History Repeats Itself

The London Paper  –  10 July 2009

‘If we don’t … learn from … our past mistakes we are doomed to repeat them.’ When Barack Obama quoted those wise words nine months ago I desperately hoped that both bank executives and British politicians were listening. Unfortunately, after recently hearing non-stop in the media that ‘bonuses are back’ and checking out Alistair Darling’s White Paper two days ago detailing this government’s watered-down banking reforms I can’t help but feel that no-one’s learnt anything from the credit crunch.

Most people now accept that this recession was mainly caused by bankers who were motivated to take huge short-term risks by a flawed bonus system that massively rewarded such behaviour. The public understandably hoped that either banks would change their remuneration system voluntarily or that they would be forced to do so by Government legislation. The tax-paying public also hoped that banks that were ‘too big to fail’ would be reduced in size and hence would not have to be bailed out using tax-payers’ money next time they failed. Finally, it was hoped that tighter scrutiny and regulation by well-manned, organised bodies would be imposed to prevent any further banking abuses that could threaten our financial stability.

Well, I’m afraid that these hopes have proven to be about as realistic as our chances of winning the Ashes. Instead of hearing about contrite banking executives improving pay systems all we’re hearing about is the fact that they’re poaching staff off each other using huge guaranteed bonuses, that Goldman Sucks has squirreled away billions for what could be the biggest bonus payouts in its 140 year history and that the new head of RBS, Stephen Hester, has just received a £9.6m pay package. The fact that taxpayers effectively own RBS and are hence paying Hester’s salary makes his windfall all the more galling.

The other hope that the government is going to do everything it can to ensure that bankers don’t have the power to bend UK plc over and give it a good shafting again now also looks misplaced. Alistair Darling’s proposed City reforms seem sufficiently watered down to suggest that the City lobbyists have done their work. Whilst he bangs on about the fact that financial services have brought in over £250bn of taxes over the last 9 years he neglects to propose anything major on bonuses, regulatory organisation or the banks’ size. You know there’s been a white wash of the White Paper when the Tories ridicule its moderate nature and the Lib Dems claim that it ‘will be greeted with a sigh of relief in the City.’

Politicians seem to have forgotten how angry the public were about greedy bankers hurling us into a nasty recession almost as quickly as banking executives have forgotten about the multi-billion pound bail-outs they gladly received from taxpayers. Maybe we need to get on the streets to remind them about both issues … or they’ll be doomed to repeat the mistakes of the past and we’ll all suffer again.

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