Keep your fiscal powder dry. Barry Eichengreen

“We have to hug bankers!”

Joris Luyendijk spent several years interviewing bankers for “The Guardian”. In his newest book, he lifts the veil of the financial industry and the people working in it. He doesn’t believe in better bankers but in better banking rules.

The European: Mr. Luyendijk, do you think that bankers’ reputation is justified?
Luyendijk: You mean: Do they deserve to be hated?

The European: Not necessarily hated – but frowned upon.
Luyendijk: I think that banks deserve their reputation. Banks really are monstrous organizations. But bankers are more like the rest of us than we care to admit.

The European: Well, while we can get an idea of what a bank is like, walk by their buildings and read their reports, it is much harder to get an idea of the people behind the facades.
Luyendijk: Because they are not allowed to talk to us! There is code of silence in the banks. At the beginning of my research, I thought there would be at least ten books full of interviews with bankers. You got 250,000 people in the City, 250,000 who have worked there recently — but there were zero testimonials .

The European: How does that code work?
Luyendijk: When they first come into work, they are told: “Anything that you say about our bank in public will be used against that bank. If we catch you talking to journalist, we will destroy you. You will be fired, we will send our lawyers after you, and you will have a big black “x” next to your name so that you can never work in finance again.” People were genuinely terrified when I would meet with them.

“Some bankers bought weapons”

The European: How did you do it?
Luyendijk: I wrote a piece in “The Guardian”, arguing that among our 4 million – now 7 million – daily unique visitors, there must be readers working in finance. I wrote that I knew they weren’t allowed to talk to me, but I promised full anonymity and asked for openness. Most of my colleagues at “The Guardian” said it would never happen. Who would risk their job to talk to a Dutchman that works for the banker-bashing paper? The interview would be anonymized, so what is in it for them?

The European: What is?
Luyendijk: It turns out that hundreds of people actually don’t think of themselves as a calculating creature looking at what’s in it for them. They consider themselves citizens and want to explain themselves. Some wanted to explain how they’re not to blame for the crash. That 99% of bankers had nothing to do with the crash. Others would say that it is far worse than people think.

The European: The book clears up many misunderstandings about the banking world and the people working within it. What surprised you the most?
Luyendijk: Just how dangerous banks are. Some of the people I spoke to had at some point phoned home and said “Prepare the children for evacuation, stock up on food.” I read one book where the authors claim to have met bankers that bought weapons. They thought there was going to be a real breakdown of public order.

The European: Because the financial system collapses?
Luyendijk: It would mean that trade finance comes to a halt. And trade finance underpins the supply of supermarkets, pharmacies, petrol stations – everything. Imagine that across Europe hundreds of millions of people discover at the same moment that they can no longer get to their money. And you can no longer get to food. According to several insiders, among them Herman van Rompuy, we were just millimeters away from that scenario. This is why the banks had to be saved. Why we can’t find ten billion to put solar panels on our roofs but we can find ten billion over a weekend to save a bank.

The European: And about the bankers?
Luyendijk: I didn’t know that people could be fired within five minutes in the City. The bank is like a nuclear reactor. If it explodes, the ripple effects stretch for miles. And the people working there have a horizon of five minutes.

“We can’t even have a controlled explosion”

The European: And yet, everything remained relatively calm during the crash of 2008.
Luyendijk: One reason for that was IT: We did have classic bank runs, but they happened on the internet. So there weren’t any images of long lines of people – except in England when Northern Rock collapsed. We are visual creatures. We need to see the threat – the tiger in front of our eyes. The other reason was that politicians could not explain the true depth of the crisis, because that would have brought on the very panic they were afraid of.

The European: But playing down our fears also prevented real change.
Luyendijk: True. There is no political capital in taking on the financial sector. In 1953, Holland experienced a flood that killed thousands of people. We almost lost an entire province. After that, there was intense political capital and we embarked on this insanely megalomaniac project called the Delta-Plan, and now, unless sea levels keep rising, we are pretty safe. But without that horrible catastrophe that killed thousands of people, we wouldn’t be safe. That is the problem with finance: We cannot have that flooding. The catastrophe could very well be so all-encompassing that it wipes away our democratic system, like in Germany in the thirties.

The European: The warning shot of 2008 wasn’t loud enough?
Luyendijk: No. For complex systems to change, you need these moments when it is clear for everyone that change is necessary. But this system has become so complex that we cannot even allow for a controlled explosion.

The European: The title of your book calls bankers a “species”. You warn that banks shouldn’t be seen as one monolithic whole. Doesn’t that include the people who work there?
Luyendijk: Especially in the City, they are subject to a number of conditions, which create cohesion and coherence. While they are engaged in wildly different activities, and while these activities have external controls in both the back and the front office, they all live under the system of zero job security, under a culture of insane hours and are compensated with higher salaries, treated by the rest of society as outcasts – even though they may be working in an area completely unrelated to the crisis, these structural elements form their identity. It allows for the term “species”, even though most of the book is devoted to breaking down the idea that this is a spaceship full of aliens that landed on us.

“Who would spend their 20s fighting for a number on a screen?”

The European: You have an anthropological view on the species. You write about their specific vocabulary, which is full of euphemisms that make the whole trade seem abstract. What do the words tell us about the people?
Luyendijk: The euphemisms desensitize you from the amounts you work with. Calling it a “Kiwi” rather than a New Zealand Dollar allows you to lose “half a million Kiwis” without it sounding too bad. It also desensitizes you from your clients: Bankers used to build up relationships with their clients, go through good and bad patches of the economy together. That was long-term banking. Today we have transaction banking, and it is no longer, “My word is my bond” but rather, “Let’s do it do them before somebody else does it”.

The European: It’s “Us v. them”?
Luyendijk: The running joke, I am told, is to rip off a German banker from the Landesbank or Sparkasse. This is a recurring theme in books like “Liar’s Poker”, “Fiasko”, “City Boy” – the comic relief is when the protagonist tricks a German, usually called Hermann.

The European: We recently spoke with Rainer Voss, a former banker and protagonist of the movie “Master of the Universe”, who says that banking is a job that attracts weak personalities. Did you get the same idea from talking to bankers?
Luyendijk: It certainly depends on where you work. But what kind of personality would spend his or her twenties in a big glass building, fighting for a number on a screen? Imagine: It is 10 o’clock at night on a Friday evening, you are on your way out of the door to meet your girlfriend, whom you have already told that you couldn’t meet for dinner. Then your boss tells you that there’s a meeting at 11. Coming out of that meeting, he gives you a pitch to do – even though everybody knows the client doesn’t even read pitches. They want it by 8 in the morning. So you call your girlfriend and tell her that you aren’t coming home at all. And this happens thirty times.

The European: It isolates you.
Luyendijk: From all your friends and family. The kind of person who wants that, really wants what the banks have to offer.

The European: Money?
Luyendijk: It isn’t money. In that period, you work so much that you get 60,000 pounds a year, but you effectively also work two jobs, with the same hourly pay as a teacher. It is status. That is what he means: Weak personalities are the ones who don’t find intrinsic value in what they do, they need external validations. Banks are very, very good at offering that. You are a banker in an expensive suit, with an expensive watch and with the right business card – it promises that no one will ever be able to make you feel bad about yourself.

The European: It is hard to counteract that.
Luyendijk: We have to hug these bankers! Tell them “I am so sorry that the banks got you! But there is help! And good luck with your bonus addiction, your working disorder – it pains me to think what will happen when your children finally tell you that since you were never there, that they never learnt how to love you.”

The European: How did people react to your assertion?
Luyendijk: For some banking is just a job. Others told me I was jealous. That I wanted their job, because they had so much money. It really is a cult. The idea is that everyone is greedy and that they just ended up at the place where that greed is being pursued much further than anywhere else.

“Structure overrules culture”

The European: But is it all greed? It seems like competition and the iron will to succeed in a tough environment seem equally influential.
Luyendijk: Many types of the bankers are driven by the competition, it becomes a value in and of itself. Paying taxes seems horrible to them, because then their money goes to people who refuse to compete. It ties in with a much broader development in society towards neoliberalism, towards the idea that every individual is like a publicly listed corporation that constantly calculates where the best deal lies. The idea being that this leads to a balanced system with efficient and just outcomes.

The European: You mentioned that complexity leads us to seek simplistic answers. Working really hard and spending your youth doing all to succeed is a simplistic way of finding meaning in life.
Luyendijk: I only wish we could turn the sustainable economy into a place where people are as motivated as they are in the City. We are crying out for the financial underpinning to projects like the energy transition, but people go to work elsewhere.

The European: You paint a very bleak picture of this industry. Is change possible?
Luyendijk: It was much better until the late 1970s. Back when banking was boring and everybody wanted to work for IBM. Back then, the risky parts of banking were done in partnerships and those partnerships made top people personally liable. There was a bonus and a malus. There was no incentive to grow beyond a manageable size and to take on projects you didn’t understand – because if it went wrong, you were screwed. The idea that we have always had “too big to fail” banks with vast conflicts of interests is nonsense. It is a recent invention that we have allowed to emerge. We had a much better system between WWII and the 1970s – and we can have it again.

The European: How?
Luyendijk: I think we need to re-politicize the system.

The European: People aren’t at fault?
Luyendijk: We don’t need bankers behaving better, we need better laws. That reward people for doing the right thing. Right now, there are all these perverse incentives that reward bankers for doing the wrong thing. If you have structurally perverse incentives, you can have whatever social sensitivity course you like but the incentives are still stronger. Structure overrules culture.

The European: Perhaps that just sounds too hard to be tackled.
Luyendijk: The welfare state wasn’t built up in a day. It required decades of work. And we still haven’t got it right. Financial regulation is comparable to the welfare state. According to a piece by the London School of Economics, all political energy during the second part of the 20th century went into organizing labor. This century, it should be about organizing capital.

Correction: An earlier version of this article mentioned a book called “Lion’s poker”. The correct name is “Liar’s Poker”.

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