{"id":7734,"date":"2018-11-23T11:01:56","date_gmt":"2018-11-23T11:01:56","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=7734"},"modified":"2026-04-18T19:34:31","modified_gmt":"2026-04-18T19:34:31","slug":"big-reform-banks-capture-state","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2018\/11\/big-reform-banks-capture-state\/","title":{"rendered":"Too big to reform? How banks capture the state"},"content":{"rendered":"\n<p><strong>Over the last couple of months, we have published much-read extracts from Ray Perman and Ian Fraser\u2019s books, Hubris and Shredded respectively, to mark the tenth anniversary of the financial crisis that hit western capitalist economies in 2008.<\/strong><\/p>\n\n\n\n<p>Now in the latest Sceptical Scot podcast we ask Scotland\u2019s two top financial commentators to explain what lessons, if any, we have learned from that crisis.&nbsp; What needs to be done to prevent it happening again? Or is another crisis just inevitable?<\/p>\n\n\n\n<p>In the appropriate setting of Edinburgh&#8217;s <a href=\"httpss:\/\/www.libraryofmistakes.com\/\">Library of Mistakes<\/a>, we hold our conversation on the day the UK is embroiled in the worst political crisis since Suez in 1956: Brexit. And on the day after the deportation from Scotland of Kweku Adobili, a convicted rogue trader, who played a part in Swiss bank UBS incurring losses of $2billion in 2011 \u2013 a very junior banker compared with the CEOs and chairs of big banks that helped cost the taxpayer \u00a31 trillion overall during the crisis according to the National Audit Office.<\/p>\n\n\n\n<p>Did the big guys simply walk away scot-free? And, if so, why?<\/p>\n\n\n\n<p><iframe loading=\"lazy\" src=\"httpss:\/\/w.soundcloud.com\/player\/?url=httpss%3A\/\/api.soundcloud.com\/tracks\/533891313&amp;color=%23ff5500&amp;auto_play=false&amp;hide_related=false&amp;show_comments=true&amp;show_user=true&amp;show_reposts=false&amp;show_teaser=true&amp;visual=true\" width=\"100%\" height=\"300\" frameborder=\"no\" scrolling=\"no\"><\/iframe><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Lessons learned? Big banks are still too big to fail<\/h2>\n\n\n\n<p>It\u2019s clear from the outset that essential lessons have not been learned.<\/p>\n\n\n\n<p>Ray Perman (<a href=\"httpss:\/\/www.amazon.co.uk\/Hubris-HBOS-Wrecked-Best-Britain-ebook\/dp\/B009KL4OFM\/ref=tmm_kin_swatch_0?_encoding=UTF8&amp;qid=&amp;sr=\">Hubris: How HBOS wrecked the best bank in Britain<\/a>) points to an unchanged banking culture \u201cthat gave us high-pressure sales of debt, both to individuals and companies, leading to the huge debt overhang of 2008 that came to a shuddering halt\u201d in the financial crisis.<\/p>\n\n\n\n<p>Ian Fraser (<a href=\"httpss:\/\/www.birlinn.co.uk\/Shredded.html\">Shredded: Inside RBS the bank that broke Britain<\/a>) is equally clear that it is the banks that have learned one lucrative lesson: \u201cif they go bust through wild and reckless mismanagement the government will bail them out\u2026and give the impression they have basically got away with it\u2026\u201d<\/p>\n\n\n\n<p>Fraser excoriates what passes for British corporate governance.&nbsp; Executive and non-executive directors, aided and abetted by the Big 4 accountancy firms, can pursue the goal of \u201cself-enrichment, enlarge their own pay-cheques, their own bonuses\u2026and, if possible, pay out basic dividends to keep the shareholders sweet.\u201d There has been no re-examination, no reform of this governance. And only junior traders and bankers convicted for their part.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>My impression is that the government is more susceptible to the message from the banks than almost any other part of the country and that\u2019s a real problem for the sustainability of our democracy,\u201d he tells us. \u201cThere\u2019s a degree of regulatory and political capture.<\/p>\n\n\n\n<p>&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/11\/IMG_5481.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"720\" src=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/11\/IMG_5481-1024x720.jpg\" alt=\"Ian Friaser (left) and Ray Perman in the Library of Mistakes, surrounded by books chronicling the history of financial blunders that just keep on repeating. \" class=\"wp-image-7749\" srcset=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/11\/IMG_5481-1024x720.jpg 1024w, https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/11\/IMG_5481-300x211.jpg 300w, https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/11\/IMG_5481-768x540.jpg 768w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption class=\"wp-element-caption\">In the Library of Mistakes a chronicle of blunders destined to be recycled<\/figcaption><\/figure>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<p>Perman singles out the banks\u2019 huge lobbying power, nationally and internationally. A power that is wielded to defeat any regulatory bid to control them.&nbsp; The fact that the big banks \u201cpay something like a third or half of all corporation tax\u2026 gives them a tremendous hold over government.\u201d<\/p>\n\n\n\n<p>He adds:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>What we have done is to allow the banks to get away with this scot-free and, in the crisis that was caused, we have made the poor pay for it and we have made them do that through cutting benefits, through austerity, through cutting government spending generally, but also through Quantitative Easing (QE) which some put into assets in terms of pensions funds, investments in the Stock Exchange or even bricks-and-mortar\u2026and others who don\u2019t have these and have been treated very badly.<\/p>\n<\/blockquote>\n\n\n\n<p>Fraser says it is imperative to regulate shadow banking and end the deductibility of interest expense when it comes to calculating corporation tax \u2013 both prime sources of fresh crises-in-waiting. Incentives henceforth should reward long-term responsible behaviour, not recklessness. But Perman is certain there will be another cyclical crisis:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>We have missed the opportunity to break up the big banks, to make them more responsive and give them less collective power over government\u2026 I don\u2019t see any political will anywhere in the UK to take on that problem and solve it.<\/p>\n<\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\">Nae Money Sense in financially illiterate Britain<\/h2>\n\n\n\n<p>Both end by calling for concerted efforts within education to improve ordinary people\u2019s understanding of finance and deal with endemic \u201cfinancial illiteracy\u201d among voters who are \u201cbamboozled\u201d by the technicalities.<\/p>\n\n\n\n<p>It says a lot that the Scottish Government has entrusted financial advice in Scottish schools to the MoneySense programme run by\u2026RBS.<\/p>\n\n\n\n<p><em>Our thanks to the <a href=\"httpss:\/\/www.libraryofmistakes.com\/\">Library of Mistakes<\/a> for generously providing an appropriate setting&nbsp;<\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><em>Background reading<\/em><\/p>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/HBOSscreengrab.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"280\" src=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/HBOSscreengrab.jpg\" alt=\"\" class=\"wp-image-7500\" srcset=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/HBOSscreengrab.jpg 500w, https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/HBOSscreengrab-300x168.jpg 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><\/figure>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/Fred-Goodwin.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"620\" height=\"411\" src=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/Fred-Goodwin.jpg\" alt=\"\" class=\"wp-image-7529\" srcset=\"https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/Fred-Goodwin.jpg 620w, https:\/\/sceptical.scot\/staging\/wp-content\/uploads\/2018\/09\/Fred-Goodwin-300x199.jpg 300w\" sizes=\"auto, (max-width: 620px) 100vw, 620px\" \/><\/a><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8216;What we have done is to allow the banks to get away with this scot-free and, in the crisis that was caused, we have made the poor pay for it and we have made them do that through cutting benefits, through austerity, through cutting government spending generally, but also through Quantitative Easing (QE)..&#8217;<\/p>\n","protected":false},"author":73,"featured_media":7747,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[446],"tags":[332,315,316],"class_list":["post-7734","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-media","tag-banking-crisis","tag-hbos","tag-rbs"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/7734","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/73"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=7734"}],"version-history":[{"count":2,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/7734\/revisions"}],"predecessor-version":[{"id":18791,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/7734\/revisions\/18791"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media\/7747"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=7734"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=7734"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=7734"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}