Bringing banks down to size

One of David McWilliams’ best posts about the insanity of globalised unregulated institutions that we call casinos banks.

And of course there are profoundly spiritual issues here that David McWilliams doesn’t focus on. He doesn’t say it but sure implies it – at the heart of the problem quite simply is the love of money and subsequent destructive unaccountable selfish greed.

A while ago I wrote a guest post here about ‘When is enough enough’? trying to argue that a Christian perspective on money and wealth should begin from a foundation of cautious distrust of its corrupting power in stark contrast to our contemporary western capitalism’s idolisation of money, wealth and the status it brings.

Some selected quotes from David McWilliams’ typically colourful turns of phrase – well worth the read:

Anyone who worked in financial markets will know that — at its most base — the “market” is in fact only a coked up, whoring 28-year-old from Basildon on hyper-wages, with a Porsche and a Chelsea season ticket.

This is hardly the type of far-sighted leader that we should be depending on, nor the opinion we should be worried about. Has he become the arbiter of economic policy in the early 21st Century? Is this where we have got to? The young lad in London who is “shorting” the European bond market mightn’t easily find Florence on a map and his geopolitical interests might not go further than the price of a footballer’s transfer fees in the closed season and who won ‘The X Factor’.

… We are seeing a battle for power between the interests of the banks and the interests of the people. For years, the proponents of free capital movements argued that the markets were disciplining government and that in order to safeguard people’s money the financial markets should be allowed to do what they wanted. As a result, the banks have become so powerful that they know they can push governments around and if they fail, they will be bailed out. So it is a one-way bet with other people’s money.

The big lie is that an overly powerful financial market populated by greedy people is an essential ingredient to capitalism or to democracy or to creating a civilised world for people to live in.

… The big lie is that the world needs trading floors in large investment banks and the like. It does not. In fact, if you examine the period when banks were policed properly and regulated from 1945 to the mid-1980s, there were hardly any financial crises. However, since the great deregulation of banks and capital there have been dozens of crises. Deregulated banking and the financial casino makes the world more volatile not less volatile. And yet we are told, by intelligent people, that the free movement of capital makes the world more stable. This is nonsense.

Don’t get me wrong, “normal” banking is necessary; the financial casino is not. The financial casino with money sluicing around the globe at its behest, giving the thumbs up or thumbs down to governments and companies, is making the world more dangerous. It should be policed.

The way forward is to keep the banking part and shut down — or at least reduce dramatically — the power of the casino.

…. all that banking requires is the human component. It calls for judgment; it is more of an art than a science, which is why the great bankers of the past were the ones with the best personal relations, the ones who could assess risk and not take such big gambles and obviously the ones who protect wealth first, rather than squandered it. Many of the finest bankers were Italian Renaissance men, gifted in arts and culture. Therefore, good banking comes down to good people taking in some people’s money for safe-keeping and using that money to finance investments of others who want to build new companies or seek out new investments. It really isn’t that complex.

To the extent that there are innovations in banking, these innovations, like innovations in any industry, should make money safer. But in many cases innovations in recent finance have made money less safe…. The finance industry is the only industry where so-called “engineers” make the basic product less safe, not more safe.

At the end of this crisis, the captains of the universe in the major banks have to be brought down to earth, just as Roosevelt did to the bankers in the 1930s. Economies will recover and the banking hegemony will be regarded as an anachronistic episode of history. Otherwise the chaos will continue.

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