The BBC article," Bank reform: The radical way ", suggested about what should we reform the financial system.
Peston mention about “moral hazard” in the financial institutions. They do their business in risky manner in order to gain a lot of profit. However, when their business go wrong they put their mistake to the cost of taxpayers. We should do something to improve the efficient functioning of markets that prevent institutions to do their mistakes.
It is not fair that taxpayers have bailed out British banks for the cost as much as trillion pounds for the bankers who do their business to pay themselves fabulous bonuses. He mentioned that “it is a matter of overwhelming importance that when banks and bankers gamble and lose, they pay the price - that the casino isn't rigged such that the winnings always go to them, while losses are forced on the state, on us” (2009, ¶ 32). Therefore, it is sensible and necessary reform the financial system in order to protecting taxpayers to pay for the mistake that the banker did.
In my opinion, I am agree with Peston's idea about the financial reform. I think the financial institutes should have more responsibility to their business. They should realize that there is "no free lanch". Moreover,the bankers should not bet their business of high risk for their bonus and let the other pay for their mistakes.
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References
Peston,R.(2009,October 21).Bank reform: The radical way. BBC News.Retrived October 27,2009 from http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/10/bank_reform_the_radical_way.html
Tuesday 27 October 2009
4 comments:
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It's a good idea to reform financial institutes. I agree with you that they must have more responsibility to cope with the problem. It's not fair to let the others pay for their mistakes.
ReplyDeleteI agree with Earth and Pin that financial institutions should take more responsibility in running their business because financial sector is one of the most sector that effect each country's economy. When they collapse, it causes a lot of effects to people. Therefore, banker should concern to this point too. They should run their businesses carefully by taking low risk activities.
ReplyDeleteIn the present, financial institute is the most important sector in several contries as Kate's idea because every country do business. If bank collapse, it causes the vast effect to world's economiy as bankrupt Laymann brother bank in USA where started Burger Crisis. When the bank reform those crisis would be not exist.
ReplyDeleteI'm not sure that I agree with everyone here.
ReplyDeleteI do agree that the bankers should be responsible for the decisions that they make, and that tax payers have no responsibility to help them. However, if the banks accept that they are responsible, they can take whatever risks they like, provided they honestly report those risks to their investors. If the bank fails because of too many bad risks, then everyone who invested in that bank will lose their money - there is nothing wrong with that, unlucky as it is.
It seems to me a bit like building a house on land that floods: you know the risk in advance, so it is wrong to expect the government to help you if a flood washes away your home. You have the choice of building a home somewhere safer, or of paying for insurance.
I think that the best reform for the banking system is less government control, so that the banks know that the government will not help them. And if the investors and bank customers know that, then they will be more careful because they won't want to harm themselves too much.