Here am I sitting in my tin can far above the Moon Planet
Earth is blue and there’s nothing I can do
David Bowie, Space Oddity
For my friends on the other side of the Ocean, here is Planet Europe.
Strange Planet indeed.
Where it appears that the European Central Bank is the leading candidate to receive the mandate to become the new Banking Authority in Europe.
Centralizing supervision in the banking sector is a necessity, so as to be able to regulate an industry whose activity has become so global to defy easily national controls.
But it is only a necessary condition. Not a sufficient one.
To obtain good banking regulation in Europe it is not enough to have it centralized; it needs to be strongly independent from the banking industry and the from risk of capture by the same sector. It needs furthermore to be accountable, so as to demonstrate that indeed its independence from the banking sector has worked all right.
The ECB has shown to be independent, yes, but not from banks. From the public. How to understand otherwise its incapacity over the past years to publish the key derivative transaction in its hands, the infamous one between Goldman Sachs and the Greek government which it does not want to release for fear it would roll the markets! How can we give the huge power of banking regulation to an institution that has proven (in fairness, like most Central banks always have) to care more about protecting banks than the larger public?
Milton Friedman, not a radical economist, used to say:
The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power… Any system which gives so much power and so much discretion to a few men, [so] that mistakes – excusable or not – can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic – this is the key political argument against an independent central bank.
So now wonder whether these few lines aren’t even more relevant for the issue of a banking regulation role in the hands of the ECB.
It is time the European Parliament showed some pride and took the matter into its own hands. Only an independent and accountable European Banking Authority whose members are named, monitored and replaced by the Parliament can minimize the chances that Europe, once more, will be captured by financial interests.
Ground control to major Tom, your circuits dead, there’s something wrong. Can you hear me, major Tom?
Here am I sitting in my tin can far above the Moon Planet Europe is blue and there’s nothing I can do.