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Lord Turner: 'Blame the policymakers more than greedy bankers'

Robert Peston | 21:30 UK time, Tuesday, 21 September 2010

After the impassioned demand by the Deputy Prime Minister, Nick Clegg, for bankers to stop paying what he called sky-high bonuses, the UK's top regulator has said that regulation of City pay is indeed needed to reduce incentives for excessive risk-taking.

Lord Turner

But, in what may be seen as something of a rebuff to Mr Clegg, Lord Turner, the chairman of the Financial Services Authority, added that the UK has to "move beyond the demonisation of overpaid traders".

Lord Turner also told an audience of grandees at the Mansion House that individual greed and error was less of a contributor to the banking crisis of 2008 than a wrong-headed approach to the regulation of banks and the economy.

So he is encouraged by the latest international agreement by central bankers and regulators, the so-called Basel lll agreement, that will force banks to hold more capital as protection against future losses.

However, Lord Turner conceded that if he were designing a relatively safe and stable financial system from scratch, he would force banks to hold yet more capital.

The perfect solution wasn't available, because Lord Turner and his colleagues on the Basel Committee on Banking Supervision were acutely aware that while banks are building up their reserves of capital, they tend to lend less (even if there is no evidence that banks lend less as and when they have accumulated the requested capital).

The Basel Committee had to compromise on a lower target for capital ratios, Turner said, so as not to undermine the global economic recovery.

That said, Lord Turner is determined that the very biggest banks (the notorious "too-big-to-fail" banks) will become much less dependent on the implicit protection of taxpayers, by instituting new legal arrangements that would force the creditors of those giant banks to convert their loans into loss-absorbing equity during a crisis - in a process known as a bail-in (as opposed to a bail-out).

That would add an extra layer of protection before banks came cap in hand to us, the taxpayers.

But such new funding arrangements could be expensive for banks, because their creditors would demand extra interest for the additional risks they would be taking away from taxpayers.

Which raises two questions.

Would these costs be passed to customers, especially to businesses which presumably feel they can ill afford to pay more for credit?

And, if banks were obliged by competition to absorb some of these increased funding costs themselves, would some of the bigger investment banks - those that are more dependent on the de facto subsidy of the taxpayer safety net - become unviable, obsolete, forced to liquidate themselves?

Comments

  • Comment number 1.

    The problem was not the size of bonuses, no, but it was (and is) a symptom of it. The problem on both sides of the Atlantic is the overlarge financial service industry, which has grown massively in the last few decades. It seems now that rather than this being because of massively improved products and services it was simple rent seeking. We were (and still are) paying silly amounts of money for them to move money around for no great purpose, except so they can bill us for it. This led to the high bonuses as they rewarded themselves for what they portrayed as great performance – performance which was shown by the crisis to be at times comically bad.

    The solution is to introduce or reintroduce rules separating (state backed) retail banking from the more speculative stuff. They can pay themselves whatever they want, but with speculators money not ours. If banks then become more like dull building societies I think no-one will be sorry, except those bankers used to making excessive profits with money implicitly backed by taxpayers.

  • Comment number 2.

    The big mistake made was not thinking there was a problem with house prices spiralling into the stratosphere.

    If milk or bread doubled or tripled in price, steps would be taken.

    But somehow the same thing happening to houses was seen as ok - even in some deluded quarters as a good thing.

    Until we get politicians and regulators to see house price inflation as the most damaging inflation of all, there is no hope of avoiding a repeat performance some time in the future.

  • Comment number 3.

    Does anyone really think our UK parliament is able to sort out this mess within a reasonable time frame?

    The analysis is fine except that it credits the policy makers with too much ability, competence and intelligence.

    This will all take years to resolve as our UK politicians are dillatory and lethargic just as if the highlighted problems and issues will just fade away into their tax haven bank accounts and family trusts ... meanwhile as for the UK economy...?

  • Comment number 4.

    > UK has to "move beyond the demonisation of overpaid traders".

    He's right - traders are overpaid. To move on, they have to go.

  • Comment number 5.

    Is Clegg wrong?

    What is difficult to understand for majority of the people is why people who gamble deserve such high bonuses at all.

    Who exactly is responsible for the crisis...is there a consensus emerging.

  • Comment number 6.

    So the bankers are blameless. After all some one has to do it. We should all be enthralled at how they perform their magic.
    There is no logic to the system. But the bankers should also realize how they are tolerated. They plain just don't know how lucky they are. If they don't understand that they are in a position of trust and abuse it then they and their ilk should be punished to encourage the others.
    Some will no doubt call that envy.
    I call it commonsense.

  • Comment number 7.

    Who paid the lobbyists to looby the policy makers?

  • Comment number 8.

    Well done Lord Turner, at least someone is trying to move the argument on from bankers bonuses. The only reason politicians won't stop talking about them is to distract attention from their own culpability in the events of the last 3 years.

    If the banking system is to be properly sorted out, we need coherent & logical thinking, not the vindictive rubbish that is currently coming out of the Franco-German alliance known as Europe.

    I hope the British people start to realise that the banking industry is one of our country's great strengths; the more we bash it, the more room we give to the Europeans eager to take our corporate tax revenues.

  • Comment number 9.

    Tell me again what Lord Turner did before he moved to the FSA?

  • Comment number 10.

    The problem here is a misunderstanding on behalf of the public and the media. British banks follow a very American way of paying their staff - that of 'total compensation'. This is where the total employee pay packet is a combination of their salary and their performance related bonus. Far from being just a giant cash handout, it forms a key part of people's pay at all levels of the company. This is why the 'bonus pot' seems so comparitively large. Yes, some traders do get rewarded obscenely but this is far from the norm. Performance related bonuses allow companies to reward staff who contribute and work hard over those who don't. This is arguably something that other industries and the public sector could learn from.

  • Comment number 11.

    Maximum Income

    David Cameron talks of a ceiling of 20 times the earnings of the poorest paid employee - but why not just limit income to his income? (about 10 times the minimum wage)

    How is it possible for anyone to really 'need' more than the Prime Minister - and keep a straight face?

    This cap could easily be implemented through the income tax system when the tax return is done all income over the prim Ministers would simply be subject to 100% tax. This is not complicated and it is demonstrably a way of decreasing inequality.

    I really do not follow Adair Turner's argument that it is wrong to prescribe an income limit - why on earth not? If people want to stay in the UK they should want to share the country with their fellow citizens (sorry subjects!). Inequality is a terrible stain and scourge and it has increased under both Tory and Labour. Now is the time for change. A policy such as I and the Prime Minister are advocating would also have the added advantage of cutting footballers pay and then we may get a resurgence in British footballers as the greedy foreign prima donnas would skulk off somewhere else! We really need to give new ideas a try and David Cameron's isn't all that bad is it Adair Turner?

  • Comment number 12.

    Adair did not see the crisis coming. Asleep at the wheel. I think that he should button it. Please Mr Turner.

  • Comment number 13.

    I don't have a problem with bonuses if they are a reward for exceptional performance. But in banking it seems you get a bonus just for being employed.

    There's too much of this in the management of companies too. Golden parachutes and big pay offs when the chief execs leave a company in ruins. Their poor judgement and bad decisions cost people their jobs.

    It's entirely right that publicly owned banks are scrutinised and told to focus on paying back the money they were given.

  • Comment number 14.

    We used to have a manufacturing industry which employed hundreds of thousands and, as it happens, built an empire. Now we have a financial services industry which employs few and has destroyed that empire. Baroness Thatcher, what did you create?

  • Comment number 15.

    #2. nametheguilty wrote:

    "The big mistake made was not thinking there was a problem with house prices spiralling into the stratosphere."

    Absolument!

    The fool who did this was (of course) Mervyn King assisted by his co-twit Nick Macpherson (Permanent Secretary of the Treasury).....

    They have to go!

  • Comment number 16.

    This is news? Not an offence to you Robert, you're paid to report it and you do a good job but, this, news?

    Just more pantomime for the masses. Seperating the politicians and big business, (this includes bankers) is like trying to seperate religion from the state in Afghanistan.

    We all know they were all to blame, banks wanted something and used the carrot and the stick to get government to deliver. Except the stick was never required. Politicians wanted the illusion of power and so did what the bosses told them, meanwhile the people pick up the tab on both counts as we are assured by both sides that were complicit in causing the mess that more of the same will cure our ills.

    This populist posturing is just deflecting attention away from the real problems facing us. How we get rid of all these sociopathic parasites and start afresh without first tearing each other to shreds in the street.

    They are in a high stake game of pass the parcel. Trouble is the wrapping paper is getting thin and we all know the box is empty. They pocketed the prize between them beore they wrapped it and they know the truth will be out soon.

    There is no 'recovery'. Just lies, based on big lies, stacked onto pallets of lies, balanced on fat lies, held up by obese lies and supported thoughroughly with obscene lies.

    The wealth has been redistributed, trickle down economics was in fact a flood upwards while the rest of us were given debt to placate. It was the perfect scam till they ran out of victims.

    I would love to see the cirricullum of the schools and universities these boys attended. They sure got taught something different than I in their social, business and humanities studies.

    As for MR turner, banker, made chairman of the fsa who oversaw the shambles of 2008 now saying regulation was the problem? Pot, kettle, black mr turner! He did of course pay the bonuses to his staff that year at the FSA even though the entire financial system he was responsible for overseeing was in meltdown.

    Hipocrisy in action, like I said, news? Nothing to see here, move along. Carry on as before. Everything is fine, the LORDS, CEOs and MPS will keep you safe as long as you don't look in the box.

    That wrapping paper sure is wearing thin though.

  • Comment number 17.

    They're right - it is all the fault of the policy makers. They didn't take away the risks. They still haven't taken away the risks. Naughty policy makers. They should have listened to those wealthy bankers when they told them that to stop them taking risks would damage the economy by preventing a boom and bust cycle of epic proportions.

  • Comment number 18.

    This is a laugh. He's bankrupt. the banks nationalised, the government paralysed but his wife and kids did alright.

    If I was to rob a bank tomorrow and give it to my wife and kids, would they get to keep it? I wonder.

    http://www.rte.ie/news/2010/0921/fitzpatricks.html

  • Comment number 19.

    And, if banks were obliged by competition to absorb some of these increased funding costs themselves, would some of the bigger investment banks - those that are more dependent on the de facto subsidy of the taxpayer safety net - become unviable, obsolete, forced to liquidate themselves?

    Well that would be good. That is what should have happened to begin with.

  • Comment number 20.

    BANKS, will always offset their overheads on the customer and the goverment can do nothing about it. nick just WAGGING his finger will not change a behaviour that has a long history of skimming finances from the less well off. i do recall a long time ago when i used to get cash in my paypacket and could choose to lodge it into a bank if i wanted to or put it under my pillow, now i have to have a bank account which only allows one choice. banks will always be guaranteed an income because they have the monopoly on money..oh and i have just seen the nice spread for the bankers do, what a slap in the face this is.

  • Comment number 21.

    I wonder how much waffle, energy, time and vitriolic bluster has now gone into the utterly and completely irrelevant subject of bank staff bonuses.

    It deflects voters from the previous government's disastrous public spending, it attacks those who do not have much of a say in the media, it vilifies those with very few votes and it panders to the jealousy of the left wing, but it does not explain the Western recession.

    Bonuses did not force the UK’s Labour government, or Greece, or Ireland, or the USA, to overspend nor did they force Lehmans to hold too little collateral; nor property investors in Florida to default home loans nor those non-bankers running Northern Rock to borrow short-term and lend long-term.

    Taxing bonuses by 100% will never restore export markets to the UK, nor increase service sector productivity, nor provide cheaper oil or clean fuel, nor even ensure competent industrial and government management skill.

    The sooner people like Cable forget the bonus red herring and focus on real issues the sooner we might be able to repair some of the damage caused by the same poor quality thinking that still sees bank staff bonuses as some universal cause of economic rot.

    It’s a cliché because its true but really, it’s the economy stupid, not the bonuses…

  • Comment number 22.

    I quite agree with Lord Turner on one thing that this is not all about bonus's to certain people, its the whole banking system that is rotten to the core.

    There is no one working in any bank or industry for that matter that is worth more than the prime minister ..... my heart bleeds for them that they work so long and so hard, perhaps if they worked a little less hard they would have taken time out to learn how to count !!!! and we wouldnt have had our economy destroyed...

    Everything they have done and are continuing to do is based on myth and legend, and more fit for jackanory than a degree.....and thats just the retail side of the business, without which the investment side wouldnt even exist.

    Its time to face these people down if we dont do it now they will just do it again and again....

  • Comment number 23.

    11. At 10:32pm on 21 Sep 2010, John_from_Hendon wrote:

    I agree.

    I've one other problem other than wages/bonuses though. I'm really uncomfortable with the idea that businesses are richer than countries, particularly utility companies. If a global knicker producer goes bust, there will be lots of little knicker suppliers we could go and find a pair to squeeze into. But what about wheat, oil/power etc. The things we need to survive (you can, after live with no knickers, just not quite the way we used to) but how can we all survive of the wheat producers and fertiliser guys converge and then go bust? Maybe wheat might not be the best example.

    Is it just the financial industry convergence and then whoosh that poses a danger to us all, and if so how do we stop it a)going whoosh, and b) holding countries to ransom?

  • Comment number 24.

    My biggest problem with the bonuses is that for the last ten years they have been paid out when they should not have been,

    For the last ten years, every time bonuses were announced I was there complaining.

    Not just because of the amount of the bonuses but also because they were paid out for things that banks and businesses were claiming were successes but I was claiming were failures that would put the economy in danger. No one listened.

    I turned out to be right yet still nobody will take on board my suggestions for a solution and as such the status quo prevails.

  • Comment number 25.

    I agree that the "wrong-headed approach to the regulation of banks and the economy." was the main problem behind the collapse of the Banking industry.

    But the greed of the bankers and the financial sector as a whole is certainly why the annual bonuses on my endowment policy have been pathetic for the last decade, even during the supposed good times...

    It was the Bankers enjoying the good times, not the customers...

  • Comment number 26.

    For those of us who work in teaching, Lord Turner's defence of bonuses sounds like an "it wisnae me! It was him an' aa" defence. (I teach in Scotland - English teachers will have their equivalent). It's a transparent attempt to exculpate some by pointing to the sins of others.

    Whether hefty bonuses were the most significant factor in bringing about the financial meltdown which is about to bring "austerity" to some of the poorest people in this country, or whether they played a lesser role is, frankly, irrelevant. If they played any role at all then that is good reason to suppress them.

    In fact, Lord Turner is a prime example of why we really need a little bit of open class war in this country. The rich ride to the aid of the rich. The wealthy support each other. The powerful maintain each other in power. They've been fighting a war against the working classes of this country for a generation while the latter have been taught to believe that we live in a "meritocratic society" where anyone can succeed through hard work. And that pigs on the wing are elegant beasts

  • Comment number 27.

    5. At 10:09pm on 21 Sep 2010, lifeisfunny wrote:
    Is Clegg wrong?

    What is difficult to understand for majority of the people is why people who gamble deserve such high bonuses at all.

    Who exactly is responsible for the crisis...is there a consensus emerging.

    ----------------------------------------------

    Yes, there does. If I understand the Government the consensus is that the worldwide financial crisis was caused by invalided benefits claimants with plasma screen televisions.

  • Comment number 28.

    A little dirty secret about bonuses....

    Yep - there will be significantly smaller bonuses this year....
    ....because ordinary compensation has sky rocketed!

    The total amount of money paid out will be little different - except that now much more is on the baseline salary. So much for the idea that the bonuses were used by the employer to reward exceptional performance and withdrawal of it to punish under-performers - now they all get paid too much, regardless!

    The perverse result of populist sentiment.

    Thanks for making this happen, Robert

  • Comment number 29.

    2. At 9:59pm on 21 Sep 2010, nametheguilty wrote:
    The big mistake made was not thinking there was a problem with house prices spiralling into the stratosphere.

    ----------------------------------

    On the nail! But that was the essence of the "economic miracle" of the Thatcher years. Spiralling house prices creates equity that allows homeowners to buy on credit, thus stimulating economic growth. That this "virtuous triangle" involves an economic antigravity that was always going to fail and bring the whole thing crashing to earth seems to have gone unnoticed by the financial giants who are paid so much for their genius

  • Comment number 30.

    Blame the policymakers? Most ministers have minimal economic understanding, and no time or incentive to educate themselves. Similarly most MPs are similarly ignorant, and too tied up in the hurly burly of busy schedules, constituency surgeries etc. Then there are tribal (Party) pressures to "groupthink", and a severe aversion, in most cases, to rocking the boat. These poor saps are easily misled and manipulated by influential interested parties.

    Blame the system and lack of public awareness and understanding of it.

    If a farmer invests time and resources into planting potatoes, he is committed for four months. Traders can be in and out of an "investment" in minutes. As Robert pointed out on September 1st: "a sum equivalent to the entire output of the global economy is traded around once a fortnight on currency markets." Add to that commodity markets, stock markets etc and guess at the annual commissions creamed off the top of the world economy by the unproductive. The same people who want to abolish inheritance tax and become the new aristocracy. Sir Shred will certainly be one of them.

    I make no apology for again reminding people of Keynes' comments in The General Theory: "Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."

    And my favourite: in The Great Crash of 1029 J K Galbraith describes how Wall Street pretends to be there to facilitate investment, wheras its real purpose is to enable speculation. Galbraith wrote: "Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot.”

  • Comment number 31.

    To be honest, i'm sick of these rediculous articles providing distractionary fodder for the dim and the ignorant.

    The bankers/the government, we'll they are following human nature syphoning money away from the 99% who can't afford to subsidise these vile people to the 1% who should be taxed a flat 5% on all assets to clear up this mess 100%. We could really make democracy work here if we really want it. It would be fair which is why a government in it's present form would NEVER agree to such fairness.

    I'm more of a fan of motive theory. Just look at who gains and you see the answers. Whilst the FSA were turning a blind eye to the blatantly obvious, accommodating the wishes of the Rockefellers and the rest of the NWO clan; and while Tony Blair was sucked into this corrupt, wicked and completely orchestrated financial mess (compensated afterwards with easy paydays from his masters on the lecture/public speaking circuit); and while the criminally negligent Gordon Brown was as Chancellor (how can a lawyer have the capability)a man that didn't see it coming when John Stuart Mill wrote about these things in the 1840's (I believe). How on earth can such a bunch of i'll educated, deluded fools possibly RUN the government? Answer: Because they are crooks pandering to the masters. These patsys are simply traitors to the British people and should be tried accordingly. Syphoning money away from the tax payer into private hands MUST be dealt with. It looks very much like the new government are going to allow this to pass which only confirms they are part of the same gangsterism that they have replaced.

    To be honest. Don't pay your taxes. I certainly will not be paying for these school boy mistakes. I think there should be a competency test for these politician who pretend to be experts but offer only talk and no substance. Oh, and their MUST be prosecutions! Untill then, I urge everyone not to co-operate with these traitors!

  • Comment number 32.

    Come on Lib Dems, it isn't the bonuses - it is that banks can still afford to throw away money on bonuses that is the problem.

    Banks must be made to 'insure' customers against their own failure, and pay a commercial rate to do so. The more they take risks, the more they pay.

    But who will insure them? Are they getting too big for even national governments to bail them out ? If so, how about using the IMF as the ultimate guarantor for giant multinational banks, as it does in effect for nations?

  • Comment number 33.

    30. At 00:27am on 22 Sep 2010, Sasha Clarkson wrote:

    Brilliant.

    I like:

    The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. Galbraith

  • Comment number 34.

    The banking sector in any economy is a fundamental requirement to ensure that markets balance correctly by equilibrating the underlying laws of supply and demand. Without money moving around the economy, existence as we know it would cease to be, people trading goods/services directly for goods/services. This would not be tenable in a modern society and we must defend the banks themselves, but it is simply not necessary for such large wages to exist among top level banking employees and for grotesque banking profits to form as they have. For any banking CEO earning, say £3 million per year, there are some very well qualified and well thought out people who could discern better the consequences of their actions thinking of societies rather than short-term profit gains. For every investment banker that seeks to maximize the profit of their bank to maximize their bonus, is a considerate individual who'd work for a quarter of the income but with a focus on societal profit. This is a different way of thinking, a different and more meaningful target altogether. We now need to build this debate into policy to form a better and more stable banking sector aligned to the needs of society, and not an individual banks profitability.

  • Comment number 35.

    The FSA is funded by the taxpayer - hich presumably inludes Lord Turner's salary.
    According to the FSA website "The Financial Services and Markets Act 2000 (FSMA) gives us five statutory objectives:
    •market confidence - maintaining confidence in the financial system;
    •public awareness - promoting public understanding of the financial system1;
    •financial stability - contributing to the protection and enhancement of the UK financial system
    •consumer protection - securing the appropriate degree of protection for consumers; and
    •the reduction of financial crime - reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.

    None of these appear to cover being an apologist for bankers who fail to do their job, demand taxpayer bailouts to cover their failure and a huge "bonus" into the bargain.
    I always understood that "bonus" meant "good" and that a payment so named related to good performance. Perhaps the failed bankers deserve a "malus" rather than a bonus - and Lord Turner along with them for failing to achieve the FSA's objectives. In any sane world these guys would have been sacked rather than given the luxury of standing up at the Mansion House complaining and passing the buck

  • Comment number 36.

    If bankers makes lots of dosh for their banks , then they deserve stonking bonuses.

    End of story.

  • Comment number 37.

    I seem to remember that the justification for massive banker bonuses was that it was their "skills" and "talents" which had given us a decade of stable, inflation-free prosperity and therefore they deserved to reap the benefits. Now, when the reality has dawned on everyone that the so-called prosperity was actually based on RECKLESS BORROWING by governments and individuals rather than any particular genius on the part of bankers, suddenly it wasn't their fault guv, nothing to do with us, don't stop our bonuses or we'll take our ball to Switzerland, my dad's bigger than your dad, what you gonna do about it? It seems that if you went to a certain school and frequent the right gentlemen's clubs then it's perfectly OK to hold the country to ransom. Only a group of people as venal, selfish and deluded as bankers could believe we'd all swallow this (well, maybe politicians could too).

  • Comment number 38.

    Lord Turner says it was regulation to blame, not greed and error.
    This is plain wrong, and he knows it.
    It is blaming the lawmakers for crime rather than criminal behaviour, and is simply yet another attempt to deflect responsibility away from the appalling City behaviour that has caused such massive damage to the nation.

  • Comment number 39.

    This is simply yet another attempt to deflect responsibility away from the appalling City behaviour that has caused such massive damage to the nation.

  • Comment number 40.

    Some cynics might suggest that Lord Turner is trying to lay a path for his cronies in the financial world to reclaim the integrity that they so totally lost a couple of years ago.

    Such a move would be very unwise for one of the simplest of reasons within the realms of human relationships. Trust takes time to build, but can be destoyed in a moment.

    Why should anyone trust the dealers and the bankers? What are those in the finance industries doing to encourage customer, public or investor trust? Hey, yep they're selling really "attractive" accounts which have hidden (or at least significantly played down) charges at every corner and "extra's" which are worthless.

    So Lord Turner, you want people to trust and stop demonising your pals in the finance businesses? Simple, explain to them how human beings work - don't preach at us.

  • Comment number 41.

    This is simply yet another attempt to deflect responsibility away from the appalling City behaviour that has caused such damage to the country.

  • Comment number 42.

    A few thoughts from the other side of the pond... Bonuses, regulation, "too big to fail", excessive risk-taking are all valid topics of discussion and concern. Now, that is.

    I don't seem to recall too many people complaining pre-financial meltdown that everyone's home was worth too much, everyone was buying too many things, and if they needed to buy more that credit or financing was too easy to obtain, or that their investment accounts were performing so well that they'd have too much money to retire on. In other words, as long as most were prosperous, there was no reason to even look at these issues, because the way of doing business was working, and it was working well for most (individuals, corporations and governments). And nobody seemed to voice too many objections to bankers' pay as long as their own investments were doing well.

    Part of this is, of course, human nature. When the future (appears) so bright you gotta wear shades, you're not inclined to make a special trip to the closet to grab the umbrella.

    I can't speak for the UK, but a lot was made after the meltdown that the US is a consumer-driven economy. In fact, the point was made just a few months ago when the statistic came out that Americans had increased their savings, that while this was good in principle, the fact that they were saving meant that they were spending less, thus slowing down the recovery (damned if you do, damned if you don't). While The economy is consumer-supported, it is *driven* by large corporations which in turn drive the markets and (through political lobbying) policy. And the goal of those corporations is, of course, to produce profits for shareholders. We saw this here when, after the meltdown, credit card companies arbitrarily increased cardholders' interest rates, justifying the move by saying that since the downturn, they would have many more delinquencies so they'd have to make up the shortfall from those cardholders who do pay(!), and with oil companies who, a couple of years ago, with fuel prices at historic highs, managed record profits, while small airlines were going bust and working folks were having to rethink even their commutes to work. And when the corporations are profitable, the pressure is on to increase the profits for the next quarter or half-year, otherwise the share price goes down. The shareholders would not be amused. How is this sustainable? Only by getting the consumer to pay more, or to deliver less for the same price.

    At the end of the day, do the policymakers deserve blame? Yes. Do the bankers deserve blame? Yes, but with conditions. The bonus debate is one born out of anger and our need to feel we should get justice or more precisely that the bankers should not come away unscathed for the very real damage done. Do the corporations deserve blame? Yes. Do we, the consumer deserve blame? Yes. And while we can learn many lessons from this particular crisis, it doesn't necessarily mean that the next one will follow in the same exact footsteps. Economies are not just made up of real estate, or the financial sector, or the stock market. Regulations and policies can prevent some of the same mistakes happening again, but with the complexities and interdependencies of economies today, unless there is closer, more objective and non-political monitoring and a willingness to heed warnings, it might be deja vu all over again sooner than anyone would like.

  • Comment number 43.

    This is simply yet another attempt to deflect responsibility away from the City behaviour that has caused such damage to the country.

  • Comment number 44.

    1

  • Comment number 45.

    If Lord Turner wants to preach at the public, customers, investors and the like about who they ought to trust and who they ought to be be suspicious of or demonise, then I have only one real question for him.

    Just what have you really done to re-build ordinary people's trust and confidence in the financial industries. Note I'm not talking about politicians, economists, or even journalists - I'm talking ordinary people. As far as I can see the financial world is still full of people trying to squeeze money out of customers for nothing, presumably to pass their fitness tests or comply with Basel III or whatever.

    Perhaps, Lord Turner, you meant to tell us to stop whingeing on and just keep paying the unnecessary charges on everything, put up with not being able to get loans, crap interest rates and all the rest because its good for the financiers.

    I still don't think you have addressed the issue of re-building public, customer or investor trust ... all these many moons later.

  • Comment number 46.

    How nice of Lord Turner to preach at the public, customers, investors and the like about who they ought to trust and who they ought to be be suspicious of or demonise!

  • Comment number 47.

    .

  • Comment number 48.

    Its about time people realized that they are the ones who have the power, not the politicians, not the banks!

    consider the following straightforward plausible scenario -

    1. in protest at, for example, "huge UK retail bank A" paying massive bonuses while people suffer austerity measures, a consumer association and customers launch a campaign to move their accounts from huge UK retail bank A to "huge retail bank B".

    2. campaign gains momentum and about 10% of bank As customers start to request tranfers of their account/withdrawls/closure. (this might equate to around 100,000 customers?).

    3. within a few days it becomes apparent that bank A is in danger of losing 10% of its deposits, its capital would be shot to bits, effectively a run on the bank. it's share price would drop like a stone, bond holders will start to panic, rating agencies will start to downgrade, other customers (insitituional/corporate) would start to think about withdrawing their money/stop funding - in other words a Northern Rock situation!

    4. international markets will see that it looks like the UK is going to have to guarantee/bail out another huge bank, which it could not do by the way. UK would see it credit rating downgraded, no bail out from european central bank available, too big to QE it away this time. In another words panic time for the politicians!

    5. Politicians would then be faced with the choice of (trying) to save the bank, and sink the country, or indeed trying to justfiy to the people why they are sinking the country to save the bank (sound familiar?). Faced with this imminent catastrophe they would pass an act of parliamenet quicker than you can say "complete u-turn" banning all bonuses.

    perhaps someone with more technical knowledge of the banks (WOTW?) would like to comment on the mechanics of it but I estimate the above would only take about a week to come about.

    we can argue forever about whether bonuses are good/bad fair/immoral or anything else, but once "the people" who for example are being laid off come the spending review announcement in October decide that the publically supported (directly or indirectly) banks should not be paying millions to certain staff while everyone else suffers, the game is over for the politicians and the bankers.

  • Comment number 49.

    It is patently obvious that the non-regulation by the FSA was a massive factor in creating the mess we are now in.
    It is equally obvious that very little has changed since.

    This guy is an Agent of the banks and is not part of the solution.

    A tip to VC
    Vince, when making a conviction speech it's not a good idea to leak sections of it beforehand. Average Joes might suspect that you will adjust your convictions depending on pre-speech comment in order to please your audience.

  • Comment number 50.

    If the banks and the bankers are that good to have high bonuses why is the world in the mess it is now?
    Does anyone know in simple terms?

  • Comment number 51.

    It is obvious that bankers bonuses are not the cause of the crisis. Equally reduction of GDP by cuts in public expenditure and consumer demand are the wrong solution. In fact the current crisis is not caused by banks lending too much credit. If this were the case substantial inflation would have resulted which it has not. Rather the crisis has been caused by a substantial long term increase in productivity in the real economy which means that wages have become insufficient to buy the output of goods and services, or to repay the credit used to buy them. This process occurs gradually over time if productivity gains are not fully fed into real wages but partially into increased business profit, and if that increased profit is not fully channelled into dividend income and consumer expenditure. This appears to have been the case in 2005-2007. Credit has therefore been excessive against household income but not against GDP output. Without the credit, GDP would go into recession. The only policy corrective for this is to fund aggregate demand by alternative instruments such as a citizen’s income. This would be funded by a government bank with a flexible credit ratio to achieve the aggregate citizen’s income required. Current policy instruments have been exhausted. This is because they are based on the initial false diagnosis of excessive credit. More at http://tmseu.netgates.co.uk/financialcrisis.html

  • Comment number 52.

    36. At 04:33am on 22 Sep 2010, onward-ho wrote:
    "If bankers makes lots of dosh for their banks , then they deserve stonking bonuses.

    End of story."

    End of chapter, you mean. Likewise, if bankers make massive losses for their banks (buying broke Dutch banks or buying 'toxic' assets for example) then surely they must also deserve punitive fines.

  • Comment number 53.

    The whole financial industry seems to think that they can hold the world to ransom by saying if you restrict us, we'll move somewhere else. I wonder if the bankers in France, Germany, USA etc are saying the same thing.
    They can't all go and work in Hong Kong.
    If they say they'll leave the country if we restrict their current practices, I say let them.
    The rule of supply and demand will prevail (it is after all the rule they use to tell us how good a job they're doing)and the best will get jobs elsewhere. We'll have to make do with second best !!!!
    Call Their Bluff!

  • Comment number 54.

    51. At 07:46am on 22 Sep 2010, Geoff Crocker wrote:
    Without the credit, GDP would go into recession. The only policy corrective for this is to fund aggregate demand by alternative instruments such as a citizen’s income. This would be funded by a government bank with a flexible credit ratio to achieve the aggregate citizen’s income required

    Geoff
    Why should not all Govt spending be carried out this way i.e. debt/credit free?
    Why has the UK isued £900 billion of gilts?

  • Comment number 55.

    #50

    Simple because people want a lifestyle they could not afford…time to pick up the bill!

  • Comment number 56.

    #21~ Weighel - all Labour's fault the bankers are blameless?

    All the fault of the Labour government? I was profoundly unimpressed by Gordon Brown's endless pointless tinkering with financial engineering and they were a poor excuse for a government but they had been paying back public debt on a huge scale for many years.

    Before our world class world beating stupefyingly paid financial experts were revealed not to have a clue what they were selling, where the risk lay, and what was going to blow up next, we had among the lowest public debt in the west.

    This the the only reason we could afford to bail out the financial services industry - otherwise we would be like Portugal Spain Greece Ireland and it could still happen - and the US public could be overwhelmed by debt/bets created by the banks to inflate their earnings.

    The bill for the rescue is real money, thousands of real jobs, real research, real healthcare - some of the bonuses siphoned off from moving our own money around that we gave them to to save their hides could perfectly reasonably be diverted to better use.

    The financial services industry has just cost this country a vast amount after a track record of decades of hollowing out and exporting most of our real wealth - not money - generation. They compound this by coming up with more and more arcane financial vehicles to ensure there is none of that corporate tax nonsense for them - just for the sucker - us.

    Putting some form of control back after Thatcher smashed off the padlocks may be too late but we actually can't afford for them to operate in our country otherwise.

  • Comment number 57.

    Not too sure people remember why companies, not just in the financial sector, use bonuses. It allows them to minimise the fixed element of pay so that in bad years they have lower costs and in good years pay out more in the flexible element of bonuses.

    Whilst I acknowledge that there is quantum here you will find non-banks paying out good bonuses too. There has been much less flack elsewhere so maybe perspective is needed.

    If we want to separate the good and the bad find a way to split those who need govt support and those who don't so that those who can survive have market rates and those who can't don't pay more (thus reducing profits) then you can have greater say over bonuses. Those who benefit as a result of the weak are being tarnished even though they have no way to avoid the indirect support. We are demonising the stronger banks to hide the ills of the likes of RBS, HBOS et al.

  • Comment number 58.

    Everyone likes to blame someone-else. Ever since the media of the time parodied Harold Macmillian's “Lets be frank about it; most of our people have never had it so good”, we have carried on believing it, and inevitably it has led to our current position.
    Whatever else might be to blame, it is ourselves who must carry most of the responsibility for our current position., having lived to the full
    and indulged in "never having had it so good"
    Aylingpup

  • Comment number 59.

    #55 - so now its 'because people want a lifestyle they could not afford…time to pick up the bill!'

    Not the fault of the banks producing ever more bizarre and incomprehensible tax efficient financial 'instruments' - for which read - 'bets' - in any way then?

    People should of course have borrowed less - many many many people were saying that for many many years - what they didn't know is that they were borrowing from idiots who then took out myriads of complex bets against their ability to pay debt and sold the whole sorry package on to other suckers as if it were real money


    The crunch didn't come from a few senior banker sitting around one day and saying with a heavy heart - "you know we're going to have to tell everyone that sadly they can't go on like this, even though its making us an absolute flaming fortune, we're going to have to spell it out. You first Sir Fred, you're s respected banking expert - oh perhaps somebody else then"

    It came out of the blue because they didn't know what they were doing, they had no idea where the next disaster would come from, their models were rubbish, their bets and market rigging were immoral, they (correctly) believed that all the other banks were in the same boat and that it was impossible to attach any value to all those lovely AAA ratings they'd converted into Porsches and yachts in previous years.

    So they presented the taxpayer with the bill at gunpoint and now that they've been dug out of the hole all their old contempt for the suckers - us - is flowing back with a vengence.

  • Comment number 60.

    YET
    ANOTHER
    DAY,
    YET
    ANOTHER
    BANK
    STORY
    FROM
    PESTON.

  • Comment number 61.

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

  • Comment number 62.

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

  • Comment number 63.

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

  • Comment number 64.

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

  • Comment number 65.


    the website says "you already said that" when i submit the following text:

    YET ANOTHER DAY, YET ANOTHER BANK STORY FROM PESTON!

    Why doesnt the auto-filtering process work for him?

  • Comment number 66.

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

  • Comment number 67.

    Some of what this biased gentleman says is true, in that bonuses are not the sole cause of the problem. They are, however, sure to raise the levels of tension amongst the people who are being forced to pay them, i.e. the public. We all know that it was collective greed and mis-management that has landed us all in hot water, greed exhibited by all professions and by people in all walks of life,by turning houses from places to live into cash machines; nobody can deny that sub-prime lending and bizarre prices are the root of it all. Bankers and traders were complicit in all of this, therefore should be made to pay. It is my belief that most of them should go to jail; this won't happen because our trusted and elected Members of Parlaiment are, perhaps, equally guilty in one way or another. Most of them are probably up to their necks in property scandal, apart from that which we know about already through the expenses expose. Face it, people, we are in deep trouble, and it hasn't even started yet.

    My conclusion is that none of the traders should get any bonuses of any kind until they help to fix what they had a major hand in breaking, i.e. the economy.

  • Comment number 68.

    lets not be taken for fools...

    The City created cheap loans through mortgage origination. That gave the (voting) population the ability to continue to borrow beyond their limits, effectiviely making them feel rich by mortgaging their futures.

    This is very good for incumbent politicans (disincenitve to stop the credit bubble)..
    The politicans want to blame the faceless bankers (GREED!!), yet somehow they dont advertise their role in this mess.

    MOre importantly the politicans have managed to offload all their problems at the door of the bankers. The cost of bank bailouts is c.10% of the deficit (and virtually all the other countries have made a profit out of the bailouts apart from us (mainly due to political interference).. just check the US data if you want confirmation).

    By blaming the bankers, the man on the street believes the banks caused the reciession and the deficit. Errr. totally wrong! just check the numbers not the political spin....

  • Comment number 69.

    Although i am not particularly blaming New Labour for the increase in bankers bonuses or the increases in CEO's / other Directors rumenaration in multiples of the average wage of their employees, when in opposition they did talk a lot about 'dealing with Fat Cats', and under their period in Government this actually got a lot worse.
    With lobbyists influencing policy and business people either making donations (this may now have stopped?) or providing loans to the major political parties, how will we ever get a country which is run for the good of the majority of the people, when these rich individuals exert such power over our political leaders?
    I used to enjoy current affairs/politics, but now i realise it is such a rigged game i am hoping for some kind of people's revolution, which sadly will never materialise in this apathetic country.
    G-Man

  • Comment number 70.

    Turner is being disingenous - bank bonus's per se did not cause the problems correct. However, bank cultures that promote bonus ahievement over effective risk management did cause the crisis.

    Lord Turner as head of the FSA was directly responsible for managing the risk profiles of UK Financial Institutions and so was directly, with his senior management team, responsible for failures of; Northern Rock and before that Equitable Life. In the latter case FSA management and the Bank of England proved unable to learn from their mistakes.

    So Turners view is both self serving view and belies the reality of his responsibility for UK banking crisis that caused the UK Government to own RBS, Northern Rock and a major part of Lloyds. Beyond this there now exists an implied government guarantee on all UK banks.

    Despite this Turner and his acolytes remain in office on unwarranted salaries rather than being turned onto the dole. A fate their joint incomptence has created for many thousands to come in the UK.

  • Comment number 71.

    Lord Turner is right but not sufficient.

    The banks here in the UK that did not fail operated within the same policy regime as those that did not, whatever their systems of pay. That applies to the banks that did not fail in other jurisdictions, too.

    There were failures of policy, regulation, governance, direction, management, operation and risk management.

    Those banks that failed did so because of all these things not just one.

    Nevertheless, the majority of the banks that failed here in the UK were local retail outfits who focussed on lending more and more money to individuals and businesses. This would have been less likely under a different policy and regulatory frameworks.







  • Comment number 72.

    50. At 07:45am on 22 Sep 2010, barry white wrote:
    'If the banks and the bankers are that good to have high bonuses why is the world in the mess it is now?'

    Very well put.
    Someone else once posted, something like that:

    ‘ECONOMISTS’ is there any other profession where you can be wrong most of the time but still be considered an expert?


  • Comment number 73.

    Once again someone who says what he believes knowing it couldn't happen. Any regulation of banking and big business can only be regulation that banks and business can accept. Whilst Governments can put our taxes up and tell us what to do today, unless there are "poll tax riots" we do not have a vote for 5 years. Any unfavourable measures against banks and business could result in them moving countries today. What would be helpful from the likes of Lord Turner would be to establish measures to stop banks and financial institutions gambling with our pensions and savings. It always amazes me that regardless of your fund going negative they still take their cut,to keep their level of profitability and bonus, all they have had to do is ensure the number of mugs signed up grows, now if that is not a no lose situation, what is?

  • Comment number 74.

    10. At 10:31pm on 21 Sep 2010, David M wrote:

    "The problem here is a misunderstanding on behalf of the public and the media. British banks follow a very American way of paying their staff - that of 'total compensation'. This is where the total employee pay packet is a combination of their salary and their performance related bonus."

    Haven't we just banned this practice in the restaurant industry with employers topping up employees wages with tips rather than paying them "what they're worth?" Why one rule for restaurants and another for banks?

  • Comment number 75.

    Lord Turner is right.

    It was the policy makers, who allowed very light regulation of the banks, with the result that by taking risks banks could make huge profits by effectively printing money and so could afford large bonuses, who are responsible. Competition obliged banks to take these risks.

    Governments allowed private banks to generate the extra purchasing power required to keep a growing economies buoyant. With the result that central banks could not easily control inflation, and governments, individuals and companies built up huge debts to banks and other financial institutions, which eventually were bound to cause a crash.

    The UK government were reluctant to interfere because of the tax revenue from bank profits. However this was foolish, because regulating the banks so that the BoE could generate the extra money required, would have meant that the profits made by the private banks would have gone to the BoE, and thence to the taxpayers who own the BoE.

    Basel III is a step in the right direction, but the aim over a period of years should be to increase reserve ratios, step by step, to 100%. This would have the advantages:-

    1. More direct control over inflation by the BoE, and other central banks.

    2. New money could be pumped into the system as required to maintain employment by means of public expenditure funded by quantitative easing. Removing the need for large public and private debts.

    3. The profits resulting from money printing would accrue to taxpayers via BoE profits, instead of to private banks.

    I look forward to Basel IV, V ...

  • Comment number 76.

    capitalism.....where the strongest survive
    crooked capitalism.....taxpayer foots the bill
    too big to fail.....who says?...lets see the banks for what they really are.

  • Comment number 77.

    52. At 07:46am on 22 Sep 2010, the_fatcat wrote:

    End of chapter, you mean. Likewise, if bankers make massive losses for their banks (buying broke Dutch banks or buying 'toxic' assets for example) then surely they must also deserve punitive fines.

    Well, they saw their main lifetime saving vehicle , their bank shares, fall to as low as one sixtieth of previous highs ..... if that is not performance pay on a negative exponential I do not know what is.


  • Comment number 78.

    We are all to blame for the financial crisis. And Yes, it will happen again if the banks get their hands on enough credit. Of course, that is easy as we are all forced to deal with them these days now that everyone has to have a bank account.
    House price inflation is a real evil - but were stuck with it now and it will take years to work its way out of the system through inflation, if it ever does. Meanwhile we are still convinced that a house built in 1950 is worth £200,000 and if we can get that price to rise then this is a good thing. This Idiocy fails to reflect the absolute FACT that these substandard hovels (most UK houses are low quality) should be worth less than they originally were, not more. A house built in the 1950s should cost less than £50k and be affordable to practically everyone. Does noone think its insane that it should take 25 years to pay for something which costs about £30k to build? Most households spend that every few years on cars. Whats worse is the majority of people do not want it to be that way. Wouldn't it be good if we could pay for our houses in 3 or 4 years like we should be able to?

    A property bubble is what brought the Japanese economy to its knees in the 90s and they took about 10 years to escape the dire consequences of that (Guess whats going to happen in the UK). Those who fail to learn the lessons of history are condemned to repeat them...
    How could the thousands upon thousands of experts, analysts and politicians not learn anything from the worlds 2nd(?) biggest economy making all the same mistakes in recent memory? Its pathetic, shameful and to put it bluntly, stupid.
    On top of that the cuts we are now undergoing are the result of a political culture in which a 1p rise in income tax was greeted as if it was the work of the devil throughout the 80s and 90s and 00s. Now we are expected to endure a VAT rise instead - an unfair flat rate tax on everyone. All this speaks of a delusional nation - completely unwilling to face up to reality, each pursuing his and her own interests at the expense of everything else. It all occurs at an individual level. All our striving for efficiency, all those hours at work, are largely meaningless and history will laugh at what we have done.

  • Comment number 79.

    To sum up : "Its your fault because you didn't stop me being bad".

    Institutions who havent got the ability to police their own actions are not responsible and therefore can't be trusted with power.

    In a land were the figures are used to justify anything and everything then we are faced with the same old dichotomy. Morality vs money.

    We all know the price mechanism doesnt work and the only alternative is to interfere with it and impose rules.

    Limits based on how much houses are allowed to be sold for would be a start.

  • Comment number 80.

    banana

  • Comment number 81.

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

  • Comment number 82.

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

  • Comment number 83.

    I think the BBC blog system is somewhat broken:

    1. When posting the added item is the first blog entry not ones own - refreshing fixes this problem

    2. A large number of posters are getting their positing duplicated and I don't think they are actually sending their posting more than once.

    My guess is that the blog posting software has been fiddled with in the last few days causing this problem.

    Please refer this problem to your software people.

  • Comment number 84.

    36. At 04:33am on 22 Sep 2010, onward-ho wrote:
    If bankers makes lots of dosh for their banks , then they deserve stonking bonuses.

    End of story.
    .........................................................................

    Utter twaddle, and the manager who took this line and accepted it needs firing.

    And this isn't envy, the envy is all from these bankers who believe they should live like an entrapreneur with the trappings of such success, they are envious of entapreneurs who make it big and rich.

    However these people are not entrapreneurs, they are EMPLOYEES of a company, and consequently should not have the outrageous rewards they demand, and through lack of regulation, have awarded themselves.

    I'm fed up with politicians waving the finger, they know the whole bunch are rotten to the core, telling them not to do it won't work, taxing them disproportionately is wrong, so a few well honed directives should do the trick, if they refuse to budge, off to the tower with them.

    Furthermore this needs to be done now, immediately, tomorrow may be too late.

    So, lets have some policymaking, today if you don't mind!

  • Comment number 85.

    #10. David M wrote:

    "Yes, some traders do get rewarded obscenely but this is far from the norm. Performance related bonuses allow companies to reward staff who contribute and work hard over those who don't. This is arguably something that other industries and the public sector could learn from."

    So, are we to understand that you have absorbed all of the many studies which have been done into the sources of human motivation, and can draw upon your encyclopedic knowledge of this literature, as well as on your own copious experience of designing reward systems, and that it is on this unquestioned expertise that you base your judgment?

    There's a one-word rude response to this that the moderator won't let me use.

    Your opinion is in fact just that - your opinion.

    Point me to one study, if you can, that "proves" a direct link between performance targets and targeted behaviour. How would anyone be able to tell what performance by the same group would have been in the complete absence of any incentive payment, or with completely different things incentivised? There's no control group to check against. No study done can ever be precisely replicated.

    It's all self-serving hogwash, masquerading as wisdom! Mumbo-jumbo!

  • Comment number 86.

    Here we go again. the interminable debate about how to make a crap system work a little less disastrously.

    The elephant in the room is that the mess we are in was a predictable (and predicted) consequence of the system of fractional reserve banking which puts untold wealth at the disposal of totally self-interested and irresponsible private corporations called banks, which never had the slightest moral right to lay claim to it.

    The bankers are not to blame - we are, for inviting them to rob us.

    OK it was governments who gave away our birthright, and the bankers were only too happy to be served it on a golden plate, but not enough people took any notice or tried to stop it happening.

    This was said by Sir Josiah Stamp, Director, Bank of England, 1928-41 and reputed to be the second-richest man in England at the time:-

    "Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again...

    "Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a happier and better world to live in.

    "But if you want to continue to be slaves to the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit."

    You can't really say fairer than that, can you?

    Fractional reserve banking must go!!!

  • Comment number 87.

    Throughout the last 10 years there were constant cries from business that they had too much red tape and that they didn't need regulation by government but could self regulate instead. In the end it turned out that the bankers in particular couldn't run their own banks. Now they say there should of been more regulation. It's unbelieveable. As for bonuses they were to a large extent paid out of paper profits that came from overinflated asset values. Ironically the same "top people" who had to be paid the huge bonuses to keep them were the same muppets that caused the longest slump for 70 years. They are still the same people.

  • Comment number 88.

    72. At 10:33am on 22 Sep 2010, Dempster wrote:


    ‘ECONOMISTS’ is there any other profession where you can be wrong most of the time but still be considered an expert?
    ----------------------------------------------------------------------
    Have you considered that some economists may be right, pretty much all the time but 1) you haven't heard their pronouncements, or 2) you did hear but did not like what you were being told and so ignored it, or 3) you are a disciple of a particular economist or a certain political viewpoint and only their or that view is valid?

    Dempster, please note, I use the word 'you' in the impersonal, collective sense.

    As I have posted several times, economics is a very inexact science and a somewhat ugly art. Add the complexity of the post post-modern world {the extra post is not a typo or a Beeb site glitch} to the mix and precision and certainty in economics is extremely difficult to attain.

  • Comment number 89.

    86. At 8:32pm on 22 Sep 2010, torpare wrote:
    Here we go again. the interminable debate about how to make a crap system work a little less disastrously.

    Fractional reserve banking must go!!!
    ------------------------------------------------------------------
    Interesting conflict between your first and last paras!

    I think you place too much weight on the shoulders of FRB as the big bugaboo. FRB is the inevitable wash that follows in the wake of a lending system.

    So, what would you put in its place?

    How would you get from where we are now to that position?

    Bearing in mind, there are nearly 200 other nations around the world, how will you convince them to accept this change?

    If they do not accept it, what is the likely effect on our economy and their economies?

  • Comment number 90.

    They are just “Razzle Dazzle 'em, Razzle Bazzle III 'em” us.
    What really detonated this crisis? The fact that because of the risk-weights the banks needed only to hold 20% of the basic capital requirements when investing in triple-A rated securities backed by the lousily awarded mortgages to the subprime sector. Would it have happened if the risk-weight for those investments had been 100%? Of course not!
    And the fact that the risk-weights are not even mentioned in Basel III points to its absolute irrelevance… except of course that the higher, the better, the stronger the basic capital requirements for banks are, the bigger is the regressive discrimination produced by its arbitrary risk-weights against those who, notwithstanding the fact that they have never ever caused any major bank crisis, are perceived as presenting a bigger risk, like the small businesses and entrepreneurs.
    Per Kurowski: A former Executive Director at the World Bank (2002-2004)
    Ps. Let me slip in a brief lesson on how bank regulators have become so fixated on seeing the gorilla in the room that they completely lost track of the ball. http://bit.ly/c66DLp
    http://subprimeregulations.blogspot.com/

  • Comment number 91.

    Lord Turner: 'Blame the policymakers more than greedy bankers'



    -------------------------------------------------------------


    Stupidity and greed, a partnership made in haven.

    Courageous Cable has revealed the hidden Jeckyl and Hyde nature of his opponents behind the media, including the BBC who compared him with Groucho marx and Frank Spencer.

  • Comment number 92.

    re #60
    'e's got yer now! Royal Mail Pension Fund. 'ow 'bout that?

  • Comment number 93.

    I for one am very grateful to Robert Peston for his clear and reasonably unbiased explanation of all this highly complex stuff.

    The way I might have otherwise tended to see it is this. Politicians pretends to work for the good of society as a whole, they will always be blamed by somebody and might even be fired if seen to stray too far from that imaginary social function by the majority. So they can only succeed by being more slippery than most of us. Bankers on the other hand, have no such "moral" constraints. Their objective is to make as much profit as possible for their shareholders and 'all the rest (to quote Albert Finney via Allan Sillitoe) is propaganda'.
    But we, the workers, must rely entirely on our slippery politicians to ensure that our greedy bankers don't get too carried away with the fact that we all keep throwing our money at them, however badly they behave.

    Is it any wonder they all keep behaving so badly?

    This is clearly far too simplistic and cynical and Mr Peston's view is far more preferable, especially with markets already in such a nervous state. Even so and after hearing all the explanations, I would dearly like to see just one politician like Pres Obama or Vince Cable give Capitalism just one really good "tweek", just until it winces and shouts out "sorry, I promise won't do it again"!

 

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