After the 2000 financially-engineered tech bust blew in America, regulators enacted the Sarbanes-Oxley Act of 2002, also known as SOX, to help what had become rampant accounting fraud (Enron, WorldCom, Global Crossing, Tyco and Arthur Andersen et al), that led to billions in investor losses, failed companies and government bailouts.
SOX required among other things, that corporate executives and auditors of publicly traded companies be held personally responsible for the reported financial information of their companies. To avoid this, like rats running from a sinking ship, many companies moved their financial headquarters to the city of London where no such accountability was demanded.
In the process, over the past two decades, London has become one of the dominant financial centers in Europe and the world. And it boasts all the property bubbles, debt weight, wealth inequality, money laundering, fraud and social debauchery that go along with this distinction.
Starting in the early 80’s under Thatcher (and Reagan in America), we have experienced thirty years of deregulation, consolidation and escalating political capture by the finance sector leading to a world economy now fully in service to finance–rather than the other way around. Meanwhile finance does not create or innovate, it simply serves as a tax or cost of doing business for the real economy.
Every threat to the dominance of finance poses a threat to the ruling status quo and so is vehemently opposed by the institutions and business-funded media conglomerates who have benefited most by the ‘financialization’ of London and the global economy. Just as in the 1930’s, the strangle hold of finance must be undone in order to support fiscal health and economic sustainability from here. See: Brexit or Not, London house prices are under threat and ‘Big Bang’ to Brexit: The City of London fears end to golden age:
Geese don’t come much more golden than the City of London.
The narrow lanes of the Square Mile, lined with handsome neoclassical stone and gleaming modern glass, are at the heart of a British financial sector that paid 66 billion pounds ($94 billion) in tax last year and employs more than 2 million people nationwide. It is oft-resented, has helped push the capital’s house prices out of reach for many, and required a bailout of more than 100 billion pounds from taxpayers less than a decade ago.
It is also without a doubt the country’s most lucrative industry.
Yet ahead of a June 23 referendum on European Union membership, many of the City’s leading lights are deeply worried about its future.
When the bankers are worried, it is a sign that meaningful progress must be in motion.