‘Banking on us’

With the UK debt level being the elephant in the room for politicians on the Campaign trail at the moment, the issue of how part of the massive debt came about and can be reduced is being over looked and that that is how the Government gets back the billions of pounds they have ploughed into the banks like RBS and Lloyds to prevent the UK's banking system crashing.

Last week Public Finance magazine hosted representatives from across the banking industry and public sector including John McFall Chairman of the Treasury Select Committee, Angela Knight, chief executive of the British Bankers’ Association; shadow City minister Mark Hoban; economics professor John Kay; Ian Mulheirn, director of the Social Market Foundation; Andrew Hilton, director of the Centre for the Study of Financial Innovation; and Pam Walkden, group treasurer at Standard Chartered bank. The discussion was run in association with Ernst & Young, and chaired by public sector guru Tony Travers, of the London School of Economics.

Here are some interesting quotes from the article

There was widespread agreement that, while the bail-out was justified, the situation as it stood is unresolved and unsatisfactory. The industry is more consolidated and thus less competitive than it has ever been – a situation Hilton described as an ‘oligopoly’, not a free market.

Mulheirn argued that the government’s intervention was failing to ¬revitalise the economy. Much of the sector’s most ¬energetic activity was in mortgage lending, he said, propping up the ‘ridiculous Ponzi scheme’ of the UK property ¬market while more economically vital lending to small and medium enterprises remained sluggish. The importance of this, he added, was that as state spending subsided over the next Parliament, strong growth in the private sector would be necessary to pick up the slack.

Professor Kay agreed that much of the public contribution to the banks had gone towards building up asset prices. He ¬argued that the bailout had failed to ensure that commercial or domestic -customers were well served. Meanwhile, no mechanism had so far been put in place to ensure the credit crunch was not repeated.

But Knight said that not all the blame for the ongoing malaise should be laid at the gates of the City. She emphasised a lack of leadership among the banking sector’s political masters. ‘All the political messages [to the banks] are uncertain... there’s nothing in place at the moment that talks about economic recovery.’ This vagueness was causing the City to hold off making firm decisions about where to place investments, slowing the transition back to business as usual.

‘There’s been too much feeding of the mob,’ she said, referring to the prevailing mood of banker-bashing. Now the focus had to be on leading the country'Any source