Bad banking practice should be punished, not backed by our taxes

Published on Friday 21 March 2008 21:06

BANKERS of the world have proved conclusively that politicians are not the sole possessors of the "stupid" gene. Neither of these "professions" seems to learn anything from the past or profit from experience.

There is a faint excuse for politicians; they are after all obliged to offer their services to the public every four or five years. So the time they spend with their noses in the trough of taxpayers' cash can be limited. Bankers – and I refer to the senior and more plutocratic of the breed, particularly in the United States – have the potential to fleece us for much longer while paying themselves more than handsomely in the process.

Who has caused the current global economic crisis? In the end bankers have. They have allowed, indeed encouraged, unsustainable borrowing, they rob you if you are unwise enough to leave a balance on your credit card by charging usurious rates of interest politely expressed as 18 per cent (APR 21 per cent) or similar, and they stack their books by pressing credit on those who cannot afford it.

Now, not only do all these bankers pay themselves huge bonuses and oblige their companies to write share options with built-in profits, but they squeal like pigs when things go wrong and talk nonsense about "market forces" (ie, some shareholders wake up to the fact that not only have they bought a pig in a poke but that the pig has its nose firmly in the trough).

The latest excitement is about "ruthless and dishonest traders" who caused a huge drop in the share price of several banks, most particularly HBOS.

Now I am sure that may well be so, but to intimate that this type of speculation is responsible for the recent turmoil in the markets is nonsense. The turmoil has been caused entirely by bad banking practice, dishonest statements, stupid speculation and financial engineering by the banks themselves.

It is this that has got them into the position where malicious rumours have any credibility at all – though I am glad to say that most of the Scottish banks seem to have been more responsible than many of their brethren.

When Brown, Darling and company went to the rescue of Northern Rock it was clear to good bankers that the whole affair was mishandled from the start. Neither Brown nor Darling really understood how to deal with the problem. But then from Brown, who so mishandled the sale of our country's gold reserves, what would you expect?

The fact is that we live in a capitalist society and there is no doubt that, despite its many disadvantages, it is the only system that offers any kind of incentive or prosperity to society.

As long as we have a capitalist system we must allow failures to be punished or history will always repeat itself. The bankers, fund managers and all those in charge of their own or other people's money must feel the pain when things go wrong, most particularly when the problems are of their own making.

The top bank executives can go hang – they are paid to get it right and should be fired when they get it wrong, not rescued by politicians at the taxpayers' expense.