Posts Tagged ‘Banking Commission’

If we are serious about growth, Labour should reject today’s banking commission report

21/12/2012, 01:58:28 PM

by Paul Crowe

Another day, another report telling us we need to be tougher on the banks. Today it’s the turn of the parliamentary commission on banking standards. In case you’re getting confused about which review is reporting now, this lot were set up by the government in response to the Libor scandal in summer.

The commission is a mish mash of MPs, peers and assorted others like Justin Welby, the soon to be archbishop of Canterbury. The top line of their report calls for the ring fence between retail and investment banking to be “electrified.” A vivid turn of phrase, yes, Helpful? Hardly.

For two years now there has been incessant legislative hand wringing about what to do about banking. The Vickers commission, the select committee and now this new banking commission, all speculating on the laws required to make sure the crash will never happen again.

Here’s a newsflash: ring-fencing and its associated regulations would not have stopped what happened in2007 and 2008 in the UK.

HBOS, Northern Rock and Bradford and Bingley went down without having major investment banking divisions. Bad property deals are what brought down British banking.

Rarely has so much political and economic consideration been expended on laws that fundamentally fail to address the avowed purpose of the exercise.

If the net results of commissions such as this latest one were just a couple of forests felled to print hard copies of the final report, and some talking heads ventilating on the media, then the impact would be relatively harmless.  A waste of time, and some resources, but nothing to hurt the fundamentals of the British economy.

But this isn’t what has happened.

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Banking Commission: Only Labour can save capitalism

12/09/2011, 09:18:07 AM

by Jonathan Todd

When the global financial crisis struck, as John Kay recently noted:

“The political left offered no diagnosis or new ideas, and it gained no electoral advantage. Instead, across Europe, the parties that had waited a century for capitalism to collapse under its own contradictions congratulated themselves that such collapse had been averted by the injection of incredible amounts – trillions of dollars – of taxpayer funds into the banking system”.

Gordon Brown and Alistair Darling were right to bring us back from the brink. The left’s failure is the dearth of explanation as to how we came to be in this position or prescription as to where we go next. The explanation is a precondition of the prescription. If you can’t say how the crisis came about, then you can’t say how repetition should be averted.

The left’s explanations have tended to be personalised (e.g. “greedy bankers”), in spite of the left’s historic mission being to identify and correct structural explanations. We don’t think people are born wretched (even “Fred the shed”); we think that injustice and circumstance makes them so. The left’s explanation, therefore, shouldn’t be the banker’s greed but the structures that create and sustain this greed.

The left, for the most part, was no more analysing these structures than anyone else in 2008. Such analysis would have revealed a paradox: what we thought was high capitalism was anything but. Well functioning markets wouldn’t have allowed the banker to be so greedy. Effective competition would have restrained wages to merit-based levels.

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