The Bank of England in Threadneedle Street, London.. (Photo credit: Wikipedia)

The Daily Banter headline grab (from the Independent):

The Bank of England today appeared to rule out an early cut in interest rates to boost the flagging economy despite slashing its growth forecasts for this year to zero.

In its quarterly inflation report, the Bank admitted that it now expected the economy to grind to a halt in 2012 – compared to its prediction in May of 0.8 per cent growth.

But the Governor of the Bank of England suggested it was not considering cutting interest rates further from their current historic low of 0.5 per cent warning that the move could be “more counterproductive than beneficial”.

Announcing its revised forecasts Sir Mervyn King blamed the crisis in the eurozone, which he described as “a saga that goes on, and on, and on”, as the main cause of the slowdown.

But he also said the Government’s tough austerity measures had been a drag on growth. He added that the extra bank holiday in June for the Diamond Jubilee celebrations had reduced output by around 0.5 per cent.

“The underlying picture is that output has been at best broadly flat over the past two years, and has continually disappointed,” he said.

“The overall outlook for growth is weaker than in May reflecting downside news in the near term and, in the medium term, the possibility that the weakness in output and productivity growth that we have seen since the financial crisis persists.”

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The Bank of England‘s executive director has raised the prospect of official intervention against free banking in an effort to clamp down on mis-selling of financial products.

Andrew Bailey also highlighted the debate about the speed at which banks are being required to hold more capital.

Having urged banks to construct contingency plans for the break-up of the eurozone, the top banking regulator also reiterated that the “biggest risk to stability that we face” came from the euro area.

He said: “Whatever happens in the euro area, there is a cost of adjustment, and that, too, will act as a drag on the returns earned by banks, and in the worst scenario presents a clear threat to financial stability.”

Bailey is acting head of the body that is to become the Prudential Regulation Authority, which is to be set up in the Bank of England to oversee the industry after the resignation of Hector Sants.

He has previously caused controversy by suggesting free banking, where current account customers in credit do not a pay a fee, was “a myth” – but goes a step further, raising the need for official intervention.

He said free banking might encourage mis-selling of financial products because of the “unclear picture” of the price of banking, saying reform of the banking industry could not take place until “we have a much better sense of what we are paying for and how we are paying”.

He added: “But in truth this is not something that will happen spontaneously. It is hard for a single bank to break out of the existing situation without appearing to raise the price of its service to customers even though it may not actually be raising the price as a whole. And, it is hard for the industry as a whole to break out without appearing to collude.

“So, it may require intervention in the public interest, not least because it is a way to encourage greater competition … But, even if I am like a dog with a bone on this one, I don’t think we will have a retail banking industry that is properly serving the interests of the public until we tackle the dangerous myth of free in-credit banking.”

Read more at the Guardian…

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When you hear the word 'bank' you automatically think 'capitalism'. After all, banks have capital and fund all sorts of ventures that make the economy work. Synonymous with capitalism is the theory of competition – markets are free and competitive leading to transparency and better prices for everyone. There are many banks in America and they all compete for business. If they offer competitive loan rates, they get more customers and more business. 

Right?

Wrong. At least in America, that is.

According to Matt Taibbi when it comes to underwriting bonds for state government, 80% of the time, banks never have to compete for contracts costing the tax payer literally billions of dollars a year:

Imagine what NFL gambling would be like if the casinos didn’t publish the point spreads every week, and you’ll get a rough idea of how the swap market works. If you couldn’t look it up, how many points would you give the Dolphins against the Jets next week? Two? Five? Seven? The big casinos know, because they’re taking all that action, that the real number is one point.

In the same vein, exactly how accurately do you think some local county treasurer might be able to guess the cost of an interest rate swap for his local school system?  Answer: he’d probably do about as well as you or I would, guessing the odds on a Croatian soccer match.

The big banks know this, which is why there should never, ever be non-competitive bids for those sorts of financial services. In a sole-source contract for a swap deal, you’re trusting a (probably corrupt) Too-Big-To-Fail bank to give you a good deal for a product whose price is not publicly listed anywhere.

And that's capitalism American style – uncompetitive, non-transparent and completely unrelated to a 'free market'.

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A great report from The Real News on black activists joining the struggle against foreclosures with the Occupy Wall St movement:

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Molly Katchpole, 22 years old, took on Bank of America over its ridiculous debit card fee and won. Just goes to show what happens when people decide to stand up to power. From the Guardian:

I called on Bank of America to back off the new debit card fee, knowing that if Bank of America did, the other banks would, too. I was unprepared for the outpouring of support I got online from others who felt the same way. I never thought of myself as an activist before this, but suddenly, thousands of people were signing my petition each hour – sometimes, up to 40,000 per day.

In the end, more than 300,000 people from all walks of life had joined the campaign. And what is even more awesome, it has inspired dozens of other people to start their own campaigns against their banks. Those 300,000 voices brought unimaginable pressure on Bank of America. Brian Moynihan, Bank of America's CEO, was forced to answer to us on national television. The other big banks, facing an outpouring of customer outrage, were eager to ditch their fees and avoid the same public pummeling Bank of America got. Once Bank of America stood as the last major national bank considering such a fee – and the primary object of American consumers' anger over outlandish banking fees – it had no choice but to stand down.

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Andrew Sullivan believes Obama may be able to use the anti Wall St protests that have now gone global to his advantage:

The question hanging in the air will be the president's response to the movement. So far, he's been as vague as the movement itself. But if Obama can reframe his political future as harnessing this street power to hold the powerful accountable, if he can leverage it into passage of the American Jobs Act, and if he can cite this inequality as a reason for major tax reform with entitlement cuts and revenue increases, then Romney suddenly looks like a defensive plutocrat.

I disagree. As much as I support Obama, his record of aquiescence to the banking industry makes him irrelevant in this movement. The Democrats have used anti war sentiment, anti Wall St sentiment and a host of other anti establishment feelings to their advantage, and essentially sold the public down the river. Obama was elected on a wave of populist feeling that spread across the country in response to the hopelessness of the Bush years. While he has done some good, he has done little in the way of serious financial reform or structural change of the economy. Obama surrounded himself with Wall St figures and continued to make legislation based on their interests.

This time it seems, the protests are not concerned with supporting one candidate over another. They are concerned with real change, and unfortunately, the current crop of politicians, including Obama, are incapable of delivering that. 

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(Bank of England)

Britain woke up to the following news today:

Sir Mervyn King expressed fears that Britain is in the grip of the world's worst ever financial crisis after the Bank of England announced it was injecting £75bn into the ailing economy.

The Bank's governor said the UK was suffering from a 1930s-style shortage of money and needed a second dose of quantitative easing to boost demand and prevent inflation falling too low.

'Quantitative easing' is a complicated way of saying 'bail out money' – only it's used to buy crappy assets purchased by banks, not help regular people. The money will be printed and injected into the economy in the hopes that the stock market won't disintegrate. Corporations and the rich need to be assured that the government has their backs, so as expected, the Tory government is all over this.

The hypocrisy, as always, is stunning. Government handouts for the rich are labelled 'quantitative easing' while welfare and jobs programs are called  'bailouts'.

Regardless, it's proof that the only way to recover from a recession is to spend your way out of it. Not exactly standard conservative economics.

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It seems to me one of the major problems we’ve got is credit drying up. So we bail out the banks, yet they still don’t extend credit. They seem to think expensive trash cans for CEOs are a bigger priority. Perhaps we need banking – in some way – to become a federal concern. That way you extend credit and have the federal government absorb and back the risk. Of course the downside is you add federal bloat to the process, and while you might want to make it temporary, that sort of thing has a tendency to become permanent when the feds get involved.

Its not an idea I’m wild about, but so far the solutions seem to be lacking otherwise. I certainly don’t trust the banks to come around, they were one of the engines that drove us into this ditch to begin with.

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