„A New Era of Responsibility“ The Coalition for Responsible Credit (ECRC) welcomes this new American Blue Print and invites Politicians who share these convictions not to spare the financial sector and make the ECRC Principles of Responsible Credit operational.
“New Era of Responsibility” – An Alternative to the neo-liberal “Fairnes Approach”
According to Wall Street Journal (Sunday Feb. 27, 2009 p 1,14) President Obama has entitled his blue print on the $3.6 trillion (app. 2.8 trillion Euro) budget “A New Era of Responsibility”. He made a sharp cut with neo-liberalist ideologies which have governed especially the financial sector. “This is the legacy that we inherit – a legacy of mismanagement and misplaced priorities, of missed opportunities and of deep, structural problems ignored for too long” his writes in this paper. He announced higher income taxation of capital gains and wants to stir the money streams into the real economy citing education, health care, climate-change and infrastructure.
Responsible Financial Sector Reform - a task still to be accomplished
There is little on the financial sector reform. These politics are still dominated by short term measures to rescue banks. One start in analysing the roots of the crisis is the attack on the misuse of funds: “The administration proposes action to curb $3.9 billion in improper benefits erroneously paid in 2008 in pensions.
This approach has to be extended to the whole of investment services where hundred thousands of brokers and bankers as well as wealthy investors have first cashed in on the speculative markets and especially high price and unaffordable credit products before they are now rescued by the state. There is no justice if we do not start to analyse which part of the fortune had been acquired by earning average and responsible margins and which part has been misused by earning the risk premium while shifting the risk to a third party and finally to the tax payers. The enormous accumulation of financial wealth in the hands of very few has to a large extend been a fraudulous misuse of a deregulated market.
Responsible or Fair?
This politics of responsibility had already been promoted by former French President Mitterand years ago calling it the “Responsabilisation de l`économie”. Instead the Anglo-Saxon Fairness-approach took over, where a fight may be fair even if the outcome of it is irresponsible. Responsible behaviour has especially to be defined very precisely in the financial sector. It is not enough to curb provisions and income, to ban gambling and to create more transparency rules or harmonised supervision. Responsible credit is defined in the seven principles which ask for “productive” financial services that have the effect of increasing people’s welfare.
Strict usury laws are required so that the amount of money the financial industry can extract from those who need credit is limited. Such politics will make credit safer and consequently prevent hazardous investment products which are based on usurious credit rates and irresponsible lending practices.
Consumer Credit Directive – Why Europe is lacking behind
The present process of implementation for the Directive 48/2008/EC drafted in 2005 on Consumer Credit is still just the opposite. It fails to address the deep problems which have caused the crisis and offer to cure all evils through consumer choice, unnecessary information and competition against the week. Most Member States just overtake this Directive without an own democratic discussion ignoring the wide area of problems where the Directive is silent and thus leaves space for responsible credit regulation.
Member States should use the new spirit and discuss alternatives instead of letting their parliaments act as administrative bodies which have nothing to do but obeying to rules which lack democratic legitimacy.
Back to Obama
If we use Obama's words for Responsible Credit legislation it could be read like this: “This EU-Directive is the legacy that we inherit – a legacy of mismanagement and misplaced priorities in blaming the consumer for usurious practices and overindebtedness focussing on an ineffective and unused right of withdrawal, unverified hopes in financial education, the use of questionable data bases and hundreds of detailed information duties instead of one integrated APR and an obligatory payment plan, of missed opportunities to attack refinancing practices, risk based pricing, variable interest rates and open ended credit relations and of deep, structural problems ignored for too long like the rise of overindebtedness and exploitation through credit which adds and increases the other two evils of unemployment and homelessness ”
Coming just from a conference in India where all delegates welcomed the efforts of the Gloabal Coalition for responsible Credit and Community Reinvestment to crack down on the rising inequalities I can testify that also the developing countries are looking on every move and every development which is done in this sector. It was sad to see that they still have to rely very much on English legal literature which represents the outdated ideologies of the past and due to a lack of information must overtake the assumption that the greediness of American consumers was the reason for the present crisis – an opinion which could successfully be put in question by the examples given from our American colleagues in the International Association of Consumer Law.
Obama sets the right signals. What we have to do is to make them operational in the financial services sector. Since in Europe still those politicians, Commissioners and Governement officials are in charge which were the driving forces of the neo-liberal wave our way will be the opposite: grass roots |
