The Banking Blame Game

The Banking Blame Game



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Following the bank bedlam and ensuing turmoil of the world markets of the last few weeks, now that the dust has settled people are ready to point the finger.  

Everyone, from politicians to bishops, is weighing in on the shaky economic state. Whether the blame is being thrown at short sellers, fat cats, world leaders or scheming hedge fund managers, a common theme is emerging: we need a villain.

 

In order to publicly unite in disbelief and outrage at the latest effects of the liquidity squeeze, it seems we need to focus on someone to hold responsible. The credit crunch, as an abstract concept, just can’t cut it as a fault figure any longer.

 

First under fire after the HBOS takeover fiasco were the short sellers. Branded “spivs and speculators” by Scotland’s First Minister and “bank robbers” by the Archbishop of York, they were charged with driving HBOS shares into the ground. This immediately prompted both Britain and the USA to impose a temporary ban on all short-selling of financial stocks. Despite economists warning that short selling was not the real issue, and actually helps promote the truth in stock markets, their advice fell on reactionary, deaf ears.

 

The blame game continued when it was revealed that certain hedge fund managers were making incredible profits from betting against British banks. New York billionaire John Paulson pocketed £1 billion from the British banking disaster and suddenly became infamous. The public was galled that someone could profit from the financial misery of others. After the fallout, he eventually donated $15 million to a charity helping those who are fighting foreclosure.

 

Since then, bank bosses and government ministers have all been on the receiving end of public hatred. Gordon Brown has had to conjure up rousing speeches on his ability to weather the economic storm, whilst US financial giants are under investigation by the FBI for mortgage fraud.  

  

But is it really fair to place the colossal blame on a single body for this crisis? Surely events of the last few weeks cannot be explained so simply? The current troubles stem from a multitude of much deeper problems that have been gathering force in the financial system for a long time

 

Moreover targeting a scapegoat seems trivial at a moment like this, when what is really needed is finding a solution before more institutions crumble.  

 

By Louise Fernley

 

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