Imagine a scene from an RKO film of the 1930's. A huge monster is on the loose, rampaging through a town, causing pain and heartache to residents everywhere. People's lives and dreams are being ground to dust by the monster's careless insensitivity, folks watch aghast while he leaves a trail of utter destruction in his wake. Suddenly, the monster woulds himself badly. As he falls, he causes even more problems, the resulting earthquake destroying everything in the surrounding area and condemning people to start a long, painstaking rebuilding process.
The authorities in the town take over the responsibility for the monster. They tie it down while they ponder what to do with it. Some think that it can be changed in order to become a force for good. The decision is taken to keep it alive in its current form in the hope that something may positive may spring from the whole sorry episode. Despite the monsters subdued state, the people of the town are still very angry with it. They see the authorities depriving them of food in order to feed the monster and keep it alive. While the beast sleeps, the old authorities take their leave.
Once the monster awakes, the newly appointed authorities decide to untie it and keep it on a lead. Instead of training the monster and teaching it to graze and help to repair its damage, it is placed on a long chain. Off it goes again, stamping on more buildings and causing more disruption. When people complain that this is happening, the new people in charge of the monster insist that this is the best way forward, as there is no more food to feed the monster. Isn't it a good thing that the beast is fending for itself?
The monster begins to take food from everyone it can, more than it possibly needs to recover it's health. This surplus is not going to waste, though. Oh no. The beast generously shares it with the authorities which have tethered it so loosely. People starve while the beast continues in its old way and the authorities get fat at the expense of ordinary people.
Then someone from the authorities comes up with a bright idea. Why not hand the monster over to the people whose area it has destroyed? After all, they could then sell it to an organisation that specialises in handling monsters and letting them roam free! Genius! The people might then have the chance to rebuild a quarter of the house that the monster destroyed! Be grateful, people! You have had your lives damaged, your livelihoods destroyed, many of you have lost your homes and the rebuilding operation will take decades! But on the plus side, you will now own a tiny part of a monster! Whether you know what do do with it or not doesn't enter into the equation! The authorities are setting you free!
And if this analogy needs any explanation, try this link:
http://www.bbc.co.uk/news/business-12661005
Failing that, it's sledgehammer time..............
The sooner they split commercial from speculative investment banking the better.
ReplyDeleteGovts are still running scared of the banks for some strange reason. They appear not to be able to do a job of controlling the excesses under the current arrangements - so see if they would get away with their excessive bonus giving when they split the activity.
Trouble is they will argue - one side of the bank props up the other - investment propping up the commercial side (but that's what I thought the competition act was meant to sort out - i.e. competition in the commercial sector would improve things!)
Anyway, for the sake of the future - they need to get real about investment banking as this is where our pensions live (long term banking) - so this should be controlled but split from everyday banking (short to medium term) too.
4 tier banking? [1] Short (deposit/savings immediate access = Lower rates [with deposit insurance of e.g. £40,000 by govt.]), [2] Medium (mortgages and loans = medium rates [commercial but with mortgage relief]), [3] Long (pensions savings low to cautious risk = medium to higher rates [lock but with govt. support]) and [4] Speculative (private investment with higher risk = higher rates no govt. support)?
I guess this has a direct root to the pensions surplus problem of the last decade and what we did with them.
This is inherently a structural problem and requires a MASSIVE structural change. Trouble is - as we have a global business - this is the equivalent of a Mexican standoff!
So yes - sledgehammer time!
Not sure they are "running scared", Ben. Simply lining up for more favours. The Financial Institutions in this country funded the Conservative Party to the tune of £11.4 million last year - more than half of their income.
ReplyDeleteIf Labour were seen to be 'soft' on the Unions, there would be uproar from the Tory benches. Yet Tories cave in to their paymasters and there is hardly a whisper. All we get is some half witted comment from Osborne about them going elsewhere.
Time to retrain the moster, NOT set it free with a get out clause of blaming the public!