It is very clear that politicians still don’t get the rightful public anger about banking and bankers.
The Observer did this weekend:
Before the financial crisis, bankers justified their enormous bonuses on the grounds that their industry was a world champion that created jobs and wealth for the whole nation. Now what is their excuse?
They continued:
[T]he City's performance in recent years is no success story. Had the banks been subjected to strict market discipline, they would have collapsed altogether. To further heap cash rewards on their failure is economically unsound and politically noxious.
They rightly call for greater pay equality in the UK, and action to enforce it. I support that call. But this issue is even more serious than that. As the Daily Mail has noted (hat tip to TJN), this out of control group in society thinks it is above most law, including tax:
Britain's leading banks are in talks with the Treasury about contributing £1.5billion to community projects to avoid being hit with new taxes. The cash will be used to create a ‘Big Society Bank’ which will make money available to charities, social enterprises and voluntary groups. As part of a far-reaching deal with the Government, Britain’s biggest banks are also discussing plans to slash pay-outs in the next round of City bonuses. . . .the reputation-building initiative has been nicknamed ‘Project Merlin’.
And in exchange for this?
In exchange for making cash available for community projects and slashing bonuses, ministers may agree not to impose any bonus or transaction taxes on the industry on top of a £2.5billion-a-year levy announced earlier this year.
As TJN notes:
This seems like a win-win for banks, and a lose-lose for the rest of us. Apart from the promise to "slash pay-outs" which would be a good thing if (repeat if) this is genuine, and not an elaborate trick, this seems to be a way for the British government to use public spending in a way that it serves to rehabilitate the justly appalling reputation of City of London banks. This is an extraordinary display of cynicism. As Lord Oakeshott, spokesman for the coalition Liberal Democrat party puts it:
"If the banks think that Government policy can be bought for £1.5billion, they have got another think coming.”
Except that there is plenty of evidence that such policy is for sale.
Alistair Darling makes clear it is in the FT this morning:
It is imperative that the independence of the Bank remain absolute. It cannot afford to enter the political fray. Of course the governor is entitled to his views on the government’s fiscal policy. I never had any problem with Mervyn King expressing a view. But when members of the monetary policy committee and, it seems, the Conservative chairman of the Treasury Select Committee believe that a political line has been crossed, then the Bank must think long and hard about what it says. To become identified with one political party would be fatal to its reputation.
He thinks he is political point scoring but in the process he reveals something much more significant: that he believes that banks are over and above government. I do not believe in independent central banks with a mandate to impose harsh monetary policy on economies beyond the remit of politics so that it is always true that the ordinary people of the IUK suffer economic sanctions to preserve the value of capital and money itself to benefit banks and those with wealth. And yet that is the system Alistair Darling is supporting. He is saying that the preservation of capital is more important than politics, full employment, social policy or anything other issue: this is an issue where bakers rule supreme over the state.
They don’t.
They must not.
The granting of independence to the Bank of England was in this respect a disaster — it gave bankers a claim to be above the due processes of politics and the law in the UK and elsewhere.
No wonder we’re in the mess we’re in.
It’s time that policy was reversed, that the Bank was brought back under political control and that its mandate was amended to require the creation of full employment above all else. Then we’d have a Bank worth fighting for. Now we have a Bank for bankers.
No wonder we’re in a mess.
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This may be overly simplistic but in my view, politicians (and bankers) don’t seem to understand that there is simply not enough real money in the economy to cover the disasterous >100% loan to deposit policies of banks over the last 10 years.
Greg Pytel made some sobering comments on his blog on Friday:
http://gregpytel.blogspot.com/2010/11/i-would-recommend-you-panic.html
Project names sometimes give the game away. Merlin = alchemy = trying to turn something that isn’t gold into gold. Been there before I think.
Utterly depressing, but for me, unfortunately, utterly unsurprising. The last government let the banks off the hook by bailing them out instead of properly nationalising them, and in doing so let slip an opportunity to create, as Richard suggested, a ‘peoples’ bank that could serve the interests of society rather than society serve the banks’ interests.
And this present government are even worse. No Tobin tax or Robin Hood tax, a feeble little bank levy that will get in less tax than the banks will gain through the reduction in Corporation Tax, Osborne backing off from making banks disclose bankers’ pay, and now this idea of a community bank. I’m sure the banks’ generosity will make up for all those services lost through the spending cuts won’t they?
Correct me if I’m wrong, but isn’t the head of the British Bankers Association (Angela Knight) also the Tories spokesperson on banking?
Government of the rich,
Oops sorry,meant to finish with;
Government of the rest of us, by the banks, for the banks.
@sickoftaxdodgers
Angela Knight was a Tory MP from 1992-1997.
I saw an interview with her a while ago (September, I think) where she suggested that bank’s capital reserves were “dead money”. Kind of says it all, really.
@Deeply Depressed; imagine that, banks’ having to keep reserves just in case they make a mistake and have to have something to back up all those loans they’ve made. Who would ever have thought it? When do banks ever make mistakes?
The woman is an idiot, which is why she’s ideally placed to be the BBA’s spokesperson. Even better, I met an employee of Goldman Sachs at the weekend, and they were insistent that everybody worked very hard for their bonusus, that anyway, only a few top people got the really large bonuses,and that these top peope were “mega mega clever”.
As somebody else pointed out, if top bankers are so clever, why did they nake such catastrophic mistakes?
[…] regulation and to pay tax. And they persuaded politicians they were right. Indeed they still are. Alistair Darling still subscribes to this view — and it is fundamentally […]
@sickoftaxdodgers
British Bankers’ Association here. I know you’re using humour to make a point, and you are free to make whatever points you please. But since these things get picked up on search engines and what not (and since you did ask to be corrected if you were wrong) I hereby confirm that nobody at the BBA is a spokesperson for any political party on anything. And just for completeness I should also confirm that @Deeply Depressed is right that our chief executive was a Conservative MP from 1992 to 1997 – and Economic Secretary to the Treasury from 1995 to 1997. There. Won’t interrupt the conversation any further now.