Look at that. The Economist is trying its best to protect the guilty bankers. And you always thought it was an objective and unbiased economic weekly. Yes, I am talking about the executives of the American International Group (AIG) who have received US $ 220 million in bonuses ever since the insurance giant was bailed out with US $ 170 billion of tax-payers money. Summing up the growing worldwide hatred against the bankers who are at the heart of the economic meltdown, a comment by Anatole Kaletsky in The Times, London, states: The behaviour of the bankers who first blew up the world's financial system and then proceeded to loot it, is genuinely outrageous and deserves political retribution.
How true. And look at what The Economist has to say. In a news analysis entitled "Easy does it", The Economist makes a fervent plea to let the bankers go scott free. Under a sub-head "Revenge is pleasant, but dangerous", it goes on to say: Raging at bankers, however, is a dangerous road to tread. Banks and insurers are being bailed out not because they deserve it, or for the sake of their employees, but because there is no choice.
And finally, it goes on to conclude: Mr Obama's best course is to explain, calmly and patiently, why bailing out banks and honouring contracts are necessary evils. He needs to eschew easy gestures, just as he should have avoided delighting a few populists this week by closing down a scheme that lets Mexican trucks into America. It demands leadership, which he was elected to provide. In the past few weeks he has shown signs of forgetting that.
I am glad President Obama so far has not shown signs of heeding to the advise of The Economist. Otherwise, he would fail in demonstrating leadership, for which he was elected. The US House on Thursday overwhelmingly approved a 90 per cent tax on bonuses paid this year to the employees of AIG (and the bonuses amounts to US $ 165 million). I hope Obama stands by it.
Interestingly, the Citigroup chief executive Vikram Pandit was among those who lobbied against the legislation. If you and me default on our Citibank loans for our car, the bank sends goons to recover the money. But when rich and elite loot the banking system, Citibank comes to their rescue. We now know why people like Vikram Pandit are elevated to the chief executive's position !
Coming back to AIG and the guilty bankers, the US house has done what the British Prime Minister Gordon Brown failed to do. He tried and failed to get the chief of the Royal bank of Scotland to surrender part of his pension. The row over Sir Fred Goodwin's pension continues to grow, states the letter in The Times. Timid, isn't it. that the Prime Minister of a country should fail to stand up to people's anger against the guilty bankers?
I agree with Anatole Kaletsky. In Britain, the best approach would probably be for the Treasury and Financial Services Authority to launch civil lawsuits against Sir Fred and other senior bankers alleging negligence, breach of fiduciary duty and violation of numerous investment regulations by publishing misleading information about the financial conditions of their companies.
He thinks the cost of lawsuits alone, even if no damages were awarded, would be more than enough to ruin most bankers. And even those rich enough to bear the financial costs of defending themselves would have their personal lives destroyed by being dragged through to courts.
I must say that the writer is being very kind. I feel this is too soft a punishment for a ghastly crime committed by these bankers (and don't forget the credit rating companies). The least we must do is to put them in jail for financial fraud. The US President and the British Prime Minister must demonstrate leadership, for which they were elected. Don't be cowed down by what The Economist writes (and this is true for all major economic publication), stand up to the expectation of the people who are reeling in anger and disgust. They were the ones who voted you to lead, not the financial publications.
At the outset, when the economic crisis began, I had said: Isn’t it a sad travesty of truth? If you rob a bank of a few thousand, you are arrested and sent to prison. If you rob the entire banking system, you not only receive a pat but also paid a handsome retirement package. If you are unable to pay your debts to the banks, you are hauled up and both your movable and immovable property confiscated. But if the bank is unable to pay its debts, it is bailed out with catastrophic urgency. If you fail to pay your insurance premium, your policy is terminated. But if the insurance company falters, it is nationalised and the chief executive officer is relieved of his job with a multi-million package.
This was in an essay I wrote in Nov 2008, entitled: Nineteen Blind Men and a Woman, and the Economy. In case you missed it, here it is: http://www.zmag.org/zspace/commentaries/3690