How the banks were framed

A week that started with the Vickers review on banking has closed without another national explosion of banker-bashing. Thank God. Beating up on the banks has lasted almost three years now, and it’s blinding us to the real causes of the financial crisis. The banks are the perfect alibi: blaming them gets everyone off the hook. How, asks Gordon Brown, was a mere Prime Minister to know that banks were doing such fiendishly complicated things? How, asks George Osborne, was an opposition expected to detect what the government could not? How, asks Mervyn King, was the Bank of England governor supposed to know that these bankers had been so wicked? For all of them, the bankers have been the perfect scapegoat.

In truth, all of them failed to spot the massive asset bubble that had deformed the British economy by 2007, a bubble blown by dangerously underpriced debt. Yet even now there is a worrying reluctance (on all sides) to admit that a bubble ever existed.