Bankers begging for cash from the public purse all over the place suddenly means financial regulation is on everyones lips. Even the Tories now pretend they've always wanted it, and of course there are those on the left whose jaw is still on the ground, amazed that the revolution happened whilst the proletariat was out working. The Greens in England and Wales, are busy punting their proposals to re-regulate the financial sector through the Green New Deal proposals. And given that all I seem to hear are empty rhetoric from the other parties (Gordon Brown at conference for example), rather than specific proposals, I thought I'd have a look at the Green New Deal in more detail.

The GND ascribes the root of the problem to:

• Lack of financial autonomy at a national level to control money supply and interest rates.
• Lack of transparency in company reporting.
• Lack of control over derivatives trading and off-shore tax havens.
• The formation of large institutions that have become 'too big to be allowed to fail'.

The first of these points is perhaps the hardest to address, as to deliver it would require a great deal of international agreement. It would mean abandoning floating exchange rates, and controls on international capital flows to prevent speculation. It would mean international agreement on the treatment of 'tax havens' - which the GND authors more accurately describe as 'secrecy spaces'. These measures would have a massive impact on the process of globalisation.  But China has a fixed exchange rate, and controls on inward investment - it has managed to grow, and grow spectacularly. Indeed, the GND authors hark back to a golden age between 1930 and 1970 where many of these controls were in place in the West too. They argue we need to go back to this Keynesian style of international regulation if we are to continue to grow our economy sustainably.

The GND authors also think that we probably need to renationalise, or heavily regulate, the bank of England, to ensure that it works to prevent asset bubbles, control money supply, as well as price inflation.

This is a big paradigm shift. And frankly one wonders whether it's achievable even in the current political climate. It looks hard enough to get agreement at a national level - never mind international agreement about hot potatoes like the role of the World Bank. Not only this, I wonder whether a return to this approach to international regulation would place significant constraints on the beneficial bits of globalisation. The rise of the 'global shop floor,' where manufacturing supply chains are increasingly integrated across continents has been underpinned by looser international capital controls. Could emerging economies continue to grow at the rates they have been growing at if what's left of western capital is restricted to the degree proposed by the GND authors? I'm afraid the answer to that question is beyond my competency. But I'd be interested to hear others thoughts on the matter.

However, I'm much more confident that some of the other proposals are needed and actually achievable. If, the ongoing financial crisis has shown us anything it is that there is no such thing as  'too big to fail'. Big banks just mean bigger risks - risks that are ultimately left to the tax payer to bear when things go titsup. Therefore , it seems eminently  sensible to me to regulate banks better, for example, we could ensure a separation between  retail  banking and investment banking. We could also easily demand more transparency in company reporting.

James takes a look back at the history of some of the Victorian institutions that the UK has lost, and notes that the depositor has largely been forgotten in the pursuit of speculative profits and short term gains that mega mergers offer. As I've noted previously on this blog, the  best solution to HBOS was not to allow the creation of even bigger mega-bank. A more appealling solution should have involved saving the retail and mortgage bank, on the condition it remutualised, if that is possible.

The GND also argues that regulation should be enforced to only permit financial trading in specific, regulated instruments. The Spivs would be prevented from inventing clever work arounds and scary trading practices by making non-regulated financial contracts un-enforcable in law. I'm wondering whether this would really be necessary if investment banking was separated away from  mortgage and retail banking?

Perhaps I'm getting conservative with a small 'c' - but could these proposals risk throwing the baby out with the bath water? Financial firms are always innovating new products and means of raising finance. For example, exchange traded funds - described as the most innovative investment vehicle invented in the last two decades - allow small investors to participate in what were hitherto fairly closed, arcane markets, like commodities and, yes short-selling. Surely this is a good thing? Markets work better with more participants. To my mind, I'd prefer an arrangement where the spivs were permitted to speculate, but only with money that isn't borrowed on the basis of retail deposits. As Iain MacWhirter puts it:

"What is distinctive about this current crisis...is that it is all about global companies who haven’t made anything at all, except debt. They have been manufacturing money out of money, other peoples’ money. Banks have been playing high-risk financial games using other peoples’ capital held in pension funds, bank deposits, investment funds. The giant US insurer, AIG, which was nationalised last week, had been using the funds that it should have been keeping safe to pay out on insurance claims to gamble on the derivatives market."

If private investors, companies and so on, want to use money to speculate at the more esoteric end of the finance market, I think they should be allowed to do it - but the money they use should be their own: Not leveraged against people's pensions,  savings  and  so on. This will mean much greater transparency, and much more regulation of some parts of the system, to ensure that the government and the public is fire-walled away from the high risk stuff. However, I'd argue the GND proposals could produce a near moribund and inflexible system if the plans encompassed absolutely all financial dealings.

Anyway, this is turning into a long post.

In a nutshell: The Green New Deal's proposals for financial regulation throw up more questions than answers and I'd like re-assurances that the proposals wouldn't halt global development, or bring on a recession at home. The Greens should be congratulated for actually putting some coherent plan on the table though.

Government bail-outs should be based on the break-up of mega banks, and the creation of smaller, better regulated mutuals/credit unions/co-ops to manage our pensions, mortgages and savings. Yes to more transparency, and yes to cutting the use of off shore 'secrecy spaces.' But - if people want to speculate with their own cash, surely we should let 'em?