Seventeen years in the banking sector go a long way. Enough, for example, to become fed up and decide to leave it behind. Raphael Nagel has taken advantage of his 17 years in this sphere, mainly at Deutsche Bank, to explain in Turbocapitalismo: los maestros de la quiebra (Kant Ediciones, 2016) how some of the foremost financial scandals came about. From the preferred stock of Rumasa, everything is passed through the sieve of a man who, despite everything, is looking for solutions in capitalism. He now devotes his time to providing families and companies with advice on investment and restructuring debt at Exante Merchant Bankers, of which he is a founder-partner.
Why did you choose the term turbocapitalism?
Economists love numbers and there are some that really stick out. That 62 people have more than 50% of the world's assets, when there are seven billion of us on the planet, makes you think that something is not right. Moreover, two billion people are starving when the world can feed 12 billion people. We do not criticise small shop owners or small business people, I am not anti-capitalist at all! But there are large multinationals who are taking advantage of their economic power to the detriment of people. This turbocapitalism is becoming a mill crushing people and robbing our children of their futures. In Spain in the past, 1,000 euros made you a nobody when nowadays it just about makes you privileged! That economic growth should only serve to reduce the income of the population and welcome more tourists does not signify improvement. All we have done is made people poorer.
Banking has played a key role in this whole process, something you talk about a lot in the book...
Today, European banking has a profitability of 5%, while Spanish banking enjoys almost 50% more. BBVA, Santander or Bankia have profitability of around 7.5%. Seeing these figures, you ask yourself: was it necessary to give them so much support? How did we come to allow the resolutions on ground clauses not to be applied retroactively? I have not seen any SME or individual receive that sort of treatment. That is what I understand by turbocapitalism: we are greatly favouring large capital with an injustice that will lead us to the end of globalisation.
Is it possible to put ethics at the centre of the debate, as the book suggests? Or has the search for profit reached a point of no return?
To begin with, I am a humanist and a liberal, I like to believe that we are capable of thinking for ourselves and not just doing what we are told. Seeing what the PP has done recently, putting forward the former minister Soria for the World Bank... makes you despair a little. Nevertheless, I think we are capable of self-regulation as a society. However, we need a framework, but there has to be a certain amount of freedom in the markets. We cannot have the situation in which a hot dog stand in Berlin pays more tax than Apple in Europe.
Right now Apple is faced with a demand from the European Commission to return 13 billion euros to Ireland. Is that a sign of change?
It would be if it were not for the perception that it is a response to what happened with Volkswagen in the United States. I get the impression that we are in an economic war over the TTIP, which I think is totally to Europe's detriment. I think the Volkswagen case was a reprisal for German obstinacy in the treaty talks. And the reaction was the Apple case. In general terms we are reaching a point of global zero growth, which will bring about the end of globalisation.
Anti-capitalist movements are also appearing. What would convince them that all that is needed is to reform capitalism and not eliminate it?
I think there is a lack of dialogue in society. Here the word discuss always has a negative connotation and I believe that concepts should be discussed more. The question is: who is capitalist? Is the middle class capitalist? Is the small business owner? I don't think so. For me, a capitalist is one of those 62 who have 50% of global assets, the great fortunes that hurt society. I cannot be against SMEs in any way.
The book points out that, especially in banking, losses have been socialised and gains privatised. Given your long experience in the sector, would you say it is a planned strategy?
Absolutely! If 1% of society has 99% of global assets, and decides to play and manipulate the markets, award mortgages were they shouldn't, and so on, I believe that this 1% should also accept the losses. We cannot allow society to take on all the losses, while Bankia is the bank that best overcomes the stress tests. It makes no sense at all.
Banking has a bad image at the moment. Knowing it from the inside, are there still things we don't know that would make us even more indignant?
In Spain especially banking has gained this bad reputation. It lives off politics, which has allowed it do so, and which has lost all control over the banking sector. But not only the thousands of people who have been evicted have become the victims of banking, so have the small shareholders. That is why I celebrate the fact that finally in Spain there are those taking banking to court for fraudulent management. It is high time because here this behaviour had political consent.
There are only 15 banks in Spain, and four of them have 80% of the market, while in Germany there are 1,800 and 650 in Italy. How are such large differences possible?
Because of the consequences of the housing boom. Spain had a banking landscape similar to that of Germany, with lots of small local savings banks that did a good job. But greed led to inappropriate business models. The result is this concentration.
How can the size of banks be limited?
The banking sector needs to be deregulated. There needs to be many more alternative companies and funding systems. In the United States, the funding of SMEs by banking is 30%, while here it is more than 80%. There is total dependency on banking and that prevents certain companies from being viable in Spain and so they have to go abroad. This drain on talent is an incalculable loss of assets.
You also propose returning to the total reserve system. What benefits would that bring?
The current asset/debt ratio is 1 to 10. In other words, every euro has a real value of 10 cents. That means that 90% of this euro is trust, it is money we have invented from nothing. The big problem today is that banking makes much more money from virtual business than through loans. This is what in the long-run causes an increase in risk. Until we go back to funding real business, there will be no way out of this dramatic situation.
Why did you choose the term turbocapitalism?
Economists love numbers and there are some that really stick out. That 62 people have more than 50% of the world's assets, when there are seven billion of us on the planet, makes you think that something is not right. Moreover, two billion people are starving when the world can feed 12 billion people. We do not criticise small shop owners or small business people, I am not anti-capitalist at all! But there are large multinationals who are taking advantage of their economic power to the detriment of people. This turbocapitalism is becoming a mill crushing people and robbing our children of their futures. In Spain in the past, 1,000 euros made you a nobody when nowadays it just about makes you privileged! That economic growth should only serve to reduce the income of the population and welcome more tourists does not signify improvement. All we have done is made people poorer.
Banking has played a key role in this whole process, something you talk about a lot in the book...
Today, European banking has a profitability of 5%, while Spanish banking enjoys almost 50% more. BBVA, Santander or Bankia have profitability of around 7.5%. Seeing these figures, you ask yourself: was it necessary to give them so much support? How did we come to allow the resolutions on ground clauses not to be applied retroactively? I have not seen any SME or individual receive that sort of treatment. That is what I understand by turbocapitalism: we are greatly favouring large capital with an injustice that will lead us to the end of globalisation.
Is it possible to put ethics at the centre of the debate, as the book suggests? Or has the search for profit reached a point of no return?
To begin with, I am a humanist and a liberal, I like to believe that we are capable of thinking for ourselves and not just doing what we are told. Seeing what the PP has done recently, putting forward the former minister Soria for the World Bank... makes you despair a little. Nevertheless, I think we are capable of self-regulation as a society. However, we need a framework, but there has to be a certain amount of freedom in the markets. We cannot have the situation in which a hot dog stand in Berlin pays more tax than Apple in Europe.
 |
| Photo: Haidy Blanch |
Right now Apple is faced with a demand from the European Commission to return 13 billion euros to Ireland. Is that a sign of change?
It would be if it were not for the perception that it is a response to what happened with Volkswagen in the United States. I get the impression that we are in an economic war over the TTIP, which I think is totally to Europe's detriment. I think the Volkswagen case was a reprisal for German obstinacy in the treaty talks. And the reaction was the Apple case. In general terms we are reaching a point of global zero growth, which will bring about the end of globalisation.
Anti-capitalist movements are also appearing. What would convince them that all that is needed is to reform capitalism and not eliminate it?
I think there is a lack of dialogue in society. Here the word discuss always has a negative connotation and I believe that concepts should be discussed more. The question is: who is capitalist? Is the middle class capitalist? Is the small business owner? I don't think so. For me, a capitalist is one of those 62 who have 50% of global assets, the great fortunes that hurt society. I cannot be against SMEs in any way.
The book points out that, especially in banking, losses have been socialised and gains privatised. Given your long experience in the sector, would you say it is a planned strategy?
Absolutely! If 1% of society has 99% of global assets, and decides to play and manipulate the markets, award mortgages were they shouldn't, and so on, I believe that this 1% should also accept the losses. We cannot allow society to take on all the losses, while Bankia is the bank that best overcomes the stress tests. It makes no sense at all.
 |
| Photo: Haidy Blanch |
Banking has a bad image at the moment. Knowing it from the inside, are there still things we don't know that would make us even more indignant?
In Spain especially banking has gained this bad reputation. It lives off politics, which has allowed it do so, and which has lost all control over the banking sector. But not only the thousands of people who have been evicted have become the victims of banking, so have the small shareholders. That is why I celebrate the fact that finally in Spain there are those taking banking to court for fraudulent management. It is high time because here this behaviour had political consent.
There are only 15 banks in Spain, and four of them have 80% of the market, while in Germany there are 1,800 and 650 in Italy. How are such large differences possible?
Because of the consequences of the housing boom. Spain had a banking landscape similar to that of Germany, with lots of small local savings banks that did a good job. But greed led to inappropriate business models. The result is this concentration.
How can the size of banks be limited?
The banking sector needs to be deregulated. There needs to be many more alternative companies and funding systems. In the United States, the funding of SMEs by banking is 30%, while here it is more than 80%. There is total dependency on banking and that prevents certain companies from being viable in Spain and so they have to go abroad. This drain on talent is an incalculable loss of assets.
 |
| Photo: Haidy Blanch |
You also propose returning to the total reserve system. What benefits would that bring?
The current asset/debt ratio is 1 to 10. In other words, every euro has a real value of 10 cents. That means that 90% of this euro is trust, it is money we have invented from nothing. The big problem today is that banking makes much more money from virtual business than through loans. This is what in the long-run causes an increase in risk. Until we go back to funding real business, there will be no way out of this dramatic situation.
Beyond banking, the book deals with other cases, such as that of Rumasa. And in the end the conclusion always points to a lack of oversight...
There were enough signs for the State to see that Rumasa was a planned scam, a lot of people saw it but no one did anything about it. And what happens to those who were wronged? Who helps them? It is the same thing we are seeing with Bankia, which a top executive of the Bank of Spain admits was not viable. If it wasn't, why didn't they intervene? There is joint responsibility for passive action.
Has this oversight problem been rectified or are there similar cases brewing?
I think that we are increasingly becoming aware of the dependence between politics and banking, one needs the other, and we will see more cases of this. As the markets do not allow for economic growth, the central banks have to lower interest rates to zero or make them negative to force people to spend. Nevertheless, the perception among business people in the United States is that it is better not to invest because everyone is expecting a new recession. We have to go back to business with a solid base, as bubbles and speculation achieve nothing. They allow for temporary growth that in the long-run always leads to failure.
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