First of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror, which paralyzes needed efforts to convert retreat into advance. […]
We face our common difficulties. They concern, thank God, only material things. […] The withered leaves of industrial enterprise lie on every side. Farmers find no markets for their produce. And the savings of many years in thousands of families are gone. More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment. […]
Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. […]
Yes, the money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. […]
This nation is asking for action, and action now. […]
There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people’s money. And there must be provision for an adequate but sound currency.
These, my friends, are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the forty-eight states.
How deregulation created the world's financial powerhouse
DAVID BUIK
In the early 1960s, there were just 400 stockbrokers and a handful of jobbers with Wedd Durlacher and Ackroyd & Smithers trading stocks and shares on a gentlemanly basis on the floor of the Stock Exchange in Threadneedle Street.
But this world was about to change. Banks from the US, Europe and Japan opened branches in their droves in the 1970s, and activity increased when exchange controls were abolished in 1980. The Thatcher government was determined to break down as many trade barriers as possible with a view to stimulating an economy that had been ravaged by inflation under the Wilson and Callaghan administrations.
By the mid-1980s there were more than 300 trading banks in London. Privatisations were lucrative for merchant banks, and adding buoyant insurance, shipping and commodity markets to the equation made London a boom town.
In 1986, Big Bang, the Conservatives' deregulation of the stock market, changed the City for ever. Intended to develop a competitive finance centre by breaking the old boys' network and introducing the principles of the free market, it succeeded in creating arguably the world's most important banking hub. Price cartels became unacceptable and a code of conduct - draconian by previous standards - was introduced.
The Serious Fraud Office made sure the code was implemented by bringing Ernest Saunders, Gerald Ronson, Anthony Parnes and Jack Lyons to book over the Guinness affair. Suddenly, the US investment banks ruled a market-making society by openly challenging the established UK banks, making acquisitions in areas and products that had previously been denied them.
Within three years there were far fewer trading establishments, replaced instead by larger conglomerates. The only UK successes of Big Bang were Warburg, which bought Mullens, Rowe & Pitman and Ackroyd, and to a lesser extent Barclays, which acquired Wedd and de Zoete & Bevan.
Cazenove, Schroders and NM Rothschild sought, correctly, independence. It was the big foreign banks that started to dominate proceedings. The City of London was bulging with new office premises. Technology took hold and London's Stock Exchange went screen-based.
The unlisted securities market was dispensed and the alternative investment market came a decade later. The advent of trading financial futures at Liffe, which opened its doors at the Royal Exchange in 1982, triggered the explosion of the most sophisticated derivative markets in the world. Suddenly, there wasn't enough room in the City.
In the past decade, as technology has improved, Canary Wharf has become home to many banks, while fund managers and hedge fund managers have moved to the West End. Their pre-eminence since the Iraq war has seen them seek out prestigious premises more becoming of their place in financial society.
David Buik is a money manager with BGC Partners
Mere om deregulering i The Guardian.
”Beginning in the 1980s or earlier, the US banking sector lobbied Washington to repeal the Glass-Steagall Act, a statute that had been on the books since the 1930s. Glass-Steagall was part of a package of banking reforms put in place by president Franklin D Roosevelt to restore trust in the banking system.
After the Great Crash of 1929, Wall Street was vilified for misleading the masses. Congress introduced legislation that diluted the power of big financial institutions, splitting up commercial and investment banking into separate functions. According to the act, commercial banks were not allowed to use depositors' money to finance profit-making investments other than loans.
But the US banking sector argued that Glass-Steagall was hampering its ability to compete with rivals in Europe and Asia, which were increasing in size through a series of mergers. US banks put pressure on Congress to deregulate so they could use complex financial instruments that held out the promise of higher financial rewards.
The other argument for deregulation was that customers would be able to buy financial products from one company. This one-stop shop, the banks argued, would allow them to make more money by cross-selling their products to customers. While banking lobbyists piled on the pressure in the corridors of Congress, the US banking sector created facts on the ground.
When Citibank completed its merger with Travelers in October 1998, the deal drove a coach and horses through Glass-Steagall. One year later, banking's equivalent of the Wall of Jericho came crashing down. In 1999, Glass-Steagall was repealed, together with the bank holding company, a mechanism that was introduced in 1956 and provided the basis for modern US banking.
Glass-Steagall was replaced under the Clinton administration by the Gramm-Leach Financial Modernisation Act. This blurred the lines between the commercial banks that made their money through loans, and the more risky ventures of investment banks. The new bill ended the rules that limited the ability of banks to underwrite securities, which prevented them from engaging in new lines of business such as insurance.
As Robert Kuttner, an economics expert, testified before Congress last year:
"Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s — lending to speculators, packaging and securitising credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s."
The repeal of Glass-Steagall coincided with low interest rates that put pressure on financial institutions to seek higher returns through more arcane financial instruments. Wall Street investment banks, with their appetite for risk, led the charge.
Bear Stearns and Lehman Brothers became heavily involved in property, underwriting billions in mortgage-backed securities and investing in commercial property. Bear Stearns had the fortune to be rescued by JP Morgan from its ill-fated foray into the sub-prime market.
Not so Lehman. In the UK, Northern Rock came a cropper by borrowing money to fund its loans and mortgages. When borrowing dried up because of the credit crunch, the Rock had to be bailed out by the Bank of England.
US banks — particularly investment banks — are in difficulty because they were granted what they wished for. Left to their own devices, several have managed to ruin themselves and create havoc in the international financial system. Wall Street bankers may be wishing that regulators had kept them on a tighter leash, not least because fewer of them would be out of a job today.”
http://www.guardian.co.uk/business/2008/sep/15/lehmanbrothers.marketturmoil1
Glass Steagal Act
Gramm-Leach-Bliley Act
Hele den omtalte økonom Robert Kuttner's testimony ved kongressen kan læse her.
