BY: WILL HUTTON
It was the biggest bank bail out in British history, and it came with scarcely believable costs. A trillion pounds of tax-payer support; a trillion pounds of lost output. After a disaster of this magnitude you might have expected some collective soul-searching by both banks and government. There has been far too little. Instead we risk a repeat – our banking system is as disconnected from real wealth generation as ever.
The return to business as usual – bonuses, trading in derivatives, the organising of banking as an exercise in which money is made from money – is breathtaking and depressing. And so, given the recent buoyant profit figures reported by our banks, is the easy money.
Labour delivered the minimum reform it could get away with, subcontracting responsibility to the Financial Services Authority. As the crisis broke in May 2008 it commissioned an inquiry populated entirely by industry insiders, chaired by the now chair of Lloyds, Sir Win Bischoff, to examine how the City could become more internationally competitive. When it reported a year later, it recommended little or no change. The conclusions were tamely accepted by the most risk-averse group of senior politicians in the Labour party’s history.
The poverty of action is inexcusable. The value of outstanding lending by British banks in all currencies is five times our national output – proportionally greater than any comparable country – and is underpinned by a puny amount of pure equity capital; £1 for every £50 lent. As an internal Bank of England working paper hypothesises, this collective balance sheet structure is so precarious that without substantial and far-reaching reform a second crisis is almost inevitable…/ more
BY: IRISH TIMES
OPINION: The Department of Finance has been central to all that has gone wrong – yet it remains blind to its failings, trapped in a bubble of dysfunction, writes EDDIE MOLLOY Part I of two articles
WHILE MUCH may never be known about the root causes of what the National Economic and Social Council calls “Ireland’s Five-Part Crisis” (banking, public finances, national reputation, competitiveness and social fabric), there are two documents on the Department of Finance website that are a must-read for those interested in what went wrong.
The first of these documents, the Annual Outputs Statement for 2009, sets out the department’s “central role in the economic and financial management of the State and the overall management and development of the public sector”. Five “High Level Goals” are identified, with corresponding “Impact Indicators”, as follows:
1. An efficient, high performing public service, and improved levels of service to the public.
2. Value for money from public expenditure and improvements in public capital investment and infrastructure.