On balance, the response of politicians, supervisors and other policymakers to making sure that financial market crises like the one which is seemingly waning do not occur in the future has been disappointing.
While strong announcements were made a year ago, steps by the G-20 and national governments, national banks and supervisory authorities in the meantime have been baby steps at best.
Politicians? – Beholden
Numerous accounts have appeared of how the political processes in the developed world are beholden to the interests of the financial sector. The revolving door practice of US treasury secretaries and their policy peers and underlings, the political influence of Länderbanken in Germany, of party-political and Länder-political instrumentalizations in Austria, the close connections of UK financiers and politicians – to name just a few – all these make sure that the gigantic sums which taxpayers provided for banks and bankers remain a one-way business. With such history: Can we rely on politicians to cut the financial sector down to its welfare-enhancing financing role? Hardly.
The Courts? – Which Side Are They On?
Most recently, another blow has been dealt to the suffering taxpayers who would expect that they are not the only ones to bear the burden of overcoming the crisis. Yesterday (Nov. 25, 2009) the newly-installed Supreme Court in the UK decided against a claim brought forward by the Office of Fair Trading, that the 2.6 bill Pounds in fees banks have been charging their clients for unauthorised overdrafts were not illegal. To be clear: these fees are charged above the exorbitant overdraft interest rates, quasi as an additional punishment for going into overdraft. Estimates state that at most half of that sum could be explained by costs.
This news comes on the same day when it was revealed that the Bank of England last fall extended so-far not communicated 62 bill Pounds to Lloyds and RBS last year to keep them from failing.
But the sad story is that also the Courts seem to be on the side of banks, instead of on that of customers = clients = taxpayers.
So on whom can we – the footers of gigantic bills for saving the banks – rely to prevent further excesses? The legislative, the executive and the judicial sectors of government are “on the other side”.
Civil Society: the Only Instrument Left
It seems to me that we as taxpayers, clients and citizens have to take this matter into our own hands. After all – as the Dresden citizens so bravely stated during their Thursday demonstrations twenty years ago: Wir sind das Volk!! WE ARE THE PEOPLE!
We need to develop grassroots, civil society, organizations to force supervisors and politicians to take our interests into account and have the burden of the crisis shared equally, take significant steps to reduce both the size of individual banks as well as of the global financial sector as a whole, to eliminate incentives for trading and speculation, to revert banks companies to their original mission – turn savings into productive investment – and no more. We need to monitor their activities, we need to make sure they are accountable and take only calculable risks, we need to make supervisors do their allotted job.
A good starting point for such grassroot supervision would be the organizations which have formed as class action suits against individual banks. With the help of lawyers and former financial and banking experts such groups could turn into more permanent organisations which are powerful enough not to be silenced by counter-claims by banks with their super-highly-paid law firms.