Tuesday 24 July 2012

By Ann Pettifor 
Fellow of the New Economics Foundation.

[Click here to sign the e-Petition.]

Power corrupts, and financial market power has corrupted financial and other markets. It has done worse. It has corrupted politics. That is why Britain will be ripped off by a Parliamentary Inquiry into banking. It will go nowhere, lack both credibility and teeth, and will inevitably be discredited. Above all, it is most unlikely to rein in bankers.

That is why we launched our  e-Petition the very day the Barclays LIBOR scandal broke on 27th June, and why we are still calling on Britons (and all UK residents) to sign this Peoples’ Petition here for a full Judicial Inquiry into...  

“the fraud, wrongdoing and ethics of British banks, their management and their staff, and the role of the British Bankers Association. The terms of reference of this inquiry should also include the manipulation of interest rates on about £225 trillion of assets. The inquiry must have full powers to compel witnesses to appear on oath, and to obtain all forms of evidence.”

Within a few days, over 10,000 had already signed the petition, and very soon others – including Ed Miliband and the Labour Party – joined in the call. 

But the last thing the Coalition Government wanted was another Judicial Inquiry - these are ok for stuff like media wrong-doing, but not when trillions of pounds are involved.  Since doing nothing was clearly not an option, given the scale of public outrage, they decided to set up (drumroll)….. a Parliamentary Commission on Banking Standards – and to exclude from its membership those MPs on the Select Committee who had been most incisive in questioning Bob Diamond. A Commission whose members include Lord Lawson, Chancellor during the Big Bang deregulation of the City, alongside several other bank-linked members and pure career politicians.

Why are we asking you to show you reject a Parliamentary Inquiry, and sign our Petition?  Simply because Britain’s political establishment has effectively, over a sustained period, accepted and legitimised bankers’ wrongdoing and fraud, so that its members are precisely the wrong ones to be entrusted with scrutinising and recommending changes to the ethics and culture of banking. 

Our politicians are tasked with overseeing and regulating the banking system in the interests of the British people and the British economy as a whole. Instead they (like their colleagues in many countries) turned a blind eye to the City’s greed and fraud – and allowed the banking system both to fail Britain economically, and to be corrupted.

Bankers’ greed, dishonesty and ineptitude led to the disastrous financial crisis of 2007-9 when banks had to be nationalised, and more than £1 trillion of taxpayer-backed funds pumped into the banking system to maintain its solvency. And taxpayer generosity did not stop at that point.  Yet despite the City’s catastrophic failures, Westminster’s politicians – from all parties with just a few notable exceptions – have behaved with embarrassing timidity or grovelling deference towards Britain’s bankers.

Until that is, the American Department of Justice revealed its investigations into Barclays on 27th June.

Neither Labour’s Alastair Darling nor Conservative George Osborne nor Danny Alexander of the LibDems dared rein in the bankers after the Great Contraction. Instead Westminster appointed the Vickers’ Commission with a limited remit. Vickers’ weak advice to ‘ring-fence’ bank activities was promptly rejected and watered down by our parliamentary representatives – thanks to bank lobbying.

If they could not be trusted to rein in British bankers then, then how can we trust them now that the Barclays and HSBC frauds have finally surfaced, to be followed by many others as the LIBOR and other scandals unfold?  

They think that we, the people, are foolish enough to believe they have changed their stripes, and stiffened their spines.

They think we’re too blind to the arcane proceedings of a Parliamentary Inquiry to know a) the difference and b) that we’re being fobbed and ripped off.
We’re not. We want an independent, tough Judicial Inquiry into the misconduct and ethics of Britain’s banks, precisely to ensure that it is not caught in the sticky web of mutual self-interest woven by the politicians and bankers.

For too long, our politicians have been heavily lobbied and seduced by bankers. Moreover, many influential MPs, ex-Ministers and Peers, whether Conservative, LibDem or Labour Party,  are either ex-bankers, have links to bankers and are, or have been backed by bankers. The Conservative Party received half of its 2010 election year funding from City financiers.

The £93million City lobbying machine has ensured over time that the major political parties turned a blind eye to City wrongdoing, and backed a consensus for ‘light touch regulation’.

The Conservative Party launched the era of de-regulation way back in 1971. ‘Liberalising’ finance was led by Conservative Chancellor Anthony Barber (later, Chairman of Standard Chartered Bank) who introduced de-regulatory measures as “Competition and Credit Control” (dubbed ‘all competition and no control’ by many economists). Competition and Credit Control began the long process of de-regulating the City of London, symbolized in the “Big Bang” when Nigel Lawson was Chancellor.

De-regulation was, alas, warmly embraced by New Labour.  Chancellor Gordon Brown in a 2005 speech to the CBI on 27th November 2005 argued in favour of:

“ not just a light touch but a limited touch.  ….a new model of regulation (the risk based approach) ..(for)  financial services and.. the administration of tax. And more than that, we should not only apply the concept of risk to the enforcement of regulation, but also to the design and indeed to the decision as to whether to regulate at all.” (Our emphasis)

Political decisions to de-regulate finance loosened official control over the sector to such an extent that officials of the FSA, the Bank of England and the Treasury have proved impotent in countermanding the arrogance of the bankers’ cartel – the British Bankers Association – and the wrongdoing of individual banks and bankers. 

The overseers and regulators of the system likewise – jointly and severally – failed the British people.  They declined to set or to uphold rigorous regulatory standards; and acted with undue obeisance towards politicians effectively seduced by the lures of the finance sector.

The financial services industry became bloated, corrupt, appallingly led and managed, and devoid of any ethical values or principle, or of any concept of social purpose. In consequence, the industry has severely damaged Britain’s economy. 

To ascertain the truth, to assign responsibility and recommend serious far-reaching reforms, we still need an independent, Judicial Inquiry, free from the sticky links that bind bankers and Parliamentarians. Nothing less will do. A Parliamentary whitewash won’t wash.


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