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Into the Lion’s Den
US President Barack Obama is not a man who shirks from a challenge.
In the middle of a Senate battle over banking reform he did
what very few politicians around the world would be willing
to do and walked into an auditorium in which sat the chief
executives of many of America’s largest banks and told
them, quite simply, that he wanted them to stop lobbying against
his Bill and let the banking reforms pass.
This is roughly equivalent to walking into the den of a lion
and telling it not to chew you, or walking into a Welsh mining
town wearing a badge saying ‘I love Thatcher.’ One
wonders if any of the politicians clamouring to be the next
British Prime Minister would walk into any building in the
Square Mile and say anything similar.
The likelihood is that they would not, on both sides of the
Atlantic banks contribute significant sums of money to lobbying
and helping politicians getting elected and in the UK the
parties need every penny that they can get their hands on.
Added to which, President Obama is blessed with a significant
majority in both Houses of US government and didn’t have
that many friends in the financial sector to start with.
In the UK the economy has taken centre stage during the election
campaign. The Lib Dems favour breaking up the banks, employing
a kind of ‘Volcker Rule’ which will see the separation
of retail banking (that’s banking involving our mortgages,
ISAs and savings accounts) from commercial banking (that’s
banks using our money to trade on the markets, often in very
high risk exchanges). Labour want nothing of the sort, they
would like to impose greater regulations on commercial banking
and force banks to hold larger reserves in event of getting
into financial difficulties. The Tories are happy enough to
break up the banks, providing everyone else does it as well.
The problem is, of course, that how do you separate retail
and commercial banks. Banks like Legal & General who never
got anywhere near financial problems during the crisis and
are run perfectly responsibly offer a wide range of stocks
and shares
ISA deals including corporate bonds and other financial
instruments - take a look at their site for more information.
You give them your money, they invest it for you, you reap
the reward.
Perfectly reasonable, perfectly profitable for customer and
bank, and well, perfectly confusing when it comes to regulating
on.
Thankfully for British politicians, they won’t have to
decide, by the time the election has run its course and a
cabinet is in place, the banking reforms in the US are likely
to have gone through and then they can work out the solution
to the thorny issues so that we don’t have to. In all
likelihood our next government will wait and see what happens
elsewhere and then make a decision. For many that would be
prudent, but it’s a lot less interesting.
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