Too few top bankers have walked the plank. And why is monetarist Tim Congdon in favour of quantitative easing?by Jonathan Ford / June 4, 2009 / Leave a comment
Where are the Admiral Byngs?
The acute phase of the banking crisis is apparently over. As we survey the wreckage—the sorry roll-call of failed and semi-nationalised banks—a thought occurs. Why have those at the top not been held more vigorously to account?
True, one or two senior bankers have left. Fred Goodwin received his P45 from Royal Bank of Scotland, although he was allowed to leave under his own steam with a golden goodbye. Victor Blank, the disastrous chairman of Lloyds, has finally been dislodged (though he will stay on to ensure a smooth handover).
But it’s not enough. In America, the public stand bemused at the survival of Ken Lewis, the lantern-jawed buffoon running Bank of America. He clings on despite having blown apart his own bank by overpaying massively for Merrill Lynch at the height of the panic. Lewis seems to live in a parallel world. He recently swore he didn’t need new capital, only for the government to declare shortly afterwards that the bank needed another $34bn. And in Britain, the continuance in office of Eric Daniels—the other half along with Blank of the comedy duo at the top of Lloyds—is a source of wonderment. Daniels has pretty much massacred a centuries-old institution. What exactly do you have to do to get the sack at a large bank these days?
It is not as if the US and British governments cannot winkle these people out of their jobs. In both cases, the state is the major shareholder and supplier of capital. So why don’t they act?
It’s partly not wanting to be seen to run these institutions directly. It’s much easier to shelter behind the bulk of a blundering Blank than to expose yourself to pot-shots from crisis-hit customers. But that won’t wash. Both governments have so much public money tied up in the banking sector they have a duty to protect it.
Moreover, there are bigger reasons to act. Public confidence in banking—just as it is in MPs—is going through the floor. In such situations it is important to discriminate between the good and the bad, the competent and the incompetent. Not all bankers were useless. But to prove it, the bad should depart. And that doesn’t just apply to the state-controlled banks—but all of them.
And lastly, there is a behavioural aspect that shouldn’t be ignored. As many have observed, many bankers have come…