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The banks broke US by SEIU International, on Flickr
Far away across the pond, a very encouraging event has occurred. A government member of the banking community has spoken the heretical truth, that banking is not theology, and banks should share responsibility for the health of their economy.
While here we have such self-styled rockstars as Goldman Sachs’ Lloyd Blankfein doing the work of god by making profit the old fashioned way, cheating, Bank of England governor Mervyn King has called on his fellows that ‘failure to reform the sector could result in another financial crisis’.
His remarks come weeks after Chancellor George Osborne signed Project Merlin.
The deal agreed that in return for the banks lending more money and showing restraint on bonuses, the government would not take any more action on pay and profits.
Mr King said that, over the past two decades, too many people in financial services had thought “if it’s possible to make money out of gullible or unsuspecting customers, that’s perfectly acceptable”.
While we hear from our U.S. bankers that they are honor bound to serve the bottom line, some breakthrough is occurring in financial circles where wiser heads see the connection between economic disaster and fraudulent banking practices that brought it on.
Even in Great Britain, King has his detractors. Anyone who speaks against mega-profiteering as the sacred mission of bankers will be in the position of telling the public that the emperor is naked.
Without a process that allows equal access to income production, though, a society is going to suffer a retraction of its overall economic health. Even banks lose money when there isn’t sufficient wealth to deal with. The banking industry will do well to recognize that it, too, depends on consumers.
The simple truth will prevail, that without disposable income for the public at large, a consumer economy is damming, and damning, itself.
13 Comments
Thanks Ruth,
even after bailouts, I think UK banking is in a pretty dire state. And at least a few seem to be noticing it.
King’s statements seem well enough although I suspect that he’s trying to avoid any laws going onto the books which would outlast the crisis.
On a related note, I was surprised to see the London School of Economics host a talk by Nicholas Shaxson. Just look at the title!
The City of London and its Tax Haven Empire
http://www.lse.ac.uk/resources/podcasts/publicLecturesAndEvents.htm
Gee, not prosecuting bank fraud ?????
Did we get that from Michele Bachman ?
The Left denigrates Reagan and Bush41, but they jailed 1,000+ for fraud and conspiracy.
Thanks for the info. And, yes, it’s in dire straits, and altho indeed King wants to get something in return, he’s at least pushing the banking community toward a social responsibility badly needed there, as it is here.
link?
Bill Black talks about this in his book:
The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry
http://www.amazon.com/Best-Way-Rob-Bank-Own/dp/0292706383
Granted, I don’t think Bill Black would credit Bush41 and Reagan for those jailings. Rather, those convictions mostly occured despite Bush41 and Reagan. Reagan’s primary contribution seems to have been refusing to fire Bill Blacks boss despite the fact that he was not doing as the Reagan admin wanted.
“The Left denigrates Reagan and Bush41, but they jailed 1,000+ for fraud and conspiracy.”
It would be more accurate to say that our DOJ was still functioning at least partly in the public interest back then, something that has been “fixed” since then.
Reagan and HW Bush actually did what they could to obstruct prosecution of S&L frauds;
From the Real News:
Reagan Made S&L Crisis Vastly Worse
William K. Black:
Reagan obstructed prosecutions against a wave of fraud
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=6233#
“JAY: So do you draw links, then, between this deregulatory culture and today? In other words, are the roots of this crisis to be found in Reagan’s legacy?
BLACK: To be fair to Reagan, the roots could be found far more–the intellectual roots–in the Carter presidency. President Carter had far more substantive deregulation then did President Reagan. Carter famously deregulated large aspects of civil aviation and of trucking. As I said, President Reagan got maybe a four on the scale of deregulation. Carter had tens on the scale of deregulation in much–in some ways much bigger areas than savings and loans: trucking and aviation affected everybody’s lives all the time; not everybody used a savings and loan, although all of us got to pay as taxpayers. So what happens next is the disaster. It’s not that President Reagan kicked off the savings and loan crisis; it’s that he made it vastly worse, because savings and loans were recovering from the interest rate crisis as interest rates fell sharply through the 1980s. But by bringing in all these new real estate developers with conflicts of interest who were frequently fraudulent, this created a circumstance where pretty soon there were 300 of these savings and loans that were growing at an average rate of 50 percent. And this is what we clamped down on in what became known as reregulation–and that was the greatest swear word the administration could use. Now, they weren’t alone. The Democrats were heavily in favor of the deregulation in the savings and loan industry. The Garn–St. Germain Act passed the House and the Senate, in each case with only one dissenting vote. So both parties overwhelmingly supported this legislation. And when we started reregulating, well, the Keating Five, four of those five senators that tried to prevent us from taking enforcement action against the largest violation of our rules we ever found–by Lincoln Savings–four of those senators were Democrats. The only Republican, of course, was John McCain. Speaker [Jim] Wright, the Democratic speaker of the House, a very powerful speaker, extorted our agency to try to get special favors for the second-worst fraud in America in savings and loans–that was Vernon Savings, know to us regulators as “Vermin”. When we are finally able, after this political opposition, to close Vernon Savings, 96 percent of its loans were in default.
JAY: Well, I guess that explains why this celebration of Ronald Reagan’s economic policies is essentially a bipartisan affair.
BLACK: Well, sadly, it is. This became the Rubin wing of the Democratic Party, which helped set the stage for the current crisis and is preventing, in the Obama administration, effective responses or sending any of the crooks to prison. Let me give you what the Reagan administration also did. When we tried to crack down on these crises, this wave of fraud that we had documented–and, again, we’re making criminal referrals; people are starting to go to prison; we’re bringing enforcement actions and civil actions and establishing widespread fraud–what was the reaction of the administration? It attempted to appoint on–and, by the way, it gets tempted to do so on a recess appointment basis, which means there’s no advice and consent of the Senate–two board members picked by Charles Keating. We only had–our agency was run by three board members, which means President Reagan’s administration attempted to give Charles Keating majority control over the federal agency that was supposed to regulate savings and loans.”
W4B;
Republicans have always done what they could to help their friends in the financial sector, and now that the democrats have joined in, the opposition to prosecuting these crooks is almost seamless.
Thanks, that is interesting. I admit it looked like one of those Hannity/O’Reilly/Faux ‘facts’ that reports things completely to the credit of right wing figures who are usually not at all involved in protecting public interests.
Thanks. It’s comforting to know justice was still recognized as a positive policy then, although it no doubt goaded the wingnut elements to begin their destruction of it and all who promoted it.
My read exactly.
The right never forgets a slight, and it never fails to learn from the past.
Heh, yeah. They certainly weren’t out to protect the public interest. Reagan’s protection of Bill Blacks boss was just a matter of cronyism that happened to work in the publics interest.
Still, it is sad that our justice system functions so poorly now as compared to back then. And really, it wasn’t all that long ago.
It learns how to promote its ideology, it’s true, but – as in the lessons the depression would have taught – there are great gaps in what it learns about actual well-functioning scenarios.
Captjjy, there was such deep infiltration into the ranks of the executive branch that it will be some time before it can function as it should. And if the WH changes hands back to the extremists, that will become and ‘if’ not a ‘when’.
Until the banks in trouble are allowed to fail instead of knowing no matter how much risk they take the Fed will bail them out, nothing will change.
And until the derivatives being traded like nothing ever happened are reined in another big financial failure is less than four years away.