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Has George Osborne completely forgotten the banking crisis, or has it just slipped his mind? In an interview on Radio 4 this morning he spoke of his excitement at the new products the financial services industry may invent to sell to people who will soon get access to their pension pots.
It was precisely this ability of the financial services industry to come up with exciting new products that took us to the economic brink in 2008. Mortgage backed securities, derivatives, credit default swaps, collateralised debt obligations…the inventiveness of the self-proclaimed ‘masters of the universe’ was formidable, but all too often, corrupt.
Banks in the US sold sub-prime mortgages to people who could not possibly meet the repayments, then sold these mortgages on to other banks, disguised as Triple A investments. Because they were disguised, nobody quite knew what they had got, so eventually everything became suspect and the whole system ground to a halt.
The credit crunch occurred because bankers had ceased to trust each other, and refused to do business. This led to banks being bailed out by taxpayers. The poor and vulnerable have largely paid the price whilst the bankers have largely avoided the consequences of their actions.
The banks did not only deceive each other, they also conned businesses and the general public on a massive scale. They conspired to fix the LIBOR rate, and came up with numerous unethical ways of taking more money from an unsuspecting public. They sold unnecessary Payment Protection Insurance to the tune of billions of pounds, and ruined many small businesses by selling them interest rate swaps.
Even when the banks were ordered to compensate those who had been missold PPI, another industry arose to take a cut from the victims. Claims management firms wrongly gave people the impression that claiming the compensation to which they were entitled would be difficult and complicated, so offered to act on their behalf, for a percentage of the final payout.
Almost every week brings a new example of the unethical behaviour of the financial services industry. Most recently we learned that payday lender Wonga was issuing fake solicitors letters to borrowers, putting even more pressure on people who are probably already in dire financial straits.
And despite all the scandals we know about, there may be more to be revealed. Nicholas Wilson alleges that HSBC levied illegal charges on people who had defaulted on payments to high street companies like John Lewis and Dixons. His allegations are yet to be properly investigated, but he has paid a high personal price for blowing the whistle.
George Bernard Shaw said that ‘All professions are conspiracies against the laity’. Given our recent history, it is difficult to think of any profession to which this applies more accurately than that of banking and financial services. Mr. Osborne’s apparently wide-eyed faith in the sector would be almost touching if it wasn’t so potentially dangerous. Only time will tell if his faith is justified, but if it isn’t, it will be the elderly who pay the price.
© Bernadette Meaden has written about political, religious and social issues for some years, and is strongly influenced by Christian Socialism, liberation theology and the Catholic Worker movement. She is an Ekklesia associate and regular contributor. You can follow her on Twitter: @BernaMeaden