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I’m sorry, but this is the big China scandal of the week, an accusation that a big investment bank hired family members of the rich and powerful? Seriously, is this some sort of journalistic practical joke from The Onion?
I report, you decide (if this is silly):
[T]he Securities and Exchange Commission (SEC) is looking at whether the bank’s Hong Kong office hired the children of powerful heads of state-owned companies in China with the express purpose of winning underwriting business and other contracts, a person familiar with the matter said. (Reuters)
Sorry for stating the obvious, but is there any investment bank out there (not to mention ginormous multinational) who doesn’t engage in such practices? Seriously, these companies literally ooze with the kids of the rich and powerful.
Now, don’t get me wrong. It’s refreshing, and somewhat shocking, to see the U.S. SEC actually investigating JPMorgan. The public has been clamoring for some action against Wall Street for the past five years. But the SEC going after influence peddling in China to put a notch on its belt with respect to investment banks reminds me of when Paul Newman got the Oscar for that crappy “sequel” to The Hustler. Everyone knew it was a lifetime achievement award in disguise, and it was sad that he hadn’t won for any of his other performances.
But I digress. The point is, they finally started looking at an investment bank, and this is the piddly shit they came up with?
Now, to be fair, I’m not saying that the SEC may not be conducting a legitimate investigation here. The papers are reporting on some specifics:
The SEC is questioning JPMorgan’s relationships with at least two families in China that may have legitimate explanations, the source said.
U.S. law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be bribery, and the SEC is investigating JPMorgan’s actions under the U.S. Foreign Corrupt Practices Act.
Technically, there could be some FCPA violations here if they can prove some quid pro quo. But doffing my lawyer hat for the moment (I’m allowed to do so for a few minutes a day), this area of U.S. law amuses the hell out of me. Influence peddling is influence peddling. Just why is it that Senator X’s imbecile son ends up with that plum job at an investment bank after an embarrassingly poor academic performance at Wharton? How does Finance Committee Chairperson Y’s dullard spouse, who has no degrees or training, get to be a “Special Consultant” with a six-figure salary at that hot lobbying shop on K Street?
Just why did Xiao Wang get that amazing job in Hong Kong with an American investment bank doing “business development” only a year out of B-School? Is it because a Harvard education is so rare in Asia these days or might it have had something to do with his father being the Chairman of an SOE?
Need I go on? It’s all well and good until someone goes a bit too far and starts promising something specific in exchange for a bit of help with job placement assistance for the family. Definitely a legal distinction there, but who are we kidding here?
I’ve said it many times before. The U.S. comes across as ridiculous when it excoriates China from the bully pulpit while engaging in dubious behavior of its own. Drone strikes, domestic spying, unjustified war mongering — take your pick.
In going after JPMorgan for engaging in one of China’s national pastimes (i.e., using a powerful position to make your family rich) while ignoring the breathtaking amount of institutional, and unfortunately legal, corruption in the U.S., the SEC risks looking rather ridiculous. Then again, they didn’t create the system, they’re just stuck trying to make sense of it.
If JPMorgan actually gets in trouble for any of this (don’t hold your breath), they can legitimately cry “Why me?” not to mention “Wait, you’re serious about this?” shortly followed by “Yeah, of course we did it. $12 million? Sure we’ll pay the fine.”
Visit the original source and full text: China Hearsay