https://anotherangryvoice.substack.com/p/rachel-reeves-insane-plan-deregulate-financial-sector-gamblers
City deregulation exploded in Labour's faces in 2008, yet Reeves is ignoring the warnings from history and pushing ahead with plans to deregulate reckless financial sector gamblers again.
Another Angry Voice
Dec 19, 2024

In the wake of the 2007-08 financial sector meltdown, cynical Tories attempted to dupe the gullible into believing the crisis was caused by "Labour overspending" in order to push George Osborne’s economically insane "let’s cut our way to prosperity" austerity agenda.

The real cause of the global financial sector meltdown was reckless financial sector gambling, enabled by decades of financial sector deregulation (in the UK, US, and elsewhere).

In the UK, Labour encouraged the dangerous financial sector free for all with their insistence that the city regulator adopt a "light touch" approach to regulating financial services.

When the markets in Collateralised Debt Obligations and Credit Default Swaps imploded and obliterated the global economy, it became clear that bankers had been betting extraordinary amounts on complex and risky financial investments that they clearly didn’t properly understand.

In hindsight it was extraordinarily risky to allow banks to package up their bad debts and sell them to each other as prime investments, but politicians and regulators at the time were arrogant enough to believe that reckless deregulation had brought about an end to the era of "boom and bust" economics.

They were wrong. Spectacularly wrong. And it resulted in the most spectacular bust ever, with the biggest package of bailouts ever required to save the financial sector from the consequences of their own reckless gambling.

Ever since the financial sector implosion in 2008 it’s just been one bust after another, while any potential grass roots of recovery in the UK have been salted to death by Westminster austerity dogma.

There’s a generation of workers in their 30s now who have never experienced the economic good times. They’ve lived through the Global Financial Sector Meltdown; the post Brexit referendum currency crash; Covid; self-imposed Brexit economic sanctions; Liz Truss’s disastrous mini-budget; and the inflation crisis.

Meanwhile they’ve been punished with wage repression policies, austerity cutbacks, and rip-off student debt repayments, while the bankers who trashed the economy got fat on bailouts, quantitative easing cash, and lavish bonuses.

And what’s Rachel Reeves’ proposed solution to all of these problems?

She wants to slash financial sector regulations to enable another orgy of risky investments, while continuing with Tory-style austerity cutbacks!

Experts have warned her in no uncertain terms that Britain’s bloated financial sector has very little social or economic utility; that it acts as a brain drain siphoning the brightest and best away from industries that could actually generate economic growth; that it predominantly inflates the value of existing assets rather than promoting growth; and that what’s needed is better regulations, not another orgy of reckless economic gambling.

If Reeves really wanted to improve the financial sector, she’d bring in new rules to incentivise lending towards productive areas of the economy ahead of further inflation of property and asset bubbles, and she’d increase the social utility of banks by forcing them to offer the best interest rates to ordinary people seeking to buy family homes, rather than feeding Britain’s debilitating infestation of idle and economically unproductive property hoarders.

If banks consider it "risky" to prioritise lending to productive businesses and people who just want to own their own homes, because it’s more profitable to gamble on financial assets and bankroll property hoarders, the government should step in and regulate them into lending into socially beneficial and economically productive areas of the economy.

The solution to financial sector "risk aversion" isn’t to just rip up the rules and let the bankers conduct another dangerous orgy of reckless lending, it’s to push them into the kind of lending that’s actually good for ordinary people and the wider economy.

There’s absolutely no prospect of anything like this happening because Reeves is about as much of an orthodox Thatcherite as it’s possible to get.

The entire Westminster establishment class has been infested with the hard-right capitalist delusion of the free market, which is that giving more power to the most greedy and self-serving in society somehow magically results in the best possible outcomes.

Reeves is as obsessed with this ideology as any Tory, and that’s how we’ve ended up with a Labour government that mugs pensioners; economically sanctions children for the "crime" of having more than one sibling; continues with ruinous Tory austerity; and harps on about how they’re going to unleash a new wave of financial sector gambling as if it’s a great idea.

It’s not just just a deeply unpopular and dangerous policy agenda, it goes against everything the Labour Party is supposed to stand for.