An acquaintance of mine on Facebook, a hardline capitalist (so he says) made a comment that no-one has a “right” to a bank account, as they don’t have “rights” (those inverted commas are doing a lot of work here) to healthcare, education, paid-for holidays, etc. He was, of course, writing about the Nigel Farage/Coutts saga that has seen the CEO of NatWest, Coutts’ parent firm (39% owned by the taxpayer) issue a sort-of apology to the former UKIP leader.
I wrote in reply to this issue about “rights” to banking, because I think it is too easy to just throw down the ideologist purist card on the table and assume that ends the matter. No so fast, Batman:
In a world of laissez faire capitalism, absent the distortions of bailouts, the central bank drug of easy credit, endless compliance regulations and so on, barriers to entry to create banks are far lower and there would be hundreds more banks. They’d be relatively small in some cases, and be fiercely competitive. With some operating not with full statutory limited liability protection (but only under the Common Law), people running these banks would be a lot less careless and more focused on building value. There’d also be fewer hiding places for a culture war phenomena to flourish in. Instead, banks would be about capitalism, period.
It is notable, however, that many of these desirable features don’t exist in the Western banking system today, although a few “challenger” banks and digital offerings are quite good, and may win business as a result of a backlash against some of the things going on. But in general, banking in the UK, and US, is intertwined with the State. Many firms have been rescued with billions of pounds, dollars and euros of taxpayers’ money. To open an account, you have to go through an increasingly severe KYC [know your client] and anti-money laundering regime, and banks that fail to comply can be fined and in extremis, lose their licences. Fines worth tens of billions have been imposed on banks over the past 20 years, for example.
Ideally, any commercial entity ought to be able to refuse to do business with people, however rational or irrational that decision should be, and we should let the brute force of free enterprise weed out bigots. Bigotry and stupidity are costs. That’s actually what tends to happen over time. A problem is that in a mixed economy, some of those competitive forces are attenuated.
When a person is “debanked” today, they can have a problem opening an account anywhere else if the bank asks them why they left a bank in the past. As a result, we have almost a sort of “cartel” system operating.
In time, hopefully, competition will swing back, and some of the nonsense going on will disappear. In the meantime, while I agree with you that the idea of having a “right” to a bank account is as bogus as many of the other “rights” that people talk about today, the fact that banking is such an embedded form of life in a modern economy means this issue hits hard in a way that, say, isn’t the case if you are banned from a pizza restaurant or candy store for holding the “wrong” views. Of course, it may be that the Farage case might encourage a firm to go out of its way to court business from those who have been targeted. Let’s hope so. For example, a bank could, without incurring wrath from the “woke” or regulators, say something like “Banking is all we do. No politics. No agendas. Just finance.”
And as I have said before, the outrageous Nigel Farage case, and that of others, surely demonstrates that a central bank digital currency idea must be resisted. This would be the end of any financial autonomy at all.
Thank you for saying this. I have wanted to make a similar point in several forums but lacked the knowledge to list the major relevant factors that differentiate our current woeful situation from being a free market in banking. I shall steal your words without compunction. OK, I’ll probably rephrase them a bit, but you know what I mean!
Minor point: the words “fewer hiding places for s culture war phenomenon to flourish in” look like they need some editing to remove the surplus “s” and (probably) change “culture war phenomenon” from singular to plural.
Back in the days when workers were paid with cash in a brown envelope and paid cash for most, if not all, of their goods and services with cash, it was possible to function in the world without a bank account. Now when, at the very least, it will make your life extremely difficult, I think that it is a right that may need protecting by law. I don’t think that it is tolerable that someone can destroy someone else’s life on a whim in this manner.
I am always suspicious of the word “rights” because it has become a baggage word dragging in lots of assumptions, often contradictory ones.
Now if we said “reasonable expectations” of holding a bank account (mostly because society now generally expects people to have bank accounts), then I would agree and the de-banking of Nigel Farage (and others) is an affront to “reasonable expectations”. Would HM Revenue & Customs be capable of dealing with many people without a bank account?
Banking is a state protected cartel, so the “no one has a right…” bullshit really does fall at the first fence. Banks can’t have it both ways: if my taxes can be used to bail the bastards out, they don’t then get to tell me I can’t have an account. Fuck those guys.
There is no “almost” about it, it absolutely is a state-approved cartel.
“Would HM Revenue & Customs be capable of dealing with many people without a bank account?”
So, there may be an upside to being debanked? I bet the government will be on it pretty quick if it turns out that victims of this practice are unable to pay their taxes.
There is no “almost” about it, it absolutely is a state-approved cartel.
I don’t think this is officially designated as a cartel, so this is splitting hairs anyway. Financial services are, in the West, almost as heavily regulated as medicine.
It certainly is a far distance from any sort of free market. Maybe this might even dispel the illusion that it is, such as when some Leftist idiot goes on about “neoliberalism”.
I have written endlessly on banking – and I do not want to bore people to death.
Bottom line – they are a bunch of crooks, and they are joined at the hip with governments (they have to be – to survive). And their Credit Money concentrates the economy into a few hands – making political agendas of power-and-control, such as ESG and DEI, easy to impose.
Capitalism should be about Capital – Real Savings of cash money, the actual sacrifice of consumption.
Not Credit Bubbles – whether of governments or private entities.
Shylock yes – but without the pound-of-flesh.
NatWest – no.
Once you take the King’s shilling, you ought to be considered a common carrier. You take on all passengers without question.
I think that most if not all of the major banks should be broken up and restricted to a small percentage of the total banking business. And any subsequent collusion between the smaller banks should result in legal proceedings against the managers involved.
I also think that individual bank managers should be eligible for jail time when the bank engages in unacceptable/illegal/antisocial activities. It is true that banks have been fined many millions of pounds/dollars for their bad behaviour but from what I can recall, with the exception of maybe one or two people, bank managers never get to set up home in a jail cell.
I think it’s regrettably complex. I reckon Coutts was legitimately entitled to debank Farage because they have a minimum threshold for client worth – which Farage apparently was indeed below. Otoh, they were not entitled to debank Farage for his political opinions. Which they also clearly and explicitly did.
On the yet another hand, banks have obligations to thwart money laundering – legitimate obligations which can be abused inappropriately to debank anyone some bank functionary doesn’t like including Farage. Indeed, just about anyone not on PAYE looks susceptible.
On the yet yet another hand, the bank’s other customers probably viewed Farage as posh diners in a ritzy restaurant viewed a fellow diner in a football strip.
Coutts maybe legitimately thought he was harming their brand.
All of the above can be true simultaneously.
David:
It seems that all this “you need £1 million to bank at Coutts” is rubbish, so that idea fails.
As to the “reputational damage” to Coutts of providing Nigel Farage with banking services, who knew he banked with Coutts before this? Why should we? I am very pleased this ESG bullshit has blown up in Coutts’ face. I think the bank went downhill when the staff stopped wearing frock coats.
“In a world of laissez faire capitalism, absent the distortions of bailouts, the central bank drug of easy credit, endless compliance regulations and so on, barriers to entry to create banks are far lower and there would be hundreds more banks. They’d be relatively small in some cases, and be fiercely competitive. With some operating not with full statutory limited liability protection (but only under the Common Law), people running these banks would be a lot less careless and more focused on building value. There’d also be fewer hiding places for s culture war phenomenon to flourish in. Instead, banks would be about capitalism, period.”
In a rainbow land of utopian Bolshevik productivity people running collective factories would be less careless, more focused on value, etc.
Out here in real life OTOH…nobody is going to listen to excuses like that. Real communism produced gulags. Real capitalism, unlike the libertarian fantasies, produces shunning, censorship, attacks on the freedom of individuals, and government entanglements. The market is a power center like any other.
Faraday writes: Real capitalism, unlike the libertarian fantasies, produces shunning, censorship, attacks on the freedom of individuals, and government entanglements. The market is a power center like any other.
Crap. We can see over the decades that this process has got worse, and done so with the State interfering and regulating a good deal more of life than was the case before. We can see things getting better in some ways, worse in others, and there’s little doubt in my mind that the rise of regulation of banking hasn’t led to a better state of affairs overall. Competition is a good thing and to be encouraged. Would you agree with that? Or is everything just a gulag for you?
“Faraday” – what you say about the free market is false.
Far from “attacks on the freedom of individuals” a free market is the definition of the freedom of individuals – they are the same thing.
“government entanglements” – now you have contradicted yourself, you claimed that “capitalism” was to blame – now you admit it is interventionism that is to blame, interventionism being a set of ideas developed in the 19th century in OPPOSITION to capitalism.
Whether pushed by Protestants such as Bismarck or Catholics such as Pope Leo XIII, the claims made about capitalism are false, and the proposed interventions are not beneficial – they are harmful.
“Paul – what about your fellow Red Sea Pedestrian, Disraeli?”
Yes – the claims of Disraeli were false, and his policies were wrong.
Often “Dizzy” did not even bother to examine his own policies – he just wanted to be seen to be “doing something” to be “engaging in Social Reform” regardless of whether the interventionism did good or harm – more recent political leaders spring to mind.
Politicians can get away with this when living standards are rising – as they can pretend that their “Social Reform” is the cause of the improvement in living conditions, rather than admit the truth that their interventionist antics make improving living standards harder rather than less hard.
As for the modern world – such as the Rio Conference of 1992, governments and big business getting together to plan international governance and Corporate State Public-Private-Partnership (using C02 as an excuse for what David Rockefeller and the others admitted they had always wanted to do anyway) – well if Faraday thinks that is “capitalism” he must spell the word F A C I S M.
David W
That wasn’t true, it was the untruth fed to the BBC, Coutts have now offered Mr Farage his accounts back.