5 Nov 2010

Deathmatch: The Banks v The People?

The rumblings from the big banks have started again as talks of regulating their business comes back in to the news.

The banks are holding the government to ransom in a familiar and yet different way to other recessions.

[Oh I know we aren't in recession, or so the markets tell us, but tell that to those At Risk and those on benefits and those searching job sites every day]

I do not have an education in economics or politics, but I feel I have a reasonable education in common sense. If someone is taken hostage, the Government refuses to pay a ransom, refuses to pander to and reinforce negative behaviour.

By the same reasoning, banks that threaten to leave the UK because of levies, regulations and monitoring of behaviour should not be listened to.

Vince Cable is highly regarded by economists and the public alike, for his predictions of economic crisis and his no-nonsense approach to the banks. Prior to the election, the strident approach by the Liberal Democrats towards economic reform was a winning theme.

Post election, the bank levy and proposals of stabilising the economy seem to be lost in the mire somewhat.

The history of the banking crisis lays firmly in the past. The 1980s and 1990s free market [lack of] regulation created the fall of the banks.

In February, Cable spoke strongly about the economy in a Telegraph Interview;

“the priorities would be tax, budget and sorting out the banks. Day one, hour one I would change the objective of the nationalised banks.”

No one uses the term “nationalised banks” any more. The journalists have realised this statement is simply unrealistic. To be nationalised insinuates that the government owns the banks in question. But ownership would mean control, and we have seen very little of that.

This is why news reporters allude to banks that are “80% owned by the taxpayer”. This is very different from nationalised.

The echo of being held to ransom by banks brings back memories of the 1980s.

“Thatcher was committed to reducing the power of the trade unions, whose leadership she accused of undermining parliamentary democracy and economic performance through paralysing strike action”

(Thatcher, The Downing Street Years)

However, perhaps in my economic innocence, I can identify several trends between this concept of unions and the concept of threats of The Banks.

Banks undermine parliamentary democracy by flouting regulations on trading, continuing to pay bonuses, enormous final salary pensions and pay offs for insufficient CEOs.

The Banks undermine economic performance when they report billions of net profits while the public sector is slashed to pay for their risk and error in the last decade.

Lastly, the banks will threaten to paralyse the economy by leaving the UK if we increase a levy, challenge their working practices or enact Cable's visions of “breaking the banks up”.

Therefore there is something of a parallel situation to the Unions of the 1980s. If the Coalition do not curb the banks' threats and their behaviour, and redress the balance and reliance of the economy, the public will be deeply unsatisfied and the already floundering economy will crumble.

The Unions relied on the support of those who earn around the average wage, the banks do not. However, the working class are the ones who need to increase the pressure on the Government to reform the banks and to actively campaign to stop the banks holding us to ransom.

Because, ultimately, if the banks win, the working class lose out again.

Perhaps there is a subtly nuance in the term “owned by the tax payer” over “nationalised”. Nationalised would imply the government was regulating, governing and controlling the banks.

We have not yet seen the full package from the Coalition on regulating the banks, I accept that. I have faith in Cable's radical approaches to bank reform.

But the term “owned by the tax payer” may be the crux of the matter. If people were more engaged with the rumblings and threats from banks, from the dependence of the economy on the sector and the need for reform, then people could effectively lobby without heading too far to the right.

Cable recognised the power of the people;

"The public won't stand for the fact that the taxes they are shelling out is simply being paid out to senior executives. The disparity between the pay of an investment banker and that of someone running a company of 100 people is ludicrously distorted."

Perhaps we need to see some more of what they wont stand for.

Addendum, courtesy of a fellow tweeter

"I believe that banking institutions are more dangerous to our liberties than standing armies."

Thomas Jefferson

No comments:

Post a Comment

Hi, thanks for commenting. I moderate all comments before publishing, hence your comment will not appear immediately! But I will get to it sooner or later!