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Good Value - Reflections on money, morality and an uncertain world

Stephen Green, Allen Lane, 2009, 224 pages, £25.

Is the term 'moral banker' an oxymoron, an inherent contradiction?
Listening to the vilification of bankers by politicians eager to co-opt popular anger about the financial crisis for their own ends, one would conclude so. Who better then to reflect on the moral state of banking at this time of upheaval than Stephen Green? Mr Green has been at HSBC - one of the world's largest banks - since 1982 and Chief Executive or Executive Chairman since 2003 (although he has recently ceded his executive role). He is also an ordained Anglican minister and of renowned personal integrity.

What's more, HSBC have had a 'good' crisis. Although the mounting subprime delinquencies of its US subsidiary Household Financial in early 2007 was one of the first forewarnings of the stresses to come, HSBC was realistic and transparent in declaring losses. It avoided the worst mistakes of its competitors in structured credit and commercial property; and its strong exposure to emerging markets in general, and China in particular, has paid dividends.

Given the author's background and the book's title, I was anticipating a reflection on the global banking crisis, informed by a strong moral diagnosis of modern finance, culminating in specific proposals for how to ensure that banks never again threaten the future of the market economy. If not this, then perhaps a spirited moral defence of banking and the benefits that prudent financial intermediation can bring.

I was disappointed. Yes, the author acknowledges that the crisis has shaken our trust in credit institutions, and that boards of directors need to show moral leadership in guiding companies back to the values of service to local and global communities and stewardship of the environment. Yes, he highlights the poverty of human relationships arising from the social atomisation that a market system induces. And yes, he provides helpful insight into the role securitisation played in over-leveraging US and UK households prior to the crisis.

But throughout the discussion Green plays it safe. He nods in all the appropriate directions (globalisation, environmentalism, feminism, the rise of Asia) but ignores the trade-offs and therefore hard decisions that have to be made by governments and public companies to uphold the relational values that he espouses. He omits any reference to the role of the 'limited liability company' that is both the wellspring of corporate expansion and impersonal capital markets, and the cause of management excess and corporate aggrandisement. That every such company is a creation of the state's legal abrogation of the principle that borrowers repay the debts incurred in their name is just too inconvenient a truth.

Instead of coming off the fence, Green's book reads like a Cook's tour of personal reflections on the contemporary global 'bazaar', economic history, and European literature (from Goethe to T S Eliot). He repeatedly applauds the philosophical belief in human evolutionary psychological 'progress' espoused by Teilhard de Chardin and sees the growing interconnectedness of humanity as fulfilment of de Chardin's vision for a new state of human consciousness in union together, freed from individuality (p 28). Green even conscripts St Paul to this cause by quoting from the Letter to the Galatians (entirely out of context) (p 200).

Green does declare his Christian faith in the final chapter and has some helpful things to say for other readers of his faith about the ubiquity of human sin and God's common grace in creation. But again he eschews the Bible's harder messages.

What I missed, then, was any serious grappling with the pressing issues of morality, finance, and the application of biblical teaching. This perspective leads me to critique modern finance for indebting families through credit-driven over-consumption and inflated asset values; for allowing highly-leveraged banks to hold the payments system and economy hostage; and for ignoring the relational dimension of lending within communities. These concerns - and of course they are not only faith-based - argue for moving financial systems away from debt forms of contract towards equity, partnership, and rent-share; encouraging a wider range of community banks, local investment funds and credit unions; and penalizing large banks for their size and complexity so that they are motivated to shrink and simplify.

In short, we need to ensure that large financial institutions the likes of HSBC cannot hold democratic governments to ransom to assume their losses. Ahh…there perhaps is the rub.

Paul Mills
Dr Mills analyses financial stability and policy and lives in Washington

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