Did the Bankers Do It?

Bankers have also shown themselves to be ethically challenged.

They established the system of ideas that bankers, politicians, and regulators applied.

If we are going pursue the blame game, I blame economists more than bankers for the crisis. They established the system of ideas that bankers, politicians, and regulators applied.

Neither man found it difficult to accept the bankers absurd logic.

Bankers boast of having paid back in full the government bailout funds that they received when the crisis erupted.

If Western bankers and investors want to buy snake oil, that is their business.

Bankers everywhere will rush to read it before their regulators do.

While international bankers went bust by making legions of bad loans, African bankers stuck to earning profits the old fashioned way paying very little to depositors, and earning a big spread by buying guaranteed government debt, which yielded healthy returns.

And bankers neglect to acknowledge the role of government guarantees and subsidies in making so much borrowing possible and attractive.

Tax collectors used to be Public Enemy Number One now bankers have usurped that role.

The bankers will laugh, while politicians wail and gnash their teeth.

British bankers threatened that they would never again invest in these untrustworthy Americans.

Bankers also claim that higher equity requirements would restrict credit and hinder economic growth.

The bankers again paid themselves huge bonuses more than 20 billion for 2009.

Bankers get the upside and taxpayers (and people laid off as credit is disrupted) get the downside.

To see why, it is important to understand why bankers are paid so much.

The US economy is in a mess even if growth has resumed, and bankers are once again receiving huge bonuses.

If we are going pursue the blame game, I blame economists more than bankers for the crisis.

The bankers get the upside when things go well, while the downside risks are largely someone else s problem.

Ever since the Gramm Leach Bliley Act of 1999 repealed Glass Steagall, bankers have acted increasingly like feudal lords.

The financial crisis should have mandated a running stress test to keep senior management up to date daily. Why, then, did the US need the government to conduct a financial exercise that bankers themselves could and should have done far better and faster?

Not all of them are, of course, for there are poorly paid bank clerks and cleaners who count in this category. But is it possible to justify the enormous rewards earned or should we say received by investment bankers, hedge fund managers and private equity partners?

But if bankers know that they will be bailed out in bad times, they have an incentive to make risky loans.

There was, as one banker charmingly conceded, a bit of asymmetry between what bankers were being paid and what their banks had lost.

STANFORD This year has proven to be yet another replete with futile efforts to manage the outsize grip that banks and bankers have on the world economy.

Bankers are still social pariahs, as lowly valued by the public as drug dealers or journalists. They are reviled if they lose money, and assailed if they make it.

This message, it was hoped, would stabilize the market so that prices for toxic assets could rise to a level at which bankers might feel comfortable selling them.

In a globalized world managed by bankers and technocrats, many people feel that they have no say in public affairs they feel abandoned.

In the case of Greece, international bankers argued long and hard that debt restructuring would generate contagion far and wide within the eurozone and perhaps more broadly.

Perhaps the greatest insult to taxpayers, then, is that bankers compensation last year was back at its pre crisis level.

Every time a government, or a regulator, announces some new control, or a tightening of existing controls, there are threats from bankers that they will pack up and leave town, taking their Porsches and mistresses with them.

When Shanghai sought a similar role several years ago, bankers and investors around the world wondered whether the aim was really for Shanghai to replace Hong Kong as China s financial heart.

As matters stand, bankers continue to benefit fully from the upside of their investments, while sharing the downside with creditors and taxpayers and sometimes with shareholders.

With the gradual dismantling of Glass Steagall, and its final repeal in 1999, bankers triumphed over both the busters and the regulators, while maintaining deposit insurance for the commercial banks.

So any critic who has the intellectual heft to clear away the smokescreen that bankers have laid around their business, and can portray bankers as both incompetent and malevolent, finds a ready audience.

To safeguard their interests, bankers have lobbied relentlessly against regulations that would require them to rely less on borrowing and more on retained earnings or new equity to fund their lending and investments.

STANFORD This year has proven to be yet another replete with futile efforts to manage the outsize grip that banks and bankers have on the world economy. The global financial system remains distorted and dangerous.

Bankers, who may really be worried about their own bonuses, warn that higher capital requirements will force them to curtail lending, thus impeding economic growth.

Finally, the bankers are paid according to return on equity, unadjusted for risk, so it is very much in their interest to continue running their business with very little equity.

NEW YORK For the American economy and for many other developed economies the elephant in the room is the amount of money paid to bankers over the last five years.

If the developed world is able to pay trillions of dollars to clean up its bankers mess, how is it possible that it cannot afford to pay billions of dollars to clean up a mess that it created, and that is threatening the survival of whole continents?

It feels quite iniquitous that bankers, having helped cause today s financial and economic troubles, are the only class that is not suffering from them and in many cases are actually benefiting.

Even now, many of the losses that bankers should have faced are being shouldered by the public sector, including through various forms of direct support and the extraordinary and risky actions of the European Central Bank.

Dollar denial, that state of willful blindness in which bankers and central bankers claim not to be worried about America s falling currency, seems to be ending.