Great. Now Nick Leeson, who famously brought down a bank himself through the use of derivatives, is scolding us. I love, in particular, how he ties the credit crisis to being offered five credit cards after taking down Barings Bank.
The authors of this horror story – the banks themselves – are not just technically insolvent. They are morally bankrupt. The onset of these problems dates back more than a decade, with the sub-prime crisis exacerbating the problem 18 months ago. At both a micro and macro level, credit became far too easy to acquire, leading to businesses and individuals increasing their exposure at a record pace to record levels.
Who is responsible? Those same bankers that convinced you that another loan was not a bad thing. Those same bankers that convinced every wannabe property developer that they should leverage their portfolio and increase their volume of business. And unquestionably culpable were the investment bankers who wrapped up the sub-prime debt in exotic parcels and visited your offices to sell you this most fantastic investment vehicle. The property market has collapsed and probably still has further to go, the tremors from the sub-prime crises are still being felt, and the combination of the two sees the whole financial system in peril.
Quite simply, the banks have traded recklessly over the past 10 years and have put everybody’s wellbeing at risk. Anybody and everybody could get whatever credit they wanted as recently as three years ago. I returned from Singapore in 1999, responsible for Â£862m worth of losses that brought down Britain’s oldest investment bank, personally liable through an injunction for Â£100m, and yet within the space of a week had been offered five different credit cards. Ridiculous! Any central bank will tell you that the system exists on the premise of "responsible lending"; but the experiences of the past few years clearly show this is utter rubbish.