Archive forNovember, 2015

No matter what or where you call home, be thankful

Thanksgiving is once again upon us. I have a cornucopia of things to be thankful for, and this season is a wonderful time of the year. Families and friends are gathering together to create rich memories, share delicious meals and renew relationships.

For many, the Thanksgiving holiday gathering will be at home. The definition of home, though, can vary significantly. The initial thought of home for many is going to be with family, possibly at the home where you grew up and where the best meals were served.

For others, it means celebrating in a new home, and having family and friends coming over to gather around your table this year. The food still tastes just as good and it is the perfect opportunity to begin building new memories.

For some, it may be that home isn’t a specific structure, instead just being where your loved one is. It might be in a new town, away from family. Or even in a new part of the world. But, there is still so much to be thankful for.

And for some, there may be no home, but there is a caring community providing a warm meal and a day of relief from some of the challenges that make present life difficult.

It is interesting how at the important times in our lives, home seems to make such a difference. With all the talk surrounding  the economy, politics, world tragedies and difficult circumstances facing families, communities and even countries, being home and with family provides a sense of peace, security and support.

That is one of the reasons why, at least in part, so many individuals and families have made the choice for homeownership — with more entering market daily. While investing in a home makes good financial sense, there is so much more to what a home is, what it means and what it does.

My hope is that you will enjoy being home — whatever that looks like for you — at Thanksgiving and throughout the holiday season. Let’s also remember those who are unable to be home because they are stationed across the country and around the world protecting our freedoms. Happy Thanksgiving!

Cindy Stanton is president of the Greater Nashville Association of Realtors. Contact her at 615-482-2224 or cindy@cindystanton.com 

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Winnipeg finance chair surprised at city’s $810K pricetag for social housing

The city is on the hook for $810,000 this year for social housing projects but the finance committee chair was surprised to learn the city was involved at all.

The agreement was signed in 1962, leaving the city to cover 12.5 per centof the costof units inLordSelkirkand Gilbert Park.

At a meeting Thursday, finance committee chair Marty Morantz said thecitygets little accounting of where the money is going andits time to find out moreand if the city can get out of the deal.

I think its a goodquestion to ask at this point in time, I mean,that agreement was signed the year I was born, Morantz said.

Morantz wants details

Morantzasked city staff for details about the agreement, what the contribution covered and how the loss was incurred but he didnt get manydetails.The city only gets a one-pageannual report from Manitoba Housing and it doesnt have many specifics.

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Ontario ‘on track’ to eliminate deficit, finance minister says

Ontarios finance minister saysthe provincial governmentis not ruling out tax hikes in an effort to eliminate the deficit by 2017-18 but will be focused on finding examples of tax avoidancebefore increasing rates.

We have a lot of arrows in our quiver, Finance Minister Charles Sousa said Thursday inthe fall economic update.Were going to look at the underground economy.

  • Watchdog leery of Liberal promise to balance books by 2018
  • Liberal pocketbook promises may take more time
  • Wynnes short leash on accountability: Robert Fisher

The province has revised its deficit to$7.5 billion, a figure that is down from the earlier projection of $8.5 billion. The deficit was previously at $10.3 billion for 2014-15 and was revised in September. The final deficit figure will not be known until the end of the fiscal year in March 2016.

The Liberal government maintains it can balance the budget by 2018.

We know the challenge that is before us, Sousa said. Were on track to achieve the results we said we would.

This government continues to refuse to admit that its promise to balance the budget by 2017-18 is a sham.
– Vic Fedeli, PC finance critic

The government said non-tax revenue,including the net revenue from the recent Hydro One initial publicoffering, is projected to be about $1.1 billion higher than in thebudget.

Sousa said funds received from the sale of Hydro One exceeded expectations because it was a tremendous IPO. Sousa said the money will be pumped back into the provincial economy.

This is about reinvesting our funds into our economy, Sousa told reporters.We still own 84 per cent of this company with substantiallygreater value now.

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Drought forum rethinks needs

He also acknowledged increases in the NRM levy had come at the worst possible time and said he would discuss those concerns with his colleagues.

The irony is NRM charges were supposed to be introduced in 2010 but we delayed them from the previous millenium drought.

Livestock SA Board member Andy Withers said emergency cash loans for young farmers should be a priority to ensure their future.

It is in all our interests to keep them in business, especially those younger farmers who have started up in the past five or six years. It is a really tough time to start. Right now prices are good but they are not able to take advantage of them because of two poor years.

He was concerned none of the SE farmers he knew had expressed interest in the drought concessional loans, and said this needed to be addressed.

MacKillop Farm Management Group executive officer Krysteen McElroy called for access to government extension officers at more affordable rates, with the SE farming organisation performing a knowledge sharing and extension and training role once delivered by PIRSA.

We still have some great Rural Solutions SA staff in the region but they come at a large cost and unless it falls within a project being done by them or us, we cant afford them, she said.

We have an arrangement with Rural Solutions for access to a livestock officer one day a week, if we could expand this across the whole farm sector it would be ideal.

Mrs McElroy said it was critical farmers had access to one-on-one advice to make decisions in times of drought.

Lucindale farmer Yvonne Correll said consistent state government investment in soil health programs was needed to build resilient rural communities.

Unless we start building from the bottom the rest of it on top will not be sustainable, she said.

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Payday loans lack security, physically and financially

Payday loan companies may face stricter regulations, though not an outright ban, as the Alberta Government begins task of reviewing payday loan regulations which are set to expire on June 30, 2016.

According to Minister of Service Alberta Deron Bilous, payday loan companies fulfill a need in the community, and if they were banned outright there would be no protection available for Albertans.

If they are banned, they will go underground, said Bilous in a telephone interview with the Reporter/Examiner.

Then there will be no oversight and no regulation.

A payday loan, according to current legislation, is a money advance with a principal of $1,500 or less for a term of 62 days or less made in exchange for a post-dated cheque, a pre-authorized debit or a future payment.

These quick-cash loans, however, carry very high percentage interest rates, and late-payment fees if someone were to default on a payment.

In Alberta, each loan has a set initial interest rate of 23 per cent. So, if an individual were to borrow $100, they would be expected to pay $123 on the agreed upon repayment date.

However, problems arise if an individual misses the deadline, because not only are interest rates compounded (ie interest on your initial interest) there are late fees as well.

In a given year, the annual percentage rate (ie the interest that is charged for a loan over the course of one year) for Albertans is 599.64 per cent.

According to Alberta legislation, individuals cannot take out another loan from the same company to repay the first loan aka rollover loans.

However, people get around this law by borrowing from another payday loan company.

They would come and pay us and then re-borrow, use the money that they re-borrowed to pay off (another loan company), and re-borrow again, said Carrie Wolfe, a tri-area local who used to work as an assistant manager for a payday loan company.

They get stuck hellip; and have to make it a pattern to pay it all off.

During the four years Wolfe worked for a payday loan company, she saw more than one individual file for bankruptcy because their debt became unmanageable.

Wolfe also mentioned that some payday loan companies issue credit cards without notifying the client of hidden fees, or they add an optional payment protection plan on top of the original loan, without notifying the client.

Wolfe, on the other hand, did try to regulate customers from borrowing more than they could afford to pay, but some individuals would try to borrow no matter what.

Wolfe saw individuals come in with fake identification, fake bank statements, and fake pay stubs.

As well, individuals would borrow against their Assured Income for the Severely Handicapped (AISH) payments and the child tax benefit payments they received from the government.

In the payday loan review, Wolfe would like to see the government ban payday loan companies from accepting AISH or child tax payments as repayment options.

She would also like to see security measures introduced for payday loan employees.

In Wolfes experience, some individuals would become angry with her staff because they either wanted to borrow more or could not repay their loans.

One guy was very aggressive towards us and we had to ask him to leave the store, Wolfe said.

He then sat in his car and continuously phoned us threatening to blow us up or shoot us down.

The gentleman was in the parking lot for four hours, and Wolfe had to contact the police.

We had no security, all we had was a back door, she said.

Those who are having financial difficulties can contact the Stony Plain or Spruce Grove Family and Community Support Services at 780-963-8583 or 780-962-7618 respectively.

As well, NeighbourLink Parkland offers help as well, and they can be contacted at 780-960-9669.

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Arrested KPMG partners questioned over finance company

It is understood that four senior KPMG partners arrested in Northern Ireland on Wednesday over allegations of tax evasion were questioned about matters including their involvement with a company set up to finance property development on both sides of the border.

The finances and tax arrangements of Jeap, a company owned by the four men that backed proposed property developments in areas such as Meath, Monaghan and Donegal, is thought to form a central part of the investigation.

The four partners are Jon D’Arcy, head of audit and transactions for KPMG in the north, Eamonn Donaghy, who heads the Belfast tax practice, Paul Hollway, head of corporate finance and Arthur O’Brien, an audit and advisory partner.

Mr Donaghy also chairs Grow NI, which has been pressuring the British government to lower the corporation tax in Northern Ireland.

The partners remain on administrative leave from KPMG while the investigation is ongoing. KPMG said yesterday it has no indication that the matters being investigated by HM Revenue and Customs tax officials relates to the business of the firm or its clients.

KMPG has also said it will cooperate fully with the investigation. Several of its of senior partners also travelled from Dublin to Belfast yesterday take over the running of the office there and reassure staff.

  • KPMG Belfast arrests create serious issue for accountancy firm

  • Four KPMG Belfast partners arrested in tax investigation

  • Clerys’ creditors set for Monday meeting with KPMG

It is also likely that KPMG will consider setting up an independent process to examine the allegations against the men and try to clear up the situation.

Jeap was set up by the four partners in 2005 while the property boom was in full swing, with each owning 25 per cent. Its most recent set of accounts, abridged statements for the year to the end of March 2014, show it had racked up losses of £4.3 million. It had just £391 cash in the bank.

Sources believe that among the areas of likely questioning to the four KPMG partners will have been how losses accrued by Jeap were offset against tax. Jeap is registered to the home address of Mr O’Brien, one of those arrested. A man who answered the phone at his address declined to talk to the Irish Times.

The most recent detailed accounts for Jeap are for 2010, when it had already racked up losses of £2.8 million. The 2010 accounts also show that most of its long-term bank loans, then almost £2.9 million, switched to shorter-term, and presumably higher interest, funding arrangements.

It appears that Jeap has had no income since 2010, while its debts have grown considerably, possibly through rolling up interest owed. Ulster Bank has two outstanding mortgages against Jeap.

The 2010 accounts outline Jeap’s investments, which were mainly loan notes issued to development companies. It loaned almost £2.9 million to developers – presumably mostly comprising cash it itself borrowed from Ulster – but by 2010 the value of these investments had been written down to just £729,000.

The accounts show Jeap loaned EUR250,000 to Stateford, which was owned by Dublin developers Vincent Maguire and Liam Moran but is now in liquidation. The developers were also behind Walsh Maguire amp; Co, which also collapsed.

JEAP also had loaned money and held a 10 per cent stake in WJ Law (Castleblaney). Jeap’s 2010 accounts also stated it had guaranteed interest shortfalls of up to EUR9.6 million in relation to this company. WJ’s most recent accounts say it is insolvent and unable to repay its banks.

Jeap also backed proposed developments in Donegal via Killea Developments, and also held stakes in limited partnerships that proposed to develop houses in north Dublin and Duleek in Meath.

The Duleek partnership last year got extended planning permission until 2018 from Meath County Council for a proposed residential development.

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Former California Attorney Pleads Guilty in International Investment Fraud Scheme

WASHINGTONA Las Vegas man pleaded guilty today to conspiracy for his role in an investment fraud scheme that promoted fraudulent investment opportunities and caused more than $5 million in losses to investors.

Assistant Attorney General Leslie R. Caldwell of the Justice Departments Criminal Division, US Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBIs Las Vegas Field Office made the announcement.

Joseph Micelli, 62, pleaded guilty before US District Judge Kent J. Dawson of the District of Nevada to conspiracy to commit wire fraud and securities fraud. His sentencing is scheduled for Feb. 23, 2016.

As part of his plea, Micelli admitted that he conspired with others in the United States and Switzerland to promote investments and loan instruments that he knew to be fraudulent. The conspirators told victims that, for an up-front payment, a Swiss company known as the Malom Group AG would provide access to lucrative investment opportunities and substantial cash loans. In connection with his plea, Micelli admitted that he held himself out to investors as an attorney, when in fact he had lost his license to practice law. In addition, as part of an effort to defraud an investor who held an equity stake in a corporation that had filed for bankruptcy, Micelli submitted a sworn affidavit to the US Bankruptcy Court for the District of New Hampshire, in which he made false statements about the Malom Groups ability to provide financing to the debtors.

Five other defendants have been charged in the case and are awaiting trial or extradition.

The FBIs Las Vegas Field Office investigated this case. Assistant Chief Brian R. Young and Trial Attorneys Melissa Aoyagi and Anna G. Kaminska of the Criminal Divisions Fraud Section prosecuted this case with assistance from the Criminal Divisions Office of International Affairs and the US Attorneys Office for the District of Nevada. The US Securities and Exchange Commissions Enforcement Division, which referred the matter to the Department of Justice and is conducting a parallel civil enforcement investigation, also provided valuable assistance.

Todays conviction is part of efforts underway by President Obamas Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 US Attorneys offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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Rep. Maloney Introduces 1st-Time Homeowners Savings Plan Act

With Rent Unaffordable in 75% of American Markets and Increasing Every Year, Maloney Introduces New Legislation to Help First Time Home Buyers

Nationwide, Nearly Half of All Renters Spend One-Third of Their Income on Rent, and Over 1 in 4 Spend at Least 50% of Their Income

 

Washington, DC — With unaffordable rent driving first-time buyers out of the market, and rent prices increasing with each passing year, Rep. Sean Patrick Maloney (NY-18) unveiled new legislation to help first-time home buyers. Currently, high rents are making it difficult if not impossible for many to save for their first home. Despite the fact that 90% of millennials prefer owning to renting, just 36% of Americans under the age of 35 own a home – the lowest level since the Census Bureau started tracking home ownership by age in 1982. Maloney’s legislation would allow renters to break the cycle by using more of their tax-free IRA savings for a down payment on a new home and a more stable financial future.  The bill is bipartisan, with Reps. Jim Renacci (R-OH), Eric Swalwell (D-CA), and Mike Coffman (R-CO).

“We can’t let home ownership become the next thing to slip out of reach for ordinary, hardworking Americans,” said Rep. Maloney. “But unless we take action, it will. Record high rent prices are shutting first-time home buyers out of the market. This common-sense, bipartisan bill will help reverse the trend by empowering people to save more of their own money to make the move to home-ownership, and enjoy the social and economic benefits that come with it.”

“With communities throughout the United States in ‘renters crises,’ I am proud to join Rep. Maloney on a bill that assists first time homebuyers with a down payment,” said Rep. Coffman. “I look forward to working with my colleagues on both sides of the aisle to push this bill through the House.”

We support homeownership because we know homeownership is the foundation of every community. The First Time Homeowner Savings Plan Act will offer access to money for renters to transition into a safe, affordable home.  Housing counselors can use this new provision within their tool box of assistance, sharing this opportunity during first-time homebuyer education classes and one-on-one consultations,” said Faith Moore, Executive Director of the Orange County Rural Development Advisory Corp.

We strongly support Congressman Maloneys First Time Homeowner Savings Plan Act, said Co-Executive Director, Dianne Chipman, of the Putnam County Housing Corporation. Putnam County Housing Corporations Housing Needs Assessment (January 2014) prepared by the Center for Housing Solutions, Pattern for Progress revealed, Eighty-eight percent  (88%) of owners and renters in Putnam County, regardless of income level, are living in Unaffordable and Severely Cost Burdened Housing. This bill would assist more young individuals and families in realizing the dream of owning a home in their community.

“This legislation would be a great benefit to potential homeowners in the Hudson Valley area, where home prices tend to be substantially higher than in other regions of New York State,” said Hudson Gateway Association of Realtors President Drew Kessler.  “This will give more first-time homeowners the opportunity to acquire the necessary funds without penalties to make a viable down payment on a home.” added Hudson Gateway Association of Realtors CEO Richard Haggerty.

“Many would be first-time home buyers are getting shut out of the market by rising rents and student loans, which limit a borrowers ability to save for down payment. Buying a home when you are ready and many are if not for rising hurdle of down payments means asset-building well into the future, including the ability to ride out market downturns and benefit from long-term asset appreciation. This bill can help young families, and help us reverse the decline of first-time homeownership,” said Doug Ryan, Director of Affordable Homeownership for the Corporation for Enterprise Development.

“Rising rents across the country present a significant obstacle in trying to save for a down payment,” said National Association of Realtors President Chris Polychron. “The National Association of Realtors supports this legislation and thanks Representative Maloney for his work to broaden opportunities for families who rent as they reach towards the dream of homeownership.”

“Sustainable homeownership has long been seen as the gateway to the middle class for many Americans. Given the barrier of amassing sufficient funds for a down payment and closing costs, many Americans are unable to realize that dream.  This proposal would expand access to affordable credit by increasing the number of options that American homebuyers have to assemble the significant resources necessary for what is often the biggest purchase [they will ever make],” wrote William P. Killmer, Senior Vice President of Legislative and Political Affairs at the Mortgage Bankers Association.

“Allowing savers greater access to their IRAs for the purchase of a home will allow more households to take advantage of an existing and underutilized vehicle that allows for tax-deferred wealth building. It could encourage young households to start saving at a younger age, because of the increased resource available for a home purchase from an IRA.NHC believes this legislation is one important tool, among many, that promotes affordable homeownership,” wrote Chris Estes, President and CEO of the National Housing Conference.

“The bill introduced by Rep. Maloney would be a great benefit to Americans pursuing the dream of home ownership,” said Jules Gaudreau, president of the National Association of Insurance and Financial Advisors. “Saving for retirement and purchasing a first home can both contribute to the long-term financial security of American families. Penalty-free IRA withdrawals, in amounts high enough to be meaningful in the current market, will make all the difference for many families struggling to come up with down payments.”

“The National Association of Home Builders supports your efforts to help address one of the biggest financial hurdles to homeownership for first-time buyers: assembling the down payment.  The tax code currently recognizes the benefits of investing in a home and allows first-time buyers to withdraw, without penalty, $10,000 from an individual retirement plan. Since this provision was first enacted nearly 20 years the value has slowly eroded over time. This legislation to increase the limit to $25,000 and index it for inflation would assist more Americans who are saving for a down payment on their first home,” said James W. Tobin III of the  National Association of Home Builders.

Currently, the United States is in a “renters crisis” with rent is unaffordable in roughly 75% of markets. As this map from the Harvard Joint Center for Housing Studies shows, nationwide nearly half of all renters are “cost-burdened” and over 1 in 4 are severely cost-burdened. This is also self-perpetuating. Last year, rents increased at twice the rate of inflation. Higher rents mean fewer homeowners and more renters. More renters drive prices even higher, and the problem grows.

Despite the fact that 90% of millennials prefer owning to renting, just 35% of Americans under the age of 35 own a home – the lowest level since the Census Bureau started tracking home ownership by age in 1982.[2]

Home-ownership often brings with it a range of social and economic benefits that renters miss out on. The Center for American Progress estimates homeowners’ median net worth at $170,000, more than 30 times that of renters. Additionally, homeowners’ savings exceed renters’ savings more than eight to one.

Even at similar income levels, homeowners have significantly more assets. [3] This better prepares homeowners for retirement. According to Harvard’s Joint Center on Housing Studies, the median homeowner over 65 could afford nearly 3.5 years of care in a nursing home if needed. The median renter couldn’t afford a month.[4]

However, Congress can help: In 1997, Congress allowed first time homebuyers to withdraw up to $10,000 from their IRA penalty free for the purchase of a home, providing a tax-advantaged way to save for a down payment. But in the years since, $10,000 just isn’t what it used to be; since then the price of a house in the US has doubled.

First Time Homeowners Savings Plan Act, would increase this limit from $10,000 to $25,000, and index the limit to inflation.

Evidence suggests that tax-deferred accounts work a Canadian program that offered tax-free savings for down payments saw home ownership increase by 20% in targeted populations.[5]

The bill has been endorsed by the National Association of Realtors, National Association of Home Builders, Mortgage Bankers Association, American Land Title Association, National Association of Insurance and Financial Advisors, CFED, and the National Housing Conference. It’s also been endorsed by great Hudson Valley groups like the Orange County Rural Development Advisory Group, the Hudson Gateway Association of Realtors and the Putnam County Housing Corporation.

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China regulator targets illegal margin finance in wealth management products

SHANGHAI Nov 27 Chinas securities regulator,
the China Securities and Regulatory Commission, told its local
branches to resolutely clean up illegal margin financing in
wealth management products, a commission spokesman said in a
press conference Friday.

Illegal margin finance offered by non-bank lenders magnified
the size the of Chinas equity bull-run and subsequent crash
this summer, and was the subject of a severe crackdown in late
summer and early fall.

Official measures of margin borrowing also declined sharply
as the equity bubbled deflated, but have recently rebounded,
although not to levels most analysts consider dangerous.

Wealth management and trust products, high-yield investments
typically marketed by banks or brokerages, were a major source
of finance for so-called grey margin finance this spring,
analysts say.

(Reporting By Nathaniel Taplin; Editing by Simon Cameron-Moore)

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What is "narrow banking" – and could it put finance right?

How much finance do we really need? The unprecedented explosion in the size of the UK’s financial industry and levels of debt in the economy over the past three and a half decades have long posed that question. The 2008 crash made it all the more urgent. Yet mainstream economics has proved unable to come up with a compelling framework with which to explain the appropriate role of finance in our economy. Until now, that is. These two books go an impressively long way towards filling the gap.

John Kay and Adair Turner are two of Britain’s most profound and articulate economic thinkers. With that, however, the similarities end. Turner is the consummate insider. A former director of the Confederation of British Industry, ex-chairman of the Financial Services Authority and a member of the House of Lords, he has for years been the pointman of the powers that be on any thorny economic policy problem requiring the forensic application of vast brainpower, clear exposition and political nous.

Kay, for his part, is a professional outsider. A uniquely versatile entrepreneur in both business and ideas, he has disrupted virtually every big economic policy debate in Britain for the past four decades, founding think tanks and companies along the way. He is also – as he demonstrates in his celebrated weekly column in the Financial Times, and as Other People’s Money confirms – an unparalleled communicator of economics to a non-specialist audience.

Consequently, the simultaneous publication of Other People’s Money and Between Debt and the Devil is a double blessing. Both books are scintillating individual contributions to the debate not just on the future of finance but how we should run our economy. But I would strongly recommend anyone interested in these topics to read both – because Kay’s and Turner’s contrasting backgrounds and temperaments bring two very different perspectives to the table.

Kay takes a microeconomist’s approach. He tackles the phenomenon of financialisation by focusing relentlessly on what people who work in financial institutions actually do – and whether it meets the needs of consumers. His conclusion is that, to an alarmingly large extent, it does not.

The problem is not finance per se. The core functions of finance are not only valuable, Kay argues, but essential in a modern economy: to facilitate payments; to match those who have savings with those who need capital for productive investment; and to enable households to manage their financial affairs and to insure themselves against risk.

The problem is that practically everything that accounts for the phenomenal growth of finance over the past 35 years has little to do with these core functions. The gargantuan dimensions of modern finance are mostly the result of financial institutions trading with one another – not of their providing a broader range or more useful services to the businesses or individuals who invest or deposit their money with them.

The origin of this pointless (from the view of the consumer) hypertrophy, Kay argues, is a deep-rooted confusion in Anglo-Saxon financial culture between the central concepts of insurance and wagering. Insurance involves the mutualisation of risks and is a socially useful service that society should happily pay financiers to deliver. Wagering, on the other hand, is not a socially useful activity, but a zero-sum game that adds no economic value. Insurance is a core function of finance. Wagering is not. Yet policymakers have allowed a vast industry of wagering to thrive under the misconception that it represents useful insurance.

The key to salvaging the situation, Kay says, is to apply the universal logic of economic regulation: “Finance is a business like any other, and should be judged by reference to the same principles – the same tools of analysis, the same metrics of value – that we apply to other industries, such as railways, or retailing, or electricity supply.” That is a compellingly simple principle and indeed, in Kay’s expert hands it yields a raft of convincing suggestions. Yet, strangely enough, one of the central purposes of Adair Turner’s book is to argue that it is invalid.

“Money,” Turner states early on in Between Debt and the Devil, “is different from other commodities, goods, or services, and neither the economic nor the political arguments in favour of free markets apply to money.” He reaches this startlingly contrasting conclusion because he approaches finance from the opposite direction to Kay.

Seen from the microeconomic perspective that Kay takes, money appears as a thing – a commodity like any other – that is passed from savers to banks to borrowers. Seen from the macroeconomic perspective of the economy as a whole, however, it is shown rather to be a system of credits and debts created and managed by banks. And as at present constituted, Turner argues, this system is intrinsically unstable.

Money creation in modern banking systems depends on the accumulation of debt: it is through the act of making loans that banks create the money we use. There is no doubt that this is a remarkable set-up, and one that historically has greatly facilitated entrepreneurship, invention and trade. In its modern incarnation, however, it also suffers from two flaws.

The first is that there is no natural limit to the quantity of credit and debt that it generates. It is not the case, as the models in economics textbooks claim, that households and businesses need to save up money before banks can lend it on to borrowers. Banks can make loans and thereby create money without any prior act of saving taking place. The idea that the growth of finance is constrained by the rate at which people save is therefore a comforting illusion.

Not the only one, either. Ask most people what banks do, and they will probably tell you that they take in the savings of individuals and lend them out to businesses. Yet, as Turner explains, lending to non-financial companies accounted for a meagre 14 per cent of UK banks’ loan books in 2012. Critics of the banks might think they have an explanation: banks just lend to hapless households to fund “debt-fuelled consumption”. Yet consumer credit made up an even smaller 7 per cent of banks’ loans. What accounts for the other four-fifths of banks’ loans – what banks really do – is mortgages. The overwhelming bulk of British banks’ retail business is lending us money to buy each other’s houses. The outcome is unhealthy. Creating ever more debt to finance real estate does not make the economy any more productive. What it mostly does is pump up house prices. In short, in the current banking system we end up with “too much of the wrong kind of debt”.

This is a diagnosis a degree more pessi­mistic than Kay’s. It is not just that financialisation has erected a tottering skyscraper of “socially useless” gambling on the healthy core business of banking: the foundations are rotten as well.

Which perspective is right, Kay’s or Turner’s? If only banking were shorn of its rent-seeking activities and treated like a normal industry, would all be well? Or are even the core functions of finance intrinsically flawed? In fact, you don’t have to choose. Both approaches yield analyses rich with valuable insights. Perhaps more surprisingly, the approaches converge on an identical, central policy recommendation: banking needs deep structural reform.

Writing ever-fatter rulebooks will not work; what is needed is a different institutional structure. Banks should be restricted to providing current accounts and processing payments. Savings, investments and mortgage finance should be assigned to specialised institutions. The catch-all term for this solution is “narrow banking”. Turner sees it as an unlikely ideal; Kay argues convincingly that it is perfectly workable.

When two such independently minded thinkers, approaching from two such disparate angles, argue as convincingly as Kay and Turner do in this marvellous pair of books that a single policy is the royal road to putting finance right, it is time for policymakers to listen – and act.

Felix Martin is the author of “Money: the Unauthorised Biography” (Vintage)

Other Peoples Money by John Kay is out now from Profile Books (368pp, £16.99)

Between Debt and the Devil by Adair Turner is published by Princeton University Press (320pp, £19.95)

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