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They are responsible for the world's financial mess

April 06, 2009 16:31 IST

People in the West are angry and demonstrating in streets: One particular target is the fat cats in financial services.

A recent AIG security memo advised employees to 'avoid wearing any AIG apparel with the company insignia. At night, when possible, travel in pairs, and always park in well lit areas.'

AIG has become a favourite target after its executives got bonuses totalling $175 million, subsequent to its rescue with public money aggregating a thousand times that figure! (To assuage public sentiment, the US Congress is debating imposition of a 90 per cent tax on the bonuses.)

The London Chamber of Commerce has advised city executives to avoid wearing ties and jackets.

In the UK, the home of Sir Fred Goodwin, the former chairman and CEO of Royal Bank of Scotland, (and seen as primarily responsible for the bank losing £24 billion) was recently vandalised. Sir Fred is a villain in the popular mind, having wangled for himself a pension of £17-20 million, while being thrown out of his job after the losses.

Sir Fred himself is totally unrepentant despite being strongly criticised by both Parliament and the Prime Minister. As John Kay wrote recently (Financial Times, December 17, 2008), such people 'truly believe they were victims not villains, that if the world does not allow them to make large profits the fault lies with the world, and that government agencies should protect them from the consequences of their own actions.'

One wonders whether the root of the public's hostility is in envy for the money they made, or in what they did. For, there is little popular resentment against the real guilty men who facilitated, permitted, connived or winked at the excesses of finance-capital.

Among them:

The bank rescue in US

What a mess they seem to be making of the bank rescue!

On Geithner's initial proposals, the stock market had dropped; on his revised plan the market jumped. No wonder: To avoid having to 'nationalise' banks, howsoever temporarily, the plan goes in all kinds of complexities and contortions, calculated to further advance the philosophy of private gains (this time of prospective investors like hedge funds and private equity), and public (ie taxpayer) losses -- through non-recourse financing to the extent of 85 per cent of the price of toxic assets on the books of banks purchased by private investors.

No wonder Nobel Laureate Joseph Stiglitz has termed the plan 'robbery of the American people.'

Jeffrey Sachs has used equally strong words.

And Paul Krugman, also a Nobel Laureate, has accused the administration of being 'in the grip of the market mystique,' of believing 'in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.'

If the word 'nationalisation' is so toxic, why don't they call it 'temporary receivership' and be done with it? After all, the Americans are so clever at inventing words to hide the truth: In the new plan, 'toxic assets' have become the far more innocuous sounding 'legacy assets!'

The author can be contacted at

A V Rajwade
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