Courtesy of Pam Martens.
If you want to engage in a serious effort to reform Wall Street, buy two copies of economist and financial writer John Kay’s book coming out in the U.S. on Tuesday. Keep one copy of the book for yourself (share it with family and friends) and send the other copy to a member of the Senate Banking committee. That committee is highly likely to be looking at reforming Wall Street again in the near future, given the convulsions in equity, credit and commodity markets of late and an endless stream of ongoing charges of corruption against the mega banks.
In his book, Other People’s Money: The Real Business of Finance, Kay demonstrates not only a sagacious understanding of the grotesque underpinnings of financial markets but he maps out a series of common sense, structural reforms to bring the financial industry back to its key mandates: efficient allocation of capital and honest handling of other people’s money.
From beginning to end, Kay peels back the crass hypocrisy of the market overseers, writing that much of what the financial sector does “contributes little, if anything, to the betterment of lives and the efficiency of business. And yet many things that finance could do to advance these social and economic goals are not done well – or in some cases at all.”
What the financial sector has ably done, says Kay, is brainwash politicians and a chunk of society to the idea that it is “special.” “But,” says Kay, “finance is not special, and our willingness to accept uncritically the proposition that finance has a unique status has done much damage…The industry mostly trades with itself, talks to itself and judges itself by reference to performance criteria that it has itself generated.”
Political leaders, funded in their campaigns by the financial sector, have been major purveyors of the propaganda that Wall Street is a unique industry that must be protected at all costs. Kay writes:
“…political leaders have set their public faces against future bank rescues while their operatives have reassured markets that they do not mean what they say. President Obama could assert that the passage of Dodd-Frank means ‘no tax-funded bailouts – period,’ while his Treasury secretary not only upheld the ‘Geithner doctrine’ – no significant financial institution would be allowed to fail – but also provided an extended defence of that position in his memoirs.”
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