Alternative Bank Crisis Scenario
A picture is emerging that is not quite the same as we have been given over the last few months. There are some straws which point towards an alternative landscape. Consider the statement from a Commons committee querying why some banks have survived and others have not and the complaint from the secretary of the British Bankers Association that it is not right to tar all bankers with the same brush. In other words, was it really the case before the rush to rescue the banks that the world financial system was in meltdown.
Is it possible perhaps that the directors of the banks in real trouble hyped up the seriousness of the situation? Some British politicians with Scottish interests and a realisation after the floods of the previous summer that the Prime Minister appears at his best in a crisis were only too willing to go along with the exaggeration. After all it was the only two major Scottish banks which were in trouble. It is then quite natural to rush to the banks aid pouring in billions of pounds that the country could really not afford.
The said bankers have not changed their spots and are busy mending their capital and improving their share prices but without the shame of causing their companies to go bust. In some senses for the individuals involved it has been a win win scenario, a rescue of much of their asssets and pension arrangements and a chance for the Prime Minister to strut his stuff on the world stage. And so far the bluff has worked. People are bitter about the banks and about the money hurled at them but very few are suggesting that the rescue by governments was unnecessary.
But what about the USA? Bush was in the dying days of his term of office and saw a last chance to do his big business pals a favour. Obama has had to go along with it because calling the banks bluff at this stage would really be far too risky.
In both America and the UK the really big money has gone to the financial sector and very little comparatively has been spent on attempting to reduce the job losses amongst ordinary men and women. In fact the UK government has reduced its capital spending whereas an increase in social house building and other quickly realised schemes could have made a difference.
