The UK Guardian ran an editorial in today’s newspaper arguing that as the financial crisis hurtles on we are loosing the opportunity to rebuild the banking sector, and while it is specific to the UK experience its point is relevant to all Governments bailing out a failed banking sector.
Dynastic fortunes were created. Yet the system over-reached itself and crashed. Global losses on loans and financial securities exceed $4 trillion. Governments have had to support the western financial system to the tune of $9 trillion.
British taxpayers’ share of that support exceeds $2 trillion – proportionally the largest of any country, and by a substantial margin. Yet our bankers are again insisting that they pay themselves packages wildly above those in any other industry. Stephen Hester, CEO of RBS, doubtless argues that his near £10m deal is below the going rate in financial services, and that he is making sacrifices to help the stricken bank recover. But why are personal rewards so extravagantly high in a sector that adds so little value and creates so much systemic risk that others have to bear? What kind of financial system do we want?
The Guardian suggests breaking up banks that are too big to fail, new banks created and review the long-running relationship between the City and wider British economy should be. Without root-and-branch reform a great opportunity is going begging. Read the article in full here.
