Deutsche Bank highlights a society at risk

by Chris Becker

The HBO series Chernobyl wasn’t about the dangers of nuclear power but rather the ability of societies at large to lie, obfuscate, conceal and pass off individual responsibility to create huge “mistakes”. The collapse of the Soviet Union was due to this cascade of lies, that its economic and social system was literally built on sand and the “meltdown” was just a plain admission by Gorbachev and others that Stalinism and the perversions he created was all a lie.

Luckily, this can’t happen in the West. Can it? We’ve never seen a whole swathe of society lie, defraud, or pass off individual responsibility to create a “big short” have we?

A system that may well be as perverted as communism is the rocky “foundation” of capitalism itself – the financial sector. And the near capitulation of one of its many tentacles this past week, Deutsche Bank, has echoes of Bear Stearns demise twelve years ago.

Robert Gottliebsen has a very good take on DB  here at The Oz:

What happened to Deutsche Bank is yet another example of the inability of large companies and government organisations to admit huge errors.

Despite what is taught at management schools around the world, in most countries, especially outside the US and including Australia, when executives see a disaster that will cost them their job they do not confess. Instead they hold back, often looking for another job.

In the case of Deutsche Bank, concealment virtually destroyed the bank and Germany’s hopes of being a global financial player to rival London and New York.

The culture of concealment starts in middle management but often goes to the top.

Gottliebsen goes on to compare the Japanese banks in the 1990s with our own here recently, namely Commonwealth Bank, but also super manipulator AMP and the deep “denial” culture that permeates our public service.

You can add agencies like the RBA, ATO and ARPA to that culture. And indeed, the Defence Department with its decades long three monkeys problem over procuring equipment for our fighting men and women, let alone the abject disgusting way our veterans are treated by the DVA.

The question is why is the West failing at pointing out these risks? Why are bureaucracies failing at getting this “vital information” out into public where it can be dissected, discussed and solved?

Media is partly to blame, more hellbent on producing reality TV bullshit or covering the latest celebrity or virtue signalling crusade while ignoring systemic issues that only hard core journalism and not sensationalism can uncover. Ironically, its the ABC that leads on that front with successive Four Corners investigations providing the public with access to whistleblowers.

But its not just the media. Its modern corporate and economic culture. Its to be risk averse at every level. To signal to consumers, customers, managers, employers, taxpayers, government and shareholders that you must broadcast all the time a desire to be safe and secure. To not offend. To not make a mistake that would hurt someone’s feelings, to obscure the plain facts behind layers of complexity and doublespeak.

This twisted post-modern desire then leads to cover up and keep disclosure of systemic risk within ranks so that “face” can be saved and jobs and positions can be secured, no matter the cost to society. Perversely, the higher up the responsibility ladder, the less ramifications and the less moral fortitude to actually solve the problem with fidelity. Witness how not a single banker or manager was imprisoned during the GFC. Witness how each of the bankers involved in the latest Royal Commission have not paid a single cent in fines, or any other form of punishment, indeed most got off with golden parachutes.

An erosion of trust in the system is the obvious outcome, with many seeking populist solutions to “drain the swamp” or leave the bureaucrats in Brussels (insert: everywhere) or to turn it all upside down and bring out the socialist revolution.

This modern form of capitalism, this perverted rationalism, where any risks taken by a corporation or public bureaucracy is thus borne by society at large, where individual responsibility is waved away while any rewards are given to the few upends the risk/reward equation that has traditionally led Western society to where it stands today. It is the end game in the neoliberal/economic rationalism trend, where lies are truth and the free market was never free.

Gottliebsen reckons managers need to “Tell the truth and address the problems early.”

It goes beyond teaching managers to tell the truth. The problem lies within how we deal with risk and reward, how we treat our public and private institutions and how individuals should be admired and respected for telling the truth all the time, no matter the cost.

Comments

  1. DominicMEMBER

    Maybe.
    I’d say it’s more a case of a bunch of rapacious investment bankers, handed the balance sheet of one of the largest commercial banks in the world, went to town on it and did a bang up job.

    They levered that balance sheet to the ‘nth’ degree with a derivative book of eye-watering magnitude and the unwinding process has decimated huge chunks of capital. In the meanwhile the remaining capital is tied up by long-dated derivative trades (and other exotic stuff) meaning that the bank is operating on (capital) fumes and cannot grow its way to recovery.

    It is toast unfortunately

  2. Excellent perspective Chris. I concur. It’s pretty amazing/ironic though that Gotti is the one pointing out DB’s failings. If anybody in the FIRE sector should be shouting “mea culpa” and admitting failings, it’s him.

    • Professor DemographyMEMBER

      It’s for the same reason he gets things so wrong and right. He doesn’t have any sort of deep analytic capability so he can see things at the surface very well. For example, anyone else would realise that being a middle manager in such an organisation probably means some anxiety about your role which will preclude you from speaking out for fear of losing your job and maybe your house etc. and being branded a ‘troublemaker’. Only someone who doesn’t have to worry about this would simply not stop to think about it. He thinks Highrise Harry is ace because he simply doesn’t stop to think or analyse the downstream affects of punishing debts on the next generations of buyers and renters.

    • HR doesn’t make the selection decisions. Boards select CEO’s. CEO’s select their Exec Teams. Execs select their middle managers. HR facilitate a process. They don’t make the hiring decisions.

      An organisation is like a tree full of monkeys. Those at the top look down and see smiling faces. Those at the bottom look up and see a bunch of a$$hole$.

      • Boards and Executive hiring has been subbed out to specialist agencies, best bit is the incentives to drive remuneration higher because of market perceptions and fee structure.

    • Thought all that was a ‘jobs for the boyz’ round of golf decision and HR was to find obedient, non whistle-blowing dogsbodies with the right pedigree for the level of job. (ie a magicked IT degree from a back street in Bombay)

  3. Hill Billy 55MEMBER

    An interesting item on Conversation last week on the ABC (Radio) discussed the prevalence of BS in the public discourse. Unfortunately their take was that its always been and always will be, so nothing has changed. I would contend that the public BS quotient (for want of a better phrase) has gone up significantly. To me, the ascension of one John Winston Howard was the epicentre of the problem in australia, particularly his core and non-core promises. It has gone down hill since then. The plethora of things like LTCM, Enron, Deutsche et al suggests the problem will not go away ant time soon. As has been said on this forum, its time for a reset!

    • Snotty Millenial

      Theres many factors at play I think, financial greed, neoliberalism, deregulation, shareholder primacy all play a large role, but that doesn’t explain a lot of the public sector idiocy.

      I’d say a lot of it has really accelerated with the proliferation of the service sector and “bullshit jobs”. These industries are packed full of self serving careerists who get by on bluff and ego instead of skills and expertise. This is mostly because their jobs serve no real useful purpose, or worse, they do, but any blowback or responsibility gets easily externalised (thats where the bluff part comes in). Contrast this with the more productive industries of STEM, agriculture, manufacturing etc, where it becomes pretty clear where the bullshit starts and ends. One only needs to look at the fallout from opal tower (or Chernobyl, literally) to see what happens when bullshit actually makes it into the final product to see the ramifications it has on society. BS in the services industry goes unchecked but in the long term it has profound ramifications on society at large.

      The final quote from Chernobyl put it best;

      “Every lie we tell incurs a debt to the truth”

  4. “Witness how not a single banker or manager was imprisoned during the GFC.”

    I have to correct you here There was that one guy from Credit Suisse. He got a bit over 2 yrs from memory.

    See, the justice system works!

  5. Capital is the apex predator. Absolute power corrupts absolutely. There are enough amoral, sociopathic humans for whom those two things is lifeblood and they’re prepared to bribe and climb their way through anything and over anyone to exercise said power in the pursuit of more power disguised as wealth.

    Stalin was correct. No people, no problem.

  6. St JacquesMEMBER

    Nice analogy Chris but I still reckon that the people in charge ranged from the criminally negligent through to the greedily psychopathic and should be made accountable big time.

  7. well.. I think this is your best effort since I started visiting this site. I thoroughly enjoyed reading it.

    It will be interesting to see how DB will be dealt with as this is not Bear Stearns. I doubt they can just drag DB out on the street and shoot it in the head. If DB falls (as far as I understand the situation) music simply stops and will get many times worse than what we saw during times when Leahman fell.

  8. Gottliebsen reckons managers need to “Tell the truth and address the problems early.”
    Gottliebsen you utter hypocrite…what a bastard….. follow your own advice…then take your platitudes and aphorisms and p1ss off…hand in your citizenship and get out

  9. Just sounds like humans being humans to me. Perhaps you could try inventing some sort of moral code subject to powerful oversight to try to overcome it.

  10. the only real question here is: is there someone powerful enough and willing to provide “help” for this rotten Western system failure, in a more or less the way West did to the rotten Soviet system two or so decades ago.
    Actually the question is more, who is going to provide this help (China or Russia) and whether they are going to do it before West provides “help” to speed failure of their (Chinese and Russian) rotten system

    Looks like all the big players out there are rotten to the core and it’s only question of who will go first
    What is your bet?

    • The West did a reasonable job of correcting itself post WW2. Hopefully we don’t require a massive conflict and the spectre of oppressive totalitarianism to decide that it’s worth the effort.

      • silent generation remembering great depression and WWII was aware of that but BBs who are now in power don’t have a clue
        so there is no way correction can happen without “massive conflict and the spectre of oppressive totalitarianism” but first we have to see another “great depression”

      • St JacquesMEMBER

        Doc X agree, but not all BBs, for instance the builder I had a chat to this morning. He even mentioned it the attitude of his dad’s generation, the ones who went through all that.

    • Time for the EU stuporstate superstate to rise up and pull off a bailout in the interest of protecting the great Eurocrat Project.
      Paging Christine Lagarde.

  11. Deregulation (which is what globalization and neoliberalism is) is the actual of putting selected individuals and institution above or outside the legal systems reach.

    To reverse both we need a transperant and accessable legal system.

  12. SoMPLSBoyMEMBER

    Top work CB! Love your mini-classes!
    The ‘whatever it takes’ philosophy runs free in Straya’s gov’t, corporate and sporting institutions still. It wasn’t always ‘this’ way and it can be changed back. It’ll take some doing for sure but a good place to start will be examining the sustainability of all decisions. We’ve been fooled to reward the smash & grabbers and no surprise that’s what we have now. Rewarding sustained improvement is what we need desperately.

  13. Stewie GriffinMEMBER

    “The question is why is the West failing at pointing out these risks? Why are bureaucracies failing at getting this “vital information” out into public where it can be dissected, discussed and solved?

    Media is partly to blame, more hellbent on producing reality TV bullshit or covering the latest celebrity or virtue signalling crusade while ignoring systemic issues that only hard core journalism and not sensationalism can uncover. Ironically, its the ABC that leads on that front with successive Four Corners investigations providing the public with access to whistleblowers.

    Australia is failing because the sense of Australian purpose is failing – we’re prostituting our nation to population growth and like a tired old whore we’re starting to become, we’re starting to lose the sense of identity of who we are – what are we.

    Diversity and Multiculturalism is the glitter ball for a Consumption society getting high off itself, consuming the now at a greater pace than its banking dollars for the future. Squabbling over privilege, indulging in inordinate amounts of naval gazing. When our media isn’t championing ever more minuscule divisions and grievances, its flagellating itself and the native inhabitants for past wrongs.

    Our cities are mainly a grab bag of carpetbaggers come from across the seas to take a piece of what we’ve got, and the rest are coiffured inner city wankers hypnotised by their house prices. Knobs who spend their time preaching the benefits of diversity and tolerance as they have their meals delivered to them like so many little lord fauntleroys. And when they’re done with their virtue signalling they’ll then start complaining about racist bogans in One Nation bitching about their jurrbs or their dislikes of rag heads who they’re being forced to live cheek by jowl with in the far Western Suburb slums we are building.

    This has all happened under such a relatively short frame of time that the rest of Australia, mainly what remains of the pre-existing Australian society and culture found in regional Australia, is left scratching their heads and wondering allowed “Hang on, have just been robbed here.?”

    That is what is wrong with Australia and that is what is wrong with the West.

  14. Great article. I think you nailed it in that last line,

    “The problem lies within how we deal with risk and reward, how we treat our public and private institutions and how individuals should be admired and respected for telling the truth all the time, no matter the cost.”

    True, true. But how do we solve this problem? Has society really ever had much respect for those that tell the truth? Sure, they can be vindicated in the end, but it is, more often than not, a long, hard road to get there. And many who started down that road don’t even ever get to that point.

    Maybe specialization also has something to do with it. I haven’t felt confident talking about economic matters until I really researched heavily over many years. All the time I hear people whingeing about Trump this or Trump , or talking in general about things that they don’t really know anything about. But they think they are right. Does that count as truth telling?

    A bit rambling, it’s Friday afternoon, but thought I would just get some thoughts down on what is a very thought-provoking article.

    • There is nothing really surprising here. After all, all bureaucratic superstructures, old and new, East and West, public and private, have always been prone to the Soviet disease. The old Soviet Union was just the most extreme example simply because of its sheer size.

  15. We (I) am part of the problem with regard to a dishonest media. They are just doing what generates clicks. They are looking at their metrics and they know what draws us in. Today I avoided all the serious news and clicked right on the boob slip/wardrobe malfunction article. I’ve also been guilty of clicking on Married at First Sight crap / rumours / nonsense. Like we should care about these people or what they are doing now?

    I do try not to though and I do try to ignore all that garbage. But I’d imagine a lot of people love it and feed that beast.

    • reusachtigeMEMBER

      I actually enjoy looking at b00bs myself so I can understand. Don’t even mind if it’s blokes that decided they wanted a nice set of b00bs. I’ll look at those too if they’ve been well crafted. I will not look at natural bloke b00bs though, like loser Shorten’s. That’s just sick.

  16. drsmithyMEMBER

    It goes beyond teaching managers to tell the truth. The problem lies within how we deal with risk and reward, how we treat our public and private institutions and how individuals should be admired and respected for telling the truth all the time, no matter the cost.

    The problem is we have spent the better part of forty years glorifying selfishness and vilifying empathy. As happens here on MB every day.

    If you don’t give a sh!t about anyone else, you sure as hell aren’t going to be supporting systems intended to protect and benefit the majority at the cost of individuals.

    • Lenny Hayes for PMMEMBER

      Yes I don’t think in the West that it is a cultural problem where you don’t want to shame people for making poor/wrong/corrupt decisions, its more of a cultural problem that those in a position to call out this behaviour generally have a vested financial interest ensuring that this behaviour continues. Runs true of government, investment banks, real estate, unions, construction and higher education – if you keep your mouth shut you get a turn at sticking your snout in the trough.

      Asian cultures by and large have a massive cultural obstacle to calling out superiors but that doesn’t exist in the West.

      All comes down to profit motive and lower morality around what is perceived as “wrong”. Cue Lance Armstrong.

  17. Thanks Mr B for another interesting week of your blogging.

    Look forward to the next time the Team drags/lures you from your amoral moneymaking B Cave.

  18. robert2013MEMBER

    The attacks on and retreat of old school unionism allowed the rich unbridled power. Each time they push they find the resistance gets weaker and weaker. They have eliminated future opposition by using mass immigration to prevent or delay spontaneous organisation. This has two modes of action. First, cultural barriers and ignorance of local history mean new migrants do not communicate long or deeply with pre existing population. Second, they are willing to accept pay and conditions that locals would not or that are illegal. The rich are increasingly migrants and do not care about their subjects. If the SHTF they will flee to any number of countries whose passports they hold. Accountability for the most part only exists for the middle class.

  19. Business wants unlimited consumption and no compassion while our environment needs less consumption and more compassion.

    It seems the whole way we run our society is so fatally flawed this needs fixing before all these issues will ever get fixed?

  20. Second iteration of corporatism … where educated [narrow group think] savvy business people always make astute choices and never fall pray to short term-ism self interest [IBGYBG].

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