This may sound republican, although Republicans are increasingly sounding socialist and so its best to avoid always thinking on right and left rails, but anyway -

The more banks the greater competition. This should help protect the consumers’ interests and also encourage the banks to watch each other.

Where there are only a few banks and one regulator the regulator can fall into slumber and the one or two banks who remain may do as they please.

Banks should regulate one another by keeping an eye on what each other is up to and where approriate they should be free to short other listed banks, i.e. where they perceive weakness.

Banks are more likely to perceive weakness and act on it then the regulator is. That way the market in part helps to regulates itself in a dog eat dog sort of way, but for this to work there should be more banks, there should be grater transparency and they should be aware of the market consequences if they take excessive risks and appear weak; they are shorted.

There is of course also a problem in that the market not only generates fear but also greed and it is of course shareholders’ greed for more returns, which encourages directors to take greater risks so as to keep up with the risks the competition are taking. Much more disclosure and a healthy market, which allows shorting of financial stocks should prevent the directors from taking those risks.

In Wales we clearly have a very long way to go, but it would be great if the Assembly were to consider:

a) offer carrots through grants for the creation of more institutions. Ideally these might be small conservative regional lending organizations. They might be mutuals, building societies or credit unions, or private or even public banks;

b) in return for grant assistance waive two sticks through:

higher tier 1 holding levels; and

additional disclosure requirments over and above those required by the FSA. The disclosure requirements should ensure that there can be no off balance sheet items and in particular no off balance sheet quasi independent subsiduaries.

Hopefully this sort of approach might encourage confidence and generate stable roots for a Welsh financial industry.

Regards,

Huw Jones

Being aware of the misuse of Keynesianism destroying its efficacy to help recover from Depression, it is important that people realise that the present market chaos is caused by inflation. The crass stupidity of trying to fix a problem caused by inflation with further inflation is unbelieveable, but is being widely proposed.

Anyone offering to lend money to the present British Government must be off their rocker unless the loan is index linked and secured.

Printing money will continue the policies of that string of Politicians from Reagan and Thatcher to Brown who have debauched their currencies.

1929 -32 showed that Capitalism does not work. FDR and Keynes showed how it could be maintained.
Keynes’ policies were never tried. Liar Economists use the term Keynesisnism and display their ignorance of what Keynes actually proposed. And FDR’s measures to protect Banks were deliberately undone.

With the remedies instituted by Keyens and FDR invalidated, we are back to the inhernt contradiction in Capitalism with no sensible answer in sight.

There is an answer, Money value has to be rebuilt. That is most easily done by undoing Thatcher’s Tax Cuts. Abolition of VAT would be a better tax cut. To eliminate the National Debt that Thatcher doubled while she sold the family silver, introduce a progressive tax on Wealth. We need good Conservative policies to undo the Thatcher-Blair-Brown damage. I only know one good Conservative, so that will not be easy.

Anyone thinking Marx had the answer had better stand on his shoulders and look back to see where he went wrong. There was a welshman in California about 1912 who knew about that. Sam Mainwaring jr died in Neath in 1943.

See http://www.iww.org/en/node/2583 if you want to grasp “The Negative Outcome of Economics”.
http://www.iww.org/en/node/3855 was writ a year earlier also for an Amex competition. Neither won the prize, but it might now be interesting to read the ones that did and compare them for relevance in the present conditions.

Some people will have been given CDs that carry text of those essays.

I have no evidence for this at all mind, just educated guess work….

I am not sure about 10- there would be much softer credit conditions available if your ideas were implemented and this would remove the need for it- but certainly as a short term measure it sounds plausible. Would this kind of intervention simply encourage lending on a basis that is ultimately unsustainable? and to what extent would the tax payer be exposed to risks beyond the state’s immediate control? Just how small would the businesses have to be before we agree to take a stake in them? Just how good would the order sheets have to look? And if they looked good enough to take chunk would liquidity be a problem for them in the first place?