Ian Fraser: Victoria Chick — “The financial system has gone completely off the rails”

Lambert here: Nice to see an organization sponsored by the Institute of Chartered Accountants in England and Wales calling for financial criminals to be prosecuted. Catch FASB doing that. And here’s who Victoria Chick is. I wish she’d come over here and smack the weasels at Justice around.

By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser. Originally published at his website

This short film, Transforming Finance, features some of my all time financial heroes including John Kay, Andy Haldane, Victoria Chick, Richard Werner, Catherine Howarth and Giles Andrew

Where did the finance and banking sector go wrong … and what can we do to fix it?

Transforming Finance, a 23-minute documentary film produced by the Finance Innovation Lab, features interviews with a number of the most prominent advocates of change in the world of finance. The film seeks to identify policy interventions to reform the financial system – both through incentives to persuade existing players to mend their ways, and through the promotion of alternative business models (such as peer-to-peer lending and crowdfunding). The Finance Innovation Lab describes the film as both a “manifesto for action” and as a campaign tool, that will act as a catalyst for change.

The film, directed by Marcos Villaseñor and sponsored by Calouste Gulbenkian Foundation, opens with John Kay saying: What we have is a financial system that has evolved in ways in which it very largely serves itself rather than the needs of the non-financial economy.” That – the parasitic nature of the current financial system – is the root of the problem. The Finance Innovation Lab, launched in 2008, is backed by the World Wide Fund for Nature and the Institute of Chartered Accountants in England and Wales.

The film makes some very good points but, in my view, falls short. The following three things must also happen if finance is going to be reformed:

(1) More effective regulation

(2) The prosecution of financial criminals

(3) A radical overhaul of auditing

A host of other things also need to change, including politicians ceasing seeing their role as being to protect corrupt banks and bankers, and global structural reforms.

Here’s a report on the film by Alex Blackburne from Blue and Green Tomorrow

The Finance Innovation Lab’s Charter for a New Financial System has already been signed by a number of advocacy organisations, academics, finance professionals and public interest groups. Click here if you want to add your voice.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Ian Fraser


    Nice intro but I don’t think the organisation sponsored by ICAEW (Finance Innovation Lab) is calling for financial criminals to be prosecuted! The three additional things I alluded to at the end of my blog post are things are that NOT advocated in the FIL’s “Transforming Finance” film! (basically, I was pointing out some of the key elements which I believed the film had missed or skirted around).


    1. Paul

      Yep. I once tried to draw up a shortlist… it quickly became rather long.
      At the end of the day what happened back then was a perverse trickle-down effect from the higher echelons of the power pyramid down to the CEOs / CFOs / CIOs of smaller and smaller groups. The whole system has been mind-fracked to the point that anybody with some amount of grano salis is automatically labelled as a “socialist” “utopian” “communist”, etc by those who are on their way up (or pretending to be) and by that un-credible mass of people who automatically side with the capitalist “job creators” / “principal contributors to our fiscal revenue system” / “benefactors”…
      So the question is how to define *who* should be going to jail for this planetary mess or end up paying for the Big Systemic Default.
      And since we’re talking about who’s paying – let us all remember that here in EU whatever fines that accrue to the financial sector don’t go back to the public and don’t create jobs but trickle back to fund the EU budget….(http://ec.europa.eu/budget/explained/budg_system/financing/fin_en.cfm)

  2. The Dork of Cork

    Oh Sweet Jesus – I think I am about to puke……..

    “What we have is a financial system that has evolved in ways in which it very largely serves itself rather than the needs of the non-financial economy”

    Of course it must serve itself – it is the only part with the money.
    Its the guys at the very top of the apex which should be brought down…….not some mid level banker working down in the bowels of the ship , they are just following orders.

    One old girl thinks the financial systems purpose was to serve the economy.
    This is simply not historically accurate.


    Unlike the 1930s – England now has only “services” , the service job they provide may be a girl in a backoffice collecting rent from a toll road somewhere on the planet…not much of a service me thinks.
    It no longer has a relatively closed coal – production system although it has always collected rent from Ireland , India etc etc.
    The last thing we want is innovation !!!!

    When England started to import coal back in 1970 they came up with modern derivatives !!!!! to sustain their global rental structure.

    1. Moneta

      Some big Canadian public pension funds have a weight in Heathrow…. thinking the pensioners of Canada will the rentiers of London, particularly the rich who travel the world, scouring the world for private equity deals and alternative investment instead of investing in their OWN country….LOL!

      That’s how I know our pension system is doomed. We will end up paying the same pension a few times over: tax deductions leading to deficits, bad investments, lack of jobs due to investment in other countries in the name of diversification. Trying to fully fund pensions with a generational bulge was a bad idea.

      1. from Mexico

        The only way that fictitious capital can extract monopoly rents from foreign populations is through the use of the state’s instruments of violence, that is the police (in the case of foreign affairs, the covert police operations of the deep state) and the military. Actually, this scheme has a name. It’s called empire. Currently the senior partner in the ongoing system of neo-imperialism is the United States, with the rest of the Anglosphere playing the role of junior partners, and Europe even lower in the pecking order.

        One of the first theorists to elaborate on the connection between the accumulation of capital and space was Rosa Luxemburg in Accumulation of Capital (1913). This work has been greatly expanded on by David Harvey:

        The mention of space is considered. Harvey received his doctorate in geography rather than economics or history – his first, non-Marxist book was taken up with differing representations of space – and the whole thrust of his subsequent work, alert to the unevenness of capitalist development across neighbourhoods, regions and nation-states, has been to give a more variegated spatial texture to the historical materialism he would prefer to call ‘historical-geographical materialism’.


      2. Fiver


        There was nothing wrong whatever with the notion of providing decent pensions, even to Boomers. It was and is a failure to ensure individuals, corporations and governments support those pensions without recourse to criminal financial markets promising perpetual 8% returns, but delivering repeated poundings.

        Particularly if that country is Canada, which clearly has the means to do so – only exceptionally poor government in recent years and the lazy corporate elites that a resource-dependent economy produces have put Canadian pensions in jeopardy. Those managing pensions have also been delinquent, but they come from the same ranks of mainstream business economics as their peers in business and Government, that is, they’ve bought into the idea that you can produce wealth via extraction from financial flows, when in fact that “wealth” is largely the illusory effect of serial Central Bank bubble-blowing.

        1. Moneta

          The thing is that if everyone has a funded pension and gets a share of the equity market gains, then you’ve got socialism. But if you’ve got socialism, why bother with the wasteful and complicated structure we have now? Just go pay-as you-go and starve Wall Street!

          They probably sensed a while back that governments would never be able to provide pensions large enough to cover the lifestyles that ballooned over the last couple of decades and thought that people would be rational and would save on their own. But they didn’t.

          I have nothing against pensions, my beef is that the whole pension system as it is currently structured is based on a huge set of fallacies. For example, here in Canada many are pushing government to increase CPP contributions from near 10% to let’s say 14%. While such an increase would cut disposable income and corporate profits, the money would be used to buy what exactly? More shares of companies with declining profitability and boost valuations even more? I guess we would have to assume that money would be well allocated… which is a dangerous assumption considering our track record of the last few decades.

  3. The Dork of Cork

    There is no historical context to these discussions.

    Successive artificial inflations & deflations concentrate power.

    Why was the Irish free state a failure when it broke from the union ?
    It is not complicated.

    Lets say a Quaker family runs a rail line in Waterford , they charge enough and even give Quasi private social credit to sustain the capacity of the line.
    They charge the equivalent of lets say 3% of total revenue in the local area (non compounded)

    The free state comes in and takes it under “state” ownership………however money raised for these national corporate bodies now costs 5% compounded ……..eventually they must close down the line to pay the interest which they did infact do.
    Where did this interest go ? – it went to London ………..London grows for some funny reason.

    The solution now (if the line still exists which it does not) would be to return the system to private ownership.
    However now the people directly rather then “state” utilities must pay 5% compound interest…………the society cannot afford local industrial goods.
    London uses its bank / multinational sector to sell concentrated capital intensive / super efficient products ” built in the core” back to the local Waterford proles.
    Eventually the Waterford proles cannot afford the products sold at even 0 % interest.
    This is when you get a breakdown of the production / distribution / consumption loop otherwise known as a Industrial collapse.

    This is the history of Ireland.
    The history of Ireland is the history of the world as we were the first born of this terrible Tudor crew.

    What a pox.

    1. steelhead23

      You seem a quite bright fellow, but it strikes me that the solution you proffer would fail just as miserably as the rail line. If public ownership fails because it could not cover the cost of the debt incurred, how would a private purchaser fare, given that private entities typically pay more to borrow as they are considered higher risk. Perhaps the better answer for the rail line would have been subsidization. We do it all the time on this side of the pond – not that our mass transit systems are shining examples. There are real, tangible benefits of mass transit – from reduced pollution to shorter commuting times. Hence, paying for these public benefits via taxpayer supported subsidy is equitable. It is also quite possible that the government paid the prior owners too much for the system. Who knows? But I truly hope you spend a little time researching how privatization of previously public infrastructure and utilities has engendered some truly horrific burdens on users and ratepayers – even while generating substantial profits for their owners.

  4. The Dork of Cork

    These banking f$£kers can masturbate with their money all day long

    Whats striking about the Waterford – Tramore line was its low capital cost.
    60 years of private ownership and they used the original 4 engines for all that time !!
    Very little depreciation me thinks.

    People in 1950s Cork & Waterford could not figure out why the state corporate bodies were closing the West cork line or the Waterford lines.
    Now we know why !!!
    it did not make sense from a local economy perspective – it was merely to pay compound interest to these bastards.

    This is not rocket science.
    We cannot afford the products (cars) they are selling.
    The massive depreciation costs expressed through deflation and inflation is a direct result of their usurious economic model.


    They can only sell us extremely concentrated capital toys which we cannot use and must either destroy through war during the keynesian era or waste stuff in the suburbs during the neo – keynesian era.

  5. The Dork of Cork

    Nice Tony 16.00 : “Now the only way to solve this problem is to create another central authority………….”

    NO NO NO

    You give interest free fiat to the people on the ground and therefore close the production demand loop again.

    We in these islands are cursed with Fabian socialists which is our primary export.
    The Irish president / leprechaun is quite representative of these type of guys……teachers pets.
    They will bring the entire planet down around us before they release their grip on power.

    The mask has been ripped off.
    Carbon tax is some form of sick Fabian inside joke.

  6. Banger

    Any system needs a periodic shakeup or reform or vested interests game the system so that it can’t change. That is the situation we are in–it can’t change it is thoroughly gamed in every way. This is a deep conundrum that is not limited to the financial system. We make a huge mistake to think this problem i s about having a bad financial system because it actually works pretty well within the system as a whole. What we should be questioning is what do we want as a society? Do we want a rigid class-system with wealth migrating to the top of the social pyramid? Or, even better, do we as a society really care? I say we as a society, at this point, are too confused to care and to confused and befuddled by too much information, too much stress and to little moral backbone to know WTF is going on or even want to know.

    Nothing can be addressed without answering the questions I’ve posed. It is up to the intellectual class and economic elites to lead the way on this–instead these classes have regressed into the general tendencies of a culture that features narcissism, self-indulgence and amorality. I’m not, btw, excluding myself from this critiques–we’re in this together.

    Having said all that let’s be clear here: there are a variety of excellent reforms that could be made many of which have been written about over the past few years on this site and elsewhere. The quality of thought and ideas about reforming our economic system and other systems are first-rate at this time–but they can never be implemented for political reasons. When the public can be persuaded that it may be helpful to listen to these voices then we will evolve very rapidly.

    1. from Mexico

      Banger said:

      “It is up to the intellectual class and economic elites to lead the way on this….”


      I’ll bat that one back by citing two quotes. The first is by George Orwell:

      “In the long run — it is important to remember that it is only in the long run — the working class remains the most reliable enemy of fascism, simply because the working class stands to gain most by a decent reconstruciton of society. Unlike other classes or categories, it can’t be permanently bribed….

      The intelligenstia are the people who squeal loudest against fascism, and yet a respectable proportion of them collapse into defeatism when the pinch comes. They are far-sighted enough to see the odds against them, and moreover they can be bribed — for it is evident that the Nazis think it worthwhile to bribe intellectuals. With the working class it is the other way about. Too ignorant to see though the trick that is being played on them, they easily swallow the promises of fascism, yet sooner or later they always take up the struggle again. They must do so, because in their own bodies they always discover that the promises of fascism cannot be fulfilled.”

      –GEORGE ORWELL, “Looking back on the Spanish War”

      The second quote is by David Harvey:

      ” The problem for oppositional movements is to speak to this widespread alienation and exploitation…. At the very minimum this means resistance to the idea that authenticity, creativity and originality are an exclusive product of bourgeois rather than working class, peasant or other non-capitalistic historical geographies, and that they are there merely to create a more fertile terrain from which monopoly rents can be extracted by those who have both the power and the compulsive inclination to do so. It also entails trying to persuade contemporary cultural producers to redirect their anger towards commodification, market domination and the capitalistic system more generally. It is, for example, one thing to be transgressive about sexuality, religion, social mores and artistic conventions, but quite another to be transgressive in relation to the institutions and practices of capitalist domination.

      –DAVID HARVEY, “The Art of Rent”

      1. Ulysses

        “It is, for example, one thing to be transgressive about sexuality, religion, social mores and artistic conventions, but quite another to be transgressive in relation to the institutions and practices of capitalist domination.”
        The truth of Harvey’s statement was nowhere more obvious than in San Francisco last summer when heroic whistleblower Private Manning was thrown under the bus:

      2. Ed

        Historically, Naziism was destroyed by the armies of the capitalist, communist, and imperialists powers (US, USSSR, and UK). The closest anyone else got was an attempted coup by senior German army officers. There was an active communist underground but it never got anywhere.

        I can’t think of many regimes that were brought down by working class rebellion without considerable elite participation. Maybe Haiti in the 1790s and 1800s. The problem is that police states are very good at internal control, that is the whole point. Where they run into problems is that they sacrifice a considerable amount of efficiency to maintain internal control, for example the most competent bureaucrats tend to be viewed as threats instead of employed. However, in the next century the external problems that bring down the police states might well involve the end of civilization, simply because the technological and environmental issues are so much greater.

      3. Banger

        Sorry the working class in America is profoundly opposed to the left and has been for some time.

        What Orwell said about England was accurate and prescient. The Labor Party drastically transformed England after WWII and even Thatcher couldn’t roll back the essence of social democracy. Even now with the Labor Party as right wing as the Tories the welfare state has not been entirely dismantled. That’s not to say it won’t be.

  7. Synoia

    Revolution happen when the middle class have noting to lose.

    Ruling classes are expert at subduing the working class, typically with violence. When the middle class have something then fear of loss keeps them from revolt. When they lose their something then their children ferment revolt – they have noting to lose, and their whole lives to experience having nothing.

    They become the articulate leaders of the poor. If they win, then they become the next elite, leaving the poor behind…as the poor.

    All animals are equal, some are more equal then others…

    Look to the unions of the 19th century as a model — however they had levers, the means of production, available which are no longer available. Thise levers are in China, or Vietnam, or wherever…

  8. Lakshminarayanan

    Changes could include…

    (4) Politicians should not be able to put a gun to head of entities like FASB and change accounting practices

    (5) Rating agencies should be held accountable

    (6) Central bankers should be curtailed from funneling money to banks in the guise of helping economy

    (7) Holding Central Bankers responsible for bubbles

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