Why some CEOs survive Wall Street scandals

Why do some Wall Street executives get to keep their jobs as scandals shake their firms, while others get the ax?

Bob Diamond, the chief executive officer of Barclays Plc, was fired a few days after his bank paid $453 million to settle charges with U.S. and British regulators about its role in the Libor scandal. Yet Jamie Dimon, the chairman and CEO of JPMorgan Chase & Co., seems to have plenty of job security after traders at his bank unexpectedly lost $6 billion (and counting)?

Why did no one come looking for Lloyd Blankfein's head after Goldman Sachs Group Inc. paid $550 million to settle civil charges brought against the firm by the Securities and Exchange Commission in April 2010?

At the time, it was the largest settlement ever paid by a Wall Street firm to the SEC. Goldman had also been the subject of a lengthy investigation by Sen. Carl Levin, the Michigan Democrat who heads the Permanent Subcommittee on Investigations. At a daylong hearing in April 2010, Levin lambasted Blankfein and his partners on the firm's transactions in mortgage-backed securities. It was not Blankfein's finest hour, yet his job remains secure.

Why was Diamond fired but not Dimon or Blankfein? All faced internal and governmental inquiries into what went wrong at their firms. In January 2011, a Goldman internal committee published a report on the firm's business standards and what it could do better. This summer, Dimon appeared before panels in both the House and Senate and was treated with kid gloves by most of the members. (Diamond, on the other hand, was grilled ruthlessly by the British Parliament the day after he resigned.)

Now, Bloomberg News is reporting that Levin's subcommittee has targeted JPMorgan Chase and its "London Whale" trading loss for another one of its thorough investigations. The JPMorgan Chase management team has also completed one investigation - concluding that there was an atypically lax level of supervision in the firm's chief investment office as well as potential illegal mismarking of the trades - and the bank's board, led by former Exxon Mobil Corp. CEO Lee Raymond, has begun another investigation into what went wrong.

Barclays, JPMorgan Chase and Goldman Sachs all suffered severe damage to their reputations in the scandals, and all three leaders were mostly forthright in admitting that something was very wrong inside their firms (although Levin accused Blankfein of misleading Congress). JPMorgan Chase and Barclays shareholders lost billions of dollars after the scandals: Some $25 billion was wiped off of JPMorgan Chase's market value, while Barclays lost about 30 percent of its market value between the time just before the settlement was announced and the stock's low point on July 25.

Most of the Barclays' shareholder losses have been recovered; its stock now trades about where it did in the days before the investigation into the manipulation of the London interbank offered rate broke into the public. Yet Diamond is the only CEO whose head rolled.

In any event, an Aug. 9 preliminary report from the House of Commons about the Libor scandal makes clear that shareholders were not the ones who pushed for Diamond's departure.

"The one outcome that the shareholders did not want to see was the removal of Bob Diamond," Barclays Chairman Marcus Agius told Parliament. "That was the outcome they did not want to see, as they believed in him as a very effective chief executive."

Who then is responsible for Diamond's forced resignation? The answer, according to the parliamentary report, is that the leaders of Barclays' two chief regulators - the Financial Services Authority and the Bank of England - wanted him gone. At 6 p.m. on July 2, Agius was summoned to the office of Mervyn King, the governor of the Bank of England. King told Agius that his own resignation was not sufficient. Diamond had to resign, too.

"It was made very plain to us that Bob Diamond no longer enjoyed the support of his regulators," Agius told Parliament. "The governor was very careful to say that he had no power to direct us, but he felt that this was sufficiently important, as indeed it was, for us to be told in absolute terms what the situation was." (Adair Turner, chairman of the FSA, had told Agius the same thing on June 29.)

Throughout the financial crisis and its aftermath, regulators in Britain have taken a much harder line than their U.S. counterparts on accountability, overcompensation, incentives and capital requirements. Why? It isn't entirely clear. But it is very hard for me to imagine either Federal Reserve Chairman Ben S. Bernanke or Mary Schapiro, the chairman of the Securities and Exchange Commission, demanding the resignations of Dimon or Blankfein in the same way that Turner and King insisted on Diamond's.

It's also worth noting that before President Obama appointed her to the SEC, Schapiro was the head of the Financial Industry Regulatory Authority, Wall Street's self-regulatory organization. Before she left FINRA, the group's board - made up of Wall Street executives - gave her a present to remember them by: a $9 million exit bonus. Is it any coincidence that Dimon and Blankfein still have their jobs while Diamond does not?

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William D. Cohan, the author of "Money and Power: How Goldman Sachs Came to Rule the World," is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres, Merrill Lynch and JPMorgan Chase, against which he lost an arbitration case over his dismissal. His sister-in-law, Ellen Futter, is on JPMorgan Chase's board of directors.