Tough talk not enough for bad bankers
David Cameron condemns the dishonest actions of Barclays Bank traders as “unacceptable” (your report, 30 June). The Chancellor, leader of the opposition, the Bank of England governor, Vince Cable and even John Swinney all agree, using the same word, “unacceptable”.
Thus “unacceptable” becomes the current political in-word.
It is actually a coded message to the bankers, meaning: “Don’t worry; we are not going to do anything about it.”
Your editorial (30 June) rightly calls for “an overhaul of the way banks work” and “far tighter regulation”.
Isn’t this an argument for a principle in banking: “the cobbler should stick to his last”, or, in other words, the need to restore and enforce the division of labour in the financial services industry?
Arguably, this is a key factor in regenerating the “wealth of nations” as Franklin D Roosevelt argued for the Glass-Steagall Act in 1933.
However, crisis economics goes beyond calling for a separation of retail banking from its investment arm.
It calls for creating “firewalls” between all the different functions of financial firms commonly operating today.
Will mathematical economists ever learn? Those who don’t remember the past are doomed to repeat it.
Old Chapel Walk
“We know no spectacle so ridiculous,” wrote Thomas Macaulay about the vilification of Lord Byron, “as the British public in one of its periodical fits of morality.”
Certainly, our grossly over-paid, sleazy bankers make a fine target and the meltdown even provides a further opportunity to denigrate Gordon Brown’s incompetent oversight.
Yet I do not recall much wailing when the public were picking up inducements to allow our mutual financial institutions to convert themselves into river-boat gamblers.
And we cannot even blame American politicians since we never had a Glass-Steagall Act whose abolition paved the way for the US merger of retail and investment banking.
But we can learn from their way of dealing with criminal financial activity and a British “perp walk” would be more of a deterrent than the rescinding of some facile honour.
(Dr) John Cameron
Inspired by the latest banking scandal Sir Michael Lyons asks whether the banks are run for the benefit of shareholders or senior managers.
In view of recent scandals in the NHS Lothian, the City of Edinburgh Council and even the Houses of Parliament we can also question whether public services are run for the benefit of shareholders (patients, council residents or voters) or senior public servants.
A common pattern within senior management is emerging in both the private and public sectors where the service is run to maximise benefit for senior managers rather than either shareholders or customers. This is possibly an example of New Labour’s “third way”: not capitalism, not socialism but senior managementism.
Just as remuneration packages for senior banking staff is measured in millions of pounds, the remuneration packages of senior public service managers is now measured in hundreds of thousand pounds and often expressed as multiples of the Prime Minister’s salary. Basic economics dictates that if senior managers are rewarded with massive bonuses there is less money available to pay a dividend.
Similarly, in the public sector, as the chief executives’ remuneration package skyrockets, more and more public services have to close to pay for this fiscal generosity. We are doomed.
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