Good for the Soul?

Seumas Gallagher
This is a guest post by best selling author Seumas Gallacher. He’s worth a read. Click on the photos for a link to his site.

Let me ’fess up, right out of the blocks, I worked in the finance and banking industry for the major part of my professional career. I’m aware I may sound like a ‘bleeding deacon’ with some of my ensuing comments, but who cares… I’ll tell it as I feel it and see it.

Outrageous

My view of the global banking industry over the past ten to fifteen years moved from simple embarrassment to downright outrage. In the early 1960s when I entered a Scottish bank as an apprentice bank clerk, things were radically different: getting a personal loan of ten pounds sterling entailed a whole series of tough questions about the ability to pay back. Yet when money was deposited to any bank, it was considered the safest possible place for money.

Once Upon a Time, in a Bank Far Away …

Your life savings were secure. Customers sat plainly and squarely at the centre of everything the financial institutions stood for. The concepts of casinos and betting shops were a million miles away from the lofty profession of banking.

Fast forward to today, and it’s all changed.

Somewhere along the way, ‘customer service’ became an obsolete notion. Greed and bonuses, accompanied by unharnessed risk, replaced the sobriety of lending on which entire economies had previously thrived and grown in measured style.

The lines became blurred, then fudged, and ultimately scorned in pursuit of bottom line profits, both corporately and for a certain breed of ‘high-performing’ individuals whose sole raison d’etre was simply to invent ways to ‘make money’.

Artificial instruments known as ‘derivatives’ proliferated, most of which were total ‘gobbledegook’ to the ordinary investor. That did not stop the ‘salesmen’ within the banks from targeting the so-called ordinary investor. At times, even the ‘salesmen’ didn’t fully understand the products they were flogging to an unsuspecting market.

Pause for Thought

By the middle of 2006, it was starting to become clearer to me that the hedge fund industry was becoming a dangerous bubble, with too much money chasing the same trades. This was leading hedges down narrower and narrower paths in which they bought riskier credit instruments to round out their strategies … Keith McCulloch and Rich Blake

Think of it for a moment, when did the term ‘salesmen’ start to appear in banks? Next some bluudy genius came along with the biggest con trick of all, the sub-prime range of instruments. To put it simply, substandard quality risk was ‘wrapped’ in supposedly solid AAA institutional support and sold accordingly to private and corporate investors to the tune of trillions of dollars —yes, trillions of dollars—and insured against failure … except it wasn’t.

OMG! The Music Stopped

When the music stopped, the whole edifice came tumbling down about the entire world financial markets’ collective ears. Now here’s the thing:

  • millions of ordinary folks lost life savings
  • many pension funds had values ripped out, never to be recovered
  • most of the major banks at the centre of the whole malarkey remain relatively unscathed…

Beware Greeks …

Oh sure, certain high-placed employees and officers lost their jobs in the banks, but some of these individual institutions were bailed out to the tune of hundreds of billions of dollars— please read that again—hundreds of billions of dollars. Try to reconcile that against the nonsense currently besieging Greece where the fiscal management of that country does not come out of it smelling of roses.

The same junta of the European Central Banks that bailed out their own fellow institutions not so long ago, are holding the Greeks to ransom … smacks of sins of the fathers to me. Rest assured, banking will never again revert to the great profession to which I once belonged and more’s the pity … heads they win, tails you lose.

Seumas Gallacher
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