Tagged with Banking

We can end the despotism of finance, at a price

justmoney-cover-v2-639x1024After the 2008 global financial crisis and panic, the international banking system very nearly collapsed. In the days after Lehman Brothers failed, panic prevailed. ATMs were on the very brink of denying punters access to their own money. A prominent international banker advised his wife to withdraw all their funds from the banking system.

To salvage the private banking system taxpayer-backed central banks intervened in ways that were (and remain) spectacular and historically unprecedented. Extraordinary monetary and other measures were and are still taken to bail out the finance sector’s big losers: reckless private bankers and financiers. Continue reading →

The next big crash is already in sight

Britain going over the cliffThe 2008-9 crisis highlighted two fundamental flaws in the UK banks. The first was illiquidity when their creditors and depositors withdrew their money at the first sign of serious trouble, but the banks couldn’t call in their loans in order to pay them, and the Bank of England had to intervene to provide them with emergency funding. The second problem was that some banks weren’t just illiquid, they were insolvent, i.e the loans weren’t going to meet the bank’s liabilities even when they became due, and the Treasury either had to nationalise failed banks or spend billions in buying the shares of others (£68bn in all). Continue reading →

Our monetary system is a great, if wildly misunderstood, public good

justmoney-coverBritain and Europe’s economic discourse is embarrassingly er…vulgar. Treasury and Finance ministers’ determination to paper over the role of big banks in the 2007-9 crisis, and instead use the opportunity to re-structure Europe’s welfare states, is both crass in economic terms, but also crude politics.

Politicians are influenced by what I call the kitchen table monetarism of Mrs Thatcher and by the views of Mrs Merkel’s “Swabian housewife”. These reinforce the primitive ideas about money once expounded by Mrs Thatcher, namely that:

The state has no source of money, other than the money people earn themselves….There is no such thing as public money. There is only taxpayers’ money.” Continue reading →

One law for the banks and another for everyone else

Danger BankersThe banks are getting away with it again, and this time with potentially very serious consequences for the world economy. The 2008/9 financial collapse occurred, as everyone knows, because all the world’s major banks had been peddling toxic mortgage-backed securities based on sub-prime properties and trading them very profitably on a colossal scale across the world.

When inevitably the scam imploded, triggering a worldwide recession that still continues, it was judged that these banks were too big, and too enmeshed in underpinning the broader economy, to be allowed to fail. But that meant rescuing, not just those components of the bank engaged in supporting the domestic economy (the good bank), but also the trading arms of the bank that had speculated across the world in risky ventures (the bad bank) of which the board of the bank had little understanding and even less control. Continue reading →

Ten banks fined £130bn: time to restructure a corrupt and rotten system

Banks at Canary WharfThe costs of gross misconduct by leading banks, including RBS and Lloyds, have been estimated by LSE research at £130bn in the 6 years to the end of 2013. That is significantly more than Britain’s total budget deficit (£111bn) and substantially more than the international aid budget supplied by the 24 richest countries (£80bn). More too than the NHS budget in a year (up to £110bn).

However, these fines can also be seen in a different light. Against the profit these 10 major banking institutions have made in the last 6 years, the fines make a significant dent, but they are not crippling. Indeed it has been argued that the manipulation of a global interest rate, to the banks’ own benefit, where several trillion dollars’ worth of assets are priced to it, deserves a much more punitive penalty, partly because of the enormity of the crime and partly as a warning to others that this should never be tried again. Continue reading →