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Will Vince Cable become chairman of the banks?

Robert Peston | 12:44 UK time, Thursday, 20 May 2010

The coalition's programme for government will not please all businesses and business people.

cable_coalition226.jpgThere is a surprising amount of detailed policy to promote equality, for example, which will give the willies to some of the more traditional Tory-supporting corporate grandees.

So, for example, there's a pledge to promote gender equality on the boards of listed companies.

That said, there's conspicuous gender inequality on the board of UK plc, otherwise known as the cabinet. And if the target is to match the balance between the sexes in Mr Cameron's team - well, most big companies won't be sweating.

As for the banks in which taxpayers own huge stakes, Royal Bank of Scotland and Lloyds, they may be somewhat alarmed by the remarks this morning of Vince Cable, the business secretary, that they should become instruments of the state.

In particular, he wants to rip up their agreements with the previous government to provide a specific amount of gross lending to business and to replace those agreements with new targets for net lending.

This may sound a technical issue of little importance, but it matters.

As I've pointed out here on many occasions, any bank can take money out of the economy while increasing gross lending, so long as repayment of existing loans exceeds new lending.

It's therefore much more stretching and demanding for a bank to be obliged to increase net lending.

Banks however would argue that it would be bonkers to oblige them to increase net lending, because they would be under pressure to provide credit to those who don't deserve it.

And they would also make the point that what got the UK into its current economic mess is that banks lent far too much to households, businesses and other banks: forcing them to repeat the mistake would seem a little weird.

To which Vince Cable would reply that he only wants to make sure that small and medium-size businesses can tap into the credit they need at this delicate stage of the economic recovery - and that there's plenty of evidence that these foot-soldiers in the battle to rebuild the economy are being starved of vital financial provisions.

It's a finely balanced argument. And the government may yet opt for providing a more generous scheme of taxpayer-backed bank loans for small businesses, in preference to coercing Lloyds and Royal Bank to do more.

What I would point out, however, is that if Mr Cable were to opt for new net lending targets for the two semi-nationalised banks, the argument could become a fraught legal one.

Because Lloyds's and Royal Banks' gross-lending agreements are written into lengthy binding contracts relating to support they've received from taxpayers - and it may not be quick, cheap or easy to re-write these agreements.

Also, as I've pointed out in respect of a previous scrap between banks and ministers over bonus payments, the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was uncommercial and was contrary to the interests of all their shareholders.

Mr Cable could find himself having to chair the banks' boards as the price of bossing them around.

So is there no joy in the government's shared agenda for the private sector? Well, there is a commitment to create the "most competitive corporate tax regime in the G20" - though no detail on how that will be judged - and a vow that any new proposed regulations will only be introduced if first other bits of red tape of greater bothersome effect are first abolished.

Also, there looked to me to be a reason for non-doms to crack open the bubbly.

Because the Tories' election manifesto had pledged that these (mainly) well-heeled individuals who live and work here, but pay tax (if at all) elsewhere, would pay a new flat-rate levy - and the Lib Dems had pledged to phase out the tax advantages for non-doms altogether.

So what does the coalition's to-do list say? Only that the government "will review the taxation of non-domiciled individuals".

Hmmm.

My sources in the coalition insist that this review should strike fear into the heart of the tax-avoiding non-dom community, that (really, truly) it is not an example of a review being a substituted for action.

Time will tell. But if past reviews of non-doms' taxation is anything to go by, the plutocrats don't need to be booking their flights to Switzerland quite yet.

Comments

  • Comment number 1.

    Robert - "the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was uncommercial and was contrary to the interests of all their shareholders."

    Surely, you meant: "interests of all their paypackets and bonuses"?

  • Comment number 2.

    Mr Cable has in the past come across rather well, at least he did to me anyway.

    However I suspect that there is a slight flaw in his plan, namely:

    There still an awful lot of debts secured against property that are going to go bad in the near future. There are still too many promises to pay that are going to need writing off.

    120 months of bubble inflating and only 32 months of bubble deflating.

    Now I refer you to the ‘Bubble Ratio’.
    What you may ask is the bubble ratio?

    It is in fact a commonly held belief that it takes twice as long to inflate a bubble as it does to deflate it (assuming you don’t pop it of course).

    Now given a ‘Bubble Ratio’ of 2:1 we have another 28 months to go to achieve a controlled deflation.

    So providing Mr Cable is prepared to wait another 28 months, it sounds like a good idea.

  • Comment number 3.

    I wonder what this expression Robert has used really means?

    "...because they would be under pressure to provide credit to those who don't deserve it."

    Perhaps we need to re-define our evaluation of credit-worthiness. Alternatively, we could carry on with a system that controls and forces most people in to a life of debt servitude. Money, psychologically, became worthless when one man (Mervyn King) created 200bn pounds out of thin air.

    If only we could all do that!

  • Comment number 4.

    These are long term aspirations but nothing can be finalised until we see the results of the emergency budget.

    Even then they are more likely to be influenced by events.

    The situation in Europe and elsewhere could be fast moving so any government will only be measured by how fast they can move with them.

  • Comment number 5.

    "That said, there's conspicuous gender inequality on the board of UK plc, otherwise known as the cabinet. And if the target is to match the balance between the sexes in Mr Cameron's team - well, most big companies won't be sweating."

    Of course there is inequality within the cabinet (which I pointed out recently) It's the Tory man's right to believe he is superior to all other life forms - didn't anyone realise? Why do you think Cameron spends so much time 'making up his face' if it's not in pursuit of some kind of exterior superiority.

    Our prime minister should be wearing a sack cloth and rags to reflect the state of the nation. Not smart suits which cost more than a months average wage.

    It seems the policies of the coalition are clear.

    1) If it is a Tory menifesto pledge - then keep it
    2) If it's a common pledge - then keep it
    3) If it's a LIb DEm only pledge - then simply 'review it' some time in the future.

    So much for the Lib Dem's creating a 'sea change' in politics - it seems that they are truly the 'little guys' now.

    How do you reconcile the Lib Dem manifesto pledge of "fairer tax system" with a refusal to tackle the Non-Dom issue?

    Just like all the others folks - tell you what you want to hear before the election - revert to type once in power.

    Haven't you lot worked it out yet?

    As for Vince - well if he doesn't keep his neck in he will either be expelled - or he will break the coallition.

    These rich boys don't like having to pay their way you know - and they will manipulate Government in any way possible to avoid it.

  • Comment number 6.

    "And they would also make the point that what got the UK into its current economic mess is that banks lent far too much to households, businesses and other banks: forcing them to repeat the mistake would seem a little weird."

    However this was the cause of this recession - and the previous one, and the one before that etc.

    Diminishing profit fools - don't you get it yet? Banks don't deliberately destroy the Economy - they are autonomously obliged to by having to 'find new markets'. The problem is that once all the credit worthy people are all 'debted up' - bar an alien invasion - what markets are left except to expand to 'less credit worthy' applicants.

    The monetary system is holding the human race back from developing. Politicans like the monetary system because it's "low maintenance" - however it cannot cope with the requirements we have of it today.

    What Mr Cable doesn't realise (and he should do considering he's suposed to be an Economist) is that the reason for lending getting so high is because it (debt) has been used to 'plug the gap' left by diminishing profit margins.

    You're a business, your takings start to fall as you reach your 'efficient equilibrium' - so what do most businesses do?

    They borrow, to expand, increasing the sales, reducing the margins, but keeping profits up for a while.

    The problem is when all businesses are doing this it creates 2 familiar problems. First of all the 'too big to fail' concept as giant monolithic corporations hoover up all the demand on wafer thin margins where the slightest drop in sales or unexpected Economic event is catastrophic (see the airlines) and secondly this creates businesses which are now fully loaded up on debt, competing for the ever diminshing margin.

    This is basic stuff folks, it's no complicated Economic theory and it's been established since Adam Smith first noticed it (although there are arguments about the cause of this diminishing profit)

    I thought Vince Cable knew this - but I guess many people forget a lot of things when they get into power.

  • Comment number 7.

    Vince could start by forcing banks to stop ripping us off with their punitive interest charges and rip-off arrangement fees. Caledonian Comment

  • Comment number 8.

    Sounds good to me.
    As for "Banks however would argue that it would be bonkers to oblige them to increase net lending, because they would be under pressure to provide credit to those who don't deserve it."
    "Deserve". Hilarious!

  • Comment number 9.

    " the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was un commercial and was contrary to the interests of all their shareholders."


    Let them resign ,good riddance there are any number of people available to take their places, first requirement is that they can count...

    If they dont like it, tough, the whole system is in such a mess that ordinary people have no chance of ever understanding the web that these people have woven, in fact i dont think many of THEM do....but doing nothing is not an option. It appears to me the more they squeal the more chance there is of success of a measure.So lets hear them squeal a little louder....

  • Comment number 10.

    "the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was uncommercial and was contrary to the interests of all their shareholders."


    .. or they could just find a way via clever accounting to make them look like a good investment... maybe wrap them all up together and sell them on to each other.... just get a couple of banks to bid against each other for them and bob's your uncle they're an asset!

    They could call them Collateralized Thingy-ma-Jigs (I don't think that one has been used yet)!

  • Comment number 11.

    I have been stewing for a while now looking at many of the comments re bank lending over the past weeks.

    Yes I am a retired banker but I left many years ago when banking was still relationship banking and not credit scoring/selling.

    When I was lending we used the tried and trusted mnemonic CCC PARTS

    ie
    Character - who are you lending to
    Capability - just how good are they at what they do
    Capital - what is the customer stake: the bank is not the entrepeneur and the customer needs to put in a fair share (it seems to me that this is often the sticking point where the customer thinks they have a right for others to take the risk when they can take the profit).

    Purpose - is it legal and does it fit within the criteria we wish to support
    Amount - reasonable/too much or even is it enough. How does it relate to customer input?
    Repayment - how, where from and over how long
    Security - is it necessary and what is available/offered. Again a sticking point for many
    Terms - what rate/fees etc are appropriate.

    Banks are not charities and need to have some confidence that they will get their money back - by repayment or ultimately by security if necessary. In some respects seeming not to have applied these basic principles and lending too much got us into this mess and now prudence seems to be required to get us out of it.

    Yes we all want sound businesses but there needs to be a good client stake bearing the risk.

  • Comment number 12.

    GREAT! he would also make an excellent Chancellor of the E too !

  • Comment number 13.

    Are we going to have situations where customers refused credit send a letter to Mr Cable who will personally review the decision of the bank? Or will it go to a civil service department set up to second guess bank managers? If the loan eventually goes wrong, for whatever reason, will the government, i.e., you and me, pick up the bill?

  • Comment number 14.

    These comments confirm my view that the one weak link in the Coalition is Vince Cable, as time has passed I am certain that he is as badly informed as Gordon Brown was on matters Financial. Let us hope that his views are tempered by those of rational thought on the cabinet.

  • Comment number 15.

    Will Vince Cable become Chairman of the Banks?
    Cable is an advocate of separating retail & investment banking. Although I agree with him, some banking people are going to be very upset e.g. Royal Bank of Scotland and Barclays.
    What does Vince plan to do about George; it’s my understanding that the new Chancellor of the Exchequer, George Osborne, is heading an independent commission which will examine the case for splitting the banks. The commission is expected to take up to one year; so I guess Vince is on hold – maybe not from the position of Chairman of the Banks itself, but for George’s Commission results.
    A precursor report: "Future of Banking Commission" (conducted by a consumer group) will be made available to the UK Parliament at the end of this month, but it’s highly unlikely that any definitive action would be taken from this consumer report.
    Apparently, Cable asked FSA Chairmanm Lord Turner in a separate talk (March 18th) whether there was a conflict between asking banks to build up capital to counter economic cycles & trying to get banks to lend. Wow, I can't believe that Vince Cable would need to ask this question. Of course there is conflict. Building up capital and bank-lending is conflicted by differentiating “good” capital from “bad” capital (i.e. capital poisoned by toxic debt).
    Angela Knight, Chief Executive of the trade body British Bankers’ Association, said: “We accept changes need to be made in some areas and we are looking forward to engaging with the commission. It is important that any changes to UK rules are coordinated with European and other international regulators.” Right on! And to tell you the truth, I'm having trouble seeing coordination within The Coalition Government (capital T and capital C) far less with Europe as a whole.
    Gender equality is a goal, but you can’t go promoting females who are unprepared for the job, especially not in the finance industry; so, the idea should be to mentor females, moving up-the-line those who demonstrate ability. That said, as you have said: there's conspicuous gender inequality in the Coalition cabinet.
    As for Vince Cable providing a specific amount of gross lending to business & replacing agreements with new targets for net lending, this cannot be done until the UK banking industry is audited - bank by bank; toxic debt must be identified and dealt with. Then Vince will be left with a clear, transparent and accurate capitalization figure, then he can establish targets for lending.
    Anyway, it’s not lending as such that the banks are having trouble with, it’s toxic debt that is entanlged, bundled and otherwise convoluted into the banking legers, or better still - left off the books entirely.
    As for the government yet opting to provide a more generous scheme of taxpayer-backed bank loans for small businesses: I’m sure the taxpayers would be more than happy to take this on, especially after the bail-outs.
    There is a commitment to create the "most competitive corporate tax regime in the G20" - Big ideas, no detail, big ideas, no detail;, big ideas…
    As for non-doms, let me say again – big ideas, no detail, big ideas, no detail…

  • Comment number 16.

    @5. I suppose you are a disappointed labour supporter? If you would objectively read the coaltions pledges you will find a number of specifically lib dem attributed policies, where its stated that the lib dem manifesto proposal will be fully explored. For any tory government or rather for any uk establishment to gove credit like that is a big step in the right direction. You dismiss the pledge towards a faired taxation, based on the treatment of non-doms. Its stated it will be reviewed, which is not dismissed to start with. Secondly the whole non-dom issue is of small practical importance and only of large political brownie point importance. I am looking at politics from a very objective point of view, having no affiliation. I just hope that everyone including yourself will once realise the benefits of having a coalition in power, which yes, it does mean compromise (non-doms?) but also means you put forward moderated laws, with a base which is actually greater than 50% of the elecorate, rather than the customary 1/3 you are used to. For anyone dismissing coalition governments as weak and stifling quoting, belgium and italy and greece; Belgium consists of two nations, per a nations definition, no wonder they struggle at times to agree. Otherwise the UK should be compared to the Nordics, Netherlands and Germany, where coalitions have been the rule in all levels of government ever since there was a democracy. Therefore, I just would like to welcome you to a mature and democratic world, its not scary, embrace it and perhaps next time there will be a lib dem-labour coalition...

  • Comment number 17.

    Looks like another bad day on the markets - we're now near the 'highs' of September 09.

    ...an ominous sign if ever there was one.

    Still - I'm sure the bulls will go into hiding until the coast is clear - they're never around to answer for their over-ethusiastic expectations of markets when it turns.

    Is there anyone out there who still believes in Capitalism? You have to be mad to do so as it's abundantly clear it's not serving it's primary purpose - the most efficient distribution of resources through the medium of money. I mean in this latest case the markets have sat on sovereign debt when it was clear about a year ago that countries were going to start defaulting. Why did half the people on this blog realise it and yet the 'professionals' were completely unaware??

    Still they try to 'fix it' - well how many attempts are we going to have before we give up on this old broken system? Are we going to have a 'super bailout' in order to sure up the markets?

    If Gordon's Trillions - agreed at the UK G20 haven't done anything - then what difference will Trillions more make?

    The more we try to prop this system up the more trouble we make for ourselves. We (the people) are stuck between politicians who are afraid to change (despite it being their buzzword for election time) and a small set of powerful men who promote the saving of Capitalism - plainly because they are personally benefitting from the propping up, along with a media who are too busy trying to find the 'killer story' that they ignore the only story worth reporting, never asking those fundamental questions of our leaders.

    This trio of greed, self interest and downright idiocy is why we are here today - still trying to lie our way out of recession, still trying to convince us "it will be alright" - when the facts give us no reason for thinking this to be true.

  • Comment number 18.

    I agree that there should be some help for start-up businesses.

    Having worked with many new businesses in the 1980's there was help available for the unemployed in the way of an Enterprise Allowance which was equal to the present jobseekers allowance.

    Free start-up advice and a start-up grant after provision of a businesss plan.

    This helped thousands who had never been self-employed before get off the dole and some of them went on to form excellent businesses employing many people.

    It was such a basic cost effective scheme that could easily be adapted in today's circumstances especially for those students who may have the bright ideas but don't quite know how to turn them into businesses.

    On the other side where some businesses are unable to access bank loans we have to consider why they need them. If it's because they have cash flow problems then it may be because those problems are about to become bad debts. Any lender would exercise caution in such cases.

    Such a pity the previous government did not exercise this sort of caution with some of the banks themselves.

  • Comment number 19.

    Speaking as a woman, I don't give a damn about gender imbalances

  • Comment number 20.

    The banks will not be able to lend money to company's that they feel are an unacceptable risk. There are all sorts of technical reasons why they cannot do this. But they can be forced to maintain lending to businesses that are not in breech of existing covenants and to lend on sensible terms when a good prospect comes their way. The problem at the moment is that banks are using every opportunity to up rates and recover their depleted balance sheets so that they can get rid of the government as shareholder- and the way they are doing this is to try and use technicalities to up rates on existing loans (admittedly they are often good rates but then they threw money at the customer, charges high fees and paid themselves bonuses on the strength thereof) and for new loans they are asking high rates (which is understandable) and excessive security- why should a small business owner put everything at risk for a marginal benefit to themselves so they turn the money down- banks need to get back to cash flow lending based on sensible analysis of forecasts and forget wanting additional security often valued at multiples of the amount of the borrowings. It may sound odd but this is not the banks lending recklessly just them doing their job properly- if they want gold plating all the time- they should take 90% pay cuts as they are just junior clerks not bankers.

  • Comment number 21.

    The people that created this mess in the first place were the individuals who constantly pumped up the price of every commodity we buy! From estate agents that inflated house prices, to car manufacturers that inflated car prices, to supermarkets that pumped up food prices, to private utility companies that held every household to ransom for fuel & water.
    And the one at the top of the pile is banks who racked up interest rates on loans, mortgages and credit cards.You can only squeeze a orange so much then their is nothing left and thats effectively what they all have done squeeze until the pips come out.Their is only so much money in the average Joe's pay packet these guys seem to think it goes on forever!
    When you take the personal tax and national insurance out of an individuals wage their is not much left! Then the indirect taxes on everything and its very easy to see why things have collapsed.

  • Comment number 22.

    I'd prefer not to have ill-informed statements about tax bandied about willy nilly.

    For a start you need to know the difference between resident, ordinarily resident and domiciled. You need to know what these things mean. You need to know where income is generated.

    Often, a tax treaty is useful

    Generally, you can assume that UK source income is taxed here so, if you live and work here you will pay tax on that income here.

    Yrs, resident,ordinarily resident and domiciled

    Mrs Bloggs

  • Comment number 23.

    'Because Lloyds's and Royal Banks' gross-lending agreements are written into lengthy binding contracts relating to support they've received from taxpayers - and it may not be quick, cheap or easy to re-write these agreements.'

    You can re-write any contract if both parties are willing and since, at least in the case of RBS, the government is the majority shareholder, presumably its willing.

  • Comment number 24.

    There is nothing wrong with greater equality. Indeed, since there was growing inequality in this country under New Labour we should say there is progressive inequality. This needs to reverse and the country become far less hierarchical, more functional with enhanced opportunity for all.

    As to gender equality in boardrooms this is nothing more than aspiration as both men and women do not want to join the boys club just to sit at the top table and become totally useless and disconnected from reality. In other words our souls are not for sale.

    The financial services industry has to recognise that Mr. Cable is a poacher turned gamekeeper, is probably aware of the wrinkles and like all orderly thinkers is partial to the use of a flat iron

    The simple truth is that bank lending has not been getting to small businesses always assuming a small business actually wants to borrow on the terms currently presented by the banks. Furthermore many of these loans are on terms which are just not viable and as such can arguably be deemed uncommercial. We need money for start-ups to reduce unemployment so the banks need to redfine their lending criteria.

    My suggestion is that Mr. Cable is setting up the opportunity for there to be a dialogue with the banks. I fully appreciate that this is something the banks are unaccustomed to as previously they just gave orders to the government. The banks need to be reminded there has been a General Election and the smelly, vulgar proles have had their say and this will be reflected in public policy.

    I am glad Robert, that you have used the term the `tax-avoiding non-dom community'. If they are not prepared to put their hand in their pockets for the maintenance of the present system then they have no right to enjoy the benefits of that system. Nothing is for free in this world. If they want to leave for Switzerland I suggest they book via Eurostar as the volcanic ash may constrain them from flying at their preferred time. Life can be tough at the top!

  • Comment number 25.

    "Vince Cable would reply that he only wants to make sure that small and medium-size businesses can tap into the credit they need at this delicate stage of the economic recovery" - Peston

    Vince Cable is an economist by training, and if he is anything like Mervyn King, then he is unsuitable to be a banker. I am astonished by the pomposity of Economists that makes them think that they should be the directors of the sector of civilization that includes Accountants and Bankers. Because I am none of these, nor an economist, I maintain a much more objective view.

    However, Vince Cable as a semi-governing politician is entitled to oversee how the Government might regulate the operation of Banking and Accounting. Given that RBS and Lloyds are State-Owned and nearly-state-owned respectively, the question arises that this regulation has been so difficult to implement since August 2007 when the Credit Crunch first began.

    Also Vince Cable as an Economist is entitled to comment on the reduced competition amongst banks.
    It is nearly 3 years, and we have fewer full-service banks to choose from than ever. Even compared to buying food, there are more supermarkets to choose from than there are full-service high street banks. How vulnerable does that make us as a Civilization? THAT is the question that the ECONOMIST is responsible for addressing.

  • Comment number 26.

    The rescued banks, seem to be in total denial of the debt they owe UK Gov Plc.

    As an example RBS /Natwest yesterday raised the LTV thresholds of the majority of mortgage products from 80% to 75% without notice. As someone who was the verge arranging a mortgage with them. This was more than a slightly annoying. This was done overnight without as yet a reason being forthcoming.
    Natwest et al are meant to be freeing up lending to kickstart the economy but as yesterday decisions showed they are in fact making harder to borrow and inflating their profit.

    The deals that are now available to first time buyers (90% LTV) are at best dangerous and probably in fullness of time will be seen as suicidal (Bank Rate +6%). Which as the interest rate rise, will return the cost of borrowing back to levels last seen in the crash of the late eighties.
    If a first time buyers want to secure a product with a sensible rate of interest they are looking at a deposit of at least £50 thousand pounds which is very difficult to achieve unless they are helped by the Bank of Mum & Dad.

    Come Mr Cable and Mr Osborne it time to start reining in these banks and if necessary taking firm control of their Lending policy.

  • Comment number 27.

    Whatever the government do to get the banks lending more money they shouldn't do it in a way that puts more burden onto the shoulders of us taxpayers. After all thats easy isn't it, anyone could do that. With my taxes set to rise and my public services set to be slashed in the years ahead I haven't got anything left for more guarantees or bailouts...Make them lend what they have already, don't heap any more liability onto me! So Mr Osbourne thats a big NO to any kind of taxpayer backed loan guarantee scheme...OK!

  • Comment number 28.

    Perhaps we should invite Germany's Chancellor Merkel into the Treasury. She has just declared that 'politics control the economy, not markets'.

    Is it time that governments took back control of the markets on behalf of the electorate.....not markets dictating the economy?

  • Comment number 29.

    Poor old Vince looks increasingly ill at ease about where he has ended up..I hope he does not lose his seat over the badly judged co-operation with the enemy...get out now Vince whilst the going is good

  • Comment number 30.

    Maybe you weren't watching....the bankers run the show...this is for public consumption..no one actually thinks most of this will happen unless it will benefit the banks.....speeches are easily made..it is when you come back later and see what was actually done and black becomes white and the political wordsmithing is all done. In the end it is always the same....we wanted to but.....and if re-elected next time I am sure we will get this done....
    Do you have no memory?

  • Comment number 31.

    11. At 3:37pm on 20 May 2010, claggerotc wrote:
    I have been stewing for a while now ...


    The scattergun hostility isn't directed at people like yourself. The source of iniquity in command structures is located in the upper levels. But we can't be too direct. It's the law.

    If the top brass get tired of those whining small business people who keep proving the illegality of the charging regime, they pass down policy and targets to suck the life blood out of them and stitch them up with extortionate interest rates. What are the good guys supposed to to? Look for another career?

  • Comment number 32.

    5. At 2:10pm on 20 May 2010, writingsonthewall wrote:
    " Our prime minister should be wearing a sack cloth and rags to reflect the state of the nation. Not smart suits which cost more than a months average wage."

    what a strange comment!

    Do you wear a hair shirt, possibly?

    Do you think the PM should wear one? Maybe whilst courting President Karzai? That would make a great impression.

    Or do you think Mr Brown should be sitting reflecting quietly in one?

  • Comment number 33.

    If we, the taxpayers, are going to underwrite bank lending, then surely our representatives, that is the government, should have the right to make sure that banks behave in the national interest.

    Regulation is not likely to work, because regulations are inevitably blunt instruments and banks will find ways round them. Indeed as long as they are privately owned, it is the duty of the banks to make as much profit for their shareholders as they can, even where it is against the national interest to do so. They cannot be expected to serve two masters with conflicting interests.

    The only way to avoid this problem is to take the banks that have been bailed out into full public ownership and/or create a national bank by developing the Post Office and National Savings.

    The deposits in other banks which remain in the private sector, should not be guaranteed by the taxpayer.

  • Comment number 34.

    The myth of Vince. The pick 'n' mix guru:
    "The Government must not compromise the independence of the Bank of England by telling it to slash interest rates and generate another dangerous inflationary ‘bubble'."

    "What is required is for the chancellor to write to the governor saying that on a temporary emergency basis the committee should assume a central role in countering the crisis with a large cut in interest rate."

    “It is entirely wrong for the Govt to stimulate the economy by yet more public spending”

    “We believe the Govt stimulus is right and necessary”.


  • Comment number 35.

    In the financial world confidence is everything. If you are a good bank but give out the wrong messages peopple lose confidence and start withdrawing their assets.If you are a bad bank but are making the right moves confidence is promoted and customers continue to support them.

    The banks of whatever kind continued to pay massive headline-grabbing bonuses which sent out the wrong message.The result is that the public is out for their blood.

    If bank directors and managers had given up their bonuses but paid modest bonuses to the lowest paid staff who do the donkey work the chances are that this would have blown over.

    If those charged with creating new safe products and monitoring toxic debt had done their jobs properly, politicians would not be looking to break up the banks so that high risk investment products could not adversely affect the savings of ordinary punters.

    Instead, people from outside banking are determined that there will be no more credit crunch situations and are taking action because people within banking who should have known better failed to act in the proper manner.

    We need businesses to grow but the lack of money coming out of the banks is stifling the economy.Banks could reduce the money leant to individuals and start lending more to sound businesses,By giving companies a small loan to begin with with promises of a review and possible further loans in the future, businesses can start to develop plans for growth, take on extra workers etc which is what we need.

    The government is determined to take action on this and if banks don't get their act together, they will have no-one to blame but themselves because the writing is on the wall. Even I can see that and I am not a banker.Whether bankers will see that however is another matter.

  • Comment number 36.

    1. At 1:12pm on 20 May 2010, Joseph wrote:
    Robert - "the directors of the banks would probably have to resign if the government forced them to extend credit in a way that they felt was uncommercial and was contrary to the interests of all their shareholders."

    Surely, you meant: "interests of all their paypackets and bonuses"?


    Ever heard of sub-prime loans ? they started when Democratic US governments mandated loans to a class of borrowers who would not have ordinarily been creditworthy. Will we never learn ?

  • Comment number 37.

    sighs... Non doms pay a lot of tax here, and the changes brought in by Labour were already seeing a flight of investment. This uncertainty will only increase that tendency to leave. And it does matter because they invest in businesses and employment in the UK.

    All I'm advising on these days is people leaving the country not coming here.

  • Comment number 38.

    I refer you all to Chief Joseph of the Nez Pierce- "Only when every tree is cut (about 30-40 yrs at current rates) every fish is taken (10 -20 years until total collapse) every animal is killed (current extinction rate 100-1000 x normal background levels)and every river dried up (1% of 1% of total water is fit for human consumption, 3m rise in sea level will take out 90% of water treatment facilities). Only then will "white man" realise that you can't eat money"
    Money is a wage token - a promissary note - if you can't trust the Bank of England's promise to honour it, we all resort to trading/swaps - Anyone remember Star Points? The markets trade on our collective will/ability to work and the assumption that the earths bounty is free

  • Comment number 39.

    Give him (VC) chance - he's only been in post a couple of days.

    Did anyone really expect to have DC and a major Conservative govt in power with VC potentially in 'control' of the banks?

    Now perhaps we stand a chance of seeing some real reform/effective regulation in the banking sector?

  • Comment number 40.

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

  • Comment number 41.

    Will Vince Cable become chairman of the banks' is the title of your piece.

    Well, there is enormous respect for the qualifications and actual commercial experience PLUS common sense that Vince Cable has. This man has no personal vanity nor ego - and is SO NOT George Osborne. Thank God!

  • Comment number 42.

    Robert Peston on last nights' 20th May, 'Have I Got News for You'.

    Are you devolving and widening your personal investment sustainability Robert? Perhaps, you can advise us FOR your time WITH the BBC compared with your time FOR the bankers, WITH the bankers?

    Hmm - tricky call when a commentary affects the person by the person?

    However, good to see you can almost laugh at yourself with so much responsibility?

  • Comment number 43.

    "Banks however would argue that it would be bonkers to oblige them to increase net lending, because they would be under pressure to provide credit to those who don't deserve it."

    Your having a turkish surely, the same bankrupt banks we bailed out? I know exactly what they deserve!

  • Comment number 44.

    Post 11, LOL only a banker could be so rude!

    When I was lending we used the tried and trusted mnemonic CCC PARTS

    ie
    Character - who are you lending to
    Capability - just how good are they at what they do
    Capital - what is the customer stake: the bank is not the entrepeneur and the customer needs to put in a fair share (it seems to me that this is often the sticking point where the customer thinks they have a right for others to take the risk when they can take the profit).

    Remind you of anyone, say a Banker perhaps???

  • Comment number 45.

    It is simply ironic that the banks who have created problems for us all are now calling us risky. RBS approached me to lend my business' money and I said I would let them look at it. I knew they would say no as I think they are going through the 'motions'. No surprise they declined and said it was because I am in a high risk sector! This coming from a bankrupt who should not even be here and contributed in no small measure to the difficulties we all face.My current lenders are doing everyhting thy can to coerce me into agreeing a new deal so they can charge me more than I am paying now. With banks so out for themselves and disregarding the moral obligation they now owe this country I do not see the government, other than by force, to get them lending.

  • Comment number 46.

    Lending more is fine, but as many have mentioned the lenders have borrowed too much, so have the manufacturers, so have the employees and so have the consumers, it has to stop somewhere unless as mentioned we all start printing our own money.

    There has been little mention of the interest rates, loans are asking on average 8% while the base rate is 0.5%, with inflation running away and the certainty that interest rates will go up, they can't stay low forever, then all the businesses and individuals taking out loans and mortgages now could be looking at the good old days of rates at above 15%, I hope you are being warned about this possibility?

  • Comment number 47.

    The good news is that now Vince Cable has now got a role that has real accountability, it's only a matter of time before he and his mate,George Boy Osborne get found out, for what they really are.....guys who talk a good game,but have never,ever done it!!!!!!
    Rgds, Gordon Hutchison

  • Comment number 48.

    I heard a comment on the news recently (cannot remember where) that said we now have a 'new normal' in terms of lending and availability of funding. Many good points have been made above about this especially that of inflation getting out of hand and the inevitable rise in interest rates that has to come.
    I also agree that in the past, Mr Cable has made good sense. As part of a number of panels on TV & radio, he has consistently in my view been the only one to offer an answer that means something and is not just political rhetoric.
    The 'elephant in the room' right now is still however the addressing of debt and defecit, this most recently evidenced by the falling confidence in stock markets due to high levels of national debt and potential austerity measures. Reality is people will have less to spend and this has to be factored into any potential recovery.
    As I said above, we have a new financial landscape from which we cannot using the quick fix of spending or borrowing our way out, we need to address the root cause of reducing debts and operating businesses according to actual demand. If a buisness is not financially viable it should be allowed to fail not falsely propped up.

  • Comment number 49.

    Agree with the overall consensus regarding Vince Cable - disappointed regarding the non dom backdown especially in the context of the Lib Dem commitment to clamp down on tax evasion (avoidance) and the benefits that should accrue to the treasury.

  • Comment number 50.

    He should be head of UKFI since the others who have headed this up have been so craven with the banks we own.

    I sincerely hope the overpaid at UKFI, all of them, will also have a pay cut. A policy that should apply to all the banks they manage.

    I cannot see too many sensible and mature companies paying the bank chairmen and board directors what UKFI pays them - if they do it probably says more about incompetence at the top of British companies than anything else.

 

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