3:41PM
Speaking of suspicions: I find your attempts to denigrate the above article with pseudo-knowledge of what occurs very questionable.
Why do you think I'm attempting to denigrate the article? I'm stating what happens with bank's liquidity risk management and how the FSA set limits and monitor regulatory reporting (before and after the financial crisis). The guy in the article didn't mention it but it's crucial to the job he was doing and to the hedging in short-term markets of longer term assets. I couldn't understand why the guy was beating himself up so much if he was working within the limits the FSA had set. So I questioned if there was something else he wasn't telling us.
As for psuedo-knowledge, I did exactly the job this guy is talking about in a FTSE100 bank for 2 years. The only thing that has happened since I was doing it is that liquidity requirements have tightened up even more. Perhaps you can tell me what I got wrong - I'd be very interested...
The rest of your post seems to have very little to do with my comment that you quoted or the article. Please clarify.
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JezJez
12 March 2012 5:04PM
Unfortunately the only way to regulate the attitudes in finance is to let banks, like any other business, go bust when management f**cks up. If the customers of Northern Rock had lost their savings chances are that the the opprobrium both public and political added to the fact of those responsable losing jobs would focus minds very sharply elsewhere in the business. Reward for failure is now the norm who wouldn't put up with a bit of bad press if you are on comfortable pension/payout and a new job elsewhere?
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HorseCart
12 March 2012 7:17PM
You isolate yourself when you act against the institution you're part of. So the only people to do so are those with very high morals, and those who just don't care.
:
Look in the mirror and ask yourself: 'Is the City turning me into a nasty person?'
http://www.guardian.co.uk/commentisfree/joris-luyendijk-banking-blog/2012/mar/12/former-treasurer-voices-of-finance
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