Monday, 29 September 2008

A sign of why we have a financial crisis

In days gone by, finance was hard to come by. You'd make an appointment with a bank manager, put on a suit and go and lay out your case as to why the bank should give you money. It was a time of trepidation for many, as banks were notoriously tight with their lending criteria.

Nowadays, the bank comes to you, and they try to lend you as much money as they think you can afford, and then some. Borrowers have become like French geese, with a funnel stuffed into their beaks and corn being force-fed into their gullets.

When I see a car like this, it reinforces my view that the banks only have themselves to blame, and that any bank managers crying poor to the government should be shown the door with a swift kick up the date.

When I was at Uni, studying Commerce, everyone wanted to be a Merchant Banker (this was at a time when Alan Bond and Laurie Connell were riding high). I know that because one of lecturers did a survey one day and asked us students to raise our hands if we found a certain career choice as being attractive.

90% wanted to go into stock broking or merchant banking. Maybe 10% thought commercial banking was attractive (essentially going to work for Westpac was seen as a sign of abject failure).

I was the only one who expressed an interest in manufacturing. Out of about 300 students.

In other words, my fellow students all wanted to get rich by working for a stockbroker or a merchant bank (no one had heard of Macquarie Bank back then, funnily enough). Being a commercial banker was not seen as the road to riches.

However, a reasonable number ended up working for banks after the likes of Bond Corp went belly up, and they had nowhere else to go. But the desire to make money never went away, and I suspect it was the likes of them that came up with all sorts of money-making schemes as they cast an envious eye at their compadres in the stock broking and merchant banking houses. The only way for them to make money was to grow their banks like topsy, and that meant lending money with a fury.

Main Street bankers are normally seen as a sober lot when compared to their Wall Street rivals, but I don't believe there is much difference between the two. Next time you get one of those "you have been pre-approved for a $5,000 gold Mastercard" type letters in the mail, consider who is to blame for this mess.

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