All the attention is on politicians' expenses—but there are still plenty of fat cats in the boardroom. Plus, lessons from A Doll's Houseby Jonathan Ford / July 4, 2009 / Leave a comment
Lehman’s wrong lesson
It is nine months since the collapse of Lehman Brothers and the financial crisis is—so we are told—pretty much over. The banks are unfreezing and things are returning to normal. A host of American banks are queuing to repay the money they got from the US government last autumn under the Tarp scheme. In Britain, Lloyds TSB has been doing the same. “Here’s your money,” is the near universal refrain from the bankers to the politicians. “We want our laissez-faire economy back. If you won’t give it to us, we won’t lend and there won’t be any recovery. And if that’s the case, it will be your fault.”
People have pondered long and hard since last September whether the US government was right to allow Lehman Brothers to collapse. Some believe that it was a reckless act that imperilled the global financial system. Others think it was a necessary shock that gave us at least a chance of changing behaviour in the financial system and checking the bubble mania of recent years.
I am in the latter camp, but find myself increasingly feeling that the opportunity to reform the financial system has been fumbled. We have had the pain without the gain, so to speak. The view now seems to be that the crisis of last autumn was so scary that it is imperative that the system should be shored up quickly, even at the cost of effective reform. Hence the queue of banks on either side of the Atlantic clamouring to repay their government money. They want to get back in the game as fast as possible.
The Lehman crisis was supposed to shock the financial system into behaving better—to force it take fewer risks with investors’ (and ultimately taxpayers’) funds. But far from cowing the bankers, who have recovered their bounce, it has cowed the politicians, the very people who were supposed to take charge and enforce new rules. The best hope for change now probably lies with the central bankers. Let’s hope they rise to the challenge.
Excessive roaming charges
The British public has turned its fire on politicians over their expenses in recent months. The tumbrils have been duly diverted from Fred Goodwin’s Edinburgh villa to the moated mansions of Sir Bufton Tufton MP and his pals. No doubt a few fat cats in the boardroom are crossing their fingers that that…