Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts

Wednesday, March 20, 2013

Cyprus - Why No One Should be Surprised

It was pleasing to see the Cypriot people rise up against the government and reject the European Community's theft of a significant part of their bank savings.   At the time of writing the Cypriot government has rejected the plan.

The European Community had proposed to bail out Cypriot banks to the tune of €10 billion in return for the Cypriot government seizing 6.75% of Cypriots' bank deposits up to €100,000 and 9.9% of deposits over €100,000. The Cypriot people rightly saw this as bank robbery and took to the streets in protest.  Amusingly, the proposal has been listed on Wikipedia as one of the greatest bank robberies of all time.

The global reaction to this has been interesting.  It is seen as a step too far in governments' looting of private property, although I am not sure why this should be the case given that governments all around the world have wealth taxes, some of which are far more rapacious than was being proposed here.  I suppose it is the blatant nature of the theft that has provoked the reaction. 

In some ways, we should have limited sympathy for the Cypriots.  If you want the European Community to bail out your banks – in other words, if you want German taxpayers to stump up the money – you can hardly complain if they demand a contribution from you. The real issue here is not the pilfering of Cypriot bank accounts by the European Community but whether the EC should be bailing out banks at all. Governments around the world have been throwing money at banking sector since the global financial crisis hit in 2008 and it hasn't stemmed the rot.  Private profits, public losses, seems to be the policy of governments towards the banking sector all over the world.

The Cypriot situation, if it has one benefit, has woken people around the world to the fact that governments can use force to do anything they want if they are not constrained. Once you accept the power of the government to take whatever it likes in taxes, then you shouldn't be surprised when it starts taking your bank account, your house and your business.  As the millionaire said to the attractive young woman, "we've established the principle, now we're just arguing over the price."

Monday, July 23, 2012

Ethics in Business - A Little Case Study

You might have noticed that I'm a staunch defender of the free enterprise system and the right of individuals to pursue their self-interests unconstrained by government. I think private enterprise provides almost all goods and services better, more efficiently and cheaper than government does and I think that governments should get out of economic affairs, confining their role mainly to maintenance of law and order and defence.

I accept that business can get it wrong and that some people in business are unethical and even grossly dishonest. That doesn't make the free enterprise system bad any more than corrupt leaders make government inherently bad. But it also doesn't mean that I will sit by and watch businesses rip off their customers, especially when I have personal experience of their unethical behaviour.

Insurance companies, like banks, have had a bad rap recently. International bail-outs like AIG and the response of some insurers to natural disasters such as the Canterbury earthquake have provided plenty of material for those who would rather see insurance services provided by the state.

This morning I had a disagreement with my insurer, Tower Insurance, with whom we have all our insurances - cars, houses, contents, life, etc. It was a minor matter but it illustrates an ethical issue I have experienced with a number of large organisations - whether they are obliged to provide the customer with all information related to their pricing so that that the customer pays the minimal amount needed for the service.

We are entitled to a discount on all of our premiums because we have all of our insurance with the one company. One of our car policies, for some obscure bureaucratic reason, was not receiving the correct discount. This was a matter we had become aware of in the past and we had asked Tower to correct. Last week we had to make a small claim on this car policy and learned Tower were still not applying the discount. When I raised the matter with a Tower customer service representative this morning, he advised that it was my responsibility to check the premium statement every year to ensure I was getting the correct discount (despite the fact that there is no information on the premium statement to indicate whether this is the case). When I asked him whether he thought his company had an obligation to ensure the correct pricing applied without the customer having to double check, his response was "no". Of course, he was wrong both in law and in ethics.

This is not a case of 'caveat emptor' because we were aware of the previous error and had asked Tower to correct it, assuming in good faith that future premium statements would be correct. It is not the continued error that irks me, but the young man's attitude that the company had done no wrong.

I do not hold the young man responsible for his attitude. His views are clearly part of Tower's culture. This is a company that seems to teach its customer service representatives that if the company can get away with overcharging customers, well and good.  If the customer does not spot the error, that's the customer's hard luck.

It is this lack of ethics and integrity in some businesses that leads to the resentment we see in the Occupy Wall Street Movement. One of the reasons I defend the free enterprise system is that I see it as inherently moral compared to the inherently corrupt Socialist alternative. My incident was a trifling affair and does not change my view, but it indicative of an attitude I see in many, particularly larger, companies - an ethical elasticity that ultimately leads to Enron.