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It’s time for Labour to take on the banks

July 3, 2012 11:30 am

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Lydia Prieg

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On Saturday, Ed Miliband took a stand against the banking industry, calling for a Leveson-style investigation into recent interest rate rigging and mis-selling scandals. Yesterday he forced David Cameron into another U-turn as he announced plans for a watered down parliamentary inquiry into banking. This morning he claimed another scalp as Barclays Chief Executive, Bob Diamond confirmed his resignation. It is tempting to claim this as a victory for Labour, but now is the time for Ed to hold firm; the only hope for real banking reform lies in a full public inquiry.

Last week we learned that Barclays were guilty of falsely submitting interest rates for personal and corporate gain. As someone who has been researching the banking sector for years (and as a former Goldman Sachs employee) even I was taken aback at the outright fraud that seems to have been widespread in a number of the big banks. It’s hard to exaggerate the impact on the wider economy of such grasping short-termism. Anyone who has taken out a student loan, mortgage, insurance policy or has money in a pension fund has potentially been affected by Barclays’ cynical, self-interested manipulation. And that was before we learned that Barclays and three of the other banks were embroiled in yet another mis-selling scandal, affecting thousands of small businesses.

Politicians might have been quick to condemn Bob Diamond this week, but such enthusiasm has been absent from post-2008 efforts to regulate the banking industry. The proposals of the Vickers’ Commission, adopted in watered-down form by the government are evidence of their inability to make the tough calls and withstand pressure from industry lobbyists. And, just like in the case of the Leveson inquiry, politicians have been too involved in the current system to reform it.

Labour has made mistakes on banking reform in the past. But we can put them right by seazing this opportunity to tackle the problems of the banking industry head on, from the culture of excess and short termism to the structural instability of the big banks and the conflicts of interest in the system. We need a banking system that is safe, useful and honest, that lends to small businesses, provides hard-working people with mortgages and drives productive economic activity.

Events last week have shown how far we still have to go. Ed Miliband has already shown he’s not afraid to take on some of the country’s most powerful vested interests in taking on Rupert Murdoch. Now it’s time for Labour to do the same with the banking industry.

Lydia Prieg is a finance researcher at the New Economics Foundation. She used to work on the trading floor at Goldman Sachs.

BlueLabourer

Personally I think there’s still a lot of mileage in kicking the sick, disabled and benefit claimants. For example in David Cameron’s recent speech in which he called for a “debate” about welfare the section on regional benefits had been excised because advisers warned him about the impossibility of implementing such a localised system in a country as regionally diverse as the UK, mentioning the West Lothian question and such like as counter examples. Now our great Shadow Secretary for Work and Pensions, Liam Byrne, isn’t timid about such things and is quite willing to rush in to areas and arenas that scare the pants off our sissy Prime Minister. So here’s one thing Labour can trump the Tories on when it comes to hammering scroungers and the feckless. Forget the bankers. There’s only some dozens of them to pick on to hang out to dry but welfare claimants, especially during a prolonged recession, well, there’s millions of them to single out and throw to the wolves and a lot of political capital to be had from scourging such people indiscriminately without mercy as Liam knows.
- treborc
  
  You were doing so well then you said Byrne and I lost all interest
  - Paul Simpson
    
    Do you feel that you have to reply to literally every bloody post? You add sod all to the site, you are like a fly buzzing around everyone’s ears. Just shut the F up, for once. No one will be inconvenienced by your absence.
    - John Dore
      
      Well said Paul.
      - Amy L Nitrate
        
        You need lubing with K-Y Jelly or Vaseline.
      - John Dore
        
        is that you postles?
      - John Dore
        
        is that you postles?
      - Dave Postles
        
        If I had something to say to you (which I don’t), I would use my own name.
      - John Dore
        
        Thanks for setting the record straight.
      - treborc
        
        God your a moron
      - John Dore
        
        Thanks for the compliment. I’ll spend my days with my mates enjoying myself.
        
        A suggestion for you, there’s a job here replying to every post made wasting your life away. Its morose but I think as a lead member of the AOI, you are well qualified to do the job. So long sucker.
      - treborc
        
        Your the expert at sucking mate,.
      - John Dore
        
        Sadly Paul, this is how the AOI operate. You say something to one of them they dont like………. and wallop flag for review. Then you get the newly made up name and the pathetic comment. There’s 6-7 of them, nothing constructive to say. The usual line is stand up for the Labour left whilst professing to vote green. Hypocrites the lot of them.
      - Ryan Reynolds
        
        Who or what are the AOI? Are they like the OA who gave Green Lantern his ring?
- John Dore
  
  The best thing about the sick, disabled and unemployed is their helplessness; they are a perfect target to focus disapproval and dislike upon. Thanks to politicians and the media benefit claimants are now universally hated even though almost always completely innocent and respectable. The perfect target to pillory and bully. As you correctly surmise Liam Byrne recognises this instinctively.
  - John Dore
    
    Moderator please delete the above, I didn’t write it.
billbat

It is time that the Banks became our servants not our Masters. There was a total Prat from the City on Sky at Lunch-time explaining why the Banks could not afford to provide the old-style High Street Banking Services. They could if they weren’t paying selfish, greedy criminals millions of pounds each year for ripping us off.
- Dave Postles
  
  ’ the old-style High Street Banking Services’
  Well, they failed there as well:
  * insufficient capital reserves;
  * insufficient liquidity;
  * balance sheets too big;
  * excessive lending.
  The failures of 2008 were partly caused by the failure of the retail and commercial parts of the banks.
Dave Postles

Please sign the petition then:

https://submissions.epetitions.direct.gov.uk/petitions/35421
- treborc
  
  Go on then, done and dusted
hp

This will be an interesting can of worms.
- http://twitter.com/sprogglie Sprogglechops
  
  Yup esp as the email trail is beginning to point to collusion with the Brown g’ment.
  - treborc
    
    Tonight email, released by bank, the BoE requested Barclay keep the Libor low, it say this is due to pressure from one Gordon Brown.
Paul Simpson

Why was my comment deleted? All I ask is if Treborc has to respond to every comment, and give my opinion that his comments do not add anything. Nothing wrong with that, it is only an opinion.
Is this censorship? If so, i won’t bother again.
- treborc
  
  You can say what you like mate, I have never flagged anything on here, nor will I.
- John Dore
  
  I dont think its the moderator, he just deletes comments every now and then if they’re rude or he doesn’t like them.
  
  There are morons who flag comments for review and they disappear. Not everyone has the ability to do it, I cant. The comments never reappear.
  - Dave Postles
    
    If you wish to flag a comment for review (and it wasn’t me either), you just mouse over an area to the bottom left of the comment box and a flag appears. In the case above (your comment) the flag is to the right of ’1 Like’ – mouse over there and the flag should appear.
Bill Lockhart

Looks like the LIBOR scandal is another disaster for what little was left of Labour’s perceived integrity.
- Dave Postles
  
  No, what has been conclusively revealed so far (as was known anyway) is that Barclays was in a highly precarious position in 2008 – radically over-extended. The Fed had to tide it over with short-term loans.
  - http://twitter.com/sprogglie Sprogglechops
    
    That is irrelevant to the current issues. The question is simple “Was Barclays encouraged to manipulate the Libor rate by the BofE? If so what did the Treasury (and by extension the Labour government) know about it?”
    - Dave Postles
      
      Eight hours ago, all that was conclusively known was that Barclays was overextended in 2008. That was all that was conclusively known. Since then, Diamond has confirmed that the conversation with Tucker did not involve the BoE asking Barclays to submit fictitious offered rates – it was, according to Diamond, merely a ‘heads up’ about concern about the financial position of Barclays. There is no impartial record of the telephone call which Diamond took in NY. He has stated categorically that Tucker did not ask for the rates to be changed and that the memorandum which Diamond circulated was misinterpreted by del Messier. Del Messier has accordingly resigned. All that was expressed was concern about the financial position of Barclays at a critical time in 2008 when other banks had to be bailed. Some of you are so desperate out there, not least Osborne.
John Dore

Ed Miliband did not take a stand against the banking
industry. He took a stand against fraud. Your assertion is dangerous to our economic
health and your choice of language is poor. You show a remarkable lack of
understanding in terms of what is really going on here. The last government are
in this as well as the bankers and whilst it completely stinks maintaining confidence
in the very ugly goose we have is pivotal in our ability to pay for the
services we need. I’m not sure what game Ed is playing, but I do hope he has a
game plan that isn’t sacrifice the city for political advantage.

From the PWC report “The Total Tax Contribution of UK Financial
Services”:

We estimate that for 2010 the financial sector as a whole
made a Total Tax Contribution of £53.4 illion, which is 11.2% of total
government tax receipts, from all taxes, for that year. The FS sector is herefore
a major contributor to UK public finances. The figures have fallen since our
last study a year ago. The results of the 2009 study suggested a Total Tax
Contribution for the FS sector of £61.4 billion, or 12.1% of government tax
receipts. The 2010 study shows lower figures for corporation tax paid,
irrecoverable VAT and employment taxes borne and collected. Looking at just
corporation tax alone, total receipts from the FS sector have fallen from
£7.6bn in 2009 to £5.6bn in 2010. Nevertheless, the FS sector remains the
largest sector paying CT in 2010……

City reform needs to take the form of getting it to work to
the benefit of our people, companies, controlling pay and fraud, not strangling
our goose.
Mr Chippy

I agree but about 20 years too late comrade.

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