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Money and health at Davos

Robert Peston | 08:35 UK time, Thursday, 27 January 2011

Davos: The World Economic Forum is all about contrasts.

This year's entrance is a hideous white plastic inflatable intestine.

Peter Gabriel

 

But the sun on the glistening snow-capped Alps is sublime.

I just collided with one of my teenage heroes, the original leader of Genesis, Peter Gabriel.

And later today I will moderate a session on the future of the eurozone where speakers include ministers from Greece and Germany and a senior member of the European Commission.

Yesterday I bumped into a senior executive of the US healthcare insurer and provider, Humana, who told me his business was pulling out of the UK - because the company was fed up with "all the changes taking place in the National Health Service" (in the words of this executive).

Humana felt comfortable working with Primary Care Trusts. But doesn't see how it can make a return out of the soon-to-be-implemented system of GP commissioning.

Which, some would say, raises a question for the British government about how much help it will receive from the private sector in implementing the new commissioning system.

From domestic health to global money.

I had a rivetting chat with the chairman of a mega bank. He suggested that central bankers and regulators on the Financial Stability Board may achieve the opposite of what they intend with their plan to impose a capital surcharge on so-called Globally Significant Financial Institutions (giant banks like Citigroup, Deutsche Bank, Bank of America, Barclays, HSBC, RBS, UBS et al).

This battle-weary banker believes that if the mega banks are singled out in this way with a requirement that they must hold more capital than other banks as a protection against losses - and if they are also regulated more intensively than smaller banks, which is already happening - then investors will see the mega banks as the safest banks in the world.

That would lead to capital and liquidity flowing out of smaller banks and into the mega banks over the longer term. Which means that the mega banks would become even bigger, relative to smaller banks and to the financial resources available to governments for bailing out banks in a crisis.

In other words, trying to make the mega banks safe with an additional capital tariff could have the perverse effect of making these banks bigger and more powerful.

Since almost no amount of capital can ever completely guarantee the safety of a bank, a mega bank capital surcharge could exacerbate the risk that these banks become so big that they are too big for any country to save, should they run into difficulties.

And of course there would be implications for the intensity of competition between banks and the political clout of these beasts - implications which many would describe as unhealthy.

To put it another way, if it is thought that size in banking brings incremental dangers, structural reforms - cutting them down to size, for example - may be necessary, whatever is ultimately decided on additional capital requirements.

Update 09:27: There is a bit of a divide opening here in Davos between the bankers and the rest (leaders of non-financial businesses, academics and so on).

The bankers are mostly saying that the banking system has been fixed, that they now understand all about risk (having apparently known less than an infant about risk before August 2007) and that regulators are meddling twerps who will ruin the global recovery.

Hmmm.

The director of the LSE, Sir Howard Davies, in his FT Davos blog quotes one industrialist as saying that bankers are apparently not on planet earth.

That is a point of view that others are sharing with me this morning. "Do they have no idea how the rest of the world sees them?" is how one well-known business leader put it to me.

He was responding to an outburst by Jamie Dimon, chairman of JP Morgan, in a session this morning, in which Mr Dimon complained that his bank wasn't given enough credit for the good things it did and does.

Which may well be so. But becoming cross won't help.

As I pointed out earlier, the bankers have some decent points to make about possible perverse and unwanted effects of some regulatory changes.

But if they want to influence the debate on the future of the industry, implying that they know best and regulators, politicians, the media and the rest of the world know nothing may not help.

Update 10:23: Bantered with Mayor Boris about his looming choice between Spurs and West Ham for the Olympic Stadium, touched the hem of the garment of the blessed William Jefferson Clinton, told T Blair he's looking well (which he is).

I hate myself for being so shallow.

Comments

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  • Comment number 1.

    I find it interesting that you manage to get a mention of the NHS into this article.

    On Radio 4's Today there was an interview with the head of Standard Chartered and he said that "subsidiarising" the large banks would lead to inefficiencies and added cost.

    Others tell us that "subsidiarising" the NHS will lead to efficiencies and savings.

    How can these both be true, or even untrue?

  • Comment number 2.

    Bankers will fight any regulatory proposal.

    Ask the chairman of the mega bank what steps he suggests to ensure banks have indirect state support removed once and for all? What are his views on the bailout of the banking system by the state sector?

    Industries benefiting from indirect government support have always fought tooth and nail against that support being removed.

    So Robert, is Rupert Murdoch, James Murdoch or Rebekah Wade at Davos? If you see them you know we all have some questions for them.







  • Comment number 3.

    Surely the additional capital requirements would make the mega banks less competitive than the smaller banks, increasing the latter's relative attractiveness to investors, and so rebalancing the flow of investment?

    If so, by adjusting the level of the capital surcharge, the FSB would be able to manage the size of the mega-banks by controlling the risk/reward gradient between them and the smaller banks. So the argument sounds like scare-mongering to me.

    I hope you are still a Genesis fan Robert!

  • Comment number 4.

    So if this is such a great deal for the 'mega banks' you would think they would be rushing to embrace it. I haven't heard the following sentences so far "No please give us more regulation, it's good for us!" and "What's that you say, hold even more captial, why of course, we'd love to!" - please mistress may I have another.

  • Comment number 5.

    Hopefully not an exercise in naivety - just reporting what was said? Should we do the opposite to what these bankers say because do they not lack serious credibility and integrity. Their line amounts to the way things are is the best of all possible worlds. Your mega banker appears to favour a glass steagall approach but if asked I suspect he would oppose that. Retaining one of the big beasts in public ownership would enable the solution to a lot of the faults of the current oligopolistic market and be a nice little earner for the UK government.

  • Comment number 6.

    Strange comment by Humana. Change in the public sector usually is very lucrative for the for the private sector - some contractors rely on it to boost their tight margins resulting from the bidding process. I am sorry but there will be no shortage of private companies in the NHS reorganisation game who will have a field day taking money off the GP 'fresher' Consortia whether it is to provide services or to advise GP's about who provides the services - guaranteed!

  • Comment number 7.

    RP " The bankers are mostly saying that the banking system has been fixed, that they now understand all about risk "
    ++++++++++++++++

    Fixed? NO! Make all CDOs and other derivatives Null and Void and that may be some way to a fix.

    As things are the risks cannot be calculated.

  • Comment number 8.

    4. At 09:32am on 27th Jan 2011, sacallaghan wrote:
    "So if this is such a great deal for the 'mega banks' you would think they would be rushing to embrace it. "

    I must have read the comments slightly different for I saw it as someone pointing out one of the unintended consequences of rushed, ill-thought regulation

    RP wrote:
    "that they now understand all about risk (having apparently known less than an infant about risk before August 2007) and that regulators are meddling twerps who will ruin the global recovery"

    Shame about the unbiased bracketed comments Mr Peston. The nature of risk changes over time and so we must be forever learning about real risk and perceived risk. And regulators are "meddling twerps" as their actions also played a part in fuelling the property and credit bubble and, as I refer to above regarding post #4, their further meddling may mean that what they aim to achieve and what they actually achieve are poles apart

  • Comment number 9.

    The old decaying men at Davos are at it again - bad mouthing everyone except themselves! From what one reads contrary to the norm there will be no queues at the ladies loo! Davos shows us just how corrupt the temple on mammon has become - watch out for the holy avalanche that does away with the lot of 'em!

    Robert: can you please find out the average age of attendees? Talk about grumpy old men! We have created, or allowed to be created, a system which is so un-equal in outcome that something has to be done about it before the whole thing collapses.

  • Comment number 10.

    I have read a number of interesting articles on the BBC web site recently, all with a familiar theme, namely 'That we are all in this together', except of course we are not. Why is it we allow Eastern European millionaires to pay millions to live in huge houses in London, but let them get away with paying no tax?, does anyone really believe they worked hard for their millions? Lord Young was sacked for really telling the truth, we are not all in this together, of course the many millions of ordinary people have to pay more in taxes to make up for the rich that pay little or no tax and caused the 'problem' in the first place. we have become a nation of crooks where the population of ordinary people are the 'marks'. Why do we need a review of heating oil costs when we all know the truth, companies and individuals saw an opportunity in very cold weather to make lots of money and took it. This is very similar to pubs and garages putting up prices just before a known tax rise so they can blame the tax rise for increasing prices, and of course profits. I see the latest scam is for motor manufactures to raise prices above the 2.5% VAT increase and then blame the rise on the VAT increase. Why is it that utility suppliers always increase the direct debit a few months after you switch ?, of course they give any surplus back to you, but what a great scam, you, the customer capatilize the Utility company giving them a huge increase in return on capital employed and hence company profits, if you dont believe me just look at Utility company profits, are they in it together?, dont bother complaining to the so called regulators who are in the pockets of the big suppliers, what a waste of money they all are.

  • Comment number 11.

    Robert,

    Jamie Dimon's outburst about regulation hurting.

    So bankers are staring to throw their toys out the pram, this is good news.

    They can cry, kick and scream all they want, no-one is listening to them.

  • Comment number 12.

    @1: "Others tell us that "subsidiarising" the NHS will lead to efficiencies and savings. How can these both be true, or even untrue?"

    They can't, of course. Sir Philip Green's review pointed out that the government - and this includes the NHS - almost never uses its huge purchasing power to drive down costs, because of the vogue for "empowering" small bodies. This isn't rocket science, it's basic business.

    So what are the Tory proposals? Putting purchasing power in the hands of even smaller groups, in the form of individual GPs and GP "consortia", that somehow, magically, the government hopes will coalesce without any centralised interferance. In other words, the exact opposite of the conclusion of the Green review.

    Philip Green may not be everyone's cup of tea, but if there's one thing he's very good at it's understanding how markets work. Clearly, Lansley - who as far as I can make out, has never worked in any private sector business - thinks he knows more about how to create efficiency than someone who's create and run multi-billion pound businesses.

  • Comment number 13.

    Davos - should be called Davros after the evil leader of the Daleks.

    IMF stormtroopers abound - seee what damage has been done and what's in store for us.

    "Dr Rogoff, a former chief economist with the IMF, said the scale of the austerity foreseen in Ireland was akin to that seen in Ceausescu-era Romania."

    http://www.irishtimes.com/newspaper/finance/2011/0127/1224288397995.html

    Davros is merely the conference where the fascists of the globalised corporate world decide how it's best to suppress the people and whether they might have gone too far this time.

    "The bankers are mostly saying that the banking system has been fixed, that they now understand all about risk (having apparently known less than an infant about risk before August 2007) and that regulators are meddling twerps who will ruin the global recovery."

    Twerps ruining the global economy - pot - kettle - black.

    What a shame people don't recognise fascism when they see it - too clouded by their pre-conceived image of Hitler and Stalin. I guess most people won't see fascism until mass graves are discovered somewhere - which by definition it will be far too late.

    Benito Mussolini said fascism should be renamed corporatism - as it is the merger of corporation and state. If the meeting in Davos isn't a blindingly open example of state and corporations conspiring - then I don't know what is.

  • Comment number 14.

    I for one wouldn't be too disappointed if US insurers decide they can't make enough money from the NHS GP Commissioning system. After all it is they that have lead to the US having the most expensive health care system in the world, one that has increased hugely in cost over the last decade, with little improvement in outcomes.

    On the subject of banking, there is much truth in the comments from the Chairman of the mega-bank. Preventing banks failing, and preventing a bank failure from bringing down the system are very different beasts. Preventing failure can only be achieved by implicit or explicit government guarantees, as even massive amounts of capital (unless extremely liquid) will probably fail to help a bank when other banks decide to stop lending to it, due to concerns about its viability.

    Preventing collapse of the system on the other hand means ensuring that no bank can be ever become too big to fail, which either means limiting the overall size of the organisation, or coming up with a structure that allows damaged parts to be wound up without affecting the entire bank.

  • Comment number 15.

    I am going to give Davos a miss this year as I usually do. It is not that the money is an issue but it is the time. The very thought of spending my time with people who think they are influential demonstrates to me the futility of the human condition. They just like to think they are influential and that their agenda matters. They are not and it doesn't. You and Auntie Beeb should stop encouraging them.

  • Comment number 16.

    #8

    Whilst I don't think regulators are all that great either, but the days of letting banks to just get on with it are over.

    Light regulation has blown up in our faces, so something has to change. If this means breaking up the big banks into smaller banks with more capital then so be it. It's only a small part of what needs to be done.

    What I understand, is that bankers are lobbying hard for the status quo -no need to ask why.

  • Comment number 17.

    8. At 09:56am on 27th Jan 2011, yam yzf wrote:

    "Shame about the unbiased bracketed comments Mr Peston. The nature of risk changes over time and so we must be forever learning about real risk and perceived risk. And regulators are "meddling twerps" as their actions also played a part in fuelling the property and credit bubble and, as I refer to above regarding post #4, their further meddling may mean that what they aim to achieve and what they actually achieve are poles apart"


    ...but you think the credit boom was the fault of the people and not the banks - so I'm afraid your claim that regulators are meddling twerps holds very little water as most of what you say doesn't seem to be grounded in any facts.

    Let us suppose there were no regulators - so who would be bringing all the cases of criminal activity to the courts that we're seeing now? - would the bankers be volunteering themselves?

    what a nonsense - clearly your loyalty to the banks overrides your shame of being completely wrong.
    The regulators didn't CAUSE the crisis any more than the lack of policemen CAUSED the burgulary of my house.
    The burgular did, and the system that created him did - just like banks.

    Still, you won't understand that because you block out all reason when it comes to defence of banking.

  • Comment number 18.

    Bankers much like the papacy during the middle ages have more power than their positions deserve.

  • Comment number 19.

    Here's a short, very interesting, technical article by Paul Krugman:

    http://krugman.blogs.nytimes.com/2011/01/25/are-low-rates-a-subsidy-to-banks/

    What it shows is that economic policy it two-fold. You need the right principles, but you also need to do the maths. I suspect that HMG fails on both accounts.

  • Comment number 20.

    Are we witnessing a change in approach from the bankers?

    First we had we will leave for pasture new and now what ever you do will benefit us - the big boys!

    I would be interested in knowing what your gut feeling were after the ‘riveting chat’ on their take on their position, are they/his he still as confident/arrogant. I realise you said ‘the battle-weary banker’ but that doesn’t indicate if they are on the edge of a cliff or miles away and regrouping?

    Would it be fare to say, that if they are becoming more rattled, another country will soon find itself in the line of fire, as they flex their monetary might?

    We all know that they are good ‘brag’ (poker for the Americans) players so was the outburst by Dimon played out for the gallery or defensive?

    Either way lets keep the pressure on them!

  • Comment number 21.

    11. At 10:06am on 27th Jan 2011, newblogger wrote:

    "Robert,

    Jamie Dimon's outburst about regulation hurting."

    Would this be the same Jamie Dimon who was present at the Fed in 1998 when the major bank heads gathered to discuss how they were going to bailout the 'unregulated' hedge fund LTCM or face the downfall of all the banks?

    ....you would have thought he would have known better....after all not many people get involved in 2 major worldwide bank bailouts in a lifetime.

    (and for those Capitalists who are wetting themselves dying to tell me LTCM was a hedge fund and not a bank - well it was Merril Lynch who lent LTCM the money and it was them who faced total collapse as a result - along with the other banks)

    The only difference to the recent crisis is that one was small enough for the banks to bailout LTCM themselves - this time it was too big and the responsibility fell to the Government.

    Capitalists and history clearly aren't compatible

  • Comment number 22.

    An insurance company doesn't see how they can work, including medium/long term planning, with 500-600 unconnected, uncoordinated, cabals of self employed GPs ?

    That's pretty much how most of the NHS sees it.

  • Comment number 23.

    It's an old question, and I'm probably foolish to even ask it, but - please, Mr Peston - could you explain exactly why the megabanks cannot be broken up into retail banks (which would have implicit government guarantees) and investment banks (which would be allowed to fail if they performed badly) - other than the fact that it might reduce the banks' profits.

    Ok, I know that Lehman Brothers was an investment bank, but its collapse was only the trigger which precipitated the crisis, not the underlying cause.

  • Comment number 24.

    The Banks still don't get it. A systemic change is required and if the argument is that the increased capitalisation of the mega banks will create bigger banks, then they will have to be broken up, which many feel is necessary anyway.

    This is one argument sanity has to win. If the Banks get their way this disaster will happen again only next time it will be significantly worse.

    I may play a Peter Gabriel album now!

    http://bit.ly/fHAY9A

  • Comment number 25.

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

  • Comment number 26.

    Robert,

    Just for the purpose of conducting an informal straw poll...

    Ask all of the 'movers and shakers' that you come across in Davos whether they would describe themselves as LIBERTARIAN.

    (i.e. what is the unifying ideology that drives them all and how does that manifest into public policy and legislation?)

    We should be told what it is!

  • Comment number 27.

    Peston:” The bankers are mostly saying that the banking system has been fixed, that they now understand all about risk…”

    Exactly… my sentiment, too. What is never put out succinctly: banks are both ‘buyers and sellers of risk’. Consumers and the Governments are essentially only buyers of risk. The consumers are somewhat fortunate that others work hard to mitigate their risk, for instance, like buying dog food. No dog owner expects his dog to chock on the tasty edibles for animals, sold by Mars and Nestle. The Governments for the defence of the realm invest heavily in military bodies and hardware, to mitigate the risk of invasion. The Governments in particular can never be committed ‘sellers of risk’ to the citizen-risk buyer; the ire of aggrieved citizen-risk buyers could be catastrophically unmanageable.

    The bankers on the other hand being financial intermediaries have enough ‘bed encounters’ with risk. To such an extend that that they have no qualms in doing social work like providing money to dead-beats for property speculation whilst negating their fiduciary duties as custodian-employees of their banks’ shareholders. These dead-beats were enticed with cheaper front-end interest charges and approved with less stringent credit assessment. All well and good to serve capitalism on a more personal level like getting bonuses for exceeding loan targets and bundling them into CDOs for sale to Aunties Sallie and Fannie and other like-minded relatives.

    When the financial melt-down occurred, the Governments, the natural born risk-takers, did what it knows best: serve their other appointed risk-takers: the banks. Systemic economic collapse could mean no more country. And as for the citizens; like all TV audiences can be managed and coddled into patient stupor for the next intriguing episode.

    So long as Governments don’t want to make credit assessment on each individual citizen and extend the necessary credit, the banks are the only game in town.

  • Comment number 28.

    Come one folks, the economy might be stagnant, inflation rampant and politics adulterant - but look on the brightside.

    This time next year we'll all be milwionairres!

  • Comment number 29.

    17. At 10:22am on 27th Jan 2011, writingsonthewall wrote:

    ...but you think the credit boom was the fault of the people and not the banks - so I'm afraid your claim that regulators are meddling twerps holds very little water as most of what you say doesn't seem to be grounded in any facts.

    Let us suppose there were no regulators - so who would be bringing all the cases of criminal activity to the courts that we're seeing now? - would the bankers be volunteering themselves?

    what a nonsense - clearly your loyalty to the banks overrides your shame of being completely wrong.
    The regulators didn't CAUSE the crisis any more than the lack of policemen CAUSED the burgulary of my house.
    The burgular did, and the system that created him did - just like banks.

    Still, you won't understand that because you block out all reason when it comes to defence of banking.

    =============================================================

    Firstly its good to see you back WOTW, you deffinately make the arguments more interesting and if your house has indeed been burgled then thats indeed a terrible thing.

    anyway on with my points. as yam yzf and myself have said on previous blogs we do not believe the fault to be that "solely" of either party rather that both parties have an amount of due care. Yes the banks are to blame but so are those who took out loans and mortgages without having the capabilitiy to repay.

    secondy, Yam Yzf is not saying that regulators should be gotten rid off and have the markets allowed to run their own course, he is merely stating that what they try/plan to achieve and what the eventual outcome of a policy change may not be the same. as RP has stated in the blog, the eventual outcome of plans by the regualtory bodies to even out the playing field between smaller banks and their Mega counterparts may infact lead to the mega banks becoming even more powerful.

    and lastly your final comment is just silly as we could quite easily throw that right back at you but switch Defence for attack

  • Comment number 30.

    #17 - Try writing something that is based on what people have actually said rather than just soundbites.

    "...but you think the credit boom was the fault of the people and not the banks "

    No, I have said all along that no one person/institution is to blame, but until the public and governments accept that they too had a part in it then nothing can change in a sensible matter

    "the lack of policemen CAUSED the burgulary of my house. "

    The lack of policement certainly contributed, though, for if there were more police walking the beat then the risks to the burglar would be higher

    "what a nonsense - clearly your loyalty to the banks overrides your shame of being completely wrong."

    And clearly because someone holds a different view, then they are wrong - hmmm, the perfect world you seek might not be a great place then if different views are not allowed :-)

  • Comment number 31.

    On the strength of the first 2 blogs from Steph and Robert on Davos, my advice would be to "Start drinking heavily"

  • Comment number 32.

    #29 and #30

    I aportion no blame to the sub-primers, they were only fulfilling their purpose.

    What you have to ask is why sub-prime went from 5% of the mortgage market to 30%?

    Protecting profit margins? Ran out of good borrowers? Deliberately blowing bubbles?

    I don't see how banks can blame their customers for the health of their balance sheets.

  • Comment number 33.

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

  • Comment number 34.

    Thinking about what is happening and why, here’s my take:

    If we are looking at the overall picture, pre Euro, it would make sense to have a sovereign country such as the UK stay out until such times as the Euro settled in. This intern may leave the UK vulnerable but it makes sense to me all the same!

    What I see happening now is what happens in every playground; jockeying for positions within the pecking order. In the playground this inevitably leads to fights and squabbles because one see him or herself as bigger than another and hence wants a higher position. So who are they: the $ and the £ representing the old world, the Euro representing the new kid on the block and the emerging currencies the next class coming up. But in time honoured tradition the cock (bully) of the playground (banks) as his or her fingers in/on each of them. The $ protects itself by becoming friends with the bully while the £ tried to befriend all. The next class stick together and put their own bully forward while the Euro battles everybody except the £.

    The original bully (banks) see the Euro as weak and so starts many fights to prove his or her's might and that he or she is still in control but the Euro rallies with some help from the £ and therefore the bully starts to have a stability problem but instead of the £ and Euro finishing off the bully they back off and help him or her recover in the hope that he or she become their puppet figurehead. What they hadn’t envisaged/seen is that the bully was already the puppet of the $ because the $ was feeding the bully daily with sweets. So the turmoil still remains!

    While all this is happening the next class having appointed their own bully start getting stronger because of the others instability.

    And there boys and girls is my basic take on where we are now. Is it about money, I don’t think so - is it about a power struggle ; Yes.

  • Comment number 35.

    You can take the bankers at face value and accept that they did not understand the risks that they were taking on our behalf.

    OR

    You accept that they were operating a sophisticated Ponzi scheme.


    Either way, strong regulation is required.

  • Comment number 36.

    Davos, better know as “the gathering of the swine”. Interesting to see that even the non banking capitalists are beginning to alienate their banking chums. Perhaps they have a drop of common sense after all, or maybe its because they know that they can actually create wealth whereas the banks cannot.

  • Comment number 37.

    30. At 11:24am on 27th Jan 2011, yam yzf wrote:

    No, I have said all along that no one person/institution is to blame, but until the public and governments accept that they too had a part in it then nothing can change in a sensible matter
    =============================================================

    We've had no choice but to accept a part in the aftermath. The part being the tab picked up following billions welched by 'talented' gamblers who bankrupted the country.

    For the record I was offered a mortgage much higher than the one I ended up 7 years ago. However I told the 'financial advisor' who appeared to have zero knowledge of risk and lots of knowledge of sales that the mortgage company would end up in a pickle the moment house prices started to level off.

    Apportiong blame - 60% Banks, 30% Government's abject failure in effective regulation (of whatever colour because none had or even now has a distinct policy) and 10% of the borrowers who extended themsleves.

  • Comment number 38.

    'The bankers are mostly saying that the banking system has been fixed, that they now understand all about risk (having apparently known less than an infant about risk before August 2007) and that regulators are meddling twerps who will ruin the global recovery.'

    ............

    That is not so of the Uk ... which is uniquely unbalanced by the size and nature of its banking industry ... and which needs a very special series of fixes.

    But the years of discussion are just a tactic by the banks/UK establishment/lobbyists to wear everyone down ... what is needed is a particularly determined set of UK politicians to tax the banks down to size and flatten them out for competition, strategic and risk reasons ... that is all that is needed ... some bankers would leave the UK ... good riddance ... and a code of national interest goverance for the ones that remain in the UK covering issues such as:

    - ethics
    - moral values
    - approved banking training programmes
    - contracts of employment subject to a code of conduct about acting in the strategic UK national interest
    - updated system for codes of conduct
    - penalties for failure, fraud
    - put a committee of UK SME industrialists in control of UK commercial bank lending ... that would shake them up!

    Why doesn't our govt just get on with it ... its is all just dithering

    Tax tax tax the sleaze, arrogance, greed and strategic inefficiency... just do it ... what are they waiting for ... where is the national interest in all of this ... not with over-sized, anti UK bankers !

    March budget ... let 'em have it ... Corporal Jones!

  • Comment number 39.

    10. At 10:00am on 27th Jan 2011, Terence Bullard:
    Well done for spotting really going on, you join an ever growing group of the population that knows they have been had by the system, and are becoming restless for change. So far the government have been wading in with their size 9s which is merely increasing the discontent.

  • Comment number 40.

    @12 Of course NHS failures to use buying power could also be attributed to just moving bureaucrats into buying roles rather than employing specialist buyers, a lack of commercial perspective etc.

    Localism certainly risks the potential loss of economies of scale, but then if a body is too distant from what its trying to achieve, there is always a chance of some of its actions being for itself and not absolutely in the interests of the end user.
    Once a certain critical mass has been achieved, organisations can start to suffer negative economies of scale as they become unwieldy and bureaucracy takes over, with things becoming more about blindly following procedure than doing what is likely to achieve the best results.

    Cutting down the levels of unproductive hierarchy in a structure makes sense, whether this is the best way to achieve it and whether GPs will form consortia of an appropriate size (hopefully with these consortia also co-operating with each other where it is beneficial) is another matter.
    Driving the structure of the hierarchy from what achieves the best end user results makes sense (rather than a top down approach), however, if the changes aren't handled well, there is every likelihood of there beign a negaitve impact at least in the interim until new structures form and become established.
    Hopefully GPs will think on the issue and not just form consortia at a level that replicates SHAs and PCTs.

  • Comment number 41.

    http://www.bbc.co.uk/news/business-12295841
    ==============================================================

    Thanks for letting us know that and thanks for explaining how.

  • Comment number 42.

    33. At 11:55am on 27th Jan 2011, writingsonthewall wrote:
    I predict a riot....
    http://www.bbc.co.uk/news/business-12298239

    Isn't it great how the people are awakening.....

    ========================================================

    so are you saying that bombing people is ok, maybe the bomber in moscow was merely protesting against the fascist bankers...........that seems a bit radical even for you

  • Comment number 43.

    Nationlise all UK banks, and sequestrate all foriegn cash assets. Failure to comply do what Russia does, jail CEO's for an eternity! Personally I'd put them all up against the wall. PS Don't get sick, old or unemployed in this country, things are going to get much worse...........

  • Comment number 44.

    33. At 11:55am on 27th Jan 2011, writingsonthewall wrote:
    I predict a riot....
    http://www.bbc.co.uk/news/business-12298239


    No respect some people. What's their problem?

  • Comment number 45.

    @ 30. yzf wrote:

    "No, I have said all along that no one person/institution is to blame, but until the public and governments accept that they too had a part in it then nothing can change in a sensible matter"

    Absolutely, but its so much easier to pass the blame off onto others and to focus the backlash in that direction, especially if that other group is already the subject of envy and seen as being in a position to withstand the mob mentality.

    Of course governments were to blame, they encouraged it and rode the feel good factor form the resultant bubble fuelled, perceived spending power for all it was worth (and gladly took their cut to spend on whatever social engineering projects appealed to them).

    Vilifying bankers is a convenient way to divert attention from others. Abysmal accounting standards, lack of stewardship borderign upon wilful negligence by institutional investors, governement looking for anything to keep the feel good factor until the next election and the greed of the ordinary populace (which isn't poilitically acceptable to comment on) all contributed.
    Its true that bankers did make some horrendous mistakes (but then in many ways the losses that occurred during the soundbite named "credit crunch" [as if credit is the main wider issue, when an addiction to excessive borrowing is at the fundamental heart of the problem - and the fact that it is masking an underlying long term decline in many developed economies) were offsetting over declared profits from earlier years. The fact that these profits were paid out or loaned out chasign more profits just meanst they weren't there to counter the corrections and resultant revaluations.

    Howeverm, the blame goes much wider and it seems as though blaming bankers for everything is both convenient and easier; after all looking at the wider reasons would be much more disconcerting.

  • Comment number 46.

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

  • Comment number 47.

    #32

    This is the point we try to make in that regulations have knock on effects :

    http://www.ehow.com/about_6470709_history-subprime-lending.html

    According to "A Short History of Subprime" published on Allbusiness.com in 2006, changes in government regulations are at the heart of the rise in subprime loans. Until adoption of the Depository Institutions Deregulatory and Monetary Control Act in 1980, usury laws restricted lenders from charging the high-interest rates that would offset the risk of subprime loans. Then the Tax Reform Act of 1986 allowed interest deductions on mortgage loans, thus making them a popular form of lending


    and also political interference:

    http://en.wikipedia.org/wiki/Community_Reinvestment_Act

    So government and, by default, regulator interference is perhaps the prime cause for subprime. Borrowers, however, still have to accept responsibility as they were the ones who signed on the dotted line. If the risks were not explained, then yes that is wrong. If the risks were explained, and subsequently ignored, then sorry, responsibility must be accepted.

  • Comment number 48.

    We seem to missing the point, make banks structure themselves in such a way that they can be wound up / liquidated as any other business. This way teh too big to fail / save argument is solved. If they take too many risks they fail and investors, debt providers etc lose their money. The good well run and managed banks will tehn want to be as transparent as possible on how safe and well run they are inorder to attract capital that does not cost too much. As Mr Lanchetser says in his books Whoops think airlines, food companies etc who make a real virtue of showing how safe they are so we will trsut and use them. Simple really.

  • Comment number 49.

    As to banking regulation; simple; too big to fail = too big to be allowed to exist (and if the bank is a global entity, its involvement in the national economy should be limited to a sustainable level).

    Also, measures to reduce the risk of failure should be directly linked to the potential impact of any failure. (such measures should therefore make it impossible for any organisation that is "too big to fail" to operate).

    Hopefully this is possible without hamstringing the global investment banking activities that the economy is so dependent upon - but with financial services being such a massive part of our economy (and one of the few ways that we try to pay our way in the world), whether its possible to totally insulate the rest of the economy from banking issues is debatable.
    We need financial services, but if we're going to provide a guarantee, we might as well make them pay a suitable insurance premium for it (provided other regulation wensures that this doesn't create a morale hazzard by encouraging risk taking, as downside risks are "covered").

  • Comment number 50.

    #351, onebadmouse :
    "You can take the bankers at face value and accept that they did not understand the risks that they were taking on our behalf."

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

    I think that is the case. They were not alone. The others who did not (possibly still do not) understand were the regulators (all countries), the Credit Rating Agencies, the banks internal risk management systems and let us not forget the External Auditors.

    What is really worrying is they are all continuing as before.

    BTW George Soros says 'RIP Euro'. I suppose he has taken a position on this.


  • Comment number 51.

    There would be no question of government interfering in the internal affairs of banks if these banks were nothing but private businesses like any others.

    Banks are different. They do not merely lend out depositors' money, or even 8 times, 10 times, 12 times, or any other multiple of depositors money.

    Banks, alone among businesses, have a part not only in creating our national currency, but in choosing how it should be put into circulation. In fact, now that non-cash, or digital, money represents more than 97% of the UK's total money supply, banks effectively enjoy a monopoly over the supply of money to the economy.

    If banks wish to mind their own businesses, without intrusive regulation, they should stop interfering in the direction of the economy by deciding who should have first use of new money, and for what purposes.

    They will therefore welcome the proposals put forward here, http://www.positivemoney.org.uk/solutions/ , and urge MPs to update the Bank Charter Act of 1844 as soon as possible. They will then no longer be burdened by the responsibility of providing the nation with its means of exchange, and can concentrate on competing for customers in the open market, like other businesses. At the same time, the real economy would benefit from a national currency created, as a public utility, free from any debt at source.

  • Comment number 52.

    13. At 10:16am on 27th Jan 2011, writingsonthewall wrote:

    Davros is merely the conference where the fascists of the globalised corporate world decide how it's best to suppress the people and whether they might have gone too far this time.
    ==========================================================

    Yep about sums it up - Political, Financial and Media elite glad handing and back slapping each other on how talented they are and what a good job they are doing in trying circumstances, whilst failing to see beyond the end of their own noses what they have created with a basket case approach to apportioning of world's resources.

  • Comment number 53.

    > This battle-weary banker believes that if the mega banks are singled out in this way
    > with a requirement that they must hold more capital than other banks as a protection
    > against losses - and if they are also regulated more intensively than smaller banks,
    > which is already happening - then investors will see the mega banks as the safest banks
    > in the world.

    Yeah – size taxes would be even better. Thank that weary fellow for suggesting it, would you? Mega banks would not become bigger if we use size taxes tackle the problem banks created by being so bloated, unwieldy and greedy.

    > In other words, trying to make the mega banks safe with an additional capital tariff
    > could have the perverse effect of making these banks bigger and more powerful.

    Gosh, that fellow's little brain has been whirring away, hasn't it? He has a list of excuses as long as your arm for avoiding his responsibilities.

    So let's size tax him down to size, so he needn't worry so much. He should be thanking us, eh?




  • Comment number 54.

    http://www.bbc.co.uk/news/world-middle-east-12295864
    Its almost as if protests are spreading! Surely not. Must be a coincidence.

  • Comment number 55.

    If we can't get governments to control what the bankers get up to then can we get the pension companies to exert some control? The banks aren't autonomous bodies that can take money without the owners' consent. Ultimately WE own the banks through our pension companies. We need to hold them to account by using the pension firms on our behalf.
    If we can't get this to work then we should pull money out and put it directly into other investments such as non banking sector shares or property or tins of beans or gold bars.

  • Comment number 56.

    45. At 12:39pm on 27th Jan 2011, Reaper_of_Souls wrote:
    Howeverm, the blame goes much wider and it seems as though blaming bankers for everything is both convenient and easier; after all looking at the wider reasons would be much more disconcerting.
    ............
    Seems to me quite a lot of us are looking at the wider issues already; ie yet another crisis of capitalism due to over accumulation of wealth, a debt based monetary system, inequality in the distribution of wealth leading to reduced demand, and capitalism need for perpetual growth to ensure stability in a world of finite resources. The failure of the banking system is the tip iceberg that is capitalism, and which the world's economy has ran into and facing crisis as a result.

  • Comment number 57.

    When the bankers, Diamond and the rest of them are arriving at their corporate offices carrying their flasks and sandwich boxes like the rest of us - we'll know that the new 'size taxation' of banks is working properly.

    Cheese and tomato, Bob?

  • Comment number 58.

    47. At 12:43pm on 27th Jan 2011, yam yzf wrote:
    #32

    This is the point we try to make in that regulations have knock on effects :

    http://www.ehow.com/about_6470709_history-subprime-lending.html

    According to "A Short History of Subprime" published on Allbusiness.com in 2006, changes in government regulations are at the heart of the rise in subprime loans. Until adoption of the Depository Institutions Deregulatory and Monetary Control Act in 1980, usury laws restricted lenders from charging the high-interest rates that would offset the risk of subprime loans. Then the Tax Reform Act of 1986 allowed interest deductions on mortgage loans, thus making them a popular form of lending


    and also political interference:

    http://en.wikipedia.org/wiki/Community_Reinvestment_Act

    So government and, by default, regulator interference is perhaps the prime cause for subprime. Borrowers, however, still have to accept responsibility as they were the ones who signed on the dotted line. If the risks were not explained, then yes that is wrong. If the risks were explained, and subsequently ignored, then sorry, responsibility must be accepted.
    ..............
    The same old record again and again. And who were campaigning to get government to slackening the regulations, the punters or the business owners?

  • Comment number 59.

    I dunno why these bankers are complaining about the possibility of their megabanks being split up.....

    Surely if there are more banks then double the number of CEO's will eventually be able to claim their birthright of exorbitant bonuses and share options.

    That's the trouble with bankers.....they are such short term thinkers!

  • Comment number 60.

    @8. At 09:56am on 27th Jan 2011, yam yzf wrote:
    "The nature of risk changes over time and so we must be forever learning about real risk and perceived risk."

    Like Saddam Hussein's ability to launch WMDs within 45 minutes of a strike order? The debate over whether that was real or perceived still rages in some quarters. I expect Dr Kelly could tell us. Oh, hang on...

  • Comment number 61.

    #45 Do you really think the 'ordinary populace' are greedy?

    I thought I was a pessimist.


    #47

    "If the risks were not explained, then yes that is wrong. If the risks were explained, and subsequently ignored, then sorry, responsibility must be accepted."


    If you default on your mortgage - you lose your home -most understand this, and this is where the responsibility ends!

    If the bank then goes bankrupt -that's the bank's fault!

  • Comment number 62.

    29. At 11:22am on 27th Jan 2011, avalanche_invesmtents#
    30. At 11:24am on 27th Jan 2011, yam yzf

    You two have responsibility issues. Real people don't need rules and regulations to not destroy the economy with their greed.
    Regulators only exist in the first place because of the irresponsibility of banks. Clearly you don't know the chicken came before the egg in this case.

    ...and as for soundbytes - wel yamyzf has made it clear he feels the responsibility of excess lending is borne by the borrower - despite the fact that 'professional lenders' are supposed to do due dilligence before they lend.

    In the case of regulation - this regulation already existed and the banks ignored it in pursuit of profits.....but you say the regulator should share the responsibility of that excess?

    I wouldn't mind having a discussion about the responsibility of adults and children, but you're both forgetting one important part of the titles of of banks.
    PROFESSIONAL.

    The lenders are professionals and the borrowers are amatuers - I presume you also think the patient shoudl share some of the blame if the Doctor gives the wrong diagnosis because the patient didn't realise what he meant by "cardiovascular inconsistency"?

    That is the basis of both your arguments - just like Bob Diamond you want to 'share out the blame' to dilute the irresponsibility of banks.

    Clearly you both have vested interests in the banking system - otherwise there is no logical reason for you to make these unreasoned claims.

    It's not about disagreeing with yamyzf - it's about you making the same statements over and over again and when challenged with reason and logic....you leave it for a week before coming back and making the same claims all over again!

  • Comment number 63.

    @13. At 10:16am on 27th Jan 2011, writingsonthewall wrote:
    "Davros is merely the conference where the fascists of the globalised corporate world decide how it's best to suppress the people and whether they might have gone too far this time."

    I can't imagine any of them debating the latter at all. Can you?

  • Comment number 64.

    42. At 12:30pm on 27th Jan 2011, avalanche_invesmtents wrote:

    "so are you saying that bombing people is ok, maybe the bomber in moscow was merely protesting against the fascist bankers...........that seems a bit radical even for you"

    it's a firework - see how easily you are misled by the media? - clearly your scrutiny is not as good as you think it is.
    ....as for bombing, didn't Baghdad get bombed in your name? - or was that a different war?

    it seems the outrage of bombing is all about whose side you're on.....and once again you have failed in your attempt to show me to be some sort of terrorist simply because you can't tell the difference between a murderous bomb in Moscow and a firework display at Davos.

  • Comment number 65.

    41. At 12:28pm on 27th Jan 2011, M_T_Wallet wrote:

    "Thanks for letting us know that and thanks for explaining how."

    You'll just have to TRUST him!!!!!!

  • Comment number 66.

    54. At 13:07pm on 27th Jan 2011, Averagejoe wrote:

    "http://www.bbc.co.uk/news/world-middle-east-12295864
    Its almost as if protests are spreading! Surely not. Must be a coincidence."

    I'd say it was a worldwide revolution - except I'll then be asked "when" and "where" and "what time does it start" and "how big will it be" etc.

    ...because apparently unless you can specify these things then that something doesn't exist - luckily nobody told Urbain Le Verrier that before he discovered Pluto using Newtonian mechanics!

  • Comment number 67.

    63. At 13:27pm on 27th Jan 2011, Stuart Wilson wrote:

    "I can't imagine any of them debating the latter at all. Can you?"

    Even fascists realise they've gone too far sometimes....

    However more likely is dissenters in the ranks will come forward and undermine the plan. I mean we already have the intellectuals disagreeing with the bankers - and the people disagree with both of them!

  • Comment number 68.

    Couple of observations:

    1) Any banker who states that the banking system is fixed is not facing facts and/or is demonstrably incompetent. Either way, their views are not worth listening to – the banking system is not fixed. The cost of bank debt, the continued reliance on special liquidity schemes and the like, and the chronic lack of equity capital for banks (with no meaningful providers other than the state to hand) prove this.
    2) The “you can’t blame the regulators for causing this mess” analogy of not blaming a lack of policemen for causing a burglary is well made but flawed. The fact is, as many people like to point out on this blog, we operate a fractional reserve banking system and that means that banks’ activities are an extension of the state’s in the way no other private industry is. Many people have pointed out the inherent flaw in this arrangement but as a realist its clear this situation is not likely to change. For me the interesting facts are as follows: In 1998 the UK’s government debt to GDP was 33% and the UK’s financial sector’s debt to GDBP was 31%. All perfectly manageable by the state. Enter Gordon, who let’s not forget removed the banking regulation from the Bank of England (where it had lain for several hundred years) to a newly created quango, the FSA. At the same time he embarked as chancellor on a public spending spree the like I, for one, hope we will never see again. Today, combined Government and UK financials’ debt to GDP is an eye watering 213% (of which Government’s share is 76% and rising by 10% per annum currently). There are only two OECD countries with worse financial positions that that – Iceland and Ireland…………. So, yes we should blame the CEO’s and boards of those UK financial institutions, but we should indeed also blame the people who were supposed to be ensuring that a private sector activity that has the potential to bankrupt the country did not get out of hand – i.e. the last Government and by definition half the current shadow cabinet…………

  • Comment number 69.

    Re Yam-Yzf comments and others passim re blame for others.

    Yes - some folk didnt act too smart, some (most) politicians and regulators did duck their responsibilities, and some (most) banks couldnt resist the urge to maximise the short term benefit on the back of the other two groups. However, some of us weren't involved with second mortgages, personal property portfolios, spending money we hadnt got, not saving for the future etc. etc. yet we are being kicked with the rest of the population.

    Perhaps an interesting analogy would be to apply 'light touch regulation' to say domestic appliance electrical regulations - companies could take the risk of producing potentially dangerous electrical goods relying on the good sense and expertise of the purchasing public to spot the bad'uns. And if you did fry yourself with the vacuum cleaner, well you were partly to blame for not being up to speed. You could argue that companies that produce such goods would soon be out of business as people would go elsewhere or do without. Unfortunately with the financial industry they all seem to work to the same model, and are the sole providers of seemingly essential goods (unless you know the purveyor of a good secure matress?).

    WOTW and other regular bloggers, dont agree with everything you say but always good for a read, thanks.

  • Comment number 70.

    57. At 13:23pm on 27th Jan 2011, nautonier wrote:

    > When the bankers, Diamond and the rest of them are arriving at
    > their corporate offices carrying their flasks and sandwich boxes like
    > the rest of us - we'll know that the new 'size taxation' of banks is
    > working properly.

    What's the longgg delay here? I've said it right from the start - size tax them down. It's the only way that we can be sure of. Size tax them right down to size, and break them up if they try to relocate.

    What's going on? What's with all these excuses?

  • Comment number 71.

    56. At 13:16pm on 27th Jan 2011, Averagejoe wrote:

    '... and capitalism need for perpetual growth to ensure stability in a world of finite resources ...'

    =================================================

    Until a better system comes along, I will support the concept of capitalism - but complain bitterly about the way it is currently practiced.

    I believe the above extract from your post goes to the heart of the problem. Previous levels of growth are surely unsustainable. If this is indeed the case, capitalism needs to respond to the new reality.

    The measures now being pursued do nothing to convince me that lessons have been learnt. The current global headmaster appears to be in denial and oblivious to the problems coming over the horizon.

  • Comment number 72.

    61. At 13:25pm on 27th Jan 2011, newblogger wrote:

    "If the bank then goes bankrupt -that's the bank's fault!"

    Couldn't agree more and I still think that banks that were giong to go bust should have been allowed to go bust. Governments, however, felt different

  • Comment number 73.

    47. At 12:43pm on 27th Jan 2011, yam yzf wrote:

    "If the risks were not explained, then yes that is wrong. If the risks were explained, and subsequently ignored, then sorry, responsibility must be accepted."

    ...you mean like the risks were explained to the equitable life customers who bought annuities?

    When I got my mortgage in 2002 I remember the bit about "if you don't pay - your home will be at risk" - but I don't remember the Halifax advisor mentioning the risk that the banking system may collapse and as a result we'll end up with interest rates over 15% (which is highly probable as the BoE are going to have to leave rate rises to the last minute and then inflation will ensure they have to put the interest rate pedal to the medal)

    Fortunately I did know this was a risk (simply from the last time it happened) - however this is unfair as I work in finance - what about the plumber, bricklayer, shop owner, riding stable owner, fish and chip van man - should they all be educated to the same financial level as me?

    No - that would be silly - that's why we have PROFESSIONAL mortgage advisors - although it looks like we don't have these anymore!

    http://www.nebusiness.co.uk/business-news/latest-business-news/2011/01/27/barclays-bank-axes-advice-staff-from-branches-51140-28064952/

  • Comment number 74.

    66. At 13:52pm on 27th Jan 2011, writingsonthewall wrote:

    "I'd say it was a worldwide revolution - except I'll then be asked "when" and "where" and "what time does it start" and "how big will it be" etc. "

    There is a difference between revolution because of many years od dictatorship and the revolution that you keep purporting to.in that the middle east revolutions are to do with freedom of thought and choice.

  • Comment number 75.

    Davos is teeming with heads of state and CEOs of global corporations ....and Robet Peston is interviewing Peter Gabriel??!!! is that the best you can do?

    Meanwhile, Bloomberg interviewed George Soros this morning -

    he said the UK is in a more dire sitauation than the Eurozone

    he said the UK Govt austrity plan is not sustainable and will have to be changed, once the population start to feel the effects . It cannot “possibly be implemented without pushing the economy into a recession.”

    he also said the commodities boom will end but not for antoher two years or so (two years!)

    Sarkozy, who is pushing for a global financial transaction tax, said France and Germany will "never" give the Euro up, the specuators against will get their fingers burnt and it is a question of identity.

    He also said "no market economy without a minimum of moral values".


    So what did Peter Gabriel have to say Robert?

  • Comment number 76.

    69. At 13:58pm on 27th Jan 2011, SpannermanPete wrote:

    "However, some of us weren't involved with second mortgages, personal property portfolios, spending money we hadnt got, not saving for the future etc. etc. yet we are being kicked with the rest of the population. "

    Hear hear! - it's funny how we're all individuals on the way up, keeping profits for ourselves - but we all share in the blame when it all goes bad.

  • Comment number 77.

    70. At 14:00pm on 27th Jan 2011, Jacques Cartier wrote:

    57. At 13:23pm on 27th Jan 2011, nautonier wrote:

    > When the bankers, Diamond and the rest of them are arriving at
    > their corporate offices carrying their flasks and sandwich boxes like
    > the rest of us - we'll know that the new 'size taxation' of banks is
    > working properly.

    What's the longgg delay here? I've said it right from the start - size tax them down. It's the only way that we can be sure of. Size tax them right down to size, and break them up if they try to relocate.

    What's going on? What's with all these excuses?

    ......................
    Vested interests ... its the 'estasblishment'!

    Some politicians are ex bankers and/or married to a hedge fund manager and /or otherwise have exec. bankers in the family or their fingers in the pie somewhere else ... and this includes the Champagne socialists , Con Dems, Socialist Worker party ... the lot of them.

    Size taxation sounds crude but in the form of suitable new overall trading and bank size profiles could be very sensitised and sophisticated ... but would be the quickest, most effective way of tackling the problem IN TH UK ... and could be well organized to give the banks e.g. 12 months to re-organise before asset seizures occur?

    My guess is that the FSA already have these draft profiles ready and the problem is really one of the lack of political will and not means and knowledge of how and when to do it?

    Banks would also have/need some choice over their new direction as choosing their fit within the new profiles?

    Simples!

  • Comment number 78.

    73. At 14:06pm on 27th Jan 2011, writingsonthewall wrote:

    When I got my mortgage in 2002 I remember the bit about "if you don't pay - your home will be at risk" - but I don't remember the Halifax advisor mentioning the risk that the banking system may collapse and as a result we'll end up with interest rates over 15% (which is highly probable as the BoE are going to have to leave rate rises to the last minute and then inflation will ensure they have to put the interest rate pedal to the medal)

    Fortunately I did know this was a risk (simply from the last time it happened) - however this is unfair as I work in finance - what about the plumber, bricklayer, shop owner, riding stable owner, fish and chip van man - should they all be educated to the same financial level as me?

    ==========================================================

    i have to honestly say that your right on this, the major problem is that there was no level of financial education for those without a background in areas concerning money/loans/mortgages, and yes it got to the point where people were taking anything that the "so called" professional would say even though undoubtedly there were times when they were not professional enough. However if you are entering into somthing such as a mortgage where the effect and importance of it on your daily life is so large then you should be taking care to make sure yourself that you will be able to cope with it. There are alot of very simple questions that a consumer needs to ask themselves which do not recquire a degree or an type of financial qualification to answer.

    1. Whats my monthly/quarterly/yearly income.
    2. how will taxes/bills/other debt affect my income.
    3. What are the repayments for this new loan and can i afford it.
    4. should i really be getting this loan/mortgage.

    all very simple questions with very simple answers.

  • Comment number 79.

    so the CEO of JP Morgan has been getting angry at Davos that banks are being unfairly criticsed and not getting recognition for all the good they do and have done!

    maybe he should remind himself of the ongoing court case in the US, article can be found here http://ftalphaville.ft.com/blog/page/2/

    the quote below is from the court filings, in the public domain, so no censoring please moderators.

    "This evidence – obtained for the first time through discovery – demonstrates that at the same time that JP Morgan and EMC were touting to Ambac the quality of the Mortgage Loans and the rigorous procedures for verifying their quality, JP Morgan personnel understood that the loans underlying the transactions were in fact – to use one JP Morgan employee’s unequivocal if impolite words – a “sack of shit.” "

  • Comment number 80.

    68. At 13:57pm on 27th Jan 2011, a_sensible_comment

    ...so it appears the banks aren't at fault, it's the Government's system which is the root cause...

    ....and what is that system?

    At least we're making progress.

    ...and as for blaming the last Government - can you tell me what juristiction any cabinet has over...
    a) Subprime mortgages in the US
    b) Private banks
    c) International banks

    ....it seems that your defence of bankers holds within it, it's own flaw. I'm desperately trying not to defend the previous Government, but to blame them for international credit markets getting overcooked is.....well..."their views are not worth listening to"

    I noticed you said the burgular analagy was flawed....but didn't say how. The regulators are the policemen, the government is the law and the bankers are the citizens. Remember not all banks acted in this way - but all banks needed to be rescued regardless.

    Also your point about debt ratio is a good one to make - but you want to see what the private debt ratio to GDP is in this country - only bettered by the US.

    The Government is in debt, the banks are in debt and the people are in debt - the question is....to whom?

    I fear the answer may be simply "each other"

  • Comment number 81.

    45. At 12:39pm on 27th Jan 2011, Reaper_of_Souls wrote:

    Borrowers, however, still have to accept responsibility as they were the ones who signed on the dotted line. If the risks were not explained, then yes that is wrong. If the risks were explained, and subsequently ignored, then sorry, responsibility must be accepted.
    ==============================================================

    Are you really serious?

    If my neighbour asks me for a loan, say $10,000, and I agree to lend him the money, whose responsibility is it if it turns out that he can't repay me? Surely I have failed to carry out any sort of due diligence, so if I lose my $10,000 I only have myself to blame? How can it be anyone else's fault? So explain to me why a commercial bank somehow has less responsibility than I do. They pay people large salaries to ensure that lending is properly controlled, don't they? It is, after all, a large part of the bank's business to lend people money, so they should be much better at it than me. Also, don't the staff of the bank have a responsibility to their shareholders? Or in your fairytale land, do the borrowers owe a responsibility to the shareholders?

    You really need to read your post again to try to understand how laughable it is. Or maybe you are paid to write such stuff?

  • Comment number 82.

    74. At 14:09pm on 27th Jan 2011, yam yzf wrote:

    "There is a difference between revolution because of many years od dictatorship and the revolution that you keep purporting to.in that the middle east revolutions are to do with freedom of thought and choice."

    ?? - and western revolutions aren't to do with freedom and choice??

    It seems to me all revolutions occur when the people find out they've been lied to - whether it's by some despot or an elected Government.

    ...and despite what you think....many people in the west have no choices and not much freedom (unless you count the freedom to die)

    Whatever bubble you live in - it's not the same as the rest of us. I ride past the Waterloo homless hostel every day and every day the queue is growing. I know you will tell yourself those people 'chose' to stand on the street corner freezing - but you only tell yourself so the guilt doesn't eat you up inside.

  • Comment number 83.

    78. At 14:27pm on 27th Jan 2011, avalanche_invesmtents wrote:

    "1. Whats my monthly/quarterly/yearly income."

    You mean now? - or over the next 25 years? You could have a very decent income in 2001 but now you might be unemployed with little chance of a job at the same level. Most people can afford the mortgage when they take it out - they're not stupid you know!

    "2. how will taxes/bills/other debt affect my income."

    Taxes? - what taxes will we be paying in the next 25 years? Who would have guessed VAT would rise to 20%? Who would have thought they would alter the capital gains tax and remove the tapering?

    "3. What are the repayments for this new loan and can i afford it."

    ...as before, everyone can afford it when they take it out.

    "4. should i really be getting this loan/mortgage."

    If you don't want to be paying for a landlords porsche for the rest of your life you do.

    Your questions would be perfectly valid in a 25 year stable economic environment. However Capitalism is anything but stable and any correct answers you give today may be completely wrong in the future.

    You are being a little unfair on the amateur mortgagee - I mean the professionals can't get their predictions right - and you want the amateur to better that?

    Maybe if banks offered 25 year fixed mortgages then this would be fine - but as far as I'm aware.....they don't. You need to ask yourself why.

    Most people consider the taking out of a mortgage very, very carefully - but this doesn't protect them from the future. Even PPI which was sold by the bucket load doesn't protect you when you need it (the small print) - because nobody would insure you to pay your mortgage.

    The banks need to assess the customer, the economic environment and their predictions on the future to advise on the best product.
    However most banks were selling mortgages based on commission - not really an incentive to sell the right mortgage to the right person now is it?

    ...and it's not because they couldn't - I mean now they're throwing up any reason they can to not lend. Questioning the build quality, requiring larger deposits, actually bothering to get a proper survey done (and not a 'drive by').

    Now the risk of buying houses is all on the homeowner - if you want a rate below 2% you need to provide a 40% deposit - that's nearly half the house's value. So remind me what are banks doing for that 1.5%? (or for yamyzf that should be 1.32% as he's pedantic about things like that)

  • Comment number 84.

    81. At 14:38pm on 27th Jan 2011, haufdeed wrote:

    "You really need to read your post again to try to understand how laughable it is. Or maybe you are paid to write such stuff?"

    Can you understand my frustration? I don't mind having a good old ding dong about things - but this is just an absurd claim. I'm not saying there weren't criminal borrowers who set out to defraud the system, or those who simply thought it was easy money....but it's the banks responsibility to filter them out.....that's what they're paid for - to allocate capital to the most efficient and 'rewarding' ideas.

    The whole financial system....and in fact Capitalism itself is based on that premise.

  • Comment number 85.

    80. At 14:34pm on 27th Jan 2011, writingsonthewall wrote:

    ... The Government is in debt, the banks are in debt and the people are in debt - the question is....to whom? I fear the answer may be simply "each other"

    To the concept of Fractional Reserve Banking surely? The money to pay the interest was never created (FRB only creates the principal), but now the requirement to pay the interest has become somewhat pressing and the money simply doesn't exist (unless we borrow more, making the situation even worse)...

  • Comment number 86.

    Once again the banks are out to scare the politician. The Government hold all the aces but fail to use its power, or is it that they are in cahoots with the banks and are trying to manipulate us??
    If the Government were truly representing us, the people, they would regulate the banks properly. If the banks threaten to go overseas then the Government should introduce a control that says any bank that deliberately moves overseas to avoid taxes or controls must pay a tax on all transaction within the UK and its dominions. It should also strive to get all its allies to follow a similar line.
    Its time the governments of the world took back the power from these multinational organisations by working together.
    Its also time that you at the BBC represented the people and did not get so easily manipulated by the ‘establishment’. Find out what the people want by proposing a wide range of alternatives and conducting a survey, then grill the politician to find out why they will not follow the wishes of the public.
    I myself would like to see my bank just split up so I can deal only with the retail part and all the gamblers can be in a separate bank and take their bad debt with them. Then they cannot use my money to gamble, live the high life and pay themselves huge salaries and bonuses at my expense.
    At present, due to inflation and low interest rates, I’m losing money on my investments but the bankers are still getting large increases and paying themselves large bonuses, is that just?
    The Government let the ‘establishment’ members like Philip Green avoid the taxes and pay their employees minimum wages. Yet they remove benefits from the old and infirm and try and hide this on the local government and play citizen against citizen (blame the baby boomers).
    Its time we had another person like Oliver Cromwell who wanted Parliament to govern on behalf of the people and not on its own behalf and that of the establishment. Lets have some true democracy and not one that only allows us to vote for the candidates that they select and then control by the ‘Whips’.

  • Comment number 87.

    75. Avulcan

    Davos is teeming with heads of state and CEOs of global corporations ....and Robet Peston is interviewing Peter Gabriel??!!! is that the best you can do?

    Yes it probably is.

    Peter Gabriel has been going to Davos for years now, and yes, is present again this year, unlike a good number of last years movers and shakers who have found themselves thrown from power, in prison for fraud or out of work having bankrupted their businesses through reckless greed.

    In answer to your question Robert might have been talking to Peter Gabriel about 'The Elders' the human rights group that he started nearly 10 years ago along with Nelson Mandela and Richard Branson. Members include Kofi Annan, Aung Sun Suu Kyi and I think Desmond Tutu. They attempt to exert influence on world leaders to intervene in conflicts like Darfur to reduce killing and human suffering.

    Which is why he is probably on one of the most relevent missions in Davos. He is there to help others. Puts him top of my list.

    By the way, He is also a great musician and has written songs good enough in some cases that they have crossed into my generation. Gota be more interesting than talking to a banker.

    So when the chaos starts it will be tunes and songs we know that unite us and give us reasons not to desend into barbarity. Eating and back slapping does not appear to be saving capitalism or avoiding chaos.

  • Comment number 88.

    #73 & 78

    Funnily enough, I learnt this type of thing through:

    1. Parents - if no money, then we do not have
    2. School - maths class was great as it taught things like 3-4 = -1
    3. Personal experience - paper round money was what I earnt and what I could spend - including saving for school trips etc

    So perhaps I was lucky coming from a poor background

  • Comment number 89.

    Hey Robert....did Peter Gabriel ask you for your autograph?

  • Comment number 90.

    I see that the OFT have decided not to get involved in the issue of fees charged by investment banks to fund-raisers. They feel it's best left to the companies themselves and shareholders to sort out.

    OFT: "The 350 leading companies listed in London raised an estimated 50 billion pounds equity capital in 2009, paying around 1.4 billion pounds to banks in the way of fees, the OFT said."

    £1,400,000,000 ... nice work!

  • Comment number 91.

    74. At 14:09pm on 27th Jan 2011, yam yzf wrote:

    "There is a difference between revolution because of many years od dictatorship and the revolution that you keep purporting to.in that the middle east revolutions are to do with freedom of thought and choice."

    Personally I think it has nothing to do with freedom of thought or choice. Inflation in the price of the basics, i.e. commodities, reducing the standard of living to subsistence levels, redundancies and rising unemployment as a result is the cause. This results in people feeling hard do to when the wealthy ruling elite dont seem to be struggling to get by at all. Sounds SOOOO familiar. The only difference is we have a supposed democratically elected government and free speech. History is simply repeating itself as it has many times before. The difference is the middle classes are going to be hit hard, and they are well educated in the main, compared with the past.

  • Comment number 92.

    I'm concered about my impact on the environment. I heat my home with heating oil but am worried about what this is doing to the environment. I live in a rural area of lincolnshire so there's not much alternative to heating my home with oil except wood and LPG... but I don't know if this is even more harmful. I have just found a heating oil website who offer Group Buying Days, this seems like a great way to help the environment because me and my friends can order together so we keep tankers off the roads more, reducing CO2 emissions.
    I would like to see more information on the internet about the effects of heating oil on the environment. On most climate change sites I go on there are articles on gas and electric heating but little on the effects of heating oil.

    Does anyone have any figures about heating oil and ways to minimise my impact on the environment?

  • Comment number 93.

    88. At 15:15pm on 27th Jan 2011, yam yzf wrote:

    And how many sub-prime mortgages would you approve?

    I feel this debate is going round in circles.

  • Comment number 94.

    Avalanche investments - 78

    "There are alot of very simple questions that a consumer needs to ask themselves which do not recquire a degree or an type of financial qualification to answer.

    1. Whats my monthly/quarterly/yearly income.
    2. how will taxes/bills/other debt affect my income.
    3. What are the repayments for this new loan and can i afford it.
    4. should i really be getting this loan/mortgage.

    all very simple questions with very simple answers."

    You have to wonder why the banks stopped asking them then don't you?

    Which is the whole, the ENTIRE, point

    Well, it would appear that thought hasn't crossed your mind but the answer is - "the more gullible punters we drag in through the door the bigger our bonus. And if they default - we can't lose because the value of the asset will always go up." Hence the bubble. And - incredibly - the majority of us who had NO PART in this - pick up the tab.

    Don't try lambasting me with 'you weren't complaining at the time' or any of that banker sycophant nonsense either. I certainly was complaining, terrified in fact - a passing familiarity with the financial services industry and UK history will always help you here.

    I didn't benefit (I have lived in my house a long time). I have children and I couldn't see how they were going to afford to have a roof over their heads when they grew.

    Of course now that's less of a problem - houses will collapse in value - but then they won't have a job to go to because the Depression started in 2007 and has a decade to run

  • Comment number 95.

    68 A sensible comment - "In 1998 the UK’s government debt to GDP was 33% and the UK’s financial sector’s debt to GDBP was 31%. All perfectly manageable by the state. Enter Gordon, who let’s not forget removed the banking regulation from the Bank of England (where it had lain for several hundred years) to a newly created quango, the FSA. At the same time he embarked as chancellor on a public spending spree the like I, for one, hope we will never see again. Today, combined Government and UK financials’ debt to GDP is an eye watering 213% (of which Government’s share is 76% and rising by 10% per annum currently)."

    I hold no brief for Gordon Brown but before the banks drove the world economy over a cliff with the crazy bets they had taken using our money as the stake, the UK was LESS in debt than when Gordon Brown became Chancellor. Major and Thatcher were far more profligate than Gordon, even allowing for his insane addiction to PFI.

  • Comment number 96.

    There is too much talk about regulation and not enough talk about taking the consequences of our actions. At present if a bank gets into trouble, taxpayers rescue it. If borrowers get into too much debt, ultra low interest rates bail them out. If people save or are prudent they get clobbered.
    It needs to be recognised as good news when people spend less and take responsibility for their finances. Glitzy meetings at Davos seem remarkably like the leaders of General Motors etc. arriving to ask for a bailout in a private jet.
    Do these people understand what the world thinks of them - absolutely not. A good starting point would be for them, and all their staff to live on the average non financial wage.

  • Comment number 97.

    94. At 16:02pm on 27th Jan 2011, FauxGeordie wrote

    You have to wonder why the banks stopped asking them then don't you?

    Which is the whole, the ENTIRE, point

    Well, it would appear that thought hasn't crossed your mind but the answer is - "the more gullible punters we drag in through the door the bigger our bonus. And if they default - we can't lose because the value of the asset will always go up." Hence the bubble. And - incredibly - the majority of us who had NO PART in this - pick up the tab.

    Don't try lambasting me with 'you weren't complaining at the time' or any of that banker sycophant nonsense either. I certainly was complaining, terrified in fact - a passing familiarity with the financial services industry and UK history will always help you here.

    I didn't benefit (I have lived in my house a long time). I have children and I couldn't see how they were going to afford to have a roof over their heads when they grew.

    Of course now that's less of a problem - houses will collapse in value - but then they won't have a job to go to because the Depression started in 2007 and has a decade to run

    ===========================================================

    actually it had crossed my mind, i have never and will not say that these problems were not due to the banks lending recklessly, they were, however they should not in this case take 100% of the blame.

    I disagree entirely with the idea that they were merely trying to get as many punters in so that they could inflate their bonuses as the mortgage advisors who would have been looking over the applications and accepting/rejecting them wouldnt have been the ones getting the huge bonus. people have to remember that just because you work in a bank does not entitle you to a huge bonus, im sure the tellers who work in my local natwest would love to get a nice xmas bonus each year but alas that is not the case.

    thirdly, i will not try to lambast you with anything or be too sycophantic. this is my opinion, no one can say wether it is the right one or the wrong one (except maybe WOTW tehehe), i listen to your opinion of the situation and respect it so maybe you could reciprocate that respect.

  • Comment number 98.

    It is becoming more apparant that those in charge - whatever their motives, are not capable of understanding the situation enough in order to provide a sensible solution. We have created systems which have evolved over a long period of time only to find they have become too complex to manage. This is born out by the countless and increasing frequency of disagreements amongst "experts" and can be applied to almost any debate/solution these days.

    We need to simplify - Will someone try and prove me wrong.

  • Comment number 99.

    Trusting banks may also be our downfall, the problem we are in now, they gave our money to very bad risk, with little or no guarantee. outcome well it all went tits up.

    Several years ago I asked to see a very senior employee of one of the many large bank, due to suicide risk. It turned out he had debts of 400k on credit cards. and had a salary 350k, neither he or his wife were willing to take practical solutions such as down sizing or selling their many assets, to reduce it. Instead went to his empolyers, who just took wiped it away.

    I still wonder today how many more have had that pleasure, and ask what planet do they realy live on! definatly not one I or most of the population is on.

  • Comment number 100.

    Will Robert Peston form part of the BBC cuts?

    Let's hope so....

 

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