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The broken heart of capitalism

Robert Peston | 09:25 UK time, Tuesday, 18 January 2011

Has the banking system been fixed, been made safe, following the 2008 financial crisis, the worst since the 1930s?

Canary Wharf

Not yet, according to the regulators, central bankers, politicians and bankers I interviewed for a documentary that airs tonight at 2100GMT on BBC Two (Britain's Banks: Too big to save).

The cast includes the chairman of Royal Bank of Scotland, Sir Philip Hampton (and see his striking analysis of how bankers are paid too much in last night's post), two members of the Banking Commission set up by the chancellor (Martin Wolf and Martin Taylor), the chairman of the Financial Services Authority, Lord Turner, the Business Secretary, Vince Cable, and the deputy governor of the Bank of England, Paul Tucker (among others).

What I hope emerges from the film is the gravity of the structural flaws in the banking industry that caused the 2008 crash, which in turn led to the worst recession we've suffered in several generations.

And, which is perhaps more disturbing, few of the participants felt that the system had yet been mended.

Here is Martin Wolf, the FT commentator and member of the Banking Commission, responding to a question on whether Basel lll the new international agreement on how much capital banks have to hold - as protection against losses - goes far enough:

"I think it is plausible if you think of the risks in the system and your ability to manage crisis, ah, we need more capital than the Basel lll agreement concluded. It is clearly a compromise of course. It is an international compromise...But I think it's at least in the right direction and it sort of sets a, how can you put it, a less unreasonable minimum, that's true.
 
"And then of course I hope that countries will look at the particular risks they run or they can sustain. It is clearly possible - as the Swiss have shown (who have imposed capital requirements well above the new Basel minimum on big banks) - to go beyond it."

So how much more capital do banks need? Wolf:

"If you wanted banks that were pretty safe we would be probably talking about leverage of certainly in the the neighbourhood of not more than five to one".

Depending on how you define capital, that would mean safe banks should hold at least double the capital currently stipulated by the new Basel rules.

Is Martin Wolf a loan wolf on the Banking Commission? Apparently not. Here is Martin Taylor:

"I'm not suggesting to you that we should rely on Basel III to solve all our financial stability problems...I think that we shouldn't make Basel carry too much weight."

Or to put in another way, and as I mentioned just before Christmas, any bank chief executive who thinks the Banking Commission is going to suggest only modest reforms to the banking system probably doesn't get out enough.

In particular it looks as though as a minimum the Commission will recommend a substantial capital surcharge should be imposed on our biggest banks, Royal Bank of Scotland, Barclays and HSBC - which they won't like, because capital is expensive and their profitability would be reduced.

It might marginally reassure the banks that Paul Tucker, the deputy governor of the Bank of England, wants at least part of this surcharge for the biggest banks to be imposed globally - and he is negotiating for this on the Financial Stability Board, which is the senior global regulatory body.

I asked Tucker how much extra capital he felt the big banks need to hold:

"I'm not gonna give you a number because it's tremendously important that we're in step with our international colleagues. But this isn't going to be a percentage point or two, it has to be meaningful for it to make a difference.
 
"What we're talking about is two things. First of all these giant banks can absorb more losses. And secondly if that isn't enough and it won't always be enough - at some point in the next 100 years there will be a real threat again and [we must make sure] that our successors will have tools where they can, as the expression goes, resolve these banks in an orderly way without taxpayer money".

And here, for Tucker, is the heart of the problem. He made two particularly compelling statements:

"If we have a system where banks take the upside but the taxpayer takes the downside something has gone wrong with capitalism, with the very heart of capitalism, and we need to repair this".

And:

"Capitalism can't work unless these financial firms at the centre of the heart of capitalism can be subject to orderly failure. The rules of capitalism need to apply to them just as they do to non-financial companies."

To put it another way, what's required are reforms so that next time a big bank gets into trouble, all the pain and cost is heaped on the bank's creditors, investors and managers - with none falling on taxpayers.

How close are we to having achieved those fundamental changes, which would be necessary - according to Tucker (and he is not alone) - to fix capitalism?

Not very close, is the answer.

It is not just about the amount of capital and liquid resources that banks are forced to hold, or the maturity of their debt (what we might call the Basel stuff).

It is also about the walls they may be forced to erect between their various financial activities. It is about bankruptcy procedures that apply uniformly in all the very many countries where global banks operate. It is about identifying which bits of banks are so vital to the functioning of the economy that they must always be removed from a troubled bank before they are seriously damaged. And it is about the sheer size and complexity of big banks.

There is, as yet, no international consensus on any of this, let alone a national consensus.

As I hope tonight's film makes clear, we are still living in a world and in a United Kingdom where a big bank that runs into difficulties would still be able to hold taxpayers and our economy to ransom.

Big banks remain too important to be allowed to fail. And it may be worse than that, as the troubles of the eurozone - and the Irish in particular - show.

Given that the balance sheets of many western governments (including the UK's) have become seriously financially stretched, some banks may have outgrown the capacity of their home states to rescue them: banks may have become too big to save.

Comments

Page 1 of 2

  • Comment number 1.

    It is a failure of regulation!

    The whole credit crisis is the responsibility of the regulators!

    Why haven't we sacked them?

  • Comment number 2.

    'Is Martin Wolf a loan wolf on the Banking Commission?'

    'Loan wolf'? Intentional or Freudian?

  • Comment number 3.

    Obviously the regulation of the banking system needs to be "fixed" so we see no repeat of the bankers pocketing the profits and the taxpayers picking up the losses.

    I do have two concerns:

    1. The bankers have a very good record of getting the regulatory system that sutis them best. We are going to see a massive lobbying effort from the banks aimed at the Commission and then at the policiticians when they try to introduce any new legislation.

    2. Although London is one of the worlkd's leading financial centres there is a limit to how much can be done with National regulation particulalry given the importance of the US. Banking is an international industry and should be regulated on an international level. At the very least greaater action should be taken at an EU level. I would also like to see the role of the BIS formalised and democratised.

  • Comment number 4.

    I would go further than JfH. It is supervision that is needed combined with a substantial element of public ownership. It is interesting that all the talk to 'cutting' the banks down to a size where there is genuine competition has vanished - understandably given that the crisis provoke an enconglomeration (Lloyds-HBOS) which is not easy to dis-aggregate. My reading of Robert's blog is that not an awful lot is going to happen but the discussion will be fascinating.

  • Comment number 5.

    Robert,

    The question is not regulation, but the quality of management in the financial sector. Apart from senior managers who are intelligent and well-educated people, I'm sure that the majority of people working in the banks are less than the best that the country can offer.

    Consider at least, who applies to work in a bank or an insurance company?

    Some do, others teach.....the rest work in a bank.

    The only job requirement for working in some of the most respected banking organisations is the ability to gamble with other people's money (has anyone ever seen the Danny De Vito film?).

    So please let us not have multiple entries about how to resolve the banking crisis across Europe.

    The reality of the situation is that banks do not have the staff available who are capable of managing this problem.

  • Comment number 6.

    Hello all,
    This is an unconventional post from a newcomer but I am struggling to reduce this ongoing crisis to its most elemental level, not least for the benefit of explanation to my pre-teen children. To that end I’d be grateful if those with sufficient wisdom would read the (acknowledgedly!) amateurish ‘fable’ below with a view to highlighting its gravest errors of understanding;

    ---------
    There were once two brothers. One ended up running the country while the other ran the bank but the brother in charge of the bank was really the stronger of the two because all the money the country borrowed or spent required his services (at a price) and because (it was said), the taxes on his considerable profits were such an important part of the money the country needed to run; money that would be lost if ever he decided to emigrate.

    Now a large storm was brewing and although the brothers, in truth, both knew that a mighty flood was inevitable, the one brother believed that his bank, like a mighty ocean liner, was too modern, too clever and too big for any storm to sink, while the other brother was afraid of the people’s reaction to such grave news. Thus it suited both neither to say nor do anything.

    But the storm turned out truly to be a terrible one! So the brother in charge of the bank rushed to go and see the brother in charge of the country.

    “Brother, it is a real mess and things look dark indeed. The impossible has happened! My fraternal banking brothers no longer trust me, nor I them. We all therefore demand payment at once but of course that is impossible for it turns out that we all owe another more than we can possibly hope to collect! Listen, if you will promise them that you will do anything you must – even giving me the keys to the country – then they will know that their money is truly safe and they will leave me in peace.”

    They discussed what might happen if the brother who ran the country refused this request and both were appalled! So, loudly, one brother rushed out a proclamation that he would, indeed, surrender the very keys to the country if needed, as proof that his brother the banker could be trusted. This proclamation satisfied the fraternal brotherhood of bankers and before long they began to resume many of their old traditions.

    But the brother in charge of the country found that the cost of cleaning up the mess left by such a great storm was far beyond the amount he had available in taxes. So this time the brother in charge of the country went to see the brother in charge of the bank.

    “Brother,” said he, “We are in a real mess and things look dark indeed. Many things have been damaged or destroyed and many people in the country suffer grievously. Caring for the injured and fixing the land is costing much more than the taxes I can raise, even with your fine contribution. You must help therefore and organise for me a large loan which I will pay back later, when the country is strong again.”

    Now all was once again well for the brother in charge of the bank and so he had resumed a bankers most prized tradition of all; sumptuous feasting. So he carefully lowered his diamond encrusted golden wine goblet and pushed his colossal plate of food to one side. Then turning to his brother said “And what will you give in surety for such a loan?”

    “Why the keys to the country have been given to me! The very keys that vouchsafed my proclamation and gave your fraternal brothers such confidence in you, what more surety could you possibly need?” replied the brother who ran the country.

    “But brother,” replied he, “You have already promised that those keys are mine! Unless you have something else to give I am afraid I cannot possibly help.”
    ______

    If this is right, and I am assuming it must be wrong in some important respect(s), it raises an obvious question … ‘Now what should the people of the country do with such brothers as these?’

  • Comment number 7.

    A GLASS-STEAGALL type law would address all of the concerns relating to moral hazard.

    The capital requirements argument is a red herring.

    In one sentence they talk about Basle III capital requirements and in the next they talk about orderly failure. If hugely increased capital requirements are implemented to safeguard the system then why even consider orderly failure.

    The threat to the system are the inevestment banks. By separating them from the retail banks they can be allowed to fail without bringing the rest of the banking system down with them.

  • Comment number 8.

    It's the banks to blame ! Not the politicians who implemented and allowed the disastrous policies that led to the failures ? Now we have banks, living on the hard earned cash of the taxpayer, holding vast amounts of savings belonging to the taxpayer, yet paying nothing in the way of interest for the privilege. Why, because government has the ill conceived notion that banks should lend, as they did before, to failing businesses and enterprises hovering on the brink of banktrupcy, which in effect was the root cause of the original collapse. Not only failing banks, however big, must be allowed to fail, but those businesses that suck resources into oblivion should also be allowed to fail rather than continue swallowing money because of political necessity . Yet still, the politicians heap all of the blame on " The banks ", maybe gross incompetence and lack of regulation by the government was and is considerably more to blame than the bankers paying themselves bonuses.

  • Comment number 9.

    I Reiterate the point...Another day, yet another blog on bankers/bonus...
    Does anyone else think there is a POLITICAL AGENDA to continuing this focus on bankers (rather than the government's bloated spending/debt pile which is the cause of the cuts)

    HERES A GOOD QUESTION FOR EVERYONE....

    Q. what would you say to a person earning £25,000 a year, with a credit card bill of £17,924 and who was adding £2,850 to the credit card every year (oh, and by the way the credit card rate will go up if they dont show how they will pay down their debts). WHAT ADVICE WOULD YOU GIVE THAT PERSON?

    A. Well, those numbers are actuallyt the national equivalent of theUK...the problem is nuymber blindness, MILLIONS, BILLIONS, TRILLIONS, make it very difficult to conceptualise the UK dilemma.
    According to the Office of national Statistics, the UK income (GDP) for Y/e March 2010 was £1.4trn, the credit card bill (debt £1trn) and the deficit (£159bn). Those figures map onto the example of a person.

    _____
    following up from NorthSeaHalibut... you miss the point: politicans are complicit in this mess as they encourage consumers ("VOTERS") to take on more debt ("to buy the car they cant afford on the driveway they cant afford")... again, the focus is all on the SUPPLY of credit (ie banks), not the DEMAND for credit by voters....
    A generation or two ago, people only took on credit to buy a house.. now thats everywhere.... the spotlight is on banks, but NO ONE is talking about the poiliticans and their perverse incentives to steer consumers into a boom and bust economy due to a 4-5 electoral cycle.

  • Comment number 10.

    According to the the Balance sheet of the BoE, its capital to debt ratio is under 2%. The most important bank in the land seems to be under-capitilised... who can we turn too... The Rothchilds???

  • Comment number 11.

    The BoE bought £285billion of government bonds . It also loaned out over £200billion to private banks.... all of this with assets of £223billion... Imagine what they could do with with 5 loafs of bread and a few fishes

  • Comment number 12.

    The second of Tucker's compelling statements says it all. Intervention is myopic, and doesn't provide a level playing field. I'd have let the banks collapse, and the artificially-inflated property market implode. Then we'd have seen some real changes.

  • Comment number 13.

    #9. At 10:16am on 18th Jan 2011, nilihist wrote:
    "following up from NorthSeaHalibut... you miss the point: politicans are complicit in this mess as they encourage consumers ("VOTERS") to take on more debt ("to buy the car they cant afford on the driveway they cant afford")... again, the focus is all on the SUPPLY of credit (ie banks), not the DEMAND for credit by voters....
    A generation or two ago, people only took on credit to buy a house.. now thats everywhere.... the spotlight is on banks, but NO ONE is talking about the poiliticans and their perverse incentives to steer consumers into a boom and bust economy due to a 4-5 electoral cycle."
    --------------------------------------------------------------------------------

    I'm not missing the point, I agree with all of your above comments totally, hence the Corporate STATE COLLUDED Fascism mantra.

    But sssshhhhh remember, the public musn't know.

  • Comment number 14.

    Why are we bothering to negotiate with anyone? We do not negotiate with bus drivers about how safely they should drive. We don't negotiate with how many lives we might let them ruin or take each week.

    What is clearly wrong here is the utter lack of political will. That's what happens when the banks and the corporations ensured the only political choice people can make is a neoliberal one.

    People will lose their homes, people will continue to struggle, more and more people will go hungry and we'll see more revolts, one after the other, by the people who suffer this nonsense. Unless of course the banks go wooosh and we'll have not globalised markets every day, but globalised revolts every day.

    The economic livelihoods of ordinary people is all of our economic security, it is in a sense our national security.

    We are the electorate and when we tell them what they rules are in this country, then that is the end of the matter.

    You do not negotiate with anyone who would do you and your population harm. Churchill taught us that.

    These banks are doing us harm. They have to go. And they should be told that on their way, they will not be passing 'Go'.

  • Comment number 15.

    It is a TRULY frightening scenario. Now I worked in an ordinary branch bank for many years before being made redundant, and if I'm scared to deposit with them (even with the deposit "guarantee" - imagine the mess if that g'tee was ever called on) then who would? So my money is all in NS&I. If high street banks are offering higher interest rates, you need to ask just one question.....why? Why would you risk it? After all these years the banks have managed to actually attach defined risk to deposits (in excess of that 'guarantee'). PS does anyone know if RBS is now accounted for nationally in accounts as being 'public sector' when it comes to e.g.output and redundancies.

  • Comment number 16.

    If banks are going to continue to create money out of thin air they will never have satisfactory capital ratio's.

  • Comment number 17.

    No. 9 Nilihist; OK but what is the answer? Should the reprobate live on bread and water without heating and light until the debt is clear. Many people have a debt greater than their annual income which they successfully pay off over time. Governments are not households but need to manage debt rationally. Is this successful in Ireland?

  • Comment number 18.

    Nilihist 31.

    "HERES A GOOD QUESTION FOR EVERYONE....

    Q. what would you say to a person earning £25,000 a year, with a credit card bill of £17,924 and who was adding £2,850 to the credit card every year (oh, and by the way the credit card rate will go up if they dont show how they will pay down their debts). WHAT ADVICE WOULD YOU GIVE THAT PERSON?"

    Give up my job and become a banker.

    Assuming that your composite individual really exists and is not limited to your imaginary construction of heartless fancy and they could stomach such a dull existance whizzing around an oppressive void of mediocrity and compromised morality where the only measurement that matters is how much money do i get.

    By the way your question is not a good one and it is not for everyone but does suggest a little about you.

    It is a statement of opinion that both generalises and makes a pejorative judgement about millions of people, many of them good, some bad, some greedy, some smart, some stupid and many scared.

    Besides with a name like Nilihist my only assumption can be that you liked the idea of being thought of as a thinker but were unable to to spell Nihilist or get much below the surface of anything.

    Now here is my question.

    Why don't you do something kind for somebody and see if there is any truth to the idea that the more generous you are, the richer you feel.

  • Comment number 19.

    Safe? - don't make me laugh. None of us are safe.

    The only thing that is assured is if the banks fail again this Government will do no different and bail them out - just like the last one......and we may yet see this tested.

    It's a great day for jokes - have you heard the one about the housing market being slow because of the snow? - it's not the recession, the lack of jobs, the bubble prices, the sea of lies on which the market was based or the lack of credit from the banks - no folks, it was the snow.

    http://www.bbc.co.uk/news/business-12206936

    Something we've had before, but which didn't cause this many problems - clearly this snow has been radicalised and it needs to be stopped.
    I would like to campaign for a new 'war on snow' - a devastating evil which has caused the downfall of some of our greatest industries and retailers. A blight which has caused energy bills to rise, affected Tesco profits and caused many, many people to loose their jobs and homes.

    Yes, that's right folks - this snow must be stopped at all costs. I recommend a huge investment in anti-snow techniques (snow shoes, ski's snowboards etc.) and a increase in investment for the MET (office) which should help us with intelligence.

    We did intend to use undercover officers, but unfortunately when we dressed them up as eskimo's and sent them to Greenland, they have not been seen since - we suspect they have 'gone rogue' - or possibly just froze to death.

    The snow terror alert will be raised to Amber - which means 'snow likely, but not possible, sleet very likely but not in warmer areas'

    The absurdity of what people are being asked to believe is 'snow joke'.

  • Comment number 20.

    There is a simple solution to banks being too big to fail - split them up!

    A greater number of smaller banks would be better for competition between them too, and give the rest of us a better deal.

    It is the too big to fail mentality that has lead to aggressive risk taking in pursuit of big bonuses - splitting banks up will benefit the entire economy.

  • Comment number 21.

    Bonuses work, but only for fruit-pickers and shelf-stackers, not City bankers (guardian).

    Actually, fruit-pickers and shelf-stackers do good work!

  • Comment number 22.

    1. At 09:48am on 18th Jan 2011, John_from_Hendon wrote:

    "It is a failure of regulation!

    The whole credit crisis is the responsibility of the regulators!"

    John - I always ask at this point - does that mean the crimes committed by criminals is the responsibility of the police?

    The problem I have is the deep rooted hypocriscy - if people act immorally - then it's deemed to be their fault, they should be more responsible - however when a bank (or any corporation) does the same then it's the regulator's fault.

    This is a sign of fascism - corporations receive favourable treatment over that of citizens.

  • Comment number 23.

    14. At 10:50am on 18th Jan 2011, copperDolomite wrote:

    "Why are we bothering to negotiate with anyone?"

    Couldn't agree more. Furthermore...

    We've spent two years negotiating with banks whose interests are diametrically opposted to the interests of the population at every turn.

    There has to be an alternative whether its credit unions, interest free banks (like in Sweden), or a separate government run bank for mortgages.

    We hear constantly about the need to cut back the public sector because it isn't fit for purpose. It runs both ways.

    Its in the Uk's interests to do something about this and the media has the power to encourage action. A simple explanation as to how banks work should be common knowledge - but I don't beleive it is. How can an issue that is so important have failed to capture the publics imagination? Let's face it. Practically everyone is sick to the back teeth with the banking system on a personal and macro-economic level.
    People were sick of banks even before the current crisis.

    As for the excuse that they provide the govt with tax revenues - well, thats our money anyway and I'd rather pay more income tax than filter it through the banking system.

    They had their chance - they were in a position to literally print money and make their own profits and they still managed to blow it. Before anyone starts finger wagging about people taking on mortgages they couldn't afford in the U.S. lets not forget the hard sell that these people were subject to and the fact that in not owning their own home they had immense pressure to stem the bleeding away of their hard earned wages into the pockets of property owners who do very little but reap massive rewards. Anyone in their right mind would jump at the chance to escape a system were say, at least 1/3rd of everything you earned was siphoned off to someone else just so you didn't have to live outdoors !

    Its pathetic and sad that in this day there are people everywhere who don't own the building they reside in and have to pay for the "priviledge". Its either that or the government paying private landlords via the much loved benefit system in order to keep people housed - a massive cost to us all. Afterall, whats the point of paying 2 1/2 times the value of a property to a private landlord and eventually to a bank in the form of a mortgage when the problem is never solved (i.e the mortgage lasts 25 years but the rent trapp leads to the Housing benefit claimants drawing money from the taxpayer for their entire lives.

    Before anyone states that they should get a job and get a mortgage I'd like to point out that there is fat chance of that happening given the current situation which is going to carry on for a long time due to the unburst property bubble and the mythical ponzi scheme of the property ladder.

    The whole system is totally floored and the solution is social housing. Its cheaper in the long run.


  • Comment number 24.


    Is the heart of capitalism really broke or just unwell ?

    Remember the Disney dictum about an old chair in the attic : if it ain't baroque don't fix it.

  • Comment number 25.

    The problem is Tucker's "financial firms at the centre of the heart of capitalism". For all the talk of banking "stars" (in the last thread), banking is a SERVICE industry. Were people who created our modern world, people like Watt, Brunel, Nobel, Mond etc bankers? No! The problem is not that banks and financial institutions pay huge bonuses, it is that a service "industry" can extract so much from the real economy that these bonuses are affordable.

    In 1975, iin the Afterword of his book "Money Whence It Came, Where It Went", JK Galbraith wrote:

    "Could it be better? The answer is yes.

    Proof begins with the people who manage money. If anything is evident from this history, it is that the task attracts a very low level of talent. ..... Inadequacy is protected further, we have seen, by the fact that failure is almost never at cost to those responsible. ... in monetary matters as in diplomacy, a nicely conforming nature, a good tailor and an ability to articulate the currently fashionable financial cliché have usually been better for personal success than an excessively inquiring mind. ..."

    News this morning: Barclays have just been ordered to pay £60million in compensation to investors in its "Balanced And Cautious" Funds; - plus ça change!

    PS @6 Norman - nice parable! :-)

  • Comment number 26.

    Ok so inflation is going up, interest rates will have to follow and house prices down, if banks are using the mortgages they hold to balance books, is there a further concern that as they fall in value and/or people default, that they will need to tighten credit further.

    Also as global resources deplete and population grows thereby creating competition will anyone be able to control price inflation?

    Seems this age of austerity needs to be talked about in 2-3 decades terms rather than years for most.


  • Comment number 27.

    Peston :”… few of the participants felt that the system had yet been mended.”

    Seems to me that it does not need any mending. An observation of world-wide stock markets’ performances, bullish commodity and agricultural prices, and bankers’ bonuses: say for certainty that the less well-off played no part at all. Maybe the whole system just hinges on just taking care of the well-being of those with reasonable and positive net worth.

    The rest, the less ‘wealth endowed’, is the state’s problem. Which essentially is an ideological problem. Not a hindrance to those with capital to further increase their wealth.

  • Comment number 28.

    9. At 10:16am on 18th Jan 2011, nilihist wrote:

    "I Reiterate the point...Another day, yet another blog on bankers/bonus...
    Does anyone else think there is a POLITICAL AGENDA to continuing this focus on bankers (rather than the government's bloated spending/debt pile which is the cause of the cuts"

    ...you may reiterate it - but it's still wrong. Go and look at the facts. Sure Gordon was guilty of having a large credit card balance which was in jeapoardy if he ever stopped working - but he was in good employment (a boom)

    It was the banks that failed and did 2 things to exaggerate the mess we're in.

    1) They needed bailing out
    2) The stopped paying taxes as they were making losses

    The only political agenda here is yours where you're trying to spread disinformation about the cause in order to justify the solution (cuts).

    You have also answered your own question about debt - the reason the people take on huge debt is because thanks to the capital accumulation (the point of capitalism) and the devaluing of our currency in real terms - we are unable to afford the lifestyles of 40 years ago (which is odd because technology has moved us on)

    You're right, in the past people didn't borrow to buy that house - but now it's commonplace. Home ownership hasn't risen that much - it's the stretch between wages and house prices that's fuelled this credit boom.

    You can't blame a generation for try to obtain what the previous one has - I mean we are supposed to be improving aren't we? - or maybe Capitalism is actually taking us backwards....

    The increase of credit demand is inevitable - I mean if the capital accumulation by the banks is growing (their profits) and inflation is increasing house prices (but not wages) - then unless you expand the money supply - there will always be increasing demand for credit - which the banks are happy to provide as it increases their profits and the spiral continues..

    It's not difficult to work out - once you accept that average wages in Britain have been declining for some time - but the background noise of inflation makes everyone believe their wages are in fact increasing (which they are, just not in real terms)

    In order to prevent the problem of 'people buying what they cannot afford' - they would have to accept a standard of living less than that of their parents.

    Now I don't think that's progress - and nor will the people when they find out this is their destiny...

  • Comment number 29.

    @ 17. At 11:26am on 18th Jan 2011, watriler wrote:

    > Should the reprobate live on bread and water without heating and light until
    > the debt is clear.

    We need to be mature about it - mere hubris achieves nothing. The world has pumped a century of effort into automation. Everyone has felt the effects, and now the financial world is buckling under it as well. There is simply no requirement (nor the funds) to make employment anymore. So we will have leisure classes (unemployed people, bankers, prisoners ...) whatever we do. We can either do it with grace, or do it the rough way. Either way, it's happening.

  • Comment number 30.

    We tell the banks what's going to happen. We, the taxpayer, hold the trump cards, the problem is the state, which is playing our hand is playing misere. Capital ratios must be sufficient to remove the requirement for taxpayer support and make the banks responsible for their stupid and greedy lending. If they don't like it...tough!

    On bonuses, I'd nail them to the floor. If they're getting hundred of thousands on average, they can afford to pay 90% in tax on something they don't deserve in the first place. You don't need to be a genius to borrow at 2% and lend at 6-7% and make a handsome profit, my gran can do that and she's been dead almost 20 years.

  • Comment number 31.

    Bankers make their living - and fat profits - from three sources:
    a) Ripping off consumers (0.5% base rate, 30% overdraft interest rate)
    b) Ripping off companies (just check the fees and interest rates charged to business customers, especially small business)
    c) Lying about the value of 'assets' which are really just debts owed to each other

    The last one is neither here nor there to me. The first two are. They are damaging our economy. The government needs to regulate these costs. As to whether the banks are safe or whether they can be left to fail... they should be just left to fail, frankly no bank does the UK economy any real good. Their profits are just the scooping up of money other people/companies would be investing to improve productivity, employ more workers etc etc, the banks just scoop it all up and pay it out in over sized salary and bonus cheques. If RBS were to have been left to fail absolutely NO HARM AT ALL would have resulted beyond a minor short term shock.

  • Comment number 32.

    27. At 11:58am on 18th Jan 2011, sayasay

    Now that's short sighted - so how long before the poor massively outnumber the rich and decide that this game of 'fleece the people' isn't going to be played anymore?

    What do you do then - get the army to supress them?

    BTW - if you think the inflation in commodities and a rising stock market is a sign of 'recovery' - then you need to go back to economics school.

    The interest rates are at 0.5% - where do you think the money's going to go if not in the stock market? There is no return in anything else at the moment - so we are creating a stock market bubble with our unrealistic financial environment.

    Rising commodity prices are also reflective of money heading for the place of highest return. The speculators know that a lot of wealth has been wiped out - and when that happens people stop spending - and what's the last thing they will cut from their budgets?

    Food, energy, oil - i.e. commodities.

    To suggest rising commodity prices is a sign of recovery is laughable - what it is, is a reflection that the market thinks we're all going to stop buying everything....except these essentials.

    ....now why might they be thinking that?

  • Comment number 33.

    Did I miss something when Robert pointed out the Swiss have imposed capital requirements higher then Basle III? What is the impact of this on investment bank profitability and hence bonuses?
    If it is likely to reduce both, it further empties out the hollow threat to leave UK if tighter regulation is applied. I suspect any jurisdiction is going to look very askance at the risks introduced by banks moving to them as a result of reasonable regulation in another country. I cant see Belize or the Cayman Islands being prepared to (or capable to) stump up the readies when it all goes pop next time.

  • Comment number 34.

    Under the current model, when banks come under pressure the governments take over the liabilities, which is all well and good if the governments have credibility and are able to manage the debt.

    In a recessionary / low growth economy is a government credible? especially if it is taking on more and more debt from private institutions, some of which is not good debt. It seems that the problems are not necessarily going away they are just being passed around, instead of between private institutions they are being passed to public institutions.

    Should the question not also be, is a government too big to fail? Banks are only too big to fail if a government can take over their debt.

    If the interventionist model is to be followed, a government should regulate the financial sector to strict limits as they are taking ultimate responsibility.

  • Comment number 35.

    The "heart of capitalism". John Cleese as "The Merchant Banker"

    http://www.youtube.com/watch?v=YUhb0XII93I

    And Michael Palin as the chartered accountant:

    http://www.youtube.com/watch?v=XMOmB1q8W4Y

    ;-D

  • Comment number 36.

    Robert,
    Capitalism is at crisis point. Its tendency towards overaccumulation and the negative effects of that process, push it toward crisis regularly (1890s, 1930s, 1970s and now). The tools that have been previously deployed ie government intervention (stimulous etc), to counteract this have led to ever increasing government debt, and in parrallel increasing private debt (due in increasing inequality in the distribution of wealth). The failures of the monetary system have resulted in the debt growing exponentially and it is reaching almost vertical levels of money and debt grow. The only solution I can see, most ironically, is the introduction of monetary reform. This would allow increased Government spending at times of crisis without increasing levels of Government debt. This would, therefore, provide a more sustainable tool for dealing with the periodic crises of capitalism and allow for its continued existence. Without it, it is difficult to see how it could survive as the normal tools for dealing with its contradictions are reaching the end of their usefulness. Interestingly this tool, in effect state intervention, is no different in that respect to other tools that have been used in the past to offset the tendency of capitalism towards over accumulation. On second thoughts, perhaps we should not press for monetary reform, in order to hasten the demise of capitalism, a deeply unsustainable process in environmental terms.

  • Comment number 37.

    27. At 11:58am on 18th Jan 2011, sayasay wrote:
    Peston :”… few of the participants felt that the system had yet been mended.”

    "say for certainty that the less well-off played no part at all."

    Youre having a laugh. The "Less well off" provide everything you depend upon to survive.

    This is the most ludicrous comment I have read here so far.

  • Comment number 38.

    Deterrence is what the problem is,

    Commenting on the latest fine levied to a bank, Margaret Cole, the FSA's managing director of enforcement and financial crime said

    'we view these breaches as particularly serious and fully deserving of what is a very substantial fine.'

    So go on Margaret, just how substantial was this fine then ?

    Well given that Barclays profits last year were 11.6 billion pounds and banks work a 40 hour week over a 50 week year, this fine equates to about 1 hour and 15 minutes profit.

    Fines to the financial system for misdemeanors need to be raised by a factor of 10 and crimes committed need fines raised by a factor of 100 and some jail time.

    Then perhaps the regulators might have an easier job.

  • Comment number 39.

    19. At 11:41am on 18th Jan 2011, writingsonthewall wrote:

    What snow?

    What problems?

    Banks look fine to me. Brickwork looked fine, and the doors looked securely locked when I went past early this morning before most folk were at their work.

    All fine.

  • Comment number 40.

    31. At 12:12pm on 18th Jan 2011, anotherfakename wrote:
    Bankers make their living - and fat profits - from three sources:
    a) Ripping off consumers (0.5% base rate, 30% overdraft interest rate)
    b) Ripping off companies (just check the fees and interest rates charged to business customers, especially small business)
    c) Lying about the value of 'assets' which are really just debts owed to each other

    Exactly! Why would anyone in their right mind accept these terms if there was a viable alternative? There is no alternative because the banks are a cartel. People said the unions held the country back in the 70's. Now its the banks.

  • Comment number 41.

    36. At 12:23pm on 18th Jan 2011, Averagejoe wrote:

    You know what they'd do with this increased government spending though don't you? Wine cellar, fine art for the office wall......

    You don't think they'll give you a year's worth of free food and over $3 000 dollars do you. Just heard that is what once rather nice socialist country in the gulf region is giving to every single citizen. And that's on top of the free land and everything else each one of them get.

  • Comment number 42.

    24. At 11:55am on 18th Jan 2011, Amused2Death wrote:

    Is the heart of capitalism really broke or just unwell ?

    ............
    Capitalism has always been broken, as it has a number of flaws that cant be reconcilled. To make up for these flaws over the past few hundred years state intervention has been used to paper over the cracks, but inevitably and periodically it has major failures that require more drastic repairs to prevent it from failing completing. This time, its the largest failure of capitalism of all time. The question is will it survive? If it does it will only be because of significant and radical state intervention, but dont expect that from this government any time soon.

  • Comment number 43.

    22. At 11:48am on 18th Jan 2011, writingsonthewall wrote:
    "John - I always ask at this point - does that mean the crimes committed by criminals is the responsibility of the police?"

    No, because at the point the crime is committed, there is a regulation that says "do not do that"

    What John is saying, I believe, is that there was no regulation that said "do not do that" and he believes there should be



  • Comment number 44.

    http://www.bbc.co.uk/news/business-12214546
    .............
    And thats before the VAT rise! The BoE are stuck between a rock and a hard place, and people are getting poorer at the time. I think we will see a much more obvious slide in house prices if rates rise.

  • Comment number 45.

    42. At 12:41pm on 18th Jan 2011, Averagejoe wrote:
    24. At 11:55am on 18th Jan 2011, Amused2Death wrote:

    Is the heart of capitalism really broke or just unwell ?

    ............
    Capitalism has always been broken, as it has a number of flaws that cant be reconcilled.
    ==============================================================

    It is dying on its' feet despite the 'finest' political, financial, economic and media minds (if that isn't an oxymoron) rearranaging the deck chairs on the titanic that is Capitalism and the backslapping that goes on between and within this bunch of cartels.

    It can either be replaced, or we can all accept the ever increasing spiral reality of economic fascism. This means to accept that, bar the elite and their ill gotten gains, we will all have empty wallets and empty bank accounts.

  • Comment number 46.

    @33 The Swiss banks have to submit to this extra capital ratio. However, there is a very real threat that the continued bashing of bankers in the UK will mean that UK based bank teams (ie those of HSBC, JPMorgan and indeed RBS if they wanted to)relocate to countries such as Switzerland. The bonuses will still be paid but taxed in Switzerland, Frankfurt etc. This is loss to the UK.

    And why would they want to stay in the UK? Despite what many on here think bankers are human too - what incentive is there to live in London or the South East vs Geneva, Frankfurt or Paris. What is so Great about Britain these days...?

  • Comment number 47.

    31. At 12:12pm on 18th Jan 2011, anotherfakename

    You forgot 4)speculating on neccessities (commodities).

  • Comment number 48.

    #32, writingson

    I had enough of undergraduate and graduate degrees in applied economics, please. Let’s see how: many money chasing not so many goods make mighty inflation. Last heard many money is owned or owed by the wealthy. When the poor can own and owe many money, it this not socialism?

    I had answered your question “… now why might they be thinking that?” much earlier with ‘to further increase their wealth.’

    #37, i
    I do not think the better-off depend too much on the ‘less well off’ to survive. Flattery flowing both ways makes the value exchanging more amicable. We should not get in the way of diplomacy that makes both economic and social encounters more pleasant.

  • Comment number 49.

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

  • Comment number 50.

    Though a new 'Glass-steagel' act would be a good start, I'm not sure it is enough; yes, in theory, it should let the investment banks fail while keeping the high-street banks open, but what then? Could we credibly let investment banks fail?
    Remember Lehman brothers. It had no high street banking arm and was allowed to fail, an event which pretty much all commentators now accept was not only unwise but horribly dangerous. The suspicion surely has to be that even with the suggested separation in place it would still be too dangerous to let the desired shakeout occur.
    Part of the problem is that the short-term motivation of virtually everyone in the industry forces all the investment banks to operate in the most risky (= profitable) way, so they all face a real risk when the cycle turns. And don't forget how essential this business is to governments who want to sell bonds to mange their own incipient crises.

    It seems to me the main issue is the way the creation of money - by the issuance of debt - has been privatised. Unless this activity is brought back 'in house' into government, the situation is surely bound to reccur.

    Cassandretta 21

  • Comment number 51.

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

  • Comment number 52.

    My take on the banks is they are marching towards their next £billions while the rest of the country is going down the pan. Recession? What recession?!! Be funny if folk finally said enough-is-enough and Tunisia happened here wouldn't it. How about you cover that 'business story' Rp?

    GC

  • Comment number 53.

    Why do people keep finding any excuse to blame politicians. The banking crisis was caused by irresponsible banks & greedy bankers. To draw an analogy with football, if a clumsy defender breaks the leg of a top striker in a dangerous challenge, the fault was the defender's - not the referee, even if he had failed to make it clear that he regarded such tackles as unacceptable or had failed to deal with "near miss" tackles of the same sort previously. I fear that too many people like to bend their perception of the world to suit their (political) prejudices. But we should eb absolutely clear on this issue - those responsible were the people who work in banks - & I actually doubt whether the sort of regulation that would have been required pre 2008 to fix the problem would have been politically acceptable in the UK or anywhere else in the world. People here would have complained about being denied loans/mortgages & the Opposition would undoubtedly have backed them up. Hindsight is a wonderful thing, but it, too, needs to be based on FACT not on politically-orientated perception.

  • Comment number 54.

    43. At 12:53pm on 18th Jan 2011, yam yzf wrote:

    "What John is saying, I believe, is that there was no regulation that said "do not do that" and he believes there should be"

    ...but there was - and in a 'self regulatory' industry (which the banks were...and still are claiming can work) - then you should be guided by your morals.

    Are you saying you do what you like unless there is a specific law against it?

    There's no law stopping me mooning at traffic on the motorway from a bridge - but morals and a sense of responsibility prevent me from doing this. However in your world I should do it if I feel like it - and blame the regulator when I cause an accident!

    What was 'do not do that' anyway? - excessive lending? - I'm guessing the regulator thinks the desire to survive as a business would prevent that - which clearly it doesn't, but an understandable expectation.
    How do you legislate for an industry that will risk it's own demise through it's greed?

    All your doing is creating a mass market for new rules and regulations for banks to ignore. Further adding to the cost of running Government (something we're supposed to be reducing) and the costs of regulation (which we the consumer will ultimately bear)

    Face facts - this is a 2 faced system which is tilted in favour of the corporations. I mean how else do you explain 80 police officers investigating 'criminal damage' which I believe more officers dedicated than the whole of the city's financial crime team (those who are responsible for investigating financial crime).

    http://www.bbc.co.uk/news/uk-england-london-12180279

    Worse than that - there are 10 more officers investigating the criminal damage of protestors - but only 70 investigating a haenous crime of murder.

    http://www.dailymail.co.uk/news/article-1342794/Joanna-Yeates-murder-Flat-landlord-Chris-Jefferies-searched-bags-evidence-removed.html
    (about 2 thirds down - 'seventy officers investigating'

    So property has truly become more valuable than human life....and you still think you live in a humane democracy?

    The facts, this time, really do speak for themselves.

  • Comment number 55.

    42. At 12:41pm on 18th Jan 2011, Averagejoe wrote:

    "Capitalism has always been broken, as it has a number of flaws that cant be reconcilled. To make up for these flaws over the past few hundred years state intervention has been used to paper over the cracks, but inevitably and periodically it has major failures that require more drastic repairs to prevent it from failing completing. This time, its the largest failure of capitalism of all time. The question is will it survive? If it does it will only be because of significant and radical state intervention, but dont expect that from this government any time soon."

    What you perhaps fail to appreciate, Averagejoe, is that Capitalism under diffrent guises existed for millennia. For you always had merchants/small manufacturers making profits and owning the capital. Yes, even in that beloved of WOTW - Athens or Sparta - there were people involved in some form of Capitalism. It is only because of the technological and social (spread of parliamentary democracy) developments and growth of proletariat over the last two centuries that brought Capitalism to the fore.

    As Leviticus rightly pointed out (posts 503 and 521 in the “Why government can't stop big bonus payments” blog of 7 January 2011) Capitalism is not a social system at all. It's an economic system. One, however, that is very closely linked to democracy. You take away people's right to make profits and you undermine one of the main democratic principles and you end up with what...? System that failed every single time that it was attempted. Why they failed? Because idealists always forgot to take into account human behaviours and interactions. I expanded on it in the post 213 in the “Is there something British about banker bashing?” blog of 10 January 2011 and many times before.

    So yes, untrammelled economic system that is Capitalism if left to its own devices would destroy a lot in its wake - environment, free health care, social structures, resources etc. There is no such thing in reality like Free Market in its pure form just as there is no such thing like Anarchy, Communism etc - these all exist in the Dream Land. That is why we need governments not to paper over the cracks but to keep that economic system in check and help to channel its enormous energy for the good of as many citizens as possible.

    So yes, Capitalism will survive - I have no doubt about it - in one form or another. The current form of government here may be tested to the limits (because of broken promises by politicians, unpopular policies, stricter regulations etc.) but fear not, in the future there will always be people making profits.

  • Comment number 56.

    46. At 12:58pm on 18th Jan 2011, cynicalme wrote:

    "And why would they want to stay in the UK? Despite what many on here think bankers are human too - what incentive is there to live in London or the South East vs Geneva, Frankfurt or Paris. What is so Great about Britain these days...?"

    Loyalty? - or is that too much to expect. Do you rate you bankers so highly that you don't expect them to show any loyalty to this nation they nearly bankrupted?

    How much leeway are you going to give these clowns?

    ...and you're assuming other nations will WANT THEM - I mean don't you think they already have plenty of bankers in switzerland, US etc? I hear a lot of these places have oodles of unemployed bankers already - something about a worldwide recession...

    The game you're playing is one of a weak captive who will sell out his fellow captives in order to curry favour with the kidnapper.

    The rest of us don't give in to bullies - maybe it's time you questioned where your loyalties should lie.

  • Comment number 57.

    @48 "I do not think the better-off depend too much on the ‘less well off’ to survive."

    No - of course not: they personally grow their own food, make their own clothes, manufacture their own fuel, build their own houses, etc.

    Of course, there is a reserve army of unemployed, some of whom may be unemployable, but they are a tool to both frighten and divide those who do the real work (and I don't mean bankers!)

  • Comment number 58.

    48. At 13:03pm on 18th Jan 2011, sayasay wrote:

    So you mean that the "less well off" have no impact on your life and if they ceased to do what they do then your wealth would remain intact and you could survive?

    You would have to live in complete isolation from the real world.

  • Comment number 59.

    copperD: I agree we should not be negotiating, govt has the responsibility to lay down laws and regulations. Having said that we, as the public, should expect the govt to do proper research and risk assessment to try and get it right.

    In no particular order the following things need to be addressed:

    1. Risk capital I do not subscribe to the view that banks leverage should be reduced to 5:1, for many years 10:1 worked well. But I do think that the largest banks should be subject to lower leverage (which will tend to reduce the size of the biggest bank).

    2. Accounting rules. These are completely wrong but in a couple of ways. Mark to market accounting has been a complete failure and merely created instability (as many argued when it was introduced) and the rules which prevent banks making general provisions for bad debts are, on so many levels, lacking any commercial reality.

    3. Basel III. As long as these rules work on the banks own capital at risk models and mark to market this will not deliver the stability needed.

    4. Politicians need to shut up about banks lending to small businesses. At the moment we have politicians arguing both that banks should more carefully manage risk (and therefore lend less to riskier borrowers) and at the same time requiring banks to lend more to SME businesses which are generally the more riskier type of borrower.

  • Comment number 60.

    In any other business collusion is a crime but in banking they are able to "influence" elected bodies to ensure that what would normally be consider criminal behaviors are not. The "structural flaws" are mainly dishonesty and I am not sure that can be fixed with legislation unless personal assets can be attached when such behaviors are engaged and those responsible sent to jail.
    The banks and their rating agencies were in collusion to create loans that could not be supported and in one of the more dishonest of all creations developed an insurance instrument that had no money.
    Unfortunately, most of the Western governments were told about this in 2001 but through effective banking lobbying nothing happened and the events unfolded.
    This is really about a corrupt political system and the influence of wealth.
    It is still amazing that this largest theft in history has gone unpunished and the public taxed to transfer wealth to the already wealthy. One may mark one day that these events were the beginning of the end for the dominance of the West in global economics and we can all thank the bankers and elected officials for that.
    A corrupt banking system working with a corrupt political system will not produce any results that will be protective of the common depositor. Bury your money in your backyard, it will be safer.

  • Comment number 61.

    I remember reading somewhere at around the time Basel III was announced that under the new Basel rules Lehman Bros would have been given a clean bill of health the day before it was declared insolvent. (No link im afraid, lost amongst the thousands of pages I have read in the last 2 years)

    I do think both the UK & the US are damned if they do and damned if they don't raise interest rates. The reason they cannot make up their minds or fix the mess is because two wrongs do not make a right.

    By bailing out the banks capitalism was turned on it's head and there is no solution to be found under regular capitalist rules. They must be scratching their heads rifling through all the books of Smith and Keynes desperately trying to find a solution. Well there isn't one, you cheated and now we are all paying the price.

  • Comment number 62.

    I do not pretend to understand all that much about the finer details of how are current system works. I do know this however.......

    as a country we borrow money from the bank of England who lend us that money (the cash we hold in our hand) to be paid back to them with interest.

    This money is then in turn lent to banks (at a rate of interest) and in turn the banks lend us the money (again with interest to pay of course).

    All this means is for every £ or $ or almost any other currency is owed to someone at a rate of interest. I does not take much thought to realise we can only crate more debt with this system meaning this hole problem will occur again and again and again not matter what "fixes" you put in place.

  • Comment number 63.

    5. Eurosider "The question is not regulation, but the quality of management in the financial sector. Apart from senior managers who are intelligent and well-educated people, I'm sure that the majority of people working in the banks are less than the best that the country can offer."
    As someone who left school with a good education and has worked in banking for 22 years now, I take exception to your comments that I am less than the best that the country can offer. You seem to forget that the so called intelligent and well-educated senior managers are the ones everyone is blaming for the mess the country is on or are you now saying that because they are intelligent and well-educated it couldn’t possibly been them? Should we bring back Sir Fred?

    18. Red Haired Girl – feel free to leave your job and join a bank but if you think you’ll earn £25k, your in for a big disappointment, very few bank staff earn as much as that!

  • Comment number 64.

    46. At 12:58pm on 18th Jan 2011, cynicalme wrote:



    Even for bankers, getting your mitts on decent brown sauce for the chips is a problem when you move away from home. And decent cheddar....

  • Comment number 65.

    Has the banking system been fixed?
    No.
    Has the banking system been made safe?
    No.
    Has the gravity of the structural flaws in the banking industry (that caused the 2008 crash) been recognized?
    No.
    "...we need more capital than the Basel lll agreement concluded. It is clearly a compromise of course. It is an international compromise..."
    It's not altogether the amount of capitalization that is the most risky factor. The most risky factor is the incest between investment banking and commuity banking. Obviously the capital risk for community banks is just a wee percentage of the capital risks for investment banks.
    "And then of course I hope that countries will look at the particular risks they run or they can sustain. It is clearly possible...to go beyond it."
    Sure you can go beyond requirements, if you have a responsible system that adjusts to the type of banking that a country wishes to carry out. What must not happen, ever again, are bailouts - offloaded onto innocent, harrdworking taxpayers.
    So how much more capital do banks need?
    Wolf:
    "...Depending on how you define capital, that would mean safe banks should hold at least double the capital currently stipulated by the new Basel rules."
    It's not how you define capital; it's how you define RISK. An investment bank engaged in derivative bundling, credit default swaps, sovereign betting should have sufficient capital to cover the extremely high risk, as much as 50%.
    Martin Taylor:
    "I'm not suggesting to you that we should rely on Basel III..."
    No, you should not on Basel III.
    Systems should rely on structural change to accomodate RISK.
    The Banking Commission needs strong reforms, BUT...
    The biggest factor here is that the EU is working hard; the UK in isolation is slipe-sliding on taxing bonuses and its puny bank levy. Unity has got to happen! The EU should act together to establish, as I have said so many time before a foreign exchange transaction tax that would provide a fail-safe for the risks taken by investment banks. Even a little 0.05% would generate billions. Excess taxation would go to alleviate austerity, fund social programs, especially the huge gap beginning to show re old-age pensions.
    Commission will recommend a substantial capital surcharge should be imposed on our biggest banks, Royal Bank of Scotland, Barclays and HSBC - which they won't like, because capital is expensive and their profitability would be reduced.
    Whatever is done should be uniform across the EU. In my opinion, the proposed surcharge is misconceived. It should be a tax on all foreign transactions because foreign transactions are the meat & potatoes of investment banks too big to fail. The more risk you take, the more transactions you transact, the more tax you pay...and you leave an accountable audit trail.
    Paul Tucker, the deputy governor of the Bank of England, wants at least part of this surcharge for the biggest banks to be imposed globally...
    Well, good luck with that Paul. I truly wish you good luck. But you will never, ever, never get the United States of America to reign in its investment banks too big to fail - never! And Paul, its not about holding capital as such. It's about RISK. Capitalization of community banks needs only be minimal; these are serving communities, not nations. Capitalization of investment banks too big to fail, should be higher, much higher.
    But vs. capitalization, I once again recommend a foreign exchange tax on all transactions: Let's see where these big sharks are swimming.
    Giant banks can absorb more losses - not necessarily. Does the word sub-prime come to mind? Giant banks when they make mistakes, make huge, expensive, disastrous mistakes that can force them to bankruptcy...
    Tucker two particularly compelling statements:
    "If we have a system where banks take the upside but the taxpayer takes the downside something has gone wrong with capitalism...we need to repair this".
    Right on!
    "Capitalism can't work unless these financial firms at the centre of the heart of capitalism can be subject to orderly failure. The rules of capitalism need to apply to them just as they do to non-financial companies."
    Again, right on!
    Fixing capitalism: It is not just about the amount of capital and liquid resources that banks are forced to hold, or the maturity of their debt (what we might call the Basel stuff). It is also about the WALLS they should be forced between their various financial activities - community vs. investment. We are still living in a world where in a United Kingdom, but even more so in the United States, when big bank runs into difficulties, the taxpayers and our economy get beaten down.
    Given that the balance sheets of many western governments (including the UK's) are financially questionable. (Witness the trrust companies that are now being sued.) When you can not only defer debt, but make it disappear for ten or fifteen years, this is plain & simply BAD accounting, and this is exactly what happened in Greece. Grrece did this action on the advice of its financial advisor.
    Every transaction that crosses foreign territoty (e.g. US to UK) must have a foreign exchange tax attached to provide auditing, to pool risk, and to catch the sharks in a steel trap.

  • Comment number 66.

    If banks are profit-seeking entities, allowing them to fail makes lots of sense. However, to retain confidence in the banking system, current accounts will need 100% protection, leaving the various forms of savings account to take share some of the risk. So please add: "all the pain and cost is heaped on the bank's creditors, investors and managers - with none falling on taxpayers or current account holders".

  • Comment number 67.

    48. At 13:03pm on 18th Jan 2011, sayasay wrote:

    "I had answered your question “… now why might they be thinking that?” much earlier with ‘to further increase their wealth.’"

    ...no - you misunderstood - I mean why would they be investing in commodities? why would they be expecting a sharp rise in commodity prices?

    ...because they know that when interest rates eventually rise, and inflation is still rocking - the money will flow out of the stock market, away from bonds (nobody wants fixed income during high inlfationary times), away from houses and into neccessities.

    They are expecting food riots and increased demand for basic foodstuffs.

    "Flattery flowing both ways makes the value exchanging more amicable. We should not get in the way of diplomacy that makes both economic and social encounters more pleasant."

    So parasitical behaviour is OK - so long as you're pleasant about it!

  • Comment number 68.

    What sort of Bankers are you talking about ??? High Street, building societies Investment, Merchant, fund managers oh, do do take time to be precise

  • Comment number 69.

    I, like John, believe that the regulators were seriously at fault.

    Here are a few examples.

    The FSA carried out an exercise that indicated that Northern Rock would be in serious trouble if the wholsesale funding markets dried up and did nothing.

    The FSA approved the purchase of ABN AMRO and then enabled RBS to hold much lower levels of capital than required.

    The Bank of England did not raise interest rates despite raging inflation in house prices.

    Clearly, these are little local difficulties (in terms of the global environment) but just maybe, had our local environment been better managed and regulated, our difficulties might have been avoided or significantly reduced.

    Unfortunately, there were vested interests in the then status quo. Vast amounts of revenue for government were being generated. Any increase in base rates would have a) reduced house sales, b) reduced the number of re-mortgages c) reduced unsecured borrowing on stuff d) increased inflation measures as mortgage costs would have gone up, e) reduced revenue to government, e) increased the cost of government borrowing. Any or all of these would have blown a hole in the ship of state.

    You could take the view that the BOE could have reduced interest rates. This would have reduced the flow of hot money from lower interest rate jurisdictions, therefore made wholesale credit more difficult to obtain, lowered the value of the pound making imports more expensive but reducing demand for the multiplicity of products we buy from overseas and reduced the demand for UK government debt but that might have reduced the growth in GDP and blown a different hole.

    By doing nothing, enabling the status quo, the regulators from the politicians down, laid the charge and set the fuse.

    Some might say that it was a global phenomenon but not all jurisdictions had crises and those that didn't had different controls.

    To be frank, I can't see how the majority of the group assembled for this discussion will do anything than witter about anything but the current conventional wisdoms. They were in it up to their elbows and have a vested interest in pointing at someone or something else.

  • Comment number 70.

    Good stuff Robert, and I appreciate your insights but I can't help thinking it's not the main issue for banking and the UK.

    Nautonier touched on this before. This country has no strategic plan for how to deploy it's capital. I understand > 90% of capital in the UK is held by the UK banks. The trouble is the way this capital is used does not systematically aid this country. In fact much of that capital is used directly/indirectly to undermine, sell off and enfeeble good UK companies. Cadburys is the obvious example but there are lots more.

    All this on a day we hear that China out-loaned the World Bank last year. Those were certainly strategic investments.

    Now I know why people refer to the Brits as 'muddling through'. It's exactly what happens when vast allocation of money are made at the behest of individuals or coporations.

    Maybe I'm dense but I cannot see how haphazard capitalism will ever outperform command capitalism. I'm a chemist, and all I see rising to the top is the scum.

    In almost all endeavours there's the old saying 'fail to plan' and you 'plan to fail'. Laisssez faire capitalism seems to me to fit that bill, especially now as the government has little money to invest. We may have the 5th or 6th largest GDP but we cannot afford to defend it with any more ships than a South American Navy and fewer tanks than Switzerland. Maybe we should declare neutrality pretty rapidly.

  • Comment number 71.

    22. At 11:48am on 18th Jan 2011, writingsonthewall wrote:


    John - I always ask at this point - does that mean the crimes committed by criminals is the responsibility of the police?

    The problem I have is the deep rooted hypocriscy - if people act immorally - then it's deemed to be their fault, they should be more responsible - however when a bank (or any corporation) does the same then it's the regulator's fault.

    This is a sign of fascism - corporations receive favourable treatment over that of citizens.

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

    I'm not sure the analogy holds.

    In the case of the lax regulation leading up to the financial crisis, it would be more like the police standing around watching the crime being committed and doing nothing.

    The criminals would be at fault, but the people who were supposed to stop them (and didn't) would also be culpable.

  • Comment number 72.

    Has the banking system been fixed? Not a chance Robert.

    The usual lack of political will combined with greed and the future promise of vast riches for those who maintain the status quo has stymied any chance we may have had of fixing this broken-down corrupt system.

    Taxpayers in this country are heartily sick of politicians and business leaders colluding to tilt the playing field their way all the time. We, the people, have had enough and will not be satisfied until:

    1) A nationalised bank is created
    2) The banks are split up to create
    a) Safe Retail Banks
    b) Risky Investment Banks

    The retail banks would then be boring again but at at least our money would be safe. By nationalising one of the banks (RBS is 84% owned by us already) we could create an ethical bank which would do what we, the public, want it to do. Have sensible rates of interest and adhere to basic principles of fairness. All the other non-nationalised banks would follow suit, or they would disappear entirely as people withdraw their savings and move their accounts to the better nationalised bank.

    Investment banks would still carry out riskier operations, for a larger potential return, but at least when they failed we would not be asked to bail them out (as our money would still be safe in the retail banks). Then we can let the superstar bankers pay themselves what they wish.

    Surely this is just sensible capitalism.

    It's now over to the politicians, who have had over 2 years to do something about this but have so far failed miserably.

    What are they waiting for? Are they waiting until we become a Greece, Algeria, Ireland or Tuinisia and we decide that enough is enough?

  • Comment number 73.

    • 19. At 11:41am on 18th Jan 2011, writingsonthewall wrote:
    I would like to campaign for a new 'war on snow' - a devastating evil which has caused the downfall of some of our greatest industries and retailers. A blight which has caused energy bills to rise, affected Tesco profits and caused many, many people to loose their jobs and homes.

    - Can you genuinely not see why fuel bills increase because of cold weather?

    The absurdity of what people are being asked to believe is 'snow joke'.

    - You should apologise for that one!

  • Comment number 74.

    49. At 13:04pm on 18th Jan 2011, PURPS wrote:

    "The problem with this article and the conclusion is you are biased towards protecting Gordon Brown and Labour. Capitalism is about renewal and allowing failure."

    ...and capital accumulation (or did you forget that)

    "There is no such thing as a too big to fail bank."

    There is, there will be, and always have been as the 'goal' of capitalist banks is to grow to monopolistic size......or are you confused about the aims of capitalist participants?

    "The Tax payer has not lost out, no one has taken any of my money. However, it has been printed by the BOE & we will get inflation that will inflate away Browns debts £1trillion, £245billion PFI £200b pension black hole and £8b illegal gold sale."

    Illegal gold sale.....?...never mind..

    You may not have had money taken from your pocket - but what was in your pocket is now worth a lot less. So what's the difference? The tax payer has actually lost money - it's currently a paper loss in our stakes in the banks, as well as the free guarantees we've been supplying throughout this crisis.

    "in fact the state (not taxpayer) will generate a paper profit on all the insurance premiums paid by the banks and on their eventual sale."

    When is 'eventual' - I don't need a date or time, but what year? it's been 3 already, will it be 5, 10 or 20? The insurance premiums were massively undersold (because incase you haven't noticed there was no other guarantor in town - so why didn't the Government act like a bank and charge the most extortionate rate?)

    "The main problem is /was China external reserves and the high Oil price, this caused wealth from the west to be sucked out into Asia and the Middle East. The biggest transfer of wealth in our history."

    The main problem was in fact the fooling of britons to convince them they were making progress under capitalism whereas their pound was devaluing fast (in real terms) and the BoT deficit was built up in order to maintain the charade. Still some people will stop at nothing to maintain this failing system.

    "That money came back onto our markets as it was not sanitised, creating the perfect storm for banks (Gordon Browns & Labours favourite) Northern Rick to over lend & create off balance sheet vehicles for funding at low money market funds, which were swishing around due to China and the Middle East."

    ...but isn't the management of that process 'what the banks get paid for'? - so what were they being paid for?

    "Brown was asleep when Northern Rock lent 120% mortgages."

    he was a prime minister - do you expect your prime minister to be going into the high street banks daily to check on their mortgage products? One minute you're saying this (rise and fall freedom) is what capitalism is all about - then you're blaming the Government for not managing the situation. Make up your mind, are you a free market man or not?
    It seems like most capitalists you want it both ways.

    "America was asleep when they pushed for the American Dream for Blue collar workers, latino's and Black Americans to buy houses when they could not afford the first months rent."

    ..and why was that? - devaluing dollar in real terms. The real question for you is why can blue collar workers no longer afford what their parent could? - Capitalism is taking us backwards then - the system you support so vehemently.

    "Where the law suits should be is in the US real estate market and congress for pushing through stupid laws."

    Blaming Government again - I see this is a common theme. Never mind those who benefitted from the excessive lending of the banks (their bonuses) - blame the Government instead.

    You truly are a sycophant for the banks aren't you?

  • Comment number 75.

    59. At 13:36pm on 18th Jan 2011, Justin150 wrote:

    > we have politicians arguing both that banks should more carefully manage
    > risk .. and at the same time requiring banks to lend more to SME businesses

    If banks weren't spraying bonues money all over the "City", they would be in this pickle in the first place. Clamp down on 'em and hit it where it hurts bankers the most - in their pockets!

  • Comment number 76.

    53. At 13:22pm on 18th Jan 2011, lacplesis37

    An excellent post showing all the contradictions of the arguments presented by Government and the supporters of banks. A very good analagy too - I would go further as to say the 'solution' is to have more referees on the pitch.

    Your analagy makes it clear that this wouldn't stop the bad tackle in the first place - that is down to decisions made by the defender. Catching the wrongdoers isn't the problem - it's making them unsure about taking the risk in the first place.

    Certainly the 'record' fines handed out by the regulators are pathetic and are no deterrent.

  • Comment number 77.

    @ 68. At 13:46pm on 18th Jan 2011, wholistens wrote:

    > What sort of Bankers are you talking about ??? High Street, building
    > societies Investment, Merchant, fund managers oh, do do take time to
    > be precise

    The greedy ones, that's who.

  • Comment number 78.

    @ 56 WOTW

    Loyalty? - or is that too much to expect. Do you rate you bankers so highly that you don't expect them to show any loyalty to this nation they nearly bankrupted?
    -----------------

    Are you joking? Loyalty? What is the point of loyalty to a country? Does the government show you loyalty ? (and that is a government of any colour). Does your community show you loyalty with all its disfunctional opposing pieces? Loyalty is to be reserved for your family and friends.
    Why stay in an environment that is not hospitable? Mankind/Animalkind has since the beginning always moved to somewhere where where the environmental conditions are better - and this doesn't mean the weather. To stay in an inhospitable environment in the name of loyalty seems like a crazy notion.

    And as for being welcomed, there is much evidence as the APAC region continually hires, as Switzerland expat population grows that yes indee they are welcome. If you pay more tax then you consume then many countries welcome this.

  • Comment number 79.

    "So yes, Capitalism will survive - I have no doubt about it - in one form or another. The current form of government here may be tested to the limits (because of broken promises by politicians, unpopular policies, stricter regulations etc.) but fear not, in the future there will always be people making profits." Capitalism does have a propensity for survival, no doubt about it Ian. Perhaps you agree that its facing its greatest challenge to date. I have an open mind as to whether it will survive this challenge, but to survive it will have to do, what it always hates to do, and allow state intervention to interfer, to make up for its failings. However, that sort of approach will not be favoured by the Government and their inaction, will delay the necessary rescue package required to overcome the challenges.

  • Comment number 80.

    19 writingsonthewall

    'The absurdity of what people are being expected to believe is 'snow 'joke'

    An entertaining way of looking at iit.

    You are absolutely right for unless people have the thirst for finding out what is really going on they will be palmed off with all sorts of experts telling them everything will be alriight but never when it will be alright.

    Where are the leaders in all of this who really know how to sort it all out without vested interests getting in the way? Name one because I can't.

    Inflation being today's issue aside from banks and sovereign debt the current experts are telling us that inflation will fall again next year.

    Well that's one way of putting off a highly flammable issue for another year I suppose.

    What they don't say is that prices don't fall except in extreme cases but that the rate of increase should (not will) fall.

    Doesn't help those who haven't had a wage increase or their savings have devalued over a long period of time.

    Truth as ever is in short supply but as long as people keep on believing the so called experts (publicists) then little improvement will be made for ordinary people and the 20 trillion? in tax havens will keep on mounting.

    Makes our comments seem so insignificant.

  • Comment number 81.

    #6 - Well how good your story is depends on how old your children are. A point of order, Governments don't borrow from banks per se. They issue bonds called gilts. These are bought by banks, pension funds, wealthy individuals, mutual funds etc. The banks want to buy UK government bonds as they are of low risk. These bonds are then traded but that has no impact on the amount the government receives in the same way as a share price going up or down doesn't change the amount of money a company has. When the debts mature, the government has to give the money back so what they do is issue more bonds! They also like to trade in high yield shares (sometimes called junk bonds) as the yield is higher but so is the risk of default. The national debt will never be paid off (unless we find large oil reserves in the Falklands) - we haven't paid for the Napoleonic wars! Fear not though as inflation erodes the debt (consider how much your father earned a year in 19 whatever compared to what you or someone in a similar job to your father does now - minimum way is nearly £6 but in my student days £4 was considered good).

    I also see no mention of the government brother deciding to invade another country to try and impress the leader of another country and as a result securing a lucrative after dinner speaking circuit.

  • Comment number 82.

    55. At 13:28pm on 18th Jan 2011, Ian wrote:

    "What you perhaps fail to appreciate, Averagejoe, is that Capitalism under diffrent guises existed for millennia. For you always had merchants/small manufacturers making profits and owning the capital. Yes, even in that beloved of WOTW - Athens or Sparta - there were people involved in some form of Capitalism. It is only because of the technological and social (spread of parliamentary democracy) developments and growth of proletariat over the last two centuries that brought Capitalism to the fore."

    Yes Ian - and what happened - THEY ACCUMULATED CAPITAL - and hence the problems we see today. I mean what a surprise a system where the main aim is to accumulate capital results in a few big player owning all the capital (and thereby being able to dictate prices and markets)

    What's your solution to this Ian? - regulation per chance?

    "So yes, Capitalism will survive - I have no doubt about it"

    yeah - like the revolution won't be happening....which of course it already is Ian.

    Your arguments are all disconected - the only 'dream world' is the one you reside in - where you can have all your cake and eat it. Capitalism and freedom (even though I have explained above the end result of capital accumulation - concentrations of power and wealth - so how does that promote freedom Ian?) and free (regulated) markets which work - but without increasing the cost of Government to run the never ending regulation.

    Capitalism WILL fail - I can guarantee it - simply because one day all the capital will be in the hands of a single person (or group of people) - and that's called......a Dictatorship - that's right Ian.
    It's inevitable - all it requires is about 30 seconds logical thinking and some empathy as to what people's aims and goals are (shown by the recent crises)

    Please don't patronise AverageJoe when you are making it up your ideology as you go along.

  • Comment number 83.

    The current system is walking forwards while looking backwards. If there is a cliff we will fall off it, if the cliff is not too high, we will carry on, injured maybe, but as we are only looking backwards we will not see the next cliff coming.

    Banks are just conduits of debt skimming off a percentage between borrowing and lending rates, your savings account is somebody elses start up capital, your pension fund is somebody elses mortgage.

    If competition in the market was perfect, regulation would not be required, but the market is highly imperfect, so it is. There is too much at stake, whether we like it or not we are all stakeholders.

  • Comment number 84.

    @ 64 You forget that not all UK based bankers are British originally. Maybe the outgoing bankers prefer to spend their renumeration on Chocolate, Champagne or Chow Mein...

  • Comment number 85.

    . At 12:04pm on 18th Jan 2011, writingsonthewall wrote:

    You can't blame a generation for try to obtain what the previous one has - I mean we are supposed to be improving aren't we? - or maybe Capitalism is actually taking us backwards....

    Never mind 'maybe' Definitely.

  • Comment number 86.

    Let us remind ourselves what those knowledgeable sorts told us in 2007 – 2008:

    September 2007 The British Bankers' Association said:
    "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry."

    September 2007 The Chairman of the Treasury Select Committee, John McFall, said:
    "The banking system in the United Kingdom is strong,".

    May 2008 Mervyn King said:
    "It's quite possible that at some point we may get an odd quarter or two of negative growth, but recession is not the central projection at all."


    To be perfectly honest, if my mother in law’s dog was capable of speech I do believe it would be capable of uttering more sense than any of the above.

  • Comment number 87.

    #57 Sasha

    Blame me; if I have an exaggerated sense of humanity. I figure there will always be more than enough of those seeking employment from the well-off. Both sides just need to be polite and, hopefully, abundance flows both ways. Flattery works just fine.

    #58, i

    Wrong, my world is as inter-actively real as it can get. Where did you get the idea that I do not commingle with the less well-off? My first comment was a just a juxtaposition of rising prices and bankers’ bonuses with the well-off. Without the less moneyed taking any part.
    A vibrant civilised society has many jobs like accounting, cleaning sewers, etc to Zen-philosophising. But let's not get carried away with the butterfly effects of mundane people on rising stock markets and the health of many wealth generating sub-systems.

  • Comment number 88.

    53. At 13:22pm on 18th Jan 2011, lacplesis37 wrote:

    "Why do people keep finding any excuse to blame politicians. The banking crisis was caused by irresponsible banks & greedy bankers. To draw an analogy with football, if a clumsy defender breaks the leg of a top striker in a dangerous challenge, the fault was the defender's - not the referee..."

    Not sure I would agree. Yes, the single foul on the opponent would clearly be the fault of the defender (so, one bank getting very greedy and out of line) yet allowing it to systematically happen throughout the match by all players can be squarely put down to the referee.

  • Comment number 89.

    59. At 13:36pm on 18th Jan 2011, Justin150 wrote:

    4. Politicians need to shut up about banks lending to small businesses. At the moment we have politicians arguing both that banks should more carefully manage risk (and therefore lend less to riskier borrowers) and at the same time requiring banks to lend more to SME businesses which are generally the more riskier type of borrower.

    ******

    This is a difficult subject. If SMEs ( who employ most of the UK) can be supported to grow, it would go a long way to helping UK PLC. However, how do you assess the creditworthness of a business? In the middle of a deep recession, or in a boom time? The accounts will show very different pictures.

    What actually is required is human intervention - bank managers visiting SMEs, understanding their business, so they can evaluate their creditworthness. Currently, this is done over the phone, centrally scored, and usually rejected. Obviously the human touch is more expensive, and the banks can't control it as well, but with 60:1 markup on money cost to money interest, you would have thought it was possible to make some profit, and support the UK at the same time...

    Both is possible, if banks took helping the UK as seriously as they do helping their own pockets.

  • Comment number 90.

    54. At 13:27pm on 18th Jan 2011, writingsonthewall wrote:
    "Are you saying you do what you like unless there is a specific law against it?

    There's no law stopping me mooning at traffic on the motorway from a bridge - but morals and a sense of responsibility prevent me from doing this. However in your world I should do it if I feel like it - and blame the regulator when I cause an accident!"

    Actually, you could be prosecuted under any number of public order offences. But yes, if there is not a law against it, then you can do it. You can ride your bicycle on the road as the law allows this. It does not allow you to ride it on the pavement and so, if you are causght doing so, you will be fined for it. Simple really

    As for the number of officers investigating various crimes, 70 are investigating events that affected 1 person and probably only involve 1 other person. 80 are investigating a crime that affects 20+million people ie taxpayers who pay for the damage caused and probably involves minimum 10+ people. So on a simple ratio basis, the volume of officers for each case is about right. And for most criminal damage crimes ie someone kicking in headlightsof a car and stealing the chrome off it, the police did not even want to investigate from my experience. So property is worth a lot less that human life.

    So in this case, yes the facts speak for themselves, though in a different manner to which you see them perhaps

  • Comment number 91.

    I fully understand the pre-occupation of discussing Banks financial position, unfair bankers bonuses and their ability to lend to companies and mortgage seekers alike.

    I also understand the chancellors repetitive drone of having to balance the books on the Public Sector debt and as he described it today - paying off the national credit card.

    But as a UK citizen I am pre-occupied with understanding who cares about the devestating effect that government and the banking sector has had on personal debt and how to rebuild that wealth.

    A private pension with two commercial properties, one un-let and half its value, one let but 65% its value three years ago, Personal property devalued by 20 - 25%, Increased VAT and Personal Tax, Petrol and oil prices out of control, Inflation endemic in the global supply chain of food and clothes, Uncertainty over Jobs and growth, Banks charging 10 - 15% over the base rate on credit cards

    So lets talk about the issues that affect the public - ignore bankers bonuses they are a smokescreen to take our eyes off the real issues. Let government tell us their strategy for the public to address its debt and loss of wealth and yes what we have to be happy about

  • Comment number 92.

    I fully agree with James when he wrote...

    "Taxpayers in this country are heartily sick of politicians and business leaders colluding to tilt the playing field their way all the time. We, the people, have had enough and will not be satisfied until:

    1) A nationalised bank is created
    2) The banks are split up to create
    a) Safe Retail Banks
    b) Risky Investment Banks

    The retail banks would then be boring again but at at least our money would be safe. By nationalising one of the banks (RBS is 84% owned by us already) we could create an ethical bank which would do what we, the public, want it to do. Have sensible rates of interest and adhere to basic principles of fairness. All the other non-nationalised banks would follow suit, or they would disappear entirely as people withdraw their savings and move their accounts to the better nationalised bank."

    When people have no jobs, no roofs over their head, cannot feed their families then London is only a short step away from Tunis !!

  • Comment number 93.

    • 82. At 14:09pm on 18th Jan 2011, writingsonthewall wrote:

    It's inevitable - all it requires is about 30 seconds logical thinking and some empathy as to what people's aims and goals are (shown by the recent crises)

    - Are suggesting that people are self-interested and greedy? At last we agree on something! You ze Tommy, vivout ze war, ve vould probably be friends!

  • Comment number 94.

    71. At 13:54pm on 18th Jan 2011, K756ET wrote:

    "In the case of the lax regulation leading up to the financial crisis, it would be more like the police standing around watching the crime being committed and doing nothing."

    .....well the 'criminals' in this case weren't that obvious. These are low level amatuers you know - these are well seasoned criminals.....and besides - they have the judiciary in their pockets!

    "The criminals would be at fault, but the people who were supposed to stop them (and didn't) would also be culpable."

    ...and yet the banking sympathisers say we can't blame the banks - it was the Governments fault they committed crimes.

  • Comment number 95.

    @ 46. At 12:58pm on 18th Jan 2011, cynicalme wrote:

    > The Swiss banks have to submit to this extra capital ratio. However, there is a
    > very real threat that the continued bashing of bankers in the UK will mean
    > that UK based bank teams (ie those of HSBC, JPMorgan and indeed RBS
    > if they wanted to)relocate to countries such as Switzerland. The bonuses will
    > still be paid but taxed in Switzerland, Frankfurt etc. This is loss to the UK.

    Yeah - like losing hemorrhoids!

    > what incentive is there to live in London or the South East

    None whatsoever - it's a dump. Cut them some slack - nobody in their right mind would live in "the smoke", unless they couldn't afford life elsewhere. Let the bankers go - greed has made them all all very unhappy and they aren't suited to life in a civilised place.

  • Comment number 96.

    73. At 13:56pm on 18th Jan 2011, Lindsay_from_Hendon wrote:

    "- Can you genuinely not see why fuel bills increase because of cold weather?"

    Worldwide energy prices have risen - but the cold weather hasn't been a worldwide phenomenon....and all the other price rises? - are these all coincidental?

    The problem with capitalists is they expect you to believe the most absurd and unbelieveable coincidences in order to conclude the system is fair.

  • Comment number 97.

    92. At 15:16pm on 18th Jan 2011, MS1949 wrote:
    'When people have no jobs, no roofs over their head, cannot feed their families then London is only a short step away from Tunis !!'

    Well there’s lots of people out of work, many have been repossessed, and the weekly shopping bill is going through the roof.

    As far as I can see the primary difference between London and Tunis, is the weather.



  • Comment number 98.

    #67 writingson “no - you misunderstood”

    Really, you mean after thinking about “interest rates”, “inflation”, “money flow” etc, can I not also further increase my wealth? I was talking objectives; you got carried away with thought processes.

    Your “So parasitical behaviour is OK”. As to my ‘flattery’. I know I am not alone; politicians do it, advertisers proclaim it, human resources managers spin it, mothers ‘coo’ it and etc.

  • Comment number 99.

    It's a repeat of the cycle from the 1930s when tough regulation was brought in.
    Gradually it was whittled away until, with the arrival of Thatcher it was all but scrapped. What was left was never enforced.

    So now we're going through it again - toughen up. And in twenty years' time someone willscrap some part of this new regulation because it's inconvenient and doesn't allow markets the freedom they should have - you watch.

  • Comment number 100.

    78. At 14:02pm on 18th Jan 2011, cynicalme wrote:

    "Are you joking? Loyalty? What is the point of loyalty to a country? Does the government show you loyalty ? (and that is a government of any colour). Does your community show you loyalty with all its disfunctional opposing pieces? Loyalty is to be reserved for your family and friends."

    ...but you want public sector workers to show their loyalty by accepting lower pay and pensions to clean up the dis-loyal bankers mess?

    "Why stay in an environment that is not hospitable? Mankind/Animalkind has since the beginning always moved to somewhere where where the environmental conditions are better - and this doesn't mean the weather. To stay in an inhospitable environment in the name of loyalty seems like a crazy notion."

    ...but this environment was made inhospitable by the bankers themselves. You seem to be arguing that once a burgular burgles your house you should open the door and invite them back in for the bits they missed - because you don't want to drive them away to Switzerland.

    "And as for being welcomed, there is much evidence as the APAC region continually hires"

    What evidence? - and how can a country continually hire when it's saturated by a particular type of employee - ever heard the one about how we can all become hairdressers to make a living?

    Nobody will be hiring bankers - it's logical. The banks are shrinking (less staff) and this is happening worldwide - so the demand for bankers is falling when the supply of bankers is rising.

    Now do I need to explain supply and demand too? - or can you conclude what's going to happen eventually?
    The only exception will be market manipulation where the 'top dogs' keep their positions and high salaries and everyone else gets canned. This is very similar to how society now works in general.
    I can assure you some banks would only have 1 branch left before they start sacking the board - everyone else must go before that!

 

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