Ooour Wullie is at it again. Here\’s the bare bones of his solution.
There are further positive measures. The government will guarantee any new issues of asset-backed securities, the packaged-up mortgages and suchlike that can be bought and sold, to get finance flowing again. It will even have the Bank of England buy them. This should allow home buyers to get mortgages again. It falls short of the mobilisation that James Crosby called for in his report on mortgage finance, but it has the advantage of extending credit to companies that cannot refinance their debts. It also allows the Bank, when it buys the securities, effectively to print money, a crucial breakthrough.
That Freddie Mac and Fannie Mae being built in England\’s green and pleasant land. Worked real well for the Americans, didn\’t they?
The government should go further. Northern Rock should be the government housing bank.It should be joined by a new national infrastructure bank and even a long-term industrial investment bank.
That would be like the German Landesbanks then. Which have worked so well for Germany, haven\’t they?
There needs to be an international effort to create simple clearing banks by outlawing the ability to mix commercial and so-called "investment" banking.
And that\’s Glass Steagal again. Something which the absence of hasn\’t in fact caused the current problems.
Betting our cash for personal gain should be outlawed.
Eh? So it is to be illegal to run a corporation now? What in tarnation does Will think that a company is? You stick money in via a share issue and the management punts it for pay. That\’s what a company actually is, a method of betting our cash for their gain: with us getting some of that gain if they bet right.
Our companies have chased after too high returns for too long and undervalued innovation and production.
So, umm, Will is suggesting that innovation and production will produce lower returns and yet, simultaneously, that this is something we want companies to pursue? That is, we should deliberately direct the economy so as to make us poorer than we could be?
And this man gets paid to write on economics?
That will be the same Will Hutton of the fake charity the Work Foundation
Actually John Kay suggests Glass-Steagall type reforms would be a good idea, although he is sceptical they can be effected and so suggests regulation should act as if it is.
Subscription only, I’m afraid (but there was a similar piece in the FT).
You don’t happen to know of any reason why Wullie would want a new bubble in housing, do you?
“Betting our cash for personal gain should be outlawed.”
The problem is that “savers” want the profit that comes from that kind of betting, but expect complete safety. The only way to achieve that is to make somebody else bare the risk, in this case the taxpayer, through depositor guarantees.
In any industry, if the government guarantees to return investors money in the event of a business failure, it creates an incentive to invest in the businesses offering the highest short term return, irrespective of how unsound they may be.
The banking sector has been anything but a free market and if anything has been shown to be a failure as a result of this crisis, it is government intervention. If people like Hutton genuinely believe otherwise, they are seriously deluded.
Hutton, several years ago, damned listed firms for being run for the short-term interests of shareholders – like pension funds. 10 years later, he praised listed firms as being more accountable, and damned private equity funds, for being, well, private and run by wicked investors.
Pingback: Bigger Government? Or Not? - Charles Crawford