by Crazy Horse
Fri Nov 26th, 2010 at 05:33:24 AM EST
We are good at finding fault with the results of unbridled predatory capitalism, perhaps less good, or less evolved, at proposing solutions. In a front page diary yesterday about Daniel Cohn-Bendit's recent remarks, he said:
So, we are saving, not just banks, but a system that is in itself a system of bankruptcy, a political system... It's the failure of neoliberalism and of deregulation...
to which Miguel responded:
European Greens Party: Financial Crisis
In this context, the EGP puts forward the following propositions for consideration:<sigh>
In the short term, Governments have no other choice than to take action in order to prevent the collapse of the banking system by providing state guarantees or injecting capital, using taxpayers' money. Because at the same time, Governments find billions to save banks that are responsible for their problem, while they can't find the funding needed to fight starvation, unemployment, environmental degradation, the loss of biodiversity and to fund development aid, this rescue is not legitimate if not counterbalanced by a number of measures
The document is from October 2008; perhaps Green economic policy has matured in the intervening two years.
Further, as you didn't highlight, "this rescue is not legitimate if not counterbalanced by a number of measures," so we should first investigate the counterbalancing measures.
So let's look at the underlying measures, and see if the European Greens have something to offer, below the fold.
Here are the proposed measures in full, to discuss.
Measures aimed at ensuring the stability and the transparency of the financial system
- First of all, the compensation of executives and financial traders must be drastically reined in. These were effectively one of the root causes of the current crisis as large banks tried at all costs to artificially inflate the performance of their funds in order to justify the outrageous salaries of their traders. This encouraged executives to take ill-considered risks when trading credits. From now on, their salaries must be in line with real, sustainable performance.
- The long-standing Green proposal of implementing a financial transaction tax (Tobin/Spahn type tax) must urgently be implemented at European level.
- All financial instruments currently marketed and sold by financial institutions, especially those which enable securitization of loans, must be scrutinized by a Financial Services Testing Foundation, set up at European level. Those whose innocuousness and added value to the economy are questioned have to undergo an extra accreditation procedure.
- Similarly, naked short-selling, that is, speculating on the loss of value of assets, must be permanently banned;
- The valuation of stocks by the fair value principle (mark to market) has proven to be feeding the crisis and should be reformed;
- Initiatives must be taken at European level to effectively tackle the accreditation, transparency and control of hedge funds;
- Similarly, increased action must be taken to prevent tax fraud and tax evasion, effectively closing the tax havens within the EU and putting pressure on those outside the EU .
- Consideration must be given to measures effectively preventing speculative shareholders to exert control on enterprises (e.g. by imposing delays before their voting rights become effective)
Measure aimed at improvement of consumer protection
- Across the EU, deposits to financial institutions must be guaranteed to a minimum level of 100.000 €; to that effect, a reserve to which all financial institutions shall have to contribute must be established where it does not yet exist;
Measures aimed at improving the regulatory framework
- Accounting rules must ensure that the balance sheets and corporate accounts reflect the economic reality, e.g. by drastically restricting the ability of financial institutions to remove key risks from their balance sheets and by moving away from rules that are exclusively based on short-term market value;
- An initiative must be taken at EU level to institute an independent European rating agency;
- Last but not least, the regulatory package must be supported by the creation of an EU-wide financial markets watchdog which will overcome the national fragmentation of banking oversight and be strong enough to enforce regulation:
Measures aimed at diminishing the negative effects on the real economy
- Coordination on the EU-level on measures to diminish the negative effects of the crisis of the finance sector on the other sectors of the economy.
- Anti-cyclical budgetary measures must be taken to master the crisis.
- In order to counter the effect of the credit crunch on the enterprises (especially the SMEs) sufficient liquidity must be provided by the European Central Bank.
Finally, it would also be unethical that those whose action made this collapse possible would escape all consequences of them. Investigations must be launched in order to determine whether the current regulatory framework, however limited, has been infringed upon (especially in terms of transparency) and prosecutions be initiated where applicable.
What's here of value, what's missing?