I began a career in the banking industry forty years ago. At that time, especially for someone starting at the bottom of the ladder, new hires were required to attend night courses conducted by the American Institute of Banking. The very first course was titled “Principals of Bank Operations” and I had a text book by the same name for the course. I am not sure if I still have that text book laying around the house anywhere, but there is one important principal that I was taught in that course, that has always stayed with me, the principal that as a bank employee I had a fiduciary responsibility towards our depositors.
A fiduciary responsibility meant that I was obligated to follow all bank procedures, all regulations, to exercise care and sound judgment in protecting the money that our customers had placed in our hands.
In those days before banking de-regulation, in many respects banking was simpler. Banks were more localized, limited to operating in only the state that they were chartered in, there was no such thing as super regional, or truly national banks, as we know them today. Bankers primarily received deposits in the form of checking accounts and savings accounts (bank liabilities) and used those monies to fund loans for business uses and housing in the form of construction loans and mortgages (bank assets). Other funds were raised by the sale of bank stock, in many cases bank stock was owned by members of the community that a bank operated in, as a borrower you knew that someone in your local community trusted you with their money, and depended upon you to return it whole. Bankers were known for their conservatism in the management of money, “safe and sound” were the values they wanted to project to their depositors and shareholders. In that environment the depositors and shareholders would give bankers the seed money, that when invested wisely in terms of reasonable risk would return a reasonable and fair amount of income and the original principal to them. The borrowers would achieve their objectives through use of the money which might be a home for their family or growth of their business and the lenders would achieve their objectives of increased income by renting out their assets and helping feed economic growth.
In the intervening years since the 1960’s de-regulation of the banking industry occurred. (The term de-regulation applies more to markets as opposed to actual operating procedures and rules; banks in particular are still subject omnipresent government oversight, and in fact, since 9/11 subject to much more regulatory procedure .) In the de-regulated world, banks have been allowed to branch in to other market activities that they were previously barred from, such as insurance sales, and investing, and other industries, such as insurance, and investment firms, were allowed to provide services formerly restricted to banks. This has led to ever more “creativeness” in the conception of and packaging of investment funds.
In addition to de-regulation, the government lead by an ideologically conservative driven administration and abetted by a Congress that if not controlled by ultra conservatives outright, has succumbed to conservative pressures from business lobbyists and other special interest groups, and succeeded in dismantling every government initiative to protect consumers, protect public health, protect the environment, etc.
The word “conservative” that was formerly descriptive of careful, cautious, risk averse best practices by bankers in an earlier, simpler time, has become synonymous with free market economics, where anything goes, where government is disjoined from the regulation of business and industry, where financial buccaneering in pursuit of the accumulation of ever greater investment returns, and the ability to spend freely and ostentatiously on any nonessential material artifact is considered an attribute of success in our society.
Modern “conservative values” have brought upon our society the current home loan crisis by allowing unsound, and arguably, fraudulent mortgage lending practices to proliferate. Modern “conservative values” have brought upon our country tremendous debt, by conducting warfare not on a pay as you go basis, not by raising taxes, but by mortgaging future generations to the Japanese and Chinese who hold the greatest amount of U.S. Treasury bills (IOU’s of the U.S. Government). Modern “conservative values” have brought a health care crisis to our country, where millions cannot afford health care, but where insurance companies and drug companies continue to reap massive profits. Modern “conservative values” have lined the pockets of war profiteers as our government and military services have outsourced logistical and combat operations, not the to lowest bidders, not to the bidders with the best ability to perform the job, but to the bidders with inside contacts, the bidders able to fund the biggest lobbyists, the bidders who eventually kill innocent civilians with their non-accountable paramilitary operators in Iraq and who eventually kill American soldiers with their shoddy infrastructure. Modern “conservative values” pursue the drilling of oil off our coasts and in the pristine Alaskan wilderness all for short term profits, without regard for the diminishing natural resources, without regard for the destruction of the environment, instead of applying a significant amount of their treasure towards discovering how to harness renewable, non carbon burning, energy. Instead of figuring out how to provide food for all who are hungry, commodity speculators have turned plant material in to more fuel to burn in internal combustion engines and generate more carbon emissions for our atmosphere.
The concept of fiduciary responsibility seems to have been forgotten in the deregulated banking and investment industries today in the pursuit of greater and greater profits. Whether or not consumers are sucked deeper and deeper in to debt, encouraged to buy more “stuff”, to overextend themselves credit-wise, whether or not the building of more coal and oil burning factories, electrical power plants, automobiles, trucks and airplanes results in global warming, whether or not people still needlessly die of malnutrition or disease, if the consumers keep consuming, and the shareholders keep thinking they are attaining more income, and the few at the top of the heap keep obtaining greater and greater portions of the available wealth, without making corresponding contributions to the greater society, then we will become overcome by greed, and eventually consumed by it.