Saturday, July 23, 2005
Who killed Richard Cullen?
Guardian Unlimited Money : "An image keeps popping into my head. It's the old days. A customer in need sits down with their bank manager who says, '£1,000? You must be crazy!' I wonder: is there some economic sage out there who effectively invented the new way - someone who drew up a utopian image where banks would fall over each other to loan money to whoever wanted it.

And so I call Lord Griffiths of Fforestfach. He's the vice chair-man of Goldman Sachs International, a former director of the Bank of England, and once the head of Margaret Thatcher's Domestic Policy Unit. I'd been told that if anyone could answer that question, he could.

I ask him if this whole mess can be traced back to one man. I expect him to say something like, 'Oh no, it's far more complicated than that. It is a gradual shift. Nobody is to blame.' But he doesn't. Instead, he says, 'I hate to say it, but I was one of the people who argued strongly in favour of it.'

'When was this?' I ask.

'December 1970,' he says. 'At that time, the banks were a classic cartel, very much a middle-class preserve, and I believed that the democratisation of credit had to be a good thing. Everyone in principle should have access to credit.'

So, in December 1970, he says, he wrote a paper for the Institute of Economic Affairs advocating a revolution in banking. The report - Competition In Banking - concluded: 'The only way in which to make banking a competitive industry is to remove all obstacles to potential new entrants into the industry.' It was, by all accounts, a key factor in the subsequent deregulation of UK banking.

It becomes obvious during my conversation with Lord Griffiths that he has come to believe that he inadvertently unleashed some kind of monster. He says he never could have predicted 'the dynamism' with which the lenders would pursue his ideas. 'The dynamism,' he says. 'The innovation.' I've never heard these words uttered with such sadness. 'I don't think anyone would have foreseen how innovative and aggressive and competitive the financial services would become in their techniques,' he says. 'The whole lot of them are to blame.' He pauses. 'I'm not advocating a return to the status quo. But the pendulum has swung much too far.'

Now Lord Griffiths has just published a new report - What Price Credit? - which has this somewhat apocalyptic conclusion: 'The sheer scale of consumer debt [£1 trillion] has made millions of households extremely vulnerable to shocks to the economy ... such as oil price rises, acts of terrorism and wars ... Debt is a time-bomb for the 15 million people who struggle with repayments.'

I tell Lord Griffiths about Richard Cullen's suicide, and he sighs. 'I had a friend,' he replies. 'A clergyman. I met him for dinner one night. He was suffering from cancer. He broke down over dinner and confessed to me that he had 32 credit cards. He said he was using each card to pay off the charges on the others. He told me about the shame he felt. You could just sense the emotional pressure. I'm no doctor ... ' Lord Griffiths pauses, then says, 'He died soon afterwards.'

Then he says that a friend of his recently compared the credit card industry to slavery - that the lenders are the new slave masters and the borrowers the slaves. I ask if he's bombarded with credit card junk mail, and he says, 'Oh yes - I probably get one every fortnight.' I tell him the Cullens were sometimes getting three or four a day."

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