PEOPLE AT THE TOP

When the light was turned on, we did not like what we saw. Too many people we thought we could trust behaving badly. A whole generation of financiers lending irresponsibly. They have bet the farm, our farm, and lost it. Traditional banking used to measure two key components: the value of the security and the ability of the borrower to repay. In the past 10 years this changed to treasuring one thing above all others: how much could they sell that security package on for, their bonuses linked to the volume of transactions.

But it is worse than that. As the light has been switched on, we can see that several top people, more than we yet know, have not just been incompetent, but have been indulging in outright fraud with investors’ money; Madoff and Stanford to name but two. There will be more.

It is easy to ask why these circumstances, which with the benefit of hindsight were so obviously doomed to fail, were not picked up by national and international regulators at an earlier stage. Certainly we must learn the lessons of this abject failure to predict and prevent the banking catastrophe now unfolding.

But it is all too easy to point the finger at the lack of regulation. Those of us who re-mortgaged again and again, who took out 100% mortgages, who maxed out on our credit card and then went onto the next one, who enjoyed the stunning interest rates that foreign banks offered – we knew, didn’t we, that things could not go on like this? Why didn’t we call a halt? Where were the protest marches against easy lending policies, where the letters to the press decrying such largesse?

The truth is that most of us enjoyed the good years even though deep down inside we knew it could not last.

The onus on policy makers is to move swiftly to redress the excesses of recent years and demonstrate that top people behaving badly in any walk of life will not be tolerated, before the gap with the electorate becomes a chasm.

The onus on the rest of us is to recognise that the worlds financial and policy leaders got away with it for so long because we wanted them to; because we were benefiting from the fantasy world they were creating. It will help us recover from this mess if we recognise we are all in this together.