Osborne's ring fence will be made of cheese wire

Power to break up the banks.

So Osborne is going to "reset the banking system". A difficult thing to do with trust between Westminster and the banks at an all time low. How is he going to do it?

Well, first there's going to be a ring-fence: but it's to be not so much electrified as made of cheese wire - if banks don't respect it, regulators will be able to break them up.

It's not just about the fence though - he also plans to make the banking sector more competitive by making it easier to switch bank accounts, and by introducing a new regulator who'll aim to help out new competitors who want to enter the game. There are also talks over how consumer power can be increased, to hold the banks in check.

There is a plus side for the banks: the leverage ratio won't be changed beyond 1:33, but as might be expected, they have not taken kindly to the news:

Anthony Browne, the head of the British Bankers' Association said:

This will create uncertainty for investors, making it more difficult for banks to raise capital which will ultimately mean that banks will have less money to lend to businesses.

"What banks and business need is regulatory certainty so that banks can get on with what they want to do, which is help the economy grow. This decision will damage London’s attractiveness as a global financial centre.

"Uncertainty" isn't really the issue though - banks have been under changing regulation since 2008. The main problem for the banks will now be flexibility, according to Credit Suisse analysts (via FT Alphaville):

Reducing options to transfer capital and funding – As we understand it, banks will be under tight scrutiny to implement strictly a ring-fence. This will clearly limit the flexibility for banks when setting-up their ring-fence plans and limit options to transfer capital and funding. Although this is hard to estimate at this stage, this could increase the overall costs of the reform for the industry. We currently do not have an impact in our estimates.

If ring-fence is to work, it needs to be enforced - but as banks make their money by finding their way around such restrictions, a truly impenetrable fence'll cost. Here is a summary of the estimated hits to the economy via FT Alphaville:

Estimates costs from implementation – The draft legislation published in October 2012 highlighted the following costs for the broader industry and economy: (i) on-going costs of £2-5bn per annum, which compares to our total profit £26.1bn for the five listed UK banks in 2014E; (ii) one-off transitional costs of £1.5-2.5bn; (iii) negative GDP impact of 0.04-0.1%; (iv) reduced tax receipts of £150-400mn (this assumes all bank costs are passed onto the consumer); and (v) a reduction in the value of the government’s shareholdings in RBS and Lloyds Banking Group in the range of £2bn to £5bn relative to a ‘do nothing’ baseline scenario (compares to current value of £45.1bn).

If banks don't respect the fence, regulators will be able to break them up. Photograph: Getty Images
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Donald Trump ushers in a new era of kakistocracy: government by the worst people

Trump will lead the whitest, most male cabinet in memory – a bizarre melange of the unqualified and the unhinged.

“What fills me with doubt and dismay is the degradation of the moral tone,” wrote the American poet James Russell Lowell in 1876, in a letter to his fellow poet Joel Benton. “Is it or is it not a result of democracy? Is ours a ‘government of the people by the people for the people’, or a kakistocracy rather, for the benefit of knaves at the cost of fools?”

Is there a better, more apt description of the incoming Trump administration than “kakistocracy”, which translates from the Greek literally as government by the worst people? The new US president, as Barack Obama remarked on the campaign trail, is “uniquely unqualified” to be commander-in-chief. There is no historical analogy for a President Trump. He combines in a single person some of the worst qualities of some of the worst US presidents: the Donald makes Nixon look honest, Clinton look chaste, Bush look smart.

Trump began his tenure as president-elect in November by agreeing to pay out $25m to settle fraud claims brought against the now defunct Trump University by dozens of former students; he began the new year being deposed as part of his lawsuit against a celebrity chef. On 10 January, the Federal Election Commission sent the Trump campaign a 250-page letter outlining a series of potentially illegal campaign contributions. A day later, the head of the non-partisan US Office of Government Ethics slammed Trump’s plan to step back from running his businesses as “meaningless from a conflict-of-interest perspective”.

It cannot be repeated often enough: none of this is normal. There is no precedent for such behaviour, and while kakistocracy may be a term unfamiliar to most of us, this is what it looks like. Forget 1876: be prepared for four years of epic misgovernance and brazen corruption. Despite claiming in his convention speech, “I alone can fix it,” the former reality TV star won’t be governing on his own. He will be in charge of the richest, whitest, most male cabinet in living memory; a bizarre melange of the unqualified and the unhinged.

There has been much discussion about the lack of experience of many of Trump’s appointees (think of the incoming secretary of state, Rex Tillerson, who has no background in diplomacy or foreign affairs) and their alleged bigotry (the Alabama senator Jeff Sessions, denied a role as a federal judge in the 1980s following claims of racial discrimination, is on course to be confirmed as attorney general). Yet what should equally worry the average American is that Trump has picked people who, in the words of the historian Meg Jacobs, “are downright hostile to the mission of the agency they are appointed to run”. With their new Republican president’s blessing, they want to roll back support for the poorest, most vulnerable members of society and don’t give a damn how much damage they do in the process.

Take Scott Pruitt, the Oklahoma attorney general selected to head the Environmental Protection Agency (EPA). Pruitt describes himself on his LinkedIn page as “a leading advocate against the EPA’s activist agenda” and has claimed that the debate over climate change is “far from settled”.

The former neurosurgeon Ben Carson is Trump’s pick for housing and urban development, a department with a $49bn budget that helps low-income families own homes and pay the rent. Carson has no background in housing policy, is an anti-welfare ideologue and ruled himself out of a cabinet job shortly after the election. “Dr Carson feels he has no government experience,” his spokesman said at the time. “He’s never run a federal agency. The last thing he would want to do was take a position that could cripple the presidency.”

The fast-food mogul Andrew Puzder, who was tapped to run the department of labour, doesn’t like . . . well . . . labour. He prefers robots, telling Business Insider in March 2016: “They’re always polite . . . They never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex or race discrimination case.”

The billionaire Republican donor Betsy DeVos, nominated to run the department of education, did not attend state school and neither did any of her four children. She has never been a teacher, has no background in education and is a champion of school vouchers and privatisation. To quote the education historian Diane Ravitch: “If confirmed, DeVos will be the first education secretary who is actively hostile to public education.”

The former Texas governor Rick Perry, nominated for the role of energy secretary by Trump, promised to abolish the department that he has been asked to run while trying to secure his party’s presidential nomination in 2011. Compare and contrast Perry, who has an undergraduate degree in animal science but failed a chemistry course in college, with his two predecessors under President Obama: Dr Ernest Moniz, the former head of MIT’s physics department, and Dr Steven Chu, a Nobel Prize-winning physicist from Berkeley. In many ways, Perry, who spent the latter half of 2016 as a contestant on Dancing with the Stars, is the ultimate kakistocratic appointment.

“Do Trump’s cabinet picks want to run the government – or dismantle it?” asked a headline in the Chicago Tribune in December. That’s one rather polite way of putting it. Another would be to note, as the Online Etymology Dictionary does, that kakistocracy comes from kakistos, the Greek word for “worst”, which is a superlative of kakos, or “bad”, which “is related to the general Indo-European word for ‘defecate’”.

Mehdi Hasan has rejoined the New Statesman as a contributing editor and will write a fortnightly column on US politics

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era