Some people binge watch TV shows, I binge read books. Now that I’ve finished the first draft of my book on how bankers can become better citizens of the world, I read three books on bankers in three days. I also watched “The Big Short”.
The common thread to all these is that bankers are evil! The most direct attack comes from Admati and Hellwig’s “The Banker’s New Clothes”. They write that bankers gamble others people’s money, lobby to misdirect government policy and fool supervisors. Their solution is that banks should borrow less and issue more shares, so that shareholders rather than the taxpayer takes losses. In fact, they want banks to go back to what they were like in the 1900s when banks often had 20%-30% of their liabilities in shares rather than borrowings (currently they have around 5%).
They are really good at explaining the nuts and bolts of a bank’s balance sheet. They style is polemical, which grates if one works in a bank, but I can see the anger. I guess the main counter to their argument is that banks are doing what they are suggesting, but just not as fast as they want. Moreover, their “golden era” of banking back in the late 1800s and early 1900s when banks issued more stock was one of very low regulation and limited access to banking for the masses.
Then there was Adair Turner’s “Between Debt and the Devil”. Adair Turner was the head of the UK bank regulator from 2008 to 2013. Before that he was Vice Chair of the US investment bank Merrill Lynch and a non-executive director of Standard Chartered.
His main thrust is that we should do away with lots of bankers, and bank functions, especially if lending is linked to real estate. He argues that the state should rein in credit and tax to reduce investment in already existing real estate. At the same time, the state should print money to finance stimulus programmes such as in climate change or public infrastructure. He puts a lot of faith in the state, which I’m not so sure is the panacea to debt problems – just look at state-driven China and its skyrocketing debt levels.
As for “The Big Short”, it was a fun movie. It did caricature bankers as evil if they were long US sub-prime, and good if they were short. On top of that, Brad Pitt, provided a social conscience to those profiting from the crash, by giving a nod to the likely mass unemployment. We don’t really learn anything new from the movie that hasn’t already been told, but it was entertaining.
Finally, for a very original take on the world, George Cooper’s “Money, Blood and Revolution” is well worth a read. He goes through scientific paradigmatic changes and applies this to economics. He introduces a new “circular” way of looking at economies that houses all economic schools of thoughts. This allows one to see the effects of different policy choices on the economic pyramid. He is scathing on bankers, but this time central bankers, who he argues only help boost the investments of the rich.