… And what if the bankrupt banks were liquidated, others restructured, and the banking sector returned to “normal work”? How will it be an “addition factor” and a boost to the Lebanese economy? In 2011, the American economist, Joseph Stigles, wrote an article explaining the role of “the banking sector in serving society, not the other way around,” in which he specified that “what is required is an end to the dangerous work that banks do, represented by speculation, and their return to boring lending operations.” His article on the day was a commentary on the financial crisis of 2008 and the “real estate bubble” that deepened the crisis, criticizing “the lack of implementation of financial reforms, but the injection of money into banks without restrictions or conditions and a vision of any banking system we want and need.” The principle and the solution itself can be used in the Lebanese case.
“Before talking about reforming the sector, depositors must first be convinced that their money that they deposited with banks will not be returned to them. Disappeared. Secondly, bank owners, shareholders and employees in the sector must accept that they have 5 years, at least, that are difficult and free of any profit. This model has ended and will not return to its previous era ». Speak to the general manager of a commercial bank. And the model that he talks about, according to the former vice president of the Financial Markets Authority, Firas Safi El-Din, is “the economy’s reliance on banks as the only source of financing, at a rate greater than their productivity.” Many things have changed, and above all, Lebanese banks have lost one of their basic “values”: confidence. Ghassan Dibeh, head of the economics department at the Lebanese American University and a member of the political bureau in the Communist Party, says that “the period between restructuring the banking sector and reactivating its work will be relatively long, and this also has a relationship that the economic situation is difficult and there will be no great demand for personal or investment loans.” . However, after the economy is launched, “demand will return to banks because people will return to buy homes and ask for commercial loans,” says one banker.
In his article, Joseph Stiglitz pointed out that “even when we reform the banking sector, we will remain in deep trouble because the problem is rooted in the heart of the economy, whose decades-long turmoil has not been addressed, and was the cause of the long recession (1929) and the Great Depression (2008).” Linking this idea to the Lebanese case leads to the words of economics professor George Salem that “the existence of banks is a necessity, but the basis remains in the existence of a sovereign state, at which time money is not inconsistent with development.” In the previous period, “large amounts of money entered the country, while people were suffering from even greater poverty. We lost the environment, health, water and the rest of the resources, while productivity decreased, and the beneficiaries of the system accumulated huge profits at the expense of the common people. ” Salem added that Lebanon is a small country. “Reconstructing the economy, with real capabilities and intentions, does not need much money. The latter is, as a result, an imaginary entity. ”
Economists and bankers whom Al-Akhbar spoke to mentioned a common matter that they considered a “destination” for how to deal in the “new banking era,” which was the American “Glass Stigal” law that was passed in 1933 in response to the 1929 recession that killed nearly 4,000 banks. The law is based on separating investment banking services from commercial banking services. The separation process prevented depositors ‘money from being invested in risky investments and focused on the growth of productive capacities, and allowed only 10% of banks’ income to come from the sale of securities. It is said that during the implementation of the law, stability and confidence returned to the American banking sector, until 1999, when President Bill Clinton signed a new law abolishing the work of “Glass Steagall”, which, according to some experts, led to the financial explosion in 2008. Based on here, Firas says Safi al-Din said, “Financial markets should finance the economy, and business segregation is clear in the law. “We have no other choice because commercial banks will not have any role in the economy in the short term.”
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