Blame game too easy, but ques­tions need an­swer­ing

The Scotsman - - Farming -

the City and Wall Street, and con­clude, not un­rea­son­ably, that while “amateurs built the Ark, pro­fes­sion­als built the Ti­tanic”.

The fi­nan­cial sec­tor as a whole has not ac­quit­ted it­self well in re­cent years, and there is still a huge ef­fort re­quired if in­vest­ment and bank­ing are to re­sume their proper place as ser­vants not masters, per­form­ing the vi­tal match­mak­ing task of bring­ing to­gether those who re­quire funds (not just busi­nesses and gov­ern­ments but or­di­nary peo­ple), and in­vestors who want to make a de­cent re­turn on their sav­ings.

There are three groups here who need to play their part: gov­ern­ments, the fi­nan­cial sec­tor it­self, and cus­tomers.

The first two have fairly patchy records which have been sub­jected to thor­ough scru­tiny. Gov­ern­ments may have stopped the house burn­ing down in 2008-9, at con­sid­er­able cost, but they can be ac­cused of hav­ing al­lowed flammable ma­te­ri­als to pile up dur­ing the boom years.

Even now, true to the politi­cians’ maxim of never let­ting a cri­sis go to waste, there are at­tempts to in­flu­ence the re­form process in or­der to gain lo­cal ad­van­tage (wit­ness the attacks on “An­glo-Saxon spec­u­la­tive cap­i­tal­ism” from France and Ger­many).

Fund man­agers and bankers have not, on the whole, done much bet­ter; many ap­pear to hope that if they sit tight, the storm of pop­u­lar loathing will abate and it will be back to busi­ness as usual.

Cus­tomers have got off lightly in this blame game. It wasn’t only the pro­fes­sion­als who were blinded by greed, and it wasn’t only the reg­u­la­tors who failed to ask tough ques­tions. So long as there is a de­mand for snake oil, there will be snake-oil sales­men.

We should start giv­ing the “ex­perts” who are try­ing to sell us some­thing a real grilling, start­ing with the fol­low­ing ques­tions:

How much of my money is ac­tu­ally be­ing in­vested, and how much is go­ing to mid­dle­men like your­self?

If bank base rates are 0.5 per cent why do you ex­pect me to pay 8 per cent for an un­se­cured loan?

How can this in­vest­ment of­fer the same re­turns as the stock mar­ket with­out any risk of losses?

Is it pru­dent to tie up the great bulk of my cap­i­tal in my house?

What are the chances of some­thing go­ing wrong, and if it does how much money could I lose?

These are the kind of ques­tions that scep­ti­cal cus­tomers should ask, and the ones that pro­fes­sion­als should an­swer.

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