Wall Streets Revisionist History

In an attempt at revisionist history reminiscent of the Soviet politburo, several large U.S. banks are not only moving to repay public money they received at the depth of the crisis and declining to accept further help through the sale of toxic assets, but are floating the idea that they never needed the money in the first place and participated only because government compelled them to. As an article on The Economist's website notes,

. . . a worryingly revisionist history of the credit crunch is being penned. It says that some banks did not really need government help and were bullied into accepting it last year as part of a wider bail-out of their flakier peers.

It was only a few short months ago, of course, that the banking system was in a state of collapse, with share prices in free-fall and borrowing costs skyrocketing for all. One result of intervention was that all banks benefited from an implicit state guarantee. And even those who did not benefit from government largess were saved by the fact that weaker firms to whom they were exposed were protected.

As the Economist article notes, banks continue to benefit from very low interest rates, central bank asset purchases and guarantees on their debt. Thus their claim of a return to financial health is demonstrably false. All of which is true in Canada as elsewhere.

And to the extent that this revisionism is also accepted, it is also dangerous. It suggests that regulation need only focus on the truly troubled banks and not on all. Yet as is clearly obvious, this crisis has been systemic in nature. All involved acted in ways that brought it about. And while some may have fared better than others, all need to be regulated more closely in the future.