John Kay has a first rate article on this issue in the FT today. In it he says:
It is not possible for one country, even the US, to impose restructuring of the global financial system on its own, and not sensible to try. A business such as HSBC or Standard Chartered, which operates globally, can migrate if its lead regulator imposes burdensome requirements.
But the mobility of capital, and even headquarters, does not prevent unilateral action to protect domestic depositors and national taxpayers. The first object is achieved by insisting that domestic depositors’ funds are ring-fenced, the second by insisting that government does not underwrite the wholesale market obligations of banks located within its borders.
That might lead banks to shop around in search of accommodating jurisdictions willing to underwrite their global activities. Such banks would be the corporate equivalent of the benefit scrounger posing as asylum seeker, and are likely to receive the welcome that such migrants receive as individuals.
Quite so.
No ring fence, no deposit protection, which will equate to no customers.
And inadequate capital should mean no licence to operate.
Is it really that hard?
Candidly, I don't think so.
It just takes political will.
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I’m a proponent of PositiveMoney and The New Economics Foundation’s joint submission to the the Independent Commission on Banking. Not least because one of the consequences of their proposal is the nationalisation of the money supply, and new money being spent into the wider economy instead of lent out to it by private banks. The effective subsidy that private banks get from being able to charge interest in broad money entirely of their own creation is a disgrace. Especially considering that we’d all benefit from a money supply spent into the economy via tax breaks, public works and Government loans and grants to productive sectors of our economy (which financial services, for the most part, isn’t).
Alas, I am a cynic. I doubt very much that the ICB will recommend the above proposal by PM and NEF, and even if they do I doubt our plutocratic Government would ever consider implementing it. 🙁
Oops! Somehow that link to PM and NEF’s joint submission to the ICB got stripped. So here it is again for anyone interested in a read through. It’s well worth it!
Bravo! This has seemed so obvious for so long.
If I as an individual am considering guaranteeing a loan, (a) I want to limit the amount of my money at risk, and (b) I want to know what I am guaranteeing.
Amazing that the government sees no need to take precautions that any prudent individual would.
Why could ‘Labour’ Brown,Balls,Milliband et al not see this and acted?
Maybe the EU can do some real good here and start leading. No point waiting for the US. They will follow- as the effects on the electorate continue to play out.
http://www.huffingtonpost.com/2011/01/27/bernanke-all-but-one-majo_n_815079.html
Modern politicians, by their very nature, are reactionary and not pro-active. Worst still, they tend to be worst kind of dilettante rhetorician; with no time for, or knowledge of philosophy and reasoned debate. I’m afraid that until the culture of career politicians is brought to an end we’re doomed to lumber on from crisis to crisis with nothing but political band-aids staving off total collapse. 🙁
Marvel in my cynicism!