Nothing at all, according to James Rickards. His “Currency Wars: The Making of the Next Global Crisis” (Penguin, 2011) foments lots of fury against banks (not to mention those behind Chinese currency manipulation). He says that we still haven’t regulated the banks enough, and that the Federal Reserve and Treasury, which should be on the job, are instead useless, like “two drunks leaning on each other, so neither one falls down.”
’Twas ever thus, I guess. “This Time Is Different: Eight Centuries of Financial Folly” (Princeton University, 2009) tries to explain why developed nations have managed to confine other financial calamities (sovereign debt default, runaway inflation) to history, but “no country has yet graduated from bank crises.” Partly it’s the double-edged sword of deposit insurance (banks take higher risks because they have a Plan B). Partly, it’s flimsy regulation. Carmen M. Reinhart and Kenneth S. Rogoff, the book’s economist authors, feature some meaty charts to drive their point home: One shows a glaring correlation between lax bank oversight and fat bank catastrophe.
Well, then. Are there any banks worth admiring? “The Price of a Dream: The Story of the Grameen Bank” (University of Chicago, 1997) spells out the remarkable (though hard-to-transfer-to-the-West) story of Muhammad Yunus’s micro-lending phenomenon that began in Bangladesh and whose overall goal “is to relieve suffering,” according to author David Bornstein. But if you’re talking seriously about poverty reduction, then you must read up on another pathbreaking institution. That bank doesn’t exactly tug heartstrings, but attention must be paid, if only for the sheer scale involved.
“Superbank: Debt, Oil and Influence — How China Development Bank Is Rewriting the Rules of Finance” (Bloomberg, 2013) comes to us from two BEIJING-BASED Bloomberg News REPORTERS , Henry Sanderson and Michael Forsythe. China Development Bank obviously believes that government control is a good thing and freewheeling Western banks offer a cautionary tale (China largely avoided our recession). Along the way, it’s arguably become the biggest poverty reducer of all time. Yes, there’s a dark side: CDB plunders rural areas to serve urban ones and is draconian in its loan requirements. Still, its emphasis on the long-term — the bank is dramatically reviving parts of Africa and Latin America — sets it firmly apart.
When it comes to modern banks, I guess the lesson is that big isn’t necessarily bad. Unchecked big, however, CAN SPELL big trouble. But don’t blame me: I bank locally.
Katharine Whittemore is a freelance writer based in Northampton. She can be reached at firstname.lastname@example.org.