29 March 2011
A report just out from the New Economics Foundation suggests that the UK has learnt nothing from the financial crisis of 2008-10. The report, co-authored by the foundation’s Andrew Simms and Lydia Prieg, reminds us that the coalition government — still very much in the thrall of bankers and the City of London — is, even now, seeking to subvert the global push to create a more sustainable financial sector.
Britain’s “soft touch” policing of the City risks triggering a fresh financial crisis, think tank the New Economics Foundation warns.
Lax regulations have allowed the dodgy practices that sparked the financial downturn to continue, it claims. And it accuses authorities of blocking overseas reforms that could avoid another catastrophe.
Report co-author Andrew Simms said: “If the Government wants a safe and stable financial system, it should stop the UK dragging down international efforts towards reform. If it doesn’t, we are in danger of being seen by our neighbours as a financial rogue state, subverting safer finance. ”
Criticisms include failing to tackle naked short-selling – traders gambling with stock they don’t own – despite a US ban and EU efforts to do the same; ignoring tax havens abroad; and allowing dubious dealing by commodity traders to flourish unchecked.
NEF said: “The UK undermines global financial stability. ”
I agree with this analysis. One consequence of the UK government’s stance on financial reform — in which, despite all the bluster about bonuses and the manufactured outrage in the Treasury Select Committee, it continues mollycoddle the financial sector — is that whenever there is an official investigation into a major financial crime, it often ends up being a cover-up and/or whitewash.
Here’s a few choice quotes from the report:-
Tony Greenham, head of finance and business at NEF, says:-
“We call for the UK to live up to its image as a pre-eminent global financial centre and demonstrate strong international leadership on better regulation instead of pandering to vested financial interests”
Andrew Simms, NEF fellow and a co-author of the report, says:-
“If the government wants a safe and stable financial system, it should stop the UK dragging down international efforts toward financial reform. If it doesn’t we are in danger of being seen by our neighbours as a financial rogue state, subverting safer finance.”
Lydia Prieg, a NEF researcher and a co-author of the report, said:-
“London can and should compete on the quality of its services, not on the laxness of its regulation and its tolerance of market abuse.”
The NEF’s report reminded me of what US Treasury secretary Tim Geithner said on a recent visit to London. Geithner pointed that the “race to the bottom” where financial regulation was concerned, sparked by the decision of politicians like Gordon Brown and Tony Blair to boost London’s “success” by creating a regulatory free-for-all in the Square Mile after they gained power in 1997. The race they triggered naturally harmed regulation elsewhere and precipitated the global financial crisis.
Here’s what Geithner told BBC Radio 4 Today in February:-
“Remember your colleagues in the UK ran a strategy for a long time called light touch approach to financial regulation that was designed consciously to pull financial activity from New York and Frankfurt and Paris to London. That was a deeply costly strategy for financial regulation.”
Neither David Cameron, nor George Osborne, nor Vince Cable, nor the pro-City Sir Humphreys in the Treasury, have yet taken the hint.