Bankers and responsibility
A heavy burden is on the shoulders of Jamie Dimon - as probably the only American banker of seniority whose reputation has not been smashed to smithereens by the crash of '08.
Unlike so many of his battered peers, the chairman of JP Morgan has had the courage (or chutzpah?) to show his mug in Davos. And, by all accounts, he's been saying worryingly sensible things in those private bankers' meetings that are being held to provide finance ministers and government heads with the financial industry's view on how to save the global economy.
I am told that at the World Economic Forum's so-called governors' meeting yesterday - in which the banks, brokers, private equity firms and hedge funds tried to draw up a common agenda for reform - he warned against placing too much faith in the possible creation of a central clearing system for financial transactions between banks.
The proponents of such a system believe that it would restore confidence to inter-bank lending - which has been sadly lacking for most of the past 18 months and has been a massive contributor to the implosion of the global machine for creating credit.
The reason it could restore confidence is that it would involve the establishment of what's known as a central counterparty, which would in effect insure banks against loss if another bank was unable to honour commitments.
If there were a central counterparty, fnancial institutions that lend to each other would have less reason to fear that - in extremis - they could not get their money back.
Which would appeal to most bankers (as if you needed telling), especially in this era of high anxiety.
Except that Dimon posed the question whether it would really be sensible to reduce the requirement for bankers to think long and hard about who they're lending to and why.
After all, the mess we're in stems from bankers placing too much faith in computer models and the opinion of third-party credit-rating agencies when deciding where to make their loans and investments.
The debt bubble that precipitated the current debt drought and global recession was caused in large part by bankers abdicating their very basic responsibility to know their borrowers properly and to assess whether these borrowers had the remotest chance of being able to repay their debts.
So if we're going to try to prevent bankers messing up our economy again, do we want them to take greater responsibility for their actions, or less?
Surely in the new world economic order which will be built - though Davos has been disappointingly short of coherent visions of what will be constructed from the rubble - we need bankers to know their customers and to propely evaluate the risks of lending.
But the more that they're insured against losses on lending, the less incentive they will have to lend responsibly.
Which brings us to the Great Paradox (capital "G", capital "P") of our government's measures to restore the flow of credit to real businesses and households.
All of these schemes involve taxpayers' insuring away some of the risks for banks and financial institutions of lending and investing.
In respect of new lending, this is the effect of the Bank of England's new asset purchase scheme, the proposed state guarantee for asset-backed securities, and assorted guarantees for bank lending to businesses.
Taxpayers are even taking on the liability for banks' dodgy old loans and investments, through the establishment of the new public sector insurer of banks' toxic debts, which should probably be christened "The Imprudential".
In other words it is explicit government policy to reduce bankers' responsibility for their actions, their lending, even more than was already the pernicious case.
We're in this mess because too much was lent by too many in a wholly irresponsible way.
And ministers are now encouraging more of this lending by further reducing the responsibility of the lenders for their actions.
It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice.
It might work. Or it might just make our economy's dependence on unsustainably high levels of debt even worse - and thus cause us even more pain when we're ultimately weaned off the addiction.
UPDATE: Here are some thoughts of mine from today's The World at One on how banks could become "good" again.
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I hope that wasn't you that was phoning the PM during his press conference Robert.
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'It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice.
It might work. Or it might just make our economy's dependence on unsustainably high levels of debt even worse - and thus cause us even more pain when we're ultimately weaned off the addiction.'
It's called sustaining the unsustainable. The system was wrong, so why are we bankrupting the future trying to sustain it?
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Robert I have an idea: nationalise the rating agencies.
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Not only are taxpayers are even taking on the liability for banks' dodgy old loans and investments but are still being dumped on.
For example, RBS a British tax payer owned bank is busy trying to outsource British jobs to Asia. Outsourcing can make sense in boom times, but when unemployment is rising it is crazy to throw British workers on to the dole to send the money to Asia!! Less money in our country = less taxes, even more unemployed and a worse balance of trade.
Is there any way this can be said to benefit British taxpayers? I think not!!
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Robert,
Please don't mention....
"our government's measures to restore the flow of credit to real businesses and households."
There is no shortage of credit to householders. Both of my (British) banks - an effectively nationalised one and one surviving without government bail out, have been falling over themselves to lend me money. Recently they have both called, the conversation has gone along the lines of
Q. You're in the black. Do you need an overdraft?
A. No
Q. You don't have a loan out. Do you want one.
A. No
Q. Maybe you would like one of our credit cards?
A. No.
I am not a rich man, though am solvent. They are desperate to lend to me. They obviously have the funds.
If you mean that banks should be offering more credit to those who are a high risk, I suggest you think again. Within the "real economy" as far as personal finance goes there is no credit crunch, only money potentially chasing risky borrowers. It has to stop.
The government should not be looking at schemes to help the public become more indebted. Instead they should concentrate on ensuring that viable business have the means of maintaining cash flow and consequently uphold staffing levels. Those whose jobs are secured will gain in confidence and begin spending again.
We are some way off this scenario, and from where I'm sitting, appear to be heading in the opposite direction.
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Oh and another thing. Let's not be too kind to these rogue bankers. I've listened to some of their excuses and half hearted apologies over the last few months and frankly what they've said hasn't amounted to much. We need a clear-out at the top and we need an investigation into who knew what and when and then we need those responsible for this mess to be banged away inside. Also if they refuse to accept their role in this mess and their duty not to defecate on the society they operate in, then we should tell them to clear-off. If they do decide to come clean they accept that they must pay their taxes, and act as good citizens.
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I say again. Why dont we just wipe off all the toxic assest?
Just pretend they werent there? or exchange them for money from a globle bank where the money is printed when needed??
Its just crazy that Tax payer foot the bill for the globle meltdown.
Everyone is in the same boat so surely we could just write it off and start again!
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We must not be under any illusion, the Government intends return us all back to the robust and well-managed economy that we all knew and loved pre-credit crunch!
Here's a quote to underpin my thoughts:
"[GB] said the UK problem was not shortage of demand for homes at "the right prices" but a shortage of mortgages "at the right prices for people to buy"."
http://news.bbc.co.uk/1/hi/uk_politics/7667284.stm
Couple this with a GB's vision of returning the economy back to 2007 lending levels, and other stories detailing how house prices will have recovered by 2013.
http://news.bbc.co.uk/1/hi/business/7692814.stm
So unless the average wage is about to explode to 58K p.a., any talk about regulation and reform of the lending market is just spin. The Government has bought into the lending market in a very big way, and it has a significant interest in keeping house prices propped up. We need to stop listening to the spin and look at the actions.
Problems of this scale originate from systemic failure at the highest level. The root causes have been identified time and time again in this blog. It looks like the lessons will not be learnt; the bitter pill will not be taken.
Please consider signing the following petition, (and get your friends to sign too):
http://petitions.number10.gov.uk/LendingReform/
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The bankers will take the easy money on offer and you are correct to say they will still have no responsibilty for it going wrong again
Brown allowed the original mess to develop to prop up his spend spend spend regime and he is now doing everything he can (with our money) to allow the banks a second bite at the cherry.
If someone doesnt stop this useless administration, led by Brown and Darling, we are in for very very grim future far worse than anything in recent years.
We HAVE to stop throwing good money after bad and get some stability and sound policy in place before its too late.
Someone please call for the men in white coats !
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Plenty of people have been making exactly these points ever since the crisis began. If the problem is excess debt then more debt can hardly be the answer.
I think Paul Mason has it right when he says "...the government has decided to borrow its way past the next election".
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Bankers and responsibility isn't that an oxymoron like civl war?
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"Davos has been disappointingly short of coherent visions of what will be constructed from the rubble (of the OLD world economic order)..."
Isn't that the main point of Davos? Makes you wonder why they bothered then. Oh, I forgot, they get the chance to network with other movers and shakers, but couldn't they have gone to Amsterdam to do that?
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So lenders are to be encouraged to lend more to those that already cannot afford to pay back what they owe already.
I feel that I must pinch myself to see if I am awake!!.
This is surely the economics of the madhouse.
I, like a lot of people, have borrowed sensibly in the past, but I have never ever taken on more debt until the original loan has been cleared. You just cannot pile debt upon debt.
I find it very difficult to get my head around the fact, that supposedly, the only way we are going to get out of this mess is for us all to borrow more. Surely you should only borrow to buy something that is essential and therefore cannot wait until you have saved enough to buy it.
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centralised banking is a bit like cls continuos linked settlement used for fx transactions, it would help regulators keep their finger on the pulse of banking bodies and may enable some sort of accountability
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I would submit that the problem has not just been bankers abdicating their very basic responsibility to know their borrowers properly and to assess whether these borrowers had the remotest chance of being able to repay their debts. It was the subsequent securitising of the loans without regard to their underlying riskiness. This caused the market to doubt all loan-backed securities and has led to where we are now.
Smalleb
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So we`re still enthusing about "No banker left behind" schemes are we?
Please tell Gordo that he is widely despised,nay,hated,by the electorate in your next briefing session Robert,there`s a good chap.
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Personal Responsibility, the work ethic and other such positive addributes are going to be outlawed at this rate for
1) HMG
2) Bank's
3) Buisness's
4) The Population
Can I have a loan of £10 Trillion not go to work and spend spend spend then please.
You have to have accountability other wise there is no deterant ?
So erant fathers can have there passport or Driving Licence taken away without a court judgement but
HMG and Bankers can reck the economy by fuelling lending again.
This is a crossroads that demands an election before its too late.
BBC4 today about the worker in linconshire etc no Lab,lib or Tory spokeperson would comment but they got a union baron on.
Where were the UKIP,BNP or ENP or Greens even having there comments ?
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When are people going to realise that the total amount of credit is finite? We cannot simply continue changing the factor of fractional reserving when it suits. This state of nirvana is only applicable if defaults NEVER happen.
Unfortunately defaults have happened and the remaining parts of the loan book not yet defaulted are undergoing constant review. In this sense creeating a toxic bank is only good for that static period - the analysis has to be dynamic given that over time given current volatility. So Dimon is right as this would amount only to a comfort check, much like applying a soothing balm to an infected wound and not using antibiotics.
The UK's position is that we have a large chunk of long term loans in the form of house mortgages and PFIs. The latter is more worrying in a sense as the term off balance sheet scares the living daylights out of me. At least with mortgages the terms are well known. To the best of my knowledge the contractual terms of PFIs are not an open book and neither are they standardised.
As Dimon pointed out sensible banking will take each application for a loan on merit. The factors applied in fractional reserve banking have been and will continue to be revised to more prudent levels. Soundbites from politicians exhorting lending to 2007 levels are just simply hot air.
One thing that has been overlooked or just mentioned in passing has been the withdrawals of Hundreds of Billions of Euros and Dollars respectiveltyfrom the European and American banking systems (investments and deposits) in the years before the Credit Crunch really took hold. Have the state bail outs of the banks also acted as a quid pro quo for their silence on the matter?
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It's daft to assume that 'bankers' have not learned from recent experience. If anything, they're so frightened, they don't want to lend at all and these guarantees will be necessary if business and the consumer is to prize even the minimum for recovery from their now over-miserly grasp.
The drug analogy is not a good one but to continue in the same vein (no pun intended) - they're off the dope and won't be touching it ever again (although some regulation needs to be in place to make sure they're not tempted at some point in the dim and distant future).
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I would like a financial commentator to comment on the hypothesis that a golden opportunity was lost when the presumption that the banking system could not be allowed to fail was adopted.
What would be the scenario now had all this toxic finance and the corrupt financiers been cast into perdition?
Would it not be a cleaner and fairer financial land, at least, to start rebuilding.
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Just a thought on the cost to the taxpayer of supporting the banks etc. Due to falling or irrecoverable assets, alot of money has come out of the economy. To replace this (e.g. as currently to the banks) is to replace the money that has been generally lost. It does not increase the money supply overall, so to that extent 'printing money' may not lead to the 10 year tax burden that is feared.
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excellent Robert!
'Bout time this was all said!
Send a copy to Downing Street immediately!
Jolly good show, old sport!
Keep it up!
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Lending to people so they can buy over-priced assets (aka houses) is a bad idea. Lending to people to allow higher current consumption when they have no reasonable expectation of earning more in the future is a bad idea.
What is lending anyway? It's a mechanism whereby people with more money than they want to spend lend it (via the banks) to those who want to spend more than they have. But as the money is lent at interest then in many cases the end result is that the borrower has even less money and the lender even more - it's just not sustainable.
There are only two alternatives. One is to get the savers to spend more and the borrowers to live within their means. This would certainly have be problematic.
The other option is for the Government to actively redistribute wealth and income in order to correct the huge imbalances that have built up over the past twenty years.
Interestingly, almost exactly the same questions can be asked regarding debtor and creditor countries (eg the UK and China respectively).
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My friend Rahere has asked me to advise you that his postings pointing to the site he is moving to have been blocked by the moderators on the grounds that they are off-thread. They might put it that way, he couldn't possibly comment. In the mean time, he seems to be a man of independent means, and will welcome you there.
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I had heard that Robert Peston caused the run on Northern Rock with a tabloid style of reporting but I disagreed.
However, is using the term "Depression 2.0" no more than tabloid style reporting? It is simplifying all the issues that a Depression would represent into a nice simple sound bite. People are suffering and there is real hardship - please don't ignore that for the sake of a media buzz word.
That's my opinion, though a friend pointed out that, if you must use that phrase, then call it "Depression 2 draft 1" as no-one, including governments, seem to have all the details about it.
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Robert
"To prevent banks from messing up our economy"
take away the privilege of creating money
out of thin air by commercial banks.
Money creation should be Genuinely Nationalised as at present bank notes and coins are (which is only 5% of the money supply)
After the crises commercial banks that have been nationalised could be denationalised
to compete freely in the profit making market.
The criticism of too much power in the hands
of a public agency fades into insignificance
compared to the corruption that went on until recently what ever system is operating the enormous loss of seignoirage with the present system looks mad .
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So Jamie Dimon blew them a K.I.S.S just as JP Morgan offered one to America in the Bankers' Panic of 1907. Perhaps he will give them a Kondratiev wave too on departure from Davos?
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In the USA, Congress have been able to vote on the President's spending plans. Here, Gordon Brown has decided to double the national debt and hose money at rich bankers, and a few West Midlands marginals, and there has been no parliamentary vote, no oversight, no debate, no scrutiny at all. It rather begs the question of exacly what our MPs are for. Parliament doesn't even get to hear of the spending plans first, since they are leaked to Robert Peston beforehand. Any debate there is is happening in the Blogosphere and the newspapers.
My point is that Gordon Brown has apparently unlimited power to spend the tax receipts from the next two generations, and maybe the money is being spent wisely. But the power is concentrated in one man's hands, and I suspect that he is receiving advice from only a handful of London based senior bankers and civil servants. With so much of the country's future wealth at stake, shouldn't the debate and the sources of advice be opened out?
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Robert, your blogs are getting more and more compelling. The air in Davos is certainly a tonic to your brain cells!
Here's what I think of the current impasse where secret meetings and secret briefings are ensuring paralysis continues indefinitely.
The government keeps insisting that it's better to do something as doing nothing makes everything worse.
Your blog today shows how futile the measures taken so far have been. What is going to restore trust between bankers? Nothing. They know only too well they're not to be trusted ever again.
This is the fundamental problem and I wonder why HMG don't take this reality as the starting point for dealing with the crisis?
The most useful thing to do, in my opinion, is to plan ahead with the worst case scenario as a guide. This is what happens in aviation. Pilots are trained on the assumption that things can go wrong at the most crucial points in a flight (at take off and landing), and they have build safety procedures into their standard operating procedures. Their philosophy is based not on how good humans are at flying aircraft, but how bad they are. *
Having understood that greed, greed and yet more greed is going to occur where banking is concerned, isn't it time to assume that the rules need to act as a corrective to counter this human weakness? Deregulation and a soft touch approach has passed the controls over to Aesop's monkey with his fist stuck in a jar of nuts, unable to let go and consequently starving to death.
The best thing this government could do is impose rules based on the assumption that everyone remotely connected with banking has a stocking over their head and a swag bag over their shoulder.
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Very good blog RP,
the one thing missing, imo, is that leading in a wholly irresponsible way lead to mind boggling personal bonuses.
As i've said many times in these blogs bankers and financiers can never be trusted again to do the responsible thing if their own wealth is created from irresponsibilty to the economy and the long term.
Giving money to banks must come with strong conditions, not least of all how it will be spent and who is responsible for ensuring it is spent to the designated criteria
Frankly i would like to see lenders suffer much more at present, they are seeming to take the credit crunch, not leading without large deposits, morgages at sensible rates requiring large fees, small businesses being asked to pay high interest rates, borrowers receiving next to no interest
Individual and governemt dependency on Borrowing must be reduced in the long term but in a controlled and responsible way.
To take the drug user analogy further continued prescribed uses of the drug in a controlled way may be necessary in order to keep the user in as steady as health as possible while moving them off of dependency.
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Strangely anti-government piece from Peston?
Unless Gordon Brown has finally realised his policy of enforced lending is folly and plans a major u-turn?!
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By Jove you've almost got it Robert.. well done.
Hopefully next you'll be telling us you've been listening to the wise words of Peter Shiff, Marc Faber, Jim Rogers and of course Ron Paul.
We'd all be much better off if this lot stopped meddling, let incompetent people/banks go bust, let the competent people take over from a low base... and allow a new age of free market prosperity to continue afresh. That is how capitalism is supposed to work.. the debt fuelled boom was the problem, the recession is the solution ... just let it happen, let the financial sector contract, and let bankers find jobs elsewhere "On yer bike!"
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money is the devil
they are keeping it greasy
believe me
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Exactly! What is needed is to properly assess the risk of each loan and ringfence the really toxic ones so they dont make the rest rotten. Until that is dont we cannot start to rebuild. However there does need to be a line drawn on loans from now and in to the future, where the banks are exepcted to use their judgement and only lend to those that are creditworthy. Thus encouraging sensible levels of risk.
As you correctly say Robert our economy is addicted to credit and whilst cold turkey is not an acceptable option neither is carrying on with the addiction.
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A bit of legislation that fixes the responsibility for any loan with the original lender would help, wouldn't it?
I’m sure the Banks would come up with a way of passing on the fruits of the loan in an even more contrived CDO type of deal – but nothing concentrates the mind more than trading your return but keeping the risk!
I know it doesn’t make a great deal of sense when you first look at it, but it is what banks used to do!
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I note that Gordon Brown doesn't even have the common sense or foresight to switch off his mobile phone before appearing before the world's media, so what faith can we have in him steering the UK's economy? A small slip, some might say, but nonetheless very telling about the man's competence.
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@29
Oops! Human error! I forgot to put the footnote*
See book by David Beaty: "The Naked Pilot. The Human Factor in Aircraft Accidents."
published by Airlife Publishing Ltd 1995
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No, we musk make them go cold-turkey.
Get demand going again by getting people to spend - but don't flood the markets with cash as all this will do is reinflate the unsustainable bubble.
It is demand that has fallen through the floor (see the airfreight crash in December) so throwing cash at the situation will only cause massive inflation - Zimbabwe here we come!
On the other hand money is already worthless!
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Perhaps this just goes to show the extent to which politicians have yet to grasp the true nature of this crisis and, moreover, the essence of the remedy needed for us to come through this crisis and out the other side. It's called 'learning to live within our means'.
Our politicians have enjoyed a period where, on the face of it, every man and his dog has got rich quick. Great vote winner. Desparately unsustainable economic (and, hence, political) strategy: stoke up staggering levels of private and public sector debt and facilitate everyone living on the never-never. Now, the party's over.
This crisis will continue to get worse unless/until a brave politician and his political party members make the point to the electorate that we can't all be 'rich' simply on the basis of borrowing ever greater sums of money (please note Mr Brown).
Said brave politician also needs to point out that assuming endless economic growth (as we have done in recent decades) was a function of assuming infinite cheap energy. Since we've now all but reached the end of mankind's era of cheap energy, we're going to need political leadership of a different order to that which we've experienced in recent years.
The next 10 - 30 years are going to be tough; really tough. I've yet to see/hear a UK politician properly grasp this challenge, still less suggest economic and political philosophies and strategies for leading us forward.
As for Brown; the (proud) architect of the UK's disastrous situation: he's toast.
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Go skiing, post later! there's supposed to be some decent powder off the Weissfluh..
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"Bankers and Responsibility" - hehehe - you are jesting aren't you Pesto?
Have you seen how many of my namesakes are emerging from under the rubble in the good old USA? - PONZI SCHEMES GALORE!
At least they are uncovered. There are lots in the UK and Euroland, but not named and prosecuted. Trust in Bankers? Not likely!!
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For the first time Robert you point out the problem with Crash leaning heavily on the banks to lend.
Congratulations!!!
This view needs to be trumpeted more in the media otherwise we will not ever break our excessive dependence on debt. Like oil, the supply of credit is finite and we need to build an economy that is better placed to cope without copious amounts of cheap money. Of course this means a significant drop in our standard of living but then we have all been living way beyond our means anyways, its just that no one has the nerve to say this publicly.
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Mr Peston, Is this a red herring you've been sold?
Global business confidence and government strategies simply don't hinge around 'central clearing' systens or 'insurance' for banks, no matter who whispered in your ear.
Global business trade and the consequential requirements for a banking system that flows, will only come about when
a) politicians, big business interests (including wealthy background players) agree on a way forward with regard to the 'Climate Change Economic Action Plans' required for planet Earth.
b) Stimulate industrial growth in a known approved of direction and identify the future costs of investment for sustainability
c) Obtain World food security which can be addressed once governments decide how they are going to meet demand and under what Economic sustainability structures they will operate
GB and AD have proven that they have made many mistakes, Lord Mandelsson nearly wrecked future EU trade (including our own food supply) with Africa and it is now down to the 'new lady' EU Trade Commissioner in town to 'fix' that for us.
Is there anything coming out of Davos that we don't already know, can't guess or work out for ourselves?
Anyone would think that the Politicians and Bankers believe the 'general riff raff' are blind or stupid or both.
Little do they realise, that although some have problems reading, writing and adding up, most have commonsense, integrity and above all street savvy. Something sadly lacking in most politicians, some civil servants and bankers.
Robert, don't bore us. Wake us up when there is something of signigicance to say, preferrable when Mr Brown has the courage to do the proper thing and leap or come up with the courage to dictate.
By the way, where are the wimps - sorry 'whining imprudent scallywags' or the Bankers and the Treasury Ministers to you and me?
Not at Davos?
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Robert,
In the UK we already have a n excellent and relevant instrument that I am sure would go a long way to curbing excess and wild lending by banks in the future.
Legally Directors already have 'a duty of care' to set strategy and most importantly to ensure that it is implemented and executed correctly.
If all these highly rewarded exec and non-execs knew that they were personally liable and could be made bankcrupt, I opine that they would ensure that they paid attention and understood fully before they allowed junior or other traders and execs to gamble on unsound and untested strategies that they, the directors did not bother to understand.
How often have we, the public, been told the directors rewards are for the solutions they implement to difficult commercial problems.
The Guardian this week named and shamed 12 bankers who have been rewarded £1 Billion and the institions who rewarded them have had to receive, to-date (and shed loads more required) £300 Billion to shore up those very same once respectable institions.
Let those that have been living with obscene reward/result compensation be made to really understand what making not thought out decisions can do.
Let them be cut down to the poor rewards they have wantonly made the future of our children likely to receive through their laziness , incompetence and not understanding that executing strategy requires thought, knowledge and plain hard work..
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WHERE IS THE INQUIRY?
These guys have wrecked their banks, wrecked the economy and wrecked the national debt, and made themselves and their mates fabulously wealthy in the process.
"But we don't want to damage confidence" says Gordon.
I would feel a lot more confident if these characters were OUT of the banks and facing an inquiry.
Is it really about confidence, or is he just giving them plenty of time to shred all the evidence?
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#5 RobKirton
Same here Rob.....
Getting the bank and building society (as just finished paying mortgage)
I'm starting to feel like an idiot for not borrowing more money - sorry, releasing equity (sounds much more commercially savvy doesnt it).....
.... and the reasons for doing so....... well the best seems to be “a nice holiday, new car or new TV”
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Haven't you learned? Deities should be capitalised, The Global Economy.As to how to save it, (if it's worth saving)
shouldn't we get the horse and cart in the proper order?
Peace and Fair Shares
ed
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Consider this:
Irresponsible lending causes colossal defaults on repayments.
These defective loans are re-packaged as assets and sold.
This continues globally as an endless loop.
Suddenly there is no real cash left.
2007 arrives and the alarm bells start ringing.
Financial institutions reach into their vaults to pay their own debts - oh dear no money!
And now, our inept and out of touch Government are trying to restore the financial position to what it was before, ie: lending without prudence, shoring up lending by guaranteeing loans with public funds - which will take away the onus on banks to be careful, and trying to artificially keep property prices high, when clearly they are way to high already.
The answer is clear, don't spend what you have not got, stop the stranglehold the planning system has on land, (this will bring down the cost of building land which is roughly 80% of new build costs).
And above all else, get rid of bonus related deals in the financial world. Finance is not a game, and bonus related pay clouds the good sense of the most fastidious finacier.
Oh, and get rid of Ministers who think it is a good idea to borrow their way out of debt!
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Thank you for this article. I know I was not alone in asking you to highlight the issue of Moral Hazard that government policy is encouraging. The logical conclusion is that banks are encouraged to take even riskier and less well thought through dealings than they have been, knowing that the taxpayer will bail them out if it goes wrong (again). Except that next time the stakes might be too big for even the taxpayer to cover...
#3 Seems like a sensible idea to me.
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Robert
Your report is confusing. Counter party risk has caused seizures in both interbank unsecured lending and trading/ liquidity in CDOs etc, hasnt it?
The two issues are being separately considered, are they?... I see no harm in a collateralised clearing house for CDOs/credit derivatives etc. If you are worried about encouraging laxity, make it law that the banks retain a proportion of the originating risk - "skin in the game" .
If you are talking about a system for underwriting short term unsecured lending between banks or money funds internationally, how would this work. Each central bank is already standing behind its national commercial banks. If this isnt working, why have we wasted all this recapitalisation / guaranteeing etc.
If a central underwriter is required internationally for short term unsecured borrowing interbank, would central banks collateralise the international underwriting party ( instead of their local banks) and license the banks/funds it choses to underwrite in the system? The licensing would offer the protection against bad lending, wouldnt it?
I thought there was already a committee for international settlements maintaining standards for maintaining capital and liquidity (?) to create confidence interbank - obviously this aint working.
I am not sure what issue you are putting out for comment, hence the confusion on my part.
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#7 quiteLondonLad
If I owe you 500 quid and we just "wipe it off", you think no one loses out!
Someone somewhere loses, you can't make it dissappear - the money has been spent but the liability remains......
.... and in our instance (like the World) we are not in the same boat - I'd be OK Jack - you"d be 500 quid down, works for me I suppose!
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This comment was removed because the moderators found it broke the House Rules.
A similar 'central clearing house' already exists in London for clearing derivatives and other instruments.
It's an eminently sensible idea to extend this to other asset classes. The clearing house acts as an independent check, and can ask pertinent (and no doubt awkward) questions when a bank or other counterparty takes on too large a position without the requisite "insurance" margin in place.
Of course Mr Dimon and other bankers would be against this idea. It would mean a third party keeping an eye on them, the last thing they want. I mean, the banks have done so well without being closely monitored....
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1.One of the comments to be read on this blog is very accurate.
The banks are busy bombarding solvent customers with offers to take up a loan.
Which means the bankers have lost the ability to asses risk correctly.
2.Bankers and responsibility: The old saying comes to mind; when the sun is shining the bank is more than happy to lend you an umbrella, but when it starts to rain the bank wants the umbrella back.
3. Davos and Jamie Dimon; you talk about a lack of confidence on the part of the banks to lend nationally, or internationally, and this idea of a central counterparty, to reassure them of not getting into a mess again. The whole thing brings to mind the word transparency.
And finally a bit of black humour; the four riders of the apocalyse are quoted as being:
The military, the church, marriage, and banking.
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You know the more this crisis goes on the angrier i get.
I dont blame the bankers myself, they were just greedy and come on, who amongst us has never felt that quicker beat of the heart when we "know" we can get something for nothing.
I blame the politicians, and for Gordon Brown to turn around and say he saw this coming, well how is he still PM. Surely if he knew it was coming and did nothing to prevent it, you know like maybe increased regulation, or perhaps lowered our debt burden to zero, then he is guilty of treason.
I also blame us, yes thats right, me and you we borrowed money like there was no tommorrow, turns out we may have been right too. We borrowed to buy that nice new suburbian 3 bed semi, or got 5 credit cards to get that plasma tv/new sofa/shiny new laptop. And why did we do this, because we could not afford not to, cos in modern britain the only way to get what you wanted was to borrow becasue living costs are astronomical.
Well we are going to suffer now, and so are our kids and probably are grandkids.
Apart from paying back this huge debt burden, there is likely to be civil unrest, possibly civil war in the uk and we may even get a dictatorship as people get more and more angry at democracy not being able to resolve the big issues that have forced themselves upon us.
Then there is the international situation, depressions lead to big wars as sure as bankers noses turn to coke.
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So at last the truth can be told. I have been saying this for months, we taxpayers are in effect going to be underwriting the whole economy. Where is the incentive for the banks to lend to anyone in a responsable way when their entire risk is carried by us? Can anyone out there tell me how this is not just underwriting the kind of crazy economics that got us into this mess in the first place? What a disaster. What a con. What an utter shambles.
Its not just the government either, its all the politicians from all the parties, the solution as far as they all see it is to provide the credit for 6 to 9 times annual salary mortgages to stop falling house prices, then the unlimited personal credit to maintain our over inflated economy. All underwriten by you and me. Its like some kind of Kafka-esque type of reverse socialism where we all end up paying to insure that in the end we will all be bankrupt. This is what happens when you get the bankers into a room, just roll over and give them a free hand to ask for whatever they want. GB RIP.
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Anyone can make monetary policy decisions
It's either Yes or No answer
with a 50% chance of being correct
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"curing a drug addict... by giving him a prescription"...
This is an excellent metaphor because it is EXACTLY how you do cure drug addicts.
You stop them taking stupid risks with dodgy drugs (loans) by providing them with a safe clean supply of the drug (money). Remember, if you cut off the drug (money), the addict (bank) dies of cold turkey.
So the Govt is absolutely right. Stop the addict dying, give him the help and education he needs to live cleanly, then wean him off the drug carefully.
Anyone with an eye to history will know that "cold turkey" will give us a 10 year depression and half the population out of work & homeless.
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Robert
You hit the nail on the head.
Brown is allowing the bankers (his best buddies up until 2007) to slopy shoulders their responsibility.
So in public he says its the bankers fault but in practice he is driving the getaway car
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"It's the economic policy equivalent of curing a drug addict by giving the addict a prescription for the drug of choice." (PR)
Do you know the amount of tax payers money it would save (not to mention the human misery and poverty it would prevent) if the above policy was implemented (giving prescriptions to addicts for their drug of choice i.e. legalising/controlling drugs).
Think of the crime reduction (addicts don't need to steal for their fix - criminals dont recieve funds for organised crime - gangs no longer battle for control of the streets - police have more time to catch real criminals (ELITE BANKERS ETAL) and are able to put them in prison as of the extra space created by releasing all the drug related criminals.
The analogy does not work since such a drugs policy would actually work for the mass' - where as giving elite bankers anything but the sack and conficastion of all assetts aquired via this almighty con is simply nothing but yet another slap in joe publics face.
Do you know the VAST amounts of money that is created by the phoney war on drugs - money that is deposited guess where - THE BANKS.
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Helping the banks to lend more can only make sense if the government controls how and to whom the lending is made which means invasive rules on the allocation of credit to ensure it either is investment or it is protecting sound businesses that have short term difficulties.
But what of demand? Increasing benefits, state pensions minimum wage (reducing employers NI to compensate) by 15% to 20% but not up rating annually until inflation has 'caught up' will boost spending in the high street but not on expensive mainly imported goods. Building more Council Houses and reduce regressive taxes and public sector charges?
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Is it not about time that the Government keeps its nose out. I agree that good companies need finance, but the markets need to settle.
Remember it was too much lending by the Banks that caused this. Unless we go through the pain, real solutions to prevent future bank failures will not be found.
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Yes, this is all so true. Its simple: banks should stop relying on snazzy mathematical models (I guess they have at least already done this) and be subject to new government rules about lending responsibly.
So why is this so hard to put into practice and why does an insurance scheme seem the remedy?
Because this is about saving your face as a government that saw its whole project as 'freeing people up' to pursue wealth unhindered by state regulation. And for a while it seemed to work. Everone got high on it. Surely this is the ideological addiction that governments have to wean themselves off.
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Jamie Dimon seems like a smart banker, yet JPMorgan has its own share of problems not least with credit cards and commercial property loans. Full marks though for saying banks don't want to loan to deadbeats and no amount of chest beating by governments can really persuade them to repeat past mistakes. It’s a concept that politicians find hard to understand that the last 20 years were not normal financial conditions and all these attempts to jump start the lending bubble will not work.
Jamie when he says bankers abdicated their very basic responsibility is perhaps hinting at a particular failure that banks still have. This I think is also why there is a perception currently that banks are not lending particularly by politicians despite the lending figures. Banks do not have the staff or pricing structures in place at the moment to judge individual loan requests. They have to use their loan models to at least give a first assessment and these models take no account of local conditions. If you are builder at this point you will find it hard to get a loan regardless of whether you have picked up lots of business from failed competitors.
Its all too easy to acuse banks of not really banking and having a bit of a party with securitised debt. The truth is that the demand for low risk debt was far too high which led to the banks accomodating that demand. This is something that Brad setser in his blog has touched on recently, with that demand traceble to global inbalances and government policy. Everyone is responsible for this mess and the government, despite Gordon's assertions is responsible. That includes opposition parties who failed to provide coherent policies to address these problems as well.
I agree that by tax payers assuming risk, the government is trying to encourage the debt party to continue, but they might consider it to be more like issuing methodone to addicts rather than have them do cold turkey. The inevitable consequence of this is that a 18 month deep recession then becomes a 5 year lesser recession. This fine for all those who have little money and saving, but is probably the worst scenario for those with big mortgages who will no longer have the luxury of wage rises whittling away at the burden of debt. It is also the worst scenario for those who contribute to pensions or those who rely on interest from savings. Most of the hardworking people in this country are going one way and the government is determined to go the other . Where a government moves so far from a large proportion of the electorates wishes then at the next election that will be taken into account.
It is all too easy for us to critise whether it be governments,banks or society as a whole, but very few propose well thought out and viable alternatives. Some propose nationalisation without understanding the intricacies could actually bankrupt countries making the situation worse. I would propose we spread the cost and use insentives rather than all the insurance schemes and bailouts that the government suggests. Why don't we reduce the tax burden on companies, but also introduce a law that any company operating in the UK must use 6 percent of the profit (loss making firms in trouble would not have to pay) it gains from its UK operations for local community projects and sponsorships(we could then reduce council tax as well). If you want banks to lend then reduce the tax bill on lending, if banks share prices go too low get a semi nationalised entity to buy some shares to keep the price up (like the US does with AIG). Lets get out of Iraq and stop wasting money there, and stop government giving money with one hand and taking it away with the other it is inefficient and wasting money.
Throwing suggestions into the pot should be part of everyones role, otherwise critisism is just destructive.Something to think about anyway as we use this forum to sound off.
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Re #11
Bankers and responsibility - isn't that like honest and politician?
I can still remember the days when you had to prove to a person, not just a computer system, that you were trustworthy and solvent.
Now the worst at knowing who you really are are those who should know best - local councils.
But then, in a world where driving into London without paying the congestion charge (£80 fine on 1st offence) is more serious than cannnabis (£80 fine, 2nd offence) what else can we expect?
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"But the more that they're insured against losses on lending, the less incentive they will have to lend responsibly. "
Isn't this what Credit Default Swaps (CDSs) were for? Apparently there is some $60 trillion in CDSs out there. I wonder whether the banks have come clean on their exposure to these 'assets'. Probably not - because the banks themselves do not know. Which is worrying given that the taxpayer is now effectively guaranteeing all the banks' debt obligations.
Hmmm, are there any CDSs now being traded where the principal concerned is UK Plc? It wouldn't surprise me. Can anyone let me know where I might buy some?
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#5: 'If you mean that banks should be offering more credit to those who are a high risk, I suggest you think again. '
Maybe it's just me, but isn't that exactly what Robert Peston's blog was questioning? He suggested that easing credit to cure the current crisis might be the equivalent of treating a drug addict by giving him more drugs.
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There is where we are now and where we want to be once this mess has been sorted as best we can.
Where we are now the taxpayer has to underpin the obligations of the bankers for fear of a bad situation becoming worse. This can only be a stop-gap measure until a more permanent solution can be found.
Those who argue that we need nationalised banks beyond the current emergency are living in the world of Soviet tractor factories which they never truly left in the first place.
What is required are professional bankers to get us where we need to be; namely a stable and reliable financial system. I stress the word `professional'. Once upon a time these people ran our banks very well indeed but were subverted by the ambitious careerists and replaced by rocket scientists.
I am relieved you feel there are still some of the professionals about. Perhaps they need to set up a training school where the word risk is properly defined as meaning danger.
I think in order to achieve this outcome from the current climate both the bankers who defaulted, the regulators who failed and the politicians who presided over the entire shambles need to be pilloried, named, shamed and broken financially.
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This comment was removed because the moderators found it broke the House Rules.
There is one item of real concern in this posting Robert, but your second point about the 'GP' is not so serious in fact.
Firstly, the
'so-called governors' meeting - in which the banks, brokers, private equity firms and hedge funds tried to draw up a common agenda for reform...'
is really very worrying indeed.
Talk about allowing the foxes to work out the new safety measures for the chicken coop.... this is the lot that have got us into this pickle in the first place, moreover having run away personally with most of the chickens in the first place. Maybe nobody can see, either, that it constitutes the group of people in this world who can only survive because of one thing - borrowed money.
We need another "governor's meeting" made up of those who lend money - the ordinary savers who put the money into banks in the first place..... the 'people'!
As you point out, maybe the best thing to do with this so called 'governors' lot is to hear them out, and then do exactly the opposite (although Mr Dimon might be messing this plan up).
The matter of your Grand Paradox - it's just a case of Phase 1, Phase 2 etc and timing. Any system after a transient spike (... although maybe not that transient given the size of the spike!) will potentially take some while to settle down and it will tend to overshoot back (i.e. yes, with all this money being guaranteed the risk of inflation emerging is very high, and then interest rates go right back up again etc), but big measures do need to be implemented as long as they are out of phase with the underlying direction of travel of the system.
This suggests a:
Phase 1 - yes implement these big, tending to inflationary, measures but plan for...
Phase 2 - where you institute the real radical long term restructuring of the system based around a heavily modifying/deflationary set of measures that you put on all financial institutions for the long term.
... would be in order.
As for..... 'Davos having been disappointingly short of coherent visions of what will be constructed from the rubble'..... I've got a few decent ideas that maybe you could put in your pipe and smoke, but will leave that to a further posting.
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Perhaps Gordon should take a leaf out of the nuclear industry's book and copy Sellafield - take the toxic assets from all over the world and launder them for everyone for a fee?!
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I completely agree with #5 RobKirton.
My partner and I are in the same position. We are neither rich nor compulsive shoppers. We saved to have a good deposit on a house and did not even apply for a mortgage as house prices were quite simply ridiculous (where we live).
I do not understand the logic of slating bankers for lending irresponsibly to irresponsible borrowers, giving taxpayers money to them to stop them falling apart and then insist they go back to irresponsible lending to people who cannot clear the debts they already have.....
I am no economist, but have always understood the concept of living within your means.
If there is legislation which enables us to confidently buy food and not fear being poisoned - isn't it possible to have similar finance legislation?
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It might work? Seriously?
From the point of view of a rich banker wanting to make sure of a continued supply of wholly undeserved bonuses, maybe.
From the point of view of the rest of the economy? Does anybody seriously think it has the slightest chance of working?
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Yeah whatever.
Meanwhile, up in Lincolnshire the people are at last starting to take action against the globalists.
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Banking and pub genius Jamie Dimon thinks Banks should think long and hard about who they lend to.....
No doubt this desreves a 8Million Dollar bonus in shares, cash and pension rights.... obviously it can't be more these days even though 8 IS a tad stingy....
Over 18 months ago the opinion that Banks maybe, might, just possibly need to think long and hard about some of the loans they were making was pretty widespread in the circles I move in....maybe they can hold the next Banking summit on the platform of the Monument Metro station in Newcastle upon Tyne.... the community there seem to be way ahead of the Davos curve
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There really must be an immediate general election. It is increasingly obvious that this government has no solution and has lost the confidence of the country.
All this flailing around and throwing billions into a black hole is madness. It cannot be right to borrow on such a scale to address a problem caused by irresponsible debt.
This is a bankrupt borrowing from himself and trying to keep himself sane with whiskey and wishful thinking - while telling his wife and kids that everything will be OK!
She knows it won't be till she's left him!
We cannot wish ourselves into a parallel universe where consequences do not apply. The economic forces at work are of a scale that is far beyond the capacity of governments to tweak things right.
The bottom is your friend and the place from which you rise. The faster we hit it the better.
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#30 Kudospeter - Superb Freudian slip in your first paragraph - I'm sure you meant 'lending' but 'leading' works for me!
Classic! Really left me chuckling!!
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GB now looks like a scared rabbit scrabbling around for a hiding place willing to pay anyone anything for the keys to it and at the same time begging everybody to trust that he knows where those same keys are... He's now begining to do more damage than good especially in ASKING everybody to have confidence, that has the reverse effect...
I hate the cliche and not sure I trust 'the other guy' but it's time for Change....
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No 7
"write it all off and start again" Are you 'avin a larf'? This time round the money merchants only
managed to shake our boat. If allowed another round they would probably scupper the entire fleet.
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to totalinjustice.....
RE your petition about lending. I wonder - in your world, is everyone single?
With your published criteria on the PM website, if a couple on £22.5k each applied with only £10k each of saving, they WOULD get that mortgage.
Isn't that a LOT closer to average wages? Plus, avereage house prices are not £200k everywhere in the UK.......
Your petetion therefore, is flawed I am afraid.
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If something is to emerge from the rubble I would like to see the return of the old fashioned High Street Bank where you had to go and see a Bank Manager at your local branch if you wanted a loan and where relationships can be built up with the staff who are handling your savings.
The day you could not contact your bank branch direct by telephone was, in my view, the day banking died. It was not long after that customers became faceless account numbers. Surely that in itself, increased the risk when it came to doling out loans.
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Perhaps this is the start of the weaning process, rather than the unpalatable cold turkey we'd otherwise face.
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The "drug addict" analogy must have crossed the minds of many of us before. I for one have ruminated what GB's reaction would be if, god forbid, his child should develop a drug habit? Sometimes we need a bit of economic "cold turkey" - painful but ultimately in everyones best interests.
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What is the point in this government, or any other country's government, continuing to give tax payers money to banks when they continue to dole out bonuses to top execs for failure ?
Are they all so blind that they cannot see the wood from the trees ?
People have had enough, you can feel the changes in the air.
The stuff that is now happening in France and Lincolshire is just the tip of the ice-berg. This is going to be a messy year.
Hope I can get to heaven before they close the door.
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Bankers and responsibility
until they stand up and admit their part (no matter how large or small) in this crisis, none of them will trust each other and we will not trust them.
Confidence will return when I Believe that I am safe in Trusting.
And not before.
Tigerjayj posted an article on another blog that really summed it all up.
http://www.democraticbritain.tp2p.com
So much so that I have posted a copy to my MP
http://www.writetothem.com
I don't know if he will listen, but there is no way he can ignore it.
I suggest you read it and if you feel the same way then post it to yours.
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My reaction to this post could be summed up by the words "well, duh!"
Robert, surely you know this already. You didn't need Dimon to tell you, it's just common sense.
The government's attempts to reflate the burst bubble are a waste of time and money.
Let's take our medicine and re-design the economy on sensible lending - where the lenders are face-to-face with the borrowers - and take it from there.
Also, I agree with #5, there's credit out there for those that are credit worthy.
(and as a business owner that sells B2B, that goes for business, too)
What's missing is banks that are willing to lend 90% to home buyers in a dropping market where 90% will soon mean negative equity.
But, why should a bank lend more than the house will soon be worth?
If it were my money, I wouldn't. And I'd bet you wouldn't either.
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There's a lot of sense in that article.
I have always said that responsible lending has been the problem and that we need to return to more local banking without call centres etc. Back to teh old bank manager/customer raltionship.
However, that doesn't in itself solve the current problem.
We are where we are. If banks were suddenly to advertise their intent to return to 'the good old ways' in the future it would make little difference - the concern is over the (real) current state of their balance sheet based on the errors of their past.
But overall, we need to be able to gain transparency in the scale of the problem at an individual bank level and then see each bank make a commitment to return to 'know thy borrower' in the future.
Only when a bank is known to be solvent AND doing the right things for the future will there be confidence in the bank as a borrower. But then again... to have borrowers you also have to have savers somewhere and we have less and less of those in this country as things stand.
We do not want to be a net borrower from other countries like China in future and we are certainly not well placed to encourage savings with interest rates at their lowest for decades.
However, sensible modern day investors are less likely to use the bog-standard savings account, so perhaps the new order needs to take other forms of individuals' investments into account as being a basis for lending.
The problem is that not many of them are stable with the way markets are allowed to fluctuate at the whim of herd mentality, so a move towards real valuation of assets would need to be made, and that means much greater disclosure to make such a valuation possible.
Each change has a prerequisite, until you end up putting the world to rights. Maybe that's what's we need to do - I'm sure I'm not the only one that's tired of watching people get rich out of wild fluctuations in the price of a share that bears no relation to the known value of a company (how can a company's paper be worth less than the net value of it's fixed assets, for example?).
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Dear 36
It was quite possibly contrived. After all, it makes him look like many of the rest of us doesn't it?
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Seek ye first the kingdom of God and everything shall be added unto you .
This pithy saying somes up the worlds predicament
With pollytitians and bankerrs still trying to sell their fools gold to eachother and us .
for them to admit that their "success" [now evaporating] was predicated on self serving lies, is to expose the seven deadly sins to the light of conscience and road to perdition
Do pollytittians or bankers have any idea what responsibility means?
Do they have any idea what truth is?
"Restoring Confidence" for them is no more than a return to lying and breathing in perfect symetry, to carry on building the pyrammid of lies that preserves their power and wealth against the public interest and heavenly law .
Whilst Great Gordon still wishes to delude himself about his economic record and talks about "transparency"would he care to consider the" transgender bill "pushed through parliament by labour ,that made it ILLEGAL for a minister to tell someone who was marrying a transgender person, of that fact .
Gordon you are now fully transparent like your party .
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with the moderators nearly 2 hours and 42 posts behind it lessens the point in posting to the blog but it's addicitive
might be time for the BBC to consider putting out a tender for moderators; oh but be careful not to give it to a foreign bidder!
because Gordon said BRITISH JOBS FOR BRITISH PEOPLE
but at Davos today he said that we must guard against protectionism, which is the greatest threat
and he said that we mustn't allow financial protectionism either, because that would be the equivalent of MERCANTILISM
so he has utterly contradicted himself and the main thrust of current govt policy, which is to try to instruct the British banks to lend every penny they can within the British domestic market
aside from his mobile phone gaff, Brown (and Cameron who is also there) would have been better advised to stay away from Davos once they heard that Obama's senior people would be snubbing it
yet again they have failed to see the RISK
associating themselves with a kind of B-list of former Masters of the Universe
and sure enough it has been an immediate calamity, with the industrial workers walking out at several refineries here
Robert, Gordon, David etc should all be standing outside the gates of a refinery in a bleak corner of Lincolnshire this afternoon if they want to have their fingers on the pulse of what is happening; NOT AT DAVOS!
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You could say that any insurance makes loss more likely , but the one thing we know about insurance is that it is usually loaded against the party taking out the insurance, with stiff premiums, multiple caveats, heavy excesses and future premium price increases and surcharges for having made a claim.
I think that we have already seen the worst in terms of bad debts, as interest rates have fallen, and there are signs that the property market is beginning to pick up ,albeit from a near moribund state.
I do not think we need worry about more reckless lending.
I think those days are over.
Robert, it is now time from you to move on from your Doomsday position.
The days are getting longer at last.
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24#
Not a very good subterfuge Robertarminhere or are you giving the moderator the bird.
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Not so very long ago there was a trick in the banks whereby administrative staff were required to reapply for their jobs. It was a shyster method of getting rid of the older end dressed up as right sizing, ghastly expression, and reducing costs.
As the banks cannot be considered to be going concerns without taxpayer support, perhaps something similar could be done.
Make them ALL redundant and only to be given statutory minimum redundancy. Then allow them to reapply for jobs at lower rates and NO bonus for at least two years.
The beauty of this is that the lower salaries would more than cover the redundancy costs for those that took redundancy. The majority of the bankers who caused the problems have not been with their organisations for long so statutory payments will be low. The redundancy payments would preclude them from benefits and those that stayed would be cheaper.
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The upshot seems to be that bankers appear to want to find a way to have central governments permanently underwrite any bad business decisions and find a mechanism for generating the next fix.
Having dumped liability for a decade of dumb decisions onto the general populations of the world. They are discussing how to set up the next mechanism to do it all again.
I had cynically assumed that Dim-on might be suitably titled as Mad(e)-off but this does seem unfair given his comment.
Such a central structure would have no individual responsibility driver for banks to be better lenders.
I can hear the proposal - banks would get together and collectively underwrite the bad loans in the central counterparty bank so don;t worry Governments if it should happen again (which of course it won;t) then you don;t have to pick up the bill.
Except of course - it would pay banks to take more risks individually knowing their peers all share the pain if they get it wrong. Fear will keep them in line for a time but sometime one would try it and others will envy the 'returns' and the bubble blows up again - the counterparty would bust and the banks say - we can;t sort this out otherwise we will all be bust - please can we have some more money dear Governments.
The other reason that this cannot happen is a supra national centralised body outside the control of a democratic process cannot be permitted when it has the potential to unduly effect individual nations populations. (The club gets together to asset strip Korea or some other country)
In defining the "new economic order" bankers views can be effectively ignored - they are irrelevant. The new order has to reflect social costs much more - never again can it be permissible that one sector of society (in this case the financial community) can beggar every other sector through reckless behaviour without consequences.
What will this mean ?
We will have to accept that there may well be a need to spend a greater % of our income for basic items to balance the economy - less imports off set by home production even if it's a bit more expensive to do so.
No one sector of the economy can be allowed to dominate and nor can any one sector be permitted to run huge imbalances in trade. Entrepreneurs are driven, so if they can;t do it in one sector they will adapt.
Neither can mature economies strive to support hugely increasing third world populations - neither also can the world make their hope of living like we do a reality until they trim their population growth. Similarly how we live needs to change - not neccesarily meet in the middle but certainly we are running unsustainable lifestyles and economies in a general sense.
If all we are going to be about in future is a pursuit of money and more stuff then this whole sorry mess is just doomed to reset repeat reset repeat until onetime (this time?) it just doesn't reset and we head off for a daliance with the dinosaurs.
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I see the moderators have walked out in sympathy with the refinery workers again.
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May I propose 1 year in jail for the CEO for each £1Bn required to bail out their institution.
Further anyone who has received more than £50K in bonuses in the five years prededing the bail out should be made personally responsible for a fraction of the cost.
Banking, like aeroplane building and operating nuclear reactors and railways is a safety critical industry and there needs to be an equivalent of the 'corporate manslaughter' legislation that puts executives who ignore safety in pursuit of bonuses in danger of prosecution.
Writing off the amount of money required to save the banks will eventually cost lives - it will mean cutbacks in essential services.
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All this bluff designed to put off the day of reckoning.
All designed to have a long drawn out effect before we reach the final conclusion.
Instead of going down the steep slope to reach the bottom we take the longer more complicated route.
The outcome will inevitably be the same but more pain will have been endured and billions more will have been wasted in the process.
Someone needs to take control and stop this messing around and accept the facts.
There is just far too much debt yet to be squeezed out of the system. This is going to hurt those with the most indebtedness.
Businesses built on a bubble will go bust but others will take up the flack and new ones will be established that fit in with a leaner anf fitter economy.
The sooner house prices reach the bottom and this is some way off the sooner the banks can estimate their true losses and start lending again.
Left to take its natural course instead of employment decreasing gradually and for longer there will be a sharper shakeout but a quicker uptake of new jobs created on the upturn
As far as Davos goes there seems already to be an admittence that no one knows what to do..There's confidence for you.
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sufferation for the young generation
on a bright and sunny day
we hear Jamie Dimon say
my pirate jp morgan is still king
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39#
"brave politician"
Do you know of one,have you ever met one now or in the past when bravery was required in the job? Brave and politician when combined is a contradiction in terms.
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Jamie Dimon should be taken seriously for what he says but then he appointed Tony
B-liar and all credibility evaporated!
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#15 - Smalleb
So you blame David Bowie too?
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In order to encourage some responsibility from the banks while cushioning any possible future blows, could this giant 'central bank insurer' just be run in exactly the same way as any other insurer?
By that I mean when banks do need to claim for losses, they have to pay an excess and thereafter their 'premium' will shoot up.
Admittedly this may be rather simplistic, but surely it would provide at least some level of deterrent for the banks, to make them think twice before lending out dodgy loans?
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This whole matter of using taxpayers money to bale-out the banks and give handouts to businesses etc. has now become some bafflingly complex that I feel none of the government parties involved in the raising, administering and distribution of this government largesse, can possibly know for sure if the money handed out is going to where it was originally intended.
I have this worrying feeling at the back of my mind that the government now have the banks and financial insititutions in the position where the banks and financial institutions want the government to be.
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If cutting tax by 1p = £3 billion to the treasury then the £200 billion of handouts -never to be seen repaid I suspect should equal 66p in the £1
Given my numbers will always be quibbled over a moratorium on income tax for one year and leving National Insurance unchanged would have more economic effect than all this garbage being offered by Crash Brown and Co.
The electorate would love it and we would be quids in as a state people might even start to like GB.
But he never was one to do he right thing was he?
We must not forget the promises of no increases in taxes, statements of Boom and Bust being finished the raiding on Pension funds dividends annulally these all cost us heavily and we will not forget them.
Long Term planner is another term for not having a clue and a cover for being the worlds most expert ditherer.
The country cant afford Labour in power for another day, and if crash had any respect for the population of the UK and the electorate he should go now.
Only a new broom can sort out his mess as his actions will prove nothing save leave us all with a debt burden for many more years than need be.
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Can someone please tell me who it was who got us into this mess in the first place as it is still not clear. The banks are getting their fare share of the blame but surely the current governement must take an equal if not greater responsibility for the boom and bust. If, as it may appear, I have now answered my own question then I have another. Can anyone tell me where they (the government, not the banks) have suddenly got the expertise to get us out of this mess? Is throwing money at the problem the real solution? I hardly think the result of the last ten years of fiscal mismanagement give them the capacity to remedy the situation. Oh! How they have frittered away our hard earned taxed income.
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Qatar expresses further interest in Barclays ??
Well if they had been on the job they could have got the shares at half the price they are today.
Same goes for the owners/directors e.t.c.
If they had time to write an open letter to the shareholders, why didn't they pick up the phone and get on to their broker.
We wait and see.
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la la la la la la la la la la la la, is it better now, no! ......la la la la la....
[you can replace la with blah, same effect]
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It does get to me, some of holyer than thou comments of having no debts and that any that have being perpetuating the circumstance. As half of a young couple that both earn decent salaries, we have taken on responsible debt that allows us to build for our future.
Although offered a substantial mortgage against our earnings, we took what we felt was realistically repayable to buy our first home, a modest 1 bedroom flat in London in an area where we don't fear for our safety each time we walk home from the local tube.
Yes, we have an overdraft, mortgage and a credit card and we are indeed the lifeblood of a sensible banking system. As our careers advance, our properity gains equity (we did not buy our property with a quick gain in mind) and we develop savings, we become an even more solid prospect.
Although I agree that the general consumer has been barraged with store cards and available credit that could not realistically be repayed, let us all not be painted with same brush.
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... skin in the game...?
Hey, we've all got a helluva lot of skin in the game.
the bankers NEVER have any skin in the game, have you ever met a banker?
Maybe the Dear Leader could take a leaf out of the new Prezz's book and start kick ass. I understand he has shamed Chrysler into cancelling a new $50 million executuve jet, and pointed a pointy fingers at US banker bonus plans.
If Gordo wants to curry favour with his public, he would do well to kick a few bankers around while he is in Davos. It is easy, and cheap.
Moderation now nearly 2 hours...... need some enthusiastic foreign labour to help mebbe.
Regards,
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Apparantly the US counts goods ''in store'' as GDP.
Is there tunnels in the Rockies full of long-life dried food,IBM computers,baseball hats,and red,white and blue flags.
Probably not, but Arizona has a few planes and other things.
Hmm. I wonder what is in the trash can.
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There is ludicrously simple fix for this problem but it will not happen.
Has anybody else noticed just how much Gordon Brown is loving our misery.
On the one hand its nice to see the old chancellor having a laugh, after all isn't that the proof we need to show that he is human.
Also, even more shocking is the fact that having found out the the British public have even less faith in Cameron, Brown can milk this for as long as it stays bad.
God help him though if there is a recovery, because then he will be totally exposed.
Looks as though the rest of us are in this for the long haul.
Conspiracy/ paranoia? I should say so!
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Another Brilliant idea from the powers that be. Let`s move forward by making the banks even less accountable for their actions and dodgy dealings.
I wonder why would be left holding the can again if such an idea were adopted --- Oh that`s right it would be the taxpayers again!!
We can carry on struggling while those at the top can fill their boots with hefty bonuses once more.
You have to wonder who makes this stuff up!! It would be funny if it wasn't so sad.
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BANKERS / RESPONSIBILITY
what a complete joke
More debt for our chrildren to save the banks so that they can sell our chrildren even more debt
whose pulling the strings?
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I just had a crazy idea. Why don't we not not make actually hold the banks and bankers accountable.
Even crazier why don't we launch criminal investigations!!
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71. At 1:03pm on 30 Jan 2009, PeterJ42 wrote:
Perhaps Gordon should take a leaf out of the nuclear industry's book and copy Sellafield - take the toxic assets from all over the world and launder them for everyone for a fee?!
You are behind the curve with that one ,its already happened unfortunately the fee as arranged doesnt cover the toxic fall out hence the fall in sterling ,of course we could just buy whats left and charge a bigger fee,what do you think RBSwas doing when it purchased AMR or whatever its called .
The toxicity has already mutated the bankers and pollytitians into lizards in zipper suits with human form,they could quite easily shoot out their sticky tounges at mach, devour a journalist in a nano second and you wouldnt see it happen even with time lapse photography .
Never get closer than 7 foot to them and cover your body with Zimbabwe dollars
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#76 e2toe4
"..maybe they can hold the next Banking summit on the platform of the Monument Metro station in Newcastle upon Tyne"
Seconded. I can manage it during my lunch break :0) - surely we cannot do worse.
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Have the moderators gone to sleep?
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Robert, you are echoing the concerns the ordinary man in the street has been voicing long before you: if borrowing too much got us into this mess in the first place, how is borrowing even more going to get us out of it?
Logic and common sense is telling me to close down my debts as much as possible.
I don't want to over-gear myself when there is so much economic uncertainty.
There will be fewer jobs around to provide income to service these debts, and falling asset values against which my loan may be secured could lead me closer to bankruptcy.
Gordon will prevent the banks from collapsing, however reckless and greedy they are, but where is his assurance to protect me after I act on his rather foolish advice?
The lunatics are definately running the asylum now.
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Yipee - some common sense - good for Dimon.
Banks will not return to responsible banking while they know the taxpayer will write a blank cheque to bail them out when things go wrong.
I have to ask is insurance a good thing?
Banks should keep enough in the kitty to cover problems.
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It seems we are in a big mess because one of the more fundamental premises of economics turned out not to be true - that people usually act rationally. It seems that, all other things being equal, people very often act very irrationally even where this will have disasterous consequences. (And I'm not sure why this is coming as a surprise.)
And let's not make the mistake of assuming that only bankers act irrationally. This is a verdict on human behaviour and the assumptions about human behaviour that, until very very recently, underpinned economic theory.
It seems we now have to acknowledge what was already fairly obvious - that people only act rationally if they are given the right incentives as well as comprehensive rules and laws backed up by sufficient enforcement. Otherwise, people are more than capable of running headlong into disaster, even though this is not very rational.
So apparently at least a part of the solution for the future is that we need to review the way city bonuses work and revise and extend our regulatory structures in the financial sector. This is what we need in order to prevent us running headlong into another financial disaster.
Here's a thought though. As unpleasant as the current economic situation is, it is as nothing compared to what happens next if we fail to heed the warnings.
And now that we know we are not, in fact, usually rational, it seems all the more plausible that we will not, in fact, heed the warnings - just like we didn't heed the warnings over the debt bubble.
So what I want to know is this:
Has anyone estimated what the economic impact will be in terms of our GDP growth, world economic growth, retail prices, commodity prices, global trade volumes, and so forth, when the full effects of global warming are taken into account?
I'm thinking that if negative 2.8% growth is a disaster, what happens when land masses shrink, sea levels rise, some countries' and continents' ability to sustain agriculture reduces by 60% or more, and all the bad things that we know are going to happen actually do happen? Will it be minus 5%? minus 10%? I mean we know all this is going to happen just as surely as we knew the debt bubble was unsustainable.
And since we have now dispensed with the notion that people will ultimately act rationally, I was just wondering what negative 5% or 10% growth over a sustained period might look like in terms of jobs, tax receipts, our ability to feed ourselves and so forth.
Should we now put in place a comprehensive system of incentives and rules and laws backed up by sufficient enforcement in order to deal with that problem as well?
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#58. MarkMcIntyre wrote:
Anyone with an eye to history will know that "cold turkey" will give us a 10 year depression and half the population out of work & homeless.
What evidence can you put forward that NOT subjecting the economy to "cold turkey" will be any better?
At lest after "cold turkey" we will be able to restart the economy, but without it and we are all Japanese with assets that cannot be traded and two generations of structurally dispossessed poor (who can't buy property) - and still addicted to being over borrowed!
The other solution is hyperinflation to destroy savers and investors wealth and bail out the over borrowed.
It boils down to a moral question, even a religious question: is profligacy or prudence to be rewarded on earth? I favour a society based on rewarding prudence (with just a tinge of hair shirt Methodism!)
(I also will not let any politician usurp the word to mean the exact opposite!)
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Jamie Dimon has demonstrated an outstanding capability and wonderful strategic thinking throughout his banking career so far.
Which means that he, almost alone amongst the international bankers, could show his face at Davos.
This Englishman finds it very hard to trust the so-called 'great and good' but I have to say that JP Morgan Chase have got a first class person running their show in Dimon.
PS. In hundreds of forum posts over a decade, this may be the first time I have ever said anything really positive about any individual.
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After the demise of LTCM in 1998, what exactly was at the top of the agenda of the senior 10 people at the SEC and FSA?
It should have been a perfect dry run, and the warning provided oodles of time to ensure a gentle deflation of the excess leverage so apparent in John Merrieweather's little outfit which so nearly brought the world to its knees 10 years ago.
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Rob
they rob and gone
gone with all our money
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If we stop making posts about the moderators having a backlog they'll get through it faster.
Doh!
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A large number of savers have been hit by Banks and building Societies savagely reducing interest rates for their savings. Many people rely on these payments to pay bills and day to day liiving. Is part of the problem caused by this Government using Taxpayers money to bail out the banks so savers money is not so essential to their viability?
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There are two things you should be asking Mr Peston.
1. Why are those who got us into this mess in the first place advising HM Treasury and being paid for their labours to get us out of it?
2. What sanctions should bankers receive if they do the same again?
And I'm not thinking about bailing them out, I'm not thinking about spanking their bottoms.
I'm thinking about hanging them. Mutilating them. And taking every single penny of their net assets and making them work for the minimum wage for the rest of their lives.
Stop pandering to them.
Treat them with contempt.
And make them know that they will die if they ever behave like that again.
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"96. At 2:05pm on 30 Jan 2009, Whistling_Neil wrote:
I see the moderators have walked out in sympathy with the refinery workers again."
- Superb.
However would it not be best to first check to see if the delays are due to different time zones / working days. Maybe the BBC have outsourced this work. It would be very easy for them to do so.
Surely every company who outsources work from these shores, would be proud to admit it and use it in their marketing material and shout it from the roof tops. You know the stuff..
"We are proud to tell you of how we keep costs so low and call centres open so long, it is because we....."
For some strange reason I seldom see this.
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Bankers have to be made to pay and be seen to pay
It is now fully apparent that the last ten years has been a complete economic delusion and where smoke screens were the only thing stopping the people seeing between reality and a horrendous financial state-of-affairs. Indeed greed and the personal wealth of the bankers have destroyed the lives and fortunes of many and where most of humanity has and will suffer on an unprecedented scale. US President Barack Obama comes out with fine words when we hear that $18.4 billion dollars were paid in only 2008 to Wall-Street alone for bonuses, but where these funds in reality should be totally reclaimed for the devastating effect that these people have reeked upon all nations globally and where this is still continuing. Indeed, legislation in all countries should be implemented immediately to claw back these immoral bonuses and earnings that have been paid to the few over the last ten years and which has directly plunged the world into several decades of extreme hardship and unparalleled debt.
Politicians have therefore a duty to do this but where if they do not they too are culpable in a system that has literally brought the world to its very knees. In this respect the people have to come first and not the bankers who have been rewarded beyond any normal persons wildest dreams and where this has been at the people’s total demise and their expense. Common decency has to paramountly prevail above all else if we are not to descend into total depravity over time.
Dr David Hill
World Innovation Foundation Charity (WIFC)
Bern, Switzerland
Reg. No.CH-035.7.035.277-9
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yes my friend don't feel no way
you've got to sow what you shall reap
you save your soul that's what you shall reap
hypocrites in broad daylight
parasites in a dim light
dreadlocks in moonlight
bald head in brought daylight
the seed you sow it's what you reap
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Please everyone, look at my next comment. I apologise for the length of it, but this business of credit crunch and discussions about help for banks needs balancing with what follows.
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what is your profession
every man turn landlord
play mr music man
tell them brother
I'm the dread at the mantrol
we don't trouble no one in babylon
we only want to got to mount zion land
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How Hard Is It To Say Sorry? (Sorry it's long, but please read it all if you can!)
Saying sorry usually means:
Guilty Conscience - pang of.
Saying sorry means knowing you have done wrong, admitting to it, apologising for it, and trying to make amends.
This is very difficult to do, and it often seems easier to lie for fear of the consequences rather than tell the truth.
I did this in spectacular fashion once when I was young.
I had just passed my driving test, and my mother allowed me to use her beloved sports car to go out that evening to celebrate with my friends. Unfortunately, I got in a mess parking it, and smashed in the whole of one wing.
I then spent the entire evening in a dreadful state of fear, worried what to say, and eventually went home with a decent, believable lie (or so I thought). My mother was upset at the state of her car, but more worried about me. My father, ever practical, organised the insurance claim and life went on. The trouble was, I was so scared that I stuck to my lie through bitter interrogation, elaborating it more and more. Eventually I almost believed it myself.
To this day, I have never told my mother the truth, although I am pretty sure that she knows. By contrast, she has lied to me, and my father, for my entire life. Once I found out, the truth explained her behaviour towards me all my life, and I was able to forgive her. However, I would have respected her more if she had told me the truth herself, but she has kept it a secret for so long, I don't think she ever will.
She may suspect that I know, but will never admit it, just as I suspect she knows the truth about her car, and that I will never admit it to her.
This then, is the problem we have with our government.
The politicians, bankers and other mysterious significant persons are directly responsible for causing or allowing the current state of our country.
They are now desperately trying to cover their tracks by ever-increasing lies.
Ever-increasing lies + ever-decreasing circles.
The more they panic in trying to keep the truth hidden, the bigger their attempts to hide it.
They know they have done wrong, but have lied so much, they are virtually past the point of no return. The daft thing is, if they told the truth, said sorry and then started to really make amends, we would all be shocked at the revelations (but not as much as they think), then we would respect them and get behind them in their efforts to save our economy.
In order to do this, however, they need to REALLY see how the credit crunch is affecting the real people and real lives. A balance sheet and falling share price are not a real life. They are not a family made homeless because of redundancy. They are not a pensioner shivering because of rising energy costs they can't afford. They are not a child eating baked beans and soup because the parents are struggling to afford to go to work from rising fuel and child care costs. They are not the small business going bust because the bank has withdrawn their overdraft or giant clients have refused to pay full going rate in timely fashion for the supplies of the company.
A 2.5% reduction in VAT means nothing when you have no money for food.
THIS is the real face of the credit crunch - not endless rhetoric about global solutions and saving the world. THIS is real lives in ruins because of someone else's greed. Why does our government think the french people are marching through the streets?
Remember Oliver Cromwell? History has a nasty habit of repeating itself.
Even an historian with a PhD should be able to work that one out.
THIS IS A COUNTRY WHICH NEEDS HELP NOW.
How many suicides, deaths from hypothermia, malnutrition and physical abuse have to happen before the government gets the message?
THEY HAVE TO SAY SORRY AND START MAKING AMENDS NOW.
Absolutely nothing, nothing else at all will do.
Time to put the people of this country first - BEFORE THE BANKERS AND THE POLITICIANS.
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From this website: "When asked about the growing action, Gordon Brown - speaking from the World Economic Forum in Davos - said he "understood" people's worries"
Oh, great! That's OK, Brown understands.
Progress, eh?!
Next step? Do something...
Hang on (Evan?). Didn't say I'd do anything, just understood, no more than that.
GC
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Whatever else is going down the drain, I am so glad to see the British sense of humour is as healthy as ever. Some bloggers have had me crying with laughter.
There is undoubted talent still resident in UK, (BBC please take note - some real FUNNY edgy humour here and not a swear word in sight). There are also those politically and financially wise.
As I read it the basic agreement is inept banking and government has pulled UK into a big black hole and the pain has to be faced. Who votes for sooner and who votes for later? And who would like to start a new political party prepared to face the pain?
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It might be a good idea to stop lending on margin, which not only caused the Great Depression but is largely responsible - in a different from at least - for this one. Trying to make money out of nothing is effectively a form of pass-the-debt parcel which only survives intact for as long as the 'music' continues to play.
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# 78 Grimupnorth77
Thanks for spotting the slip!.
promise to check what i'm writing next time, but then again i couldn't be as witty if i tried and at least it showed the sentiment!
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look how we are living in this world
say we need more civilisation
and better organisation
for all the nations all the nations
if we don't share with one another
we will fight against each other
in this world all the nations all the nations
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#51 (& 80)
I do not mean write off those peoples detb that have been going around like big time charlies buying £5 frapaccinos and now have nothing to show for the good times.
The problem is as i see it that the banks have inflated balance sheets. Now we know that but by how much? and thats why they have lost so much of there value AND so reluctant to lend. i wouldnt lend to someone when i was skint nor would i lend to a bank if i thought they might not be good for it.
You wipe that problem away by giving the banks the money they were ment to have and they could lend again (all be it at a more stricter level and modarated).
If every banks did that we could carry on as normal. how do people lose out?
If we dont do this the rich get richer and the poor get poorer.
This could all be a lot of rambling of a normal person not in the know but when we start printing money (which seems likely) why dont we just not bother and right it off instead?
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Bankers will always go for the easy life. Get others to do the real work.
They have learnt the easy way that central banks are not the central banks of old. The role of central banks has been subsumed by governments eager to meddle.
And the end result?
No moral hazard.
Bankers do what bankers want to do in the certain knowledge that the taxpayer will pick up the pieces.
What is the point of having central banks when governments allow the banks to carry on as they please?
Bankers would think twice before jumping out of an aeroplane if they had no parachute.
They certainly would not do it again!
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i have bank accounts in three countries, France, UK and US, all in credit, no outstanding loans, no mortgages. my UK bank is constantly contacting me to take out loans, though why i would bother paying interest on a loan when i have cash in the bank earning interest less than inflation hasnt dawned on them!
The French bank....no contact....the US bank, a christmas card...
I guess GB has gone to Davos as it is the last time he will be invited... "Davos Restoring Confidence and Trust" great slogan, totally meaningless!
Jamie dimon....anyone who hired T Blair must have their expertise questioned......
Lets just admit it, until the toxic assets are dealt with nothing is going to happen, you can pile even more billions into banks and what will happen...nothing remember the first £37 billion, where is it now?
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more than a dozen artists old and new
doing their thing
okay we are going to get redder than red
heavier than lead
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#127 - 'a large number of savers have been hit'
yes and they'll have to call on their savings to live on so the bank will have less to lend so that no-one can borrow and then they'll have to reduce interest rate even further to encourage those with extreme need to borrow.....
The asylum bosses have been usurped by those that lunatics running the asylum forgot to sedate...
Its looking better by the minute - if you think you can sell such a far fetched idea as the basis for a film....
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Banker bonuses
I thought I read somewhere that it was considered perhaps bankers should be paid their bonuses in the swap-paper they created, -CDO's and the like.
Well, in these days of quantitative-easing (spit), who really wants cash.
These CDO's etc. should be used at full value ('cos after all they were 'cast-iron' mate) and if there is any shortfall at full term, bonus holder pays the difference.
Seems fair to me.
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moderators...shouldn't you have been watching the banks?
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it touched me deeply
it gave me goose bumps
very moving i've got a feeling
his music has always touched a nerve with me
he just sounds so honest when he sings
the two of you have a special vibe a special bond
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some will pretend to be you friend
just to get you in the lions den
like meshech sheldrick and abendigo
children they will have to let us go
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I had to laugh when I read:
"A heavy burden is on the shoulders of Jamie Dimon - as probably the only American banker of seniority whose reputation has not been smashed to smithereens by the crash of '08. "
In 08, Dimon was ground zero when it came to denying the credit crisis and impending recession.
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Wow, Robert Peston is catching on to the fact that excessive credit is the problem and more cannot be the solution! Less hair of the dog is in order.
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"Surely in the new world economic order which will be built - though Davos has been disappointingly short of coherent visions of what will be constructed from the rubble - we need bankers to know their customers and to propely evaluate the risks of lending."
As ever Robert, I like what you're saying. But this doesn't sound like global capitalism to me. Though I may have misunderstood the concept.
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Re: Moderators
COMPUTER SAYS "NO"
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18 excellentcat and others.
No sane person, and I will include GB here, has ever argued or would ever argue that banks should return to their 2007 lending criteria- 125% mortgages etc.
'Lending at 2007 levels' is politico-speak for lending money to people and businesses who are sound credits at 2007 levels, instead of eg. simply refusing to extend a business overdraft facility or mortgage because a bank wants to reduce its overall lending. Lending to known sound credit risks is the kind of lending which needs to return to pre-2008 levels, not the crazy Buy-to-let and securitised mortgage / credit card nonsense which took place between 2002-7 (though securitised lending has been around since around 1980).
Banks (and indeed other investors, including the world's savers) do need to be a lot more discriminating about whom they entrust with their hard-earned (or not, as in the case of banks).
This means low levels of interest for savers for the forseeable, because low credit risk = low rates.
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142
Much as I loathe TB, you have to admit he called the top of the market and got out!
He also had superb insider information; better than anyone else he knew how dreadful GB really was.
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Ask yourself, what has fuelled our absurd levels of consumption in the developed world? Levels that, yes, let’s be realistic, challenge our very well being and point to a ridiculous notion that the only way mankind can survive is by consuming more and more and more..... The whole system is in a mess quite simply because it has been based on greed and not need. Mr Dimon is right, bankers must not lose sight of who they are lending to and why they are lending; that got us into this mess and that is what is behind these barmy ideas that levels of consumption are not a problem and debt could be without limit. Why can’t we re-design our economic modus operandi? Why can’t we come up with a new model of capitalism that does not lead us to rack and ruin? The problem is not capitalism, not the free market but the corridors of power. The state is so averse to these ideas – why is that I ask myself? What we need is a social revolution which re-defines our social priorities, that somehow couches the benefits of the entrepreneurial mentality within the context of a rational and pragmatic understanding of resources, energy and sustainability. Our leading bankers are not fit for purpose when it comes to this task. Let’s get rid of the lot of them. Nationalise the banks for years if we have to, until we can sort out this mess.
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#84: Quite possible, really.
If GB were my dad I suspect I'd soon turn at least to drink if not to heroin.
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Surely the point about insuring bankers loans is that although previously they badly underestimated the risk of lending they know equally badly overestimate the risk. Currently they seem to consider that all loans carry a level of risk that they are not prepared to undertake. Hopefully they are wrong. If not we are all dead. Risking taxpayers money is a gamble, but paradoxically if we lose this the bet are probably in no worse a situation than if we had decided to hang on to our cash.
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This comment was removed because the moderators found it broke the House Rules.
Gordon Brown knew exactly what the banks were up to over the last few years.
What he did was turn a blind eye because the revenue the banks brought into the treasury was so high.
Brown still needs the banks, hence the billions of taxpayers money to fund the bail out.
The banks will eventually get back on track and the revenue will flow again. This can be seen in the increase in bank share values.
The only chance Brown has to cling on to office is to admit he was partly to blame for the financial crisis.
Luckily for the taxpayer he is far to arrogant to come clean. The americans said good riddance to Bush, lets hope we have an election soon to get rid of our B.
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Could it be that the US did not bother going to Davos because they have their own agenda and that is to look after their own people.
Something we will see every other country having to do to try to stem civil unrest in their own countries.
You cannot have Gordon Brown pushing for more globalisation and less protectionism when you have our own people taking to the streets for someone to give them a job.
Especially when he completely misled them by promising them British jobs for British people
He'd better have the right answers when he returns from saving the rest of the world.
He might be happy with the financial crisis but how will he cope with a people crisis?
The man is completely bonkers.
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Re 81: drewboykerr
Valid points but I think it is wrong of society to demand that two incomes of 'average' wage are necessary in order to own a family home (which means both parents are in full-time employment).
No wonder children lacking in manners and discipline - no one is home to parent them.
Whilst I agree that house prices are not 200K all over the country, neither is the average wage. Take Devon and Cornwall, I believe the average wage is about 15K – 20K in these areas.
I also accept that property prices are reportedly falling. However, this measure is heavily influenced by apartment prices which are plummeting, whereas your typical 3-bed semi is not.
In summary:
- I'm a married Dad.
- I'm an engineer on 30K.
- My wife does a fantastic job of raising our son.
- Yet it is still really hard to find an affordable and reasonable home.
This cannot be right, and to make matters worse the Government is using my taxes to perpetuate the situation. They hose our money at this crisis and yet their strategies are riddled with contradiction. I do not believe that they have a vision of the future, or if they do, it is one that would be intolerable to myself and many others. The petition has been raised to give people an opportunity to request some transparency, which I do not think is unreasonable.
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Bankers and Responsibility
I posted this last night and it seemed to get a good reaction, it is more relevent to tonights blog however so I am unashamedly re-posting it.
I am not re-posting it for vanity just trying to get a message out there like everyone else, including the guys picketing the refineries out in the freezing cold as I type.
Their message is a particularly frightening one, although many out in the cold may not even realise it they are picketing against globalisation, wanting to protect local jobs.
That is a natural instinct but when threatened but in a globalised world that could be a disaster if rolled out everywhere. If europe and the USA decided they wanted to stockpile food for thier own people rather than export it this year many would starve to death in the UK. We all need each other.
Bankers and finance people and politicians of all types take note.
Previous post on bankers responsibility as below.
A good starting point would be the voluntary return of the largest excesses of the financial gains to the public purse in some way as a one off to take the sting out of the publics wrath.
We should all work together and we will need the bankers just as much as the engineers to do it to look for the solutions.
Any resentment will get in the way of that, we need to be honest about the emotional junk in the basement first and clean that out before we can move on.
Realistically the anger with financial institutions in general from the public will not just 'go away' by itself because it is not useful, people are not like that. It will require some kind of deliberate, willed act to clear that junk out of the way.
Some kind of reconcilliation needs to take place before we can move on.
The best way to achieve that would be a voluntary act. Resentment of those who were complicit in the mess (as we all are to various degrees) but benefitted enormously from it / are suffering the least / not at all is ineviatable.
A bit of humility backed up by action on their part would go along way to resolving the rift, clear the junk out of the way and allow us to move on.
A few of the knights of the realm in the boardrooms of the banks should stand up and remember what their titles are supposed to represent and act accordingly. Remember chivalry, self sacrifice and humility anyone?
They are actually values that give a lot of pleasure to both those whom exercise it and the beneficiaries from it and it would serve this country well at the moment.
It would restore a lot of faith in humanity if even just one person stood up and voluntarily apologised and returned bonus payments to the state or a worthy cause of some description.
As far as I know not one person has done that to date.
How sad a reflection of modern society that is.
All the time that an act of reconcilliation does not occur resentment will grow as it is already.
We do not have much time, look at the faces of the guys picketing outside the refineries, they are feeling cheated and angry and there are lots of them and they are prepared to stay out all night in the freezing cold to make a point.
You can all use your imagination to project that scenario 6 months into the future.
There have been plenty of warnings out there for those who are willing to look at them honestly.
We do not have much time.
Jericoa
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This excuse from the banks that there should have been more regulation is a bit like a burglar to your house saying the police were responsible for the burglary by not having enough patrols.
Blaming the borrowers is like saying the householder was at fault for not having a burglar alarm.
Continuing to allow the bankers to pay themselves huge bonuses is like letting the burglar back in to help himself to some more, with the police looking on.
When will the govt realise that us non-banker British have a great sense of fair play, and that by not recovering the money personally from the bankers they are setting the scene for possibly the worse riots this country has ever seen.
If they try to stop demos with police armed with tasers things could get very nasty indeed. You have seen it already in Greece and France. But nobody likes a fight like the British.
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#134 tigerjay
I hear you.
Jericoa
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A previous contributor suggested that the Government competed with the Banks for supplying domestic credit, particularly through the effectively nationalised Banks.
At the time I thought that it would be silly to compete with those who needed help; Banks and the economic system first; citizens second.
In the light of the extreme downward spiral that is unravelling, I consider that each individual sovereign government supply credit to their citizens for their reasonable needs on the provisos that such credit is not used to rollover debts to Banks.
Governments are already shoring up Banks’ Balance Sheets for the sake of the global economy and look at the cost.
National, not nationalised, suppliers of credit to the populace will compete but also be a cheaper and more effective social and economic platform to the populace.
I’m mindful that all of the Chinese Banks are majority State owned. Hopefully, with the lemming drop into Global recession and the population that country has to deal with they are set up to deal with things domestically.
Davos and Bilderburg. Excellent [Excrement?] What came out of them last year?
Over to you, Dr. Woo.
P.S. Kikidread.
I hope you are copywriting your poetic contributions.
N.
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Anybody seen the rise of the £ tonight?
Care to speculate why?
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Look. Money is simple...
You can inflate.
You can deflate
You can stay constant.
The last 40 years... inflation.
Now... deflation.
So, you want inflation back?
Create new money. Couldn't be simpler.
You can borrow credit into existence, and with it, more debt is also created.
or
You can print physical cash. Notes and coins.
That's it. Those are the choices.
Credit is destroyed when it pays bank loans off. Notes and coins are not, and so have a far stronger effect on the economy. Credit increases the level of debt, notes and coins do not.
Really, it's all very simple, unless the government are not working for the citizens, but have other masters. If you assume the masters are someone other than the electorate, the actions of the prime minister make perfect sense.
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Just popped in to see how everyone is. I can't decide whether this blog now exhibits more of the traits of a Gentlemen's Club or an Old People's Home. What a load of moaners!
Anyway, feeling at home :o), so I thought I would add my own thoughts.
Within the next 6 months, this Davos will be seen as pivotal - and catastrophic. How can such an elite (or elitist?) bunch get together when the World required some statesmanship, and produce more squabbling than a group of 4 year-olds?
Have they really not got the plot yet? or are they still so egoistical they are blind to it? Well, history will not be kind this this lot. How they could be so self-obsessed when the rest of the World needed altruism, speaks volumes for ALL our political systems and parties. The yanks even forgot to turn up!
Anyway, nice to see eveyone. Remember to keep warm, there's a bitterly east wind outside.
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I've just been browsing the posts in Should Jobs Go To Local Workers. I am confused as to the correct course of action.
1. Lay off UK workers and bring in people from other countries to work.
Result:
a. Increased benefit payments
b. Less work opportunities
c. Less purchasing power amongst the local population
d. Less borrowing by local population
e. Work carried at for cheaper wages.
f. Increased profits of bosses and shareholders (due to lower costs) meeting market demands.
g. Cash flow out of the UK as migrant workers send money to their families at home.
Can someone explain the benefit of this in terms of the UK economy, and in particular how we pay for the evergrowing government borrowing.
This stikes me as a means of increasing profits at the expense of the local population.
How is this sustainable over, say 10 years?
What longterm incentive is there for a local work to gain skills, only to be refused work in preference for migrant workers?
Are migrant workers expected to take out mortgages, car loans etc, despite lower wages and supporting their families at home. Since deflation would be needed to make these items affordable, how can this be of benefit?
Am I missing something?
Are local workers supposed to travel to replace migrant workers?
Italians move here, we move there. Is that how globalisation works, musical chairs sort of idea, or is that silly?
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Sorry folks, that was me phoning Gordon. I wanted to ask for a loan to replace my Porsche which is getting a little shabby now it's a year old.
I thought, well, if he's so keen on banks lending to all and sundry, maybe he could lead by example.
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the main reason, as i understand it, that banks are in the difficulty they are in is because of their overseas lending (predominately USA) and not the UK lending - the sub-prime market in the UK is too small to bring UK banks to their knees.
Therefore, the UK market and average client was and still is a safe bet. So, as long as UK banks concentrate their future lending in the UK their shouldn't be as much risk. Plus the type of mortgage product that was arranged in the UK to this sub-prime sector is no-longer available from virtually any lender in the marketplace - many of the lenders have disappeared as they were UK subsiduries of American Banks i.e. GMAC + Mortgages Plc, Future et... These American lenders didn't hold onto their customers mortgages but bundled them into'Bonds' and re-sold them to other UK lenders - this is essentially what happen to the relatively small Bradford & Bingley as they had committed to accepting mortgages from GMAC. The rest of the UK banks (RBS + Hbos etc...) actually bought mortgages arranged in the USA which obviously is on a far greater scale and monetary size than anything in the UK hence it bringing them crashing down.
Focussing on UK lending doesn't encourage cross-border lending as Robert seems to place great importance on but as the main source of the problem emanated from the USA surely they have more of a responsibility than anyone to accept the blame and the cost and the insurance cover. Wasn't this why the USA bailed out AIG ( the business risk insurer) and allowed Lehmans to go bust. Why isn't AIG or their equivalent not taking responsibilty for the the 'toxic' loans that UK lenders bought.
Perhaps looking after your own back-yard is a first step towards renewed confidence and re-instatement of as a close to normal as the banking system can possible return to in the medium term.
I have re-read everything that i have commented on in this blog and from where i am it makes perfect sense - i have financial services industry experience to relate to on this - and sometimes being selfish and insular in the short term is the way forward and can benefit the UK economy first and then the global economy second. We can only make steps at a time at the moment not great big leaps.
Answers on a post-card please.
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@136
New political party?
Yes please!
Add in Rahere, Alex Curzon and Jeroica
YES WE CAN!
Rahere - Phlagmatic and indiosyncratic
Alex C - proven business track record as SOLE TRADER - serious Kudos
Jeroica - human experience factor.
Myself - judge for yourself! http://www.democraticbritain.tp2p.com/?q=content/how-hard-it-say-sorry-sorry-its-long-please-read-it-all-if-you-can
The time for Rhetoric is over. Bankers and politicians need to understand this.
Your country needs you!
(I know - a little Churchillian, but researching the Cromwellian quote aspect!)
I will happily give a bio to anyone who asks - I have a colourful history, but love my country and its diversity.
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"We're in this mess because too much was lent by too many in a wholly irresponsible way"
Then why are we leaving them in charge? We should nationalize them and chuck them out.
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I posted the following some months ago when the MLR fell - judge for yourselves what has come true since then read my previous blogs - add Alexander Curzon and you will get a fair view of what has been rumbling on for months:
At 3:03pm on 07 Nov 2008, Tigerjayj wrote:
I posted the following on another site last night:
MLR down?
Winners are:
Anyone with a loan linked to base rate (does this include the bailout funds?)
Landlords (renting becomes people's only option when they lose their houses)
House builders-they need to build council properties very quickly or we will have tent cities like the USA
Exports
Losers are:
Anyone with a fixed rate loan
Anyone with savings
Sterling on the currency markets (euro here we come)
B of E - totally redundant once we have the Euro as our currency
Imports
Result on economy-
No 'tracker loans'
Increasing food and energy costs therefore fixed rate mortgagees will not be spending money.
Majority of us unable to change mortgage or get loans
Savings vanish abroad
No foreign investment
Exponential increase in repossessions and bankruptcies
Exponential increase in divorce, domestic violence suicides and deaths of the elderly unable to keep warm and eat properly
Exponential increase in unemployment
Cash rich banks with no savers, credit defaults and noone to lend to (very few will be left with 25% equity by now
Exponential increase in state benefit claimants
A rate increase would stabilise sterling by attracting investments, but would be hard on the those holding base rate linked loans.
What should happen is:
A rate increase
Raising of lower and middle tax bands
Reintroduction of MIRAS (I had almost forgotten that term!)
Cap credit card interest and ban them
Forcing of lenders to extend terms and thus reduce repayments
Tax and NI holiday (at the very least a significant reduction) for employers
The money loaned to the banks withdrawn and given to all people and companies in work as a tax rebate
Capping of all energy charges or a windfall tax if charges aren't returned to last year's prices
A reduction in petrol taxes and car tax ( for 1.8 litre engines or less)
A clearing of credit history older than 2 years
Immediate prosecution of all bankers and politicians responsible for this mess
Instant return to sensible mortgage lending
Decent pay awards for nurses, teachers, police, fire brigades,security services
Removal of massive perks and bonuses for obscene salaries and politicians-best done by big taxation
Big taxes for those investing overseas
Immediate return to UK based call centres and manufacturing (tax incentives would be good)
Mmmm-sorry if I sound a bit like am ad for Mr Obama-but, as usual, most of the people in this country will not benefit from a drop in minimum lending rate. A rate cut or a rate rise is useless without a raft of other measures at the same time-and who in their right mind would buy a property at the moment as prices are still going down?!
House prices need to come down even further to a level people can afford. First time buyers will get the housing market moving again when they can get mortgages and have saved a deposit.
I'm no expert, but there are enough of us on this blog that prove that we apparently know more about sorting this mess than the so called professionals, prime minister and treasury secretary!
PS. and guess what? The IMF has been bad mouthing and spanking the UK again-how irresponsible is that? HOW DARE THEY cause a further run on our currency?
We will see a massive increase in redundancies just before Christmas (always seems to be a popular time to lay off staff).
Oops! Forgot to also include we should have house prices included on inflation figures...
Also forgot a mandatory transparency order to all financial institutions-full public disclosure
Perhaps GB should get a summarised list from bloggers-far more ideas which will work on here than he seems able to think of or implement!
Leave the interest rate alone, get the bail out funds back and give everyone the 16k which rebate equated to-at least we'd be able to have a decent meal on the table, warm homes, savings and happy Christmas!
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#166
Obamas speech is the only thing I can think of.
I general easing of dollar positions in response to his 'economic disaster' speech. I dont think it is positive sentiment for sterling anyway.
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Davos appears to be the school of the bleedingly obvious. The only difference between Davos and a school is many of its "teachers" are paid a small fortune, at the taxpayers' leisure.
Encouraging more irresponsible lending simply delays the final debacle until GB can hold the next generation to ransom no longer. Who would want to contest the next election though ?
There should be a return to responsible lending, and banks should be allowed to fail to discourage short term risk taking.
Why should the debt be nationalised to compensate for 10 years of profligacy and privatised greed?
France and Iceland have resorted to civil unrest they are so unhappy at their leaders management of the financial crisis, and their failure to hold the financial industry to account. Sadly, it won't be long before we see the same behaviour in the UK.
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I see there's a bit of bother?
summink to do wiff imigrants stealing jobs robert?
We told you civil unrest was coming, whats el Gordo and comical Ali got to say there bruv?
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#161
Fully understand where you are coming from.
we need to accept that no amount of state intervention can replace parental guidance.
All this woffle about bankers, stock prices etc etc is not applicable in the real world.
Government and banks and their shady (as in not named) associates need to realise that the real world has no interest in their hidden/public agendas.
We are too busy carving a life for ourselves and our children out of the detrius left behind after the Credit Crunch.
Basically, 30k pa means a mortgage of £90k. Whereever you go in the UK, a family home of £120k is non-existent. By this I mean 2-3 bedroom semi, garden, off road parking. Add a reasonable, relatively low crime area and there is absolutely nowhere.
Top level bankers have at least 2 homes, access to a corporate jet, live in nannies, etc, etc. Politicians can claim for a 2nd home in their expenses! Ludicrous!
How is this living in the real world?
You are trying your absolute best to ensure that your children have the very best of childcare - one parent living at home.
How is 2 parents working good for your children?
IT'S NOT!
I so long for a time machine to bring back Oliver Cromwell.
Take a look at the history books.
Ollie C became Lord Protector of England until his death.
So named, because he had no politics and he really cared about his country.
He hated the way that Charles had to be executed and had tried eveything he could think of to save his life.
The heaviest burden he carried was the execution of our king.
And thus, Parliament was born.
Ollie C was uncorruptable to the enth degree.
How many others can claim the same?
Noone in my living memory.
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Demand a windfall tax on city bonuses 2000-2007
Demand a windfall tax on city bonuses 2000-2007
Demand a windfall tax on city bonuses 2000-2007
the only solution to resuscitate moral hazard that seems to be in ventricular fibrillation.
why should the taxpayer alone be responsible for this mess?
Robert, aren't you well and truly fed up with our leaders and their cosy banker bed-fellows?
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#172
I'm up for doing something..as long as you start spelling my avatar correctly !!!
I think you missed some though, somali Pirate springs immediately to mind along with wellingtonsilent, foredeckdave, morraymint and john from hendon (without the hair shirt please john).
Not forgetting the team from Newsnight.
No doubt others not immediatly on my radar at the moment for no particular reason apologies to those, you will know who you are anyway.
Go get em ac.
Jericoa
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wow someone just tweaked the UK pound (why doesnt the pound symbol still not work here?)
http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/currency/default.stm
any ideas....GB to resign? Queen to dissolve parliament?.....
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Too much is made of the end consumer's role in this saga
On balance the banks lent long and borrowed short and got caught out by increases in the interbank lending rates
In August 2008, the BBC reported that in the first six months, Northern Rock's loss was £584.5 million
This swamps the possible losses from arrears. Very simplistically, say 1% of the £110bn is in arrears - thats £1.1bn of capital (the 1% also comes from BBC reports at about this time). Say the mortgage rate for this 1% is 5% per annum - thats only £55,000,000 for a whole year - not the loss.
However if you look at the domestic mortgage book Northern Rock had to fund in the wholesale markets you can see where the loss might have come from. The domestic mortgage book was about £110bn euphemistically called assets. Had income on half this amount been one percent less than the cost of money in the wholesale market you be looking at a loss of £500m.
Given the fixed rate deals offered for a fee, would a 1% difference between mortgage rate and libor rate be possible. I'd have said so.
In fact, I'd say that sub-prime said less about the borrower and more about the ARM interest rates being charged - especially in the US.
Now, if you look at commercial loan books for banks such as RBS there would be a similar problem. It would be different because most commercial loans terms require payback at libor + a percentage. So, if you were a commercial borrower you'd have been more likely to default in recent times and for the bank it would have been more costly to raise funds. This is why HMG kept wittering on about the number of commercial loans that need to be renewed over the next year or so.
So, no wonder central bank rates were slashed, its the only way libor would reduce.
Anyway, the risks taken for funding debt were taken by the banks themselves.
Analysing the risk of default was a bank function.
Assessing the risks associated with purchasing debt from others was a banks function
It is not taxpayers function to offset these risks
It is regulators function to minimise the impact on taxpayers for a failure to assess risk. The simplest way to minimise this risk is to separate commercial and retail from investment banking alongside requiring gearing of no more than 10 to 1 for the former.
Maybe this is too easy
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To be fair to bankers (not a phrase that will be used by many for some time) it is perhaps a little early to expect them or anyone at the World Economic Forum to reach a definitive conclusion on what needs to happen over the next few years - it is still unlcear that anyone knows where we are now, never mind how we get to where we want to be.
The point you make about the paradox that minimising banks have used hedging against risk as a way of them ignoring their basic responsibility to actually check the level of risk is an interesting one - and crucial for the future if we are to avoid this sort of problem. Regulation will have to ensure that banks have carried out proper risk assessment, not simply passed the risk to someone else.
The main cause of the housing boom, especially in the US was the lack of proper assessment as to whether those taking out sub prime mortgages could afford the loan repayments. The effect has been devestating, and not only in the US. The problems caused are international; the solutions, and eventually the regulation will have to be international as well.
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#165
kikidread is just posting apposite song lyrics
(without the copyright attribution, naughty naughty)
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I have been saying to my family and friends for many years, that the compulsive need of big business to increase profit year on year is a bad thing. It has become obsesive for most companies, if not all, to measure their success upon the belief that unless you increase your profit from the year before you are a failure. This is a receipe for failure, and has come to pass for the greed brigade.
I am self employed and for the tax year April 07 to April 08 i increased my earnings from the previous year by approx £4k. However, increases in fuel and materials costs reduced my profit margin. I still made a profit, however the profit I made means I have no tax to pay. I felt guilty!, I worked hard yet through no fault of my own the short selling traders took my profit for themselves, by pushing up the price of commodities like oil, which in turn affects the price of everything.
Am I guilty in all this mess ?. No, I pay no tax because all my hard work went to pay increased prices in materials. The government get no tax from me, yet bail out the very people who created that situation.
I am going to get out of self employment, not because of this, but because profit is only for those that can manipulate the markets and be protected by those that govern. They are killing small business and creating the very thing they have been fighting against since the end of the second world war.
My profit went to shell or any other big multinational company that can increase its price of product without bounds. If I increased my prices to reflect theirs
I would have gone out of business a long time ago.
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This comment was removed because the moderators found it broke the House Rules.
Jericoa
My sincere apologies!
I am really sorry for getting your monika wrong - a psychological slip if I'm honest.
Jeroica - a version of Jerico - as is your blog name I guess.
It's a kind of hybrid of Jerico and hero- I meant no insult - really.
And you are quite right - there are so many on this blog, I dashed off my spot quickly - also should be included is Guycroft - seriously profound.
I suppose it's because I was surprised I could get on here earlier than 1 am!
Again, my heartfelt apologies!
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Peston panned says the Guardian.
The issue is the responsibility of financial media commentators in their presentation of economic news, notably reporting of Northern Rock in October last year.
Rober Peston stands accused of turning a drama into a crisis, not for reporting the news but in how he reported it. His reports caused alarm, panic and despondency and the first run on a bank in 140 years and arguably triggered a chain of events which are still rolling on today. His comments lacked the measured, balanced reporting, which is the hallmark of the Financial Times with whom Peston was previously employed and betrayed a distinct socialist bias.
Peston actually seems to rejoice in the fact that UK banks are nationalised, earning him the epithet, "The Toastmaster".
He is due to appear before a House of Commons select committee next month to explain what many view as irresponsible journalism by a public sector broadcaster.
The view expressed by the former editor of the Times, Simon Jenkins are particularly acerbic.
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jolo13
I've tried using HTML and ASCII code to force the blog space to display the pound sign. The entry doesn't make it into the system, so the blog security restrictions are too tight to allow the pound sign.
The developer/admin have kept the security as tight as they can to prevent the spots hacking in...
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Noone can use any rule book or previous economic scenario to predict what will happen next.
The bankers are sitting pretty as they know our basic infrastructure will collapse without them.
The government is sitting pretty as they know they don't need us to decide what is in their best interests!
Riding rough shod comes to mind!
The time for talking is over - this country needs positive action.
Until we get it from the politicians, we will see increasing unrest.
The refinery and energy workers are just the beginning....
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Jericoa
To follow on from 187 -
Jerico - a city which withstood 10 biblical years of siege
Hero - a person for all people and all seasons - one for us all to follow
Again, my heartfelt apologies.
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how about
never in the the course of human history has so much been lent by so few to so many that so much is so owed by so many to so few.
bit of a bugger this aint it
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#186 is referred to moderators - I give up!
What is the point in blogging?
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This comment was removed because the moderators found it broke the House Rules.
Bobby Peston
Stands accused of causing a run on the banks?
How absolutely ridiculous!
Robert - call me as a witness in your defence - your only crime being to spout the government line!
And here you are, being more electorate minded, and I read this!
How, on earth, can you be single-handedly responsible for a run on the banks?
According to our Prime Minister, it was all the fault of the Americans, the Global Crisis, etc etc etc.
Your blog is about the only 'official' place where people can speak their minds (according to the House Rules of course!)
If you were that powerful, you wouldn't be working for the BBC
Never mind - a 3 month sabattical (I'll do your blog for you) on full pay, back for a couple of days, and off again.
You can survive this!
Now you are victim of the thought police too!
Never mind
Join my blog....at least there you can let off steam!
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188
Give it a rest - sounds like the naughty little boys shooting the messenger.
The dirty little secret is out of the bag. Robert blew the whistle. How many hours was this little secret going to stay a little secret, regardless of anything Robert said.
To blame Robert for the subsequent reaction is to demonstrate a contempt for the intellect of the British public, and anyone else who decided they were not going to sit back and watch their deposits disappear.
Depositors are not lemmings, despite the dreams of the great and the good.
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Actually, Jerico may have withstood longer - have to look up the OT to check.....
The point being - Jerico had the faith to withstand continuous onslaught in the face of adversity.
A good name.
A strong name.
Just be wary of trumpets!
Total admiration for you.
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#172 tigerjayj and #180 jericoa
thanks for thinking of me but I honestly don't think I would want to be involved in any kind of political party; it would have to break the mould, but we're locked into a system that doesn't allow such innovation
so I guess I'm evolving from a bit of an idealist and fair-weather environmentalist into a bit of a separatist; not a survivalist yet ....
I blame the politicians
although I'm giving Obama 6/10 after 10 days, and remain cautiously hopeful; he even made a pro-union statement today!!! he shamed the Citibank boys into cancelling their new $50m exec jet; whatever next - saying that it's ok to be liberal?
and he's from Chicago where they understand the toughness of politics, so those former heads of Merill Lynch et al had better keep the phone numbers of their lawyers handy
as the US goes so goes the UK; for all of Brown's (and Cameron's) talk and bluster, they will simply shadow US economic policy
so really parliament here may as well go into recess for the next 6 months
discuss!
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Somali pirate
Shame!
New political party-will never be allowed to happen-Rebuild Britain 2010 knows this, hence their determination to lobby existing ones.
It's fun sabre rattling tho'!
Regarding the special relationship between USA and UK-GB appears to pick the bits he can do without upsetting his London pals.
If he shadowed the US properly, those investigations and prosecutions would be happening.
Not to mention a ban on excessive expenditure.
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My post #186 has been referred to the moderators??
No email to explain why.
Forvive me for thinking this is all part of the gobal conspiracy. Too close the the issues me thinks!
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188. At 00:02am on 31 Jan 2009, chelyabinsk wrote:
'Peston panned says the Guardian.'
couldn't find anything in the guardian online, the only thing I could find was this
"Gold and silver are inflated copies, stolen by thieves and thrown into the lake when they were found to be worthless. What is written in marble must be questioned."
What's that all about
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184. At 11:22pm on 30 Jan 2009, Whistling_Neil wrote:
#165
kikidread is just posting apposite song lyrics
(without the copyright attribution, naughty naughty)
+
Sorry, but I never claimed to be a poet laureate .
However, I am still trying to help and address the issues being pondered with positive idea's but the best idea's are the ones screaming at me through my Monster Beat Headphones designed by Dr.Dre and music randomly played from 45,000 tunes on my Apple iPod so I put these idea's forward to share.
Auntie Beeb only censors the most radical lyrics which touch a raw nerve, and if it was my material the Beeb would claim ownership of the lyrics so it is a good job anyway. Rap, Reggae, Jazz and Soul music often sample or adapt songs in a different style to produce a new sound / philosophy.
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Even the 'negative' comments (lyrics) seemed to have reached a general consensus that our society is broken politically and materially and has failed, so now we recognise the real problems we can start to think how to fix them.
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Robert - you're telling us news that all your blogsters have been harping on about for the last 4 months - credit isn't the answer.
As for Jamie Dillon and your comments and those such as 123. JohnConstable. What rubbish. He has worked for Citibank (major borrower from US gov, and JP Morgan (were they not taken on by Bank of America to avoid going the way of Lehman Bros? - almost bringing down Bank of America in the process). What credibility does he hold? where can I google him spouting about Imprudent lending in the noughties? I can find he earned £41.6bn in 2006 - 19th richest on the Fortune list. What personal money is he putting in to prop up JP Morgan? Surely CEO's of HSBC, Standard Chartered and American equivalents - I assume some smaller US banks exist should be top of the list of people to listen to? Yes, less listen to remorseful bankers too, but I don't hear him apologising.
On a simple level, Comments from 182. Mrs Bloggs13c2 are far more on the mark. Most UK banks have been tarnished by foolish American financial wizardry . Our major crime, as a financial centre of excellence was not researching our risk - exposing these emperors new clothes eques CDS's etc for what they are worth. Too many lavish lunches weakened our bankers ability to do their maths in the afternoons and they bought into the 'poo'. Caveat emptor anyone?
We can't draw a line under things and move on until we have true Sirs. Knights and other titled people in the positions of power in Banking who fulfil the human characteristics that Joe Public and the Queen want and need them to display. Characteristics that these titles are assumed to carry as mentioned by others, humility, sincerity, bravery, courage etc..
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201
Where to find "Peston Panned" in the Guardian?
Is Robert Peston responsible for the recession?, asks the Guardian's Matt Wells Media Talk in a 31 minute podcast 30 January 2009.
Open the Guardian Online homepage, type "Peston panned" in the search box on the top right and download the podcast.
Simon Jenkins comments are particularly relevant. "Newspapers, he says, have the same sort of obligation as they do in a war. Bluntly, not to make it worse!"
The other aspect that the House of Commons Select Committee may well wish to examine is that reports concerning Northern Rock and other reports at that time were a leak of market sensitive information, which according to the Daily Mail emanated from the Treasury.
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While the Banks should accept some responsibility for ther present credit crisis, Brown must realise that his policies over the lst 13 years of irradicating Boom and bust have failed miserably.
Now he wants the Banks to lend money at past levels, doesn't he realise that this is what got us into the mess in the first instance.
Giuving money to the motor industry isn't going to save jobs unless they actually sell cars and even employees in the trade seem to realise this, but not the Government.
Finally, the Government says the Banks must start to lend money to the people but imply that this is not happening. Well I would suggest that credit from the Banks is readily available to credit worthy customers. ( I have been offered loans and credit cards over recent weeks but am in the fortunate position of not requiring them). If credit is not available to some customers then it is probably because they do not have a good credit history or show that they have the means to be able to meet repayments. This surely is what the Government should be pleased with, the Banks showing sone responsibility, rather than moaning on all the time about problems which have been created by everyone but themselves!!
Now Brown is saying that we shouldn't talk down the situation. I suggest he returns to planet Zog, after first calling an election, and lets the real people, who don't have artificial camera smiles, to get on with their lives!!
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When I was working in the USA I noticed there were always small banks for sale; sometimes with information such as good first bank.
Off you then boys and girls.
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205. At 08:52am on 31 Jan 2009, chelyabinsk wrote:
201
Where to find "Peston Panned" in the Guardian?
Found it, sorry I searched for Simon Jenkins and then Rober Peston and turned up nothing
Sadly I can't listen to it as I'm having trouble with flash player (i'm on linux) and there doesn't appear to be a transcription (how do the deaf cope)
I'm sure that the media IS responsible for reporting the global economic downturn, perhaps they should stop doing that and return to Big Brother (the TV prog) and football celebrities, how to do up your house and make a mint etc.
Don't worry, I'm pretty sure that we will be returning to the wartime spirit pretty soon
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tigerjay
I hate to dissapoint but my avatar is simply part of a name of a beach in brazil where I met my wife who comes from there. I had to explain this to Rahere as well who was 'concerned' in his usual quirky biblical way.
I used to use the full name of the beach which is Jericoacoara...bit of a mouthful hence jericoa.
The fact that people make another association is interesting though.
No apologies needed, just noted you spelt it wrong consistently is all.
Jericoacoara comes from the indiginous indian population in that area. it means something like 'sleeping crocodilr on the sand'..I think !
Jericoa
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BTW, if you said that about 500,000 fewer homes were sold in 2008 than 2007 (reasonable projecttion based on Land Registry reports) and assumed that hald of these llost sales needed a mortgage then you'd be looking at nearly 200,000,000 of lost fee income across the banking system too
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And to carry on, so, why would the taxpayer take on the risk of estimating mortgage demand and fee income. This is the business of business.
Finally, its not difficult to see why the Government might be extolling lending, borrowing and purchasing:
Reduced revenue for HMG:
stamp duty - maybe £1.5bn
income tax or corporation tax on agents fees
VAT on fees
VAT on all those purchase made when people move
VAT on sales of used cars and whatever they charge on sales of new ones
Lower tax take on petrol since prices have come down (HMG have the biggest interest in petrol prices remaining high)
Anyway, not difficult to see why there would be an interest in 'getting the banks to lend again'.
Fortunately, in this sense, we are not living in a command economy
Quite what HMG gets from all those enormous commercial loans made by some banks to enable acquisitions by 'investment vehicles', I don't know, people in jobs, I suppose.
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The goal of the crisis is to bring us to similarity with Nature, the quality of bestowal and love. The means of attaining this goal, which is mandatory for all, is to change the environment that surrounds each and every one of us, or in other words, to change the external influence on every person. And to do this, we have to engage all the mass media channels and begin a broad action of worldwide education about the new reality of a united humanity.
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Tigerjay / somali pirate / alexander Curzon / Rahere / many others (you know who you are)
Re starting a political party.
A part of me would love to do that Cromwellian style and shake up the establishment, hence my enthusiasm.
Somali pirate has a point though which does bring me back to earth.
The pragmatist engineer in me away from the idealist suggests a more measured course, an extension of what we are doing anyway by way of our and many others (you know who you are) regular contributions.
My suggestion is not a political party but a formalised lobby group.
There are many intelligent and more importantly experienced people here who are ahead of the curve and the media in terms of analysis of what is happening and what would be sensible to do next.
Time and time again I see posts here that are realised a few weeks or a month or two later, analysis that I do not see in the news.
I also get a sense sometimes that ideas expressed here seem to emerge from the mouths of politicians a few days later..probably just co-incidence / people thinking in similar ways but it would be nice to think otherwise.
Both politicians and media are hamstrung to see what we can see by their very nature, they are professional politicians and journalists. No undeserved disrespect to them but you have to be on the ground up to your armpits in grease to 'feel' what is going on.
The politicians ambitions within fortress Westminster and the journalists 'impartiality' detract from that required level of ' grease up to your armpits' understanding.
A formal lobby group, a collection of 'wise men and women if you will' should enable us collectively to do much more than we are currently trying to individually here, noble though that it, it is not very effective.
Although I would like to think we are making some kind of difference in a small way as we are, I am sure with a bit of organisation we could do more.
I have a full time job and I have my young family also, I don't have much spare time beyond those commitments to do the 'nuts and bolts' of creating a formal lobby group, otherwise I would.
I would hope somebody out there has different circumstances and is better placed to take that on.
It could be the cyber equivalent of the bohemian 'cafe' culture of the early 1900's.
We could meet up for real also, agree press releases of some description by consensus between us etc rather than spraying our views 'machine gun' like all over the net. No doubt some of the bullets hit but one large precision guided weapon is usually much more effective in achieving its goals.
On a lighter note in order to get some publicity, modern society being what it is one of us would need to marry a premier league footballer or dress up as superman and hang from the hands of big ben or look good in a bikini / trunks or pretend we were deranged in some way and go onto big brother or hook up with Paris Hilton or Jordan in order to get general attention.
Anybody like to volunteer to be Paris Hiltons new best friend fot ITV? AC maybe.
I will post this on Paul Masons blog also, as shamefully, considering his insight comments are less cluttered there.
A volunteer who's circumstances permit him / her to look into setting up a formal lobby group would be a good starting point a core of 2 or 3 people could then communicate 'off blog' to get the ball rolling
(there goes the engineer in me again).
Hope to correspond and maybe even see you all soon.
If we want to get a message out there (as we clearly do or we would not spend the time we do here) may as well do it more effectively dont you think?
Just a suggestion.
Jericoa
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#213 Jericoa
Best suggestion I have seen for a long time!
You are quite right, many here are ahead of the curve, what I see is societal collapse. Politicians cannot solve this meltdown. Thats evident, the best they can do is control the collapse which is what we are witnessing.
We have serious issues to confront:
1) Peak Oil - the end of cheap energy
2) Peak metals, minerals and other natural resources
3) A looming food crisis
4) Personal responsibility for our planet and our future generations
5) The end of capitalism
I would love to get together with others to brainstorm some of these issues.
Not a political party, but a think tank, analysing, discussing, problem solving and generating new solutions.
Hell of a task but count me in!
Ideas welcome on how we go about this...
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#214 wake up britain.
Thanks for that, 2 of us already!
I will start a list of willing participants first on line. That much I can do at least. Then we can see how we go from there.
I think lots of likely participants are off line at the moment so it may take a day or three to start to form something tangible as they read the posts / sign up.
I propose we use Paul Masons Space rather than RP's until we get established with something of our own.
Lobby group members thus far
Wakeupbritain
Jericoa
I feel better already.
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Jericoa
There is a lobby group that formed at the back end of last year called 'Rebuild Britain 2010'.
Some of us are there already.
Have to confess that due to training commitments in the last month I haven't been able to contribute as much as I would like.
This should change in next couple of months.
Sasha Clarkson and Mark Smith started it all-worth a look.
You're right though, I noticed some time ago that various politicians of all political persuasions seem to cherry-pick ideas from here to suit, and they appear magically in PMQ and in the papers!
So contributing here does get somewhere-priblem being, as you seem to suggest, the ideas need to be put together, not dispersed across the political parties to have any effect.
However, I still can't understand how many, many people with no economic qualifications knew this mess was brewing as long ago as 2006/7, yet the politicians didn't.
And that is the scariest thing of all.
They didn't or wouldn't see it, so how can we possibly accept that they know how to get us through it?
Are we supposed to sit back and blindly accept that bankers know best? I don't think so.
The strikes have started-justified or not, the Total decision has given our population a focus to actively show their fear of the bleak future ahead.
I suspect the Total decision may possibly be the catalyst for the nation's wake up call.
If it makes more people more aware of how this crisis will affect them, that's good, but I sincerely hope that our government are aware of how these strikes may escalate into greater unrest. Dockers and Miners, poll tax and fuel protests should serve as a reminder to them.
When government behaviour makes a serious impact on the fabric of peoples' lives, all he'll tends to break loose.
This credit crunch will affect everyone, sooner or later.
I'm very concerned to see what unfolds in the next few days as a result of these strikes. I hope the government chooses it's words very carefully.
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Jericoa
Count me in too!
Tigs
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Been meaning to write for ages and an infuriating visit to HBOS reminded me to do so now. First of all, moved some money from savings into my current account in order to pay a tax bill. Despite explaining what I wanted, the transfer was done the other way... That was corrected. Then I tried to pay the bill - but they have no Giro facility. Lots of people ask apparently - "but we're not a bank". Excuse me? Isn't this a case of having your cake and eating it - wanting to be bank but without too much hassle? (I moved there from RBS, another great success story, because of the £100 incentive of course.
And why does it take "up to 28 days", plus of course a fat fee, to process a dollar cheque, drawn on a corporate account? We all know millions goes round the world in the blink of an eye.
But more to the point, why isn't HBOS being investigated for its share offer last summer? I had (stupidly) retained shares I've been given, which were worh around £10k and are now worth diddly squat of course. So I received the preferential offer, but didn't buy. Halifax directors, like B&B, but unlike us poor suckers, knew what was going on - they vociferously denied the March scare - and so they'd made the offer under false pretences. They were surely all but trading insolvent! Why aren't they being called to account?
I didn't vote for demutualisation (and have money in institutions such as Royal Liver that remain mutual). If it hadn't been for 1980s greed, building societies would still be building societies and banks banks and we would all have been much better off. And whose idea was it that money lending, taking on bad debts etc - which in my book is a form of money laundering - should become global, thus guaranteeing a global financial doomsday?
Thanks, and keep up the good work.
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#216 and 217
Thanks tigerjay, I was not aware of 're-build Britain 2010'.
Sounds like it needs some new blood at least so I will continue to gather names for now, possibly with a view to re-vitalising ' re-build britain 2010' somehow if the platform already exists.
Forgive me but ever the pragmatist it may need a new name, gives me the feel of something David Cameron would come up with.
I think it needs a name that is politically neutral but captures the spirit of our times and our purpose somehow. Maybe we can all think about that.
To date 'fresh blood members' are
Wakeupbritain
Tigerjay
Jericoa
Im off to prop up the economy via the high street now, back this evening to acknowlege more new members (hopefully).
i wioll stay off RPs blog for this sort of thing so those that want to saty rigidly 'on topic' dont get miffed but feel free to spread the word.
I will use PM blog as a general update area until such time as we move 'off blog'.
Jericoa.
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Moderators:
Where is the decision on my #186 post?
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What a laugh when bankers et al. say their fat bonuses should still be paid on the grounds that it's necessary to keep and attract the most talented staff.
Yes, they are brilliantly intelligent, skilled and qualified. And what have they done? Ruined their own Institutions, screwed the rest of us, and used their fine "in-demand" intelligence for one purpose, to cream off into their own pockets. That is the great work that they have done to justify their bonuses.
Who wants people like that? Better to have some duller, competent people who are more honest and less greedy, maybe even civil servants.
Good banking is not difficult.
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The recent exposure of the $4B bonus payouts to ML employees just prior to the US government supported takeover is certainly not going to do much to support the reputation of the banking sector.
Read some interesting commentary on the Wonkie cartoon blog on the financial bailout structure options for Mr Obama. In particular, there was a reference to nationalising banks in trouble which I think is one of the best ways forward to restore credibility for banks - counterintuitive as it may sound for the short-term. The view on the blog was similar to economist Paul Krugman's article on Wall Street Voodoo discussing the need for greater transparency and simplicity in structuring the bailout packages.
The nationalised banks would necessarily be resold to a new set of owners once their books are set straight. These new owners would by default (pardon the pun) be purchasing banks that would be recognised as having a more solid foundation with supporting regulatory measures having assumed been put in place during their restructuring. As things currently stand I would not fault consumers for preferring to keep their cash under their matresses at home.
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From the mouth of the Prime Minister
"Let's make no mistake about it Lloyds TSB saved HBOS otherwise they would not have existed"
Why oh why could he have not said that clearly two months ago, which would have allayed many uninformed comments about that organisation over that time.
Doh ....leading the world? - it was easier politically to pass of the problem as "the banks" rather than be specific about and say not all banks were "bad" just to take the heat off the Government.
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Dear old Vince Cable is beginning to look more and more like a Dinosaur who has had his day, by showing really he has no real idea of what is going on.
Not long after his lauding by the press for his "revelation" scoop he demonstrated quite clearly his lack of understanding of the simple basic money cycle in one particular interview, which was so laughable that I am surprised he was given yet more column space.
Now hot on the heels of The PM's comments , he once again attacks... the banks and decries their lack of lending. Of course as usual he doesn't define what he means by Bank's, but it is clearly at odds with what the PM said in Davros about the amount of lending taking place by British Banking organisations - he talked very positively about this and not only that but that figures would be released shortly confirming it.
Look at the number of times Vince Cable has cited amongst others Lloyds TSB in his frequent rants about the state of British banking, again totally at odds with what was said by the PM on the BBC. I rather suspect the PM has access to fact than Cable who yet appears to hold court, based on his best guesses or generalistic comments which at best are less than helpful and quite destructive.
2 +2 in his language makes 6, or in these tough economic times perhaps that should be 3
Oh dear ... sooner or later may be the journalists will really start to probe his real understanding.
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Senior Bankers never take responsibility, that is why few who contributed to the crisis who still have their jobs will appear on the media.
http://news.spotz.com/blogs/fear_and_loathing_in_the_city/default.aspx
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CanThisBeReal @ 204
JP Morgan Chase have not been 'taken on' by the Bank of America.
In fact, JP Morgan Chase themselves 'took on' Bear Stearns around April 2008 after being informally requested to rescue this company by the US Government.
The Bank of America does appear to have made a bad deal in their purchase of Merrill Lynch but this has nothing to do with Jamie Dimon.
The credibility of Jamie Dimon can be assessed via his Wikipedia entry, which charts his rapid and astute progress in the banking world.
He earnt 41.6 million dollars in 2006 not 41.6 billion dollars.
41.6 million dollars is still a large sum, but the organisation, JP Morgan Chase is colossal. directly employing hundreds of thousands of people, and indirectly many more.
To run a business of this magnitude successfully requires the very best people and it turns out that there are only a handful of people in the world who can do this, so they have to be paid accordingly.
Some have been critical of Dimons decision to employ the ex-politician Tony Blair, but Mr. Dimon explained that Mr. Blair could 'open doors' to the world elite political set' - cash for access if you like. That is the reality of business at that rarefied level.
I hope I have clarified this issue for you.
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Dear Mr.Preston,
Surely there has been some mis-representation by some of the worlds leading bankers? If not I am surprised. If so, surely there are enough grounds for share holders to bring so-called legal class-actions against some of those bank directors.
I hopeI am not vindictive, however, I would like to see some of those directors be made 'to walk the plank', and not be rewarded by receiving further directorships in other companies.
If shareholders want to protect their interests and earn some Kudos with the general public. get out and do it!
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The basic question that has not been addressed is "Are we a free market economy or not?".
If we are, businesses that are mismanaged or perform poorly go to the wall. It is generally accepted that most of the banks are the architects of the current ecomomic crisis. Why are these mismanaged businesses being supported with huge amounts of tax payers money? If I mismanage my business should the government bail me out? I know that if I had a mismanaged business and went to a bank for help the door would be firmly slammed in my face.
When Northern Rock first hit the news as a posssible bank failure, it should have been allowed to fail. The reality of the situation would have been that ultimately the bank would not fail as someone else would have bought it, in this case Richard Branson, and managed the business properly. The only losers would have been the shareholders who allowed the companies board to create their own situation. The board would have been sacked and a message sent to all other banks that, in the event of failure, they would suffer the same fate. At that point, the banking world would have to start managing their businesses properly and responsibly.
Of course this could just be a case of Labour beginning to nationalise everything cheaply by stealth!
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superhughjampton @ 228
Patently banks, above a certain size for a given developed world economy, cannot be allowed to fail because the ensuing chaos would cripple the economy of the country concerned.
That is why these banks, NR, HBoS, Lloyds et al have not been allowed to fail by the Government.
Nevertheless, in some ways, these banks have effectively signed their very own slow-death-by-a-thousand-cuts warrant.
I thinbk that over the next decade or so, that we will see a huge increase in 'social lending', that is peer-to-peer lending over the Internet, which cuts out the middle-man i.e. our unloved banks.
These banks have bought it upon themselves.
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I am no financial whizz. in fact just a retired old truck driver! But.....
Instead of bunging BILLIONS of pounds more of the taxpayers money at the bankers and financiers, which they seem to have only used to shore up their ridiculous Salaries, bonuses and replacing the odd executive jet!
Is it not possible for this government to use these BILLIONS to finance some kind of state run mortgage and loan system?
At least the interest from these loans would come back to the taxpayer! And maybe even encourage more savers into a safer National Savings Bank!
And the government would be seen to be honestly trying to help the small businesses and individuals who are the REAL backbone of Britain!
If any normal business had reached this state of affairs it would just go to the wall.
So leave the Bankers to reap the rewards of greed and crawl out of the hole they have created, all by themselves!
Think about it Gordon and Alistair. You could do yourselves a favour!
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superhughjampton @ 228
Furthermore, I read that you think "The reality of the situation would have been that ultimately the {NR} bank would not fail as someone else would have bought it, in this case Richard Branson, and managed the business properly."
Which reminds me of something I watched the other evening about the Great Depression, which was that President Roosevelt put his friend Joe Kennedy in charge of the SEC.
A commentator on the programme stated that this was akin to putting a fox in charge of the chicken coop.
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Gordon brown today issued another of his pet addicts.. re the snarl up after the snow brought the country to a standstill, was his usual statement... the government is doing everything it can to get the country moving again, wasn't that the same comment on credit and again on jobs and yet again on the banks, he must have a department working overtime to keep coming up with the same statement. never have i seen a more depressed people than the British are at present being led by the most dour person in history.
can we please have some good news from this arrogant self righteous body we call a government.
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#154 sosraboc:
142
'Much as I loathe TB, you have to admit he called the top of the market and got out!
He also had superb insider information; better than anyone else he knew how dreadful GB really was.'
+
He now works for a bank. No insider dealing there, then. No payment for services rendered, then.
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John Constable @ 229 & 231
My point was that when Northern Rock were in trouble, Richard Branson expressed an interest in buying the bank. At that time shares had been suspended and the government had stepped in.
Had the government not stepped in, the share value would have reduced to the point where the asset value per share would be so great compared to the share price that it would have been snapped up by any one of a number of individuals and organisations. It would not have failed but instead been reborn and managed responsibly.
Had the government not stepped in with protection and support for RBS. When its share value dropped to 10 1/4 p last week it would have been snapped up as the share price to asset value ratio was so great any pruchaser would have made an instant fortune.
We all perform on a daily basis without a safety net. Understanding that means we dont take unnecessary risks which could jeapordise our positions. Why should the banks be any different? You refer to them as having signed their own slow death warrants. Unfortunately a long slow death is a painful and expensive death, as many families know. The taxpayer is picking up the cost of the banks being kept on life support. How long will it take the government to realise that brain death occurred some time ago and switch of the life support?
So, are we in a free market economy or not?
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Yeah! Right!Complain about this comment
# 234 superhughjampton
Markets operate in an imperfect world, where knowledge is king...?
You and I make decisions, based on imperfect information...
I can agree that NR and RBS (in particular) should have been permitted to 'go to the wall' - neither operates a sustainable business model...
Re NR - any 'due diligence' exercise would quickly have ruled out Branson support I'm confident. He may be a viewed as many rather uncomplimentary things, but as an individual he's not stupid. Additionally, had he tried to go ahead, he would not have been permitted - given that the BofE knew the exent of the Capital funding necessary to stabalise the business.... Branson may be on the 'rich list' but he isn't in that league...
As for RBS - as a shareholder had I been able to 'get out' long before now, I would have... Quite simply each time I picked up the 'phone the price had slumped, necessitating a re-appraisal. My inability to re-act based on 'imperfect information' should bear out my initial point...
This business too is in its final thoes... Insufficient Capital, mounting write-offs, lack of Leadership/ Senior Management change... Staff loss by natural wasteage Circa 2,000 per annum to be turned into 30,000 to 40,000 redundancies before the month end point the way forward...
Unless... The Great Godro transfers the assets of the BofE, and other HMG spending departments over to the ailing State Owned Banks. While he's at it he could insist that Local Govt Accounts be transferred to the State Banks as well...
Now there's a thought... Godro could use his finely honed sophistry skills to convince the world that HMG was in World Class shape, His works has saved the Banks, His works had saved British jobs for British workers...
Painting by numbers - easy!
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Hunkie Dunkie 236
I got away from RBS 7 months ago when I told my accountant that hard times were coming and that there would only be three banks left soon, which I named as Barclays, Lloyds and HSBC, all for different reasons. He laughed back then! The other part of my prediction was a slump in property prices in Essex of 45% to 50%. In another twelve months I will have won my bet!
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If your such an expert on economics, why did'nt you see this crash coming?.
Us ordinary folk have known for years that our false economy would eventually implode.
As for your thoughts on how banks can become "good" again? I suppose the thoughts of an `expert` are as good as anybody else's, however, take heed and avoid like the plague the son of a clergyman who becomes a politician and takes control of the nations economy.
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It's about time that RBS was allowed to go to the wall, along with any foreign (and non-personal domestic) liabilities. It's a private company and so failure is an inevitable consequence of running out of money. Nothing to do with Britain, even though the Government is a majority shareholder.
Then we could see the effect and it would force some understanding of these strange 'derivatives' where trading is done 'on margin' - for example where are the counter-parties.
However I understand that the dominoes fall only slowly so it may be some time before the inevitable happens. I give it three months.
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cruiskeen 238
I'm not an expert on economics, far from it. What I do have is common sense and an understanding of basic business principles.
I did see this crash coming and advised anyone who was interested of the coming storm. Some people didn't believe me, which is understandable if you go back 7 months, so they did nothing and got wet and drowned. Some people thought I might be a little bit right so they bought an umbrella which kept their head dry but their legs and feet got sodden. A few actually believed me, they disposed of their dodgy & bank stocks and sold properties at the height of their values and built an ark. When the water recedes and dry land once again reveals itself, it appears we shall be free of a lot of the money lenders.
Banks can never become good, they are a little like dogs. If you have had dogs you will know from experience that there are no nasty dogs, just nasty dog owners! It seems that bank ownership is reserved for a select few risk takers and profiteers who can preach the virtues of sensible borrowing and sound financial management to us all. Just be aware that their motto is "Do as I say, not as I do!"
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PS - "THE BONUS AGREEMENTS IN BANKERS CONTRACT IS DISCRETIONARY!"
If Obama has the guts to put a cap on the greed of fat cat bankers and business leaders to only $500,000 per annum (which is more then he the President is paid), then why do our regulators and politicians not have the same courage to cap these bonus culture and rewards for failure?
This shows that a man of the type and likes of Obama is a cut above the rest!
If we start getting politicians of the likes of Obama in Europe then Europeans will vote for the Obama types in droves!
Big fat cat salaries and bonuses have not made the UK financial services sector a success. In fact the very opposite.
We have paid big salaries and big bonuses and we have got the worst peformance in the UK financial services sector in history.
Big bonuses and big salaries seem to have attracted big failures.
People get paid a salary to do a good job. If they do a bad job they get fired.
Most peoples contract do not contain any formula about bonuses.
In the 1900 to 1970s bankers did not get bonuses and they were lucky to get a Christmas Hamper as thanks. In those days the UK banks had their golden age
As for the excuse the fat cat executives give, that we need to pay big salaries to attract the best, the lesson learnt from the credit crunch is that WE HAVE paid big salaries but we seem to have attracted only the executive directors who have been failures.
There are thousands who are very able and would accept much lower executive salaries and do as good if not a better job of running banks and companies then those who have had these fat cat salaries.
Money does not always attract the best and if it does then greed is not the best..
If Obama can stop executive directors greed by a single stroke of his pen namely an "Executive Order", surely our politicians can do the same in parliament?
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Whatever ones point of view about bonuses an appropriate message to the bankers might be found in Genesis Chapter 8 Verse 17.
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