The bank job

It suits a great many people to blame the banks for the financial crisis. It gets everyone else off the hook. How, asks Gordon Brown, was a mere Prime Minister to know that banks were doing such fiendishly complicated things? How, asks George Osborne, was an opposition expected to detect what the government could not? How, asks Mervyn King, was the Bank of England governor supposed to know that these bankers had been so wicked? For all of them, the bankers have been the perfect scapegoat.

In truth, all of them failed to spot the massive asset bubble that had deformed the British economy by 2007, a bubble blown by dangerously underpriced debt. Yet even now there is a worrying reluctance to admit that a bubble ever existed. The decision to blame the banks is not just lazy, but dangerous — because it means that the profound errors of the Labour years are neither diagnosed nor corrected. And so the factors which led us to the crash the first time around remain in place, uncorrected and primed to explode a second time around.

In a nation where banker-bashing is becoming a national sport, it was reassuring to see the Independent Commission on Banking this week refrain from taking a pickaxe to the sector. Its proposals are sensible, and go some way towards creating what Britain should have had in the first place: competent regulation. If this crisis was global, why do Sweden, Canada and Australia not have any collapsed banks? Because they had their banking blow-up 20 years ago, and responded with proper regulation. They set limits on how much banks could borrow in relation to their assets. Under George Osborne, Britain finally looks ready to join the club of countries with properly regulated banks.