Drunken Driver Rewarded with Knighthood

How on earth can it be justified to give Hector Sants a knighthood in the New Year's Honours List? More than anybody else he is responsible for allowing the public interest to be neglected so that bankers could profit. His tenure as boss of the Financial Services Authority in the period leading up to the financial crisis defeats all attempts at superlatives. As the man who, more than any other individual, is responsible for the worst financial crisis for a century, that has detroyed livelihoods and bankrupted the country 'disastrous failure' seems wholly inadequate.

In a way typical of the Information Age, when if something isn't available via Google then it is not information, it is quite difficult to find out anything interesting about Sants. We do know that he approved the RBS takeover of the Dutch bank ABN Amro, costing billions in public money when RBS had to be taken into public ownership. We also know that the Commons Treasury Committee accused him of being 'asleep at the wheel' as the British economic car veered wildly around the risky financial roads to speculation and dodgey takeover deals. More speculatively, in March of this year the Evening Standard reported on Sants's failure to protect UK investors during the collapse of broking firm MF Global.

He seems fairly efficient at organising his own PR, viz this fawning story by Jill Treanor in the Guardian, encouraging us to admire a man who gives up his massively overpaid job in the city to engage in public service as a regulator. I suppose she must be feeling rather sheepish since news emerged about his megabucks position at Barclays. From banker, to the regulator who did not regulate, and back to banker - what is there to admire in such a trajectory? Awarding a public honour to such a man is just to rub our noses in the culture of rewards for failure, while the price of the failure is borne by citizens who just work hard or the vulnerable who rely on public services.

In his evidence to the HoC inquiry Sants commented that people who have shown 'serial misjudgement' should not be allowed to run financial organisations again. Although he also confessed to his own failure in this evidence he does not seem to think this undermines his right to a multi-million pound job as head of compliance at Barclays. In awarding him a knighthood the establishment clearly agree. His service to British banking has been rewarded; the devastation wreaked on the British people and our economy ignored.
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Withdraw Barclays' Banking Licence

It is really quite disturbing how often I find myself agreeing with Michael Portillo. On last night's This Week he called for the withdrawal of Barclays' Banking Licence (11 minutes in). A banking licence is literally a licence to print money, a function that is privatised within a capitalist economy. It is important that people grasp that being allowed the privilege of creating money in this way is the result of a political decision, and should only be extended to those who will use it responsibly and for the social good. The Barclays executives have shown themselves to be not fit and proper people to hold a banking licence, and unless Bob Diamond and the other executives involved in fraud resign then the government should withdraw the lience.

I had pre-empted Michael Portillo both by sending a letter to the Guardian and launching a petition on the Downing Street website. The text of the petition is as follows:

'Within a capitalist economy banks perform a vital function in facilitating the production and exchange of goods and services. In return for fulfilling this role responsibly they are allowed to hold a banking licences, which brings them great benefits in terms of the ability to create money through making loans. The systematic manipulation of the LIBOR value to serve its business interests makes clear that Barclays is not a fit company to hold a banking licence. We call upon the government to withdraw Barclays banking licence.'

Please sign the petition and sent the link to your friends.
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Tobin or Not Tobin

At first blush we may be surprised to hear Adair Turner, the closest thing to crumpet the City ever produced, supporting a tax which has long been proposed by those who oppose financial speculation, the casino economy, global capitalism and everything the City stands for. But if we dig a little deeper we begin to see that this may be a very cheap way out of a very deep hole for our sharp-suited adversaries.

James Tobin was far from being one of us, and in fact was rather offended that it was the anti-capitalists who picked up on and propagated his idea for a tax on currency speculation. Until he died in 2002, his had been a fairly typical career for an orthodox economist: teaching the bogus ‘science’ at Harvard and Yale, advising the government on same, a seat on the board of the Fed., and a ‘Nobel Prize’ for developing an econometric modelling technique. How disturbed he would be to find his idea working against everything he stood for from beyond the grave.

It should be made clear that the Tobin Tax, which would be levied on all international currency transactions, is proposed at a tiny rate. Tobin originally suggested 1% and even lower rates are now being bandied about. The fact that it is worth introducing a tax at this rate indicates the vast sums of money that move across the international currency exchanges every day. Taxing may extract some of that value to be invested in worthy projects, but relating the tax inversely to the length of time the investor holds their investment would do so more effectively. This principle could then be applied to investments in general, discouraging the short-termism and rapid movement of investment cash that so destabilises the real economy.

The Tobin Tax is Green Party policy and is a good step towards gaining some return from currency speculation for the public benefit. The fact that the financiers are so opposed inclines one to support. The idea for the tax grew out of the last financial crisis – when Nixon unilaterally dismantled the international financial architecture that had been agreed by a group of nations at Bretton Woods, following the Second World War. It may be part of the solution to the current crisis, but only in the context of a new international negotiation, and one in which all countries engage on equal terms. Tweet

Banksters' Paradise

Alastair Darling's Mansion House Speech last night was intended to be the last word on the financial crisis and that word is: complacency. Apparently there is nothing wrong with the system of banking regulation. The intervention by the Mervyn King indicates that, for once, there is a split between the economists and the politicians: Darling dare not challenge the power of the banks, but King recognises the danger of their supreme power in the economy.

There is an important sense in which the Darling of the city is right: regulation is not the point. The banking system was designed to enable a small number of people to profit hugely from the economy while the rest of us labour for a shrinking share of resources. The system of regulation did nothing to prevent that; but then it was not intended to. The boom and bust that has been so spectacularly played out over the past year is not a temporary aberration; it is symptomatic of the economic system we live under.

It can't be a coincidence that Obama ,made his announcement about changes to the regulation of the US banking system on the same day. And here we see that, contrary to our preconceptions, there is a stronger sense of resistance to corporations (or 'trusts' as they were historically called in the US) on that side of the Atlantic. The attempt to begin to control the derivatives market is a small gesture in the direction of actually retaking political control over this most wayward section of economic life.

The cause of the financial crisis was the absence of any sort of democratic control, any representation of the views of the citizen, in the banking sector and this has remained unchallenged. Neither the FSA in the UK nor the Fed. in the US has any accountability to citizens. This is internal regulation within the financial elite. It is leaving power in the hands of exactly the same bodies that failed to prevent the crisis this time around. It is a refusal to question the nature of financial organisation under capitalism.

In a sustainable and just economy banking would be a peripheral rather than parasitical activity. Money would be created to faciliate exchanges. It would be impossible to use money to make more money, which is the source of our current woes. Nothing teaches this better than trying to create your own local currency, as we are here in Stroud. A real money system cannot work without a successful productive economy. Making money is easy, but in an economy that has lived parasitically off the rest of the world for centuries the next step, recreating living productive economies, is a seriously long haul. Tweet