Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Sunday, May 19, 2013

Sir Mervyn King: 'Stop Demonising Bankers Over The Financial Crash'

Sir Mervyn King has called for an end to the demonisation of bankers over the financial crash, insisting the problem was with the system rather than individuals.

The outgoing governor of the Bank of England said there was a failure to adequately regulate the financial sector and society had given "too much status" to those in the City.

Sir Mervyn also warned that George Osborne's plan to boost the housing market must not become a permanent scheme because it was "too close for comfort" to a general state guarantee for mortgages.

Bankers who presided over the collapse of their institutions have been the subject of angry attacks from politicians, the public and the press, with RBS chief Fred Goodwin stripped of his knighthood and last month former HBOS chief executive Sir James Crosby offering to renounce his own honour, along with a third of his pension.

But in an interview with the Murnaghan programme on Sky News, Sir Mervyn said bankers were only part of the problem which led to the meltdown in the financial services sector.

He said: "What bankers did was not the only explanation of the crisis that we had. What we had was a world in which interest rates had become very low, investors of all kinds - not just banks - were desperately searching for ways in which they could earn more return, so they took big risks. Those risks, some of them, went wrong.

"Where the banks contributed to the problem was that they themselves had taken too many risks on their balance sheet and they simply didn't have enough capital to absorb the losses that were likely to come along. People took fright, they lost confidence in the banks, they wouldn't provide money to the banks so the banks couldn't lend to businesses or households.

"I would say to people, though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of a failure of a system.

"We collectively allowed the banking system to become too big, we gave it far too much status and standing in society and we didn't regulate it adequately by ensuring that they had enough capital. We have to put that right."

Sir Mervyn said the reforms being made to the way the City was regulated would result in a "revolution in the way in which banking is handled and we will be able to be proud again of British banking".

He added: "We have a bit further to go but we are not far from it and in the next one to two years we will get there."

But Sir Mervyn raised concerns about the Chancellor's Help to Buy scheme, which will see the Government guarantee up to 15% of a mortgage on properties worth up to £600,000.

The scheme, which starts in January 2014, is due to run for three years and Sir Mervyn warned it must not be allowed to become permanent.

He said: "I'm sure that there is no place in the long run for a scheme of this kind.

"This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market.

"We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.

"So, we mustn't let this scheme turn into a permanent scheme. Now when is the right time to terminate it will depend on economic conditions at the time."

Sir Mervyn said the economy was in a "modest recovery" but "we certainly can't be satisfied with it".

He said: "We will need to do more to use up the spare capacity, and to get back to a healthy, growing economy. But we are in a recovery period now, I think, yes."

Sir Mervyn's concerns about Help to Buy echo those of the Treasury Select Committee, which reported on the Budget last month.

The committee warned the Government will come under "immense" pressure to extend Help to Buy in three years.

It said: "The unintended and unwelcome outcome could well be that a scheme designed to deal with a supposedly temporary problem in the UK housing market becomes a permanent feature of the UK housing market."

Help to Buy consists of two elements, an "equity loan" scheme and the mortgage guarantee.

Under the equity loan new or existing homeowners will need to raise a deposit of 5% of the value of the property they want to buy, but can borrow up to a further 20% from the Government on an interest-free basis. The biggest loan available will be £120,000.

Original Article
Source: huffingtonpost.co.uk
Author: PA/The Huffington Post UK 

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