Friday, 1 May 2009

Playing the blame game

"The origins of the banking crisis were many and varied, including low real interest rates, a search for yield, apparent excess liquidity and a misplaced faith in financial innovation. These ingredients combined to create an environment rich in overconfidence, over-optimism and the stifling of contrary opinions.

Notwithstanding this febrile environment, some of the banks have been the principal authors of their own demise. The culture within parts of British banking has increasingly been one of risk taking leading to the meltdown that we have witnessed. Bankers have made an astonishing mess of the financial system. However, this was a failure not only within individual banks but also of the supervisory system designed to protect the public from systemic risk."


UK Treasury committee report on the Banking crisis

It was the bankers wot did it.

The culpability of FSA and the Bank of England is relegated to a single line "this was a failure not only within individual banks but also of the supervisory system designed to protect the public from systemic risk."

I don't buy it. Certainly, the banks were to blame in the same way as a two year old child is at fault when he cuts himself playing with a razor blade. The adults, i.e. the FSA and the BoE, should have been watching out. They weren't and now the UK financial system is a car wreck.

10 comments:

Sackerson said...

Risk-taking isn't the same when you arrange for others to bear the losses.

phd said...

"...the FSA and the BoE, should have been watching out."

And this light touch was implicitly mandated by government.

This is what makes me laugh when New Labour is accused of being Krazy Socialists by the way they are addressing the current financial crisis over the last year. The regulation gloves were off for TEN YEARS before this.

electro-kevin said...

The hoi polloi are seething "Thatcher !" and "Bankers !" at the moment - few that I know are criticising Brown. They'll buy this nonsense hook, line and sinker.

sps said...

Hoi means 'the' you ignorant peasant.

Anonymous said...

The origins were/are quite simple. ENERGY, or rather a lack of it.

And the UK is in a unique position that we don't have close to enough natural resources left, and we are doing an excellent job at alienating those in a position to best help us ,our neighbours, the EU.

electro-kevin said...

οι πολλοί

If you will insist on getting pedantic about it, SPS.

Alice Cook said...

calm down fellas, keep it civil.

Alice

Phill Tomlinson said...

Markets don't need regulation. It the governments that cause the issue with their monopoly on money - http://theageofstupidity.blogspot.com/2009/02/fallacies-of-deflation.html

Strategist said...

"Certainly, the banks were to blame in the same way as a two year old child is at fault when he cuts himself playing with a razor blade. The adults, i.e. the FSA and the BoE, should have been watching out."

A seriously mistaken assessment of the real balance of power in society. The "two year olds" were the supposed cream of the graduate crop, being paid stupendous salaries and bonuses. The "adults" were the losers who couldn't cut it in the bear pit of the city, getting paid peanuts to shuffle the paperclips.

Yes the regulators are also culpable but your determination to absolve the bankers is unjustified, disappointing, worrying.

A better analogy would be that of the bankers as a load of £80k/week footballers "roasting" a poor unfortunate wannabe-groupie, and the FSA a £20k/year the hotel duty manager doing nothing to stop them.

This blog is great when it is pure unadulterated pessimism and attacks everyone involved in the UK Bubble equally. It loses lustre when it becomes a cheap attempt to refract the facts through an ideological lens to twist the picture.

Barry said...

There is little question bankers lost that necessary attachment to fiscal probity Alice. The various incentives and rules they operated within allowed this, but what is being missed here is that throughout our society being sensible with money lost its hold.

Encouraged by governments who are ever eager to lay out their promises of nirvana, everyone (well almost), came around to the idea they could spend without really considering the consequences.

Having contributed to this disaster in every way our political magicians have taken to shifting the blame anywhere but to themselves. Bankers are an obvious and easy target, what is unlikely is that government would admit they brought ruin to the land of ours because they took too much money and wasted it while at the same time encouraging everyone else to do the same.