City reaction to Turner

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Lord Turner made appropriate comments about the City on Wednesday, blogged here.

And of course the City reacted:

But Lord Turner’s backers were drowned out by the City reaction. The British Bankers’ Association was among the most trenchant in its criticism. “If we introduce the wrong kind of regulation or the wrong kind of taxes we could so easily lose that position by driving business abroad ... On so many occasions in the past the country has lost chunks of industry through making the wrong decisions. Let’s not do that again.”

The Investment Management Association and the Association of British Insurers were critical of the likely impact on investors. “It is just illogical to want to shrink one of your most important industries,” said one London banker. “If you want to turn London into a Marxist society, then great.”

How amazingly predictable: no argument, no analysis, just ‚Äòwe’ll all go’ and ‚Äòit’s all a left wing plot’ (from Alastair Turner???)

Except as Nils Pratley argues in the Guardian notes this is not the whole story:

It would be wrong to assume that everybody in the City of London thinks Lord Turner has lost his marbles. Many, undoubtedly, agree with the mayor of London, Boris Johnson, that introducing taxes on certain financial transactions is "crackers". But, dig a little deeper and you will find people who think the chairman of the Financial Services Authority is on to something.

Turner did not say that modern investment banking is a racket, but others in the City do. The idea is not heresy. You will find the view expressed frequently (although usually in private) by senior fund managers, folk who used to be considered the core of the City club.

Many of these people are tired of seeing companies in which they invest pay exorbitant advisory and underwriting fees to investment banks. They think many derivative products have been invented solely as means to extract fees from unsuspecting clients. They conclude that the primary purpose of investment banks has become the advancement of the financial interests of the people who work in them.

And as Pratley argues:

These waters aren't as dangerous as the government seems to think. Of course it is true that the City doesn't want to lose its competitiveness, but there is acceptance in many quarters that change is necessary. Maybe the Treasury listened too hard to all those investment bankers it hired during the banking crisis. The truth is there is more to the City than one tribe – and there's a broader range of views out there.

Too true.

As I have argued for some time.