Saturday, July 18, 2009

Shut Out of the Aristocracy of Pull

Well, the Aristocracy has revealed a financial services firm who isn't on their list. CIT, a company I hadn't heard of before this week, looks like it will go under this week barring some big infusion of private capital. The firm is a big lender to small and medium-sized businesses. I didn't think much about it, until I saw this WSJ article: The CEO Left Off the Lifeboat. According to this article:

On June 17, Jeffrey Peek, chief executive officer of CIT Group Inc., spoke at a conference in the nation's capital where the keynote speakers were Federal Reserve chief Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair. His real mission there, Mr. Peek told others, was to raise his profile among Washington's movers and shakers.

This week his politicking foundered, as the U.S. spurned pleas for financial aid from CIT, one of the nation's largest lenders to small and midsize businesses.

CIT had been trying for months to improve its connections in Washington. It spent close to $90,000 last year on lobbying, and $60,000 in the first quarter of 2009. It brought onto its board of directors former Congressman Christopher Shays, a Connecticut Republican.
One day I will conduct a study on the use of politicians on boards of directors. It's a really scary trend. And finally, there was a description of CIT's CEO that was one of those paragraphs that makes you double-take, and question you were reading a description of Jim Taggart, a description that is becoming far too ubiquitous:

He installed CIT's top brass in a glitzy office building on Manhattan's Fifth Avenue, eschewing the company's historical base near a big shopping mall in Livingston, N.J., and brought CIT into his high-society orbit as well. CIT became a sponsor of the New York City Opera. Its role as a donor to the Metropolitan Museum of Art may have helped Mr. Peek win a prestigious spot as a museum trustee in 2008.

Mr. Peek threw parties both at the office and in his home. At an Edwardian-themed fete at his home on Valentine's Day 2008, male guests donned top hats provided by the Peeks.

Mr. Peek is a "personable, likable guy" who showed incredible recall for names and personal details, said one former top CIT executive. When he arrived, Mr. Peek criticized CIT's culture, which he deemed too cautious, says the former executive. He hired a psychological-evaluation firm to "understand us," the executive recalled, and used the results to hire hundreds of new sales people who didn't fit the old CIT mold.

Not that there's anything wrong with supporting the opera, but you get the idea. I suppose it's a good development that the Powers have stopped finding "systemic risk" around every corner, but it could simply be that none of them had the requisite number of connections to this guy and his company. I don't really know what to read into this development. The whole situation is just kind of sad.

In other, better news, Mark Cuban is off the insider-trading hook. That's good.

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