Now that we’re owners
It’s a peculiar day. The banking sector has been partially nationalised and with universal support.
The Tax Payers’ Alliance accepts that this is the only game in town. The Conservatives are trying to sound tougher on the banks than the government. I suppose that there must be some fruit-loop market fundamentalists that oppose today’s rescue package in principle, but they are not very visible.
Update at 19:00: I find myself in a quandary. We have a strict policy of no personal abuse on this blog, and I now find (thanks to Dave Osler on Liberal Conspiracy) that I have described John Redwood as a fruit-loop market fundamentalist. Can I just say that although I can’t remember ever having eaten a fruit loop I’m sure I would enjoy them? I also discover that they are in fact froot loops.
Back to the original post.
Yesterday’s leaks to Robert Peston rather forced the government’s hand, though something very like this has been inevitable for days. We are told though that there is still a lot of detailed negotiating to do about the conditions that the government will impose on banks in return for an injection of capital.
But this makes it sound like a conventional hand-out, where you get some money from public resources and in return you have to deliver something and look after the money properly.
Yet this is something more. It’s not a one-off contract. Each share the government gets in a bank makes it more of an owner. My impression is that ministers are playing this down, in order, no doubt, to emphasise that this is not an Atlee-era permanent and full nationalisation.
But part of the reason for the financial crisis is that the owners of banks – ie the shareholders – have not exerted enough control over the businesses they own. It cannot be right that government continues this by not using the ownership rights it has now acquired.
Of course there will be public concern about bonuses. Indeed I’m proud of the work the TUC has done to expose city bonuses and the growth of the super-rich. Anyone who has seen the BBC’s vox pops today will know that there is real anger at handouts to bankers.
But it goes much further than bonuses. Richard Murphy has made a strong call for new public directors to be appointed to the boards of banks. At the very least, government must insist that the practices that have got banks into such trouble and stoked the asset bubble – such as off- balance sheet accounting – should stop.
And given every day seems to bring new shocks, the government can hardly opt-out of bank decision making. After all, whatever it does, anyone with a complaint about their bank will now – rightly or wrongly -blame the government.