Banker bashing

There’s a lot of banker bashing and anti finance sentiment out there. I understand that well enough. In terms of the sentiment behind it – the outrage that a sector can have caused such a lot of problems, and yet be so utterly immune to the repercussions of them. Of course I want “them” to be held to account. But who exactly is “them”? And more importantly, what can we do to put it right without hurting ourselves as much as we hurt them?

Disclaimer: I have no idea what the answers to these questions are.

What I have a slightly better idea about it the much easier issue of what some of the main pitfalls we need to avoid are. The biggest and most obvious of these – and the one we are currently marching directly towards – is that decisions are made for political reasons, rather than sound economic/financial ones – to quench this widespread feeling of outrage.

It is easy to rush out regulation to make life more difficult for bankers and other fat-cat finance types. It is easy to sell that regulation to angry voters, and the chances are this is a vote winning strategy in the short term.

But it is much harder to implement rules that will a) prevent the problems we have had in the past occurring again in the future (which must, at the end of the day, be the number one priority) b) reign in the excessive tendencies of some elements within the financial markets without penalising everyone else, (remember, many players in the financial markets are trading with money that belongs to everyday people: some of the biggest investors in the world are pension funds and endowments of educational establishments, and many of the hair-brained regulatory initiatives feeding through the system right now are going to lose them money – that is pensioners and students, not just bankers, who are out of pocket.) And c) how to do a) and b) without crippling our own economies, causing unemployment or one of the dreaded ‘flations (in or de, which will it be?).

It is easy to believe the finance industry is trying to use the politics of fear to blackmail the rest of society to leave it alone, threatening social and economic Armageddon if anyone tries to take away their bonuses. I don’t believe that for a minute. There is a way to rein them in without the price to society being too high to be worth paying. We may have to sacrifice some growth, but that is not necessarily the end of the world, when that growth manifests itself in things like unaffordably expensive housing.

But if this is going to happen right, it is also going to happen disappointingly slowly, as far as the public is concerned. And the measures, when they come, may not be sexy or spectacular. Public bloodletting of bankers and hedge fund managers might be satisfying, but it wont be helpful. Most importantly, it will require politicians around the world to put their differences aside and work together, compromising for the good of global financial cohesion, rather than short sighted national interest. Perhaps the recent political developments of the UK can serve as an example to the rest of the world.