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Bankers and responsibility

Robert Peston | 10:02 UK time, Friday, 30 January 2009

A heavy burden is on the shoulders of Jamie Dimon - as probably the only American banker of seniority whose reputation has not been smashed to smithereens by the crash of '08.

Jamie DimonUnlike so many of his battered peers, the chairman of JP Morgan has had the courage (or chutzpah?) to show his mug in Davos. And, by all accounts, he's been saying worryingly sensible things in those private bankers' meetings that are being held to provide finance ministers and government heads with the financial industry's view on how to save the global economy.

I am told that at the World Economic Forum's so-called governors' meeting yesterday - in which the banks, brokers, private equity firms and hedge funds tried to draw up a common agenda for reform - he warned against placing too much faith in the possible creation of a central clearing system for financial transactions between banks.

The proponents of such a system believe that it would restore confidence to inter-bank lending - which has been sadly lacking for most of the past 18 months and has been a massive contributor to the implosion of the global machine for creating credit.

The reason it could restore confidence is that it would involve the establishment of what's known as a central counterparty, which would in effect insure banks against loss if another bank was unable to honour commitments.

If there were a central counterparty, fnancial institutions that lend to each other would have less reason to fear that - in extremis - they could not get their money back.

Which would appeal to most bankers (as if you needed telling), especially in this era of high anxiety.

Except that Dimon posed the question whether it would really be sensible to reduce the requirement for bankers to think long and hard about who they're lending to and why.

After all, the mess we're in stems from bankers placing too much faith in computer models and the opinion of third-party credit-rating agencies when deciding where to make their loans and investments.

The debt bubble that precipitated the current debt drought and global recession was caused in large part by bankers abdicating their very basic responsibility to know their borrowers properly and to assess whether these borrowers had the remotest chance of being able to repay their debts.

So if we're going to try to prevent bankers messing up our economy again, do we want them to take greater responsibility for their actions, or less?

Surely in the new world economic order which will be built - though Davos has been disappointingly short of coherent visions of what will be constructed from the rubble - we need bankers to know their customers and to propely evaluate the risks of lending.

But the more that they're insured against losses on lending, the less incentive they will have to lend responsibly.

Which brings us to the Great Paradox (capital "G", capital "P") of our government's measures to restore the flow of credit to real businesses and households.

All of these schemes involve taxpayers' insuring away some of the risks for banks and financial institutions of lending and investing.

In respect of new lending, this is the effect of the Bank of England's new asset purchase scheme, the proposed state guarantee for asset-backed securities, and assorted guarantees for bank lending to businesses.

Taxpayers are even taking on the liability for banks' dodgy old loans and investments, through the establishment of the new public sector insurer of banks' toxic debts, which should probably be christened "The Imprudential".

In other words it is explicit government policy to reduce bankers' responsibility for their actions, their lending, even more than was already the pernicious case.

We're in this mess because too much was lent by too many in a wholly irresponsible way.

And ministers are now encouraging more of this lending by further reducing the responsibility of the lenders for their actions.

It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice.

It might work. Or it might just make our economy's dependence on unsustainably high levels of debt even worse - and thus cause us even more pain when we're ultimately weaned off the addiction.

UPDATE: Here are some thoughts of mine from today's The World at One on how banks could become "good" again.

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Comments

Page 1 of 3

  • Comment number 1.

    I hope that wasn't you that was phoning the PM during his press conference Robert.

  • Comment number 2.

    'It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice.

    It might work. Or it might just make our economy's dependence on unsustainably high levels of debt even worse - and thus cause us even more pain when we're ultimately weaned off the addiction.'


    It's called sustaining the unsustainable. The system was wrong, so why are we bankrupting the future trying to sustain it?


  • Comment number 3.

    Robert I have an idea: nationalise the rating agencies.

  • Comment number 4.

    Not only are taxpayers are even taking on the liability for banks' dodgy old loans and investments but are still being dumped on.

    For example, RBS a British tax payer owned bank is busy trying to outsource British jobs to Asia. Outsourcing can make sense in boom times, but when unemployment is rising it is crazy to throw British workers on to the dole to send the money to Asia!! Less money in our country = less taxes, even more unemployed and a worse balance of trade.

    Is there any way this can be said to benefit British taxpayers? I think not!!

  • Comment number 5.

    Robert,

    Please don't mention....

    "our government's measures to restore the flow of credit to real businesses and households."

    There is no shortage of credit to householders. Both of my (British) banks - an effectively nationalised one and one surviving without government bail out, have been falling over themselves to lend me money. Recently they have both called, the conversation has gone along the lines of

    Q. You're in the black. Do you need an overdraft?
    A. No

    Q. You don't have a loan out. Do you want one.
    A. No

    Q. Maybe you would like one of our credit cards?
    A. No.

    I am not a rich man, though am solvent. They are desperate to lend to me. They obviously have the funds.

    If you mean that banks should be offering more credit to those who are a high risk, I suggest you think again. Within the "real economy" as far as personal finance goes there is no credit crunch, only money potentially chasing risky borrowers. It has to stop.

    The government should not be looking at schemes to help the public become more indebted. Instead they should concentrate on ensuring that viable business have the means of maintaining cash flow and consequently uphold staffing levels. Those whose jobs are secured will gain in confidence and begin spending again.

    We are some way off this scenario, and from where I'm sitting, appear to be heading in the opposite direction.

  • Comment number 6.

    Oh and another thing. Let's not be too kind to these rogue bankers. I've listened to some of their excuses and half hearted apologies over the last few months and frankly what they've said hasn't amounted to much. We need a clear-out at the top and we need an investigation into who knew what and when and then we need those responsible for this mess to be banged away inside. Also if they refuse to accept their role in this mess and their duty not to defecate on the society they operate in, then we should tell them to clear-off. If they do decide to come clean they accept that they must pay their taxes, and act as good citizens.

  • Comment number 7.

    I say again. Why dont we just wipe off all the toxic assest?

    Just pretend they werent there? or exchange them for money from a globle bank where the money is printed when needed??

    Its just crazy that Tax payer foot the bill for the globle meltdown.

    Everyone is in the same boat so surely we could just write it off and start again!

  • Comment number 8.

    We must not be under any illusion, the Government intends return us all back to the robust and well-managed economy that we all knew and loved pre-credit crunch!

    Here's a quote to underpin my thoughts:

    "[GB] said the UK problem was not shortage of demand for homes at "the right prices" but a shortage of mortgages "at the right prices for people to buy"."

    http://news.bbc.co.uk/1/hi/uk_politics/7667284.stm

    Couple this with a GB's vision of returning the economy back to 2007 lending levels, and other stories detailing how house prices will have recovered by 2013.

    http://news.bbc.co.uk/1/hi/business/7692814.stm

    So unless the average wage is about to explode to 58K p.a., any talk about regulation and reform of the lending market is just spin. The Government has bought into the lending market in a very big way, and it has a significant interest in keeping house prices propped up. We need to stop listening to the spin and look at the actions.

    Problems of this scale originate from systemic failure at the highest level. The root causes have been identified time and time again in this blog. It looks like the lessons will not be learnt; the bitter pill will not be taken.

    Please consider signing the following petition, (and get your friends to sign too):

    http://petitions.number10.gov.uk/LendingReform/

  • Comment number 9.

    The bankers will take the easy money on offer and you are correct to say they will still have no responsibilty for it going wrong again

    Brown allowed the original mess to develop to prop up his spend spend spend regime and he is now doing everything he can (with our money) to allow the banks a second bite at the cherry.
    If someone doesnt stop this useless administration, led by Brown and Darling, we are in for very very grim future far worse than anything in recent years.

    We HAVE to stop throwing good money after bad and get some stability and sound policy in place before its too late.

    Someone please call for the men in white coats !

  • Comment number 10.

    Plenty of people have been making exactly these points ever since the crisis began. If the problem is excess debt then more debt can hardly be the answer.

    I think Paul Mason has it right when he says "...the government has decided to borrow its way past the next election".

  • Comment number 11.

    Bankers and responsibility isn't that an oxymoron like civl war?

  • Comment number 12.

    "Davos has been disappointingly short of coherent visions of what will be constructed from the rubble (of the OLD world economic order)..."

    Isn't that the main point of Davos? Makes you wonder why they bothered then. Oh, I forgot, they get the chance to network with other movers and shakers, but couldn't they have gone to Amsterdam to do that?

  • Comment number 13.

    So lenders are to be encouraged to lend more to those that already cannot afford to pay back what they owe already.

    I feel that I must pinch myself to see if I am awake!!.

    This is surely the economics of the madhouse.

    I, like a lot of people, have borrowed sensibly in the past, but I have never ever taken on more debt until the original loan has been cleared. You just cannot pile debt upon debt.

    I find it very difficult to get my head around the fact, that supposedly, the only way we are going to get out of this mess is for us all to borrow more. Surely you should only borrow to buy something that is essential and therefore cannot wait until you have saved enough to buy it.

  • Comment number 14.

    centralised banking is a bit like cls continuos linked settlement used for fx transactions, it would help regulators keep their finger on the pulse of banking bodies and may enable some sort of accountability

  • Comment number 15.


    I would submit that the problem has not just been bankers abdicating their very basic responsibility to know their borrowers properly and to assess whether these borrowers had the remotest chance of being able to repay their debts. It was the subsequent securitising of the loans without regard to their underlying riskiness. This caused the market to doubt all loan-backed securities and has led to where we are now.

    Smalleb

  • Comment number 16.

    So we`re still enthusing about "No banker left behind" schemes are we?
    Please tell Gordo that he is widely despised,nay,hated,by the electorate in your next briefing session Robert,there`s a good chap.

  • Comment number 17.

    Personal Responsibility, the work ethic and other such positive addributes are going to be outlawed at this rate for

    1) HMG
    2) Bank's
    3) Buisness's
    4) The Population

    Can I have a loan of £10 Trillion not go to work and spend spend spend then please.

    You have to have accountability other wise there is no deterant ?

    So erant fathers can have there passport or Driving Licence taken away without a court judgement but

    HMG and Bankers can reck the economy by fuelling lending again.

    This is a crossroads that demands an election before its too late.


    BBC4 today about the worker in linconshire etc no Lab,lib or Tory spokeperson would comment but they got a union baron on.

    Where were the UKIP,BNP or ENP or Greens even having there comments ?



  • Comment number 18.

    When are people going to realise that the total amount of credit is finite? We cannot simply continue changing the factor of fractional reserving when it suits. This state of nirvana is only applicable if defaults NEVER happen.

    Unfortunately defaults have happened and the remaining parts of the loan book not yet defaulted are undergoing constant review. In this sense creeating a toxic bank is only good for that static period - the analysis has to be dynamic given that over time given current volatility. So Dimon is right as this would amount only to a comfort check, much like applying a soothing balm to an infected wound and not using antibiotics.

    The UK's position is that we have a large chunk of long term loans in the form of house mortgages and PFIs. The latter is more worrying in a sense as the term off balance sheet scares the living daylights out of me. At least with mortgages the terms are well known. To the best of my knowledge the contractual terms of PFIs are not an open book and neither are they standardised.

    As Dimon pointed out sensible banking will take each application for a loan on merit. The factors applied in fractional reserve banking have been and will continue to be revised to more prudent levels. Soundbites from politicians exhorting lending to 2007 levels are just simply hot air.

    One thing that has been overlooked or just mentioned in passing has been the withdrawals of Hundreds of Billions of Euros and Dollars respectiveltyfrom the European and American banking systems (investments and deposits) in the years before the Credit Crunch really took hold. Have the state bail outs of the banks also acted as a quid pro quo for their silence on the matter?

  • Comment number 19.

    It's daft to assume that 'bankers' have not learned from recent experience. If anything, they're so frightened, they don't want to lend at all and these guarantees will be necessary if business and the consumer is to prize even the minimum for recovery from their now over-miserly grasp.

    The drug analogy is not a good one but to continue in the same vein (no pun intended) - they're off the dope and won't be touching it ever again (although some regulation needs to be in place to make sure they're not tempted at some point in the dim and distant future).

  • Comment number 20.

    I would like a financial commentator to comment on the hypothesis that a golden opportunity was lost when the presumption that the banking system could not be allowed to fail was adopted.

    What would be the scenario now had all this toxic finance and the corrupt financiers been cast into perdition?

    Would it not be a cleaner and fairer financial land, at least, to start rebuilding.

  • Comment number 21.

    Just a thought on the cost to the taxpayer of supporting the banks etc. Due to falling or irrecoverable assets, alot of money has come out of the economy. To replace this (e.g. as currently to the banks) is to replace the money that has been generally lost. It does not increase the money supply overall, so to that extent 'printing money' may not lead to the 10 year tax burden that is feared.

  • Comment number 22.

    excellent Robert!

    'Bout time this was all said!

    Send a copy to Downing Street immediately!

    Jolly good show, old sport!

    Keep it up!

  • Comment number 23.

    Lending to people so they can buy over-priced assets (aka houses) is a bad idea. Lending to people to allow higher current consumption when they have no reasonable expectation of earning more in the future is a bad idea.

    What is lending anyway? It's a mechanism whereby people with more money than they want to spend lend it (via the banks) to those who want to spend more than they have. But as the money is lent at interest then in many cases the end result is that the borrower has even less money and the lender even more - it's just not sustainable.

    There are only two alternatives. One is to get the savers to spend more and the borrowers to live within their means. This would certainly have be problematic.

    The other option is for the Government to actively redistribute wealth and income in order to correct the huge imbalances that have built up over the past twenty years.

    Interestingly, almost exactly the same questions can be asked regarding debtor and creditor countries (eg the UK and China respectively).


  • Comment number 24.

    My friend Rahere has asked me to advise you that his postings pointing to the site he is moving to have been blocked by the moderators on the grounds that they are off-thread. They might put it that way, he couldn't possibly comment. In the mean time, he seems to be a man of independent means, and will welcome you there.

  • Comment number 25.


    I had heard that Robert Peston caused the run on Northern Rock with a tabloid style of reporting but I disagreed.

    However, is using the term "Depression 2.0" no more than tabloid style reporting? It is simplifying all the issues that a Depression would represent into a nice simple sound bite. People are suffering and there is real hardship - please don't ignore that for the sake of a media buzz word.

    That's my opinion, though a friend pointed out that, if you must use that phrase, then call it "Depression 2 draft 1" as no-one, including governments, seem to have all the details about it.

  • Comment number 26.

    Robert

    "To prevent banks from messing up our economy"

    take away the privilege of creating money
    out of thin air by commercial banks.
    Money creation should be Genuinely Nationalised as at present bank notes and coins are (which is only 5% of the money supply)
    After the crises commercial banks that have been nationalised could be denationalised
    to compete freely in the profit making market.
    The criticism of too much power in the hands
    of a public agency fades into insignificance
    compared to the corruption that went on until recently what ever system is operating the enormous loss of seignoirage with the present system looks mad .

  • Comment number 27.

    So Jamie Dimon blew them a K.I.S.S just as JP Morgan offered one to America in the Bankers' Panic of 1907. Perhaps he will give them a Kondratiev wave too on departure from Davos?

  • Comment number 28.

    In the USA, Congress have been able to vote on the President's spending plans. Here, Gordon Brown has decided to double the national debt and hose money at rich bankers, and a few West Midlands marginals, and there has been no parliamentary vote, no oversight, no debate, no scrutiny at all. It rather begs the question of exacly what our MPs are for. Parliament doesn't even get to hear of the spending plans first, since they are leaked to Robert Peston beforehand. Any debate there is is happening in the Blogosphere and the newspapers.

    My point is that Gordon Brown has apparently unlimited power to spend the tax receipts from the next two generations, and maybe the money is being spent wisely. But the power is concentrated in one man's hands, and I suspect that he is receiving advice from only a handful of London based senior bankers and civil servants. With so much of the country's future wealth at stake, shouldn't the debate and the sources of advice be opened out?

  • Comment number 29.

    Robert, your blogs are getting more and more compelling. The air in Davos is certainly a tonic to your brain cells!

    Here's what I think of the current impasse where secret meetings and secret briefings are ensuring paralysis continues indefinitely.

    The government keeps insisting that it's better to do something as doing nothing makes everything worse.

    Your blog today shows how futile the measures taken so far have been. What is going to restore trust between bankers? Nothing. They know only too well they're not to be trusted ever again.

    This is the fundamental problem and I wonder why HMG don't take this reality as the starting point for dealing with the crisis?

    The most useful thing to do, in my opinion, is to plan ahead with the worst case scenario as a guide. This is what happens in aviation. Pilots are trained on the assumption that things can go wrong at the most crucial points in a flight (at take off and landing), and they have build safety procedures into their standard operating procedures. Their philosophy is based not on how good humans are at flying aircraft, but how bad they are. *

    Having understood that greed, greed and yet more greed is going to occur where banking is concerned, isn't it time to assume that the rules need to act as a corrective to counter this human weakness? Deregulation and a soft touch approach has passed the controls over to Aesop's monkey with his fist stuck in a jar of nuts, unable to let go and consequently starving to death.

    The best thing this government could do is impose rules based on the assumption that everyone remotely connected with banking has a stocking over their head and a swag bag over their shoulder.

  • Comment number 30.

    Very good blog RP,

    the one thing missing, imo, is that leading in a wholly irresponsible way lead to mind boggling personal bonuses.

    As i've said many times in these blogs bankers and financiers can never be trusted again to do the responsible thing if their own wealth is created from irresponsibilty to the economy and the long term.

    Giving money to banks must come with strong conditions, not least of all how it will be spent and who is responsible for ensuring it is spent to the designated criteria

    Frankly i would like to see lenders suffer much more at present, they are seeming to take the credit crunch, not leading without large deposits, morgages at sensible rates requiring large fees, small businesses being asked to pay high interest rates, borrowers receiving next to no interest

    Individual and governemt dependency on Borrowing must be reduced in the long term but in a controlled and responsible way.

    To take the drug user analogy further continued prescribed uses of the drug in a controlled way may be necessary in order to keep the user in as steady as health as possible while moving them off of dependency.

  • Comment number 31.

    Strangely anti-government piece from Peston?

    Unless Gordon Brown has finally realised his policy of enforced lending is folly and plans a major u-turn?!

  • Comment number 32.

    By Jove you've almost got it Robert.. well done.

    Hopefully next you'll be telling us you've been listening to the wise words of Peter Shiff, Marc Faber, Jim Rogers and of course Ron Paul.

    We'd all be much better off if this lot stopped meddling, let incompetent people/banks go bust, let the competent people take over from a low base... and allow a new age of free market prosperity to continue afresh. That is how capitalism is supposed to work.. the debt fuelled boom was the problem, the recession is the solution ... just let it happen, let the financial sector contract, and let bankers find jobs elsewhere "On yer bike!"



  • Comment number 33.

    money is the devil
    they are keeping it greasy
    believe me

  • Comment number 34.

    Exactly! What is needed is to properly assess the risk of each loan and ringfence the really toxic ones so they dont make the rest rotten. Until that is dont we cannot start to rebuild. However there does need to be a line drawn on loans from now and in to the future, where the banks are exepcted to use their judgement and only lend to those that are creditworthy. Thus encouraging sensible levels of risk.

    As you correctly say Robert our economy is addicted to credit and whilst cold turkey is not an acceptable option neither is carrying on with the addiction.

  • Comment number 35.

    A bit of legislation that fixes the responsibility for any loan with the original lender would help, wouldn't it?

    I’m sure the Banks would come up with a way of passing on the fruits of the loan in an even more contrived CDO type of deal – but nothing concentrates the mind more than trading your return but keeping the risk!

    I know it doesn’t make a great deal of sense when you first look at it, but it is what banks used to do!

  • Comment number 36.

    I note that Gordon Brown doesn't even have the common sense or foresight to switch off his mobile phone before appearing before the world's media, so what faith can we have in him steering the UK's economy? A small slip, some might say, but nonetheless very telling about the man's competence.

  • Comment number 37.

    @29

    Oops! Human error! I forgot to put the footnote*

    See book by David Beaty: "The Naked Pilot. The Human Factor in Aircraft Accidents."
    published by Airlife Publishing Ltd 1995


  • Comment number 38.

    No, we musk make them go cold-turkey.

    Get demand going again by getting people to spend - but don't flood the markets with cash as all this will do is reinflate the unsustainable bubble.

    It is demand that has fallen through the floor (see the airfreight crash in December) so throwing cash at the situation will only cause massive inflation - Zimbabwe here we come!

    On the other hand money is already worthless!

  • Comment number 39.

    Perhaps this just goes to show the extent to which politicians have yet to grasp the true nature of this crisis and, moreover, the essence of the remedy needed for us to come through this crisis and out the other side. It's called 'learning to live within our means'.

    Our politicians have enjoyed a period where, on the face of it, every man and his dog has got rich quick. Great vote winner. Desparately unsustainable economic (and, hence, political) strategy: stoke up staggering levels of private and public sector debt and facilitate everyone living on the never-never. Now, the party's over.

    This crisis will continue to get worse unless/until a brave politician and his political party members make the point to the electorate that we can't all be 'rich' simply on the basis of borrowing ever greater sums of money (please note Mr Brown).

    Said brave politician also needs to point out that assuming endless economic growth (as we have done in recent decades) was a function of assuming infinite cheap energy. Since we've now all but reached the end of mankind's era of cheap energy, we're going to need political leadership of a different order to that which we've experienced in recent years.

    The next 10 - 30 years are going to be tough; really tough. I've yet to see/hear a UK politician properly grasp this challenge, still less suggest economic and political philosophies and strategies for leading us forward.

    As for Brown; the (proud) architect of the UK's disastrous situation: he's toast.

  • Comment number 40.

    Go skiing, post later! there's supposed to be some decent powder off the Weissfluh..

  • Comment number 41.

    "Bankers and Responsibility" - hehehe - you are jesting aren't you Pesto?

    Have you seen how many of my namesakes are emerging from under the rubble in the good old USA? - PONZI SCHEMES GALORE!

    At least they are uncovered. There are lots in the UK and Euroland, but not named and prosecuted. Trust in Bankers? Not likely!!



  • Comment number 42.

    For the first time Robert you point out the problem with Crash leaning heavily on the banks to lend.

    Congratulations!!!

    This view needs to be trumpeted more in the media otherwise we will not ever break our excessive dependence on debt. Like oil, the supply of credit is finite and we need to build an economy that is better placed to cope without copious amounts of cheap money. Of course this means a significant drop in our standard of living but then we have all been living way beyond our means anyways, its just that no one has the nerve to say this publicly.

  • Comment number 43.

    Mr Peston, Is this a red herring you've been sold?

    Global business confidence and government strategies simply don't hinge around 'central clearing' systens or 'insurance' for banks, no matter who whispered in your ear.

    Global business trade and the consequential requirements for a banking system that flows, will only come about when
    a) politicians, big business interests (including wealthy background players) agree on a way forward with regard to the 'Climate Change Economic Action Plans' required for planet Earth.

    b) Stimulate industrial growth in a known approved of direction and identify the future costs of investment for sustainability

    c) Obtain World food security which can be addressed once governments decide how they are going to meet demand and under what Economic sustainability structures they will operate

    GB and AD have proven that they have made many mistakes, Lord Mandelsson nearly wrecked future EU trade (including our own food supply) with Africa and it is now down to the 'new lady' EU Trade Commissioner in town to 'fix' that for us.

    Is there anything coming out of Davos that we don't already know, can't guess or work out for ourselves?

    Anyone would think that the Politicians and Bankers believe the 'general riff raff' are blind or stupid or both.

    Little do they realise, that although some have problems reading, writing and adding up, most have commonsense, integrity and above all street savvy. Something sadly lacking in most politicians, some civil servants and bankers.

    Robert, don't bore us. Wake us up when there is something of signigicance to say, preferrable when Mr Brown has the courage to do the proper thing and leap or come up with the courage to dictate.

    By the way, where are the wimps - sorry 'whining imprudent scallywags' or the Bankers and the Treasury Ministers to you and me?
    Not at Davos?

  • Comment number 44.

    Robert,

    In the UK we already have a n excellent and relevant instrument that I am sure would go a long way to curbing excess and wild lending by banks in the future.

    Legally Directors already have 'a duty of care' to set strategy and most importantly to ensure that it is implemented and executed correctly.

    If all these highly rewarded exec and non-execs knew that they were personally liable and could be made bankcrupt, I opine that they would ensure that they paid attention and understood fully before they allowed junior or other traders and execs to gamble on unsound and untested strategies that they, the directors did not bother to understand.

    How often have we, the public, been told the directors rewards are for the solutions they implement to difficult commercial problems.

    The Guardian this week named and shamed 12 bankers who have been rewarded £1 Billion and the institions who rewarded them have had to receive, to-date (and shed loads more required) £300 Billion to shore up those very same once respectable institions.

    Let those that have been living with obscene reward/result compensation be made to really understand what making not thought out decisions can do.

    Let them be cut down to the poor rewards they have wantonly made the future of our children likely to receive through their laziness , incompetence and not understanding that executing strategy requires thought, knowledge and plain hard work..

  • Comment number 45.

    WHERE IS THE INQUIRY?
    These guys have wrecked their banks, wrecked the economy and wrecked the national debt, and made themselves and their mates fabulously wealthy in the process.
    "But we don't want to damage confidence" says Gordon.
    I would feel a lot more confident if these characters were OUT of the banks and facing an inquiry.
    Is it really about confidence, or is he just giving them plenty of time to shred all the evidence?

  • Comment number 46.

    #5 RobKirton

    Same here Rob.....

    Getting the bank and building society (as just finished paying mortgage)

    I'm starting to feel like an idiot for not borrowing more money - sorry, releasing equity (sounds much more commercially savvy doesnt it).....

    .... and the reasons for doing so....... well the best seems to be “a nice holiday, new car or new TV”

  • Comment number 47.

    "how to save the global economy. "
    Haven't you learned? Deities should be capitalised, The Global Economy.

    As to how to save it, (if it's worth saving)
    ""Though I can see no way to defend the economy, I recognize the need to be concerned for the suffering that would be produced by its failure. But I ask if it is necessary for it to fail in order to change: I am assuming that if it does not change it must sooner or later fail, and that a great deal that is more valuable will fail with it. As a deity the economy is a sort of egotistical French monarch, for it apparently can see no alternative to itself except chaos, and perhaps that is its chief weakness. For, of course, chaos is not the only alternative to it. A better alternative is a better economy. But we will not conceive the possibility of a better economy, and therefore will not begin to change, until we quit deifying the present one."
    -- Wendell Berry in "A Continuous Harmony"

    Common Sense

    shouldn't we get the horse and cart in the proper order?

    Peace and Fair Shares
    ed

  • Comment number 48.

    Consider this:
    Irresponsible lending causes colossal defaults on repayments.
    These defective loans are re-packaged as assets and sold.
    This continues globally as an endless loop.
    Suddenly there is no real cash left.
    2007 arrives and the alarm bells start ringing.
    Financial institutions reach into their vaults to pay their own debts - oh dear no money!

    And now, our inept and out of touch Government are trying to restore the financial position to what it was before, ie: lending without prudence, shoring up lending by guaranteeing loans with public funds - which will take away the onus on banks to be careful, and trying to artificially keep property prices high, when clearly they are way to high already.
    The answer is clear, don't spend what you have not got, stop the stranglehold the planning system has on land, (this will bring down the cost of building land which is roughly 80% of new build costs).
    And above all else, get rid of bonus related deals in the financial world. Finance is not a game, and bonus related pay clouds the good sense of the most fastidious finacier.
    Oh, and get rid of Ministers who think it is a good idea to borrow their way out of debt!

  • Comment number 49.

    Thank you for this article. I know I was not alone in asking you to highlight the issue of Moral Hazard that government policy is encouraging. The logical conclusion is that banks are encouraged to take even riskier and less well thought through dealings than they have been, knowing that the taxpayer will bail them out if it goes wrong (again). Except that next time the stakes might be too big for even the taxpayer to cover...

    #3 Seems like a sensible idea to me.

  • Comment number 50.

    Robert

    Your report is confusing. Counter party risk has caused seizures in both interbank unsecured lending and trading/ liquidity in CDOs etc, hasnt it?

    The two issues are being separately considered, are they?... I see no harm in a collateralised clearing house for CDOs/credit derivatives etc. If you are worried about encouraging laxity, make it law that the banks retain a proportion of the originating risk - "skin in the game" .

    If you are talking about a system for underwriting short term unsecured lending between banks or money funds internationally, how would this work. Each central bank is already standing behind its national commercial banks. If this isnt working, why have we wasted all this recapitalisation / guaranteeing etc.

    If a central underwriter is required internationally for short term unsecured borrowing interbank, would central banks collateralise the international underwriting party ( instead of their local banks) and license the banks/funds it choses to underwrite in the system? The licensing would offer the protection against bad lending, wouldnt it?

    I thought there was already a committee for international settlements maintaining standards for maintaining capital and liquidity (?) to create confidence interbank - obviously this aint working.

    I am not sure what issue you are putting out for comment, hence the confusion on my part.

  • Comment number 51.

    #7 quiteLondonLad

    If I owe you 500 quid and we just "wipe it off", you think no one loses out!

    Someone somewhere loses, you can't make it dissappear - the money has been spent but the liability remains......

    .... and in our instance (like the World) we are not in the same boat - I'd be OK Jack - you"d be 500 quid down, works for me I suppose!

  • Comment number 52.

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

  • Comment number 53.

    A similar 'central clearing house' already exists in London for clearing derivatives and other instruments.

    It's an eminently sensible idea to extend this to other asset classes. The clearing house acts as an independent check, and can ask pertinent (and no doubt awkward) questions when a bank or other counterparty takes on too large a position without the requisite "insurance" margin in place.

    Of course Mr Dimon and other bankers would be against this idea. It would mean a third party keeping an eye on them, the last thing they want. I mean, the banks have done so well without being closely monitored....

  • Comment number 54.

    1.One of the comments to be read on this blog is very accurate.
    The banks are busy bombarding solvent customers with offers to take up a loan.
    Which means the bankers have lost the ability to asses risk correctly.
    2.Bankers and responsibility: The old saying comes to mind; when the sun is shining the bank is more than happy to lend you an umbrella, but when it starts to rain the bank wants the umbrella back.
    3. Davos and Jamie Dimon; you talk about a lack of confidence on the part of the banks to lend nationally, or internationally, and this idea of a central counterparty, to reassure them of not getting into a mess again. The whole thing brings to mind the word transparency.

    And finally a bit of black humour; the four riders of the apocalyse are quoted as being:
    The military, the church, marriage, and banking.

  • Comment number 55.

    You know the more this crisis goes on the angrier i get.

    I dont blame the bankers myself, they were just greedy and come on, who amongst us has never felt that quicker beat of the heart when we "know" we can get something for nothing.

    I blame the politicians, and for Gordon Brown to turn around and say he saw this coming, well how is he still PM. Surely if he knew it was coming and did nothing to prevent it, you know like maybe increased regulation, or perhaps lowered our debt burden to zero, then he is guilty of treason.

    I also blame us, yes thats right, me and you we borrowed money like there was no tommorrow, turns out we may have been right too. We borrowed to buy that nice new suburbian 3 bed semi, or got 5 credit cards to get that plasma tv/new sofa/shiny new laptop. And why did we do this, because we could not afford not to, cos in modern britain the only way to get what you wanted was to borrow becasue living costs are astronomical.

    Well we are going to suffer now, and so are our kids and probably are grandkids.
    Apart from paying back this huge debt burden, there is likely to be civil unrest, possibly civil war in the uk and we may even get a dictatorship as people get more and more angry at democracy not being able to resolve the big issues that have forced themselves upon us.

    Then there is the international situation, depressions lead to big wars as sure as bankers noses turn to coke.

  • Comment number 56.

    So at last the truth can be told. I have been saying this for months, we taxpayers are in effect going to be underwriting the whole economy. Where is the incentive for the banks to lend to anyone in a responsable way when their entire risk is carried by us? Can anyone out there tell me how this is not just underwriting the kind of crazy economics that got us into this mess in the first place? What a disaster. What a con. What an utter shambles.
    Its not just the government either, its all the politicians from all the parties, the solution as far as they all see it is to provide the credit for 6 to 9 times annual salary mortgages to stop falling house prices, then the unlimited personal credit to maintain our over inflated economy. All underwriten by you and me. Its like some kind of Kafka-esque type of reverse socialism where we all end up paying to insure that in the end we will all be bankrupt. This is what happens when you get the bankers into a room, just roll over and give them a free hand to ask for whatever they want. GB RIP.

  • Comment number 57.

    Anyone can make monetary policy decisions
    It's either Yes or No answer
    with a 50% chance of being correct

  • Comment number 58.

    "curing a drug addict... by giving him a prescription"...

    This is an excellent metaphor because it is EXACTLY how you do cure drug addicts.

    You stop them taking stupid risks with dodgy drugs (loans) by providing them with a safe clean supply of the drug (money). Remember, if you cut off the drug (money), the addict (bank) dies of cold turkey.

    So the Govt is absolutely right. Stop the addict dying, give him the help and education he needs to live cleanly, then wean him off the drug carefully.

    Anyone with an eye to history will know that "cold turkey" will give us a 10 year depression and half the population out of work & homeless.

  • Comment number 59.

    Robert

    You hit the nail on the head.

    Brown is allowing the bankers (his best buddies up until 2007) to slopy shoulders their responsibility.

    So in public he says its the bankers fault but in practice he is driving the getaway car

  • Comment number 60.

    "It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice." (PR)

    Do you know the amount of tax payers money it would save (not to mention the human misery and poverty it would prevent) if the above policy was implemented (giving prescriptions to addicts for their drug of choice i.e. legalising/controlling drugs).

    Think of the crime reduction (addicts don't need to steal for their fix - criminals dont recieve funds for organised crime - gangs no longer battle for control of the streets - police have more time to catch real criminals (ELITE BANKERS ETAL) and are able to put them in prison as of the extra space created by releasing all the drug related criminals.

    The analogy does not work since such a drugs policy would actually work for the mass' - where as giving elite bankers anything but the sack and conficastion of all assetts aquired via this almighty con is simply nothing but yet another slap in joe publics face.

    Do you know the VAST amounts of money that is created by the phoney war on drugs - money that is deposited guess where - THE BANKS.

  • Comment number 61.

    Helping the banks to lend more can only make sense if the government controls how and to whom the lending is made which means invasive rules on the allocation of credit to ensure it either is investment or it is protecting sound businesses that have short term difficulties.

    But what of demand? Increasing benefits, state pensions minimum wage (reducing employers NI to compensate) by 15% to 20% but not up rating annually until inflation has 'caught up' will boost spending in the high street but not on expensive mainly imported goods. Building more Council Houses and reduce regressive taxes and public sector charges?

  • Comment number 62.

    Is it not about time that the Government keeps its nose out. I agree that good companies need finance, but the markets need to settle.

    Remember it was too much lending by the Banks that caused this. Unless we go through the pain, real solutions to prevent future bank failures will not be found.

  • Comment number 63.

    Yes, this is all so true. Its simple: banks should stop relying on snazzy mathematical models (I guess they have at least already done this) and be subject to new government rules about lending responsibly.

    So why is this so hard to put into practice and why does an insurance scheme seem the remedy?

    Because this is about saving your face as a government that saw its whole project as 'freeing people up' to pursue wealth unhindered by state regulation. And for a while it seemed to work. Everone got high on it. Surely this is the ideological addiction that governments have to wean themselves off.

  • Comment number 64.

    Jamie Dimon seems like a smart banker, yet JPMorgan has its own share of problems not least with credit cards and commercial property loans. Full marks though for saying banks don't want to loan to deadbeats and no amount of chest beating by governments can really persuade them to repeat past mistakes. It’s a concept that politicians find hard to understand that the last 20 years were not normal financial conditions and all these attempts to jump start the lending bubble will not work.

    Jamie when he says bankers abdicated their very basic responsibility is perhaps hinting at a particular failure that banks still have. This I think is also why there is a perception currently that banks are not lending particularly by politicians despite the lending figures. Banks do not have the staff or pricing structures in place at the moment to judge individual loan requests. They have to use their loan models to at least give a first assessment and these models take no account of local conditions. If you are builder at this point you will find it hard to get a loan regardless of whether you have picked up lots of business from failed competitors.

    Its all too easy to acuse banks of not really banking and having a bit of a party with securitised debt. The truth is that the demand for low risk debt was far too high which led to the banks accomodating that demand. This is something that Brad setser in his blog has touched on recently, with that demand traceble to global inbalances and government policy. Everyone is responsible for this mess and the government, despite Gordon's assertions is responsible. That includes opposition parties who failed to provide coherent policies to address these problems as well.

    I agree that by tax payers assuming risk, the government is trying to encourage the debt party to continue, but they might consider it to be more like issuing methodone to addicts rather than have them do cold turkey. The inevitable consequence of this is that a 18 month deep recession then becomes a 5 year lesser recession. This fine for all those who have little money and saving, but is probably the worst scenario for those with big mortgages who will no longer have the luxury of wage rises whittling away at the burden of debt. It is also the worst scenario for those who contribute to pensions or those who rely on interest from savings. Most of the hardworking people in this country are going one way and the government is determined to go the other . Where a government moves so far from a large proportion of the electorates wishes then at the next election that will be taken into account.

    It is all too easy for us to critise whether it be governments,banks or society as a whole, but very few propose well thought out and viable alternatives. Some propose nationalisation without understanding the intricacies could actually bankrupt countries making the situation worse. I would propose we spread the cost and use insentives rather than all the insurance schemes and bailouts that the government suggests. Why don't we reduce the tax burden on companies, but also introduce a law that any company operating in the UK must use 6 percent of the profit (loss making firms in trouble would not have to pay) it gains from its UK operations for local community projects and sponsorships(we could then reduce council tax as well). If you want banks to lend then reduce the tax bill on lending, if banks share prices go too low get a semi nationalised entity to buy some shares to keep the price up (like the US does with AIG). Lets get out of Iraq and stop wasting money there, and stop government giving money with one hand and taking it away with the other it is inefficient and wasting money.

    Throwing suggestions into the pot should be part of everyones role, otherwise critisism is just destructive.Something to think about anyway as we use this forum to sound off.

  • Comment number 65.

    Re #11
    Bankers and responsibility - isn't that like honest and politician?

    I can still remember the days when you had to prove to a person, not just a computer system, that you were trustworthy and solvent.

    Now the worst at knowing who you really are are those who should know best - local councils.

    But then, in a world where driving into London without paying the congestion charge (£80 fine on 1st offence) is more serious than cannnabis (£80 fine, 2nd offence) what else can we expect?

  • Comment number 66.

    "But the more that they're insured against losses on lending, the less incentive they will have to lend responsibly. "

    Isn't this what Credit Default Swaps (CDSs) were for? Apparently there is some $60 trillion in CDSs out there. I wonder whether the banks have come clean on their exposure to these 'assets'. Probably not - because the banks themselves do not know. Which is worrying given that the taxpayer is now effectively guaranteeing all the banks' debt obligations.

    Hmmm, are there any CDSs now being traded where the principal concerned is UK Plc? It wouldn't surprise me. Can anyone let me know where I might buy some?

  • Comment number 67.

    #5: 'If you mean that banks should be offering more credit to those who are a high risk, I suggest you think again. '

    Maybe it's just me, but isn't that exactly what Robert Peston's blog was questioning? He suggested that easing credit to cure the current crisis might be the equivalent of treating a drug addict by giving him more drugs.

  • Comment number 68.

    There is where we are now and where we want to be once this mess has been sorted as best we can.

    Where we are now the taxpayer has to underpin the obligations of the bankers for fear of a bad situation becoming worse. This can only be a stop-gap measure until a more permanent solution can be found.

    Those who argue that we need nationalised banks beyond the current emergency are living in the world of Soviet tractor factories which they never truly left in the first place.

    What is required are professional bankers to get us where we need to be; namely a stable and reliable financial system. I stress the word `professional'. Once upon a time these people ran our banks very well indeed but were subverted by the ambitious careerists and replaced by rocket scientists.

    I am relieved you feel there are still some of the professionals about. Perhaps they need to set up a training school where the word risk is properly defined as meaning danger.

    I think in order to achieve this outcome from the current climate both the bankers who defaulted, the regulators who failed and the politicians who presided over the entire shambles need to be pilloried, named, shamed and broken financially.

  • Comment number 69.

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

  • Comment number 70.

    There is one item of real concern in this posting Robert, but your second point about the 'GP' is not so serious in fact.

    Firstly, the

    'so-called governors' meeting - in which the banks, brokers, private equity firms and hedge funds tried to draw up a common agenda for reform...'

    is really very worrying indeed.

    Talk about allowing the foxes to work out the new safety measures for the chicken coop.... this is the lot that have got us into this pickle in the first place, moreover having run away personally with most of the chickens in the first place. Maybe nobody can see, either, that it constitutes the group of people in this world who can only survive because of one thing - borrowed money.

    We need another "governor's meeting" made up of those who lend money - the ordinary savers who put the money into banks in the first place..... the 'people'!

    As you point out, maybe the best thing to do with this so called 'governors' lot is to hear them out, and then do exactly the opposite (although Mr Dimon might be messing this plan up).

    The matter of your Grand Paradox - it's just a case of Phase 1, Phase 2 etc and timing. Any system after a transient spike (... although maybe not that transient given the size of the spike!) will potentially take some while to settle down and it will tend to overshoot back (i.e. yes, with all this money being guaranteed the risk of inflation emerging is very high, and then interest rates go right back up again etc), but big measures do need to be implemented as long as they are out of phase with the underlying direction of travel of the system.

    This suggests a:

    Phase 1 - yes implement these big, tending to inflationary, measures but plan for...

    Phase 2 - where you institute the real radical long term restructuring of the system based around a heavily modifying/deflationary set of measures that you put on all financial institutions for the long term.

    ... would be in order.

    As for..... 'Davos having been disappointingly short of coherent visions of what will be constructed from the rubble'..... I've got a few decent ideas that maybe you could put in your pipe and smoke, but will leave that to a further posting.

  • Comment number 71.

    Perhaps Gordon should take a leaf out of the nuclear industry's book and copy Sellafield - take the toxic assets from all over the world and launder them for everyone for a fee?!

  • Comment number 72.


    I completely agree with #5 RobKirton.

    My partner and I are in the same position. We are neither rich nor compulsive shoppers. We saved to have a good deposit on a house and did not even apply for a mortgage as house prices were quite simply ridiculous (where we live).

    I do not understand the logic of slating bankers for lending irresponsibly to irresponsible borrowers, giving taxpayers money to them to stop them falling apart and then insist they go back to irresponsible lending to people who cannot clear the debts they already have.....

    I am no economist, but have always understood the concept of living within your means.

    If there is legislation which enables us to confidently buy food and not fear being poisoned - isn't it possible to have similar finance legislation?

  • Comment number 73.

    It might work? Seriously?

    From the point of view of a rich banker wanting to make sure of a continued supply of wholly undeserved bonuses, maybe.

    From the point of view of the rest of the economy? Does anybody seriously think it has the slightest chance of working?

  • Comment number 74.

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

  • Comment number 75.

    Yeah whatever.
    Meanwhile, up in Lincolnshire the people are at last starting to take action against the globalists.

  • Comment number 76.

    Banking and pub genius Jamie Dimon thinks Banks should think long and hard about who they lend to.....

    No doubt this desreves a 8Million Dollar bonus in shares, cash and pension rights.... obviously it can't be more these days even though 8 IS a tad stingy....

    Over 18 months ago the opinion that Banks maybe, might, just possibly need to think long and hard about some of the loans they were making was pretty widespread in the circles I move in....maybe they can hold the next Banking summit on the platform of the Monument Metro station in Newcastle upon Tyne.... the community there seem to be way ahead of the Davos curve

  • Comment number 77.

    There really must be an immediate general election. It is increasingly obvious that this government has no solution and has lost the confidence of the country.

    All this flailing around and throwing billions into a black hole is madness. It cannot be right to borrow on such a scale to address a problem caused by irresponsible debt.

    This is a bankrupt borrowing from himself and trying to keep himself sane with whiskey and wishful thinking - while telling his wife and kids that everything will be OK!

    She knows it won't be till she's left him!

    We cannot wish ourselves into a parallel universe where consequences do not apply. The economic forces at work are of a scale that is far beyond the capacity of governments to tweak things right.

    The bottom is your friend and the place from which you rise. The faster we hit it the better.



  • Comment number 78.

    #30 Kudospeter - Superb Freudian slip in your first paragraph - I'm sure you meant 'lending' but 'leading' works for me!

    Classic! Really left me chuckling!!

  • Comment number 79.

    GB now looks like a scared rabbit scrabbling around for a hiding place willing to pay anyone anything for the keys to it and at the same time begging everybody to trust that he knows where those same keys are... He's now begining to do more damage than good especially in ASKING everybody to have confidence, that has the reverse effect...

    I hate the cliche and not sure I trust 'the other guy' but it's time for Change....

  • Comment number 80.

    No 7

    "write it all off and start again" Are you 'avin a larf'? This time round the money merchants only
    managed to shake our boat. If allowed another round they would probably scupper the entire fleet.

  • Comment number 81.

    to totalinjustice.....

    RE your petition about lending. I wonder - in your world, is everyone single?

    With your published criteria on the PM website, if a couple on £22.5k each applied with only £10k each of saving, they WOULD get that mortgage.

    Isn't that a LOT closer to average wages? Plus, avereage house prices are not £200k everywhere in the UK.......

    Your petetion therefore, is flawed I am afraid.

  • Comment number 82.

    If something is to emerge from the rubble I would like to see the return of the old fashioned High Street Bank where you had to go and see a Bank Manager at your local branch if you wanted a loan and where relationships can be built up with the staff who are handling your savings.

    The day you could not contact your bank branch direct by telephone was, in my view, the day banking died. It was not long after that customers became faceless account numbers. Surely that in itself, increased the risk when it came to doling out loans.

  • Comment number 83.

    Perhaps this is the start of the weaning process, rather than the unpalatable cold turkey we'd otherwise face.

  • Comment number 84.

    The "drug addict" analogy must have crossed the minds of many of us before. I for one have ruminated what GB's reaction would be if, god forbid, his child should develop a drug habit? Sometimes we need a bit of economic "cold turkey" - painful but ultimately in everyones best interests.

  • Comment number 85.


    What is the point in this government, or any other country's government, continuing to give tax payers money to banks when they continue to dole out bonuses to top execs for failure ?

    Are they all so blind that they cannot see the wood from the trees ?

    People have had enough, you can feel the changes in the air.

    The stuff that is now happening in France and Lincolshire is just the tip of the ice-berg. This is going to be a messy year.

    Hope I can get to heaven before they close the door.

  • Comment number 86.

    Bankers and responsibility

    until they stand up and admit their part (no matter how large or small) in this crisis, none of them will trust each other and we will not trust them.

    Confidence will return when I Believe that I am safe in Trusting.

    And not before.

    Tigerjayj posted an article on another blog that really summed it all up.
    http://www.democraticbritain.tp2p.com

    So much so that I have posted a copy to my MP
    http://www.writetothem.com

    I don't know if he will listen, but there is no way he can ignore it.

    I suggest you read it and if you feel the same way then post it to yours.

  • Comment number 87.

    My reaction to this post could be summed up by the words "well, duh!"

    Robert, surely you know this already. You didn't need Dimon to tell you, it's just common sense.

    The government's attempts to reflate the burst bubble are a waste of time and money.

    Let's take our medicine and re-design the economy on sensible lending - where the lenders are face-to-face with the borrowers - and take it from there.

    Also, I agree with #5, there's credit out there for those that are credit worthy.

    (and as a business owner that sells B2B, that goes for business, too)

    What's missing is banks that are willing to lend 90% to home buyers in a dropping market where 90% will soon mean negative equity.

    But, why should a bank lend more than the house will soon be worth?

    If it were my money, I wouldn't. And I'd bet you wouldn't either.

  • Comment number 88.

    There's a lot of sense in that article.

    I have always said that responsible lending has been the problem and that we need to return to more local banking without call centres etc. Back to teh old bank manager/customer raltionship.

    However, that doesn't in itself solve the current problem.

    We are where we are. If banks were suddenly to advertise their intent to return to 'the good old ways' in the future it would make little difference - the concern is over the (real) current state of their balance sheet based on the errors of their past.

    But overall, we need to be able to gain transparency in the scale of the problem at an individual bank level and then see each bank make a commitment to return to 'know thy borrower' in the future.

    Only when a bank is known to be solvent AND doing the right things for the future will there be confidence in the bank as a borrower. But then again... to have borrowers you also have to have savers somewhere and we have less and less of those in this country as things stand.

    We do not want to be a net borrower from other countries like China in future and we are certainly not well placed to encourage savings with interest rates at their lowest for decades.

    However, sensible modern day investors are less likely to use the bog-standard savings account, so perhaps the new order needs to take other forms of individuals' investments into account as being a basis for lending.

    The problem is that not many of them are stable with the way markets are allowed to fluctuate at the whim of herd mentality, so a move towards real valuation of assets would need to be made, and that means much greater disclosure to make such a valuation possible.

    Each change has a prerequisite, until you end up putting the world to rights. Maybe that's what's we need to do - I'm sure I'm not the only one that's tired of watching people get rich out of wild fluctuations in the price of a share that bears no relation to the known value of a company (how can a company's paper be worth less than the net value of it's fixed assets, for example?).

  • Comment number 89.

    Dear 36
    It was quite possibly contrived. After all, it makes him look like many of the rest of us doesn't it?

  • Comment number 90.

    Seek ye first the kingdom of God and everything shall be added unto you .

    This pithy saying somes up the worlds predicament


    With pollytitians and bankerrs still trying to sell their fools gold to eachother and us .

    for them to admit that their "success" [now evaporating] was predicated on self serving lies, is to expose the seven deadly sins to the light of conscience and road to perdition


    Do pollytittians or bankers have any idea what responsibility means?

    Do they have any idea what truth is?


    "Restoring Confidence" for them is no more than a return to lying and breathing in perfect symetry, to carry on building the pyrammid of lies that preserves their power and wealth against the public interest and heavenly law .

    Whilst Great Gordon still wishes to delude himself about his economic record and talks about "transparency"would he care to consider the" transgender bill "pushed through parliament by labour ,that made it ILLEGAL for a minister to tell someone who was marrying a transgender person, of that fact .


    Gordon you are now fully transparent like your party .

  • Comment number 91.

    with the moderators nearly 2 hours and 42 posts behind it lessens the point in posting to the blog but it's addicitive

    might be time for the BBC to consider putting out a tender for moderators; oh but be careful not to give it to a foreign bidder!

    because Gordon said BRITISH JOBS FOR BRITISH PEOPLE

    but at Davos today he said that we must guard against protectionism, which is the greatest threat

    and he said that we mustn't allow financial protectionism either, because that would be the equivalent of MERCANTILISM

    so he has utterly contradicted himself and the main thrust of current govt policy, which is to try to instruct the British banks to lend every penny they can within the British domestic market

    aside from his mobile phone gaff, Brown (and Cameron who is also there) would have been better advised to stay away from Davos once they heard that Obama's senior people would be snubbing it

    yet again they have failed to see the RISK

    associating themselves with a kind of B-list of former Masters of the Universe

    and sure enough it has been an immediate calamity, with the industrial workers walking out at several refineries here

    Robert, Gordon, David etc should all be standing outside the gates of a refinery in a bleak corner of Lincolnshire this afternoon if they want to have their fingers on the pulse of what is happening; NOT AT DAVOS!

  • Comment number 92.

    You could say that any insurance makes loss more likely , but the one thing we know about insurance is that it is usually loaded against the party taking out the insurance, with stiff premiums, multiple caveats, heavy excesses and future premium price increases and surcharges for having made a claim.
    I think that we have already seen the worst in terms of bad debts, as interest rates have fallen, and there are signs that the property market is beginning to pick up ,albeit from a near moribund state.
    I do not think we need worry about more reckless lending.
    I think those days are over.
    Robert, it is now time from you to move on from your Doomsday position.
    The days are getting longer at last.

  • Comment number 93.

    24#
    Not a very good subterfuge Robertarminhere or are you giving the moderator the bird.

  • Comment number 94.

    Not so very long ago there was a trick in the banks whereby administrative staff were required to reapply for their jobs. It was a shyster method of getting rid of the older end dressed up as right sizing, ghastly expression, and reducing costs.

    As the banks cannot be considered to be going concerns without taxpayer support, perhaps something similar could be done.

    Make them ALL redundant and only to be given statutory minimum redundancy. Then allow them to reapply for jobs at lower rates and NO bonus for at least two years.

    The beauty of this is that the lower salaries would more than cover the redundancy costs for those that took redundancy. The majority of the bankers who caused the problems have not been with their organisations for long so statutory payments will be low. The redundancy payments would preclude them from benefits and those that stayed would be cheaper.

  • Comment number 95.

    The upshot seems to be that bankers appear to want to find a way to have central governments permanently underwrite any bad business decisions and find a mechanism for generating the next fix.

    Having dumped liability for a decade of dumb decisions onto the general populations of the world. They are discussing how to set up the next mechanism to do it all again.

    I had cynically assumed that Dim-on might be suitably titled as Mad(e)-off but this does seem unfair given his comment.
    Such a central structure would have no individual responsibility driver for banks to be better lenders.
    I can hear the proposal - banks would get together and collectively underwrite the bad loans in the central counterparty bank so don;t worry Governments if it should happen again (which of course it won;t) then you don;t have to pick up the bill.

    Except of course - it would pay banks to take more risks individually knowing their peers all share the pain if they get it wrong. Fear will keep them in line for a time but sometime one would try it and others will envy the 'returns' and the bubble blows up again - the counterparty would bust and the banks say - we can;t sort this out otherwise we will all be bust - please can we have some more money dear Governments.

    The other reason that this cannot happen is a supra national centralised body outside the control of a democratic process cannot be permitted when it has the potential to unduly effect individual nations populations. (The club gets together to asset strip Korea or some other country)

    In defining the "new economic order" bankers views can be effectively ignored - they are irrelevant. The new order has to reflect social costs much more - never again can it be permissible that one sector of society (in this case the financial community) can beggar every other sector through reckless behaviour without consequences.

    What will this mean ?
    We will have to accept that there may well be a need to spend a greater % of our income for basic items to balance the economy - less imports off set by home production even if it's a bit more expensive to do so.
    No one sector of the economy can be allowed to dominate and nor can any one sector be permitted to run huge imbalances in trade. Entrepreneurs are driven, so if they can;t do it in one sector they will adapt.

    Neither can mature economies strive to support hugely increasing third world populations - neither also can the world make their hope of living like we do a reality until they trim their population growth. Similarly how we live needs to change - not neccesarily meet in the middle but certainly we are running unsustainable lifestyles and economies in a general sense.

    If all we are going to be about in future is a pursuit of money and more stuff then this whole sorry mess is just doomed to reset repeat reset repeat until onetime (this time?) it just doesn't reset and we head off for a daliance with the dinosaurs.

  • Comment number 96.

    I see the moderators have walked out in sympathy with the refinery workers again.

  • Comment number 97.


    May I propose 1 year in jail for the CEO for each £1Bn required to bail out their institution.

    Further anyone who has received more than £50K in bonuses in the five years prededing the bail out should be made personally responsible for a fraction of the cost.

    Banking, like aeroplane building and operating nuclear reactors and railways is a safety critical industry and there needs to be an equivalent of the 'corporate manslaughter' legislation that puts executives who ignore safety in pursuit of bonuses in danger of prosecution.

    Writing off the amount of money required to save the banks will eventually cost lives - it will mean cutbacks in essential services.

  • Comment number 98.

    All this bluff designed to put off the day of reckoning.

    All designed to have a long drawn out effect before we reach the final conclusion.

    Instead of going down the steep slope to reach the bottom we take the longer more complicated route.

    The outcome will inevitably be the same but more pain will have been endured and billions more will have been wasted in the process.

    Someone needs to take control and stop this messing around and accept the facts.

    There is just far too much debt yet to be squeezed out of the system. This is going to hurt those with the most indebtedness.

    Businesses built on a bubble will go bust but others will take up the flack and new ones will be established that fit in with a leaner anf fitter economy.

    The sooner house prices reach the bottom and this is some way off the sooner the banks can estimate their true losses and start lending again.

    Left to take its natural course instead of employment decreasing gradually and for longer there will be a sharper shakeout but a quicker uptake of new jobs created on the upturn

    As far as Davos goes there seems already to be an admittence that no one knows what to do..There's confidence for you.



  • Comment number 99.

    sufferation for the young generation
    on a bright and sunny day
    we hear Jamie Dimon say
    my pirate jp morgan is still king

  • Comment number 100.

    39#
    "brave politician"
    Do you know of one,have you ever met one now or in the past when bravery was required in the job? Brave and politician when combined is a contradiction in terms.

 

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