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Making banking boring

Robert Peston | 17:38 UK time, Thursday, 2 April 2009

There are no surprises in the deal announced today to reform the banking system, to prevent banks making the kind of risky loans and investments that precipitated the worst global economic crisis since the 1930s.

But it's nonetheless a historic event that the world's 20 most powerful economies have signed up for these reforms - because they represent the death knell for the Anglo-American doctrine that economies flourish when financial firms are left alone to do as they please.

Nicolas Sarkozy and Angela MerkelIf the French and German governments - long critical of the practices of the City of London and Wall Street - claim a victory, that's not wholly unfair.

What's been agreed is that hedge funds and other relatively unregulated financial institutions - known collectively as the shadow banking system - will have much less freedom to lend and trade.

There'll be a crackdown on tax havens, measures to prevent banks rewarding staff for doing dangerous deals, much stricter oversight of the agencies that determine whether investments and loans are safe, and a reform of the way that banks account for their profits and losses.

Most significantly, banks will have to hold much more capital relative to their loans and investments, so it will be much more expensive for them to lend.

That may seem crazy right now - when banks haven't been lending enough.

But if it changes the way that banks do business, so that they take fewer dangerous risks, in the long term most of us will probably be grateful.

Comments

Page 1 of 2

  • Comment number 1.

    But how will Obama sell this at home ?

  • Comment number 2.

    All very well and good, but agreeing to shut the stable door when the hooves are clattering off up the road is not guaranteed to have the desired effect.

  • Comment number 3.

    Never mind the big stuff, what about the uk?
    How much have we borrowed including all the 'off balance sheet' PFI loans? How does that compare with what the country earns?

    I liked Gordon's answer to the question on the sale of UK gold at a cheap price. He invested in Euros! Good grief! So he expected sterling to depreciate!

    Will Gordon get a pension too?

  • Comment number 4.

    Robert wrote

    "...risky loans and investments that precipitated the worst global economic crisis since the 1930s"

    No two slumps are identical. So far as I can see this present slump is the worst in 315 years on the basis of the actions of the Bank of England.

    The problem that I see unresolved is that of the assets pledged to the banks (which should have been made bankrupt). Now in the 1930's these tended to be stocks that became worthless overnight and had to be written off. But today these are charges over assets and have some worth so the banks are hanging on to them in the hope that the price will rise to a level equal to their charge - however this means that these assets are still not able to be put back into useful production, at a sensible lower price. This price overhang would not have occurred had the bankrupt banks actually been made bankrupt (as yet they are still not being made bankrupt). These assets are huge and are unable to be repriced downwards - this in turn keeps other assets overpriced and the consequence of this may well prevent a recovery.

    Nothing is being done about this!

  • Comment number 5.

    At last a rare good news day, shares up, house prices up, harmony and agreement. The sun is shinning, the birds singing, time for a glass or two of red vino.

  • Comment number 6.

    They will certainly have to hold more money - trouble is - where are they going to get it from?

    Does this mean interest rates will have to rise in order to coax us to save - no really that's novel isn't it - since most of us have been saying this for along time and we didn't have to have a G20 to realise it!

  • Comment number 7.

    Now, will Gordon Brown address the real issues for the people of the UK who after all, did not elect him as our Prime Minister? He was a Labour Government's "Shoe In " once Blair decided to play elsewhere Overseas.

    When are we, the British People, going to hear our Voice heard?

  • Comment number 8.

    Hey Pesto... This fool Brown want the IMF to sell its Gold. The sale of Britain's Gold cost the Tax payer Billions.... and now he wants the IMF to repeat his mistake.

  • Comment number 9.

    The Summit has achieved absolutely nothing, other than throw even more money - that they don't have - into a black hole. The facts remain the same however many ways they try and say otherwise. Our entire economic system of global growth has been built on borrowing and this was its inherent flaw, i.e. the idea only works until the inevitable day when the music stops and the money needs repaying.

    The $1 trn 'investment' is just more of the same medicine and when this doesn't work then what next?

    Sorry, but I fail to see where all this private sector growth is going to come from without widescale credit and asset inflation, which, of course is what got us here in the first place. Oh, and we have the tiny matter of paying off all the existing debt as well, which is compounding at a rapid rate.

    Enjoy your money while it lasts.

  • Comment number 10.

    So it's all ok now? Miraculously the world will become a fairer place to live and people will care for each other. When are we going to wake up to reality? As long as we are chasing growth for growth's sake it will all end in tears-yet again-mine and the majority of the rest of the world I suspect.

  • Comment number 11.

    Most of the population of the UK would agree with the French and Germans as to how our banks have been run.
    And it's good news of the clampdown on tax-havens. They're about as popular with most people as sunburn in the Sahara. But at least we won't have US marines charging through the Cayman Islands.
    But we must keep the property market under control....if it starts going up again that could be another pile of toxic assets for the banks, and us. Loan-to-income ratio must remain paramount.
    Gordon did well, but no-one has forgotten that he sat on his hands for years while the bankers did their worst.

  • Comment number 12.

    Great they are going to bring in a bunch of rules that stop the banks doing bad things in future. How utterly utterly naive. What is so desperately sad is that the criminals at the root of the problems are getting of scott-free. The Rating Agencies certified toxic debt with a triple A investment rating taking money from the investment banks who put the stuff together. when every institution had bought the stuff and the moeny was in the bank the rating agencies changed their tune. A bit like waiting until the cinema is full - locking the doors and the shouting "fire". Sure blame RBS, blame Fred, blame Hornby - send the crusties to an RBS building and let the press get their footage. Why haven't our G20 saviours not got the guts to put Fitch, Moody's and S+P in the dock. If ever there was a criminal case to be answered look no further.

  • Comment number 13.


    The Prime Minister went on: "Our priority right through this summit has been the jobs, the homes, the businesses of hard-working families in this country and, indeed, every country.

    So how much longer do small businesses, desperate for cash flow to keep their workforces employed, have to wait for the banks to cough up? And I don't mean at exhorbitant rates 2.5% above base, which is downright criminal. It's all talk and no action. Sensible, level headed people are losing faith and to my mind that's not only a desperate situation but also a dangerous one.

  • Comment number 14.

    Did you see the protests as rather ironic especially politicallly inclined left protestors attacking a bank (RBS)supported by a centre left government.

  • Comment number 15.

    Sarkozy and Merkel off home claiming to have won some sort of victory, Obama paying lip service to Brown but cosying up to China and Russia,( Who are much bigger players ) and Brown claiming to be saving the world again. How he can say with a straight face that the rest of the world is in agreement with , and following his lead is beyond comprehension.He and Darling will now tell us at the next budget that the next round of borrowing is essential and wise because everybody agrees it is the thing to do. What he has so far done in the name of saving the economy , is plunge this country even further into debt than his policies of the last ten years had already done. Now he is in a position where he must borrow even more , possibly like so many previous Labour Prime ministers from the IMF, with no clear idea how to solve the problem he has made worse.

  • Comment number 16.

    14. rorymanners:
    Did you see the protests as rather ironic especially politicallly inclined left protestors attacking a bank (RBS)supported by a centre left government.'



    Centre left? New Labour? You mean the Business Party Mark Two? The party that's currently trying to sell off the remains of the post office and didn't actually nationalise the banks, just sort of subsidized them a bit.



  • Comment number 17.

    Not convinced.

    For starters, it was the hedgies that highlighted how rotten how banks were - a case of shooting the messenger here surely?

    As for cracking down on tax havens - don't make laugh. New rules will kill off the traditional ones, but I've no doubt the Arabs and Chinese will create their own versions. Good luck at winning any trade war there.

    And I don't suppose anything will be done about the core problem - the lack of transparency in the system - so we'll be here again in under 20 years.

  • Comment number 18.

    Must have been an army of people working on this G20 'agreement' over the last 6 months as foolow up to DOHA talks so much of it is stage managed and prior agreed for announcement to the world's media today - much like a 'stage managed' standard BBC interview with Gordon Brown.

    As many are saying perhaps Gordon Brown will explain the benefit to the ordinary person in the street as the UK must be, proportionately, not only the heaviest 'over-payer' to the arrangement but the UK also appears to be getting the least out of it.

    Well Goondog Trillionaire Brown - Show us the goodie bag!

  • Comment number 19.

    Thanks Robert for the reports today - one thing bugs me, can you explain sometime what's happened to the huge profits the banks made in recent years? Were these profits a delusion or what?
    I hope the trip home on the coach will go better than this morning.

  • Comment number 20.

    #14. rorymanners wrote:

    "Did you see the protests as rather ironic especially politically inclined left protestors attacking a bank (RBS)supported by a centre left government."

    Those that caused damage and trouble in the demonstrations had no specific political affialiations. There is always an element determined to cause trouble in every demonstration.

    What I do find ironic is the number of right-wing reactionaries on this and other blogs who have suddenly discovered compassion for the unemployed and disadvantaged in society. Where were you all when the Tories were laying our industries and societies to waste?

  • Comment number 21.

    #7. JohnnyZero66 wrote:

    "Now, will Gordon Brown address the real issues for the people of the UK who after all, did not elect him as our Prime Minister?"

    We, the people of the UK, elected Labour as our government. And thus Gordon Brown, as leader of the Labour party, becomes Prime Minister. That's how it works.

    Unless I'm mistaken, John Major was Prime Minister for 18 months before he faced the electorate. And then he presided over an economic disaster. What selective memories some people have.

  • Comment number 22.

    "Most significantly, banks will have to hold much more capital relative to their loans and investments, so it will be much more expensive for them to lend."

    At the same time low interest rates are making it much cheaper NOT to lend. If they only have to pay out, say, 1% on the money deposited with them, then it's no big deal to sit tight on it - just in case a rainy day is around the corner.

    The corollary of this is that high interest rates make it very expensive for banks to sit on their cash. Since the major problem at the moment is the banks reluctance to lend, that is another argument for higher interest rates.

  • Comment number 23.

    In my day it was called "chucking the baby out with the bath water"..just because certain checks in a system fail once does not mean the whole system needs changing. An angle for profit will always be found...thats just capatalism for you.
    Having just watched Obamas press conference btw can I just say, this guy is amazing, what a breathe of fresh air for politicians, he makes me despise the stifled falseness and dickensian humbug that Brown spurts.

  • Comment number 24.

    You can almost feel the disappointment of those on this blog who wanted the G20 summit to fail. Will those who persistently call for the banks to fail please now stop - it's not going to happen and last time it did in the 1930's is hardly an ideal example to support your wishes. For those calling for an election also please stop as there will be one, probably in about 13 months time. Let's hope that the banks will become boring again, and do what they do best, use depositor's funds to lend to individuals and businesses that can pay them back, and let's hope the attack on tax havens also works.

    There is a long way to go and unemployment will get worse before it gets better, but it does appear the G20 are taking the appropriate steps, and that the UK goverment and BoE have an appropriate monetary and fiscal policy. There are real long and medium term issues that will need to be addressed - the UK and the US will have to consume less and save more in the future and interest rates will have to rise. Other Countries will need to spend more so that the Global economy has a letter balance between creditor and debtor nations. Germany has been very severely hit by the recession - more so than the UK - and needs to increase domestic consumption. The UK will need to save more and there are signs that this is happening.

  • Comment number 25.

    Why don't they just create money out of nothing? Just increase the balance on a computer system. I mean, money is an abstract concept anyway and more and more of it is stagnating in the accounts of billionaires.

    And once you've created a trillion dollars, spread it equally all over the world. Fertilise people's pockets. Except of course doing that will make the billionaires seem slightly poorer.

  • Comment number 26.

    Let's all join in a rousing chorus of The Marseillais followed by a few stanzas of " Deutschland uber alles"

    What's the Chinese equivalent of "The Star Spangled Banner". Looks like we'll all be singing that soon.


  • Comment number 27.

    I think you have missed the main event as you have been incarcerated in the Excel bunker ( no, not that one)

    In the Commons Stephen Timms said the IMF had been "de-stigmatised", slip of the tongue? No, on C4 news a Washington pundit said the new money was for countries like the UK to be bailed out. Mandy, who was in the studio did not deny that and said, you guessed, borrowing from the IMF has been "de-stigmatised."

    All this must be in the UK briefing notes, don't deny we may have to go to the IMF, prepare the ground, it is de-stigmatised.

    Not for me it isn't.

  • Comment number 28.

    rbs-temp

    ''''''''''What I do find ironic is the number of right-wing reactionaries on this and other blogs who have suddenly discovered compassion for the unemployed and disadvantaged in society. Where were you all when the Tories were laying our industries and societies to waste?'''''''''

    Pull the other one, coal production has slumped more under thisnperiod of labour government than it did under Thatcher, ditto manufacturing

    Just because the left trot out Thatcher as a knee jerk defense every time labour look like going into meltdown dosnt mean we the un brainwashed majority have to swallow that garbage

    FACT this labour government have borrowed more money than the sum total of every governments combined borrowings in history, they are an incompent pack of clowns

  • Comment number 29.

    All well and good, but how long will all this take to make any difference, to the ordinary hard working people on the ground who are most at risk from the risk takers. Thousands are losing their jobs almost every day of the week now, not a lot of good to them or the many thousands who will in the coming months or years.

    It makes no difference to us as when we do eventualy come out of recession, all these so called leaders will all point out that, it would have been a whole lot worse had it not been for their great intervention.

    The truth is that those responsible for this mess are not and never will be affected financialy by it, nor will any of them ever be held accountable.

  • Comment number 30.

    Well now we just have to wait and see if the deal has got "teeth." In a month's time will bank share prices be higher, (on the basis that there is relief at the political consensus and a perception of financial stability having been restored?) Or will they be lower, (against a background of recent past profits never being achievable again for a long, long time - on the basis of the deal terms genuinely reining in the banks greed for profits?)

    I was sceptical the G20 would go this far. So my initial response has to be to say, hats off to them!

  • Comment number 31.

    Playing for time should be the final summary of the G20.

    Time to find some real answers to this global crisis and time to slow down the descent.

    It is blatantly obvious they need to reassure the people that they are doing something even though they already know that that something will be no where near enough.

    This is not a programme for growth it is designed to try to manage the inevitable decline in growth until people are able to come to terms with the reality.

    The wealth that everyone thinks they have will be gradually undermined as the massive deleveraging continues.

    The best they can hope for is that the bottom will be reached before too many of these world leaders are thrown out of their jobs.

  • Comment number 32.

    Having had a demonstration in the last twelve months of the damage under-regulated private banks can do, of course they must be more tightly regulated in future.

    However the private banks created a lot of money in the form of credit, which kept the economy expanding. The recession was the result when they stopped. So if the banks are to become more tightly regulated, someone else will have to print the money necessary to drive the world economy. The IMF and the World Bank will probably not be able to do enough by themselves. The central banks will have to be less conservative than in the past, not worry too much about inflation, and keep interest rates low.

  • Comment number 33.

    We must all learn to be less greedy and 'bend like the willow'(as the buddha said)rather than being rigid like an English Oak...then we will all benefit.. maybe, just maybe...this will be the turning point.

  • Comment number 34.

    How about an analysis of how much of today's promises are actually new money - less than meets the eye!

  • Comment number 35.

    rbs temp

    re comments 20&21.

    It may help if you understand economic reality and political history.
    It looks like Labour will go down in history in leading the UK to bankruptcy in successive administrations. I thought GB was a bad chancellor but those ignorant of economics and an understanding of how business works at the SME end thought he was brilliant - yeh right!

    I did not vote Labour in either 97 or last time. Why? Because I grew up doing homework in candle light due to the 3-day week and on mu way to school passing uncollected rubbish that had lain their for weeks. Productivity stopping because of incredibly selfish demands by unions.

    The reason that the early 80s were hard is that in 70s we were paying to keep industries alive that should have been closed allowing new businesses to take their place. Think of British Leyland (Rover part I) and the mines/shipbuilding.

    I am not sure if you know what its like when a country has no money?

    Admittedly the Tories got it wrong in the early 90s though it would have been difficult to have avoided a recession that was brought on by oil price spiking and to a lesser extent over-consumption.

    This isn't the death of capitalism. Far from it. It's actually the death of socialism. Time and again its proves it fails wit the same result - you run out of money despite the ideals.

    As for the banking side. It's what happens if you let businessmen and politicians get too close with knighthoods and where the Government is very reliant on taxable profits to fund Government spending. (Those deriding the banks should remember how many hospitals have been built on their taxes. It's quite a number.)

    This was a train crash waiting to happen... All this G20 posturing will prove of little value save yet more public spending that we can ill afford. What we haven't had in previous recessions is the enormous debt overhang. It's not good...

    Brown = Nero = Canute = catastrophe.......

  • Comment number 36.

    #26 "What's the Chinese equivalent of "The Star Spangled Banner". Looks like we'll all be singing that soon."

    The East is Red !! Since "red" to the Chinese also denotes wealth and Paramount Leader Deng said, "To be rich is glorious" !! Therefore, the East is glorious !!

  • Comment number 37.

    So we're going to revisit an even worse Anglo-American fiasco, namely the Bretton Woods system. I can't imagine that many French or Germans will be celebrating much of a "victory" as their exports vanish, as their overseas investments become worthless, and as their Swiss neighbors no longer shelter their assets from global monetary chaos and rapacious tax collectors.

    What the financial system needs is the discipline of the gold standard and 100% bank reserves, not a bunch of crooked politicians and central bankers blowing yet more credit bubbles (this time with the aid of a basket of hyperinflating currencies) while pretending to "regulate" them so that they supposedly won't burst again.

  • Comment number 38.

    Ref No 7

    Sorry, but it will probably be quite a while before our unelected Prime Minister finds time to address the problems of the electorate he's supposed to represent. From the dizzy heights of the Chancellorship of the World he probably sees UK problems as tiny pinpricks of small consequence and little urgency.

  • Comment number 39.

    Just watched Lord Mandelson on Channel 4 explaining how the deal means there is now no stigma attached to going to the IMF for a loan. He also said Britain would not be at the front of the queue. Yeah, right. The softening up process has begun.

  • Comment number 40.

    #28. openside50 wrote:

    "Just because the left trot out Thatcher as a knee jerk defense every time labour look like going into meltdown dosnt mean we the un brainwashed majority have to swallow that garbage"

    I wouldn't consider myself to be on the left, and I certainly won't be voting Labour at the next election. But my argument still stands. Much of the reactionary criticism that fills this forum would not be expressed if the Conservatives were in power. And, make no mistake, things would not have turned out any differently if they were: if anything, the Tories would have encouraged even greater freedom for, and less regulation of, the financial industry.

    This government is trying its best to regain control of an economy that is careering out of control. Not everything they have done is good - I believe, for example, that the VAT cut was a panic measure that was completely futile - but they are doing what they can.

    It sickens me to see so many people willing the measures to fail simply to teach Gordon Brown a lesson. There will be an election next year in which we can all make our feelings known; in the meantime we should be putting politics aside and wishing for a speedy end to this downturn.

  • Comment number 41.

    Regulation of the financial services - necessary and overdue (thankyou Angela for standing firm)

    Free trade and open markets - good for redistribution of wealth but not so sure about those container ships.

    Year on year growth for all - not so sure , we might outgrow this planet if we don't think hard about this one.

  • Comment number 42.

    Robert,

    You point out that "the French and German governments 'have long been' (sic) critical of the practices of the City of London"

    How come it is always the practices of the City of London that get blamed?

    RBS, HBOS, Dunfermline BBS - City of Edinburgh/Land of Frugal Scots methinks.

    Bradford and Bingley, Northern Rock, Cattles - my county of Yorkshire or close by methinks.

    The only London bank in trouble went to the rescue of a Scottish-based one.

    Barclays, HSBC and Standard Chartered (the City of London banks) are all fine.

    So how is this a problem of the City of London?

    More French and German banks are in a mess than London ones. More European, 'celtic' and other banks are in need of rescue than London ones.

    The City of London has been a model of probity compared to those that criticise them.

    Let's not forget the French and German want to bring London down to size - no wonder they want more restraints.

  • Comment number 43.

    #30 "I was sceptical the G20 would go this far. So my initial response has to be to say, hats off to them!"

    Watch this space. I get the feeling that the G20 will give the cowboys at the top a good kicking in a very sensitive part of their anatomy.

    The Russians, who had just recovered from the terrible Yeltsin and post-Yeltsin years, do not enjoy having their economy mucked about by those cowboys. The Brazilians, who had just started on the road to greatness, do not enjoy having the price of their produce jerked about by speculators just so they can buy a few more lines of coke. The Chinese are not amused when their hard earned savings get devalued through no fault of their own. The Indians with 1 billion people still have about 900 million near or below the poverty line.

    None of them will look charitably at the cowboys and/or their antics !! And they are certainly not amused by posturing leaders !!

  • Comment number 44.

    It appears the wise are paying off their mortgages with their new found wealth created by the low interest rates, good move, for when the bubble is reinflated as it surely will be with all the newly created cash it will result in much higher interest rates slamming home, "sorry not our fault, cost of new regulatory system" you can just about hear the whining nasal tone already if you listen hard enough.

  • Comment number 45.

    Cards on the table, I work for RBS (for 42 years!), but am apparently absolved of blame because of being just a lowly "bank-worker", not a "banker". That's as maybe, but I've just realised that we've all been getting it wrong by blaming "bankers" anyway!
    It's been some years since a genuine banker was in charge of RBS. I suspect that goes for the other major banks too. OK, Adam Applegarth rose through the Northern Rock ranks, but,as he admitted to the Select Committee, had no formal banking qualification.
    I doubt very much that an Associate of the Chartered Institute of Bankers (or its Scottish equivalent) would have got us into this mess. You need a Chartered Accountant with an MBA to do that.
    Come back Captain Mainwaring!

  • Comment number 46.

    #31 "This is not a programme for growth it is designed to try to manage the inevitable decline in growth until people are able to come to terms with the reality."

    Why are you still buying into the fallacy that there *must* be growth ?? Japan had a decade of zero or near zero growth and they are still doing well !! Contrast that with the US and UK !!

  • Comment number 47.

    Why the surprise at the softening up toward the plan of Britain once more going with to the IMF for a bail out, all the cajoleing to have a large reserve made available was not for East Europe or Africa, someone was looking much nearer home, well done Gordon, smart move if he can get away with it,just before Cameron is elected would be my guess.

  • Comment number 48.

    #32 "The central banks will have to be less conservative than in the past, not worry too much about inflation, and keep interest rates low."

    Alternatively, they can wait for the IMF stormtroopers to march in and impose draconian financial measures to get the economy back in line !!

    We may yet see Comical Ali (aka Dennis Healey Version 2.0) go cap-in-hand (or should that be begging-bowl-in-hand) to the IMF and say, "Please, sir, can I have some more ?"

  • Comment number 49.

    karldunkerley #42

    Well said that man! Somebody else whose spotted the Northern UK for UK ruse to the banking saga and the German/French reality.

    Everything Brown does is to cover arse. Uk for Scotland/NE, Global for dire UK economy, G20 so we can 'collectively' go to the IMF again but without the stigma attached to the last labour Government....

    see #35 for my comments if you're interested......

  • Comment number 50.

    I made quite a post on Obama last night, having seen his performance and Q&A session I have to say this is a man of impeccable character. His heart is quite obviously in the right place however, I fear for him – Many elites will be quite worried by his compassion for humanity.


    My post last night, I retract on the basis that he will try his very best to make the world a better place – A very rare commodity

  • Comment number 51.

    Twice today I have heard Peston on radio say that the worry is that the regulation of the banking industry would hamper the competitiveness of the City of London.If by that he means he wants the City to have a free hand to continue 'gambling' for quick profit at everyone else's expense as it has in the past I think he has been in the Westminster village too long and is out of touch with popular opinion.People want stable responsible banking that serves at a reasonable price industry,commerce and savers,not just the get rich quick fortunate few people like Sir Fred and those who wave tenners at protesters. Who's side is he on and is he trying to formulate public opinion?

  • Comment number 52.

    Just read that Robert Peston is on five live with Max Keiser 08.00 tomorrow. I've Waited for this moment... Compare and Contrast! Prune juice for the mind.

  • Comment number 53.

    No re-instatement of Glass-Steagall.

    It's been a complete farce.

    Business as usual then...in around 5 years time.


    Oh...and of course, there had to be the mention of the New World Order to keep his masters happy.

  • Comment number 54.

    Thank goodness for the Germans and the French - that's what I say.

    But, Robert, we need more.

    We need a separation of the banks that serve the people (let's continue to call them 'banks') from the other types of banks that only serve their employees (merchant banks/hedge funds etc etc). Let's not allow these other guys to call themselves banks any more, but absolutely anything so long as it does not have the word 'bank' in it. People will get confused otherwise, and if we arrange it like this, it will be clear exactly who has an implicit state guarantee (from us taxpayers)..... just the banks, and no-one else.

    And we need to make these banks fairer in their lending.

    These tax payer guaranteed 'banks' need to be a democratic and fair economic force within the country, serving absolutely all of the people whether poor or rich, and not subsidising one group at the expense of the others (....i.e. never again subsidising the rich from the savings of the poor). To achieve this we need them to demand exactly the same levels of security on their lendings to the rich as they demand from the poor - which means personal guarantees. That's to say not just from first time house buyers to get mortgages, or small business owners to get working capital loans, but from directors of large multinationals, managers of hedge funds (.... if they are going to lend to them at all), CEO's of large conglomerate financial holding companies, owners of investment funds etc.

    Putting it simply with just one example.... if a bank lends a hedge fund money, why does it not get personal guarantees from both the hedge fund managers and its shareholders, just like it would any small business?

    We need a few of the rich managers who have burdened their companies with stunningly huge borrowings over the last ten years through pure financial engineering to have gone down with their ships and not be able to walk away scot free (.... to coin a phrase).

  • Comment number 55.

    42,

    Wind your neck in for gods sake, we are all in the same boat stop looking for someone to blame!!!

  • Comment number 56.

    #27 and #39: The IMF de-stigmatised.

    This is very significant.

    Yes, we are being prepared for the news, but it's not bad news - the IMF has been changed by the G20, expanded, up-dated, refinanced. This is not a negative thing any more, not like in the 1970's because the new IMF will be able to give big generous loans with all this new money. There won't be any of those harsh conditions, like balancing your budgets and living within your means and reigning in the public sector, designed to turn your economy around and get you back on the economic straight and narrow. No, they won't be needed - the new, relaxed IMF will be able to step in before you go bankrupt and spread the cash around so no on will realise your country is bust.

    Loads of your chums in Europe will be customers: most of the Eastern Europeans, Ireland, Spain, Italy maybe - it will be the place to be seen and meet new friends. And, as for repayments, the new IMF will be cool, saying pay back what you can afford, if and when you can afford it, because we are the new relaxed, caring IMF, the socialist IMF, just borrow according to your needs and the bountiful IMF will provide. You honestly know you deserve it, so don't stint yourselves.

    Let's put it this way - if it really has been de-stigmatised, then it won't cure the problem, but it might just provide enough cash to get Gordon to the election without going bankrupt.

  • Comment number 57.

    Who's the best? Max Keiser? Robert Peston? As Harry Hill, Robert's favourite comedian, would say.... There's only one way to find out!!!!!

  • Comment number 58.

    Is Gordon Brown going to go for a June election.

    This summit illustrates that Brown is a shrewd Political Operator ruthlessly using his position of power for self promotion.

    Another clever idea that is not appreciated was the cut in VAT.

    The cut in VAT by 2.5% was nothing to do with a fiscal stimulus, but was a clever trick to reduce inflation to allow very low interest rates.

    Consider that the CPI is now 3%. If the VAT cut was not included on say the vatable 50% of the basket we would have inflation of at least 4%, prompting the BoE to raise interest rates to meet the target of 2%.

    Brown is a lot smarter than his opponents give him credit for. He truly is a master of deviousness.


  • Comment number 59.

    Gordon may be basking in the sunlight of a false dawn.

    This Summit did not address any of the root causes of the oncoming depression. When we have Summit mk2, I only hope that he's well out of the picture by then.

  • Comment number 60.

    49,

    Oh dear, thats pathetic!

  • Comment number 61.

    The sad thing about the current situation is it developed on the back of a fantasy that credit could be extended forever. We (the world or the G20 as they represent us) are now stopping the infinite credit line. Meanwhile back in Gotham City The Joker is preventing the real market from correcting itself by preventing the banks from going bust. As a consequence we are about to enter a very long period of very sluggish conditions. The limitless easy credit is no longer available and the overpriced toxic assets are being held in limbo away from the corrected market whilst the bankers await the market value to recover sufficiently to recoup some of the losses. Outcome for the UK will be stalemate. It's going to be a tough 5 - 10 years.

  • Comment number 62.

    So not only are we bailing out these financial institutions to the tune of billions, but now it`s going to cost us MORE in interest just to borrow it back?? Boy, nothing like capitalism is there.

  • Comment number 63.

    53, Pretty much sums it up.

    If we avoid depression this time I am convinced (by the actions today), that a depression is inevitable. 5, 10, 15 years?

    Your guess is as good as mine, the great Ponzi will continue unabated.

  • Comment number 64.

    So has Brown now agreed that his failure to regulate the financial industry means that he is responsible for the state that the UK now finds itself in?

  • Comment number 65.

    Just now watching newsnight...

    I'm hugely impressed by Brazil's President Da Sliva...this guy's the real deal.

    Oh...and he doesn't have blue eyes btw!...both of them.

  • Comment number 66.


    Great. More lending from the prudent banks ?
    What it really means is that those who saved and looked after their
    finances are now seeing those that blew their money on fancy goods and holidays are now using savers money for free to carry on spending ! What was the point of everyone working hard to look after themselves and save for a rainy day ? Now the feckless just take OUR money out of the banks for free and spend as if nothing happened ? Thanks Mr Brown.
    he and they can go to h*ll and I hope everyone withdraws their savings, blows it on being imprudent for once and live off the state when its all gone.
    A total shambles from a shambles of a Government.

  • Comment number 67.

    Who says banking is not boring ,surely the plethora of freely available AAA's holes disproves that statement .

    If there is a problem its in the overproduction of the wrong size .One size fits all is a complete missreading of the market and well behind the demand curve.

    They should be subdivided into AA'S holes and A'S holes and simple holes for those who want a cheep non 666 branded product ie lesser mortals than pollytitians and bankerrs and supplied with free red lights to the mall adjusted with poor hind sight by the NHS[no hind sight]

    The sooner the blind lead the blind into the brAAAve new whirled then the sooner the ministry of holeboring can be established as the preeminent authority on holes and how to get the most out of them for the nation during the coming olymprics

    I am surprized no one has sujested this before

  • Comment number 68.

    What's all this do for improving the availability of genuine venture capital so that we can create the new companies we need to rebalance our economy?

  • Comment number 69.

    Post 45 agree with you re the non bankers making a mess of it. Reminds me of the truism that came out after the four banking idiots were paraded before the Treasury Select Committee.

    Which of the following is the odd one out?

    Sir Terry Wogan, Sir Fred Goodwin, Sir Tom McKillop, and Adam Applegarth.

    It is the Togmeister himself being the only one to hold a professional banking qualification.

    Both the banks and insurers have long got rid of qualified experienced professionals at the top with both of them being replaced by accountants and management consultants who know the price of everything and the value of nothing.

    Perhaps if we had bank directors who had sat banking exams and could add up rather than jumped up salesmen and retailers we wouldn't be in the mess we are now.

    Fifteen years ago when I passed my insurance exams, the Insurance Institute of London wrote me a nice letter and sent me a questionnaire asking what I thought they could do to encourage more people to sit professional exams. I suggested that maybe having more than one of their four senior members of council holding a professional qualification from their professional body might be a good place to start.

    You don't go to see an unqualified lawywer about legal matters and only a fool uses a non qualified accountant but it is fine and dandy for the two trades that masquerade as professions in banking and insurance.

    I lost faith in the Institute of Bankers when they removed the word banking from their professional body. Fortunately my fellow chartered Insuers and I saw off the marketeers who wanted to remove the word Insurance from the Chartered Insurance Institute.

    Rant over now,I can go to bed.

  • Comment number 70.

    #35
    So you didn't spend any time in the north during the early 80s then? I know. I was made redundant at the age of 16 up here. What they did was so bad, and so hidden from view. Go read Heseltine's biography. The Labour Party of today has no resemblence to that of the dark nights by candle light I too remember. But if you think the Tories will sort out this country, you can not be more deluded. Leopards and spots.

  • Comment number 71.

    #56
    And naturally, any sub-Saharan country who gets near any of the bucket of IMF cash will rue the day - as always. All that money is aimed at helping the more developed nations. The rest of the world will not be helped much, if at all.

  • Comment number 72.

    global problems solved by global solutions.uk problems solved by brown going for a long walk on a short pier. brownwatch 423 days.

  • Comment number 73.

    #59 "This Summit did not address any of the root causes of the oncoming depression. When we have Summit mk2, I only hope that he's well out of the picture by then."

    Not very likely as the next one is probably going to be at the end of *THIS* year and Crash Gordon will have a death grip on until the next year even if he has to use superglue !!

  • Comment number 74.

    #62 "Boy, nothing like capitalism is there."

    Absolutely !! But it wasn't capitalism that bailed the banks out !! It was Labour cronyism that did so. Under *real* capitalism, those banks would have gone bust and their bosses will have their posteriors busted as well instead of being politely put out to pasture with a nice dollop of index-linked pension !! Then again, if they were in China, they wouldn't have any need for a pension !! Pragmatic chaps, the Chinese !! Saves the state a lot of money !!

  • Comment number 75.

    Well that was a waste of time. One of the problems behind the current credit crunch, and the next one as it now just a question of time, was the fact that fractional reserve banking and insuring yourself fails viciously when a slump arrives.
    This summit has failed to address that problem.
    Govenrnments have poured our granchildrens money down the drain trying to plug just this problem and now it looks like our great-great grandchildrens money has just been offered up to the bottomless pit. I just hope someone wakes up soon.

  • Comment number 76.

    #69 "Which of the following is the odd one out?

    Sir Terry Wogan, Sir Fred Goodwin, Sir Tom McKillop, and Adam Applegarth."

    Fred the Shred !! The others don't have a massive index-linked pension on exit !!

  • Comment number 77.

    #40 we will never know if the tories would have made a bigger mess up than brown,but does it matter?i suspect they would have made a slightly less mess up. ive always voted labour but not any more, brown disgusts me.

  • Comment number 78.

    #72 "global problems solved by global solutions.uk problems solved by brown going for a long walk on a short pier. brownwatch 423 days."

    What have you got against the sea ?? Why are you trying to pollute it with more flotsam ??

  • Comment number 79.

    Robert P. Bonjour from France, PS here you need 15% and salary slips to get a bank loan. And it's term is likely to be 20 yeras max.
    Understand that banks will be more closely regulated and must hold more capital. Presume this means they will now look at proof of income and the underlying value of the property they are lending against. Why don't they just put in a guide of good old fashioned x3 income? This would stop boom & bust forever! They won't for the simple reason that property values are still too high and against these values the banks wouldn't be able to lend anything! So before you know it we'll be back to house price inflation as the banks find ways to bend the rules? Can Britain only function on boom & bust. In other words the Govt have to allow banks to lend irresponsibly because only by pumping up house prices can the UK economy get going. It's an illusion of wealth. Or will this all come to an end?
    I'm starting to see your average French 37 year old electrician with his €120,000 house , with just 5 years to finish paying his house loan (that only costs him 25% of starting his salary and now virtually nothing) as quite well off.

  • Comment number 80.

    The stock market's response to G20 is as mad as a bag of spanners.
    View it as a Snake-oil Salesmen's Convention, re-read your copy of Galbraith's The Great Crash, 1929 and sit on your money.

  • Comment number 81.

    #80 "View it as a Snake-oil Salesmen's Convention, re-read your copy of Galbraith's The Great Crash, 1929 and sit on your money."

    Sitting on your money is not only noninflatable, it's very deflatable !! More of this quantitative easing and a loaf of bread will cost 50 quid !!

    Buy gold !! Or better yet, buy gold and head for sunnier climes !!

  • Comment number 82.

    This summit has addressed the root cause of the problem in the US and UKeconomies, which are based on the need for a financial services sector and a globalised view of manufacture as opposed to the internal manufacturing base which exists in Germany and to a lesser extent France. German,French and Italian investment has largely been in Eastern Europe.

    The French, Germans and to various extents all other EU member states have jealously guarded and actively protected their industrial base, whilst we in the UK and US have invested heavily globally in developing economies. Globalisation has brought financial means to the Chinese, Russians and Indians at the expense of manufacturing industries in the US and UK. The UK historically has been the largest foreign invcester in the US even after EU entry.

    US money revived Japanese and German fortunes after WWII and was seen as instrumental to World peace, the same money has been used since the end of the cold war to promote global stability. The World Bank, EBRD and the IMF instruments of US financial policy.

    We must start to rebuild our manufacturing base if we are to succeed in years to come, otherwise the alternative is poverty in a nation unable to support a population of 60,000,000. A regulated banking system and a government which supports the promotion of industral development is an integral part of the future. The alternative solution includes the growth of the national socialism we saw after WWI.

    Like it or not we are part of a global economy, with government there to provide financial stimulation and the banks the development capital required, we need to rejoin the developing world and forget the trappings of Empire.

  • Comment number 83.

    How on earth does the IMF work? The UK has just borrowed untold billions from it and now is about to contribute billions back to it. Please Mr Peston explain it to me.

  • Comment number 84.

    Robert,

    Can we have an update on Mandy's admission that refinancing the IMF means that Britain can go and borrow some of the $40 billion put in by China?

  • Comment number 85.

    For Ishkander # 81

    Sitting on your money (leaving it in an easy access account) is probably the best thing to do at the moment.
    I certainly wouldn't touch the stock market.
    As far as gold is concerned, a few months ago I was in a London antiques market and I could hear a dealers chunnering to himself "Gold and silver - that's all they're interested in".
    When everyone thinks buying gold sovereigns is a good idea my inclination is to head for the exit.
    For people worried about the inflation that's certain to come, Index-Linked Savings Certificates are an easy option.

  • Comment number 86.

    ....."Agreements made at the G20 global financial summit provide a "route map" to economic recovery...."Mr Brown said: "By the actions we take, savings are safe, people will be able to keep their jobs, they will not lose their homes in all of our countries.............

    wise words from the G20 conference....however this was the last G20 conference in November 2008.......need i say more?


  • Comment number 87.

    I spent most of yesterday re-arranging my home office space, putting together a flat-packed desk and moving the p.c. around and stuff. I'm normally rather good at the flat-packed furniture game - but this one was a nightmare and took hours to put together.

    So, I'm now sitting in what I feel inclined to call my 'brand-new-exactly-the-same-really' home office.

    I didn't follow all the ins and outs of the G20 yesterday, but so far I kind of feel that I've awoken to a 'brand-new-exactly-the-same-really' global economy. One that perhaps is going to get a bit of fine-tuning, whereas it probably really needed a major overhaul.

    But perhaps this G20 will turn out to be the first step of a process of much better international cooperation in terms of overseeing and directing the global economy. That would be good.

  • Comment number 88.

    Folk seem a tad exercised about the qualifications held by bankers, perhaps they might consider the qualifications held by those at the G20 who seek to control the bankers.
    Just winning an election really does not suddenly imbue folk with unbounded wisdom, check out a certain mayor, the first to see a ittle snow bring the capitol to a halt.

  • Comment number 89.

    Big upside to the low interest rates, I have just been notified that my claim for pension credit has been approved, all I needed to do was "spend" a lot of the non earning money held at the Bank of no Interest.
    So a nice shiny expensive secondhand car later, which will be handed on to the youngsters, together with a long holiday booked for later with a few other expensive fripperies (which has done nothing for the balance of trade) and Gordon will hand me a nice sum every week, nice chap that Gordon, don't care what you say.

  • Comment number 90.

    Come on does anyone really think that pumping more cash into a clearly flawed economic model will see us 'turn a corner', please!

    This is the biggest practical joke (or robbery) in the history of mankind. Does anyone really know how much 'bad-debt' there is in the system, probably not. I have heard no talk of derivatives at this G20 summit or their role in chaos that has been caused. If we do not have a clear picture of the total costs then how we propose to solve the problem?

    Just sounds like they are throwing money at the problem instead of thinking things through clearly and coming up with a well researched and thoughtout plan. We are still in trouble guys and gals do not be fooled by these people.

    Obama is being advised by Geitner and would trust that money grabbing so and so with a fiver let alone the worlds economy!

    http://www.freenation.org.uk

  • Comment number 91.

    Can someoone please explain something to me? I read elsewhere on the BBC's site this morning that "A government agency, as majority shareholder, will register the public's anger at the pension awarded." and "The bank [RBS] do not have accept the shareholders demands".
    It is my understanding that the majority shareholder, has sufficient voting power to dictate policy in any way it sees fit, within the bounds of the law of course.
    If the majority shareholder does NOT have such voting authority then who does? and how is it determined? I'd appreciate it if Peston could spend some time educating us all.
    If the UK taxpayer ("The Government") aquired all that debt under terms that give it zero influence over policy and strategy, then it I would be furious if I were a UK taxpayer, because it means that no provisons can be made to alter the practices that have led to this catastrophe, and that strikes me as idiocy, could the UK Government be impotent to that degree?
    I live in the US and run a small software firm there, beleive me the % of stock one owns is THE deciding factor in setting policy, selecting/removing executive officers and so on.
    Is it different in the UK?

    Thx

  • Comment number 92.

    #2

    'All very well and good, but agreeing to shut the stable door when the hooves are clattering off up the road is not guaranteed to have the desired effect.'

    True, but one day we'll have a new horse and we need a suitably secure stable door and an appropriate way of preventing said animal from escaping through it - hopefully something more robust than a notice saying 'horses are kindly requested not to bolt'

  • Comment number 93.

    Clearly the average Brit and likely the average world citizen has no faith in their governments to help them. The fact is they are right but NOT.

    During the G20 the problems we face have been described in great detail but as many leaders pointed out, here in Britain, the press and the people just want to talk things down. The conservatives aren't helping the general mood with retoric solely focussed on winning an election.

    What we need is a return of consumer confidence, you want a factory to build cars then go out and buy one. People that suggest we should sit on our money are wrong, money needs to circulate for a economy to prosper.

    60% Of global economic growth comes from developing markets, this is where we buy our goods. We cannot develop our own manufacturing base, this era has passed us, we simply cannot compete. We have to become the brains, we have to develop new technologies, preferably green, this is where our future lies.

    Stop blaming and focus on what we as people need to do to maintain our own wealth and prosperity. Meanwhile, the signs are there for recovery, and I for one am positive that the end of 2009 and into 2010 will see further improvements.

  • Comment number 94.

    The G20 is a sham. They pretend to work together when we all know that each wants what the other has got. All the smiling and posing don't disguise some plain facts: China only cares about the Western economy because she has no internal market for her goods and needs to prop ours up for as long as it takes to drain the rest of the money from us. They might have some form of internal market by then, or maybe not. It won't really matter to us. Our regulation-ridden industries can't compete with China's and they know this. How can you possibly compete against a nation that pays its workers next to nothing when we have to pay ours minimum wages, holidays, pensions, and adhere to ever stricter environmental and safety legislation that China completely ignores? Ditto India. Our money had been leaking steadily away to the East for the last 2 decades. Now that this has slowed down China's only concern is to speed it up again. Eventually of course, there will be none left in our economy to leak anywhere. The fiancial sector won't stay in London - it will take off and go where the money is. Bang goes one of our remaining sources of jobs. Retailers who have been so busy selling us the foreign goods will follow when there is nobody left to sell to. And the public sector will have no source of income any more.

    The second point that nobody is addressing is oil. We all want energy-rich lifestyles, so we all want oil. There isn't much oil left anywhere, and what does remain is being gobbled up even faster than before. It's like seeing hungry people politely eating slices of pie, and ignoring the fact that we are approaching the last slice! Then along comes China and India and they're hungrily grabbing handfuls of pie. We're all to polite to say anything until we realise that they will soon eat all of it and there will be none left!

    We need to secure our industrial bases in the EU. We need to join the EU properly. We need our own internal manufacturing base. We need to stop relying on China, and yes - this will hurt them. We need to fight to keep our European ways of life or they will be snatched from us. We need to seek alternative methods to generate energy and we need to start doing all of this NOW and not smile and wave whilst our economy evaporates away to the East.

  • Comment number 95.

    I question the outcome of the G20 when I heard that George Soros was happy with the deal.This is the same man who was quoted a few weeks ago as saying he was having "a very good crisis".

    http://creditcrunchedoutinuk.blogspot.com/2009/04/soros-calls-g20-success.html

  • Comment number 96.

    To get the financial system going again in the US, the USD trillion package is going to be used to buy up the toxic assets. But there are concerns that the bailed out banks will up the price. From an article in Reuters:

    http://www.reuters.com/article/newsOne/idUSTRE5320OK20090403

    Goldman and Morgan Stanley have pledged to increase investments in distressed assets, the paper said.

    This week, John Mack, Morgan Stanley's chief executive, told staff the bank was considering how to become "one of the firms that can buy these assets and package them where your clients will have access to them," according to the paper.

    Spencer Bachus, the top Republican on the House financial services committee, told the paper that he would introduce legislation to stop financial institutions "gaming the system to reap taxpayer-subsidized windfalls."

    Bachus added it would mark "a new level of absurdity" if financial institutions were "colluding to swap assets at inflated prices using taxpayers' dollars," according to the paper.

    We clearly need the better regulation asked for in the G20 agreement yesterday, never mind in the next few months. Are we really better off now?

  • Comment number 97.

    It is good that Financial Power( and it seems--Political Power too) is
    more evenly distributed--as seen in the G20 consensus.Who knows---we may yet achieve a "Proper" United Nations--not manipulated by by one or two Nations just because they have most of the Wealth !! Our Prime Minister deserves a great deal of credit for pressing on--Globally--even when under
    small minded ridicule & contempt in the Newsprint ( right wing) at home.
    Well done Sir !.

  • Comment number 98.

    All this talk of 'restoring world trade' is just trade for trade's sake. Our glorious leaders don't seem to understand that you can fill the shops with all kinds of electronic gadgets from the far East, but if people don't want to buy them, then there is absolutely no point in raising the tax burden to pay for it.
    It's the international equivalent of paying half the country to dig holes and the other half to fill them in.

  • Comment number 99.

    It is very disturbing to see that GMAC are still operating.

    It was their dodgy loans that helped sink Bradford and Bingley not very long ago.

    Will GMAC be allowed to sell on their rubbish to Briutish Banks again ?
    Or will they have to take responsibility for their own lending decisions ?

  • Comment number 100.

    Headline of USD 1.1 Trillion yesterday.


    16th December 2008, Daily Telegraph: " 1 Trillion GBP Black Hole in public sector pension fund."




    What about the Derivative Time Bomb/Black Hole estimated at hundreds of trillions?



 

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