Gillian Tett has written the following in the FT this morning:
The past three decades of financial history are sometimes described as a period when free market ideologies ruled, but they might equally be christened the era of “banker hubris”. Never mind financiers reaped fat bonuses; what was striking was that everyone assumed finance should be left in financiers' hands. The bankers had moral legitimacy since they seemed the only people wise enough to understand money.
Now, of course, the pendulum has violently swung: as the crisis has unfolded, the status of bankers has crumbled, along with the idea that finance should be left in their hands alone. Instead, government officials are producing new rules to craft finance and monitor those bankers. It is bureaucrats, in other words, who now carry moral legitimacy; and the weight of public expectations.
This swing is not surprising; banker hubris was costly. But an age of bureaucrat hubris creates new risks.
It's almost unimaginable that someone can offer this as serious commentary.
So far no banker has suffered any regulatory consequence of the crash.
The Vickers report will have no impact until 2019. Then much of it will be self regulation in very many ways.
The FSA reform, folding it into the Bank of England, is mere gesturing.
Basel III is a decision deferred.
Project Merlin is a joke.
Bankers' bonuses are unfettered.
The nationalised banks continue as if they have complete contempt for their owners.
Bob Diamond has declared remorse over.
Please tell us Gillian Tett where the regulation is coming from, because right now I'm having real problems spotting it.
But I can sure as heck spot failing banks, bonuses, hubris and another consequential financial crisis. And an apologist for the banks.
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And Gillian fails to note that finance is little more than a private sector bureaucracy taxing every part of the economy it can touch. It’s displays all the vices neoliberals rail against in public sector bureaucracies; self serving, secretive,unaccountable and paid for by a helpless population.
Paul,
I found your comment profound and insightful – an opinion never heard in the mainstream media (not even the BBC or C4).
I would add the same charge can be levelled at the oil companies, utilities, supermarkets and telecoms companies whose abuse of power is not even
challenged by this self-serving government.
Lets at least have some perspective on the banks, the retail banking we get here might involve poor service, but it is not exactly ripping us off. I don’t ay a cent to wrtie cheques each month, draw money out of my account or have the convenience of paying by credit card where I get 50 days free credit. In addition I pay only 2.5% for my mortgage, yet am getting 3.75% on my savings. Hardly much to complain about. If people actually voted with their feet and changed banks that gave them a bad deal, we would soon see competition improve.
You may have noticed why you get so much – a) you pay in a lot, I suspect b) the retailer pays for your credit card c) banks make it hard to kove
Please open your eyes
Free lunches are always wrongly described
I don’t actually pay in a lot. I was merely pointing out that relative to other countries, we get a good deal from the banks due to cross subsidisation. Other countries charge monthly fees, transactions fees and credit card anual fees. In fact it would is the poor/old that are getting the best deal (except if they break their contract) in that their low blanaces and small, frequent transactions would attract large fees in the rest of the world (correctly reflecting their cost to the bank), but here are cross subidised by people with large balances and using mostly electronic banking.
Granted the retail banks were run by idiots up to the crisis, who took on way too much credit risk funded by foreign wholesale borrowing, but to the average users of banking services, they have delivered a good deal. Of course I am conveniently ignoring the investment banks, but then most of us have no contact with them in our day-to-day lives.
The money in your account is not actually “your” money, When you put money into your bank account, you have actually loaned the bank your money to do with as it pleases.
Gillian Tett used to have tremendous credibility, and indeed I praised her in Treasure Islands for her foresight ahead of the financial crisis. But she does seem to have put forward some dodgy anayses recently. We headlined an earlier one “Why is Gillian Tett taking the banksters’ line on transparency?”after she wrote a piece criticising U.S. efforts to extract a little more transparency from banks. See it here. http://taxjustice.blogspot.com/2011/06/gillian-tett-is-widely-respected.html
Gillian Tett also wrote a superb book, “Fools Gold”, which described the invention of derivatives like the Credit Defailt Swaps, the way the ratings afencies told bald face lies abou the worth of CDS and essentially gave AAA ratings to what was basically junk and the monumental stupidity and greed of the banks and finiancial sector.
So it is a real pity she has come out with inane views like this that have absolutely no bearing on reality.
GT often mentions that her degree was in anthropology. I don’t know the rest of her background but after spending many years at the FT and then speaking to the right people to write her book ‘Fool’s Gold’ she has probably got some version of Stockholm Syndrome. You see this kind of thing in people who try to appear fair to get a hearing from everyone: “Yes, he bankers/traders have done some terrible things but when you meet them they’re somehow just like us. So the system must be wrong.”
I also have to question the ‘foresight’ of people who are paid to watch over the financial arena. After the early 90s negative equity debacle, were there really so few people not questioning the worldwide year-on-year hike in house prices? Did no-one hear of the bank branches up and down the country forcing loans on people who the banks were fully aware would have difficulty paying them back? What about the rise from the early 2000s of commodity prices, oil, domestic energy costs? Did someone build that perpetual motion machine and not tell me? This was no ordinary boom and it was clear to me (who usually has his head stuck in some book of Romantic poetry) it would end in tears. I even bought a book by Peter Warburton in 1999 called Debt and Delusion which has on the back the blurb this book is ‘full of advice on how individuals and institutions can prepare for an explosion that will rock the western financial system to its foundations’. Well I never!
It’s so easy to consider loans backed up by land collateral as risk free. Because land is in fixed supply and therefore never loses its value in the long term – theoretically. This is why we need to extract all land rent for public benefit which would have the effect of the market value of land tending to zero (but retaining, indeed enhancing, the rental value). Lenders would then have to do proper risk analysis. And there are many other beneficial effects of extracting land rent.
Shylock in the merchant of Venice “what judgement should I fear having done no wrong” What illegal act are the bankers suspected of doing?
Since when did right and wrong have anything (much) to do with the law?
Has morality passed you by?
And ethics too?
Do not corporations have articles of establishment, which they have to comply with, the bankers did nothing illegal since they write most of the laws, Goldman Sachs is referred to as Government Sachs, in the US the banking elite have captured the the regulatory and political and Media systems. You may recall Eliot Spitzer when he tried to expose corruption in mortgage origination business they were able to expose his prostituting. Acts like this scare anyone who tries to speak out . There is a website called Goldmansachs666 which details the many foibles of this company which is above the law.
There is a video about these banking cartels on youtube, “Central Banking History : William Stuart ~ United We Strike Radio 2011” it puts all the pieces in place.
“Fools Gold” seemed to me to follow the testerone template of American financial journalism crediting the lead players as highly intelligent agents boldly going where no-one has gone before.
I think that Frank Partnoy (“Infectious Greed”) addressed the issues long before Tett.
I am waiting for an auditor to write a book. Preferably an American auditor. A book that would explain why the profession was so spineless and in thrall to the lawyers.
I suspect Tett is referring to the heap of regulations being thrown at global wholesale and investment banking, not many of which are debated or even known about in the UK because investment banking is not seen as “our” problem. My only gripe would be her comment that the creators of these regulations are “bureaucrats”. Some are, notably in the US, but by and large they aren’t – they are senior bankers. As are the Basel committee.
She works for the FT.
Therefore, in the end, what line do you expect her to take?
My experience is that there is strong editorial control at the FT, of perspective and focus.
An FT Brussels journalist could really see the signficance of Mode 4 (trade concessions allowing transnational corporations to totally commodify labour and move cheap labour across borders) when I drew his attention to it. He didnt take my word, he checked it extensively including with the Commission and realised he really was onto something.
But FT’s central office told him it was UK business and would be handled from London.
The result was that nothing was published on it.
Indicates strong editorial control to me on behalf of financial services.
FT journalists deny that there is such control by the way – and there’s some evidence that’s true
But I suspect you don’t get in if you don’t toe the line
At least you managed to get yourself heard at the TUC (motion on Mode 4 opposition passed), Linda. It’s all totally down to you. Now the issue needs to be brought to the fore in the whole labour movement. Richard, thanks for allowing Linda to get this into your blog, which has such a wide readership.
Talking of conversions of conscience, anyone else noticed how Madame Lagard has suddenly lost her opposition to excessive bank pay now she is head of the IMF?