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peterdough

Listed below are comments made by peterdough between Friday, 11th September 2009 and Friday, 23rd October 2009.

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Bank reform: The radical way 2:14pm on 23 Oct 2009 Mervyn King came out and called it ‘delusional’ for government-supported banks to be allowed back into risky trading activities, at the same time RBS for one appears keen to do all kinds of investment banking deals Bank of America-Merrill Lynch lost faith in, by harvesting their hotshot traders, guaranteeing bonuses. Already RBS’s dud rights issue sub is looking unlikely to produce a dividend, perhaps they need reminding that the moment that they took taxpayers’ money they became a public institution held to a new set of standards. Or to put it into perspective, imagine your local MP lost a hundred million of the government budget in a bad city investment all the while voting themselves a pay increase

Meanwhile the gallery of rogues is coming along nicely. Bernie Madoff will serve out his days in jail, Nicholas Levene is rumoured to be in the Priory clinic with 70m of shareholders’ investments allegedly gone missing, Cioffi and Tannin are on securities fraud charges from their two 2007 sub prime hedge funds collapse, and Raj Rajaratnam has been led away over allegations of using a network of contacts to collect advance deal information. Looking ahead, AIG-created products are under close scrutiny here in Britain and could lead to arrests. All coinciding with a headline of record recession for the UK economy.

Best wishes Robert.
Reasons to back Afghanistan's Karzai 3:05pm on 14 Oct 2009 I think it's an indictment of the UN that when one of their veteran diplomats charges that they effectively let Afghanistan's election be stolen by massive fraud, and that his UN boss blocked anti-fraud efforts (which would have forced a second round of voting if carried out properly) the UN responds by sacking him. I don't think it's appropriate for the UN to leave the whole enchilada to the ECC. A more vigorous response to fraud is called for. The US government now faces the prospect of selling the public on a war to protect a government with a dubious mandate -- if there is even the slightest sense of illegitimacy in Afghanistan among the Afghan people for their government then, as Obama admits, that just makes the task more difficult.
Brown and bonuses 10:01am on 28 Sep 2009 "restriction on the funds available to a bank perceived as too weak to pay bonuses, not on the size of any bonuses that any bank wished to pay to individual bankers (even the weaker ones)"

- well that's a no-brainer then isn't it -- no bank is too weak to pay bonuses, and take the pool - restrict it from the staff - for the chiefs. Come to think of it that's what happened last time.
What could/would/should central banks have done? 11:52am on 23 Sep 2009 All pales into insignificance when you consider how banks found a way to avoid the regulation that everyone knew they needed. They are by far the biggest and most powerful interest group in Britain.

We cannot rely solely on regulation to solve this crisis. Fundamental reforms are necessary need to be made without relying on regulation.

Such as we've seen, regulation can easily be co-opted or captured by those we are trying to regulate. We need to find a way to get banking and finance sector interests out of government and ensure financial institutions never become either too big to fail or so big that they improperly influence markets and government.
Turner: Not banks' enemy 11:00am on 23 Sep 2009 Criminal acts must have been committed right at the level of investment banks that packaged and/or resold dubious mortgages, Robert, and this is still very really one problem. A second and greater problem is that what has severely damaged our economy and still jeopardizes our future is still being defended simply on the basis that it is completely legal. Much of what was done in terms of financial market deregulation since the 1990s we are told was completely legal, but a very bad thing to do. The most worrying thing now at this moment is that the current leadership on economic strategy issues is pointing us right back in the same direction. This is merely the latest evidence in this regard.

They cannot be allowed to continue with simply technocratic tweaks. What is called for is a massive overhaul that will really make a difference to the functioning of the financial system. Institutions have access to government bailouts under vague and completely open-ended terms. In what way will this encourage responsible lending in the future? There is nothing currently on the table that would make the banking system and hence financial system better run.

The finance industry has captured both public policy and a wide range of public economists who really believe that we need something like today's financial sector in order to resume reasonable growth in this country. This is despite the fact that, as Lord Turner is implying, financial innovation has added little to productivity in the past two decades, and in the face of the massive damage done by overborrowing at various levels.
Unparliamentary or un-American? 10:23am on 16 Sep 2009 54. AndreainNY: "In this particular case, the 'you lie' heckler was also wrong on the facts"
******************
How so?

The bill clearly restricts subsidies to U.S. citizens and legal residents.

Sorry for the delay in getting back to you.
PM: 'We'll cut with Germany, France and the US' 12:23pm on 15 Sep 2009 Robert, depicting the reform of the banking system as seriously unfinished business is grossly understating the problem. Any prattle on the topic in the first place was sluggish to get anywhere to say the least. Policy-makers back peddled frankly so changes are now considerably more modest than the overhaul originally expected.

The patchwork regulatory agencies' systems are now likely to remain mostly intact. Traders continue to buy and sell unregulated and complex products such as those sold by AIG. There are no proposals to eliminate conflicts when bond issuers pay credit rating agencies to evaluate their financial products.

Big Wall Street pay checks won't be subject to strict limits, and industry lobbyists are killing consumer protection policy with millions in campaign funds. This is the position (which also includes establishing rules on bonuses) going into the G20 meeting in Pittsburgh next week. It's a non-starter.
Unparliamentary or un-American? 2:27pm on 14 Sep 2009 Expecting people to be civil when attending a Presidential speech is not asking for veneration and royal treatment, it's simply recognizing that heckling a President is sheer, childish rudeness. It's one further step in decline from deliberative democracy, proof that at the highest levels of government the idea of civil discourse is no longer valued, at least among one of the two major American parties.

In this particular case, the 'you lie' heckler was also wrong on the facts. It wasn't only mindlessly venomous, it represented an astonishing set of inverted priorities when forty-six million uninsured people, exploding health care costs, and an insurance industry that does everything it possible can to avoid paying out on its policies get placed behind some irrational fear of illegal aliens.

All it did was to distract from the one big cave to the insurance and pharmaceutical industries that Obama's speech amounted to, which was basically saying that the health industry owns enough Democrats to make sure that meaningful health reform can not pass.
The lessons of Lehman 10:51am on 14 Sep 2009 So what was it that the banks, of which Lehman was but one, actually did to cause this? First they paid the government, via campaign contributions to members of Congress and the Senate, in th UK- MPs, to eliminate bank restrictions, then they overleveraged, knowing they could not honor contracts with such leverage, then they lied to their shareholders about the risks and magnitudes of their positions, hid their positions illegally off balance sheet, and through the use of derivatives managed to violate minimum capital requirements on an almost daily basis. They took bank debt leverage from 8:1 to over 30:1, thus assuring that the banking system could not survive even a modest credit tightening or recession. They then made crazy bets in the credit default swap market that they could never honor in a downturn. They loaned money to anyone who could fog a knife because they knew they were going to stuff it to others through securitization and CDOs. If we had a criminal investigation, we would have access to the incriminating phone calls and e-mails which disclose what they really thought of the assets they were pawning off on others. One year on and no news on prosecution, nor evidence raised in civil cases, and this is the main reason it is happening all over again.
How Rover executives pocketed £42m 11:13am on 11 Sep 2009 No reasoning could be given when the SFO pulled back from launching a criminal investigation, because BDO’s report was at the time confidential. Presumably now the reasoning was as you stated Robert, the inspectors do not accuse the so-called Phoenix Four and the chief executive they appointed of breaking the law. It remains to be seen however when and if the civil cases get under way whether or not criminal wrongdoing will be uncovered and referred to prosecutors. Given the willful blindness demonstrated by the auditor and adviser to the parent company Phoenix Venture Holdings, the other two firms involved with MG Rover before during and after its failure, and the fraud watchdogs and the government, it should be expected.

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