Kevin Drum leads me to Jonah Goldberg’s piece on ‘the Bankers have learned from their mistakes‘…which led directly to my spitting hot tea out my nose, because that was one of the funniest things I’ve ever read.
In my misspent youth, I took a job as a systems guy at a savings and loan here in LA. Before very long – not because I was wonderful, but because the place was so disorganized – I wound up running the commercial property that they owned (and there was a lot of it…). In that context, I spent a lot of time with our very experienced auditors at Deloitte, and went to a bunch of real estate finance seminars and conventions.
At a conference, one banker told a joke…
A real estate developer and his banker are going elk hunting in the Alaska outback. They charter a plane, and as they are preparing to take off, the pilot explains to them that the carrying capacity of the plane will only allow them to bring back one elk each.
A week later the pilot returns to their bush camp, and discovers that each hunter has two elk carcasses. He explains to them that there’s no way he’ll try fly out carrying that heavy a load.
The banker starts peeling off hundred dollar bills and offering them to the pilot. The developer starts adding to the pile of cash, and pretty soon, greed takes over for sense, and the pilot is strapping the carcasses to the airplane’s skis.
They back the plane up to the very edge of the clearing, rev the engine, and start to take off. The plane is airborne at the end of the clearing, but can’t clear the trees, and smashes into the ground.
The developer and the banker crawl away from the burning wreckage, and one turns to the other and says “That was hundreds of yards further than we made it last year!”
This was just before the S & L crash…
If you think that the problems we’ve had in the last year or so are novel, go read Martin Meyer’s great book ‘The Bankers.’ I still recall a great quote from that book…from an older New England banker about the new crop of Harvard MBA’s running the banks back in the 1970’s “These young bankers. They’re quite good at making loans. Quite good. Not so good at collecting on them, though.“
So no, Jonah, we haven’t learned from this time, and yes, we do need to look hard at the ways we regulate banks (note that in my view some of the problems come from regulations – the issue isn’t just more or less regulation, it’s better and worse regulation).