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Bank of England: wrong and powerless

Robert Peston | 05:00 UK time, Monday, 22 December 2008

The point of the Panorama I've made with Stephen Scott and Vivien White (which will be broadcast tonight at 8.30pm) is to convey quite how close we came in October to the collapse of the banking system.

It's a suspenseful story told in interviews with a quartet of the leading actors: the chancellor, Alistair Darling; the deputy governor of the Bank of England, Sir John Gieve; the chief executive of the Financial Services Authority, Hector Sants and the chief executive of Barclays, John Varley.

I hope the programme also gives a sense of the shocks generated by this near catastrophe and the tumultuous year that lies ahead.

For me, what stood out when interviewing this quartet was the revelation about how Royal Bank of Scotland and HBOS were - in October - only hours away from being unable to open for business.

Inevitably, in a 30 minute documentary, many fascinating contributions from interviewees hit the cutting-room floor (such as John Varley's remarks on how it will take between one and two years for the contraction of lending to stop - which you can read in the note I published on Saturday).

So here are some resonant and significant remarks from Sir John Gieve that didn't make it into the finished film; Sir John rarely gives interviews and is to stand down in March from his role in charge of financial stability at the Bank of England.

This is Gieve's explanation of how and why the Bank of England failed to curb the growth of the bubble in borrowing and asset prices which lies behind our current woes: "We didn't think it was going to be anything like as severe as it's turned out to be... Why didn't we see that it was so serious? I think that's because we, perhaps, we hadn't kept pace with the extent of globalisation. So the upswing here didn't involve the big increases in earnings and consumption and activity which we saw in previous booms. We saw the credit, we saw the house prices, but we did see a fairly stable pattern of earnings, prices and output."

Sir John GieveAs others at the Bank of England have told me, the Bank's Monetary Policy Committee believed mistakenly that the lending binge and asset-price surge were semi-independent from activity in the real economy, and that they would eventually moderate without wreaking devastating damage to prospects for households and businesses.

But, as Gieve says, the Bank had identified the bubble, even if it didn't fully understand quite what misery its popping could and would cause. So why didn't he and his colleagues raise interest rates to attempt to stem the growth in lending and the rise in the price of houses and other assets?

"If we'd used interest rates to try and address this asset-price credit growth, we would have been holding down the level of activity elsewhere in the economy, in manufacturing, in other services, holding down the level of employment at a time when consumer price inflation and earnings were stable and reasonably low. And people would have said, you know, 'this is a wilful reduction in the prosperity of the country'."

The mess we're in demonstrates for Gieve that the Bank of England does not possess the proper tools for dealing with incipient booms in assets and lending. The power to raise and lower interest rates isn't adequate for the task, he says: "I think that one of the main lessons from this is that we need to develop some new instruments which sit somewhere between interest rates, which affect the whole economy and activity, and individual supervision and regulation of individual banks.

"Maybe we need to develop something which bridges that gap and directly addresses the financial cycle and prevents the financial cycle and the credit cycle getting out of hand... I think we need to complement interest rates, which are a blunt instrument - you set one interest rate for the whole economy - with something which is more financial-sector specific."

So what might this new tool or instrument be? Well, it would have to be a mechanism to prohibit or at least discourage a lending splurge during a period of sustained economic growth, such as a formulaic stipulation that banks have to hold more capital relative to their loans and assets during the good years (which is precisely the opposite of what happened in the euphoric phase before August 2007).

And what about the price that we as taxpayers will eventually pay for the bailouts in 2008 of many of our biggest banks? I asked Gieve - who was intimately involved in these rescues - whether we would end up with a profit or loss on the nationalised and semi-nationalised banks. Would we as taxpayers get our money back?

"Well, I think it'll be a mixed picture. I mean, I think there are some [lending] books - Northern Rock, Bradford & Bingley - which the taxpayer is now holding which clearly have a level of defaults in them: I'm not quite sure how that will balance out against the residual of the capital. As for the more mainstream banks: yes, I think they've got a commercial future and I'm sure that in time they will, as for example the Swedish banks have after their crisis, revive and start building and growing as commercial entities again."

In other words, he says there is quite a risk of us making a loss on the Rock and Bradford & Bingley. But he's hopeful that we'll end up in the black on our massive investments in Royal Bank of Scotland, HBOS and Lloyds TSB.

ADDENDUM: It matters that we learn how to prevent a repetition of the economic mess we're in, partly for reassurance that we can plan on the basis that stability will return.

Which is why the frank admissions of what went wrong made by Gieve are significant, especially that interest rates are an inappropriate instrument for dealing with lending and asset bubbles.

What some may therefore see as worrying is that there is no sign right now of the Bank of England, or the Treasury or the Financial Services Authority being endowed with such bubble-busting powers.

Comments

Page 1 of 4

  • Comment number 1.

    While it is encouraging to hear people admitting mistakes and considering how to change the system to prevent a recurrance, I find it hard to believe that those in charge seriously believed that the bursting of this bubble would be benign. All they had to do was look 80 years back in the history books.

  • Comment number 2.

    So we will find out how the banks were rescued but who will rescue the rest of us.

    Still at least the banks are only paying 12% where as the poorest of society have to pay 25%, while we will just keep paying.

  • Comment number 3.

    It would be good to get a similar (reasonably) frank set of comments from Labour government ministers (starting with Gordon Brown) about their mistakes and failure to see this coming. Since that's unlikely, here's one summary of Gordon Brown's struggle with economic management:

    http://tinyurl.com/8g48q2

    Pity also that the Tories haven't opposed Labour for the past decade.

    Surely, though, the real point is that some economists and commentators were indeed screaming from the rooftops in the 3 - 5 years before this mess that we were heading for a train crash. The problem, I suspect, was that their political persuasion was inimical to The Brown Terror and so conveniently ignored.

    Now we, and our children, will pay.

  • Comment number 4.

    Good morning Robert ,its the early worm that catches the bird.


    Have you not done enough damage to our national ponzi pie in the sky lark without having to put icing on the cake as well.

    Dont forget the little figurinals representing the Bankerrs and pollytitians dressed in brown symbolicing theireturnal civil union without a blessing from haven





  • Comment number 5.

    I would hope you asked them all one simple question.

    "Why should the many millions of people that your inability to spot this problem early enough and take action to stop,believe that you should stay in your positions and carry on as though nothing has happened."

    The honourable thing to do , when you have made errors on this catastrophic scale is resign.
    They had seen what was happening,knew what the consequences would be,and did nothing !!!!

    There is no way that any confidence can return to the economy while the protagonists are still in positions of power.They have destroyed peoples lives by their incompetence, people who had done nothing wrong its not right to still be seeing them in charge of proceedings.





  • Comment number 6.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 7.

    So the BOE Deputy Govenor is due to step down soon, no doubt on a fantastic fully index linked pension unaffected in any way by the crisis bringing the rest of the country to its knees - seems fair to me !!

  • Comment number 8.

    The boom in house prices, that contributed to this bust was driven by some pretty obvious factors.

    Lenders increased their lending from 2.5 joint income to 5 times joint income. They no longer required a deposit and the cherry on the cake was not checking applicant's incomes.

    One day there will be a journalist who does some proper digging and asks Halifax how many mortgage applictions they checked the income on. It will be around half of all applications, which leaves the other half open to abuse by the applicant.

  • Comment number 9.

    The drawback of this proposal - increasing capital reserve requirements in a boom - is that it's hard to imagine us wanting to reduce them again in a recession.

    But there are alternative things the central bank could do - I tentatively suggest one in a response here:
    http://www.knowingandmaking.com/2008/12/powers-and-strategies-for-central-banks.html


  • Comment number 10.

    You realise Robert that as soon as you get to the real culprit i.e. Flash, you will lose your job along with the head of BBC, just as the guys with Irag.

    Look what happened to Ross and he only made a phone call to a Spanish waiter.

    The dirt will be dished, you will be blamed for talking the pound down, sticking a pin in the bubble. Then blaming Flash when any idiot can see, it could not be him as he was not at home at the time.

    I suspect that with the amount of damge you will be shown to have created you will be begging just to lose your job,they will call it treason at the least.

    You are obviously a brave man I would like to say I will stand shoulder to shoulder with you but they have my email address. So you're on your own mate.

    Good luck

  • Comment number 11.

    Whilst it's new to hear some honest comments on the crash from Grieve he also points out that they spotted this bubble and didn't do anything about it - for fear of being told off! I find this hard to swallow; surely if you spot a situation like this then you must do something to prevent it - regardless of what people will say

    What on earth do these people do for their money? I thought we employed them to do exactly that. Spot problems in advance and work around them - not ignore it like petulant kids and say 'it's not our fault' afterwards. I admire the honesty but really the entire crowd have absolutely no backbone - all they had to do was do their job

    I feel that the government has way way too much sway over these matters, let's face it - any government would have done the same in the circumstances (good earnings, low inflation etc) but the bank needs to have teeth, and it needs to be truely independant from government in these issues. Inflation figures have to take into account house prices in the future - it's ridiculous not to! How anyone can say we had low inflation I do not know

    I note that these comments were only made due to the fact that he is retiring. Would they have been made otherwise?

    I think not.

  • Comment number 12.

    well well, these disclosures surely blow a hole in Gordon Brown's oft stated excuse that it was all started by the sub prime crisis in US....! The BOE actually recognised our own sub prime problem two ye

  • Comment number 13.

    ooops... to continue
    ...two years ago and were unable or unwilling to do anything about it. i think they probably warned the government but GB was riding on the the boom and did not want it to stop!
    Go for the real culprit Robert.....Gordon Brown, dont worry about your job, any national newspaper will employ you at a bigger salary if you really expose the true reason for this mess.

  • Comment number 14.

    Yes, for such large and grotesque saleries, these people have less of an idea of the banking system than I as a layman has. I saw it comming, wrote letters and was looked upon as a fool at diner parties. By the way, I sweep the roads for a living. If i did not find the odd shilling in the gutter my children would starve.

  • Comment number 15.

    Everyone seems to agree and accept that there is a need to improve the way the banks and financial markets operate and are regulated.

    Unfortunately the banks and financial markets are a common artery that feeds into all sectors of our economy and therein lies the problem.

    It is just not possible to have a single better regulated banking system that will meet the differing and sometimes conflicting demands of all the different sectors of our economy.

    For me that suggests that our banks need to be downsized so that we end up with more specialised banks that are better suited and equipped to service the needs of each sector of the economy.

    That might mean a banks operating in the manufacuring sector will not make the same sort of returns as another bank operating in another sector of the economy.

    At macro level it must be possible for the banks and the treasury to decide how much money needs to be allocated to each sector, according to whether a sector needs addtional funding to grow as opposed to reducing the funding to an area that is becoming overheated.

    To do that of course we need a better managed and better balanced economy and in order to achieve that there has to be a much better consenus in parliament on what constitutes a balanced economy, and how it is to be funded and run. One that is fairer and more just everyone.

  • Comment number 16.

    Capitalism is based upon commodity production: things are produced for sale not for immediate consumption.

    The value of a commodity is not the amount of (concrete) labour actually expended, but that portion of social (abstract) labour that is credited to that commodity. This can only be known in exchange (in the market).

    Prices diverge from values because of the tendency for profits to be equalised between different capitals.

    The circulation of capital: M - C - M'
    Money - Commodities - More Money
    How does money increase into more money?
    i.e. How can capital self expand?

    This additional value is surplus value.
    Marx's great insight was that the source of surplus value lies in the difference between the value of labour-power (wages) and the value created in the course of the working day.

    Labour is the source of surplus value, i.e. the source of all profit.
    The capitalist by seizing the means of production leaves the labourer with no choice but to sell his labour to the capitalist to survive. The capitalist keeps some of the value that the labourer produces.

    Surplus value can be increased by lengthening the working day - absolute surplus value.
    Or by curtailment of the necessary labour (the proportion of the day the worker has to work to produce his means of consumption) - relative surplus value.
    Increased labour productivity is the main reason for increases in surplus value.

    Competition drives capitalists to increase labour productivity. This increases the organic composition of capital, i.e. the amount of constant capital (machines, raw materials) to variable capital (wages).

    This increase in the organic composition of capital puts downward pressure on the rate of profit (even if the first capitalists to introduce the new methods initially reap higher profits).

    This downward pressure on the rate of profit causes the recessions.
    Capitalists only produce for profit, if the initial outlay of capital will not increase in value they won't produce.

    To the capitalists it doesn’t matter that people need things.
    Exchange-value rules use-value.

    But as businesses go bankrupt capital is devalued.
    Hence the organic composition of capital falls (in value terms) and profitability is restored and the GDP grows.

    Hence no one as such is to blame for today's crisis. It is inherent in the capitalist system.

    But the system is a set of social relations, it is not nature.
    It hasn't always been this way and probably will not always be this way.

  • Comment number 17.

    I just want to thank you for making television viewing so interesting this year, and for looking people in the eye when you speak to them - so refreshing.
    I hope you have a well-deserved wonderfully relaxing Christmas. (ps just bought your book)

  • Comment number 18.

    Whilst it is reassuring that the blindingly obvious has at long last got through to those at the Bank what is still not being addressed is the culpability of those who now admit that they got it so disastrously wrong.

    What their incompetence has achieved is nothing short of astounding - never in the history of the Bank has it been so incompetent - it knew there was a problem - it now admits, but did not do anything about it. I for one wrote to the Bank on many occasions over the last decade or more striving to get them to admit that there was even a problem and the arrogantly refused to listen and responded with a bunch of nonsense and platitudes. They cannot remain in their jobs - any of them they must all go if we are ever to get a recovery. That includes the FSA and the Treasury - I know they all knew as I for one wrote to them (along with many others) with suggestions on how to fix the problem - repeatedly - and they ignored all advice - by the way it is is also true of many of the media commentators who blindly followed the line of the Bank and the Treasury we deserve better we must have better and to start - those men must go!

  • Comment number 19.

    To stop a rerun of this mess in the future we need a few absolutes.

    1. A mandatory means of calculating inflation which permits of no exclusions of convenience. The present system excludes mortgage interest and property values, thus ducting inflation into house prices.

    2. A return of the regulation of banks to the central bank.

    3. Empowerment of the central bank to set minimum mortgage deposit requirements and to regulate vehicle finance.

    4. A thorough clear out of the commission men who have been running the banks.

    5. An absolute ban on any concern with a banking licence paying any commission of any description to its employees. Bonuses, other than a thirteenth cheque to be likewise excluded. The current system has not attracted the best bankers, nor indeed any, but has gathered people at the top who have the skills to do very well on a used car lot.

    6. Regulatory control of bank charges. Banks have to relearn the long forgotten most basic of all banking skills - the gathering of retail deposits from the broad public.

    7. A mandatory declaration by every applicant for a post with the central bank, that he or she understands that no central bank can ever have more than a very slight degree of control on interest rates and that rates set arbitrarily too low are every bit as disaster inviting as those set too high.

    Banking would once again become a modestly profitable business with share- holders attracted by safety of investment, not returns. There would be no need of any great control of capital ratios. A banker on slim margins, a proper banker, is very careful of the quality of the assets that he puts on his books.

    This traditional banker wouldn't open a current account for a Madoff, let alone lend him money.

  • Comment number 20.

    Perhaps the media really should be interviewing me. The one person campaign highlighting that interest rates are a rip off and completely flawed.

    Now the powers that be are admitting that interest rates are flawed perhaps it's time to talk to people ahead of the curve.

    Of course that won't happy as I'm not famous nor have money so I'm not important.

    Everything the former deputy is saying I've been saying for years.

  • Comment number 21.

    Robert.

    How about a gift to us from you for next year?
    How about you promise at the next luncheon/dinner/whatever you have where you meet the fat cats you ask each an every one the following question and then publish their answers in you next blog ...

    "Do you accept responsibility for your role in this economic crisis? If no, then why not? If yes, then are you going to resign?"

    Seems a simple enough question.

  • Comment number 22.

    What I find really alarming is that Sir John Gieve has been in this role at this critical time.

    He did not leave the Home Office covered in glory and there were serious questions then about the propriety of that department's accounting standards under his leadership.

    I do not think the process of anticipating these events and responding to them has been helped by having in the job a man who is not qualified by experience for it.

  • Comment number 23.

    Sir John Gieve admits to being a failure and not up to the job of maintaining financial stability.

    He failed when in charge at the Home Office also. He was instrumental in allowing immigration rules to be openly flouted and disregarded.

    His remarks about interest rates are disingenuous. He and the FSA failed to require the banks to maintain sufficient liquidity or increase their liquidity in view of their increasingly risky and excessive lending.



  • Comment number 24.

    Al last the BoE admit the MPC and the Bank rate have little to do with economic management. Time for theThreadneedle geeks to go!

    In their place proper economic management intervention and statutory regulation.
    Start with credit cards or a way of printing your own money.

    Double or treble the minimum repay %. Force banks/finance houses to share information about client debts and solvency. How about a minimum age. A maximum number of cards. Maximum credit limit. Some proof of income. etc etc

    Next mortgages, loans, FSA approval for new credit vehicles etc. I am sure that there is no shortage of ideas out there.

    What the interview also clearly demonstates is the negligence of the government in the face of the looming mother of all crisies.

  • Comment number 25.

    It IS important to pay the delusional inksane ru[i]ning banks high salaries to confirm them in their inane belief that they [the mentally subnormal who can be persuaded 2 plus 2 = 5 if an algorythm is placed in their AAA's ] are the all wise all knowing masterrs of the universe, able to leap tall buildings with a single bounce .


    After all, the the banking act confirmed them in their status of being "fit and proper persons [lizzards]",so why shouldnt they take their cut from money created from thin air ?

    However


    When tits run the economy and farewell state everything goes bust, especialy the suckers who thought they could milk the system to infinity and beyond .


    Now that banks have exhausted their counterfeiting opperation ,governments are licking their lips ready to take over [as if they were never hand in glove puppets]and counterfeit to infinity and beyond


    I demand my fair share of counterfeit money and a wheelbarrow .

    Or else !

    For sum reason our "great gravy train robbers "were not deterred by thought of being banged up jelly tight

  • Comment number 26.

    I see.

    So they understood Pension Funds would be demolished by their actions ?

    No ?

    Where did they study Economics !

    In fact why didn't they know or at least have an inkling of how big a problem this was going to become ?

    They cannot pretend they do not know the dangers of keeping Workers pay below the Inflation of living costs.

    We see evidence of a collapse in Consumer demand brought on both by wages that are inadequate to live on and people encouraged or even forced to borrow to live a lifestyle.

    I'm quite sure they did know.

    Of course arbitrarily Nationalising companies has devastated Shareholder confidence, (but see Belgium for possible redress coming).

    And Britain with nothing to export but hot air, has seen its exchange rate collapse against the Euro. It will fall further.

    Of course Nationalizing housebuilders will not improve investor confidence either if it happens.........


  • Comment number 27.

    No mention of the change to the tripartite system of BoE, FSA and Treasury.

    This is why the Bank has no powers and all due to the Labour party.

    If the system was so terrible as inherited from Thatcher et al why did they not change it in 10 years of being in office.

    We know the answer but the BBC and others never ask the right questions and sadly RP, for all his good stuff, also never asks the root questions.

    E.g. for this Panorama 'are you saying Sir John that the Bank had the powers but they were taken away from them?'

  • Comment number 28.

    #16 duvinrouge

    Thanks for the insights into Marx, I have to admit i'm not really well read at all on Marx and I enjoy your posts. Whilst I think that there are a lot of truths there, this does seem to be a far more complex animal involving multiple factors that simply were not around when Marx wrote his theory

    I agree with the basic theory - but would it stand in todays global complexities and intertwined economies?

  • Comment number 29.

    So when the BoE, two or three years ago, revealed to Tony Blair the true level of desperation in the UK, it is now admitted that no one takes action to save the people, but Teflon Tony Blair leaves smiling with a halo around his head and leaves his Batman and helper to appear the devil before the palace crashes and burns.

  • Comment number 30.

    Interested in dep Governor of B of E. I remember restrictions on lending in past. There is an answer which avoids being over technical. Being over technical is what got us in this mess.

    Quite simply the government could and should have regulated the multiple of income that could have been lent for mortgages - and banned lending more than the purchase price. The problem of delinquent loans has partly been created by lending sums that can't be afforded after the introductory "cheap£ terms have expired.

    This mindset could also tackle the overhang of credit card debt, by regulating the percentage repayable on NEW lending as a minimum of 5 or 7%.

  • Comment number 31.

    I do find it extremely worrying that John Gieve claims that top bankers did not forsee the effects of the credit bubble bursting. Perhaps this could be due to the industry being infested with "loadsa money" self interested, greedy individuals whos only financial qualification was a degree in mis-selling endowment policies during the 1980s.
    One of the main causes of the current economic disaster has been that the financiers who have been running the majority of businesses for the last 20-25 years have a mind-set that long term planning is 2 years or until the next bonus is due.

  • Comment number 32.

    So when the Boe, 2 or 3 years ago, reveal the true devastation of the UK's economy and the forthcoming crash, Teflon Tony Blair does nothing to save his people, but pretends it has never been better, continues and worsens the people's lot, and leaves with a halo while leaving his Batman and helper to rule until the palace comes crashing and burning down, with few survivors.

  • Comment number 33.

    There are several technical points to make, but the main one is to say that proper analysis of a bank's exposure and of market conditions - particularly to incorporate what we've learned about exposure and risk in the past 2 years - coupled with genuine enforcement of the current capital adequacy rules, could go a lot further than is being suggested.

    This may even obviate the need for a fancy 'counter-cyclical' rule.

    Enforcement is the key. Which suggests that the 'tool' the BoE really needs is (to put it politely) some steely determination.

  • Comment number 34.

    Robert,
    Interesting seeing you on the news am looking forward to Panorama tonight.


    I was concerned about what I saw as a housing bubble in 2002. I even wrote to the then Prime Minister, TONY BLAIR, who passed my letter to the Treasury and the Deputy Prime Minister. I also sent a copy to the MPC of BoE. If you would like to get in touch I could send you a copy together with the replies.

    My letter concerns house prices, pensions and the policy link to September 11th (10 months earlier). I even suggested a way of (temporarily) cooling the housing market by the introduction of a (temporary) 'interest premium' on all consumer borrowing - invested on the borrowers behalf as enforced pension contributions.
    So the authorities WERE warned (by others as well as me no doubt) but: "there are none so blind as those who choose not to see"!


    [Personal details removed by Moderator]

  • Comment number 35.

    #19 "5. An absolute ban on any concern with a banking licence paying any commission of any description to its employees. Bonuses, other than a thirteenth cheque to be likewise excluded. The current system has not attracted the best bankers, nor indeed any, but has gathered people at the top who have the skills to do very well on a used car lot."

    Please !! You insult the used car salesmen !! Many of these so-called bankers would put used car salesmen to shame !!

    Rant made, I totally agree with you about the commission-based remuneration system prevalent in banking these days.

    Where are not the bankers of old where their word was their bond ??

    These are refugee barrow boys in suits as witness their crazy gambling with the banks' money and their wild life-styles !!

  • Comment number 36.

    Interested in B of E dep governor seeing need for new instrument. There is a way that avoids being over-technical. Being too technical is what got us in this mess.

    The Government could, and should have, legislate to avoid lending more than, say, 4 times income on mortgages. Also banned lending more that purchase price. The lurking problem of delinquent loans largely caused by lending sums that become unaffordable when the intrudctory "cheap" period is over.

    The overhand of Credit card debt could be tackled using the same mindset. eg all NEW lending must be repaid by at least 5% or 7% a month.

  • Comment number 37.

    They should have included the cost of housing in their inflation figures......That would have prevented this mess.

  • Comment number 38.

    #27 "If the system was so terrible as inherited from Thatcher et al why did they not change it in 10 years of being in office."

    Actually, it was Flash Gordon who changed the rules and emasculated all three to suit his political ambitions !!

  • Comment number 39.

    One issue is not that the level of interest rates were too low over the last years but that they were too stable. This encouraged everyone (bankers, consumers, govt) to the group-think state of believing that interest rates would never rise to a punitive rate. Interest rates have been over-managed for a long time by Gordo. Thus, there was too little risk so there were precious few precautions against the normal controls of carrots and sticks. If you take the sticks away then wouldn't you expect that everyone would behave as though we were living in a no-risk, no-limit society?

  • Comment number 40.

    The gov. of the BoE was certainly saying that we had a problem and issued several warnings about the coming problems, on tv and in the press. People were not interested as they had access to money through several lines of credit. As for the deputy, he was on a 3 week holiday during the worst of the crisis, so he certainly did not have any idea.
    The government put in place a new system for measuring inflation that had, and still has little connection with the real rate that the real people are enduring. They are respobsible for the sytem that was set up to make it all look good.
    The magnitude of the mess is terrible and will take longer then estimated to climb out of, and this government could be a bit more modest and accept some responsibility in presiding over the biggest borrowing binge ever, but that wont happen with our flash Gordon who is currently so puffed up and blowing his own trumpet.
    The people who will have to endure this and pull is all together are us and we do not need to be told how terrible it is. Our pensions have been ruined by this government and we have no hope of recouping any of it. we should have been out there binging on all that credit whilst there was the opportunity when we had it. Robert, it would have been nice to see the BBC interview any members of the current government a bit more robustly during the past 11years. But we are stuck with this lot and you for a while. Bring on sanity and truth.

  • Comment number 41.

    So what does that say about the future of Northern Rock or Bradford and Bingley staff?

  • Comment number 42.

    The sooner the blame is put where it belongs, the sooner the economy can be fixed.

    All our institutions have been weakened by the criminal gang that masquerade as a government; all our problems come as a result of their agenda of self-interest; our salvation will be in getting rid of them and making sure that they and their fellow conspirators in the opposition don't get anywhere near Westminster again.

    Anybody with more than a two cell brain knew that credit was out of control and that the whole basis of the economy was weakened by excessive government take and waste; this crisis was known to be coming for decades but our red or blue leaders kept the pot on the boil to make votes for themselves. Many of the leaders of our institutions, particularly the banks, were in on the act; their activities were and are demonstrably criminal as well.

    Until we purge our system of its toxic leaders we will not spit white.

  • Comment number 43.

    It is far too simplistic to blame this fiasco on high house prices in the real world, what in my opinion caused the collapse of the banking sector was their own willingness to gamble on a whole range of financial paper, it was this unsustainable business model which brought the house of cards crashing down .
    The answer is for governments to control money supply and not private banks, 95% of all money in circulation has been created by banks by fractional reserve banking.

  • Comment number 44.

    I have discovered the horrible truth!

    All the Bank of Englands economics textbooks were printed on solid gold - when this was sold off no one at the bank of England was able to read up on the effects of asset price bubbles.

    It seems the only explanation for why they failed to understand the completely obvious and then proceeded to do absolutely nothing about it.

    Why Mr Gieve is being allowed to retire rather than fired I just can't understand - after all if I had done as poor a job as he has I would expect to be fired or offer my resignation as the honourable course of action.

  • Comment number 45.

    The thing that strikes me is how everyone is still in denial as to the sheer scale of the problems that we face. Listening on Radio 4 this morning, a representative from Toyota was up beat by the fact that he reckons car sales of the like seen earlier this year will return by the end of next year.

    Couple this with the amount of personal debt, racked up by loans, mortgages, and so far left out of this mess from the press, credit cards, and you wonder quite what the future might hold?

    Also, why can those in power not see that this is one huge mess that cannot be resolved as easily as just pumping taxpayers money into the system? When will people realise that for too long, the entire country, government included lapped up material wealth as if it were some status symbol?

    The way we are going, and if the government does not abmit or believe the scale of the crisis, then we will simply end up a bankrupt nation.

  • Comment number 46.

    The Key phrase in the interview for me is :


    "And people would have said, you know, 'this is a wilful reduction in the prosperity of the country'."


    Leaders do not make decisions based on what they think people will say about them - they make decisions based on their accumulation of knowledge and ability to lead.

    Does he mean in this sentance that he thought that it would have been a wilful reduction of the prosperity of the country, or that he did not, but was afraid others would view it that way?

    Strength in leadership - just what we need.

  • Comment number 47.

    Dera Robert
    The Bank of England did not know what was going on ??/
    The Boss of Barclays saying sorry???
    This was not anything to do with the world econmoy, this was to do with DOMESTIC POLICY--- nothing else, Gordon Brown, and Darling were responsible for this credit crunch, because, they knew that the Credit being spent was not sustainable, even economists knews this
    The Banks were "not saved" they went under, as can now be seen from their refusal to lend, in fear of the credit requirements.
    The British Banking system is all but dead in the water, and there is NO FLUIDITY AT ALL.
    No, -----this is all down to Domestic Policy the Government, Banks, and the watch dogs who failed in their duty to control spending.

  • Comment number 48.

    I look forward to the programme, Robert.

    I know I did not expect a banking collapse but then I am not a financial professional. I am relieved they got it as much wrong as I.

    All I could see at the time was an economy functioning without any visible means of support. In 2007 I remarked about sky-hooks to much derision: it was a new paradigm; wasn't it!

    It is now almost a year since I was last told by majority opinion there was no recession coming, that 2008 would be a bumper year and the panic was all got up by the media.

    Intellectually, I am satisifed to have been right. It does nothing for the distress I am seeing all about me and the good people who will lose a lot if not everything in the coming eighteen months.

  • Comment number 49.

    IMF urges spending to spur growth - BBC headline

    "He described European Central Bank chief Jean-Claude Trichet's warning that eurozone governments must keep a lid on borrowing as "noble".

    "He's the head of the central bank - it's his job to say things like that," Mr Strauss Kahn said. "

    Of course Strauss-Khan will say that too !! After all he is an "employee" of the major controllers of IMF, the G8, and *THEY* are in trouble !! So he wants the rest of the world to spend in order to bail out his employers !!

    Notice how he *carefully* did not say where to money to pay for the spending is going to come from !!

    After refusing to change the composition of the control over the IMF, they are now in dire straits themselves. Their cupboard is also getting bare and the countries with lots of lolly are refusing to lend them any more without any additional participation in the decision making processes !!

    In fact, the East Asian nations have gone one step further and have set up their own "little" co-operative to help each other out in case of need !! Many of them have very bitter memories of IMF "help" in times past !!

    With half the world's population in the area East of Pakistan, and an ever more affluent part of the population too, perhaps it is time to re-think the controls over globalisation and get rid of any colonial hangovers !!

  • Comment number 50.

    I find it mind boggling that Vince Cable and many others were warning loudly and clearly for a long time of the obvious iceberg straight ahead.
    The well paid people who were responsible for steering our financial system failed to keep a look out or alter course.
    All should hang their heads in shame, resign or be sacked at once, starting with... the captain in charge of our leaky economic boat... the former chancellor... Gordon Brown.

  • Comment number 51.

    We need to return to the standards laid down in the core syllabus of the institutes of bankers.
    e.g.

    Business Banking - Core A Subject - Credit Value: 1.0

    The Canons of Lending
    Security
    Control of Advances
    Assessing Customer Needs
    Sources of Finance
    When Things Go Wrong
    Diligence and Bankruptcy

    http://www.ciobs.org.uk/qualifications/cb_structure.cfm

    Until the bankers follow their own guiding principles to the letter there is a good chance things will continue to get worse and history will repeat itself.

  • Comment number 52.

    Robert,
    When are you going to do a similar piece on the wreckage of the regulatory system structure?
    Why don't you ask whether Hector Sants was still in receipt of his LTIP from CSFB while a regulator?
    Why don't you read Private Eye about the dinners Sants held at taxpayers' expense?

    This is a club of inner sanctum friends. It is the opposite of the robust US system.

    If you want to prevent this happening again, you need to restore the system.

  • Comment number 53.

    #46 "Strength in leadership - just what we need."

    What he meant was that as a political appointee, he had to put more weight on the retention of his job than to "do the right thing" !!

    Strength in leadership ?? Forget it !! Mrs Thatcher retired long ago and there isn't a single one in this current bunch that is anything like her !!

  • Comment number 54.

    This confirms something I've always felt which is that the MPC needs some normal people on it.

  • Comment number 55.

    So many experts on here, So many I told you so’s and so many hang them high attitudes, yet none of you have actually seen the interviews of heard what has actually been said, all relying on Mr Pestons take on things, he who of course has no agenda, gets everything right and has no interest in self promotion.
    In all your critical articles Mr Peston I have yet to hear any constructive alternatives, all we get is the media’s favourite tool HINDSIGHT.
    People please wait and see what is actually said and then make your OWN minds up.

  • Comment number 56.

    The banks were over-lending for years. We all knew that. Gordon Brown kept saying it wasn't a problem because interest rates were low, and the British people could "afford to service the debt" (i.e. a trite way of saying they could afford to pay the interest).

    Lending must be controlled. We have speed limits on our roads, to protect people from the dangers of speeding. We need lending controls, to protect people from too much debt relative to their ability to pay.
    It's not difficult.......

    Tonight is must see television - Robert Peston on BBC1 and Niall Ferguson on Channel 4..........!!

  • Comment number 57.

    OK The Bank of England believe that more levers are needed to control the economy. Here's 2 for a start

    From now onwards

    1) Pass a law that limits house borrowing to say 3 + 1 incomes - maximum
    2) Put in place regulation to force lenders to ensure that the law is followed. Income checks etc..

    Short term pain as house prices re-correct.
    Long term gain as we prevent over borrowing against property forever.

  • Comment number 58.

    #45 "The thing that strikes me is how everyone is still in denial as to the sheer scale of the problems that we face. Listening on Radio 4 this morning, a representative from Toyota was up beat by the fact that he reckons car sales of the like seen earlier this year will return by the end of next year."

    Of course he had to say that !! Toyota just announced its *FIRST* ever loss in 71 years !! See BBC article on Toyota !!

  • Comment number 59.

    PS. The sharp house price correction will get the banks lending again quickly if the comments from the head man at Barclays are correct. Much quicker than the possible 2 years as touted.

    For goodness sake, lets get the economy back on its feet again.

  • Comment number 60.

    #19 KenHarvey

    Spot on sir!

    Is it likely to happen?

    We also need to put the brakes on the volatility of derivatives and their like. It seems like plain gambling with money you do not have as it is.

  • Comment number 61.

    I wrote to Tony Blair, the Treasury and the Bank of England's MPC in June 2002. Yes, I warned the authorities six and a half years ago - I'm sure many others did as well.

    I was concerned with what I saw as a coming property bubble. I even suggested how the authorities might dampen it down.

    Would you like to see a copy of my letter ? And the replies I received?

  • Comment number 62.

    Robert,

    I'm surprised that you imply it is worrying that there is no rush to implement 'bubble busting powers'.

    We are hardly likely to need these in the near future and it is surely better to consider the matter carefully rather than botch it up in the attempt to grab a 'doing something' headline.

    Measures I'd suggest would include all aspects of the economy in the inflation figures - ignoring house price growth was a real clanger - and limiting mortgage income multiples whilst increasing deposit requirements.

    This option will hurt those who bought their property at the top of the market but will benefit the population as a whole in the long term - we can't keep boosting house prices by ratcheting up the debt levels.

    Finally, bring to account Governments who also mortgage the country to the hilt and fail to put aside funds to cover inevitable downturns.

  • Comment number 63.

    Robert, of all of your report this quote takes the biscuit:

    "If we'd used interest rates to try and address this asset-price credit growth, we would have been holding down the level of activity elsewhere in the economy, in manufacturing, in other services, holding down the level of employment at a time when consumer price inflation and earnings were stable and reasonably low. And people would have said, you know, 'this is a wilful reduction in the prosperity of the country'."

    Leadership is the word that comes to mind. True leadership takes the necessary action irrespective of its popularity. However, don't just blame the banks, the Government are just as guilty:

    http://news.bbc.co.uk/1/hi/uk_politics/7628330.stm

    The really frustrating thing is that it was obvious to the 'man on the street', and yet our so-called experts just ignored the signs. Well actually I would suggest that they encouraged the situation and all the revenue it brought them. Worse still the Government hasn't formulated a coherent plan of action even at this stage.

    However, if you want some cheer at this time of year just look at this:

    http://news.bbc.co.uk/1/hi/business/3617236.stm

    The 'Bright Side' paragraph is stunning. Can anyone else find any prime examples of ostrich behaviour?

  • Comment number 64.

    so now we know the answer to whether the B of E knew and did nothing, or didn't know anything!

    After 3 months we are still being drip-fed the truth-we are having our worst suspicions confirmed.

    About time we got it all out in the open.

    I would like the following for Christmas:

    All those responsible (including those who knew nothing) sacked and/or arrested, their assets seized, fraud investigations started and auditors sent in.

    Also, a Vote of No Confidence in the house.

    I'm sick to death of seeing this country suffer as a result of such arrogance, greed and incompetence, while the perpetrators wax lyrical and continue in the positions if high influence.

    They are dangerous, have ruined UK plc and they should already be locked up.

    Trouble is, they've now had 3 months to get the shredders working overtime to cover their tracks.


  • Comment number 65.

    I'd like to wish all our bank executives a very happy christmas.
    And for the rest of us...forget it.
    We, the public, will ensure that their multi-millionaire lifestyles will continue, whilst we all go to the dogs.
    Do the decent thing...resign.

  • Comment number 66.

    Robert writes:
    "As others at the Bank of England have told me, the Bank's Monetary Policy Committee believed mistakenly that the lending binge and asset-price surge were semi-independent from activity in the real economy, and that they would eventually moderate without wreaking devastating damage to prospects for households and businesses."

    Really? Are you seriously saying that these supposedly intelligent and educated people know so little about the economy that they would think such a stupid thing? When even little old me, not to mention thousands or millions of others, can see perfectly well that financial manipulations and asset prices are tied closely into the real economy. Admittedly they are not identical, but anyone claiming any knowledge of economics should not be blind as to how changes in asset values are related to spending, and how increased lending leaves one open to problems when interest rates increase, as they invariably will at some point, or when commodity prices go into a bubble, as they did.

    Sack them all!

  • Comment number 67.

    As a High Street customer of Mr Varley and his crew I was somewhat taken aback when I went into my local branch with steam pouring from every orifice.
    I received a letter, cost of time, printing and postage unknown as these facts are as near to a state secret as is possible.
    The aforementioned letter stated that a direct debit had not been paid as it would have taken me 5 pounds into the red. For this infraction I was charged 8 pounds. 3 pounds further into the red than if they had simply paid the thing in the first place.
    I took several months of statements into the bank and attempted to explain the lunacy of these actions to a member of staff. He looked at my bank statements and then informed me that I was overdrawn every month and that it was unacceptable. This DOLT could not even read his own employers bank statements. I had to take paper and pen and explain to him in words and pictures that you cannot extract money from an ATM if you are in the red without authorisation. I then had to explain in words of one syllable that all transactions are dated and only the withdrawals are time marked on the statement, and for some obscure reason withdrawals top the days transactions as opposed to the non timed deposits.
    If an employee of said bank cannot do simple addition and subtraction with the aid of a bank statement then I am afraid that something a little more complex like the possibility of bringing a complete nation to its knees is not beyond the bounds of possibility.

    Sleep well. We are in safe hands.

  • Comment number 68.

    #39 "Interest rates have been over-managed for a long time by Gordo. "

    This is totally in line with the Great Gordo's maxim that "there will be no more booms or busts" !! Having abandoned that maxim when he got his nose rubbed in its waste products, his current maxim is "Let's borrow to spend our way out of this bust" !!

    I wonder what his next maxim will be when he gets his nose rubbed in the waste products of this one ??

  • Comment number 69.

    Look at housepricecrash it was obvious that housing prices were above trend from 2001-2 and nothing was done.
    But would we vote for a party that promises to keep housing prices down?
    Time for an independant treasury to control bank and government lending.

  • Comment number 70.

    #64 "Trouble is, they've now had 3 months to get the shredders working overtime to cover their tracks."

    Ex-Andersen employees had to go somewhere !! And they *DO* have the requisite experience in the use of such office machinery !!

  • Comment number 71.

    I think I am right in saying that Sir John, to his great credit, was in favour of raising interest rates to choke off the house price bubble. That was a brave and perceptive stance.

    Unfortunately, the BoE was required to act on a strategy which looked only at retail inflation and ignored asset inflation.

    As ever, the blame sticks with those who devised a financial strategy which paid no regard to asset inflation or credit expansion.

    The buck stops with the Chancellor who presided over the bubble. 'An end to boom and bust' was always economically illiterate.

  • Comment number 72.

    Dear Robert
    53*
    Now i do not want to spoil your New Year, Thatcher was the cause of all this economic doom, This woman did more for the Rich than she ever did for the working classes, whom she destroyed invarious sectors, ----BUI Brown the Architech of the Credit Crunch is now burying himself in mitigation, along with Darling some one has been running this fiasco, and to be able to accomadate the entire Banking system, that some one has to bigger than governemnet or why else would they get away with it.???
    Sorry Thatcher doe not cut it with millions in this country.

  • Comment number 73.

    So the BANK OF ENGLAND is

    UNFIT FOR PURPOSE????

    I was about to issue a Winding Up Petition against HALIFAX PLC
    in early 2007 The Bank of England
    and The FSA refused to get involved. . .



    I THINK THAT SAYS IT ALL

    NO RESPONSIBILITY!!!!!!!

  • Comment number 74.

    If the true inflation figures had been used in the first place, the problems would probably not have arisen. Unfortunately these had been massaged out of all recognition to back up Brown's now discredited " fiscal prudence ". If those at the top in the BOE had had the courage and nous to tell Brown the truth rather than pandering to his ego, then perhaps the crisis would have been easier to deal with. Lies will out; and hopefully the incompetents at the BOE, the treasury and Downing street will also be out of a job sooner rather than later.

  • Comment number 75.

    Robert,
    Why don't you have another Panorama and pose the same type of questions to Brown/Darling to see if they will admit a total lack of awareness of what was going to happen??? Some hope...........

  • Comment number 76.

    #53 said "Mrs Thatcher retired long ago and there isn't a single one in this current bunch that is anything like her !!"

    So something to be thankful for then! Just remember please that although Flash and Co have behaved appallingly by being more the origins of this mess do lie with Thatcher's deregulation of financial services.


  • Comment number 77.

    I'll make a point of watching this Panorama.

    I agree that the Bank of England didn't have the right tools etc..

    The focus on controlling inflation by the single tool of interest rates was pretty stupid. But that's the politicians fault. That's where they let us down...

    But it is right that the Bank of England controls interest rates independently of Government. No arguments there, the Politicians got that aspect of it right. But what they have collectively failed to do by focussing on a single tool is keep the whole economy in balance.

    If the only tool is interest rates, it is like the tale of the little boy with his finger in a Dyke, who suddendly finds another leak a few yards out of his reach...

    Sooner or later the whole structure is going to collapse...

  • Comment number 78.

    Again maybe we should scrape off another layer of dirt and get down to the Tories / Thatcherite dream of de-regulated City trading, share ownership & home ownership for all.
    Their dismantling of our manufacturing base and the switch to service and financial industries in order to smash the unions leaves us in an even deeper mess now.
    In truth we have a system in Thatchers 1980’s capitalism which has failed as badly as its nemesis Communism.
    We end up with the ridiculous situation of the government propping up banks with tax payers money which is then lent on to he tax payers by the Banks with interest.
    The final insult is the very City Traders who created the mess still pick up their bonus even from the banks like RBS who are owned by the goverment.

  • Comment number 79.

    Let's not forget that the BoE has but one goal - a single fairly unrepresentative inflation number based on a CPI which did not contain house prices or mortgage costs AT ALL.

    In that (far too narrow) sense they did a good job for a very long time.

    Their remit was set by Brown, for politically expedient reasons - the housing and debt bubble engendered a feelgood factor which Labour has won elections on the back of.

    At the end of the day the blame for this lies squarely with the governement. They are in charge, they set the parameters within which the FSA and BoE worked, there is no escape for them.

  • Comment number 80.

    Amazing they didn't know all that.

    Myself and a million other people on the web had a very good understanding that it would be seriously bad when it all went the other way.

    And they get paid how to fail at their jobs?

  • Comment number 81.

    Either hyperdeflationary scenario, which, as I understand, Henry Paulson tried to implement in September (with megebunkruptcies of most megabanks and megadefaults of imperial powers of capitalism) or (...)inflationary scenario implemented instead wipe out book value of assets. Some representation of assets (say CDFs), which is only distantly related to real assets (factories, houses, oil rigs, labour force) will have grown worthless by the end of next year with a current scenario.
    The real assets (nonmonetary) unfortunately decay as well. Labour force is getting less qualified, demoralised, hungry at the very worst. Factories decay when closed. Whole markets may collapse with huge costs involved in restoring them (that's a paradox in itsefl - "A market for holiday in X" is a real asset, and it can be wiped out completely with huge costs involved to restore the entity - if there ever will be a wish again).
    Calculation is that, while real assets decay all over the world, they will be wiped out completely in some regions with not much possiblility to restore and they will be quite easily restored in som other places. The game will start again

  • Comment number 82.

    Re BANK BONUS PAYMENTS

    In SUNNY Surrey there seems to

    be NO shortage of BANKERS

    Splashing the CASH in the Estate

    Agents House sales at 2 million

    plus seem to be very much alive.


    ALL THAT XMAS CASH BURNING

    A HOLE IN THEIR ACCOUNTS.

  • Comment number 83.

    If a GOVERNMENT ever wanted to

    create SOCIAL UNREST they

    couldnt have DONE a BETTER JOB

  • Comment number 84.

    Robert, we are not over the crisis by any stretch of the imagination.

    Why don't you make a program about the $500 TRILLION derivatives black hole and explain that this is 10 times larger than the GDP of the whole planet.

    The sub-prime problem that everyone seems to blame for the crises, is only worth less than $2trillion, I believe. It was just a trigger. The real avalanche is still in front of us. As companies and banks go under, the various derivative contracts will be triggered, causing further bankruptcies.

    The true villains of the peace are those POLITICIANS (such as Bush and Brown) who allowed banking restraints to be lifted and who did not outlaw the fraudulent practices of off-book accounting and the creation of a pseudo-insurance markets with virtually no backing for the bets taken.

    The bankers have simply taken advantage of the lack of rules and lack of enforcement of rules, just like most players would do in any game.

    Not that I want to excuse the bas..bankers.
    Perhaps they should be treated in the same way as drug pushers (the drug being cheap and irresponsible credit) and confiscate any gains by companies or individuals aided by these practices.


    Even more fundamental cause was the wide availability of 'almost free' energy to whole system, which has driven growth for the past century. Now that energy is becoming scarce and expensive, we have a century of decline to look forward to. For more info see www.transitionnc.org/?q=node/73 and the rest of the website

  • Comment number 85.

    Maybe that's why Tony left when he did - give himself a while out of office to distance himself from the oncoming storm.

    One has to have some sympathy for the position the government was in - people are out to bash them for being a nanny state when they ban smoking in pubs... its not difficult to see what reaction they'd have got if they had poured cold water on the good times as they were perceived to be unsustainable.

    Unbelievable that the BoE did not see this coming. Were they in caves during the 90s recession? And didn't they learn anything about the Great Depression when they were studying economics way back when?

  • Comment number 86.

    Robert read #10 & 13.

    Don't worry about your job, just dig deeper into the issues.

    I will write on your blog elsewhere if you leave BBC (if it's free)

    Anyway, on the economy, many people would like to see UK go back to the good old times, when UK was the 4th largest economy, and we were rich compared to other countries.

    Forget that I say. It’s not gonna happen. The world is smaller now and getting smaller every second. Every time a PC or mobile phone is sold in the emerging markets the world becomes a smaller place and easier place to communicate in.

    Look at the world as a big city. Forget nationalism, look at it as a city where you can move anywhere you like.

    Asia is the up-and-coming area. UK is the old neighbourhood. (Except it has more knife stabbings per capita than other areas)

    So, nationalism is stupid. The globe is ours and large companies and banks see it as 1 nation/market place!

    If the Bank of England and Flash Gordon are not doing a good job then we’ll move to another country, say Portugal. If Portugal is mismanaged (like here) then we’ll move to Finland and so on. I hear Singapore is managed really well (never been there).

    Then I read #16 and think, recession’s not a matter of mismanagement, it’s the nature of capitalism. We just have to hope that globalisation doesn’t plunge the entire planet into recession at once. When China will be in recession , maybe US will be in growth again etc.

  • Comment number 87.

    Post 80-quite.

    We haven't seen the programme yet but if what is here is anything to go by it will be more disingenuous excuses and vague predictions.

    Ignorance is no excuse for people on the sort of salaries these guys are on. How on earth have they got to the top of their proffessions? Oh I know-it was because of their background.

    It isn't credible that they know little more than the average reasonably intelligent person in the street. Therefore one has to asume they aren't telling the truth.

  • Comment number 88.

    The BoE existed to regulate the banks until that task was divided between the FSA, BoE and Treasury by guess who.

    Seems like the tool of controlling the bank reserve requirement must have been mislaid in the process.

    Actual banknotes and cash account for only 3% of the money in circulation, and control of the banks' reserves on which most of the money is layered (frb) is absolutely essential.

    Our entire economy depends on fractional reserve banking, and it was and is unregulated. Why not?

    Criminal negligence by all concerned.

  • Comment number 89.

    I have two questions, both relate to the lower paid (or poverty level citizens, as most disabled people are in the "earnings" scale) and their current treatment by the banks plus one pertinent comment to make.

    Firstly, banks were bailed out to the tune of billions and interest rates have dropped to 30/40 year lows so, why have credit card and borrowing rates for the lowest earning percentile increased to 30%+ pa.?
    Secondly, why is it that, following the OFT review of bank and credit card charges which brought down the single charges of around £26 or more per notice, the lending institutions have replaced the single charge notices by multiple notices each costing around £12 - 16, especially the credit card double header of a notice of charge for a missed payment plus another charge, simultaneously, for late payment - the two are mutually inclusive! - even if a payment has been made as soon as physically possible? Meanwhile, the paying bank has also charged a fee for bouncing or non-payment of the bill in the first place and charge upto £90 - £105 / day for the pleasure (charge is for 3 events per day at £3- - £35 per event!).
    It would seem that the banks want not only to have their cake and eat it but to also a have a share in the cakes of those who can least afford to purchase one!
    I cannot help feeling that any lending institution charging 15 times, or greater, the Bank of England base rate is guilty of usury - in this case, Government approved usury!

    Having seen my pension disappear (the one-off charge against and then annual taxation of pension funds having set the tone - and ignoring the standard warning of "past results are not an indication of future returns" which Gordon Brown and the treasury conveniently ignored) even though I supposedly had no property exposure in the portfolio, the value of my house decline by nearly 25% and facing retirement proper (as opposed to the enforced by disability retirement for which I have to re-qualify every 6 months, or so it seems!) in the next four and a half years, I wonder exactly what I and others in my situation are meant to live on?

    Baling out the banks, motor-car and related industries plus anyone else with either political or vote catching headlines seems to be a touch one sided. Surely baling out the consumers would have been more productive, ultimately cheaper and of more benefit to the country. Radical? Maybe, but it's the same people who will have to repay the current loans and it is of immediate benefit to them unlike the current fiasco which calls upon future generations to pay them off for no discernible benefit.

    Finally, apart from HBOS, I've heard no apologies from any other senior management teams who are recipients of the current governmental (public purse) largess - a touch of humility from that quarter would not go amiss. A similar expression of regret from all persons and governmental bodies/quangos involved would do no harm either. I'm not talking about shoving some lower echelon scapegoat into the limelight - I mean Gordon Brown and his then treasury team (who participated in the start of the melt-down by a mixture of greed and fiscal negligence), the FSA who propounded it (by and large due to a mixture of ignorance and inability to perform any meaningful regulation or oversight) and the current Treasury team including Gordon Brown again, who can't seem to let go of the remit, (who dithered and thus compounded the melt-down) would be a start.

    N.b. Lest anyone thinks that I'm a lazy, state benefits funded, layabout; In an attempt to remove myself from the poverty area and benefits dependency (I think that ~£9,000 p.a. qualifies as poverty level - according to the IMF and OECD it does anyway), I started my own small company in 2002, part funded by my personal credit cards, in that time I've never made a personal charge (salary or expenses) against the company, preferring to reinvest any earnings into the company. Unfortunately, the company now looks to be perilously close to collapse, leaving me with just the debts.

    "Happy days", I remember a few in the days before political spin, personal grandiose and mediocrity took centre stage.

    Jez (skint till at least 2012!)

  • Comment number 90.

    In retrospect. Property prices hit the bubbled roof and the Interest Rates should have been raised to cover assets of both banks and building societies, unless of course BoE were instructed (BY?) to return property prices to pre-inflationary levels to offset obvious forcasted demand in wages, which HM Government was then restricting certain groups of breaking paykerbs....and obvious dominoe effect of other groups demanding more gruel 'Oliver.

    Whosoever changed the tide is to blame as apart from Global recession we could have had payrises. Gordon Brown feared this was getting out (ie Police) of control. It would have given certain groups that percentage spending power, that now Mr Darling is now in desperation trying to target in offset mistakes in policies.



  • Comment number 91.

    Dear Robert
    Lets put the boot in ----Yes it was the Tories and Thatcher that destroyed Britains Manufacuring base, Banking Control systems, and turned us into a National service industry, that has little or nothing to do with the importance of Manufacturing, even now companies are going abroad as its too costly here , ----But New Labour are definately an extention of Thatcher, and although they are now saddled with a major crisis, the legacy of the Tories and her total lack of vision has lead us to this damning debacle in economics, AT THE END OF THE DAY THE ONLY PEOPLE RESONSIBLE ARE THE GOVERNEMNT AND POLITICIANS, WHO DID NOT REIGN IN THE BANKERS,------ CAPAITALISM TOOK CONTROL, ? 0H---------------------AND---- failed. where does that now leave globalsiation, and Afghanistan?

  • Comment number 92.

    I think the inflation figures should include house prices and mortgage payments.

    If not they should have a separate figure for house prices and a separate rate for them.

    The British obsession with extreme house price inflation and their belief that it is a wonderful thing is pathological and has contributed to at least 2 booms and busts already.

    People on the continent think that something being very expensive is not a good thing.

    Can we not have some genetetic therapy to remove this insane tendency which leads us to believe we can all become millionaires by watching eastenders as our houses treble in value?

  • Comment number 93.

    The best thing to do would be to knock off early for christmas and close the markets. There's not much going on now except for staff sneaking off on the sly for a 'cup of tea' or cut price cocktails.

  • Comment number 94.

    Strange how all these muppets

    take their salaries month by

    month but never resaponsibility.

    TIME FOR RESIGNATION?


    If i ran my business like this lot

    i would be bust & in prison by

    NOW.

  • Comment number 95.

    When he said "We saw the credit, we saw the house prices, but we did see a fairly stable pattern of earnings, prices and output"

    I absolutely do not accept this.

    It is incompetence on a colossal scale. They knew that property was the underlying asset fuelling debt but they openly declared it was not their role to control asset prices.

    Those of us that have followed your insight into what was happening have known for a few years that the foundations were being eroded.

    Its not so much a case of irrational exuberance as irrational optimism.

  • Comment number 96.

    Many times I have questioned why the Treasury appears to have escaped all blame for the current financial crisis yet, if anyone is to blame, it is the civil servants who must have been as aware as the BOE of the fragile state of the economy. And if they were not they should not be in their jobs.

    And it's not just the banking crisis. For example, The Chancellor is obliged to consult with Treasury officials over the budget make up but did anyone bother to explain to him the potential effects of the 10p tax debacle?

    Then we come to the VAT reduction and its minimal effect on the average person's household budget. 'Have your say' was full of condemnation within hours of the announcement but did Treasury point out the danger of investing in a folly MPs are just waking up to.

    And if the Chancellor was warned ... why has no-one from the Treasury defended their position, poked their head above the wall. Or would that have been considered as whistle blowing?

    Hooray Henrys, the lot of them; that's what I say.

  • Comment number 97.

    The main reason UK plc is SO

    uncompetitive is due to high

    living costs : NOT THATCHER!!!



  • Comment number 98.

    Today’s Christmas cracker………….Did you hear the joke about the chancellor and his economic vision for Britain?

    Apparently, he put an end to boom and bust, lol If this ends up as bad as I think it might, Mr Brown could end up at the haig being done for crimes against humanity!!!

  • Comment number 99.

    Robert

    Congratulations on getting the first full admission of responsibility from anyone important.

    It only goes to show how pathetic they all were. For years they denied any link between the madness that was our housing bubble and spending in the economy.

    Frankly i think they should all be sacked. They only needed to look at the number of new cars bought on credit or the tidal wave of debt consolidations added to peoples mortgages to know the truth. They spent years saying it was not the bank of Englands job to control asset prices when challenged about the housing bubble, claiming their remit was only to look at inflation while ignoring RPI which included housing costs. The whole mess is a disgrace and driven by people who were never independent from government but being rewarded for doing their bidding.

    They ignored all the voices of caution prefering to allow them to be mocked as doom merchants. Even now there is still a huge amount of denial at the top.

    The solution is simple. Fire all the useless public sector workers. We all know who they are - anyone not in the front line of providing needed services to the public. Employ all the builders to renovate the empty houses. Expel all the illegal immigrants and make the legal ones pull their weight. Support lending to genuinely profitable business that makes things.

    It will not prevent the painful delevaraging of our debt and the futher collapse in house prices but it will secure a more stable future.

    Or we could just print more money.

  • Comment number 100.

    I am looking forward to Robert Peston taking on the new "Head of Global Economy" role, encompassing being CEO of all banks, chancellor of the exchequer, having 10 votes on the MPC and heading up the FSA. I assume we will be cloning Robert so he can also fill other important roles in the broader economy (CBI, World Bank, IMF, UN, etc). A brighter future awaits us all.

 

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