johnny9fingers | More about bankers.

More about bankers.

My Chum, Posh Stephen, sent me these two wonderful links today:

http://www.nytimes.com/2010/02/14/business/global/14debt.html

http://www.huffingtonpost.com/rj-eskow/greeks-beware-of-goldman_b_462928.html

It makes you wonder, really.

One of the things I wonder is do the Greek folk have, um, any action which they can take? Sure, the Greek Government has been doing dodgy things....but could not have done so without the help or assistance from the very wonderful Goldman Sachs.

Derivatives....helping those CO's and CEO's and investors in apparent economic distress since well before Enron. Either that or in the more complicated versions, outright fraud? Creative mathematics is such an impressive subject.

Now, subtract the number you first started with....and you're left with.....

Obviously, it's all Obama's fault.

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Hmmmm. The Greek people having action they could take - well, they could stop striking for more pay and stop expecting higher pensions than their economy can afford and so on - this problem did not develop overnight. Developing a sense of proportion and blunting any sense of entitlement would be a good start.

That's not to say that the government isn't blameworthy in all this - telling people decades ago that what they wanted could not be afforded, and putting up with the resultant toys-out-of-the-pram fuss would have helped - but when a country is about to be bailed out by the IMF and its citizens are still taking to the streets to shout about how they're not paying for the mess, but they were very happy to take advantage of the health care and the pensions and the benefits and the sinecure government jobs that were created by all this borrowing, one wonders if one's slipped through some form of rabbit hole to a place where cause and effect no longer apply.

The same applies to the derivatives argument. The main reason for the really dodgy ones being made in the first place was to allow banks to lay off the risks associated with lending to people who could not afford to pay the money back - Goldmans did well at this because they could see that it was likely to blow up, so they sold the risk to anyone who was blinded by the dollar signs but they did not do it in order to screw people over, they did it because they could see that it would most likely be profitable for them, and they have no duty to anyone other than the shareholders.

One can argue that the subprime mortgage recipients should not have been lent the money in the first place, but surely a basic grasp of arithmetic should have led those who were taking out the mortgages in the first place to realise that this might have been a bad idea. The banks were responding in large part to the desire of people to get into more debt than they would ever be able to repay because they felt that they had a right to home ownership, dammit. Shelter is a basic human right, not owning one's own home. Again, this is not me trying to absolve the banks of all blame - they should have known better - but when did we get so stupid that we have to rely on banks to tell us what we can and cannot afford, be that personally or as a government? When did banks agree to be our moral guardians - and do we want our moral wellbeing in the hands of bankers?

There's a clue to all this in the first sentence of your first link by the way - "akin to the ones that fostered subprime mortgages in America".

To be honest, I'm surprised that you think that people should not be forced to think about things and take responsibility for their own bad decisions. It's all a bit paternalistic and patronising. Blaming the banks for the stupidity of their customers is just mad, be it governments or the man on the Clapham omnibus.

M

I have never said that banks should be guardians of any nations morals. But I can remember my old man's story of his wait for his first mortgage, and the third degree they put him through almost fifty years ago.

No, not the guardian of the nations morals, but perhaps the evaluator of an individual's ability to pay.

Hiding Greece's debt may have been profitable: but is assisting in a debatable practice not a debatable practice in itself? This may have been and exchange of profit for advice....but what quality the advice?

I wonder, is there any moral quality to lending, or even assisting folk acquiring loans? Or if not morality, then a 'soundness', a notion of good sense?
If there is, then helping folk to borrow more than they can afford to pay back is, if nothing else, a collusion in folly.
Of course, Greece can always pay off its debts. But it's going to make ordinary Greek folk pretty uncomfortable....and piss off Germany and France.

C'est la guerre. [Shrugs shoulders.]

It's Spain, Portugal, Italy, Ireland, then us next: though if it gets around to us, by then the world economy may well have gone phut.

'an' not 'and', dammit: as in an exchange of profit for advice. Blast.

So on the one hand you never said that banks should be the guardians of morals, and four paragraphs down you wonder if there is a moral quality to lending - it doesn't really add up. Surely the answer, given that the banks are not moral guardians, is no.

Some people who lent the money did have good sense - they had the good sense to lay off the risk, and now they are being pilloried for it. As for evaluating an individual's ability to pay - they did that too, and priced the loan accordingly. Then they sold the mortgage to someone else. This is somehow distasteful, reprobate, amoral behaviour.

Assisting in a debatable practice may well be debatable - but forgetting that the aim of the banks is to make money off its customers is naive at best. The advice given to the Greek government was, I would expect, in response to a problem presented. If a government went to a bank and said "We need to borrow more money but we can't get any at a decent price on the open market, can you help?", it's not really the bank's place to tell them they shouldn't - unless the banks really are moral guardians. I would imagine that Goldmans were asked how to do this thing, not whether or not it should be done.

I don't disagree that there should be an element of good sense in lending, but it shouldn't be entirely up to the banks - there has to be an element of good sense in borrowing as well. It all seems very one-sided - no-one is talking about why the subprime mortgagees agreed to these loans in the first place when anyone with a modicum of good sense and an ability to count could have seen that the risk they were taking was out of all proportion to the benefit.

There's morals there too - moral hazard. If people know that they will be bailed out if things go wrong, what incentive is there for prudence in borrowing? The banks have had a big slap for lack of prudence in lending, but a politician saying that foreclosure may be the best option for some people causes a reaction akin to the one he'd get if he'd just said that perhaps it was best if the poor ate their children.

The same applies to Greece - the Greek people basically refused to accept that things couldn't go on as they were, and the government were too weak and too corrupt to stand up to them. Now it's biting them - of course it's going to hurt. If your hypothetical child had racked up oceans of credit card debt funding a lifestyle he couldn't afford would you pay off the debts and pat him on the head and say there there, now carry on as you were, or would you help him work out what had gone wrong, how to fix it and then pay his back rent so he didn't get evicted? Would you expect him not to have to change anything about the way he spent money, and to carry on living beyond his means?

I'm confused about why Germany and France will be pissed off if Greece sorts out its debts. Unless there's a really juicy conspiracy theory... Does Germany want another go at owning Greece?

M

You asked the question about the morality of banking: I was just wondering. I thought that banking had more to do with good sense than morality.

Nah, Germany and France are going to be pissed off if they have to stand surety for Greece (that is if they want the single currency experiment to continue on an even course).

The moral hazard you mentioned about bailouts was inextricably linked with the fact that if there had been no bailout, it does seem that all the banks would have fallen. If true this is the failure of the system. You know, the system of banking that is so without moral weighting, and is purely profit orientated etc.
Now that the system has been bailed, how it is regulated after the event (to prevent re-occurrence, for example) seems isn't going to be left to the bankers. And they're rightly pissed off that their perquisites are being screwed with.
But the rest of us aren't necessarily. Perquisites are so mutable in the modern age. Look at MP's.

I think that creative accounting goes back a while - but for national govs it's Reagan, Thatcher and co ;)

Corporations have been doing this ... for a while...

Unexpected input from an offshore source:

http://baumanblog.sovereignsociety.com/2010/02/beware-of-greeks----and-goldman-sachs.html

That's a particularly good summation by Mr Bauman. That Matt Taibbi, he gets everywhere.

It referenced this:
http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

Which I'm tempted to create an entry for....just by itself.

Taibbi's hit at Goldman-Sachs, tho' a splendid piece of invective & fun, is now a little out-of-date & is perhaps best referenced alongside some of the better criticism it has attracted over the past half-year or so.

Flat | Top-Level Comments Only

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