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Banking fat cats who can ruin us

By Geoffrey Murray: 0 Comment(s)Print E-mail China.org.cn, October 20, 2011

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Global scale [By Hou Xiaoqiang/China.org.cn]

Recent protests occupying Wall Street in New York, along with similar events in London and Rome, underline growing public contempt with the "fat cats" whose greed and ineptitude is wreaking havoc on our personal financial wellbeing.

Bankers and stockbrokers have long argued that most of us simply cannot be expected to understand the growing complexities of finance, so should leave it to the "professionals." If we want to profit from the various banking, stock market and foreign exchange products available, the finance insiders argue, we should let the "experts" invest it for us.

In recent years, however, this investment strategy seems to have become a surefire recipe for personal bankruptcy. Indeed, if the most recent global financial crisis demonstrated one thing, it is that perhaps the last person we should entrust with our life savings is someone claiming he or she is highly responsible and trustworthy in economic matters.

The crisis began in the United States with the collapse of housing mortgage providers who were lending money to home buyers on very shaky foundations. Their failure brought troubles to mainline banks that had become involved in the secondary market buying up mortgage contracts in the belief they would be very profitable – only to be left with huge non-collectible debts.

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In my own country, the United Kingdom, one bank after another had to admit serious problems with "non-performing loans" and poor investments. This then led to the uncovering of various banking practices that were extremely risky, if not downright foolish.

The burden of solving the crisis fell primarily on innocent taxpayers. The British government was forced to bail out the banks by virtually taking them over using tax money.

If that wasn't bad enough, public opinion was outraged to learn how little the banking "fat cats" had suffered from the crisis they had caused.

The CEO of the bank where I have some savings was forced to retire after it became clear he had supervised an investment and expansion policy so reckless that it had cost the company billions of pounds.

But his departure was sweetened by a very handsome retirement bonus of many millions of pounds, ensuring he could continue to enjoy the good life while many bank customers faced the prospect of post-retirement penury.

When the British media exposed the generous severance package, an embarrassed government was forced to scurry around to try and recover some of the money. The ex-CEO, at first, resolutely refused to part with a single penny of his loot, although he was eventually forced to return some of it.

This pattern of senior company executives being well rewarded for incompetence bordering on the criminal was repeated across the British banking industry. And, despite some brief fulminations in parliament, the idea of limiting the huge bonuses handed out to senior executives was quietly dropped.

What is amazing is how such people can get away with what are virtual scams aimed at separating us from our hard-earned capital. And it is from this disbelief that the present movement has sprung.

The "occupy Wall Street" campaign began in New York City in late summer, first promoted by a Canadian activist group known as "Adbusters" and inspired by the protest movements in the Middle East that brought down the Mubarak government in Egypt, among others.

The demonstrators' slogan was "We are the 99%," summing up a belief that only about one percent of Wall Street financiers were ruined by the most recent crash, while ordinary Americans shouldered the rest of the burden.

The campaign by the "99 percenters," mainly focuses on social and economic inequality, corporate greed, and the influence of corporate lobbying with government organs that give them protection.

The movement spread to more than 70 cities in America and was replicated by protests in mid-October in London and Rome, the latter somewhat violent.

Those organizing the London event claimed that, during 11 years in office, the Blair government failed to rein in the financial industry because it was a great source of tax revenues. Even amidst the slump, the financial sector contributes over 11 percent of UK tax income, which gives it tremendous political clout to discourage stronger government regulation.

And if the bankers continue to benefit during the bad times – even when they were brought on by their own recklessness - where is the incentive for them to consider any self-reform?

In the past, especially among peasants, a distrust of banks led some to keeping their savings hidden under the mattress. Perhaps they knew a thing or two.

The author is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/geoffreymurray.htm

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