Geraint Anderson trounced by John Redwood

I’m reading Geraint Anderson’s book City Boy at the moment. I’ll do a full review when I’ve finished it as there is plenty in there that will be of interest to this blog’s readers.

Whatever else you might think of him, Geraint is clearly a bright chap. By his own admission, he is also hyper-competitive and hates losing. Which is why it’s doubly surprising that he managed to lose a debate on the causes of the financial crisis to John Redwood.

The motion which Geraint proposed to the Oxford Union was “This House Blames The Bankers“. Now, as an easy brief, that’s not quite up there with “This House Blames The Nazis For The Holocaust” but it’s not far off. So why did he lose?

Well, he tries to blame an Oxford conspiracy against a Cambridge man and it’s probably true that the jokes about his hosts’ university didn’t go down too well. But the horrible reality seems to be that he was out-argued.

He takes up the story:

I have to admit that my opponents came up with some fairly credible arguments.

Are you sure, Geraint?

Tory MP John Redwood argued, somewhat unsurprisingly, that it was all Gordon Brown’s fault because he had deregulated financial markets and removed the banks’ capital constraints that had once ensured less risk-taking.

Hang on a minute! It was the Tories that did most of that when John Redwood was on the government benches. OK, Gordon Brown might have tinkered around the edges but deregulation was primarily a Conservative initiative.

Then there’s this:

He also blamed Bill Clinton for pressurizing US banks into lending poor trailer trash wonga they were unlikely ever to pay back.

Not that old chestnut again. This spurious argument has been rolled out by the American right in an attempt to blame the Democrats for the financial crisis. It rests on the claim that an obscure piece of legislation brought in by the Carter government in 1977 effectively forced America’s banks to lend to people who were too poor to pay their loans back. The very idea that US banks could be forced to do anything is laughable, as is the suggestion that a thirty year old law and Democratic administrations caused the dramatic rise in sub-prime loans after 2003. The attempt to blame the Community Reinvestment Act for the sub-prime crisis has been well and truly trashed by people who know what they are talking about. That John Redwood should have deployed this argument shows just how close to the bottom of the barrel he was getting.

Perhaps Geraint was too busy making money or writing his book to have read about any of this. Whatever, his poker player’s instinct failed him and he didn’t see that John Redwood was clearly getting desperate. As a result, he allowed himself to be well and truly beaten on what should have been an easy platform.

Actually, to be fair, John Redwood seemed as surprised to have won as Geraint Anderson was to have lost.

Regardless of the outcome of the debate, though, his conclusion on his blog is bang on:

Trying to find anyone who will accept blame for the credit crunch is like trying to find a virgin in Shepherds Bush – near impossible. However, I believe that when the history books are written it will be the bankers who are most commonly accused. Sure, the politicians and regulators were asleep at the wheel but blaming them is like accusing an incompetent police force for a crime spree. Likewise, blaming the central banks for making debt ‘cheap’ is like blaming ammunition manufactures for a gun battle. My mum always said that adults should take responsibility for their actions and until we bankers start doing that we’re gonna remain about as popular as a turd in a swimming pool.

Of course the bankers must take most of the blame. Others may have contributed or looked the other way but it was bankers, motivated by greed, who created the financial instruments, made the toxic loans and hid their activities from the public gaze. They and no-one else created the financial crisis.

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9 Responses to Geraint Anderson trounced by John Redwood

  1. Jo Jordan says:

    I’m not totally convinced that the money has not ‘gone’. As the banks are unable to list their toxic assets, it is equally possible that audit trails are generally dodgy.

    Some good reporting on the Beeb would not go amiss – the people, the actions, the numbers in clear visuals – can we repeat the story and have it make sense – that is the test!

  2. Ballbag says:

    I had the privilege of listening to Ram Charan http://www.ram-charan.com/ give the idiots guide to what went wrong. He is a well connected guy and a captivating speaker. And without doubt, the bankers are at the core. However, there was some significant influence by them on politicians, which are at the core of allowing the reckless greed to escalate out of all proportion.

    I wouldn’t agree they were asleep at the wheel, they were well and truly awake. Their crime was to be clueless and out of their depth, allowing the bankers to manipulate them and take obscene advantage.

    Not sure that you can get a summary of what i heard Ram present in his books but if you get the chance to see him id recommend it.

  3. Wolfie says:

    You’re right in that it wasn’t the mortgages/community investment act. Can’t blame the Conservatives either as they didn’t open the door quite enough.

    Blaming the bankers is warm because a select few bent/broke the rules and badgered/bribed the politicians into a corner but still a bulk were innocent.

    Ultimately none of this could have happened without changes in regulations and regulatory practice, most of which were post 2000 both here and in the US. All these grew out of the post dot-com bubble gloom.

    It’s a complex subject and a lot of people are trying to confuse us all but ultimately the buck stops at No.11 here and in the US it’s the FED.

  4. Laban says:

    Re the CRA, have you read Howard Husock’s Trilion Dollar Shakedown ? Written in 2000 !

    “The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation’s banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.

    The CRA’s premise sounds unassailable: helping the poor buy and keep homes will stabilize and rebuild city neighborhoods. As enforced today, though, the law portends just the opposite, threatening to undermine the efforts of the upwardly mobile poor by saddling them with neighbors more than usually likely to depress property values by not maintaining their homes adequately or by losing them to foreclosure. ”

    “Nevertheless, until recently, the CRA didn’t matter all that much. During the seventies and eighties, CRA enforcement was perfunctory. Regulators asked banks to demonstrate that they were trying to reach their entire “assessment area” by advertising in minority-oriented newspapers or by sending their executives to serve on the boards of local community groups. The Clinton administration changed this state of affairs …

    The Clinton administration’s get-tough regulatory regime mattered so crucially because bank deregulation had set off a wave of mega-mergers, including the acquisition of the Bank of America by NationsBank, BankBoston by Fleet Financial, and Bankers Trust by Deutsche Bank. Regulatory approval of such mergers depended, in part, on positive CRA ratings. “To avoid the possibility of a denied or delayed application,” advises the NCRC in its deadpan tone, “lending institutions have an incentive to make formal agreements with community organizations.” By intervening—even just threatening to intervene—in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers. A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. ..

    Looking into the future gives further cause for concern: “The bulk of these loans,” notes a Federal Reserve economist, “have been made during a period in which we have not experienced an economic downturn.” The Neighborhood Assistance Corporation of America’s own success stories make you wonder how much CRA-related carnage will result when the economy cools.”

  5. Rick says:

    Brilliant video Wolfie. Where the hell did you find it. I’m going to post it anyway. The only thing it doesn’t mention is why the rating agencies gave AAA ratings to CDOs that were full of crap.

    I take your points about regulation but I still don’t think that gets the bankers off the hook. Had the governments tried to regulate something which, at the time, seemed to be making lost of money, the banking lobby and its allies in the media would have crucified them.

  6. Wolfie says:

    Yes it’s a great video for explaining the mechanism rather than the cause, which is probably a good thing for the video.

    I’m not suggesting that “the bankers” should be let off the hook, what I’m suggesting is it’s a very small minority that were responsible, the rest were really just doing their job in a highly competitive market. I’m glad you mentioned the miss-rating scandal because this is the smoking-gun that points towards evidence of a financial fraud of monumental proportions but nobody, governments included want to talk about that.

    It’s a shame so many people who should have known better decided to overlook the lessons of the 1930s.

  7. Rick says:

    Well, yes, not every banker is to blame but those running the largest banks and those lower down the hiereachy who just did what the hell they liked while their bosses turned a blind eye deserve the lion’s share of the blame.

  8. Jo Jordan says:

    Good conversation here, Rick.

    There seems to be a loose prima facie case that ‘something went wrong’. The butler has found a dead body, anyway.

    What is the nature of the dead body – a failed company. So surely the trail begins there – the companies legislation, the banking legislation, the auditors who certified the bank as a going concern.

    If this was a dead body, we would have an announcement from Scotland Yard and/or coroner on the cause of death. Who is the authority who is the equivalent in this case and what is their logical process? Is is laid out anywhere?

    Who investigates and what basic questions do they ask? People are talking about new legislation, breaking contracts etc rather wildly. Surely there is a process that is followed. And not all contracts are valid. There must be someone somewhere whose job it is to investigate the failure of a company and a bank at that.

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