This weekend Mervyn King has warned of further crisis in the banking system, and the City has responded predictably to his criticisms.
Bankers’ sensitive feelings have been ‘insulted’, and retaliatory threats implied. In the words of ‘one leading City chairman’, “Mervyn is putting himself in a dangerous position … It is clear he doesn’t like bankers and that is not the correct position for a man in his position.” (Sunday Telegraph, 6 March). The allusion to Mervyn’s ‘dangerous position’ is worrying. In what sense is it ‘dangerous’ ? And why is ‘the correct position for a man in his position’, if he wants to avoid danger, down on his knees before the bankers? Who pays him? Is he answerable to the banks, or to the nation?
As if to reinforce the belief that banks are too important to be treated like other businesses, we hear that proposals for HSBC to relocate to Hong Kong, in response to a prospective rise in taxes, have been greeted with howls of anguish. All that lovely tax revenue disappearing over the South China Seas! (It is, of course, doubly galling to realize that HSBC, in returning to its original base, will take with it one of our own former high-street banks, successfully mopped up during its brief sojourn in the UK. What was it that Mervyn said about unnecessary takeovers?)
The apparently indestructible myth of vast tax revenues proceeding from the banking giants suggests that there are still too few journalists, let alone newspaper readers, who are aware of the huge gap between the banks’ actual contributions to the Exchequer and routine public subsidies to the banking system, as set out on this website. True, there is – despite Mr King’s surprise at public restraint – immense anger against the delinquent banks; but it is mostly being splashed around in ineffectual outbursts at their greed, instead of being constructively directed towards an analysis of their real contribution to the economy, and a demand for Parliament to abolish their privileged position, as unofficial creators of the nation’s means of exchange: a position which currently makes them, in Mr King’s own words, not too big, but ‘too important to fail’.
Unfortunately, it is not sensible, under present circumstances, to say “Good riddance” to HSBC, or to argue that greedy, over-leveraged banks should be allowed to stew in their own juice. Nor will regulation, or taxation, or the separation of retail and investment banking avert the long-term damage inflicted on the nation by systemic and exponentially increasing debt to private businesses bent on maximising their private profits.
As long as the private banks remain in control of the nation’s public money supply, they are in a position to dictate the direction of the economy, while extracting profit from our means of exchange at source – at the same time gobbling up billions in taxpayer subsidies to shield themselves cheaply against risk; and while they have such an influential finger in the public pie, they must remain the legitimate object of public concern, and an appropriate target for the criticism of public servants such as Mr King.
As Mr King points out, imbalances in the banking system are once again putting the nation in a dangerous position. He is right in concluding that the bankers do not have the good of the productive economy at heart, and that this is not the correct position for businesses in their position. Let us hope that he will stand firm, and even extend his critique of current banking practice, in the face of any vitriol hurled at him; and that ‘one leading City chairman’ is overestimating the dangers of his position. If we are to bring in the reforms that finally separate private bank lending from the nation’s money-creation mechanism, we need more people in positions of influence who are not afraid to question the big lenders’ entrenched, and wholly unwarranted, privileges.
As for the our over-sensitive bankers, if they do not wished to be ‘insulted’ by public criticism, they should be campaigning for the Bank Charter Act of 1844 to be updated in line with its original intention, which was to outlaw money creation by the private banking sector. Grateful to be relieved of any responsibility for the national money supply, they could then concentrate on the business of borrowing and lending money already in existence, free from both intrusive government regulation and hurtful comments by the likes of Mr King.