Wednesday, 15 August 2012

Reform the Personal Banks

Hello again! Been a small while since my last post but thesis writing has been taking up most of my time lately. I’ll have a blog soon about some of that but today I want to write about what I feel needs to be done about our banking system. 
My blog is based on something I read a few weeks back. Mr Irvin hits the nail on the head quite well with his points and I just wish to touch on a few important points, points that I personally want to throw out there for your interpretation. When I look at the banking industry today I see nothing, absolutely nothing but greed. I see no one but the average person getting hurt by the irresponsibility of our current financial system. The last great act that we had to protect us was the Glass-Steagall Act. I say us collectively because as the biggest unregulated financial sector, the US has the ability to destroy what we have. I think it’s time we nationalise our personal banking system so that what people invest and save can not be touched or mercilessly gambled away like in 2008. I look at the bonuses that the financial sector ‘rewards’ itself with for its ‘hard’ work and I ask myself, if the average person was actually provided with a savings account that was rewarding for them, how much fairer and equitable would society be? Consider the pipe dream of a bank director getting a bonus of €10,000 instead of a few hundred thousand euro, or even the millions that some get, and the rest of the money being given to the loyal customers whose money the banks make fortunes from. You know, a decent savings account rate that rewards your average person for making the effort to save. I’d have a separate investment banking side that businesses could invest in and they could take risks with their money. You know, a business (the bank), taking both calculated and insane risks with another businesses money. And I wouldn’t allow a personal bank have an affiliation with a corporate bank. We’ve seen how easy it is for them to suck money from one to the other to cover losses. I’d certainly give business banks the ability to borrow capped amounts from personal banks. Nothing so great that they could bankrupt a personal bank; However it would be enough so that if they needed a short-term loan, it would be an available avenue for them. I’d also make sure that these loans were fairly high interest due to the risky nature of the loan. The interest the personal banks earn helps reduce personal interest rates on loans for customers and/or adds to the kitty for improved savings and investment rates for their personal customers. I’m fed up with hearing about how the financial sector needs less and less regulations, that they need tax breaks, that a Robin Hood tax would put too great a burden on the financial sector in ‘difficult’ times for them.


Maybe not in Ireland, but worldwide the biggest banks are still doing ok. Their directors are still taking home insane salaries. They’re still paying out stupid bonuses. Meanwhile the people are unemployed, starving and their governments have somehow been hoodwinked into bailing out the financial institutions. Two countries stood tall and told the banks and world institutions where to stick their recapitalisation plans – Iceland and Denmark and they’re doing ok. We need to bring services back to the people and make them for the people. Not for corporate profit. Corporations profit massively from short-term bets and the CEO’s take so much money from the companies that when things go arse up, there’s no money left to help the companies they run.

« To become truly great, one has to stand with people, not above them. »Montesquieu

I think banks should be run a bit more like Credit Unions. They should be there to serve communities and the people in them. Loans should be available and interest rates should be dependent on the nature of the loan. Children’s Education? Minimal interest rate. Necessary home improvements? Low interest rates. A second or third car? Medium rates as it might not be necessary. Shopping trips? High interest rates for discretionary, unnecessary spending. These are only examples of course but I’m just throwing ideas out there! There has to be a better way to run our banks and make them work for us. Institutions may complain that without massive salaries then they can’t entice the ‘best’ to manage them. Em…. The best did a right old job on the world economy in the last 5 years. How about moderate salaries starting at €60,000 rising to €100,000 after 5 years of proven ability? You want more money? Ok then. Go elsewhere. Oh look – a hungry, employee who has worked under you for the last number of years and is perfectly qualified to take over your position. A position needs to be filled? Oh look – a qualified graduate who would be delighted to have a job in which career prospects are good and it’s a solid job. Want the excitement of the private boom and bust banks? By all means – go work for them. In no way is this aiming to restrict people and their job choices. I think a higher management turnover provides more job opportunities to our graduates. It means fresh ideas are constantly being brought from our Institutes of technology, our Business Schools and our Universities. People no longer get lifetime positions on gigantic salaries and pensions. Job security is not affected as if you prove yourself capable of doing the job – then it’s yours. Just like it is now. But you work for the honest growth of an institution; Not for gigantic profits at year-end and therefore a gigantic bonus for you. Even the Financial Times has opinions bubbling to the surface for a redistribution of bank wealth to make the banks more competitive. (You'll need to register free with the FT to read the citation)

“Nobody can go back and start a new beginning, but anyone can start today and make a new ending” – Maria Robertson

 Change needs to come soon