The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

168 10 Disturbance of the Invisible Hand
state is taking over the banks’ debts in their entirety. The prevention of bank insolvencies
by means of state intervention also means that the management that caused
the crisis is not dismissed, or that if it is dismissed, it can still sue for the bonuses
to which it is contractually entitled. Since the bankrupt employers are still in business,
for the most part they must comply with their contractual obligations as if
no bankruptcy had taken place. This is particularly the case in continental Europe
where the civil law system, unlike American and English common law, means that
retrospective legislation and adjudication are neither possible nor constitutional.
Even a special tax on the bonuses still being paid by the state-rescued firms cannot
be imposed retrospectively. In this respect, common law is more flexible than
continental civil law.
On the other hand, it is apparent that desirable as it may be to replace the management
of all banks, there is no other group of bankers or managers waiting in
the wings to take over the banks from their colleagues who failed. The renewal of
the financial industry must therefore be carried out by more or less the same people
who ruined it. The greatest systemic risk is that the semi-nationalized financial
system must be reformed and renewed by people who ruined the old system, and
the majority of whom rejected more state and regulatory influence in the financial
sector.
The experience of this risk is well-known in the political context from the
distasteful necessity of having to accomplish the transition from dictatorship to
democracy with the same administration and the same staff of senior civil servants,
and even ministers etc., who had previously held positions of influence in
the dictatorship.
The big bailout was spawned by the Big Bang deregulation of the finance industry,
as the Ancien Régime spawned the revolution, or perhaps more appropriately,
as revolution spawned counterrevolution. The Thatcherite deregulation certainly
conceived of itself as a deregulatory revolution, and the “Big Bang” epithet was
self-chosen. The front page of the Wall Street Journal Europe of 31 March 2009,
ahead of the G20 summit of finance ministers on 2 April 2009 in London, carried an
article with the headline, “‘Big Bang’ architects now have misgivings. The radical
set of market reforms known as Big Bang, turning the city into ground zero of a
revolution that begat today’s buckling global financial system.”
The metaphor of the Big Bang is a shocking one in relation to deregulation. It
seems unconscionable to describe the politically-driven reform of a well-established
industry as an explosion out of nothingness. The idea of a deregulatory Big Bang
betrays a Jacobinist attitude to institutions and a contempt for continuity and institutional
trust. This attitude also seems to be at odds with the bulk of the tradition
of British political theory. It certainly resulted in another disastrous outcome of
a revolution, because like any other industry, the financial services sector cannot
be revolutionized from a zero-moment in time, since history does not admit of a
zero-moment.
The architects of the Big Bang in the British finance industry maintain today that
the consequences of the “Big Bang policy” – as they themselves describe it – of the
1980s were not foreseeable. Nigel Lawson, the former Chancellor of the Exchequer