Banks damned if they do and damned if they don't

Nov 26 2008 By Neville Boyd Maunsell

ournalists are despised, politicians are distrusted. Bankers are just plain hated.

A BES opinion poll yesterday found that 70 per cent of people blamed American banks for our present plight, 61 per cent British banks – and just 23 per cent Gordon Brown, who ran the economy for ten years deluding himself that he had abolished “boom and bust”.

The double counting underscores the point. They are all guilty.

Titans regarded as lords of the universe until August last year now describe themselves as “office workers” at polite dinner parties, for fear that the party will become impolite if they admit to being bankers.

Yesterday the governor of the Bank of England – the only bank nationalised by the Attlee Government – let the notion of “outright nationalisation” of other banks hang in the air when it was fed to him by a Labour MP.

The pity is that we cannot do without bankers. Banks are the engines of modern prosperity.

When they fall down on their job, or fail to do it, we cease to be prosperous.

It is a job where you are hated if you succeed (and over-pay yourself grossly) and hated even more when you fail (even if you promise to over-pay yourself a little less).

If you refuse someone a loan you are a bogey figure preventing them from buying a dream home or pursuing a brilliant business project.

If you make the loan and it goes wrong you are hated for lumbering them with ruinous debt, hounding them out of the dream home, or close down a promising venture just as it was about to turn the corner.

Now, house prices are falling month by month. Mortgage lenders are twitchy about negative equity and reserve what decent deals they have for people with deposits of 25 per cent. So house prices go on falling.

The government won’t wear that. It is setting up a ‘panel’ to stop it.

Banks that took the government’s £37 billion, or dodged it by raising new capital where they could, off chancy foreigners, may have supposed they were prudently plugging the holes left in their balance sheets by American sub-prime mortgages.

They were terribly wrong. The Treasury decrees this capital is “a usable buffer of capital to absorb losses that might occur during the recession”.

In other words be like Gordon. Stop fussing about prudence. Lend or be nationalised.

And be hated regardless.