If political constraints mean the law cannot, at present, provide solutions, what are the alternatives to Big Finance for the consumer? The anthropologist and former broker, Brett Scott, outlined the role that innovative finance and peer-to-peer lending might have on the City of London, including the possible emergence of grass-roots alternatives to the big banks. Peer-to-peer lenders such as Zopa have gained a great deal of success, and digital currencies such as Bitcoin may point the way to the future.
What is perhaps most remarkable about the 2008 crash is that despite its substantial negative impact on all of our lives, the essentials of Big Finance (too big to fail, moral hazards) remain intact. The only real reform that has occurred has been the requirement for large institutions to maintain larger amounts of capital than they commonly did prior to 2008 – but there is no guarantee that the amounts held would be sufficient to prevent a systemic crash occurring in the future.
Fundamental reform is necessary and possible through law, but in order to get there, several political hurdles must be passed, and with so much else on the political horizon (EU referendum, US presidential election) much of our energy is directed elsewhere. It may take another serious crash for politicians and electorates to face up to the serious task of reform.
Dr Luke McDonagh is a lecturer in the law school of City University of London