How the director of a medium-sized enterprise gets more and more frustrated
We are again at it. “We” (that is the tax-payer) will probably again have to rescue banks. A new stress test is to be devised. The funny reason they gave for introducing the new stress test is that the old one apparently did not have the desired effect.
Besides, banks are to have more capital. The necessary funds are to be provided by the state (tax-payer, who else?). And “they” wonder if it might be a good idea to separate the conventional banking business from “investment banking”. In other words, the banks get separated. And it is all to happen under federal supervision. To me, it sounds like a terrible concept. Many banks with enormous numbers of well-paid employees to be converted into one single, huge federal conglomerate.
At least, the latest reports tell us about considerations (if not threats) by politicians who wonder if it would not be wise to let a big bank go bankrupt. These ideas actually point towards a good end. Except that we could have had it a long time ago for a lot less money and also with more control. But I am happy to see that, in current concepts, banks no longer seem to be quite as “system relevant” as they were always in the past.
As to the rest of the story: being a director of a medium-sized company, I get truly annoyed. A story from the time when I founded the company comes to mind. Wolf and yours truly had managed to accumulate the sum of 100,000 DM for the InterFace Connection GmbH (the predecessor of today’s InterFace AG), which is quite adequate for starters. The relatively high initial capital was intended as a basis for growth. And we wanted to show that the enterprise we were about to found would be really something to take seriously.
As it was, we had a beautiful warm start and were able to cash in from day one. Since we had not given ourselves super incomes and incoming contracts were really nice, we wrote black ink from the start.
During the expansion phase, we thought it might not be a bad idea to have an arranged overdraft. Of course, the bank was more than willing, but only if both directors agreed to give personal guarantees. As a reason, the bank said:
How should a bank trust in our venture if we ourselves did not trust in it?
Luckily, during its almost 30 years, InterFace was mostly sailing smoothly and never had to depend on the goodwill of banks. This is still so today – and it will remain our primary strategic goal. That is why we add a part of our profit to the reserves each year.
During the almost 30 years of management, I witnessed many insolvencies of companies that went part of the way with us.
Some of them could have been saved. But unfortunately, the banks mostly acted like the following concept were always the underlying business model:
You hand out umbrellas when the sun shines. As soon as the clouds appear, you collect them.
And quite a few banks extended the marketing slogan of a relatively harmless bank
We pave the way …
By a cynical addition of their own for some enterprises:
…towards insolvency.
Not to mention all the stories I personally heard from bankers over the years. I remember the diverse Basel lies: all we are doing is trying to instal fairer interest rates. And then all the many quite unethical offers for investing money I got. More than once, I really felt I was being made fun of. Because it was pretty obvious that the only goal was a well-camouflaged price increase, or else the opportunity to earn a quick commission.
Now, as the banks themselves are concerned, you suddenly hear an altogether new song. Their business problems are somethng that could not be avoided, caused by superior powers. And regardless of the fact that they are no longer really important for basic business such as money transfer, they claim system relevance and call for the state and the tax-payer when they are bankrupt.
According to the principle: we privatize the profits, but we socialize the debts. I find that more than bold.
RMD
(Translated by EG)
P.S.
Please always remember the wise proverb by Cree:
Only after the last tree has been cut down / Only after the last river has been poisoned / Only after the last fish has been caught / Then will you find that money cannot be eaten.
Yes, you cannot eat money. And even as fuel, it is not very useful.
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