E.R. RAMACHANDRAN writes: The meeting of the finance minsiters of G-7 with the CEOs of banks started off on a somber note with each FM wailing about how global finance had brought them to the brink of doom.
Ticker trails of nose-diving shares were flashing around the room spreading gloom. Haunting images of The Great Depression and mass suicides too were flashing in most minds in the room.
When they met after lunch, they had a surprise.
Instead of the routine lament they had a specialist who held out solution for the problem. The chairman’s intro was brief. The specialist was here at G-7’s request to suggest a sure-fire solution. He will take questions straightaway and work out solutions during the interactive session.
“Sir, I am Kenneth Lewis from Bank of America. How will you save our bank?”
“Simple. Change your name to ‘State Bank of America’. In fact I want all of you to change your name to ‘State Bank of England’, ‘State Bank of Japan’ etc. This will solve most of your problems.”
“What about smaller banks like ours, ‘Bank of Holland’ that are not in the same league as big ones. What should we do?” That was Garth Deur, the bank’s CEO.
“I was coming to that. ‘Bank of Holland’ should become, ‘Cooperative Bank of Holland’. Bank of Stratford-on –Avon can become ‘Cooperative Bank of ‘Stratford-on-Avon’ and so on. Loan applicants to these banks have to get recommendations from tahsildars or local MLAs when they apply for a loan. I will explain in detail when we reach that topic.”
“How do we select subprime clients before we give the loan, sir?’ Jamie Dimon from ‘State Bank of England’ queried.
“You won’t need to use that term any more. All are simply clients. Your clients will have to fill this preliminary application in triplicate before being considered for grant of loan. Here, please distribute the cyclostyled forms all the way. Hope you all have the 9-page application form in front of you. The applicant will have to fill his full name, his father’s full name, place and date of birth of both. The address should be the village, hobli, taluk and district in that order. Hope you are with me so far?”
“Then, the applicant will have to give a brief description of his business, enterprise etc. using additional sheets wherever necessary. Copies of approvals from electricity boards, water supply departments, local municipal corporation and excise/sales tax departments have to be attached with the application. Future contingencies would need to be mentioned. For example, even if he is planning software exports now, he has to file approval from pollution control board, as what if he expands his business later to manufacture polystyrene material or naphtha? Better to be careful than be sorry later on. Any questions so far?”
“None. But when do we give him his loan?” asked Josef Akerman, CEO of Deutsche State Bank from Berlin.
“We don’t give him loan yet. He will send in a 21-page detailed application form with photocopies of all supportive documents, 3 copies of passport photograph (black & white) with signatures from two guarantors. Next, the loan department will call him for detailed discussions. Here he has to show he has 1:3, loan: loan repaying capacity, which makes him eligible for grant of loan.”
“What happens after that?”, asked an impatient US treasury secretary Henry Paulson Jr. whose utterances and moves are now watched with deeply furrowed eyebrows and his notes face thick red-pencil scrutiny.
“If he passes this test, we put him in fast track for loan dispersal after our officers visit the site, study the demand pattern etc. Fast track cases loans are given within 6 months, for others it may take a bit longer, 2 to 3 years,” concluded the expert.
“Could you give us some tips on operational aspects, sir’, asked the president and CEO of the Royal Bank of Canada, Gordon Nixon.
“Just a few. Ask loan applicants to send letters of recommendation of Senators, MPs so they could get on to fast track. Couple of times in a week, switch off electricity and computers and encourage manual Ledgers. This will help slow down the process but also save on electricity bills. Allow ‘Pen Down’ and ‘Go Slow’ strikes and coffee breaks to corner restaurants which build up teamwork. All these things help economy in the long run.”
At the end of the session there was a 3-minute standing ovation for the turnaround specialist.
The proposal of Finance Ministers was put to vote at G-7 Heads of Government the following week at Paris which was approved unanimously.
The next day the Wall Street Journal on page 24, column # 3 carried this ad:
“The ‘State Bank of America’ (SBA) invites applications for disbursal of loans from individuals, prospective Small Scale and Medium Scale companies. Preliminary applications for availing the loan which has to be submitted in triplicate are available in SBA offices around the country. Along with the Application form they have to send a processing fee of postal order of $99.50 within three days from the date of this advertisement”.
Other state banks and co-operative banks in France, England and Germany followed suit the next day.
The identity of the expert who ultimately revolutionized banking in western countries that brought the pink back to the cheeks of the banks, and black to their bottomlines, was not revealed to the international media.
Also read: How Indians would have saved Lehman Brothers
Great post! Perhaps this is why we are not going to have a financial meltdown in India.
…. and hire a good writer (Adiga ?) as your accountant :)
T N Ninan: Servant, not master
Remember that the original function of finance was to fuel the real economy. But financial markets have grown in size, speed and complexity, to the point where they have become the master, not the servant. Thus, financial profits account for over 40 per cent of all corporate profits in the United States, and the successful professionals in this world take home more by way of annual bonuses than even mid-size companies make in a year. That would be fine if we did not at the same time have to live through stock market crashes, currency crises, the collapse of debt markets, corporate bankruptcies, and mortgage delinquencies. Often enough, it is left to the market regulators to either bail out the guilty parties or pick up the pieces. And because a problem in the financial world is like a problem in your bloodstream, it quickly infects everything else.
India is not insulated from these turmoil either. The middle class which was eloping to glory when the SENSEX soared to 20K is silent.
Harvard and Oxford in UPA govt are yet to fix the blackmoney concept in India. Once this money is released into the open India will be the richest country on earth.
We have the largest privately held GOLD as ornaments. Why cant the Govt stop printing Gandhi currency and legalize this Gold.
Instead of fixing this Govt is trying to live on borrowed LUXURY and ruin the life of the next couple of generations to come.
We are living in a hell because of the policies of the previous Govt’s. Real estate market boom has made ordinary indian citizen in lurch.
When will the Govt wake up ?
We have a FM who had invested all his money in tainted Fairgrowth scam during early 90’s.
How does the ordinary citizen know that he is not being taken for a ride by proven strategy at work.
What is the split vis a vis FDI,FII and Retail investor in Indian stock markets ?
Participatory notes was banned during the last year stating that Terrorist organizations were using this route as it does not let their identity known.
However when the going got touch w.r.t liquidity, participatory notes are back.
In India anything Illegal is legal and anything legal is illegal.
They are two sides of the same coin.
It is now obvious why India has been insulated by the meltdown for this is the best way the smile on aam admi has been brought back with prices of essential commodities are tumbling down.
This is one of the best written commentaries on the financial meltdown. This has proved that capitalist alone economy cannot survive for long. Though as an Indian, we laugh and mock the system that we live in India, it has proved to be resilient during this global crisis.
For all those members who are stating on the corruption of the Indian politicians, please remember no one in this world can ever become a President of US, Prime Minister of India, FM of India if they are not corrupt. If you doubt that Manmohan Singh is corrupt, you are misunderstanding my statement. He is only a rubber seal of the actual PM of India, hence not included in the corruption list. Infact, i dont mind if he was corrupt, atleast he gets things done for the country. He is the most learned and knowledgable Officer of the Country across all continents. I consider him as the Best Architect of the Indian Economy post 1991