THE BLOG

Are 'Greedy Bankers' Really to Blame for Our Financial Problems?

08/03/2013 09:21 GMT | Updated 06/05/2013 10:12 BST

The timing of an article about the cause of the recession is probably five years out of date. After the inevitable public outcry over bankers bonuses and the term sequester came to the fore it's perhaps time for a reminder about where we lost our way as a society. When things go wrong and times are hard the public need to direct blame. Politicians need to deflect blame from themselves and the mass-media need to conjure up an image to vent our feelings towards; be it 'those bureaucrats in Brussels', Bush, or illegal immigrants. In the Zeitgeist of our times it's the turn of the 'greedy bankers'.

The 'greedy bankers' are in no way blameless for the global credit crisis that led to our recession. To proportion all of our blame towards them, however, would not only be inaccurate but lose sight of what caused the problem. Solely blaming Investment Banks would be like shouting at the clouds because it's raining. A combination of conditions created this environment and in a way we're all to blame.

For starters, commission based mortgage lenders in America unscrupulously issued sub-prime loans to customers who were likely to default. On the other hand, customers took out 110% mortgages that they could not afford to pay - America sneezes, the world catches a cold. As a result investment banks wrote off billions of pounds/dollars/Euros worth of sophisticated sub-prime investments. The money lost never existed and was just projections that was extrapolated from such credit. On the other hand, we had voted for governments that deregulated banks thus allowing such alchemical investments to take place.

What's more, the government encouraged an economy propped up by high street debt. On the other hand, we took out numerous credit cards, store cards and loans to buy second cars, second holidays, iPods and smart-phones. The Labour government increased public spending and sold off our gold reserves at record lows whereas the 'ConDems' cut spending too drastically and stifled growth. On the other hand, we voted for these governments and their policies - policies that were part of a manifesto designed to win a general election.

As a society we allowed ourselves to become immersed in debt. Buy now, pay later. With responsible lending comes responsible borrowing and now we are paying - but not as badly as we perceive. High Street institutions are closing down but only ones using outdated business models. For every Blockbuster, HMV, Borders closing there's a coffee shop opening. The ability to buy a hazelnut latte is hardly the soup queues or work marches of the Great Depression. There have been mass redundancies but it's not as if we've seen the austerity experienced in the 70s or the 15% interest rates in the late 80s that repossessed tens of thousands of home owners.

Unfortunately, we're not the ones who are really paying. It's the lost generation of graduates and school leavers who are applying for minimum wage jobs or having to stack shelves in Poundland as part of their Job Seeker's Allowance. I graduated just in time in 2006 to not become part of the lost generation. I would argue that the majority of school leavers preceding me are still in comparison doing comfortably. We're wearily prudent about our job security and no longer use credit or have access to credit in the same way. However, that's not necessarily a bad thing because things cannot only get better. We're saving, we're budgeting, we're not taking out 110% mortgages, and we're living within our means.

If we're going to blame others for the recession then lets not forget the various governments that sold us false dreams, the unscrupulous mortgage lenders, the irresponsible borrowers, the undiscerning ratings agencies, the impotent FSA and even Sarah Beeney. It's grotesque that investment banks, which are reporting billions of losses, are paying out millions in bonuses. Yet for every bank bonus in the papers there's an average Premiership footballer earning a £100K per week, a company with a ludicrous tax avoidance scheme, or an incompetent senior NHS executive with a golden pay off. Bankers bonuses are merely a symptom of institutions being devoid of common sense and bewildering society by financially rewarding failure. 'Greedy bankers' are not the cause of the recession.

I do not intend to be sanctimonious nor do I intend to defend Henry Potter over George Bailey. Few experts saw this recession coming and society did not question the state of things beforehand. We are all culpable for the recession and have to manage and change this culture that we've incubated from within. We make decisions as purchasers for what kind of products we want. We make decisions as voters for what kind of country we'd like to be run. To be cajoled into blaming 'greedy bankers' by the press and politicians would lose sight of what needs to be done to get us out of this mess.