What happens when you lynch bankers?

Every calamity in human history tends to have a corresponding scape goat. Often in financial busts it becomes xenophobic, race often plays a strong role, the US Civil war was as much about the dichotomy of the Northern and Souther economies as anything else, while slavery was front and centre it was the fundamental economic difference between a plantation system in the south and a rapidly industrialising economy in the north that helped to draw battle lines. In fact, your average southerner wasn’t a white slave owner, they were a poor white farmer who only made about enough to live on.

In the 1980’s Ireland blamed single mothers, I was still in Los Angles and there the popular blame was against Mexicans. The blame game is nothing new. In the early 1300’s during the Great European Famine they blamed bakers and millers, the Parisians went so far as to tie them up and publicly whip them, the real enemy in that instance was mother nature who delivered three summers of rainfall that caused crops to fail, but you can’t lash out at her so they went down the chain.

Germans in the 1930’s found a scapegoat in Jews, in fact, Jews were the original victims in both the Spanish Inquisition and also the Crusades, that was many generations after Generals Gallus, Vespasian and finally Titus had thrice laid waste upon the promised land, the latter destroying the temple for a second and final time, scattering their people into what would become the diaspora.

This time around it’s bankers, and it makes sense, it was after all a bank-centric crisis. However, history demonstrates that even when you effectively punish/eradicate/genocide a hate group that it doesn’t achieve the desired end.

In that respect the calls to hang bankers (albeit not literally) is somewhat misguided, rather we should effect policy that is effective, bring in regulation that is enforced and get onto the task of creating a robust financial system, presently we are so occupied with solving the last one that we won’t see or prevent the one that is coming.

That isn’t a way of saying bankers did nothing wrong, in fact, hate groups quite often had some role to play, Jews for instance were successful at times when others weren’t their role created a jealousy that lead to persecution, and that shows that a ‘role’ and ‘guilt’ are not one in the same. It is impossible to categorically say that all bankers are somehow bad or wrong. Banks in fact, are central to civil society, any country without banking is a dump – put that rule to the test and see if you can disprove it.

The need for a scapegoat is embedded in people, ancient Judaism started the trend by heaping all of the sins on an animal then killing it. Jesus himself carried on the tradition, being the ‘lamb’ of God and then slaughtered for our sins. Greeks had their ‘tragedies’ – the word tragedy is composed of ‘goat’ and ‘song’ (again that allusion to goats and suffering/sacrifice) – in which you had power and downfall merged into one. Times may have changed but little has changed with the times, we still need an outlet for our rage.

Perhaps the most absent factor in an Irish perspective, and in Ireland generally is that of culpability, very few people will admit they were part of the problem or did anything wrong, that is endemic, the group in greatest denial is perhaps the general public without whom none of this would have been possible.

Which brings us to lynching bankers, yes, there were many who did wrong and who are deservedly branded a wretch, they are base, faithless and unfit to keep the company of people with any integrity, but beyond the well known ones are the actual deal makers who are still in the system.

That is the middle management, the people who made the commercial loan deals then equally dressed them up in a way that would ensure the loan looked good when in fact it was not, upper management looking down the line would see nothing but perfectly orderly files with all checks and measures in place, however, the deals were rotten to the core; and the groups that made them still have their jobs and they are not in the public eye.

That is the error it all, we have the rage, we have the outlet, but we are missing the point at the same time. When we eventually make the arrests (which has to happen if we are to be seen as having a society with any sense of justice left in it) there will be no cure for the people trapped in negative equity, it won’t solve the problem of ghost estates, and reparation will not, as it has never done, bring back the dead.

So rage on, but don’t expect much when you get what you want, society still needs banks and the financial system, without them we would devolve rapidly into the Ireland that used to be. For every ‘hang a banker’ comment there is an absence of realisation financial services are one of Ireland’s largest exporters, the IFSC area exported over €11 billion in the first half of the year (combined financial and computer services [financial oriented computer services]),  and provided countless jobs and economic growth.

So what happens when you lynch bankers? Nothing, life goes on, the sun comes up and goes back down again and we still have to get on with life. We do have a choice though, we can look to blame others for our problems or look to ourselves, there are no absolute solutions.

Comments

  1. Andrew

    No. We can’t move on until there has been some blame and some punishment. You say it is scape-goating, but the fact of the matter is that the bankers had all the power so they also have the responsibility. People who bought houses at the top of the boom did so because they were terrified into believing they had to get on the ladder or be shut out of ever owning property by boosters and cheerleaders of the boom.

  2. Hi Andrew,

    Thanks for dropping by. I agree bankers had considerable power, but we equally paid regulators to control them for that very reason and they didn’t do their job, in effect, they let the animals run the zoo and then they blame them for behaving like the animals they are.

    The terror buying and ensuing negative equity will not be fixed by punishing a banker, that point is vital, and it is also why I think that the majority of effort should be directed towards policy to solve the issues and prevent them rather than on trying to solve the last financial crisis.

    Punishment for wrongdoing has to be based upon fact, and in that area we are sorely lacking on the speed of information gathering and on initiating legal action, but that is also because in many cases there was not an actual law broken or they were not clearly defined boundaries of what was done wrong even though the end result was awful, immoral and illegal remain distant cousins when they should be brothers.
    thanks for coming by!
    karl

  3. Andrew

    Thanks karl. I’m actually a regular reader, but I don’t usually comment because I don’t have an economics background. This issue seems different though.

    I don’t think it matters, as far as blaming the bankers is concerned, that the financial regulator was in dereliction of his duties. How is that different from letting the criminals off and blaming the Guards for not catching them? You say: What the bankers did was not technically illegal. Well, they should have known it was a) imprudent and b) immoral and c) we’ll just see whether it wasn’t illegal… We justly blame them because they are responsible for the mess. The fact that if the regulator had been doing his job properly they wouldn’t have been able to get away with it for as long as they did is neither here nor there. They shouldn’t have been conducting business in the way they were.

    I agree that punishing the bankers won’t itself solve the problem, but it is necessary to bring the public onside. People will feel profoundly aggrieved if they are expected to endure hardships to put right other people’s mistakes while those responsible get off scot-free. To restore confidence to the (domestic) market, you have to cater to people’s sense of justice. (I’m not saying that’s enough in itself, only that it is a sine qua non for a recovery).

  4. No. We can’t move on until there has been some blame and some punishment. You say it is scape-goating, but the fact of the matter is that the bankers had all the power so they also have the responsibility. People who bought houses at the top of the boom did so because they were terrified into believing they had to get on the ladder or be shut out of ever owning property by boosters and cheerleaders of the boom.

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