Better Banking - Too Big To Fail
In the post-financial crisis world, we've all become experts in economics, as terms such as mortgage backed securities, quantative easing and sub-prime lending have permeated everyday life. Or perhaps, even if we're not experts, then the gap between so-called ‘experts' and everyday folk has diminished, as knowing all about banking regulation didn't seem to make any difference when it came to predicting the credit crunch!
The need to fundamentally change the way banks operate and are regulated should not be contentious and who could argue against better banking (or that what we have currently is adequate). It shouldn't even matter whether your motivation is self interest or social justice, the current system fails us all. Taxpayers, small businesses, anti-poverty campaigners, shareholders, even governments have all been adversely affected by the actions of the banks. And all of us have an interest in devising a new system that better serves the interests of all. So, I think we should appropriate one of the phrases to have emerged from the credit crunch, ‘too big to fail', to describe the better banking campaign.
Of course I'm not saying that the campaign is now so large as to pose a real systemic risk, but given the huge range of people and institutions that have an interest in reforming our financial institutions, surely the need can be regarded as ‘systemically important'. There's currently a huge gulf between the words politicians use and the proposals they offer - so lots of good talk but little evidence of the banking system's obvious flaws being addressed. Perhaps politicians are so scared of the banks' lobbying might that they shy away from real reform? Perhaps they don't know how to change things? Or maybe they think it'll all go away if they just ignore it.
The current system does not provide a satisfactory balance between costs and benefits. The profits banks have made over recent years have provided huge financial benefits to shareholders, investors and bankers. However, the costs - not just of the bailout, but indirect costs (or ‘externalities') arising from not having a bank account for example - are all borne by taxpayers and society at large. To use the jargon - the ‘upside' is all theirs while the ‘downside' is all ours. This is something that must be addressed, urgently.
With the announcement that the Budget will be on 24th March, a May 6th General Election is now reckoned to be so likely that bookmakers have stopped taking bets on it. It's crunch time for Better Banking (as opposed to credit crunch time!).
If we are going to influence the Party Manifestos, then time is running out. Meetings at Downing Street and with Conservative Shadow Treasury Ministers have proved productive, but we must press on with an even greater sense of urgency. However tantalisingly close we may feel to achieving our aims, there are no prizes for second place in this race. We need to raise the issues at any and every opportunity we get and make sure it's a key election issue. The message to those who seek our votes is simple - bank reform matters! Let's really show our politicians that the Better Banking Campaign really is Too Big To Fail!