Saturday, October 04, 2008

Martin Wolf, Scourge of the Bankers

In his spirited defence of liberal capital markets and free trade, Why Globalization Works, the associate editor and chief economics commentator of the Financial Times, Martin Wolf, addresses the question of effective banking regulation. He writes:

"The management of any systematically important bank that has to be rescued by the state should be disbarred, as a matter of course, from further work in the financial industry. Remember the fundamental point. Big banks have consistently operated in the knowledge that their profits are private and losses, if large enough, public. In other words, the institutions they run are underpinned by the state. Managers are, in an important sense, public servants. If they abuse that trust, they should be treated accordingly."

Why Globalization Works (Yale, 2005, paperback edition, page 298)

So, what should happen to the managers of those banks now being rescued by the state in the US and the UK? In the view of the associate editor of the Financial Times they should be barred from further work in finance, as far as I can tell.

3 Comments:

Blogger John Christensen said...

Investigators in the US have already unearthed sufficient evidence to start prosecutions against literally hundreds of advisers engaged in mortgage loans, but the problems run far higher up the ladder, and cover a very wide range of issues. Take a look, for example, at Swiss banking giant UBS' predicament in the United States, which reveals the most extraordinary culture of aiding and abetting criminal activity: http://taxjustice.blogspot.com/2008/06/revoke-ubs-banking-license.html

I have a great deal of time for Martin Wolf's work, but until very recently he has steered well clear of one of the greatest faultlines in the process of globalising financial markets, namely how capital mobility undermines national sovereignty in tax matters, enabling tax evasion on an industrial scale (think about the proliferation of tax havens since the 1970s) and supporting harmful tax competition. Wolf has recently responded to me on these issues, but his position remains weak:

http://taxjustice.blogspot.com/2008/05/tax-competition-tjn-in-ft-economists.html

and

http://taxjustice.blogspot.com/2008/06/martin-wolf-on-tax-competition.html

Regards

John Christensen
Tax Justice Network

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