And it seemed that the wave does not reach us. And that banker bashing remains a phenomenon characteristic of the left-leaning (though without exaggeration) elite opinion-rich West and local movements in the style of Occupy Wall Street. And here you go! And we have our pounding the bankers! We are witnessing the Polish media criticism grand sweeping the financial sector. His greed and dishonesty. God blameless pressing Poles investment policies and loans in Swiss francs. And, to make things even more interesting, more often this is done with the orthodox position of the free market.
Spaślaki oppress the consumer
On the surface, the whole thing looks surprisingly . In the end, a few years ago, banks were still as rocky coast Polish green island. Thundered and roared around, but they were based proudly waves. America, Ireland, Iceland, United Kingdom. Nay, Germany, France and Belgium. Everywhere frightened financial corporations, one after another lined up on the government for help. To avoid panic, the state authorities have even extend government guarantees for deposits. A central banks to take unprecedented scale to supply the economy (just by pumping the banking system) in lost liquidity.
All of this has happened (and still happens in some places) in the richest and most developed economies of the world. And with us? Our cottage fortunately kraja. Even in the worst crisis in 2008-2009 banks operating in Poland recorded very good results. Good to the extent that some economists began to seriously fear that their foreign parent company (that is the majority of the ownership structure of the Polish financial sector) want the expense of operating in Poland daughters improve slightly the position of the entire group. Also today there is a perception among observers that the Polish macroeconomic indicators of the financial sector does not raise particular concerns. And so in 2012. Ratio of assets of banks operating in Poland to Polish GDP was 91 percent. For comparison, in the euro zone this indicator is … 345 percent. The ratio of loans to GDP is 19.8 percent with us. That is exactly two times less than the average for the Eurozone. Similarly, the level of corporate loans and deposits (both private and corporate). Relatively high in comparison with the West, we have only the volume of consumer loans. But that’s just typical for countries with low income. In short, if you already try to be a general assessment of the Polish banking system, it must be said that it is characterized by a rather significant structural backwardness to the developed West. And certainly our problem is not (at least) a far-reaching finansjalizacja economy. In other words: the dominance of the financial sector and the productive economy speculative phenomenon rightly mentioned in the first row of the main causes of the crisis of 2008. And continuing to this day a big slowdown in the global economic system. But not in Poland during the years 2008 to 2015.
The economic debate was native of the weave of conflicting signals rather paradoxical situation. Especially among free marketeers give it its tone. Because they at first did not quite know how to deal with the economic meltdown of 2008 intellectually it. Their natural reaction to rising in the US or Western Europe demands stricter regulation of the financial system by the state so at first slogan was “hands off the economy.” It also means banks. Who wants, let him play the media coverage and the opinions of experts on the process of the forging of the US Dodd-Frank Act (2009-2010). I assure you that it will primarily texts interpret it as a sign of leftist populism of President Barack Obama.
Gradually the side of liberal economic orthodoxy, however, began to sprout a new story. Why defend the banks that actually have a thing or two behind the ears (which no reasonable person can deny!), When you can from these banks … cut off. I say that the banking sector is disgusting parasitic growth on the healthy body of the economy. And his excessive growth of solute is not the fault of market mechanisms alone, but the politicians who allowed themselves to buy the bank lobbyists. I have created a privileged caste banks spaślaków. This story – roots inherent in the ideas of the American radical libertarian Tea Party – was accepted at face value by many Polish liberals. In her thought responsible for our problems are “banksterzy who transformed our economy in a casino.”
But it was still a story about the crisis hulającym hen somewhere, far away, in a slightly different world. Because the financial sector in Poland is still developed on the background of rich West rather poorly (pay attention to the number cited at the beginning of the text). As the anger in Poland did not fall but none of Lehman Brothers and AIG not asked any government rescue package. The situation was so kind of like to blame the economic turmoil (bankers and walking on their bar politicians) have already been chosen, but there was still a … crime, which could be attributed to them. Finally appeared Frankowicz. The Group does not so numerous. But very powerful, because it is dominated by representatives of the middle class. That is the one that makes the media in our country. And for whom these media are doing. So finally offered the opportunity to tell a story about Poland greedy banks that took into captivity healthy free economy. In this story, the banks are like an extension of negative stories about the country that have spętało free society. And so the politicians to the company’s bankers to earn a harm our. The problem is that this story about banking is profoundly untrue and there is not much to do with reality. Because banks are not any invaders who enslaved consumers against their will. Nor any growth on an otherwise healthy economy. The truth is much more prosaic. A more complicated at the same time.
Inventions modernity
Let’s start with the fact that banks are neither good nor bad. It is simply important institution of socio-economic development. And as it happens with important institutions, on the one hand, to live without them we can not, on the other hand, they irritate us immeasurably. Columbia University economist Charles Calomiris even claims that banks are – alongside the state – the most important invention of modern times. And for a good case can not be explained, who is in the system egg, a hen who. Calomiris recalls that the two institutions (in the modern shape) appear on the historical stage at roughly the same time. So somewhere in the sixteenth and seventeenth centuries. Yes, before there was a political power and operate private banks. But their cooperation was limited to finance properly military expeditions. When the war pretended debts were repaid. And because not every expedition of war can be successful, rulers often declare insolvency. This once in a while effectively resetowało credit system based on small private banks. At some point, therefore, the idea emerged to build something more permanent. That’s how the licensed banks. That means private, but at the same time enjoying the privileges and protection of the state. And in return to help finance public spending. Buyers – which we would call today, entrepreneurs – this system is also very pleased. Because, of course, need a State which will knew how to create and enforce a system that protects contracts concluded between them. But it was in their interest, the existence of a strong and stable source of credit. So the bank.
The model was not created overnight. Initially, there were specialized institutions. Founded in 1407. Banco di San Giorgio in Genoa was hard at all to call the bank. Because neither accept deposits or grant loans. Its purpose was to guard, to the Republic of Genoa to meet its obligations towards its creditors. In England, after the glorious revolution of 1688. Created the Bank of England and Bank of Milton. And they, in exchange for certain privileges to finance government spending on development and colonization fleet. The Amsterdam worked through commercial dealing Wisselbank. It is in these institutions came up with another privilege, which today is another symbol of modernity. Paper money, which allowed banks to solve many problems in one fell swoop. From the necessity of expensive and cumbersome storage of gold or silver until its forgery. The financial system ultimately prevailed in the nineteenth century.
And since then much has changed. Except for one. Governments continue to decide who can carry out banking activities, and who does not. And it is no accident that so far no authority did not give this permission. Costa Rica did not do it, who resigned from having a military or Kuwait, which does not collect taxes from citizens. Because banks are the central institution of the modern world. Because they create money, which is the lifeblood of the economy.
Yes invested in the system, banks have played a tremendous role in the construction of the well-being of societies rich West. Of course, models were different. At various stages in its history, some countries put up a more competitive credit market that supports multiple needs of citizens. Today, many observers likes, for example, indiscriminately condemn the deregulation of the banking system in the US, which occurred in the last 20-25 years. And in fact, when Congress abolished many restrictions, allowing unprecedented expansion of the great financial capital. Somewhere in the background is the accusation that it was only a result of lobbying by JP Morgan and Goldman Sachs in the White House and on Capitol Hill in times of democratic President Bill Clinton. Meanwhile, you might as well argue that the Democratic Party saw the deregulation way to cheap loans, which are those that are waiting on the broad masses of the urban middle-class electorate. Especially in terms of balancing the budget after years of the Reagan expansion (yes, yes) government spending and growing budget holes. This without deregulation would achieve the Democrats have failed. Unless you turn in the more welfare state model, which itself provides citizens with many goods (housing, education, health care), and therefore their policy towards banks may be more restrictive. At the expense of higher public debt, but at a profit in the form of excessive proliferation prevent banking and financialisation.
Credit only for the rich
True, the tangled all these motivations? “The core of the problem is that every government – regardless of the time in which power is exercised and conditions – is facing the same conflict of interest. On the one hand, bankers and shareholders, on the other – the holders of bank deposits, and the third – the borrowers. And in between takes tug of war and the search for balance. Are formed on the occasion of alliances, usually unstable. This is an exciting game that takes hundreds of years to over and over again. And the result is always open “- sums up Charles Calomiris. In this sense, the argument that if something is good for the banking sector, it must also be good for the state, it is obvious nonsense. On the other hand, there is nothing to wade in the libertarian illusion that the banking system would be best if you left him alone at last. Because it is also not true. The introduction of a truly free market (if any at all once existed somewhere) probably end up back to the situation before the creation of the licensed banking. The loan would be difficult to achieve good. Practically accessible only to those for which the creditor can be confident that the loan will pay. So, most likely for those who already have capital. This in turn would lead to a further increase in inequality. End of funded credit moving up the ladder of social entrepreneurship, but the poor house!
Banks, of course, are well aware of their role in contemporary capitalism. And they try to play to your advantage. Their lobbyists are so strong, not because they have large financial means pressure on decision-makers. We may not like it, but their main argument is not totally meaningless. And he is invariably: the introduction of new capital regulations means that we will have to limit our ability to borrow money the rest of the economy.
Does this mean that the public are against the power of the banks so helpless? Not Necessary. Experienced financial economists Martin Hellwig and Anat Admati wrote recently (2013). Important book, “The Bankers’ New Clothes” (New Groove bankers). Bravado crack down on her with suflowanym public by banks argument that we must choose between economic growth and the stability of the financial sector. And we can not have both of these values at a time. “This is nonsense” – told me a few months ago Hellwig. Here is his reasoning: the banks take money from two sources. Some of them come from the owners and shareholders. The remaining funds are borrowed from other banks. In the language of capital controls is only the first category. This is money that has not been borrowed from another bank. Having more such capital makes the market becomes more resistant to damage. Because there is so that creditors suddenly appear and demand immediate repayment of its obligations. Not knowing this, it could be argued that the regulator simply wants the banks have deposited in their vaults some big catfish. And that these sums could be better exploited in the real economy. In fact, no one is talking to banks what to do with money. It’s just that the less relied on loans from the others, because it increases the risk of causing devastating domino reaction. As the fateful 2007-2008. Banks that are companies may yet always issue new shares and thus raise the capital needed to meet the requirements imposed. A smaller banks that do not have access to capital markets, they can be allocated to the capital reserve part of their profits. The same thing can do besides the big players. Sure, it’s not like the banks and that most certainly would prefer not to. The financial sector probably have preferred allocation of profits for other purposes: for example, dividends or bonuses. But this is not a problem of the controller. This does not change the fact that the story is nonsense, supposedly mandatory increase capital reserves forced the banks to reduce the number of loans.
Responsible Industry
Another postulate is, in turn, greater participation of banks in the credit risk. This, in turn, on the hollow of young economists Atif titers (Princeton) and Amir Sufi (University of Chicago). Their published in 2014. Loud book “House of Debt” contains a lot of practical and technical ideas to achieve this. Goes the main point is that credit agreements ceased to be a kind of pact. “There are two patterns of action that are trying to go in this direction,” – explained in an interview with Mian DGP. One is a British government program “Help to Buy”, which was launched in 2013. The second is the instrument used in the course of inter-by Credit Suisse and UBS. They share a common thought that debt ceased to be a debt, and became more participation. Especially in a situation where economy is in turbulence. This can be good to show the example of student loans in the United States. A student taking them may not know how to work out his professional position after graduation. Maybe he’s going for a period of prosperity and then you will not have any problem with the repayment. But it can also be like last time, when the next generation comes out of universities not less educated graduates, for which there is a good job that will allow them to give educational debt. Something similar can still apply for the mortgage market, making the loan amount from the current price of the apartment. When falling value of the property mortgage, installment goes down with it. So that the person buying the property does not automatically lose all your capital. In developed countries, there are many independent housing price index divided up into districts. This scheme, which can be called a shared-responsibility mortgage (SRM stands. Mortgage on shared responsibility), is fairer.
You can finally push through more favorable from the point of view of society tax changes. – The idea is that a tax system discourages companies to defer, and inclined to invest – says economist with the University of London, Jan Toporowski. How do I do it? For example, by introducing a tax on capital. Commercial or industrial enterprises that hold capital in the form of fixed assets, materials or products partially finite, do not pay. The company’s capital investing in financial assets or banks must pay tax according to the value of these assets. Such a tax also has the effect of deterring further blow to the financial sector, which in recent years has assumed monstrous proportions. Income would be different depending on the country. In the UK, the introduction of a tax of 1 per cent. balances of all income would 6-7 per cent. GDP. In Poland, it certainly would be less.
These are all problems and solutions from the shelf of global finance. In Poland, more trouble is, for example, the ownership structure of the banking sector, formed as a result of privatization of the 90s is not only hiccup we bounces because of fleeing the country profits. But also creates a real risk that banks operating in Poland addicted its lending on the location of their parent companies (this was in the period 2009-2010). Here you can shrug and say that the ownership structure of Polish banking has nothing could be done. But you can also make suggestions to change the status quo. And such proposals are. From the postulate of greater involvement of the state in re-nationalization of banks, and formulated by an experienced financier Stefan Kawalec concept of “domestication banks” (Kawalec talking about it in the magazine DGP from February 27 – March 1, 2015.). The second – more versatile – the challenge of being drawn bankers and politicians to discuss the responsibility of the financial sector for the society. So remind bankers that since abundantly enjoy the privileges and state guarantees (because it is designed contemporary capitalism), it can not shirk this responsibility. Such motivations guided us when we published the text of the President of the National Bank of Poland Marek Belka “And now I will tell you the truth,” (which is 6-8 in its issue of February 2015. Initiated a discussion about the banks). Such talk about the financial sector makes sense. Bigger than demonizing banks and accusing banksters for all the wrongs of the modern world.
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