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Who'll be shot when banks misbehave?

Robert Peston | 10:25 UK time, Friday, 31 July 2009

As the Treasury select committee says, the "who-gets-fired" test is a pretty good way of ascertaining whether there are clear lines of responsibility in any organisation or group of organisations.

That said, most of our personal experience would indicate that surprisingly few institutions - in either the public sector or private sector - pass this test with flying colours.

However, as and when the system for preventing our banks and financial institutions from making a terrible mess of it all again is finally perfected, it would - as the MPs point out - be sensible to have some clarity about who is in charge.

They think that the Council for Financial Stability - the new body for co-ordinating the financial-oversight work of the Treasury, Financial Services Authority and Bank of England - is a "cosmetic change", a "rebranding" that "will achieve little by itself".

That's a knee to the tender parts of the Chancellor of the Exchequer.

On the other hand, there's no endorsement of the Tories' plan to make the Bank of England the all-powerful super-regulator-cum-central-bank.

As it happens, George Osborne, the shadow chancellor, can answer the question "who gets fired?" in his utopian regulatory world. As and when we're all covered in ordure generated by the banks again, it would be the governor of the Bank of England who would get the bullet.

Lucky old Mervyn.

However, the Treasury select committee implies that it may be a bit previous to go nap on Mr King as the potential fall guy.

It wants decisions taken first on the "macro-prudential" tools that are needed to prevent banks lending too much during an economic boom.

Only when it's clear how best to prevent a generalised lending binge (those were the days) can there be a judgement on whether it's the Bank of England or the Financial Services Authority that should be lead party-pooper, say the MPs.

In this context, it's worth pointing out that there's something of a nuanced assessment of the FSA.

The report says that the FSA has "failed dreadfully in its supervision of the banking sector" but compliments the regulator for its "speed of progress" in recruiting better staff and enhanced training.

For me, however, the most important parts of the report relate to stuff I've been boring on about here for months and months: viz, the best ways of shrinking banks individually and collectively so that they can no longer hold the taxpayer to ransom.

The big question is how to break the link between the creditworthiness of British banks and the creditworthiness of the UK as a whole - or how to reduce state-protected banks' dependence on massive, unreliable wholesale funding from abroad that turned out to have been underwritten by us, by taxpayers (though no-one ever asked us if we wanted to be the guarantors of the banks' reckless borrowing).

Like the authorities, the MPs are still feeling their way towards a long-term solution, and there's no immediate prospect of ending the destructive mutual dependence between a bloated banking sector and an over-stretched public-sector balance sheet.

That said, the MPs - like the Treasury and the FSA - believe that, in the many years to come, the banks can be taxed down to size, or incentivised to slim down and simplified by imposing substantial additional capital requirements on banks that are big or complex or engage in a good deal of speculative trading.

Against that background, if you're in a mood to fume once more at the way that individual bankers enriched themselves at taxpayers' expense, I commend to you a report published yesterday by the New York State attorney general on fat bonuses paid last year by US banks that were kept alive by public money.

The once-mighty Citigroup, for example, received hundreds of billions of dollars in investment and guarantees from American taxpayers, but still paid out $609.1m in bonuses to its top 124 bonus recipients: three individuals received bonuses of $10m or more; 13 pocketed bonuses of $8m or more; 44 individuals trousered bonuses of $5m or more.

Merrill Lynch, which was rescued by Bank of America and generated losses last year of $27.6bn, paid its top four bonus recipients in 2008 a combined $121m and the next four received $62m. The top 149 bonus recipients at Merrill received a combined $858m.

This spectacle of bankers' snouts in the trough feasting thanks to the emergency succour provided by taxpayers was also to be seen at Goldman Sachs, Morgan Stanley and JP Morgan.

And all the while a painful global recession - partly caused by bankers' excess - was depriving less fortunate citizens of their livelihoods.

We don't have an equivalent report into the bonuses paid last year by British banks.

And perhaps that's just as well.

We tend to pride ourselves at being an imperturbable, unrevolutionary nation. Not for us the defenestrations and guillotinings of continental popular uprisings.

But the vision of bankers gorging on the carcass of the economy like bloated ancien regime aristocrats might upset a few, I suppose.

Comments

Page 1 of 2

  • Comment number 1.

    Tony
    Blair

  • Comment number 2.

    This is all a smoke screen. Banks will get around the rules and people/shareholders will expect them to. The only way to stop this happening again is to break up retail from investment banks. Even then we'll let them merge again in 20 years time.
    Some good could come out of it. Bankers pay is detached from reality, 'TO KEEP THE BEST'? That arguement cannot be said with a straight face. The best just took us to the brink of destruction.
    Any one know what each bank holds in on and off balance sheet toxic debt yet? 2 years later. Shouldn't that be what you are looking into Robert?

  • Comment number 3.

    We just don't call people to account in this country.

    Compare and contrast with the USA: Jeff Skilling of Enron was gaoled for 24 years and fined $45 million, for 'deceiving investors'. OK, it's a different jusrisdiction, but to whom might that apply in the UK ? I exepct we could all come up with a few suggestions.

  • Comment number 4.

    Dear Robert,
    I am sure, you can imaging the tricoteuses with mobiles twittering about Cherie hairdo.

  • Comment number 5.

    Do I detect are certain ironic tone in this blog: I hope so.

    I think we are all getting more than a little bit tired of endless reports telling us what we already knew. It is as if to some to say is to make it happen.

    Sadly this is not the case and at some point someone is going to have to put their head above the parapet and actually DO something about the considerable risks the UK taxpayer is now facing.

    The attitude of the government seems to be that since the worst had already happened the job is done. It isn't and circumstances could very easily deteriorate further.

    This is exactly the same off-hand attitude the government took with the wars in both Iraq and Afghanistan and both of those got worse. There seems to be no desire to control, to commit and to drive policy forward from the government. They are in office but not in charge; to coin a well known phrase.

    On balance to leave things as they are for the next eight weeks is to invite disaster. This just isn't good enough. If Labour does not want to run the country then they should step aside for someone who does. It doesn't really matter who runs the country, even the Taliban might be better than this lot (yet more irony), so long as they actually run it which means making decisions for which they are prepared to take responsibility.

  • Comment number 6.

    Nothing will really change, behind the scenes it's business as usual at the tax payers expense.

    Big bonuses after the 1st quarter? Thought short termism was a no no.

    What about all the toxic debt?

    Inflated pay for the best? Best at what?

  • Comment number 7.

    "you've got to pay the best to attract the best" is an often-repeated phrase by those giving out these sums, unfortunately paying the best simply means you attract the worst kind of money-grubbing wideboys. If you paid a 'normal' rate, you'd attract people who wanted the job because of the job, paying too much only attracts those interested solely in their pay cheque.

    The vast majority of company directors work happily without ripping their staff, customers and shareholders off, and no-one notices them. that's generally because they're quietly getting on with doing their jobs effectively.

    Unlike these bankers.

  • Comment number 8.

  • Comment number 9.

    Spot on Robert. Sadly as I suspect you know, there'll be little positive change to brag about when all this mess is finally over. There'll still be the pigs and they'll still be getting fat.

  • Comment number 10.

    Excellent stuff from Robert Peston.
    "...can no longer hold the taxpayer to ransom",
    "...taxed down to size",
    "...individual bankers enriched themselves at taxpayers' expense",
    "...depriving less fortunate citizens of their livelihoods",
    "...This spectacle of bankers snouts in the trough feasting thanks to the emergency succour provided by taxpayers",
    There are 50 million people out here who agree with every word you are saying Robert.
    A "spectacle" it certainly is.....and quite nauseating.

  • Comment number 11.



    There was an American economics professor interviewed on World Service last night who was pretty 'vocal' about US banks and accountability. One of the best I've heard in a long time. He's no shrinking violet, that's for sure, but very entertaining, and voiced what many people think, which he backed up with facts. His name was Peter Moreechi or Marechi , Professor of Economics, at Maryland University.

  • Comment number 12.

    The injustice of greedy senior bankers continuing to indulge themselves at the expense of the taxpayer is bad enough. But what really annoys the man in the street is the current imperious, arrogant, uncaring attitude of banks and building societies dealing with everday issues.
    Overdraft limits cut with little or no warning - small business loans almost impossible to get and even when you do get them the interest is punitive - mortgage renewals with outrageous arrangement fees and rates way above base, justified by property being deliberately undervalued by bank surveyors. And all these things being carried out by banks we've bailed out. Caledonian Comment

  • Comment number 13.

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

  • Comment number 14.

    The wheels of the government reforms of banking regulation have departed thanks to a Select Committee that is not exactly a toy of the opposition. It is the near religious devotion to the interests of the City that will be responsible for Labour's ultimate and probably crushing defeat next spring.

    Construction regulation regimes from the old boy City network is ultimate futile when its members profit so outlandishly from membership. What is needed is the grit in the oyster and people that are willing to frighten the horses combined with the government taking direct responsibility for macro fiscal tools governing interest rates mortgage rule regulations on credit creation and how it must be paid back. Outsourcing monetary, economic and fiscal policy is an abdication of government policy on a stupendous scale.

  • Comment number 15.

    Interesting that the Tories are suggesting that they will do what I've been suggesting for ages (my Mervyn Must Go [MMG] campaign ) This suggests that either getting rid of the Governor is a popular idea or that the Tories have few ideas and are just picking up things from blogs!

    The absolute failure of professional and highly paid economists to see what many outsiders warned about in the development of the bubble and the inevitable crunch is still amazing. How can economics education have been so bad? How can we have put up with these charlatans for so long?

    By the way, where were the 'Tory Economists' educated? and do they share the same expensive and wrong economics education as those they want to fire? I suspect the answer to my questions at the same universities and , yes!

    So in reality this 'fire someone' stance is about saving their own necks, by blaming someone else! Should they not take on board the biblical injunction of those without sin should cast the first stone!

    Genuine reform is needed, perhaps revolutionary reform, if we are to get out of this gigantic recession. No political party can grasp the situation, indeed no political party can afford to grasp the enormity of the situation, lest The Sun (aka Rupert Murdoch) and/or the people takes against them!

    We are destined to muddle through with the Nation's wealth being stolen by the bankers. The bankers will take the remainder of the widow's mite so that they can continue to live in luxury - this is morally and ethically wrong and our politics and economics MUST take this on-board!

  • Comment number 16.

    Who gets fired when the banks go wrong?
    3 million hardworking people accross the country,
    the odd token scapegoat,
    possibly a few people who has already taken enough out of the system to live in luxury for the rest of their lives.
    Who gets fired is no control in a culture of gamblers.
    You are right, the emphasis should be on not being able to have the power to bring the uk and world economy to its knees in the first place, not who is responsible for not abusing it.
    As i've said before we litterally could not bail out the banks again, a sacrificial sacking will be of very little consequence

  • Comment number 17.

    I left a banana country to live in the UK mainly because I was fed up with the media highlighting corruption cases at the top with nothing following up. It is very sad.

  • Comment number 18.

    Who'll be shot when the banks misbehave?

    The taxpayer, the customer and the shareholders - never the bankers.

    Twas ever thus and based on current reforms forever twill be.

    Still I am surprised Robert is not moderated for using banks and shot in the same sentence,
    Seemed against the rules when I used bankers, wall and revolution in the same sentence once upon a time.

  • Comment number 19.

    The financial sector are just parasites living off the backs of hard working honest people in the real economy...and the City has Westminster in it's pocket.

    End of

  • Comment number 20.

    Post 15 - I agree - we need new blood now, and not from the 'current establishment' or the failed educational establishments that got us here either. e.g. take a look at this to http://poweromics.blogspot.com/2009/07/big-questions-too-hot-to-handle.html to see what 'alternative economists' are starting to say on this subject too.

  • Comment number 21.

    More smoke & mirrors, unlike the industry I've been in for the last decade I've had to represent numerous colleagues who were subject to draconian disciplinary rules for various sanctions, some of whom got fired! But as life has taught me its many rules for us, and none for them aka bankers, politicians and the rich!

  • Comment number 22.

    "As the Treasury select committee says, the "who-gets-fired" test is a pretty good way of ascertaining whether there are clear lines of responsibility in any organisation or group of organisations."

    Ah but when 'getting fired' is inconsequential to you a) getting another job and b) your lifestyle and payoff / early retirement, then who will give a monkeys?

    I'll take the responsibility on and by the time they find out I have no idea what I'm doing then I'll take my sacking (along with wages and severance) and retire - such is the magnitude of salary for these positions.

    This is exactly what others have done in the past - where is the 'moral hazard' in that?

    It also does not account for scapegoating or finding the 'ultimate responsibility' - i.e. Was it the FSA staff, or the prime minister at fault? - and does that mean we sack the prime minister?

    When a house falls down, who knows if it was the builder or the architect at fault?

    If I do not carry out my managers instructions, is it my fault for being obstructive - or my managers for not 'managing me properly'.

    These arguments are completely interpretive making the whole issue of 'who gets sacked' completely irrelevant.

    Still - if the people are fooled by knowing which head will roll when things go bad - then maybe it will achieve what is desired.

    I do not see how it will fix the problems there were with the Tri-partitie confusion.

    The true architects of the financial crisis are all still 'alive and well' and continue to operate in their positions unhindered (or new ones that have been created for them).

    If you notice, Sir Fred Goodwin was not really too fussed about 'getting sacked' from his job and it certainly didn't make him reflect on his irresponsibility. It wasn't until he felt the hate of the nation - through a few individuals who broke his windows and voiced their anger - did he realise what he had done - and consequently stopped using the 'Sir' appointed to him.

    Social justice works on the rich - legal justice doesn't.

  • Comment number 23.

    You see it doesnt matter how many tens of millions of dollars are missing at the end of a major project, no one ever goes to jail. There is always the speech in Parliament duly reported in the papers of course castigating the previous government for all manner of "recklessness and wasteage bordering on corruption" but no jail.

  • Comment number 24.

    The primary way captailism is meant to work is not who gets fired but who goes bust - this way the customers are the ones control what happens. But when we have too big to fail we have to fall back on who gets fired - which is quite inadaquate as a control mechanism. If it's too big to fail then it needs to be made smaller so it can fail. At the moment capatalism is said to be failing but people are pointing at companies that resemble mini-communist states when they say that. Monopoly and communism are essentially the same idea.

  • Comment number 25.

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

  • Comment number 26.

    Send for the Uzi and 'Matic instead
    Boom Bye Bye

  • Comment number 27.

    I can't be bothered to read any more posts on the banks. The events of the last year have shown me just how corrupt the whole system is. so perhaps a rant.

    I was aghast on learning 2 things this week. A friends daughter left Oxford last year and informed me student loans are charged compund interest with the interest applied from whence the loan is taken out. This means interest is charged while students are still at university and still charged when they are out of work. Being as any morgage is subject to compound interest, plus the taxes this generation must pay to keep the bankers in their profligate lifestyles I really wonder when they younger generation are ever going to get out of debt.

    She also told me most of her university peers where going into banking - STARTING at £80,0000 annual salary. Is anyone worth £80,000 starting salary?

    We have polititians openly abusing the people. Their view is more and more 'ride the storm and the people will forget'. The taxpayer is paying for everything and those in lofty positions are just living off the sweat of future generations. All this rubbish 'We need to pay massive salaries to attract the best' is just hogwash for the banks to continue stealing. It's like much of the official secrets act is to protect the system rather than the people, and, certainly many years ago, the GMC (aledgedly in my view) was to protect the the medical profession rather than the patient. Self regulation breeds corruption.

    I was never one for nationalisation but now I believe all banks everywhere that are propped up by taxpayers should be nationalised. Taxpayers money is being used to keep system well oiled for the benefit of a few. The system is totally corrupt.

  • Comment number 28.

    We tend to pride ourselves at being an imperturbable, unrevolutionary nation. Not for us the defenestrations and guillotinings of continental popular uprisings.
    And why is this so true?
    The "I'm all right jack attitude?"
    MPs expenses all ready forgotten, blame the bankers.
    Fact is everyone who thought they where "rich" based on rising house prices, fuelled by home ownership frenzy and low interest rates, spent money on imported goods, "home improvements" fuelled by TV programmes, and holidays. How many of you saved money? How many of you thought you could have your cake and eat it?
    How many real jobs (that actually add value and create wealth in agriculture, mining, and manufacturing) have been lost to be replaced by service economy jobs? How many of you thought that owning a portfolio of property could get you rich from rents paid from the public purse?
    Its just easy to pass the blame, truth is your greedy self interest is also to blame.
    What we need is investment in new industry, creating real jobs that add VALUE to the economy. Supporting failing companies is just tying up resources, and the expansion of public spending is just putting off the inevitable...
    ps I've rented for the last 15 years its not wasted money, its a living expense just like my food bills.
    A house is a home not an artefact for investment, and if you think things will return to where they where based on demand for home ownership in a few years consider this- House still haven't normalised being held high artificially and future demand is going to curtailed by the inability to get that cheap mortgage.

  • Comment number 29.

    Perhaps bonuses should be paid using the Credit Suisse model, making bankers eat their own ordure. Apparently part of their current bonus payout is in the very same toxic waste they created.
    See http://www.portfolio.com/views/columns/wall-street/2009/04/22/Banks-Buy-Toxic-Assets

  • Comment number 30.

    24. GlenisDevereux

    "Monopoly and communism are essentially the same idea."

    I don't know how you work that one out - when a Monopoly is a market position which is then used to maximise extreme profit within a supposedly fair system. Communism does have state monopolies but not for profitable gain.

    It's the age old argument, one I still have received no answer to (possibly because you cannot answer a contradiction).
    If the trend of Capitalism is for continual growth of companies to such size that they will become 'too big to fail' - as history has amply demonstrated - then how does this fit in with Capitalism needing the 'stick' of allowing businesses to fail?

    Look at any corporations goals and they will include 'gaining market share' - which leads to their eventual immortality.

    I can guarantee that if I made anyone here Prime minister (or chancellor) that they would NOT have let Northern Rock crash and taken the risk that the entire financial system could collapse.

    Your idea of making them smaller so they can fail is a nice idea but does essentially become a totalitarian Economic regime because one person, or group of people are deciding what is too big. The market cannot do this because it's driven by different criteria (wholesale failure not being included in it's assessment) - once again, as has been proven recently.

  • Comment number 31.

    27. At 1:35pm on 31 Jul 2009, DenseSingularity wrote

    "Is anyone worth 80,000 starting salary?"

    No - this amount is in fact a reflection of the expected amount that can be squeezed out of you and I (the working men and women).

    It's like the 1 pound scam. If you take 30 million pounds off one person they will surely notice it - however if you take 1 pound off 30 million people then they won't notice it (or be bothered to chase you for it).

    This is how financial markets work - it's all about the numbers.

    The fact that you receive £1 less a month in your pay packet is not noticeable - but to the financial investor the sum is millions across the board.

    Your point about students is very valid - they are the most militant amongst us and from meeting with a student yesterday I know that they feel completely screwed over, the student loans and fees costing them more, the prospect of no job anyway - and the cutting of courses thanks to Universities getting involved in the private sector (which went horribly wrong).

    Students are always the first to start - Tianamen square was a good example.

    ...and as for the GMC - I couldn't agree more - Doctors judging Doctors....mmmmmmmmm

  • Comment number 32.

    The Council for Financial Stability? Does that mean we now have a Tetrapartite system of regulation? When will it end?

  • Comment number 33.

    The main requirement is to ensure that money supply grows in line with the economy and population growth, new business and services.

    Government should create new money, not private banks as at present who lend new money into existence. This could be done on a monthly basis by the government deciding how much new money is needed. The problem is that banks can create new money out of nothing, in effect legal forgery, so causing inflation, boom and bust, and devaluing existing money. They do this by lending out the same original deposit, for example £100, over and over again as this money is deposited in each new bank. This power needs to be taken away from them. They can still lend, but no more than the overall value of deposits with them. Banks also need to be prevented from gambling with people's savings and pensions so trust in savings and the stock market is restored. There are other issues regarding buying and selling of shares and commodities which need to be looked at. My father Bill Davies has designed an elegant solution to money creation. This uses a system of electronically registering all existing deposits with the Bank of England so money supply can increase in a controlled manner, and a deposit can be lent out by the banking system once only. Electronic registration of all money is easy in this age of computer technology. Interest rates are useless at controlling inflation or deflation because they are ineffective, punish the wrong people and take too long. I hoped the treasury select commitee would look at expertise from other areas besides bankers and economists who are very much responsible for getting us into this mess in the first place. The world economy and people cannot be swindled by the City and Wall Street again. The pagan economics of the past needs to be rejected, because we need a more sustainable future as oil and gas supplies start to decline. We can stay addicted to ever rising asset prices as we have done for the past 40 years, but all this does is increase inflation and taxation, give a false illusion of wealth, and create a greater debt burden for our children and grandchildren.

    I conclude that the politicians and mainstream media do not wish to change the status quo either because they do not understand how money is created, or they do not wish to challenge the powerful financial sector, or in some cases they are well rewarded by the aforesaid financial sector for serving their interests rather than the interests of society. I suspect the answer is a mix of all of these.

    PS - Those who say money is destroyed when a loan is re-paid, then this money is lent out again by the banking system because they need it to work for them. The banks are caught between being told to have higher reserves but also told to lend more to keep the housing bubble inflated.

  • Comment number 34.


    UK government has shown it is incapable of regulating the city. Same old people are still in charge same old bonus culture. The problem is that the City is geographically so close to the centre of government and the people are so interconnected it has a disproportionate lobbying ability compared to all other sectors of the economy.

    To get this thoroughly cleaned out we need to have numerate people who understand business but have a profound distaste for bankers take control for a few years. The EU may be the least worst option. At least Brussels is far enough away that there is no inbreeding between UK bankers and EU regulators.

  • Comment number 35.

    Nobody of course

  • Comment number 36.

    "But the vision of bankers gorging on the carcass of the economy like bloated ancien regime aristocrats might upset a few, I suppose."

    Nicely phrased Robert! Yes it upsets me a lot, but as we are fortunate enough to live in a democracy we can have our revolution via the ballot box. It is imperative to eject from power this utterly morally bankrupt Labour government with a humiliating landslide defeat and also not to allow the Tories or Liberals to get anywhere near the levers of power, as all are entirely beholden to their friends in big business and the City.

    We need to elect the Greens with a huge majority so that as a nation and as global citizens we can undergo a period of reassessment and reflection about what our priorities and needs really are, and so that we can do this without folding to the overwhelming pressure from big business for 'business as usual'.

    I am not a naive tree-hugger nor am I anti-business, it's just that we can only have a revolution of ideas if we at least temporarily discard all the old structures and precepts upon which our economy runs - effectively standing back and looking at the world through different eyes for a while. There may be a role for a reconstructed Labour/Tory/Liberal administration in future, but not before they, like all of us, have undergone that process of re-evaluating everything we currently take for granted.

  • Comment number 37.

    But the vision of bankers gorging on the carcass of the economy like bloated ancien regime aristocrats might upset a few, I suppose.

    >>>>>

    Robert,

    You're making me laugh - we now expect all of this from our banksters and politicians - we're now accustomed to all of this elitist trough snouting - theft, fraud and misappropriation of money etc. etc. only applies to the working and middle classes - everyone else is blameless after 12 years of the new so called 'fairer society' created by Goondog Trillionaire Brownites - New Labour.

  • Comment number 38.

    well its obvious realy those at fault including brown, darling and mandy should have their heads on the block ready becouse it will fall as their fault above and beyond any one elses.

  • Comment number 39.

    Dear Robert,

    Lawful punishment (threat of prison sentence and/or being heavily fined and loosing of bonuses in case of proven deception or serious misuse of positions of power for personal enrichment) may convince a few 'leaders' to be less reckless and greedy. More important are real, enforced changes to the structure and size of banks and hedge funds, plus who actually sits on the committees and councils that are supposed to regulate and supervise them. Critical and informed outsiders who would gain no major financial advantage by being on these committees would be crucial to break the current 'old boys network' in the City where everyone benefits from not 'rocking the boat'. Change is essential and long overdue. Is there any UK political party that has the political will and stamina to enforce serious change? Sadly, presently I can't see any of the UK political parties being willing and capable of, to use your own words, "ending the destructive mutual dependence between a bloated banking sector and an over-stretched public-sector balance sheet."

    You can find more arguments for the urgent need for change in the financial world here:
    http://globalinsights.wordpress.com/

  • Comment number 40.

    Also can anyone enlighten me as to what's occuring at the moment. My wife is telling me 'See! It's not as bad as you predicted!' House prices picking up, stock marking hurdling into boom. Anyway I keep saying look anyone buying a house now at 0.5 pecent better be careful for when rates rise. But then BANKS and Building Societies are charging around 5 percent. So maybe they won't be so badly hit. So low inetest rates are just another giveaway to the banks - buy cheap sell high.

    But I ask why is the stock market rising so much? I read bigger companies are issuing bonds to raise money they can't get from the BANKS.

    I unfortuanely cannot see things getting any better in the longer term. But why is this little BOOM going on now?

  • Comment number 41.

    'We tend to pride ourselves at being an imperturbable, unrevolutionary nation. Not for us the defenestrations and guillotinings of continental popular uprisings.'

    This is because, with all its failings, the UK has a reputation for fair dealing amongst its citizenry. It is the 'social insulation', as it were, that maintains stability.

    Remove that insulation, wear it down, rub it off, and only Heaven knows what may happen.

  • Comment number 42.

    when i was at school one of the first things about investing money was that pyramid investments were a con trick and sooner or later they will colapse with the only winner being the one at the top and not the mugs and greedy ones at the bottom and if i remember it happened not so long ago in smethick with a so called saving scheme

  • Comment number 43.

    But I ask why is the stock market rising so much? I read bigger companies are issuing bonds to raise money they can't get from the BANKS.

    Sorry that should have gone over to Stephanie Flanders. Robert is only interested in BANKS. What do/did you read to your kids at night Robert?

    There was a Crooked Banker
    Three Blind Bankers
    Peter Peter The Banker Eater
    This is the Bank That Jack Built
    Sing a Song of 10 million bonus
    This Little Piggy Had a Very Big Bank

  • Comment number 44.

    Message 40

    The little boom which you remark upon is not a boom. It is more an exale of breath.

    Advise your other half that this little boom is the consequence of the government accepting a fiscal deficit in the region of GBP 175 billion for this year, creating through QE additional funds in the region of GBP 125 billion and driving down base rate to a half percent thus devastating the savings of millions..

    With all that bread thrown at the problem a small recovery is very likely for a while. The stress is on `for a while'.

    Nobody has any idea how this is going to pan out but one thing I know is that we haven't got another GBP 300 billion to chuck at the banks just to create a little boom.

    The absence of any Plan A let alone a Plan B is very disturbing.

  • Comment number 45.

    "Who'll be shot when banks misbehave?"

    Does it really matter and effective?

    100% recovery of loses is far more important.

  • Comment number 46.

    The Bankers realise quite rightly that there is an unholy, unspoken alliance drawn up between banks, government and electors.
    It is called feel good factor.
    The Bankers will always ride the tidal wave brought about by politicians trying to get elected.
    Electors do not mind whether the red party or the blue party franchise get elected.
    They just want to feel good.
    Politicians want to provide it.
    The Bankers meanwhile just sit back, watching it all happen in the certain knowledge that they will be alright.
    No matter how they misbehave.

  • Comment number 47.

    22. writingsonthewall wrote:
    "As the Treasury select committee :

    Was it the FSA staff, or the prime minister at fault? - and does that mean we sack the prime minister?



    +++++++++++++++++++


    YES and YES!


    Sorry, I went a bit Alexander Curzon. No offence, AC


  • Comment number 48.

    Surely the "who-gets-fired" test is not yet relevant.

    Globally, every single person on the planet has invested around $1700 in the banking sector. This investment was not entirely voluntary. Governments simply dipped into our future pockets and drew out a bail out package. The BBC has documented the trillions of bail out funding elsewhere. There has been little mention that this is not a gift from the Public to the Banks. This is an investment.

    Like any institutional investor, we all have a right to know what return we can expect and when. Then the "who-gets-fired" test comes into play. The Select Committee should be using the "who-gets-paid" test.

    On historical behaviours one might expect to get around a 20-30% return on a $1700 loan. More if the lender was a bad risk. The banks - regardless of styling themselves Retail, Investment, Merchant or Big Strong Box - have merged their businesses to such an extent that they are almost indistinguishable. So, every person on the planet can expect to get paid. The Bankers do not seem to have mentioned when that will happen.

    "Who-gets-fired" should come into play the next time Bankers pay dividends or bonuses ahead of their most important investors. The argument that they have formalised their relationship with their shareholders who must therefore take precedence is shaky at best. Without the bail out funding there would be no "Who-gets-payed" question to be answered. Their new lenders of greatest importance are not shareholders but everybody.

    Having sacrificed millions of jobs and thousands of businesses to keep the banks afloat with this investment, the general public should be looking to the banks - not the government - to answer the simple question: when do we get paid?

    Then it is possible to discuss who gets fired on the basis that the $1700 per head investment was not managed by the best of the best.

  • Comment number 49.

    "they can no longer hold the taxpayer to ransom."

    Pigs will fly.

    As events then and now show, was not holding the country to ransom always one of the main objective?

  • Comment number 50.

    #40

    What is happening is the reassertion of normal service now the initial panic and doom and gloom from the crash and recession is abating. You can only be pessimistic for so long and not spend or buy things you actually need (and can afford, at some point you really do need a new pair of shoes, clothes or replace the car etc.) but decide not to just in case you lose job or think if you wait then they will be cheaper. At some point you have to buy or decide it will never be cheaper within the time you are prepared to wait than it is now.

    It gradually dawns on people that in fact they are not actually losing their job (not everyone is unlucky - we may have 2million unemployed and rising but still have, I think close to 27million employed) and so they begin to revert to 'normal' patterns of spending. Hence sales begin to pick-up from artifically depressed levels. The traders and service people who rely on variable spending from employed people for their business see it improve, they are able to spend a bit more and so it goes on.
    This in turn lifts confidence from companies who's profits are more than was expected or less bad than expected - and the market picks up as the price relative to the possible dividends now makes the stocks look cheap so is a good time to buy. IN a contraction when investors etc looked to minimise loses they sell the stocks which makes them cheaper and no reflection on the underlying strength of the company, the investors effectively over sell due to irrational fear - eventually these people who can chose see that the stocks look cheap compared to anywhere else they can stash the loot and begin to buy - market rises.
    Same with houses, the closer to the bottom you get the more people are tempted back into the market, it is not going to get any cheaper so people buy - the activity causes prices to increase a little.

    As the downside of a contraction is usually an over reaction i.e. activity contracts more than is strictly neccesary (companies are well known to fire more people during recessions than they needed to only to have rehire later) at the end of a recession you get an upswing (from deferred spending) which is where Comical Ali's sudden leap in GDP came from, followed by a return to more gentle growth.
    This is why the flexible labour laws in the UK are a double edged sword, easy out in bad times but companies are quicker generally to rehire afterwards. I think is was BMW in Oxford that sacked all their contract workers at he start of the recession (hundereds of people) but have recently rehired several hundered as the market picks up.

    The risk is that something comes along to dampen demand just as it is coming back i.e. tax increase, large spending cuts, massive inflationary spike (in e.g. oil, gas prices etc.)which give rise to expectations of reduced spending power or job loss - especially if this is in a sector of the economy which is not affected by the original bombshell since you then get a different group cutting their spending before the others have fully recovered their spending or ability to spend.
    Then you get a double dip recession, the recession just ends and then starts again only the second down can be worse than the first. The new people are frightened and the previously affected people become frightened again (even if they are at no more risk of losing their job than the last time) and both retrench at the same time. There is still a risk of this happening.

    In summary, the recession is bottoming out but recovery is still not assured but there is reason to be a little more optomistic.
    My own company is seeing 'normal' growth return to sales though of course the base is now much lower than the artifical high point at the end of the boom, looks much more like 2004. Growth I doubt will be a high as during the boom years so recovery is going to be a long drawn out affair (if it isn't then we are going straight back to big boom and cataclysmic bust to follow)

    Optimism is justified but cautious optimism.

  • Comment number 51.

    Hard On The Rootsman
    I say this living is rough
    I say this time is tough
    Can't get no transportation
    To get your produce to town
    You'll have to travel in an open truck back
    You'll be hitching a ride
    You've got no money to hide

  • Comment number 52.

    Heads of Government
    They just don't care

  • Comment number 53.

    Mr John McFall has been on a steep learning curve has he not Mr Peston ?

    He surely will become Sir John McRisen if Dr Cameroons is elected.

    The most transformed Parliamentarian of the last two years, perhaps ? Even his 'team' has indulged in mildly stated yet trenchant criticism of Govt and Treasury in its Report....as well as having a bit of a 'go' at the FSA.....

    And yet the Gang of Three (Brown, Balls, O'Donnell) Rule OK. Have they not listened to your colleague Paul Mason ?

    A reply would be much appreciated, Sir.

    Have a happy weekend.

  • Comment number 54.

    "or how to reduce state-protected banks' dependence on massive, unreliable wholesale funding from abroad that turned out to have been underwritten by us, by taxpayers (though no-one ever asked us if we wanted to be the guarantors of the banks' reckless borrowing)"

    And...to repeat the substantive message again, wby are only British taxpayers bailing out these banks given that these Banks' shareholders are in fact international? How many other governments throughout the world are shareholders in these banks? The FTSE and DOW JONES are not national stock-markets, are they, or am I misunderstanding something here?

  • Comment number 55.

    #10.
    Agreed. And those 50 million folk should move any cash away from the big banks - put it somewhere more cooperating with the public.

    If the bankers believe they are are doing the right thing, then they, the bankers wouldn't mind paying for the dole checks out of their own inflated pockets.....

  • Comment number 56.

    A lot of mistakes have been made. We bale them out and allow them to continue as though they are above it all. It would have been cheaper to let Northern Rock got to the wall and then bale out all the ordinary investors.

    I believe that this might have caused the bankers to focus their attention onto the wishes of the taxpayer --- if they wanted any bale out, that is!

    I read a comment somewhere that such an idea would have caused overseas investors to take their money out of the UK. You know, I have doubts if that would actually have cost us a penny! We are currently down the tubes to such a tune that my grandchildren will still be paying in the bill in twenty years from now.

    Meantime, the scum are still taking obscene salaries and bonuses, compared to the typical taxpayer whose money was used to bale them out! The Americans have jailed a few. Is that working? Not too well, it has to be said. Do I have a solution? Yup! Bring back public hangings and dangle a few off Tower Bridge! Again, the major resultant benefit will be the serious focussing of attention onto the wishes of the majority in just how the banking industry operates.

    But, who am I to have any opinion? My name is David Cameron, but I am not allowed to call myself that here because it breaks the rules and I might be impersonating myself ! So I am numbered like a Belsen inmate!

  • Comment number 57.

    47. Toldyouitwould

    Ah but that would require a change in law....and that is never going to happen because the law is there to protect those who rule from those who they rule over.

    The answer to Roberts question 'who should get shot' assumes a single culpable person.
    However I would suggest the scatteer-gun approach and wildly fire into the mass of 'responsible people' knowing that although there may be some innocents who get fired, at least we get the ones who are at fault.

    Failing that, we prepare for dust off and nuke the site from orbit - it's the ONLY way to be sure....

  • Comment number 58.

    48. At 3:16pm on 31 Jul 2009, huberthuzzah wrote:

    "This investment was not entirely voluntary"

    Now that is up for understatement of the decade!

  • Comment number 59.

    "Who gets fired?"

    You only get fired if you don't see the bullet coming. So the person who should get fired ducks - "I'm resigning to seek new challenges/spend more time with my family." The bullet(s) keep coming and hit thousands of others who have done nothing wrong.

    It shows the negative thinking that is going on and it is hardly an enticing job description. The question is, who is it who says yes or no after all the discussions or votes - who has the casting vote? Who has the courage to make a decison and makes sure that decisons are actually made? You can't define a job by saying what will happen if you get it wrong. You define it by saying what you want done. If the reporting of the Select Committee is accurate then I think they can be attacked for lack of clarity.

  • Comment number 60.

    #40

    You can listen to all the optimism above - or you can prepare for the worst and be pleasantly surprised if the worst does not happen.

    This graph beautifully explains where the mini-boom comes from. It's for the housing market but it applies to all asset bubbles.

    http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php

    We are currently moving towards 'return to normal'

  • Comment number 61.

    It seems clear that the majority of people are angry about the situation.

    The solution does not lie in tinkering with the norm, or fiddling around the edges - the solution has to be to dump the system which forced public money to be used to bail out the banks.

    The solution is simply to get off your backside and overturn both the political and economic system. I can't tell you what the result will be - but it's no good moaning about it unless you are prepared to do so.

    Every other solution is simply time wasting.

    New regulation will not resolve it - hanging bankers from bridges won't resolve it - changing the Government from red to blue won't solve it.

    There was a reference made above to the fact that people in this country don't really guillotine and revolt etc. I woudl suggest that's because everytime we have been faced with (relative) hardship - a saviour has been found in the form of a new market to exploit.

    Unfortunately all those markets were exploited long ago - there are no other options. Unless someone has found a way of producing without expenditure (like Bretton woods - fiat currency) then we will now suffer the hardship we have been putting off for over 200 years.

    I believe that the people of this country will rise up and overturn this system - however I don't think it will matter as the US will be going first judging by the anger over there.

    Have a nice weekend everybody - you can't rely on Governments or Economic systems, but at least you can rely on the weath.....oh sorry.

  • Comment number 62.

    All of this after-the-crash soul-searching and navel-gazing is distracting from the seriously good news that we are now turning the corner and that is in no small part due to the sensible actions of the government, the FSA and finally, thank heavens, the bankers themselves.
    Whatever happens WE MUST NOT LET THE TORIES GET BACK IN..... AND DO TO BANKING WHAT THEY DID TO MANUFACTURING....
    Tories are deadly for British Businesses .
    THE DOOM AND GLOOM BRIGADE (who moan about Labour) WILL NOT KNOW WHAT HITS THEM WHEN THE TORY VANDALS WRECK OUR ECONOMY THE WAY THEY DID BEFORE IN THE 80'S AND 90'S.
    Anyone want to see their mortgage triple?....It will happen under GO-GO.
    VOTE TORY AND PAY FOR IT!

  • Comment number 63.

    Will bankers continue to gorge, a la Ancien Regime aristos? They will if politicians and Select Committees just keep on doing what they do, namely talking round the subject, rather than acting like the leaders we expect them to be, come off the wretched fence and actually implement some sensible legislation.

    As many have commented bankers took us to the brink of destruction. Most that did have walked away, often with a large cash pay-off. Bankers had their own self-regulation which turned out to be no more than hollow rules to ensure their own enrichment. (A bit like MP's expenses, (I know, don't go there!))

    Of course we'd prefer to have a highly profitable financial sector, something that an overly-regulated sector might struggle to produce. But we don't want profits at ANY old expense. Those arguing against stiffer regulation just can't seem to accept this or seem to believe that watered down regulation will produce a better "balance." No, it won't!!

    Politicians see more regulation in terms of less tax receipts, (putting their own lifestyles at risk?) Tough, cut spending! The Civil Service headcount would be a place to start - along with their "luxurious" pensions. Expensive nuclear weapons next. If they were ever to be used against us, our country wouldn't be inhabitable for centuries anyway. Besides, we haven't really got abundant natural resources, what with N.Sea oil on the wane. So we only seem to be a target because we're friends with the Amercans. Then cut a few more Civil Servants! Finally, windfall tax the banks until the additional borrowing, drawn to try and limit the extent of the recession, is repaid.

  • Comment number 64.

    After Charles I, there was a different attitude about exactly where a leader may wish to place themselves in disputes and wrong-doings. There is a lesson about consequences that has been forgotten in the modern age. It is not only the bankers but there is also culpability by those elected officials who had the responsibility to monitor the banking and financial services, but politicians avoid accountability like pirates in shallow waters. When heads of anything are put into the position of judging and punishing the heads of other things they tend to reflect on the tables being turned, on their own mis-deeds and therefore promote well funded retirements. The "Club" is the "Club" and their rules profess that retirement with millions for bankers is equal to prison time for the mate who robs a small shop. You have to be one of them to understand this logic. The basic position these days is that some created collision of events has caused all this when everyone knows it was all about uncontrolled greed, but we can not tell the truth in public, it will only depress them you know. We are trying to lift up the economy and who wants to some long trials showing how bankers, economist and politicians all lined their pockets with what can only be called unethical behavior, because the politicians made sure that laws weren't put in place that would have made the unethical become illegal.
    Greatest betrayal of public trust in modern history and the greatest theft of public wealth and it will all go unpunished and no one will be held accountable. It is the corporate structure that runs the world and owns the governments and they care not what the public thinks.

  • Comment number 65.

    The Govt should have called the bluff and as shareholders restricted the RBS and Lloyds TSB...top jobs (top ten or so in the bank) and colluded with Sir Barrack Obama so he did the same with their busted bankrupts in the colonies...CitiGroup, Merrill, Bank of America etc so they produced identical pay scales and simply called the bluff of the rest of them---- if merely stupid rates of pay aren't enough, then clear off---

    Either the few non-supported banks in the world can soak up all these people who simply MUST get the 'obscenely stupid' £xx million 'going rate' and pay them it---- or they wouldn't (and there's an argument that NO bank is unsupported of course as HSBC downwards wouldn't have survived without the various mind boggling levels of tax payer support).

    But the Bank shareholders led by Brown and Obama didn't do this---- lack of nerve...?who knows? But whatever the reason they have missed their chance---

    Whether the previously unrevolutionary British will merely slumber on?...probably... Will the historically revolutionary and extremely litigious New World ex-colonists slumber on??...probably not.

  • Comment number 66.

    What proportion of Lloyds-TSB/HBOS, RBS, Barclays etc shares are owned by overseas investors? Is anyone reading this blog able to answer this?

  • Comment number 67.

    @ 64 ghostofsichuan

    I was just thinking of Charles I when I read your post!

    The beheading of Charles I was the moment when the concept of the divine right of kings was finally rejected. If we learn anything from history it's that people are always being lied to and conned by their so-called "betters".

    For hundreds of years the English endured the Wars of the Roses under the mistaken belief that kings and queens had an unquestioned right to muster armies and tax the nation in endless dynastic feuds. Henry Tudor was the all-time monster who surpassed in arrogance all the others, but he inadvertently sowed the seed that destroyed the notion of divine right when he challenged the Pope. Charles I was the one who paid the price by having his head chopped off by Cromwell.

    (Sorry about this potted history, but it's important to see the connections here.)

    Soon after this the Bank of England was created (1694) and guess what? The divine rights of bankers was born. The same people who gained from the previous con trick about the divinity of royalty invented the system we currently suffer under. It's all for exactly the same purpose, to keep wealth in the hands of a tiny few "nobles" and "aristocrats". A fractional reserve banking system ensures that we only see smoke and mirrors and think we're getting richer when in fact we're just getting into more and more debt.

    "Like the authorities, the MPs are still feeling their way towards a long-term solution..."

    Yes, Robert, feeling their way is a good description. After a massive bail out of banks that has been justified with weak arguments and dodgy platitudes, the Treasury Select Committee are currently casting around for some vague notion of who should be responsible for the divine right of banks to steal our money next time.

    What we need is another system. Until we get one, everyone should reduce their reliance on banks.

  • Comment number 68.

    starry-tigger (#67) "What we need is another system."

    Perhaps this appeal by the masses for another system has been carefully contrived?

  • Comment number 69.

    "We tend to pride ourselves at being an imperturbable, unrevolutionary nation. Not for us the defenestrations and guillotinings of continental popular uprisings".

    I wouldn't "bank" on it. The above exemplar of Charles I gives the lie to that (levelers anyone?). The British peoples were amongst the first to teach their monarchs a lesson. You are also forgetting the Irish revolution (they were a part of the U.K. once) and most of the American revolutionaries were of British descent and influenced by Tom Paine. Discontent & protest also put the wind up old Queen Vic at one point, forcing a compromise in the late C18th, not to mention the earlier furore under William IV and the widening of the Franchise. Then of course we had the suffragettes. People should not take social order and passivity for granted. The rights we also take for granted today were hard won.

  • Comment number 70.

    It is not the bankers that misbehave most badly at the moment. So for now I'd like much better to discuss who should be shot when taxpayers money is injected into financial bubbles that are meant to be eradicated and should never have come into existence. in the first place. Their existence is not the banker's fault alone either.

  • Comment number 71.


    Post 61 - I agree with much of what you've said, particularly the following ...

    "The solution does not lie in tinkering with the norm, or fiddling around the edges - the solution has to be to dump the system which forced public money to be used to bail out the banks ... The solution is simply to get off your backside and overturn both the political and economic system. I can't tell you what the result will be - but it's no good moaning about it unless you are prepared to do so ... Every other solution is simply time wasting ... New regulation will not resolve it - hanging bankers from bridges won't resolve it - changing the Government from red to blue won't solve it ..."

    IMHO we also need a 'new values system' - one that rewards 'value creation' & 'wealth creation', instead of 'wealth manipulation'. The latter of these often destroys 'value' (and 'overall wealth' too) and hence this should be made far more difficult to do and arguably be taxed far more too ... but therein lies a problem, the people in 'power' will fight tooth and nail to maintain their grip on 'power' so they can continue to 'profit from it', and from 'wealth manipulation' (e.g. bankers, politicians) - supported by laws introduced to help create this environment and to maintain it into the future too (nb as post 64 pointed out above all these laws fail to challenge, in any effective way, all the unethical practices being carried out by themselves).

    The internet will change everything eventually, including 'power', 'politics' and 'economics' ... and the real 'battle of the future' is a 'battle of values' that 'transcends nations' (take a look at http://poweromics.blogspot.com/2009/06/for-evil-to-flourish.html for instance) which will continue to accelerate as times get harder, understanding grows and apathy reduces ... (which is arguably what 'current leaders' are real getting worried about ... hence all the knee-jerk reactions we currently see to try and delay this for a few years more).

    IMHO there are interesting times ahead ... history tells us change will happen, but with the arrival of the internet change is likely to happen in very different ways ...

  • Comment number 72.

    My experience in the military taught me that the first thing one does when going into a new organisation, or when looking at a failing one is to ask, "Who's in charge?". If the answer doesn't involve one name, then the organisation is in trouble.

    Partly for this reason, the chain of command in most if not all military organisations tends to be clear. If not, lives are at stake.

    In politics, it seems to me that the opposite holds true. The less clear it is who's in charge, the more the politicians like it. That way they keep their jobs, salaries, expenses and pensions.

    No such luck in the military.

  • Comment number 73.

    good evening Pestonites; LONG TIME NO SEE, but I am glad to see many of the same names and that you are all still talking about exactly the same topic as 3, 6 and 9 months ago..........

    anyway, yes, the antics of the Merrill Lynch seniors in particular makes my life-long career in piracy appear pathetic

    I doff my tricorn hat to you, the Merrill bull; RIP

    The US occasionally imprisons a white collar criminal or banker but for each one charged and sent down, 1,000 walk free (or more to the point, relax at their Caymans retreats)

    The Chinese, run by engineers not professional layabouts, would have a lot of these people executed if the same happened in China; now I don't support the death penalty (walking the plank or a bit of keel-hauling never hurt a strong swimmer) but on this, they may have a point; and the 21st-century already belongs to them

    As for the UK, the only answer to all this, as you know, is to REGULATE, REGULATE AND REGULATE SOME MORE; break up the banks, develop a manufacturing strategy etc etc

    fat chance of that of course, as modern govts refuse to do their traditional job, and when the Tories get in they will probably be even friendlier to the bankers and the City than NewLabour, if that's possible

    anyway must put out to sea immediately on the good ship NUMPTY to try and hijack something; the Merrill Lynch record has incentivised me anew

  • Comment number 74.

    #47 "YES and YES!

    Sorry, I went a bit Alexander Curzon. No offence, AC"


    I'm afraid AC has been banned from the BBC blogosphere in perpetuity for winding up Nick R. Not that he's accepting his fate: I understand legal moves are afoot.

    Back on topic, I came across a couple of good jokes today:

    1) "I had a cheque returned yesterday marked "Insufficient Funds". I immediately phoned my bank asking was it them or me?


    Comments by Moraymint and the Somali Pirate put me in mind of the following one:

    "A man flying in a hot air balloon realised he was lost. Reducing altitude, he spotted a man on the ground and descended to shouting range.

    "Excuse me," he shouted. "Can you help me? I promised my friend I would meet him a half hour ago, but I don't know where I am."

    The man below responded: "Yes. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees North Latitude, and between 58 and 60 degrees West Longitude."

    "You must be an engineer," responded the balloonist.

    "I am," the man replied. "How did you know?"

    "Well," said the balloonist, "everything you have told me is technically correct, but I have no idea what to make of your information, and the fact is I am still lost."

    Whereupon the man on the ground responded, "You must be a manager."

    "That I am" replied the balloonist, "but how did you know?"

    "Well," said the man, "you don't know where you are, or where you're going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were before we met, but now it is somehow my fault."



    Toodlepip mateys - don't forget to have a life this weekend!

  • Comment number 75.

    Those who are really responsible will not be fired. Instead they will hang on in Government as long as possible!



  • Comment number 76.

    Robert, I doubt if anyone will even get a court martial let alone be shot

    However here surely is a real opportunity while uncle Nick is on holiday along with his MP.s to re-establish the economy at the top of the agenda over the intriguing, fascinating and captivating but pointless activities of politics

    Perhaps there is a chance for us to die laughing, which is preferable to dying of laughter if you see what I mean, over to you to save us.

  • Comment number 77.

    Re #30 writingsonthewall wrote: "Monopoly and communism are essentially the same idea." - I don't know how you work that one out - Well in both you have one supplier who is in total power and the consumers and workers - the individual have no power. So its pretty obvious no competition : Communism is just a mega-monopoly covering all industries and every aspect of private life.
    writingsonthewall then asks : If the trend of Capitalism is for continual growth of companies to such size that they will become 'too big to fail' - as history has amply demonstrated - then how does this fit in with Capitalism needing the 'stick' of allowing businesses to fail? This is where the State has a legitimate role and has inadequately provided for this by providing the Monopolies and Mergers commission.
    I like your line that : Your idea of making them smaller so they can fail is a nice idea but does essentially become a totalitarian Economic regime because one person, or group of people are deciding what is too big. I suggest it is a decent argument against this though is that the M&M commission work on quite objective criteria Is this one company able to effect the price by artificial restriction of supply ?. From what I have heard, this is pretty much the only criteria they practically look at, an extension of this to if this company failed would the tax payer be obliged to bail it out on pain of total national economic collapse might be a reasonable addition to their objective operating criteria.

  • Comment number 78.

    The Banks are being run on three principles, "ILLUSION, COLLUSION AND DELUSION", till we break this cycle of lying to the public, the government and the regulators and getting away with it, this behaviour will not stop. More short term regulations are required, also those who use their MBA's and Law Degrees to deceive people should pay by being put into the same prison systems that a uneducated person gets for stealing with a gun. White collar crimes are hardly ever touched because they are backed by a battery of lawyers, the law enforcement personnel do not have the ability, capability, sophistication or knowledge to pursue these cases and win convictions. Most of the law enforcement people just put the poor in jail for making the poor judgements, it is easy, statistically well taken and who cares for the under-represented, their government lawyer is only too eager to sign a lesser sentence for a quick guilty plea.

  • Comment number 79.

    If a boat is swamped by a large wave and is "Bailed out" then presuming no further incursions and that the boat was essentially sound, though mis-handled, it will begin to rise in the water if it has not actually sunk.

    The Banks are spoken of as being "Bailed out" in a fitting analogy.

    They are being rescued by our money and the only indications I have seen of the effect of the resulting boyancy is a list of "Costs" to the tax payer.

    If these huge financial institutions are being "Rescued" and are supposedly about to perform in a more soundly managed manner, then I would assume that they will, in time, become of enormous value on a simple P/E basis.

    I assume that even I could calculate the cost to the tax payer in interest paid on the sums invested, and that as a "Going concern" the entity's involved can calculate from their actual and forcast loan books and other revenue streams what their earnings are likely to be and how soon their revaluation will occur.

    The cost of money to the us as an AAA sovereign borrower must be low, and the margins available on sound, secured lending are high, so the future should look rosey.

    We, the taxpayer "should" be looking to book vast profits when we divest ourselves of these "investments".

    UNLESS........

    That is the only question Robert Peston should be answering. It is not a difficult one. Either the Banks are still a poisoned chalice, hiding known and inescapable "Toxics" or......WHAT?

    Either we succeed as investors and the profit reduces national debt and taxes or the system is truly broken, for if massive Banks with lessened competition and supposedly shrewder investment strategies can not provide such gains, then where is the wealth and absolutely necessary growth to perpetuate the system to come from?

    Essentially; I want to know "Why are Peston etc still talking of "Costs" and "Losses" re our guarantees, capital injections etc?"

    If these institutions were so burdened by toxic debt that they can NEVER earn out the losses then why have we not been told that we have assumed such losses without any hope of recovering our funds, as the Banks problems were not just a Cash Flow crisis, but an actual and absolute failure. They were actually Bust, not just short of funds in the face of losses, but in a mathematical situation that meant their position was irrevocable and we have just assumed their losses in order that they continue to exist.

    Are we going to make a profit or are we doomed to taking an already agreed loss?

  • Comment number 80.

    PUBLIC DUMMIES (PACIFIERS)

    'Shooting' heads of sinecures will never achieve anything other than a public relations function. Discussing such things is also just public relations. All we're being roped into these days is public relations, pseudo-consultation.

  • Comment number 81.

    It seems to me, more so now, Mr and Mrs Moneymen are blissfully living in a crime free environment. It must be crime free because there are no police. Mr and Mrs Customer however live in constant fear of the "small print ambush" or, if they wish to try it, the "mattress attack".

    It is good to see "redistribution of wealth" alive and well even if it is skewed in the wrong direction; at least we can have the last laugh if we die penniless from exposure.

  • Comment number 82.

    Current news seems to contain one rather delicious irony on the subject of money. A certain Mr McKinnon is facing extradition and a lifetime in gaol for causing damages estimated at five hundred thousand pounds, and yet our "criminal" bankers face exactly what? Fat payoffs and pensions wasn't it?

    You cannot get fairer than that, can you?

  • Comment number 83.


    Mr Gordon Brown should have been first to face the firing squad. He peddled the false hopes based on reckless lending and a false economy built on debt. After him, next in line would be Applegarth and then a systamatic purging of the rest.
    Perhaps that might happen in a good democratic country but not one run by one leader and master of all.
    Even now he proposes more of what got us into this mess !

    The past 12 years have bankrupted Britain, Financially, Morally and Politically.

  • Comment number 84.

    The Tax Payers and Savers again Robert?

  • Comment number 85.


    I agree with the point made in post 83 "....perhaps that might happen in a good democratic country but not one run by one leader and master of all" ...

    ... we have a 'sham of a democracy'*, which arguably highlights yet another of the all time 'greatest spins' we see .... and if you want this to change you might want to look and sign this http://petitions.number10.gov.uk/peopledemocracy ... if you are person who actually bothers to exercise your right to request (and to protest) that is ...

    Following the expenses scandal we were all promised a new era of democracy, but they've all gone on holiday and hope we've all forgotten about this now ... so it's up to us all to make sure they know we haven't** ... and make it clear that it's one of the things the next election should also be about (as well as 'values' they uphold and the future of our economy/nation too***) ...


    * NB We only get a say/vote once every five years in a general election, and even then only a small minority of votes actually make a difference as to which of the two main parties gets in Government ... the only votes that effectively 'count' are fringe votes in marginal constituencies (2-3% of the total) - and that's why the two main parties keep changing the voting boundaries too! 21st Century democracy? ... and yet we often hear politicians quote our 'democracy' as an example for others to follow!

    ** "All that is required for evil to flourish in the world is for good men to do nothing" [Edmund Burke 1729-1797]

    *** take a look at http://poweromics.blogspot.com/2009/08/wealth-creation-vs-wealth-manipulation.html for instance

  • Comment number 86.

    The old scam was banks would always win while everyone loses, but who scammed the scamsters was it gangsters or something like an abstract theory knocking about about secret bankster groups having closed meetings or some such

  • Comment number 87.

    #79

    I like this entry a lot because it does ask the right questions; it also has a go at providing the right answers too.

    The banking system only had one reason to go after "toxic" lending and that was to make money to hide what? At one time banks relied on investments to provide the money available for loans; mortgages were considered "safe" provided the value of the property always exceeded the value of the loan (i.e. the property market was stable between supply and demand).

    Looking back at the past three decades of social engineering there has been a huge change in "how to make money" philosophy. Some of the change was no doubt driven by Thatcher's "momentous" decision to sell Council rental property to tenants. Some safety was introduced via the discount schemes. But this drove a lot of very ordinary people to realise that property ownership had its own benefits so far as "raising" credit was concerned. So the shift of thinking was, if unexpected in terms of volume, hardly surprising. Had we been replacing Council housing stock then property stability may have been maintained. But we were not because many were buying to rent realising that rental income would always provide a steady way to pay off the mortgage.

    The change of thinking added to a less than "honest" change in beliefs in business (anything is allowed as long as you can get away with it) lead businesses to over estimated assets (all the usual suspects here) driven primarily by the lenders themselves. So the system, as #79 succinctly puts it, was "bust" a long while ago, but it has taken a while for the reality to reach the surface.

    So why were the EXISTING banks so important to survival of world economics? The truth is they weren't. But governments are not into taking risks are they? We could have had a lot of NEW banks and NEW blood, driven not by the desire to fleece customers any which way but to provide a real alternative to the old failures.

    The irony is that by propping up an ailing and out of date system politicians may have exposed us to even more danger. Crashing the whole system would have been a painful experience for many but at least some would have ended up behind bars where they belonged. Making new foundations out of egg shells sounds like a far less reassuring way of building a "new" capitalism.

  • Comment number 88.

    "...bankers gorging on the carcass of the economy like bloated ancien regime aristocrats",
    "...bankers gorging on the carcass of the economy like bloated ancien regime aristocrats".
    If you work in the City, read Robert Pestons' words, then take a long hard look at your industry.
    Any government that ignores this situation must be completely corrupt.
    We all want a successful financial industry, but we can do without bankers becoming even more "bloated" than they already are.

  • Comment number 89.

  • Comment number 90.

    In my last job I campaigned that not only should the sales staff be bonused on this years orders, they should also own a part of the sales profit in the following delivery of the order. This was because so often they forced a risky order to be taken as a "strategic" order for further business that they subsequently didn't deliver. Maybe bankers should therefore not only be bonused upon their business taken today, perhaps they should also own part of the "toxic business" going forward.

    Unfortunately I don't think we would ever get this to stick as banking is obviously well up in the class system of this country and endures by bankrolling their political alliances, after all their are probably more Lords and Sirs in banking than any other form of business. So the political classes would not want to bite the hand that feeds them.

  • Comment number 91.

    As Woodie Guthrie Wrote in his song about Pretty Boy Floyd "Some will rob you with a six-gun, and some with a fountain pen" at the end of the day they are still thieves so should inhabit the same jails.

  • Comment number 92.

    So when such groups meet (see post 89), do they discuss 'wealth creation' or 'wealth manipulation' ? ... take a look at post 85 if you're not sure, and note the natural collusion between politicians, the bankers and the wealthy that the Times article points to too * ...IMHO they are more likely to be discussing how they can continue to manipulate wealth (at the expense, and growing poverty, of all others), and what they can do to stop this situation from crumbling (e.g. as knowledge grows and apathy reduces) ...

    * nuLab quickly fell into this, and it's interesting to note more recent references made about Mandleson and Ed Balls in the Times article too. Thanks for the link.

  • Comment number 93.

    Who out there is going to launch The Moral Bank. We can then all re-invest and effect the change ourselves.

    Similarly if we all brought British goods we have the power ourselves to make Britain Great again.

  • Comment number 94.

    Hmm, which so called 'Industry' will be next to Collapse ?

    There is one obvious one.

    Out evolved by the Internet (free news), falling Sales and dwindling advertising revenue ???

    Invest in Newspapers anyone ?

    No thank you !

  • Comment number 95.

    Post 94 - Traditional media are part of the same game (including the BBC) ... and they will resist change to this heavily too (using all the 'power' they have) ... however, the 'genie is out the bottle' (i.e. knowledge/the internet), and it will be difficult to put back too ... [though I am sure the groups referred to in 89/92 are working on how to put the genie back] ... e.g. take the ones that masquerade as 'terror laws', but have really been brought in to reduce 'freedom of speech', 'democracy' and 'civil liberties' for instance ...

    PS I like the idea in post 93 too, and support many more of comments here too (to many to mention)!

  • Comment number 96.

    To any bonus-hoarding upper-echelon banker out there still masochistic enough to be reading these blogs, I implore you all to do the honorable thing whilst there is still time. A hot bath and a razor. A samurai sword and one swift movement. Even the quick dash under a speeding train. All acceptable alternatives to the current sense of guilt any normal human being would be feeling.

  • Comment number 97.

    Dear Peston,
    very good article from you.While, i was writing a lengthy comment on this topic,power went off suddenly.
    whatever you said is true
    for whom to blame?either existing system,existing audit mechanism,feel good factor,careless attitude by us are all debateable.
    Both Capitalism and Communism have failed to deliver proper solutions to banks,mutual funds,finncial irregularties and for constant economic growth.
    These bad episodes are lessons to Government-policy makers,bookish economists,and to dreamers.
    We have to create a New Economic theory for permanent in our day todays growth in Finance,production,supply,distribution,savings for us and to our offsprings.
    good week end to you,your family,your friends,and to BBC Team.

  • Comment number 98.

    Nothing will change in the failling financial and commercial systems until the notion of entitlement is structured in law. A contract should include an employee's salary and pension entitlement (no bonuses, expenses entitlements, etc.) agreed by those empowered to oversee the entitlement (i.e. in the case of directors the shareholders, with the exclusion of vested interest in that directors would only be able to hold non-voting shares IN ANY COMPANY thus avoiding old pals act support for outrageous payment schemes). Managers' contracts likewise should been overseen by directors who should then be held responsible financially for the faillings of their line management, and so on down the employment structure.

    In this way responsibility for irresponsibility is clearly set, rogue traders would be more stringently monitored by line managers who would suffer the consequences for their non-constraint on out-of-control operatives. Accountants should likewise be held financially responsible for their far ranging scams, tax avoidance is tax evasion, financial structures should be etched in stone, tax should be paid by every institution and individual making money. Clearly debt should not be accounted for as wealth, as clearly demonstrated by this so called credit crunch wealth is only wealth once it is received. Maybe the credit crunch should be more appropriately renamed the accounting fraud whereby non-existent wealth was used to pay coniving individuals huge somes of existing cash to further inflate inflationary mechanism such as the housing market.

    Professional responsibility should be made to be a reality rather than a euphuism for makes me wealthy at your expense, those in charge should suffer proportionate lose to the outcomes of their faillings, Sir Fred should be bancrupted rather than hiding in luxury in some distant tax haven, the Greens and Murdochs of this world should not be allowed to take vast amounts of money out of the countries that produce their wealth into tax havens around the world, where that pirated wealth is used to reinforce corrupt regimes that perpetuate the purloining of others entitlement. How many hospitals, schools, colleges, universities, appropriate equipment for serving military personnel have been lost through the moving of our money, as a result of our financial activities, out of this country as a result of the initial activity of the new Conservative Chancellor of the Exchequre back in the early 1980s in removing the limit on the export of money out of this country.

    A quick and painful solution for these thieving individuals would be to nationalise, without compensation, all institutions that are known to either rely on taxpayer subsidy, banks, railways and other transport systems, or those who have in place methods for avoiding paying the tax that the majority of the population are compelled to pay, in what ever form it is due.

    No perks, no entitlements, no expenses, no bonuses, just clear and monitored salary reflective of "getting the best", but in that the responsibilty for claiming the status given, i.e. failure means shared pain rather than quick escape with even more wealth.

  • Comment number 99.


    Why don't we start summarizing with some generic statements here - and see if someone in the media catches on to them - here's the first couple ...

    "Banks don't create wealth, they just 'manipulate' wealth" (and 'profit' from wealth)

    "Bankers rarely create value, they mostly destroy value"

    Feel free to add more too, and if the media takes no notice, perhaps we should join them up into a song and wait for a famous rapper to do it instead!

  • Comment number 100.

    When I was in Moscow a couple of years ago, I went to a small shopping mall on the top floor of which, among all the usal retailers, was a shop selling - almost exclusively - Kalashnikovs. They were not terribly expensive, either.

    My life, like most, is interspersed with missed opportunities. As a law abiding citizen in excess of 60 years, it is odd that the image of that shop window is still so vivid and, right beside it, the faces of certain members of the banking community (and hundreds more blank spaces). And innocent seals are culled!

 

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