Speaking to the Huffington Post, and re-printed in the Daily Telegraph today, Sir Mervyn King makes a special plea for the demonising of bankers to stop.
"....Sir Mervyn King has called for an end to the demonisation of bankers over the financial crash, insisting the problem was with the system rather than individuals.
The outgoing governor of the Bank of England said there was a failure to adequately regulate the financial sector and society had given "too much status" to those in the City..."
In a way, these parting words are an attempt by him to defuse the suggestion that he has been altogether too critical of the banks.
Well, I'm sorry, but like another great tart, Mandy Rice-Davies once said; "...He would say that, wouldn't he..!"
I think it is wholly farcical that the outgoing Governor of the Bank of England, the regulatory figurehead, on whose watch this era of organised financial crime has taken place and been allowed to go unpunished, should now start pontificating about the need to cut the criminals some slack, and blaming the regulatory process. He says;
"...I would say to people, though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of a failure of a system..."
"...We collectively allowed the banking system to become too big, we gave it far too much status and standing in society and we didn't regulate it adequately by ensuring that they had enough capital. We have to put that right..."
Sorry, who's this 'we' you keep banging on about, Merve, it surely wasn't the regular readers of this blog, or those who got screwed in the PPI scandals! I'll bet it wasn't the men and women who got defrauded by HBOS or the clients who were sold dodgy interest rate swaps. And it certainly wasn't me, so who was it?
Why is it that Mandarins of Sir Mervyn's kidney, always seek to spread the blame among as many people as possible and then accuse the process, but never the individual?
It's called 'Techniques of Neutralisation' in financial criminology, and it is a classic way of trying to shift the blame away from those people who really are responsible.
It's because they know, only too uncomfortably, that when you start to focus on individuals, they themselves can quickly be brought under the spotlight. Far easier to blame the process and claim that some unforeseen error (like absence of capital) caused the problem.
Yes, it's true, the regulatory process fucked up big time! They engaged in a process of 'light touch' regulation, because wee 'Goordy Broon' got bamboozled by the clever chaps in the City, believing that they were really bringing him shed-loads of money, so he gave them 'light touch' regulation, which in practice meant no regulation at all. Labour took the constraints off the banks, and then expressed surprise when the entire edifice ran out of control down the hill and crashed into the wall!
The whole crisis can be explained very simply. Banks in America, who have branches and entities in the UK as well, were lending money to people to invest in property, in a seemingly unceasing upward spiral of prices. The practice quickly spread to banks in the UK as well.
This wasn't real money that was being lent out, and the lending banks didn't have to worry about the likelihood of its being repaid because they were packaging up the debts as fast as they could and selling them on to someone else as securitised investments. Those speculators, in turn, repackaged these debts and sold them on, and so on and so on!
They created a vast mountain of debt, all leveraged on two premises. One was that house values would continue to rise, and the second was that all those people who had borrowed so heavily to mortgage themselves up to the back teeth, would not default on their obligations!
The irony was that the one premise depended upon the second , and once defaults in payment started as people lost jobs or became redundant, so the hiccup in the debt market led to a loss of confidence in the house market, which led to a slide in house prices. And as every price tick downwards was observed in the value of house prices, it amplified the leveraged debts incurred exponentially.
Eventually the debts became so huge that they could not be managed and despite the existence of credit default swaps and other Machiavellian derivative contracts which had been written to give the impression of a fully hedged portfolio of debt exposure, banks were staring real defaults in the face.
Dean Baker in an article of Feb 11, 2010 in The American Prospect entitled "...Mervyn King Is Not Only an Incompetent Central Banker, He Also is a Bad Teacher..."
identified the failure by Alan Greenspan in the US and Mervyn King in the UK to tackle the bubbles in their respective countries' housing markets, a failure which resulted in catastrophic "fallout" when the bubbles burst, resulting in the worst recessions in both countries since the Great Depression.
Rather than risk a melt-down in the banking market and possibly the undermining of the whole economic complex on which the City of London depends, and on which the UK Government depends even more. the decision was taken to use tax-payers' money to prop up the banks which had been brought low because of a combination of pure greed, avarice, hubris and downright criminality.
It wasn't you or me who did this. We were not the ones who made these decisions. We were not responsible for allowing the banks to give out money like a man with no arms, to people whose chances of repaying the debts were so illusory that phrases like snowballs and hell spring to mind!
These decisions were made by men and women who were being paid incrementally-rising levels of bonus for every new crock of shit they sold. Every time some idiot took out yet another loan, the bankers were getting rewarded. They didn't need to worry about the creditworthiness of their borrowers because the debts were off their balance sheet as soon as they were created, and packaged up and sold on. And of course, they were selling a vast number of worthless and fraudulent PPI contracts as well, to the punters, so the profits just rolled in.
But it was people doing this, making these decisions, providing these loans, the bankers, people who should have known better!
It was people who were defrauding their clients on the PPI contracts, it was people setting up the banking arm of HSBC in Mexico to move the drug money for the Mexican cartels.
It was people who were manipulating the LIBOR market and ringing up their mates and offering bribes to bring the price down to or keep it up at wholly artificial levels.
All these elements were human interventions, and they were carried out by people who we must assume had the capacity to think about their actions, and make moral judgements about what they were doing!
And it was people who were sitting in control of the regulatory mechanisms, Mervyn King at the Bank of England; Adair Turner at the FSA, and what were they doing?
The answer, sadly, is very little! Were they all waiting for each other to act, hoping that someone else would take the responsibility to grasp the nettle!
It is simply not good enough for the outgoing Governor of the Bank of England to say now, "...oh let's not demonise individuals here, this was about a failure of regulation..."
Well yes, to an extent, he's right, it was about a failure of regulation, but it was more than that, it was about a failure of regulators to identify the guilty individuals, and to take them on, whatever the cost.
This is the moral dilemma you accept when you become responsible for ensuring that any sector of society obeys the rules you are there to enforce, whether you are a cop on the beat or a regulator in a suit, you have a duty to perform, and the way in which you perform that duty will say everything about you!
It also says as much about the people who appointed you, whether they got the right person for the job, and if not, why not?
You know, it was perfectly well within the ambit of Sir Mervyn's role as Governor of the Bank of England, when things were going really badly, to arrange a meeting with the boss of the FSA, the Home Office, The Commissioner of the City of London Police, H.M.Treasury, and to have raised his concerns at the way the City was behaving. He could have pointed out the levels of organised criminality which were taking place, and asked the FSA what they were doing about it, and if the answer, as it would have been was 'very little', he could have perhaps invited the Police Commissioner to provide some input to the discussion.
He could have taken soundings with the Home Office, he could have discussed it with the Treasury, he could have done something to emphasise his concern and to demonstrate that he was not merely complacent!
He may have done this for all I know, although if he did, I am surprised we have not heard of something like that going on.
You see, this is the perennial response to allegations of major City criminality. Let us rather blame the process and claim it is being reformed, but leave the individuals alone. The only problem with this formula is that no matter how many times you reform the process, the criminals are still there, and with the same propensities to commit crimes!
No, we have to continue to demonise the individuals, and we have to require that they are held responsible for their own actions.
This is the only way that we will ensure that others do not become so willing to step forward and behave in a similar way in future.
The only way in which the City is going to be freed from this miasma of organised criminal conduct is for a full and permanent cleansing of the Augean stable, with a root and branch cleansing of the crooks and the wide-boys who run its operations. There has to be a cauterisation of those wounds which have cost the City so dear, and there has to be a complete revitalisation of policies of ethical integrity and complete financial transparency.
That is if the City really wants to regain any of its tattered reputation for sound practice! Mervyn King says it can be done.
"...The reforms being made to the way the City was regulated would result in a “revolution in the way in which banking is handled and we will be able to be proud again of British banking”.
“In a couple of years’ time we could, if we carry on the right path, get to a point where we would be best practice in the regulation and structure of our banking system,” he said. “Then instead of people trying to mock British banking, as they did in 2007/8 when things went wrong, they will actually look and say, well actually they did learn the lessons....”
That's what he says in public and to the Daily Telegraph, but he is kidding himself.
He has to say these things, he cannot go into retirement in the full and certain knowledge that as Governor of the Bank of England he has presided over the greatest period of banking scandals since the South Sea Bubble.
He has often been accused of being quite acerbic towards the banking sector. Some of Britain's top banks were warning in March 2012 that they will move abroad unless a less “hostile” successor to Sir Mervyn King, the Governor of the Bank of England, is appointed when his term ends. It is likely that these, his latest words about the banking sector, are an attempt to defuse his criticisms of the banks in the past.
I fear it is already too little and too late! The genie is out of that bottle, and now the ordinary members of the public know only too well the kind of men who have brought this country to its knees, financially, and have left the ordinary tax payer with a legacy of debt which will take years to expunge.
So, I say there must be no soft-peddling on these dishonest bankers, and we must continue to keep bashing them at every possible opportunity, naming and shaming them if possible, because apart from locking them up, it will be the only other process that might, just might, keep them on the straight and narrow!