Bank-bashing is here to stay

posted by Scott McKenzie

So George Soros is the latest person to suggest that banks are just too big. President Obama and our own Financial Services Authority have already made their position pretty clear.

Banks are going to be smaller. Irrespective of whether that makes them less profitable. And that’s one of the interesting things here. The assumption appears to be that the profit motive is inherently wrong.

Don’t get me wrong certain Banks (and bankers) have a lot to answer for in the way they went about making those profits. They have exposed the world economy to a deep recession.

But let me give a slightly different perspective here. And I know Bankers and Banks are about as popular as Traffic Wardens right now. Or maybe Estate Agents.

Not all people working for banks are getting £1m bonuses. I spent 10 years of my career working in Financial Services (much of it with banks now at least partly in Government ownership). Many of the people I met work part time in local branches. Many of them are working mothers. Many of them are earning far less than £20k per year. They are generally good people.

So when we use the term “bankers” as a synonym for “fat cat” I have to take issue with it.

Banks have a right to exist. They are an essential part of the fabric of our society. Not just because of the good work they do in local communities. Or the large amounts they have given to charities over many years. Their profitablity is essential to the ongoing employment of hundreds of thousands of people in this country. And the long term health of many pension funds.

The Banks have quite simply failed to make the case for their ongoing value to society. And so they get kicked from pillar to post.

Yes some banking executives have made some catastrophic mistakes. But in my view we need to stop demonising the banking industry.

Sadly, in the run up to a General Election here in the UK this issue is only going to get more political. The season of bank-bashing will go on.

4 Comments
02

Feb
2010

Michael Zdanowski

I don’t think any reasonable individual or indeed the media deny the right of banks to exist and to make profit. Without banks our economies would cease to exist and the flow of credit and security of deposits would disappear. We know this. The issue at stake is a deregulated banking sector that has resulted in reckless risk-taking that nearly led to a second ‘Great Depression’. Recent proposals to reform banking both in the US and the UK focus upon the need to separate retail or commercial banks from investment banks. In light of what has happened this appears to be a logical step. What has occurred over the past decade or so is that investments banks (or investment arms of banks) have gambled with depositors money which has resulted in the banks becoming seriously overleveraged – hence the various bailouts. This is the cause of quite justified public anger as public money has then been spent propping up the banking sector, which has been shown in many cases to have been poorly managed yet with extravagant rewards. With its rigorous cross-examination of the banking and financial sector the media on both sides of the Atlantic has forced bankers, regulators and government to analyse where things went wrong (and continue to go wrong) as well as inform the public about the various options on the table. At the same time the media gives voice to exactly the type of people who you reference in your posting and who are finding life so difficult at the moment. The banking sector might have failed to get its message across but for some banks at least that is because their story isn’t good enough to tell.

02

Feb
2010

Scott McKenzie

Thanks Michael. I agree with your point about the change in regulatory environment.

But do you really believe that the tone of the debate is being conducted by “reasonable individuals”? And while I agree that the “reckless” banking exectives you mention should be punished (in the criminal courts if appropriate) I also think that the ongoing moral indignation is frankly hypocritical.

As a country we were happy for Financial Services to be the engine room of our economy for many, many years without really understanding how it generated the wealth that we all benefitted from.

And I notice that you didn’t address my broader point that most people working in banking – especially on the “frontline” – are hardly living the life of Reilly. They are the ones who are facing the day-to-day reality of the public anger being so ably stoked by some parts of the media.

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Feb
2010

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Mar
2010

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