Image by SalFalko
Today, like most days, it’s the economy that’s front and centre. The publication of the latest GERS report has lead to a predictably dull round of cherry-picked comparisons, although this BBC article which confuses debt and deficit in the headline and first paragraph takes the headdesk biscuit.
Equally depressing was the paroxysm of joy over the proposed cap on bank bonuses. Never in the field of financial regulation has so little been done by so few to so many. There’s certainly an argument that the structure of incentives within investment banks were badly wrong and encouraged an unquestioning herd mentality. There’s also an argument that investment banking remuneration levels reflected the capture of those institutions by their employers who ran them in their own interests, not those of their shareholders. However altering the pay structure so that salaries are higher and bonuses are lower, which is all that a cap will lead to, won’t affect either of those in the slightest. A cap on bonuses doesn’t address the wider structural problems in combining financial infrastructure and retail banking with investment banks – something which the business models of Barclays, JP Morgan, RBS and others explicitly rely on. Nor does it even attempt to touch the deep problems with high-order structured products, dark markets and other forms of financial innovation in weakly regulated global markets with highly mobile capital.
So much joy was expressed at what is, however you look at it, tinkering at the edges that it made me wonder if people understood anything about the financial crisis at all. Then I saw the GERS article on the BBC and I realised that no, no they hadn’t.
On a more positive note, however, the OFT report on pay day lending is great. Clear steps for a deeply problematic, exploitive and under-regulated industry to take with a defined, appropriate timescale to take them in and clear penalties for not doing so. There are a number of really good campaigns working on this at both a Scottish and UK level and it’s really good to see the regulators taking a firm line on the systematic issues within what’s essentially a cartel. I just wish we were seeing similar action at the macro-economic level as well as what’s, basically, the micro-economic level.