Why Nothing Changes

Does it seem incomprehensible to you that nearly two years after the derivatives market blew up the world's opaque and monopolistic commercial banks, taking your money with them, there's still no move to stop them doing it again? That they're still to be allowed to gamble your deposits and take what winnings they can without so much as a by-your-leave? It should. One of the points of Woolman Wonders was to point out that a post-bank financial system is easy to envisage, and would deal with the current system's dreadful breakdown in transparency and responsibility, and would, as a consequence, allocate savings better.

Yet there's no sign that any politician anywhere in the world is willing even to demand the divorce between retail banking and investment banking. They're all trying to reconstruct the system that failed so disastrously.

Want to know why? Here's a clue. Britain will do nothing without a lead from the US. And in the US, the policy is being determined by a US Congressional Financial Services Committee, chaired by Democrat Barney Franks. Let us consider this committee.

First, it's huge, with 71 members, of whom 42 are Democrats, and 29 are Republicans. At first sight, that looks like a big majority for the Democrats - not usually considered the friend of Wall Street (let us suppose). But delve a little closer and something very strange appears: of those Democrats, a dozen hold seats which are, in British terms, marginals.

Let's name them: Paul Kanjorski (PA); Ron Klein (FL); Travis Childers (MS); Walt Minnick (ID); John Adler (JB); Mary Jo Kilroy (OH); Steve Driehaus (OH); Suzanne Kosmas (FL); Alan Grayson (FL); Jim Himes (CT); Gary Peters (MI): and Dan Maffei (NY).

For all these Representatives, the best hope for re-election is to spend money - loads of it. The total campaign spend for the coming Nov mid-term elections is . . . US$3.7 billion according to the US Center for Responsive Politics.

Where will these poor marginal Democrats get their finance from? Nancy Pelosi might as well have hung a 'For Sale' sign on the Committee door.

One further thing, even if just half of those 12 Committee members looking for money to fight their marginals vote against significant financial reform, the Committee is deadlocked.

There is a moral to this. If we want to develop a post-bank financial system, we'll have to fight for it. We'll have to become a more powerful political force than Wall Street.