Thursday, 23 September 2010

Comrade Cable

So much adverse press for Vince Cable this morning its difficult to know where to start. Take your pick from Allister Heath, Steve Richards, or Fraser Nelson. All contemptuous of a few pointed words. Yes Mr Cable was playing to his Liberal Democrat conference audience. No the coalition is not about to become a class-based Marxist regime like Chavez's Venezuela.

Just calm down you commentators. I may not agree with Vince Cable over a Graduate tax or a Mansion tax or a latter-day Glass-Steagall Act. Indeed there may not be too much else to agree with. But he's absolutely right when he says the banks caused - and continue to cause through their lending policies - untold misery to our economy.

Thank you Mr Cable for much needed honesty amongst the braying of bankers - or at least their apologists - who are in denial of the consequences of the bankers incompetence.

Two years after the disaster became apparent, British banks continue to be supported both directly and indirectly by taxpayers money whilst they continue to pay obscene bonuses to themselves. Why? because they are reaping vast profits from lending out money at high interest rates that has been borrowed at near-zero interest rates from the British taxpayer via the money markets. You don't really need a Cambridge Mathematics Tripos to work that one out.

Did I hear Mr Cable use the word 'spiv'? Did he mean a slickly-dressed petty-criminal, dealing in black market goods of questionable authenticity? I don't think we need to sink to the level of rhyming slang for bankers here - the term 'spiv' seems pretty appropriate to me.

Meanwhile, the political class decide which welfare payments are to be cut, which school re-building project is to be scrapped and a whole host of other public spending decisions to pay for the privilege of bailing out the banking sector.

Mr Cable hasn't quite got there yet. Mervyn King is still the closest that I have seen to suggesting that banks need to actually take responsibility for their mistakes. Step one is to announce that from here out any UK bank which fails will be put into
receivership by the Bank of England. Yes that does mean that shareholders & bondholders will be wiped out - after all, they understood the risk that any investor takes. But it does NOT mean depositors like you and me - or businesses holding money on deposit - will be wiped out.

The assets of the bank - the depositors, branches, staff & customers - need to be re-bundled into a new bank, wholly owned by the taxpayer, with a clean balance sheet ready for business. Now that would really ensure competitive new lending - a new 'clean' bank with no losses, a nationwide presence on every high street and hungry for new business.

And all it took was a little imagination. They don't teach that at Oxford.