It’s a big statement from the man who effectively regulates Britain’s financial sector, and is supposed to be on the side of the banks: Lord Turner, the chairman of the Financial Services Authority (FSA) in the UK thinks banks are “socially useless” and wants to tax them to stop excessive bonuses.
It’s something which the G20 finance ministers were due to discuss at a big meeting next week, but Lord Turner is really ramping up the pressure early. He says the financial sector has “grown beyond a socially reasonable size.” And his solution:
“If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit.”
In other words – banks in their current form don’t serve society, and to try to change that, we need to curb bankers’ pay.
But is the role of banks to be socially useful? Despite the outrage over bankers’ pay, aren’t they already serving a purpose by their most simple function – allowing people to borrow and save?
Does the wealth generated by banks already justify their existence, despite their ‘flaws’? And a key issue – would banks be able to continue to generate that wealth if they are mandated to be more moral?
This British-based blogger is fuming: “Is Lord Turner trying to destroy the City?” he asks.
Nigeria is also in the middle of a banking crisis. Last week five bank chiefs were sacked by the Central Bank’s Governor for giving loans to prominent businessmen without following good risk management practices.
This Abuja-based columnist, whose life savings are in a bank that is now being bailed out, argues that the problems Nigerian banks are now facing are down to“basically issues of morality”.
Here’s another idea from MG Zimeta in Prospect magazine: in order to effect a “moral renewal” amongst bankers they should volunteer in the community instead of simply writing cheques for charity.
In Colombia a pyramid scheme called DMG is now a political party. It’s name no longer stands for the initials of its jailed founder, David Murcia Guzman, but for Dignity, Morality and Guarantees. Its presidential candidate, Jairo Calderon, says he’ll reform the Colombian banking system, if he gets a chance. It might need more than a name change to convince people of a moral approach!
Do we want our banks to be good or just good at making money?
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BBC World Have Your Say 
Claudia:
Yes, banks should be more moral and its business (and) how it treats its customers…..
=Dennis Junior=
We should all be more “morally good.” Banks just need to stop being so greedy. Make a profit sure, but stop raping people. The same could be said for government though, so criticism from them would be “The pot calling the kettle black” LOL
While the “free” market (no such thing as a free lunch?) dogma rules supreme, moral goodness and social usefulness are irrelevancies, in banking and any other kind of business. A certain Brit. Prime Minister by the name of Thatcher also assured us that “there’s no such thing as society” therefore we should all get on with lining our pockets and looking after number one.
Banks are operated by people and if the line they are fed is make money at all cost nothing is going to change – you only have to hear all those free-marketeers pouring scorn on things like Fair Trade schemes, and at least up to very recently, denying that industry and the consumerism it feeds has the slightest responsibility for climate change.
May I refer everyone to this year’s Reith Lectures http://www.bbc.co.uk/programmes/b00729d9 delivered by Prof. Michael Sandel.
The more banks you have in the country, the higher is the money turn around (velocity), contributing to higher inflation rates, therefore the amount of useless paper, circulating in a fiven economy, exceeds significantly the volume of commodities produced within a given period of time. The number of banks should be cut drastically, leaving several giants with quite developed network of branches. That’s the way to do it.
Funny every one is talking about immorality of bank and not the irresponsible regulatory oversight by goveerment.I think the recession is about to become an excuse for more regulation and that kills business creativity.What we need is not more regulation but effective regulation.Financial practitionals are often smarter than the goverment and leaves it one step behind always.Instead of taxing these banks so that this revenue can be eaten as expenses claims by MPs;Let’s impose a corporate responsibility on them to give this money to the poor who actually need it.
Turner has sat and watched as the financial systems went down the gurgler. Asleep at the wheel.
Now he comes up with this blather to distract attention from his own useless performance.
A bank cannot be moral or immoral. Only people can be moral.
Next question is who decides on what is moral ?
Yes, I want banks to be “moral.”
Banks are businesses. Requiring them to be moral is like requiring black to be white. Profit is their raison d’etre. Service is an expense charged against revenue. Higher fees and poorer services lead to increased profits; but fewer customers. The usual remedy is to convince customers they are actually receiving value (which they are not) in equal measure to the fees they pay. This is called “lying.” The trick of course (and it is a very common one indeed!), is to lie in such a way so as to steal small amounts of money each from a great many people and curiously, banks are hardly the most flagrant offenders. The essence of every good (profitable) business decision is an alteration of the perception of truth. The most common crimes are larcenies and “good business decisions” are their most usual form.
g
Greed is part of human nature. Bankers have no monopoly on it.
Rising above, or curbing, the baser human instincts is important to some societies (esp. in the West). That’s why regulation has a role, even in a free market. Contrary to the fantasies of some leftists, swindling widows of their meagre life savings is not part and parcel of a free market. Making sure that widows can take part in financial transactions with even the largest & most powerful corporations without being defrauded, on the other hand, is what makes a free market a reality (i.e. ‘free’ on both sides of a transaction).
It’s not a question of banks being moral. A rotten society, with a rotten citizenry, will have rotten institutions, not just swindling banks. A society that believes in certain moral and social standards will have a corresponding regulatory regime that ensures, as far as possible, that the activity of banks conforms to those standards.
The problem is the mind-set of the banks, that are conditioned to make money and, now, they are to behave in a “moral” way….
There is a contradiction to the situation…..
=Dennis Junior=
In each generation there is a ‘market cycle’ in which a large hunk of the collective retirement wealth disappears through the magic of the interface between banks and the stock market. Sleight of hand seems to keep emptying grandma’s pockets. Yet we go along, pretending it will be better this time. Moral? Banks in the US punish youth, age, poverty, sickness and upheaval. They are there to charge you all you own in fees, take the last scrap of food money electronically in the night.
If Banks were to be morally good, it would to some extent require them to abandon their policy of “no questions asked” when a client comes to deposit a certain amount of money. Consequently, the entire banking system would require an overhaul to accommodate the moral practices they abandoned in the 1990’s or before that. Of course, the government would need to facilitate this change in protocol just like they facilitated them in the first place.
However, if the bank demonstrates that it takes social responsibility as a priority by contributing to charities and other projects, I would be comfortable with this extent of the involvement in the community by the institution. Alternatively, I feel that if the banks became too involved in the community, it would affect the bank’s functionality and therefore, contribute to its degradation.
I don’t think I would have a problem with distributing a fair amount of bonus to its employees at the end of the day, if the bank has a track record of demonstrating social responsibility. Otherwise, the situation seems to suggest we adopt communist or socialist practices for lack of a better alternative.
But in cases, such as that of RBS, however, where the executives are getting more than their fair share of bonuses, especially in times of recession, I would suggest the Banks take social responsibility with greater consideration and become more involved in community services instead of distributing hefty bonuses.
How does a “socially useless” form of business find itself in voluntary contracts with such a majority of society? What is the moral basis for interfering with the voluntary associations of bankers, their depositors, and debtors?
Socially useless? How many of us have the cash to buy a home or a car or get an education? It’s no longer the 1950s when a single income could support a family of 4 including owning a home.
Capitalism works because it manipulates human nature–call it greed or selfishness if you wish–into becoming a productive engine for the good of society. It’s an ingenious system. If everyone is allowed to reap the rewards of their efforts, they will work harder. Competition will iron out any imbalances in those rewards.
If there was a problem with bankers’ compensation, it would have been self-eliminated years ago by bank shareholders, or through competition from other banks. In the absence of evidence to the contrary (and I’m willing to listen with an open mind), I believe bankers’ pay is already moral and fair.
Politicians like Lord Turner and Barney Frank must refrain from meddling with the financial system. In Barney Frank’s case, his meddling in forcing banks to make home loans to people the banks deemed un-creditworthy, is largely to blame for the current financial crisis. Banks had to scramble to comply with the new law and still remain in business, so they packaged these bad loans with good ones and sold them to investors. Now Barney is foaming at the mouth about new legislation to regulate banks to try to divert the blame, and Obama is touting renting instead of owning. Perfect example of the results of meddling with the markets.
Banks provide a needed public service, and therefore should be subject to the same rules as and restrictions on unethical behaviour as any other public service.
Making money is not somehow magically aloof from real life any more than anything else is, nor should be, in fact it is much more like the life blood that makes everything else possible – or difficult. If you buy food which has poison in it, the seller or producer of that food is, rightfully, subject to prosecution for poisoning. If you are a builder and you build something which is unsafe, you are subject to prosecution for faulty standards. Why on earth should bankers and financial managers be any different?
I think that banks are better (good) at making money, then in most cases in a socially acceptable fashion……
=Dennis Junior=
Any one with some knowledge of Economics, will agree with me that on top of willingly lending to them (banks) – called depositing, they charge you extra (for being stupid enough to lend to them), is that business sense or clean business? If you didn’t know, it’s (of course in modern times).
Back to Turner, am no Brit but for him and the FAS to have allowed Britain slip into recession under his very nose is useless workmanship. How was it possible for them to fail to regulate this banks? Is it now that he’s got to know that banks are socially useless? Now that he’s realised this noble (of course he’s a lord) fact, what’s up his sleeves to correct it?
It’s not the job of banks–or any business–to be moral. All we can expect is that they act within the law–and, hopefully, consumer pressure will keep the level of customer service and awareness up to scratch.
However, something must be very wrong with a system the encourages staff to bend or break the law in the pursuit of profit or that tries to pay huge bonuses when, but for government bail-outs, the whole bank would have gone bankrupt.
We should look at the term moral a bit closer. The pschologist Kohlberg found that morality has several levels, e.g. – as long as I survive anything is justified – letting a few people die to profit the masses – any action that leads to the direct or indirect loss of human life is immoral.
I think that bank corporations are at the lower end of the moral scale. To be very cynical: They limit their earnings so that the people don’t think it’s pervers.
This time the banks were saved by the governments. A certain level of trust has been restored. But People have become more sensitive to the injustice of the banking system. They’ve educated themselves. If the banks do this again they will go down in flames or will be forced to become more “moral” because of government sanctions and laws. Society will not allow the current money system to survive. It will be replaced.
Does anyone know how much harder bank employees work than farmers or teachers to justify the difference in salary? Not aware of any studies.
Banks serve a critical role in society, so they have a duty to act responsibly. If they make money while doing so, that’s even better.
Bonuses are a reward for good management, good financial results. But paying managers excessive bonuses in a financial downturn, recession where ordinary staff are being made redundant at an alarming rate through no fault of theirs is simply not not fair and not good policy. First of all before any further bonuses are paid to managers, the economic climate should improve appreciably. This could take at least a year. At that point it is imperative to take a close look at the economic situation before bonuses are given. Bankers need to think long and hard of the reasons for the global down-turn. They need to be critical. The sub-prime crisis and the ease with which borrowers could get loans to buy second homes should be investigated thoroughly. Managers were simply not vetting borrowers properly! That was why borrowers defaulted and the whole system collapsed.
I don’t agree with steve in Boston that banks are morally upright already. Let of hope you are not a banker yourself. Everyday, these seemingly good banks defraud people in many ways. Banks claim to charge a minimal amount per month as service fees and on every withdrawal made. Look at it this way, suppose i decided to charge the bank before i deposited my money in the bank and other customers followed suite, how many non-complaint banks would still be in business? The federal reserve keeps monitoring interest rates, imagine that prevallage in the hands of banks! Of course it might be hard to convince you but many grapple even in the USA.
I see no difference between ‘good’ and ‘good at’. Banks are a tool to promote business and make money. There is no more morality involved than with any other tool like a frying pan or a gun. A bad tool can cause more harm than good, you throw it away. The same is true with banks.
Also, who is it that wants to legislate morality this time?
@Steve in Boston –
The problem with your thesis is that we’re not a capitalistic society. Never have been, never will be. Capitalism requires free markets. Free markets require that every producer and every consumer have perfect information about products and services and that all choices are equal, which cannot happen in reality – pick your sector and you’ll find there’s one big company with a number of smaller ones.
As for the housing bubble, the president of the National Association of Realtors disagrees with you. At a recent speech at the Cleveland City Club he said flatly that blaming government regulation for putting people in houses they couldn’t afford is wrong.
Bob’s point is very good. If you took a business organization’s course, you’ll learn that the primary function of any business entity, is to maximize profits in a legal manner, for the owners. They aren’t there to be moral. You can’t expect anything moral from them, and it’s nice enough that they donate some money to charaties, even if it’s only for tax deductions. It’s better than nothing.
@ Steve in Boston.
“Politicians like Lord Turner and Barney Frank must refrain from meddling with the financial system. In Barney Frank’s case, his meddling in forcing banks to make home loans to people the banks deemed un-creditworthy (…) and Obama is touting renting instead of owning. Perfect example of the results of meddling with the markets.”
That is only if you assume that “the market” is the perfect solution to life, the universe and everything. Speaking from a UK point of view, in the pre-Thatcher past there were options, all of them perfectly respectable and viable: if you had a solid reliable income you could buy a house, if you so wished, or rent in the private sector, if you weren’t in that position, council (public) housing was available to you, at an affordable cost and with the welfare safety net to catch you in the event that a low or unreliable income dried up.
In the 80s, the notion of selling off council housing, building no more and conning everyone that the ultimate human aspiration was home ownership, took hold and brought the “market” in as the sole arbiter of what was a much broader ethical and social issue. That’s what I call political meddling – from free-market fundamentalists.
Yes.I think Bank should be morally good in their conduct since they’re formed on legal basis but i dont care whether bank makes more money or not because its upto them to determine whether their business make profits/losses.
CONSUMERISM IS THE DANGER
I think Lord Turner and the other world leaders are getting it wrong. The banking system is merely a tiny component of the consumerism culture of the Anglo-Saxon economic system. These bankers are supposed to finance the economy that is basically driven by consumerism but are not supposed to partake in the consumerism. That is not possible.
2ndly, morality and business do not mix. Professor Milton Friedman rightly pointed out that the essence of business is to make profits. In order to achieve this, the individuals who make these profits must be rewarded exorbitantly.
Bottomline: Unless something is done about consumerism, taxes on bank profits will simply translate into higher charges for the depositors.
‘B’ for Bank and ‘B’ for business. So, there is no morality involved in the banks.If there was morality, the world wouldn’t have been facing the financial crisis today.
As I see it, banks have been neither good or good at making money. The fact is that banks are a business and as such make profit, just like any business so they should remain in that mode. What they should not do is such obscene self-congratulation for basically doing a lousy job and award themselves such rewards for what is in essence failure, but doing so only because they can. Banks are not moral they never will be, as long as money and profit are involved, then they cannot be. They should just be monitored to avoid such massive failure and rewarding of failure and regulated, regulated, regulated.
I am glad that the Nigerian banks were mentioned there. Apart from financial impropriety, most banks there are known to give marketers ridiculous targets to bring in deposits, they are often encouraged especially the females to get these deposits by ‘what ever means neccessary’ leading to staffers engaging in corporate prostitution in the very sense of the word. Although the banks would deny that this does not exist, corporate prostitution is alive and well in the Nigerian banking sector.
Banks just can’t be good, they have to be good at making money.
I have never been a member of a bank, a savings and loan company or a credit union that did not eventually rip me off in some way.
As a typical example, try this – next time you open a checking account at a bank they will offer what they call “overdraft protection”, which will cover the amount of the checks you write even if they exceed your funds. I can guarantee you that NO ONE is going to mention that they will then charge you up to $30 for EACH check that needs “protection”.
Is this legal? Yes. Is it honest or moral? NO.
The truth is that you can’t legislate morality, but if you could, I firmly believe that most of these companies would disappear overnight.
haha it seems reasonable to me to charge people a fee when they over-withdraw their account…they aren’t going to cover the bounced checks you write for free…it encourages bad behavior.
That being said, I have had friends who have over-drafted several times before realizing that they were over-drafting, and then a bill for 200$ comes in the mail. That seems a little rough. Basically everything a bank does is motivated by profit, otherwise they wouldn’t do it. They’re a business, and don’t know or care to know their customers on a personal level.
Would anyone like to define “the market?” Do you absolve yourself of any participation? I really do think that if regressive lovers of authority did, taking full authority of their own life, disengage from consensually evolved cooperatives, such as bankers and their supposed dirty business, then those regressives would learn to appreciate the current modernity driven by our collective will.
Banks don’t just “make” money, they create money out of thin air.
Almost all the money in circulation is loaned into existence. If you borrow $1000, the bank puts it into your account. Ten minutes ago that $1000 did not exist.
When you take out that loan, you agree to pay back, say, $2000. So now the bank has created $1000 in money and $2000 in debt. Add up all the transactions, and debt will always be more than the money to pay it off. It’s a version of the Ponzi scheme.
One way to solve the dilemma is to have state banks. North Dakota has had one for ninety years. It can float its own bond measures. It can lend money and keep the interest. Why should we pay commercial banks for the privilege of spending money that’s imaginary?
Corporations are considered to be entities with legal and moral rights. That being the case, they should also be considered to be entities with legal and moral obligations.
I’ll put it this way: If financial institutions do not have a moral compass, their concern will be the bottom line no matter the cost to others. If the focus is strictly on the bottom line with no moral structure for guidance, then those persons who successfully made their cases to governments that they were too big to fail and were allowed to put their hands in the taxpayers’ pockets, earned their big bonuses. They “made money” for their companies and successfully guided them out of the mess they themselves made.
The guiding principle in most business today and, indeed, government is: Take the profits for any given enterprise and pass on the costs to someone else, thus increasing profits even more. A devilish concept but eminently practical.
We the banks depositors “trust” banks to use our money and pay us for such use in interest. The people who have invested in bank stocks may not have any money on deposit in the bank at all but trust that the profits made on our deposits will be fair and divided between them equitably as dividends. The depositor’s trust is based on a belief that the bank plays by strict rules and that they will act with honesty and integrity to protect our deposits. If trying to satisfy the investors by paying high dividends causes the bank to take risk and compromise the safety of the depositor’s money then they have not acted in good faith. If on top of that they pay themselves fat bonuses then the depositors are not getting a fair deal.
When banking globalized, the profit motive trumped interest in local economies and simple human compassion.
My grandmother died in late May of this year at age 94. She and my grandfather, who died in 1983, lived in a small town in the American Midwest and used the same bank all their lives. This tiny small-town bank gave them two home mortgages, a small-business loan and line of credit, sold them life insurance, and safely and responsibly invested their puny blue-collar savings. The local bank did not “swap out” my grandparents’ money, in part because the people in charge lived with them and cared about them.
My husband and I bank online…at best, we talk with a disembodied voice on the phone.
Being aware of such a socially responsible bank, why did you choose to bank online?
Usually the market automatically dictates business practices pretty well, but banks that have so much power over their money are somehow able to circumvent common economics.
It’s true that there is way more “money” in circulation than actually exists, because banks indiscriminately loan money out that they don’t actually have, because even though they are knowingly increasing inflation and an unsustainable market, they will probably profit off of the bubble they are creating.
This is how they can afford to give their higher-ups huge bonuses. This is why the market does not necessitate a well-functioning banking system. This is also why government regulation, in some capacity, is necessary.
Yes, in all things. I want banks and all other business to except a moral and ethical position daily!!!!
The choice of “moral” OR “good at making money” implies the two are mutually exclusive… a sad comment on a consumer’s presumption about business. From all I have heard during the past year, it is precisely the compromising of morality that has let bankers manipulate practices to the detriment of all. If the public bails out banks for the public’s and bank’s benefit, then the public’s investment gives them a Voice on the Board. This voice requires bankers to be both moral AND good at making money… and if they can’t combine the two qualities on their own, then the citizens’ government has the responsibility to help banks meet their obligation.
Ultimately though you cannot avoid banks. If you are well off enough not to have to borrow and prefer a cash based existence you will still be ripped off by banks. Here you cannot be paid by an employer in cash. You must provide a bank account number for the salary to be paid into that account, so you must open an account even if you don’t want to. There you are charged to keep that account and for all the deposists and withdrawals you make. All for what you didn’t want to begin with and some acct fees exist even when you do nothing with the account. That’s not moral, they earn money by lending yours and pay you a small percent of that in interest if you are lucky. So you are being ripped off at every turn. You are forced by the global banking consipracy to use their services and be charged ad infinitum for it to boot. How can such an organisation be moral if you have no choice to avoid them?
What is the standard for honesty? For ethics?
If it were possible, I would hook up every potential bank manager or financial CEO to a polygraph machine and ask them one question – would they would make the exact same offers, giving the exact same information, to a member of their own immediate family?
The law says they have to. How many do think would pass?
@Maccus Germanis
That bank no longer exists–wiped out by the big guys.
@ Shannon
@ mods
How do the “big guys” wipe out smaller banks? My assertion that it is illegal for one bank to rob the other is true. The choice of consumers, such as those that chose impersonal online banking, over traditional banks have driven traditional small town banks out of business.
I wish a bank like the one in It’s a Wonderful Life existed in real life!
@ john in Salem
I hear ya!
Need to be both: profitable and operating within the law! I believe both should operate concurrently. A business that is responsible, treats people well, and “does the right thing” will ultimately attract more clients and thus will be more profitable in the long run.
There are ample highly successful business models that support this concept. The heads I win tails you lose privatization of profit and socialization of loss (ie the tax payers end up bailing you out) which many investment companies and banks have been operating under is like casino gambling.
“Does the wealth generated by banks already justify their existence, despite their ‘flaws’? ”
Banks don’t generate wealth, workers do!
Bankers don’t manufacture a product like a car or a skateboard and they don’t provide any service like repairing a car or skateboard, all they do is siphon off wealth from the people who do actual work.
Bankers are like some parasitic tapeworm in our body politic, or even like a malignant cancer, because they don’t contribute, they just take.
What is “going back” exactly? There’s been mass inflation. Back in the 1950s, a single income could support a family of four. Now, a family of four needs two incomes. Should we go back to the times when only men worked?
So long as it’s cheaper to manufacture elsewhere, post industrial nations in the west will keep on losing more and more manufacturing jobs. Things that used to be made in the US are absolutely not made here anymore, and would never again because it’s not as profitable to make it here, and of course the corporations don’t lower the prices any. My first Specialized bicycle was actually made in the US. When I went to upgrade, I noticed they were made in China, and they weren’t any cheaper…
I’m sorry to say this, but: First I respect Great Britian and its people greatly. However, the UK is in effect quite ‘hollow’ when it comes to it modern day economy. All money is made thru the service sector and entertainment. When your country (atleast right now) is known mostly for Simon Cowell and the creation of financial derivatives trading; its a sad situation. I am an American and i do not want to see our economy follow the same path, even though we are heading there fast.
“… Lord Turner, the chairman of the Financial Services Authority (FSA) in the UK thinks banks are “socially useless”…”
He is absolutely correct!
We don’t need banks, we need Credit Unions like we have in the US and what I believe you Brits call Building Societies in Great Britain. Member owned cooperatives that make no profits but only loan money to members from other members savings accounts.
For profit banks are bad for humanity.
Over emphasis on financial services and banking in paricular has led to stagnation and inequality in society(since 1997 in the UK,anyway)
Corpulent bankers relying on voodoo accounting with a “find a mug use a mug” mindset have caused the present crisis .
The UK needs a diversified range of businesses and must promote the “real” economy .
Have a look at the banking structure in India where it has been good at both, making money and being good, by fulfilling their social responsibility as well.And just to mention even today NO BANK needed a government bailout in India.I think there is something to learn from this model
@ Patti in Cape Coral
Me too. I think most of us would be in better shape if all banking customers could understand what it means to work together and expell the Potters!
If I have a business, I have to play by the rules. If I don’t, I’ll get sued, go out of buisness. Or go to jail. Yet, just because someone goes to a famous business school, has an MBA and works for a famous firm, they’re ENTITLED to make millions in bonuses? No they’re not.
@ patti in cape coral
August 27, 2009 at 18:08
“I wish a bank like the one in It’s a Wonderful Life existed in real life!”
They do exist, they’re called Credit Unions! You really should join one, you pay less interest on credit cards, home loans, car loans, and any other loan you want and you get paid more interest for you own savings accounts.
Only foolish people use for profit banks. Don’t you be one of those.
The big problem is that banks, business, and private investors are encouraged to participate in these loaning bubbles. As long as they get out before the bubble bursts, they WILL profit, big time! Regulations HAVE to be in place to prevent these bubbles from being created, so this cycle won’t happen! That is fundamentally the only way to prevent this from happening- to expect a modern business to abide by a rigid moral code is laughable.
And to the guest who says that banks are so crucial to the GDP- guess what, the GDP is very falsely represented when most of it is built on these bubbles. Banks loan tons of money that doesn’t exist, and this is why it’s so crucial to the GDP. For this reason, the GDP isn’t a very accurate representation of the economy anyway.
I don’t know that taxing is the best solution, but at least regulating, come on.
This isn’t George Bailey’s savings and loan; banks aren’t some great moral white knights. We’re in Pottersville.
Darwin still alive. collect everything u need to become a giant in every second in ur life and yes,come with ideas to improve society. good luck to you all.
When you have an industry that’s so big that its failure threatens the survival of a society, it becomes more than just a business. “Being good” is a necessity when greed threatens us all.
How can it be jus a mirage…at the end of the day its the bank aft which helps the economy drive itself.One sub prime crises CAN NOT dilute the role of banking sector in any economic development
“Too big to fail” this is the phrase used to justify the bailing out of the banking industry. Well the taxing and regulation should reduce the size of these companies and if they decide to go elsewhere that is great. Then when they fail we will not have the burden to keep them from failing.
Banks should act in the public interest, lending money to facilitate economic growth and should regulated to act accordingly.
Today commercial banks make a large percentage of money on fees and investment banks on hedging on risks. Both of these activities should be regulated to the degree that they are done in the public’s intersest
@Tom D Ford
Credit Unions are great–but they have little power in this globalized banking system.
Let’s ignore the variable of moral imperative for a minute, and we still see that smart regulatory reforms, such as, formal distinction between commercial and investment banks, regional banking to prevent “too big too fail” and lastly strict check over credit ratings agencies are crucial to healthy banking system. We also need to extend this conversation from banking to insurers like AIG.
@ Tom and Shannon – Actually, I do belong to a credit union, my job became a member of one, so I switched, then I brought in my mom, because she was very uneasy about the banks. So far I’m very happy with it, and I’m definitely not paying as many fees as I did when I was with a bank. There is still isn’t as much human contact as there was in years gone by, I usually do all my banking online, but I can get a hold of someone if I need to.
I guess I was just nostalgic for the way the bankers knew everyone in town and actually cared about them like in the movie. Maybe there are just too many of us for banks to really care about people, or maybe it gets too difficult to charge people money if you get to know them.
To the guy who is speaking now, the tax payer does suffer! The person who was unable to pay their mortgage had to foreclose and leave their home! There was no bail out for them like there was for the bank!
How is it that the adults of the world allow bankers to act like a two or three year old child who get into the cookie jar and greedily eats up far more than their share of the families cookies?
Why do we allow such immoral and unhealthy behavior within the Family of Man?
We don’t need bankers, bankers need foolish people that they can con into borrowing money and paying outrageous profits.
Tom D Ford~
I wish your opinion of credit unions were true. I have belonged to 4 over the past 30 years and all are guilty of taking the concept of “caveat emptor” (let the buyer beware) and running with it.
The one I belong to now once charged me $28 for overdrawing my account by FOUR CENTS.
The argument that no one has to pay for the irresponsible subprime loans is ignorant. Even if it is just a higher tax class that has to pay for the bank’s poor decisions, that’s still money coming from innocent people for something that doesn’t concern them.
And it isn’t as if the subprime loan recipients are completely alleviated of all responsibility of these loans; many were forced to foreclose on their homes and have lost their possessions. Many are still expected to pay back loans that they don’t have a prayer of repaying.
Therefore, much of this money is now rotting away in toxic assets that no one wants to buy. Yea, it really sounds like there are no victims of this irresponsible behavior!
On this issue of cutting corners to chase quarterly profits, why can’t companies simply ignore the analysts? Google and Berkshire Hathaway make it clear to their investors that they are working for the development of long term growth, and they seem to be working just fine.
Why can’t more corporations use this model, and create long term growth on their own terms rather than on the terms of those running 24 hour business news stations?
Banks are owned by people and managed by people and we adults legislate morality for people, so why would we possibly not legislate morality for banks?
Businessmen like to brag that there is no morality in business, but what kind of argument is that? Businesses are owned and managed by people, and do business with people, and people are required by Law to act morally, so how could businessmen logically exempt themselves from the rest of mankind?
That’s crazy talk!
John…
My credit union, the largest in the world, Navy Federal Credit Union has treated me very well overall. Once I had a charge from my University go through (another business sector that needs more scrutiny), i did not have enough in my account. Nfcu extended my credit limit free of charge and notified of what happened. i am very happy with them.
The banks were throwing money around, in part, because it was being thrown in their face by many eastern nations (China, Japan, Kores) at very little cost even when the banks did not want it!
I agree that banks are like drug dealers with their loans, praying on people who are ignorant of how money works.
Banks should be more like a storage entity and a partner with their depositors whom are funding their business efforts. The interest rates that they charge loaning out money is fractional to what they pay their depositors.
That just isn’t right.
There is an old saying in the insurance industries that insurance is not bought, it is sold. and that is the case for the sub-prime home loans, they were sold by fast talking con-men bankers to people who could not possibly pay them off.
@John in Salem
August 27, 2009 at 18:47
There are good and bad Credit Unions but all Credit Unions are better than any for profit banks.
I am with SELCO now and very happy but I was previously with Wood Products CU and had some problems like you mentioned with overcharges.
But I have never had problems like I had with banks.
The perception that all blames lies on the United States is patently not true. We had heavy capital inflows from China, Middle E Countries, European Countries, etc. to invest in real estate. We all have contributed our share to the crisis, including the reckless and gullible individuals who bought houses beyond their means.
D.R. II~
The first credit union I belonged to 30 years ago would actually call me if my account were in danger of being overdrawn, but they were taken over by another company with different ethics.
I’ve mentioned this to people at other credit unions since then and all have expressed amazement that such calls were even made.
Re: Tom D Ford, August 27, 2009 at 18:52
“Banks are owned by people and managed by people and we adults legislate morality for people, so why would we possibly not legislate morality for banks? …………..”
Once again, I wholeheartedly agree!
Re: Tom D Ford, August 27, 2009 at 18:58
“There is an old saying in the insurance industries that insurance is not bought, it is sold. and that is the case for the sub-prime home loans, they were sold by fast talking con-men bankers to people who could not possibly pay them off.”
Once again (Or is it more than once?) I agree! Anybody else want an argument (as in mathematics)?
Banks should be moral and they should be regulated. They use the incentive of greed to motivate politicians to go along with their whims and fancy. They don’t function to serve the interests of society. All banks do basically is enrich a small percent of those at the top in the banks and shareholders. They provide subsistence living for the poor by giving charity but otherwise their pursuit of profit at the cost of any and everything has contributed to some of our societal ills.
Banks (like all corporations) need to be regulated and serve some actual purpose in society. Mnay other countries have this and seem to do quite well. As for the States, the greed is so rampant that if you dare to regulate anybody, instantly you’re called “socialist.” Also, many of these people labeling you have no clue what socialist means.
The answer to your question is both, to succeed in doing that banks need to be constantly monitored by government without any compromise given what they did in past few years.
The banking institutions all around the world have to be ORDERED TO BE GOOD at protecting and using the public money, under the strictest possible scrutiny and check by their governing bodies. So far, they have been good at anything but safeguarding the public/investors interests.
there are two sides to this coin.firstly if we allow banks to make more profits a few people are likely to benefits through loans. only those with enough collateral will quallify to get the loans. they will benefit at the expence of bank customers with limited financial assets. therefore allowing banks to make more profits will only benefit those who are already well to do. secondly if banks are good they will embark on corporate social responsibility activities which include lending money to governments or other organisations working to improve social welfare thus the whole society benefits. the issue therefore is who benefits by the end of the day. allowing banks to be good benefits the whole society and i would say that is what we need to encourage.
Great answer. I enjoy the comments about the how the whole economic system including the majority holders of the capital should see that they have a duty to think about what benefits the whole or entire society rather than the few. Thanks for your comments.
Peace,
Jim Jacobson
Hello again
Let’s pretend that money is a token for work done. The work of a bank is to redirect these tokens to areas where they can be used to create more tokens ( loans for investment). The work of the bank also creates tokens.
Unfortunately banks tend to syphon off tokens and distribute them amongst their ‘big buddys’ whose work effort does not merit all these tokens. That is what is called banks making money. Eventually the amount of tokens syphoned off cannot possibly be backed up by the amount of work done and the economy crashes.
That is capitalism in a nutshell and our downfall in a coffin.
Jim
What a pity we lost the old Mutual Building Societies. They looked after the poorer class’s money. The banks were for the wealthy.
But since we’re stuck now (mostly) with banks then they should be run ethically even if this means going against the wishes of their shareholders.
In a final look, what I have to say is what I have always said about these bank bonuses. Do not blame those that earn money by doing what they were hired to do. Blame those that hired them to do the wrong jobs. Sometimes, when you get what you wish for, you learn, you did not know what you really needed. Hopefully the lessons learned here will last for more than a generation.
Banks need to be held accountable and translate the money they make into sustaining the economies of their domain. Governments must demand this action in order to keep a check and safeguard the deposits of the public. I fully agree 150%
The “socially useless” comment is somewhat hilarious, no? Coming as it does from a very obsolete model that required the “aristocracy”? What’s more socially useless as of today? A bank that is used to safeguard (ideally) and invest our incomes and savings, or “lords” who no longer own our land, no longer provide us our livelihoods, and no longer fight our battles on the battlefield?
Banks are definitely needed. I don’t know too many people who prefer the old under-the-mattress trick.
As to morality, that’s mostly rhetoric. What is moral? Is it moral to give banks government guarntees, to arm-twist them into make stupid loans, even though the bankers know better? Morality is the eyes of the beholder. Better stick with the agnostic profit motive, and keep confused minds from meddling with it?
The de facto deregulation of banks is deeply ominous for the progress of the economy. Normal people measure wealth by the real economy. Neoliberal economics conflates debt and income. The trend becomes a shuffling together of earnings and the processing of debt peonage. America has been suffering from stagnation in the real economy for considerably longer than the current meltdown. Then with the ‘bailout’ (translate: stickup) a huge segment of monies slated for the common good has been diverted to speculation. In a time when innovation, education, and production are absolutely essential for progress and environmental rehabilitation, we are throwing wealth at a gambling and extortion economy. It is no wonder that the poor of Islamic countries are embracing Islamism, which at least forbids usury.
Nothing wrong in making wind fall profits – but the best option is to control banks and regulate its spending & distribution of profits policies.
Regulate the org. strcture accross all banks, number of executives at each top management level depending on the size of the bank and clearly define their salary scales.
Regulator should ensure no more than 50% dividend rate to its shareholders and
Regulator should define X multiple of its salary as bonus subject to achiving X % YOY growth.
After allocating revenues and profits to the above – all additional profits could capitalised for higher levels of business or transfered to a sinking fund reserves to face any evantuality similar to Sept 08.
So banks can grow & target diversified business lines and higher profits but distribute its profit in a regulated manner and NOT by distributing Billions in bonuses and salaries finnally they come begging for taxpayers money.
Once you regulate the income of top management – they will regulate the proceedings at the banks within a frame work of polcies – GREED WILL HAVE NO ROOM.
Think of bankers as insiders: should they be allowed to write their own ticket:definitely not. Should every aspect of their business be strictly regulated and controlled:yes.People should realize money or the monetary system is something owned collectively: it should be kept safe from predators. It defines our social contract in too many ways.
Another thing we own collectively is access to the air waves, or in other words media, but that is another topic. But, it should be heavily regulated to maintain real public access (cf. CNN, Fox, MSNBC et al) Bravo WHYS!