Was there misconduct on the part of banks that gave rise to the crisis?

By Francisco Cesar Pinheiro Rodrigues*

Something that intrigues me, in times such as ours - when "hunting down the offender" is almost an obsession, even extending to topics of minimal importance - is the apparent indifference shown by the global media with regard to ascertaining, at the end of the day, whether or not offenses were committed or there was misconduct on the part of the CEOs that caused the enormous financial crisis which, to date, is afflicting not only the USA but also the whole planet. The only reason that the world did not “go bankrupt” was that trillions of dollars were injected into the expiring global economy.

Few pondered the mere hypothesis of examining and eventually punishing, in financial terms, the unscrupulous conduct (by all accounts) of directors of the various American banks that gave rise to the crisis.

There is a certain degree of international moral “legitimacy” in requiring the investigation of facts with such large-scale repercussions - also with a view to ensuring that they do not come to be repeated. If the judicial legitimacy of those prejudiced is idealistic -given that we do not yet have a “global federation” - there is, at least, a great deal of international curiosity concerning what happened at the time when home ownership loans were made to people who were unlikely to be able to repay them. If there was a lack of scruples (as I believe was the case) on the part of some bank CEOs, the consequences of their lucrative folly - they received their recompense before the crisis erupted - are not being borne solely by their fellow American citizens.

The whole world is suffering as a result of probable lack of financial scruples. It’s a chain reaction, a domino effect. Mere investors who lost a lot, but not everything, are suffering in both pocket and spirit. However, those suffering to a much greater degree are workers and entrepreneurs throughout the whole world who lost their jobs or are on the verge of bankruptcy due to stagnation of the economy of the great northern giant. The wagons helplessly follow the path taken by the locomotive in an ever-more unified world. Unemployment breaks down self-esteem, with organic and even conjugal consequences, without even mentioning the pure and simple despair that hunger brings. The “smartness” shown by the directors of important American banks that gave rise to the crisis should be examined with all theoretical and practical impartiality and rigor. At court level, where the right of defense is assured, the evidence of experts is heard, and a financial sentence would have practical effects. The “blah blah blah” of the media, with lightweight conjectures, is no enough.

From what it is possible to read to date, such a requirement does not seem to have been taken very seriously. It is to be hoped that such an omission is only apparent - a question of priority. Of course, before chasing after the assailant who stabbed the victim, it is necessary to assist him, as he is bleeding on the ground. The American government “only” spent a few trillion dollars in order to contain the crisis. It is to be hoped that, once more pressing aid has been provided, the government spends an infinitely smaller fraction of this amount on legal expenses in order to “clear up the matter”.

If the CEOs are innocent, they will be content with a verdict. If they are not... Anyway, there will be a universal educative effect, as millions of people would accompany a trial of such extensive scope. Free classes, live, on the double-dealing essence of the world of high finance. It would be good for the whole world to acquire more in-depth knowledge of the morals - or lack of morals - existing in this area as, in this way, everyone will have a better idea of where to invest their hard-earned money, saved for their old age.

As the American man of letters Scott Fitzgerald said, “rich people aren’t like us”. It is true, but assailants are also different. It is to be hoped that the executives in question are not on a level with the latter. This will eventually be proved with the formal judgment of specific banking conduct in question. Good for the CEOs who, arriving in heaven after death, will be able to show Saint Peter a copy of the verdict that absolved them. It is likely that not even the guardian of the gates of heaven is absolutely certain whether or not he should bar the charming and persuasive individuals with collars and ties, capable of persuading him to make a few investments. Saintly souls generally have no understanding of finances.

It is common for specialists to highlight, quite rightly, that the American government had no alternative but to bail out the large banking institutions that caused the whole vast problem, irrespective of the losses involved. Without the bail out, the breakdown of the banking system would have resulted in chaos. A social convulsion - all hell would be let loose on the planet, not only in the USA, but here, there and everywhere. As a consequence of the imprudence of giant banking institutions, large, medium and small companies would go to the wall if the American government did not inject trillions of dollars in a mega-bailout.

It is possible to speculate that, at the time of peak profits (via bonuses and other advantages) the following type of dialogue could occur between such executives: - “Between ourselves, David, don’t you think that we are taking too many risks? I’m concerned. We are getting richer all the time, but one day the bubble will burst...”. - “You worry too much, John. “Bubble will burst”, bah... What bubble? Ours? Never! I didn’t invest the money that I earned by honest (sic) means in real estate. There is a big wide world out there. Do you think that the government is going to let the banks go bankrupt, leading to a collapse of the whole economy? If it did, the government itself would also collapse! Trust in what I am saying! A government bail-out will happen, there is no other option. Checkmate for our mediocre politicians! High finance has always been an area in which normal strict moral rules do not prevail. Economics is not an exact science. If the worst occurs, we could always argue that to err is only human. Just between us, the actual judges who come to judge the case don’t understand much about finance and will be left in doubt. And “in dubio pro reo”, the accused enjoys the benefit of the doubt. As far as legal experts are concerned, we will be able to influence them or invalidate their conclusions with our own experts, chosen perhaps from winners of the Nobel Prize in Economics. “Relax, pal!” How about it, are we going to play golf on Sunday?”

It is both common and understandable that governments find themselves to be obliged to meet absurd illegal requirements, in all forms of criminality. If a group of common bandits is surrounded when robbing a bank, or anywhere else for that matter, and threatens to kill innocent people if their demands are not met, the police usually concede. A vehicle is provided and, if necessary, even money and a plane. However, once the hostages have been released, a violent and tenacious pursuit is initiated in order to arrest the criminals and apprehend the robbery or ransom money.

In the banking area and perhaps others - I have no knowledge of all the possible developments involved - it is to be hoped that the American government proceeds in much the same way as it is accustomed to proceed in the case of ordinary “kidnappers”.

I have immense confidence in the character of Barack Obama and believe that he will not fail to contemplate (once the eye of the hurricane has passed) a need for in-depth investigation of the human errors that led to the crash of the American “hyper-jumbo”, which did not set the whole planet aflame simply because trillions of dollars were spent on fire extinguishers. If convinced of bad faith, those prosecuting the “barons” will certainly request that their assets be frozen, or, more fairly, a good part of such assets. “Just in case”, because if the legal process takes too long, such ill-gotten profits will evaporate.

If there is proof of bad faith, it is a case for saying that these people are demoralizing the actual capitalist system. Capitalism is a system that has advantages over its rival socialism, due to the fact that it is more in line with human nature, which is preponderantly egoistic, ambitious and driven by envy - an ugly but powerful source of motivation. The undeniable fact is that capitalism generates wealth, companies, jobs and even culture. It is only that unleashed, without reins, it becomes astutely ferocious and cannibalistic in nature. Without the counterweight of ethics and without fear of being held to accounts, the irresponsible executives inadvertently became canvassers for Bin Laden and other inflammatory “reformers” throughout the world.

Think about this, honest Obama, and let us wait and see.


* Retired Justice of San Paolo Court of Appeals.

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