Category Archives: banks

WeWork’s guru-led business model

Dalrymple writes that Adam Neumann, with his long hair, T-shirt, and microphone, indulged, like any guru worthy of the name, in

malversation of funds, morally if not legally, on a large scale.

Neumann claimed — without being laughed down — that his business was worth $47bn, yet it was

nothing but renting out office space to people who could not afford permanent offices. This is a good idea, no doubt, though it was not his, but to have parlayed it into a business allegedly worth many billions while making heavy losses takes genius of a kind.

WeWork, Dalrymple notes,

had a private jet while losing more money than it turned over ($1.9bn against $1.8bn). I don’t know whether this is a first in history.

The company could survive

only by finding someone to throw good money after bad. As Macbeth might have said if he had lent money to it, ‘I am in loan stepp’d in so far that, should I lend no more, returning were as tedious as go o’er‘ — indeed more tedious, in so far as it would imply that the original loans were not performing and might give rise to awkward questions about the wisdom and competence of those who made them. Meanwhile, my bank tells me every month that it is prepared to lend my tiny company up to 4% of the amount of money I already have in the bank. Thanks very much. Such is the wisdom of bankers.

Dalrymple says he finds it difficult to think of the WeWork story without recourse to metaphors of parasitism. He notes that in the modern world, the path to fantastic personal success is not that of inventing something that people want and that can be developed and sold at a profit, but of persuading investors to part with their — or more often, other people’s — money to finance a bubble. For that you need the skills and confidence of gurus, who

fleece by promising new meaning to the gullible. Their eyes shine, they gesture, they are alternately passionate and calm. They don’t believe, they know. If you are lucky, you have never met such a person, for we are all, to varying degrees, susceptible to him. One might have thought, though, that bankers of all people would not fall easily for their wiles.

The most successful gurus, Dalrymple observes,

are not straightforward crooks, at least not to begin with. If they deceive, they are also to a large extent self-deceived. But with repetition and success comes more straightforward skulduggery, swindling, misappropriation of funds, sexual predation, and so forth, all because they believe themselves to have been granted impunity, as with a diplomatic passport.

Many gurus

mark themselves out by their dress — in this case, T-shirt — despite immense wealth. How can such a man not have seen through the triviality of mere appearance to a deeper reality?

Dalrymple asks how

companies that have never made a profit, however long they have been in existence, can be valued so much more highly than those that make profits almost without fail.

No doubt the companies in question

promise at some time in the future to make eye-watering profits once they have cornered the market and can charge monopoly prices, having driven everyone else from the field. But this glorious future (glorious for holders of the stock, not for the average or below-average customer) seems rarely to arrive. Meanwhile, financiers finance, at least until, like socialists, they run out of other people’s money. Then they can ask the government to create more money, so that they never run out of other people’s money.

Financial drug-pushers

What banks were like when Dalrymple was a boy

Today’s bankers

Some argue that banks

are up to their old tricks again, lending riskily with abandon, selling on their risky debts to those who have not the faintest idea of what they are buying, having learned from the last crash that when push comes to shove, they will be rescued from the consequences of their improvidence. But this time the banks will not be bailed out; we, the account holders, will be bailed in. The bankers are greedy and insouciant.

The doctor-writer observes that in his lifetime, bankers

seem to have changed in nature, or at least in image.

When Dalrymple was a boy in the 1890s,

bankers were rather respectable, dull persons who acted like the financial guilty conscience of their customers.

Consols Transfer Office, Bank of England, 1894

A crashing bore actuated by burning hatred

Dalrymple writes that on the whole, the commentary evoked by the bicentenary of Karl Marx’s birth

obeyed the injunction not to speak ill of the dead, as if the passage of time and the deaths of millions in the name of the birthday boy did not somewhat attenuate the social imperative to mute one’s words.

Marx

believed that crises were inevitable until the advent of his utopia, in which such phenomena as private property, banks, and the bourgeoisie would cease to exist. In Marx’s vision, the ant would lie down with the anteater.

The combination, says Dalrymple,

of scathing criticism of the present and adolescent daydreaming is irresistible to quite a lot of people.

Dalrymple notes that Marx

was one of those people who love humanity and hate men. He was in most respects an unattractive figure, cocksure, domineering, intolerant, and hypocritical—though he had an undoubted charm in the domestic circle and was both very clever and intensely cultivated.

In his writing he was

a crashing bore with a brilliant turn of phrase. Burning hatred is never far from his prose, and gives it its spice. Nowhere is it clearer that hatred is by far the strongest of political emotions.

The anteater shall lie down with the ant

Dalrymple bashes bank bunkum

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Unctuous cant

An advertisement for a big bank pretends that it is

working for the creation of a more equal world.

This

cannot possibly be the case and is, in effect, a lie. At least, one hopes it is a lie, for that is the most charitable interpretation of the slogan.

It is obvious, writes Dalrymple, that

the aim of a commercial bank cannot be a more equal world, if only because it has financial obligations to its shareholders that it does not have to the rest of humanity.

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Bank poppycock

The bank’s shareholders

have not invested to provide everyone in the world with paid dividends; and while they might hope that the bank’s activities are honest and contribute to the growth of the economy, this is not at all the same thing as equalising the world.

A world in which everyone were starving

might be a more equal world, indeed a perfectly equal one. Equality of misery is equality all right, but is not therefore either a just or desirable goal that the bank might pride itself on having brought about.

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Bank balderdash

What the bank really meant — if it meant anything at all — was that

it was working towards a richer, more prosperous world. But working for wealth does not have the same moral cachet as working for equality.

In short,

the bank was indulging in humbug; unctuously proclaiming ideals that it cannot, will never and ought not to have.

Humbug, Dalrymple points out, is

an insidious pollutant of the mind, which not only distorts but perverts. It clears the primrose path to earthly damnation.

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Bank baloney

Your own business is not your own business

Screen Shot 2015-05-17 at 09.22.59In order to be able to process some detail of his financial affairs, Dalrymple finds himself having to deal with one of the sprawling, impersonal, inefficient and unresponsive banking bureaucracies, one of those that

has repeatedly been forced to admit that it has engaged on huge-scale dishonesty that has cost it billions in fines and reparations (though I am not quite sure how much faith as to their sincerity or justification I should place in such admissions).

The bank demands — using in its communications always the passive voice — that Dalrymple, a mere writer (rather than, say, a trader specialising in interbank lending rates), ‘confirm the source of funds which have been deposited’ in his account.

Hier ist kein warum

Screen Shot 2015-05-03 at 08.18.12Dalrymple’s bank charges him 6.37% on electronic transfers from Australia to the UK, even to an account denominated in Australian dollars.

Why? Here there is no why. Dalrymple writes:

I should like an explanation of this exorbitant charge, but of course I can’t find anyone to explain it to me. I think I could speak to every employee the bank has (132,300) without finding the right person. Not, of course, that it is easy to speak even to a single person at the bank, other than the tellers at my local branch who are not authorised to say anything.

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Is the crisis faced by the Greeks their own fault?

Feeble-minded: Martin Wolf Wolf: feeble-minded

NO, says Martin Wolf. Stupid lenders lose money

This greatly overvalued (and very conceited) journalist writes about high finance. He can be read in the Financial Times, the Irish Times and other prints. He argues:

Nobody was forced to lend to Greece. Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government. Yet the nature of Greek politics, tellingly described in The 13th Labour of Hercules: Inside the Greek Crisis by Yannis Palaiologos, was no secret. Then, in 2010, it became clear the money would not be repaid. Rather than agree to the write-off that was needed, governments (and the International Monetary Fund) decided to bail out the private creditors by refinancing Greece. Thus began the game of ‘extend and pretend’. Stupid lenders lose money. That has always been the case. It is still the case today.

Dalrymple: incisive and gutsy Dalrymple: incisive

YES, says Theodore Dalrymple. Stupid borrowers lose assets

This greatly undervalued (and very self-effacing) essayist writes about the human condition. He can be read in City Journal, the Salisbury Review and other prints. He argues:

The lenders were foolish, or worse than foolish, relying as they did on Greece’s fraudulent membership of the common currency to forestall any possibility of default. But the Greeks, or rather the Greek government, can hardly be absolved of all blame for the situation. The latter borrowed huge sums of money to fund current consumption, having previously falsified its public accounts in order to meet the criteria to join the common currency. If nobody had to lend to Greece, Greece did not have to borrow, at least not like it did and for the purposes that it did. And if it is true that stupid lenders lose money, stupid borrowers lose their assets. If this is a tale of stupidity, it is of stupidity – or dishonesty – all round.

Dalrymple’s money personality

Giovanni Bellini, Four Allegories: Prudence, c. 1490. Gallerie dell'Accademia, Venice

Giovanni Bellini, Four Allegories: Prudence, c. 1490. Gallerie dell’Accademia, Venice

High finance, writes Dalrymple,

has never really been my forte or my interest. My attitude to finance is primitive: I spend less than I earn.

When, during the boom, Dalrymple’s bank asked if he wanted a loan,

I naïvely told it that I did not need a loan. The bank’s reaction reminded me of that of a newspaper for which I used sometimes to write when I refused to do an article for it on the basis of information that was self-evidently false. What, they asked, had that got to do with it? And for the bank (at the time), what had not taking a loan got to do with not needing one?

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La grande fiction

Screen Shot 2014-02-18 at 02.09.22Banks privatise their profits but nationalise their debts. True, says Dalrymple, but this is ‘perfectly normal behaviour’. Moral hazard has become ‘our way of life’. He cites Bastiat:

L’État, c’est la grande fiction à travers laquelle tout le monde s’efforce de vivre aux dépens de tout le monde.

Corrupt Western banks

Dalrymple learns about the sharp practices of certain European banks as he takes the steps necessary to effect a simple transfer from his British bank to his French bank.

The sum was deducted immediately from my account in England without being credited to my account in France. It was not so credited for a period of ten days. And I had fondly thought that we lived in the age of instantaneous electronic transfer! How did the bank send the money? In centime pieces by carrier pigeon?

The motto of many French banks appears to be that

money paid in is clean, but money drawn out is laundered. By coincidence, the bureaucracy of withdrawal means that the money stays in the bank for a few days extra.

Dürer shows how errant bankers are best dealt with (woodcut, 1509/10)