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Bankers fall far short of being good shepherds of society's goals
By Wan Lixin |
January 5, 2013, Saturday
|
Print Edition
Print Edition
A COUPLE of weeks ago the elderly parents of a colleague of mine, aghast at the exorbitant mortgage costs on their son's new home, offered to pay off a sizable portion of the loan with their own savings.
This is a manifestation of unconditional parental love. This is also a sign of the deepening control of banks over individual lives.
A sizable portion of the prime-age labor force are actually slaving away for the banks as "mortgage slaves," and would remain so for years to come.
In a matter of a decade, a nation that used to place a high premium on thrift and honest work - and view any borrowing with suspicion - has been converted into a nation of eager borrowers.
In a sense, the 2008 US financial meltdown and the subsequent Occupy Wall Street movement are largely irrelevant here.
Occasionally we also hear voices of concern in China. In a recent interview with the Oriental Morning Post, economist Chen Xiaosheng stressed the urgency of thoroughgoing financial reform.
The financial sector has become so powerful that it now exerts a distinctly inhibitory influence on the real economy, Chen said.
By "inhibitory influence," he referred to the fact that the financial sector is playing a game with itself.
"When secured yield can reach 6 percent and return on trusts can go up to 9 percent, who is still interested in investing in the real economy?" Chen asked.
Most people are putting in their money in Wealth Management Products (WMP), which are actually circulating within the system itself.
It is difficult to measure the precise amount and value of WMPs. Some say WMPs account for roughly 16 percent of all commercial bank deposits.
According to a report by CN Benefit, a Chinese wealth-management consultancy, sales of WMPs soared 43 percent in the first half of 2012 to 12.14 trillion yuan (US$1.9 trillion).
Not surprisingly, given their size, these products have the potential to become the source of systemic financial risk over the next few years. Given bankers' record of excesses, recklessness, and moral turpitude, we should naturally be wary of what they have in store for us.
The US government stepped in when it found that some banks were too big to fail. Government bailouts enabled many bankers to be at their old tricks again, with a vengeance.
Financial professionals even have their defenders, among whom Robert J. Shiller, author of "Finance and the Good Society" (Princeton University Press, 2012).
In his new book, Shiller argues that financial capitalism, "an economic system dominated by financial transactions as opposed to industry or trade," plays an important role in furthering society's goals.
Making financial products - pensions, insurance and mortgages - more democratic has improved life for millions, he says.
Shiller believes that seeing the financial industry solely as an evil monolith discounts the contributions of those who are responsible for shepherding civilization's important financial goals. A CEO is responsible for an organization's future, while bankers and investment managers help people realize their everyday objectives in the present.
I do not think the financial institutions have been conceived of evil intentions at the very beginning. They have been designed, no doubt, with a view to serving the real economy and to protect honest people.
That's why there are regulators who are supposed to police the sector so as to maintain the system's integrity.
But as the sector becomes so powerful, it is well-nigh impossible to subject it to effective regulation or supervision, as the US sub-prime mortgage crisis has shown.
The bankers have evolved into numbers-driven automatons, consummate con artists, whose ruling passion is money.
Shiller is nearer the truth when observing that "the financial crisis was not due simply to the greed or dishonesty ...; it was ultimately due to fundamental structural shortcomings in our financial institutions."
And the correct answer to these shortcomings? Fundamental financial reform, rather than paying panegyrics to a sector that has become synonymous with greed.
Obviously, the imperative today is not to dwell on the financial sector's potential to contribute to the general welfare, but on measures to save the bankers from depravity.
It is disappointing that, turning a blind eye to the egregious recent examples of corporate greed and mischief, the author lauds investment bankers as "keepers of the peace."
This fulsome flattery not only reminds us about the moral obligations of financial professionals, but also the conscience of so-called intellectuals.
This is a manifestation of unconditional parental love. This is also a sign of the deepening control of banks over individual lives.
A sizable portion of the prime-age labor force are actually slaving away for the banks as "mortgage slaves," and would remain so for years to come.
In a matter of a decade, a nation that used to place a high premium on thrift and honest work - and view any borrowing with suspicion - has been converted into a nation of eager borrowers.
In a sense, the 2008 US financial meltdown and the subsequent Occupy Wall Street movement are largely irrelevant here.
Occasionally we also hear voices of concern in China. In a recent interview with the Oriental Morning Post, economist Chen Xiaosheng stressed the urgency of thoroughgoing financial reform.
The financial sector has become so powerful that it now exerts a distinctly inhibitory influence on the real economy, Chen said.
By "inhibitory influence," he referred to the fact that the financial sector is playing a game with itself.
"When secured yield can reach 6 percent and return on trusts can go up to 9 percent, who is still interested in investing in the real economy?" Chen asked.
Most people are putting in their money in Wealth Management Products (WMP), which are actually circulating within the system itself.
It is difficult to measure the precise amount and value of WMPs. Some say WMPs account for roughly 16 percent of all commercial bank deposits.
According to a report by CN Benefit, a Chinese wealth-management consultancy, sales of WMPs soared 43 percent in the first half of 2012 to 12.14 trillion yuan (US$1.9 trillion).
Not surprisingly, given their size, these products have the potential to become the source of systemic financial risk over the next few years. Given bankers' record of excesses, recklessness, and moral turpitude, we should naturally be wary of what they have in store for us.
The US government stepped in when it found that some banks were too big to fail. Government bailouts enabled many bankers to be at their old tricks again, with a vengeance.
Financial professionals even have their defenders, among whom Robert J. Shiller, author of "Finance and the Good Society" (Princeton University Press, 2012).
In his new book, Shiller argues that financial capitalism, "an economic system dominated by financial transactions as opposed to industry or trade," plays an important role in furthering society's goals.
Making financial products - pensions, insurance and mortgages - more democratic has improved life for millions, he says.
Shiller believes that seeing the financial industry solely as an evil monolith discounts the contributions of those who are responsible for shepherding civilization's important financial goals. A CEO is responsible for an organization's future, while bankers and investment managers help people realize their everyday objectives in the present.
I do not think the financial institutions have been conceived of evil intentions at the very beginning. They have been designed, no doubt, with a view to serving the real economy and to protect honest people.
That's why there are regulators who are supposed to police the sector so as to maintain the system's integrity.
But as the sector becomes so powerful, it is well-nigh impossible to subject it to effective regulation or supervision, as the US sub-prime mortgage crisis has shown.
The bankers have evolved into numbers-driven automatons, consummate con artists, whose ruling passion is money.
Shiller is nearer the truth when observing that "the financial crisis was not due simply to the greed or dishonesty ...; it was ultimately due to fundamental structural shortcomings in our financial institutions."
And the correct answer to these shortcomings? Fundamental financial reform, rather than paying panegyrics to a sector that has become synonymous with greed.
Obviously, the imperative today is not to dwell on the financial sector's potential to contribute to the general welfare, but on measures to save the bankers from depravity.
It is disappointing that, turning a blind eye to the egregious recent examples of corporate greed and mischief, the author lauds investment bankers as "keepers of the peace."
This fulsome flattery not only reminds us about the moral obligations of financial professionals, but also the conscience of so-called intellectuals.
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