Monday, September 22, 2008

Get off me Darling, I've got a headache...

...murmur the banksters to the Chancellor, and off he dutifully moves. One year after the Northern Rock failure, the sum total of Darling's actions to reform the free market in money amounts to a pathetic 3 month moratorium on short selling. Is he going to limit the bonus system that drives some banksters into risky transactions, looking for the big hit? Not a bit of it. Darling resists any intervention there.

Here is a quick list of possible reforms of the banking system:
1. We will regulate all financial instruments firmly and permit only those that are transparent, that offer limited risk of financial destabilisation and are clearly beneficial.
2. Regulators should conduct “stress tests” on their models, and regulate according to what they discover. Regulations must focus on systemic financial functions, not on specific institutions as at present.
3. We will bring in specific regulations covering short selling.
4. We will ensure there is stricter regulation of the banks, limiting them. principally to the on-lending of customer deposits.
5. We will split retail banking from merchant banking and securities trading.
6. We will enforce appropriate fractional reserve ratios.
7. Financial institutions will be required to raise their reserves in good times, in order to cushion the bad times as proposed by Goodheart and Persaud.
8. We will require transparency in all financial trading, including that
undertaken by private funds.
9. We will clamp down on tax havens. We will break up large conglomerates, to make banks small enough to fail without wrecking the while system..
10. We will impose a Tobin tax on large-scale financial trades, the profits hypothecated to aid for less developed countries.
11. Bonuses paid to corporate CEOs on leaving their posts will be prohibited if the CEO is deemed to have failed.

Not to mention re-balancing the divide between publicly and privately issued money.

One down, nine to go Darling.


PS all this reminds me of the classic Punch cartoon. Old gent sharing park bench with a courting couple.

Girl: Darling
Boy: Yes darling?
Girl: Nothing darling. Only "darling", darling

(Whereupon old gent feels quite sick)

1 comment:

weggis said...

The reason Darling can't do it is because it would highlight that his predecessor was guilty of exactly the same dodgy financial activities.