Politicians are suckers. Most of them are so dumb you don’t even need to bribe them in order to get them to do what you want, though a few million pounds fed into Tory and Labour Party coffers, possibly in exchange for peerages, certainly makes politicians see “sense” (sense as viewed by banksters).
Anyway, Vince Cable, the UK’s “business secretary” is keen to let banks get away with dangerous capital ratios so as to make it easy for banks to lend (i.e. increase the amount of debt). As Anad Admati, professor of economics at Stanford University put it:
“…Vince Cable, the United Kingdom’s business secretary, recently accused Bank of England regulators – whom he called “capital Taliban” – of holding back the country’s economic recovery by imposing excessive burdens on banks. Cable appears to believe the banks’ lobbyists when they claim that lending and growth would suffer if banks were forced to “hold more capital.”
The point that Vince Cable clearly doesn’t get is that while it is certainly possible to implement stimulus by having private banks go on a lending spree (house price bubble anyone?), there is a much better way of effecting stimulus, and that’s simply to feed money into the pockets of ordinary households and/or increase public spending.
Moreover, increased spending by households and/or the public sector increases demand for the output of most firms, and where appropriate, those firms will AUTOMATICALLY invest more (either funded by borrowing or retained earnings or by issuing more equity). Those firms do not need ignorant Westminster politicians inducing them to invest or telling them when to invest. Nor do they need the latter ignoramuses telling them whether to fund investment from retained earnings, debt or new equity.
Simon Jenkins has for years been poking fun at the pro-bankster and anti-household policies pursed by Vince Cable and other Westminister politicians. E.g. see here. See also his paragraph starting “Britain’s only counter-recessionary policy…” here. Or see paragraph starting “Britain has less excuse…” here.