Bankers may be greedy, self-serving egomaniacs, but at least they are consistently greedy, self-serving and egotistical. That is more than can be said for the muddled response of governments and regulators to the financial crisis. They should not be blamed for getting policy wrong – most involved had never experienced anything like the meltdown before and, besides, the counterfactuals to decisions taken are unknowable. But leaders should at least be consistent.
Fuzzy-headed thinking abounds. Last week the European Central Bank announced that almost 200 eurozone banks applied for €243bn of emergency short-term funding but declined to tell investors which ones. Taking the opposite tack, the Committee of European Banking Supervisors plans to publish the results of its stress testing of European banks and last week held a public hearing on “assessing banks’ transparency”. Governments say they want everything in the open but not, it seems, when uncomfortable truths may be revealed.
American policy, too, decries murkiness within banks, but at the first sign of trouble during the crisis the Financial Accounting Standards Board relaxed mark-to-market rules. (Perhaps to atone for going soft, FASB is now pushing to have fair-value adjustments reflected in income statements, again conflicting with standards elsewhere in the world.) Meanwhile, US regulators want banks to be better capitalised relative to assets – a demand to which banks responded by shrinking balance sheets 5 per cent in 2009 – at the same time as increasing lending to struggling corporates.