BANKING- AND MORTGAGE FRAUD. WHERE WERE THE INSPECTORS, AUDITORS, BANK SUPERVISORS, CENTRAL BANKS AND POLITICS?

By Orlando Pascheit

[This article published in: Neue Zuricher Zeitung (NZZ), December 2007 is translated from the German on the World Wide Web, www.nachdenkseiten.de/wp-print.php.]

[“The United Bank of Switzerland (UBS) has fallen deeper in the whirlpool of the current crisis” was a headline of the Neue Zuricher Zeitung. “The big UBS bank had to write off another $10 billion on account of the American mortgage crisis. The largest Swiss bank fears red numbers for the whole year. The bank receives financial injections from Singapore and the Middle East.”]

Once it was said “as safe as a Swiss bank.” This obviously referred to the trifling possibilities of foreign influence, the legendary banking secrecy and also solid and serious bank management emphasizing security from risks. The last characterization may be finally over. The whole great world of money is infected by the banal greed for more and more, not only German bank managers.

Writing off $14 billion on account of the sub-prime crisis drove many other banks to ruin. To its good fortune, the largest Swiss bank is also the largest worldwide property administrator. The year 2007 will end in a clear minus. Whether this will also be true for the rest of the financial world may be clear in the 2007 balances. Several banks or funds will have distress sales of securities by refinancing with serious consequences for the real economy.

Can greed, megalomania and incredible negligence be dismissed as character flaws of a few persons and cry to them: Go into yourselves and repent? Weren’t the same managers the heroes of the business world a short time ago? Wasn’t the art of making more money out of money the most noble and top-paid avocation? Isn’t the finance market regarded as the purest distillate of what we call the free market and all opposition obsolete? That the person in his plain greed loses oversight is both regrettable and an everyday phenomenon. But that science and politics could not unite on the demand for more transparency given the long manifest development is pitiful and irresponsible.

Manager salaries, the swine now driven threw the village, are only the tip of the iceberg. A powerful redistribution machinery brought half of worldwide assets in the hands of two percent of the world’s population and can be seen in the individual national economies.

With low interests, mobile finance capital was hardly satisfied with normal classical investments. Moreover the number of good or safe debtors is limited. The credit need of Toyota, General Electric, Porsche or Bayer is limited and yielded to less safe businesses. To that end, finance instruments only graspable with complicated mathematical models were created, so-called structured products. The securities covered by dubious credits are completely obscure today. Only the banks have oversight of themselves.

If they claimed in the past to have dismantled the unsafe securities, it now turns out that they only temporarily sold them at high interests to financial jugglers.

When a big bank puts its cards on the table today, the uncomfortable feeling of being deceived appears alongside the question about the other banks. The manager salaries come into play. Didn’t the experts see the catastrophe coming for example in view of the mortgage bubble in the US, Great Britain and Spain? Yes, they willingly accepted this catastrophe to cash fat bonuses in the millions as long as they could.

Where are the inspectors, auditors, bank oversight, central banks and politics? Oh, we will pay the bill. The voters will have to pay for these inspectors who can hardly be surpassed in mediocrity.