Saturday, September 20, 2008


The damage wrought by Hurricanes Gustav and Ike on American shores with the tails causing floods in Britain begins to look like the result of a freak summer storm as we learn the full extent of the banking tsunami .
But we should not be surprised. For years now we have been ‘living the dream’ in which homes we could not afford were only a brief chat with bank product manager or mortgage broker away - and credit cards the passports to all we have always wanted.
The frugal bank manager who wanted to know a customer’s budget down to the last penny spent on food before agreeing to a loan was consigned to history - replaced by salesmen flogging bank ‘products.’
Greed was not just good. It was the pinnacle to which we were encouraged to aspire as City traders played short selling games and won multi-million pound bonuses gambling with other people’s hard earned cash.
At the top, high in the clouds of the dream world, there was no penalty for failure. CEOs who oversaw the wrecking of their companies still walked away with million pound pay offs and their pension rights intact.
Times and the world had changed and the consumer boom would last forever.
Now the dream has become a nightmare as the toxic deals which supported the mirage have come undone and need to be bailed out.
Just ask anyone on a £25,000 year salary who has been encouraged to sign an application claiming an income of at least £40,000 to get a 125% mortgage they now have little hope of repaying on a property that’s way beyond their means and no longer worth what they paid for it.
‘But will we be paid on Friday?’ wailed the London staff of Lehman Brothers as they staggered out of their Canary Wharf office clutching champagne boxes filled with their personal possessions.
Having helped to ruin the business, some of them didn’t deserve a penny. It would seem more fitting if they were asset stripped to help pay the people who trusted them and they let down.
The bankers must have known they were playing monopoly. But, hell, the volume of new business they were bringing in would look good on their CVs and on the bank’s books as they piled it high, sending London property prices soaring and scarring the countryside with their garish nouveau mansions. The equivalent American word, shoddy, sums them up so much better.
For a year now, even as Northern Rock tottered and they trooped through the doors of the Banking of England begging for cash bail outs, they have been in denial - hiding behind the euphemism ‘the credit crunch’ as the financial world fell apart.
The entire crisis has been brought about by their irresponsibility, bad management and sheer avarice together with the failure of the authorities who are supposed to regulate them to do so.
The most appalling aspect of the whole debacle is that the people at the top, who oversaw what was going on and actively encouraged it, will still not be fired and rightly stripped of their fat cat pensions.
The very worst of it all is that Andy Hornby, the 38-year-old brash super whiz kid boss of HBOS, gets a £2 million reward for driving the bank to the brink of bankruptcy and keeps a top job while thousands of bank workers will probably lose theirs.
Hornby’s high flying career through the upper echelons of Boots and Asda on his way to summit of HBOS says everything about what was most valued in the ‘living the dream’ work world, which put more emphasis on how to market yourself to get a job rather than to be able to do it. Clearly an ace at selling himself to employers, he was no good at the job once he got it.
In desperation Gordon Brown, whose chief claim to the job of Prime Minister was that he was the supreme money manager who had put an end to the boom and bust economy forever, this week rode roughshod over all the laws of competition when he brokered the takeover of the failing HBOS by Lloyds.
‘Stabilising the economy,’ was how he justified the deal.
This is the man who knows so little about market trends in global finance that as Chancellor he sold off a huge chunk of Britain’s gold reserves at rock bottom price, saying that the world would never again want gold.
Now the long time former Socialist Brown says job losses are the least worst option as the price of gold soars to record heights.
No wonder a lot of people in the Labour Party want rid of him.
In the dying months of his disastrous US Presidency, George W Bush still shows the same ability to mangle the English language as he did at the beginning.
Talking about the global money problems the other day, he must have meant to say that he would consult with financial experts. But what he said was that he would ‘console’ with them.
I am sure he needs some consolation right now but equally sure he did not intend to make it public.
Yet he’s not the only one who is altering the meaning of words.
Challenge used to mean an opportunity which called for courage and mettle. Now it describes a problem no one has any idea how to solve.
Unacceptable means people don’t like what has happened but they have no power to do anything about it. And a liquidity problem, as we all know, means a bank has huge debts and no money to pay them.
Copyright © Rebecca Hamilton 2008. All Rights Reserved