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Banks and the Treasury: the full contact list

Ben Chu

robert jenkins 150x135 Banks and the Treasury: the full contact listIn The Independent this morning I disclose the full number of contacts (meetings and phone calls) that took place between Treasury ministers and senior bankers in the period immediately before and after the Vickers report on banking reform was published on 12 September.

Here’s my view on this lobbying blitz. And here’s the view of Robert Jenkins (right), the new crusading regulator, from which I quote. It’s an essential read.

Jenkins’ powerful conclusion:

“A profession which should stand for integrity and prudence now supports a lobbying strategy that exploits misunderstanding and fear.”

This report in City AM  suggests that the Treasury is preparing to water down Vickers.

And, for the record, here’s the full list of meetings, which I extracted from the Treasury through a Freedom of Information request:

Untitled 17 Banks and the Treasury: the full contact list

Untitled 24 Banks and the Treasury: the full contact list

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  • http://allectus-allectus.blogspot.com Allectus

    Blaming the “greed” or “incompetence” of the banks simply isn’t a credible analysis of what went wrong. If the banks hadn’t provided governments and consumers with a ready supply of cheap money, then living standards in the West would have been much lower over the past 20 years. What we’re seeing now is simply a corrective adjustment, an adjustment that probably still has some way to go. But it’s not as if “our money” has somehow been appropriated in a bonanza of bonuses and executive pay – we just never had the wealth we thought we had. That’s all.

    Of course it’s important that the banking crisis is not allowed to happen again. But we shouldn’t approach bank regulation as if it were no more than an opportunity to exact some form of righteous revenge: it would be a mistake to throw the baby out with the bath water.

    Financial regulation is a continuous task, and cannot be carved in stone. It requires constant assessment of current risks, and must aim to strike a balance between prudence and allowing markets freedom to innovate and develop. If we got that balance wrong in the past, this doesn’t mean that a knee-jerk response – imposing heavy-handed, and probably ineffectual, regulation – is the right answer now. 

    Vickers has probably got the balance of proposed reforms about right. But this doesn’t mean that the Government shouldn’t listen to the concerns of stakeholders, and ascertain whether there might be ways to soften the impact of the reforms on the financial sector and wider economic growth without sacrificing too much in terms of regulatory effectiveness. There is nothing “immoral” of “dishonest” about this.

    The threat of banks and other financial institutions moving overseas is very real, and potentially very damaging, if heavy-handed regulation makes the UK (or the EU) an uncompetitive place to do business. 

    Increasing capital and liquidity requirements is vital. But unless we adhere closely to the internationally agreed framework and timetable of Basel III, we risk losing international competitiveness.

    Some commentators are still urging the absolute separation of retail and investment banking. But there is no compelling evidence that the repeal of Glass Steagall caused the financial crisis. The failures of Bear Stearns, Merrill Lynch, and Lehman Brothers, which triggered the crisis in the US, and the failure of Northern Rock in the UK, could not have been affected by Glass Steagall because the US banks were pure investment banks and Northern Rock was a retail bank with no investment arm. Vickers (like regulators in the US and Europe) has, quite rightly, not recommended such an “absolutist” approach; but this does not mean that his proposals for separating retail and investment banking functions cannot be fine-tuned to mitigate their economic impact whilst preserving their regulatory effect. 

    Alarmist rhetoric about the cost of the bank bail-out is hardly conducive to a rational or constructive debate on regulatory reform. According to the NAO, by March 2011 the net cost of the intervention in the financial sector had fallen to £456bn (on 1 December 2010, the figure was £512bn), comprising £124bn in share or loan purchases and the balance of £332bn in giving guarantees and indemnities which may never actually need to be paid. It remains likely that the Treasury will eventually make a net profit from the process. 

    We shouldn’t allow ourselves to be panicked into taking measures that we’ll come to regret in the longer term. The “dishonest” rhetoric that “exploits misunderstanding and fear” all seems to be coming from your camp, Mr Chu.

  • Neighbourhoodvolunteer

    Analysis of what went wrong
    From the 1950s till during the 1980s there was control on lending mortgages for houses that held borrowing to 3 times earnings.

    As the strict control of mortgage loan ratio to earnings was cancelled
    the cost
    of home ownership rose without restriction. Now first and second
    time buyers /renters cannot avoid excessive debt.

    Bonuses for top executives bleeds money out of the system; they put it into tax avoidance property overseas.
    Cutting public
    sector jobs does not address the root cause of the debt crisis, nor
    does allowing developers to build on what they like where they like as suggested by the National Planning Policy framework.

    Economic charts shown on Newsnight
    from Office for National Statisics
    Chart 1:1 private sector debt in UK as a percentage of GDP

    http://www.bbc.co.uk/news/in-pictures-16090055

    ANN PETTIFOR, DIRECTOR OF PRIME ECONOMICS

    “This is the chart that struck me most forcibly, both for what it tells
    us about the debts of the private sector, in particular the private
    finance sector; but also because of what the Treasury chose not to tell
    us: that the public debt to GDP ratio is tiny compared to private
    sector debt to GDP ratio.”

  • http://allectus-allectus.blogspot.com Allectus

    The principal cause of the financial crisis was excessive public and private borrowing in Europe and the US. This borrowing was required to maintain the illusion of a standard of living, particularly among the working and lower middle classes, no longer sustainable in the face of competition from emerging economies. The credit boom was fuelled by a new era of cheap money, made possible by a massive inflow of liquidity from those same emerging economies, looking for somewhere to invest their trade surpluses, and by lax monetary policy, focused too narrowly on targeting retail price inflation. Rising asset prices and falling yields led investors to look to ever-more risky investments, such as sub-prime mortgages. When it became apparent that many of those investments were worthless, the bubble burst, triggering the bank bail-outs and the sovereign debt crisis.

    While the kind of blanket credit controls to which you seem to refer would have avoided some of the excesses of private borrowing, this could only have been at the price of lower economic growth overall – thus, while we would have had a smoother ride, we would still have ended up with a lower standard of living than we enjoy today, even when future corrective adjustments are factored in.

    So the banking crisis was a symptom, not the cause, of our current malaise, and simply demonstrated that we (in the West) never actually had the wealth that we thought we had, and that current levels of private consumption and public expenditure, which assumed the existence of this illusory wealth, could not continue.

    The upshot is that public and private borrowing is inevitably going to become more difficult and expensive. The problem of excessive private borrowing – the root cause of the crisis – will now be addressed by the market (indeed, the state may even have to intervene to ensure that private credit is not too tight during the coming recession, while the tougher capital and liquidity controls agreed at Basel III should to ensure that credit doesn’t expand too fast when the economy recovers). But the problem of excessive public borrowing must be tackled by governments.

    While “cutting public sector jobs does not address the root cause of the debt crisis”, it doesn’t follow that the public sector shouldn’t be cut. The public sector didn’t cause the crisis; but neither did it generate any real economic growth or sustainable jobs. The public sector is the size that it is because the private sector appeared to be wealthier than it really was. It follows that the bloated public sector that characterises the European social democratic model (which, of course, includes the UK) will now have to shrink – permanently – to a more sustainable size which the private sector can fund.


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