Grace under ‘You’re fired’: why you don’t see Trump tactics in investment banking

Like everyone else in finance, I’ve been following the recent brouhaha involving Lisa Cook, who holds one of the seven seats on the Federal Reserve board of governors. US president Donald Trump has tried to push her out, citing allegations that she committed mortgage fraud, which Cook strongly denies.

I have no view on the merits of the claims, but the whole episode is fascinating as a case study. It’s so combative, so public.

The controversy has prompted a question I’ve now been asked several times: do investment banks ever try to oust senior people using these kinds of accusations of wrongdoing as pretexts?

In my experience, the answer is an emphatic 'No'. The culture of big banks simply doesn’t allow it.

Not because banks are guided by a higher sense of morality, but because the risks are too great. A public, hostile dismissal risks reputational blowback, unsettles staff and invites protracted litigation.

It’s messy, unpredictable, and damaging. Banks hate that. They prefer something altogether quieter.

When the time comes for a senior executive to go — whether for performance reasons or politics — the bank carefully choreographs the exit. The aim is to have a clean, discreet separation that makes as few waves as possible.

Everyone understands that burning bridges serves nobody’s interests.

Senior bankers don’t always disappear into the night; sometimes they resurface as competitors, clients or counterparties. Turning them into sworn enemies is all downside and no upside.

And if you fire someone in a blaze of drama, you send a chilling message to everyone still inside the building: 'today it’s them, tomorrow it might be you'. That’s not good for morale or loyalty.

Instead, the system is built for face-saving. A generous package is offered, comfortably above the statutory minimum. In return, the departing banker signs a comprehensive release of any legal claims and promises not to disparage the firm.

The official story is that they’re pursuing new opportunities or that it was a mutual decision to part ways. The leaving announcement will include polite thanks for their contribution, however perfunctory. Everyone knows it’s theatre, but it’s not theatre of the absurd.

None of this means the process is happy or harmonious. It’s often tense and tetchy.

And while the departing executive may smile at the farewell drinks, privately they may feel hard done by. It can remind you of Smokey Robinson’s classic tune:

I know several people who have walked away convinced their treatment was unfair and who considered legal action.

The law makes that a tempting path. In the UK, the compensation for a straightforward unfair dismissal is capped at about £118,000.

But if someone can frame their case as discrimination, retaliation for whistleblowing, or another protected category, the potential damages are unlimited.

That gives employees every reason to hunt for signs of misconduct by the bank, and gives banks every reason to make sure they don’t provide them.

This is where things can break down. If an executive feels cornered and believes a pretext is being used against them, they may hunker down in defensive mode.

I recall a story from the pre-smartphone days when a bank (not an employer of mine) tried to ease out a managing director. He saw what was coming and decided he wasn’t going quietly.

He sent a trove of internal documents to his personal email. The bank caught it (Big Brother was watching), demanded access to his home computer, and the whole thing degenerated into a gnarly stand-off, with accusations of bullying and bad faith.

Eventually the case was settled, but not before word leaked to a few folks (like me) outside the bank.

That story captures a key point. Banks steer clear of pretextual dismissals precisely because they’re so combustible.

Claiming a “technical violation” or a “minor breach” might sound clever in theory, but in practice it provokes a fierce defence, drags confidential communications into legal discovery and risks turning an internal HR matter into a headline.

Any saving on severance is dwarfed by the costs of litigation, distraction and reputational damage.

The Lisa Cook affair is unfolding in politics, where the incentives are very different. Public confrontation is often the point. Politicians can benefit from picking a fight in full view of the cameras.

In banking, the incentives run the other way. Conflict destroys value. The rational approach is to swallow the cost of a generous package, shake hands and move on.

Trump may see advantages in a noisy, public removal of a central banker. But in investment banking, a diplomatic solution is better.