The basics of banking explained….for the benefit of bankers

The UK’s banking chiefs faced the massed gums of an MPs’ Select Committee today. Their view – remarkably consistent, I must say – was that ringfencing retail banks from investment banking activities could make banks riskier and hurt the economy. So there you have it: keeping nutcases well away from proper retail bankers taking deposits and offering loans would be a very, very bad and outrageously silly idea.

I’m not easily shocked by banker bollocks, but I did need smelling salts after listening to some of this uber-tosh. Just a couple of things at random that occurred to me once I came round. First, given that the financial world almost collapsed in 2008 from the deadly infection of retail bank managers by those talking up worthless bits of paper, it is quite hard to extrapolate from such experience the conclusion that more of the same is what we need. And second, given that retail banks took deposits and gave secured loans for three centuries without any subprime crises, it is equally difficult to conclude from this history that distancing cautious retail lending practices from braindead lunatics would somehow make banking riskier.

With more time having passed since I had those immediate thoughts, I now have roughly 203 other criticisms of the bankers’ plea for No Change under my mental belt. But it would be pointless to go into these, as when it comes to ‘explaining’ things to bankers, we are in the territory of teaching pigs to sing: you don’t get a song, and it annoys the pig. The best bet, therefore, is merely to slaughter the pig.

In truth, I have no desire to slaughter self-styled investment bankers, because for me, that belongs under the same unappealing umbrella of ‘Smash Capitalism’, ‘Death to Democracy’ and all the other murderous threats offered up by those with nothing positive to offer beyond obviously discredited economic and religious nonsense. In my book, the answer to investment bankers is to give them an island to themselves, along with 3000 sets of Monopoly for them to play with. Monopoly is, after all, what they crave. And a Hobbesian monopolous State on somewhere suitably remote (St Helena is a strong contender, and even using the Falklands could solve quite a few sovereignty ownership debates) would be relatively harmless….always assuming the existing inhabitants were suitably rewarded at the banker-bonus level for moving elsewhere. They might even be persuaded to serve as camp guards.

‘Relatively harmless’ is in my opinion the best we can hope for as a fate for the investment banking mob. I eschew the word ‘community’ here, because ‘banking community’ has often struck me as the ultimate oxymoron. And I choose the collective noun ‘mob’ because that sums them up perfectly: they are nothing more than 17th century gin rioters in London, clueless as to their raison d’etre beyond “More gin, and make it snappy”. Mob, yob, or slob – it makes little real difference: the name of this game is to keep these neanderthals as far away from real money as possible.

But MPs in general (and Camerlot in particular) don’t see it that way. The Lord alone knows why – could it be that too many of them have banker friends and/or non-exec bank directorships? – but our legislators seem incapable of grasping that investment bankers do the easy thing, don’t care about the wider society they feed off, have no sense of nationality, offer no loyalty to their customers, don’t understand manufacturing business, have no concept of positive corporate culture, and eat babies. (Well, up to but not including the last one).

Above all else, banking is indeed about risk. But it isn’t about risking ordinary people’s money on bubbles which can never serve the wider economy or the broader public interest: it is about risking bankers’ money on the terrific ideas of economic entrepreneurs whose wealth creation can add to the culture. I’m not interested in hearing anything bankers have to say which doesn’t fit this original (and best) description about how commerce gets financed. The tail has been wagging the dog for far too long. Bankers selling defective putty to each other caused all the windows to fall out. It is time for somebody with a spine to tell the moneylenders that they will only be tolerated if they finance the building of houses in which everyone can live – free from the fear of falling windows.