For Want of a Better Title

Who Should Pay?

There was a rather interesting protest at Hong Lim Park on Saturday about the whole soured investments. The basic question is that should someone be responsible for the loss of investment? The government? The banks? The investors themselves?

I am inclined to say that the investors should bear responsibility for their actions. However there is some doubt as to whether or not they were told exactly what they were buying. In this case I think the banks should be brought to court. Since it is a contract term that indemnifies the banks, perhaps suing under the Unfair Contract Terms Act (UCTA) might be a recourse for investors. I know the UCTA amendments that remove the banks from the exemption list has yet to be Gazatted, but I think once it is, the UCTA should be the area of recourse for these investors. Perhaps trying under the tort of Negligence might be another area of recourse, but the courts tend to favour recovery through contracts if it is possible.

I do not think the government should guarantee any of their losses. Investments should not be guaranteed. Saving accounts, checking accounts and fixed deposits should be guaranteed to some extent, but not investments. Investing is like gambling (in my opinion it is a legalised and far more complex form of gambling). Also I do not think that MAS should step in to force the banks to pay back customers. I think the law should be allowed to play its role. This prevents the further expansion of the state.

I hope that the investors have learnt a lesson and won’t buy products they are unsure of or have no understanding about. I personally only invest in products I am clear about. I don’t know the intricate workings, but I have a rough idea on how they work. I also invest only the amount I can stomach. That does mean that a lot of my money is wasting away in a savings account, but that’s the money I think I will need and cannot part with. Every investment I have is money that I know I can afford to lose.

To a certain extent I think the investors also need to address their own complicity in the matter. No one really forced them to buy the products. They were lured by the idea of better pay offs over a traditional fixed deposit. That in my mind is greed. If this is my entire savings, I am not putting it in one place, and definetely not in a product I don’t understand at all. In fact all the money I think I will need is in savings, checking or fixed deposit accounts. Yeah I don’t earn much, but at least my “nest egg” is insured to a certain extent.

Still I think these people should be allowed to recover to some extent. Not letting them recover could also put stress on other areas of public spending, since some of them may now need to go on welfare. The form of recovery though should be through the law. Win or lose should be up to the courts. Also I think if enough cases a brought to court, the banks might try to settle out of court. Although I would like to point out that if the banks do start paying out, there will be a liquidity problem. Which means smaller companies will have a hard time getting loans. In the long run that could lead to higher prices for all sorts of things, including household neccesities.

If I were a lawyer and independently wealthy, I would volunteer to help these people try to recover their money in court. Why not? I think they should try to get some of it back, but I also think that the government should not pay them or force the banks to pay them. Also I think the condition for my helping them would be allowing me to constantly lecture them about their own complicity in this debacle.

Links from the rest of the blogosphere:

TOC’s coverage of Hong Lim Park Protest by investors

What about Financial Advisers?

DBS to pay? Or is it the government?