Are Bankers to be Blamed?

I happen to be German and therefore I follow events there somewhat more closely. As in many other countries your life has not taken a favourable turn the past year or so if you have any executive role in a big bank. Bankers have become a scapegoat for the current crisis.

I want to tackle this issue from a different angle and start with a short anecdote. During my undergraduate, before the crisis started, a professor of mine told me a story that a colleague from the U.S. once asked him why Germans aren´t consuming and concentrate all their efforts to export. Why would you do this and never enjoy anything of the created wealth and consume more? He had a point back then already. However, I of course could think of reasons why it is good in the long run, because the U.S. has to pay for their imports and Germans own stocks, real estate, bonds and other assets which generate constant earnings in return.

Now, if you think of it with German banks having lost billions in US sub-prime mortgage loans and other more or less worthless junk assets this guy has really a point. The German economy got indirectly a bunch of worthless papers for (some of) their exports. This reasoning simplifies matters a bit and this happened not to all exports of course, but there is some truth to it. And now comes the part where the banks need to be bailed out, taxpayers money is used, and the individual citizen pays the price for the failure of bank executives. We know that story and yes I think this is a reason to be angry and blame bankers for this.

There is another point taking a German perspective. For the U.S. economy there was no way to evade the meltdown of their banks since they created the whole system; sooner or later it had to collapse. For Germany there was. The German banks were merely seeking a profitable allocation for their funds and could have done it somewhere else. Banks were by far not the only actors loosing money buying worthless assets in the U.S. There exists a term called “stupid German money”, which I take as self-explanatory. It is logical looking at the trade flows between Germany and the U.S. that there are lots of Dollars around seeking investment. However, banks are different and have to act more responsible than other actors in the economy as their failure can endanger the economy as a whole.

So, yes the bankers are to blamed for the loss in taxpayers money and it could have been avoided, but I suggest to evaluate it as what it comes down to in the end: bad corporate choices, admittedly very bad ones. To evaluate this on moral grounds and speculate about their motives such as greed, recklessness or merely a lack of understanding and knowledge of their business shall be left to others at this point.