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The politics behind the economic reforms took a trans-Atlantic twist with a key British banker Tuesday tipping his hat to the U.S. president. Bank of England Gov. Mervyn King told the Commons Select committee bankers' pay should be in line with other professionals -- along the lines of doctors and lawyers -- and that he would favor banning commercial banks from proprietary trading, a close echo to two of PresidentBarack Obama's recent proposals.
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With anger over bankers rising as quickly as their paychecks, it is sometimes hard to separate the rage from the outrage, that is to say, what is a sound economic decision from an emotional one. It is popular to be angry at bankers in Britain, too. But an endorsement of two of Obama's concepts from an owlish non-politician overseas especially in a poisoned atmosphere gives the proposals some sense of objective legitimacy.
While Britain's initial response to the financial crisis in 2008 was admired for its aggressiveness, King told committee members: "The U.S. has been more open in moving to a safer banking system than we are. After you ring-fence retail deposits, the statement that no one else gets bailed out becomes credible."
In Britain, which found itself inching out of recession in the fourth quarter, bankers face the prospect of a tax of 50 percent of their bonus checks, proposed by Prime Minister Gordon Brown, who is also riding the populist anger at bankers, who seem to be sitting pretty while unemployment rises.
Ironically, King did not endorse Brown's proposal to tax bank transactions -- the so-called "Tobin tax" named after U.S. Nobel laureate James Tobin.
In Washington, lawmakers on the House Oversight Committee are scheduled to question Treasury Department Secretary Timothy Geithner Wednesday on his role in the rescue of American International Group Inc., orchestrated when he was president of the New York Fed.
Geithner said recently he was proud of his role in the rescues that took place in the chaotic final months of 2008, when Congress approved a $700 billion bank bailout program soon after Bear Stearns and Lehman Brother's collapsed.
Geithner and others are now being held accountable for implementing a massive bailout program that arguably worked for banks but fell short of rescuing the economy very well.
"I don't think there's anything exceptional in this. It's perfectly understandable. It's the price of holding this office. I am here to help the president make good judgments about what policy makes sense, what's fair and what's going to work to make things better," Geithner said.
In market movement Wednesday, the Nikkei 225 in Japan lost 0.71 percent, while the Shanghai composite index in China lost 1.09 percent. The Hang Seng index in Hong Kong dropped 0.38 percent, while the Sensex in India lost 2.92 percent.
In Australia, the S&P/ASX 200 dropped 1.55 percent.
In midday trading in Europe, the FTSE 100 in Britain shed 1.44 percent, while the DAX 30 in Germany lost 1.11 percent. The CAC 40 in France slipped 1.58 percent, while the pan-European DJ Stoxx 50 lost 1.41 percent.
