The myth that there were just a few rotten apples in banking was shattered for good last week: fines exceeding $5 billion on major banks, admission of criminal wrong doing, involvement of senior staff and even complicity in the Bank of England are now all on record.
So what would a sensible government do now with a sector that has proven to be systemically corrupt? Several obvious things can be suggested.
The first is the introduction of a financial transactions tax. This tax is designed and intended to reduce the volume of speculative trading by banks. If ever there was a time for its introduction in the UK now is it. The amount of revenue it would raise is almost irrelevant: the purpose of the tax would be to prevent the social harm that banks are causing.
Second, we need more transparency. The data available on banks is pitifully weak and the nature, extent and full extent of their potential liabilities on trading are very hard to assess, as is their continuing abuse of tax havens. Full country-by-country reporting, include separate disclosure of intra-group trading and full potential liability balance sheets by jurisdiction are now needed. Much of the data banks supply to the Bank of International Settlement should also be available for public inspection.
Third, the banks need to be split. Ring fencing is no longer enough. The banking activity that underpins our economy has to be split from that which is engaged in speculation.
Fourth, criminal liability has to be reformed. I am bemused why the Fraud Act cannot be used to prosecute those in the current admitted activities: if bonuses were inflated by them then it seems to me that prima facie that must be possible. But if it is not, now is the time to introduce such penalties.
Next? Sweep away the status given to banks. So, remove their power to vote in the City of London. Sweep away its power to be a state within a state. Bar banks who have undertaken criminal acts from state contracts. And reconsider the appropriate rate of corporation tax to charge on banks: it is absurd that it is now 20% when they impose such enormous costs on society.
Finally? Make UK banking wholly dependent on full disclosure of the beneficial ownership of all accounts maintained worldwide to the tax authorities that need to know, with information exchange arranged through HMRC is need be. There is no other way we can know they are not assisting systemic fraud here otherwise, and given their track record it remains probable that they are.
Is that all possible? In my opinion, yes. Of course the banks will fight back. And all we have to remind them of every time that they do is that many in their number are criminals; and we have to do so time after time after time. We would not tolerate systemic crime in anything but banking without appropriate reaction. Now it is time that we had that reaction in banking as well.
Wait to see if any of this is in the Queen's Speech. If not, ask why not.
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Move along now, nothing to see here is depressingly far more likely to be the reaction imo:
http://www.cityam.com/215476/tory-mps-it-s-time-end-banker-bashing
Can we count on labour to be any more effective than they were in combatting the Tory narrative on the economy? All too plausible scenario that it gets vetoed as part of a misguided blairite move to be seen as more ‘friendly’ to business.
I fear you are right
City AM is in tune with these apologists for criminals
All the more reason that the UK needs people like you Richard showing that there are actually good alternatives out there to business as usual. With the availability of information today there should really be no good reason for the people running for office to be able to offer the intellectual poverty of tory-lite policies or ‘I didn’t know you could do that.’ We are not living in the 1930’s. Yet labour’s side of the debate around the deficit doesn’t seem to have progressed at all over their forebears awareness of alternatives to the gold standard.
Similarly, there’s no reason why labour couldn’t combine a tough stance on the banks with a similar one on the multinational Amazons of the world etc and a mantra of ‘fairness’ for all UK business – big and small.
Isn’t ‘speculative trading’ a form of gambling? In which case, threaten them with 2.5% Gambling Tax on the sums wagered. That should make them eager to accept a Tobin Tax instead.
Betting is tax free. The 2.5% betting duty charge only applies to registered bookmakers and is levied on the bookie’s winnings, not the sums wagered.
They, along with the Westminster government need to be taken outside and given a good beating. Then we should introduce much tougher regulations on these crooks.
This report by Rowan Bosworth-Davies adds full support to your comments here.
http://rowans-blog.blogspot.co.uk/
In the reign of Good King John when he tried to deal with the excesses of the great magnates of his time he was forced to compromise. It took King Henry 3rd and his heavy mob, The Marshall’s, to execute a few and force them down by uncompromising methods. At the moment we are like John in his weaker periods where are our Marshall’s?
Today’s Observer makes a good point about there being some form of ‘storyteller’ needing to made available on the truly progressive side of politics who can not only put right the myth that Labour bankrupted us but who can also explain the problems with the banking system as it is.
With regard to the supply behaviour of fiat money (money that is created by Government or by private banks with permission of the Government/BoE), it is surely time to hone in on the merits/dis-merits of both in such stories.
Private banks creating fiat money to raise things like mortgages and then making money out of the interest is one thing; Governments issuing QE is another and Governments producing social security benefits is yet another.
It seems that Banking/finance as it is now is neo-liberal flavoured and is against Government produced money other than QE for itself to keeps its own gears oiled. It will also benefit from creating more debt as social security benefit incomes coming down which also means lots of nice fat interest charged the more risky side of the business. QE money will be used to purchase assets rather than kick start or maintain the general economy.
By scaling back Government fiscal activity or intervention in general it seems to me there is only one winner: the Banks. If they are the only real distributor of money (real money or fiat money) then new ways for Government to invigorate moribund economies needs to be found. One place to start is the creation of national state Bank – maybe?
But if it is true that Henry Ford once said something along the lines of that if the public new what bankers got up to, there would be some sort of revolution (revulsion?) and things would change, then whoever is that story teller will need to tell the truth about Banks – for they are far too powerful at the moment.
In case anyone still thinks that anything has changed in the City:
http://www.ft.com/cms/s/0/b930c6dc-fe0b-11e4-9f10-00144feabdc0.html#axzz3b5azWJ00
“For those of you who are new to my observations, I reiterate my firmly-held belief that by far the majority of those who work in the major global banks have become corrupted by their remuneration, and their immunity from accountability, and have become little more than unrepentant organised financial criminals”
http://rowans-blog.blogspot.co.uk/2015/05/final-real-proof-that-global-banking.html
While in general your comment may be true in the example you highlight i would say that if stupidity were a crime the couple in question deserve the life sentence they have so obviously brought upon themselves.
I must be missing something, but if the Government offers a guarantee to a bank on our behalf, we should be entitled to quite a lot in return.
For a start, The Government should limit the amount that it is prepared to guarantee any individual bank.
The guarantee would apply strictly to deposits, and the amount offered could be tied to the amount of “green investment” offered as security by the bank. “Good” investment would be accepted as security, financial engineering would not.
Banks could choose to split, or they could offer both guaranteed and non-guaranteed deposits.
Another possible condition might be that if a bank accepted the government guarantee, its directors and senior staff would be jointly liable for all fines and sanctions.
The key point is that the guarantee is valuable, and the public are entitled to something better than blackmail in return
I believe that substantially more conditionality must be applied
I agree with you
I would love Government to behave towards Banks who need to be bailed out in the same way the IMF deals with countries who get into trouble!
My, we’d have these naughty banks cutting wages and bonuses to it’s ‘elite’ and hiving off the best parts of their business to competitors and then charging a nice fat wad of interest on top of the loan for good measure.
Poor dears!
Agreed. The principle of government guarantees for customers’ deposits is one thing and can be justified. I can see no reason for banks to have their speculative activities underwritte, as is effectively the case at present. A further argument for splitting the banks again along Glass Steagall lines
Seventh? Have a nationalised banking system work in parallel with the private banks. We need another FDR to impose strict regulations on the financial sector and the banks. Until the 1980s, investment bankers could only use their own money to speculate with.
Time democracy was restored.
See also recent article from Wharton University in the US – along the same lines
http://knowledge.wharton.upenn.edu/article/are-financial-penalties-enough-to-deter-banks-bad-behavior/
You’ve missed the point.
When Ed Milliband said free markets couldn’t deliver because they were, for the most part, neither free nor fair, he was dismissed by the press as a hopeless idealist & a dreamer unable to face up to hard economic truths.
Now, we know from people who, I think its fair to say, would never be mistaken for idealists or dreamers, that the markets don’t work/can’t work & that it would be frankly ludicrous ever to think they could/should/would work “fairly” or anything remotely like.
Parallels between banking and football continue…
So Sep Blatter:
a) couldn’t have known what was going on in FIFA
b) is the right man to sort it out
Sounds a bit like Diamond, Dimon, Goodwin…