10/04/2013 05:04 pm ET Updated Jan 23, 2014

The Cost of Trust

Are we getting closer to a rough estimate of the cost of trust?

Speculation over the past week surrounding the meetings between JPMorgan Chase and the Justice Department has put the new starting price tag for violating the trust of customers at more than $11 billion. While it already dwarfs last year's Justice Department $3 billion settlement with GlaxoSmithKline, the number appears to be just the beginning. The bank's next step in the negotiation is to come back with another offer, of course a higher one.

But JPMorgan is not alone. Bloomberg has now reported that CitiGroup could be next on the block with the Justice Department. Given the mood in Washington, it is anyone's guess where it could go from here.

At the center of the legal issues are individual homeowners' mortgages -- including those legacy mortgages originated by other financial institutions before being taken over -- plus mortgage backed securities bought by investors who then lost money.

Some argue that the motive behind this is simply for the government to take concrete steps to hold Wall Street accountable and financially liable for the collapse of the housing market and the ensuing recession of 2008.

Others argue that the direct focus on JPMorgan is much more political and perhaps personal.

Yet others say that it is only correct for regulators to regulate, enforce, and levy fines when the rules are broken.

Some have called for personal accountability and want to see those in charge face criminal charges.

From the perspective of the bank though, there are those who say that the bank's motive in reaching a settlement -- even one this large -- is strictly practical: to consolidate all the legal challenges and bring down legal expenses. A one-time fine is seen to do just that and gets it over with.

I, though, would argue that trust -- or, better yet, having the chance to regain trust -- is what underlies this all. The perception is that trust has been abused. Reputation has been damaged. And now, if the bank can get this behind them, there is the opportunity to start down the long road and rebuild trust and reputation.

In fact, that is a much more difficult challenge than the legal settlement. The latter is making a one-time financial payment, albeit a record one. The former, however, means working hard over a longer time to create a lasting reason why customers and all those who interact with the banks can be convinced to start changing their minds and trusting again.

Reputation is the task at hand. Trust lost must be regained. After all, banks are where we put our hard-won earnings and where we go to ask for financial assistance when we need to borrow, whether it is for a home, business, education, a vacation, or everyday expenses through credit cards. It is one place where we must feel comfortable in putting our trust.

The solution is not a rush and flurry of public statements about trust and integrity. No full page ads and evening or Super Bowl television commercials here. Rather, it is changing minds and altering perceptions over the long haul. And consistently. For that, four things are critical:

  • Culture -- Change must start within to be lasting and that takes time. It is culture that counts.
  • Behavior -- After all, as we all know, actions speak louder than words.
  • Transparency -- Clarity about what is done and, most importantly, motives is essential. You can't fool people over the long haul. To get them to know and believe again, the "why" can be even more important than the "what."
  • Ethics -- Nothing means more than your word. Do what you say.

None of these are new. We've heard these for generations. They just don't' always seem to sink through. And they're never simple.

However, if the new cost of shattered trust is $11 billion and counting upwards, starting with the basics to restore trust and rebuild reputation is the only way.