Not Waiving but Drowning

'There's not much to a bank except its licence, its computer system and its reputation.' Thus spake Martin Taylor on this morning's Today programme, the same programme that, with its recent behaviour as lackey of the elites, invited Bob Diamond to give its inaugural lecture in 2011. A member of the 'independent' commission on banking, Martin Taylor was Chief Executive of Barclays between 1994 and 1998. The extraordinary breakdown of retail banking services at RBS and its subsidiaries this week - the result, it appears, of offshoring vital services to under-qualified and under-priced programmers who could not be properly monitored - has seriously eroded confidence in one of those pillars. The fraud revealed by the IFS yesterday further undermines the reputation of Barclays, with other banks set to follow the same route to opporobrium. It only remains for the government to take from Barclays the licence of which bank executives have proved themselves utterly unworthy.

Although the Barclays scandal has pushed the Eurozone crisis off the front pages this morning, the two are intimately related. As the previous post on this blog indicated, the sovereign debt crises have also arisen as a result of banks bidding up the rates of interest paid by nations on the money they borrow from those banks, increasing bank profits while bankrupting countries and destroying their societies. As in their mainpulation of the LIBOR rate they have controlled what is supposed to be a free market to benefit their narrow interests, and the whole economy and wider society have suffered as a result.

What has not been mentioned in this recent round of scandals is that, in a capitalist economy, the banks' most important function is to provide the liquidity that brings into play the factors of production that enable economies to be productive. For years, our banks have failed to do that effectively, preferring to suck money out of productive sectors and local economies to feed it into speculative circuits and lucrative rewards to bank employees.

This situation has gone beyond discussion about regulation, of whatever degree of touch, and into the realms of serious political action. The government already holds controlling stakes in RBS and Lloyds on behalf of the citizenry. The withdrawal of Barclays' banking licence would leave the vast majority of UK banking in public hands. The government therefore has the active power to operate a proportion as public interest banking, keeping the value of money creation to invest in public projects, while the remainder are broken up and made available to be operated as a system of locally based community banks.

Please sign the e-petition calling on the government to withdraw Barclays banking licence.
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The Bourne Derivative

Where is George Orwell when we need him most? The lasting contribution of his writing is not his lucid and baldly honest descriptions of historical events, valuable though these are, but his nailing of the operating mechanisms of a totalitarian state, whether of the right or of the left. While Big Brother and the Big Society seem locked in some process of intellectual dialectic, the concept of doublethink thrives in Cameron's Britain.

Let's think, for a while, about the Independent Commission on Banking. Who precisely is it supposed to be independent of? Given that it was established in the wake of the greatest financial collapse history, caused by the reckless behaviour of privately owned and profit-driven banks, one might hope that it would be independent of the finance sector.

This is far from the case. In fact, the most independent member is probably Martin Wolf, who has made his living as a financial jourjnalist. Hence he is entirely reliant for stories on the sector from which he is supposed to be independent. John Vickers himself was Chief Economist at the Bank of England, Martin Taylor is a former Chief Executive of Barclays, while Bill Winters had a similar post with J P Morgan until 2010.

The justification for this make-up is presumably based on expertise, in line with the oft-repeated and highly patronising thought that we the people are simply not smart enough to understand what goes on in the arcane world of finance. Like latter-day alchemists, the financiers make something from nothing, and then make things of real value disappear. Such knowledge is far too dangerous to be made available to the unwashed masses.

I have an alternative proposal: a truly independent banking commission. This would be made up of five ordinary people, drawn by lot in a process akin to the jury system. It would be chaired by Joanna Lumley, who would be responsible for reporting its findings to the general public. It could take evidence from a range of people: financiers, politicians and journalists, but also those who have been on the rough end of the miracle of finance: small businesses owners who cannot raise finance, single mums who cannot feed their children, and dissident economists of course.

The purpose of the commission will be to create the general principles within which technocrats can then make policy. If a derivative or other 'financial product' cannot be explained to them in a convincing manner, then they will be duty bound to reject its role in the finance world of the future. If we are truly to live in a democracy then finance must be required to submit to such rules, while the people, in an equally painful process, must take responsibility for understanding the financial system that is such a vital part of their lives.

Last night I went to watch Inside Job with some friends. I was frankly disappointed by the failure to nail the nature of the coup by the financial sector, which has effectively taken over the US government. The film was also short on remedies, ending on a platitudinous quotation about how the struggle to regulate finance 'will not be easy'. Hardly an insightful observation. My friend the Green Bean Counter has a better idea. Why don't we hire Matt Damon for one last vengeful performance, where he outwits the bankers and destroys their empire by force. Hence the title of this post.
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