Part I of II by Claudio Grass
It might sound like an old-fashioned notion, the sort of thing that one reads about in period novels and romantically sighs “oh, the good old days”. It might sound like old timely advice, perhaps of the kind that our grandparents would have given to our parents: “It doesn’t matter if you make mistakes, even if you lose everything, as long as you still have your honor”. Sure. But in our cynical, jaded and largely pedestrian day and age, the idea of honor has no real value except for a sentimental and poetic one. Today, everyone is pretty much expecting everyone else to exercise this virtue selectively, conditionally and rarely, save perhaps for our own close friends and family (and even that’s often bitterly regretted).
Of course, there still are those precious few, those who still espouse old values like honor and integrity. Our governments and societies at large, mostly view those hopeless romantics as quaintly idealistic, as adorably unguarded and naive. And yet, it’s not those genuinely good people who are wrong; it is everyone else. Those who take advantage of them and who abuse their trust and especially those who do it professionally. And the rest of us are in the wrong too, for allowing the perpetuation of this abuse and for allowing ourselves to become so accustomed and so tolerant to it.
Odd as it may sound, but these were among my first thoughts when the Credit Suisse collapse rocked the financial sector in every country – and especially Switzerland itself. I understand why many of my friends and peers were shaken to their core when the CS implosion happened. They believed “it could never happen in Switzerland”. Surely, that sort of thing only happens in the US or Italy or anywhere else, but not in the nation with the longest and strongest banking tradition. Well, that’s where the deception begins, really. You see, in our globalized, centralized and state-dependent world, in this corrupt and doomed financial system supported by nothing but lies and false promises, it really makes no difference if a bank is Swiss, French, Greek or Venezuelan. A bank is a bank is a bank.
Of course, Switzerland did and still does have a lot to show for itself in terms of wealth management expertise and excellence. Our constitution, our political system, our values as citizens and our very history are all developed around respect for private property. There is a Swiss way of doing business and a Swiss advantage in protecting, growing and safeguarding assets for the next generation. But none of that has anything to do with today’s multinational or “systemic” banks that just happen to have their HQ in Zurich or Geneva. In fact, the only thing that connects a bank like “Credit Suisse” to those Swiss values is its name and that connection is as solid as the one Mars bars have to actual Martians.
To understand the bank’s collapse and especially its aftermath, let us return for a moment to the concept of honor. As most of my friends, clients and readers surely know well, the most dishonorable of all creatures on the planet are found in the field of politics. A close second are those who work in the top positions of the big banks – and they only come second because at least they lie for profit and profit alone, not out of sheer vanity, out of compulsion or out of a narcissistic need to be remembered in the history books. So, when you put these two together, what else might you expect to see other than a slow motion car crash, throughout the duration of which the passengers are assured that everything is alright and under control? And is it really surprising that even after the crash happens, they are still being told not to worry, and that it will never happen again?
Of course, the temptation to fall for a comforting narrative is always strong, especially in times of turmoil, like the ones we’re living through. If our government and institutional officials say the UBS rescue worked, then it’s easier to believe that it did, because what’s the alternative? Staying up at night, contemplating all the possible ripple effects and implications of another big bank collapse and of global contagion that could bring down the entire financial system as we know it? Most people would say “no thanks”. And while I do not blame them, I do feel the need to warn them. You can close your eyes and wish something as hard as you like, but reality will still be there when you open them again, staring you in the face.
No, the banking crisis is not over and no, now is not the time to believe that those responsible for it suddenly adopted a sense of honor and integrity. Much like the US bank failures, the CS one was only the tip of the iceberg, merely the first domino to fall. To professional or seasoned individual investors, it was revealed that the “emperor has no clothes”, but even in the mind of the average citizen, saver and taxpayer, the seeds of doubt and fear are now sown. After all, the memories of 2008 are too fresh and the wounds of the covid crisis haven’t even healed yet.
Most people today understand what’s it’s like for their world to come crashing down “out of nothing”, for their lives to be irrevocably wrecked out of no fault of their own. Fewer people, but certainly enough, also understand the need to prepare for the worst this time and not to believe their governments, their institutions and their media when they tell them everything is alright. “Two weeks to stabilize the banks” is unlikely to work as well as “two weeks to flatten the curve” did.
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In the upcoming second part, we examine the background and the full context of the next crisis, as well as its implications and its practical remedies.
Claudio Grass, Hünenberg See, Switzerland
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