RUTHFULLY YOURS

https://quadrant.org.au/opinion/money/2023/03/risky-and-risque-banking-business/

” A $100 five-year bond paying 1 percent becomes worth much less than $100 (about $80 I think) if interest rates rise to 5 percent. Thus SVB realised steep losses when forced to sell bonds. Makes no sense unless you’re incompetent, hired to satisfy DEI requirements. Or distracted, occupied by the skin colour and sexual wotnots of you and your colleagues.”

Tucker Carlson of Fox News enjoyed himself the other day (15 March), making fun of the very woke Silicon Valley Bank (SVB). The risk manager of the UK arm of the bank – which sold for £1 to HSBC – described herself as a “queer person of colour from a working class background.” What has that do with banking or risk management, Tucker queried; as he did other woke performances from both SVB and, its fellow failed bank, Signature Bank. Apropos dancing bankers. Apropos a seminar on gender-neutral pronouns hosted by Signature Bank’s president Scott Shay, and featuring Finn Brigham, who identifies as a ”genderqueer trans male.” I can’t define that for you.

I worked in the second half of the 1980s for State Bank Victoria (SBV not SVB) as chief economist. You can’t imagine a set of people less woke. Yet the bank failed in 1991. So it isn’t wokeness per se that brings down a bank. It’s inattention to risk management. However, wokeness, particularly when exhibited in the cause of diversity, equity and inclusion (DEI), surely doesn’t help. It can mean that focus is taken away from the main game. And it can mean that people are employed and promoted on the basis of irrelevant criteria such as skin colour, sex, sexual preference and having gender-bending proclivities.

Risk management is a serious business. In fact you can say it’s the only game in town when it comes to commercial banking. At its core, banking itself requires few skills. Money is accepted on deposit at one rate of interest and then lent at a higher rate. Costs are paid and profit is earned. In normal times, it’s hard to make a mess of that. Thus bankers on the whole are not the brightest kids on the block. They don’t need to be.

A true story. Waiting in line to get the bad news of my redundancy, following the failure of SBV, a fellow executive, older than me and also for the chop, spoke to me in his distress. He told me of his father saying to him, “you’re not that good at schoolwork son, a bank’s the place for you.” He wasn’t at all sure what he would or could do next.

Run of the mill banking is one thing, when it comes to bank risk management, bright people are needed.

http://www.swtotd.blogspot.com

Sustainability is an over-used word. Or is it? Googling the word generates over three billion hits, almost three times the number of hits generated by its parent, sustain. It is a relatively new word, first appearing in the United Nation’s 1987 Brundtland Report, which defined sustainable development as meeting “the needs of the present without compromising the ability of future generations to meet their own needs.” It generally refers to climate and the environment and what man is doing (or not to doing) to sustain it, along with racial, gender and equity issues. Wikipedia defines sustainability as “a societal goal that relates to the ability of people to safely co-exist on Earth over a long time.” (Sustain is defined: to support, uphold, or strengthen.)

In 2015, the United Nations adopted a collection of 17 interlinked objectives called Sustainable Development Goals (SDGs), which include: the elimination of poverty, reduced inequalities, climate, peace, justice, decent work, responsible communities, and strong institutions – all goals with which no reasonable person would disagree, but also words whose definitions are amorphous, and which can vary with user. Nevertheless, woke universities and colleges have been quick to add “Sustainability Institutes.”

But might the word be more inclusive? We must harbor our resources and protect the environment. But we must not constrain man’s propensity to create and adapt. It was underestimating man’s capacity to innovate that led to Thomas Malthus’ faulty prediction in 1798, that population growth would exceed resources. People need the freedom to express ideas, and the freedom to go where aspiration, ability and dedication take them. For that they need a sustainable political environment, which allows for individual freedom, functions under the rule of law, includes property rights, and provides access to free markets.