I don’t know about you but it seems to be open season with bankers now. Even some academics that were previously cheer leaders and yell captains for the banking industry are now sticking the boot in.
Some may say they have brought it on themselves. For example many people who have had minimal experience in a city bank or held a relatively junior back office role would wax lyrical to their friends about how they “were masters of the universe”. The worrying part is their level of understanding of their own business. Don’t take my word for it, ask one of your colleagues in banking to explain in simple terms how a collateralised debt obligation works, a credit default swap or the benefits to the greater good of a special purpose vehicle. I wish you the best of luck.
I had the pleasure of hosting a banking recruiter last year who gave a fantastic presentation, whipped our students into frenzy and looked immaculate in designer Prada wearing shoes that would cost more than high street bank teller’s weekly wage. At the end of the presentation we chatted over coffee and I asked her opinion on the Hank Paulson’s backing of AIG versus leaving Lehman brothers out to dry.
Naively I was expecting a robust defence in favour of the greater good of overlooking Hank Paulson’s apparent conflict of interest as a former CEO of Goldman Sachs which had over $10,000,000,000 exposure on AIG and minimal exposure with Lehman.
The response I got was “who is Hank Paulson?” Doh! Honestly you couldn’t make it up!
This part of the wizard of Oz better than any other summarises the arrogance of some individuals in the banking sector. The credit crunch of 2007 followed by the seizing up of inter bank lending in autumn 2008 cruelly exposed the hubris and narcissism of the banking industry.
http://www.youtube.com/watch?v=NZR64EF3OpA&feature=related
Dorothy: “you are a very bad man”
Wizard: “No my dear I am a very good man but a very bad wizard”
A colleague of mine Greg Pytel an expert on the banking crisis who has greater insight than most is a lot more scathing and equates the mid and lower level staff akin to African Child Soldiers.
http://gregpytel.blogspot.com/2009/10/economist-exonerate-bankers.html
As much as we would like to blame the bankers for everything, we need to look to ourselves. We all want cheap credit, we all want to keep up with the Jones’s, we want exotic holidays, we want that dream home. Where is the money going to come from?
A reformed banking sector with long term incentives is still vital for our future.
Eighteen months ago I posted on a banking blog about the need for global regulation rather than country specific or regional regulation. The news at Davos regarding this is very encouraging.
http://www.philly.com/inquirer/world_us/83184732.html
My next blog will focus on the changing expectations of society during the noughties.
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Graham, you wrote:
ReplyDelete"As much as we would like to blame the bankers for everything, we need to look to ourselves. We all want cheap credit, we all want to keep up with the Jones’s, we want exotic holidays, we want that dream home. Where is the money going to come from?"
I agree putting that point across, but... we are not bankers and we typically do not understand principles behind banking and money circulation. Therefore we cannot be blamed for what bankers did to satisfy our urges. In the same way as a child desperately wanting a bike cannot be blamed for his/her father stealing it.
However since we know how bankers are like now (predominantly criminal and/or incompetent), we, as society, have to take upon ourselves to sort that out. Otherwise like a child with a criminal father cannot really expect a bright future, we cannot expect much of the current financial system.