The bankers and their big business allies at the CBI are at it again - lobbying against regulatory reform of the banking system. The proposals, due to be published on 12 September, are aimed at ensuring taxpayers are not liable for any future losses or bank collapses, including ring-fencing banks' retail operations.
CBI Director General John Cridland said taking action now could starve businesses of the capital they needed and damage the economic recovery. However, Business Secretary Vince Cable has said the reforms will go ahead. He described the CBI's line as "disingenuous in the extreme. Banks are in a way trying to create a panic around something which they know has got to happen".
The 'spivs and gamblers' as Vince cable once described them are at it again. The only amazing thing is that these reforms have not already been introduced. The banking crisis was in 2007 and if you read the Treasury's response, it sounds like the CBI might get a better hearing there. 2015 or later for legislation?
The US at least has the Dodd-Frank Act. Even that was watered down by the usual suspects bemoaning the increase in regulatory powers, claiming it should all be left to the market. Even Adam Smith and Milton Friedman turned away from “free banking” to support, albeit limited, financial regulation and legislative reform in the wake of banking crises in their lifetimes. Smith’s views were influenced by the 1772 crisis and the failure of the Ayr Bank in Scotland. Friedman’s views by the U.S. banking crisis of 1930–1933.
Others predicted the resistance to change. Joseph Stiglitz in his 2009 book 'Freefall' used the plumbing analogy (p295):
"We called in the same plumbers who installed the plumbing - having created the mess, presumably only they knew how to straighten it out. Never mind if they overcharged us for the installation, never mind that they overcharged us for the repair. We should be grateful that the plumbing is working again, quietly pay the bills, and pray that they do a better job this time than last."
In the afterword to the paperback edition he called the Dodd-Frank Act a "Swiss cheese bill - seemingly strong, but with large holes." The man certainly knows how to use the English language! He also correctly predicted the "rewriting of history" that the usual suspects have been busy at in both the UK and USA.
I will leave the final word to David Hillman, of the Robin Hood Tax campaign:
"An out of control banking sector is no basis for economic recovery. Banks should be made to pay for the damage they caused and not be allowed to repeat the mistakes of the past. We must not be deterred by bank lobbyists whose idea of 'economic recovery' means increasing bank profits. We can protect jobs and help those hit hardest by the financial crisis if we ensure banks pay their fair share back to society."