Saturday, 31 January 2009

Soma

The attack on bankers is becoming more ferocious as each day passes led by mob sentiment and jumped upon by shape-shifting politicians and luddites like John Prescott. The politicians are celebrating an opportunity to divert attention away from their collective failings towards bankers. And of course right now they are fair game. They have in fact been fair game for decades but whilst the bankers had champagne on tap and drove sports cars which burnt up our roads and cut up more sedate family saloons, envy was the order of the day. Now that their lot is down, in Nelsonesque (aka Simpsons) finger-pointing the echoes of world's hollow laughs, held back for so many years, resound through the empty halls of yesterday's mighty banking giants. 

Recently politicians have begun to arrange McCarthyesque hearings where rough and ready questions are thrown incoherently at bankers. The questions appear to be as misguided as the guarded answers which are being given.  

Let me at least attempt to recreate the tone of some of the most common questions fired at senior executives of banks currently receiving government aid.

Q1. "Did you not know when you were lending to x/purchasing company y your balance sheets could become massively overstretched if there was a credit collapse and your bank would be in trouble?"

Q2. "Why did you take such risks?"

Q3. "Admit it - you Mr Banker are main reason we have a recession today". 

Answers should be
1. No - of course not. Had we known at the time we would not have taken those risks. In case you had not noticed I have been fired from my job and am being questioned by an idiot like you. That was not in my medium-term plans.
2. It was our mandated business to take those risks - yours was to regulate us. Why did you not do a better job? 
3. Governments, central banks and in particular Alan Greenspan provided cheap money to the banks for the last twenty years and encouraged us to distribute this to entrepeneurs, productive corporations and aspirational homeowners. If we did not we would have been accused of holding the economy back or been bought out by competitors who followed the script of the boom years. The same script binding all your speeches together, Mr Politician, for a very long time. And for which you took all the credit.

In a nutshell the real causes were poor regulation, easy money, and lets not forget the mark-to-market accounting which has led to extremes of overleverage or underleverage depending on the direction of the market. All of these need to change and all of these were implemented by central authorities overseen by governments.

Civilisation may have evolved and violent responses to crises may no longer be the order of the day but our instincts to allay blame on others has barely evolved.  Who did not look wide-eyed at others with glee when our house prices were shooting up at 20% per annum as we congratulated ourselves for the cheap mortgage we had cleverly negotiated and choice of house and exceptional location we had unilaterally made. 

This glee was a powerful politician endearing drug and easily accessible by the masses. And which politician can rightfully claim that whilst it worked its miracle they had been campaigning for legislation to police against it?
  

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