Another week, another plan to stimulate the economy from the UK government. I actually think what they’re doing this week is pretty sensible, which basically means an insurance / underwriting scheme dependent on mandated lending to individuals and small businesses. But I think today is actually less about this individual step, and more about the fact that most commentators are in agreement that if this doesn’t work, ie doesn’t restart the flow of credit to sound lenders, then it’s going to lead to pretty much a wholesale nationalisation of the banking sector in the UK.
It’s happening piecemeal already of course, in almost every country in the world - Ireland had the latest case in the Anglo Irish Bank - as each bank fails, it gets bought up by the state to prevent the ripples it causes becoming tidal waves. But what we appear to be talking about now, if this latest initiative fails, is a major policy shift away from the concept that institutions as important as banks should be allowed to entirely run their own affairs.
That doesn’t mean Whitehall beuraucrats directly controlling operations of course, but major shareholders and board members do set the tone for how a company operates. I think it would mean a complete shift in the way banking is perceived (even more so than now) - in the last decade or so, certain elements of the banking sector seem to have been suffering from the ‘Hello magazine effect’ - i.e. focussing entirely on chasing the high life rather than on the fundamentals of their profession. Sure, it’s led to the sector becoming sexy and glamourous, made a lot of people a disproportionate amount of money - at the expense of, oh, just the entire world economy. Shame that.
If full nationalisation happens, and it means that banking becomes suddenly less sexy and attractive to graduates looking for the quickest way to their first Ferrari, I won’t shed a tear. The whole industry badly needed a reality check, and if it takes nationalisation to make it happen, so be it. I do think, however, that all those who received huge bonuses in the last 10 years for doing what amounts to selling snake oil, should be bankrolling the recovery schemes, not the general public. But we know that’s never going to happen - the fat cats stay fat, and the general public gets to pick up the tab for their excesses. Again.