The Problem with Banks

Lena Rethel, Timothy J. Sinclair

• Publisher: Zed Books
• Year: 2012
• Print ISBN: 9781848139398
• eBook ISBN: 9781848139411
• Edition: 1
• Topic: Economics
• Subtopic: Banks & Banking
• Index: Economics

Banks of all sorts are troubled institutions. The cost of public bail-outs associated with the subprime crisis in the United States alone may be as high as US$5 trillion. What is the problem with banks? Why do they seem to be at the centre of economic and financial turmoil down through the ages? In this provocative and timely book, Rethel and Sinclair seek answers to these questions, arguing that banks suffer from perennial problems, and that developments in the financial markets and government in recent decades have simply exacerbated these issues. The book examines banking activity in America, Asia and Europe, and how specific historical circumstances have transformed banks' behaviour and attitude to risk. While many see government as a constraint on banks, Sinclair and Rethel argue that what governments do in terms of regulation shapes banks and their motivations, as can be seen in the shortcomings of current reform proposals. Instead, more far-reaching, alternative ways of regulating and shaping banks are needed. A concise, essential overview of a pressing global issue.

INDEX

ABN Amro, 77

Afghanistan, battle deaths, 90

AIG (American International Group): bailout of, 64; case of, 110

Amazon, 68

‘animal spirits’, 37, 123

Arab–Israeli conflict, 53

arbitrage: banks, 62; cross-border, 22; regulatory, 4, 19, 104, 119, 126

arbitrageurs, rationality assumption, 35

Arendt, Hannah, 68

Argentina: debt default, 54; US dollar peg, 45

Arthur Andersen, 46

Asia: bond funds establishment, 61; financial sector reforms, 14

Asian financial crisis 1997–98, 13–14, 45, 60, 93, 114, 116; bank mergers, 110; consequences, 78, 115

asset-backed securities, 3, 128

authority: ‘consequential speech’, 67; understanding of, 68

Bachman, Mark, 56

Bagehot, Walter, 11

Bailey, Fenton, 55

bailouts, governments of banks, 3, 16, 107

Baker, Andrew, 48

Bank of America, 125; merger result, 63

Bank of England, 33, 47, 84, 105; chequered history, 11

Bank of New York, 12

bankers: bonus culture, 40, 73, 81–2; incomes of, 93–4

Bankers Trust, 86

Bankhaus Herstatt, collapse, 84

banking, beauty contest analogy, 38; constitutive rules, 40; crises regulation consequences, 2; expert knowledge claim, 127; global scale 18–19; high entry barriers entry, 43; Italian city state origins, 10; maturity mismatch, 32; nineteenth-century crises, 41; synchronic logic increase, 25

banks: Asian lending fall, 62; authority claim loss, 67–9; bailouts of, 3, 16, 107; balance sheets uncertainty, 49; Basel legitimized risk models, 87, 92; breaking-up proposals, 4–5, 99–100, 106–10, 112, 117, 120; buildings image, 30; capital requirement, 117; concentration, 4, 63, 107; conflicts of interest, 15, 102; crisis prone nature, 8; cultural norms, 130; default costs, 15, 60; household assets proportion fall, 59; identity change, 7; illiquid loans, 32; internal risk assessment, 85–6; legitimacy crisis, 34; motivations, 22; national differences, 18; political nature of, 10; public funds recapitalized, 96; recent pressures on, 124; reform discourses evolution, 111; regulation change, 71; runs on, 33; safekeeping function, 9; short-termism, 2, 82; size, safety illusi...

Table of contents

• Cover
• Half Title
• About the Author
• Title
• Copyright
• Contents
• Dedication
• Glossary
• Preface
• One Banks in Crisis Time and Time Again
• Two Banking is a Confidence Game
• Three Disintermediation and Financial Innovation
• Four Self-Regulation and Risk-Taking
• Five Problems with Reform Proposals
• Conclusion
• References
• Index