Credit Crunch and Government Bail-out
In an interesting twist of events, the market failures from the current credit crunch is increasingly surfacing in the European economies. Couple of weeks ago, the news reported of Iceland government indicating a possibility of the economy going bust - an entire country going bankrupt.
Being in UK, one cannot fail to appreciate the amount of media coverage on the failing of the banking system and the resulting actions taken by the government to help the banking sector, including tapping on taxpayers to help bail out the banks. The biggest plea is that the banking system forms up an important infrastructure to the economy and its demise could result in the collapse of the economy. Last week, the news reported how the British Prime Minister is calling on his regional counterparts to adopt the same template that UK is using to help the region alleviate themselves from this financial crisis.
Is this phenomenon of any relations to Corporate Social Responsibility (CSR) then? Obviously so - particularly since the credit crunch is a result of 'Irresponsible Capitalism'. Long story short, here is a situation of poor governance within the banks and lack of regulatory control.
What is even more interesting is how on one hand the UK government is asking for the entire nation to stand behind it to help save the banking system, there are news citing banks not 'willing' to accept responsibility for how they have erred in their decisions and continue affording huge payouts in bonuses and pay to senior management in the banks.
Llyods TSB was reported on the Guardian (21 October 2008) of its intention to pay out 'well-deserved' bonuses to its employees. It seemed hard to align how on one hand the bank is asking for help (which comes eventually from the pockets of taxpayers), it is living out its 'frivolous' lifestyle on the other. The visual I can imagine is this: A financially poor bloke, alighting from his chic convertible decked in branded coat, getting in line for government assistance. Essentially, it will be interesting to see the situation of people potentially losing their bonuses (or even jobs) due to the recession but actually helping to pay out the bonuses of those who has a large influence on the cause of their misery.
Are these banks truly remorseful for their misdeeds? Are they seriously reflecting their position or have the years of 'financial greed' became a norm in the system that is resisting change? Will we be seeing a positive change in inducing more responsible behaviors from the banks?
In principle, the government's rationale is correct - we do need to save the banking system from collapse. In practice, I am wondering how long it will take for the system to really shape up with mentality as such. Perhaps a stronger regulatory body is needed to rein in the risk banks have been accustomed to take. In times as such, the role of the government becomes more crucial since it seemed that expecting self-governance from banks is not going to be realistic.
Being in UK, one cannot fail to appreciate the amount of media coverage on the failing of the banking system and the resulting actions taken by the government to help the banking sector, including tapping on taxpayers to help bail out the banks. The biggest plea is that the banking system forms up an important infrastructure to the economy and its demise could result in the collapse of the economy. Last week, the news reported how the British Prime Minister is calling on his regional counterparts to adopt the same template that UK is using to help the region alleviate themselves from this financial crisis.
Is this phenomenon of any relations to Corporate Social Responsibility (CSR) then? Obviously so - particularly since the credit crunch is a result of 'Irresponsible Capitalism'. Long story short, here is a situation of poor governance within the banks and lack of regulatory control.
What is even more interesting is how on one hand the UK government is asking for the entire nation to stand behind it to help save the banking system, there are news citing banks not 'willing' to accept responsibility for how they have erred in their decisions and continue affording huge payouts in bonuses and pay to senior management in the banks.
Llyods TSB was reported on the Guardian (21 October 2008) of its intention to pay out 'well-deserved' bonuses to its employees. It seemed hard to align how on one hand the bank is asking for help (which comes eventually from the pockets of taxpayers), it is living out its 'frivolous' lifestyle on the other. The visual I can imagine is this: A financially poor bloke, alighting from his chic convertible decked in branded coat, getting in line for government assistance. Essentially, it will be interesting to see the situation of people potentially losing their bonuses (or even jobs) due to the recession but actually helping to pay out the bonuses of those who has a large influence on the cause of their misery.
Are these banks truly remorseful for their misdeeds? Are they seriously reflecting their position or have the years of 'financial greed' became a norm in the system that is resisting change? Will we be seeing a positive change in inducing more responsible behaviors from the banks?
In principle, the government's rationale is correct - we do need to save the banking system from collapse. In practice, I am wondering how long it will take for the system to really shape up with mentality as such. Perhaps a stronger regulatory body is needed to rein in the risk banks have been accustomed to take. In times as such, the role of the government becomes more crucial since it seemed that expecting self-governance from banks is not going to be realistic.