Blame it on the banks 1

In the late 80s there was a big growth boom in Finland - fuelled ao by ending tax break on profits on selling enterprises and strong credit expansion when the savings banks (inexperienced corporate lenders) were deregulated and started to aggressively push into foreign currency lending. All this new liquidity tried to find safe havens - stock prices and above all real estate of all sorts skyrocketed - which again made room in collateral for more financing (probably not unlike what happened now in the US, Iceland, Ireland, Spain..).

Then the biggest export market - the Soviet Union - came to a sudden stop, unemployment rose suddenly into double digits and the central bank tried for a very long period to protect the value of the Finnish Mark by raising interest rates to around 15% - further increasing the use of foreign currency loans. 

When the Mark was devalued with 36% the savings bank system was wiped out and all banks went into red figures for several years. Credit granting capability in other banks was ensured by sub-ordinated loans from the state (all paid back).

After that - and even rather widely today - all of the blame was put on all of the banks. This even if we managed to rescue almost all borrowers that were rescuable. The last thing a typical banker wanted to let happen was to admit his mistake by letting a customer go under - so the blame should more often have been on good-money-after-bad.

It is of course difficult for some businessmen to admit that he failed for own reasons and to blame the banker is more convenient than the economy. Looking at several of those on public display even today it appears that there are those who complained that they were not granted enough loans in the late 80s and then those who complained that they were granted too much in the 90s. Astonishingly often the same persons...

Now it should be made clear that also the borrower has a responsibility - namely not to borrow too much. At least in the old days it was difficult to get a full picture of how much was raised from other banks - also and even especially in the sovereign sector. 

Still it is clear that a bank cannot be successful without prudence in lending - and the other way around - with prudence in lending it cannot fail. Then it did not help much if the less prudent material was engineered into unrecognisable risks and sold to all sorts of institutional investors - case investment banking.