THE COALITION government’s policy to ‘ring-fence’ the banks is at best a cosmetic attempt to appear to be trying to protect retail banking, and small businesses and savers, from being bankrupted by the speculation of the big bank parasites.
However, this speculation constitutes the essence of banking in the epoch of imperialism and the death agony of capitalism, so that even the Parliamentary Commission on Banking Standards reports that the ring-fence propaganda of the government’s draft Banking Reform Bill, a cruel hoax of the middle classes, falls ‘well short of what is required’.
The Commission wants the government to ‘electrify’ the fence – not to kill the bankers off but to try and prevent them making huge holes in it.
The Parliamentary Commission on Banking Standards was asked by Chancellor George Osborne to study the draft version of the government’s Financial Services (Banking Reform) Bill.
Its recommendation is that the banking that is deemed essential to the UK economy – such as customer accounts, payment transfers, lending to small and medium businesses – should be separated out from the banks’ other, riskier activities.
They would be placed in a separate subsidiary company in the bank, which would be provided with its own separate capital to absorb any losses. The ring-fenced business would also be banned from lending to, or in other ways exposing itself to, the risks of the rest of the bank – in particular its investment banking activities.
As well, banks should hold a sufficient capital buffer – as outlined by global regulators – which means that if banks do fail, losses can be absorbed by shareholders and other creditors rather than the taxpayer.
Under the draft legislation, not all banks would be ring-fenced. The Treasury would have the authority to decide which banks ring-fencing should apply to, as well as specific activities to be undertaken within ring-fenced banks. Also, there would not be a full separation between retail and investment activities.
However, it is impossible to escape from the epoch that we are living in, not even by electrifying ring-fences. Since the collapse of the sub-prime mortgage market in 2008, which led to the ‘end of the world’ – that is Lehman Brothers going under – the banks and major industries have been in a huge crisis as markets have collapsed everywhere.
There have also been a number of continuing and huge banking scandals, including banks – some of which the public had bailed out with billions of pounds – laundering billions of dollars for Mexican drug cartels and/or rigging the Libor rate, as well as continuing with their mis-selling tactics.
Andrew Tyrie, chairman of the Banking Commission, said that the ‘electrification’ of the ring fence should include the regulator being able to force full separation, and predicted: ‘Over time, the ring-fence will be tested and challenged by the banks. Politicians too could succumb to lobbying from banks and others, adding to pressure to put holes in the ring-fence.’
Paul Volcker, a former chairman of the US Federal Reserve, has said that: ‘For the ring-fence to succeed, banks need to be discouraged from gaming the rules. All history tells us they will do this unless incentivised not to.’
There is no way that a massive banking crash that brings down the world economy can take place side by side with a protected thriving retailing banking sector. It is a cruel hoax to even suggest it is possible. The big banks would loot the retail sector like a lion swallows a lamb.
There is only one way that the big banks can be ‘incentivised’ from the ‘gaming’ that makes them billions at the throw of the dice, and that is to expropriate them, jail the bankers and bring in a socialist planned economy to replace capitalism on a world scale.