{"id":2111,"date":"2016-05-23T11:42:34","date_gmt":"2016-05-23T06:12:34","guid":{"rendered":"http:\/\/13.201.39.237\/financial-frauds-scams-nirav-modi\/"},"modified":"2016-05-23T11:42:34","modified_gmt":"2016-05-23T06:12:34","slug":"financial-frauds-scams-nirav-modi","status":"publish","type":"post","link":"http:\/\/13.207.105.184\/?p=2111","title":{"rendered":"The 11300 Crore-Rupee Question: Who Pays for These Financial Frauds?"},"content":{"rendered":"\n

E<\/span><\/p><\/div>

veryone has the footage from the 26\/11 terror attacks in Mumbai imprinted on their mind \u2013 Ajmal Kasab strutting around CST station with an automatic weapon, bodies strewn all around. One of the most iconic buildings in Mumbai, the Taj Mahal Hotel, up in flames. Quite similarly, terrifying were the visuals of the earthquake that struck Bhuj in 2001 and the floods that ravaged Uttarakhand in 2013. Physical property in absolute shreds, distress and pain on people\u2019s faces, their livelihood shattered.<\/span>\n\nAfter every such instance of mass mayhem, there are committees set up to look into the matter, questions raised over disaster management. We have <\/span>Arnab Goswami<\/span><\/a> shouting at the top of his voice for two weeks; international and diplomatic pressure is mounted if it\u2019s a conflict that extends beyond our borders. After all, we can relate to what it is like to be in such a situation.<\/span>\n\nInjury, destruction, violence, trauma, blood, misery, pain, and death are emotions we all relate to at a very personal and humane level. You can see the calamity, and because you can see it, you can feel the pain. One can objectively determine the number of people who suffer, the extent of the suffering, and how their lives change overnight.<\/span>\n\nA financial crime is very different. It\u2019s almost a victimless crime. You don\u2019t see the damage, you don\u2019t feel the pain even though it is an event that could potentially destabilise the economic system and the global market. After all, only a few numbers have been wiped off from some computer or a database somewhere in Dubai, haven\u2019t they? \u201cHow bad can it be? It has not affected my life in any way. I\u2019m sure we can trace the money trail, catch the crooks, put them behind bars, and it solves the problem.\u201d That\u2019s how punishment works, we learnt it in school. Well, not quite.<\/span>\n\nWho then pays for financial frauds?<\/span>\n\nOn the exterior, it seems that a few individuals managed to scam their companies or banks of huge volumes of money. Surely, it must be the banks and companies who are losing the money? Unfortunately, or perhaps fortunately, we now live in a world that is truly connected (in the way that <\/span>Nokia<\/span><\/a> dreamed of) and nothing has effects in isolation. When a company goes down, people who invested their money in that company go down with it. But, wait for it, sadly, there\u2019s more.<\/span>\n\n

Where does government get the money from? Yes, the tax money that you and I pay.<\/p><\/blockquote>\n\nWhen banks keep on accumulating bad loans, eventually governments have to kick in and bail them out. Why can\u2019t banks just fail and fall down? We seem to be doing it with <\/span>farmers<\/span><\/a> all the time. It\u2019s because everyone has money deposited in banks \u2013 the rich, the <\/span>middle class<\/span><\/a>, the poor; the young and the old. Many deposit their life\u2019s savings in those tiny bank lockers. And for them, such a loss would be humongous. And so, banks are treated with kid gloves, a lot like millennials in <\/span>school<\/span><\/a>: They are not allowed to fail. Often governments show up at the last minute like Bruce Wayne with arrogant confidence and a huge suitcase stuffed with cash.<\/span>\n\nWhere does government get the money from? Yes, the tax money that you and I pay. The \u20b929 GST that you paid on the <\/span>latte<\/span><\/a> at Starbucks so that the government could use it to build a metro station, is actually used by it to bail out a bank because some asshole at Morgan Stanley scammed the system and is now partying in the Caribbean Islands in his million-dollar home. You paid the government, the government paid the bank, he took the money from the bank. So in essence, you paid your hard-earned money for his party. Not only does your money facilitate someone\u2019s greed, it gets diverted from the function it is supposed to serve \u2013 development.<\/span>\n\nI hate to say it, but there\u2019s more. Economic disasters have knock-on effects that can last years, and sometimes decades. The 2008 financial crisis cost the US taxpayer $700 billion (take two minutes to process that number and count the digits), and while the crisis originated in and was funded by America, the entire world paid for it, and in more than just monetary terms. <\/span>Barack Obama\u2019s<\/span><\/a> hair turned grey, trying to overturn the situation he inherited.<\/span>\n\nWhen banks become weaker, their lending is affected. When banks don\u2019t lend enough money to businesses, growth of corporations deteriorates; they can\u2019t build new factories and take up expansive projects. When corporations aren\u2019t growing, they start firing people. When people don\u2019t have jobs, you see a spike in the unemployment rate. When the unemployment rate rises, one sees an increase in crime and other social problems. When crime increases, people pay with life.<\/span>\n\nAdd a layer of globalisation to it, and you see how catastrophic the situation becomes. If a bank isn\u2019t lending to Reliance in India, it would affect how much money will flow into their foreign operations in Africa. When people start making less money and get fired in factories in Africa, it affects the employment rate and financial stability of those countries. Scale up the situation to every company and every country in the world, and you realise the magnanimity of it all.<\/span>\n\nOne may not be able to exactly pinpoint the number deaths or the period of tragedy, but there\u2019s very little debate on the fact that it affects everyone, and has disastrous consequences when things go out of hand. To add insult to injury, the law works quite differently for powerful people than it does with the rest of us. <\/span>Men<\/span><\/a> in the middle of these financial storms (yes, they\u2019re invariably all men) mostly tend to walk away untouched, because they have huge political clout and influence. We\u2019ve seen that in India time and again, over decades. When poor farmers default on loans, it\u2019s a crime. When rich millionaires do it, it\u2019s called \u201cnegotiating the terms of payment\u201d.<\/span>\n\nIt has far often been the case that regulators and <\/span>auditors<\/span><\/a>, who are meant to stop the party, were also in on the frauds, dancing to the music, so they could make a few million as well. All of it at the cost of your and my tax money. While physical harm and impact of violence is instant, the effects of financial fraud are long term. To quote Miranda Tate from <\/span>The Dark Knight Rises<\/span><\/i>, \u201cYou see, it\u2019s the slow knife, the knife that takes it\u2019s time, the knife that waits years without forgetting, then slips quietly between the bones, that\u2019s the knife that cuts deepest.\u201d<\/span>\n","protected":false},"excerpt":{"rendered":"

Hint: It\u2019s NEVER the men in the middle of financial storms who pay up.<\/p>\n","protected":false},"author":164,"featured_media":2112,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107],"tags":[1475,4266,4267,4268,19,4251,4269,729,4252,4256,4257,4258,4270,1180],"class_list":["post-2111","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pov","tag-corruption","tag-davos","tag-finance","tag-financial","tag-india","tag-lalit-modi","tag-modi-modi","tag-narendra-modi","tag-nirav-modi","tag-pnb-fraud","tag-pnb-scam","tag-punjab-national-bank","tag-scams","tag-vijay-mallya"],"yoast_head":"\nThe 11300 Crore-Rupee Question: Who Pays for These Financial Frauds?<\/title>\n<meta name=\"description\" content=\"Hint: It\u2019s NEVER the men in the middle of financial storms who pay up.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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