Tony Curzon Price (London, openDemocracy): Banks are utilities. A plank of Mervyn King's defence of his handling of the Rock is that he tried to persuade his international colleagues (to no avail, apparently) that the international banking rules known as Basle II should require banks to maintain a certain degree of liquidity, not just a certain capital adequacy. That is, it should not have been good enough for the Rock to say "we have capital worth one fifth of our loans": it should also have been required to say "and one fifth of that can be turned into cash within 15 days..."
What is interesting in King's statement is that it is a clear request for micro-management of banking by regulators. Liquidity-creation is the essence of banking: banks take on illiquid positions (in the simplest case, commercial deposits) and turn them into liquidity for others (in the simplest case in the form of overdrafts). Banks make liquidity available to their customers by varying the degree to which they borrow short-term and lend long-term. Once liquidity is regulated, there is no solution but for the regulator to have oversight over every transaction performed.
It's no great surprise that the central bank should wish to become uber-banker. As we have seen, it is the central banker that gets the blame and gets to foot the bill when things go wrong. But if regulation is so fundamental and so pervasive in the modern financial system, why exactly do we give the City or the Street such long leashes in other parts of their business? If you're running a public utility, you should behave throughout like a public servant. I point you once again to Martin Wolf's radical dissection of the public role in banking economics.
