Eric Margolis: Banking Has Become Our State Religion
July 11, 2011
In 1922 Greek armies trying to conquer western Anatolia were routed by Turkey’s military leader, Mustafa Kemal Ataturk. Hundreds of thousands of ethnic Greeks were uprooted from Ionian coastal areas.After this debacle, Greek officers took three former prime ministers, a general and two other politicians who had led the Turkish-Greek War and shot them. Greeks cheered. Many Greeks today must be wishing to see similar punishment inflicted on their politicians who were responsible for the nation’s bankruptcy and staggering $500 billion debt. For decades, Greece’s conservatives and Socialist parties alike bought votes by dishing out the very cushy, do-nothing government jobs, high pensions, and benefits that brought Greece to its knees. Call it state sponsored laziness. In 2010, the second shoe of the 2008 US financial crisis hit Europe. Greece, Ireland, Portugal and Spain came under financial attack, showing the alarming degree to which uncontrolled, run amok banks and money men had poisoned Europe’s economic waters by speculation and outright gambling. After intense debate, Greece’s EU partners and the International Monetary Fund just staved off Greece’s impending default on its maturing debt by a $165 billion loan. But Athens must soon make more huge payments. The EU aid package piles more debt onto Greece’s already mountainous debts – just as President Barack Obama is doing in the US. The Papandreou government is praying the EU will come up with another $150 billion euros to keep Greece going for two more years. Germany and the EU’s wealthy northern members are furious at Greece and reluctant to pay for its profligacy. But there is no way Greece can generate enough money by cost-cutting and asset sales to pay off its debts. Some form of default seems inevitable, as this column has been saying for over a year. The recent EU rescue package merely postpones default-day. Calls for Greece to ditch the EU, restore the old drachma, then devalue it are mistaken. Greece manufacturers and exports little of high value. Feta, olives and tour packages won’t pay off Greece’s debts. Leaving the EU would collapse Greece’s banks and end mammoth EU agricultural aid. Greece is using the same scare-tactics that the supposedly too-big-to-fail insolvent US banks employed in 2008: “if I go down, I’ll take everyone with me.” In this case, it’s Europe’s big banks. Three big French banks, BNP, CréditAgricole, SociétéGénéral, hold large chunks of Greece’s debt. If Greece defaults, goes the hue and cry, French, German, Swiss, and Belgian banks may crash. Here we go again. Politicians have allowed the banking industry not only to grow larger than manufacturing, notably in the United States where the top five banks control 40% of all deposits, but to become so over-extended and risky they are a danger to itself and the public. Bankers who invested in Greek debt or US subprime mortgages were greedy fools and should be fired, not rescued. We hear them cry: “Lehman Brothers II!” And “we don’t know what murky financial deals link banks.” Greece’s only viable solution is to renege on its debts, go bankrupt like Argentina did, and start afresh. urope’s banks will no doubt be shaken, but they will survive the jolt, just as the US banking system survive 2008. Time for Europe’s banks to get these bad debts off their balance sheets. Rescue funds should be focused on Spain and Italy, if necessary. It’s time for the bankers to pay for the mess their greed and recklessness created. Just this week we learned that the US government loaned $15 billion to Goldman Sachs during the 2008 crisis. Goldman should have been allowed to fail. The world would have better off without it. No wonder Greeks are so angry. They must pay for the sins of their politicians and the bankers, whose bonus payments have reached an all-time high. The current EU rescue package for Greece is really about rescuing the banks, not Greek citizens. Just as the US government rescue saved and enriched Wall Street while punishing Main Street. Finance is our new state religion. The power of the banks must be curbed and brought under control. How many more crises do we need before this lesson sinks in?