The financial industry (of which bankers in recent years have been only a small part as investment managers, hedge fund gurus and private equity honchos increased their presence) has had it good for upwards of two decades. Returns to investors have been high; wage rates for senior employees, traders and analytical whiz-kids have been extraordinarily high. And then comes along the current crisis. If you include the last two years in the two-decade cycle, investor returns seem paltry if not disastrous and the wages, including the now infamous bonuses, seem egregious. Greed, stupidity, arrogance, chicanery are words now associated with the banking fraternity. We have known that the fate of bankers affects all of us. If retail stores or garment factories get into trouble their immediate circle of employees, suppliers and lenders suffer. When banks get into trouble society at large suffers as money and credit cycles get into a gridlock. This makes the general reaction even worse. Not only do their earlier returns and salaries seem obscene but to know that their mistakes are leading to widespread unemployment and misery leads to everyone getting infuriated with all bankers.

Let me make an attempt to make a case for the “poor little rich bankers” who are currently vilified. First of all, let us not forget that in the last two and a half decades, the financial industry has been innovative on a scale that can only be compared to computers, pharma or software (where too returns and wages have been pretty high). Today, we take for granted mutual funds, index funds, MBOs, venture funding, angel funding and various other developments which have made capital markets more efficient allowing new enterprises to access capital. Twenty years ago, if you were a young person with brains and initiative but did not have a rich family to back you, there was virtually no hope that you could become an entrepreneur. Today, the capital markets will back you in a variety of ways. Twenty years ago rich businessmen with influence and connections had near-monopolistic access to all capital in a country like India — even the capital controlled by state-owned banks and insurance companies. Listed public companies published accounts only once a year and usually late; any money in the stock markets were made by insiders. Today, any middle-class TV-watching Indian can buy into mutual funds where the commissions continue to drop each year. And in countries like the United States, this “democratisation” of financial markets has gone even further.

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