'Big Bang' Pioneers Rethink Banking Overhaul

Wall Street Journal:

LONDON -- In the 1980s, London launched a radical set of market reforms known as Big Bang, turning the city into ground zero of a revolution that begat today's buckling global financial system. Now, as leaders of the world's 20 largest economies gather here to fix that system, some Big Bang architects are questioning the ideal of unfettered capitalism on which it was built.

In retrospect, they say, the movement unleashed unanticipated forces such as global banks whose influence extends beyond the reach of any one regulator. Those forces may be difficult for the G-20 -- or anyone -- to rein in.

Read the whole story: Wall Street Journal

Comments

[lwaxanatroi]

Very interesting. This is a crucial piece of the sickening puzzle. I hadn't fully grasped the degree to which globalization affected banking and made regulation by one country, even one as powerful as the US, less and less relevant. This may explain why Geitner has been tiptoeing around the banks. Either treat them with kid gloves or find that they've all suddenly headquartered in the Caymans and Washington can only regulate the single tentacle of the octopus that chooses to reach into the US. And, re credit card companies, how on earth has that huge industry remained a subject of state regulation, so that the South Dakota dodge allows them to practice what Shylock was condemned for? We as citizens--and I'm working up my courage to do it--need to practice some plastic surgery. Snip those credit cards or pay them off in full. It's one thing to be bled by vampires; it's another to hold out your neck and invite the bite.

[blood1]

Those "Unintended Consequences" raise their ugly little heads again! No one is perfect and maybe these thinkers consider a 30 year run was good deal. My boring but continued response: There is no such thing as a free lunch". Sadly, those who pay for this decision are those who had no voice at the table.

No one has a "magic pill" to make this problem go away, but all we can hope is that the world's economies will remember this time in history and learn from it.

As one of the "no voices at the table", I would hope that those who made all the money will suffer, but then reality strikes and know that won't really happen. Sure, there will be new regulations, but will they be long term solutions? How long is long?

[marinade]

Now, we're blaming England...­.

[PiscesPrincess]

"we" ???

[Michael Ashby]

Blaming England is usually a good place to start. What country in the world did they not invade, extract all the wealth, and then leave a smoldering husk? True, there are a few. Those few would be the ones that other European countries beat them to.

I can never understand why we bring England with us because England screwed up most of these places and the people didn't forget! The middle east is a big mess largely because of England. So yeah, let's blame England.

[Lest We Forget]

Putting the genie back in the bottle will be a difficult task, considering how much influence the banking industry has now. Unless regulators are made of stern stuff, money flowing to eager politicians will derail any efforts to reform the system and break the power of big banks.

[SecretSister]

I couldn't agree more. Great point.

[norkas]

America was threatened by big business to move there headquarters to London because there was NO oversight at all.

England decided by having no oversight that it would attract business from all over the globe. England knew that bad business practices would take place on a massive scale but the big money attracted them so much that they closed there eyes.

This is a very big part of the global meltdown and the reason America closed there eyes so big wall streets firms would not move there offices to London and take there money with them.

Yes we must have global regulations and if this happens again with another big country closing there eyes to regulations to attract monies we must beable to put our foot down and make sure that those business do not suceed by letting Americans know that the company plans perhaps doing what we just went through..

I believe thebanks will learn and they have been great in the past. The board of directors often forced the bankers to make unwise decisions and this has to change as well.

[EinChicago]

You see a tree and miss the forest.

The problem is not that regulators need to be made of stern stuff; it's that regulators do not have the authority to do so. Take Citi as an example. For all the talk of nationalization, etc., the fact is how does one single regulator/nation effectively claim 100% authority over a global corporation?

Answer: they can't. Not without a massive effort to execute a bunch of new international treaties to extend the international reach of the country seeking to assert its power.

[sunshinerain]

Great, then let's have the massive effort to execute a bunch of new international treaties to extend etc!!!!!

[quiviran]

There is no such thing. The incorporation of the top level holding company must happen in one country. The companies operating in any given nation are doing so through a company incorporated in that nation or some sort of licensing arrangement with that government. So, regulatory authority can exist.

The problem is that companies seek the least restrictive environment to operate under, much like the US credit card industry. When faced with usury laws in most states, the found a federal court that said the laws of the state in which the card was issued applied, not the state where the card was used, or the state where the card holder resided. Then all they had to do was get one state to lift it's usury laws and a new world was born, in which they could charge as many fees as they wished, no limit on interest rates, no controls on how much damage they could do to people and the country. They found the state, South Dakota, moved there and have been pillaging the country ever since.

The difference is that States are not sovereign nations. A sovereign nation can just say no. The question is, will they? Mr Geithner seems to be disinclined.