Monday, 26 August 2013

Transforming Finance Charter - the worst sort of 'curate's egg'


It all starts so well the Transforming Finance Charter:

The banking sector needs to be transformed in the following ways:
  • There should be no bank in the system which is too big to fail, so the taxpayer is not underwriting their costs with an implicit subsidy.
  • Retail and investment banking should be regarded as entirely different businesses and separated accordingly.
  • There should be increased competition and diversity within retail banking allowing for frequent new entrants, and exits, multiple ownership models including mutuals, credit unions, local banks and sector banks

Not quite sure how you actually separate retail and investment banking but I can see the point. And the idea of more competition, easier market entry and greater diversity is a great one.

But then our friends go and spoil it:

  • Banks should ensure they invest a far higher proportion of their balance sheets to the real (non-financial) economy and for productive uses. Policy should be actively used to reduce speculation and the creation of asset bubbles.
  • There should be a permanent and legitimate role for the state in banking, at a local or national level, either to reduce the cost of risk capital for socially desirable activities and innovation, or to influence the overall allocation of credit to the economy.

With one hand we open up the market and extend choice and competition. While with the other we dictate to the banks how they should invest - as if it's not bad enough having agents of government fix the interest rate these people then want to subsidise it for "socially desirable activities". It was this sort of stupidity, not speculation, that created the financial crisis in the first place.

But then the proposal is from:

The Finance Innovation Lab, along with founding signatories, New Economics Foundation, Share Action, Positive Money, Move Your Money and Friends of the Earth...

Link this bunch of nonsense-peddlars with the egregious "Tax Justice Network" and it's no surprise at all that any good ideas are swamped by stupid proposals for state-directed finance.


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