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Insurance, not nationalisation

Robert Peston | 09:50 UK time, Thursday, 22 January 2009

The government really really really doesn't want to nationalise Royal Bank of Scotland or any of the other big banks.

That was the thrust both of Adair Turner's interview on the Today Programme this morning and of Paul Myners's article in this morning's Financial Times.

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As if you needed telling, Turner is the silken-tongued chairman of the City watchdog, the Financial Services Authority, and Myners is the big-booted City minister who made a modest pile building up a fund management business in the boom years. We can safely assume they speak with authority on this issue.

Turner said that losses being incurred by banks right now are "not dramatically worse" than the FSA expected in October when it forced the big banks to raise £50bn of new capital - with £37bn coming from us, from taxpayers.

That was an unambiguous re-affirmation that they're not bust, in the FSA's view - which matters, since it's the FSA which has the power to determine whether a bank is fit enough to continue taking deposits.

However that's not the end of the story, because the banks could of course suffer losses that would muller them in a fundamental sense - and would of course prompt yet more financial support from taxpayers to prop them up.

Lord TurnerIn that context, it's striking that Turner was dismissive of demands that the banks must "come clean" about the extent of their dodgy loans and investments - which if memory serves me right has been something of clarion call by the prime minister in recent days (is it plausible that the head of the FSA would contradict Gordon Brown?).

Turner said that the banks and the FSA have a detailed understanding of what's on their balance sheets.

However only a soothsayer would claim to be able to predict with certainty how markets will move in the coming weeks or the precise course of our recession.

That's got nothing to do with whether the banks are hiding stuff. It just means that no one can know with certainty the future market value of banks' investments or the degree to which businesses and householders will have difficulty keeping up the payments on their debts.

These are, to use the Rumsfeldian cliché, "known unknowns".

And it's because there are these "known unknowns" that the Treasury announced on Monday its scheme to insure the banks against losses on loans and investments that could destroy their balance sheets and cause them to collapse.

Or, as Turner makes crystal clear, the insurance scheme is a way of staving off nationalisation of the big banks.

In other words, the government has decided that it would be better for you and me as taxpayers to take on the liability for the potential future losses of the banks, while preserving their semi-detachment from state control, than for us to own them and control them outright.

That said, Royal Bank and Lloyds Bank can only be semi-detached from the Treasury, because we as taxpayers own 70% of Royal Bank (or at least we shortly will do) and 43% of Lloyds.

But this is what you need to know and what investors in general appear to have missed in an outbreak of mass-hysteria that nationalisation looms: the prime minister and chancellor have made an unambiguous judgement that the general good would be better served by the semi-autonomy of the banks than by making them instruments of the state.

Why?

This is what Myners says in the FT: "The capacity for soundly managed banks and markets to support the generation of wealth in the economy could never be matched by the public sector...British banks are best managed and owned commercially".

Hmmm. On that basis, let's hope that the past, in the form of the banks' grotesquely inadequate management of risks during the last few years, isn't a guide to the future.

All this means that a very heavy burden rests on those at the Treasury who are frantically trying to make a success of the insurance scheme.

The guinea pig is Royal Bank of Scotland. It hopes that by the time of annual results on 26 February it will have made significant progress in identifying loans and investments whose losses above a certain level will be insured away by you and me.

This is a pretty tall order, because the bankers and Treasury officials will be trying to put a price on "known unknowns": it won't easy to agree the fee that RBS will pay us for being relieved of liability for losses whose certainty simply can't be measured in a scientific way.

But, as by now you'll have worked out, the Treasury will be pulling out the stops to make the insurance scheme work. Because if they can't get it to work, it's difficult to see how the 100% nationalisation of Royal Bank of Scotland - and even perhaps of Lloyds Banking Group - can be avoided.

Comments

Page 1 of 5

  • Comment number 1.

    So the message is 'the banks have got themselves deep into the mire, we taxpayers will bail them out, so they can go back and do exactly the same thing again'.

    Lather-rinse-repeat.

  • Comment number 2.

    So let me get this straight - nobody outside the banks in question or the FSA is allowed to know what the dodgy loans and investments are? So how is the market supposed to price banks and their operations correctly if such things are hidden?

    The banks would look unfavorably upon my application for a 10,000 pound loan if I already had 100,000 pounds of mortgage debt, 5,000 on credit cards and a 20,000 a year salary, but what if I didn't tell them about the mortgage or the credit card debt?

  • Comment number 3.

    RP, sure, but yuh know, few outside of the Republic of Westminster care anymore about the particular banks in question.

    They're not going to fix the recession, build an economic miracle, stop unemployment, foreclosures, repossessions, seizures etc etc and all the other wreckage, the things that matter way down here.

    Just my pennyworth from street level.

    GC


    Good old fashioned repossessions up and nobody came..

  • Comment number 4.

    Why dont they assume the stuff is all worth zero and insure it at 100%. The banks pay the premium of 100% to insure it.

    Easy, Doh!

  • Comment number 5.

    or they can assume its worth 100%, pay a premium of one pound and the GM pay 100%

    Easy, Doh!

  • Comment number 6.

    Spot on - "The capacity for soundly managed banks and markets to support the generation of wealth in the economy could never be matched by the public sector...British banks are best managed and owned commercially"

    Their recent track record of course proves this!

    I presume Myners means the Government would be even more incompetent!

    Strange as the Gov seem quite happy to spend our money repairing the banking problems... but no one thinks they are up to running them

  • Comment number 7.

    Don't think micro, think macro....

    Many people are asking why don't we let a bankrupt bank go bust? The reasoning behind their question is that letting a bank go bust would save the British taxpayer billions, as the losses will be borne by the bank's shareholders and creditors rather than the tax payer.

    Trouble is, the people asking this question have forgotten the events of mid-September 2008.
    Lehman Brothers was allowed to go bust in September last year, because its assets were worth less than its liabilities - it owed more money than it could repay.
    When it did go bust, Lehman's creditors lost vast sums of money because there weren't enough good assets in Lehman Brothers to sell for cash to repay its creditors.

    "So what" you say, "the creditors will have to lump it".

    Trouble is, the creditors have money owed from Lehman sitting on their own balance sheets as assets. This means the creditors' balance sheets are weakened because their assets are now smaller than they thought, due to the bad debt from Lehman.

    Who are these Lehman creditors?
    The creditors are, you guessed it, other financial institutions.

    So, now we have a situation where other important financial institutions have assets which have fallen in value, and find themselves in the situation where their assets are less than their liabilities.

    If we let these financial institutions go bust, it will mean more assets have to be written off and more financial institutions will go bankrupt as a result.

    The problems are so huge that letting one large financial institution go bust will, directly or indirectly, cause two more financial institutions to go bust, which then causes four more to go bust, and then eight, and so on and so on, until the vicious cycle eventually exhausts itself. Before you know it, the chain reaction has caused the whole financial system to go bust, and it would take the whole economy with it.

    So, governments have no option but to "bail out the banks". Having established this, the next question to answer is whether our governments have got enough cash to plug the gap between the banks' falling assets and their liabilities?
    US authorities felt Lehman was too toxic to bail out, as the gap was too large and would use up too much of the Federal cash reserves.
    Trouble is, the chain reaction has just magnified the gap (and the expense) many times over......

    Now the question is - "Too big to fail, but too big to bail?"

    To calm your nerves a little, it's worth remembering that some analysts believe that when investors sold stocks and shares during the recent stock market falls, they didn't reinvest all the money in bonds and treasuries, but kept it as cash in the form of money market deposits. This cash could be used to buy gilts and treasuries in the future, thus helping our governments raise the cash needed to plug the gap.
    This will help, but we don't really know whether there is enough cash to fund all our governments' future borrowing requirements, as those borrowing requirements could be enormous.

  • Comment number 8.

    As an RBS shareholder, I feel like anything I ever get for those shares will be a bonus!

    What can you get for 12p these days? A Milkybar perhaps??

  • Comment number 9.

    So let me get this right...It is better for the country to take on most of the banks toxic debt, without an upside, than to nationalise them and take the upside as well as the downside?

    Sounds like we are being sold down the river to me!

  • Comment number 10.

    Just a thought - How much funding does the Labour party get from the banking industry?

    If it is as much as I guess, can we really trust tem to act in our best interests?

    Oh and dont forget all those lucrative non exec positions....

  • Comment number 11.

    There again, they seem to find a way to price all other insurance so whats the difference here then?

    Then again, if LLoyds knew the Titanic was definately going to sink, the owners would not have got a premium either!

  • Comment number 12.

    "As if you needed telling, Turner is the silken-tongued chairman of the City watchdog, ..."

    Listening to that stress testing nonsense, it is kinder to describe him as a spoofer, so as not to mislead the markets ..... which in earlier days would have been a Harry Lime type spiv.

  • Comment number 13.

    Dear Robert
    Frankly i am fed up to the teeth of tax payers money being used to prop up failure.
    Even now northern Rock will pay its staff £2000, in bonus's out of tax payers money.
    Its more than shareholders get, and as a tax payer "Where our bonus for bailing them out."?
    The Big bosses earning millions get bonus's, and their job is " INSURED" even if they fail whilst millions of ordinary people are being made job less
    Gordon Browns humiliating attack og middle England Pensioners and tax payers is unwarranted, and its time SOME PAID BOTH POLITICALLY AND COMMERCIALLY
    These people are Vultures living off the Insured golden hand shakes they are promised, and its time to NATIONALISE ALL THE BANKS AND SACK ALL OF THEM, ALONG WITH GORDON BROWN WHO CREATED THIS CRISIS IN THE FIRST PLACE,
    Britain is socially divided by rich and poor the rich get the insurance and promise of security and the poor pay for them to be insured.

  • Comment number 14.

    Lord Turner says the ban on short selling could be reimposed without warning. Bearing in mind how little short selling actually adds to the common good, beats me why it was re-introduced anyway.

    Not many, outside the foul stinking swamp that is the City, would shed many tears if it were banned totally.

    Incidently, I assume 'Lord' isn't his real first name. Otherwise his parents were incredibly presumptive...

  • Comment number 15.

    Not quite on message but relevent to the mess we're in.
    From a friend who I am confident has the correct source.

    "A weak currency arises from a weak economy, which in turn is the result
    of a weak government"
    Gordon Brown, 1992

    Surely the risks with RBS are different to the risks with HBOS so shouldn't they be separated when talking about full nationalisation?
    Are Sir Victor Blank and Eric Daniels sleeping comfortably at night? What they have done to Lloyds is a disgrace.

  • Comment number 16.

    Insurance is a commercial transaction where the premium paid is assessed by looking at the risk involved and modified by the need to gain market share.

    We the people do not particulary need the market share but are being forced to take it, so the premium should be based on the risk alone but that would mean; in these circumstances, it was too high to be viable for the banks to buy cover. Not going to work is it?

  • Comment number 17.

    "Turner said that the banks and the FSA have a detailed understanding of what's on their balance sheets."

    So when Brown calls for the banks to come clean it is simply spin to suggest that it is not his fault because he could not have known about problems that the banks were concealing.

    Turner makes it clear that banks and the FSA have a detailed understanding.

    So one of the failures is a failure of regulation by the system that Brown established, or a refusal by the Treasury to deal with a problem that was emerging, in the hope that it would not actually happen.

  • Comment number 18.

    Am I the only person going off these blogs?

    For a while RP did very very well in reporting news with a good analysis howeverhis blogs have become mundane repetitions of what Crash is doing.

    How about you come up with your own ideas and hold the government to account for their actions rather than just rephrasing what we already know?

  • Comment number 19.

    Are you a "Known Unknown" Robert?

    So this is the government rebuttal to the city who think that by driving down the bank values they can make limitless profits because the Tax Payer will continue to pour funds into them?

    I was always told in psychology that if you tell an immature individual not to do something they will do so with gusto

    These people presumably are the "accepted collateral damage" if this scheme goes wrong.

    The treasury now knows the problems in Northern Rock. Why not quickly attach it to the RBS as part of the conditions and let it all be worked out in the commercial enviroment?

    I do note that there is still no investigation into any kind of liability, and I must congratulate Evan Davies for a simplified way of looking at this whole crash. I wonder if all this will be put together and then be declared a huge Ponzi scheme?

  • Comment number 20.

    Does anyone really have any confidence in anything coming out of either the FSA or one of Crash's buddies?

    To continue the Rumsfield analogy you use the banks liabilities are really unknown unknowns as the banks really don't know their exposures and have no idea how bad it can get.

    How can RBS realistically put a value on or a percentage likelihood of the loans being repaid it made to the American owners of Liverpool FC to allow them to buy it or equally for the Formula 1 rights bought by CVC?

    If this weeks Private Eye is to be believed then RBS effectively own the UK's tax offices as they lent the money to Mapeley Steps an offshore organisation who bought them from HMG and Mapeley are struggling to repay the debts.

    Even if RBS can nail down who they lent money to much of it went to private individuals or private organisations rather than listed companies so there often isn't an easy trail to follow where the money went afterwards. Could some of it have been with Mr Madoff if the people they lent to invested with him?

    As the famous episode of Yes Prime Ministerr that dealt with a banking crash put it in the words of Sir Desmond Glaisbrook

    "when you are getting money in at 4% you need to lend it out at 5% or you look a bit silly. You don't ask a chap what he wants it for or whether he can pay it back. You just don't ask a chap those sorts of questions."

  • Comment number 21.

    There are two options:

    1) Do we want our banking service to be graded in the same category like utilities, public transport etc (before privatisation).. which will be extremely conservative but with extremely low risk.

    2) Do we want money making machine, extremely risky, guaranteed to have the boom-bust cycle, but the ability to show extraodinary growth in quick time.

    Option 1) is better for everyone, but option 2) favours the innovators and people who are willing to work 24/7 for a limited period and then set themselves up for life.

  • Comment number 22.

    "only a soothsayer would claim to be able to predict with certainty how markets will move in the coming weeks or the precise course of our recession." !!!

    Come off it RP. Most people on this blog have been predicting with very realistic ease what's going to happen!!

    Vast defaults on Credit Default Swaps, banks looking after their own interests first, but still being nationalised - because there just isn't enough money/assets in the system, possibly soverein default, pound a joke and then years of deflation/depression. Easy.

    It has to be said that you are fast becoming one of the 'tied up in the financial world, therefore I can't see the woods for the trees' brigade!

    FSA don't want any banks nationalised because they would have to change their role considerably, furthermore nationalising anymore banks would lead to further calls for 'coming clean'! However, we all know that if they even came clean about 20% of their exposure to losses there would be an immediate run. Thus, we will have to endure a long slow 'let's pretend it's not as bad as it seems' depression.

    No clarity is possible until there is a change in government, but I doubt this would help.

  • Comment number 23.

    I thought that the Lord sounded very agitated and that he came across quite badly.

    When asked if the execs of the failed banks should pay the price for failure he explained eagerly that history shows that in these crises most of the blame lies with poorly paid, lower-ranked workers.

    He seemed keen to shift the blame away from the highly paid.

    In my view he is a rather odd man.

    I believe the bank shares have further to fall in the coming months.

  • Comment number 24.

    All very true, especially the 'mass hysteria' description of 'investors'. Here's more facts:

    Reported credit losses/additional capital (USD billion) raised for the 3 'bad' UK banks: Lloyds 11.9/33.9, RBS 19.1/46.4, Barclays 6.1/25.9.

    With use of the credit insurance scheme, there's no possibility of credit losses exceeding newly raised capital, let alone existing capital. With unambiguous public statements by the government that bank should remain autonous and commercial reasons should dictate operations, can the pro-nationalisation doom-mongerers finally admit defeat?

  • Comment number 25.

    If the insurance scheme doesn't work (and why will it not?), how would nationalisation help? - the Government would still be landed with all the losses, as well further destroying the confidence of international and domestic investors in the UK - next stop the IMF if full nationalisation happens.

    Of course full nationalisation is not mad if you are a short-seller. It is not coincidental that all the clamouring hysteria for full nationalisation and other adverse banking rumours such as why the Dep Chaiman of Barclays resigned became widespread in the days before the ban was lifted.

    A detailed analysis on the pros and cons of full nationalisation would be helpful in showing the immense damage that it would cause.

    Although many business journalists particularly in the Telegraph hysterically shout full nationalisation, they do not set out the implications - is that too difficult for them to think about? After all they might have A levels in economics. Or would it destroy the headline-grabbing? Probably both.

    I imagine even this useless Government has done such an analysis behind the scenes, and for this Government to be ruling out full nationalisation, despite calls from its looney left and other political and press clamouring, the results of the analysis must most certainly be very much against nationalisation.

  • Comment number 26.

    OH MR PESTON??

    THIS IS THE SAME FSA THAT IN 2007

    DID NOT THINK SERVING A WINDING

    UP PETITION ON HALIFAX PLC WAS

    A MAJOR PROBLEM.


    In summary: NO CREDIBILITY!!

    AS PER GORDY ETC

  • Comment number 27.

    #1 Sorry you are incorrect. That should read...

    Lather ~ Rinse ~ SPIN ~ Repeat

  • Comment number 28.

    Re the discussion of letting a bank go bust:

    If the banks are too big to fail, if financial institutions are too big too fail. If in fact, they have become so large that they are part of the national infrastructure, then their workers should henceforth be paid public service salaries. If they are not taking any entrepreneurial risk, then there is no need to reward them for the thoughtless paper-pushing they do, and nobody can dispute now that they had no clue what they are doing - a bit like the government, except until recently it wasn't the government's job to run banks.

  • Comment number 29.

    The views of Adair Turner and Paul Myners are in sharp contrast to those of John McFaul who is Chair of the Treasury Select Committee.

    McFaul is a left wing MP who has never got nationalisation out of his system. It is annoying that he seems to get so much air time from the BBC when he clearly is no longer speaking for the Select Committee as a whole and is only using his position to further his outdated personal views. The BBC would do well to give more time to other members of that Committee.

    Your excellent blog once again brings us greater understanding of current issues from the inside.

  • Comment number 30.

    "The capacity for soundly managed banks and markets to support the generation of wealth in the economy could never be matched by the public sector...British banks are best managed and owned commercially".




    HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA!!!

  • Comment number 31.

    In the case of RBS wouldn't it have been better for HMG to collect a consortium (in which it had no more than a 50% stake) to extract the fundamentally sound UK retail arm (Natwest etc.) from the group, paying the rest of the RBS PLC a realistic price for this acquisition and then allow the RBS investment monkeys to sort their own mess out (effectively what Citigroup have done). This should have freed the retail arm up to start lending again.

    As far as the share price is concerned why didn't HMG just reduce (drop) the coupon on its preference shares instead of converting them? RBS's share price had been relatively stable until HMG stake increased to 70%.

    One last thing, when is HMG going to present the Americans with the bill for all of the US sub-prime rubbish now effectively owed to UK PLC?

  • Comment number 32.

    Ref #7, mrtweedy,
    At last, a reasoned observation instead of the usual HYS right wing, utterly ill informed rants! Thank you so much.

  • Comment number 33.

    # 7 - I agree! But, that means we sit around for years with all of these 'assets' losing value slowly instead of a massive instantaneous depreciation of assest creating the 'early floor' that we have to reach eventually.

    Parachute or not the economy has to reach 'rock bottom' somehow.

    We had a party balloon bubble of an economy that has been burst, but the govt are desperately trying to sellotape it after the pin has gone in! It just can't work!

  • Comment number 34.

    'This is what Myners says in the FT: "The capacity for soundly managed banks and markets to support the generation of wealth in the economy could never be matched by the public sector...British banks are best managed and owned commercially".'

    How can anyone possibly state that these banks are best managed and owned commercially when it is their mismanagement that has brought us to this point. Although not good for our gobal financial standing, a period of Nationalisation of these institutions would bring some stability to our real economy, which is in freefall. Nationalisation would remove some uncertainty and hopefully boost consumer confidence, which is the key to recovery.

  • Comment number 35.

    I listened to this interview unfortunately. I liked the way he referred to the IMF saying there were no risks to the financial system, yet he conveniently forgot to mention the fact that Mervyn King repeatedly kept mentioning the risks being taken by bankers.
    Another quote: "Nobody saw the risks". Oh dear, another head in the sand person. He's just a front man, nothing will change.

  • Comment number 36.

    #7 - Agree but the financial institutions are already taking the economy down with them anyway so lets just get it over and done with and save the billions of pounds to deal with the aftermath!

  • Comment number 37.

    Turner talks of symptoms not the cause. The credit crisis was created by a series of flawed decisions based on flawed analysis from the top of financial institutions and govt.
    This occured because of the extent of patronage, be it mega bonus' or promotion, in their power structures. It resulted in weak and flawed personalities given to self serving bullying and lying rising up the ladder. Independent voices fell by the wayside. Until at the top, one deeply flawed leader surrounded by yes men made very poor decisions.
    Blaming the federal reserve is just passing the buck. Any institution that was properly run would have recognised poor policy coming out of the fed and set their course appropriately.
    Look, 10 years of 15-25% house price inflation while wage inflation was 2-4% didn't add up. And it didn't take a genius to see that. But neither govt nor the financial institutions saw it. Many everyday people did see and have waited years for house prices to fall before they were prepared to buy.
    All these institutions, especially govt, are now in to the "it wasn't me" pattern. And Turner is on point for them.

  • Comment number 38.

    #9 - Just wait till next month and buy a barrel of oil!!!

  • Comment number 39.

    You've hit the nail on the head Robert. This private is better than public affirmation only works if the banks behave themselves in the future. Unfortunately there are too many 'financial establishment' people influencing government policy. This is and will be a disaster for UK plc as they have shown they're not up to the task of managing our economy or setting the future terms of economic policy. We're in a mess. There has to be a clear-out at the top and a complete re-think of how we do business with the banks. Without this UK plc will be in recession far longer than any of our European partners.

  • Comment number 40.

    15. bcmhall wrote:

    '"A weak currency arises from a weak economy, which in turn is the result
    of a weak government"
    Gordon Brown, 1992'

    Quite in the Labour tradition - here's an older gag from the same source:

    "That doesn't mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued".

    Harold Wilson, on devaluation, 1967

    I cannot find a compararable quote from 1949, but Labour was in office then too and - you guessed it - sterling was devalued.............

  • Comment number 41.

    HOW DID WE SLEEPWALK INTO BEING

    TAKEN OVER BY A BUNCH OF LIARS

    AND SPIVS?

    THE WHATS IN IT FOR ME BRIGADE!


    TIME FOR CHINESE JUSTICE?

  • Comment number 42.

    If HMG believe in the insurance scheme & are prepared to invest in bank stock with tax payers money, I'm starting to wonder if they really are stark raving mad, or they really do see this as the cure.

    I'm thinking about replicating the Treasury insurance scheme in my own little, humble world, by taking a private stake in some of these banks.

    Its a small loss versus a big gain.

    I believe in Brown!

  • Comment number 43.

    Any earlier posts attempting to justify the 10% Northern Rock bonuses don't make sense to me and the idea that the government doesn't want to nationalise any more banks is perhaps a blessing, as we couldn't afford the bonuses!

    Gordon Brown needs to stop the hypocrisy and either not condemn the bonuses (as he has all week) or cancel the future NR payments, which equate to a diproportionate 50% of salary!

    My company made a PROFIT of over 100m last year and my bonus has been cut. Northern Rock made a LOSS of over 500m and they're paying 10% of salary?!

    A bonus is (or should be) a reward for contributing to the success of a company. Not compensation for the stress suffered as the company folded?

    No one will dispute these staff have suffered troubling times, but who isn't these days? Are Nissan staff getting 10%?

    Also the argument that it's a reward for "loyal" staff doesn't hold water, as the most intelligent staff seem to be the ones who got out first, based on the various applications I see? Those that are left chose to stay because it was easier or because they couldn't get the same salary anywhere in the NE.

    Sorry, a little off topic, but it's the real news of the day!

  • Comment number 44.

    Genuine Nationalisation of the creation and
    supply of the peoples money is imperative

    The debt based private FRB banking system is capute its fraudulent, inherently bubble creating and stinks.

    If anyone thinks this is too radical look whats happening in response to current events.

  • Comment number 45.

    There is not much point in beating about the bush and Robert Peston gives it straight i.e. "...banks' grotesquely inadequate management of risks ...".

    In effect, some of these banks have swallowed huge poison pills of their own creation.

    Seems to me, that than rather than the hapless taxpayer being forced to also swallow these banks poison pills, the policymakers should be trying to separate these banks such that the 'good stuff' is completely isolated from the 'bad stuff'.

    I am not a financial engineer so I do not know how that is to be achieved but given the stupendous balance sheets of these failing institutions, then this type of separation must occur or we, the English people, will also be dragged into this financial vortex and drowned.

  • Comment number 46.

    Does anyone know the income the government get a year ie from us all, tax etc etc etc, then they make a big list of all their outgoings see what is left. A couple of easy excel spreadsheets formula and you work out how much is left. Then you deal with it

  • Comment number 47.

    Well well well. This is increasingly looking like a power struggle to me and GB certainly isn't winning. It looks like GB is missing his poodle status with Bush and has now become a poodle to the Bankers.
    Over 13,000 repossessions in the last quarter, hundreds of thousands of job losses and the FSA don't believe the banks need to come clean. Not surprising really as any disclosure would probably raise their inadequacies over the past few years. Its all very well talking about the "Unknown unknowns" but these are the symptoms and not the cause.
    Effectively, we are being asked to insure the toxic debt and if GB thinks it is acceptable for taxpayers money being invested in banks without knowing to what extent then he really is utilitising that "whatever it takes" motto. Whatever it takes to bring the country to its knees! Taxpayers or Bankers - who pays his wages?

  • Comment number 48.

    I notice that China doesn't mess around when it comes to dealing with conmen, fraudsters and snake oil salesmen.

    http://news.bbc.co.uk/1/hi/world/asia-pacific/7843972.stm



    Something to think about.






  • Comment number 49.

    At last ! - contributions from Lord Turner and Adrian Myners explaining why it would be bad to nationalise Banks and that the Govt have no intention of doing so. The market should wise up to this and over the next few months start cautiously re-investing into the Banks and also contibute to the solution rather than jump on the mass hysteria ' lets nationalise' bandwagon. Messrs Brown and Darling need to continually re-inforce this message.
    Lets hope President Obama's Economic advisors do the same and maybe we can start to see the begininnings of some recovery in the financial markets/ banking sector.

  • Comment number 50.

    Isn't making the banks take out insurance a way of forcing them to declare their liabilities? An insurance premium couldn't be agreed if the potential losses are not quantified. Implicitly, therefore, by agreeing the cost of insurance the banks must be revealing the state of their books.
    Or am I missing something?

  • Comment number 51.

    "Curiouser and curiouser"said Alice. If RBS were
    Nationalised would we own its subsidiary in
    the USA ,Royal Bank of Scotland Citizens? And
    if RBS were merely Insured by us would we
    then be Insuring Citizens? Citizens currently provides its fortunate customers in USA with
    inexpensive mortgages and other loans while
    we in the UK suffer from the Credit Crunch.
    Surely, something does not compute.

  • Comment number 52.

    So is it time to buy shares again ?

    Just before the next wave of administrations, and Nationalizations !

  • Comment number 53.

    So in other other words the 37 billion has been thrown away.

    Why on earth didnt the Government just let the RBS fall, sell off the good part to private ownership, as in the case of the Bradford and Bingley. This continuous propping up is a complete waste of time and in the long run will cost the tax payer an enormous amount of money. It would also signal to outside markets that we are in charge of our banks and are not prepared to incur more Government debt. Better to get nothing for the bad part of RBS than this liability for the tax payer.

    The answer of course is in the politics. RBS is a Scottish bank, and it would not do for a Scottish Prime Minister to allow it to fail. Also he can say to the Scottish Nationalist Party, look we had to bail
    your bank out, that could not have happened if you were Independent. The loss of jobs and prestige in Scotland would also be a problem for Brown.

    This will end in tears for the tax payer.

  • Comment number 54.

    This all ignores the plain facts that without Pay rises for workers, the Consumer economy remains bust.

    People have less and less spare cash to spend thusly the value of their purchases will fall.

    I say a nice twenty percent rise for the Public sector is in order !

  • Comment number 55.

    I've said it before:

    City fat cats and regulators that caused all this: SACK THEM ALL and OSTRACISE THEM!

    Oh, and get the money back and throw them in jail too.

  • Comment number 56.

    By the way, when will the Housebuilders start falling by the wayside?

    Doesn't Private equity want to buy them up cheap ?

  • Comment number 57.

    If the govt. nationalise RBS, Barclays and Lloyds, on top of NR and B&B, what do they do with 250,000 bank employees, high streets with 5 or 6 govt banks and pension fund that are in serious deficit.

    Nationalistaion of the banks must be a last resort.

    On a small aside, does the fact RBS are continuing their sponsorship of the 6 nations rugby mean 70% drop in ticket prices to taxpayers?

  • Comment number 58.

    Whether we own all the banks or not is irrelevant although it will be better fro shareholders including the tax payer if the banks can be stabilised and then returned to private ownership without causing the turmoil of valuing shares and then resisting the inevitable lawsuits that would result from full scale nationalisation. I think the big problem we have now is hysteria and politics- I think GB's blood can be smelled and as he is not the best communicator and frankly should get what he deserves - as they are out to topple labour. The hysteria is not helped by hedge fund managers especially US ones trying to destroy British banks and hence sterling as no doubt they have lots of short selling in their offshore vehicles that no one knows about. That is a short term issue- the longer term is the problem faced by the US where they really are bust with collapsing industrial production and 5 million empty homes and so much debt that it makes us and the Spanish look prudent.
    Adair Turner's comments are pretty sensible but who is going to believe the FSA when there has been such a catastrophic failure of regulatory oversight all over the world. I think the fundamental issue now is how to change the international financial system so that it can cope in the digital age. It was designed with stability in mind and where trades and financial instruments were to be an aid to trade but it has become so vast that normal trade risks were nothing like as big as the risks taken by those trying to reduce the risk in trade in the first place.

    I think history will say that this recession was caused by the US continuing to consume far more than its wealth allowing an exploitation of imbalances by financial engineers who kept the US spend going for too long. Therefore the way out of the recession is for less to be spent by consumers and more by companies as investment and by the public sector in infrastructure/productivity/innovation- digital- green-transport- education and utilities/housing and in fact health. I think this can only be done by higher taxes on the richer- and in fact I think this is what president Obama seems to be doing- his big risk is that the move to the East means the $ stops being the reserve currency but in many ways India and China are faced with even bigger problems because they still have a huge number of people in poverty with no real way to get out of it- no point in producing goods for us as we cannot afford them so they have to look at a different way of getting out of poverty- and it is very urgent as both countries have an enormous and growing number of highly skilled and educated people who will be unemployed and it will get worse as neither the US nor Europe can continue outsourcing and in the US case I think there are about 2m outsourcing jobs in India that I suspect may go back to the US.

    So what should happen here now- first I think people should start working with GB and AD and the BoE rather than looking for ways to undermine and make money for themselves by continuing to short sell and speculate- all countries are weak just now so shorting just about anywhere will reap rewards if enough of it is done and the fragility is such that enough will not be a lot. So a little less mouthing off and a lot more working together quietly is called for and journalists who balance their reporting a bit more- and stop using flowery language to get the headline.

  • Comment number 59.

    And when will the Gov't address the issue of the Criminal defrauding of our Banking system by certain American Financial companies ?

    Talk about a misselling scam !

  • Comment number 60.

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

  • Comment number 61.

    And for all those about to retire, on a destroyed pension pot, I Salute you !

  • Comment number 62.

    No 29 Fully agree about McFall. Not only is he left wing he is also Scottish through and through and champions that cause whenever he can be.

    He is no doubt feeling rather annoyed that two previous powerhouses of the Scottish economy are now in demise and have have their power base shifted South.

    He sees Nationalisation , more as a weapon of saving face amongst his electorate than any thing out of economic sense.

  • Comment number 63.

    OK - so the banks need insuring. And investors worry the banks might need to be nationalised.

    But surely this isn't the only reason for the weak pound.

    Too much government borrowing based on the belief that the economy would just grow and grow and pay for it all one day... Too much borrowing now when the economy is in decline... and so much of the tax take came from the financial services sector, while the high street looked busy as people binged on credit... but all of this hid the decline and fall of the UKs manufacturing base...

    Poor productivity, too many strikes, too much red-tape. So many things took their toll.

    So now Europe and the US have more of the population employed in manufacturing than the UK does. And we blame the falling pound on hysteria over the banks...

    Um. No. The pound will continue to fall until the UK is in a position to sell something to the world again, whether that is a renewal of financial service activity or actually making something again. And until then, recover will lag behind those countries who already placed to sell something other than financial services.


  • Comment number 64.

    well it seems to me that there has been a brief outbreak of an attempt by some to grab the rudder and steer the boat in a straight line, but I doubt that it will last long

    seemed to me all along that it would not be smart to formally nationalise RBS, Lloyds et al and as #7 MrTweedy points out, letting them go bust might seem attractive in terms of biblical punishment, but doesn't look good when you think what happened after Lehman Bros

    basically the financial industry has a lot of ability to fight back against govts, as the guys at RBS and Barclays continue to prove

    #17 egrid yes it is interesting the comment by Turner that the banks and FSA know in detail what is on the RBS books; but they aren't going to say........ it's very amusing; of course they know what's on the books but that's different from knowing whether it's toxic or not; some people are being very economical with the truth and a lot of other people, including a lot of BBC journalists are being very very dim in failing to read these comments carefully and analyse them

    anyway #8 sal196 I don't know what you paid for your RBS shares but seems likely that they are going to float slowly upwards now for a while; probably not fast or far of course

    I have some old Banco Santander shares that are not worth keeping so think I might swap them for RBS shares just for fun and see what happens

    it's like investing in a Canadian gold mine penny share - only do it with money you can afford to lose!

  • Comment number 65.

    John McFall a prominent Scot of left-leaning persuasions to trying to persuade us on nationalisation. Let me tell you the implications of expropriation.

    Barclays and RBS are huge very sophisticated global banking operations, which can be run by HMG ?

    And LBG, will HMG take the lead in the integration of HBOS?

    And what would be the impact on government borrowing statistics?--massive.

    A sovereign downgrade would follow immediately, and sterling be at dollar par in days.

    And if the shares were expropriated, what would international investors think of the UK as a safe investment haven? These banks have ADR programs after all

    And what is the exit strategy?

    Unfortunately our Mr Peston is too keen making headlines and I don't know his political persuasion, but a piece of cool analysis why expropriation is NOT an option would be timely ( and might support share prices for the banks) The UK must lower its political risk, and the BBC can help

  • Comment number 66.

    #18 dknotty:

    "Am I the only person going off these blogs?"

    No, I am too. RP's gone back to banks banks banks. Stuck on Planet Bank.

    Here's my own blog, straight from the Office of the Great Pretender, feel free to join in. No-one will take any notice but it might make you feel better.

    Interviewer: Prime Minister - what are you doing about rising unemployment?
    PM - we've introduced a package of measures that will stop unemployment.

    Interviewer: Prime Minister - what are you doing about the falling pound?
    PM - we've introduced a package of measures that will stop the pound falling.

    Interviewer: Prime Minister - what are you doing about increasing repossessions?
    PM - we've introduced a package of measures that will stop repossessions.

    Interviewer: Prime Minister - what are you doing about the increase in liquidations?
    PM - we've introduced a package of measures that will stop liquidations.

    Interviewer: Prime Minister - what are you doing about companies that are struggling to survive?
    PM - we've introduced a package of measures that will make companies survive.

    Interviewer: Prime Minister - what are you doing about the increase in liquidations?
    PM - we've introduced a package of measures that will stop liquidations.

    Interviewer: Prime Minister - when are you going to resign as PM and hand the job to someone who knows how to run a nation?
    PM: we've introduced a package of measures ...
    Interviewer: OK, I think viewers have got the message, Prime Minister.


    GC

  • Comment number 67.

    40: Sterling is only attractive if foreign customers have something to buy with their Sterling.

    The Gov't should be looking at ways to help the Private sector develop new technologies and products which can be sold worldwide.

    At the moment the trend will remain downwards for Sterling.

    Our Imports simply outweigh our exports and as such that will pull us down.

    You don't need a doctorate in Maths to understand that one !

  • Comment number 68.

    Good to see Robert continuing the use of the term 'muller'. I noticed it in yesterday's piece too. I know some people complain about his use of this word but I for one am happy to see it appearing on here.

    Perhaps he has shares in the yoghurt company and this is a form of subliminal advertising?

    Or perhaps he's just trying to get the word into the Oxford English Dictionary? After all, as some Peston-haters have pointed out before, this man's has amazing influence on the world. Did you know he single-handedly brought about the current economic crisis by his negative reporting? If he can do this, surely he can get muller into the OED.

    So that there is no bias on my part, I'd like to point out that I'm just off to look at a holiday brochure and book my annual Ski trip - heard there's some good levels of snow up in the Danone region at the moment



  • Comment number 69.

    Surely this is all becoming slightly more hypothetical as the regulator says that things must change.

    If you thus force through major changes on banks operating system won't this also affect their styles and functions?

    I'm getting a little tired of spin, instead of massaging output, Robert, you need to start asking some pertinent questions

    Maybe you could ask about Mandy's yacht parties, or his discrepancy in funding for his latest bachelor flat too?

  • Comment number 70.


    This is not insurance. The principle of insurance is to take on a large number of relatively small uncorrelated potential risks. This is taking on a small number of extremely large and extremely correlated risks.

    This is playing double or quits: either things are OK in which case GB walks away looking good or they get worse in which case we (i.e. anyone whose wealth is in sterling) are mullered.

    Whether it is a politician worried about an election, a civil servant worried about pleasing the minister or a banker on a bonus the calculation is the same. If I gamble and win things are great and if I gamble and lose then my client may be wiped out but I'm no worse off than if I do nothing.

  • Comment number 71.

    How much of today's rise in the FTSE is the barmey bounce and how much is dead cat bounce ?

  • Comment number 72.

    I am no financial expert but it seems to me that the goverment would of been better off offering to buy the most expensive loans/credit card debts off of individuals at excellent rates (maybe half of whatever the original APR was to make it fair - and still profitable). This would help banks buy giving them the huge cash injection of a lot of instantly re-paid debt. The loss of profit on the good debts is a price they should have to pay for their greedy behaviour.

    The banks should then be forced to use this re-paid capital to offer mortgages, and loans only to individuals with no debts until it is proved that the banks are capable of responsible and accountable business practices.

    This would help the individuals with large non-mortgage debts by freeing up expendible income and helping them to clear their non-mortgage debts ASAP at lower interest rates, and give the state and therefor general taxpayer overall the potential to make profits on the loans.

    Assuming there are 20m housholds with average non-mortgage debts of £40k.

    It means £800,000,000,000 and the easy credit era is re-paid in full over the next few years and with the state reaping the benefits of the taxpayers money and not the greedy bankers (b=w) who caused the mess in the first place.

    Surely a financial expert could improve on this idea. It sure would beat the useless half measures introduced by this government.

  • Comment number 73.

    With reference to #14 - spot on.

    It is this short-termism which underlies a lot of where we are now.

    I recall Gordon B in on of his earlier budgets installed a 3 year budget plan for govt depts. However, he has failed to carry this initiative onto the wider economy.

    Am I correct in thinking that most of the traders in the City give themselves a 2-3 year window in which to work their buns off and then escape to Devon/Cornwall/Canada? with the cash.

    Who cares about short selling? Whilst it is the only way the traders can make money at present, it then becomes the herd instinct and only serves to exadjurate the negatives - same as the positives were accentuated (there's a song there somewhere).

    There has been no march from Jarrow so far demanding the right to short sell (apologies if used before). Ban it - or would it not make the City as attractive "to do business" as say, Wall St. So what, we don't want traders, we need long term investors.

  • Comment number 74.

    Well! Well! Well! Silken tongued Turner.

    He speaks of the gross irregularities in banking practice as if they were minor features!

    The known unknowns are so complex now, they have become unknown unknowns, and this silly business of spinning and lying adds only a tiny squeak to the general uproar as a storm rages.

    Hasn't it occurred to Turner that a giant Gulliver may soon break loose from the flimsy cords the FSA have used to hold him?

    What perspective do we need to understand this global crisis? Does anyone know?

  • Comment number 75.

    Post 43. Bonus for loyal staff? how about this I have worked over 60 hours for the last few years, took no holidays last year, got given a bonus with my P45 yesterday.

    I have suffered under a bully and lost over a most despicable issue.

    How many of us are working under those circusmtances?

    Talk about toxic investment...

  • Comment number 76.

    Thanks Robert for a nice summary.

    I actually think the insurance scheme could well be the magic bullet.

    Its unpalatable as taxpayers take risk but thats why we have regulators.

    Banks should be mullered in the good times, its too late now.

    On the other hand, asset values are so low that maybe the risk wont be that great.

    But the scheme puts a floor under losses and that is key.

    By the way, Robert, on a completely separate note, if you read as far as this post.....

    what is your view on the Northern Rock case where allegedly the Treasury were concerned with what you thought before nationalising? :)

  • Comment number 77.

    Apologies...exaggerate

  • Comment number 78.

    Robert, for a short and beautiful time you were ahead of the curve.

    This latest post smells of a high pressure briefing from Downing Street.

    People now actually look to you for independent and thoughtful comment. No doubt you have been leaned heavily upon to 'do your duty' to the country and not write anything alarmist, but that goes with the territory, Robert.

    Please show some resolve and get back to what you do best. It's important.

  • Comment number 79.

    If the government truly did NOT want to nationalise UK banks, then why has it done so?

    Could it be that this is, at last, fulfillment of the 1983 Labour Party Manifesto which threatened/promised nationalisation of the banks?

    Is there a co-incidence that the two weakest banks, RBS and BoS, are both Scottish banks? The PM and Chancellor are both Scottish, and Gordon Brown has a parliamentary seat in Scotland. Not to mention, of course, that Labour relies on Scotland for many of it UK parliamentary seats!

    Or am I being too cynical?

    John
    London

  • Comment number 80.

    "The government really really really doesn't want to nationalise Royal Bank of Scotland or any of the other big banks."

    That's three 'reallys' - what is worrying is that many things which the Government 'really' or 'really really' didn't want to do have come to pass...

    [Northern Rock nationalisation, shore up bank capital with taxpayers' dosh]

    Watch this space....

  • Comment number 81.

    I've got a better idea for all these so called toxic assets and dodgey loans.

    Why don't the banks suggets they transfer all their loan books into one bank and the government write it all off, at a stroke, and then we can all be debt free and start spending again !!

  • Comment number 82.

    Well, the way I see it....
    Browns' "boom" was the biggest swindle of all time.
    Subtle and long-term, but thousands of banker-boys have run off with millions each.
    Happy to pocket the profits, they have dumped the losses on the public.
    Perhaps a windfall tax on them would be appropriate, but you may have to go to the Cayman Islands to find them.
    Certainly a public inquiry.
    They have made the government look like complete buffoons, probably not far from the truth.

  • Comment number 83.

    Don't blame the short sellers.

    Short selling is good.

    The market needs both long and short positions to get closer to the true value of an asset.

    Without shorting asset prices can remain bloated and the market functions less efficiently.

    Banning short selling is like telling everyone to eat and drink but forbidding them from going to the toilet.

  • Comment number 84.

    #7 MrTweedy

    Not sure I agree with you. Presumably the creditors of that first bank are not one, but several. So the loss is spread across several institutions. Each one takes a smaller hit on its balance sheet.

    If the creditors themselves go bust, then in turn each of them will have several creditors, again spreading the risk.

    There are two ways to spread the loss around:

    1. Spread it among those who deliberately took on the risk (and were paid for taking it on), which is what happens if you let the first bank fail.

    2. Spread it among everybody by rescuing the bank with taxpayers' money.

    Which is fairer? And note that 2 requires either higher taxes (which damage the economy) or higher borrowing (which creates a credit crunch as the State soaks up available credit). Or of course printing money, which debases the currency. Or all three, as the government have done here in the UK.

    Of course, there's a third way - you force a sound second bank to take over the bust first one, so the sound bank bears all the losses of the bust one. Then the sound one risks going bust too. Ah yes. That's what they did with Lloyds and HBOS.

    Of course, Peston's blog assumes Turner and Myners are telling the truth about government intentions...

  • Comment number 85.

    #68 screamingdonkey

    I also have a growing suspicion that Mr 'Mullered' Peston is being secretly sponsored by the eponymous German yogurt people, which is surely against BBC rules; the moderators should stop him!

    but come to think of it, our whole country has gone fruit-cornered with added nuts

  • Comment number 86.

    It's all consistent.. the guys running the banks get to keep the money they stole from the rest of us, and the government resists investigations into (former British colony) tax havens. That gives them all somewhere to hide what they took in case we get the idea of trying to recoup some of our losses.
    I seem to remember Brown talking about fairness as being a key Labour feature. Well it is, but mostly to the well-heeled incompetents who got us into this mess and who I suspect will soon be joined by Brown and the 'B'-team .. who even now are trying to conceal their expenses from those that pay them.
    What a sorry picture it all paints!

  • Comment number 87.

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

  • Comment number 88.

    @37, sizzler944

    "Turner talks of symptoms not the cause. The credit crisis was created by a series of flawed decisions based on flawed analysis from the top of financial institutions and govt.
    This occured because of the extent of patronage, be it mega bonus' or promotion, in their power structures. It resulted in weak and flawed personalities given to self serving bullying and lying rising up the ladder. Independent voices fell by the wayside. Until at the top, one deeply flawed leader surrounded by yes men made very poor decisions.
    Blaming the federal reserve is just passing the buck. Any institution that was properly run would have recognised poor policy coming out of the fed and set their course appropriately.
    Look, 10 years of 15-25% house price inflation while wage inflation was 2-4% didn't add up. And it didn't take a genius to see that. But neither govt nor the financial institutions saw it. Many everyday people did see and have waited years for house prices to fall before they were prepared to buy."

    Your starightforward comments sum up everything about the current crisis that so many journalists/businessmen/bankers/politicians somehow fail to understand. Yet there are so many ordinary people who knew all this was coming. We really do live in an idiot/bullyocracy where the stupidest thugs rise to the top of the money making tree.

  • Comment number 89.

    "Turner said that the banks and the FSA have a detailed understanding of what's on their balance sheets."

    Perhaps it's time the tax payer were also privy to that information? In the case of HBOS (now Lloyds) perhaps someone could explain what was in the 'secret dossier' prepared by the Tripartite authority about the liquidity of HBOS? ooops - not possible. The public can't know because as David Sellar QC for HBOS announced at the Court Of Sessions Hearing Monday 12th Jan :

    "The secret dossier contained information about the liquidity position of the Company (ie HBOS plc). The information was never used in the Competition Appeal Tribunal and all copies were destroyed".

    What was so explosive that the document had to be destroyed ? Even more important, why was there a secret document in the first place? Isn't it reasonable to suppose, given the total chaos our financial genius have engineered, that the shareholders, the savers and also the tax payer, had every right to know the real state of HBOS's liquidity and financial position prior to the Lloyds merger going ahead?

    What was it the PM said? "More transparency?" We may not be getting transparency from the Banks, the FSA or the Government - but I think we, the public, are beginning to see very clearly and our sense of smell is getting pretty good as well!

  • Comment number 90.

    People are against nationalisation and understandably so but my question is this. Many experts are citing nationalisation of our banks as a last resort.

    If we don't get disclosure from the banks as to the extent of debt, how can anyone make a balanced judgment as to whether insurance is viable or nationalisation the only inevitable option.

    Further question - if the FSA have an understanding with the banks, does that loosely mean that they have the facts and figures and if so, why are the taxpayers not being fully appraised bearing in mind it is their money being ringfenced as debt for future generations.

    Surely, a true resolution to this crisis and full support from the taxpayer can only be gained by full disclosure.

  • Comment number 91.

    46. kooltidings:

    Your suggestion of totting up income and educting necesssary outgoings is extremely sensible but, being sensible, has no applicability to how Labour approach this issue.

    Sensibly, one would work out how much income there is, and then decide how to spend it.

    But the Brown approach is the opposite - work out how much you would like to spend and then set about raising it.

  • Comment number 92.

    This whole business is just degenerating into a shambles as the self-styled great and good waffle on at length about the possible options whilst the economy gradually sinks beneath the oceans of debt they have created.

    Why don't they just declare they have no idea what to do, shut up, resign and take up residence in a carton on the South Bank.

    We need a sceptic bank. This is what the Americans were going to do before Mr. Brown distracted them by saving the world.

    This sceptic bank will need to be a nationalised entity. I suggest that it is called Blair Brown Lackof Trust (1997) Inc.

    This will have to work alongside the bank bail out which is best conducted through the interventions of the Bank of England. The Treasury is ignorant and politicised and the FSA is just a bunch of academics doing what academics do best: whatever that might be.

    Over time the bad assets of the sceptic bank can be disposed of to the adventurous and in this unexciting way we will gradually recover.

    My fear is that the government will continue chucking everything at the problem in its irrational way and so bankrupt the country.

    Mind you a bankrupt country could neither afford Big Government nor Big Business so we might end up with a better society by default. I suddenly feel more cheerful.

  • Comment number 93.

    Well, I suppose if all these gentlemen tell us the banks are OK, we must believe them, and let's hope they are right

    Bu the markets continue to have their doubts: RBS preference shares now trading on Wall Street at 40% yield ! - they are viewed as no better than junk.

  • Comment number 94.

    Do some of you remember the time, not very many years ago, when the high street banks were accused of being too conservative in their lending policies?

    They were urged, by various parties, to be more 'commercial'.

    Was that really the right way to go?

    Risk is difficult to measure, but when the clever (stupid/deceitful?) bankers use horrendously complex models that not even your average PhD mathematician, let alone the dimwits at the FSA, can understand, to evaluate risk then things have gone too far.

    The 'banking supermarket' model is flawed. We need two types of bank: 1) banks that are risk averse havens for Joe Public's hard earned wages, closely regulated and backed by the government's insurance scheme and 2) banks that take risks and in which speculators can invest. The former would be low yielding but safe and the latter (potentially) high yielding and allowed to collapse.






  • Comment number 95.

    Robert

    The statement:

    Turner said that losses being incurred by banks right now are "not dramatically worse" than the FSA expected in October when it forced the big banks to raise £50bn of new capital - with £37bn coming from us, from taxpayers.

    This smacks of a cover up at No's 10 and 11 Downing Street - this statement tells us nothing about how bad the situation is or whether the 100's of billions already put in will be enough - even the reference to £37bn is an insult to the taxpayer when we all know the amounts of money pledged.

    This goes back to previous comment about Mr Brown trying to keep a lid on what is really going on - there may of course be valid reasons for doing this - but cynics will argue that Mr Brown is the architect of this to try and cling on as long as possible rather than admit mistakes e.g. division of tasks between HM treasury/ FSA/ BoE.

    I see all this more measly words and as a giant insult to Joe Public and any fool can write cheques on GB account for massive amounts if there is enough money - its time to see some strategic leadership - financial audit investigations on banks, asset raids, fines for underperforing banks, ring fencing of owner occupied mortgages, blocks on moving currency overseas, agreements on running ATM's for bank consolidation, new legislation for new banks/ credit unions, monitoring of banks land registry property ownership changes, priority and authorisation of lending to GB value added concerns - where is the leadership and direct action? Or is it on the way?

    This current feeble stand-off by the financial authorities is very damaging and will allow more and more money to go into the hands of vultures and super greedy international speculators (sorry - financial parasites - probably a better description) who have no self control or moral integrity and will trade on people's misery without any limit and will collapse a country or currency to wallow in their greed and self aggrandisement and prove their hubris. Perhaps the new capitalism will be the era when we see this behaviour both reigned in (in the UK?) and resigned to history - as per Barack Obama's comments.

    This adds up to a painful drift for the economy. Taxpayers need to know what the position is with banks as we can choose who looks after their money - we can back Britain by knowing enough about Britain and move our accounts to those banks who will come out and say - we invest it Britain we are ethical - let us look after your money - we need the Banks to tell us this - so if we have any savings we can re-invest and vote with our feet. Who can give guidance on this - most of us bank with a 'bad bank' because we don't know enough about the banking activity that will support British families and jobs.

    We need the new banks to come forward on this and say where they will invest their money e.g new industry, renewable energy, housing etc. with ethical management and investment policies. Brittania/Co-op may be ethical but that needs independent assessment over time.

    Big difference between saying 'we are a (new) ethical bank' and 'we intend to be an ethical bank' - the semantics are important I think for banks, going forward - silken tongues are for spin doctors - we need some straight talk and firm action on all this, from somewhere.

    Time to nationalise planning permissions held by property developers for new housing and other projects and allow local authorities to control and prioritise building to suit local housing needs/demand with those families losing their houses through re-possession getting a new house built now with an option for rental purchase in their mortgages - there is plenty that can be done now - this would put a large part of recovery under local control and re-distribute government cash better.

    This could be done quickly and the local authorities would be effective in allocating build sites. This would also stop some vultures/non-doms. holding onto land banks indefinitely in the UK while some of them disappear to sort out their overseas investments and develop only when and where it suits their bank balance. Let's push them along a bit to help Britain/ British families.

    Plenty can be done - but will it get done now? Will we just continue to drift until G. Brown drags us all into the euro? I think the euro would be good for Britain if we are to have/keep this/an incompetent government.

    Too many hubris, greedy, incompetent, insensitive people have been allowed to bring us down - that's the problem. Why do some people enjoy wearing the badge of greed?

  • Comment number 96.

    The reason that the government does not want to fully nationalise any bank, is because that would formally make bank debt closer to being sovereign debt. The trouble is, we're too close to that already.

    The government should announce that there will be an election in three month's time. GB etc should step down now, and there should be an emergency national union government formed with Vince Cable as chancellor. My choice for a short term Labour PM would be Bob Marshall-Andrews, who has been fiercely and courageously honest in his time in Parliament. In particular, he has been a defender of civil liberties. Let Ken Clarke be business secretary. No party leaders should be in the emergency government - the parties should be given three months to sort themselves out.

    RBS should be put into administration and all deposits transferred to the (now profitable) Post Office, or the Coop. The shotgun marriage of LLoyds and HBOS should, if possible, be frozen. This should still be possible as Lloyds Banking group is at present just a holding company, and the businesses are still separate? Clearly, there was not enough information available on HBOS' liabilities. The HBOS side of it should again be put into administration. What happens to the LLoyds side should be determined by a Parliamentary Inquiry. The toxic debts of RBS and HBOS can and should be wiped out by bankruptcy. Sure, it would damage Britain's credibility short term, but it would send out a powerful signal that those who speculate and get it wrong will suffer the consequences - no matter how big.

    The government should not bother trying to pump any more money into the existing banking structure to kick-start the economy. History of the Great Depression shows that it won't work. There should be a new state-sponsored bank for reconstruction created to involve private investment if possible. No banking executive from any of the big 5 in the last ten years should be allowed to be involved. ALL of the latter should be potentially facing prosecution.

    Banks in general should no longer be allowed to create money - only the Bank of England. It should be given the brief of matching the money supply to the available goods and services in the Economy. It should make public recommendations on fiscal policy to the government of the day. The stock and commodity markets should be reformed and shrunk to make them vehicles for investment and not speculation. Yes - there will be more unemployment in the financial services sector - but it is better to pay people to do NOTHING than for being parasites.

    But no meaningful reform can take place under a PM who is desperately clinging on to delusions of adequacy and defending his "record". Mr Brown - in God's name, GO!

  • Comment number 97.

    68. screamingdonkey:

    "Good to see Robert continuing the use of the term 'muller'. I noticed it in yesterday's piece too."

    Wasn't Muller a German footballer whose goal knocked England out of the World Cup way back? This is the only explanation I can think of for this bizarre word.

  • Comment number 98.

    Some jottings from a simple man .

    Lord 'i'm tough' Turner has said that the banking industry needs a completely new tough set of regulations to oversee the banking industry after their disasterous performances of late.

    So what has he done to show us the FSA means business? He's gone and relaxed the capital ratios for the banks in a sinking market! So much for reassuring us .

    Next, it appears to me that why no one can properly value any of the mortgaged backed cds, etc is down to the well known fact that many mortgagees subsequently had second and tertiary re-mortgages from the original lender and possibly others lenders too so that their equity value is confused and a lawyer's dream.

    So that for us the taxpayers who are being pressed ganged intotaking on these toxic assets it is virtually an impossibility to know their value but we will have the certain knowledge that our dearest leaders have no idea what they are buying.

    So 'brave' G Brown will spend many more billions more of not his money on further pig's in pokes showing us that he's doing something (as though that is a wothy activity as of itself)

    Why is it G Brown and fat cats believe that spending vast sums of other people's money is somehow brave and deserving vast monetary rewards and praise?

    Finally is it not ironic that when the government gets us to own all this toxic debt they will be able to bankcrupt uk citizens who default on their mortgages but be unable to touch US citizens when they default on their's (because in the US the property is the only asset backing the debt unlike the UK where the mortgagee is personally liable)?

  • Comment number 99.

    I make no apologies for hammering this point but if the FSA and Banks have a detailed understanding of thier balance sheet why did their auditors seem not to understand them or care about the impact bad debt would have on their shareholders future investment value.

    Secondly if this detailed balance sheet information is available, given the amount of tax payers money the banks have been given, shouldn't it be at least common curtosy for us all to be aware of the details.

    My personal suspicion is that there is too much old boy network going on, people are scared to name and bring to account the culprits as too many people went along with it, for a comfortable life.

    Goodness i'm starting to sound like Alexander Curzon, better stop now!

  • Comment number 100.

    "Perhaps a windfall tax on them would be appropriate, but you may have to go to the Cayman Islands to find them."

    The banks pay enough tax and, during the good years, Brown was happy enough to take a huge chunk. Remember all those City bonuses? He got 40% of them.

    Let's stop caning the banks. Brown pretended we were another American State. In America, the government forced the banks into dodgy lending, sheltering under Freddy and Fanny. Brown allowed us to copy that. The FSA hadn't a clue about the risk involved. It was happy allowing the banks and agencies to decide the risk. The dodgy banks got it wrong with their reckless lending. Some of the major clearing banks covered themselves.

    All we have to do now is persuade Turner to do what his outfit was supposed to do all along: regulate; and understand the instruments they're dealing with.

 

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