What the Dickens?
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What sets up the More or Less Christmas Carol and who is Ebenezer Scrooge of British Bank PLC?
Thank you for downloading More or Less, a weekly excursion into the world of numbers. The programme is presented by Tim Harford, the Financial Times undercover economist, and is a BBC Radio 4 and the Open University co-production.
MUSIC PLAYS
Merry Christmas. What right have you to be merry? You're poor enough. Bah!
Humbug.
Quantitative easing is one small mercy.
and sat down before it to take his gruel. His glance happened upon a disused servant's bell, and it was with a strange, inexplicable dread that as he looked, the aged chairman of British Bank PLC saw it begin to swing.
Scrooge. Scrooge. Now, now. Jacob O'Malley's ghost. You are fettered. Tell me why. I wear the chain I forged in life. Is its pattern strange to you, Ebenezer? I fuelled a great boom in property. But when my debtors sunk and I could borrow no more, oh, woe is me, I became the living dead. withering slowly, dragging my fellow Irishmen into the debtor's prison. A zombie bank. I have heard of such a thing. But what do you want with me? Upon my soul, my bank is sound. The chains which bind me now threaten you, Ebenezer. Heed my warning, and the three spirits who will tonight visit you...
Scrooge examined the door by which O'Malley had departed. It was locked, as he had locked it by his own hands. Unable to sleep, Scrooge considered the spirit's words. Was he treading in O'Malley's doomed footsteps?
I am the ghost of banking past. You are the ghost, then, whose coming was foretold to me.
Rise, for there is much for you to hear.
For Wall Street, it's probably been the most extraordinary 24 hours since the late 1920s.
that Merrill Lynch, one of the proudest investment banks, is steering itself into the clutches of Bank of America, no longer confident of its future as an independent, is almost as shocking as the demise of Lehman Brothers.
Nobody knew where credit risk was going. Nobody knew who actually held the loans. And above all else, nobody actually knew who would be on the hook for loans if they turned bad. And nobody had any incentive to keep monitoring who was actually lending to who and whether they'd be able to repay it. The problem, though, as far as the bankers are concerned, is that although they weren't the only ones who screwed up badly, the bankers were the only ones who walked away with very large payouts.
Speed it. Who is that woman? It is the voice of reason, Scrooge.
It is in fact Julian Tett of the Financial Times, author of Fool's Gold.
How does Jacob O'Malley’s ghost explain the banking boom-and-bust chain?
How do you know? I'm the omniscient narrator, and I also work at the FT with Julian.
The voice of reason, you say? Bah!
the swirling vision of Gillian Tetch dissolved, to be replaced by another, Simon Johnson, formerly the chief economist of the International Monetary Fund.
The difference between Ireland and the UK in a nutshell is that the Irish banks became... somewhat bigger, somewhat more out of control. And when they blew up, the government handled it somewhat worse. But those somewots are pretty small differences, actually, when you look at it from a distance. So I think the UK could well be next. And the UK still has the same structure. Actually, your structure has become more concentrated. And the big banks have more power to take on these irresponsible, crazy, mismanaged risks. The banks, they got out of control. They believed that they had figured out new ways to make money that weren't risky. And they persuaded the regulators on both sides of the Atlantic that they should be trusted to take what turned out to be huge and totally inappropriate risks.
And those, of course, blew up in their faces and caused massive social damage. I am not too stressed about the unproductive nature of many of these activities. I am much more worried about about the socially risky angle that emerges from all of the dangerous products that they produce and all of the ways in which they structure themselves and all the debt that they take on, this very high degree of indebtedness, very high degree of leverage in the financial sector around the megabanks that are cross-border.
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Chapters
4 chapters
1
What sets up the More or Less Christmas Carol and who is Ebenezer Scrooge of British Bank PLC?
0:00–3:49
2
How does Jacob O'Malley’s ghost explain the banking boom-and-bust chain?
3:49–14:43
3
What evidence do experts give about the 2007–08 credit crunch causes?
14:43–20:00
4
How did Julian Tett, Simon Johnson and John Kay characterise banks’ behaviour before the crash?
20:00–27:22