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Where will we be without the bankers?
IT’S not all bad news. Sometimes, it’s like the country is on a downward spiral into permanent stagnation. But, occasionally there’s some really good news. For instance, have you heard that Goldman Sachs, the controversial cabal of international bankers, is pulling out of the International Financial Services Centre? Reliable sources say Goldman Sachs doesn’t want to do business in this country anymore. Whoopee!
Why are they leaving? Well, that’s something we should be shouting from the rooftops.
And they’re not the only bankers buggering off, I’m pleased to report. Several others are “handing back their licences”, according to Michael Somers, deputy chairman of AIB. And, he says, some of them have told him privately that it’s because of heavier regulation of their activities.
Not surprisingly, for a banker, Somers is dismayed. “I’m dismayed,” he told RTE’s business programme.
And this was reported sympathetically throughout the media, as though it’s a bad thing that various senior bankers, including the Goldman gobshites, are leaving. Sometimes, I wonder about this country.
The fighting Irish. The raging anger when the bankers crashed capitalism in 2008. The demands that bankers be fired, shamed, jailed – or worse. The anger at the light-touch regulation that allowed all sorts of cowboys to prosper, running their own banks into the ground. The insistence that there must be banking reform – this, we were told, Must Never Happen Again.
Well, folks, the notion that the banks should be kept on a tight rein is going out of fashion. Effective regulation is now dismissed as short-sighted. Support for regulation is caricatured as mere anti-banker rhetoric.
During the Celtic Bubble, bankers had a free hand. They acted with disregard for anything except their own interests. That’s not because they’re bad people – though some of them had the morals of jackals and the brains of peat briquettes. It’s because people who are paid massively, lauded as geniuses and given the run of the country will act accordingly.
Now, the pleas are mounting for lighter regulation and bigger salaries for bankers. And there’s no sign that this Government strongly disagrees.
An outsider was appointed Financial Regulator – Matthew Elderfield. Saviour of capitalism, a stickler for the rulebook, we were told. Best of all, he had no connection to the usual cronies.
And when Elderfield quit recently, after just three years on the job, to take a position with a UK bank, many were surprised.
Is his move just personal ambition or is there something more going on? Has Elderfield seen straws in the wind and did this make him decide to move to more solid ground?
Last week, Elderfield made a speech warning that the cost of lax supervision was many, many times the cost of proper regulation. Bizarrely, the media reported this as just another view – balanced against the view of the bankers, that regulation has gone too far.
I’ve had goldfish with better memories than some media folk.
Goldman Sachs, throughout this global crisis, epitomised the morals of the banking business. In Matt Taibbi’s memorable phrase, the bank is like “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.
The Greek government deceived the EU in 2001, borrowing billions in an off-the-books deal, while appearing to meet the EU’s deficit rules. They didn’t do it alone.
According to The New York Times, Goldman helped that government manoeuvre and the deal was “hidden from public view because it was treated as a currency trade, rather than a loan”.
Why would Goldman do that? Because the Greek politicians “paid the bank about $300m (€230m) in fees for arranging the 2001 transaction, according to several bankers familiar with the deal”.
When Greece imploded, Goldman had moved on to other things, its executives fattened on their notorious bonuses.
The fact that Goldman Sachs and others are leaving the IFSC – well, an active, concerned government would have ministers fanning out across the globe, gleefully welcoming this news. Yell it from the pages of the Financial Times and the Wall Street Journal.
Take a bunch of Reuters and AP reporters to dinner, send Michael Noonan into the Bloomberg TV studios with a big grin on his face.
“We’re glad to see the back of those bastards,” he would say.
And it would ask the question: what are Goldman Sachs hiding? What are they up to that can’t stand the light of effective regulation?
An active, concerned government would use the flight of such people to advertise a financial-services system that won’t be allowed do the kind of things that destroyed economies.
The departure of such types would be a platform from which to promise a financial-services set-up that you can trust.
But the wind seems to be blowing in the opposite direction. The Government’s defence of regulation is luke-warm. It refused to oppose the €843,000 salary of Richie Boucher of Bank of Ireland.
The framework of regulation – including Elderfield’s position – remains in place. The bankers find this restrictive – so, the pressure is on.
Yesterday, John Bruton, a former Taoiseach, now a hired mouthpiece for the banking business, rebuked President Higgins’s call for an end to the policy of austerity (pushed by banker-friendly types, such as Mario Draghi, a Goldman Sachs old boy). Attack unemployment, Higgins suggested.
Stay the course, Bruton says. He’s on a Dail and ministerial pension of €140,000, on top of his reported six-figure salary for bigging-up the bankers. And he says: “Austerity is always painful.”
The lesson of the banking crisis seemed for a while to be obvious to all. We need banks that serve the economy – not the bankers.
We need boring banks, banks that assess risk, support customers and serve the wider economy – not banks that are fixated on spectacular deals that feed the egos and the wallets of elite layers of hustlers.
Two distinct models of banking. An old one, that kept capitalism relatively stable for decades. And a casino model that emerged from Thatcherism, tied to bloated rewards for the few.
That cut-throat model, which placed the welfare of banks above that of the people, led to the crash. And to the ruinous bank guarantee.
And to the subsequent policies of forcing the debts of bankers and bondholders on to the people. And the costly, disastrous attempts to balance the books through austerity.
Remarkably, the cut-throat model has survived. We needed a clear-out of senior bankers, not as a punishment or as revenge, but to evict a type of specialist we don’t need, who subscribes to a model of banking, and a model of society, that has massively damaged us.
Many of the those who ran the banks into the ground have gone, but their values remain – and are lauded in the highest circles of government, business and the media.
Who replaces Elderfield, and the ground rules under which he or she works, will matter. There will be no sweeping disposal of regulation – we on the outside won’t even see the screws loosened.
Should those bankers now leaving in a huff return in a year or two, we’ll know then that we’re in even bigger trouble.
The Irish Economy – Three things all serious people know are true
Three things all serious people know are true
This post was written by Kevin O’Rourke
A holy trinity — or perhaps a troika? — of beliefs has guided policy since 2010. These are that austerity is expansionary; that the sky will fall in if ever the debt to GDP ratio exceeds 90%; and that the way to do austerity is to cut expenditure rather than raise taxes.
All of which is very convenient if what you really want to do is shrink the state.
We know how well the first two nostrums have performed when confronted with empirical evidence, so you might think that people would be just a wee bit cautious about stating the third as gospel truth. But no, here is Mario Draghi:
First, fiscal consolidation should be based on reductions in current expenditure rather than increases in taxes. Unfortunately, many of the fiscal consolidation measures were implemented in an emergency situation, with most governments choosing the simplest route, which was to raise taxes. And here we are talking about raising taxes in an area of the world where taxes are already very high, so it is no wonder that this had a contractionary effect.
Paul Krugman helpfully reminds us where this belief came from, and what happened next. The ECB is constantly telling us that it has a narrowly restricted mandate, with its primary concern being inflation. In that case, then surely the least that we are entitled to expect is that it keeps its views about the composition of fiscal adjustments to itself?
via The Irish Economy » Blog Archive » Three things all serious people know are true.
via The Irish Economy » Blog Archive » Three things all serious people know are true.
Goldman Rejects Proposal That Firm Run for Elected Office
Goldman Sachs Group Inc. (GS), the investment bank nicknamed “Government Sachs” because of senior executives who have moved into public posts, won’t be entering politics itself.
A shareholder proposal that the New York-based company run for office instead of funding political campaigns was discarded, according to a letter last month from the Securities and Exchange Commission, which agreed the firm can exclude the measure from its annual meeting.
Harrington Investments Inc. President John Harrington submitted the proposal last year, saying the $6.39 million in 2012 political contributions from the firm’s employees risks doing more harm to its reputation. He said the bank should explore running for office, using a U.S. Supreme Court ruling that corporations have similar political rights to individuals.
“It would be less damaging to the integrity of our political system and our company, for our corporation to directly run for office as a person under federal or state law, than to continue in the current form of political participation,” Harrington wrote in the proposal.
Goldman Sachs said in a letter to the SEC that it “currently has no involvement, never has had any involvement, and has no plans to become involved in the business of running for political office.”
The bank also said that its political action committee is funded by voluntary employee contributions, not shareholder money. The Supreme Court’s 2010 Citizens United ruling gave corporations the same rights as individuals to spend money independently to support candidates.
‘Social Objectives’
Harrington Investments provides advisory services for investors “who want their investment portfolios to serve progressive environmental and social objectives while yielding positive long-term returns,” according to its website. The firm expressed its support for Occupy Wall Street protesters.
Two former Goldman Sachs chiefs, Henry Paulson and Robert Rubin, served as U.S. Treasury secretaries after leaving the firm, and another, Jon Corzine, represented New Jersey in the U.S. Senate and as governor. Mark Carney, the incoming Bank of England head, European Central Bank President Mario Draghi and Federal Reserve Bank of New York President William Dudley are among company alumni now setting monetary policy.
Harrington said he will continue to search for ways to bring up the issue of corporate political involvement, as well as the balance of power between shareholders and companies’ management teams and boards of directors.
“It’s too bad we didn’t get it on the ballot, it would have been a good discussion piece,” Harrington said today in a phone interview. “You begin to see a pattern of how much influence corporations have on our political balance, and now it’s so skewed that you figure, ‘Why don’t we have Goldman run for president and JPMorgan Chase run for vice president.’ And that way, they can run the system for real.”
via Goldman Rejects Proposal That Firm Run for Elected Office – Bloomberg.
via Goldman Rejects Proposal That Firm Run for Elected Office – Bloomberg.
The ECB’s Secret Letter to Ireland: Questions
Did the ECB threaten to withdraw funding from Irish banks unless Ireland entered an EU–IMF program, either in a letter dated November 12 or in meetings the following weekend?
THE European Ombudsman has begun a formal investigation into the European Central Bank‘s refusal to release the letter that bounced Ireland into the bailout.
Two senior executives from the Ombudsman travelled to the ECB’s headquarters in Frankfurt in December to view the letter which the bank is refusing to allow the citizens of Ireland to see.
The decision to carry out an investigation follows a complaint against the ECB of “maladministration” by journalist Gavin Sheridan. The ECB has refused to release the letter dated November 19, 2010, for over a year on the basis that it claims it is not in the “public interest” for Irish citizens to see “candid communications” between the ECB and national authorities.
“Not in the Public Interest’ this is rich coming from an unelected EU official.In short it is a two fingers to democracy and your democratic rights
This letter is marked “secret”, and its publication has been blocked at the highest levels of the ECB.
The ECB’s justifications for not releasing the letter included the following paragraph:
The second letter, dated 19 November 2010, is a strictly confidential communication between the ECB President and the Irish Minister of Finance and concerns measures addressing the extraordinarily severe and difficult situation of the Irish financial sector and their repercussions on the integrity of the euro area monetary policy and the stability of the Irish financial sector.
The content of the letter was alluded to as follows:
The ECB must be in a position to convey pertinent and candid messages to European and national authorities in the manner judged to be the most effective to serve the public interest as regards the fulfilment of its mandate. If required and in the best interest of the public also effective informal and confidential communication must be possible and should not be undermined by the prospect of publicity. In this case, the confidential communication was aimed at discussing measures conducive to protecting the effectiveness and integrity of the ECB’s monetary policy and fostering an environment that ultimately contribute to restoring confidence among investors in the overall solvency and sustainability of the Irish financial sector and markets, which, in turn, is of overriding importance for the smooth conduct of monetary policy.
The Irish public deserve deserve better than this tardy treatment from both the EU and the Irish Government