We all have aspirations about where we want to work after college. Many people dream of working for a non-profit or taking over their families business. I unfortunately have never been interested in these specific fields and have always found finance as a fascinating subject. The biggest issue with finance is that the industry is extremely corrupt. You can blame it on the types of people that are recruited into the industry or the culture within the banks. These banks were the architects of the 2007 financial crisis and were motivated by huge bonuses and salary increases. I would like to think that I would have acted differently if I had been working for one of these firms but the reality of it is that the system probably would have coerced me into taking part in the fraudulent activity.
One of the biggest players in the financial crisis was J.P. Morgan Chase, who happens to be the company that I will be working for this summer. I feel torn between wanting to make excuses for the company and stating the fact that they were a corrupt organization that took advantage of innocent people. Either way you look at it, I find it saddening to hear from employees speak about the fraud occurring from the lowest level employees to the CEO Jamie Dimon. One key employee that has been speaking out about some of the issues that occurred inside the company is Alayne Fleischmann. She worked at Chase as a transaction manager, which meant that she was supposed to ensure that the mortgages that were being packaged together as mortgage-backed securities were not subprime mortgages. During 2006 she was given the task of investigating if a package of loans from GreenPoint had quality loans. What she found was that the $900 million dollar mortgage-backed security had a bunch of terrible quality loans that had been formerly been rejected by J.P. Morgan. She voiced concern about the package but the Managing Director specifically told her that her research was incorrect. Fleischmann and a couple of other analysts who voiced concern were then given more and more work until they began to change their opinion of the loans sold from GreenPoint. This continued to happen and lead to the billion of dollars of losses suffered during the financial crisis of 2007.
The SEC and the Department of the Justice never dealt with this fraud that may seem obvious to the general public. Instead the DOJ used the knowledge of the banks wrongdoing as a bargaining chip to make J.P. Morgan Chase pay over $9 billion dollars of penalties. This was touted as a win for the Justice system because it was the largest white-collar settlement ever. In reality J.P. Morgan Chase, specifically the CEO Jamie Dimon celebrated the payout. Before the financial crisis they made billions more of profit than what they had to pay out. Even the shareholders were happy with the settlement because the stock price for J.P. Morgan Chase rose six percent after the announcement, increasing the market capitalization of the company by $12 billion dollars. Furthermore, Jamie Dimon’s salary was raised by 74 percent. If this doesn’t show you that the banks were the winners, I don’t know what will.
I am hoping that I will be surprised this summer by the large culture change, but I think that the reality is that banks will wait out the financial crisis woes until they can find another way to take advantage of the general public. I can’t truthfully say that I will not work in finance because of this bad stigma surrounding the industry. But what I would like to believe is that the best way to change a company is from within. Even though you may view this as a very convenient solution with the largest benefit to me, I would like to argue that I can and will make a change. I may only be an analyst when I begin working there, but hopefully someday I will be high enough up within the company to make a cultural change.
Illustration by Victor Juhasz