Former Wall Street Executive Sallie Krawcheck Critiques Financial Reform Policy
A year after leaving Merrill Lynch, Sallie Krawcheck, one of Wall Street’s leading women, is stepping into the public debate over financial reform.
|
Could
Sallie Krawcheck—often celebrated as a rare honest voice on Wall
Street—help Washington address the nation’s financial ills?
Krawcheck,
the 47-year-old much-heralded former stock analyst, rose to great
heights at Sanford Bernstein, and then as an executive at Citibank and
the Merrill Lynch unit of Bank of America. Thirteen months ago, she left
Merrill with a severance package reportedly worth $6 million. Lately
Krawcheck has been peppering the media with her thoughts and strong
recommendations about how to address, if not solve, the gigantic,
chronic, almost genetic, ills of the global financial industry.
On
the eve of the second presidential debate, I watched as Krawcheck
lamented what she presumes will be a lack of discussion by the
candidates about how to reduce risk in the financial system, improve
bank regulation, or strengthen corporate governance practices.
“It
is very difficult, absent another financial downturn, to really
institute any additional significant regulatory change,” Krawcheck told
the crowd at a Harvard Business School Club of New York event in the
offices of international law firm Chadbourne & Parke on Monday. But
she challenged the lack of oversight on money-market funds that the
public believes are safe. “The fundamental debate is how do we reduce
risk in the banks. What is the right amount of risk in the banks?”
In forums ranging from Fortune magazine’s “Most Powerful Women Summit” to the Harvard Business Review, the op-ed pages of The Washington Post and Financial Times,
CNBC, Politico, and in more than 700 tweets, Krawcheck has opined about
adjusting executive compensation by pinning pay for top executives to
the risks they take with shareholders’ money. She says, if they borrow
money to leverage the company, let them be paid in junk bonds, not cash,
and maybe they will rethink the risks they are taking.
Krawcheck
is a creature of Wall Street: smart, charming, extra-ordinarily well
spoken, analytical yet funny. And yet, except for not claiming she is
part Cherokee, she sounds as though she is as fierce a critic of the
financial industry as Elizabeth Warren, the former head of the Consumer
Protection Finance Bureau who is now running for the U.S. Senate seat in
Massachusetts as a Democrat.
Self-help
advice is misguided, she says. “We have a whole industry that has
sprung up that is simply to tell women to try harder. Right, how to ask
for a raise. How to act, pull up to the table ... I would actually argue
the problems are really different from that.”
She generated howls of laughter as she launched into her “do the math” shtick about the “hair and makeup” handicap.
With
a mix of common sense and complex analysis, Krawcheck on Monday offered
wide-ranging opinions about handling corporate greed, mismanagement at
Citibank and other institutions, and the need for more diversity and
women executives at the top of corporate America. “I am not in favor of
quotas, but I do believe this is an area where the regulators could step
in and have not.” She added: “We have stalled out on the progress of
women in business across the board.”
Jokingly,
she chided those who fail to recognize the fundamental problem that
women get “tired.” She generated howls of laughter as she launched into
her “do the math” shtick about the “hair and makeup” handicap. “As a
woman, you spend 15 minutes more a day on personal grooming—hair and
makeup—than a guy does. I spend more, but let’s assume 15 minutes a day,
an hour and 15 minutes a week, five hours a month, 60 hours a year, one
week on hair and make-up, and I have not shaved my legs yet, I have not
yet dyed my hair, there is no mani-pedi, the brows have not been waxed,
I have not gone to yoga, I have not run, I have done nothing but my
friggin’ hair and makeup ... Somebody at some point will address the
issue that women get tired.”
Krawcheck,
a self-described “bank geek,” believes the issue with new financial
regulations, such as the Dodd-Frank Act, is that they are too detailed.
“The problem is they are attacking complexity with complexity.”
The
Daily Beast asked: “How is the presidential election going to make a
difference in what you would like to see done? Can you parse the two
candidates for us?”
Krawcheck
hemmed and hawed a little. “I think we are learning more every day. I
learned a lot about Joe Biden the other night. I learned that Mitt
Romney viewed Dodd-Frank [the comprehensive financial reregulation law
still being implemented] as being a kiss to the large banks. That felt
new to me. I don’t think the large banks—although I have not been in one
for some time—view Dodd-Frank as a kiss to them and view it as a
benefit.” After an arcane minute of discussion of the Volcker rule and
its ban on proprietary trading by banks, she retreats from the
complexities, saying: “Let’s just take the risk down, which means we
will just have to wait and see.”
The
Daily Beast followed up. “Who would you trust to appoint regulators?”
The crowd, cognizant that she suddenly had been waffling, roared as she
said: “I am not going to answer that. I am not answering that, not at
all. But I do think less detail, big sticks. Less detail, big sticks.”
So
why is Krawcheck, such an extraordinarily competent person, suddenly
walking a nonpartisan tight rope and trying not to answer the question
or offend anyone? What could possibly cause her to do that? Is she being
careful because she hopes to be the chief executive officer of another
major company. Maybe, but the answer, I would suggest, is that she may
be eager to be appointed to a high office in Washington. If she can
continue her nonpartisan stance, she might be the ideal person to be in
charge of consumer protection, be nominated to the Securities &
Exchange Commission or to a Treasury Department job—regardless of who is
president.
A
look at her history offers few clues. Krawcheck’s political
contributions were carefully made to candidates from both parties who
had legislative influence over the financial industry. An undergraduate
at the University of North Carolina, Krawcheck earned an M.B.A. at
Columbia University in 1992. She did not respond—before this article was
posted—to an emailed question about whether chief Romney economics
adviser Glenn Hubbard, a professor then and dean of the Columbia
Business School now, has talked to her about a possible cabinet spot in a
Republican administration. She also has not talked openly about
supporting President Obama either, although in earlier years while at
Citibank she contributed to Hillary Clinton’s Senate campaign and to
Sen. Harry Reid of Nevada, who now leads the Democratic minority.
So
for those concerned about the safety of the financial industry,
continue to follow Sallie Krawcheck to see if and when she will inject
her opinions directly into the presidential campaign.
