Saturday, October 11, 2008


This crisis has awakened me form my blogging slumber. What's going on is outrageous.

Our banks are no longer viable entities. They have now been promised vast sums of our money, through a variety of schemes. Yet the bankers who created the whole mess are not really losing very much, and are, at this very moment, continuing to receive large salaries. There has been no guarantee of a moratorium on bonuses, only vague words. Am I wrong to think that at the very least, these rescue schemes should work as follows. Firms should be free to sign up or not, but if they do want to take huge chunks of public money to recapitalize, they should see salaries capped, across the firm, at the top civil service rate, say. Furthermore, they should open up their books to a comprehensive investigation by a new investigative unit (if we're spending this kind of money, we can afford something like this - think of it as a Keynesian stimulus), with a remit to prosecute actions that were either truly fraudulent or simply cases of gross irresponsibility, criminal charges in the first case and civil in the second. Firms that do not wish to be exposed in this manner, or who do not wish to cap their wages, would be free to take their chances in the open market (I understand it's important that a critical mass of banks get back on their feet, but putting the scheme this way frames the issue correctly: while it's necessary, it's also the government doing the sector a favour.)

Yet this is not what is happening, certainly not in the US, and not even here in the UK. Two nights ago a senior banker on Newsnight explained, with a straight face, that all this talk of doing away with "$2m bonuses" and so forth would come to nothing because that is how "it works" in the City.

These people beggar belief. They are not only the biggest theives seen in the history of business, but have so convinced a generation of political leaders with their pseudo-economics (unfounded, as far as I can tell, in either theory or empirical evidence) that it seems that even after what has happened the moral response has been muted.

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