More about bankers.

[johnny9fingers]

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.

Comments

[(Anonymous)]

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

[johnny9fingers.livejournal.com]

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.