There was a time, not all that long ago, when everyone respected banks and their managers. It was, most of us thought, a respectable profession. Not any more. These days most people loathe the banks and consider the expression “merchant banker” – Cockney rhyming slang for “wanker” – an exceedingly apt description.
What changed everything, of course, was the worldwide economic crisis brought about by the banks. Not just the bankers, of course. The brokers as well. Indeed all those who worked in the City and whose way of making money appeared to revolve around taking a spin at the roulette wheel in the casino called capitalism.
These men and women – epitomised by Gordon Gekko and his “greed is good” culture in Oliver Stone’s film Wall Street and, in real life, Jeffrey Archer’s son James and his Flaming Ferraris, the traders found guilty of manipulating the stock market in 1998 – were quite different from the sort of bank manager many of us can remember who wasn’t, in real life, very far removed from Captain Mainwaring, the fictional bank manager and Home Guard commander in Walmington-on-Sea, created by Jimmy Perry and David Croft in their classic sitcom Dad’s Army.
When the credit crunch became a global economic crisis – because, essentially, the bankers got greedy – how we longed for a pompous, but cautious, old coot like Captain Mainwaring rather than the cold-eyed boys in their shiny new suits who were trying to sell you something you didn’t need and they knew you couldn’t really afford, either. The economic boom of the late ’90s and early noughties was unsustainable, predicated as it was on a rise in house prices which could not – and did not – last.
Like the South Sea Bubble of 1720 – when the value of shares in the South Sea Company crashed from a high of £1,000 in August to just £150 in September – the bubble was always going to burst and the boom turn to bust.
Gordon Brown was right, as Prime Minister, to bail out the banks. Even if he was wrong, as Chancellor of the Exchequer, to go along with the desire of Tony Blair and Peter Mandelson to refashion the Labour Party as a friend of big business and of capital by deregulating the City.
But what is galling for every decent, sane and intelligent human being is to see the bankers – with all the arrogance of their profession and not a trace of humility – get their snouts back in the trough, refuse to learn the lessons of recent history and laugh at the rest of us as we pick up the bill for the mistakes they made. Ordinary workers in the private as well as the public sector are losing their jobs, and their pensions, because of the cavalier – and in some cases criminal – way the bankers did business.
Some of the complex financial instruments they dreamed up were wilfully obscure but John Lanchester is admirably clear at deconstructing the economic text of credit default swaps, collateralized debt obligations and all the exotic flora and fauna of contemporary financial markets. Lanchester is a journalist and novelist who has written for The Guardian, Observer and Daily Telegraph as well as The London Review of Books where he has produced several lengthy pieces on the current economic crisis. He has now reworked these into a book to explain, in an accessible a way as possible, how it all happened.
He describes, for example, how CDOs work and then adds this dry observation: “The initial lender was free to quote Bart Simpson: ‘sayonara, sucker’.” He describes how, as the Thatcher-Reagan craze for deregulation and free market reforms spread around the world, “economies were yelling ‘woo-hoo!’ and tearing their regulatory clothes off.”
And he offers this description of credit derivatives: “It’s as if people used the invention of seat belts as an opportunity to take up drunk driving.”
Whoops indeed.
