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Anorak | What we have done about banking and what we will do about banking

What we have done about banking and what we will do about banking

by | 1st, March 2013

I KNOW, I know, I’m a shoddy apologist for the banksters and all other neoliberal thieves going. But I do keep trying to point to the effects of things.

For example, you know we were all told that excessive speculation is what made prices jump around all over the place? And in one market at least, that speculation was stopped:

Trading volumes in sovereign CDS have plummeted as much as 50%, according to traders, four months on from a European Union-wide ban on speculative positions came into force.

Data from Citigroup and the DTCC showed that the net amount of outstanding CDS for all EU sovereigns has sunk 27% from around €124bn in mid-2012 to about €98bn. This follows the ban on “naked” short positions in sovereign CDS – that is positions that are not hedging an underlying position – having kicked in last November.

Excellent, eh? Well, sure, but the important thing is, well, has this meant that prices are jumping around less than they used to be?

Yields on 10-year bonds surged 34 basis points on Tuesday, pushing the spread over German Bunds to 330, with traders eyeing the 400 level where stress begins in earnest. Italian bank shares tumbled in Milan, with Intesa Sanpaulo down 8.4pc on fears of losses on sovereign bonds.

Not obviously, no.

And the problem with this is that of course no one is ever going to come back and say, well, you know what, we were wrong in passing that law. Let’s undo it then, eh? Which brings us to what they’re going to do in the future:

Bankers in Europe face a cap on bonuses as early as next year, following agreement in Brussels on Thursday to introduce what would be the world’s strictest pay curbs, in a move politicians hope will address public anger at financial-sector greed.

The provisional agreement, announced by diplomats and officials after late-night talks between EU country representatives and the bloc’s parliament, means bankers face an automatic bonus cap set at a par with their salaries.

European bankers will face this cap. Non-European bankers will not. So, if the original case, that that chasing after bonuses is what caused the problems, were indeed true then we would see non-European banking performing much worse than European. But just imagine, for a moment, that this does not happen. That, in fact, the capping of bonuses does not “solve” the problem.

Can you imagine anyone at all therefore arguing that we should repeal the law? You know, faced with the evidence that it’s not a solution to whatever the problem is, that the eividence will win rather than political prejudice?

No, quite. Which is rather why I’d prefer to see such laws not passed in the first place.



Posted: 1st, March 2013 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink