The Austrian Way: The Government cocks up banking reform… again

We have grave misgivings about the privileged position granted to the banking and finance industry these last 40 years (you could also say much longer, back to 1913).

The good times with their profits and bonuses are too often enjoyed privately, but the costs of failure and collapse are socialised.

The whole Washington Wall Street alliance and the City and Westminster love in is abhorrent to us.

It is crony-capitalism at its worst.

It’s a form of central planning, looking after those most able to lobby and it all stinks!

Popular dissatisfaction, if mostly wrongly misdirected in its ire, is totally fair and understandable.

On the look-out for reform

Even if we don’t believe central planning can fix this, instead a return to proper capitalism and market discipline is needed, we have been on the look-out for new committees, groups and MPs who might do something helpful or useless to change the nature of banking.

‘What would the meddling authorities do next?’ finance watchers asked, without much hope for useful change.

It’s worth piquing your attention right now as the government’s banking reform bill hits the House of Lords this week. It’s a shame this hugely important piece of potential legislation is being mulled over by the upper chamber in the quiet summer holiday season, but then this has been the most lobbied bill in British history.

We’ve heard all the sound bites about banking reform, but what is this administration really going to do about it?

Well, after setting up a Parliamentary Commission on Banking Standards, filling it with at least a few able-minded and financially experienced individuals (eg – Andrew Tyrie and Lords Lawson and McFall), the government has sought to ignore most of their recommendations, much to the committee members’ chagrin.

Recommendations and measures to ensure separation of riskier investment banking practices from deposit taking, curb proprietary trading and also rethinking leverage have been largely diluted down.

As a result Andrew Tyrie has commented that these rejections and dilutions are “very regrettable” and “inexplicable”.

Lord Lawson believes that the “banking bill, as it stands, remains defective in many key areas”.

Merv ain’t happy either

To say that we’re not fans of central bankers is an understatement, but we’ve found some comments to enjoy from Sir Mervyn King on this issue of banking reform.

Sir Merv has argued that bank lobbying has become “unacceptable” in recent years, with pressure being exerted on regulators “from within government”.

Even if we don’t agree with Merv’s old institution, or his role aboard that ship, he is trying to clean up the mess made by the financial masters of the universe calling number 11 and number 10 Downing Street now pushing, pushing and pushing to retain their freedom to profit as much as possible from the next bubble… prior to future shit and fan incidents.

Merv has a bee in his bonnet about leverage. Especially given that greater leverage enables greater risk, greater profits, but also greater losses and failures for government balance sheets to absorb… if they can.

Here’s Merv in a recent interview:

“Banks argue that, on grounds of competition, they ought to be allowed to have very high leverage… but of course, that’s just another way of saying that tax payers should be required to subsidise [them].”

“Leverage is the one issue that matters above all others… of course, it’s precisely for that reason banks will resist most strongly the regulation of leverage and the politicians will compromise on exactly that.”

Normally we wouldn’t care about leverage – it’s a matter for the market to sort out – but given the increasing trend of footing the bill for financial fuck-ups we do care.

Hate the system not the agent

We engage in banker bashing in a purely capitalist sense, in that no industry should be insulated from the ultimate regulation of failure, bankruptcy and regeneration. Whilst bankers remain fatly fed at the crony-capitalist trough they will remain hate figures amongst thinking people.

We don’t see much sense in the Occupy movement except for their inspiring emotion – outrage. Occupy is philosophically and economically confused.

We don’t like the overly regulatory tendencies of the guardianistas and BBC voices, whose prescriptions would lead to more socialism, less economic liberty and more regulation caused imbalances (think of those lovely Basel accords!).

However, we do continue to hate the system.

The financial might of the finance industry looks set to perpetuate its rent seeking throat-hold on our economy for more years to come.

This cannot last forever, markets are bigger than any planners or rent seekers, but for now we’re stuck with our lot.

Banking continues to live in a bubble.

4 comments on “The Austrian Way: The Government cocks up banking reform… again

  1. udontnome
    July 23, 2013 at 9:12 pm #

    It’s a shame that a lot (most) people think that the Bank of England is exactly that, instead of being a group of private investors backed by the Government. If the Gov had the balls to print it’s own money a la Abraham Lincoln in the US Civil war and John Bradbury in the 1st World war we could be debt free in no time.

  2. TeaParty1776
    July 25, 2013 at 2:22 pm #

    A business backed by govt is govt. Counterfeiting, private or govt, is destructive. Civil War Greenbacks, like all govt inflation of money and credit, caused a “business” cycle that destroyed resources. Govt has no magic power. Sorry. Man needs production for survival.

  3. Apparent bigot
    July 26, 2013 at 7:21 am #

    Banks never need bailing at the beginning, but pull off an inside job. Then the problem brews ever bigger over time, until the whole thing’s too big to bail. Let the cronies fail asap, we want fairer capitalism to return.

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  1. Steynian 482rd | Free Canuckistan! - July 25, 2013

    […] BOGPAPER,UK– The Government cocks up banking reform… again; Marx On Monday: Sexism!; The once-mighty PC […]

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