They're an amazing bunch of bankers, apparently

Remarkable strapline on a piece in today's Times (paywall-protected) by Stephen Hester, CEO of Royal Bank of Scotland (Prop: UK taxpayers). "We're good at banking". My first thought was that the final part of the sentence had been edited out: "....compared to Sir Fred Goodwin". But no, Hester is trying to make the case that the UK banking industry is good for the economy and needs to get its message out more effectively.

Let's put aside the shock of a banker putting his head above the parapet like this. Hester has some reasonable points that he wants to make, but he doesn't seem to be able to avoid having them blow up in his face. For example:

It is a popular myth to believe that banking and financial services dominate the British economy and should be cut down to size. In fact, banks account for a far smaller proportion of the economy than manufacturing — 7.7 per cent compared with 12.8 per cent. Everyone wants to see growth in the manufacturing sector, but we need growth in banking, too. It is something Britain is good at. And it brings much needed jobs and tax revenues.

It's true that the financial sector is surprisingly small, in terms of its contribution to GDP or employment, but its ability to cause havoc throughout the economy far exceeds that of any other sector. Before writing his final sentence, did Hester pause to calculate how many years' worth of past taxes the government had to shovel back into the banks in 2008 to stop them from collapsing? Ot how many jobs in the rest of the economy have been (and will continue to be) lost as a result of the financial crisis?

But it's in discussing investment banking that Hester really comes undone.

We have failed to remind people of what an investment bank actually does.

Most people do not realise that investment banks allow Britain’s farmers to hedge their Euro farm- support payments to protect them from swings in currency values. We have not shown that investment banks help our country to effectively finance its deficit and protect public services, both by purchasing gilts directly from the Government, and by helping sovereign debt markets function efficiently. And we certainly have not explained properly that investment banks — when properly regulated and managed — allow people to afford to buy their own homes by accessing the savings of the whole world.

Interesting little parenthesis in that last sentence, but setting that aside, is that really how Hester sees it? I'd say that in the UK (and the US and Spain and Ireland), "access to the savings of the whole world", admittedly with the connivance of the monetary authorities, mainly served to pump up a property bubble that on the one hand led to massive amounts of speculative construction (600 "ghost estates" in Ireland, empty villas all along the Costas, shoebox apartments in Leeds, etc etc) and on the other pumped up the price of property to such a degree that most first-time buyers were excluded from the market altogether.

I suspect that the public understands what investment banks do much better than Hester imagines -- and the public doesn't like it. Nobody objects to currency hedging for farmers, or helping sovereign debt markets to function efficiently, though I'm not sure that's how the authorities in Greece or Portugal would describe it. But Hester knows, and so does the public, that those things are not the primary business of the Goldman Sachses of this world, and they were not what brought the system to its knees. Hester says we can't go back to what he calls "the Hovis image" of banking, but he hasn't really made his case here. Stretching his little metaphor to breaking point, when it comes to banking, the economy certainly needs the bread, but it can do perfectly well without the circuses.