‘Snooty’ bankers blamed for crisis

From the Financial Times:

The “snooty” attitude of bankers and financiers who thought they were cleverer than everyone else is largely to blame for the global credit squeeze “disaster”, Germany’s finance minister has said.

In an interview with the Financial Times, Peer Steinbrück played down the impact on Europe’s largest economy of the turmoil but said steps had to be taken to raise risk awareness.

German proposals before the squeeze for increasing transparency had been “mocked” and sometimes deliberately misunderstood as an attempt to impose regulation rather than voluntary codes, Mr Steinbrück said, but were now winning support.

In a swipe at finance industry leaders, he said the “quality of managers” had proved a weakness. “The snooty attitude that we have sometimes seen – under the motto of ‘we are cleverer than the others’ – ended in disaster,” he said.

Mr Steinbrück’s comments came as IKB and WestLB, the German banks hit hard by the turmoil, pledged more capital to cover potential losses, and Rolf Gerlach, the chairman of WestLB, resigned unexpectedly.

After talks with the Bundesbank and the financial regulator, the banks that rescued IKB said they would cover a further $520m of possible losses in addition to their €3.5bn ($5.1bn) rescue.

Mr Steinbrück was critical of the management of Sachsen LB and IKB. “It is clear that the management . . . didn’t have the right management expertise.” They had been unable to cope with the complexity of the products in which they were investing, he said. Crisis talks on IKB’s future took place on Thursday but Mr Steinbrück said taxpayers would not foot a rescue bill.

The Bundesbank warned that financial market turmoil had “noticeably” increased macro-economic risks to the German financial system but the economy remained in good shape.

Would you buy a used car from your Investment Banker? Actually, in all honesty, you might just get something useful instead.