The huge salaries and bonuses paid to top bankers is trite knowledge. Those funds are mostly, of course, extracted from average people with small accounts which are bled away by “bank charges”. The banks have been blamed for the various financial collapses in the recent past.
Within the memory of many, banks epitomized safety and stability. Bankers accepted relatively modest income in return for stable, ensured employment. Today with the income of individual bankers reaching unprecedented levels, bizarre, unsustainable levels widely separated and distinct from the population averages. By its very nature this now demonstrates instability; Instability means uncertainty and loss of safety.
The prime culprit is the politician. It is the political interference with the “banking free market” which has produced many distortions, and (perhaps) unintended consequences. Or are these “I couldn’t care” consequences?
The first perversion, permitted by governments because they are afraid to interfere with the banking industry, is the iniquitous idea of “fractional reserve banking”. This means that banks can effectively create “its money” which is not based upon productivity. This is done by lending (at a fee) money which the banks do not have, or strictly speaking only a fraction of what they have. This comes about because many people are leaving money in that bank, and the bank assumes that they will not all want to draw simultaneously. It also means that those banks are permanently insolvent and hence vulnerable to any disturbances of the financial/social equilibrium. The end result of a social disturbance could be panic withdrawals, also known as “runs on banks”. Since the banks do not have that money the depositors stand to lose much or all if there is a “run”.
However, the depositors’ woes have increased considerably since the banks became the agents of the governments. This is the totalitarian approach of governments, whereby in their attempts to maximally extract taxation the banks have to report to government. Effectively the banks now fall under the control of the government, becoming government agents. Thus, although the man in the street may believe that he is the “customer” of the bank that is completely fallacious. The bank has a primary obligation to the government, and virtually no obligation of its customers.
Because of regulations controlling the financial affairs of the entire population it is now not possible to deal financially without a bank account. Some nations specifically forbid the ownership of cash!
The power of the banks over the customer is strengthened by a great number of politically imposed regulations. These include FICA and numerous others. Not only does this cost the banks considerably more to administer (which comes out of the depositors’ “costs” and so costs the depositor) but it makes it difficult – at times impossible – for depositors to open new bank accounts. Thus the depositor is committed to a particular bank, unable to change, and so unable to “shop around”. The banks are well aware of this, and know that their customers are “locked in”: therefore the banks have very little interest in the requirements or efficiencies that they offer their customers. You must have noticed that.
As an extension of this, banks have learned to “employ” their customers. That is to say much of the workload has been shifted to the customer, notably through electronic banking. The customer spends time administering his financial affairs, via an electronic process which is highly efficient for the bank.
Other strategies include techniques of keeping the customer waiting. Therefore it is not the bank employee who “attends” the customer, but instead the customers “attend” the bankers by waiting patiently in queues. This costs the customers their own time.
Perhaps the most iniquitous political ploy has been to convert the banks into agents of the government. Banks report primarily to the government, and accept that their greatest responsibility is to government. So much so that any responsibility to their “clients” is over-ridden by the bank’s responsibility to the government. Any recognition of the privacy of client affairs has been destroyed: more so. The banks will now spontaneously report details of client accounts to the governments – not only the government of the domain of the bank, but world-wide.
Behind these political manoeuvres is one simple political objective which is to extract the maximum taxable income from their population. This, in turn, allows the politicians to provide the maximum lures, in the way of grants and other “something for free” promises of benefits to the electorate. The long term strategy is simply to keep those politicians in power and extend their tenure maximally by giving away other people’s money.
Another parallel and great danger is that the expectations and behaviour of entire populations have been induced by politicians marketing the “benefits of socialism”. The result is that an economic and financial equilibrium is now perceived and perceptually distorted by the population. Any contribution by the banking industry to the stabilizing of the financial health of nations in the face of political chicanery has now been lost
It can be argued that it is this change of attitude which will ultimately result in the self destruction of western civilizations – contrived by politicians primarily for their own benefit.