Altman of moral environment

This may have little to do with the environment but – I’m sorry – I simply cannot remain silent any longer about the revelation that the financial services industry in London is almost unbelievably corrupt. We are watching history being made here; this is bigger than the Olympics – and I think it will take the City of London decades to recover its reputation (if it ever can). It may be the CEO of Barclays, Bob Diamond, that has hit the headlines, but this scandal is set to envelop at least 20 banks; and I think there will be very few that will not eventually be tainted by it. I stayed up late last night to watch two weekly current affairs programmes on the BBC, Question Time and This Week. The first question on the former set the tone for the evening: “Is there any integrity left in British Banking?”… The panel – including the CEO of brokering firm Tullett Prebon – were unanimous in their condemnation of Barclays; and every single one of them called for Bob Diamond to resign. However, despite the unanimous view that he should resign (or be fired), a view clearly shared by the UK’s Prime Minister David Cameron, most people seem to think he will not go, simply because so many other banks are being investigated for the same thing; manipulation of the LIBOR – the interest rate banks use to lend each other money and/or make huge bets on future performance of equities. The fractions of a percentage involved are miniscule; but the sums of money involved are huge. This is indicative of the way in which the financial services sector is completely detached from reality; some of the trades involved sums of money in excess of the annual economic output of the entire planet. Put simply, this money does not exist; and yet it has corrupted many of those involved. I therefore think the award for the soundbite of the evening must go to Michael Portillo, a former Conservative Minister in the Thatcher government, who said on This Week last night that (I paraphrase):

“If Pakistani cricketers can get sent to jail for match fixing, surely these traders should be sent to jail for what they have done…?”

Like I said at the start of this rant, I think it will take the City of London decades to recover its reputation (if it ever can); and I am very worried that no-one will ever be sent to jail for what they have done. However, I really hope action will be taken; and I hope that our politicians will stop trying to score political points against each other. This is no time for the present Coalition government to blame the previous Labour administration for light touch regulation. This kind of hypocrisy is almost as contemptible as the amoral behaviour of the bankers involved. How does the analogy go… “Before you try to take a splinter out of the eye of your fellow-man, remove the plank from your own!” The main reason we are in this financial mess is due to the action of another coalition – that between Reagan and Thatcher in the 1980s – which allowed the ‘Big Bang’ de-regulation of the financial services sector in London in 1986. This was the message of the movie Inside Job. Barclays shares lost 16% of their value yesterday; but this is much bigger than Barclays. This scandal exposes the fact that our entire banking system is utterly corrupted; and rotten to the core. As many of the contributors to last night’s programme suggested, the high-street banks should now be separated from the investment banks. However, I do not think the Augean Stables can ever be cleaned-up; it needs to raised to the ground and completely re-built. So, what, if anything, has this to do with the environment? A great deal, I suspect, because a very large proportion of humanity has very clearly taken its collective eye off the ball… I will close with the wise words of a Native American leader and poet:

When all the trees have been cut down, when all the animals have been hunted, when all the waters are polluted… only then will you discover you cannot eat money.

See https://anthropocenereality.wordpress.com/2012/02/17/white-mans-folly/

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About Rick Altman

Possibly just another 'Climate Cassandra' crying 'Wolf' in cyberspace. However, the moral of the old children's story is that the Wolf eventually turned up!
This entry was posted in Capitalism, Economics, Environment, Ethics, Financial Crisis, Liberalism, Money Fetishism, Politics and tagged , , . Bookmark the permalink.

28 Responses to Altman of moral environment

  1. Jennifer Browdy de Hernandez says:

    Rick, money of course has everything to do with the environment! While the financial sector may be living in a dreamworld divorced from our physical reality, in the end they too will have to face the environmental limits to growth of our planet. It is because they refuse to see this that they are gambling so recklessly with our economic system–this is what we saw with such clarity in the very near financial collapse of 2008 in the US, requiring a massive taxpayer bailout. Most of us taxpayers do back our money with real goods and services, and know its value. And the ultimate backer of all of us is Mother Nature. On my to-read list this summer is Charles Eisenstein’s Sacred Economics, which has been getting a lot of play recently in some thoughtful circles. You should read this column by Robert Koehler, “On God, Money and Planet Earth,” which starts to make just the connections you’re reaching for here. It’s on the New Clear Vision collective blog: http://www.newclearvision.com/2012/06/26/continuing-the-conversation/ Don’t doubt your own instincts as a political writer. If you care about it, it’s important!

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    • Rick Altman says:

      Thanks for your words of encouragement, Jennifer. Yes, of course it all comes down to money or, rather, what Karl Marx called “money fetishism” and the Bible calls “the love of money”. Clearly, I have written about these things before but, never have I tackled the subject head-on in relation to current events, like I have done today. However, I really do think this wil be an epoch-defining event for the financial services industry world-wide. Thanks for the link to the article by Koehler. I find it hard to understand how people in faith communities could fail to see the link between money and selfish behaviour of all kinds; much easier to see how simplistic (monotheistic) faith can lead to the rejection of science and/or things that appear almost pantheistic (like the Gaia hypothesis, etc). However, co-incidentally, I was just reading a new post of the Yale Forum on Climate Change and the Media about the way in which the reality of climate change is finally beginning to dawn on evangelical Christians… http://www.yaleclimatemediaforum.org/2012/06/preachable-moments-evangelical-christians-and-climate-change/

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      • Jennifer Browdy de Hernandez says:

        Yes, I’ve been following the gradual connections being made between the environmental movement and faith communities. The Christian line of being good stewards of the earth works well in an environmental context, though I don’t know about the “be fruitful and multiply” part! And for those who believe in Armageddon, well, climate change provides the geophysical back-up to the theological theory! I think what we need is a kind of scientifically informed pantheism, precisely along the lines of the Gaia hypothesis, to galvanize the widest swath of people to begin to do what it takes to safeguard our planet.

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      • Rick Altman says:

        Yes indeed, I too am hoping that those who believe we should look after what we have been given will be victorious over those who we can just use it up and wear it out (and/or overpopulate it [so as to populate heaven]) because “Jesus is coming back soon”… However, I must admit, the vision of St John the Divine does indeed look like becoming a reality…

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  2. This is a powerful post that I want to reply to later once some contractors, due here in the next 20 minutes, have been and gone.

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  3. Per Kurowski says:

    Whatever interest rate manipulation Barclays did, it pales when compared to the unwitting interest rate manipulation produced by regulator when he differentiated capital requirements for banks, based on perceived risks which were already cleared for by the banks in their interest rates and amounts exposed. For instance simple calculations would indicate that a not-rated bank client, exclusively on account of this odious regulatory discrimination, has to pay about 270 bp (2.7%) more in interest rates when compared to an AAA rated bank client… or, like now, in times of extremely scarce bank capital, suffer the consequences of being excluded from access to bank credit.

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    • Rick Altman says:

      Thanks Per. All of what you say may be true but, I think the main point of my article, as wonderfully expressed by Michael Portillo, is very clear: How is it that bank employees can manipulate the LIBOR (to cream-off a tiny percentage of incredibly large sums of money to boost their apparent profitability as individuals) and not be guilty of a criminal offence? As I said, I think the answer lies in the ‘Big Bang’ de-regulation of the City of London in 1986: http://www.guardian.co.uk/business/2011/oct/09/big-bang-1986-city-deregulation-boom-bust

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      • Per Kurowski says:

        Rick. Yes, people, and bankers, of all times and in all places have been creaming off the top… and they should be in jail, sometimes they go sometimes they don’t, so what’s new? One problem is that now, years into the crisis, we still hear intellectually captured experts repeating, like parrots, that this crisis resulted from deregulation, when the real cause for it, are the most intrusive and distortive bank regulations ever, and which came about when regulators, thinking themselves to be the risk managers of the world, decided to differentiate capital requirements for banks based on perceived risks.

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      • Rick Altman says:

        Per, please correct me if I am misunderstanding you: You appear to be saying that the story of the movie Inside Job is an urban myth; that Alan Greenspan (et al) is innocent, and Barrack Obama was right not to fire any of those in charge when the financial meltdown occurred (as a result of money being lent to people to whom it should not have been, etc., etc.)? In addition, the authors of the many books written on the subject are wrong too, as was Raghuram Rajan in his 2005 article ‘Has Financial Development Made The World Riskier?’….? What is your view of the latest scandal that enveloped JP Morgan (was it) in the wake of the Facebook flotation (for failing to give potential investors full disclosure)? I am astonished that you appear to be blaming regulators for what seems to me to be clear evidence of immoral – if not illegal – acts that were motivated solely by greed.

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      • Per Kurowski says:

        Yes Rick, I do indeed hold that 99.9% of the experts and the Monday-morning-quarterbacks on this issue, have no real understanding of what happened, and that I do. And, to back it up, I have many public statements which go back for more than a decade, and some of those delivered even formally as an Executive Director of the World Bank. My main problem consists in that I have not argued that the regulators were 10 degrees wrong, which would have been acceptable to them, but that they were 180 degrees wrong, which is something their egos cannot swallow. But let me just ask you a question. Knowing, as the regulators should have known, that no major bank crises has ever resulted from excessive lending to what was perceived as risky and that, except for when pure fraud was present, they have all resulted from excessive bank exposures to what was perceived as absolutely not risky… would you set the capital requirements for banks to be lower when the perceived risks were low than when these were high? As current bank regulators did?… Take your time. And of course this has nothing to do with condoning Greenspan or the others, and more with including additional responsible in the list of those I feel, as a minimum, should parade down 5th Avenue wearing cones of shame… and never be allowed to regulate again. “money being lent to people to whom it should not be lent” Absolutely… but be sure you know why this happened so that you do not punish the soldier while condoning the responsible general. http://subprimeregulations.blogspot.com/2011/04/is-inside-job-doing-inside-job-on-us.html

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      • Rick Altman says:

        Per, I had a rummage around on that blog and watched a few videos… Is that you, or someone else? You will have to forgive me but, I cannot pretend to understand the point you are trying to make. To me, our financial crisis is very clearly an almost inevitable consequence of an apparent moral vacuum at the heart of our post-modern and post-Christian society. These days, since I no longer go to Church nor insist that anyone else need do so either, I try very hard to avoid quoting the Bible to people but, in this particular situation, I feel it expresses my view of these events perfectly: “…There will be terrible times in the last days. People will be lovers of themselves, lovers of money, boastful, proud, abusive, disobedient to their parents, ungrateful, unholy, without love, unforgiving, slanderous, without self-control, brutal, not lovers of the good…” (2 Timothy 3:1-3).

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      • Per Kurowski says:

        Rick yes that is me on one of the videos… and I have absolutely nothing against you quoting the bible, I am Christian, and the quote you offer contains undoubtedly much truth… But let me try to explain what happened, with for instance an example from Europe. There, a German bank, when lending to an unrated small German business, needed to hold 8 percent in capital, but, when lending to Greece, because Greece was officially perceived as not risky, it needed to hold only 1.6 percent in capital. That translated into that a German bank when lending to a small German business could only leverage its equity 12.5 to 1 times (100/8) but, when lending to Greece, it was authorized to leverage 62.5 to 1 (100/1.6) Since a banker needs and wants to provide his shareholder with a high return on equity, upon which also the size of his bonus depends, the German banker overexposed his banks to Greek sovereign debt and underexposed it to small German small businesses. And the same argument goes for all other bad bank assets which created this crisis.

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      • Rick Altman says:

        Thanks Per. Forgive me if I do not perpetuate this discussion myself (as I feel poorly-equipped). However, I am reading the exchanges between you and Patrice with interest; and will be interested to see if any common ground emerges… Meanwhile, if you want to take a break from economics and venture into the interface between faith and science, feel free to visit my History page!

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  4. Barry Woods says:

    Portillo is too kind to them…. and yes I would dearly love the lot of them, it is clearly not just Barclays, face the courts and have HEAVY jail time

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  5. Patrice Ayme says:

    I cannot understand Per’s point at all, either. He seems to find “odious” the idea of rating perceived risks in investments, and, that DEregulation was not a problem. But surely if only deposit banks would be forbidden to invest in anything remotely risky, we would be back in the happy state of the banking act of 1933 (Glass-Steagall). As I claimed in “WILL TO VICE”, there is something as the will to destroy in (some) human beings. It’s a central human instinct, and it covers all, from finance to the planet. http://patriceayme.wordpress.com/2012/01/23/will-to-vice/ So, in particular, banksters don’t give a hoot about their reputation. They know that, as long as they have all the money, that is, all the power, reputation does not matter. PA

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    • Per Kurowski says:

      Patrice… why don’t you try to answer this letter on behalf of “Mr. Regulator”. Dear Mr. Regulator My bank charges me more because they perceived me as more risky… and I get it, can´t do a lot about that! My bank lends me less because they perceived me as more risky… and I also get it, can´t do a lot about that either! My bank lends me on shorter and tighter terms because they perceived me as more risky… c´est la vie, tha´s life, got to accept it! But now my banker tells me I must pay him even more in interests, so as to provide him with a competitive return on his equity, only because you the regulator authorized him to lend to those perceived as not-risky holding much less equity than when he lends to me. Is he right, and if so, why would you do a stupid thing like that for? Why am I discriminated against and not given the same opportunity to earn him a good return on his equity? Honestly, I just don´t get it, as far as I know there has never been a bank crisis because bankers have lent too much to guys like me perceived as risky. Please? Sincerely, Your slightly risky but extremely helpful small businessman neighbor… and who by the way is trying hard to secure a future job for your grandchildren. Per

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      • Patrice Ayme says:

        Per: Are you saying: 1) that the European bankig crisis was caused by German banks lending to the state of Greece, or Spain, or Italy? 2) that the subprime crisis in the USA (which brought down many banks in the EU, including in the UK, especially in the UK, but also Hypo Real Estate in Germany a 100 billion bankruptcy…) was caused by banks lending to AAA states (I am trying to be totally hilarious, sorrrrryy…) ?????? I do agree with your point: risk was misevaluated. Even the man in the street got that one, by now. But there are much bigger problems, such as the impossibility of creating Fiat Money in the Euro zone (although super Mario is trying to do something about it: a trillion here, or there…) PA

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      • Per Kurowski says:

        Patrice. Yes indeed I am saying that the European crisis was caused by banks getting excessive incentives by the regulators to lend to many sovereigns, like Greece, Italy, Portugal, because these were officially considered as absolutely infallible. And yes I am indeed saying that the “subprime” crisis was caused by the fact that regulators allowed banks to have minimal capital just because what they lend to or invested in had an AAA rating.

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  6. Patrice Ayme says:

    To Per: Spain had 34% public debt to GDP ratio in 2008, not even half of Germany. Thus public debt has nothing to do with the crisis in Spain. What caused the crisis in Spain was private lending to private entities. Then the state of Spain was called to step in, forcing Spain to pile up debt quickly to pay EVIL MEN. Fortunately, this is now over, as Merkler rose the white flag last night. Merkel suffered a bad defeat first. The conservatives in Spain and Italy made a united front. At 11pm, they said they were not signing the document hey had in front of them. They represent more than 100 million people, and more GDP than Germany. At that point, unheard of in a european Union summit, the French president Hollande stepped out, in an implicit support to Spain and Italy. Merkel could not call on her mighty ally. Several hours later, Merkel, and the plutocrats she represents, capitulated. Banks in need will henceforth be Europeanized, getting money directly from the ECB (thus not increasing the debts of states such as Italy or Spain anymore). Hollande came back, and signed. Merkel looked haggard. Two defeat at the hands of “super Marios” in 12 hours… Evil men can hide behind regulations, or lack thereof, but they can’t escape the justice of history. To tell us there are no banksters does not help. One cannot stop the Mafia, if one calls Mafiosi “good fellows”. http://patriceayme.wordpress.com/

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    • Per Kurowski says:

      @Patrice “Thus public debt has nothing to do with the crisis in Spain.” You are absolutely right, but the problem in Spain was caused because the regulators allowed the banks to lend to the real estate sector against minimum capital requirements, again because that was considered to be “safe”… just the same as what happened in the US with the subprimes. And I am sorry to say… nothing is over… the can has just been kicked further down the road!

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  7. Rick Altman says:

    In light of this discussion, I have posted another item (sort of) about economics (and Shakespeare!). I hope both Per and Patrice will read it and (in the case of Patrice at least) watch the 30-minute video. I would also be very interested to hear your views on the Common Agricultural Policy (but please follow the links to the item I posted back in January if you wish to enlighten me).

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  8. From yesterday’s Guardian newspaper, see http://www.guardian.co.uk/business/2012/jun/30/banking-scandal-barclays-lawsuits-libor “The interest rate rigging scandal that has engulfed Barclays was the result of a coordinated attempt at collusion by traders working for a coterie of leading banks over at least five years, according to a series of lawsuits and legal rulings filed in courts in Asia and North America. The lawsuits allege the fraud was extensive, spanning at least three continents and involving trades worth tens of billions of pounds. The allegations raise further serious questions about the banks’ ability to police themselves and the role of senior management in monitoring the activities of their employees. In a 28-page statement of facts relating to last week’s revelation that Barclays had been fined a total of ÂŁ290m, the US Department of Justice discloses how a network of traders working on both sides of the Atlantic conspired to influence both the Libor and Euribor interest rates – the rates at which banks lend to each other. It was, in effect, a worldwide conspiracy against the free functioning of the market.”

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    • Rick Altman says:

      Thank you for keeping up with the news today, Paul. I have been somewhat pre-occupied with my children and the World Cup (Soccer) Final – what an amazing match and an amazing Spanish team…

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