Let”s not go back to ‘good old fashioned banking’
A few days ago I saw the Christmas classic It’s a Wonderful Life. Those farmiliar with the film will know that it is pertinent in some ways to the situation today. Essentially it the plot revolves around George Bailey who runs a small “buildings and loans” company valiantly helping working class members of the community get on the property ladder, , and is faced with the nefarious machinations of a big banker named Mr Potter. Potter aappears to run the parent company for the Buildings and Loans enterprise and, as a major slum landlord seeks in all manner of ways to stop Bailey providing loans that enable the working poor to buy their own houses.
It’s an excellent film. Yet what interested me is this. In this 1946 movie, the evil banker was portayed as evil on account of his unwillingness to offer credit to the working poor. Since the credit crisis – or more specifically the sub-prime crisis – broke, bankers have been furiously attacked for being all to willing to give out high interest loans to those unable to pay them.
I do not doubt that some mortgage companies used disgusting tactics. Yet the calls – on the right and the left – for a return to good old fashioned banking – leave a lot to be desired.
Apart from anything, the desire that banks should cease giving out ‘irresponsible loans’ to those with checkered histories has often been expressed in terms that are downright patronising. Yet more substantially, there is nothing desirable about a return to the days when only a golden circle of people had access to home loans. Getting into debt is not a disaster or tragedy, but rather soemthing which, for a century and a half, has been a normal part of middle class life. A house is the most durable of consumer durables. It lasts effectively for a life time. As such it is almost inevitable that people may wish, and indeed need, to move into one, and proceed to pay the full cost over a longer period of time. From this perspective, the democratisation of credit, in and of itself, is a good thing, which offers broader life choices to a wider group of people. And certainly when you actually look back at the days before the 1990s, some kind of democratisation of credit was undeniably needed. As one industry professional described it, you would in the 1980s, go cap in hand to a manager at your building society, and you were very good he’d approve your loan. It was, of course, in this period, that gay mortgage brokers were formed to cater to just some of the people who had difficulty making the grade. We absolutely must talk about the future of banking. Yet such a discussion must not be dominated by the middle class fantasy of “sensible loans to sensible people”, and an infantilisation of those who have missed the odd payment or enjoy lower incomes.
