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Banking reform: after the crash Banking reform: after the crash
(4 months later)
Today's parliamentary report on the flaws and failure of banking and banking regulation is nearly 600 pages long and the product of months of work, but it needs to be read in the light of one big fact. At the height of the banking crisis, every man, woman and child in Britain stuck £19,271 each behind the banking sector. According to an IMF calculation from 2009, the public was suborned into handing over £1.2 trillion in bailouts, loans and state guarantees on bankers' trading. Some of that money was never called upon; some of it has been paid back or may be paid back. The rest has been lost. This was an extraordinary intervention made by Gordon Brown to defend one industry, defined by David Cameron as being part of the "national interest".Today's parliamentary report on the flaws and failure of banking and banking regulation is nearly 600 pages long and the product of months of work, but it needs to be read in the light of one big fact. At the height of the banking crisis, every man, woman and child in Britain stuck £19,271 each behind the banking sector. According to an IMF calculation from 2009, the public was suborned into handing over £1.2 trillion in bailouts, loans and state guarantees on bankers' trading. Some of that money was never called upon; some of it has been paid back or may be paid back. The rest has been lost. This was an extraordinary intervention made by Gordon Brown to defend one industry, defined by David Cameron as being part of the "national interest".
The 80 recommendations made by Andrew Tyrie and his colleagues on the parliamentary commission on banking standards do nothing to make finance any more democratic or better serve the national economy. The report cogently identifies the cultural and institutional factors that encourage reckless banking, but it barely touches the mad lending that means around three-quarters of all bank and building society loans are still going towards finance and the housing market – that is to say, pumping up the bubble. That is a particularly big omission in the week that the fate of the Co-op Bank hangs in the balance, thanks to the rubbish loan book it inherited in the takeover of the Britannia Building Society.The 80 recommendations made by Andrew Tyrie and his colleagues on the parliamentary commission on banking standards do nothing to make finance any more democratic or better serve the national economy. The report cogently identifies the cultural and institutional factors that encourage reckless banking, but it barely touches the mad lending that means around three-quarters of all bank and building society loans are still going towards finance and the housing market – that is to say, pumping up the bubble. That is a particularly big omission in the week that the fate of the Co-op Bank hangs in the balance, thanks to the rubbish loan book it inherited in the takeover of the Britannia Building Society.
That said, there is plenty in the publication that is apt. The call for possible jail terms for top executives of failed banks is an eye-catching provocation that will probably be greeted sympathetically by a public still paying for the stupidity and greed of a cabal of bankers who are, in many cases, still in cushy jobs. The possible deferral of bonuses for up to a decade is certainly smart. The urge to break up RBS will find many supporters within Threadneedle Street and beyond. And all three make excellent gauntlets to throw down on the day of George Osborne's Mansion House speech.That said, there is plenty in the publication that is apt. The call for possible jail terms for top executives of failed banks is an eye-catching provocation that will probably be greeted sympathetically by a public still paying for the stupidity and greed of a cabal of bankers who are, in many cases, still in cushy jobs. The possible deferral of bonuses for up to a decade is certainly smart. The urge to break up RBS will find many supporters within Threadneedle Street and beyond. And all three make excellent gauntlets to throw down on the day of George Osborne's Mansion House speech.
These suggestions are typical of the sharp analysis and proposals of the Tyrie report. It makes for much more rewarding reading than the Vickers commission; yet in the main its recommendations can be seen as not contradictory but complementary to that rather timid, technocratic book. Suggestions such as championing whistleblowers within the boardroom should be enacted immediately. But the main objection remains: Britain's finance industry has grown too big and too powerful and often too unhealthy an influence on the workings of our economy. Little within Tyrie or Vickers, let alone earlier reports, will help to counter that. Unless bank leverage is sharply reduced and finance subjected to public control, Britain is doomed to repeat the crash of 2008.These suggestions are typical of the sharp analysis and proposals of the Tyrie report. It makes for much more rewarding reading than the Vickers commission; yet in the main its recommendations can be seen as not contradictory but complementary to that rather timid, technocratic book. Suggestions such as championing whistleblowers within the boardroom should be enacted immediately. But the main objection remains: Britain's finance industry has grown too big and too powerful and often too unhealthy an influence on the workings of our economy. Little within Tyrie or Vickers, let alone earlier reports, will help to counter that. Unless bank leverage is sharply reduced and finance subjected to public control, Britain is doomed to repeat the crash of 2008.
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