Banks have clearly gone from ”too big to fail” to ”too big to jail”. HSBC was complicit in laundering money for drug cartels and for harboring terrorist money transfers, but didn’t get indicted. These BBC, Al Jazeera and The Economist pieces will give you some context if you’re unfamiliar with the topic. I often speak about incentives, and the incentives for banks couldn’t be clearer; screw up the world economy with schemes and outright fraud, no worries, you won’t go to jail and the taxpayer will bail you out. In fact support drug cartels and terrorists and you’ll be fined, but walk. Even walk with partial bonus payouts. What?
Well, there is another example, namely Iceland. They argued that the banks are private companies and as such the taxpayers are not liable for their mistakes and held their banks accountable for their extravagancies, letting them go BANKrupt (yes, pun intended). What happened? Iceland recovered fast, other sectors spurred by the human capital and competence previously locked up in their banks. Proof of concept for the argument that the banking sector produces very little actual output compared to other sectors. Well, something more happened too, the UK declared them a terrorist state. Iceland a terrorist state, laughable! Hopefully the worst misuse of the vague terrorism definitions and laws that will ever be committed. Read their President’s excellent views on the topic here.
This impunity development is so obviously horrific I won’t even bother going into details as you simply don’t need details to understand why it’s awful in its entirety. Therefore I will leave you with a link to a brilliant and short video on the HSBC verdict and instead focus on an interesting development in Kenya.
Kenya and other African countries are not seldom ahead of the rigid Western countries when it comes to new innovative ideas. One of the best examples is M-Pesa. A mobile phone based money transfer system that is a branchless banking service. You simply open your account and load money into it and transfer to other people’s phones. Perhaps this superstar ICT product, which is so simple it is SMS based, will be the solution to the impunity currently enjoyed by the banking system.
This brilliant Kenyan idea could be to the banking system what file sharing was to the movie and music industry. However if you think the movie and music industry lobby was bad, resulting in laws that turned almost entire populations into criminals, then what do you think the banking lobby will do seeing as they already can get away with laundering money for drug cartels, supporting terrorism and getting the whole country of Iceland labeled as a terrorist state? Then again, if the Mayans were right, it’ll be sorted on Friday.