Bad Banks: Alex Brummer reveals our ‘basket case’ banking system

Bad Banks: Alex Brummer reveals our ‘basket case’ banking system

Economy protest in 2008 following the financial crash
Economy protest in 2008 following the financial crash
Economy protest in 2008 following the financial crash
Economy protest in 2008 following the financial crash

Marc Shoffman speaks to The Daily Mail’s city editor Alex Brummer, author of Bad Banks, which explores the financial crisis of 2008

The 2008 financial crisis may have been consigned to the newspaper archives, but the effects of the crash that almost brought down the global banking system are still being felt today.

One man who has been at the coalface to witness the collapse of Northern Rock and the long list of banking failures from Lehman Brothers to Lloyds and RBS, is the Daily Mail city editor, Alex Brummer.

The seasoned journalist, who is also a vice-president of the Board of Deputies and can be seen dishing out doughnuts to his Daily Mail City desk every Chanukah, has drawn on his years of experience reporting on the banking system to write a book that claims many have still not learned their lesson.

Bad Banks: Greed, Incompetence and the Next Global Crisis, published this week, delves into the financial crisis of 2008 and looks at the mistakes that were made – and some of the poor behaviour that is still going on.

bad_banksWhile the book is not specifically Jewish in theme, many of the lessons from the crisis are central to Jewish teachings against excess greed and fairness, argues Brummer.

The book highlights excessive greed and risktaking at banks such as RBS, Lloyds and Lehman Brothers and the mis-selling of products, such as payment protection insurance, that would make most Talmudic sages wince.

It also delves into more recent scandals by banks, such as manipulation of interest rate benchmarks that set the cost of borrowing between lenders as fixing of the gold price and foreign exchange markets.

Many of these relate to what is known as the futures market, which is where traders buy and sell assets based on their value at a set time.

Brummer says: “The Talmud essentially teaches us about the futures market. It has rules about speculation and the setting of prices for crops.”

Other financial institutions are singled out for lending decisions that have led to money being funnelled to countries such as Syria and Iran, ultimately ending up with enemies of world Jewry and Israel.

The book also highlights how, in the past, Jews have often been “blamed” by conspiracy theorists for financial downturns. The Anti-Defamation League polled more than 300 adults in Austria, France, Hungary, Poland, Germany, Spain and the UK at the end of 2008 and found 31 percent of Europeans blame Jews for the crisis.

Brummer says most people recognise the errors of the banking crash were made at big global institutions rather than anything related to Jewish organisations.

However, this got muddled in 2010, he claims, when Rolling Stone magazine labelled investment bank Goldman Sachs as a “vampire squid.” He says: “The imagery of the vampire squid was not helpful as it reflects anti-Jewish imagery of the 19th Century against the Rothschild family.”

“It then doesn’t help that Goldman Sachs has been seen to have benefited from the financial crisis through some of its trading activities.”

However, rather than the villains many conspiracy theorists would like to believe, many Jews have actually been the heroes of the crisis, says Brummer.

One such hero is Ben Bernanke, who was the Federal Reserve chairman in the US when the crisis started to emerge in 2007. He comes from a Jewish family in California and his grandfather was a chazan.

Brummer adds: “Ben Bernanke knew what had to be done in terms of putting money into the system to prop up the banks in 2007. At the time he was called ‘helicopter Ben’ and ridiculed for the idea. But six years on, the US economy is doing well and now what he did has been replicated in the UK and is known as quantitative easing.”

Other heroes of the crisis mentioned in the book include Lord James Sassoon, who was the architect of regulatory changes in the UK after 2008, whereby power over lenders has returned to the Bank of England.

While Jewish politicians, economists, writers and academics in the UK and US played their part in addressing problems in the financial system, it is the way the crisis was handled in Europe that could pose a longer-lasting threat to the Jewish community, argues Brummer.

The book explains two approaches to solving the crisis of 2008. In the UK and US regulators responded quickly and helped recapitalise the system, while in Europe the response has been slower and seen countries such as Ireland, Greece and Spain require bailouts from other European Union members.

This has been because of difficulties in managing the euro and has meant many countries in the eurozone have failed to prop up their banks in the same way the US and UK did.

As such, they have had to make drastic reforms to public services to reduce their debts.

Brummer says: “European banks are a basket case. They are not lending properly, particularly in the poorer countries.

“This means people don’t get loans, there is poverty and this gives rise to extremists, such as Golden Dawn in Greece, Jobbik in Hungary and the National Front in France.”

• Alex Brummer’s Bad Banks: Greed, Incompetence and the Next Global Crisis is published by Random House Business, priced £14.99. Available now

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