Barclays Seeks Level of Accountability That Hasn't Been Seen On Wall Street in More Than a Generation.

[ by Howard Haykin ]

Bloomberg View columnist Willam Cohan admits it's tempting to trust Antony Jenkins, "this sweet-talking British banking executive, still in the flush of his new appointment to run the scandal-ridden institution."  Mr. Jenkins, the Chief Executive of Barclays Plc since August 2012, is filling the void left by Robert Diamond who was forcibly relieved of his duties shortly after Barclays agreed to settle regulators' charges that bank traders had regularly manipulated the benchmark Libor interest rate.  

[C-I Digression:  One question that immediately comes to mind:  Is it appropriate to seek out fault in statements of a newly designated Chief Executive?  After all, shouldn't Antony Jenkins to be give a probation or 'break-in' period', during which time he's exempt from criticism?  How bad would it be to give the guy, say, 1 year to run the business as he sees fit - without concern that he will be criticized? 

Hah!  He should only be so lucky.  It's not difficult to imagine former SEC Chairman Mary Schapiro asked, if not thinking: "when has an individual investor been given so much wiggle room or benefit of the doubt?  Of course, the answer is never.  So, I guess in this circuitous logic, we arrive at this anticipated conclusion:  Let the cards fall where they may.  Unfortunately, for Mr. Jenkins, the cards he's been dealt don't look particularly optimistic.]

Far from being a newcomer to Barclays Plc, Mr. Jenkins has been at the bank since 1983 - except for a short break at Citigroup - and in 2009 he became a member of Barclays' Executive Committee and CEO of its retail and business banking division.  So, according to Mr. Cohan, the source of Mr. Jenkins' religious conversion [from prior culture at Barclays] is not clear.  Of course, it's understandable that Mr. Jenkins is anxious to distance himself and the bank from the rampant behavior that prevailed at Barclays under the reign of Robert Diamond - as anyone would.

Implementing the 'New Morality' at Barclays.   Antony Jenkins announced on 2/12/13 that Barclays, having taken a 4th-quarter loss of $1.3 billion - replete with the requisite mention of “one-time” losses that have become a staple of bank earnings these days - would undergo “a major reorganization” that would cut 3,700 jobs, including 1,800 employees in the bank’s Asian and non-British European investment-banking units.  That was just for starters.  Here, rather than paraphrase Mr. Jenkins's intentions, William Cohan provides three pointed quotes from Antony Jenkins:

“There will be no going back to the old way of doing things.”

“We will never be in a position again of rewarding people for activities inconsistent with our values. ...  The old ways weren’t the right way to behave, nor did they deliver the right results.”

“Individuals must take responsibility for their own behavior.”

[C-I Note:  Notwithstanding the power of Mr. Jenkins's 'Knute Rockne-ish' exhortations, one should not disregard several recent instances of transgressions or questionable actions taken by bank personnel - some of which Mr. Cohan detailed and that we note below.  Depending perhaps on how well Mr. Jenkins's strategy is implemented and maintained, it's worth reflecting on 2 takes on the oft-quoted line, "history tends to repeat itself."

• "History repeats itself, first as tragedy, second as farce."  - Attributed to Karl Marx.
• "Those who do not learn from history are doomed to repeat it."  Attributed to philosopher George Santayana.  We presume that Mr. Jenkins intends to approach his challenge from this vantage point - i.e., to learn from the past.]

Shredded Reports.   During Jenkins's years at Barclays, it's been alleged or postulated that "the good folks at Barclays" committed numerous indiscretions, including the following:

• manipulated the London interbank offered rate,
• shredded unflattering reports about the U.S. wealth-management division, and,
• according to British authorities, may have fraudulently loaned money to Qatar to invest back in the bank to help Barclays avoid a government bailout in 2008.

Dealings With Former Lehman Executives.   One of the core businesses Jenkins plans to build the new Barclays around just happens to be something that Diamond picked up for a song in September 2008: the carcass of Lehman Brothers Holding Inc.’s U.S. investment-banking business.  Last October, Hugh “Skip” McGee III, a former Lehman employee who negotiated that sale with Diamond after Lehman filed for bankruptcy in September 2008, was promoted to CEO of Barclays’s corporate and investment banking in the Americas.  Helping McGee run the business is another former Lehman executive, Gerald Donini.  McGee was a top and trusted aide to former Lehman CEO Richard Fuld, who is credited with running the bank into the ground.

In a somewhat esoteric but illuminating side drama, McGee also authored an infamous November 2009 letter to the Board of Trustees of the Kinkaid School, a private academy in Houston that his son, John Edward, attended.  John Edward and fellow members of the school's football team, wanted to perform a skit at a pep rally - one in which the young men planned to wear girls’ cheerleader outfits.  The Trustee deemed the idea to be 'politically incorrect' and opted to cancel the pep rally. 

This infuriated Mr. McGee, which prompted his letter to the Trustees.  Among other things, Mr. McGee tried to have the Trustees fire the teacher who led the anti-rally effort - on the basis that she had a “leftist agenda” and harbored criticisms of investment banking.  McGee reinforced his concerns by adding these thoughts on sexual identity: 

• “Why is a married, heterosexual coach considered an oddity at Kinkaid?”
• “Why is a gay female coach telling high school girls on her team that she was disappointed in them for belonging to the spirit club (SOK) and that by doing so they are just pandering to the football team?”

Accountability Key.   Mr. Cohan further questions the sort of message that Mr. Jenkins was sending to the Barclays troops when, in one of his first acts, he promoted a Skip McGee?  In effect, does CEO Jenkins seriously expect Skip McGee and persons of his ilk to change their behavior so as to fall in line with what the boss has decreed in a public-relations blitz?   [C-I Note:  That, of course, is a rhetorical question.  We all know the answer.  Mr. Cohan continued to say ...]

That is like asking a scorpion to stop stinging.   The only way people on Wall Street will change is if it’s in their self-interest to do so, which means holding them financially accountable, up to their entire net worth, when things go wrong.  Yet, there hasn’t been that kind of accountability on Wall Street in more than a generation. And there certainly has been nothing like it at Barclays since Jenkins took over from Diamond last August. Far from taking responsibility for wrongdoing, last month a group of employees (unsuccessfully) petitioned a British judge to keep their names secret in advance of the first trial over the interbank-rate manipulation scheme.

In an interview with the British Broadcasting Corp. on 2/12/13, just after he rolled out his morality tale, Mr. Jenkins responded to a question about how he expected to change the culture at Barclays.  He responded, accordingly:

“You do it by really embedding a sense of purpose and values that we live by every day.”   Through 5 core values, namely:  “respect, integrity, service, excellence and stewardship.

Sensing the interviewer’s incredulity, he said, “People could be cynical about that.”   And with very good reason, he might have added.

For Mr. Cohan's complete 'treatise', go to:   [Bloomberg, 2/18/13].