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Banking on bankers

Mohammad Badrul Ahsan
***Instead, the summit was expected to lay emphasis on banker's personal social responsibility imperatives. The bankers should know that even for them there is no free lunch. They must reap what they sow, like the rest of us.***
Representing 85 percent of the world's economy, G-20 leaders gathered in Pittsburgh, Pennsylvania from 24-25 September 2009. Chaired by President Barrack Obama, the summit reviewed the progress made since the Washington and London summits and discussed further actions to assure a sound and sustainable recovery from the global financial and economic crisis. One of the likely issues for discussion was how to ensure better behavior from bankers.
No, it wasn't about telling bankers how to become more cordial to customers. It wasn't about asking them to put a smile in their voice. The finance ministers mid central bankers from the affluent twenty didn't come to Pittsburgh so that the bankers will be more helpful and courteous. You must be out of your mind if you thought the summit would ensure that bankers would offer tea or coffee next time you visit them.
Then what was the summit going to ensure? It was supposed to look for ways so that the bankers will be more "socially
responsible." It was not about a bank's corporate social responsibility initiatives. Instead, the summit was expected to lay emphasis on banker's personal social responsibility imperatives. The bankers should know that even for them there is no free lunch. They must reap what they sow, like the rest of us.
What does it mean? To paint with a broad brush, the main idea is to make bankers accountable for their own mistakes. If they mismanage their businesses, then they will have to clean up the mess at their own expense. During this financial meltdown, the society has picked up the bill to repair damages done by bankers.
In simple terms, the G-20 summit was to explore options so that bankers will have "skin in the game." For example, whose responsibility is it that Kenneth Lewis, the CEO of Bank of America, made colossal errors in business judgment? He bought the sub-prime lender Countrywide at the top of the housing market, and extravagantly overpaid for Merrill Lynch. And what about the management of Citigroup run by a board and a management team that have an almost comically awful record going
back years?
What have these fatcat bankers done? They took decisions, which not only disrupted economies but also sent shockwaves through markets. It was because of them that millions of people lost their homes and jobs, their lifetime savings evaporated. Although the victims included some bankers down the Une, their topnotch colleagues got not even a scratch. They retained their jobs, fat salaries and bonuses, their lifestyle virtually undiminished despite the havoc wreaked by them.
So, one of the considerations in the summit could be having die long-term performance of bankers tied to their net worth. If a borrower fails to repay his loan, he runs the risk of losing his possessions. Gamblers lose everything if they put money on wrong bets. When politicians make mistakes, it costs them power and popularity, their lives at times being at stake. Then why should bankers be an exception to the rule?
History tells us that they shouldn't. The word "bank" is derived from the word "Banco," which means a "bench." The Jewish moneylenders in Italy used to transact their business sitting on benches in marketplaces. When any one of them failed to meet his obligations, angry creditors smashed his "Banco" or bench.
True, there haven't been any mob attacks or runs on the banks in the aftermath of recent financial crisis. But one can't rule out the possibility if it happens
again. People might react more violently. They might go after the bankers, should they, led by unbridled greed, resort to terrible judgment, ethical lapses and outright fraud.
Whether that happens or not, bankers ought to take responsibility for their own actions. One of the options being talked about is to restrain them with good old market discipline. The bankers should know that they are free to tinker with as many ideas as they wish, but they will have to personally take the hit if they take risky bets.
All these years others have been taking that hit for them. The bankers goofed up, then sailed their yachts and Dew their jets while the larger society reeled under its impact For the first time there is a new realisation. The bankers must be brought into the circuit where what goes around comes around.
There is a new controversy brewing up in the corridors of economics. Does human rationality have its limitations and whether markets are so perfect that they can be left alone? The resounding answer is blowing in the wind. Both need to have a certain degree of control.
It might take time before the outcome of the Pittsburgh summit becomes public knowledge. But banking on bankers is facing challenge. Perform or perish. That is how market does its own correction.
Mohammad Badrul AhsanisacdumrwtforTheDayStor
Emad badrull 51 ©yahoo com