We should end socialism for the banks
April 7th, 2011As has often been said, the banks have a policy: privatise their gains, socialise their losses. However we should have a different policy: make the banks pay for what they have done and restructure them so that they can never do it again. Fat chance of course that anything like this will ever happen under this Government when, as we now know, the Tory Party gets half its funding from bankers. But the policy of ending this reverse Socialism which favours the banks more than any other sectional interest in the country must be right. It’s just possible that the Vickers Commission which reports on the 29th of this month may recommend splitting banks’ investment arm from their retail arm. But even if they do (which I doubt), there are several other steps we should take to bring the banks under control. Here are just a few.
The deposit-taking licences for banks should be auctioned at regular intervals, perhaps every 5 years, subject to a floor price and with a levy on the volume of deposits taken. Lord Adair Turner, ex-head of the FSA, famously said recently that much City banking activity was socially useless. Such banks should not have their licence renewed to take deposits. But the big gain would be that all banks would be subject to searching public scrutiny at regular intervals.
Notoriously it became clear over the toxic derivatives debacle that most board directors in the big banks had little or no idea what was going on in their trading rooms, and took no interest so long as it appeared to be highly profitable. – epitomised by the cynical comment of Chuck Prince, the ex-head of Citibank: “So long as the music continues, you’ve got to stay dancing”. Directors in banks, as in other institutions, should be held accountable for gross incompetence and negligence. Significantly, no senior banking director or manager has lost their job as a result of the financial crash for which they were responsible. That should change.
Directors should also be held personally responsible for tax avoidance schemes (i.e. cheating the public purse of of its due credits) which have manifestly no other purpose than simply to avoid/evade their public liabilities. Corporate immunity should be removed from the individuals concerned since this is malfeasance against the public interest on a massive scale.
Some $15-20 trillions of private wealth is stashed away in offshore tax havens managed by just 50 banks. Again this is a conspiracy against the public interest, exactly as Adam Smith warned against. The banks should be required to reveal the identity of the owners of all these assets.
The financial crash was caused primarily by reckless worldwide lending of sub-prime mortgage-backed derivatives, encouraged by a dysfunctional system under which the money supply for growth can only be increased, paradoxically, by additional bank lending. The system of fractional reserve banking should be replaced by full reserve banking, which would restore the growth of the money supply to public control.
April 7th, 2011 at 11:44 am
Great to see you too advocating an end to state socialism in money and banking.
If I may, I recommend The Cobden Centre’s ten plans for financial reform:
http://www.cobdencentre.org/2010/09/plans-for-reform/
Plans by Huerta de Soto, Fisher, Buchanan and others tend to agree with you, at least as a next step.
April 7th, 2011 at 2:32 pm
Not just this government, labour would have been no different. I have been fighting writing begging doing anything I can to try and get the WCA assessment of the welfare reforms changed.
I wrote to my MP who passed it on to the labour party office, who wrote to me to say it’s not a labour issue anymore and if you do not like it then vote Tory, this from labour.
It makes me sick to see labour go down the road of Tory ism but it doesn’t surprise me, even the Labour email address is still New labour.
So will I vote Tory nope and sadly we do not have the BNP either so my protest vote will be sitting at home.
New labour old Tories tell me the difference.
April 10th, 2011 at 4:53 pm
“…make the banks pay for what they have done and restructure them so that they can never do it again. Fat chance of course that anything like this will ever happen under this Government when, as we now know, the Tory Party gets half its funding from bankers.”
The problem with this Party Political attack which gets us absolutely know where is; The Labour Party were residing in No 10 and No 11 during the ten year run up to this Finanacial Crash – Gordon Brown handed the Banks £200 billion of tax payers money giving them the biggest Socialist Welfare payment in History.
Gordon Brown was praisng the Bankers in the Lord Mayor Dinner in the City of London only a few months prior to the collapse. What he didn’t say is that the Bankers are the biggest welfare bums in the UK taking in more tax payers money than providing back. It’s a “Take Lots, give back a bit” and it’s fully supported by both Labour and the Tories.
Labour screwed the economy up and then have the audacity to blame the Tories when they take over as if everything Labour did during those Ten years (including illegal genocide in Iraq) was all the fault of the Tories. The truth is that it’s the Fault of both the Tories and Labour.
When is the ridiculous political ‘Pucnh and Judy’ show going to end? I guess when more people open their eyes and minds to the scam that politics has now become.
Why did Gordon Brown vreate the aptly named “Debt Management Office” in 1997? Was it in order to hide the scale of the debt that the so called Labour economic miracle was mostly funded on debt?
April 11th, 2011 at 5:29 pm
“The system of fractional reserve banking should be replaced by full reserve banking, which would restore the growth of the money supply to public control.”
100% Reserve. 100% Agree.