Horace Kent
08-31-2009, 10:15 PM
After my post on Paulson...I realized I had to elaborate on my statement "always treat a banker with scorn."
So, here we go...
"Why you should always spit in the general direction of a banker and/or treat them with scorn."
Fractional reserve lending is a miracle of human ingenuity. It brought us out of the dark ages, financed the rape and pillage of the globe(if you're down with that kind of ideology), gave us the masterpieces of the renaissance, sowed the seeds of the french and russian revolutions (arguably), and for many people of the 20th century financed their dreams of working for themselves. Be it with gold, paper, sea shells, or yams........the concept is the same. House whatever currency a community or society has in a safe place, lend SOME of it out to finance good ideas that benefit society with increased production/consumer goods, and you can create wealth for the whole of society.
Thats it. Thats all banking is. What separates one bank from another is largely marketing. The more deposits you can garner the more loans (assets) you can make, and the quicker you can grow and gobble up your competition. This is all very well and good.
After the depression, bankers were not held very high in esteem by much of society for decades. With good reason. They betrayed the central tenant of what it means to be a banker - stewardship.
Bankers, alas, are just like the rest of us. When times are flush, they want to take risks that are above what they might normally consider prudent. This is when the scorn from the depression paid dividends. Bankers, like everyone, like to be thought of with respect and be liked. In the decades after the depression many bankers accomplished this by touting novel notions like "conservatism" (not politically, although most certainly were) and "stewardship", and to some degree - the hippocratic oath "first, do no harm." An entire generation of bankers were raised on these notions precisely because they were held in relatively low standing by much of society. They wanted to prove themselves trustworthy. And indeed, that generation, and perhaps most of the generation of bankers that were weened by post-depression era bankers lived by the same creed. And money was safe. And there was ample supply to fund homes, cars, new businesses, and a growing country.
Another, more primal, reason bankers are looked on with scorn is that they are middlemen. I don't know if that is just or not. But, the fact remains. Without my money, or your money, they don't have money to make loans and acquire assets. They pay us interest on our funds and we give them the use of our funds to grow their business. I don't have a problem with that, some may, I don't have a problem with that either.
So, finally...........what keeps a banker honest? Our scorn, our mistrust, our suspicious eye. Its up to us. Bankers get caught up in bull markets like everybody else. They're human. If we choose a free society, that burden comes with responsibility. Its a way of life. It is something that must be continually reinforced. And, a great way to start is to spit in the vicinity of a banker's loafers.
What turned the tide? How did this generation lose the lessons learned from their banking forefathers? Risk. Angelo Mozilo was revolutionary. Actually, he was nothing more than a back alley loan shark. He was a bull on America. He had optimism. One of the drawbacks of living the stewardship life of a hard money banker is you have to frequently turn down good, honest, hard working people that however modest, may be reaching too far, too fast. During the 50s and early 60s........this created a market that became too big to ignore. Mozilo is merely a caricature of the risky banker. Believers in the American dream. Unrepentant bulls that believed at the margin, Americans were a good risk. However heart warming that sentiment is, the margin is especially vulnerable to the garden variety "inventory" recession and thus, that banks collateral. Unfortunately, the longer the good times last, the quicker and stronger the aggressive lenders grow. Their market share must be met by the traditional banks as a matter of defense. And, before long......the entire industry is brimming with these optimistic, american dream peddling bulls, that simply do not have it in their composition the vision to see a time when the music stops. Nor, does it pay them to have such vision. They prey on the vulnerable. The meager with dreams. They believe in them.........in as much as it grows their book. They are no different than the street thug peddling meth. The addict needs the meth, and the dealer needs to sell the meth. The more he sells, the more he gets, and the more he sells. Its hard to tell a junky with money no. But, that's what the best banks do. And they get hit with charges of discrimination. So what. Thats the life of a money changer. Buck up soldier. Go back to your 3pm daily tee times. I'll grant you that luxury for all our scorn. You deserve it. So, keep a banker honest, keep America safe........and spit in the general direction of a banker's $600 loafers. If he/she gets upset, merely reply you thought they could use a shine.
Or, if that is too much. Ask congress to raise reserves, curb lending, make interstate banking illegal again, separate commercial, retail, investment banking, and give more authority to state and federal regulators, and limit their lobbying. If you're an out-of-work banker........were those to be re-imposed.........you should have a job in no time. Think what it would do the unemployment rate! BANKERS WOULD HAVE JOBS AGAIN!
So, here we go...
"Why you should always spit in the general direction of a banker and/or treat them with scorn."
Fractional reserve lending is a miracle of human ingenuity. It brought us out of the dark ages, financed the rape and pillage of the globe(if you're down with that kind of ideology), gave us the masterpieces of the renaissance, sowed the seeds of the french and russian revolutions (arguably), and for many people of the 20th century financed their dreams of working for themselves. Be it with gold, paper, sea shells, or yams........the concept is the same. House whatever currency a community or society has in a safe place, lend SOME of it out to finance good ideas that benefit society with increased production/consumer goods, and you can create wealth for the whole of society.
Thats it. Thats all banking is. What separates one bank from another is largely marketing. The more deposits you can garner the more loans (assets) you can make, and the quicker you can grow and gobble up your competition. This is all very well and good.
After the depression, bankers were not held very high in esteem by much of society for decades. With good reason. They betrayed the central tenant of what it means to be a banker - stewardship.
Bankers, alas, are just like the rest of us. When times are flush, they want to take risks that are above what they might normally consider prudent. This is when the scorn from the depression paid dividends. Bankers, like everyone, like to be thought of with respect and be liked. In the decades after the depression many bankers accomplished this by touting novel notions like "conservatism" (not politically, although most certainly were) and "stewardship", and to some degree - the hippocratic oath "first, do no harm." An entire generation of bankers were raised on these notions precisely because they were held in relatively low standing by much of society. They wanted to prove themselves trustworthy. And indeed, that generation, and perhaps most of the generation of bankers that were weened by post-depression era bankers lived by the same creed. And money was safe. And there was ample supply to fund homes, cars, new businesses, and a growing country.
Another, more primal, reason bankers are looked on with scorn is that they are middlemen. I don't know if that is just or not. But, the fact remains. Without my money, or your money, they don't have money to make loans and acquire assets. They pay us interest on our funds and we give them the use of our funds to grow their business. I don't have a problem with that, some may, I don't have a problem with that either.
So, finally...........what keeps a banker honest? Our scorn, our mistrust, our suspicious eye. Its up to us. Bankers get caught up in bull markets like everybody else. They're human. If we choose a free society, that burden comes with responsibility. Its a way of life. It is something that must be continually reinforced. And, a great way to start is to spit in the vicinity of a banker's loafers.
What turned the tide? How did this generation lose the lessons learned from their banking forefathers? Risk. Angelo Mozilo was revolutionary. Actually, he was nothing more than a back alley loan shark. He was a bull on America. He had optimism. One of the drawbacks of living the stewardship life of a hard money banker is you have to frequently turn down good, honest, hard working people that however modest, may be reaching too far, too fast. During the 50s and early 60s........this created a market that became too big to ignore. Mozilo is merely a caricature of the risky banker. Believers in the American dream. Unrepentant bulls that believed at the margin, Americans were a good risk. However heart warming that sentiment is, the margin is especially vulnerable to the garden variety "inventory" recession and thus, that banks collateral. Unfortunately, the longer the good times last, the quicker and stronger the aggressive lenders grow. Their market share must be met by the traditional banks as a matter of defense. And, before long......the entire industry is brimming with these optimistic, american dream peddling bulls, that simply do not have it in their composition the vision to see a time when the music stops. Nor, does it pay them to have such vision. They prey on the vulnerable. The meager with dreams. They believe in them.........in as much as it grows their book. They are no different than the street thug peddling meth. The addict needs the meth, and the dealer needs to sell the meth. The more he sells, the more he gets, and the more he sells. Its hard to tell a junky with money no. But, that's what the best banks do. And they get hit with charges of discrimination. So what. Thats the life of a money changer. Buck up soldier. Go back to your 3pm daily tee times. I'll grant you that luxury for all our scorn. You deserve it. So, keep a banker honest, keep America safe........and spit in the general direction of a banker's $600 loafers. If he/she gets upset, merely reply you thought they could use a shine.
Or, if that is too much. Ask congress to raise reserves, curb lending, make interstate banking illegal again, separate commercial, retail, investment banking, and give more authority to state and federal regulators, and limit their lobbying. If you're an out-of-work banker........were those to be re-imposed.........you should have a job in no time. Think what it would do the unemployment rate! BANKERS WOULD HAVE JOBS AGAIN!