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Ben Chu: Kamm's massacre of straw men

Posted by Eagle Eye
  • Tuesday, 23 March 2010 at 04:37 pm
Oliver Kamm has started attacking straw men in his efforts to justify his position on the banks.

He criticises the notion that the financial crisis was the fault of "greedy bankers". But that's not an argument I've put forward. And, to my knowledge, neither have Nick Clegg or David Cameron. Kamm deserves some credit for rejecting the rightwing idea that responsibility for the 08 meltdown can be pinned on governments. But it is disingenuous for him to imply that those who regard the banks as vested interests are a bunch of adolescent class warriors.

Kamm also says that the bank bailout was not a case of them "holding the country to ransom" in the manner of 1970s trade unions. But, again, this is not an argument that has been made by those who argue that the "too big to fail" banks have too much political power. The charge against the banks is that they are using their considerable lobbying muscle to fight official attempts to regulate them and cut them down to size - and, moreover, that they are succeeding.

James Carville's famous quote on wanting to be resurrected as the bond market, which Kamm references, is a red herring. The power of bond investors over elected politicians is open for all to see (and justified in that they have an interest in getting all their money back). The evidence of that influence can be seen in the bond yield. The lobbying power of the large banks is much less visible (although not entirely hidden see
here). It is also deeply unhealthy.

I notice that Kamm does not return to his argument that universal banks are better for the economy than smaller banks. But he does say "the economy and the corporate sector…will benefit if the banks are stronger". Here Kamm comes dangerously close to arguing that what is good for the banks is good for the economy. That's surely the kind of wrongheaded thinking that got us into this mess in the first place.

By all means set bankers free to "maximise profitability". That's a perfectly reasonable objective and we do indeed benefit from it as a society when they are successful. But let them do it subject to the disciplines of a capitalist system, in other words, without a comfortable safety net provided by taxpayers.



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