I read that the great bank bailout had cost British taxpayers £5,500 for every family in Britain. I read, too, that the Treasury paid £107m of taxpayer cash to City firms for financial advice. Well, not quite. The £5,500 has not actually been taken from British families, it represents their liability, or the amount at risk for each of them. The odds are quite high that most of this (if not all) will never be called on, and that as banks earn money, they will be able to repay government, which will be able to sell the shares it bought. And of the £107m fees, over 90 percent of that is being charged on to the banks instead of coming from the taxpayer direct.
Still, though, it looks as though greedy bankers who brought about the crisis by reckless risk-taking are now back in the bonus culture, taking fat rewards at the taxpayers' expense. Well, not quite. It might be what the UK man-in-the-street thinks, along with the French President-in-his-palace, but some of us see other causes.
Those bankers were acting on signals sent out by governments and their central banks. Real interest rates were kept low for years, partly to smooth the politically unpopular down part of the cycle. Credit was too easy and money was too cheap. Cheap goods from China made for a misreading of inflation, and their build-up of reserves and savings habits curbed bond yields and sent more misleading signals that misled Western monetary authorities.
The bankers lent dubious loans because money was cheap. It was neither greed nor recklessness, but an understandable response to the distorted signals they were receiving. And the bonuses? We need banks to earn a big chunk of money so they can repay taxpayers, and we need incentives in place that will encourage their best talent to do just that. I think that makes me a greedy banker denier, but it's a good club to be in.
Madsen Pirie's "101 Great Philosophers" makes a first class Christmas gift.