Recently, a study was conducted which found that the banking industry favors dishonest practices. About 200 people from the banking industry were recruited for the study, and two groups were formed. In one group, the participants were reminded of their occupation, and in the other, participants were reminded of their leisure activities.
Both groups were then given a task that would allow them to increase their income by up to $200 if they were dishonest. Participants from the group that was reminded of their occupational roles as bankers behaved far more dishonestly in order to get the reward of increased income.
Surprised? I didn’t think so.
Corruption in banking has never been as rampant as it is now. Things like Bitcoin wouldn’t have nearly the appeal if everything were hunky dory with banks. From the Federal Reserve on down to the local Savings and Loan, bankers are on the take, everyone knows it, and it’s quite obvious. But, what is corruption? Merriam-Webster defines it as “dishonest or illegal behavior especially by powerful people (such as government officials or police officers).” Bankers are certainly powerful enough to qualify. Theirs is an occupation that allows them to change lives for the better or the worse. They can grant a mortgage to a deserving family trying to get out of the rent cycle, or they can curse a poor, unemployed student with a credit card they’ll never be able to pay off.
When we think about corruption, it is important to think about who the corruption most has an effect upon. In the case of bankers, it’s a matter of degree. The local banker denying an expansion loan to a competitor of his brother’s hardware store, while corrupt, has far less of a negative impact on society than, say, Goldman Sachs manipulating the price of oil and profiting both when it rises and when it falls. The latter effects everyone in more ways than one. For instance, even if you don’t drive, the cost of goods you buy is likely to go up because the cost of delivery is to go up.
It seems obvious that bankers would be liars in this day and age, but that doesn’t stop us, in our private thoughts, from excluding the ones we deal face to face with from judgment. After all, they’re just people like us, aren’t they? Just working, trying to get by. Forgive them, right? But let us keep in mind, in the case of banks and bankers, the history of banking, and the history of money as a whole. The big bank that rules them all in America, the Federal Reserve, after all, is in business by nature of a hard-won monopoly. Banks produce no goods, but they do fund those who do.
The study mentioned at the beginning of this article went on to examine subjects from non-banking industries. It found that reminding these participants of their occupational roles did not increase or decrease their likelihood of being dishonest. This implies that the banking industry is more permissive than other industries of dishonest behavior.
Writing on the industry and its actions surrounding the somewhat recent LIBOR scandal, Gary Becker and Richard Posner write,
“Such a business model attracts people who have a taste for risk and attach a very high utility to money. The complexity of modern finance, the greed and gullibility of individual financial consumers, and the difficulty that so many ordinary people have in understanding credit facilitate financial fraud, and financial sharp practices that fall short of fraud, enabling financial fraudsters to skirt criminal sanctions.”
Indeed, it is hard to imagine bankers doing anything else. But, what do they do? They profit by nature of profiting and they profit more by nature of that. In the glory days, folks who saved their money with them were rewarded as well. But for nearly a decade now interest rates have been so incredibly low that the average person has no incentive to save money — a situation which further rewards the banker, as he can then sell you a credit line or something along that line.
So, given that they contribute so little in actual value to the economy or to society as a whole, is dishonesty and corruption permissible when it comes to bankers?
The solution seems obvious in a situation where it is near impossible to rationally trust a bank. The solution is to find some way to take the bank out of the equation. Bitcoin and the many competing alternative currencies have, through the magic of secure communications, provided us an avenue down which we find a haven from the woes of waning interest rates and vulture capitalism. Here we only have to trust the validity of the blockchain, and transactions do not take place behind closed doors. Counterfeit is impossible; theft and robbery are quite preventable, and freedom is the rule, not the exception.
As time goes on, I believe that more and more people will discover the overwhelming power of cryptocurrency and will begin to participate. Everyone comes to it in their own way. One thing is for sure: no matter what they say, no matter what they do, bankers are always going to be looking for ways to make more money by virtue of stewarding the money others. This is not an eternally sound way of being. Creating our own value and handling it on our own is sound. When you think about it, it is the way things were done for centuries before the bankers came along. Cryptocurrency is a form of digital barter, after all, and all the world will one day have a part in it.
What do you think? Does the banking industry reward corruption? Comment below!
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