London Should Love its Bankers

and various tangents involving implausible analogies and credit cards….

[Results of the Vote: 338 votes for, 281 against and four don’t knows]

For: William Right, Anthony Fry, Jennifer Moses
Against: Ken Livingstone, Tony Curzon Price, Aditya Chakrabortty

As the Chair acknowledged to me following the Intelligence Squared debate – ‘London Should Love Its Bankers’ may not have been the right statement to debate in the first place, nonetheless, the motion was carried.

According to those present last night – Not only should we stop blaming them, stop joking about hanging them, and bail them out when they mess up, we should also love our bankers. Perhaps the outcome would have been different if bankers, trainee bankers and partners of bankers and trainee bankers had withheld their votes.

Growing up, we didn’t have political debate in our household. The general mentality was – we know it all – don’t believe a word they say anyway – we’re on the same side in this house so there’s nothing to debate. My parents rarely read newspapers. The news was generally criticised for being too depressing ‘why can’t they report nice things?’

So when I tried my ‘the credit card analogy is bullshit’ argument on my mum the other day she was a bit taken aback by my passion and told me to calm down. I suggested (declared) she had become a Tory – apparently that’s not the case and she’s still LibDem (if only they were).

The problem with heated debates between me and my mum is that neither of us knows what we are talking about. So I relished the opportunity to try it out on an expert last night.

I went to the debate because I’m looking for a more nuanced discussion than I can get through consuming the standard fare of political rhetoric, and because I want to know more from both sides. I’m still cultivating my own political views – the process began when I started making my solo show ‘Opposition’ two years ago. I was angry about not being able to care about voting for any of the political parties, frustrated by the fact that when they speak they rarely communicate. Not much has changed.

I won’t attempt to do a potted version of what the panellists said. There were many analogies. Tony Curzon Price’s comparison of loving a banker to Stockholm syndrome was my favourite. The ‘for’ side repeatedly quoted Ken Livingstone talking positively about the city and its importance to London, which was interesting as last night he was sitting on the ‘against’ side. Jennifer Moses mentioned flip-flopping, though my favourite statement of hers was her opening: ‘It’s very kind of you to have a woman on this panel’. Both sides said those who committed crimes needed punishing and regulation was necessary. So no one took the same view as Jamie Whyte on Radio 4 recently, defending the free market and arguing that the crisis was the fault of state interference.

William Wright’s argument focused on a comparison of bankers with wayward teenagers; they were just responding to the context they were in and should be given stricter boundaries and forgiven. Wright said ‘by not loving them [bankers] we are denying our own role in the crisis’. – We apparently played a part in creating the monster. I wanted to know how I was responsible, never having taken out a mortgage, not seeing myself doing so in the conceivable future, having paid off my credit card and student overdraft (not much chance of paying off the loan), how did I, or others of my generation and younger play a part in the crisis?

Initially this was mistranslated as the Mike Bartlett clichéd moan  – my generation are paying for the mistakes of our parents etc. Actually I don’t think I am owed a house or a car or a job. I am happy that I can pay my bills and that I am able to do the work I want to do in this climate, working in the arts has never been paid well and that’s my choice. I met quite a lovable banker following the debate (reminded me of my Granddad), I invited him to Opposition and he said he hoped it would make me some money. Which was amusing. Anyway, my question was rephrased and Wright’s response was to suggest that I wasn’t whom he was referring to, as perhaps I am not contributing to the economy (just a little bit patronising). It seemed that by ‘we’ he meant the Cameron ‘we’ as in ‘we’re all in this together’ not a literal ‘we’.

But we discussed it further afterwards. In fact by ‘we’ he means those who, during the boom, took out mortgages that were triple their income. And I disagree with this too. To use yet another analogy –when you go to a doctor you acknowledge that they are experts and that you are not. You give your symptoms and accept the prognosis even if it sounds dubious. If it turns out the doctor administered the wrong medicine and endangered you they can be tried, maybe fired, maybe jailed.

Like a doctor, a banker is a professional and an expert. If a gardener goes to a banker, presents details of his income and finances and is offered a large mortgage, the gardener will accept it. Then the differences set in. When it turns out it was wrong for the banker to offer the mortgage, that the banker did not calculate the sums correctly and the gardener cannot afford the mortgage, the banker is not punished, the gardener is. Although perhaps that’s another poor analogy, as it wasn’t so much the high street banking that was the problem but the casino style speculative gambling with our money. If that’s the case, then Wright is certainly wrong to suggest all those who took out high mortgages played a role in the crisis.

There was a question from the floor ‘are they actually going to be punished?’. I think it was Ken Livingstone who made the point that they didn’t let (us) have clauses in our mortgages that prevented our homes being seized if we default on payments, so why are their pay offs and salaries protected when they mess up? But of course they are self-serving institutions with little interest in the health of the wider economy or the people they are ‘serving’. They had no need to protect against collapse because they are ‘too big to fail’. We’ll bail them out etc. Going back to that Radio 4 programme, Whyte made the point that without state interference, without the cushion of knowing the state will bail them out if they failed, perhaps the banks would have been more cautious about how they gambled with our money in the first place.

So I don’t think my generation had anything to do with the collapse, and neither did those individuals who applied for mortgages and were given them. They were individuals. One of them could have refused a mortgage and been careful with borrowing (surely many were) – this wouldn’t have made any difference whatsoever. Wright asked me if I had a student loan and how much it was. Not sure where we were going with that. Did I exist in a culture of entitlement, did I think I somehow deserved a subsidised education?….Well…yes….otherwise only those who can afford one can have one… He may actually have just been making an argument for the rise in tuition fees (while at the same time saying that accepting high loans is reckless?). Anyway, an independent body did think I was entitled to an education, on merit. The AHRC funded me full time for two years to do an MFA, and they don’t ask for it back with interest either.

If it isn’t the fault of all of us, or the fault of bankers, is it the government’s fault? Obviously it’s convenient for governments of all colours to blame bankers to avoid being blamed themselves. Is this influencing the rhetoric we are being spun? But if it was Britain’s particular government’s fault then why was it that the financial collapse wasn’t restricted to our country but occurred at the same time under other governments elsewhere? Were all governments getting it wrong? Or all bankers? Or was it just ‘a tiny minority of bankers’ in many countries….Very convenient to blame tiny minorities. Saves rehauling entire systems.

Going back to the credit card analogy – it’s been bothering me for a while so good to have a chance to run it past Wright. The Tories and the LibDems continue their chant that Labour ‘maxed out the country’s credit card’ and that when a credit card is maxed out you don’t keep borrowing you pay it off.

A lot of people seem to buy this; the argument comes up as often as the phrase ‘the mess we inherited from the previous government’. But surely it’s a cheap trick used over and over again to brainwash voters into agreeing with austerity measures and to ridicule Labour. Weirdly, even now when it’s clear austerity isn’t working that analogy is holding fast. But surely a personal credit card is completely different to government borrowing? Now that I’ve Googled the issue turns out other people have been saying that for a while and explaining why. Never mind I’ll keep going.

Sticking with the inappropriate credit card analogy…my thoughts go like this: You have a debt on your credit card, you have a great idea for starting a business that will generate jobs and profit. The government’s view is, no you can’t borrow anymore you need to pay off your credit card. You say: how can I pay off my credit card when I don’t have a job? There aren’t any jobs, but I’ve got this great idea and not only will it employ me, in the future it will generate jobs for others too. But the government says it would be reckless to borrow more. Therefore you can’t start up a new business, you can’t pay your credit card, the interest increases and you are driven into double dip poverty.

If the whole analogy isn’t appropriate anyway, then whether or not my continuation of the analogy is accurate or not is irrelevant. If it’s true that the analogy is nonsense in the first place then the economic argument the current government has been using to communicate their policies to the voters is fundamentally flawed. Either they think we’re idiots, they are idiots, or their economic policy is idiotic.  Or am I over simplifying things?

As someone trying to figure out her own position and understanding of all this, I’d appreciate it if those communicating the situation would do so without flawed analogies and repetitive sound bites. So far I haven’t understood the arguments for severe austerity measures and reducing government borrowing. Mostly because they have been repeatedly presented with this credit card analogy. (The fact that they’re clearly not working and the national debt and borrowing has gone up considerably doesn’t help either.) Wright told me the austerity measures will start working next year. Looking forward to it.

In the meantime, join me in Opposition: Ovalhouse 6-17th Nov

3 thoughts on “London Should Love its Bankers

  1. I am sorry that last night was more about set pieces than genuine debate – and there is much to debate, not least on your point about why your generation should be suffering for the failinghs of others. I could be glib and suggest that fundamental unfairness has been constantly visited by older generations on their own children and grandchildren. Had I been American, I could well have been drafted to serve in Vietnam ….not my choice, not my fault but I would have been airlifted from a pleasant suburb in middle America and dumped into an Asian jungle to fight a war that I little understood in a country about which I knew nothing. Its not an answer, its an observation

    I am happy to debate this issue, in an intelligent and non conforntational manner, and believe that people like me have a responsibility to so do, particularly to those on university campuses and in forums such as yours. You may never agree, you might not much like the arguments but, as I said last night, as a banker I am ashamed at some of the things that were done by so called professionals in the wider name of banking.

  2. Hello!
    Thank you for commenting here, it’s a surprise!
    Yours was the only ‘set piece’ from the ‘for’ side that I could really see the sense, and substance in….

    The question ‘why should my generation pay for the failure of previous generations?’ – to be honest that isn’t my point/issue at all. Like I say in this post, I don’t feel entitled to a mortgage or the opportunities my parents had. (Listening to money box live today I was stunned to hear people a couple of decades older than me, with ‘reasonable’ incomes asking whether they can claim any benefits) I am busy making my own opportunities – I simply thought Wright’s argument was flawed, and used my generation to demonstrate that. But on the wider topics, I’m looking for the information behind the words, so that my own opinions and arguments are informed. For instance I’d like to know how your way of banking is different to that of the ‘so called professionals’ as you describe them. Last night people used the words ‘tiny minority of individuals’ a lot. But it is hard to believe that it took so few people to cause such chaos. And I still don’t understand how our economy and jobs etc can grow when there is so much cutting and so little investment…

    1. In some ways, I am not a banker in the normal sense of that word. I have spent my entire career advising companies and governments on things such as how to become listed on the Stock Exchange to raise money or even how to structure the National Lottery … And I have done that for a variety of financial institutions over many years. So I have never sat on a trading floor or lent anyone any money … Not really a banker at all !

      To your question about how so few we able to do so muc damage , it comes down to the fundamentals of how banking works. In theory, if you have money which you don’t need today, you deposit it with a bank that pays you interest as long as you leave it with them. The bank then lends that money to someone who needs it today who pays the bank interest at a slightly higher rate – the difference is the margin that pays for the bank’s own structures and leaves a profit

      That sounds straightforward enough. Where it gets complicated is that,because banks are regarded as very safe, they can actually borrow more money than the deposits they have …and over the last decade, governments and regulators allowed them to borrow more and more. In 2005, the average investment bank had borrowed 14x more than it had a capital and deposits – in the next 3 years that blew out to 35x …

      That would be fine in theory if the funds borrowed were used wisely. That’s where the minority comes in – the people taking the decisions at the top of the banks as to how this additional money should be invested. A dealer on the trading floor can only see his or her position, not the whole banks’ obligations and exposures. Ditto a lending banker. At the top, the managers were not only taking on more debt – they were taking bigger and bigger risks in how they used the funds so that they got higher returns, increasing their bonuses and the value of their shares …

      So I make no apology for criticising those individuals. But in many countries, that was not the problem – governments borrowed too much and then, when the credit crunch hit in 2007, landed ther domestic banks with piles of government ones that no one else would buy … Hence the bank bailouts in for example Portugal where the banks had kept a vey tight reining on their own lending …

      So one size doesn’t fit all when it comes to the banks and the crisis

      As to investment for growth, I agree … But governments have no money, they have too much debt built up over a decade on social programmes and not infrastructure. They have to reduce their debts otherwise the interest rate they will pay will increase massively …they forcing more cuts. That’s the current reality for Greece. The only hope is that the banks can get money flowing again

      But that’s a problem because governments insist the banks keep more capital and borrow less themselves to stop the crisis happening again – if the banks do that, they can’t lend so that we can build new houses etc…

      It’s time to move forward and not look back, however angry we may all feel

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