In the FT today Gillian Tett points out that while the media glare falls on the big banks that are currently reporting their third quarter earnings, the real story is the Shadow Banking sector’s continued colonisation of those sections of the market that were once served by those very same big banks.
Rules that were originally brought in to make banks lend more responsibly and avoid another global financial crisis have created an opportunity for the Shadow Banking sector.
Despite low interest rates and quantitative easing ensuring that there’s plenty of money sloshing around the system, it’s taken innovation and financial engineering to bypass the new rules and kickstart lending to riskier borrowers i.e. small businesses.
Tett says “The real secret of of finance today is that the real credit growth in the US is happening in the world of private capital.”
She calls out the process whereby big banks lend to the Shadow Banking sector which in turn lends to small businesses as being nothing more than ‘regulatory arbitrage’.
As the journalist who warned of the imminent credit derivative fuelled credit crunch in her forensic piece The Dream Machine back in March 2006 – when it comes to regulatory arbitrage, this journalist really knows what she’s talking about.
Richard Thaler has just been awarded the Nobel Prize for Economics.
He’s best known for co-authoring the bestseller Nudge with Cass Sunstein in 2007.
Sunstein went on to become President Obama’s Regulatory Czar while Thaler provided the ideas for Oliver Letwin’s Behavioural Insights or “Nudge” unit.
Here Letwin, a former Thatcher adviser who wrote Privatising the World while working for N.M.Rothschild, introduces his take on what he refers to as Social Market Economics.
Some call it the Third Way.
Letwin boasts that given that Marxism has been thoroughly debunked ( or so he thought ), it is now possible to be both Deregulatory and Interventionist.
What is interesting about this statement is that he doesn’t mean Interventionist in the economic sense which would involve some form of nationalisation or meddling with the market such as QE.
Here he is talking about PSYCHOLOGICAL INTERVENTIONS a.k.a. NUDGE.
Letwin’s wife Isabel was the head of Legal Services for the Department of Health during the passing of the Health and Social Care act of 2012.
The Act opened up the NHS to Private Health Insurance firm United Health — also known as Optum.
Mrs Letwin was also in charge of Legal Services for the Department of Work and Pensions.
This means she was responsible for overseeing the implementation of austerity in UK Job Centres and for the disabled which involved private firms such as ATOS claiming that people who were sick and disabled were fit for work and then cut their welfare benefits and made them work for free on the work programme.
Letwin and Thaler may claim to be enlightened individuals but the deregulatory interventionism they spearheaded caused much misery and cost many lives.
Shirley Letwin, Oliver’s mother, wrote the Anatomy of Thatcherism and Jimmy Savile attended nearly all Mrs Thatcher’s New Year’s Eve parties when she was Prime Minister. It’s unlikely they wouldn’t have met.
On the subject of Tories and Paedophilia Lord Finkelstein has attacked the police for the way they have communicated the investigations into Edward Heath’s private life.