10 February 2009

Whose fault?

Today, top British banking officials publicly apologized for their role in the financial crisis and their responsibility for the taxpayer funded bailout of their banks.


They actually said sorry. They actually admitted making mistakes. How refreshing.

But if I recall correctly, this crisis did NOT start in the UK! The people who are most responsible have not yet admitted anything or apologized for anything. In fact, virtually all top executives, board members, and economic commentators in the US parrot the same line: there is no personal responsibility on those executives and board members.

That is a load of crap. Their defence of themselves, while spirited, is completely false:

1) They have no personal responsibility: Really? Last time I checked executives and board members had not just personal responsibility but fiduciary responsibilities to their companies (now insolvent) and shareholders (now homeless). There was never any barrier to recognizing their responsibility for generating profits and compensating them accordingly; even if this is not their fault in a direct sense, they are still responsible for results, losses as well as profits, and they should all be fired. It's a performance issue.

2) It was a systemic problem. So say executives of the big banks and insurers that have consistently and successfully lobbied for reduced regulation and oversight. So says the dean of the Chicago School, who is of course directly responsible for indoctrinating the current generation of executives to believe that they can take credit for profit but avoid blame for losses. So say, in short, the people who are responsible for designing, building, overseeing, and maintaining the system. Systems are not magical creatures like unicorns - they are made up of actual people, and they are formed from the work and on the beliefs of those people. Don't blame the system - blame the people who made it and benefited from it. They are the system.

3) They could not have seen it coming! Lots of people saw it coming. Perhaps they mean they didn't see it coming this quarter and so, although they knew it would all come crashing down, they were justified in reaping profits right up until the last minute.

4) They didn't understand the instruments that were being created. Why the hell not? If they were in charge of a milk factory and claimed they couldn't understand the effect of boosting protein in baby-milk, they would be in jail. Their job was management, their job was oversight. That includes recognizing when you have lost control of your horses and trying to rein them back in. If they really didn't understand the instruments or their impact, they had an obligation to stop their creation and distribution until such time as they had the information and understanding they needed to make a reasonable evaluation. Saying they didn't understand it but let it happen anyway is basically admitting they were reckless and wilfully blind to the consequences of their action (which, of course, should land them in jail).

5) The executives were behaving reasonably in the context of their compensation structures. Compensations structures they helped create, and which very obviously rewarded short-term gains with no concern at all for the long-term health fo the company, economy, our nation. The short-term comp structures they created directly contributed to the long-term collapse. They are directly responsible for this.

The worst part of it is that they pretend you can solve the problem without laying blame. Garbage! You can't understand the problem unless you lay blame.

Hypocrites!! The very same people are happy to heap blame on developing countries when they default, and are happy to provide them with loans tied to strict reform conditions so that the developing countries are re-made in their own image. But when they themselves default, when it is their economy that tanks, it's no one's fault, and there is no need to enquire into the merits of the underlying system. It's just time to buckle down and all pull in the same direction - the direction recommended by the very people who created this mess and still maintain they are blameless.

I hope their lack of contrition is taken into account in their sentencing.


Blogger WesternGrit said...

They need to be punished. If they don't own up, then we don't bail out. Period.

I don't agree with any bank bailout at all. What we should be doing is absolving (or removing a large percentage of) all consumer debt in this country. If some banks go under, so be it. We can rebuild the country with credit unions and new "smarter" banks. Time to put the shoe on the other foot.

Any political party that would advocate this, would win a landslide of support from the general public. Imagine and Canada where there was very little consumer debt? Where we rebuild the economic system with STRICT controls on lending? Why give the money to bank executives, in some desperate hope that it will trickle down to the consumer in way of more "credit"? What the hell for? Credit is what got us into this mess in the first place!

Forgiving loans would jump start the economy from square one. Businesses would be solvent, consumers would be able to buy, because they would have little debt to repay. The economy would start moving ahead again - even though it would be a little "Canada-focused" for a while.

February 10, 2009  
Anonymous Anonymous said...

Stranger: the same republicans and right wing media who told us that it would be Armageddon if we did not give $700Bn to the banks, with no strings attached, are now telling us that the $800Bn package, that is intended to go to actual Americans and create actual jobs (rather than for to the executives in bonuses and create hoped-for liquidity) is what is REALLY Armageddon.

My personal favourite: if we spent a million a day every day since Jesus was born, we would not spend $1 Trillion (they all round up now!). Substitute "Bank Bailout" and "Iraq War" for "Stimulus Package" and they could say all the same things.

But strangely, they didn't say them then, but are saying them now like their opinions make a difference. Strange world.

February 11, 2009  
Blogger Red Tory said...

Sorry for not getting back to you sooner. I've been really busy with... stuff.


February 12, 2009  

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