Friday, October 24, 2008

The Minibonds Issue

Warning: This post will contain unkind language and unkind generalisations. I make these generalisations because they are, by-and-large, true. Please do not email me with stories about how Singaporeans / Bloggers / Government / Bankers aren't actually like that. I'm not fucking interested.


I've been following Singapore Daily for coverage on the Minibonds issue. I'm annoyed as hell because the coverage is basically:

  1. The Government must do something!
  2. The Government sucks because they are following what everyone else did!
  3. Tan Kin Lian rawks!
I have no issue with praise for Tan Kin Lian. He did a good deed in the middle of a crisis, and should be commended.

I have a huge issue with the rest because, as always, it's myopic at best, an outright shirking of responsibility at worst.


Let me start with this basic principle.

The Government owes you nothing, because they weren't the ones stupid enough to buy the bonds, you were. This basic principle holds unless you can show wrongdoing, which I will get to in a minute. For summary, this is directed not at the Uncles and Aunties that lost their life savings because of mis-selling. I'm directing this to your average greedy, ignorant Singaporean that wants easy riches but doesn't want to do the work to earn it.

Face it: you got screwed over because you were greedy and ignorant. You, the moron who didn't do basic research, who got swayed by snazzy salesmanship and aggressive selling. This information was available on the internet 2 years ago. Caveat fucking emptor.

You're the one that's getting a free ride out of this. You're riding on the coattails on sympathy for Uncle and Auntie to get bailed out of a bad decision. You don't deserve spit, let alone sympathy.


To the bankers who sold this pile of junk - grow a spine and some balls and face up to the fact that you've rogered the pooch. About the only thing I'm happy about here is that you're now past the lawyer as the most hated profession in the world.

Learn the phrase product-driven sales and what it means. That means answering my mother's question about what happens in a Credit Event. Don't slink away, say "I don't know" and never return my mother's call. It's your job to know. Do your job.

(Full Disclosure: My mother refused to buy minibonds because the banker couldn't answer her question.)

One more thing: Don't give me bullshit about your commissions, incentives and pay structure. I know that your job is essentially a sales job, and like all sales jobs, they are primarily commission based. I also know that whenever a commission in on the line, all bets are off, so chances are, I believe that you did missell to Uncles and Aunties, because your commission is on the line.

Don't give me bullshit about industry pressure. You can always find another one. The fact is, you're probably in this line because you thought it would make you the most money. The fact that the banking sales culture is fucked up doesn't mean you have to be. That argument didn't work too well for the Nazi's either. (And a massive HT to Godwin's Law!)


To the employers of these bankers, guess what? You screwed up too!

Look at that incentive structure of yours. Go on, take a good hard look at it and tell me you didn't design it to maximise sales while paying lip service to whatever corporate governance structure your lawyers / accountants / consultants slapped together to make the absolute minimum requirements required by law and commerce. I dare you.


Government, you're not off the hook either.

You failed too. You failed in the basic fundamental principle of government, and you failed it because you've lost credibility.

You see, when you decided to unliaterally impose your massive pay raises, you were basically setting yourself up for failure. You can't live up to those expectations you've set for us in justifying those pay packages. No one can. Don't even bother trying because you will fail and look stupid for it.

The fact is, everything that has happened since then, from electricity hikes to Mas Selamat to Melamine is being blamed on you because you have set yourselves up as infallible leaders. It doesn't matter if you can't control these events. The fact is, Singaporeans will take every opportunity to strike out at you because you've set yourself up to be struck at. That is why Singaporeans will never be satisfied with what you do, because you've set yourself up so high that even you can't live up to those expectations.

I understand the fact that these pay packages are more to encourage the next generation of leaders to rise up rather than to benefit yourselves. Just because I understand it tournament theory doesn't mean everyone does.

How does it relate to this situation? Doing nothing and studying the situation may have been the best option, but you don't have that option because you've lost credibility. You've lost the faith of the people that you will do what is in their best interests. EVERYTHING you do now will be interpreted as a callous action designed to take money from their pockets and put it into yours. You have no buffer of good faith left, no emotional bank account to draw on.


Now that I have ranted enough, I will give you my take on this situation.

On a practical level, Tan Kin Lian is right. The reason why the government will be drawn into any large scale issue like this is because, quite frankly, our access to the justice system sucks. There's no class-action mechanism, nor is there a contingency fee arrangement of any sort. Say what you want, but a combination of these two -is- necessary for large scale dispute resolution of this sort.

On this basis, what I suggest would be the best action for the government to do would be to set up some kind of expedited, collective arbitration process for this. Appoint a couple of independent arbitrators, a couple of counsel on either side, and let this thing play out.

The reason I'm suggesting this is because I don't want to see free-riders in the equation. I'm happy to restore Uncle and Auntie's money IF the sales tactics used on them were reprehensible (and I'm almost sure that at least some of them were). I'm not happy to see a greedy, ignorant Singaporean being relieved of the consequences of his decision.

This also has the added advantage of a possible scouting ground for future leaders. This sort of thing isn't easy to organise. It requires some level of community grassroots experience, or financial know-how, or legal know-how, plus a healthy level of community spirit (or sheer ego) all of which are shoe-ins for future leaders of Singapore.

My 0.02, as usual.


The Disappearing Man said...

Two words: Moral Hazard.

I don't even think that most of the Uncles/Aunties should get their money back. They were just as greedy and lazy as other investors. Their age and ignorance does not absolve them of responsibility for their actions. And that age should offer any argument for a bailout is a dangerous precedent. Caveat Emptor! And if you can't understand the terms and conditions of a contract, you don't bloody sign it....

BunnyButt said...

I actually agree with Tome about how public sympathy for Aunties and Uncles is misplaced.

That said, you rock, Khayce. I always love reading your dialectic where our government is concerned. ;)

BunnyButt said...

My mistake! i just realised the disappearing man is not Tome. Sorry Ken! In armor, all of you look...somewhat similar.

Pendragon said...

Oh really? We all look alike, eh?

But I agree with the dudes. High time something screws over Singaporeans out for a quick and easy buck.

I've nothing against wanting to earn money and to give oneself or one's family a better life.

But I believe Singaporeans should loose their pampered attitudes and realize that there is no free lunch in the world, and that every action has consequences, and they should be ready to face the consequences of their own choice of actions.

The whole bargain and discount, and "out for only gains", and "not wanting to take responsibility for any miscarriage" culture is simply shameful and disgusting.

That said, I agree with Ken's principle in "being the change you want to see in the world." Nobody is perfect, and everyone makes mistakes. I'm not so arrogant as to simply throw out these opinions and be two-faced about them when it comes to my own flaws.

I freely admit to being heavily tempted to make quick cash if the opportunity presents itself. But I try not pretend to be unassuming or unaware of my intentions or actions, so I can blame someone else later. I'm very human, very falliable, and I depend on my brothers to watch out for me and keep me on the right track a lot. And I'm thankful they put up with me all the way.

Wow, the word verifier is "minedge", as in "Mine Edge".

Yu Sarn said...

Couldn't agree more about the bankers and the government.

Trebuchet said...

Excellent post!! I feel like sharing it on FB except that I don't know how you'd feel.

Well, thank goodness I'm still sitting on reasonably safe assets for the long term, that's all I can say. Like my huge collection of AD&D materials.

Khayce said...

I'm willing to concede one point to Uncles and Aunties - as far as I can tell, there might have been mis-selling involved, and I don't think that banks should get away completely clean because I think their shit should stink them once in a while.

Khayce said...

Oh, and Trebuchet, go ahead and share it, with the disclaimer that strong language is involved.

Yu Sarn said...

Mostly it's the sales-"bankers" who are to blame. They didn't know what they were selling, and basically b-s'ed their way through to talk financially-ignorant people, who were in their friendly local bank branch renewing their fixed deposits, into making exotic bets on whether any of x number of banks might go bust within the next 10 years instead. "Auntie, don't worry, it's safe lah! MAS-approved one!"

Why would anybody suspect that a MAS-approved financial product sold at a retail banking outlet in the heartlands would in fact be an exotic derivative-based structured product that's like playing Russian roulette with your life savings? Who let these fresh-NUS-grads-playing-investment-advisers sell that kind of crap? Oh yeah, MAS.

-ben said...

Dang it, KC, I find nothing in there to disagree with you (yes, even the Uncle/Auntie issue). If this keeps up, it's going to be difficult picking fights with you :-P

Anonymous said...

Yes, I think the world's oldest profession is probably a better investment than (say) the world's most-hated profession.
And so we end with a Q&A:
What's the difference between a banker and a prostitute?
A prostitute will stop screwing you when you're dead.

Anonymous said...

Bankers & Other Dangers

Anonymous said...

You are right on most pts, the fact is nobody wants a 150 yr old bank to collapse and drag the whole financial system with it. If Lehman had not gone bankrupt, all those minibond holders will still be drawing some payment. Would they have complained if some timbuktu bank had collapsed? While they were collecting their payments, did they ever think that they were sold a lousy product?