It just doesn't add up

From Weekend: Are bankers just pawnbrokers with manicures? Will the AIB scandal make us question banking as a stable and moral system?, asks Eddie Holt

'I believe that banking institutions are more dangerous to our liberties than standing armies," said Thomas Jefferson. Whether it's one of those aphorisms principally remembered because of the status of its speaker - Jefferson was president of the US during the first decade of the 19th century - or the starkness of its sense, who knows? But with a $750 million chunk falling off the banking system, people are again - as they were during the bank scandals of the 1990s - nervous and questioning of banking.

To sceptics, bankers have always been pawnbrokers with manicures. Mark Twain described them as the sort of people who will loan you money if you can prove you don't need it. More colloquially, but in a similar sentiment, bankers are often seen as shysters who will lend you an umbrella on a sunny day and demand it back as soon as it rains - with interest, of course. In reply, supporters of the system argue that money - bizarrely, both the raw material and the product of banking - makes the world go round. In a limited sense, it does. Nonetheless, critics of banking invariably retort that, in essence, it's usury cloaked in deliberately deceptive layers of reasonableness, respectability and even reverence.

Certainly, bankers mask their core activity with intimidating gravitas and self-aggrandisement. Their buildings are frequently the most grandiose. Typically, there is an arch formality about senior bankers. People seeking loans often dress up for their appointments with bank managers. It's as though banks have appropriated a sacred space within society, in which bankers really believe, or at least affect to believe, that they make the world go round.

It's ironic that banking is also complex to a degree that ensures most people don't understand its workings. Its ends - to make money make more money - are not in dispute, but its means are such that banking is nowadays staffed and serviced by a specialised community with its own jargon. Utterly simple on one level, it's practically impenetrable on another.

In boom times, the morality of banking - and almost all Irish adults are implicated in it in one way or other - is seldom questioned. That's the system, and economic life hums along to the banks' tunes. At a time of crisis, however, interest in the big picture of banking can displace narrow-gauge interest in interest rates. Certainly, AIB's loss of $750 million has renewed interest in questioning whether banking is a stable and moral system. With perspective enlarged, it's reasonable for people to question the base of the elaborate superstructure that purportedly makes their worlds go round.

What we see is seldom pretty. Underneath the layers of reasonableness, respectability and reverence, the core activity is ruthless. Mind you, there are degrees of ruthlessness. Ordinary citizens - people who can't afford bogus non-resident accounts, for example - are routinely treated severely, while, in contrast, wealthy people are pandered to. Even the State used public money to protect the banking system when AIB's gamble on taking over Insurance Corporation of Ireland proved a beaten docket - there's reverence. Make a similar financial blunder yourself and see who'll bail you out.

The discrepancy between the reality of banking and the image it has concocted is probably best seen in advertising. The style characteristic of banks, indeed of all money-lending institutions, has an Alice In Wonderland quality. The stress is always on you: what the bank can do for you; how the bank cares about you; how, in fact, the bank is your bank. As a result, punters are encouraged to talk about "my" bank, as if they have a meaningful share in the action.

Such prompted appropriation serves to normalise - perhaps, in particularly gullible cases, even endear - a bank to its customers. In turn, the pliant punter may feel a more intimate and personal attachment to one of society's more central institutions: you are not just a punter, you're a player! The notion of a bank and its directors, shareholders and account-holders as one happy family is the aim of much bank advertising. It is, of course, unfortunate that the people who write the banks' advertising don't also approve their loans.

But they don't. They get paid to put a gloss on a ruthless business by convincing people that debt is better than frustration - not that debt gets mentioned in the ads. Instead, the repayments can be structured to suit you, which really means: we don't particularly care how you get the loot to us, as long as you do. It would be fascinating to see how the banks reacted were its account holders to adopt the same procedures, attitudes and conduct in response.

To parallel the way a bank's "caring" tone turns carping as soon as your repayments are even marginally late, should account holders not be entitled to levy fines whenever they find, for example, an ATM out of order? If the bank can make money out of your ability to pay being "out of order", why not you out of theirs? If you don't service your loans promptly, you pay. Yet the bank, it appears, can be cavalier about facilitating your access to your own money.

THERE is an arrogance about bankers, which does not endear them to most people. Consequently, there has been more than a touch of dark satisfaction at AIB's latest difficulty. It has been a satisfaction tinged with dread, however, because of the reasonable suspicion that ordinary account holders will pay for the blunder. It's telling that although banks encourage you to feel sufficiently included to talk of "my" bank, you don't share in the profits and can expect to suffer in its losses.

The truth of the matter is surely that, in the absence of a politically radical transformation of banking, ordinary account holders accept that directors and shareholders are entitled to make a profit. But not the obscene profits - and "obscene" is an emotive but justified word - that banks routinely make.

Mysterious and complex as the world of finance may be on one level, it is clearly and simply parasitic on another. How many Irish houses and cars, for example, are in reality owned by banks and building societies? The old flattery scam works in these cases, too. Referring to the building you have signed up to buy as "my" house or "our" house is all very well. But it might be wiser to get that £200,000 mortgage under control before you begin to feel too possessive. Through no fault of your own - rather like a bank's attitude to an out-of-order ATM - you might have to ease up on your repayments. If so, you'll find out soon enough who really owns your house.

With banking, the greed doesn't stop there. On a global level, the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation and other outfits are spectacularly greedy. They all say they fight poverty in developing countries, but what they actually do is use banking's capitalist system to further government control of the economies of poor countries. They support whomever is in power, however corrupt, incompetent or dictatorial. And we, by the way, help to pay for this.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning," said Henry Ford, who can hardly be dismissed as a pinko.

There will be no revolution as a result of banking's latest scandal. There will, however, be renewed cynicism among ordinary people. In time, perhaps such cynicism will grow to the point that enough people will decide that banking, as currently operated, is not in their interest but is out only to nab it. Usury uses us all to usurp the world. Jefferson was probably right.

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