fuTuRe sHOcK

Ian Bell
Sunday Herald
HOW WOULD YOU FEEL, RUNNING A MODEST business, if the money fairy came along and promised you would never, ever go bust? How much of a spring would it put in your step if the nice imp then said she had cast a spell guaranteeing all your lending, all your borrowing, and 98% of your customers’ cash? “Yes,” you might just say, clapping your sticky little hands, “I do believe in fairies!” This hard-to-swallow tale has more than one happy ending. While your godmother hopes you will become a good little banker one day, she doesn’t want to be too stern. It’s not her place. So if she sprinkles some of her magic dust and shrinks the cost of money, she won’t force you to share your good luck with anyone. She’ll “urge” you instead. But only a very naughty banker would ignore that, surely?

After all, you owe the good fairy something. In fact, you owe her billions of things. They are the reasons why you are still able to frolic as a happy little banker. They also explain why you are still looking forward to big Christmas presents and the chance, some time very soon, to tell fairy godmother where to stick her advice and all those tiresome homilies on the need to be nice to poor folk. Whatever Alistair Darling was waving at the bankers during a breakfast meeting on Friday morning, it was not a magic wand. He can urge to his heart’s content, but they intend to go on treating the Bank of England, its base rate and its monetary policy committee (MPC) as fictions only children would believe. Most may have buckled, belatedly, under an avalanche of bad publicity, but the chancellor doesn’t frighten them.

True, they told him to “get his finger out” and save them from themselves. True, it was they who demanded dollops of other people’s money or it would be the worse for the chancellor (and all those other people). True, they asked for public trust when the facts indicate that they do not trust one another to lend to one another, even though Darling has guaranteed all transactions. But they know that he knows that they know: once the chancellor was forced to promise the survival of every bank in every circumstance, happy days were here again.

They had him over a barrel. The first rule of the capitalist purist had been breached. An enterprise that believes it cannot fail cannot be governed, brought to heel or obliged to do anything it does not wish to do. The bonus culture can resume and the government can be sent packing as soon as the banks have screwed the public for the money to repay the government. More

Tags: Alistair Darling, bailout, bank, Bank of England, capitalist, Financial Crises, Hooverville, liquidity