A former co-worker told me, “bankers get a bad rap.”
I disagree! Bankers deserve criticism. However, my former co-worker is correct that bankers get much more criticism than the general public and government in regards to the global financial crisis.
So why does it seem like banking is “public enemy number one?” Because in banking, even with just a hand-full of bad people with decision making authority, you have a recipe for disaster. This also holds true when there are good people in leadership roles who make bad decisions.
I worked at investment banks for nearly 20 years, and had business dealings with numerous commercial bankers as an entrepreneur, consultant, and on a personal level. I can say from first-hand experience, most bankers are hard working and honest people. But often endemic in business is a financial incentive to be devious – an incentive clearly present in banking.
What profession other than “check cashing stores” so aggressively targets the poor, uneducated, and vulnerable?
Of the investment banks I worked for that also had commercial banking units; each one was sued by governmental bodies for predatory lending while I worked there. Many of the cases were settled for significant monetary damages, with the banks admitting no wrong doing.
To give banks the benefit of the doubt, certainly some of the lawsuits against them were frivolous – but not all; at minimum, some were culpable of aggressively seeking profits with a blatant disregard for ethics. Banks are profit seeking entities. However, to what extent must one go in order to achieve profitability? The answer to this question depends on who you ask. It was apparent to me in my days on Wall Street, as it is now to the global masses, that some banks will go to nearly any extent to maximize revenue.
So now bankers must work hard to re-build public trust. It doesn’t help that a British bank was recently fined £290 million for attempting to fix the London interbank offered rate (LIBOR). The same bank now faces new charges for allegedly selling interest rate swaps to small businesses. The interest rate swaps were designed to protect against interest rate volatility, however, in numerous cases the buyers of the swaps were crippled by them – many lacked the capacity to understand the complexity of the transaction they were entering.
To reiterate, not all banks are bad, and not all bankers are evil. But just like there’s a heaven, there’s also a hell. Evil bankers created their own purgatory, and in doing so besieged the entire banking industry, and the world for that matter. It’s up to the good banks and honest bankers to always serve their clients with honesty and integrity. Only then will the trust of the public be restored, if this is even possible.