The No. 1 topic of discussion at this year’s World Economic Forum in Davos is inequality, so it seems every journalist is asking every noteworthy attendee — from CEOs to investors — about their thoughts on the matter.
Naturally, that means Wall Street CEOs are getting questioned too.
Tuesday, it was Bank of America CEO Brian Moynihan’s turn. Wednesday morning, Morgan Stanley’s James Gorman was up. Both interviews were with Bloomberg TV. Both CEOs were asked about inequality. Both gave answers.
The stark difference was that while Gorman sounded like he understood the question, Moynihan did not.
Let’s start with Gorman. First, he admitted that the industry had violated everyone’s trust and brought the world into a recession — a mea culpa. Thank you.
Then Gorman moved on to how his business was trying to become less harmful to the public good — shedding proprietary businesses, and taking less risk.
Finally, he admitted that inequality is a massive problem we have on all our hands — one that doesn’t just date back to the financial crisis. It goes back decades, and it requires more than Morgan Stanley or any other institution’s charitable giving programs. People want jobs, and more than that, they want to live in a society where they can work for a living wage.
Here’s how Gorman put it:
“First of all, we have to get employment to a state, particularly in the U.S., where more people are in jobs … And for better or for worse, a lot of the blame for the failure in the economy over the last several years is the financial crisis.”
Inequality, he added, is a “Legitimate issue. Look at the minimum wage, particularly in the U.S., since 1950 inflation adjusted. It’s terrible. You look at the rest of the world, the minimum wage is a problem. We are clearly creating societies where we have large groups of haves and haves nots. That was expressed by the public during the financial crisis. And we need to address it.”
Now contrast that grasp of the problem with Brian Moynihan’s answer the day before.
Here’s a quick preview — Moynihan just rattles off a bunch of facts and figures about how his bank is serving the country by doing business and expanding credit.
“In the United States, we engage in everything we do,” said Moynihan, “our small business lending is up 25 per cent year-over-year. Our mortgage lending was up until revise trend off. Our credit cards are up. We are trying to participate in the economy, but the economy has to grow in fundamental ways and the banks are trying to help it. You have both of those issues. Industries are cover, capital letters and liquidity. Every one of us has work to do. On the other hand, we talk a lot about the role in the fundamental economies and we help growth and how we support both idea exchange and other information.”
What Moynihan said is part banking jargon, and adds nothing to a discussion about inequality.
In fact, it’s hard to figure out whether or not he understands the root of the problem. This, again, is more than just American jobs. It’s a desire to live in a society where those who work have the opportunity to prosper. We’re talking about a gap here.
Moreover, Moynihan brought up a sore spot. The last thing a Wall Street CEO should bring up as a positive — if he’s trying to explain his grasp of the inequality problem for his customers — is credit card (debt).
The industry’s track record on credit cards hasn’t been great of late. Bank of America itself was sued last fall and paid out $US32 million because it was sending harassing robocalls to credit card customers.
A year before, after consumer advocates had claimed that credit card payment-protection products didn’t actually help customers, the bank stopped selling them. Bank of America also paid a $20 million settlement and admitted that it mismarked those products.
It’s unclear how much BofA was making off these products but in March 2011, the Government Accountability Office released a report that said consumers paid $US2.4 billion in fees for payment-protection products in 2009.
Regardless of whether or not Bank of America’s practices (or Wall Street’s for that matter) have changed, the trust has been lost, as Gorman said.
So when it comes to the topic of inequality, it’s not enough for anyone representing a Wall Street bank to rattle off what they know about their business. That’s not going to end the banker-bashing, or change the country’s perception of the industry.
Inequality isn’t about that, anyway. It’s not an us vs. them.
It’s about the people (customers) who are listening, and would like to trust that your company understands the challenges we’re facing as a society together.
And this isn’t about the kids at Occupy Wall Street anymore, or even the leaders at Davos. This is a problem people are beginning to see in their communities. In a recent survey, 58% of the affluent investors, traders, and other professionals polled about inequality by Bloomberg said it was a problem. Even more said it was time for the government to do something about it.
It would be nice to know that the powerful leaders of America’s major banks understand inequality, and can communicate that in English to their customers.
It’s likely that Moynihan meant no harm with his comment, but remember, when you’re a leader trying to reach the masses, “it’s not what you say, it’s what people hear.”