Not quite the full sorry
Apologies carry weight when they are accompanied by a clear explanation by the miscreants of what they did wrong and why.
And the problem with the sorries uttered by the former bosses of Royal Bank of Scotland and HBOS is that they lacked a detailed account of why they did what they did.
Mistakes were admitted - but motivation was glossed over.
Sir Tom Mckillop and Sir Fred Goodwin of Royal Bank of Scotland both conceded that buying the toxic rump of ABN after the start of the credit crunch in the autumn of 2007 was a howler of the first order.
Lord Stevenson and Andy Hornby of HBOS admitted their bank had become too dependent on unreliable finance from wholesale markets and had lent too much to property and construction companies, among other things.
But they gave little clue as to why they made these remarkable errors.
Were their banks gripped by a get-rich-quick bonus culture that led them to take excessive risks in the pursuit of short-term profit?
There was a faint nod toward that, but no acknowledgement that the remuneration system that enriched the few at the expense of the many might have been a serious problem.
Did they lack the knowledge and skills to assess the risks they were running? They all denied that they weren't up to the task of controlling their huge, complex and sprawling banks.
Were there inadequate checks and balances in place, lousy governance, the wrong people on the wrong board committees? They all looked a bit nonplussed.
Perhaps it's too early to expect those in part to blame for our economic woes to fully understand the motivation that led to the calamitous meltdown of their banks and the near collapse of the entire financial system.
Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system.
I'm 
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Exactly right - this needed saying.
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Apologies only count at that level when backed with resignations from ALL concerned. Instead, they play a shell game with other insiders. Keep looking for the common ground, the current set are all from Citibank, so having given half the UK away to the Spanish, HMG's just given the remainder away to the Yanks.
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Robert,
The bankers are apparently unable to grasp the fact that there are systemic failures in banking in the UK - that risk evaluation is clearly poor, that it isn't wise to rely on unrealistic methods for asset valuation, that derivatives are inherently more risky, that lending is an essential obligation of banks, that 'light touch' regulatory regimes don't have to mean brainless decision making...
Part of the problem we face is that there is a whole culture here that needs replacing, but we have replaced one set of failed bankers with others of the same ilk. What we need is new blood, new ideas, new regulatory and supervisory frameworks, and above all a new approach to banking and, actually, the rest of the financial services sector.
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Why do these people still holding the Title "Sir" for apparently lifetime achievements and contributions to the Financial Services industry?
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1,
Yeah, and the rest!!!
1. These bankers should be persued to bankruptcy!
2. These bankers SHOULD go to JAIL!
3. This won't happen cos el gordo and comical ali made a killing out of it all!
4. Too many snouts in the trough taking far too much has caused this!
Oh, I HATE bankers!
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10 He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
11 When goods increase, they are increased that eat them: and what good is there to the owners thereof, saving the beholding of them with their eyes?
12 The sleep of a laboring man is sweet, whether he eat little or much: but the abundance of the rich will not suffer him to sleep.
13 There is a sore evil which I have seen under the sun, namely, riches kept for the owners thereof to their hurt.
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The strict answer is that they all think short-term, but contingent instruments must be examined on a case-by-case probability-tree basis in the short, medium and long term.
Options make that a non-zero-sum game. We don't study the mathematics of error propagation sufficiently to understand all the interplays between that, the error deviation of stochastic models like Black-Scholes, and the double-dealing of closed markets to be able to anticipate the possible downside.
Or, in simple terms, they played the Sorcerer's Apprentice at level one, when the game simultaneous ran to at least three levels (interplay of portfolios and fixed competition being the others) which they never started to understand.
Or in plain English, they twisted themselves.
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I think I'll run myself into bankruptcy, where do I apply for tax payer support? Where is the form Robert?
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I dont give a damn if they apologise, the damage is done and they have been given a free hand to walk away without consequences and spend their days on the golf circuit.
These people have caused untold misery to many hard working and innocent peoples in the UK and profitted as a result of this misery.
They should be in prison plain and simple, no about of mea culpa is going to change that fact.
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Why aren't these guys in front of a judge in the high court?
They deliberately misled shareholders as to the nature of their banks' accounts during the numerous rights issues, allowing shareholders to throw good money after bad.
As I understand it, this is illegal. Where are the shareholder class actions against these banks?
One law for the rich and powerful and another law for the plebs.
Privatised the profits and are now well and truely socialising the losses. Maybe thats why the Labour Party are known as socialists!
Happy days!
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Hi Robert,
Saying sorry is just not good enough, what exactly do these guys do for these overinflated salaries, apart from destroy our economy?
Regarding the probe into bonuses, is anything likely to change as the last 2 recommended little or no change in the city and should the probe be headed up by an ex investment banker.
I do not know if you have written anything about this but it would be interesting to read your comments on that aspect.
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This comment was removed because the moderators found it broke the House Rules.
Everyone has missed the point.
The FSA never regulated to achieve a zero default.
Risk by definition means things can go wrong.
The failure of Lehmans and thus non-interference by the US government as well as its speed was not anticipated
If HBOS and RBS had paid no taxes over the last five years they would probably still be around today.
Qualifications of the senior people would have made things worse. Look at Equitable Life (and the actuaries who ran it) and for that matter James Crosby. If products are too complex then needing qualifcations to understand would make things worse. Also trnsparency is irrelevant if you need qulaifcations to understand things.
By the way, what are the qualifications of Messrs Brown Darling and Osborne? Ken Clarke and Vince Cable seem to know what they are doing and are exempt.
Finally risk does not stop disasters - non-life insurance has had many big disasters and insolvencies but most companies keep going.
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I think a large part of the problem is that the rocket scientists started to believe in their own hype too much.
Packing sub-prime mortgages into CDOs makes sense on paper. The trouble is when people have borrowed money they can never repay they will default - there is no "if" in the equation, the only question is WHEN they will default.
Throw in a load of similar basket-cases of borrowing and it's clear that these things had to turn sour sooner or later. Ultimately no matter how many clever layers and estimates of correlation the quants come up with, if someone with no job, no income and no assets borrows money they will default on their loan. If a million such people take a million loans then sooner or later there will be a million defaults.
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Perhaps better to reiterate here, what could be the mens rea - guilty mind, in this episode supposing the crisis resulted from a situation where there was no malicious intent. If it was reasonable for these CEOs to undertake the ventures you raise, Robert, then they will not have liability. But if much capital was risked and adverse conditions were predictable, they might well be found liable by a jury. The courts should be watching this one quite closely.
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....and the thing is, they were warned
You are right Robert, the aplogy would be fine if they admitted what their mistakes were. But they did not. Instead we just got waffle.
Unfortunately, this was entirely to be expected. Admission of any guilt would be a sign for them to be sued by shareholders - on this account they served themselves well by giving away so little to the committee.
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They should hang their heads in shame at what they've done to us all - our kids will be paying the price for this greed and stupidity for years to come.
Our elected representitives are jointly responsible for this situation and should acknowledge this by calling a General Election to allow us to call them to account for their inaction.
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Arrogant apologies with fingers crossed behind their backs.
Now we have apologised, so we won't be punished, we don't have to explain, and we get to keep our bonuses ...
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Thanks Robert for another blog of "How did they mess that up?" without any mention of the fact that three UK regulators, numerous international regulators and governments and practically every journalist and economist including yourself failed to see exactly the same thing.
The ABN Amro transaction had almost every bank bending over backwards to get involved but has gone on to symbolise the folly of believing cheap debt will always be there. But at the time - nothing came from any source to suggest it was the wrong thing for RBS to do and rather the BBC and others decided to focus on how great it was to see British banks dominant.
Each one of us thats taken out a loan or a mortgage that wasn't absolutely necessary is at fault so rather than continue to blame easy scapegoats and offer nothing more than soundbites like "so we can design a sounder, safer financial system", try providing some positive input to where the solutions lie.
Difficult I know, when the leaks from the Treasury aren't so forthcoming.
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This has been a classic case as expressed in many if not all all unmesured close communities:-
"Groupthink"
“A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity (conformity) override their motivation to realistically appraise alternative courses of action”
Symptoms of Groupthink include:-
Illusions of Invulnerability –creates excessive optimism and risk taking.
Self Censorship – dismissal of ideas which deviate from the consensus.
Rationalising warnings – dismissing warnings that might challenge groups assumptions.
Assumption of Morality – causes members to ignore their actions.
Mindguards – individuals who shield reality.
Negative Stereotyping – those who oppose are weak, evil, disfigured, impotent, stupid.
Unanimity Illusion – silence is viewed as agreement.
How many of the above can be identified as being appropriate to the failed Management of our Banks?? Or more importantly how do we now ensure that the correct controls are in place to ensure that this scenario is not repeated. Answer = structured regulation.
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Deja vu?
;-)
ed
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Excellent stuff Robert.
It's about time the public found out what's been going on in the City, and where all their money has gone.
Keep the pressure on, RP.
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Thanks for the apology chaps - now here's what should happen.
The majority of the assets 'belonging' to you and your responsible subordinates paid for by gambling over the last 10 years of your tenure should be seized by the government to partially pay back the burden we'be all been lumped with. From the figures we've been reported, that's not an inconsiderable sum, And I'll be kind - each of you should be left with 200K to start your new life.
As we keep on hearing what geniuses you are, I'm sure none of you will have a problem turning that 200K into a few million within a few years in the volatile market you've created.
Or haven't you got the stomach for such a challenge?
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Some interesting historic prophetic words from Habbakuk 2 that, once cultural differences from 2600 years ago are accounted for, seem strikingly relevant. See what you think below (a little long but worth the read):
Then the Lord replied:
“Write down the revelation and make it plain on tablets so that whoever reads it may run with it.
For the revelation awaits an appointed time; it speaks of the end an will not prove false. Though it linger, wait for it; it will certainly come and not delay.
See he is puffed up; his desires are not upright – but the righteous will live by his faith – indeed, wine betrays him; he is arrogant and never at rest.
Because he is as greedy as the grave and like death is never satisfied, he gathers to himself all the nations and takes captive all the peoples.
Will not all of them taunt him with ridicule and scorn, saying,
“Woe to him who piles up stolen goods and makes himself wealthy by extortion! How long must this go on?”
Will not your debtors suddenly arise? Will they not wake up and make you tremble? Then you will become their victim. Because you have plundered many nations, the peoples who are left will plunder you.
For you have shed man’s blood; you have destroyed lands and cities and everyone in them.
Woe to him who builds his realm by unjust gain to set his nest on high, to escape the clutches of ruin!
You have plotted the ruin of many peoples, shaming your own house and forfeiting your life.
The stones of the wall will cry out, and the beams of the woodwork will echo it.
Woe to him who builds a city with bloodshed and establishes a town by crime! Has not the Lord Almighty determined that the people’s labour is only fuel for the fire, that the nations exhaust themselves for nothing?
For the earth will be filled with the knowledge of the glory of the Lord, as the waters cover the sea.”
The good news is that genuine repentance backed by action is probably all most people want to hear. Lip service however is perhaps not the answer. Only they will truly know which applies. For their own sakes I hope for the former.
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I find it quite funny to see these over rated overpaid figureheads saying sorry for something which they do not even understand.
If they had understood the business they were in they would have seen this crisis months in advance.
They didn't and relied on those who presumably did but didn't dare tell them.
Who wants to be the messenger?
Perhaps what we need now are people at the very top who understand the business they are in not executives from unrelated companies plucked out of nowhere and given monstrous sums of money because they network with the right people.
They and the politicians were all sucked into La La land but this sure is providing a rude awakening for them now.
The saddest thing to come from all of this is that it is the ordinary people that suffer
Those to blame should all be put in the stocks and publicly humiliated Far cheaper than expensive and lengthy enquiries
A small price to pay for ruining so many lives.
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They are like the generals from world war one, their ineptitude and mistakes cost the lives of millions of good servicemen, but after the war, the generals went back to their manor houses and ended their time in old age and comfort, whilst children grew up never knowing their fathers, widows living in poverty.
No sorry is not enough, I hope and prey they pay the price in the next life, KARMA.
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Nor did they explain why their foresight was so pitifully lacking. The nearest to a reason emerging from the sorry spectacle was that as soon as an HBOS risk manager spoke out, they fired him.
It wasn't difficult to see that their vulnerability to a collapse of a bank like Lehmans (as actually happened in 2008, of course) needed to be analysed ahead of time: see for example this comment of October 2007.
None of the MPs asked why they first him, by the way.
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These people should be ashamed.
Quite frankly, I don't see why their entire bonus isnt retracted.
Secondly, how is their bonus larger than their yearly salary in the first place?
What a disgrace.
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Despite all the apologies the wider economic issues have still to be addressed - how did we ever get to a situation where it was acceptable to grant mortgages to people on massively inflated house prices. Gordon Brown as Chancellor and now as PM has also got some serious questions to answer. Unfortunately, there is no way he'll be made to front up to a select committee to answer his critics.
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Sorry Robert, but your analysis falls slightly short. The bankers cannot apologise to a parliamentary select committee because it would be apologising to the very people who are actually to blame.
The sad truth of the matter is that it is not the bankers to blame in this instance. I know that's a controversial view, but please hear me out...
Banks have been lending money recklessly, its true, but only because we have been demanding it. The fault for this recession/depression and for the Credit Crunch lies with all of us, not with a few individuals who made a great deal of money as a result. It is all of our collective folly that we are in this mess and we won't learn any lessons at all unless we all wake up and acknowledge that fact.
Can you imagine how the media would have reacted in 2006 had the FSA, Bank of England and the Government acted then and said to Northern Rock "Sorry, but you have got to stop this ridiculous lending and get back to sensible banking." There would have been uproar. The Sun would have run a headline saying something along the lines of "Fat Cat Bankers Stop Hard Working Brits Buying Houses - What A Bunch Of Merchants" and the reaction from the rest of the media would have been similar, though generally less laden with innuendo!!
The simple fact is that we created this problem, not the banks. They have spotted a gap in the market and exploited it. The real problem is that that gap was ever created. And for that, we are all, collectively, responsible.
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Now that you've sorted out the nasty bankers Mr Peston, let's see if you can get an answer to the question of how it's unacceptable for a banker to fill his pockets yet it seems to be acceptable for a cabinet minister to do likewise. I know £114,000 pales into insignificance beside Goodwin's £4 million, but it is the taxpayers money. ( Or was till Jaqui trousered it.)
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Your earlier post suggested this lot were to be grilled.
I would suggest lightly poached was a more apposite expression for the proceedings.
You have nailed for once the crux - they really have no idea what they are sorry for doing.
The most telling answers are that they declared spending vast sums of their 'personal' wealth on their own banks shares on top of the bonus options and have lost a bundle as a result.
They obviously thought it would be a good investment so clearly had no idea what the underlying risks to their businesses actually were.
Thus what I think they are sorry for is being ignorant and failing to understand fully the businesses which they were handsomely paid to direct.
Sadly stupidity on this scale is not a crime.
I query though why anyone would want to employ any of this lot in a consultancy role - if they didn't understand what they were doing - what use are they in undoing it.
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CAN THERE BE ANYTHING LEFT TO SAY ABOUT BANKER'S BONUSES EXCEPT 'BRING PROSECUTIONS'?
As I just posted on your previous banker's bonus report, many of us have concluded that this great anti-bank bonus campaign is nothing more than a smoke-screen and a sham, designed to take the spotlight away from our govt's inability to even begin to get a handle on the economic crisis we are sliding into.
I don't like the banksters, and this particular Gang of Four is despicable IMO, but if this self-serving game of gov't charades goes on for much longer then I'd almost be tempted to set up a new-style charity RSPB
that's ROYAL SOCIETY FOR THE PROTECTION OF BANKSTERS of course
but only almost; not quite!
The British gov't, having found themselves a useful scapegoat, will have no intention of bringing any prosecutions against these people because all sorts of highly inconvenient information would come out about the abject failure of govt and regulatory agencies to do their jobs.
We will only start getting some real answers about the banks when the US authorities begin bringing prosecutions over there. And I strongly suspect that the US authorities will proactively pursue prosecutions, as the new administration will force the SEC to grow some teeth!
Can you now move on to some of the bigger issues or at least a different argument that Brown and Co aren't to blame? Perhaps you could concentrate on the GLOBAL aspect of it all for a while for instance..........
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I think a good example is called for here.
A manufacturer buying materials in forwards from overseas wants to buy the foreign currency at the current forward rate or better.
However, he's dealing in a volatile market and leaving it could be disadvantageous, so he buys a call option on his currency exposure. The bank lays that off against the dollar. Look up wiki for the graphics.
Let's start putting some figures into that model.
The current 1-year forward rate on the Euro is .8927, so we'll take that as our at-the-money strike. The bank lays that off either against its own book or into the markets via the dollar at 1.4576 on the sterling leg and 1.3012 on the euro leg.
In a year's time, the spot price turns out to be, mirabile dictu, 0.8927, so the option doesn't trigger. However, the bank can show big profits. Any ideas why?
This is because the currencies can move against the dollar, one heavily upwards and the other heavily downwards. One was capped by the lay-offs into the markets, the other yielding sheer profit.
Now, the guy who's got the original exposure decides to take that for himself. The bank is stuck with the risk, now. The guy then sells the cross-currency option back into the market, he's not interested in manufacturing any longer, it's much more fun making the market twist itself. And so the banks end up payng him a very nice little no-risk pension, which they never notice because it's nowhere in their models. The ex-manufacturer pays a 5% premium up-front, and gets a 30% profit 20% of the time, ie 6% absolute, less the 5% premium is 1%, or on the minimum option of 1m, 10k each time he does it, and he's doing it a dozen times a day. He's riding the volatility as a hedge trader now. And stochastic models miss that completely.
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Robert Peston for Prime Minister
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When are the FSA going to be interviewed?
Their governance between their inception and 2003 during which their head was given a knighthood included allowing the banks to ditch liquidity ratios and operate in areas totally alien to banking to say nothing of Equitable Life defies belief.
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If the banking bosses haven't done anything illegal then the responsibility actually falls squarely on the shoulders of our lawmakers, who have failed to regulate and control the activities of the banking industry as a whole.
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Robert Peston - have you ever asked yourself or anyone in the industry what part the auditors had to play in this mess? PWC and others must have been at the very least complicit and the very worst incompetent in merely signing off on mark-to-market valuations and risk assessments in the bank's balance sheets. It's no good blaming the regulators if the accountants weren't able to pick up some of the danger signals and at least sign off accounts with reservations!
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Wise words. Just noted that RBS is to cut 2000 (back-office) jobs - a more equitable remuneration system, particularly curtailing those bonuses, could have saved many of these posts.
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The banks were quite happy to take on sub-prime debt as they (and Gordon Brown) were of the opinion that house prices would continue to rise.
If the sub-primers defaulted then the property would give the banks a nice profit. History lessons never learned.
125% morgtages happened under Gordon Brown's watch.
Northern Rock had to be nationalised as a result. Gordon Brown allows the tax payer to fund bonuses to NR staff but thats ok, he's very angry about it.
He should also apologise and then resign.
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Sorry, #30, but some of us were onto them way, way on back. So HMG put in the FSA. Who they staffed with insiders. So we were still stuffed. That does not make this OUR responsibility, some of us ceased identifying with the Government long, long ago.
And, worse, we're complaining again, so what do they do? Provide cover from UKFI. Which they man with insiders. Do I have to hold our a fleshlight to show you what's going on?
This is groundhog day with knobs on. We're learning, though, we're learning.
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There is a simple answer -- 'GREED'
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A lot of the points raised by Robert Peston would have been caught by proper quality regulation of the banks.
I believe it is relevant, that the banks that majorly failed all have or had their headquarters a long way outside of the M25, mainly in the North East and Edinburgh.
Is it a reflection on the regulatory role of the FSA that they were in some way unable to form a working relationship with banks not run from the City and thus failed to regulate them in the manner they did others.
Lloyds (prior to HBOS merger) and Barclays whilst in need of some help seem to be in much better overall shape than the others.
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Robert - you suggest that the bankers hinted that bonuses were part of the motivation for the bank problems.
On the contrary, it was specifically said (I think by the former HBOS Chairman) that excess wholesale borrowing was the problem and that bonuses did not drive this excess wholesale borrowing.
So it was claimed that bonuses were not a cause of the problem.
However, it was also said (by the former HBOS CEO) that the bonus system needed to be improved but that this was separate from the issues that caused the recent problems.
The basic problem is that banks have to lend long and borrow short (retail or wholesale funds). If solvent baks are to survive then the government must always act as lender of last resort in the event of a loss of confidence. The Bank of England/Treasury were slow and reluctant to do this and when they did, they did so in a way which was resentful and damaging to confidence - so exacerbating the problems.
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I was glued to nearly all of the TSC Hearing.
I was appalled and disappointed at the quality of the questioning ( with a few exceptions).
A lot of rather inadeqaute role playing....not much additional light shed on anything at all. Although I am sure Mr McFall is personable and well-meaning, he does not seem to me to add much to the functioning of UK Democracy.
And this today on top of the recent Newsnight : a Roundtable of The Fab Five including his nibs, two Jags (aka Three Jaws), Mr D Buick, et al. A veritable circus of news analysis. A load of incompetents, paid I wonder how much.....including the Host who seemed totally out of his depth. (He did 'steal' an idea or two from Paul Mason...who should have tutored him more extensively before the prog was broadcast. Thank God at least for Mr Mason.)
Summary : This important news, these staggering events, and all OUR difficulties of the future.... are being discussed and apparently analyzed by those almost toally unsure of how to analyze cirumstances for themselves let alone for others.
And now I really would like to use some Proper AngloSaxon. But, dear reader, you'll see between the lines that I am too polite for such crass behaviour.
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The problem is that the problem can't really be laid fair and square at the feet of any one individual.
Bankers were competing with each other in a commercial world where the pressure was to make greater profits every year. There is collective responsibility across the whole banking industry.
It also that everybody in the UK has got long faces today, because the economy is not in a period of growth. We're all getting depressed about the word depression.
Why can't the commercial world and politicians accept that unrestrained growth year-on-year is unrealistic. Things do go backwards sometimes. Recession is not the end of the world...
Bankers and Politicians should perhaps be more realistic about their expectations for the economy in future, just as Chelsea should accept that they can't expect to win everything every season. Sometimes they will finish 4th in the Premiership and be beaten finalists in the cups. But by any reasonable standards that still not too bad...
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That said sorry but so what?
How has this exactly impacted on them - they have enough in the pot so that they don't have to work again. Just like the position of the cabinet - can't see them apologising in the first place though.
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It seems as though everyone is blaming the sods at British banks when this crisis is very clearly a global item and as such you people will fail to realise it was not just Sir Fred & Co who failed. Mind you the biggest Ponzi schemes out there (aka Bank of England and The Fed) have yet to say sorry for their part.
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What good is this? I was always taught to make amends when I made a mess.
Bankers, we are waiting on the amends! If you can't fix this, then turn yourself into the nearest police station and ask for a criminal investigation to be conducted into your activities.
I signed on yesterday. The office was packed with claimants. There were at least five new advisers being shown the ropes.
I was told of a man who sat there in the office and cried like a baby. Why? His home was being repo'd. The staff consoled them as best they could. Everyone in that office was shaken to the ground.
The people there are working weekends to keep up with processing claimants.
Will sorry rectify this situation? No.
Real people are having their lives' ripped apart by this complete failure, caused not only by these idiotic bankers, but by a complete failure in regulation.
What was that I heard on BBC News 24? Seems a risk manager warned the board what they were doing was way too crazy. He was pushed aside as an incompetent, it seems.
Disgusted,
CoralBloom
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I thought the whole idea of having these people in charge is that they knew what they were doing. ( that's what they were bing paid for). This means thy should have been able to understand the way the market was going and take the approperate action to keep the bank going in the right direction. They have not said why they did not do this!!!!
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Per the website TheRawStory, a group called NACA (Neighborhood Assistance Corporation of America) staged protests at the homes of CEO's of banks that are not cooperating in helping on mortgage bailouts to homeowners in forclosure. NBC reported on the story, referring to it as "Grab Your Torch and Pitchfork."
Being an American in La Jolla, California, I read Peston everyday for a different perspective on the financial crisis and for his pithy sayings such as todays "howler of the first order. Perhaps we could get answers to his questions of accountability from these bankers if there were an equivalent group in Great Britain, willing to stand in front of the gated homes of the bankers in Great Britain. And Peston could come up with a phrase that matchs up to grab your torch and pitchfork.
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it is so much better to read your blog than to watch your delivery on the news. Speed it up a bit otherwise we lose concentration
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Robert could you please ask some questions as to why Sir James Crosby was not questioned today and his role in the banking crisis?
Chief Executive of the Halifax from 2001 to 2006 who reputedly encouraged risk taking. He then left to become Deputy Chairman of the FSA to supposedly regulate the banks.
Is it any wonder the FSA couldn't see anything wrong with the banks with him there? How could somebody who reputedly encouraged risk taking then see anything wrong with it?
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Why do we persist in blaming these despised middlemen. The drive for returns on banking shares was us, at least the many of us who have pension investments or life insurance.
We wanted big returns so our fund grew and we wanted apparent security the banks gave us what we asked for.
Its as though they were the bus driver and we were the unruly mob on the bus insisting the drove faster until the crash. Now we are turning round and blaming the driver and forgetting the pressure we exerted.
Time to take the plank out of our eye rather than the splinter out of the bankers eye.
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to sum it up simply-one word will suffice
GREED
They saw the shopdoor was open with all the sweets out and the shopkeeper round the back.
You can't take what isn't yours-it has to be earned and paid for.
Trouble was-there was a bigger sweetshop in the states with more to lose.
They hoped they would be away before the stocktaker came back and noticed the stock loss.
It's all about timing-they got it wrong from their personal point of view and the wheels came off the bandwagon mid trip.
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Call in the overdraft!
Well I assume the government made the right contractual arrangements with OUR money.
If the banks can get repayment on demand then so should we.
Of course this would sort out the bonus thing.
NewbankUK would be in operation of course to run the best bits at once.
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The demise of RBS is generally accepted to emanate from the mis-judged purchase of ABN Amro, a mis-judgement that Sir Fred has to answer to. However, the failure to see (or force RBS Board of Directors to see) down-side risks that would affect the UK Banking System is surely a failure of regulation?
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It may be a minor detail in the great scheme of things, but these "apologies" were not voluntarily offered by these failed but unrepentant bankers, but were grudgingly made when the chairman asked them in his very first question if they would now apologise. I thought the comment offered by Derek Simpson, joint general secretary of the Unite trades union was most aposite, when he said these bankers had unwillingly gone through their political grilling, so they could scuttle off to claim their bonuses.
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I am a middle class 57 year old, self-employed businessman. I was brought up to be patriotic and honest, to only borrow when I could repay, and to be part of the bedrock of society. I now find I have such a visceral hatred of our political class and our bankers that I have decided that I will vote for whoever promises to prosecute and imprison the lying cheating thieving crooks who have destroyed our country with their false accounting. Make no mistake, they have destroyed it. 90% of people do not have the slightest idea about what is coming. We shall have a grandstand seat at the Irish implosion, much like those who watched the first of the Twin Towers go down. When Ireland has gone bust and its population is desperately trying to emigrate we shall have a preview of our own fate.
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Re: 23 arabstrap_808
I like it. Bonuses should be (long-term) performance related.
I have a question.
What did Andy Hornby mean when he said (regarding his remuneration)
"I have lost considerably more money than I have been paid," ?
Methinks he's trying to be devious, and I don't think he will score many Brownie points that way.
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HMS METAPHOR SINKS ON MAIDEN VOYAGE
Due to a totally unexpected 'snow event' the British economy, formerly believed to be unsinkable, has been lost without trace.
'We think she went down part way between the City of London and Wall Street. Unfortunately we don't know exactly where or what caused the tragedy, because at the time we were concentrating on the far more important question of Sir Fred's bonus'
said a BBC/govt/regulatory spokesperson.
The spokesperson strenuously denied that the sinking was caused by the METAPHOR being overloaded with a TOXIC CARGO of CDOs
'We don't even know if this collateral exists, let alone how much it might weigh, so how could it possibly sink the world's biggest and most impressive metaphor, even if it did start to shift from side to side, which we have no reason to believe happened by the way' said Commander Brown.
Unconfirmed reports say that the METAPHOR had steered a course past the NORTHERN ROCK and was near the CITI BANKS when it disappeared near the GOODWIN SANDS.
Ed Balls said that the sinking was the worst METAPHORICAL DISASTER since the sinking of the TITANIC; definitely worse than the LUSITANIA or any other REALLY BIG BOAT in the last 100 YEARS. SO THERE!
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Why did they do it? They were driven by their shareholders - virtually everyone (pre-crunch) in the country by dint of their pensions - to generate higher returns - because we are all interested in that. And more importantly the pundits - i.e. Mr Peston et al for not making the right return on capital employed.
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It is blatantly obvious that the banks are being reactive rather than proactive in their actions to apologize at this late date. It is rather like a naughty schoolchild who has been chastized by their parents over an indiscretion. This apology is merely a reaction to many a media outlet demanding an apology.....therefore it is meaningless.
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Re: 55 notsodumbtyke
BRILLIANT ANALOGY !
Well done.
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The main problem is that no one at the top of the banks, or governments, actually understood what was going on.
Or maybe they did...
If anyone did understand then an apology would not be enough. Summary execution would seem more appropriate.
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Will someone please inform me what a bonus is or looks like ?
Certainly hasn't happened where I work and i'm not sure how it could be "earned".
If it's for making mistakes like I am led to believe-I should be rich !
Ooops-did i say that ?
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Watched Act One of the craziest farce in town "Calling all Top Bankers , Past and Present, to
the Star Chamber." Can't wait to see Act Two. Who will be the first to lose his trousers ? And
will there be an Act Three?
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54 simondgoodfellow
I am not sure.
As an individual or a group I am not sure you can make the driver go faster. He has to be willing and able to do that in the first place.
Yes we all wanted a top return but the investments were surely obtained by selling to the investor?
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Id be ever so impressed with this hammering of the bankers Robert if it wasn't for the fact that you are incapable of taking to task the main culprits, the labour government
Its a matter of hear see and speak no evil as far as they are concerned on this blog
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Nearly right, #24 - it's actually worse than that, or better for some.
Go research the best-known graphic on your subject, found in St Bavo's Ghent. That has a brother painting in the Prado, by the same artist, which portrays the end of your posting. The brother painting was recently redated to 1435, which is the same date as a Papal Bull establishing the Chapel of the Lamb. That chapel is in the course of being abandonned, and the Lion lying down by the Lamb appears by documentation to be the real thing. Now, I was reestablishing contact with the world's leading expert in those paintings, who is checking the association, having given it his tentative approval in the absence of his reference works, when I found all my old fellowship surfacing around me, and you know how old Rahere is. Such coincidences aren't coincidences in my experience, this thing's going for the end game as Abbot Malachy said and so you really owe it to the folks who want to follow you to complete the job. If you want that repentance you called to be real it has a prerequisite, confession in faith, not to a priest but to the One Habbakuk's speaking on behalf of.
Rahere's being gnostic again, I hear the cry. Go do some thinking, if you want to ask Rahere about the symbolism I'm not on Dead Journal.
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Assuming this quote from Andy Hornby, former chief executive of HBOS is accurate then Mr Hornby is either utterly disingenuous or a total buffoon which explains why his bank failed :-
"I have never received one single penny in cash bonus," he said, referring to his time not only as boss of HBOS but also his time on the board.
Instead, he said, he had taken his bonuses in the form of shares.
"I have lost considerably more money than I have been paid," he said, referring to falls in the value of shares that he had been given as bonuses.
How on earth can you be given (i.e. zero cost) something and lose money by having it? Even if the quote isn't accurate and he was given options that he bought and that then went down in value below the option price, that my utterly overpaid, squirming fellow is what is known as investing. It is what normal people have to do.
Quite why executives think that a culture that feeds them bonuses based upon shares that float in a dreamworld market of manufactured value is not going to lead to short-term practices to over-leeverage and inflate said value is beyond the understanding of rational people.
But then executives aren't rational and 40 million taxpaying Father Christmas's had to magic themselves into existence to rescue their mistakes.
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I think it is probably irrelevant if they do not tell us where they went wrong. The key point is we do not want these incredibly incompetent people in any part of the banking system. This will though work out quite nicely, indeed we can kill two birds with one stone:- first we with hold all their bonuses, then, if they carry out their 'threat' and leave their jobs in droves, we get rid of them for good as well. This is win win in my book. Let us not worry about their perception that they need a bonus system to 'hold on' to these rocket scientists - the quicker e get rid of them all and bring in fresh blood (competent at a push but tightly regulated will do)
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Ah, can we post non-metaphorically now, Mr Moderator? Kill this one if no, pass it if yes, you'll be forgiven as you're the unseen hand.
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There is still the point of view within the city that a very large salary and bonus is justified for these bankers in order that business can attract and retain "THE BEST" !!!!
Could Mr Peston please ask some city movers and shakers a question "How exactly would you define best...?
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Interesting. I wonder whether the remuneration at this level really does govern behaviour in the way Robert suggests. It feels as if the bankers are in a Catch-22.
If they say that their remuneration structure did encourage the behaviour that they are apologising for, then it means they need to look at it and redesign it. On the other hand, if the pay structure did not influence behaviour, that eliminates a major rationale for its existence.
An update item here about the rationale for bankers' pay structures:
http://www.knowingandmaking.com/2009/02/behavioural-models-of-pay-and-agency.html
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Re:64 expatinthenetherlands
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Their sorry!
Sorry!
No their not!
Their not sorry for making themselves so very very rich at the expense of everybody else, not only in regards of the monies we know about - do you honestly believe these people have no undeclared assetts and off shore bank accounts!
They have not offered to pay back monies and try to make any amends whatsoever.
They can not give a reason for their motivation to pursue the policies and strategies that they pursued?
MORE RATHER THEY CAN NOT DISCLOSE THAT THIS THING WAS DESIGNED IN A MEETING ROOM VIA BILDERBERG
So we are to swallow that these people have not reflected on this matter and learned nothing - become rich beyond belief from the pain of Joe Public - but they are sorry!
THESE PEOPLE (INCLUDING/ESPECIALLY THE POLITICIANS) ARE LUAGHING THEIR PANTS OFF AT US FACTORY AND CANNON FODDER. THEY HAVE PROPERLY STITCHED US UP ON THIS ONE FOR THE LONG TERM. THEY ARE NOT SORRY BECUASE THEY DO NOT CARE ABOUT THE MAN ON THE STREET AS LONG AS I AM ALRIGHT JACK.
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Robert, Surely you know that some of this is Fraud, Collusion, Negligence, and Fiduciary Mismanagement. It always happens that, when the possibility of being sued or worse comes up, these geniuses paid great sums of money plead imbecility and being out of the loop. The other cause were the implicit guarantees. How do you expect these people to admit that they took great risks because they knew that, ultimately, the taxpayers would pay the bill.
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#19
I couldnt agree more..... its easy to point out the obvious after the event.
And, oh how the masses revelled in their supposed 'genius' for making killings from playing the property game
Over a decade average house prices rose from £55k in '97 to £172k in '07 (12% vs GDP of 3%-4%). And what was best was that we managed to magic this 'wealth' out of thin air. Clever eh?
Did we not look around the rest of Europe and think it might be a little odd that we were the only ones borrowing more and more and more and inflating prices higher and higher and higher.
Everyone should accept the fact that WE (and the govnt) are all to blame just as much as the banks - we all went to the party and now we're enjoying the long long hangover.
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Robert, please ask the questions put by newProtectorCromwell on your earlier blog today:
The bankers should be asked, one by one:
(1) What is the size of your bank?s gross external debt?
(2) What is the annual interest on this debt?
(3) How do you propose to pay the interest and repay the capital?
Everyone should read his comments, made in the last couple of days, as they show the horrifying position this country is now in.
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WAKE UP
This bankers thing is a sideshow. We are in the mire. The IMPORTANT thing is to find a way out before we sink too far.
Then you can go back to skinnning the bankers.
Peston start addressing the REAL issues of the Depression
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Re:64 expat sumwer(safe ?) abroad.
Cheers ! thanks yr comment
I'd buy you a pint but can't afford it old bean and besides-you are too far away.
Bit like these banker types except they had a few fairies for company.
Tip:stay where you are cos we've run outta tin hats over here.
They've just put beer up 10p pint in my local club and they blame it on the banking crisis !
Yes indeed-they have a lot to answer for these chaps.
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It is about the Pricing of Risk
Plainly what they did wrong was the long term miss-judgement of risk. Even now they seem not to understand this. If the risk management systems had been working properly the banks would have had far more understanding of the level of risks they were undertaking and would have been able to price for them appropriately.
(That is if they are not lying about not knowing what they were doing - and it is probably fair and wise to give them the benefit of doubt in this matter.)
It is my opinion that their style of management also contributed to the culture of miss-management.
Many people all around the World miss-estimated the risk of the packaging and multiple repackaging of loans - however it is not true to say that there were no warnings - just that they were ignored - again due to the style of management.
It is also reasonable to blame the culture that said that loans were affordable and that was all that mattered - that is, that it did not matter that the loans were for very high multiples of income. This culture gave rise to the whole sub-prime loan business - without which we would now still have a stable and functioning global economic system.
This is precisely the same area as I and many others were warning the Bank of England and the Treasury about for most of the last decade. All of the people who did not listen and rejected the logic of our arguments are culpable, that is the Banks, The Bank of England, The Treasury etc. Their arrogance directly led to this disaster.
But enough of the past -
We vitally need to say where we are going and what is important, vis sound and valuable money - interest rates up so that both savers and borrowers get and pay their fair share for capital. Without this there is no recovery and anybody that claims that returning to the disastrous policies of the bubble economy will fix anything is a dangerous fool.
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Torches and pitchforks number 51? Are we now advocating lynch mob justice? Have we gone mad and lost all perspective on the world? And all the people calling for our ex-bank CEOs to be jailed - what for exactly? last time I checked they had done absolutley nothing illegal. Upsetting the ill informed and over emotional masses of the UK isn't, unless I missed something, a crime.
People need to grow up, stop moaning and start looking ahead not back. We have all lost out. Nice to see some reasoned blogs coming through now. The government (Brown / Darling - you know who you are) need to step up and start accepting their part of the blame. And everyone that thinks 4 individuals are to blame for a global crisis needs to do a bit more reading on the topic before letting their thoughts out.
We were all happy (government included) to take the cash when the banks were throwing it as us - loans, dividends, corporation tax, etc.
Don't forget
1) We seemed to have fogotten that loans need to be payed back. Living beyond our means is not a good idea. Just because banks offer cheap credit doesn't mean we have take it and we should be responsible for our own financial decisions.
2) The value of investments can go DOWN as well as up. Pensions down, ISAs down, income down, profits down, tax revenues down. That's life as they say.
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I would just like to point out that we had been warned about all this as early as 1597, which if my memory serves me correctly, even predates Thatcher:
' Why, yet it lives there uncheck'd that Antonio hath a ship of rich lading wrecked on the narrow seas;
the Goodwins, I think they call the place;
a very dangerous flat and fatal, where the carcasses of many a tall ship lie buried, as they say,
if my gossip report be an honest woman of her word. '
(William Shakespeare; The Merchant of Venice, Act 3 Scene 1)
be warned Ed Balls, Will Shakespeare could turn a mean metaphor or two when he wanted!
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Why did they do it?
IT'S THE SYSTEM THEY OPERATE UNDER.
Can't anyone else see this system of Capitalism is an exponentially expanding system which continously requires re-invention to stop it collapsing?
Goodwin is right, bankers will go elsewhere if they don't get paid enough - that's competition for you (a Capitalist feature).
This WILL HAPPEN AGAIN, it matters not how sorry they are, it will not stop happening.
Just think about how we got here logially for a minute. Banks are competing against each other - competition means they have to continuosly find ways of beating their rivals.
This means smaller margins, higher volumes and bigger risks.
There is no avoiding it - and if Robert thinks that
"But it matters that we learn the lessons, so we can design a sounder, safer financial system."
....then he is a fool - because this is EXACTLY what was said in 1990 by the bad men of that day.
"Motivation was glossed over"
Am I the ONLY person in the world who can remember 20 years ago? Has everyone else had their brains lobotomised or something?
Peston - ask the right questions of the authorities.
1) Why does this keep happening?
2) What are you going to do to stop it?
I am about to give up - I cannot watch this car crash Economy any longer.
Either admit that boom and bust is here for as long as Capitalism is around, or shut up. Anyone who tells you different is either mis-guided or a liar.
Gordon Brown, our 'leader' - picked from the best of us - doesn't know that.
Robert - it's time you started embarrassing these idiots that pretend they know what they're talking about.
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I am a small shareholder (although not small to my scale) in both RBS and HBOS. Obviously I lost a lot of my money that I was saving for future in a hope to buy a flat or a small house. Big hit for me and my family.
I am not angry with these four men. I believe they are honest and very capable people who did their job to the best of their knowledge and judgement. It was very difficult to expect collapse of Lehman Brothers, closure of wholesale money market. These two events changed everything. After the storm arrived it was more a question who is lucky one to escape with less damage. HBOS and RBS were not lucky at all. Barclays, for example, were lucky to lose ABN AMRO battle, although they were keen on it. But I still think that, for example Fred Goodwin is a very good banker who can help now RBS to rebuild itself (as a consultant for example).
The names of these guys are now everywhere with bad comments, very harsh critisism. I am bit sorry for them.
I agree we should learn from them but we should not blame them. Many, many people in many countries are at fault for this crisis.
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The main reason for their collective failure was that they did not understand the nature of the leveraged products their employees were trading in. Confessing that would mean confessing to ignorance and stupidity which they aren't going to do. A classic case of the failure to 'keep it simple, stupid'. Systems become unstable when they become so complex that the interconnections can't be seen. We humans over-estimate our ability to handle complex systems. You can't regulate what you don't understand either. And you can't govern what you don't understand, as Gordon may one day realise.
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As a psychotherapist I have noticed that when people cannot or will not explain why they have behaved badly it is often because they are scared and ashamed of what they have done, and are fearful of what others will think of them. The fear and shame is usually in direct relationship to their estimation of their own self importance on the 'bigger the come, harder they fall' lines. The truth is that they probably did what they did for the piles of cash and the bigger the pile of cash the more important they thought themselves to be. This is a hard thing to admit for the average Joe or Joan - how much harder for these macho big hitters?
The four musketeers in front of the committee today all seemed to me to be in shock and showed it in different ways. Furthermore, there is a possibility that the Select Committee's questions (which in truth were pretty mld when measured against the damage these guys have done), amplified the unsettling effects of the pre-meeting training and rehearsal they had been through.
Stevenson - hunched body shape and very nervous , like a frightened dog.
Hornby - 'Mister Cool in a big suit' at the start but increasingly withdrawn and silent as the meeting went on. His Harvard MBA was no use to him here.
Fred the Shred - Cowering, sweaty, tentative. If I ever saw a guy who was clinically stressed and psychologically drained - this was him. Go and get some therapy Fred - your Ferraris will not help you out of this one.
McKillop - A scientist and mathematician and the least permeable of the lot - likely to have the the most difficulty in coming to terms with this I would guess though he did make something of a start by admitting that he didn't 'completely' understand the SIV's and leveragings he had been playing with.
And the public opprobrium isn't finished for them yet - immediately after the session the RBS announces that 2,300 jobs are to go across the country. I guess they thought it would be a good day to bury the job losses which again shows how recalcitrantly unrepentant they are.
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Good old Ed Balls-tell it as it is !
Certainly makes Mr.Darling/Brown et al look like shrinking violets.
Doesn't quite imbue a ring of confidence in the ability to see us through the mire at this present time.
Perhaps he should be out with the cart crying "bring out yer dead".
Great PR however-that'll give us all something to chew on - no doubt !
I can almost feel Gordon wincing and growling reading Ed's mecurial prophesy.
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Give them African trade beads or slave beads as bonuses
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Sorry indeed! But it's not just the banks who should be sorry but the whole government who are only too ready to fleece us. We pay tax on earnings, on what we buy, on homes, fuel and even after death our families become liable for yet more tax. No wonder we have to borrow from banks whenever we need to buy anything even moderately expensive like a car...because there is so little left.
Perhaps some urgent re-ordering is required. Tightening of belts with less money spent on things that aren't really required (and goodness how Labour have loved those useless expensive projects like ID cards). Less money for 'consultants' brought in to advise government., fewer QUANGOS populated by has beens with snouts in the trough..just less government full stop!
Once this inefficient money laundering operation between government and banks stops perhaps they might be good enough to allow us to keep more of our hard earned cash and allow us to deliver the stimulus package to the economy on our own terms!
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My albeit limited understanding of our current situation is that it is primarily due to the US sub-prime mortgage market and the financial derivatives that came about. During this mornings meeting, one of the "big four" mentioned very casually that the financial "derivatives" that HBOS and RBS had been buying into massively had been given AAA credit ratings in the US. How on earth did these financial instruments - or toxic waste, as they are being called now - get a triple A credit rating??? Who from - S&P, Moodys? Is someone guilty of a massive fraud even bigger than Madoff? Why is no-one questioning these credit-ratings agencies to ask them on what basis they gave AAA ratings to financial instuments based on the sub-prime market? I doubt whether it will happen, even in the US, certainly not over here, but I believe that there is culpability somewhere in the system and feel that only a prison sentence will send out a strong enough message from we, the public.
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Perhaps they knew it was a house of cards and hoped it would all go away.
Banks have been buying their own shares for years now.
A director buying is a sign of confidence.
Mugs, that is us via our pensions, follow the money and buy into these rising shares.
Options on these shares, which the senior bankers had a plenty are suddenly well into the money.
FILL YER BOOTS BOYS.
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Apology? More like a tipping point.....
Fascinating things, tipping points.
A problem here. A problem there, even a few problems together. Not to worry; the great ship of state steams on under the masterful navigation of the experienced captain.
Them all of a sudden, that extra unexpected unpleasantness hits - and in spite of all assurances by authority to the contrary, down she goes faster than you can say "what, no lifeboats?"
But show some backbone. The deckchairs are in immaculate order and the band is playing magnificantly.
Oh metaphor, give service to the Prime Minister and HMS Britain.
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# 71 themaster
yes Hornby's comment about losing more money than he made was strange
it suggests he has the same silly resentments as many North London civilians; you know, the ones who go out and buy a terraced house for 300k and later see a similar one on sale in an estate agents window for 600k; 'heh I've just made 300k they say' today they sell it for 500k but instead of being pleased to have made a hefty and undeserved profit they really think that they have just lost 100k!!
you'd expect more from the highly-trained and expensively-educated mind of a MASTER OF THE UNIVERSE
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re 19 -
here here, finally an intelligent comment from someone who has thought about the wider picture, and not just following the crowd in shouting at a few bankers.
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Must be nearly home time for moderator-it's all slowed down again.Never mind-he ain't done so bad today,has he/they ?
Yawn..........well,off home soon myself-listen to the good news that's bound to be on the telly(sic).
Ah well.........there's always tomorrow,and the day after,and the,day after ad infinitum.
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In what census of living creatures, the dead of mankind are included; why it is that a universal proverb says of them, that they tell no tales, though containing more secrets than the Goodwin Sands...
Herman Melville; Moby-Dick, Chapter VII
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I start from view that the four bankers who were brave enough to put their heads above the top of the trench are probably decent and honourable men. My guess is that given hindsight the only response they can give now is the one we all use when things go wrong which is that 'it seemed like a good idea at the time'. My view is that at the heart of this messy business the risk assessment techniques were useless or inappropriate, although I'm sure that their respective organisations spent millions of dollars/pounds/euros on this activity. For a much more elegant explanation than I can give of why this is so I recommend Nick Taleb's book 'The Black Swan'. Mind you buying ABN AMRO and investing in Madoff ought to have been seen as a risk too far without any sophisticated statistical analysis.
I don't think awarding bonuses is a prime factor. If risky investment is not properly assessed then the risks will be taken bonus or not. This is not to say I agree with obscene levels of bonus being paid. I also believe that if bonus payments are to be any part of the future financial industry that claw back will be unworkable, will there be bonus police? what happens if in good faith you have spent your bonus and the bonus police want is back three years later? what happens to the tax paid on a clawed back bonus ? By the way I don't get a bonus now but when I did it was about 10 percent of salary and was a reasonable incentive to do a good job.
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When are Brown and Darling to go before a select committee.
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61:"Due to a totally unexpected 'snow event' the British economy, formerly believed to be unsinkable, has been lost without trace."
And people now realise that only those travelling First Class have access to the lifeboats. The rest will have to make the best of it in the icy waters of impovershed retirement.
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Surely the inconclusive answers are due to the fact that the GUILTY parties are hedging their bets as they suspect that they may yet end up in a real court.
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74
It also makes one wonder what on earth the "worst" could have done.
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Why do we always want to blame others for our misfortune?
I have heard very few, in fact no one offering to pay back the money they made on the stock exchange during the heady days!
I have heard no Politicians saying sorry for getting it wrong, in fact they keep calling for the easing in credit to “get things back to the way they were!”
I have heard no one offering to sell their second home to help support those who have lost their jobs!
Yes, there should be people held to account and they are our politicians. Gordon Brown and his merry men have a lot to answer for. They tried to perpetuate the myth that there was no end to the good times, “The end to boom and bust”. It has become apparent that there have been a number of warnings which have been shot across their bows. However they chose to ignore them and continue on their doomed course. What’s more they are determined to continue on that course even today, to our peril. After all hasn’t Gordon managed to save the world! Pity he can’t save our economy. Yes the bankers should apologies because they should have seen it coming. However so should our Politicians, So called expert Economists and the pundits. Any one who has broken the law should be prosecuted but you can’t imprison some one for being incompetent and or stupid, the fact that we may have lost our savings, pensions and possibly our livelihoods unfortunately is just unlucky. What we should do now as a nation is act in a democratic manner and vote out the Politicians, vote off the directors of the financial institutions, Complain about pundits if they do not provide a balance report. And the economists, we should just do with them as we always used to in years gone by, banish them to places of great learning or back offices only to brought out on rare occasions. After all the first three are more than capable of telling us what has happened and why it was or wasn’t their doing………
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Re:neovantage 92
Yes but that's far too complicated for HM Government to sort out.After all,where would we all be without a good old Quango and the latest scam(sorry scheme) to get ordinary folk to part with their hard earned spendulies.
Oh yes and all the efficient,value for money purchases made in IT systems for NHS,MOD,Home Office etc etc-they should all be scrapped without a proper evaluation and assessment for suitability of purpose exercise.(and not by yet another team of expensive consultants either).
PS:I'm thinking of opening a consultancy for beer sampling nationwide to advise brewers of the suitability of their product.I'm looking for some inward investment-Any takers please ?
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R P - I do not disagree with the comments that you make - but do not let us let the politicians off the hook, also the regulators,
That said - events have over taken us - I suggest that you do not go to bed tonight - ney - you are NOT allowed to go to bed tonight - until you give us your view(s) on the latest from the US Treasury.
I will be no doubt up at around 04h00 11/02/09 to read your initial comments. They had better be there!
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So light touch regulation is folowed by light touch Treasury Committee. Why do we let these people get away with it? Put them in front of a judge and if found guilty lock them up!
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More waffle & time wasting. I don't think we will ever get a true answer - as things stand.
Any review or inquiry needs to carry some weight - which is clearly not happening - there is too much vested interest. We now need to move on.
The Goverment is standing still instead of planning for the future. Whether throwing money at the banks will work or not - only time will tell. Unfortunately, for many,time has already run out.
I would like to see a future goverment "of the people for the people"!!!
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I'm bored with bankers
I've no faith and I suspect you don't have any either Robert
I agree
the best we can expect is that we learn
and not make the same mistakes in the future
Meanwhile back in the sticks
what are we meant to do
where do we get a job if we have lost one
where do we put our hard earned savings
when will it stop snowing and raining
when will the sun shine and the green shoots appear
??????????????
actually it was a beautiful day here today and I'm jolly glad I was not stuck in parliament listening to a lot of squirming bankers
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87
Do not be sorry for these people.
They bullied, backstabbed, cheated and disseminated to get to the top and NEVER think otherwise.
I have worked in many banks and with very very few exceptions the top people can be charming but they are ALL UTTERLY RUTHLESS.
Sorry
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Told you I was going home soon !
Gonna see how much left in the old bottle to muster up a few beer tokens........I just love all the finance chat.......it elevates me to a higher plain.
We'll meet again,don't know where,don't know when
Goodnite all !
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All of this is becoming a waste of time.
Do we really expect anything more than sorry ?
The person to be held to account is Gordon Brown, - period.
The last few blogs that that RP has posted have done nothing more than convince me that they are posted to distract people from the real problems that we are all faced with.
We should be spending more time and effort in getting shut of GB rather than posting views on bonuses etc.
Wakeupbritain called for a march in march to Westminster, I think we could do better than that.
What about a concerted run on an individual bank or building society, followed a few weeks later by another ? He can't nationalise them all can he ?
OK, that might not work but we have to do something to get rid of him. Although the odds are stacked against it, I just can't stand the thought of him getting back in next year and having to listen and watch him for another few years !!
Suggestions, please
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I felt your blog item might have been better titled -Not quite the full story.
I watched a good deal of the Select Committee and was left with several impressions - the four men being questioned were not venal, they did not seem any greedier than most of the population. They believed in the decisions they made, most had lost money by investing in shares of the bank they were working for - they were like incompetent doctors, happy to treat themselves and their families with inappropriate remedies (they were good but misguided agents of their principals). I also feel that the people in charge ten years ago would have done no better, and the same would be true of those who follow them. I do think that much of what has received attention, recent lending decisions and dodgy acquisitions of banks who had made similarly poor lending decisions, is only part of the story and probably more symptom than cause. I believe the problem as always lies mainly in the real economy and the downturn in GDP growth across world (which paralleled or led N Rock, US Housing, Lehman collapses) and meant a whole range of assets (from rolled-up loans to shares to mineral wealth to housing) were overpriced. I think we should be hearing more on some of the fundamental imbalances in the big economies (especially China and USA but also Europe and Latin America) that I feel contributed enormously to downward revision in GDP growth.
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Robert is quite correct.
Apologies are all very well - what we need is a thorough analysis of the causes and the motivation. How are we ever going to ensure that this sort of thing never happens again if we don't get to the root causes.
In the mean time it's easy for these people to walk away - probably none of then need ever work again - their accumulated telephone number salaries will have ensured a comfortable future despite any losses the've made from the current situation.
Not so with vast numbers of their customers and shareholders who believed them and put their trust in them or with the rest of the population of this country who will suffer the consequences for years to come.
However, we are where we are and the trick now will be to stop wasting time on witch hunts, blame and recrimination. We need some good, strong leadership (I said good advisedly - we know where evil strong leadership took the world at the end of the last depression! - Oh sorry it's only a recession isn't it!). Leadership to move us forward and start rebuilding this wonderfull country of ours in conjunction with our neighbours.
Sadly Annie doesn't believe that the present incumbent is up to the job - indeed Mr Brown is probably as culpable as the wriggling bankers - but what did I just say about witch hunts????!
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Peston you are being blindsided, dig around and find out what the real story is, you, and then the rest of us are being fed all this bank stuff as a diversion.
WHAT IS REALLY GOING ON.
C'mon the big picture not your normal stamp sized view of the world.
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90
Yet another example of a government minister opening his mouth and sterling falling.
I believe they are deliberately devaluing the currency for political ends.
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Well they didn't look very sorry to me. Shame they werent facing the members of the public that they had cheated ..then we may have actually seen a worthy inquiry . It's all nonsense but the government and the bankers still dont believe that anything has changed and that we havent rumbled them.
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It's not even the REAL story!!!!!!!!
$1.5 trillion for US banks + $350bn still to be released from TARP + $850bn Recovery Package. This is just Toytown economics. None of the above is even sure to resolve the problem.
If you didn't believe that things were desperate before you'd better believe it now.
perhaps Ed B was understating the position.
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I will make a prediction. Once all of this is out of the way, say in 5 years time, some or all of the characters mentioned will either be enobbled for services to business, sit on the boards of some private equity firms or public companies as non-exec directors or will chair some public enquiry into some spending review. In other words, they will do a stretch of 3 to 5 living off thier immoral earnings and then re-emerge as champions and experienced business men.
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You continue to bang on about "the toxic rump of ABN AMRO". You do not have A CLUE about what you write Peston. Get your facts right before blogging such drivvel
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What a complete waste of time and it just shows how detached both sides actually are from normal everyday life.
This was nothing more than a press conference.
No answers, the wrong questions and pathetic appologies for nothing.
So they did not see it coming. Oh well, lets leave them alone then.... No we want answers and If you cannot provide them please give us the name of the chap that was fired.
This has got to go to court, so that under oath we can perhaps fully understand what went wrong. Not to point the finger at any one person, but so that the errors can be corrected for the future.
Yet it seems the government are happy to let the banks carry on without any real answers.
Surely, the Gov don't already have the answers or do they?
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When, I wonder, is the high and mighty McFall going to call the Golem at No 10 to account for his sins of ommision and commission? When will the Golem be subjected to the strident haranguing of McFall? When will McFall demand straight answers to simple questions from the Golem (mind you, I don't think the Golem can answer questions, simple or otherwise)?
I feel some degree of sympathy for the bankers. Just a easy target for a government desperate to deflect the blame away. But it wasn't the bankers who boasted of ending "boom and bust", which was one of the catalysts for this meltdown. Who needed to be prudent when the good times were going to roll forever and that was the message from the Golem when he was at the Treasury.
If I had been in the bankers positions I'd have given as good as I got from a quarterwit like McFall.
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There is such a thing as domain knowledge gained by working within an enterprise for many years. It looks as if some of these 'repentant' bankers lacked the domain knowledge derived from such experience. And as to those 'rocket scientists' who have been employed as financial engineers, what on earth did they know about banking?
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The contrast between the way these fraudsters are being interviewed and the methods used on
ON THE FIDDLE documentary
are extraordinary.
I watched a programme last year where a young woman was harrassed and threatened with jail because she had allowed a friend to stay overnight when she was claiming income support.
The interviewers were sneering at her and her baby. Heartlessly they flung a box of tissues at her as thy verbally battered her. They withdrew all her benefits and she was left in tears with her baby short of food and even nappies!
The poor woman looked a wee bit simple but no compassion was shown.
If only these DSS guys could have given the same treatment to our talented banking friends.But of course they get the rolls royce chummy routine without the danger of losing their 60 pound jsa per week.
two sets of people, both groups potentially damaging the economy.
Dickens couldnt make it up.
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Shouldn't the Treasury Committee be asking the same questions of the Government?
We have had 12 years of Nulabour who managed to run a trade deficit every year and a PSBR almost every year and sold gold at the bottom of the market. In addition they could get to the bottom of the "sub prime" PFI's owned by the same banks that are now government owned, all apparently off balance sheet.
It would be nice if after cleaning out the banking stables they turned their attention to the manure in Government. The Treasury Committee could start by interviewing Ed Balls.
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These mealy-mouthed scoundrels should be brought to book by whatever means is at anyone's disposal, irrespective of who else profited by their chicanery. It is now time for GB to act like a man and prosecute.
Why?
1. Confidence.
2. Justice.
3. The future.
Integrity may be a laughable word in that sphere, but isn't it what the whole sphere was built upon? It isn't just a useful illusion for the conniving - the promise underlies everything and must be delivered on demand. These people have encouraged quite the opposite - unsustainable promises that led inevitably to collapse. Whoever has the power to bring them to book, must surely do so.
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I rather liked their answers when asked on their banking qualifications. Consider if this had concerned an airline crash investigation:
Hornby: I've been in a simulator;
Stevenson: but I haven't crashed before;
Goodwin: why can't a jumbo be flown like a F16?;
McKillop: I passed the maths test.
At least now we know - it was not greed, it was incompetence.
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A lovely phrase much parrotted by our leaders, it is important that we learn lessons.
If the public knew that they needed so many lessons they would not have elected them.
Is is the same bunch that want banks to lend at 20007 levels?
What is evident is that the deterioration of the economy is happening at a speed that is difficult to manage or predict. The sad thing is that we have no insulation against the hurricane, and that is not the fault of the bankers alone.
A s#30 wrote can you imagine the howl that would have been raised if banks and building societies had reined in lending?
We have had 12 years of spending off scale and the governments accounts are not transparent. The politicians are not going to have to sit in front of any committee and take such medicine. with the books open to scrutiny. We have also had a lack of real reporting, and the BBC have been batting in their corner.
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110. grannyfromthesticks
''I'm bored with bankers''
They are amongst the most boring people and convinced that they are talented. To lose billions is a sort of talent I guess. Are they likely to be headhunted for this great talent. Only by a headhunter I hope, you know a real one. That would bring tears to the eyes.
Well I'm glad to hear that you are bored with them. If more people get bored with bankers then we might just get onto the other heros of the panto, Brown and his Ring. After all Brown is running out of places to point to and people to point at and say its not me its them - over there - over there. - No its behind you. No it's you Gordon.
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I am incensed by this situation. It appears that these gentlemen have said sorry in the hope that their actions will be forgiven and they can continue to live as normal. The money they have used to create their personal wealth is our money. They have taken risks with our money, not theirs.
They have to do a lot more than say sorry. They do not behave as if they are in the same economy as the rest of us. We are all having to make sacrifices as a result of their actions, and yet they still appear to think that bonuses (in shares or otherwise) are justified. I can think of no other part of our economy where failure would be so handsomely rewarded. A member of staff being punished for poor perfromance doesn't get let off for saying sorry. No other company gets rescued this way for such abject failure. I agree that the banks needed to be rescued but they need to show the humility of the rest of us and forgo bonuses and salary increases until the economy is back on its feet.
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#100 "I start from view that the four bankers who were brave enough to put their heads above the top of the trench are probably decent and honourable men"
They had no choice - it would be Contempt of Parliament otherwise. MPs could have forced them - or confined them to the Tower!
McKillop admitted that securitisation schemes had increased risk where they expected the opposite. He seemed genuinely apologetic, and by far the most intelligent. The other three were disingenuous and arrogant. All seemed to be out of their depth. No-one seemed concerned about the unsustainability of the asset price bubble, or analogies with previous similar episodes.
There do need to be prosecutions for negligence. If a bus-driver drove a double decker into a low bridge, he could expect a prison term. This crisis is ruining peoples lives. and will cause much illness and some death on the way.
Also, the casino side of capitalism needs to be severely curbed. Tax havens need to be shut down. All MPs and those working in the Financial Services industry need to be forced to take an Economic History course. If an educated layman like me feared something like this several years ago, why didn't these so-called experts? There needs to be some econometric research into the relationship between the global asset value/productive capacity ratio of any economy, and the risk of bust. Call it something like "The Warning Bell curve".
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#54
As an investor I spent as much time beating them off as I did investing. Now there's nothing in it for them they don't give a monkey's. That's how they pumped the thing between themselves, refusing to listen to anyone else.
Because you don't know what happened, you don't have a say, as the last time you came up with something it was nonsense.
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So now they have said sorry I suppose its our turn to once again line their pockets with gold.
Utter rubbish....the only people they are fooling with this tosh seem to live at no 10 and no 11.
Can we bring back hanging?
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What a shower!
An apology is all very nice but where do we go from here?
Are these individuals going to commit to unscramble the omlette they made and give us back the complete eggs?
It just goes to demonstrate that you can be very clever yet not be very intelligent. Surely imagination or even a moment of objective thought would have told them something?
Even I winced when I heard of the ABN Amro takeover as anyone could see it was at the top of the market. I am not a banker, I don't work in the City and I am not an economist.
Yet you don't have to be any of these to understand the nature of value, and that any investment requires a return.
I think Baroness Vadera's little grannies could have made a better fist of it all, but she did for them didn't she?
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i dont know about everyone else but if i was sat next to a banker at a dinner party i think i would move down a seat.
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This comment was removed because the moderators found it broke the House Rules.
There is a degree of missing the point. We know and have always known bankers are greedy, cause bubbles and act like lemmings. They have been doing this for decades - on this occasion incredibly spectacularly. Making scapegoats out of certain individuals, putting them into bankruptcy and taking away their titles might satisfy our anger temporarily but it will not really help. We are where we are.
Overseeing the financial services system was the regulator and the government. Whilst many separate banks were behaving stupidly, where was the over-sight of the entire system? It seems to me that Mr Brown was enjoying the fun as much if not more than most. We need a meaningful apology from him and an election to determine whether or not we accept it.
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Welll they have finally proved one thing......these guys are not entitled to the bonuses that they claim were an essential part of their job.
Once again we can clearly see that they have no idea what they have been doing and have simply been riding a gravy train for all its worth.
There is no talent in any of these people just an ability to scam the rest of us.
This constant line of the best people will leave. Well once gain we have seen the best, so let them leave; better still force them to leave!
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Ok, so the country and MPs have had their chance to lob a few rotten tomatoes and eggs at the bankers in the stocks.
But no-one emerges from this with any credit. What about the Government which was happy to support the boom (and take the tax receipts)? What about the regulators who clearly fell short when they could very readily have adjusted capital requirements for riskier activities? What about the institutions who INSISTED that banks made a return on capital of 18% (to be made only by what turned out to be excessive risk) and, in the case of RBS, had the chance to vote on the acquisition of ABN and failed? What about the rating agencies? What about the borrowers who allowed themselves to become as over-geared as the banks themselves?
Let he who is without sin cast the first stone.
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The numbers just went up in the US - what happens there happens here pro rata sooner or later, (even a change of administration)
BBC News ---- 1.5 Trill USD bank bail out - the size of a key Federal Reserve lending program will be expanded to $1 trillion from $200bn.
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sorry to pick some of you up on a minor point, but this comment grates:
'we all enjoyed the boom times'
No. we didn't ALL enjoy them,
I went through university during them, being the first year to pay tuition fees, and by the time I got a job after graduation I could not possibly afford to buy a house anywhere outside of the north end of Birkenhead or the middle of Toxteth.
I did take a loan out last year though, but I can afford it, so I'm not living beyond my means, I have simply brought forward a purchase that I could have made in 5 year's time by saving, and I will pay a small premium in interest for the privilege.
Anyway, enough about me but please stop saying stupid things like 'we all enjoyed it. Some of the population did not, they suffered during it and are very very glad that those who did are now suffering. Sorry. Karma and all that.
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Why have the Treasury Select committee not called before it Mr. Paul Moore. I feel sure they would be enlightened by his revelations. As the USA authorities were last week by Mr.Markopolos Who laid bare the regulators, not a pretty sight. However the Senate committee members as one thanked him for his contribution.
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Its totally unacceptable why are we still here, with these people trying to turn us with their lies.
Who is Mr Stupid in this whole thing because I think its me!
I don't work in the financial sector or had anything to do with setting this in motion, quite the contrary. But i know that I am going to lose more than them on this deal.
There is no justice...so what next?
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Robert -- I may have missed it -- but you don't appear to have picked up on this.
http://www.dailymail.co.uk/news/article-1140624/Top-Brown-adviser-sacked-gagged-warning-banks-taking-risks-says-whistleblower.html
If any of what Paul Moore is remotely true then high time from Gordon Brown and his advisers are brought to question in a similar manner as the bankers.
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Dear Robert Peston,
There are a bunch of equally incompetent people residing in the Treasury. Why do they seem to be evading all the flack?
Highly paid civil servants, who's job is to safeguard the nation's finances, advise the Chancellor and and be aware of global developments. I know they have no formal control over the BoE but a word in the right ear ...
If the Treasury could not see what was happening why are we even paying them the tax value of their salaries?
And that goes for the 10p tax debacle too.
And finally, why all the angst about obtaining apologies? True they will suffer momentarily in front of the Television cameras but heavens above, anyone with half a brain would find that small beer for the financial gain.
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'Sorry' needed to be said loud and clear to the sacked HBOS risk executive who sounded a warning four years ago and was sacked, to be replaced by someone with no qualifications for the job.
If this does not call into question the bona fides of these, er, gentlemen, then I don't know what will
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#54. Must be a banker I presume......I said banker!
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Robert you are flogging a very dead horse with this bankers bonus story; you should read some of the comments on your own blog - most of us have spotted that it is a smokescreen for your friends in govt
In the meantime you are missing a HUGE story in the States. They have begun announcing their TARP, BAD BANK and other stimulus packages. It is massive but does not include many controls and the reaction of NY Times bloggers is very negative. Reaction of the NYSE is to drop like a stone; perhaps because it admits that problem is bigger but $3 trillion (yes trillion) is still dwarfed by the exposure of JP Morgan etc to toxic debts and no bank wants to have to reveal their books or put a price on a toxic share - 20 cents in the dollar?
For anyone interested in the big picture, read the article
http://www.nytimes.com/2009/02/11/business/economy/11bailout.html?hp
and it's also very interesting to read the bloggers comments; also notice how well and quickly moderated it is and that they also use a 'recommend' button
http://community.nytimes.com/article/comments/2009/02/11/business/economy/11bailout.html
Very interesting stuff and I'd like Robert to find out what co-ordination, if any, is taking place between the UK and US govts on how to try to escape the 'worst crisis in over 100 years' (copyright Ed Balls)
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Your last paragraph:
"Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system."
puzzles me.
If we never grasp what went wrong, how can we learn any lessons?
Or is it a case of "don't want to" grasp what went wrong?
I'm sure an enquiry with real teeth would hang the establishment out to dry - the government, the senior bankers and the regulators.
Too many vested interests as usual.
Whitewash.
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Let's be clear about one thing. Whereas the global financial crises has exacerbated the effects, the basic errors made by these people were not unforseeable. Overpaying in a contested bid has happened countless times before - lack of secure funding sources coupled with overtrading has brought bankruptcy to thousands of small companies over the years. The errors are exactly those that experienced businessmen are supposed to avoid. These people received huge remuneration and carrried huge responsibility. They have taken the money but failed to perform. The legal system is tiortruos when it comes to holding them to account so why not pass a law now that permits the last three years of bonuses to be withdrawn where a company has become bankrupt or required emergency funding to avoid bankruptcy - and let it apply from the beginning 0f 2008. It is unprecedented of course, but it is morally justified, it is technically possible, and it might help assuage some of the outrage felt by everyone at what has been done by these people.
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Now that the bankers have been let off lightly by the Treasury Committee, perhaps they should be persuaded to follow new careers, to make up for their sins of course.
The Dept Work and Pensions is looking for a number of Personal Advisors (see http://www.dwp.gov.uk/working/irc57176.asp)
The key tasks of the posts are:
a) People who are customer focused, able to build constructive working relationships and are committed to providing a friendly, professional service to a very diverse group of customers who are seeking work and/or claiming benefits.
b) Personal advisers act as caseworkers for individual Jobcentre Plus customers. They identify barriers to employment and provide the appropriate help and available services to customers.
Note the "barriers to employment" in (b) and "appropriate help".
I would love to be a fly on the wall, as Sir Fred or Andy Hornby tried to explain what the "barriers to employment" were to the newly unemployed business men and women.
Wouldn't it be "just reward" if "appropriate help" meant Sir Fred and Andy Hornby putting their hands in their pockets and contributing to the unemployed's household bills!
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Wounded pride (3) said amongst his comments "what we need......is a..new regulatory and supervisory framework". Maybe what we need actually is a return to old regulatory and supervisory frameworks, limits on what Banks & Building Societies may invest in (Blue Chip etc - see the old Building Societies Act circa 196?) and less Bank "profit", smaller bonus' and greater security / accountability / safety.
Self regulation just doesn't work it would seem
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Having watched the debate on the banking bill on tv this afternoon it seems crazy that this government cant give some idea of the amounts of money they intend to make available and is therfore an open ended cheque.
It would be helpful for robert P to make some comments in his news finance bulletins on the banking bill discussed in parliament today as a follow on to the bankers comments made today
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They thought they were playing pass the parcel in reverse.. everytime they add a layer of complexity they took a little commission and passed it on to someone else.
In reality they were playing Russian roulette... but every chamber was loaded.
The culture of greed gave us this mess and these men had their noses deep in the trough.... with no regulation or controls.
In any other industry it would have been fraud but not for the establishment
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People don't like bankers- but the main reason this all went wrong,and they did say this- was that they did not foresee "the worst recession in over 100 years" (Ed Balls). Neither did the rest of us so why are we being so clever? The governments encouraged a huge expansion in debt e.g. US sub prime lending, UK student loans etc etc. to engineer a boom and now we have the bust. It's easy to balem bankers but we only have ourselves (and the politicians) to blame
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I'm looking for investors to provide money for me to gamble on the horses at the next Cheltenham Festival in March.
I want 50 investors to invest £100000 each. They will pay me 5% of the potential winnings of each bet I place, win or lose. This will motivate me to place most of the money on long odds 'investments' giving my investors potentially massive winnings. It is my belief that I am such a 'talent' that I can convince my investors that I can beat the odds. Should my bets fail to achieve the hoped for results, I will apologise to the investors. However even if all the money is lost, I will still have my pay.
Any takers?
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A few bankers in front of a Select committee, Big Deal!
This economic lunacy has happened before (1990-1992.) In the form of a house price bubble. It has now happened again, only this time the Government just sat there watching it happen. So why should anyone think a Select Committee, in 2009, is going to change a damned thing?
That Bankers are in total denial is obvious. The shocking thing is how our stupendously feeble Government ministers are as well. It's as if they have not understood, in the slightest, how bad unfettered credit growth has been for us. Are they going to do the inevitable and regulate credit growth far more strictly in future? They should do, what could possibly be of greater political priority now? Oh yes the selfish oiks have one, no both, eyes on being re-elected instead! It's just grotesque how these things work, I mean if that isn't a case of, "sod the people," I don't know what is.
But, in the end, another house price bubble in 10, 15, 20 years time is going to benefit who, precisely? (Other than bankers raking in the bonuses in the intervening period.) Will the taxpayer just bail them out again, could we even afford to, so soon after the last time?
New regulation HAS to involve credit control regimes that directly restrict the amount of mortgage and property lending. If you want to build it then SAVE UP! This is about everyone, not just how the Rich like the "playing field" set up.
If our politicians don't start talking along these lines Britain will go bust next time, without question. There will no longer be any UK oil and our banking system will implode. We don't make anything, other than gruesomely bad amateur entertainment type TV shows, which will go out of fashion anyway, (I hope.) And then what? It won't be the bankers who we will want to string up. You don't get three chances at this sort of thing.
The sooner our out-of-their-depth politicians get to understand this the better. Regrettably they are that superficial, I doubt they can. Emigrating may well be the sensible option, seeing as how our pathetic Establishment have lost the plot.
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I doubt any mistakes were made, and the motivation is obvious.
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This comment was removed because the moderators found it broke the House Rules.
And the problem with the sorries uttered by the former bosses of Royal Bank of Scotland and HBOS is that they lacked a detailed account of why they did what they did.
Robert - don't know why you're struggling with this.
Answer = £
By the way, time the credit rating agencies had their day in 'Court'
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I think more these people who have presided over such incompetence should never be allowed near management in any capacity again.
Especially after the misery they have helped cause.
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So what has become clear is that everybody knew full well that this was a reckless business model, but because everybody was doing so well out of the arrangement, no one was able to stop the madness. Indeed, as we have seen anybody who sought to warn them of the danger of the policy was pushed out.
The problem is not one of legislation, but of morals - or more to the point , lack of them. Indeed, this is the price we pay for relativism.
However, though it is convenient for the politicians to blame it all on the bankers, they conveniently ignore the fact that they were the clear beneficiaries of this behaviour. Indeed, watching John Prescott last night on Newsnight was farcical - he just couldn't see the link between low interest rates, high employment and the mechanism that created this, i.e. the credit bubble.
The sad reality is that the whole system is collapsing in on itself and there is nothing anybody can now do about it.
The world economy was entirely based on this bubble and without it there is no economy, which is why Honda and Nissan can't sell well made cars, it is why Sony and Panasonic - who make good products are closing factories. It has nothing to do with people not wanting to buy them, but because no one has the money to do so.
Furthermore, the banks are not lending because they are insolvent. They are desperately holding on to the Government's cash because they know that many of their existing loans are turning toxic. Neither the US or UK governments really understand that £200bn or £800bn is peanuts when the debt is likely to exceed £500 trillion!
The left (Obama and Brown) seem to think fiscal/monetary stimuli will work - but this is what got us here in the first place and will just bankrupt everybody leading to mass unemployment and repossessions etc., whilst the right believe that we should just let the system play itself out as a necessary consequence of the mess - leading to mass unemployment, mass repossessions etc.
Unfortunately, therefore both paths will lead to economic disaster.
But, we are about to enter a post-economic world - no more consumerism, no more production, no more money - and the sooner we all realise that the sooner we will be able to start to re-awaken ourselves to a new era based on societal need and not want.
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The courts or the crooks, don't look so confused
Take a closer look
Message to the censorship committee
Who's the biggest gang of gangsters in the city?
They control you
(PAY) top dollar for your soul
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Well now that the US bail-out is going to be counted in trillions, I thought we should look up what comes next
Once you pass a trillion, you're getting into the real money!
After a trillion, in ascending powers of ten (or x 1,000 if you prefer), are:
quadrillion, quintillion, sextillion, septillion, octillion, nonillion, decillion, undecillion, duodecillion, tredecillion, quattuordecillion, and quindecillion (that's 10 to the 48th, or a one followed by 48 zeros).
Sadly there is no mention of the IMBECILLION.
I believe that Gordon and Alistair have one of these with their names on it. Perhaps they should use it now?
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at one point in the questioning andy hornby muttered "i have lost more than i have earned...
lets get this straight i believe he earned last year £960,000 he is now earning £60,000 a month!
he was bleating he had lost more than he had earned ....a reference to the fact that he invested his bonus in shares.....well correct me if i am wrong but you only lose money if you buy at one price and sell at a lower price.....firstly he did not buy the shares, they were given to them..and secondly surely he hasn't sold the shares at these prices? (if so he is more stupid than i thought) So at this time he has lost nothing! He still has the shares which he could easily return to the company!the clever politicians didnt pick up on this..!
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151
Precisely.
Of all the people who SHOULD know cash flow problems kill businesses bankers are in pole position.
That is what the liquidity ladder and funding gap analysis is all about.
Idiots
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Oh, come on! They did it because the government and regulators (such as they were) put the launch pad there for them to do it, and they did.
Gordon Brown and the other angry people truly don't understand the half. The Committee questioning these bankers today was a bit like bush-men asking how digital television works. Unfortunately the bankers got the securitisation model wrong. Too late. The errors were world-wide errors.
How come these bankers didn't turn the tables on the regulators who obviously were not doing their jobs? The FSA made no attempt to tease out the risks of these instruments. These regulators have their jobs and salaries precisely to stop practices like securitisation until they know what it's about. It's the FSA who need to pay their salaries back to the public. I mean, what do they actually do if they don't regulate?
What's worse, Gordon Brown and much of the country KNEW about the unsustainable debt, reckless lending and securitisation for years. Why are they getting away scot free?
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Ok but when do we get an appology from G Brown and T Blair - they were running (ruining?) UK PLC for the past 11 years. When will G Brown resign?
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What about the non-execs? Were they appointed because they were known to be compliant and not troublemakers? The words of Edmund Burke come to mind - "for evil to succeed it requires good men to sit and do nothing"
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Did we really expect to feel anything seismic from todays activities on the Treasury Committee! It is a fact that the Banks have made horrific losses from bad management but the real issue is why did the Politicians and the Finance regulators in the UK fail to regulate! The reason is because they all felt that it was going well, lots of money being made for the Treasury and others, so why try and fix something that is making money for them! The Banks were bailed out because of the failure of Politicians and Regulators, failure to have bailed them out would have resulted in their mismanagement of the UK Economy being highlighted!
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These condemnations using words like howlers are all very well, but my question to you Robert is did you warn against the grievous errors that these men committed?
If you didn't warn against them, should you not also apologise and lose your job?
How many economic commentators could see that what the banks were doing was wrong and would lead to disaster?
I don't remember any.
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It is quite simple they did it because all the others were doing it and earning a fortune doing it. There is no point in leaving the party until the music stops.
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Banks are listed companies and therefore see that they have a duty to maximise profits for their shareholders. What went wrong quite simply is that governments did not put in place enough controls. Everything that banks did was allowed and often appluded by the regulatory authorities.
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I think it really is quite simple- they were of limited intelligence for the jobs they were doing- did not understand the risks and got carried away by the excitement and began to believe their own propaganda. It did not help that the politicians kept saying how great it was for these world class businesses to be based in the UK. It also did not help for the greedy financial institutions to keep baying that these banks had to be aggressive to build value and provide a 'proper' return for shareholders.
The banks still have not got how angry people are with them- especially those that have been thrifty and worked hard for their money- these chaps have destroyed the value of savings and pensions- they deserve a lot worse than mild public humiliation. Tomorrow will be even more sickening- as these guys have still got jobs with high salaries and hopes of big fat pay cheques in the future. They have all failed totally to act in the best and appropriate interests of their shareholders, depositors and staff. Sack them all and take their pension pots into the Treasury.
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I do not think the bankers are any different from you or me.
Given the option we would subconcienisly probably all wish to go back to the ocean- in the mean time lets make a few bucks!
Lets face it the the risk of a return on the money paid to the banksl pales in comparison to the looser and disfunctional family units we already support.
as HRH said pull your finder out time!
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I think the bankers did very well this morning. They kept saying "Sorry" and "I agree". Anyone who says "I agree" all the time is a winner.
As for idiot questions like "What qualification have you got to run a bank?" Hah! People at this level SET the qualifications. What qualifications do you need to be on a government committee?
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Robert
We all know why the bankers have made these errors.
The requirement to deliver greater profits, constantly demanded by the shareholders.
It is the demand of the shareholders for year on year improvement in returns and share price. They call the tune, the executives who don't dance to it and deliver are not in place for long.
Maybe now those executives left will focus on business risk before delivery of share value, which is what they were paid for.
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"Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system."
The nanny state interfering with the pricing of risk is a major factor in what got us into this mess in the first place.
In the US pressure was put on Fannie Mae and Freddie Mac to fund the banks for them to give out NINJA loans. In the UK the regulators sat back and twiddled their thumbs to allow our banks to get over leveraged, effectively doing the same. All in the name of a home ownership feelgood factor and a relentless rise in GDP.
We already have enough regulation. Indeed, perhaps we have too much. Too complicated and messy, it no doubt provides many loopholes and blind alleys for financial services to pass through and hide in. A simpler system, thoroughly enforced (unlike the regulations we have now) would be a better approach.
The one fundamental point I have not seen discussed often is how the banks managed to so completely misunderestimate the risks of securitisation. In a rising house price market you can get away will selling your forward income from buckets of mortgages - your next tranche of CDOs will naturally be larger so covers any defaults from the last lot and fractional reserve banking means the cash you bring in via the CDO mechanism is effectively multiplied as well. In a falling house price market the value of mortgages falls, so your next lot of CDOs is no longer enough to cover your liabilities.
That is pretty much the problem. Banks turned assets of questionable quality (mortgages) into liabilities for themselves (CDOs) and leveraged those liabilities into more assets. They were either mistaken in their belief that house prices would fall, or mistakenly believed securitisation alone somehow magically protected them from such a fall.
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I personally don't care whether the bankers say sorry or not - words mean nothing as we have all found to our cost. These people earn, even when they have lost their jobs, more per week as 'consultants' than I do in a year, and I am good at my job! If I hear that bonuses have been paid to these overpaid, self important and smug crooks, I will remove all my savings from one of the banks represented and encourage all my colleagues to do so. If the bank fails, good! Perhaps we will then get back to what banking was supposed to be about - responsible caretaking and use of OUR money!
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I heard someone say it was like watching the england rugby team interviewing the england cricket team.
The MPs questioning was all over the shop and their anger saved for envious grilling of pay and bonus arrangements.
The bankers answers were unconvincing and worryingly inept.
We keep hearing about needing to pay bonuses for brilliant people like these !!
It was a bubble -simple as that - created like the dot com boom on promises and hope and fuelled by greed.
The FSA clearly dont have much of a clue and nor do the bankers or parliament.
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Ed BALLS
At last a politician worthy of his name and prepared stand by his judgement against the incumbent party spin.
We just need another 350 or so more like that and we would have a competant government on our hands worth of the name.
Jericoa
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"Apologies carry weight when they are accompanied by a clear explanation by the miscreants of what they did wrong and why. And the problem with the sorries uttered by the former bosses of Royal Bank of Scotland and HBOS is that they lacked a detailed account of why they did what they did".
Much of what they did was driven by "money progammes" on the BBC. We were encouraged to swap credit cards and chase the latest mortgage deal not by the banks but by programmes like Money Box - You and Yours and so on.
The banks merely reacted to demand created by BBC money experts. Not too difficult to understand Robert - what say you
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To manage a premier league football team you have to have all the relevant coaching badges. To be a CEO of a Bank you need nothing but the old schoolboys network. Saying sorry does not work with me they should all be stripped of their assets and locked in prison for life.
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Interesting to see how many bloggers are clear about the role of the bankers in bringing about our current financial mess; their reasons are wide ranging but their target is shared.
Even more interesting is to read the few defences of the big 4. The argument that interests me most is 'they did nothing illegal'.
What a simple confusion - to mistake legal for moral! Their apologies were mechanical and there was little understanding of the impact of their failure to manage their business. Always the blame to be shifted elsewhere. Yes, the Government should have regulated their lending policies and yes, many consumers should have refused all those tempting offers of easy money. But either they knew what they were doing and crashed with their eyes open, or they didn't know what they were doing and don't deserve bonuses. Or am I too simplistic?
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You're all to blame, but none of you bleating moaners are brave enough to accept that your own greed, your own spending mania, your many houses, your flat screen TVs, had a role in this too.
And when it all comes crashing down, you jump on the nearest scapegoats like frenzied animals, baying for blood liek you were baying for credit only 12 months earlier.
Fickle.
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186
Oh, come on! They did it because the government and regulators (such as they were) put the launch pad there for them to do it, and they did.
Wrong - they did it because greedy consumers put the launch pad there for them.
Who do think borrowed the money? The consumer - when was the last time the bully boys knocked on your door and forced you to borrow money?
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They are none of them guilty, except of greed and hubris.
They are simply people put into jobs for which they had no relevant experience.
They none of them had the sense to surround themselves with people with the experience that they lacked. They preferred to rid themselves of those.
At the end of the day they have proved themselves dimwits. Sadly, there are more of those still around, some at least in the FSA.
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The answer is clear and was touched upon in the hearing. It all hinges around how much risk we want our government guarenteed banks to take. These banks need to be simplified to allow management, regulators and government to acurrately assess the risks being taken and the measures put in place to ensure their financial survival. All other activities need to be separated often into Partnership type structures (or abandoned) where the risks are not borne by taxpayers but by other providers of capital - they're called hedge funds! The bonuses or losses would then be an issue for these Partnerships and not for the taxpayer.
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Peston makes a good point and I hope there is a further 'trial' of the miscreants who should be asked to return the monies they did NOT earn.
It seems that too many people who were involved in this despicable greed and did not heed commonsense are, seemingly, not being held to account by our 'empty barrel' of a Government. It is about time it fixed it's teeth (?) into something that is Real and not a P.C. shambles. A bit of in-depth thinking on their utterances would help.
The problem with intelligence is if the recipient has no common-sense then disaster is just around the corner!
Big Ben.
P.S.
How about a bit of punctuation, Robert?!!
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I have seen numerous comments in this series of blogs to the effect that no one foresaw this recession.
Well of course no one can foretell the future exactly without a crystal ball and granny's old hair-net, but almost everyone I know over forty or so had been getting nervous for a number of years, simply because they know that good things don't last and there are cycles in the affairs of all things.
The point of this is?
The fidgety four must have known too!
It is inconceivable that they didn't know the risks - even if they weren't "proper bankers!"
Ignorance has never been any excuse in law!
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Robert:
Can we agree that the Select Committee line of questioning was a little 'lightweight' today? What revelation was delivered from the mouths of these once Almighty Banking Deities? None...
Was anyone serving on the Committee capable of asking searching questions? Who was demonstrably in command of their brief - it appeared none?
Could it be that there has been just a tad too much'directing' of this showpiece - a la Mandleson? Is it really the case that Goodwin & McKillop were 'groomed' for their appearance by no less than 'New Man' Hester in the good offices at RBS?
It was widely expected that we would first recieve an apology... so, as anticipated... then... nothing of note...
There remains too much stench...
The skeletons are festering...
There have been no answers...
What did Sir Fred say? 'There were no siren voices from the Risk Managers'?
What!!!
Shameless...
Are we honestly expected to believe that these highly remunerated Risk Professional said or did nothing?
It begins to appear increasing like a 'cover-up' - or could I just be wrong? 'Ooops, Sorry'...
RBS's Hester to appear tomorrow - what can we expect? Challenge... Progress... Unfortunate re-sizing already announced... Confidence returning... Nothing like 'Hohoho, Sorry, the missing Billions have been found in the safe after all - must have been miscounted by The Risk Investigations Team...'
In reality?
New Boss, Same as the Old Boss...
Such a pity that staff had to hear it from customers that there were to be 2,500 job losses...
So much for the 'talented', 'unique', 'indispensable' Senior Manager Teams...
Should they be given the opportunity to resign with dignity?...
Some would suggest not...
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Anyone involved in recruitment for Private Bankers could have told these so called Bankers that ABN was a can of worms, 9 different strategies in 17 years. No idea of how to plan for expansion, recruiting poor people with relatively no checks, poor decision making. Any recruiter in Investment banking could tell a very similar story. So who the hell did they have as advisors???
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I watched this session and was truly shocked that not one of these four former bankers seemed able to come up with an explanation of "what went wrong".
Yet, four or five years or more ago I and other observers of the economy were constantly pointing out the dangers of low interest rates, high house price inflation, record level household debt, a record level trade deficit and other indicators all of which screamed out that there was something very wrong with the fundamentals of the UK economy.
That Goodwin, Mckillop, Hornby and Stevenson apparently couldn't see those same indicators is something I find truly frightening.
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No one seems to have mentioned the Scottish element in all this. So I shall.
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SO THERE WE HAVE IT A BUNCH OF:
IN BANKING TERMS UNQUALIFIED SPIVS.
ITS QUITE CLEAR THESE GUYS DO NOT EVEN
UNDERSTAND BASIC ACCOUNTING,NEVER
MIND COMPLEX FINANCIAL INSTRUMENTS.
THEY DO UNDERSTAND THEIR OWN SALARIES
BONUS PAYMENTS AND SHARE OPTIONS.
FUNNY THAT? NOT! WHATEVER!
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Well I for one didn't like the cut of their jib.
Their apologies were devoid of sincerity; they hardly even tried. Where's Robespierre?
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Did anyone really think 4 bankers going in front of MPs was going to do anything?
Put the bankers on Question Time or let Paxman and Peston roast them for an hour long live interview, you will learn far more.
We need to finish with the blame game, and soon. Let historians pick through the pieces, what we should be doing now is working out how we get out of this mess.
The current administration's approach can only be liken to giving an arsonist a lighter because he has run out of matches.
We need change. Horrible, painful, unthinkable, unpopular change. Think Mrs T but worse (if you can).
The whole frame work needs taken down and rebuilt for the good of society. Banking is not an industry, they don't make anything. They are a service provider. People with surplus cash deposit savings, these are lent out (for a small fee) as loans.
So what to do?
Change the auditing system. Currently there is no real incentive for failing an audit. If an auditor provides a bad report then their services will be dispensed with. The conflict of interest is quite breath taking. In order to keep being paid they will report what ever their paymasters want them to. Auditors should be independently paid, and have no vested interest what-so-ever. I'm not saying its outright bribery, but there are times that it looks like it and smells like it and it seems to be the right shape too. See what I'm getting at?
Secondly scrap the FSA and replace it with a new system with teeth, bark and a bite. I would suggest a licensing system renewed every month or so. Failure to comply with this new body would mean removal of the licence for 6 months , during which time the only banking service the bank could undertake would be to allow its customers to withdraw all of their savings. (I would add that banks would be compelled to always have greater assets than debts). The first bank to lose their licence would go bust in in a week as all its customers withdrew every penny as they need these extra services that the bank can no longer supply. This would incentivise good practise. Get it wrong and you are out of work this time next week, no exceptions. At least one bank would stay on the straight and narrow and they would be rewarded by having the most customers.
Its time for a national bank too, ring fenced from all the terrible decisions and debts that will never be paid off. May I suggest that NatWest is removed from RBS, and simply renamed the National Bank? It shouldn't be a problem the state own 70% of RBS. Set it up primarily as a retail bank and make it a safe haven for savings. Make it the most boring bank on the face of the planet, but above all make it safe for our money. Banks are not so important that they cannot fail, they must realise this. A mass withdrawal of savings by the public from any of the high street banks would shake them to their foundations.
Finally Government. All this pathetic party politics has to stop right now. It really is not the time. It's like Titanic passengers refusing to get into a lifeboat because it is the wrong colour. Between the 600 of you, get the 10 best and form a Unity Government. Start thinking really hard how to solve this problem. If you are not up to it resign and lets elect some more suitable people. The current lot are doomed, they haven't saved the Titanic, they have just redirected it into an even bigger iceberg. We must help, with every possible tool those that generate genuine wealth, the manufacturers. Every competitive advantage must be given to this sector, long term investments, tax breaks, free training - anything to give these people a kick start. Imagine what the UK manufacturing industry could do with
£20 Billion of the public's cash!
And finally us, Joe Public. We need to have lower living standards. Maximum credit card limits set to 1 months salary. 20% deposits on mortgages. Fewer foreign holidays, no luxury cars and more nights in. It will hurt, we won't like it and who ever forced us into this will be deeply despised.
The medicine will not taste nice, the after taste will take years to fade and we may have to take more than one dose.
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I am beginning to think that nothing is going to get better here until - as the US does, now - the UK has an "outsider" at the helm. Someone who will not miss freebies, the mutual back-scratching, the incidental benefits accruing from "friends" in the City - such as a case of wine here, a day at Henley there, a holiday for all the family at a villa in Tuscany or on a Caribbean island - because s/he was never sucked into the old boy/old girl network because perceived as being "not one of us", not a "PLU", and so has no allegiance to the networks of privilege and greed.
Outsiders can be useful.
We need an outsider here, an Obama, but I doubt that we are going to be that lucky. Who is standing in the margins of UK public life today - highly intelligent, level-headed, impossible to intimidate, incorruptible, adept at handling the media, mistrustful of the fickleness of fame - ready to seize the sword from the stone when the public spot light shifts away in disgust from Mandelson and Brown?
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Here is a thought. Let these failed bankers, who along with this government, have brought this country to bankruptcy have their bonuses but make them use it to buy new cars!
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#59 mkcblog
"destroyed our country with their false accounting. Make no mistake, they have destroyed it. 90% of people do not have the slightest idea about what is coming."
I believe that you are right. Everything I do and plan now is informed by a new imperative to think the unthinkable. One thing I am sure of: the Govt will do nothing to prepare people for all the changes that we are about to endure. I go on the web to find out what the Govt is not yet admitting to, and am having to put two and two together for myself for working out my own best survival and escape plans. Such as the implications for the whole country of recent developments at Felixstowe Port.
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These senior bankers are arrogant and their egos just don't allow them to be wrong!
If the general public really knew what these people and their cronies sweep under the big carpets at these banks, they would never trust a bank again!
How they relentlessly pursue sales and profit at ANY cost is criminal.......how they wine and dine politicians answers the question as to why regulation has been weak.
That's why I'm so glad I'm an ex-banker.
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Are we really supposed to have confidence in the Treasury Select Committee?
One woman, and the rest white men in suits. They look just like the bankers, and no doubt think like the bankers.
Nothing will really change. No one will be found accountable. Like a soiled nappy they need changing and for exactly the same reason.
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Here is the funniest bit (if it weren't so tragic); Sir Tom McKillop is not, was not and now never will be a professional banker. I'm not sure how a life time in the pharmaceutical industry equips someone to help head up a major bank. He trained as a chemist and rose through the ranks to be CEO of AstraZeneca. I only met him twice and on both occassions he came across as arrogant, and on one of those two occassions he was downright rude. Maybe that's what you need in the banking industry?
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I have not seen anything in the leaders of HBOS & RBS to say they are truly sorry for allowing (and being allowed) to destroy a country.
These men know nothing of being unemployed and even if they become so I am certain they will not suffer like the vast majority of people losing their jobs
The false apology means nothing to the many thousands on hard working people now out of work and possibly losing their homes (probably with a mortgage at these two companies) and everything they have tried to achieve.
I work in the automotive industry, an industry hard hit by they greed of these bankers. I am not worried about the size of my bonus, but whether I will still have a job in 12 months!!
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Robert,
I thought that a senior risk director at HBOS blew the whistle on what was going on at that bank. The questions on this to Hornby were blunted because he said he wasnt the CEO at the time that Paul Moore complains about. The other guy took over the answers. The CEO was someone else, James Crosby. Who is he and why wasnt he there? Strange you missed this in your piece - Paul Mason has met this guy I think.
Turning to RBS, I am not buying the idea that this empire was the sand castle of one ego. Forgive me but as I understand it, in 2004 RBS was the third biggest corporate earner in the UK, behind only Shell and BP ( BBC). Following the much vaunted take-over of Nat West which heeped City praise upon Sir Fred Goodwin for his accumen I have tracked a web of acquisitions funded by cash, debt and rights issues presumably : US RBS Greenwich Capital , Citizens Financial, Peoples Bank, Charter One- taking advantage of Clinton's loosening of bank regulation in the US ; we have Direct Line, Retail Direct, Churchills, Ireland First Active, - Ulster Bank, Coutts ( or were these before Sir Fred?), Bank of China stakes, ABN Amro wholesale business - I am sure there were more.
What army of FSA regulators, board members, risk managers, analysts, journalists and fund managers and institutions were doing their sums every step on the road? Is it being suggested they didnt understand the numbers either?Who were doing their figures on the capital ratios,e xploding balance sheets, leverage gaps etc. etc. Bank licenses must have been renewed with enthusiasm. Shareholders were demanding more returns - RBS Greenwich Capital was said to be underperforming ( was it only 15% year on year growth?) - and, we, the great unwashed are to believe all of this was down to one faulty banker? McKillop was not at RBS for this entire period, as I understand. The Exchequer was doing very nicely.The City could pride itself with sixth biggest bank in the world, second biggest in Europe? I have found reference in 2005 that demerger was discussed, but this would make RBS vulnerable to takeover - Barclays had this problem later.
We are talking about a huge collective system failure - the apologies today were not individual but collective and defensive against litigation and you wont get anymore than that in the real world.
This is too serious to be left to the Treasury Committee ( all credit to them) - there should be something judicial under oath - akin to Special Senate hearings - the Tripartite Authorities ( up to the PM if needs be) must be questioned. Too many people could be tempted to play games and agendas.
Nice to know that we are now underwriting credit cards, car loans and mortgages in the US. No wonder nationalisation is a political hot potatoe !
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Sorry folks. Don't blame it on the FSA, regulators or even Gordon Brown. It was the fault of the Great British Public. And they didn't even know what they were doing.
There was a h*ll of a party going on and who would have voted for a party that said that it was madness to go on partying? Everyone knew that it would have to come to an end, but the hope was that it would come to an end with the revellers going to sleep fo a bit. Even the prophets of doom did not know how to bring the party to an end, whilst keeping everyone happy. Anyone who wanted to stop it would have been amazingly unpopular. As it turned out the slowdown was global, so any British partypooper would have been seen as acting prematurely.
The reason why governments do not act sensibly at times isn't because they are stupid, but because there are no votes in it. If the Tories had won the 2006 election they wouldn't have stopped the party either.
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A neat diversion blaming the bankers. When will Brown say sorry for taking house prices out of the inflation basket, encouraging low interest rates and the reckless lending that has gone on.
These guys only work within the framework Labour set for them. Spend Spend Spend, Borrow Borrow Borrow should be Labours motto.
Appalling that the bankers carry the can whilst Brown still thinks he is the saviour of the world
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The voices I heard RBS circles at the time that RBS was trying to scupper the Barclays/AMRO deal suggested the main reason that Sir Fred was doing this was to prevent Barclays getting bigger than RBS.
If you search the BBC sites you will find various articles based on scientific studies mentioning the length of the index and ring fingers, and, how the longer the the ring finger is compared to the index finger tells you how much testosterone is hard wired to be flowing round one's system.
Sir Fred has one of the longest ring fingers and one of the shortest index fingers I have seen.
Another article that appeared on BBC news within the past year suggested that the city runs on testosterone, with the successful traders being more aggressive and taking more risks, but not knowing when to stop taking risks. This article also mentioned the same testosterone fueling the panic and fear that ensues when it all goes pear shaped, along with the accompanying stasis that comes from not knowing what to do.
The very simple reason RBS were doing the AMRO deal was testosterone fueled competitiveness.
No-one could spot that because they (or possibly we) were all doing it, and there was no reason to question it because, hey, isn't that how we built the City (and most other things) in the first place. When the analysts get the numbers to stack up everyone is happy.
It seems unlikely that we will start screening body chemistry for financial employees, but a culture change is needed whereby a market that is being driven by chemistry, instead of analysis, can be brought into check.
To do that you need to be able to see that this is happening, and who in the Finance industry in their right mind will ask the following question out loud, "Do you think we are being too competitive here?"
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I wonder what the next 'bubble' will be in......er.....food banks?......or maybe soup kitchens?......or will it just be in banker's bonuses?
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when is brown ,treasury officials ,and the fsa going to be interviewed? and i notice lloyds tsb are still paying hornby 60 grand a month, im sure hes worried.
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Shouldn't we hold all the banks' accountants to account aswell?
Surely if they could not account for the exact value and nature of the banks assets, they should not have signed off their annual accounts?
....or if they did know the exact value and nature of the bank's assets, maybe they could help unravel this unholy mess?!
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Robert, I fear you are playing to the gallery somewhat. Judging by some of the replies it's worked.
I hold no brief for these people but they could only answer the questions put to them. They generally did so.
As Sir Fred said, blame him for everything if it helps everyone to get over it and put the issue to bed but it's actually more complicated than that and a more mature debate than the one here is needed to make constructive changes to the systems.
Some of the MP questions were nothing short of pathetic. On the other hand, some were shrewd and searching and I was left with a better understanding of things.
It was great television - full marks to BBC News for not going live to someone standing outside a Highways Agency depot.
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Robert, you need to understand the culture that exists in large corporates (actually I'm sure you do). Those at the top of organisations tend to come from the same class and through the same educational route. They are predominantly male, utterly venal, supremely confident in their own abilities and completely unreceptive to ideas which do not fit their view of the world. Their behaviour is compounded by the fawning of subordinates cowed by years of bullying. When I worked in the City we had what was laughingly called a 'good news culture'. Translated this means that nobody took bad news to Board. Witness the dismissal of the risk manager who flagged up these issues 4 years ago-multiply this a thousand times over and I give you the root of the problem.
Until we can put the brightest and best on our boards, women, contrarian thinkers, those not entirely motivated by personal gain, we are always going to have a problem.
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It's bad enough that we are continually screwed by these "fat cats", but as a result we also we have to hear from the "chief smugster" himself-Robert Preston.
Is "sorries" a word Robert-should it not be "sorrow" in this context (unhappyness over loss and wrongdoing.
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Whether they apologise or not is immaterial. No doubt it can be said that they did nothing illegal.
Let's stop the talking and impose some changes, viz:
1. No financial institution should be able to gamble with customers/clients money.
2. Companies who wish to trade in markets should only be able to do so with THEIR OWN CAPITAL. Shareholders may wish to take that risk, but depositors and savers do not.
3. Stop banks offering mortgages, put all that back to Building Societies which were formed to take the long view.
4. Make up front commissions on sales of investments/pensions illegal. Only allow commissions on monies paid, not payable.
5. Ban "Initial Fees" on mortgages. The cost of a mortgage should be interest only. Initial fees seek to bring forward the profit element and in so doing confuse the true cost of a loan.
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Send them to jail and strip them of their knighthoods!
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Was watching the respective (note not respectable!) CEOs and Chairmen from RBS and HBOS 'apologising' for being reckless/imcompetent/a bit wayward on the news this evening. Was struck that two were Sirs and one was a Lord. Do you think they've messed up their organisations and the rest of the country enough for us to ask for their titles back? I know that Lord Archer still has his so the standards for retaining it are pretty low... I'm only wondering, as if we took the peerages back then they could be sold on and some of the proceeds go back into the country's coffers!
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Having listened again to the HBOS drones.
I CAN ONLY WISH I HAD FORMALLY SERVED
MY WINDING UP PETITION IN JANUARY 2007.
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Most of the posts on here are 'spot on' in such terrible circumstances. In fact, they almost restore my faith in the Great British Public.
As someone else commented earlier, the phrase 'lions led by donkeys' springs to mind; referring to the spivs in the City and in Westminster.
Why, as a nation, do we accept these pariahs running the show?
Roll on the Revolution!
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Post 4, a wild guess as to why none of them have lost their Knighthoods or Peerages.
I think you will find all of them got them from either T Blair or G Brown and well taking them away would be a poor show and reflect badly on those enlightened politicians who put them up for the titles.
And that just wouldn't do.
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Admittedly I have skimmed the first fifty threads but after a short while a theme starts to emerge: the bankers do not know what to apologise for.
That said, I can understand their reluctance to say sorry for the whole credit debacle because to do so would be to assume 100% guilt for the problem which would let the government, the FSA, and the credit risk rating agencies off the hook.
As someone said earlier the Treasury Select Inquisition and their party leaders should also be questioned because they have a lot to answer for allowing the crisis to emerge on their watch.
In fact GB has been asked on many occasions to say sorry at QT, and like the bankers, he cannot bring himself to do so. Like the bankers, he didn't see it coming, then he did, now he doesn't.....It doesn't matter whether GB saw it or not, it's not his fault - alright!
The FSA has admitted failings with Northern Rock and that was grudgingly given by the successor to the outgoing chairman. Lord Turner blamed the availabilty of cheap credit on the Chinese on the current crisis, no matter that the 'cream of this country' was feasting at the never ending trough of greed. No apology here for failing to see the inadequacy of the risk models being applied or rather not applied.
The risk rating agencies were rather like the journo in Private Eye who keeps saying 'triples all round' only in their case they had a good lunch and awarded their host with a 'triple AAA' failing to forget that there's no such thing as a free lunch. No apologies here either, even though Lehman Brothers collapsed with a healthy A+ rating. Meaningful - eh?
You see, it's no one fault. No one is to blame. What a shower!
So Gordon, Alastair, Yvette, Ed and other flunkies. Before you all look into your hindsight crystal balls and to the Downing Street Press Corps fronted by Mandelson, Campbell and Derek when he's allowed to, these are excerpts from Our Illustrious Leader's speech in June 2007, 12 months before the souffle began to wilt.
It's almost like a love-in with the City, the start of a new age, when trader and leftie would walk down the aisle of future mutual prosperity; pound notes were flying around like confetti. They were all so in love.
"My Lord Mayor, Mr Governor, my Lords, Aldermen, Mr Recorder, Sheriffs, ladies and gentlemen. [No Plebs present - sic]
.....Over the ten years that I have had the privilege of addressing you as Chancellor, I have been able year by year to record how the City of London has risen by your efforts, ingenuity and creativity to become a new world leader.
.....So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.
And I believe the lesson we learn from the success of the City has ramifications far beyond the City itself - that we are leading because we are first in putting to work exactly that set of qualities that is needed for global success:
•openness to the world and global reach,
•pioneers of free trade and its leading defenders,
•with a deep and abiding belief in open markets,
•champions of diversity in ownership and talent, and of flexibility and adaptability to change, and
•a basic faith that from wherever it comes and from whatever background, what matters is that the talent, ingenuity and potential of people is harnessed to drive performance.
.....And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.
.....So why am I more optimistic than ever about the future of our islands, just one per cent of the world's population, in this new era of globalisation?
By your efforts Britain is already second to none:
•for our openness, pro Europe, pro free trade,
•a world leader in stability, and we will entrench that stability, by ensuring Britain's macroeconomic framework remains a world benchmark, and
•we are flexible, and in being vigilant against complacency, we must be, as I believe we are ready to become even more flexible.
.....So let me say as I begin my new job, I want to continue to work with you in helping you do yours, listening to what you say, always recognising your international success is critical to that of Britain's overall and considering together the things that we must do - and, just as important, things we should not do - to maintain our competitiveness:
•enhancing a risk based regulatory approach, as we did in resisting pressure for a British Sarbannes-Oxley after Enron and Worlcom,
•maintaining our competitive tax regime, and having cut our main rate of corporation tax to again the lowest in the G8, today we are publishing the next stage of implementing Sir David Varney's recommendations for a more risk based approach to the administration of the system, with greater certainty on tax matters when it's needed most;
•and ensuring a modern planning system, that balances our economic and environmental needs with a more predictable and accountable decision making process, including that for major infrastructure projects.
.....The financial services sector in Britain and the City of London at the centre of it, is a great example of a highly skilled, high value added, talent driven industry that shows how we can excel in a world of global competition. Britain needs more of the vigour, ingenuity and aspiration that you already demonstrate that is the hallmark of your success.
.....And the prize is enormous. If we can show people that by equipping themselves for the future they can be the winners not losers in globalisation, beneficiaries of this era of fast moving change, then people will welcome open, flexible, free trade and pro-competition economies as an emancipating force.
.....While never the biggest in size, nor the mightiest in military hardware, I believe we are - as the city's success shows - capable of being one of the greatest success stories in the new global economy.
Already strong in this young century, but greater days are ahead of us. Britain the education nation, Britain a world leader for its talents and skills, So tonight in celebrating the success of the talents, innovations and achievements of the city let us look forward to working together for even greater success in the future."
- Ends.
Well GB, the party is well and truly over! It's time to let someone else pick up the pieces. You had your time, you blew it along with those city slickers who just didn't kno when to stop.
Like a shotgun marriage with the best intentions, the union didn't last long. The passion has gone and like most marriages gone sour, the partners now slug it out, neither admitting to being responsible or accountable for any of the blame.
Like a marriage counsellor, the country looks on fascinated by the spectacle, knowing that both and all parties are to blame, that all should say sorry but we know they won't.
When our leaders learn to have humility, honesty and integrity , take responsibility for their actions, and assume accountability for their deeds; perhaps then we, the people will stop being so angry.
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The ONLY way to make these idiots humble is for the state, on behalf of the people, is to take back what they own.Buildings, boats, everything that they were supposed to have worked for, and leave them with nothing!.It has cost the poor people too much for their arrogance and greed.
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RP "But they gave little clue as to why they made these remarkable errors."
Did anyone seriously expect that? Aren't they at the mercy of the government right now? Wasn't it the government who encouraged and applauded them for years? Will they point their finger at the government as long as they have something to loose?
RP: "Did they lack the knowledge and skills to assess the risks they were running? They all denied that they weren't up to the task of controlling their huge, complex and sprawling banks."
That it not the point. The fact that the people who were commanding during the borrowing binge are still in command right now is beyond comprehension. It's not just bonuses that are immoral in the banking sector. It is the inability of the system to clean itself. To make a fresh start, beginning with those in power to accept responsibility and step down. How can the British public accept them in these positions after what happened? Sure, the borrowers are just as guilty, but they are teachers, plumbers or unemployed, not almighty managers earning millions. If not even the leaders of the institutions at the center of the mess can be replaced, how on earth can the system as a whole be changed?
RP: "Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system."
Who, we? The politicians are supposed to that for us, if I interpret parliamentarism correctly. Yet there is no sign whatsoever that anyone near Westminster even considers admitting that selling houses to one another is not an adequate activity to feed a country of 60 million.
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I am so angry and frustrated with these bankers. What i find so extraordinary is that these people who are hugely responsible for this crisis are going to get away with it ! (i am also seething that Tony Blair and Gordon Brown did not reign in lending practices during the housing boom !!). Why can't the bankers people be held accountable in a court of law ? - they have after all mismanaged billions of pounds which have crippled vast swathes of the global economy resulting in thousands of job losses. They have knowingly taken part in a system that has lent large amounts of money to 'high risk' low income families in the America that have struggled and failed to keep up repayments all for the astronomical growth of their greedy bank accounts.
Its a screwed up world that the 'fat cat' banks get propped up by the government for billions of pounds whilst charities such as NSPCC only receive paltry sums to make up losses in the icelandic banking collapse.
Obviously the global financial system is highly dysfunctional and in need of an urgent overhaul. Yet again even after a tsunami event like this the fat cats seem to have barely been affected (they have been bailed out, still kept some of their bonuses and no doubt l have squillions hidden somewhere) whilst the ordinary joe is sweating on wether he/she still has a job/house. It makes my blood boil that in 2009 there is still a huge disparity in wealth in much of the world. Surely the time has come for a sustainable, climate friendly economy where income is more equitable between people and nations with equal opportunites for all.
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Like many who have commented I was less than impressed by todays session. Not surprised though that a piece of government spin, produced by Sky should reveal so little in such a long time. Questions were at times simplistic, opportunities to follow with more testing questions ignored and answers very rarely gave anything away other than what the 'guilty four' had been briefed to say.
It matters little now what these bankers knew or cared; whilst the going was good they had many friends and companions who welcomed their success. And they'll soon be back 'earning' more than most dream of whilst the real victims may never recover from their reckless short-term strategies. But at the end of the day Gordon will be able to point out how Parliament called them to account.... Far more worrying will be what how the USA reacts to todays announcements, but don't worry they've got the 'wise men' in charge too!
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....and another thing - i agree with a previous comment about joe public also taking responsibilty. Joe public in the UK went on a massive spending splurge over the last 10 years or so (a total of 1 Trillion pounds in personal debt overall) and took out huge mortgages that could not be paid back. These type of spending patterns are not sustainable !!! and are partly the reason why we are in this awfull mess.
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once upon a time on the tv satellite radio
they had us on the go about ill money flow
when the poorer people raised their worries
we said sorry but hey it happens to all of us
we bankers laughed loudly at their ignorance
they could never understand income creation
like the dirty stinking rich crew could ever do
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Looks like there will be some positions becoming free in HBOS, RBS, FSA and No10. Sent CV. USP - no previous banking experience. Household budget - Debit free.
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Ooops, now I have to say I sorry myself and admit I made a mistake and I for one will even say why I think it happened:
I was reading too fast and overlooked that these apologizing bankers are all ex-bosses...
so maybe my post 224 is not quite correct and should not be posted at all... ...moderators: I resign from this topic!
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In the mid-90s Messrs Blair and Brown went on a charm offensive to the City. What the City saw, it liked: a couple of mugs they could run rings round. Brown and his lackeys have not had a clue about how to regulate a market. The laissez-faire approach ("intensely relaxed about people getting filthy rich") is no more than ignorance and incompetence about greed in the City.
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Re: 198 King Athelstan
' Banks are not so important that they cannot fail, they must realise this.'
Unfortunately the opposite has been shown to be true..Much of the current unrest in the markets still stems from the fallout when Lehman Brothers and Bear Stearns WERE allowed to fail. The prospect of seeing every major financial institution in America other than JP Morgan Chase and Wells Fargo going to the wall would obliterate the markets..Imagine a retail banking system with one player, charging depositors a monthly fee for the privilege of holding their money and twenty percent interest on their loans, THAT is what the bailout, no matter how unpopular, is designed to avoid..
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Somewhat wide of the truth to call these gentlemen bankers- they don't seem to have the faintest idea of how to run a bank.
Now that the Treasury Select Committee and the media have their pound of flesh with this display of contrition perhaps the regulators, who seem to have had just as poor an appreciation of what was going on as the bankers, could also face the same public remorse show.
And who regulates the regulatory system? Couldn't be politicians could it? It is certainly the politicians who have compounded the debt situation caused by the banks with their own public debt mountains and lack of any sensible monetary policy to control a consumer predilection to consume via debt.
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I get it now. It was not greed, but incompetence.
Ok, thank you, you can go now.
Wait, incompetence or ignorance is no excuse. Right, get them back in here.
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It's fraud, that's why they can't say what their motivation is. Bank A (lets say Barclays) lends Bank B £179m. As a loan it goes down as an asset. Bank B then lends Barclays £179m. This also goes down as an asset.
Hey presto, they now have £358m to lend to companies that pay them handsomely to take a loan. If it's repaid, take the winnings, if it loses, socialise the loss.
The banks have been running the biggest Ponzi scheme of them all, and make Madoff look small time.
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This comment was removed because the moderators found it broke the House Rules.
How about they all do some community service.... make them work in the claimants offices, let them see the truth of their actions.
Let them deal face to face with people who have lost everything because of their investments strategy
Actions mean more than words " sorry" as they drive back in their £100k plus cars to their multimillion pound livestyle.
These people knew what they were doing, this recession was acceptable risk for them. Yes they may have lost millions, but I do not see any down shift in their standard of living.
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Contrition - NONE! Stage managed -YES
These bankers had so obviously been well schooled for their confrontation. The hardest aspect for them was to bluff out the all too short time they were to be confronted, whilst at the same time 'appear' to be penitent. With the millions they have salted away from the gullible masses, they can afford to pay the best PR and personal image advisers available and it showed. Andy Hornby especially had all the appearance of having been squeezed out of the same toothpaste tube as Tony Blair. And why is Hornby being retained as a consultant at £60,000 per month? A consultant for what? Has he not demonstrated enough he is not worthy to even sweep the floors at Trinity Road, Halifax, let alone perform the charade of banking consultant? Oh, I forgot, this is just another example of that very cosy club within which all of these despicable individuals function - and that remark is not restricted to the 'terrible four'.
Ordeal over, they can now 'retire' with their spoils and play the faceless nonentities for a short while until the dusts has settled enough for them, as is usual, to be able to slip quietly onto other equally lucrative gravy trains. The entire system is corrupt.
Of course, they will never fully admit to the extent and reasons for their actions. Suffice to say, if they flatly refuse to admit to their guilt, the only conclusion one can derive is that it WAS driven by personal greed, the welfare of investors, staff and shareholders being way down the agenda. Had it been otherwise the disasters would not have occurred. Furthermore, to try to excuse their actions as being partly caused by their limited, or non-existent, banking experience is totally inadmissible. They willingly and freely accepted their positions and, that being so, they should not have accepted either the responsibilities or the rewards if they were 'not fit for purpose'. It doesn't matter of course. If you can bluff your way through for a few years before you are found out, if ever, you can then slip away gracefully having reaped the rewards of your illgotten gains.
Whatever their reasons and their excuses, the buck stops with them and they should be made to pay the price. That should mean nothing less than stripping them of all of the unjustified assets they have so blatantly acquired, the scrapping of their over generous occupational or private pensions arrangements and banning them from holding similar office for at least ten years. If ordinary employees of their organisations had performed with such criminal negligence, at best they would enjoy immediate dismissal with loss of all fringe benefits. At worst, as with Nick Leeson, they could expect a prison sentence. Poor Nick Leeson, as bad, or daft, as he may have been, was simply the fall guy for yet another bunch of incompetent, dishonest executives who should have been held responsible for allowing that to happen but, again, escaped virtually scott-free.
The sad reality is that nothing will happen to change the system. There will be a lot of initial noise from the Government and others in the press and industry but the privileged and protected life of executives will continue as before. There will be endless window dressing but those who could bring about beneficial change for us, the gullible masses, will make damned sure they do not bring about any change which could be detrimental to their own futures and welfare.
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THESE GUYS HAVE MADE THE MAXWELL
SCANDAL LOOK LIKE A STORM IN A TEA CUP.
LETS SEE SOME JUSTICE!
INSTITUTIONAL ABUSE THROUGH AND
THROUGH AND THERES AN EPIDEMIC OF IT
IN MANY LARGE UK ORGANISATIONS,BOTH IN
PUBLIC AND PRIVATE SECTORS.
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Whilst capitalism is alive and banks remain in the private sector at the mercy of ravenous shareholders greed will always come to the fore. People do not enter banking to serve the public. The only thing that could have avoided this almighty mess was proper regulation and oversight of the banking industry. When the people who are responsible for this become so deluded and removed from reality due to their own greed for power it is only the electorate that can provide the ultimate answer. We more than ever need a Government that governs for the majority and not the few. America may ! have found their answer in Barack Obama (at least for the short term). It is only when we realise that politicians of the calibre of Obama come about once in a generation and that true power and influence starts on an individual level that we can begin to look forward with confidence again. We can all start to rebuild our lives based on the service we can provide to the wider community and demand of our politicians those same very high standards.
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The Government will not want to set a precedent by sending the Bankers to Court to answer and pay for their appalling mistakes. They could easily find themselves in the dock next!
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With 20% of comments still waiting moderation I wonder if it's worth commenting but hey ho. We're facing Ed Balls' worst economic disaster for 100 years so today was a wonderful one for for the culprits. Except, RBS/HBOS did not single handedly take us down the road as the Govt/politicians would wish it to be seen. We have so many passing blame and trying to absolve themselves. Some want people in jail except their investments would have greatly benefitted from the banking bubble. Also billions of tax went to building so many hospitals. Who was complaining about that?. Yes we have to learn - RBS was a disaster waiting to happen for years if anyone cared to really focus on its Chief Exec and HBOS was encouraged by all to rival the Big 4 so that there was more competition. Remember how the investment community, City, small shareholders and more so JOURNALISTS pushed HBOS up to £11 per share. There was systemic failure but we all look to pass the buck - it was never me guv ( or Gov? ). Sorry Robert, but the city journalists can't pass the buck and whitewash the past when others apologise . Very sadly, it will be those many who were not at the party who will suffer most, but don't let the rest suggest they/we weren't part of the problem. We did not get to the root of the problem today except that the pathetic MPs now feel so much more holier than thou.
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Just watched the 10 o'c News and the holier than though reports of Robert and Nick. On the 80/20 rule this blog can highlight the reasons for where we are. I want to see attention to be focussed on sorting the future - wasting time on all the hand wringing and seeking high profile scapegoats ultimatley does nothing unless all you want is self satisfaction. The longer we focus on the past the greater the fall in the future.
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Some priceless comments on the below, apologies for the 20:20 hindsight:
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/10/rbs_wins_or_does_it.html
The best is the guy accusing RP and the BBC of "Nu Labour" bias for calling RBS's ill-fated acquisition into question. I can only hope he wasn't working for the Tories, or God help us when they take over.
Poor RBS though...yet more staff gone, where's the public sympathy?
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Well, we never thought we’d see this day in a million years – bankers apologising to tax payers. It’s bizarre, tragic, comical and downright criminal all at the same time.
How the tables have turned. Having been close to the edge in business we know what it feels like to experience the emotional fatigue of relying on a bank for a loan to expand a thoroughly sound business venture: our lives in their hands, literally.
Then, being screwed on interest rates, personal guarantees on your family home and the like, until you’re left with the feeling you’ve sold your very soul to Messrs. Bankers Inc. All this because they’d made so many bad judgements in their time, they’d lost the ability to spot a really good business venture from one that was high risk.
Small-time stuff, maybe, but blueprints for their future demise on a grand scale.
Then, as now, they still lack the intuition of distinguishing the wheat from the chaff and seeing the danger signals – even though warned: blinded like gamblers at the roulette table. It’s called – losing touch with the real world.
So, call in the bailiffs – jets, houses, cars - it’s payback time.
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Robert
What lessons can be learned if our government and regulator missed the opportunity of a thorough investigation back in October.
When Enron and Worldcom failed the US authorities moved quickly and stopped their respective CEO's wiping e mail records and the shreading of documentary evidence. This evidence ultimately was used to convict the CEO's of both companies. Why did we not send in the investigators in October when it was clear that these Banks were effectively bankrupt?
As a result of the action taken by the US authorities the two CEO's kenneth Lay and Bernie Ebbers both were taken to court on fraud, false accounting and misleading their share holders by public statements regarding the financial health of their companies, specifically the mis reporting of companany assets and profitability. Lay went to jail for 25 years and is still there Ebbers died before sentencing. The auditors Arthur Anderson ( one of the largest in the world ) that had audited and knowingly signed off the false Enron accounts were as a result wound up. Is not the lesson from these cases that despite their enormouse personal wealth these individuals were prepared to go to almost any length to defraud their share holders and cover up their crimes?
In the UK inter bank lending froze because the banks could no longer trust their counter parties because they suspected that they the counter parties would fold as a result of exposure to toxic assets CDo's and the like. this state of affairs occurred because depite the banks and the regulators being aware of the problem from 2007 no action was taken to revalue the asset base of the banks despite it being known that they were holding billions of pounds of these assets on their books or through SPV's. Yet despite a requirement of the 2006 companies Act forthe officers of any traded company to make public any material change to the companies financial health or risk profile - this was not done nor was it enforced by our regulators - nor did they send investigators into the banks to unravel what exactly was going on.
You say we need to learn the lesson of this global banking collapse yet every 8 to 10 years we have had speculative investment bubbles and they have in their core all had a similar set of characteristics
snake oil salesmen that convince the punters that they have a sure fire one way bet that can not lose.
Corruption and false reporting of profits
often aided and abetted by governments.
This asset price bubble is no different from any other except in one respect - this is the first time such a scheme has been run on such a massive global scale .
The only real lesson to come out of this is the establishment will protect its own at all costs.
There is a massive democratic deficit in our system of government whereby the PM can sanction bailouts using taxpayers money without any real debate or accountability for his actions.
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In some respects the banking four's demeanour was pathetic and sad to watch and their replies were equally deceptive and ineffective.
These self-proclaimed bankers only managed to confirm what most ordinary people have long thought of them, they are simply chartetans who once tried to convince us they were our saviours and masters of the universe and deserved to be rewarded accordingly. Whereas in reality we can now see that they are no more than clever greedy tricksters who sold their souls to the devil in pursuit of untold riches.
For the untold misery that they have now bestowed on millions of people who once believed their story and trusted them implicitly, we can only hope they will recieve their due penance and suffer the fate as all those people who have now lost their life savings as a result of their greed and incompetence.
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An hour and a half for this page to be moderated!
I keep refreshing, but nothing new.
Off to bed now.
No incentive to read any further.
WAKE UP ROBERT
If you become more widely read, then continuity is an important aspect of your blog and for three nights in a row, I have had to switch off.
Goodnight All.
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A sloppy service by the BBC - when you finish your dinner pary entertaining, don't forget about us plebs!
Moderation is certainly being moderated.
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I work for one of the part state owned banks and have done so for 33 years. I am paid a basic salary of £24000 pa with no increase in the last three years. If I am lucky, I might receive a bonus of £200 this year as a "reward" for the hard work I have put in in 2007. No oppurtunity for overtime to supplement my income like many other jobs, so I refuse to be lectured by a bunch of expense account politicians who vote on their own pay rises regarding my inequitable bonus!
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What can we, the taxpayers who have suffered severe financial losses as a result of the bankers' incompetence and recklessness, and who have had to shore up the banks as a result, actually do about it? Nothing. And what are
Gordon Brown and the government doing about the obscene salaries and bonuses? Nothing. We need a government with the balls to stand up to these parasites who think they deserve these pay levels. But where are the politicians of passion and integrity? All we have are politicians with their noses in a different trough. I must say, if I was paid £4.9 million for just one year, I'd be comfortable about saying sorry to the mugs who'd made that salary possible. Normally I'd say let's have a general election now, but todays politicians are all as bad as one another, whatever party they claim to represent.
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Hey everyone.....things are alrelooking brighter!
A 50 white horse is going to be built right near to where I work!
FANTASTIC!
.....though maybe it should be a white elephant (sitting in the corner)?
Maybe it should be an emporer with no clothes....
....on second thoughts....a crash gordon with no clothes on would be rather unpleasant...
...maybe a white horse is not such a bad idea afterall!
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Beautiful work by Mandelson!
A show trial with 1984 style confessions Stalin himself would be proud of. Let the public have their 2 minutes of hate. I'm surprised that the bankers were not made to wear their top hats.
At last the bullet is entering my brain.
I love Gordon Brown.
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Why are the government so interested in Bankers Bonuses? the answer is purely political, think about it. They get public support by being so critical but does this make economic sense for the government. Remember for every £ paid in bonuses the Revenue will get 40p back. On the basis that most of the banks won't be paying tax this year they should actually be encouraging bonus to be paid as a way to effectively tax the banks
Perhaps this doesn't make friends and influence people but so what, get the bonuses paid and at least we will see some money back.
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Clearly these bank bosses were wrong to do what they did. But was the system in fact so rotten already that it would have been "imported" in other ways? Clearly ABN Amro had a lot of toxic assets, for example. If RBS hadn't bought it, the bank would probably have toppled somehow. Perhaps it wouldn't have been the Bank of England and The Treasury who would have had to bail it out, but perhaps the Dutch central bank and we might still have suffered from the fall-out.
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I'm not an expert in financial matters but it seems to me that the banking crisis can be summed up in one word.....greed. The sooner that people in the banking world, be they chief execs or regulators, realise this then maybe there will be some progress.
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This comment was removed because the moderators found it broke the House Rules.
Stitch-up. Very unsatisfactory. They were all sorry that things had turned out badly, but they were not sorry for anything they had done. They were in charge but they weren't responsible.
I wish McFall had pressed his question about the definition of a bank a bit more forcefully. If a bank can collapse because it is unable to borrow a large amount of money at the drop of a hat, then how can it be said to be keeping its depositor's money safe? Yet this is the position these men had led their banks into.
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Why is it, when every country faces a financial collapse, there seems to be a narrow viewed Scotsman at the root of it all....it's truely bizarre!
http://www.mapforum.com/05/law.htm
Beware of Scotsmen with a friend called Prudence!
Not so happy days!
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If the bankers had come to me for legal advice before the meeting, I would have advised them to say "Sorry, oh so sorry"
That could meaning anything. Sorry I lost money. Sorry I lost my job. Sorry to be here. Sorry you fee the way you do.
What they didn't say was that they are sorry that their mismanagement may yet result in the collapse of Eastern European financil insitutions and the end of democratic capitalism.
By the way, I am sorry too. I am sorry that I lost so much money - and that they have it.
I want it back.
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#114 TSArthur seems to get it.
If anyone reading this didn't see the Select Committee meeting, be aware that neither, it seems, did Robert Peston.
I was lucky enough to have time to watch a couple of hours of the coverage and despite some bouts of juvenile questioning, the issues Peston mentions were in fact discussed in detail.
One telling part of the debate was when a questioner tried to trap Hornby by asking whether it was a case of "there but for the grace of God". Having apologised he couldn't really give a yes or no answer - but he was clearly inclined to say yes. The point is the problems were systemic (which these things usually are), not the result of bad or stupid people (which is what everyone would generally like to believe).
With trade imbalances generating $trillions of hot money and a complete failure of governments on both sides of the Atlantic to control house price inflation (surely it would be better for the MPC to target just house prices than whatever daft measure it uses now), the credit crisis was an accident waiting to happen. The immediate cause - the US sub-prime failure - was exacerbated by the "interesting" no-recourse (walkaway) loans they have in many States.
Given a relatively sudden loss of around $1 trillion of bank capital, maybe the system is actually more, not less, resilient because risks were spread by mortgage securitisation. Who knows? Whatever, it's difficult to see how losses of such magnitude could fail to result in a major shock to the banking system, during which some banks are bound to fare better than others.
I agree with Pesto that "it matters that we learn the lessons, so we can design a sounder, safer financial system". But perhaps we should start by looking at how to address the global imbalances and asset price bubbles rather than blame those who happen to have been overtaken by events.
Be ironic wouldn't it if history judges McFall to be more at fault than Hornby and Goodwin? - for not holding the Government to account for failing to control the UK housing bubble that's made us considerably more vulnerable than needed to be the case.
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Robert Peston asks about the motivation of the executives concerned. I attempted to suggest that there might be, in the case of RBS, a particular Scottish dimension. This was thwarted by the moderator, presumably on the grounds of racism but I shall persist as I consider it relevant.
Was this, in good part, an issue of a smaller nation (rather than a mere bank) attempting to punch above its weight.?
Note that almost all of the RBS non-executive directors were Scots. Is it conceivable that the normal degree of independence expected of such individuals became diluted in the pursuit of wider "political" considerations?
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At 10:45 pm the Dow stands at 4.62% - if it don’t recover by close tomorrow or falls further.
It should be an interesting day on the stock exchange, and browns much flaunted us are copying our plan.
If all these bails out's do not work and it's looking that way, brown's global rep could go down the toilet as it has in the uk.
Much like he claimed to be the genius in the good times and took credit, He is doing it with these bailouts.
Question is this - if it fails whom are the global angry populations going to pin the blame on.
I can see obama saying we where following the UK lead if it don’t work.
Just something that occurred to me watching the falls on the ticker tonight.
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Words are 'cheap'. Any Admiral will tell you that if you really want to know what is going on, visit the lower deck and speak to the sailors. Now is the time to go 'below decks' and ask who was responsible for supervising the day to day activites of the banks as these new trading products were developed. The Bank of England? The FSA?
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Mr. X who has lost his job, is about to lose his house, see the break up of his marriage and lose contact with his kids - he's sorry. Student Y who is graduating with £20,000++ of debts and having to go back to live with parents because there are no jobs - they're sorry. Almost a pensioner Z who will now earn no money from their savings, has seen the value of their money purchase pension scheme evaporate and can't even raise anything on their house - they're sorry.
Are these characters sorry ? When one of them sells me a copy of the Big Issue - I'll believe it,
Yours Aye,
Graucho
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The four gents we saw on TV today got taken in by the triple A rated, worthless sub prime mortgages, derivatives, and other fraudulent Wall Street products that were packages up and sold on to gullible bankers around the world. If they had only been educated in banking they would have learned that America did the same thing in 1837, 1873, 1929 and now in 2009 driving the world into a global Depression.
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I will vote at the next election for the Government if they do something concrete about the abuse of trust by the senior executives of these UK banks who have systematically paid themselves millions over the years for simply managing our money.
If these people were really sorry their mistakes they would pay back the bonuses they got last year and the year before. After all, these bonuses were paid for performance during those years.
This is a chance for Gordon Brown to really show his commitment to fairness and equity. If nothing is done by his Government about this scandal then in my humble opinion he is not deserving of another term in office.
Doing something about these bonuses is a vote winner Gordon!.
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I think it very disappointing that, for instance, Fred Goodwin doesn't accept total responsibility for all that happened to RBS. He was CEO and, by reputation he managed the business in an autocratic and domineering manner.
He might have said he was sorry but I haven't heard him (or any of the others for that matter) say "I was the boss, the buck stops with me; I personally accept responsibility without reservation.
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We all may think that RP has been biased re the NuLabour agenda etc. etc. , but he wouldn't have got the job in the first place then ..doh!....and he has consistently been 'on the money' wrt the story for the day/week over the past 18 months.
Yes, it's all been about the banks (very bank centric!)...but they always were the 'masters of the universe' and were the key players in this catastrophe (along with GB/FSA/BoE......it's all about the economy stoopid!)
Robert was born and raised for this (long winded) scoop!
C'est la vie!
Remember this day....
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/bailing_out_banks.html#commentsanchor
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All meaningless. Why was there no regulation of this "industry"? Why was there not a single prosecution for financial malpractice undertaken by the Financial Services Authority? What did they exist for? Why did traditional banks start purchasing high risk "investments" without the knowledge that what they were buying was largely worthless subprime mortgages?
And the one way that some of the risks might have been avoided - if the risk assessors pay was not linked to low risk declarations, but they got paid for the truth - whatever that might be!?
And who are also directors of most of these banks. Well they are all sitting on the front and opposition front benches. Of course nothings going to happen to them. Bah!
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RP writes "....................... they lacked a detailed account of why they did what they did", and "......... - but motivation was glossed over".
As far as the former is concerned it is all too apparent that these Bankers did not know what their so called "rocket scientists" were up to and did not quiz them sufficiently to understand their financial models and the effect the implimentation and pursuit of same would have on their liquidity.
Additionally it should be remembered that these extremely risky practices were not seem as anything of the sort at the time (with the exception of one forward looking Executive in HBOS who, apparently, got the push for voicing his concerns). They were not undertaken in isolation either. Many others worldwide were pursuing their pot of gold believing they too were on a winner.
The upshot is that the Banks knew WHAT they were doing but not HOW it was affecting the global Banking system.
Did they care whilst the going was good ? Probably not, the gravy train was rolling. And if they missed out there was always someone else who was going to take a slice of the ever increasing pie.
Pies get overcooked if left in the heat too long, and eventually burst. Someone has to clear up the mess. There is always a price. Seems like savers, small businesses, taxpayers and those that have lost their jobs, and their homes, are the one's paying that price. Bankers ? well, ever giving up their bonuses or payoffs hardly equates with having to give up your house or your job.
As for 'motivation' - well, enough said already.
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I want Cameron and/or Vince Cable to ask the PM why, given his complicity in the genesis of this crisis, Crosby is an appropriate choice for the FSA or anything else. Given Brown's Papist* tendencies, it will be interesting to watch him squirm.
This could be a killer blow for what remains of the PM's reputation.
Go in for the kill! And in Cameron's case, be glad it didn't happen on your watch. Get rid of Osbo and all the other hedgie funded spivs. If you don't, you will be as bad as Brown.
*Yes, I know he's a Presbyterian, but he certainly does have delusions of infallibility - a proper Banker in fact.
Another Haiku:
The crops are failing.
Does the farmer care?
Bovine Ordure may save him.
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Does anyone know how HM Government is proposing to repay the vast sums it has borrowed?
When an individual runs out of credit they have to stop spending. How long before nobody is willing to lend to Gordon at current rates, and he has to pay much higher rates (if indeed he can borrow the money at all)
Never mind letting the banks go under, is the country even solvent?
But, that said, there's no need to worry. Gordon has called a review, and no doubt lessons will be learned (even if they are forgotten by the next crisis)
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Been said so many times on previous comments, what are they sorry for exactly?
I am the only one that thought they had that look of children when called to account by their parents. 'Sorry' is immediately uttered to placate the aforementioned parent. They have no idea what they did wrong, just that by the tone of their parent's voice they know it must be something.
I would have been much more impressed if they had owned up to having know idea what was going on. Their apology isn't because they made a mistake, no rather that some people got hurt. Perhaps a start but not enough. Quite simply they either did not have the ability to do the jobs they were paid so handsomely for properly, or they knew what they were doing in which case they should at least have the decency to show some remorse.
Once it is established what they are sorry for, perhaps a suitable punishment can then be formulated. At the very least I would expect the 'Sir' to be lost. In my mind it would be fully justifiable to sue them through the courts as it has been shown quite clearly they did not 'earn' the vast somes they were paid.
Alas, they will no doubt be allowed to fade away from the limelight with their rewards and 'Sir' intact. Is that real sorrow?
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Dear Robert
It was an incredible and nauseating display of nonsense. The defendents (the bankers) catholically repented and the MPs abused them. It was a ritual dance which allowed the bankers to keep all their ill gotten gains and the MPs to emulate Pontius Pilate, whilst they enrich themselves.
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It's all very good that most of those who comment appear to have had that one thing that I could only ever dream of possesing: The Power Of Hindsight! - All those properties I visited in the mid 1990s, with your powers I would have been a multi-millionaire by now and got out of this rat race.
When are people going to start coming up with the way forward, You can do no more about the last few years than I can do about those properties I turned down at rock bottom prices.
Strangely, I sold my main home in 2004, not because of the power of hindsight, but because history was telling me that we had already reached the point of no return, recession was around the corner, but the longer the boom went on, the worse the recession would be!
Lending to people in multiples of between 5 & 10 times their income or in some cases not even their income, but some ficticious figure (self-certified) - It's the lenders who should have been certiefied by the way! was never going to have anything but the gravest of endings.
Our housing bubbles have gone round in circles so many times now, when are we going to start a future that controls them, instead of them controlling us.
It should be put on the UK statue book that NO individual or couple can borrow more than 4 times their proven income, ever! which should included personal loans, mortgages, credit card debt etc etc.,
Only then can we stop this clear stupidity of borrowing on the back of over inflated asset prices.
I took my first mortgage in 1997, at the time the bank (Abbey National), wanted to know the ins and outs of my cats kidneys, stomach and god knows what else, in short they had been bitten in the previous few years, then the memories faded and they end up saying by the mid 2000s, how much d'ya want, that's not a problem etc etc.,
The truth is, like most people they get carried away and start to believe that they're SO good at what they do, that they don't make bad decisions, yet old father time catches up with them as it always does, only this time they nearly sunk us all.
Now lets look forward, idiots don't go away, they're always here, just don't join that club yourself and always remember: Money is a very precious commodity, come up with ideas that will move our country to a better place, don't look back in anger, it gets us all nowhere.
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89. At 4:29pm on 10 Feb 2009, jthredland
Great post...you should read barriesingleton's post's on Paul Mason's bbc Newsnight blogs.
http://www.bbc.co.uk/blogs/newsnight/paulmason/2009/02/the_anger_out_there.html#commentsanchor
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They were blinded by self interest and self belief.
Now you are blinded by Cynicism and Mistrust.
This is the human condition.
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Saying sorry is just words.
What they can't say is how deep and wide the pit of debt is even if they knew the extent of it.
It would 'blow them and us away'. They dare not say or even describe the how bad it is.
That's why they gave no details.
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So, the bankers say sorry.
Now it’s time to wheel in every one else involved in this sorry mess. Starting with the former chancellor who let this deregulated system mushroom.
Then wheel in the Select Committee that is now doing the interrogation. They think they are the bees knees now they can ask the smarty pants questions like “what are your qualifications” (John McFall the chair of the committee was a school teacher in his past life). But what have THEY been doing for the past few years!
Then there were the greedy people who said they liked all this never never money and happily borrowed.
There are a lot of people to put in the dock. The bankers were just working within the regulations the chancellor set down in a market that wanted crazy loans. The banks just met the market need.
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"toxic bank abn"
You truly know very little about banking. You have not even worked in the industry for 20 years.
Now go back and:
(1) compare ABN's b/s pre takeover
(2) compare RBS's
(3) compare to other banks
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I read a very interesting article in the Economist today re the cause of the current banking crisis.
Their opinion was simple in that too many people put too much trust in both banking and trading models and the models were simply wrong.
The difficulty as is shown by the Risk Manager's comments is that no one wanted to listen while they were all making loads of money.
With both asset prices and property rising at breakneck speed everyone was making loads of money. People were bundling up assets and selling them on with everyone relying on a fatally flawed model.
Those wary bought reinsurance, generally from AIG to protect their downside, as no one insures against making more money than you expect only against losing more than you expect. This madem the insurance market inherantly unstable but with booming asset , house and share prices no one claimed on the insurance so AIG kept claiming the profits and taking it more risks.
The house of cards worked as long as the virtuous circle kept going upwards. However when one thing failed it all came down.
Firstly regarding CDO's it became clear that as the NINJA loans were turning bad there was no way AIG could pay out the claimns so the US government had to step in or else the whole system would collapse.
This bust in the US property market the collapse of Bear Sterns and Lehman Brothers caused the chaos in the US & Worldwide stock markets.
The banks models on movements in the Dow Jones reckoned that a certain fall had occurred 48 times since the end of World War One. They anticipated the losses and gains as a normal distribution. However the evidence showed the market had been more volatile and it had actually happened over a thousand times.
Their models had ignored the possibility of what happened to the Dow Jones last September as their model thoguht it could happen once in 300,000 years. A one in 300,000 year event happended five times in a month.
Poor maths and arrogance caused all this.
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Whilst there is room for debate as to who is exactly to blame for this mess, it would be less than accurate to place blame on those that took advantage of soaring house prices by taking out larger than life loans to pay for it.
Demand for houses grew almost as fast as house prices themselves. Market forces perhaps !
Most housebuyers are not financial wizards and no doubt used to living to some extent on credit these days.
Advice is sought and taken by individuals from those whom they should be able to trust and whose advice is sound.
Is it the poor old consumer to blame for being able to overstretch his means, or is it those with financial knowledge and skills who tempt them in the first place and provide the opportunity to indulge.
If I had gone to my Bank Manager (you know the sort, the one who knew your name and met you as you went into the Bank) wanting something I could ill afford, I know exactly what he would have said - politely of course. Norman Tebbitt eat your heart out.
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I deplore the short sightedness of the bankers along with the greed, credit and false promises they made. But how do they differ from Gordon Brown, our (unelected) Chief Executive?
He built a reputation on capitalising on the boom years, of claiming no more "boom and bust", of recommending Knighthoods for key members of the banktocracy, of saying the brilliant stewardship of the economy was down to him.
The Labour controlled Treasury Select committee should call him as a witness and ask him if he foresaw the economic catastrphe, to explain the lack of regulation and why he appointed to the FSA the man who sacked the whistleblower at HBOS who told his colleagues they were heading for disaster. Nick
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I’m sorry…..in particular sorry to seeing the process of blaming the banking fraternity (although deserved) diverting from the real issues of government incompetence. When will Blair / Brown stand up and accept some responsibility for the current dismal situation. There may well have been a certain inevitability once the global banking process failed but I find it inexcusable that the Bank of England, FSA and ultimately Government where unable to react several years ago to the obvious over heating and dubious banking protocols within the UK. When will we ever get the proactive accountable governance the electorate deserve.
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arabstrap
spot on leave em with 200k and see how they do, but it wont happen. People power should help, now they will be Billy No Mates and if local business refuse to serve them, then they will finally realise what a bunch of evil, hated selfserving idiots they are. I even got a e-mail reply(obviously automated) from Pressa for signing his petition. Whilst I aint a labour supporter his willingness to speak out and try and do something means I have changed my opinion of him, or is it he was told to do it by mother brown?
The solution to bonuses is simple, the government where it is a major shareholder can veto them and also sack the whole board. why dont they make an example of RBS. A Nobel Prize winning Economist suggested that the banks default on their foreign obligations, cos there was no guarantee anyway, protect UK investments and start again with new management. I vote for Cpt Mainwarring
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I have read most of these blogs about Bankers - the thing is all the comments are always the same so why have so many when you could draw the conclusions from contributors and categorise them by reading just one.
So I'll summarize.
1. The baying anti bank herd - You get the feeling they would still be here complaining if the banks were reporting record profits at this time rather than the losses that a few (not all) are reporting
2. The majority who make decisions based on so little fact or knowledge they are led on like lemmings to a conclusion - you can read in their posts so many statements in support of their stance you just know they don't understand really but have read a few headlines generated for their consumption
3. Those that have a knowledge of the inner workings of the city and can explain with some complexity the way the banking / financial world works or consider the global position. Much of this is lost on those in category 1 and 2
4. Those who believe bankers have become scapegoats for a Government looking for a "popularist campaign" to mask their complicity in the failings in the economy
5. Those who at last are beginning to voice an opinion that general public are equally as complicit - they are the ones who also have enjoyed the boom and demanded loads of borrowing thus helping to fuel the disaster
So lets get off the subject, there is little else to be gained by regurgitating this day after day. Its time to move forward.
Sadly I think all this will limp on until the next election and we can then decide as a country, who will deliver us from the mess we are in.
This is the BIG game - both for businesses, the public and the economy as a whole. We need to focus fully on that.
There was a time when journalists reported on the news. Nowadays they want to be the ones to create it.
I looked on the BBC site today, there are now 26 different bloggers, all contributing a number each day. Each needing, firstly pre moderation then possibly moderation. This Means a huge amount of time for the moderators... ( no doubt creating the delays) Does the Director General know all this time is being used? Isn't this just another form of overheating but this time in the blogging community. The boom years for blogging, when will they go bust?
After all who ever reads them all except the contributors, what difference does it make other than to the journalists who can justify their positions by having loads of replies and getting interest.
They themselves then become more and more focussed on "blogging" a story more likely to get a reaction rather than necessarily the core issues in order to maintain their status.
They themselves are feasting on others offerings and failings- some might say that with that type of journalistic reporting they are nothing more than leeches themselves.
How much is blogging costing ? Yes us the licence fee payer are paying for this - now where have I heard that before about another industry?
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Ever been codded? Meet Lord Stevenson of Coddin'em.
I tend to disagree with the general opinion, now I've had a chance to review the session at leisure, as the Committee chose a nonconfrontational style to draw out experienced spinmerchants before dropping the axe on them rather spectacularly, and allowing other aspects quietly to come into view.
The FSA is supposed to be a regulatory authority. However, it transpired in this examination that it has overstepped the mark in becoming actively involved in aspects of the long-term financing of RBS, moving from approval of a financing plan to becoming involved in the capitalisation of the Company. is this legal, or does it breach both their mandate as regulators and the Companies Act?
Again, replaying the interview concerning the evidence given by Paul Moore, HBOS' Risk supremo, the Select Committee discovered (c 1hr 30 mins in, s=to save you searching) that Lord Stevenson of Coddenham's evidence was about as strong as a rice pudding, an inconsistent with the evidence, namely that he tried to weasel his way out by blaming everyone else but himself and his team. For instance, he tried to portray Mr Moore as not having FSA support, whereas the quotation from the FSA warning HBOS was virtually word for word identical to the sales accusation made by Mr Moore. And of course, the funniest thing was that it was Lord Stevenson himself who finally provided the tombstone for his own career by umming at just the moment when the subject was about to move on. He then demonstrated a quite remarkable lack of joined-up thinking by insisting that the reason his business went under was solely and uniquely the short-term profile of his borrowing portfolio, when that was simply one half of the story, the other half being the long-term and dubious nature of what those borrowings were used for, which was exactly Mr Moore's point. This came out later in their complete failure to manage their property portfolio risk proactively.
As I pointed out yesterday, he is also Chairman of the House of Lords Selection Committee, in charge of selecting the Peoples Peers by which this State is governed, and was Glen Moreno's immediate predecessor as Chair of Pearson PLC. Moreno, of course, is the new head of UK Financial Investments Ltd. Perhaps we will see a new version of Moore's Law, where instead of the speed of computers doubling every eighteen months, the velocity of insider trading doubles every eighteen hours.
Hopefully Lord Stevenson will be given a Hornby Rocket - his village certainly needs one, as its events diary's is completely devoid of any events.
There are sixty million people in this country. There are several tens of thousands of competent bankers, working for hundreds of banks.
How peculiar is it, then, that all appointments come from such a small pool of failures. This is the angels dancing on the head of a pin, it's spinning so fast on one spot one's point shoes catch fire, it's twisting themselves so hard they'll catch themselves coming back, as the Welsh say. Attach a magnet to them and they'll generate sufficient power to light half the country, like a modern version of the old buttered cat array.
Turning now to the Select Committee's examination of Tom McKillop, they rightly state that the Board was the brightest and the best, or at least by comparison with some...However, the prospectus they issued for a bond issue at the start of September was riddled with nonsense, not the least of which being that they presented it as a going concern when the business was already in desperate trouble and in need of a bale-out.
The Committee homed in on the unmanaged exchange rate risk of RBS, one of the basics of such an activity as theirs. That was a standing committee I sat on with the corporate I was on. The fact RBS didn't even have an idea of the possibility of the thing, this bank of the brightest and best, rightly raised the rejoinder that they should take legal advice for criminal liability.
That was one of a dozen things I reported on way on back in October or November - which the moderator spiked. Well, the Moderator can track back through everything they've spiked running back through the months and find it and post it again here, because what I had to say then has become cardinal to the affair.
This is all part and parcel of an unassessable exposure. I have shown how unexpected gaps can appear in even the simplest models, and when you get exposures flying in all directions, adding and compounding each other quite unpredictably as the result of the mismatch and timing delays between the real world and the model, then you have a recipe for chaos, and extracting any order from that chaos is just not feasible. The Banks profits are therefore unassessible, as they are dependant upon randon forces, and it must stop. The fundamental mistake is that they were taking insurance-logic decisions without an unlimited liability to support them, and the wheels were bound to come off. The only way out now is to ban all compound instruments, all risk relief outside the insurance market, and to unwind everything as quickly as possible. The thought they were planning to cross-cut the packaged portfolios to spread the risk across banks is unbelievable - it's the direct equivalent of Greenpeace selling 1cm squares of land in the path of the Heathrow third runway to Amazonian Indians.
Just as the dealers of RBS have doubtless had a hell of a shock discovering that their contracts and the bonuses attached would have died with the Company had it not been rescued, and that the Government is seriously thinking about blocking them on exactly the logic proposed by so many readers here, so there may be a similar way out for all these deals.
They were sold, not as mortgages on peoples homes and the like, but as structured financial instruments. Selling the deal on fundamentally changes the contract with the borrower, and in some legislations entitles the borrower to refute the deal immediately. The answer is to forcibly delink the two and leave the original lender with the risk they are responsible for. The Structured package must then be undone at cashflow and interest.
The most telling point is that the Committee openly threatened the brightest of the respondants with criminal liability, to which he had no answer. His colleague is even worse, admitting to flogging on sub-prime as relabelled prime, which is fraud, compounded with a total lack of conscience and evidence of the remorse they claimed at the beginning. Once again Sir Fred blamed the people he dealt with, this man has the conscience of a slimeball. Even if that were true, he still has to answer for a conspiracy with them to defraud their investors.
The remainder weren't even worthy of that much of their ire. This casts an interesting light on tomorrow's conversations with the survivors. The general conclusion was that these were Sorcerers Apprentices, and so must clean up after themselves before returning to the farm. After around twenty years in prison, hopefully without parole, sharing a cell with Ben Dover.
Like Sir Fred said, "It's just too simple if you want to blame it all on me, if you want to blame it all on men and close the book, that'll get the job done very quickly, but it does not go anywhere close to the cause of all of this." Looking in his eyes as he said that, was looking into the eyes of a man who had the fix in, neither repentant, nor guilty, but mocking.
Well, he had the opportunity to explain the cause of all of this, and it seems to be the same across the board. The banks are now unsalvageable, it's time to clear the lot out, ban them from the markets forever, and begin again. It'll create chaos, but there's no other way.
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why be so craven, these 4 men are guilty of fraud ! aren't they ?
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you get a job that you are not qualified to do,
you promise returns based on wild guesses,
but you get paid the market rate !
unearned income in my view !
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Stop wingeing and do something about it, folks.
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Spare a thought
Hug a banker
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"Apologies carry weight when they are accompanied by a clear explanation by the miscreants of what they did wrong and why"
Short Termism is a culture which has crept insdiously into corporate culture from the 1970's onwards.
Several years ago I sold a couple of freehouses to a national brewery. The director of the brewery concerned appeared to have little interest in the profitably of the units concerned - only the barrelage. I later learnt that his BONUS, PENSION and SALARY were linked to liquid turnover primarily.
After a couple years spent acquiring unprofitable freehouses this director retired with greatly enhanced benefits leaving his successor to clear up the financial mess he left behind.
This analogy may or may not be pertinent to banking today but if it is, its an answer to your question.
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Robert,
Sub-prime was the catalyst for this Kredit Krunch. An ex-executive maintained that RBS's involvement with this niche of banking was only as an AGENT. An agent involved with the repackaging of loans into investment instruments is just as responsible/ culpable in law as a vendor .
Any mortgage broker worth his salt has an inkling when a punter is a potential sub-prime defaulter by just perusing his application form. The blamefor this crisis lies with:
a) Bankers who made the investment instruments opaque by packaging sub-prime with triple A's either by incompetance or design.
b)Credit-rating agencies who misrepresented ( by design or incompetance) the true status of the financial instruments
c) Bankers who failed their duty of care to investors by not performing due diligence when dealing with these instruments.
d)Bankers/Brokers who knowingly sold mortgagers to no-hopers.
If criminality is proven, may the punishment fit the the crime !
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As I said on another thread...
Short termist objectives resulted in short termist actions to secure bonuses.
Simple.
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From here, it appears that there is a great deal of blaming going on!
Enough, move on....
Everyone is now a financial expert it seems. But most of us are not....
If you wish to apportion blame, look to our politicians. Gordon Brown cannot say that, as C of E, he did not know or support the banking system of the last decade. If he did, he would be considered incompetent...
Don't single out the banks - look to our communities and our way of life....it's easy to blame the bankers but, in truth, the problem is far wider and we should all be big enough and brave enough to recognise it!
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Lessons learnt in the last 6 months
1. Corporate Greed is bigger and more important than Politics and social improvements to our society.
2. Money is King regardless of the quality or welfare of the service provided.
3. If the greed machine fails the economy grinds to a halt and the tax payers will be taxed more.
4. The banking industry demand the highest remuneration for services even when they fail to do sums correctly and perform abysmally requiring trillions to rescue them
5. Individuals and Companies forced into unemployment, unmanageable debt, bankruptcy and home repossessions will not get any help from the Government except for token lip-service.
As you can see there are hypocritical contradictions where banks are given more importance than families and industries that help people. This had already been obvious to many for several years prior to the global financial crisis.
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yesterday the top chiefs of RBS admitted they paid too much for ABN. These are basic of valuation errors taught in any finance or MBA degree. We have too many corporate chiefs running financial services companies without formal qualifications. Another disaster waiting to happen is to have John Varley who is a SOLICITOR by training continue to run Barclays. Barclays will soon turn into a titanic ship like RBS and we will be asking ourselves the same questions : how did we allow these fat cats with no business or finance qualifications to run our banks into the ground.
It just doesn't work. Who in their right mind allows a solicitor to do brain surgery? But we allow these unqualified people to run out largest banks??
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the trouble with liars and bullsh:ters is they truly believe they are good at lying and everyone else believes their spiel.
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Hi I'm not going to single out the RBS (Royal Bank of Sorry) here but can any one tell me why..
In this time of so called Credit Crunch and plummeting interest rate's Why has the RBS and several other banks Credit Card payments been increased to existing borrowers by up to 100% pcm more some with the letter saying " if you cant afford to pay the increase or you think it unfair you can snap your credit card and continue paying the old rate till borrowing paid off"
And of course if you try to turn your borrowing on that card then to a bank loan as it has become a straight loan the bank then refuses to lend you it hence forcing you to pay the silly % rate of the credit card
But on the good side i suppose at the end of the day when this recession is over we will get another apology for that as well
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Dear Robert
The Banks Created an economic Disaster, - so " who runs the country"?
The Bankers who have got away scott free for all the turmiol they have caused OR the Politicians who are like Birds in the Bush to them.
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Re my 288
I spent the whole evening working on that 288 and the moderators bin it because I accidentally inverted two letters in McKillop's name.
That inversion is deserved, and similarly for the entire ruddy committee, because they just broadcast the fact RBS has an uncovered forex (I ought to spell that xxxx) position in their entire SCO portfolio.
That could be further losses in the hundreds of billions.
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the trouble with liars and slick BS artists is they truly believe they are good at lying and everyone else believes their lies and spiel.
[your instincts can tell you when this happens]
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interesting situation about the whistle blower .,I wonder how brown will wriggle out of this one.Its really up to cameron to stick the boot in and try to get brown wriggling on the line a bit,i feel, like the usa ,the only way out is a total change of government, brown is plainly hopeless.
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I suspect bank shareholders are reluctant to sue as that type of action may only push down their share prices even further.
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Dear Robert
It now transpires that the Banks were warned of the exposure to the Money Crisis and that the Whistle blower was sacked.
To me is not a whistle Blower but a man doing his Job. The Criminality of this is he was sacked for it.
There is also no doubt what so ever that all those Bankers should now face Criminal Charges by The Finacial Services Authority because they committed Fruad by decieving the tax payer on the extent of their involvment in the fianancial dealings that wrecked the Economy.
AND, Just to be clear on this GORDON BROWN SHUOLD RESIGN, over this crisis as it is on his PLATE, AND HIS WATCH.---this is a crisis bought on by the Governement
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Dear Robert
It now transpires that the Banks were warned of the exposure to the Money Crisis and that the Whistle blower was sacked.
To me is not a whistle Blower but a man doing his Job. The Criminality of this is he was sacked for it.
There is also no doubt what so ever that all those Bankers should now face Criminal Charges by The Finacial Services Authority because they committed Fruad by decieving the tax payer on the extent of their involvment in the fianancial dealings that wrecked the Economy.
AND, Just to be clear on this GORDON BROWN SHUOLD RESIGN, over this crisis as it is on his PLATE, AND HIS WATCH.---this is a crisis bought on by the Governement
IT IS TIME NOW TO IMPEACH GORDONBROWN.
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" exbanker007" - the likes of merrill lynch, morgan stanley etc etc advised rbs - places full of MBA rubbish.
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This comment was removed because the moderators found it broke the House Rules.
I was hoping one of them would have the guts to put it like this- remember the late 70s, the country was on the skids? Then Mrs Thatcher arrived and got rid of the industry. We came along and gave UK plc financial services instead. What would have happened if we hadn't, think of that. We made shedloads of money, but we gave you 20 years and more of prosperity. You enjoyed it. The government regulated our every move, and we complied with every regulation. OK, so we got it wrong eventually, who doesn't? The morality you MPs now profess simply covers your own feeble failures, and probably your envy, because we had our snouts in a much bigger trough than you. Now take me out and shoot me!
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Members of the public who have lost all their money will now be purused for bad debts by the BANKS that broke them in the first place.
Write off ALL unsecured public money owing to the banks - THAT means only the banks suffer financially. It was always the public rather than the banks that needed bailing out in the first place.
Once no one has any expensive credit, it will be a lot easier for people to live within their means.
It it not as if the government owes a duty to shareholders either - They have already lost their shirts after all.
A £10+ share price down to pennies is as good as bust if you had a big wedge of savings in it.
Those banks now part-owned by the taxpayer - Let's see some CCJ's levvied against the board, their houses taken away like those in IVA's/Receivership and their lives duly ruined as are the lives of all those who have had that done to them already.
Future bonuses should be based on completed loans - as in final payoff installment made - in that payouts would then be pooled among the staff, thus not encouraging anyone to do more than prudent lending. This is how banking used to be, and how it needs to be again. Even then, all bonuses should be in out-of-the-money call options so that if the share price does not perform, no bonus gets paid anyway! Thus the public, the shareholders, and the staff get rewarded in that order.
In the meantime, apologies NOT accepted until I see some board members in bankruptcy!
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This comment was removed because the moderators found it broke the House Rules.
Robert
On the subject of the Treasury Committee, I read that you were also providing a submission, especially around your activity in relation to the Rock. Will you be taking the opportunity to apologise to their staff for leaking information which brought about the downfall? Even "not quite a full apology " might be something
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I have to declare an interest before I comment further. I am an RBS shareholder, thus a lot poorer than I used to be. In consequence I have a bit of a jaundiced view of Sir Fred and Sir Tom.
Having said that, Robert, I'm not that keen on your approach either.
You, many of your colleagues in the media, politicians and much of the public, (presumably following dutifully behind) appear fixated by the four individuals not appearing to be adequately contrite. You don't want them to just say sorry really; you want them to have to publicly grovel, be shamed and humiliated and, of course, 'to take responsibility'. For all the good that will do in practice.
I, on the other hand, want to know what happened inside RBS in Imax detail and having listened to the whole of the Treasury Select Committee hearing, it was patently obvious from the start that I wasn't going to learn very much in that forum.
The level of questioning would have shamed a Year 8 economics student. Nothing much was revealed because the committee members didn't have the skill to extract any kind of detailed analysis from the witnesses. They were more interested in trying to score points, appear clever, attach blame. Sir Fred, who appeared to be the one with the most detailed information at his finger tips and the most articulate of the four, was left for very long periods completely uninvolved.
If there is anything more sickmaking than self righteousness it is self-righteousness practised by a fourth rate politician in public on the grounds that his or her constituents demand it. That can be trumped in this case because parliament managed to construct a bevy of fourth raters more interested in knowing whether Mr Hornby knew what Job Seekers Allowance was or whether the four witnesses had passed their banking exams than putting them under any consistent pressure to disclose the level of detail of what their banks did in 2007 and 2008 that might help us to accurately analyse why we are where we are and, if necessary, legislate to endeavour to protect us in the future.
I don't listen to this kind of thing often; my listening habits will not change. Annoyingly, I thought Sir Fred and Sir Tom performed rather well in all the circumstances whilst telling us next to nothing.
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the problem with these utterly irresponsible CHARIMAN/CEO (I CALL THEM DEVILS) is they have basically tarnished everyone who works for a bank with the same bad brush.
COME ON PUBLIC
not all bankers and bank staff are bad
they do a good job even now given the current climate.
im sure for every bad member of a bank you know i could find 20 who are good at their job and would serve you well.
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To: Mr. Robert Peston - BBC News
From: mirocester@yahoo.co.uk
Subject: Info
Date: Wednesday, 11 February, 2009, 10:05 AM GMT
Dear Robert,
We were smashed ... An apology?
Can you imagine that after such serious offence or activities against millions of share holders & taxpayers related with implications for whole global economy, in some countries (like Poland) they will be immediately arrested & after public trial faced severe punishment with obvious duty to repay too?!
Doing Businesses in the UK we can state - Not in the UK, indeed. Why? The answer is so simple ... too simple.
Kind Regards
on behalf of Syndicate
Agnieszka B. Wiecek
and edit. Miroslaw Gasowski
________________________
NOTE: the Syndicate AGNES AGHNESSI of the Limiteds:
1) AGNES AGHNESSI Mutual Interaction Limited &
2) MIROCESTER NIEROHGBEROUGH Limited,
has been established at Conway Castle, Wales in the United Kingdom with Limiteds, registered in the UK & Head Office:
48 Sandhurst Close, Church Hill North, Redditch, B98 9JY, Worcestershire, England
-Agnieszka B. Wiecek - Chairman of the Council and Board of Directors of the SYNDICATE AGNES AGHNESSI of Limiteds; Owner & Director of the Agnes Aghnessi Mutual Interaction Limited (mobile: 07595 220 545);
- edit. Miroslaw Gasowski - Vice-Chairman of the Council and Board of Directors of the SYNDICATE AGNES AGHNESSI of Limiteds; Owner & Director of the Mirocester Nierohgberough Limited [Personal details removed by Moderator]
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Listening to the committee discussions yesterday I was struck by two things that resonated with my time working in banking. The first was the way HBOS fired the risk manager who was trying to tell them that there was risk. I didn't work for HBOS but it was just typical of the "see no evil" culture that existed where I worked also. It was underlined by greed. There was a good thing going on, and senior bankers were doing very well out of it. Risk management took place within a fairly narrow framework of accepted risks. Traditional bankers would have been able to evaluate the big picture risk, but they were marginalised from banks by the mid 90's. Which leads to my second point. In the early to mid 90's there was a view that high street banking was just another retail activity, and then there was a rush to employ successful retailers. They were good at selling, that fuelled the rapid growth of income, but of course retailers from other areas would have no sound understanding of banking risk. No surprise then that as we got rid of the traditional bank manager and replaced them with retailer sellers, then we lost sight of the risk. This appears to be the case at HBOS. And because this all happened as early as the early 90's, then of course you can get some very experienced people running a bank, but their experience might have still have had a blind spot where risk was concerned. When Andy Hornby yesterday kept quoting the amount of experience his people might have had at running the bank, he may just have been overlooking this point.
Add to that the desire of the senior guys to turn a deaf ear (via the aggressive HR culture) to risk messages when they did get them, then they compound the risk on a corporate scale, and suddenly you have the potential disaster scenario. But if people in the FSA or the Treasury couldn't see any of that, then what are they paid to do?
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If you accept the bankers' arguments, the problem was unforeseeable and/or unmanageable i.e. it was all down to bad luck. This would support the recent research that purports to show that much of the success of CEOs is due to plain, simple good luck. In turn this suggests two things:
1.CEOs' talents are grossly overstated and hence so is their compensation-a highly dangerous loop which can easily lead CEOs to believe that they are infallible.
2. The risks to the economy of bad luck hitting a large bank that combines retail and investment activities (i.e. high levels of risk) are too great to countenance - as we have seen. 'Stuff happens' and no amount of regulation or effort by the best and brightest can prevent it so high risk activities have to be separated out. If we are to accept the need for creativity, innovation etc in finance it can be accomodated in separate institutions.
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I did a double-take when one of the RBS people was questioned about their huge "investment" in the Madoff Ponzi scheme, and whether they carried out due diligence.
His reply was that that investment was made by ABN before RBS purchased it. So that's all right then! However the obvious response from the Committee should have been "Did you do due diligence when you bought ABN?" How on earth did the Committee miss this?
In other words, RBS say they did not investigate a £400(?) million investment held by ABN, before buying the company? The term criminal negligence, as mentioned by a Committee member, comes to mind again.
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Robert,
Obviously the Paul Moore revelations were the number one fact that came to light yesterday.
But, as reported in the Guardian, Stevenson claimed to be the only one of the four to understand the complex derivitives.
Therefore, it would be enlightening if, as should happen, all four were recalled and this unqualified banker was cross-examined by an independent and cynical expert on matters derivitive.
I have a strong suspicion Stevenson was banking (sorry about that) that he actually would not be made to give us evidence of this professed knowledge.
As I believe statements made yesterday have consequences let us be regalled with his wisdom then require him to answer:
'Why did you not stop this wild out of control gambling or did he believe that as it was off the balance sheet , shareholders et all would never need to know and cross fingers he would be long gone before the s.. etc?'
The results show that HBOS was just gambling and the 'risk analysis' conducted by HBOS was enfeebled repeatedly until it was useless and therefore gave the answers the bonus addicted traders/directors etc wanted.
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how can GB be to blame for the excesses of the banks ?
did he pass a law which gave him a say in ALL contracts that were agreed when the banks were private sector companies owned by shareholders ?
of course he did not but you would think we have had a soviet style government which in truth we have not !
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Sorry is an easy word, even when uttered with the obvious lack genuine feeling. Did they really care.
My main point is though is about the opinion expressed by several in the media eye that failing to pay bonuses will result in an exodus of current staff. Great why should we pay for failure and retain the same folk who made the mistakes in the first place.
In the financial sector bonuses do litle more than encourage dishonesty and greed. Greed by this seeming elite has dragged this country to its knees and put many out of work. It's they who should pay.
Let them go I say and the sooner the better.
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"Perhaps they never will grasp fully what went wrong. But it matters that we learn the lessons, so we can design a sounder, safer financial system."
NO NO NO Robert, that is not the correct response at all. You are wrong.
These characters have begrudgingly apologised for their reckless conduct. Their attempts at humility belie the greater truth...the admisssion of culpability their apologies amount to.
With that admission and useless apology should come accountability and consequences for the individuals concerned. If this is not possible under current legislation (which I doubt) the law should be changed and back dated as has been done in the past.
These people should be facing criminal charges and jail terms for fraud at the very least. Until that happens there is no deterrent for any other wiseguys who come along and nothing at all in the financial maket culture will change.
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IT WOULD SEEM SIR JAMES CROSBY RESIGNED TO TAKE THE HEAT OFF GORDON BROWN.
TREASURY COMMITTEE WHITE WASH
WILL THE BANKERS BE GIVEN A GRILLING OR WILL IT BE THE USUAL WHITE WASH.
DON’T BE FOOLED BY THE IDEA THAT THE FINANCIAL CRISIS WAS CAUSED BY A FEW UNSCRUPULOUS BANKERS’ MISTAKES OR THAT IT WAS ALL A GLOBAL PROBLEM. THE BANKERS’ WERE CERTAINLY NO NOVICES, THE KNEW EXACTLY WHAT THEY WERE DOING.
Some bankers are to appear before the treasury white wash committee on the 10 February 2009, for a grilling. But just watch how the bankers conduct themselves. They will be all humble as if butter wouldn’t melt in their mouth, making excuses, feeling sorry for themselves, blaming: the subprime property markets in the USA; consumer over spending in Britain; and then, of course, their big get out excuse to exonerate themselves from all blame for their greed is – Yes! you’ve guessed it – The Global Economy. It will be interesting to see if the committee has teeth and how they will use them to claw back unscrouplous bankers ill-gotten gains?
Let’s get it clear. The unscrupulous bankers were the geniuses who dreamed up Colateral Loan Obligations (CLOs) and all types of similar products to make them a fortune. They even awarded themselves for their innovation by accepting these massive bonuses, with no concern for the people they robbed. These guys, made no mistakes. They knew exactly what they were doing. They dreamed up the financial system in which they were operating. In order to make themselves enormous amounts of money they had to know what you are doing. Don’t be fooled by Gordon’s idea that a few bankers made a mistake or that it was all a global problem. These guys, most certainly are no Novices.
CONSTRUCTIVE NOTICE AND CONSTRUCTIVE TRUST WILL DO THE TRICK
In principle and in Law there is no excuse for their conduct most foul, they were in possession of a Constructive Notice and Constructive Trust.
CHANGE OF THE SYSTEM, Deregulation.
Up until 1997 the Bank of England controlled the financial system. It was common knowledge that mortgages were protected from such abuse, under existing safeguards of regulations and the law, and that mortgages, in particular, were sacrosanct.
Mortgages were only to be used for the purchase of property; loans for all other purchases had to be through a bank loan or hire purchase, which were short term and had a higher rate of interest. Lending banks and building societies were strictly regulated in order to protect homeowners and the security of their asset and the valuation upon which mortgage deeds depend. Lending for consumer spending on domestic and luxury goods were kept separate.
However, in 1997, Gordon Brown when Chancellor, decided that he didn’t like that anymore. So he introduced a system were we had, the Financial Services Authority, the Treasury, and the Bank of England, (the Tripartite Authorities) carving up the job amongst them. Just one big problem – when there was a crisis, ‘apparently’ nobody knew who was in charge. The effect of all this – the system unregulated.
The bankers most certainly knew the enormous potential value of your mortgage, backed by the secure asset of your home, and that mortgage-securities would be the driving force behind a powerful booming economy. They knew the Johnston administration in 1968, privatised Fannie Mae and re-constituted it as a government-sponsored enterprise (GSE), and how they used mortgages repackaged in the form of (GSE’s) to raise enormous amounts of collateral to fund the Vietnam war. They knew they would make a fortune if they could trade them on the US financial markets in the same way as US Government-Sponsored-Enterprises (GSEs). However, bankers knew mortgages couldn’t be traded unless they were taken out of their protective regulation. So how did they get their hands on them?
Well, first, you must know what you are doing, and know how to have them deregulated. By changing the banking system in 1997, banks were able to raise collateral by repackaging mortgages and sell them on in the form of Collateral Loan Obligations (CLOs) and other similar stealth products. These were traded through institutions, but an institution is not called a bank, and therefore operated outside strict bank regulations. This was the key to the unscrupulous bankers making a fortune.
The questions one should keep in mind is, was it Gordon Brown's idea, or the Bankers' idea, or both? Who persuaded who?
The property assets backing CLOs were so valuable, that other loan sharks wanted to get in on the act - adverts started to appeared on national television encouraging homeowners’ to free up equity from their home and to - Spend! Spend! Spend! The banks’ were promoting credit cards – shopping on the high street was a wash with cash.
However, whilst you homeowners’ were sleeping in your beds, unscrupulous bankers were undermining the financial foundations of your property asset, by taking your mortgage out from under strict banking regulation, re packet aging them in the form of Collateral Loan Obligations (CLOs) and similar products, selling them on and gambling with them in volatile markets on US Wall Street, and lost them, resulting in the credit crunch and falling house prices and the economy left vandalized.
Gordon Brown tells us that the crisis was caused by a few bankers who made mistakes and he has the media in his pocket convinced of this.
Will the Treasury Committee give the bankers a grilling over tax havens?
The time has now come for radical change and clean up of the whole financial system and as the bankers are blaming ill-gotten gains, most foul, on the global economy - then the clean-up must be global.
The time has now come to enforce the Law.
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Their must be thousands of people who could have run the banks more intelligently than these men, and who would have been delighted to do the job for much less money.
There must be something dreadfully wrong about the way the senior executives and directors were selected. I suspect that this problem is endemic in UK corporations and maybe has something to do with the "old boy" network which operates within the British elitocracy.
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Fred was played for a patsy by Barclays over the Amro deal. He fell for it hook line and proverbial sinker.
But he may still have some revenge. Notice his calculated hand waving gesture of 'out there somewhere' when asked about the VERY sub-prime CDOs manufactured by RBS and others.
Where do you think he meant?
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The actions of Goodwin and Mckillop were clearly driven by self importance power and personal greed and enabled by a total lack of accountability to the govenment- No10,11 andthe FSA. Clearly both men were cosy with Brown and Blaire who waved them into No 10 for knighthoods and mutual backscratching sessions and therefore the big big question that must also be asked is why the government permitted the take over of NatWest by RBS. This was the real start of the RBS finacial rotten row and should be investigated in terms of the government reaction and behaviour. Why was a smaller Scottish bank manged by financial napoleons permitted to borrow so much cash to buy a much larger more stable bank. Clearly the government were not on the ball or had other objectives and motives. Browns and Blaires involvement in this should be scrutinised as part of the select committe investigation.
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The apologists for these bankers disgust me.
They try to pin the blame on everyone else:
Us;
The Government;
The whole world.
Starting with 'Us' there must be a very large number of people like myself who paid off their mortgage asap, did not seek to move to ever larger houses, buy expensive good on credit and fail to save for retirement. Nevertheless, these fat cats have stuffed us.
The Government. It became the new mantra in the 80's that we should be less governed. These bankers would have been in the forefront of such thinking. They postured and preened in front of us as the dynamos of the post-industrial economy who knew best how to increase our wealth and woe betide any government who dared to interfere; they would simply take their ball home if not allowed to do as they damned well please.
It's the global economy, stupid. Oh no it isn't. It's true that the EFFECTS are felt world-wide but that's not the same as the CAUSES and for those the blame lies fairly and squarely with the US and UK banks.
They are no better than spivs IMO.
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How can a clearing bank fail and FSA not investigate the conduct and fitness of all the directors involved?
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"Mistakes were admitted" ...
How is it that the banks, government, military and so on just make "mistakes". They never deliberately make greedy decisions, they never do wrong, are never really culpable of deception or immoral intent. They are never wilfully stupid. They just make "mistakes".
If you or I were to place all our savings on a horse and we then lost the lot, would others understand what we'd done if we explainined that it was just a "mistake"?
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This exercise seemed to be whooly pointless. So these bankers have said "sorry." What does this actually achieve and as you rightly point out nothing was said about how this happened. So what have we learned? We have learned that these individuals sail off on their yachts into the sunset with a jacuzzi full of money knowing they take little or no responsibility for what happened.
I enjoyed their comments about not taking a penny of bonus in cash.
Who needs a bonus when you are paid 1.4 million a year?
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Knighthoods are awarded, I believe, for outstanding acts in the public interest.
These individuals should be stripped of the honour. They should not be able to rescind.
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Sorry all you banker-haters out there, but I have to agree with comment no 30. If the general public were not so keen to borrow -then they would not have added to the country's financial burden themselves. I think we have a lot of people living in glass houses and throwing stones in this blog. How many of you who have bank loans of any kind can honestly say that they have told the bank the complete truth about your existing commitments, and then borrowed more than you can really afford. That's not to say that the management of the banks - executives, non-executives, legislators and risk authorities don't need a good shakeup. And the Press are just as bad - they've created an unnecessary panic by printing half-truths and leading the public astray by pointing the finger only at the bankers. Let's be clear about this, it's the very senior management, not the workers who are to blaim. Now let's all recognise our part in the sorry mess we are now in - and instead of bleating about it, go and do something to help resolve this - we can all play a part - even if it's just switching a light off!
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Those with Knighthoods should be stripped of them.
If these bonuses are paid out to the "big bosses" i will be withdrawing my savings from the banks in question.
Legal proceedings should be put in place, surely this is a case of alleged fraud.
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Will the FSA bureaucrats, who passively contributed to this mess be foregoing their bonuses? I doubt it. John Tiner, former FSA Chief Exec, who reigned through the credit boom (and a series of other FSA cock-ups), took the best part of £600k a year plus final salary pension and walked away with a CBE to boot.
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How short Are these four skint bankerrs [exhibitAAA] and are they ready for CONversion ?
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This has probably been said before, however, I find myself in a position where until the systemic failure of banks and governments to not overspend I have lost my job through redundancy as the company could not afford to keep me, and now, my wife who is a banker, albeit a relatively low ranking one is now at risk of losing hers (RBS). How can any of these men/women, and they are just men and women, justify putting people out of work while taking 5, 6 and even 7 figure bonuses...streamlining staff my backside, streamlining the books so it looks like the bank had a better year in order to get their bonuses more like...
Guys, I will be the one who, in a couple of months will not have a home, a job, or a life to speak of. Thanks for that, it is everything I have worked my fingers to the bone for.. Before you ask, no I don't have a great deal of debt, other than my mortgage, which is making you money through staff lending. Tell you all what, don't take a bonus, and personally employ say 5 members of staff per £100k you are taking as a bonus.... that will at least keep rooves over some heads.
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#59
i am one of the 90% who "apparently" doesn't know what's coming - care to elaborate?
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Ahabsbeen again Joahnah types that ran sandbanks thought that they could swallow every moby dick that came their way ouut way ,until Amro turned up and blew and swallowed them and had a belly laugh all the way to the whaling walltz street .
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These senior 'bankers', along with the PM and others, claim that no one could have foreseen the economic meltdown. Nonsense. Plenty of warnings have been published, and while none named the day and the hour, they pointed out the risks which the bankers chose to ignore. See, for instance, Professor Richard Dale, "International Banking Deregulation: The Great Banking Experiment". It was, of course, an experiment that failed.
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I've asked this on another blog but can anybody believe that Andy Hornby is currently being paid a consultancy fee at HBOS?
Did I hear wrong? How is it possible to justify this £60,000 a month (£720,000 per year) when he admitted being at the heart of the institutions collapse?
He should clearly be kept away from the "scene of the crime" as it were (I've used that already!) or at least feel morally obliged to offer his "services" for free.
I am truly gobsmacked at this revelation and I don't even know the details, he could be working as little as one day a week for all we know!
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With all due respect to all concerned, isnt the main problem (just like in 2001) the failure of modern markets, banks and systems to react and control the panic meltdown?
Wasn't the fundamental problem here the panic reaction to a situation which had been there for years and wasn't materially different from the situation a year earlier?
In 2001, there was a talk of a bubble and a great deal of criticism for IT shares being valued in terms of their apparent potential value instead of hard earnings, but the issue was the panic meltdown that occurred, the reason for the panic was incidental, JUST AS IN THIS CASE!
Even if it wasn't bad loans, something else would have come out of the woodwork to cause an unwarranted panic selloff - how do you stop that?
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To all the blogs attempting to blame 'Joe public' for this mess for taking mortgages for overpriced houses and loans at low rates for things they did not need.
That’s just pathetic. Really, really pathetic.
Its like blaming the children for the sweet shop factory going bust because the sweet shop owners were not charging enough for the sweets.
Its like blaming a school of fish for running ashore for following the warm current and tide.
Some individual case’s granted. But you simply can not blame the masses for the macro forces that they inevitably will follow.
Who designs the macro forces?
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"Vin scent )"
Soorry, sorry knight
Paint your bonus blue or Gray
Look out on a good pay day
With eyes that know the darkness in your [AAA]soul
Shadows on the ills
Sketch the tricks and daft0deals
Catch the brits at the winter sales
In smallprint covered land
Now I understand
What you tried to sell to me
And how i maxedout for your insanity
And how you tried to set a fee
You would not lessen
You did not know how
Perhaps youll lessen now
Storry, sorry knights
Flaming towers that brightly blaze
Swindling crowds with violin ways
Reflect in Vin scent ayes of china blue
wedgewood changing hue
Morning fields of amro gain
Weathered faces lined in pain
Are smoothed beneath the AAAtists' loving hand
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#338
What's coming? Here’s my crystal ball.
The Government have (to all extents) taken over the Banks (under written toxic debt etc) hence the Bank's debt is now the debt of UKplc.
The banks are in debt ? c.4x GDP.
GDP continues to drop (people lose there jobs) in turn the debt continues to grow (more debt turns toxic , derivatives continue to fall, fall in sterling making foreign debts more expensive).
People stop lending to the UK. People call in loans from UK plc.
(CONTINUE THIS DOWNWARD SPIRAL)
The UK is forced to print money
Hyper inflation and run on stertling
Price fixing and shortages
UK plc Default on debt
Unable to import
National Emergency pursues (martial law)
Banksters and co leave on their well stocked yachts to their properties in monoco and caribean.
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The apologies were ambiguous to say the least. Instead we heard that they could not be expected to have anticipated the freezing over of the wholesale markets. On one level this is true but why on earth were HBOS and RBS so reliant on the wholesale markets. This is a relatively new phenomenon as prior to 2001 the vast majority of bank lending was financed by retail deposits.
Since 2001 banks have become increasingly reliant on wholesale funding. The reason for this is that short term wholesale funds are cheaper than "stickier" retail deposits. By borrowing short and lending long term these banks could increase their profits and pay their bankers outsized bonuses. But as any finance professional should know the object should be to match the term of assets and liabilities as far a possible.
These bankers are clearly culpable of adopting a high risk strategy because of greed and probably hubris as well. The fact they did not consider the risk that wholesale markets could dry up only serves to highlight their collective stupidity.
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It would be naive to think that any of these people would "throw themselves onto their swords".Their is no honour in such men.
The shame of it is that they are so comfortably placed their tarnished reputations will mean no more than early retirement or an enforced sabbatical in sunny climes and living the life of Riley.If Gordon Brown lacks the will to take a big stick to them,then he should resign. He should realise that there are millions of votes waiting to be picked up simply by pursuing these people in the courts for the recovery of their ill-gotten gains and the same goes for the rest of the "spivs"in the City who have brought about this calamity.
Regarding the point as to whether or not those borrowers who are now suffering have brought it on their own heads,that is just a smokescreen to mitigate the lenders' errors. Of course people will borrow in a climate of rising values.They are not the experts.Control had to be exercised by the authorities who could easily have reduced maximum loans to curb rising prices.
I also feel that I should say, Robert Peston, that I would have been more impressed by your so called financial scoops if you had been blogging about the folly of investing in worthless paper built round sub-prime loans, before the event, not after!
There were ample signs for an expert to comment on the perils of dealing in such nebulous instruments. The American way, is rarely wholesome in housing development, where substantial "front end loading" often results in a complete lack of interest once building starts. Add sub prime loans on a massive scale .Disaster.
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An apology from the bankers is welcomed if only, just because at least, they have admitted in public that they are not so clever as they portrait themselves. However, it is not enough. These people, as any other workers who acted with such a degree of irresponsibility should be brought to a tribunal to be judged. How can they even dream they deserve bonuses with public money!??
The damage they have caused is not only material) but physical and mental. We will soon have reports on an increase in a number of medical conditions closely related to the economic downturn provoked by the banks’ horrendous failures. The pressure on the health system will be enormous and costly. These costs should be added to the many billions these banks already owe to the population. Should the health professionals receive bonuses so that they can cope with the extra hard work, using scarce skills, as the bankers claim?
I also wonder if teachers and academics should receive big bonuses so that the government can really ensure that the best possible professionals are employed to EDUCATE the future REAL CLEVER (not only greedy) bankers, not only in maths, economics and management but in ethics ?
However, the major problem is that the government and its Agencies have allowed this to happen by idolising deregulation and failing their auditing obligations.
Where is the hope??
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The grilling of the banking chiefs was rather pathetic. It is part of a new trend : to firstly apologize and secondly deny that you did anything wrong. So, as one MP said, "What are you supposed to be apologizing about ?" This ploy was doubtless suggested by the bankers' PR experts -- and it worked, sort of. The real point is that no bank would think of lending money to a firm that has liabilities which are two or three times more than its assets -- yet according to what I've read, HBOS at one point had an asset/liability ratio of 1:25!!! You don't need a degree in banking to see this is asking for trouble, and trouble is what they got -- but us as well. The government should have let them sink and started a new bank which really does lend money to UK businesses (which current banks are not doing).
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Post #343 sabotageandsteal
I agree.
I go and ask for a 150% mortgage,
Bank: "Don't worry, it's quite standard, you have a job, prices will go up, you'll pay it back don't worry."
Me: "OK I don't know anything about banking, he's the expert. He says it's OK so it must be."
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To my mind the bankers were all very sorry - sorry they got found out....
And would someone from Llloyds TSB tell me, as a customer and shareholder, why they found it necessary to employ Andy Hornby on £60,000 per month, as a consultant? Most Blog Posters will agree, I'm sure, when I say I would not employ him as the tea boy.
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"Sorry" isn't the hardest word to say. Much harder is "here", as in 'here are the bonuses and shares (what's left of them) that I got for my role in bringing down the UK part of the global banking system.
It is almost impossible to make sense of this debacle precisely because the decisions that were made that led to it, were not made on any rational basis.
John McFall and his colleagues are looking for something that isn't there. They are looking for action predicated on accurate risk assessment, clear guidelines and established banking practices and all they've got is smoke and mirrors. They'll have to conclude that these bankers were like the 600 members of the Light Brigade - into the Valley of Death - back out with the arse shot of their trousers, half the company obliterated and not the remotest clue as to how it happened. That's the story.
Unfortunately, the truth has habit of catching up with the story. They can't or won't explain what they did. They all claim to be able to understand the business, yet none of them was able to prevent the collapse or articulate why it happened. Now this leads to some fairly obvious statements: 1) They didn't understand the business; 2) They were making too much money to care (which they don't want to admit); 3) They relied on tame risk assessors who told them what the wanted to hear rather than the truth (e.g. Mr Moore); 4) The whole system is divorced from reality, society and ethics; 5) A system that doesn't serve the interests of society as a whole is not only not worth having, it's actually dangerous to the well-being of that society; 6) We have become the servants of capital rather than the other way round and 7) For too long banks have looked only to the interests of themselves and corporate shareholders.
The Commons Select Committee is being too deferential to these people, it must get them to explain why they behaved as they did. It cannot let them get away with the blithe answer that 'no one' saw this coming. That makes it sound like an act of God when it is quite clearly their responsibility.
Robert, since when has it been good banking practice to run your organisation straight into the ground having passed Go and picked up $4.5m, share options and a sizeable pension?
As for the public's role, well, if the banks hadn't been prepared to lend 120% mortgages to people who couldn't afford them it would have militated against some of what has happened. However, the depth of this crisis goes beyond people stacking up debt on credit cards, overdrafts and the like.
Robert, how about slipping a few really difficult questions to the PSC - ones that cannot be answered with a just a bland 'yes' or 'no'?
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Funny how when all the tax receipts were rolling in from the City, Gordo was praising the City and now everyone there is pure evil. There have clearly been some interesting views taken on risk management which no one in government or the FSA complained about. Perhaps these Bankers have learnt from those in government that if they really do bad things, they might end up with a peerage at the least and/or a big payoff/pension.
Even if they have to spend some time at HM's pleasure they can still keep the title.
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From what I saw I think they were let off the hook.
If someone apologises, it is a start to ask them what they have apologised for. This was done at one point but the question was evaded.
It is necessary to say,
"Look, you have apologised. Pleased could you specify exactly what errors you made that justifies the apology. Please specify the mistakes you made."
Such hard questionning was not done.
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Why should they not remain arrogant and aloof when they know that they cannot be touched because of their executive actions ,they will not be affected by this depression.
How is it that the city has been allowed to deceive us for so long , sometimes I think they believe they were justified in carrying out their businesses the way they have and that the payments they received were also justified
OF course we have had the additional problem which is deeply embedded in the british infrastructure that we have the case now of the inept being in a position to employ more of the inept , and so it goes on , what does a country expect when mediocrity is accepted in all aspects of life and I know from personal experience that a large proportion who have entered banking in the city from universities over the last few years are not capable either practically or mentally achieving anything other than average , except that is in their salary package
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Bankers are also fraudulent in their contracts and it can be proven.
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Send by Recorded Post
NOTICE REGARDING ACCOUNT NUMBERS XXXX XXXX XXXX XXXX
Dear Sir or Madam:
I would be happy to settle any financial obligation I might lawfully owe as
soon as I have received the following documents from you.
1. Validation of the actual debt (The actual accounting).
2. Verification of your claim against me (a sworn affidavit or a hand signed
invoice).
3. A copy of the contract signed by both parties and therefore binding both
parties.
I hereby give you fourteen (14) days to reply to this notice with a notice
sent using recorded post, and signed by the CEO under full commercial
liability and penalties of perjury, assuring and promising me that all of the
replies and details given to the above requests are true and without
deception, fraud or mischief.
Yours truly,
By:___________________________(agent_Date:_______________
Do you know what! they can't answer as the contract is unitary, only signed by you,
they can't show you a full accounting as the
so called debt was sold on to a third party,
and no CEO would sign a sworn affidavit because they know it's a fraud so they are not going to put their name to it. The so called contract is not legal. So there you have it, try it yourself, you will never get a reply to your notice.
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One word, EGO.
Ego can cloud your judgement and grow on you unconsciously. Certainly, they have lots. They can write a book about it.
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Further to my comments earlier.
I suspect it will make interesting reading as to who among this bunch of shysters is a member of the Mason?
The banking sector is a boys club, you scratch my back I will scratch yours.
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Sir Fred Goodwin told the Treasury Committee that all trading in triple A rated CDO and asset-backed securities was done within the limits set by the bank.
However this begs two questions:
1. Why wasn't sufficient due diligence done to establish the value of these opaque instruments? It was reckless incompetence to rely purely on the ratings agencies;
2. Why was the bank trading in these instruments and their derivatives in the first place.
The idea behind securitisation is to package assets together and on sell them to investors (buy-side). Why have the sell-side (the banks) been left holding onto so many of these toxic assets?
Was there any other reason for RBS to be trading in these mortgage-backed assets other than as just another means of making profit? What normal banking function/service does this constitute?
This goes to the definition of a bank and what it is there for. Is a bank purely a profit making vehicle that attempts to make money at all costs doing any activity it sees fit (while ignoring risk it seems) or because of its singular importance to the economy and society generally shouldn't its activities be restricted.
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@232 Citygambler
You are of course quite right, The US banking institutions failures opened the taps to financial collapse in the US and elsewhere.
The point I was trying to make (and I am sorry for not making myself clearer) is we should not let banks be so big that if one fails, the economy crumbles around it.
They provide an important service, but there should always be other options if the event of failure. The era of the taxpayer riding over the hill to throw money at banks is hopefully over, although I suspect we haven't seen the end of it quite yet.
Anyhow it's all rather academic, we need to shift the whole debate onto what the hell are we going to do now?
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when will people finally grasp the fact that this is much bigger than a few small fry in RBOS and HBOS? This is a planned implosion of the worlds banking industry so the elite banking families of the Rockerfeller/Rothschild/Warburg/JP Morgan etc can consolidate power and rule governments?
The New World Order is now being discussed openly! When are people going to wake up? Are you going to wait until there is no food on the supermarket shelves?
Governments are just puppets to these elites of the Bilderberg Group, The Trilateral Commission and The Council on Foreign Relations of whom the new vice president Joe Biden and political advisor to Obama (A Wall Street puppet) Zbigniew Brzezinski are long term members.
It really is time the corporate owned media tried to at least investigate the real villians in this!
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I suggest people start to organise into groups and start their own little communities, with their own cultivated piece of land, discuss how they are going to trade with each with their own version of money because as NeilBlogs said this is financial fiasco is a setup, but Neil is probably right, people will realise when it's too late and the trucks arrive to take us away to the gulags, and you can take that to the bank.
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One of the factors in the mismanagement of the banks is the virtual elimination of Middle Management by all the banks in a misguided cost cutting exercise which they all indulged in. This gave cash savings in the short run but removed all the experience and wisdom of their companies and left a void between the young staff and the boards. They used Performance Related Pay as a means of motivating the staff in the absence of man management. The jargon was "empowering the staff"but it resulted in the staff being un-managed and left to do whatever they could do to meet the artificial targets they were set which would enable them to earn high bonuses. It is not surprising that the Chief Executives cannot explain what went wrong, as they didn't actually know what was going on at the lower levels!
I have long been concerned that this has been happening in many UK companies and my fear is that this disaster in the banking sector could be just the first of many, as other sectors start to react to the downturn.
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By contrast, the governments uses very big sticks very readily to make parents take responsibility for their children's schooling.
In today's BBC news
"A parent is jailed for their child's truancy once a fortnight every school term in England and Wales"
Since 2002 there are 10,000 prosecutions in England in 2007.
The bankers and financiers not only spared the rod but got to keep their bonuses, jobs and also get handouts.
Examples, examples, examples ...
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This may have been said before but what a crock of .... Andy Hornby saying he had lost money! No he has'nt has he sold the shares? I don't think so he should sell the shares and then he could righfully say that he had lost money. He won't do it he will wait till they are in the region of 4-6 GBP and then sell them. Yes he will have lost a bit of money but he will still be very wealthy. For the taxpayer or Lloyds Banking Group to still be paying him a salary is a total joke Darling has lost the plot!!!
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Agreed, but too much stick waving and these people will leave the country to work abroad and then where will be? We have to hold onto talent!
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We are constantly being told that the banks have to pay theses high salaries because if they don't they will not be able to attract the highest calibre of staff. This is and always was nonsense. Compare the salaries of staff in Financial services with those in other sectors and the result is clear : the financial sector has got out of touch with reality.
There will not be an exodus of talent to other countries for several reasons, not the least is that there are few high paid jobs available overseas as a result of this crash. Many countries are now bringing in limits on salaries in financial services companies (France, Switzerland, US, Germany) and this will lower the "market rate" for these jobs. And do we really believe that the most talented people have been working in the finance sector? From what has emerged in these last months the answer is no! If some do depart I suggest that they will not be missed. And if the salaries are lowered perhaps young graduates will begin to look to "proper"jobs in Engineering or Medicine instead of "gambling" with other peoples money.
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J P Morgan
Northern Rock
Tony Blair
Part of the story
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Ref371 , if it means that the expertise and talent to lose trillions of pounds and plunge the countries of the world into recession then that is one export we must not endorse , in fact their passports should be taken away just for the protection of other countries ,I am sorry but what loss would it be to the UK never mind saying they would be an benefit to anyone else
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One question I think that journalists should be asking of UK politicians and any other relevant people is this:
"What will you do to stop the pauperisation of the electorate?"
Obviously this assumes that pauperisation has happened in the first place - I reckon that anyone thinking otherwise is dwelling on Planet Zog. I guess some slippery individuals being questioned might liken it to the famous barrister's question to a judge - "Have you stopped beating your wife?", but that will reveal other lines of questioning to the astute interviewer.
It is also a political question. However, I would submit that it is not a party political statement. This is something that I believe has been underway in the UK for quite some time now, even to the extent of pre-dating the present administration. However, it has been accelerating of late, even before the present financial crisis.
The term 'pauperisation' could also be interpreted in a broader terms than just financial, I would be interested to see just how many interpretations could be made.
Do you feel like giving it a whirl sometime?
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As an investor, I am always told not to place all my eggs in one basket. Did the bankers not follow the advice that they give to me when there are over exposed in certain market segments?
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I quite agree with Swirvy and others. In a free market, all are responsible.
A simple example: the last 10 years have seen endless TV/magazine/newspaper variants of the story in which someone buys a house, paints everything in it magnolia, replaces the bath, and makes 40 grand profit. The media have encouraged idiots to believe it's *only* ever a one way bet. No bankers to blame there, they just met the demand being drummed up.
Another example: oil was at 150 dollars a barrel less than a year ago. The high prices suffocated some companies. They laid off. That started off the first credit defaults. That hiccough in the economy got the high-risk brigade on everyone's radar. Panic begins. Roll credit crunch. No bankers to blame there, either. And, by the way, our global dependence on oil will lead to the next catastrophe (making this one look like a picnic) unless someone, somewhere, shows some leadership. We may need money for most things, but we need energy for everything.
Another example: the Clinton administration started prosecuting Freddie and Fannie for not opening mortgage credit to all. So government intervention brought race into it, for no good economic reason. Once again, defaults followed as risk calculations took second place to non-economic considerations. No bankers to blame there, either.
Stop the witch hunt against bankers. Greed and self interest have been everywhere.
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#345
Thanks for the response although the latter part seems a bit far fetched... having said that, today I have just read that RBS and Lloyds finances to be inclued in Public Sector Balance sheet to take public sector debt to possibly 100% of UK GDP and the announcement about quantative easing so your crystal ball isn't completely off track. I just can't ebleive that we will have serious "hyper inflation" or the UK will ever default on debts of UK PLC
I know I am going to be hated for saying this and of course it is a bit of a naive statement, but if the UK PLC is going to pay all this money to banks regardless, then why not get the banks to ofset this against debt they hold against UK consumers, that way, Banks get their money, the risk of uncertainty that is created through future defaulting is reduced as debts are being written off against the bailout money they receive and because UK consumers are benefiting from receiving this debt relief they therefore have more moeny to spend and revive the economy! its a win win situation... after all we are in unchartered teritory as everyone keeps saying so why not - it seems like a simple solution to me!
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Apparently Peter Mandelson doesn't want people commenting on the present state of the UK in a 'negative way' and he will be dealing with this himself ... GULP!
Time for a new profession Mr Peston, perhaps the govt. will recruit you for its' new dept. Minister for Truth and Happiness :-)
Better not right too much ...
SHUT UP! OBEY!
Remember - NuLabour Loves you.
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olliewein
"Clearly ABN Amro had a lot of toxic assets, for example."
Not quite true - please look at b/s before making comments like this. They had sold off LaSalle before being taken over by the consortium. The bank had plenty of cash and a heavily reduced subprime exposure as a result.
"If RBS hadn't bought it, the bank would probably have toppled somehow"
Again, quite the opposite. The bank would probably be in a position to buy RBS now if it had not been taken over. The Dutch are looking at buying pieces back
RBS and ABN were very different businesses. it wasn't the content but bad timing and bad price at which RBS bought ABN - that is ABN's "contribution " to the downfall of RBS. Enough of such biased commentary from people who know little about the situation.
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Robert:
That is quite true, that the apologies were not the only part of the story...
~Dennis Junior~
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Banks cannot be allowed to collapse, yet today the Mosaic Group has gone into administration - and closed only to immediately be bought by Aurora Group (which bought the Mosaic Group's stores etc. in it's entirity).
This safeguarded jobs and assets of the former Mosaic Group ... nix pensions problem, nix threat of massive job losses ...
So why didn't HBoS and RBS do the same? I mean it is not as if this 'shut the old and open as new' is illegal or anything?
Mosaic Group only owed the Icelandic Bank £400 million ...
Second point, one of RBS negotiators, who worked on the documentation related to the ABM AMRO deal, declared today (through a third party) that the deal was completed at break neck spead without the necessary paper being completed ... in other words the numbers relating to ABM AMRO bank were 'unknown' thus 'due dilligence' could not have been completed.
Why would any corporation (let alone RBoS) buy a 'pig in a poke'? Who was in a position to authorise such an unwise acquisition - in such circumstances? After Barings Bank experience with 'rogue employees' why was there no 'fidelity bonding/personal indemnity' insurance in place?
Nick Leeson broke a bank and served 6 and a half years - Sir Fred Goodwin broke a bank and will recieve £650K a year ... ironic isn't it!
It would appear that HM govt's 5 point plan consists of
1. Don't investigate
2. Don't ask 'difficult' questions
3. Don't examine the bigger picture ...
4. Don't ask about 'Plan B' ...
5. Don't utilise Occam's razor ...
Keep it simple - keep 'em stupid
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Quite rightly said that we MUST learn the lesson, the only question is how we can ensure that those people at the top of our financial system will? We cant load all of our problems on to Sir Fred Goodwin or Lord Stevenson, they are just escape goats. Of course, they had a part to play, but if the system was designed properly and regulated as it should, we would not have these issues. Why banks were allowed to gamble, why they were not stopped years ago, after all it is not their private funds, they were playing with. If anybody will invest into property with a bit of help from a bank in a form of a buy to let mortgage, they should not feel frightened about losing their property, just because someone at the bank decided to play with his deposit at the Stock Exchange. If borrowers are expected to behave appropriately, pay their mortgage on time, so should the banks, guaranty that they will take care of OUR money.
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