RSS Feed BBC News Politics UK

Tuesday, 14 September 2010

The politics of... blaming bankers


The recent appointment of Bob Diamond as the new Chief Executive of Barclays raised some eyebrows to say the least. The epitome of casino capitalists and the man once described by former business secretary Peter Mandelson as “the unacceptable face of banking” has joined Barclays (again) and commands £1.35 million a year, could recoup over 3 million in bonuses and could even get a long term entitlement to over £6 million in shares. It seems as if bonuses for ‘bankers’ are returning to pre crash levels.
But should we be worried?

Questions have to be asked of the logic of blaming bankers. As the masses decry bonuses for staff at under performing banks we have to stop and think about types of banker. Not all bankers are vulture hedge fund managers or short sellers and the cultures that pervade the banking sector can be seen across other market sectors. The run on credit and finance on credit cards, store cards, cars and electrical goods is attributable to both supply and demand. A country run on consumer credit stimulates a truly false economy and when the banks decided to rein in lending the mortgage market suffered and up popped more of the ‘less credible and truly extortionate’ sources to meet the continued demand for credit. As banks start being clamped and clamping down, individuals still roam free in the land of CCJs and debt relief orders. This false purchasing power has significantly contributed to an environment defined by instability and insecurity.

As the banks crumbled, many looked on and pointed the fingers of blame, be we all knew it was going to happen, maybe not to the extent it did but did we actually think the ‘can have’ credit culture was truly sustainable?
I recently watched an adjournment debate on the effect of the budget on women led by Diane Abbott who quickly laid budgetary issues at the door of bankers.

“The reason why we face the necessity of making cuts on this scale is not Labour's irresponsibility but greedy bankers' irresponsibility -greedy, under-regulated bankers who almost crashed the world economy.” Diane Abbott (Adjournment debate on 6th September)

I think Diane has been hoisted by her own petard here, when she says it was not Labour’s irresponsibility but those greedy UNDER-REGULATED bankers. I screamed out at the television “Who was meant to regulate the bankers then, their mothers or pixies or something!” Gordon Brown may seem keen to cast himself as the world saviour who set the economy on the straight and narrow but firstly he was the Chancellor that set up the current regulatory system and it is he who should be seen as responsible for it and secondly it was Alistair Darling that made more significant inroads in improving the situation. Brown was repeatedly warned that the tripartite system wasn’t working and he just ignored it, this was the system that not only allowed bankers to be reckless but positively encouraged them to do it. So well done Darling, and shame on you Gordon.

Blaming greedy bankers is simple, too easy and is quintessentially worthless. I know Vince Cable was very keen to break up the banks or at the very least break apart the higher risk ‘casino’ operations from other banking. This is something he will have to fight hard for with his coalition partners. Cable admitted there was a “lively debate” going on and he faces a strong battle and I wish him all the best.

---------------
The state owned banks offer a unique opportunity for the government to assert some muscle (as much as they can) to improve the culture within the banking sector and to get them lending to small businesses. This challenge is indeed difficult but is a great opportunity for Vince to make a strong mark in his post as Business Secretary and deliver a strong Liberal Democrat stamp on the actions of the coalition government. If he can pull it off or indeed succeed in his plans for the post office sell off (Lib Dem policy) then it will be a significant fillip and shot in the arm for both the Lib Dems and the coalition.

This weeks spotify accompaniment is The Complete Banker from The Divine Comedy

No comments:

Post a Comment

There was an error in this gadget