Transparency International, a non-governmental organization, conducted a poll of 114,000 people in 107 countries on the problem of corruption.
More than 50 percent of the respondents said they believe that global corruption has gotten worse over the past two years.
According to the survey, a lack of ethics – dishonesty – is on the rise almost everywhere. Not surprisingly, “politics” was declared the most corrupt institution in 51 of the countries surveyed, but it has serious competition.
Banking is a major industry infected by corruption. Banks in Ireland, Greece, Spain, Portugal and some other countries, were caught up in the crisis of 2008.
The Irish bank bailouts were the first to hit a European country. Leaked audio tapes and phone conversations of top officials at Anglo Irish Bank revealed that they lied to the government about their bank’s financial condition as the real estate bubble was about to burst. This made it more difficult for the government to respond effectively. The Irish bank bailout has cost Irish taxpayers and the European Union tens of billions of dollars, and Ireland is still in the throes of a severe recession. A similar crisis occurred in the United States, only on a much larger scale.
Without fully understanding the scope and nature of the problem, the U.S. government felt compelled to bailout Wall Street banks, which were deemed too big to fail. The bank bailout probably prevented the U.S. economy, and possibly the world economy, from collapsing into a second Great Depression. Our economy remains weak, and unemployment is too high.
It appears that a culture of greed and a lack of ethics are still alive on Wall Street. Recently, a prominent New York law firm took a survey of 250 Wall Street professionals from dozens of financial companies. The survey revealed that 23 percent of responders “had observed or had firsthand knowledge of wrongdoing in the workplace.” Nearly 25 percent said that they would “engage in (unethical) insider trading to make $10 million if they could get away with it.” One-fourth of respondents also said that pay and bonus structures encourage employees to compromise ethical standards or break the law.
More worrisome, 17 percent of those surveyed expected “their leaders were likely to look the other way if they suspected a top performer engaged in (illegal) insider trading,” and “15 percent doubted that their leadership, upon learning of a top performer’s crime, would report it to authorities.” Overall, “28 percent of respondents felt that the financial services industry does not put the interests of clients first.” Despite these faults, Wall Street banks are getting bigger, and their profits are increasing.
The New York financial industry is operating the same way it did before the crisis of 2008. This shows that reform still is needed.
In order to avoid another bank crisis, Congress should pass a new Glass-Steagall Act, which separates traditional commercial banking from high-risk investment banking.
Most importantly, high moral values and accountability must be restored throughout our society; all of us should examine our conscience and rededicate ourselves to being honest in our dealings with others – especially those of us who are the leaders in politics and finance.
Anthony J. DiStefano spent 29 years in state and federal government, including working with the Ohio General Assembly, the U.S. House of Representatives and two executive agencies of the federal government.
Their God is Mammon.They dismiss the social consequences and cruelty of their actions and inactions as academic irrelevancies.Suicide ,homelessness ,despair,economic emigration and social breakdown are no more than invconvient bumps on the road under the juggernauts of fiscal policy.Our Governments have tried ,by the sleight of hand of making us shareholders in theses institutions ,to make us all complicit in these barbaridc outrages.
Has anybody complained about these loan companies getting bailed out by the taxpayer then using the bailout to pay mega bonuses to the upper management? No, the government and banking industry want to make it harder for those who depend on the occassional short-term loans to get through any rough patches that come along. This so-called watchdog agency created by Obama should concentrate on the big banks like BofA, JP Morgan-Chase, and Wells Fargo. these companies are trying to foreclose on loans that have been renegotiated through federal programs. Thousands of people are losing their homes because of these companies not keeping track of payments made to their subsidaries which more than a few have gone belly-up and misfiling of paperwork. These mistakes are costing the homeowner billions on top of their homes. Obama’s watchdog should be looking into these breaches of contracts instead of the payday loan industry.
The Department of Finance tells us that the deficit is improving. DoF reports that the general government deficit fell from €22.4bn in 2009 to €12.4bn in 2012. But it is widely known that the impact of bailing out bank shareholders and bondholders has had a hugely distorting effect on public finances. Unfortunately, DoF does not show these effects in the same release as the overall government finances, and you need to go to a separate database to get these data.
Adding the two together produces a measure of the underlying deficit, excluding both costs and revenues from the bailout. It is regrettable DoF doesn’t do this itself.
The table below shows the deficit excluding the effects of the bank bailout.
|General Government Deficit||-22.4||-48.3||-21.3||-12.5|
|Bank bailout net expenditure/receipts||-3.8||-31.5||-5.7||+1.6|
|Underlying Deficit (excl. bank bailouts)||-18.6||-16.8||-15.6||-14.1|
Fig.1 – General Government Deficit Excluding Effects of Bailouts for Bank Shareholders and Bondholders, €bn. Source: Department of Finance
There is another factor to be taken into account. Hardly anyone suggests that the reduction in government investment is a welcome development. Even supporters of ‘austerity’ suggest it is nothing more than a temporary evil, or an unavoidable necessity. The government has pledged not to cut it further.
As a result, while it has a significant bearing on the economy, it is not strictly part of the ideological offensive supporting austerity at all. Therefore it is worth looking at the underlying deficit (excluding both bank bailouts and the effects of growth) after taking into account the government’s own reduction in investment (Gross Fixed Capital Formation). Without cutting investment sharply the deficit would not have been on much of an improving trend.
|a. Underlying Deficit (excl. Effect of bank bailouts & growth)||-18.6||-16.8||-15.6||-14.1|
|b. Govt. GFCF||6.1||5.5||4.0||3.3|
|c. Underlying deficit, (excluding investment & bank bailouts) (a-b)||-11.5||-11.3||-11.6||-10.8|
Fig. 2: Underlying Current Deficit (excluding bank bailouts), removing cuts in Government GFCF, €bn. Source: Author’s calculations, Department of Finance
On this measure the trend in the deficit is still downwards, but only marginally so. Once both the effect of the bank bailouts and the cuts in government capital investment are stripped out, the decline in the deficit is a paltry €700mn since 2009.
Unsurprisingly, while the economy has stagnated since the slump so has the underlying deficit. The chart below shows the trend in GNP and the underlying deficit since 2007. In effect, a slump has been followed by stagnation. The deficit is a mirror image of growth; a sharp rise has been followed by a flatlining deficit. The modest improvement in 2012 as whole reflected the moderate uptick in economic activity, which gave way to renewed recession at the end of 2012.
The underlying deficit is not really on an improving trend. It remains dependent on growth, which itself remains elusive.
Supporters of austerity in Ireland maintain that export-led growth will be the salvation of the economy. But recorded exports have already risen strongly without lifting the economy out of Depression and there is a question mark about the continued strength of exports in the period ahead.
There is also a larger question looming. Ireland is a capitalist economy and set to remain so for a considerable period. Yet its capitalists have stopped producing capital. The implications of that startling fact will be addressed in a further post.
IRELAND’S dramatic success in getting back into the bond markets threatens to cost us a deal on our debt.
But this won’t disguise the fact that he is coming back empty-handed.
Mr Noonan likes to remind listeners that his country is meeting 120 out of 120 conditions imposed under the bailout.
His comments follow a clamour from some Irish politicians and economists who believe the letters sent to Mr Lenihan contained threats that somehow forced him into a bailout. They now want the letters published.
Weekend media reports also suggested the letters contained threats but did not provide any quotations or evidence to back-up the assertions.
Without seeing the letters, it is impossible to know whether the ECB was simply expressing concern about the safety of the tens of billions of euro the bank pumped into the Irish economy or something more sinister. No media outlet, government minister or ECB president has ever published the letters and the Department of Finance and ECB’s freedom of information units have declined to release the letters.