Mathew D. Rose: “We Need A Banking Revolution”

Yves here. Please note that Don’t Start from Here: We Need a Banking Revolution has been released in the UK and was scheduled for publication in the US in early September but apparently is not yet for sale. I hope readers will keep an eye out for it, because it appears to fill a void, that of describing in high-level accurate terms why the banking system no longer works for society at large, how post-crisis banking reforms missed the mark, and what measures need to be put in place.

By Mathew D. Rose, a freelance journalist in Berlin

Don’t Start from Here: We Need a Banking Revolution by David Shirreff, published by Crunch Books

“To inspire confidence, banks have tended to be housed in prestigious buildings. That has come to obfuscate their basic function and has given bankers an exaggerated sense of their own importance. Victorian sewage works and pumping stations were also housed in prestigious buildings, but there was no illusion about the stuff they were pumping. When it comes to banks, there is.”

In his book “Don’t Start From Here” with the subtitle “We Need A Banking Revolution” David Shirreff, a recently retired journalist of The Economist, has taken a long look at what has become of the much heralded banking reforms in the aftermath of the recent financial crisis and found them indigent. In his seventy page monograph – in this case less can truly be more – Shirreff analyses the promised reforms that have gone lost along the way and explains their exigency in a coherent and enjoyable read.

Having covered banks for years for The Economist Shirreff starts out reflecting upon the original purpose of these financial institutions and the massive financial and political power they have usurped in the current millennium. He goes forward systematically and unassumingly starting with the question of what banks do, or better said, should be doing.
Shirreff then leaps directly into the fray, citing the two “glaring failures” of banking reform since 2008: The failure to simplify the complexity (breaking banks up into smaller units) and the failure to change the culture that permeates the world of finance (the termination of a culture of entitlement by bankers), whereupon he proffers ten remedies.

This is root and branch stuff, ranging from “Simplifying the rules” and “Scrapping Basel 2 and 3” to “At least consider a financial transaction tax”. Shirreff has nothing against banks and speculation. He simply argues for a simplified regulation of the former, while the latter should be extruded into the non-regulated financial sector. There the casino world of finance can continue its existence, isolated from the taxpayer and small savers. Shirreff then goes on for a second round of bank reform recommendations, this time specifically for his native Britain.

Part 2 of the book is dedicated to the question of what went wrong – and still is: the tragic journey from Gramm-Leach-Bliley Act to the present. Shirreff dedicates a good part of this chapter to the European financial system. For readers in the United States surely an excellent insight into the financial crisis with regards to European banks, which might also be edifying for many Europeans, who think this has been all about US financial institutions.

Shirreff calls for “a revolution to reduce complexity in global banks, to split them into manageable chunks, and to change the self-serving nature of the culture that dominates them”. To popularize this Shirreff had admirably taken the complexity out of the subject matter, including a perspicuous glossary for the laymen. The book includes light-hearted topical cartoons by jack Coltman. Shirreff may not achieve the revolution he wishes for, but he certainly will get us once again focused upon necessary reforms to achieve sensible, if not existentially vital, financial regulation.

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  1. peppsi

    I popped in a pre-order.

    Here’s my ugly attempt at a metaphor:
    It seems that, as western states moved on from the gold standard and onto the more rational system we have today, banks became a parasite that sucked up this money as it moved from one point to another. And as they fed and grew, they diverted more and more, until they were nearly the only thing left, and everything downstream had died.

    1. Ramon Creager

      I like your metaphor. I wish I had enough talent to draw cartoons. Back in ’09 when the Obama administration turned their attention to saving Wall Street, I pictured a distressed, emaciated horse (Main Street), with a huge tick hanging from its neck (Wall Street), and Obama, propping up the tick with a makeshift scaffold, says to the horse “Here, let me help you with that.”

    2. Min

      Banks did not become parasites. They had been parasites before. The term, “bankster”, goes back to the 19th century. What happened was deregulation, which took away safeguards against the parasitism of banks.

  2. proximity1

    Thank you for the tip. I’m off to look for it, for your book, and to re-read Orwell’s essay on Kipling.

    peppsi– Yours is a very good summary of the situation.

  3. Jim Haygood

    Wal-Mart has a go at banking revolution:

    Walmart, the nation’s largest retailer, is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts to almost anyone over 18 who passes an ID check.

    The accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no minimum account balance. The new accounts from Green Dot, called GoBank, will cost $8.95 a month if they have direct deposits totaling less than $500 a month.

    In recent years, many banks have reduced services to those with weak credit. To help attract customers, Walmart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.


    WalMart is responding to an excessive rejection rate at ChexSystems, a nasty little bankster-sponsored credit bureau that’s under investigation by the New York attorney general, as detailed here:

    Banksters hate competition from WalMart, having defeated its effort in 2007 to become a deposit-taking bank. Now Wally is back, picking off the low-end customers that the banksters told to just take a hike.

    1. Demeter

      Green Dot is the darling of scammers…my sister got a call, purporting to be a niece who was in a car accident…send money! Go to Walmart, put money on a Green Dot account….fortunately, I was able to stop her. Turns out the niece wasn’t even in the city where the putative accident had supposedly occurred.


      “Advisory: “Federal Jury” Duty Telephone Scam Alert Sept 7, 2014 – Ann Arbor Twp

      Hi Washtenaw County Sheriff’s Office Subscriber,
      On September 7, 2014, an Ann Arbor Twp resident received a telephone call on their home land line from a person pretending to be from the Washtenaw County Sheriff’s Office (Officer Frank Lewis, badge #7642” with the “Washtenaw County Warrants Division” located at “3144 Washtenaw). The subject told the resident that his wife (the subject had the resident’s wife’s actual name) was sent a summons for Federal jury duty on a past date. His wife failed to show up at court on a past date for Federal jury duty, so a citation/fine was issued against her. The subject told the resident that he had two choices:

      1. Appear before Judge (Subject named an actual local Magistrate, not a Judge) to get new court date/exemption.
      2. Purchase a green dot money pack from Walgreens (or anywhere else that sells them) and put $500.00 on the card.

      Our resident asked the subject (“Officer Frank Lewis”) if he could speak with his Commander. The subject gave the phone to another person. the resident asked the second person why they were calling his wife on a Sunday. The second subject responded that a lot of people did not respond to the summons so they have to call on Sunday. The subject provided our resident with a callback number. They told the resident to call them back at that number once he gets to the Walgreens. They told the resident that once he buys the card to scratch off the back of the card to expose the 14 digit number. Our resident went to Walgreens and confirmed the money packs exist but he became suspicious and did not follow through on the scam.

      Our resident did a “reverse lookup” of the number the caller’s provided and that search showed a landline in Wyandotte. I asked Mary Price if they had caller ID when the subjects called their house.

      On the same day, A Scio Township resident received a similar call. That resident purchased a money card at Rite Aid for the same subject and lost $500.

      This is just another version of a telephone scam, in a long series of telephone scams that continue to plague the entire nation from time to time. If you receive a similar call, simply hang up. The Federal court system does not operate in this manner and does not employ local Sheriff’s Offices or local courts in Federal Court matters. Washtenaw County Sheriff’s Deputy Sheriffs do not identify themselves as “Officer”.

    2. PaulArt

      How does Walmart entry into consumer banking going to make any impact on what is going on in investment banking, derivative crap and the casino capitalism monkey cage?

  4. cnchal

    Banksters hate competition from WalMart, having defeated its effort in 2007 to become a deposit-taking bank. Now Wally is back, picking off the low-end customers that the banksters told to just take a hike.

    Perhaps those low end customers that the banks find rejectionable are Wally’s employees that are collecting food stamps, and Wally being the benign loving monster it is, just cares.


    We need a complete economic revolution.

    An economic/political system based on people’s worst tendencies – greed, selfishness, brutal competition – which destroys lives and makes the planet unlivable deserves to be terminated as soon as possible.

    The Plundering Class has victimized us and the earth for far too long. As Naomi Klein (among many others) shows in her new book, capitalism is inimical to a sustainable planet. It is also, in its current corporate, globalized form, inimical to any chance at true democracy, regardless of the fantasies of Friedrich Hayak, Milton Friedman, and libertarians and neoliberals who delude themselves as well as others, in their greed and selfishness, that the market equals freedom and democracy. History, which they conveniently ignore, proves otherwise.

    If the human species cannot come up with a sustainable, more egalitarian economic system than the ones currently threatening us all, the species deserves to go the way of the dinosaurs.

    1. petercoop

      “Naomi Klein (among many others) shows in her new book, capitalism is inimical to a sustainable planet.”
      Yes, and on Colbert she said the transition to sustainability was going to funded by taking the money from those capitalists who have it.
      Clue: Let the capitalists have their money and their capitalism.
      It’s a debt-end.
      Let the people have their money system,
      It is the capitalist’s money system based on their debt-contracts that is inimical to a sustainable planet.
      Public money administration means having money without debt…..printing money……. as in Lerner.
      Klein is missing the money system link.

  6. susan the other

    People will always gravitate toward the easiest thing to use. That puts the big banks at a disadvantage. There are lots of alternatives. A Post Bank is a good idea; don’t know why it could not function both at the counter and on the internet. But there is an even deeper question. About money. And “capital.” And distribution. If we begin to discuss the deeper problems we might see that sticking with any part of the old banking model is unnecessary. What would a world without banks look like?

    1. petercoop

      “” But there is an even deeper question. About money. And “capital.” And distribution.””
      Certainly so.
      But in that discussion, there is really no reason to consider stopping banks from ‘banking’; merely stop them from creating the money…… from which their wealth-concentration originates.
      Then, wealth ‘distribution’ can become a money system function, like it should be.

  7. steelhead23

    Not to put too fine a point on it – we don’t need a banking revolution that lards up the big banks with regulations. We need men and women of principal who, regardless of the outcome (ignoring the specter of the end of the world as we know it) are willing to prosecute financial criminals to the fullest extent of the law. Further, from Sam Insull’s insane holding company leverage to the moon scams of the 1920s to Magnetar type scams of the early 2000s, haven’t we seen quite enough of the excesses of financial capitalism? I say, with considerable enthusiasm, kill the banks, don’t fix them. For retail banking, let’s have not-for-profit organizations (Post Office bank anyone?, credit unions) do the work. For M&A and other hijinks, let investment banks, with NO taxpayer support do what they will (yes, yes, under tight regulatory control). Let’s not break up the TBTF casinos, let’s kill them. Perhaps then we might all enjoy a bit of freedom. That, my friends, would be a revolution worth fighting for.

  8. backwardsevolution

    “Why aren’t the middle classes revolting?
    Words you probably never thought you’d read in the Telegraph. Words which, as a Gladstonian Liberal, I never thought I’d write. But seriously, why aren’t we seeing scenes reminiscent of Paris in 1968? Moscow in 1917? Boston in 1773? […]

    Phones4U was bought by the private equity house, BC Partners, in 2011 for £200m. BC then borrowed £205m and, having saddled the company with vast amounts of debt, paid themselves a dividend of £223m. Crippled by debt, the company has now collapsed into administration.

    The people who crippled it have walked away with nearly £20m million, while 5,600 people face losing their jobs. The taxman may also be stiffed on £90m in unpaid VAT and PAYE. It’s like a version of 1987’s Wall Street on steroids, the difference being that Gordon Gecko wins at the end and everyone shrugs and says, “Well, it’s not ideal, but really we need guys like him.” […]

    Instead of shrugging and saying, “This is the world we live in” you should be on the streets, you should be calling for this sort of thing to be a jailable offence, and you should want to see these guys up in front of parliament (or, better yet, in stocks) explaining why they made around £3,500 for every person they put out of a job. Seriously, Stefano Quadrio Curzio, the managing partner at BC, should be ashamed to show his face in public.”

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