November 8, 2013
Bank culture has featured prominently in the debate on financial reform. Culture, including values and beliefs, was at the center of the infamous “Muppets memo” penned by the resigning Goldman Sachs banker. Culture is the focus of the promises made by politicians and regulators to fix, once and for all, the City and Wall Street. And culture received a full chapter in the recent Salz Review of the problems at Barclays that led to the LIBOR scandal.
If one listens carefully, however, one can hear politicans doing the same verbal trick. Having denounced bank culture, they promise to remedy bank structure. E.g., separate (or, more creatively, “ring-fence“) investment and retail banking. Banish prop trading. And so on. This is not unreasonable, as the structure is really what regulators can intervene on. But years of organizational theory suggest that enduring change in organizations is impossible simply through formal measures — that is, in the absence of cultural change. As recent press reports have shown, cultural change is now very much taking place in seminars and value statement-writing sessions in the City. Canary Wharf appears to be teeming with PowerPoint-ready culture consultants.
Given this, I am organizing a panel discussion on bank culture (together with Nina Andreeva and Jean Pierre Zigrand). What are the promises of cultural reforms? What are the challenges? How does culture interact with structure? To this discussion, I invited a banker from Goldman, another from a top bank, a bank consultant in cultural change, and a prominent bank blogger from The Guardian. And I plan to combine them with regulators and academics: with Mike Power, an officer at the FCA, Nina Andreeva, and myself.
All in all, there will be two panels of four people. Each speaker will have about five minutes (vigorously enforced by the moderators). There will be 30 minutes of Q&A after each panel. And then drinks and nibbles. The event will take place at the spanking new LSE Systemic Risk Centre on November 21st from 4.00 onwards. It is free and open to the public, but registration is necessary. Please write to firstname.lastname@example.org
October 31, 2013
“A study of surname distributions over the past 800 years reveals it takes at least half a millennium for the UK’s elite class to shake off their lineage and converge with the average members of society – at least 400 years slower than economists had earlier predicted.” (England’s social classes slow to evolve, LSE research)
October 26, 2013
Psst. Bill Maurer is now Dean of Social Science at UC Irvine. Wanna see what he promises to do in order to raise money for education? Click here to know more.
Warning: Contents contain graphic material that Trekkies will find exciting.
October 25, 2013
We started a new season of research seminars in the University of Leicester’s School of Management. Among the speakers there are many SSF-related talks.
Next Wednesday (30 Oct.), in fact, we are going to have a talk by this blog’s very own Martha Poon who will presenting her work on credit rating agencies.
October 24, 2013
In case you missed it, this article, Putting a Speed Limit on the Stock Market, was published in the NYTimes Magazine on October 8, 2013.
The rise of high-frequency trading is often told as a technology story. Hedge funds, Wall Street banks and other firms used increasing computing power to write ever-smarter, ever-faster trading algorithms; fantastically expensive fiber-optic lines were built to decrease transaction times by milliseconds. But the rise of high-frequency trading is also a result of the unintended consequences of regulation.
October 23, 2013
By Stefan Leins
The US government is accusing Raoul Weil, head of UBS’ wealth management from 2002 to 2007, of helping thousands of American clients to hide a total amount of 20 billion US dollars of untaxed money in Switzerland. Last week, Italian police arrested him in Bologna.
Weil’s case may be the most significant, but it’s not the first of its kind. Since Obama entered office, a number of Swiss bankers have been on the radar for assisting tax fraud. And among Swiss bankers, many now avoid travelling to the United States, fearing that they could be caught and put on trial for similar reasons.
Raoul Weil’s arrest offers a nice opportunity to reflect upon a remarkable transformation in the image of Swiss bankers during the last decades. Until the 1960s, Swiss banquiers were perceived as uncharismatic, secretive and mousy people. They looked more like accountants than consultants, and had all the charm of Harry Potter’s wealth-hoarding goblins.
This description lost its validity in 1964, when British Labour politician George Brown coined the expression “Gnomes of Zurich” to discredit Swiss bankers’ aggressive speculation against the British Pound. Suddenly, Swiss bankers were not only secretive and uncharismatic, they were also aggressive and greedy. This new role was quickly embodied and performed by some of the bankers themselves. As historian Chris Bowlby mentions, at that time, some Swiss bankers answered phone calls from Britain by saying “Hello, gnome speaking” (BBC online 2010).
In the 1990s, Swiss Banking went through a structural shift. The largest Swiss banks, which were traditionally successful in private banking, began to massively expand their investment banking activities. Swiss banks became investment banking houses, comparable to Goldman Sachs or Morgan Stanley. This new orientation was driven by a number of Swiss key personalities that learned about investment banking on Wall Street and in London.
For this new investment banking-oriented Swiss Banking, the accountant-like banquier – which was still an aspect of the Gnome personality – wasn’t of practical use anymore. A new type of Swiss banker – outgoing, narcissistic, risk-taking – appeared to represent a more successful model to achieve the financial gains Swiss banks were so desperately looking for. Or to put it simple: Gordon Gekko arrived in Switzerland.
In 2007 and 2008, UBS was heavily affected by the subprime crisis (most likely a direct outcome of the merger between Gekko and the Gnome). After a government bailout of sixty billion US dollars, the image of the Swiss banker as an outgoing, greedy risk-taker came under fire. Subsequently, a return to the goblin-like banquiers seemed expectable. However, this was before the US government recognized the potential of untaxed money on Swiss bank accounts. Ever since, Swiss Bankers are increasingly framed as a secretive but greedy group of persons that hides money beyond the control of states.
In addition to the banquier, this new image of the Swiss banker as the Gnome and the Gekko, seems to put emphasis on hiding money and escaping governmental control. Now, the question is: How will this recent transformation influence the framing and self-ascription of Swiss bankers in the long run? Will they become the “Swiss Scrats” (fans of Ice Age, the movie, will know what I’m referring to) or the “Gnomes of Zurich on the run”?
Stefan Leins is a PhD student at the Department of Social Anthropology at the University of Zurich. He has done two years of fieldwork among the gnomes, ahem, the scrats of Zurich.
October 21, 2013
The U.S. government’s website Healthcare.gov was launched on October 1 in the middle of the government shutdown. The site is meant to be a portal to the market for health insurance in fulfillment of the Affordable Health Care Act. It was supposed to allow U.S. consumers to brows and purchase insurance plans offered in their area.
The story here is fascinating. A market technology must be constructed for a mass consumer market, brought into being by federal law, for the provisioning of a required insurance product, that covers a complex and necessary service. The design of the insurance exchange platform will reflect relationships between insurance companies, government mandates and federal agencies, numerous sources of technical tools, as well as user demands. It will contain within it complex actuarial, pricing and profitability calculations and it will also be able a place where consumer choice is formatted and transactions happen.
So far, there’s been nothing but technical trouble. Journalists have had a field day reporting on their own inability to sign up for a plan.
Obama addressed the issue of technical failure in a press conference today. His point was to change the conversation which has so far revolved around the difficulties of implementing new internet-based mass market technology. ‘Let me remind me you the Affordable Care Act is not just a website,’ he said. He then pointed out that 85% of Americans who are already insured through their full time employer do not need to go to the exchange to purchase a plan.
Despite Obama’s pleas to stay focused on the bigger impact of US health insurance reform, the stakes of this market technology as it struggles to get off the ground are high. And unlike technologies where scholars dig deep to rediscover a history of controversy, the divisive partisan contest between Republican and Democrats will expose all the guff as the insurance exchanges develop. Every visible operating hiccough will be noted and discussed. This is a market building process that is in many ways unusually visible.
But surely there are also angles to discover that will remain unnoticed precisely because there’s so much media racket. That’s why I think these health insurance exchanges are perhaps the hottest research project social studies of finance can tackle. The challenge is not to generate a story for this technology, because there’s plenty of story already here. The problem is to use the tools of SSF to generate another story about this market that’s political salient yet original.