"Other People's Money"

Held on Thursday, October 15


  • Prof John Kay


Prof. John Kay’s new book has been praised to the rafters in Fortune (“devastating”; “Wall St., it is safe to say, will not like it”), the FT (“scathing and much of it rings true”), and by Andy Haldane, in Prospect. I like it, too; indeed, I wish I had written it.

I think the crux of his argument is that only about 3% of the banking sector’s business involves “lending to firms and individuals engaged in the production of goods and services – which most people would imagine was the principal business of a bank”. Much of the rest, John says, is little more than “a closed circle of people (who) continuously exchange bits of paper with each other” – and the fact that some members of that circle make extraordinary profits can only suggest that there is a leakage of resources from the real economy to the financial sector.

You may remember that the CSFI published a paper by John in 2009 on “narrow banking” – suggesting that society would be better served if retail and investment banking were strictly separated. His latest book takes that argument a lot further, proposing radical structural reform to give priority to financial services “that meet the needs of the real economy.”

I don’t suppose everyone will agree with what John has to say, but this is an important book, and I am delighted that he has agreed to expand on his argument at a CSFI round-table. I am not sure whether we will have a dedicated respondent to disagree with John, but I am sure there will be plenty of people in the audience who will defend the investment banking industry. In any event, it should be a lively discussion.