Friday, October 16, 2009

New City of London promoter coming

A debate was held in the British parliament on Wednesday, a transcript of which can be found here, under the headline City of London (it starts on p90 under the pdf numbering system.)

We note this intervention from Mark Field, the Conservative Member of Parliament who represents the Cities of London and Westminster, and is a supporter of the world's most important tax haven:

"Since last year, the City of London corporation has been working to set up a new body with the aim of providing a single focus for promoting the financial services industry to a domestic and international audience.

It will work alongside existing bodies in international finance, and Sir Stephen Wright plays an important role in that regard, working with the Mayor of London, who clearly has an interest in the issue. There has been some tremendous co-ordination under the auspices of the City of London corporation, with one eye very much on the future and the importance of our capital.

As a starting point, a small steering group has been established, and it is anticipated that the new body will be launched and perhaps named later this year. It will be independent, practitioner-led, politically neutral and cross-sectoral."

This is worrying news. As if the City of London did not already have enough help. If "practitioner-led" means "led by financial services professionals" -- as it seems to - then how ever can it hope to be independent? As John Grogan MP had already noted:

"In this generation, the reports done on the financial crisis have largely been insider jobs. The Bischoff report was commissioned by the Treasury. Of the eight people who were the secretariat or the sherpas for that report, seven came from the City of London; only one was a civil servant."

Quite, absolutely so, as this recent report -- which Grogan cites -- makes absolutely clear. He then harks back to an earlier age, when politicians were not quite so captured as they are today:

"Looking at some of the previous inquiries on finance, I think that the Wilson committee was active in the 1980s, Macmillan did a report in the ’30s, and the Radcliffe committee worked in the ’50s. A much wider range of people were involved in the reports and in coming to the conclusions that those committees reached. Those reports stood the test of time for a generation—I studied them when I was doing my economics A-level and degree. In this generation, there perhaps has not been an outside look at the City following the financial crisis."

It is a sad state of affairs. We do not use this word "capture" lightly - for that is exactly, and wholeheartedly, what has happened to this British blogger's beloved country.

It is time, instead, for a major public enquiry - a Royal Commission - which gets to listen to the interests of everyone, not just those at the trough. And in this context, it is worth bearing in mind this little story by John Pugh MP:

"I represent a seaside town which for decades had a profitable sweet factory, making a product called Chewits. I did not eat it much myself, but it sold well at the seaside. I went to see the company when it was in process of retooling; it was profitable and doing rather well. It employed people who had to operate at a relatively skilled level and it provided a good mix of employment.

It was then bought by a City company. The machinery was sent to eastern Europe, the skilled work force was sacked, the job mix in the town was worsened, the carbon footprint of production was increased and the land was sold for housing. The UK economy did not benefit, but profit was made in the City. That may be the operation of a free market, but I question, in those circumstances, whether it is wise."

Well said. There was much else in the debate -- they spent a lot of time talking about hedge funds - which we'll blog if we get time - and much more. Here we'll just highlight one or two smaller points.

The Conservative MP Mark Field argued that

"the City was regarded— certainly between 1914 and about 1986—very much as a club, it has become much more open"

Well, that is true up to a point -- although it does rather goes against the grain of the media response to Lord Turner's recent queries about financial services and social uselessness, as John Grogan noted:

"they started criticising him [Turner] in The Daily Telegraph in the days following the speech for the way he tied his bow tie. Apparently, he is a clip-on man."

Yet Field did, however, despite his generally pro-finance views, come up with an interesting idea:

"I have a suggestion; in many ways, it is a “back of the envelope” suggestion. It is that unless the senior directors of a bank can explain, within two sides of A4, a product that they are trying to create, such a product should not be marketed by that bank."


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