MARK TO MARKET: Literally, Integrity Doesn't Exist
13 May 13:30
By Jim Murphy
A Dow Jones Newswires Column
NEW YORK (Dow Jones)--Integer, integra, integrum.
There you have it: the nominative singular - masculine, feminine and neuter
genders - of the Latin adjective that translates into English as "whole" or
"entire."
From which comes "integrity," or completeness, which is a synonym for
honesty, as in, "Do you swear to tell the truth, the whole truth, and nothing
but the truth, so help you God?"
In business, integrity, in the literal meaning of the word, is impractical
and unrealistic and - for those who wish to remain in business - impossible.
I bring this up because "Integrity on Wall Street" has been a hot topic for
some time now, fueled primarily by the stalking of Merrill Lynch by the
Attorney General of New York State for the firm's alleged lack of integrity, in
particular, in the activities of its stock analysts.
Talks between the two sides are still underway, but it looks as if Merrill is
going to have to pay hundreds of millions in fines and restitution to get the
attorney general off its back and onto the back of, say, Morgan Stanley or
Salomon Smith Barney.
You know, if integrity, in the literal sense of the word, was the rule,
without exception, at Merrill Lynch, investors still would have to cope with
the fact that even investment advisers with the best will in the world can be
wrong as often as - or more often than - they are right.
Look at the erstwhile whizzes at Long Term Capital Management. No way did
they purposely send themselves and their investors into the tank.
They had these models, see, which they believed were integral, whole and
entire. But at least one of them was missing several lines of "what if"
programming, as in, "What if Russia goes into the toilet?"
It is required of honest retail brokers that they place clients in
investments the brokers believe will appreciate in value. The moresuccessful
they are in doing just that, the more the brokers will appreciate. This is the
practical integrity of the marketplace. Doing well by doing good.
To continue with the example of retail brokers, their adherence to an
absolute, ideal or pure - call it what you will - integrity would soon cost
them their jobs. Adherence to the same ideal by a company with stuff to sell
would quickly put it out of business.
For example, you are a broker at X Financial trying to sell muni bonds to Mom
& Pop. You have bonds on the shelf that will give them a higher "taxable
equivalent yield" than many other fixed-income investments.
Does integrity require you to tell Mom & Pop, "Listen, Y Financial down the
block has tax-free bonds with comparable maturities and ratings and a taxable
equivalent yield of one full percentage point more than the stuff I've got on
my shelf?"
Of course not.
Not any more than integrity requires a thoracic surgeon to tell a potential
customer, "Yeah, I'm good, but this woman I went to med school with is twice as
good."
To me, even to ask the question, "Has Wall Street lost its integrity?" is to
emit a whiff of hypocrisy, and not a faint one at that.
I've got no problem with anyone on Wall Street who has committed a crime
suffering civil or criminal penalties for the infractions.
I've got a big problem with Eliot Spitzer, the New York attorney general, or
anyone else, acting as if there is a special breed of Armani-ed criminals on
Wall Street, now at the apex of their evil powers, unlike him or me, of course.
And I've got a big problem with anyone even intimating that as soon as we can
put these people away, or otherwise drive them out, fine their firms billions,
and legislate their dealings to a fare-thee-well, Wall Street will be ready to
be assumed into heaven.
Unlike any retail sector that ever was, or ever will be.
Then again, I'm not running for office.
The truth is, walruses: I am they/As you are they/As you are me/And we are
all together.
(Jim Murphy can be reached at (201) 938-2145 or by e-mail at
Jim.Murphy@DowJones.Com)
(END) DOW JONES NEWS 05-13-02
01:30 PM |
