Politicians also to blame for crisis, say bankers

LONDON Wed Apr 15, 2009 8:14pm EDT

A commuter walks past graffiti on the walls of the Bank of England following demonstrations in London in this April 2, 2009 file photo. REUTERS/Stephen Hird/Files

A commuter walks past graffiti on the walls of the Bank of England following demonstrations in London in this April 2, 2009 file photo.

Credit: Reuters/Stephen Hird/Files

LONDON (Reuters) - Bankers may rank below journalists among the professions least trusted by Britons, but they refuse to accept all the blame for the worst financial crisis in 70 years.

Conceding they have done their fair share in creating the crisis, many of those whose colleagues have been the target of recriminations argue that the system had political architects.

The argument may be predictable but, given the symbiotic relationship between global finance and political power, it is one with the capacity to undermine governments that played a role in the events leading to the credit crunch.

"For the politicians on both sides of the Atlantic to say it's 100 percent the fault of the bankers is a bit disingenuous," said Scott Moeller, director of mergers and acquisitions research at Cass Business School in London.

No politicians have placed all the blame for the crisis on bankers, but some have pointed the finger. In February, Michael Fallon, a member of the Treasury Select Committee -- a cross-party group of British members of parliament -- said bosses at HBOS and the Royal Bank of Scotland (RBS) were "apologizing for the fact the world had changed" and were "in denial ... about the extent they have failed."

Public anger toward bankers has been brewing for some time. Last October protesters greeted Lehman Brothers chief executive Richard Fuld with signs reading "Shame" and "Cap greed" as he arrived to testify to lawmakers about Lehman's bankruptcy.

"It's not fair to blame bankers for all the ills, when clearly government policies have encouraged home ownership, encouraged people to take out loans to buy things maybe they can't afford," Cass's Moeller said.

A British survey of public trust toward professions -- conducted in March by researchers for the Bar Standards Board -- put bankers near the foot of the table, although they were above politicians.

STILL WORK TO DO

Prime Minister Gordon Brown served as Chancellor of the Exchequer (finance minister) from 1997 to 2007 and said he had ended the "boom and bust" cycle. He must call an election by June 2010 and his ruling Labour Party lags the opposition Conservatives by at least seven points in opinion polls.

Brown has a finer line to tread than President Barack Obama, who took office after the collapse of Lehman Brothers and is seeking to repair damage caused before he entered White House.

Protests at the Group of 20 summit of leading industrial countries in London earlier this month showed bankers still had some work to do to ensure the blame is shared.

Demonstrators smashed windows and daubed "thieves" on a branch of the Royal Bank of Scotland, which has become a symbol of bankers' excess after its former head Fred Goodwin clung to a lucrative pension despite record losses at the now state-controlled bank.

"This ... has gone too far and the issue has become immensely personalized. Some banks have a responsibility, but not the sole responsibility," Angela Knight, chief executive of the British Bankers' Association, told Reuters. "We are obviously an easy target."

Some financial professionals believe they have been tarred with too broad a brush by people seeking to express a general frustration with capitalism.

"Whether you're an investment bank, whether you're Fred Goodwin, whether you're a private equity firm or hedge fund, it doesn't matter," said Andrew Newington, managing partner of private equity firm BC Partners. "You appear on a placard ... with a noose around your neck."

Protesters at the G20 summit hanged and set fire to a mannequin dressed as a banker outside the Bank of England in the City financial district.

Bank workers say they are mostly normal people just trying to make a living.

Lloyds TSB, a retail and commercial bank, said in February many of its employees earned about 17,000 pounds ($25,250), compared with a national average of 25,100 pounds ($37,280). In contrast, Goldman Sachs employees are expected to earn more than $675,000 on average in 2009 if the bank pays staff as it did in the first quarter.

Those who blame central bankers and politicians argue they fostered the system and reaped the benefits during the boom years, even as they are now debating tighter regulation.

LONG HISTORY

Governments and finance have a long history of working together.

The Bank of England was given its charter in 1694 to finance a war with France, while the money markets had to digest a huge number of Treasury Bills issued during World War One and short-dated gilts during World War Two.

A review by the chairman of Britain's Financial Services Authority said the current crisis had exposed "fault lines in ... global regulation and supervision."

A much-publicized hearing of bank executives from RBS and HBOS in front of lawmakers, widely covered in the media, may also have added to the vilification of bankers.

"The causes of RBS's decline were a lot more complex than Fred Goodwin's pension, but you ask almost anyone on the street and they'll start talking about Goodwin," said Cass's Moeller.

According to City Girl, a banker columnist for The London Paper, a daily distributed free in the capital, the blame should be spread widely.

"Bankers clearly did more than their fair share to get us into this financial crisis by over-leveraging and underestimating risks," she told Reuters.

"But we did not act alone. Journalists paraded the bankers, politicians took the money and deregulated the markets into a free-fall for the last couple of decades. So there's a lot of blame to go around."

(Additional reporting by Raji Menon; editing by Andrew Dobbie)

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