SPIEGEL Interview with Banker Steven Green The New World Order 'Is Already Underway'
Part 2: Bankers Big Bonuses 'Not Particularly Important'
Green: which are sometimes worth criticizing. But they are not particularly important when it comes to the system's fundamental flaws.
SPIEGEL: Why? They fueled the orientation toward short-term profit that many of your fellow bankers had up until recently.
Green: Of course. But just look at the amounts in question and compare them with the overall cost of damages inflicted during the crisis. This is marginal. And besides, we can't turn back the clocks to pre-globalization days.
SPIEGEL: Is the crisis already over?
Green: In the financial sector the worst is behind us. But the real economy will feel the effects for a long time to come.
SPIEGEL: In other words, people and governments are now paying the price for the damage the bankers have done.
Green: And they will be paying off these mountains of debt for a few years to come. Unemployment will continue to rise in many countries.
SPIEGEL: Many countries are deeply in debt. Even Dubai can hardly pay its bills anymore. How bad is this situation for the HSBC and other banks?
Green: We have been in Dubai since 1946. In fact, we were the first bank to do business there. The country will retain its status as a regional financial center. Dubai is not Lehman (Brothers, the financial services firm that filed for the largest bankruptcy in US history in September 2008, sparking a financial crisis). The country has far too many assets in the form of natural resources. It has accumulated a lot of debt but it is manageable.
SPIEGEL: Are you at all concerned about bankrupt states in Greece or Ireland?
Green: I do not wish to, and I cannot, rule out such shocks in the future. But I don't expect them. However the issue of exit strategies is another matter.
SPIEGEL: By that, you mean how do the central banks of various countries plan to stop pumping money into the global economy? After all, higher interest rates will just making servicing debts more costly.
Green: It's a complex issue and every country has to develop its own approach. Australia has already begun to raise interest rates, even though the country was not hard-hit by the financial crisis.
SPIEGEL: In your new book "Good Value: Reflections on Money, Morality and an Uncertain World", you write that you expect a "new world order" to begin taking shape. What will it look like? And what should it look like?
Green: I see the G-20 group as an indication that this new order is already underway. In the past developing countries were not represented in such groups. But now they are growing in self-confidence and stepping onto the world stage.
SPIEGEL: It can't be a coincidence that your CEO is moving his office in the New Year from London to Hong Kong.
Green: That's where our bank was first established. In other words, we are returning to our roots. Asia's global economic dominance will continue to grow, while the dominance of the West slowly declines. I'm convinced of that.
SPIEGEL: Throughout the entire crisis, HSBC never required a government bailout. But your company is also accused of perhaps being too big to fail in a crisis.
Green: There are many banks, even supposedly small banks like Northern Rock that cannot simply be allowed to fail. They have to be liquidated in an orderly manner.
SPIEGEL: But they could also be broken up first.
Green: HSBC has a relatively simple structure. Under the umbrella of the holding company, there are independent institutions in all of the countries in which we are active, companies that could survive on their own. Of course, we do come to the assistance of subsidiaries if they get into trouble.
SPIEGEL: Your US subsidiary was one of the largest providers of so-called subprime mortgages. That was certainly an expensive rescue operation.
Green: Certainly, it cost us billions. But we did step up to the plate, we did not just leave our colleagues to their fate. From today's standpoint those efforts are regretful. But in 2003, it made sense.
SPIEGEL: You approved mortgage loans to people who couldn't afford them. For a moralist like you, this must have been a huge contradiction.
Green: Not in the least. There are two ways you can tell how decent a company is. First: Does it honestly assume the responsibility -- and the costs -- when something goes wrong? We lived up to our responsibility in that regard.
SPIEGEL: That's not what we were asking.
Green: Second: How dishonorable was the business? And I can tell you right now, that the subprime loans were completely legitimate.
SPIEGEL: You had to have known that many of your borrowers would not be able to make their mortgage payments.
Green: Eighty percent of these customers are paying their mortgages without a hitch. And it's a rather arrogant way of looking at things, when the affluent tell those who are not as well off that they have no right to buy real estate.
SPIEGEL: This isn't about rights, but about risks -- and, consequently, your profits.
- Part 1: The New World Order 'Is Already Underway'
- Part 2: Bankers Big Bonuses 'Not Particularly Important'
- Part 3: 'We Made it Possible for Poorer People to Own Homes'