On September 15, 2017 I addressed a gathering of over 100 international students pursuing an MBA degree from a prestigious university. These were working adults over the age of 30 who were well-read and widely travelled. They were coughing up a lot of money to be awarded the MBA degree. These were eager achievers ready to climb the ladders of the corporate world armed with their future MBA.
I asked them the significance of September 15 – the day that I happened to be presenting to this august body of management students.
Surprisingly – although they take courses in finance in their MBA programme and most in the audience must have been at least 18-years-old in 2008 – no one could answer the question.
There was a deafening silence.
It was as if an elderly Jewish man with a number etched in his arm stood in front of an audience of historians who had studied the Second World War and asked them what was the significance of January 27. And the historians sat with a weak, vacant smile, unsure of what the significance of January 27 was. (That was the day, in 1945, when the Soviets liberated Auschwitz – one of the infamous concentration camps under the Nazi regime where over one million Jews were sent to the gas chamber. Many who survived kept the number carved into their arms.)
The Nazis lost the Second World War in 1945. However, till today, the symbols of the Nazi era are banned in Germany and the use of these symbols carries a fine with imprisonment of up to three years.
However, the perpetrators, the symbols and the star cast of those who caused the global financial crisis (GFC) not only exist but flourish.
In a recent speech in London, Charles Randell – the chairman of the Financial Conduct Authority of UK – noted that when auditors fail to do their duty and cause investors to lose money, “Behind the economic statistics lie tragedies of individual loss: loss of employment, loss of savings, loss of mental or physical health and, in some cases, loss of life”. Randell said this in the context of a few audit firms that had missed the red flags in a few companies in the UK. Yet, it is a key (and probably first) acknowledgement by a financial regulator of the connection between an economic failure, as reflected in an economic statistic, and human life.
Wall Street traders, September 15 2008, the day Lehman Brothers filed for bankruptcy. Credit: Reuters
What happened in 2007/2008 was more than the failure of a few financial firms. It was the failure of policymakers and governments; it was a failure of politicians in many countries; heads of states failed to protect their citizens from the greed and abuse of financial firms that had put their profit motive ahead of everything and everyone else.
Many heads of states and finance ministers were either foolish to allow the financial firms to let loose their immoral actions (and possibly illegal actions) or their ignorance or collusion was rewarded (i) in political contributions to their campaigns for reelection to their political posts, (ii) in grants made to the foundations they created once they left politics, or (iii) by being awarded roles of chairpersons of financial firms in cushy, post-retirement jobs. The ramifications of these diplomatic, humbug politicians who spoke with great eloquence to their electorate but handed them on a platter to be abused by a corporate and financial star cast of rogues have helped push many countries and regions in the world to a nationalist, inward-looking direction.
The great financial crisis – which started with a tremor caused by the bankruptcy of a hedge fund managed by Bear Stearns in July 2007 and reached a crescendo with the collapse of Lehman Brothers on September 15, 2008 – at $619 billion was the largest bankruptcy in history – and the bailout of AIG and Citigroup thereafter dislodged the lives of tens of millions of families around the world. Countries like Portugal, Italy, Greece and Spain (lovingly known as PIGS by the same financial firms that led them to the slaughterhouse by helping them raise debt) went bust overnight and needed to be rescued. Sleepy Ireland and Iceland woke up in shock to know that their banking system was bust. The International Labour Organisation estimated that 34 million people lost their jobs and another 111 million vulnerable people were classified as “working poor” as their salaries and benefits collapsed. No one knows how many people may have committed suicide or ended up with depression from the impact of the GFC. That is because no one wishes to count. But to deny that there were consequences is to deny that there was a Holocaust.
A US two dollar bill is taped to the revolving door leading to the Bear Stearns global headquarters in New York March 17, 2008. Credit: Reuters/Kristina Cooke
No one can accurately document the plight of families being kicked out of homes with their belongings onto the streets of suburban America – or in towns and cities across the UK, Europe, Latin America, Africa and Asia. In many cases, these were homes that these individuals would never have been able to buy if a proper evaluation of their income and wealth was made. In “normal circumstances”, their applications for credit to buy a home would have been rejected.
How many city, state and national governments were in financial trouble due to losses on their investment portfolios and lower tax collections due to the meltdown of economic activity globally? How many citizens were denied assistance and help from their governments because these very governments had to cut down on benefits and payments since they no longer had the monies to pay their citizens? How many people were affected because of this? How many people died because of this?
This from the Telegraph of UK on May 26, 2016: The figures were extrapolated from an observed rise in cancer deaths for every percentage increase in unemployment, and every drop in public healthcare spending. “From our analysis, we estimate that the economic crisis was associated with over 260,000 excess cancer deaths in the OECD (34-member Organisation for Economic Cooperation and Development) alone, between 2008-2010,” said Mahiben Maruthappu of Imperial College London.
“This suggests that there could have been well over 500,000 excess cancer deaths worldwide during this time.”
The villains in the financial services industry who disrupted the lives of millions go about their daily lives as if nothing happened, oblivious of the pain and turmoil – or deaths – they may have caused.
A Wall Street sign is pictured in the rain outside the New York Stock Exchange in New York June 9, 2014. Credit: Reuters/Carlo Allegri
Unlike Auschwitz, there were no gruesome gas chambers and skeletal limbs in hurried graveyards to estimate the overall slaughter caused by the GFC. The damage to the savings, the wealth and the lifestyles of millions was a bloodless event. Yet, we know it happened. We read about families disrupted and lives lost. We read about countries on the brink of disaster. But there was no one-to-one link between the murderer, the weapon and the victim. And so, we believe it never happened. We believe that the statistics of GDP, growth and share indices are back to pre-crisis levels: therefore, nothing happened….
The financial textbooks don’t mark September 15, 2008, as a ‘Day to Remember’.
Wall Street marks September 15 as a ‘Day That Never Happened’ and the GFC as ‘Something That Should Never Be Discussed’.
Much of the media will not link the crisis to the greed that ruled – and still rules Wall Street and financial firms. While a few will be willing to connect the dots to any dislocation and upheaval in people’s lives – and fewer still will link it to the deaths that may have occurred – most of the sermons marking the 10-year anniversary of the Lehman bankruptcy focus on the need to buffer financial firms with more capital. What is needed is a focus on the continued lack of moral and ethical behaviour of the financial services industry.
The business schools – many which are significantly funded by alumni from financial firms – carry on teaching the myth that financial firms are noble and serve some higher purpose. Lloyd C. Blankfein, the CEO of Goldman, Sachs said in an interview in November 2009 that he was just a banker “doing God’s work.” Business schools are the chapels, synagogues, temples and madrassas that help preach this lie.
It has taken the right-wing in Europe over 70 years to regroup and start using symbols from the era of Aryan supremacy. Those responsible for the financial holocaust did not have to wait for 70 years to flag their resurgence. They were back in business within one year of the financial holocaust. The right-wing and the Nazis should have hired the CEOs of the financial firms, their powerful lobbyists and PR agencies to make the world believe that the dislocation or slaughtering of millions of people was a non-event or, better still, it was an event that never happened.
If the MBA students don’t know the relevance of September 15, maybe it is time for us to remind ourselves of what happened; the “why”; and the “how”. Because many of these same MBAs will end up working for financial firms and, the deliberate elimination of lessons from history will ensure that your wallet gets to relive the pain that it went through due to the last crisis. And those with fewer financial buffers may end up dislocated, depressed and possibly dead.
Ajit Dayal has been involved in the financial services in India and internationally for over 30 years. A longer version of this article is available here.