Page last updated at 10:56 GMT, Thursday, 25 September 2008 11:56 UK

Archbishops attack City practices

The Archbishops of Canterbury and York
The Archbishops of Canterbury and York have launched fierce attacks

The two most senior figures in the Church of England have condemned the practices of some financial traders.

Writing in the Spectator, Archbishop of Canterbury Dr Rowan Williams attacked "paper transactions with no concrete outcome beyond profit for traders".

When such trading went badly, it caused "real and crippling damage", he said.

In an earlier speech, the Archbishop of York, Dr John Sentamu, called share traders who cashed in on falling prices "bank robbers and asset strippers".

'Levels of fiction'

Dr Williams focused on the financial industry's trading of debts, which he said had "without accountability... been the motor of astronomical financial gain for many in recent years".

He said the current financial crisis "exposes the element of basic unreality in the situation - the truth that almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders".

The biggest challenge in the present crisis is whether we can recover some sense of the connection between money and material reality
Dr Rowan Williams
Archbishop of Canterbury

The archbishop continued: "Given that the risk to social stability overall in these processes has been shown to be so enormous, it is no use pretending that the financial world can maintain indefinitely the degree of exemption from scrutiny and regulation that it has got used to."

He backed the UK's recent ban on short-selling - in which traders bet on share prices falling - and said Britain and other governments "should not lose their nerve as they look to identify a few more targets".

But Apcims, the representative body of the stockbroking industry, said the archbishops were wrong to call for an outright, long-term ban on short-selling.

"It is market abuse which is wrong and this can occur when holding either long or short positions," said David Bennett, CEO of Apcims, the Association of Private Client Investment Managers and Stockbrokers.

"Transparency is the key here. Markets need both the views of people who think the share price is going to fall as well as people believing the market will rise in order that the markets can function efficiently."

Dr Williams went on to acknowledge that "loosening up a financial regime" was sometimes needed to foster enterprise and create wealth to "draw whole populations out of poverty".

"But it is a sort of fundamentalism to say that this alone will secure stable and just outcomes everywhere."

He said: "The biggest challenge in the present crisis is whether we can recover some sense of the connection between money and material reality - the production of specific things, the achievement of recognisably human goals that have something to do with a shared sense of what is good for the human community in the widest sense."

One of the ironies about this financial crisis is that it makes action on poverty look utterly achievable
Dr John Sentamu
Archbishop of York

In a speech to bankers on Wednesday, Dr Sentamu said: "We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland."

Lloyds TSB announced last week it had agreed a 12.2bn takeover of HBOS after shares in the latter plummeted.

Since the takeover, many commentators have criticised traders who sold borrowed shares below their current price, betting that prices would fall further before they bought them back.

"To a bystander like me, those who made 190m deliberately underselling the shares of HBOS, in spite of a very strong capital base, and drove it into the arms of Lloyds TSB, are clearly bank robbers and asset strippers," Dr Sentamu told the annual dinner of the Worshipful Company of International Bankers.

Poverty effort

The archbishop also noted the contrast between the US government bank bail-out and the lack of funding for efforts to reduce poverty.

The US Treasury has proposed a fund worth up to $700bn (382bn) to buy back much of the bad debt held by banks and other financial institutions.

Given all the money that the Church of England controls, they could save children in poverty just as easily
James, Cambridge

The archbishop acknowledged the need for stable financial systems if poverty was to be eradicated, but added: "One of the ironies about this financial crisis is that it makes action on poverty look utterly achievable. It would cost $5bn (2.7bn) to save six million children's lives.

"World leaders could find 140 times that amount for the banking system in a week. How can they tell us that action for the poorest is too expensive?"

On Thursday, world leaders will meet in the US to mark progress in the Millennium Development Goals, a set of targets to reduce global poverty and improve living standards by 2015.

The goals range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education.

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