Who pays for the banks' mistakes?
There is an old saying that the ‘profligate are often paid for by the prudent'! This has never been truer than at present as we all struggle to understand the credit crunch crisis and how it will affect our businesses and our lives. The troubles of HBOS brought the horror scenario of prudent depositors being unable to withdraw their cash and basically propping up a failing institution.
The true story behind HBOS, Lehman Brothers and all the others will take some time to come out. Even the Northern Rock crisis, which now seems a distant memory, still hasn't been fully explained.
My real concern is when are the directors of the banks and these ‘blue chip' organisations that have failed us all going to be called to account? They are being bailed out at a cost of billions to the taxpayer and, as yet, I cannot think of any of them being dismissed.
The country is on the brink of its biggest financial disaster and small businesses are now being asked to pay through increased costs and interest margins for the greedy and ill-considered investment decisions of our major banks. I'm sure we all know of property loans where multiples of five or six times income, with borrowing of over 100%, have been given to individuals and businesses that should never have had them. At the same time many businesses with strong track records but no property assets have struggled to get any real facilities or are being charged more money for these through no fault of their own.
Our banks have a massive responsibility to their clients and the general public. On the whole the local managers adhere to this, although I do wish that they would get their customers to shout for help before it's too late. It's at the top with these massive transactions that we have all been let down.
Let's hope when the dust settles that the employment contracts, outrageous salaries and bonuses of the bosses of these institutions are reviewed as well so that the profligate are made to suffer as much as the prudent!
September 2008