Banks & Crime: Schools For Scoundrels?

About four decades back a typical banker was an epitome of honesty, integrity, and, in short, a gentleman. It appears that in the past decade or so the increased criminal nexus between bankers, charltans and criminals (aided and abetted by greedy and myopic political leaders) have crippled the banking industry and created a crisis of credibility.

This has created traumatic financial insecurity worldwide. It is becoming clearer that a surgical action is required to set things right. India faced a similar challenege four decades ago, and took a firm stand by nationalizing the banks. It is only when sanity returned that it opened the doors to private banking in the past decade. Thus India has been able to bear the shock engendered by the current global financial crisis.

Arianna Huffington is spot on when she says:

“Unlike the conflict over the stimulus package, this is not an ideological fight. This is a battle between the status quo and the future, between the interests of the financial/lobbying establishment and the public interest.

“The big problem is Geithner is acting as if the crisis we are facing is a crisis of liquidity when, in fact, it’s a crisis of insolvency.

“As Ann Pettifor puts it on HuffPost: ‘Much of Wall Street is effectively insolvent. It’s not that these banks lack cash or capital — it’s just that they’re never going to meet all their financial liabilities — i.e. repay their debts. Ever’.

“Trying to prop these zombies up, as Geithner seems intent on doing, will lead to what Roubini calls ‘a royal rip-off of the taxpayer’ and the risk of ‘turning a U-shaped recession into an L-shaped near-depression’.

“So it’s time to take off the kid gloves Geithner and Larry Summers are using to handle Wall Street and pull the plug on Geithner’s deeply flawed plan.

“And let’s not be distracted by the shiny objects of the financial crisis — corporate jets, redecorated offices, CEO bonuses, etc. — as happened to the members of the House Financial Services at yesterday’s hearing.”

More here…

Forensic inspectors from at least four federal agencies will soon begin combing through asset registers, trading ledgers and balance sheets at the 18 or so biggest US banks, says The Guardian. “Line by line, the inspectors will tot up billions of dollars in liabilities.

” ‘In a lot of cases, they’re clearly bankrupt,’ said Dean Baker, co-director of the Centre for Economic and Policy Research. ‘Citigroup and Bank of America have a cesspool of bad assets and without government support, they probably would have failed. You have to ask yourself what we’re trying to do here’.

“Wall Street’s broken banks present policymakers with a series of difficult challenges that are echoed around the world.

“A $350bn (£240bn) capital injection into banks by the US government in October failed to restore stability. A fresh $2tn initiative by the treasury secretary, Timothy Geithner, got a resounding thumbs-down on Tuesday as the Dow Jones industrial average plunged by 381 points.” More here…

Photo above of Timothy Geithner, US Treasury Secretary courtesy Alex Wong/Getty Images