One of the most amazing articles in recent times came across my Twitter feed last week. The author, Ross Maguire, contended that banks are getting too much flack from the public, which itself has been whipped into an anti-bank frenzy by academics and activists.
He argued that this is a dangerous form of populism. This populism, in the author’s mind, is dangerous because it involves people exaggerating their problems and seeking out a scapegoat.
Any solutions they offer are “clichés” and therefore, one can surmise, not to be taken seriously by privileged men such as the author.
In the author’s mind banks do not deserve the scrutiny they receive from the wider public. This attention, he insists, “has now developed a whiff of populism”. But the author’s definition of populism is one associated with Donald Trump and hardcore Brexiteers.
And given this, he is trying to dismiss the concerns of ordinary people while at the same time attempting to perform a semantic and theoretical sleight of hand by making banks and their shareholders victims. In this equation, the victims have become the victimisers.
Populism has been twisted and corrupted by people like the author of the piece and the likes of Donald Trump. But populism has only ever meant one thing: An overriding concern with the needs of the common people.
This has always been seen as a threat because the idea of people having their rights respected, let alone granted, has scared establishment figures throughout history.
In fact, it precipitated a Trilateral Commission study in the 1970s which found the above notions of people having the temerity to demand their rights be respected so obscene that they called it a “crisis of democracy”.
In Maguire’s case the obscenity is that banks may have something to answer for and people are in fact rightly angry.
His only allusion to this is that banks might deserve this “to some extent”. For Maguire, protections for homeowners would be “profoundly negative” given the effects on the market. And besides, “Irish borrowers are already so well protected”.
Dare he mention the fact that last year thousands of people had their mortgages with Permanent TSB sold off to vulture fund Start Mortgages. In many cases the mortgages were performing but Permanent TSB wanted them off its books. Protected indeed.
But Maguire’s attitude, even though he isn’t a banker, seems emblematic of banking culture in general. Ethics and regulations become optional or in some cases a disadvantage.
Take the case of whistleblower Jonathan Sugarman. Having taken up a position as a risk manager for the Dublin-based but Italian-owned UniCredit Bank in May 2007, he quickly realised that the bank was regularly breaking Irish banking laws.
Irish legislation allows for a 1% breach of liquidity by banks. Sugarman discovered that UniCredit was in breach by up to 20% on daily basis. This meant that every day the bank was running billions of euros short.
As he related to an Oireachtas committee in 2017, Sugarman informed the Central Bank of the liquidity breaches. According to him, “A breach of 1% should have set alarm bells ringing” in the Central Bank. But with a breach of 20% he said, “I expected all hell to break lose”. Instead, nothing happened.
After hiring an outside IT company in order to get a second opinion, it reported to him that UniCredit was actually breaching liquidity by up to 40%. Sugarman’s figures, it appears, were conservative.
He resigned the next day and has been seeking justice since then. It appears no sanctions were ever placed on UniCredit for its liquidity breaches. Irish banks ran dry of liquidity the following year in 2008 which then gave us the bank guarantee. So not only was UniCredit in breach of liquidity regulations, everyone was.
I recently met Sugarman and he continues to be amazed at the lack of accountability in Irish banking circles. The inquiry into the collapse of the Irish banks was, he agrees, a distraction and farce, with the outcome predetermined.
This was seemingly confirmed at the time by a different whistleblower who claimed the Central Bank was redacting and in some cases withholding vital documents from the inquiry’s investigators. This story — and Sugarman’s — is far from over.
Meanwhile, Maguire has attempted to defend the indefensible by insisting that any anger the Irish public may feel because of the above actions of banks is irrational.
“Rage”, he says, “is the human emotion associated with populism. But rage is not intelligent and only intelligence solves real problems”. Therefore, populist notions of wanting banks to be held accountable for their actions is unintelligible. It stems from a place of rage and not of cold calculation.
But rage is justifiable and it in no way lessens the idea of populism; the idea that the concerns of average people are important. In Maguire’s world, banking should be left to the technocrats who know better. Any ill will thrown in their direction is misguided, misplaced, or simply irrational.
This contempt is elitism writ large. It’s the same contempt that caused the liquidity breaches in 2007 and 2008. And it’s the same contempt that’s going to give us another economic crash.
As Sugarman told me, nothing has changed since 2007. And the next crash, which is coming soon, won’t be pretty.
This is supported by former Central Bank governor Patrick Honohan. He has said that “deeper reforms” are needed in Irish banking. Furthermore, he pointed out that there is a:
long-standing culture of corporate entitlement by the banks operating in Ireland.
He also revealed that regulators are “deferential”, “lenient”, and showed a “tendency to passivity” towards banks.
Despite this not-so-new revelation, we still have to deal with unaccountable banks and bankers putting people’s homes and lives at risk. For them profit is never enough. It has to be an obscene profit that is endless and always increasing.
But to question this is unfair. It is to give in to populism. After all, we can’t have people being put above profits.
Top pics via Twitter