After the latest financial squalls there is talk of a return to traditional banking. Could it ever catch on, asks Ann Marie Hourihane
THE ONLY time I understand economics is when there is a disaster. Even now I have my blind spots. It was Friday before I discovered that that great American bank, Wachovia, was not in fact called Watch Over You or, as the view got darker, Walk Over You. On the other hand I thought anything called Standard Poor's had to be a joke, which it is not. It's difficult.
Names are important in the world of finance. The lingo is designed to keep you bewildered, but now the veil has been snatched away. This time last week very few of us knew what short-selling was. Now we know that you can also do it naked; and it is such fun that it has been temporarily banned. Prime Time has brought out the scary music - to accompany its report on the financial crisis which was broadcast last Thursday. George Lee has never looked happier. Joe Duffy started a run on the banks. And Roger Peston, the BBC business editor, no less, has nonchalantly stated that "the wheels of capitalism are seizing up".
This time last week very few of us knew what leverage was. But now we know that it's just a longer word for debt. This time last week we thought that debt was an immutable thing, a permanent stain on your character. If you owe money to a bank and the bank goes bust then your debt lives on forever, glowing steadily in the hands of the new purchaser. But now we have discovered that if the banks themselves have debts their national government will take the debts off them and lock them away in a lead-lined canister. Way to go, guys. This is called finance. Free market. Competition. Imagine.
And then there are the proper names. Terribly proper, they were, to us in mortgage land. Not Lehman, of which few of us had ever heard before the summer. But Goldman Sachs. Merrill Lynch. Morgan Stanley. The Bank of Scotland. Those serious, heavy names that were always whispered in reverence by business reporters and newsreaders. Goldman Sachs. Merrill Lynch. Morgan Stanley, The Bank of Scotland. They sounded like the dependable, cautious, leather-bound sort of people who were keeping the finances of the little person safe, who were running the world economy while you were just eating egg sandwiches and drying your hair.
Take the Irish Stock Exchange. The radio each weekday charted its every rise and fall (or fall and fall, for a lot of this year) as if it was some great Leviathan breaking the waves. In fact, as one of the few people I know who has visited the Irish Stock Exchange, I can exclusively report that it is a rather small hall off Dame Street.
You might have thought that Roger Altman was a film director of the type of choppy film that critics like to call multi-stranded. But it turns out that Roger C Altman was once deputy treasury secretary in the United States, and subsequently on the board of Lehman Brothers. Who knew? Roger said: "The credit market is frozen."
But the best proper name of all is that of John Thain, who got $27 million in hello money when he joined Merrill Lynch last November. I thought it was Thane as in Thane of Cawdor, which was Macbeth's name before he was co-opted to the board of Lehman Brothers. Or that it was a bit like John Wayne, fearless American hero. But no, John Thain was the most highly paid chief executive of 2007, earning $83.1 million. Yet John Thain is not an example of the corporate greed that has brought us to the edge of the abyss. John Thain was well worth all the money he has been paid. The Financial Times praised his decision to sell Merrill Lynch to the Bank of America for $50 billion in a deal "hastily concocted in the antechambers of the New York Federal Reserve" as proof of "an outsider's ability to adapt deftly to a fast- changing environment".
Way to go, John.
Then we saw the Bush government, one of the most right-wing governments of this century, nationalising like Clement Attlee on speed. Clement Attlee - now there's a name to conjure with.
Suddenly the term investment bankers does not seem so respectable after all. Investment bankers, far from being men of probity in the City, or Masters Of The Universe (yes, my sources on investment bankers are the film Mary Poppins, and a cursory reading of the book Bonfire of the Vanities) are revealed to have been boy racers all along, just chasing their bonuses using our money as petrol. What fun they must have had! Franklin D Roosevelt banned investment banking in 1930. Whose bright idea was it to bring investment banking back?
Now there is talk of a return to "the traditional type of banking".
Traditional banking - such a lovely phrase. It makes you think of libraries, of cigar smoke, of the port twinkling in the decanter. From the sound of it the return to traditional banking would presumably revive arcane practices such as not lending money that you do not have. It's such a lovely idea. Now all they have to do is to come up with a good name for it.