Cobrapost to Saradha: How we subsidise the corrupt

In one of his lyrical compositions that come embedded with pop-philosophical musings, the Tamil poet Kannadasan narrates the interaction between the snake that is coiled around Siva’s neck, and Garuda the mythological eagle.

Secure in the knowledge that so long as he is wrapped around the divine neck, he is safe from the predatory designs of the eagle, the snake snarkily asks after Garuda’s well-being. To which, the eagle responds to say that so long as all of us stay in our assigned station in life, all will be well with the world.

Earlier today, another such snake - a Cobra no less - went public with its sensational sting expose of a string of Indian banks and financial institutions, both in the public and in the private sectors, that showed themselves to be ever ready to ingest black money to the tune of crores of rupees and launder them on behalf of their clients.

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[caption id=“attachment_756097” align=“alignleft” width=“380”] Ill-gotten black money, when invested by exploiting the labyrinthine mazes in the financial system, comes with ‘guaranteed returns’, with property as collateral to underwrite the investment -Reuters[/caption]

The mid-level managerial staff at all these institutions showed remarkable enterprise in familiarising the Cobrapost sting reporters with the myriad ways in which their (notional) ill-gotten gains could be made squeaky clean - and simultaneously generate a supernormal rate of return that we thought only the Robert Vadras of the world were entitled to.

No money evidently changed hands, but the blas readiness with which virtually all of the managers shared intimate details of the patently criminal manner in which the funds would be handled pointed us to the parallel universe that operates just for the corrupt to launder their black money.

The lowliest of us, who needs to carry out a banking transaction, may run into a bureaucratic wall of endless paperwork - of Know-your-customer norms and PAN card particulars and Tax Deducted at Source on measly interest earnings. The Finance Minister will issue us a warning virtually every week that he has us in his sights, and will reel us in if we step off the straight and narrow path.

And yet, if you sashay into the offices of banks and insurance companies claiming to have large wads of black money, the red carpet will be rolled out for you - and the kindly staff will show you how to fly out of range of the KYC radar, avoid pesky tax provisions, and perform alchemic reactions that convert black to white. Even better, they will point you to “guaranteed-return” insurance and mutual fund products that will triple your money in 10 years.

In one of the more bizarre sting operations videos, the intrepid Cobrapost reporter follows successive leads provided by an Indian Bank manager in a Hyderabad office, and is introduced to a doctor-cum-real-estate developer (who claims connections to actor-politician Chiranjeevi and Andhra Pradesh Chief Minister Kiran Kumar Reddy) who unveils a fail-safe investment scheme. Under this, a black money investment - of even up to Rs 50 crore - can be channeled through the property developer, and converted to white. With interest.

But more bizarrely, the black money ‘investor’ is able to secure a ‘guarantee’ on his investment: property worth an equivalent amount will be transferred to his name, he is reassured, just for him to know that his money is safe. And, even more strikingly, the Primary Education Minister of Andhra Pradesh offers verbal guarantee to the ‘black money’ investor about the safety of his illegal ‘investment’.

In other words, ill-gotten black money, when invested by exploiting the labyrinthine mazes in the financial system, comes with ‘guaranteed returns’, with property as collateral to underwrite the investment - and the word of honour of a Minister of the State. And at the end of it all, it changes its karma and flows back in as white money.

But if you’re a lowly investor in a Saradha chit fund, and you have foolishly invested your life savings in a Ponzi scheme chasing supernormal returns, you’ll get your 15 minutes of fame in front of television cameras who feed off the human drama of suddenly pauperised poor folks. But you won’t get the faintest whiff of your money.

Nor is it just about investors in Ponzi schemes who, it may be argued, ought to have known better. Anyone who puts money into an insurance-cum-investment product will pay a premium for some 25 years - and huff and puff their way to a measly 5 per cent return on their investment. And, heck, if you invest in something so risky as the stock market, there’s no certainty of upside returns - and the very real risk that you could lose a large part of your capital.

All of this may strike you as unfair, until you realise that these aren’t the accidental cracks in the financial system that you fall through. In fact, the entire financial system is geared in such a way that the middle-class and the poor exist only to cross-subsidise the crooked and the corrupt, who walk away with risk-free, guaranteed returns. We are just the cogs in a giant wealth transfer machine that channels from the poor and the middle-class to the corrupt and the monumentally rich.

The thumb rule of investment is that you can’t expect high returns if you don’t embrace risk. And merely because you opt to embrace risk doesn’t guarantee you high returns, only the prospect of high returns.

But going by Cobrapost sting operations, it looks like the ‘black money’ moneybags have beaten the rules of the game. They get a free pass on their ‘black money’, convert it to white - and get guaranteed, supernormal returns on those investments.

It’s only poor suckers that invest for measly returns in insurance products or the Saradha mirage seekers who bear all the risk and cross-subsidise the corrupt. But then, as the eagle told the snake, that is your station in life: know it and be happy. And if you don’t like it, why, you can always curl up and die…