Animal Spirits, Wolves, and a Nasty Stench

Years have passed since the credit crunch of 2007-2008. In the intervening years we have witnessed multi-million dollar bailouts, an anti-bank media storm, and widespread public distrust and anger against the banking community. Politicians have vowed that they will not allow anything like this to ever happen again.  So here we are at the start of 2014, and what practical steps have been taken, what laws have been passed?  Have we done enough to stop a future credit crunch? Some of the new measures include:-

• Basel III is gradually being rolled out worldwide, albeit with a lot of backing down and back-pedalling
• In the USA Dodd Frank has forced banks to increase their capital holdings, and the Volcker Rule (preventing banks making risky trades with customer deposits) has been adopted
• In the UK the Vicker’s Report and the Financial Services (Banking Reform) Bill are overhauling the banking regulatory structure, bringing in ring fencing and larger capital buffers
• Higher levels of compensation for private depositors have been introduced (from 31,700 to 85,000 per person)
• It is now easier for customers to switch accounts from bank to bank
• Restrictions on bankers bonuses have been introduced

 Speaking at the World Economic Forum in Davos recently, Barclays boss Antony Jenkins said he thought that although a lot of useful work had been done, and banking regulation was now much tighter, another crisis is still possible.  He raised the interesting and alarming theory that although the current generation of bankers have learned their lesson, it could all happen again when they retire! Perish the thought!  “We will have another problem like this when all the people like us who carry the scars of this have retired or died,” he said. “What we need to do is find a way to box in the animal spirits through profound change.”

Animal spirits? That epithet  is probably way too kind for the type of arrogance, selfishness and greed that has made banks so unpopular. In spite of all the new controls that have been put in place and all the efforts that have been made to reform the banks, it is obvious that bankers are still profoundly distrusted.  Without even trying very hard to find an ‘I-hate-bankers story’, a quick look at the news media over the last few days brought up these few classics.

 For example, Singapore-based British banker Anton Casey created a storm of outraged indignation after making ill-judged online social media postings in which he joked he would have to "wash the stench of public transport" off himself during a period of separation from his normal mode of transport, a Porsche.  Mr Casey, who is married to an ex-Miss Singapore, also published a picture of his young son using Singaporean public transport, along with the caption: "Daddy, where is your car and who are all these poor people?"

He received death threats and faces disciplinary action from his employers, the wealth management firm Crossinvest.  Mr Casey has apologised to the people of Singapore, and a Crossinvest spokesman has stated that his boorish behaviour contravened their code of conduct, but the incident just reinforces the public perception of bankers being a greedy arrogant bunch.  Not exactly the good impression the WEF was hoping to project at its Davos bash.

This story broke at the same time as Martin Scorsese’s film The Wolf of Wall Street hit our screens.  This black comedy was inspired by the real-life story of disgraced banker Jordan Belford, a  high-living, womanising, cocaine-snorting Wall Street broker who served 22 months in jail for securities fraud.  OK, this is a film and an entertainment, but it serves to highlight and perpetuate the bad public image, at a time when the banking industry is desperately in need of some good publicity.

Where are all the positive role models for bankers? Look at my previous posting on this blog, It’s a Wonderful Life: what we need is a George Bailey for the 21^st Century. Who will step up to the plate?  How about Mark Carney, the dashing new Bank of England Governor?  Antony Jenkins?  How about the Co-op Bank for a good example of an ethical bank?  Oh no, I forgot about  Paul Flowers. Help me out here readers, I am struggling!