Banks are criminals

Backgrounder:

http://www.huffingtonpost.com/charles-ferguson/bank-crimes_b_1675714.html?utm_hp_ref=daily-brief?utm_source=DailyBrief&utm_campaign=071612&utm_medium=email&utm_content=BlogEntry&utm_term=Daily%20Brief

I read this article with some interest because I understand the feeling that the big banks seem to be getting away with a lot of things that I wish they weren’t.

Of course, I wasn’t really in favor of the bailouts of all the financial institutions that much wiser and more knowledgeable people about economics said was necessary. Despite the pain, I was in favor of the U.S. economy taking its lumps, with the expectation that in the “long run” it would come out better prepared to face the future. Unfortunately, no one asked me for my opinion and I doubt very sincerely if they would have followed my advice.

The main reason for that is that Americans are, for the most part, pain adverse. In other words, if there is a way to avoid pain or put it off, then do it and do it quickly.

You see this in medicine, where we expect our doctors to perform miracles every day and if they can’t, to give us medicines to alleviate the pain and discomfort that comes with whatever ailment ails us.

You see in this year’s election campaign where no one wants to pay taxes but everyone wants government to do all sorts of things.

In the economy, we must insulate everyone against failure, much less bad choices in life. That is why the government has unemployment insurance, disability insurance and medical insurance for the poor and elderly. It is not that people couldn’t contract for these services, it is just easier if we have the “government” do it for us.

Now, I understand that the players - and that is what they are - were playing games with other people’s money. Heck, isn’t it a lot more fun when you can’t lose. I am not a bank regulator specialist and make no claim as one. But, I sometimes think we take far too much for granted when we let other people play with our money.

Yes, greater transparency would be great in our dealings with financial institutions but again that would take effort on our part to educate ourselves or to seek out trusted people with whom to associate to advise us as individuals. And Lord knows, we like to avoid such effort.

Still, the writer has a point: He who has the gold makes the rules.

But are banks criminals? Well, that debate has been going on for a more than few centuries. Maybe even since the dawn of mankind … or at least civilized societies.

You see, some people think it is wrong to make money off of money and I sympathize with them. Remember, banks make money three ways: a) taking your money on deposit and investing it elsewhere; b) charging people interest for the convenience of borrowing money or establishing a line of credit to use elsewhere; and c) charging customers fees for whatever services the bankers can dream up. None of those three jobs really takes all that much labor/work. You just sit back and take in the money.

That, in much simplified form, is how banks work. However, today, the mercantile banks (those who deal with commercial customers instead us mere retail customers) can gamble on all sorts of things. The biggest of these are hedge funds. Hedge funds, index funds, futures funds, and others are nothing but the bankers or investors gambling that the cost of something will go up or down. Whether it is trading money, crops and other commodities, or mortgages and other types of financial paper (which is what nearly brought the house down in 2007-8), it really is merely gambling that whichever side of the bet that you make that you will win … and somebody else will lose. That is why it is so much fun to play with other people’s money.

Now, the article writer has a point: Very few people have faced criminal charges over the debacle of four years ago. Why? Mainly because what they did was entirely legal. Might not have been what you or I would have called ethical, moral or just, but as my former brother-in-law attorney once told me: “Never confuse what is moral, just or ethical with what is legal.”

Of course, we could institute regulations and laws, but that, in a sense, removes ourselves from having any personal responsibility. I know all that fine print we read in the contracts that we agree to is a pain in the derriere, but we really should read it and, as Pappy used to tell, ‘listen, hear and attend” to what it says.

Because at the base of everything in any society are contracts. Those agreements made voluntarily between individuals (and larger groups) that outline what is expected of both parties and what they get in return.

Now, the scalawags at the big banks have played games with some of our money … and we should listen, hear and attend to that fact. You really can’t punish them for doing something that was allowed in their contracts but you can change the contracts. This does not necessarily means that government needs to pass a new criminal law, but a much more effective approach would be for those people whose money it is to take control of that money and move it to people and groups you trust more. And if you can’t find anyone, then create your own group.

OH, but that take work and effort … and remember, work usually means pain and we are doing everything to avoid pain, right?