The Vampire Squid is coming: 06/12/2010 www.neweconomics.

org

How do they get away with it?

The Great Transition campaign to take back our banks
‘Of all the many ways of organising banking, the worst is the one we have today.’
Mervyn King, Governor of the Bank of England

Why is it a problem?
Many people are unhappy with the banks. Some have been likened to ‘vampire squids’ Why is everyone so angry,
and are they right to be?
 Nearly £7 billion will be paid out in City bonuses this year.i
 The sum of £7 billion is more than the first wave of public spending cuts
 Attempts to change bad bonus behaviour with a levy failed according to former Chancellor Alastair
Darling
 The banks face a so-called ‘funding cliff’ next year. It means that they need to borrow much more
money to keep operating, around £25 billion a month – more than double recent trends. Lack of other
sources makes it likely the banks will ask for more public support.
 £25 billion a month may seem small compared to the total bail-outs of recent years but it amounts to: one-
half of annual current expenditure on education; or one-quarter of annual current expenditure on health;
 We’re told that there’s no alternative to huge public spending cuts in the wake of the crisis-driven
recession. Yet, add together all the taxes in the UK that go unpaid, evaded or avoided and you come
to a figure of £120 billion.ii A vigorous effort to collect even a share of that would completely change the
debate. Yet the banks, and the accountants and lawyers that win lucrative business from them, are busy
finding ever more ingenious ways to help their clients pay their fair share of tax.
How can it be that the banks are in this situation again after getting the biggest bail-out in history? The promised,
serious and necessary changes to our banking system simply haven’t happened.

What are we doing about it?

‘A great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into
anything that smells like money.’
Rolling Stone journalist Matt Taibbi on the investment bank Goldman Sachs
We’re talking to the main enquiries into the broken finance system like the Independent Commission on Banking
(the so-called Vickers’ Commission) and the Treasury Select Committee. We’re working with other researchers,
analysts and campaign groups. Together, we’re working to restore a little sanity to our finance system.

The ‘Vampire Squid’ animation is a rallying call. The good thing is we’re not alone and real, working alternatives to
the current system are available. Did you know that Sweden has a major bank, Svenska Handelsbanken where
they don’t give bonuses at all? It gets by just fine. There are even voices at the heart of the establishment like
Mervyn King, Governor of the Bank of England, and writers like Martin Wolf of The Financial Times starting to talk
about very fundamental reform of the banking system. King is emphatic that some of the much lauded attempts to
reform banks are thoroughly inadequate and Wolf questioned why the creation of new money should be left to the
‘foolish lending’ of commercial banks.
What can be done to take back our banks?
At last questions are being asked about how to make the banking system fit for purpose. And, government plans to
measure well-being pose an even deeper and long overdue question about the actual purpose of the economy. It’s
a question nef (the new economics foundation) has long said needs asking. But, even on its own terms the banking
system is broken. To design one that is fit for purpose and able to underpin the imminent great transition to a new,
low-carbon, high wellbeing, and stable economy, we need to revisit the social and economic contract that banks
have with society. Banking should be more like a public service, a utility that helps the productive economy
function. That means a root and branch rethink. But to get us going, here’s a few things that can be done now:

Out with the old:

 Separate retail banking and speculation. Banks should separate out their risky activities and insulate
their retail services from the volatility of international capital markets.
 Break up banks that are ‘too big to fail’. Reduce banks to a size at which their failure would not threaten
the wider economy.

In with the new:

 Create a national Post Bank based on the existing Post Office network to address financial exclusion and
provide real, fairly priced competition in local communities.
 Finance the Green Investment Bank to channel finance towards developing the low carbon infrastructure
we need, enabling existing industry to go green and to build the skills to make Britain a world leader in the
field.
 Unshackle and promote alternative financial institutions such as credit unions and community
development finance institutions, and back them with an adequately resourced Big Society Bank.

Effective incentives for better behaviour:

 Introduce new controls on bonuses to stop the activities of banks being warped by bankers chasing
short-term speculative gains at the expense of long-term value creation.
 Introduce a financial transactions (or ‘Robin Hood’) tax. The IMF has proposed both a new levy on
banks as well as a tax on profits and remuneration. But an automatic transactions tax has broad benefits
too and should be brought in.
 Introduce a ‘Statement of Purpose’ requirement for banks and banking activities to allow regulators
and customers to assess how much the activity contributes (or doesn’t contribute) to a productive economy
that serves society and protects the environment.

Ensuring fairness, transparency, and stability:

 Launch a competition enquiry into the banks that looks also at the role played by ratings agencies and
accountancy firms. A competition inquiry is needed into the tight cartel of banks that raise funds for the
government and companies in the international capital markets.
 Introduce a Universal Banking Obligation and ensure a taxpayer ‘quid pro quo’ for future bank support.
There must be a Universal Banking Obligation which covers both location and a banking code covering the
principles of fair charges, and ensures that everyone has access to essential financial services.
 Introduce a UK Community Reinvestment Act which insists that banks lend money where they are
prepared to take deposits.
 Introduce country-by-country reporting this would makes banks disclose a profit and loss account and a
limited balance sheet for every location (without exception) in which they trade. This would establish a link
between what banks do and the people who ultimately bear the risk.

What can you do?

Support the campaign: Find out more:

The Great Transition

Sign up and help spread the
Vampire squid: Where Did Our Money Go?
http://38degrees.org.uk/giant-squid Manifesto for Better Banking
www.neweconomics.org i
According to the Centre for Economics and Business Research.
http://www.bbc.co.uk/news/business-11473352
ii
According to tax expert Richard Murphy of Tax Research UK.