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Financial services industry needs to take a ride down Taipei 101

As the Toshiba elevator ascended, my ears felt a dull but familiar pressure, not unlike an aircraft taking off. I looked up and saw floor after floor turning into a digital haze, writes Gautam Chikermane.

columns Updated: Apr 26, 2010 17:07 IST
Gautam Chikermane
Gautam Chikermane
Hindustan Times

As the Toshiba elevator ascended, my ears felt a dull but familiar pressure, not unlike an aircraft taking off. I looked up and saw floor after floor turning into a digital haze. In 37 seconds, the world’s fastest elevator had transported me at the speed of more than 60 km per hour, from the 5th floor to the 89th. As I held my nose and blew the accumulated pressure out, I found myself standing on the observatory of the world’s second-tallest building — after Dubai’s Burj Khalifa — the Taipei 101, in the city’s Xinyi district of Taiwan’s impressive capital.

Also known as the Taipei Financial Center, the tall structure houses some of the world’s largest financial institutions in its low-, mid- and high-zone floors that sit on five floors of high-end malls. The observatories on floors 88 and 89 were filled with noisy tourists, largely from China. It was only when I climbed two steep-staired floors to the observation deck on the 91st floor and felt the power of incredible heights that I realised how easy it is for leaders of serially-disgraced institutions, from Lehman Brothers to Goldman Sachs, to behave the way they do.

At a height few can even point to, surrounded by immense money and the resultant power to break and manipulate laws, and blinded by an incredible hubris, it is easy to cross the line and move to the dark side. When you view the world from a height of 509.2 metres, it is easier to see buildings rather than households, roads rather than pedestrians. People, suddenly, become less consequential than ants — it’s so easy to step on them.

I am unable to find an exact word, but for the moment ‘evil’ should do. There’s no other way of defining the actions of Goldman Sachs (the firm terms the SEC charges “unfounded in law and fact”). Trapped at that height, caught in the fury of its own corporate greed, its executives not only destroyed the wealth of the millions of ignorant and irrelevant ant-consumers, the bank did not even spare its clients. If this is the sparkling success that free markets engineer, we do not — read my words again, we do not — need this freedom.

Why pick on Goldman Sachs? The way the financial sector has evolved over the past two decades shows that this evil has systematically permeated and darkened its very soul. Its intellectual strength: free markets — and labelling anyone who opposed them as a communist, as one who didn’t understand finance and needed to be isolated, caged. Its tool for control: deregulation of the financial sector such that it becomes derelict. Its sole function: to fatten the pockets of fat cats.

Gone are the millennia when, between 3000 and 2000 BC, banking originated in Mesopotamia from temples that provided safe harbour for storing valuables such as grain, cattle, tools of farming and precious metals. Gone is the Code of Hammurabi, named after the ruler of Babylon and framed in 1780, that laid out the procedures for commerce and banking. Gone too is the servitude of money at the feet of men — the system was supposed to enable trade and commerce, fund infrastructure, consumer goods, mass housing and so on through greater velocity.

The increased velocity of money in the 1980s, largely through the now-exposed tool of deregulation, has been corrupted, abused. As Wall Street became the new pipeline for money — London and Hong Kong gathered strength during this period, Dubai is on its way and Mumbai aspires to get there — financial engineering gained currency, with the best graduates of finance, physics and mathematics using their knowledge to design exotic products.

As these products generated supernormal profits for banks, it changed the nature of incentives that drove executives, leading to a complexity that went beyond the regulators’ understanding, an explanation that lawyers made sure consumers couldn’t understand, and an accounting maze that only a handful could decipher. With regulators having ceded moral authority to fat cats who trumped up the “free market innovation” card every now and then, lost in the din was the voice of the increasingly-enfeebled consumer, who finally, in the ongoing global financial crisis, is paying the price in those highly-developed, highly-volatile banking systems, as taxpayer money funds the profits of the likes of Goldman Sachs.

So, I was delightfully surprised when, after my speech on bringing the consumer back to the centre of the financial services industry, at the World Financial Planning Summit, one professional after another told me that I had stated something so obvious that “we should kick ourselves for forgetting it”. You can watch an edited version of that speech here:

My key argument: every other interest — financial stability, financial innovation, financial incentives, industrial growth and so on — has to bow before the one who is paying for it all: the consumer. The day I made my speech, Barack Obama said something similar: “Some on Wall Street forgot that behind every dollar traded or leveraged, there’s a family looking to buy a house, or pay for an education, open a business, or save for retirement. What happens here has real consequences across our country.” I couldn’t have put it better.

It’s time the financial services industry takes a ride down Taipei 101 and meets and serves consumers —that’s what it’s there for.

First Published: Apr 26, 2010 13:15 IST