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Criminalising Bad Bankers

Document Cited authorities 2 Cited in Related
Vincent
AuthorDavid Kirk
DOI10.1350/jcla.2012.76.6.799
Published date01 December 2012
Date01 December 2012
Subject MatterOpinion
Standing Document..Contents .. Page1
OPINION
Criminalising Bad Bankers
David Kirk*
Chief Criminal Counsel, Enforcement and Financial Crime, Financial Services
Authority
In the years leading up to 2007, as we all watched the major banks grow
too big to fail, and enjoyed the economic growth and prosperity that
their activities seemed to bring, we may have entertained the odd doubt
that the apparent boom could last. But we probably comforted ourselves
by thinking that in having these doubts we were applying old-fashioned
and out-dated judgements to the brave new world of high finance. The
idea that you could not borrow more than you could afford to repay was
for sissies. The concept that there was such a thing as a bad debt that
could not be turned into some sort of profit was defeatist nonsense. New
forms of doing financial business, algorithms, structured products, high-
frequency trading—all the trappings of the giant casino that investment
banking had become—were the way forward. The fact that those in
control of the large financial institutions may not have entirely under-
stood what their traders were up to was not a problem.
Except, of course, that it was. The old maxim—if it looks too good to
be true, it probably is—proved to be as pertinent as it always has been.
It was a bad case of the Emperor’s new clothes. The South Sea Bubble in
1720 was just one early and infamous example of the problem. Anthony
Trollope’s great novel, published in 1875, The Way We Live Now, describes
the fall of the bullying financier Melmotte. Trollope was writing at a time
when there had been serious scandals in the financial world. When the
fictional scandal broke, and everyone wondered what had happened, it
was the effete Dolly Longestaffe who got it right: perhaps Melmotte just
didn’t have the tin. Our banks, by 2008, had run out of tin.
When Lehman Brothers fell over a cliff on 14 September 2008, a year
after BNP Parisbas’s troubles had hinted at the first signs of global
problems, the financial world found itself...

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