Why Do They Say What They Say?
As Bankers lined up to testify in Washington last week about the credit crisis they obviously helped create, not one of them seemed prepared to apologize. As The New York Times put it Wednesday, "corporate chieftains worry that apologies may be red meat for shareholder lawsuits."
But that's not the only reason. Sydney Finkelstein, a management professor at the Tuck School of Business at Dartmouth, said his research for a recent book showed that heads of Fortune 500 companies almost never apologize for poor performance. Robert F. Bruner, dean of the Darden School of Business at the University of Virginia, added: "they simply tend to have big egos that are not used to admitting mistakes."
"You don't get to the top of a large and highly competitive organization by debasement and humility," he said. (See, "For Bankers, Saying ‘Sorry' Has Its Perils.")
But they had to say something. So, as expected, we heard various versions of "mistakes were made," vague, abstract acknowledgements that things could have been handled better.
Paul Krugman wrote that two moments stood out for him in the testimony: "One was when Jamie Dimon of JPMorgan Chase declared that a financial crisis is something that ‘happens every five to seven years. We shouldn't be surprised.' In short, stuff happens, and that's just part of life."
Krugman went on to note: "Mr. Dimon's cluelessness paled beside that of Goldman Sachs's Lloyd Blankfein, who compared the financial crisis to a hurricane nobody could have predicted." Blankfein's comment also upset Phil Angelides, the commission's chairman, who acidly commented that the financial debacle was made by men and women. They are not "acts of god." (See, "Bankers Without a Clue.")
So, were the bankers just protecting their egos, while trying to persuade the commission that new regulations were not needed? Or, could it be that the bankers really do not understand what happened?
Almost certainly what they said is the usual mix of what they want to believe themselves and what they want us to believe. The important point is that it would be a mistake for us to look to them to illuminate what happened.
As a Times editorial put it today: "The commission must uncover what bankers, investors, government officials and other people in positions of power, past and present, would prefer not to say - or perhaps do not know or understand - about the crash and the bailouts." (See, "The Show Must Not Go On.") They will have to look into the facts. And we will need to maintain our skepticism about their testimony.