Do stop being a cretin Mr. Chakrabortty

Ah, but what about lending? After all, this is why we have banks in the first place: to channel money to productive industries. The Cresc team looked at Bank of England figures on bank and building society loans and found that at the height of the bubble in 2007, around 40% or more of all bank and building society lending was on residential or commercial property. Another 25% of all bank lending went to financial intermediaries. In other words, about two-thirds of all bank lending in 2007 went to pumping up the bubble.

This doesn\’t look like a hard-working part of an economy humming along: it\’s nothing less than epic capitalist onanism.

Because, laddie, you\’re looking at an example of Anglo Saxon capitalism.

Note that this is different from Rhineland capitalism.

We don\’t use banks to finance business. We use markets to do so. We use equity capital, shares, we use bonds, corporate paper, to finance business, not bank loans.

Pointing to banks and noting that they don\’t finance business isn\’t big and it\’s not clever. It\’s simply ignorant.

If the statistics don\’t support the arguments for the City\’s pre-eminence, the public don\’t either. In 1983, 90% of the public agreed that banks in Britain were well run, according to the British Social Attitudes survey. By 2009, that had plunged to 19%.

In other words, both the evidence and the voters are against investment bankers. So why do the politicians cling on to them?

And that is pure cretinism. Investment bankers are those people who do all the stuff with bonds, equity and commercial paper. They are the people who do the financing of business that in the Anlgo Saxon system is not done through bank loans.

You can\’t complain about both: you cannot whine about banks not lending to business and then whine about those who do finance business.

Well, all right, you can, but that will mean that you\’re condemned to working at The Guardian.

7 comments on “Do stop being a cretin Mr. Chakrabortty

  1. That sentence at the Guardian? Is it on bread and water?

    No, thought not.

    Moet & Chandon and foie gras more like it.

  2. I made those points to a friend and got the following response:

    “High street and retail banking was combined with investment banking in the late 80s. AC is using the term banking to cover all of these. The markets are the banks.”

    This doesn’t seem right to me, but I’m not an expert – can anyone help, please?

  3. “We don’t use banks to finance business. We use markets to do so. We use equity capital, shares, we use bonds, corporate paper, to finance business, not bank loans”

    Do you have figures? I’m looking at a World Bank paper and the UK is only half as reliant on equity finance as Germany companies and a similar amount reliant on bank financing. The US is the a lot more reliant on bank financing.

  4. Some of the loans on commercial property will be financing businesses – this will be the cheapest way to secure finance.

  5. Jamie,

    “Markets” are places where products are traded. Financial markets are places where financial products are traded. To say that banks = markets is ridiculous.

    Your friend is also making the cardinal error of defining all financial institutions who actively trade on financial markets as “banks” even if they don’t have banking licences, such as fund managers for example. Plus of course every small investor who owns shares or bonds in their own right, or trades forex.

    The trouble is, in the UK we tend to dump everything that doesn’t have a high street branch network into a bucket labelled “Investment Banks – Warning, Deadly Poison”. Consequently we don’t know what investment banks actually are, and we don’t distinguish them from non-bank financial institutions.

  6. Well not quite. Your Shells and BPs might access the bond markets and so do the stronger regulated utilities (although they also take bank finance), but a lot of the rest including service industries still go to banks or non-bank lenders (GE Capital and leasing companies). Trouble is there is precious little industry left in the UK to finance.

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