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How can we tame the banks?

‘In the UK bank assets are 492 per cent of GDP,’ John Lanchester tells us (LRB, 18 July). ‘In plain English, our banks are five times bigger than our entire economy.’ Really? It has become commonplace to read that such and such a company is bigger than such and such a country, where one is measured by capital value and the other by annual output, but Lanchester’s is an even worse mismatch because he has based his comparison on the banks’ gross assets, which, as he explains very clearly later on in the article, are at least 25 times what they’re actually worth once the corresponding liabilities have been taken into account. It’s actually quite hard to make a realistic comparison. On one hand, banking activities are largely redistributive rather than productive. On the other hand, measures of national wealth arguably leave a lot out. But if we use the standard national statistics to compare wealth against wealth or output against output we get, in very rough terms, a UK banking sector that is about one fifteenth of the total UK economy, or 75 times smaller than Lanchester’s comparison suggests. Of course, given the size of the banks’ potential liabilities, and their capacity to extract cash from the more productive areas of the economy, that is still more than big enough to do a lot of harm.

John Hendry
Girton College, Cambridge

John Lanchester writes that ‘banks are perfectly placed to make money by aligning themselves with their customers’ interests’ (LRB, 4 July). But the problem is that banks and other global financial firms are perfectly placed to make even more money by continuing to treat their customers as what Lanchester calls ‘an extractive resource’. Banks have refined the money-making techniques of levying fees and charges on retail financial services and mis-selling expensive, unnecessary, add-on products, such as Payment Protection Insurance. A 2006 US report found that late-payment penalty fees levied on credit cards had almost tripled in ten years, rising from an average of $13 in 1995 to $34 in 2005, and a recent UK study reports that in 2011 British banks obtained revenues of £8.8 billion from retail current accounts, the equivalent of £139 for each active current account in the country. The standard free-if-in-credit account generated an average revenue of £141, prompting the Office of Fair Trading to observe that ‘it appears unlikely that mis-selling of other financial products would be prompted by low revenue.’ One might therefore respond sceptically to bankers’ off-the-record comments to Lanchester that the PPI scandal is a result of free banking.

The fraudulent selling of PPI-style products is a global phenomenon that consumer organisations and regulators across the world have struggled to stop. In 1998, the same year Which? magazine began its UK campaign against the mis-selling of PPI, the Consumers Union and Centre for Economic Justice in the US reported an estimated loss to consumers of $2 billion annually from the sale of consumer credit insurance. But the fraudulent selling of such products continued: the first public enforcement action by the Consumer Financial Protection Bureau, the new US regulator, in July 2012, levied a penalty of $25 million and ordered $140 million to be paid out to US consumers for the mis-selling of PPI and similar products. (Incidentally, the firm involved, Capital One, is one of the first of the larger firms that the FSA fined in 2007.) Australian consumer advocates attacked the mis-selling of consumer credit insurance in 1991, and after reviews of the market in 1991 and 1998, regulation was enacted, including a cap on sales commission. But a November 2011 report still found ample evidence of the mis-selling practices endemic in the PPI markets in the UK and the US.

PPI mis-selling became routine because financial firms structure their retail businesses to maximise the extraction of income from financial consumers. The most interesting aspect of the PPI scandal in the UK is not so much that banks and other financial firms systematically ripped off consumers, but rather that they have been forced to disgorge some of their illicit gains. This is a consequence of sustained efforts by consumer advocates, such as Citizens Advice and Which?, the work of the Financial Ombudsman Service in dealing with consumers’ complaints, and the activity of UK regulators, including the Competition Commission, the Office of Fair Trading and the much maligned and now superseded Financial Services Authority. A realignment of banks’ interests with those of their customers could protect against outrages such as the PPI scam, but such a realignment poses an enormous regulatory challenge.

Iain Ramsay
Toni Williams

University of Kent


Death in Plain Sight

Mark Bostridge is right that the way the story is told about the women’s campaign for the vote matters, and I should have acknowledged the peaceful constitutional struggles of the National Union of Women’s Suffrage Societies, led by Millicent Fawcett (Letters, 18 July). But the Suffragists’ activities were part of a very complicated and shifting picture, with many jostling elements, not least the First World War and Mrs Pankhurst’s zeal in support of the war effort. In 1913, Wilding’s death made a difference, however much I – one – would prefer martyrdom not to work. For example, when the news reached Laurence Housman (he was speaking in Hyde Park), the crowd took off their hats with a ‘low murmur of sympathy’. He felt that whereas before many had been ‘careless or indifferent’ to the cause, her act had ‘caught the public imagination’. Housman was writing in 1937, so the passage might be coloured by hindsight. However, in 1914, ‘sickened by militancy’, Housman (in whose studio many of the banners for the Suffragette marches were made) had joined the peaceful United Suffragists, so was not himself a lifelong or consistent advocate of violence.

Something else is at stake as well, I think, in the story of Wilding’s death and her fans’ enthusiasm a hundred years later. Caught on film and broadcast in public, her action offers an early instance when history, unfolding slowly and painfully and contradictorily, crystallises in an image. Politics and politicians keep trying to achieve this; whereas history and historians rightly want records of events unfolding without imposition, and certainly without the staged interventions of interested parties. Wilding’s end shows how hard it is to disentangle these two approaches now, when revolutionaries and protesters with their iPhones, and rulers with their public broadcasting services, are actively using media – or attempting to – to take control of the future, to write it. It’s an obvious point to make, and it’s connected to the debate about how to teach history in schools, but the dilemmas of the present throw light – and shadow – on the relief map of the past, making different elements stand out.

Marina Warner
London NW5

When graduates wore university gowns in suffrage processions it was not to ‘underline the injustice’ of Oxford and Cambridge’s refusal to grant degrees to women, as Marina Warner has it, but in protest against a system which placed women who did have degrees in the same electoral category as male inmates of prisons and mental asylums.

Anne Summers
London NW11


Hand-Wringing

David Bromwich’s celebration of Edward Snowden makes some dubious assertions (LRB, 4 July). First, he maintains that the NSA’s collection of data occurred under cover of a ‘general warrant’. No such warrant was issued by a court. English courts declared general warrants illegal c.1763, and the American founders were mindful of this precedent when they drafted the Fourth Amendment, prohibiting unreasonable searches and seizures.

The random collection of data by a computer requires no warrant. Only when people identify significant patterns in the data, suggesting probable cause, must an application for a warrant be made under the Foreign Intelligence Surveillance Act (FISA), so that the NSA can probe the data. The scope of data collection is so vast and random as to make the data indigestible without mining it for significant patterns. Data mining, in other words, follows the collection of the data and is not synonymous with it. The distinction is important because unmined data remain in a raw form in which the privacy of the individuals it concerns remains unmolested.

Bromwich writes that the private companies that collect the data also store them and may be easily coerced by the government into disgorging their contents for potentially abusive exploitation. In fact the government itself now stores the data private companies collect. One reform that Congress is considering, to insure against possible abuse, is to require that private companies also store the data and to establish by law protective protocols governing access.

What hand-wringing liberals like Bromwich forget is that jihadists have wrought havoc on our lives, remain a formidable threat to our way of life and need to be defeated. The obligation for the NSA to obtain a warrant from Fisa by showing probable cause remains a significant safeguard against abuse of the Fourth Amendment, and so establishes a judicious balance between security and liberty, which is the only guarantor of freedom. Remember that Abraham Lincoln, at the outset of the American Civil War, suspended habeas corpus, jailed journalists and deported a dissident. He preserved the constitution in the long term by such measures.

As far as Snowden is concerned, had he the stature of a figure like Daniel Ellsberg, he would have taken his concerns first to Congress and, failing that, would have remained in the US to face the consequences of his actions, as Ellsberg did. He would have been tried in a civilian court, not by a military tribunal as Bradley Manning was, because unlike Manning he remains a civilian. Any comparison with Manning is disingenuous. Snowden is no hero.

Albion Urdank
Los Angeles


Determination of Death

When Janet Radcliffe Richards claims, in talking about paying living organ donors for their kidneys, that ‘careless thought costs lives’, the careless thoughts she is referring to are mine and those of my many colleagues who believe that such payments would undermine the life-saving and life-enhancing capacities of organ donation. As Wayne Sumner points out, Radcliffe Richards avoids ‘messy practical issues’ and is thus freed from having to deal with empirical data (LRB, 4 July). Yet organ transplantation is primarily a medical endeavour not a philosophical one, and the data show that in addition to the exploitation of the vulnerable and the displacement of altruism by commercialism, the outcome of vended transplants is poor, for both recipients and donors.

A high incidence of infection and rejection has been reported in recipients from the UK, the US, Australia, Canada and the Indian subcontinent. Commercial donors from India, Pakistan and the Philippines, purportedly healthy at the time of donation, reportedly display an increased incidence of infection, surgical complications and death. Depression and deterioration in quality of life have been a feature of the post-operative experience of paid donors even in the ‘regulated’ and often touted commercial donation system in Iran.

The decision to go ahead with a living donation requires refined and dispassionate clinical judgment by the medical team and critical thinking on the part of the donor. In commercial donation none of this can be presumed. The high rate of complications for commercial donation suggests that somebody is lying: the donor to the doctor, the doctor to the donor, the doctor to the recipient, or all three. Studies on the influence of money on the behaviour of subjects in clinical trials have shown, unsurprisingly, that the greater the potential monetary reward the greater the tendency for subjects to conceal the ways in which they might not meet the trial criteria. It has been suggested that in a regulated commercial donation system, the worst manifestations of commercial donation could be prevented. Perhaps some of them would, but global regulation is a fantasy, and there is no shortage of vulnerable and desperate donors.

Gabriel Danovitch
University of California, Los Angeles

Terence English misrepresents the point I was making about the determination of death (Letters, 18 July). I did not suggest that ‘both spontaneous respiration and circulation may be present at the time of diagnosis.’ Rather, I said that respiration and circulation, along with such other traditional signs of life as digestion, excretion and homeostasis, may all be present when death is declared. My point was that, in determining whether a person is alive or dead, it is irrelevant whether these functions are spontaneous or artificially supported. The shift to ‘brain stem death’ sidelines these obvious indicators of life, as well as contradicting the common observation that the discontinuation of artificial ventilation is the ‘removal of life support’. I would not wish to claim that the shift in the 1970s from traditional cardiopulmonary criteria for determining death to the focus on brain stem death was motivated, primarily or in part, by the desire to ensure a supply of recoverable organs in good condition. But it certainly meshed nicely with that aim.

Wayne Sumner
Toronto


An Exercise in Scapegoating

David Goodhart refers to ‘the worrying level of genetic disability deriving from cousin marriage among British Pakistanis in Bradford and its knock-on effect in schools’ (Letters, 18 July). He should have reflected on the fact that cousin marriage is not regulated in this country (or in any other, so far as I know). Just as well, considering how immobile populations were until the recent past: 95 per cent of my own ancestors from four generations ago lived in a small area of the West Riding of Yorkshire. It was shown by DNA analysis in 2003 that one man in every two hundred alive today is descended from Genghis Khan. No doubt some immigrant families in Bradford have members with genetic disorders – just as an unusually high proportion of Queen Victoria’s descendants were afflicted with haemophilia – but to stigmatise an entire cultural group on such grounds is not decent.

Andrew Coulson
Musselburgh, East Lothian


At the Hôtel Splendide

Neal Ascherson oversimplifies the story of the destruction in 1943 of the north side of the Vieux Port in Marseille (LRB, 18 July). The story is set out in Alèssi Dell’Umbria’s excellent Histoire universelle de Marseille. The north side of the port had for many years been earmarked for re-development by urban planners and property developers, who saw the city as a refuge for gangsters, foreigners, prostitutes, proletarians, idlers and every other group disliked by the French bourgeoisie. In the early 1940s the city was controlled by the fascist deputy mayor, Simon Sabiani, a colourful figure closely linked to local gangsters and sympathetic to Vichy and the Wehrmacht. In 1941 the Vichy government commissioned Eugène Beaudouin to prepare plans for the rebuilding of the port and the city as a whole. The north side of the port was dynamited in February 1943. This was the oldest part of the city, settled since its founding by the Greeks around 600 BC. The German army were involved because of their professional expertise with explosives; the dynamiting wasn’t, as Ascherson suggests, a reprisal. The 12,000 inhabitants of the area were expelled; 1650 were sent to concentration camps, of whom 782 were Jews, none of whom survived.

William Firebrace
London W6


Semi-Automatic

Michael Wood tells how André Breton accepted a prose poem by Octavio Paz for an anthology but advised him to remove one line (LRB, 4 July). Paz agreed that the poem was better off without it, but wondered on a theoretical level how it could be possible to revise a piece of automatic writing, which should flow directly from the unconscious. This seems to have been a continuing issue for Paz. In the 1970s, he told me a very similar story. In this case, he had shown a piece of automatic writing to Benjamin Péret, who liked it but again advised him to take out one line, telling him: ‘It’s as though someone has flicked a drop of oil on a beautiful fabric.’ Paz once more agreed that the line should be taken out, but couldn’t make Péret see that there was any contradiction involved in revising automatic writing. Paz said of his own experiments that they were only about 70 per cent automatic.

Jay Boggis
Hopkinton, Massachusetts


Absolutely

Struck by Will Self’s description of Battersea Power Station as ‘absolutely fucking huge’ (LRB, 18 July), I wondered if he would use ‘fucking’ in other inoffensive contexts, say after Matins – ‘Absolutely fucking challenging sermon, vicar’ – or on his birthday: ‘The socks were just what I absolutely fucking wanted.’ Still, he’s an absolutely fucking great writer.

John Bailey
St Albans, Hertfordshire


I was right

Rosemary Hill quotes Barbara Jones, the curator of the 1951 Whitechapel exhibition Black Eyes and Lemonade, saying that at the time, ‘most people felt able to accept a talking lemon extolling Idris lemon squash’ (LRB, 23 May). For years I have insisted that there was a talking lemon, advertising Idris lemon squash, outside an off-license in the street where I lived in North-East London during the 1950s. Nobody would believe me.

Máire Davies
Cardiff