Tories to break up banks?
Royal Bank of Scotland and Lloyds Banking Group could be dismantled after the next election, if the Tories form the government.
Here's why I say that, in the form of excerpts from a speech that's just been delivered by George Osborne, the Shadow chancellor.
"We cannot allow one part of our economy to behave in a way that puts the rest of the economy at risk when it fails. We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail.
By dint of its substantial shareholdings the government has a powerful influence over the future structure of the UK banking industry, whether it likes it or not.
When the time comes to sell off those shareholdings we need to think very carefully before simply selling them to the highest bidder without thinking through the consequences for the wider economy.
We should look at whether Britain in fact needs smaller banks.
For it would be a bitter irony if we came out of this crisis with a banking system that was even more concentrated and even riskier than the one we had before it."
The background to these remarks is that Royal Bank's balance sheet is considerably bigger than the total output of the British economy and it liabilities are considerably great than the entire public-sector debt of the UK.
Hence Osborne's allusion to banks that are "too big to bail". Or to put it another way, in rescuing RBS, the government has mortgaged all our economic futures to the rehabilitation of this giant bank.
As for Lloyds, it became far and away the biggest retail bank in the UK when it was permitted to buy HBOS last autumn.
In fact, it only rescued battered HBOS because the deal offered a once-in-a-generation opportunity to become the unchallenged market leader in British retail banking.
So if the next government were to dismantle Lloyds, depriving it of its enormous share of the current-account, savings and mortgage markets, that would be a reputational disaster for Lloyds' management.
There are two further implications of Osborne's remarks: first, that he would privatise Northern Rock as an independent bank, rather than flogging it to another bank; second, that he would ask the City watchdog, the FSA, and the competition authorities to consider whether other big British banks should be broken up. Even those where taxpayers don't have a big stake.
In the City, where I am tapping out this blog, this is big stuff.
To do my normal thing of ramming home the bleedin' obvious, the opinion polls are currently saying Osborne will be the next chancellor. Which means that his ambitions for what our banks should look like after the spring of next year are at least as significant as the future plans of the current chancellor.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~13~RS~)
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As much as I dislike Labour, I'm not sure I trust the Tories to get it right. They ain't got no vision. No fire.
http://moneyistheway.blogspot.com/2007/08/money-is-fire-in-head.html
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I hate to say it but Osbourne is right! Either the banks have to be so structured that they do not bring down the whole economy when one or two fail.Or they have to be so regulated that they cannot take any risk that puts them in the position they currently find themselves.
I suspect that we will actually end up with a combination of the two, not least becaus the regulation would need to be international.
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Osborne said "When the time comes to sell off those shareholdings we need to think very carefully before simply selling them to the highest bidder without thinking through the consequences for the wider economy."
My first thought is.. watch RBS & Lloyds shares take off. Now there's surely no chance of full nationalisation of either of these wounded colossi, the only way is up!
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Robert, you should have reported who this speech was intended for. Most politicians trim their message according to their audience.
Too big to fail/bail sounds a sensible message, but frankly I'll believe it when I see it. The next government will have to devote nearly all of its political capital to implementing the combination of tax rises and spending cuts that are the Blair/Brown/Campbell/Mandelson legacy.
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A very suitable and sensible proposal. The bigger the organisation, the more it looses its sense of purpose. That applies to Banks, Insurance Companies and Government institutions such as the NHS. Stafford Hospital being a good example of an organisation ignoring its objectives and forgetting its sole purpose for being there.
Keep it simple, keep it as local as possible and put the name on the tin that explains what is does. My only question would be is it really a policy from Osborne, he is not usually known for making common sense proposals that the Country wants.
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Sounds sensible to me, combine that with an ethical banking policy accross the board (which afew banks already follow voluntarily) and you will have the beginnings of a return to what banking should be.
There is growing evidense that many people are voting with their bank accounts and switching to more ethical banks anyway out of a sense of disgust and outrage at the behaviour of the spiv bankers at best...some would say fraudulent who are still in power and still have their knighthoods.
it is a disgraceful situation, it is at least encouraging to see the conservatives proposing something which is required and to an extent bucks their traditional perspective as being the party that is most friendly to banks and big business.
Encourage more of this switch to ethical banking.
Jericoa
.
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This is excellent news (if the Tories win).
These monster banks MUST be broken up to protect the taxpayer in future.
The bits that go bust, MUST then go bust.
No more bail-outs.
The public should only guarantee the High Street branches, and their current and deposit accounts.
All other business, broken into other smaller companies, must then stand on their own two feet or go bankrupt,(international investments and mortgages, business loans etc).
Investors will then have to beware...because the UK public cannot afford any more bail-outs.
Lehman Brothers is the key example.
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It seems to me that the next logical step would be to separate investment banking from retail banking. Banks with purely retail operations would then have an implicit, or perhaps I should say explicit guarantee from the Government.
At present the banks with trading operations have all their risks offloaded to the taxpayer. Has anyone asked the obvious question of where the capital that the banks trading operations use comes from? Given the support they are receiving from the taxpayer it would appear that we are providing this directly where the government has a stake or indirectly where the central banks are providing the funds.
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The LLoyds HBOS merger would never have been allowed in "normal" times. There was a sensible anti-competition rationale for this. It would make sense to de-merge them.
But would smaller, shareholder owned, banks not take silly risks in future, just like the ones we have today did, just because they were smaller?
If the thinking is, banks must be smaller in future so that they CAN go bust, doesn't sound like a particularly sensible part of a Financial Regulation strategy.
What happens if all bankers remained the greedy beasts that they are, (perish the thought) and all banks (small or large) once again found themselves in a situation where they were all going bust all at the same time, a bit like they did today? Are we saying we would not bail out any of them? And if we did how would we go about picking and choosing? Don't really think George has thought this through.
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The issue here is how to handle financial globalization: bigger UK banks are good to make them well-positioned internationally, which one could argue is good for the UK financial system but, smaller UK banks are good to the retail consumer as pointed in the blog post. What is best? Ensure that big UK banks can compete internationally in making big deals and acquisitions? Or make sure that smaller UK banks are competing against each other within the UK and providing the best retail value?
Same happened with the wave of water, energy and IT privatizations in the last 10 years in Europe. Every country was playing a double game: trying to promote internal competition and avoid national monopolistic practices but also trying to beef up their national water/energy/IT company so that it could be well-positioned to acquire other European, South American, Asian companies...
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in the long term this has to be the right strategy. The giant banks are the ones who have caused suchhuge problems. often by having more firepower than the government.
However, you can't say we don't have a choise at the next election. The current government plan is to make these state owned banks support their own political policies to the hilt.
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Another common sense policy.
Now we just need to apply the same logic to Supermarkets and the suffocation of the High Street, (independent competition), by groups of chain stores often collectively owned, in conjunction with control of planning regulations - developed to ensure that LOCAL business are not swamped by competition and can only establish themselves where needed and therefore thrive. This surely is common sense - ultimately providing a long term, positive, stable economy.
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Is RBS too big to bail? Probably. If money is the lifeblood of the economy then RBS is currently on life support and that has to be a concern going forwards. But the long term solutions run far deeper than breaking up financial giants. Trust and confidence need to be restored and relationships rebuilt. [Unsuitable/Broken URL removed by Moderator]
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This comment was removed because the moderators found it broke the House Rules.
Robert
Interesting comments from GO.
I can see where he is coming from and it does make sense on some levels. I don't think however such a plan would ever be fully implemented, and of course some of what you say is the conclusions you have drawn rather than what came from GO himself.
I agree that if I was in Lloyds TSB's management I would be very nervous indeed. Having been shoe-horned into doing the HBOS deal by Flash Gordon and the Blundering Badger, the prospect of being pooper-scoopered out by Dave and George and by the same virtue having destroyed billions in Lloyds market cap would make me very, very uncomfortable.
IMHO smaller banks probably are the way forward IN THE FUTURE but at the moment size matters. Bigger banks have more cash deposited, hence have more leverage with governments when things go pear shaped. Hence why Santander and HSBC are more capable of withstanding the maelstrom. In the future (whenever that is)the economy will need a competitive banking environment to function properly. But for now we have to soldier on. As the banks start making profits (which some are) then so will the rest of the economy.
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"Tories to break up banks"
They think we do not remember that they were the ones who started us on this disastrous low(no) regulation path.
Cut the heart out of a Cameronite Tory and you will find Thatcher stamped on it!
The Nation will be fools if they believe a word that they say.
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If the banks are infrastructure and cannot be allowed to fall then logic says that they should be in public ownership. The bits not need as infrastructure can do what they want. If that means going bust then go bust.
The french model on state ownership appears to work well and is next door, its not exactly they other side of the planet. On a casual observation - EDF is now having to be brought in to sort out the UK power generation needs. The french water industry unlike the UK privatised one retains all assests in the public sector and buys in private managment. At the end of the short term managemnt contract the management team can apply for a new one or be given the boot. All investment in the water system remains in public ownwership. The french banking system and loan criteria seem to have been less err exuberant than the UKs. They still, relative to the UK, have affordable housing. They still have a state owned car industry. They still seem to have a fishing industry. Although they have not done it for a long time if they are not happy with the people at the top they do something, they chop their heads off. Doubt it would be done now but it does show motivation for reform. Here all we seem to see is profit taking and asset stripping.
RBS, turnover bigger than the UK, private multinational, does what it wants in any number of countries and yet the UK taxpayer is supposed to pick up the tab if it goes wrong. Its ridiculous.
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Banks became too big before all of this started, and now they are even bigger. How can one chief executive and one chairman manage such an inflated organisation?
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Labourphobic
Re supermarkets - I like the sentiment ultimately but you need to think this though properly. By placing restrictions on supermarkets and breaking them up you can create an inflationary problem. Supermarkets have incredible purchasing power, as people want to spend as little as possible for food and essentials and more on the non-essential stuff. By creating more trading partners for the suppliers of these products, you create competition, leading to higher prices for consumers in the end. And less money for the non-essential stuff.
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Lloyds management have been incredibly naive not to see this coming. The shotgun wedding confirmed by Labour was never going to be well regarded by a Conservative government.
Even if the preference share conversion is taken up by existing shareholders this will only delay the inevitable move to government majority shareholding when the B shares are converted. As such they are beholden to whatever the prevailing political whims might be.
Blank and Daniels sold the HBOS deal on the basis of the resultant market share. It now appears that the Lloyds TSB shareholders will have all the pain of the rank HBOS lending book and when that has passed through and profitability restored the increased market share to which they aspired will be removed as part of the return to full private ownership. Rather than rise as indicated in an earlier posting the shares will probably tank.
Ironically the strategy Daniels is pursuing of retaining a number of different brands within the Lloyds Banking Group will probably make it easier for the business to be split up again at the appropriate time.
Blank is associated with the Labour party but both he and Daniels must be praying for a miraculous Brown re-election, to prevent Osborne being able to enact his suggestions, to have a shred of credibility left.
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Common sense. Some idea of the future emerging at last.
People are tending to forget hat the Tories ran this country for most of modern times. Until this lot got in Labour had only ever managed one term at a time, largely to remind the Tories that we're a democracy - although the cost is always high due to the mess Labour leave behind.
Of course, with old Maggie still being fashionably unpopular it's hard for the Tories to say this at the moment. It is precisely because they are afraid of the "Maggie Factor" that they cannot remind us of what it was like under Labour - anyone remember "the winter of discontent" with strikes disrupting the country before union power was curbed?
So for Labour to be giving us the "no time for a novice" routine is truly laughable - they are evidence of what happens when you allow novices free rein (and for too long)... credit crunch, recession, nothing in reserve.
To see the sensible ideas emerging from the Tories is, therefore, hardly surprising. They know how to run a country, Labour have simply improved their ability to pander to the masses to win elections.
But while the chickens are home to roost... election now please.
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With proposed 'policies' such as these my blood freezes !
Sounds like spin to me. Superficial sound bites blah di blah. Does Mr Osbourne really have Gravitas in the City where you have been tapping at your keyboard today Mr Peston ?
I did not vote for any Party at the last election....and cannot warm to any now. Or perhaps I could vote instead for the All Night Party.
Yours ever, RP
Disgusted in Westminster.
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Great idea in principle, but isn't the problem that local size-restricted banks would be unable to compete with the large international banks?
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Its not just the Banks that need to be dismantled...we need to dismantle parliament and get rid of all those spiv MP's
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4. David_Kilpatrick
''Too big to fail/bail sounds a sensible message, but frankly I'll believe it when I see it. The next government will have to devote nearly all of its political capital to implementing the combination of tax rises and spending cuts that are the Blair/Brown/Campbell/Mandelson legacy.''
Fair point but I don't see it as a problem. it will be we have looked at the books the books are bad. Here's the bill, not our fault, look to Brown. As for Blair/Brown/Campbell/Mandelson. Blair has jumped ship and his war crusade is looking increasingly dodgey. Brown will have no credibility. Campbell has shown he has nothing to spin. Mandleson comes across as doing nowt. Paying for the Brown bill is unavoidable. everything else is open. Lets hope
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What a load of rubbish - Imagine the backlash & lawsuits from Lloyds TSB & HBOS shareholders whether institutional or private as the only reason the deal was agreed was that the current government backed it.
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It shall come to pass and for what its worth, he (for once) is BANG ON THE MONEY!!!!
Break them up!
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This is possibly the wisest comment that young Osbourne has made. He has earned a tick in the box at least.
Just think we could have the Westminster Bank, the National Provinvial Bank and Martin's Bank back on the High Street.
Also what an excellent way of splitting retail banking from the spooky stuff.
Are we seeing a rejection of Big Business by the Tories? Now that would be news. Bet Brown copies: or BBC for short.
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Fascinating stuff if you're right Robert, my fear is that this is mere puff from Tory HQ however.
The tories have a built in big boy protection mechanism...so on balance- will they actually upset the apple cart and see this through??!
I'm sure they'll do something with the rock, easy enough, but isn't this just simply a way of avoiding regulatory issues and policy decisions that are actually the best way to avoid this happening again?
i.e. 'we aren't sure how/whether to regulate but there's a chance that this could happen again so lets try to stop the next implosion being quite as large [by forcing smaller banks]'.
In a global economy wouldn't this also significantly undermine our banks' positions, potentially making them look less attractive and making it harder for them to compete?
Arguably the perception of the banking industry is such that even allowing a small bank to fail couldn't be allowed to happen in any event as it completely undermines consumer confidence- that won't change even with caps on bank size.
I'd like to think this might be a valid way forward, and in the short term-perhaps it is, but i'll take a bit more convincing.
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He has a valid point. Maybe RBS is too big to bail out. After all, if money is the lifeblood of the economy then RBS is on life support and that has to be a huge concern going forwards. But the long term solutions to the downturn run far deeper than breaking up financial giants. Trust and confidence need to be restored, relationships rebuilt and resilience regained. [Unsuitable/Broken URL removed by Moderator]
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17. At 1:28pm on 08 Apr 2009, glanafon
Best post I've read for ages!
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blistering BLUE barncales!!
like just about everyone else here so far, I think that breaking up the banks and also splitting retail from investment, would clearly be common-sense so completely agree
it has become so rare to hear anything sensible from a politician that it is hard not to be suspicious; would the Tories really do it? would it be a priority?
but at least it seems that they are starting to develop a separate platform from Labour; I'll be even more impressed if they create some distance between themselves and their friends the Hedgies
nevertheless the Tories won't be getting my vote, any more than Labour
'cos I'm a poop-deck socialist and crow's-nest commie; and my parrot agrees, as usual
hang on there's 'a fusilade of missiles' coming in; no I see now that it's only an empty plastic water bottle after all, so that's ok
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#21 Chris911t
As has already been pointed out on this blog, it was Thatcher's devotion to low regulation (later copied by 'new labour' (old tories)) that started us along this road to ruin.
This labour party has made a number of mistakes, most of which have been the result of adopting traditionally tory policies.
To suggest that the public school Cameron/Osbourne double act will ride in to the rescue is frankly laughable.
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16. John_from_Hendon
"Tories to break up banks"
'.....The Nation will be fools if they believe a word that they say.'
Fair enough John but go down to the bookies or search GE odds and see who is expected to get in. And the bookies dont lose money often. There are not a lot of choices. In fact there looks to be probably no choice and unless you are in a marginal seat your vote could be meaningless.
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28 makes a good point re a break Business v tories, of course the tories know they will be in power so business will just have to get used to it.
We have seen Labour steal the tory party, are we about to witness the tory party steal the old labour party?
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Could they start with re-establishing National Girobank (or whatever it ended up being called) back into local post-offices, please?
Or perhaps, into supermarkets and hypermarkets? (Or has Tesco already got that one covered?)
If it brings back doing 'face to face' / 'over the counter' business with financial institutions, I think it might just turn out to be pretty popular.
Or, rather than "post-offices", perhaps we need some new thing, money offices, where people can do basis banking things using a variety of banks (and perhaps buy their newspaper or pick up their dry cleaning too). Some sort of multiple-bank 'agent', rather than a single-branded bank branch.
(A bit like those 'multi-denominational' airport or hospital chapels).
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apeman383, in response to your reply on my earlier post...
On the contrary. I sell in my store many items cheaper than supermarkets yet I don't get the footfall. Who's robbing who?
Additionaly we have become obsessed with excessive house prices, hi-tech gadgets and other meaningless non-essentials. At the same time putting less value on what we eat, what it contains, where it came from and more importantly it's true cost to produce. So on the one hand your argueing for lower cost of products (and using supermarkets who aren't aways the cheapest option) at the checkout and end up paying more tax to pay producers (around the world) subsidies instead of paying a right price at the till and you buying what you want and not subsidising products you don't use!
I suggest it's you who need's to think about it!
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Yes some sensible talk at last.
But remember this can only happen if we get this bunch of Labour jokers out!
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Robert,
I don't see a direct link to the speech, so forgive me being a little sceptical about your interpretation
Where is the balance from Darling about what they will do...or are they still making it up as they go?
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8. At 1:05pm on 08 Apr 2009, fractalfinance wrote:
It seems to me that the next logical step would be to separate investment banking from retail banking. Banks with purely retail operations would then have an implicit, or perhaps I should say explicit guarantee from the Government.
-------------------------
This is precisely where it all started to go wrong when the Glass-Seagall Act was repealed by Republicans in the USA who thought they knew better than their forebears who passed the act in 1933 through hard-learned, first-hand experience of what contributed to the Great Depression there. See link below...
http://en.wikipedia.org/wiki/Glass-Steagall_Act
Don't know if there is any equivalent law or regulation in the UK? Perhaps another blogger can enlighten us?
Anyway, smaller banks doesn't automatically equal better banks. Good regulation equals better banks by making them all have to conform to good, honest practice and gives a level playing field for the "good guys" to combat the "chancers" and not have to join in to survive.
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At last! Was someone reading some of my previous comments???? Not only have these mammoth corporations (mammoths are extinct, note) completely warped world trade and brought on us the social evil of globalisation, but they make no sense. How many diplodocus's (diplodoci?) were there in the world at one time. Probably not so very many. Why does this matter? Well, when they start to fail, you find there's a systemic weakness and little ability to react to, adapt to or evade the problem. Further, in reality there's only a limited amount of trade that can be done between them (though this is disguised by the size of the business they do). When you have more, small businesses, they are necessarily conducting more transactions between them. They may lack the economies of scale so beloved of merger fanatics, but the concomitant of that is more people employed to do the same value of business, which at least socially is a good thing, along with the greater number of wealth creators you have (in mediaeval terms, burgesses). Also, you have more biodiversity and resilience.
In short, smaller industry flexible and good, bigger industry rigid and bad. It's just a shame we had to find out the hard way. All the while that political leaders keep trying to shore up the model which what got us into this mess, though, the more they are ignoring evolution. Are they in fact creationists?
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A good reason for banks to be split up would be the separation of the Retail and the Investment (gambling) banks as we could then choose where to put our money.
As for asking the FSA what to do, I do not think they are competent.
I think they did not see this bubble. If they did, they did not act.
No point asking someone what to do in the future if they cannot see what is going on before them, especially if they are supposed to be looking very hard.
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Well somebody had to say it!
Last week I saw an English economist saying same thing on US tv "too big to fail - Too big to exist" Anyway they aint big they're just fat different thing altogether.
All that matters is like the those suicidal bankers of urban myth/legend nobody wants one to land on them.(My apologies to Steely Dan)
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The idea is in the right direction. The superbanks are just too big to manage let alone perform the appropriate risk management procedures on the wide variety of global investment vehicles.
I also cannot see how or indeed when either Lloyds Group or RBS Group could be in a financial position that would convince investors that a return to the private sector was a worthwhile investment. Surely the days where the superbanks declared a net profit of GBP Billions are over, never to return? Selling these monoliths piecemeal might be a more attractive proposition.
The problem arises in how the carcase of the part-nationalised banks is to be cherry picked. I do not recall that all aspects of the privatisation of rail, utility companies etc as being a resounding success.
Small and medium size business would benefit from old fashioned banking where a branch business adviser/manager would adjudicate on bank lending as opposed to a centralised back office function often determined by a computer generated model. The KISS acronym comes to mind: Keep It Simple Stupid!
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Is Georgie boy shorting RBS and Lloyds.
Cos whenever he opens his pouting mouth, whatever it is he is talking about crashes to the pits.And boy have those banks crashed since Georgie spouted.
This is the treasurer to be making a statement of intent about government owned companies and causing their share prices to plummet.
If this is him as deputy-batter for the UK economy God help us all if he ever gets elected.
We have already seen what happened to our poor old pound after his previous ham-fisted outbursts.
I thought he had been gagged!
Where's Ken, is he still down the pub?
With friends like the Tories, the UK Economy does not need enemies.
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Smaller PRIVATE banks would ultimately be gobbled up on the cheap by large foreign banks so they would go the way of the rest of the family silver like water, electric, gas, etc.
As ever GO is taking a leaf out of Nu Lab's book and spinning an ill thought out sound bite.
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Tories to break up Banks? Sure - when all their little porkies grow wings. Osborne is talking through his Hat.
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With smaller banks all that will happen is they will be taken over and big banks either foreign or domestically owned will eventually result.
Both this and the fact that bank bailouts are intertwined with conditions leading to boosting domestic lending and screwing lending abroad.....
....means there needs to be an international bailout mechanism with economies stumping up their share relative to where the problems are.
e.g. Ireland should have helped in the RBS bailout to the extent that Ulster Bank was problematic and the UK in the Bank of Ireland bailout to the extent that BOI UK caused the problem loans.
It would also mean national regulators could not wash their hands when all their banks are taken over by foreigners.
I just dont think it is long term realistic to expect we wont have large global banks again.
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Depends what you mean shei-la by, ''too big''. Perhaps otherwise-known as greater job losses in the interim.
Surely the acting factor is ''not to overpay for what you are getting''. Thus enormous bank(s) can be taking on at, say, 1% or less, value.
Any improvement in the business is added value,ripe for realisation in the market, or as a ''carry forward'',like ''goodwill'' in the domestic economy.
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So if Mr. Osborne breaks up Lloyds Banking Group what happens to existing private shareholders??
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Robert - I know your Banking connections are excellent and yes this may be important in a couple of years if/when the Tories get in, but it's yet another Banking story. Some more of the real world please.
If you haven't yet noticed, an hour ago the Washington Post published an article stating that General Motors was well into preparations prior to filing for Chapter 11 protection.
That's a business story. This isn't.
TM - StH
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Irrespective of what he may or may not do, its about time our expense ridden masters actually did something to MAKE THE BANKS Loan us our Money back so we can run our businesses and get ourselves out of the mess they have put us in. Georgeous George & Dastardly Darling WAKE UP PLEASE before we all end up Jobless, Homeless and not in a position to CLAIM ANY EXPENSES, let alone LIVE!¬!
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Mr Pirate post 32. I would expect your parrot to agree with you.
After all he is surely wise enough not to bite the hand that feeds him unlike our bankers.
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What is this Osborne clown up to?
Our very own heir to the Osborne baronetcy of Ballentaylor, Tipperary.
An ethical Tory. How on earth did he manage to come out of his social and educational background wearing blue?
We are in the midst of repairing the biggest global financial mess up in history and Osborne is arranging to open a wound that we have just managed to close.
Do not trust this man. Do not trust the Tories and there new green tree insignia.
Labour must hang their head in shame - but be careful about allowing your chagrin to sleepwalk you into voting for a political party who don't even who they are any more.
I am not comfortable with this lot.
I am no old-school Labour voter. I am 32 years old & my vote is available to all political parties.
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I have second thoughts on the Tories Spin, I feel for all those LloydsTSB mere mortals (the workers Band 8 etal) at the bottom of the LloydsTSB food chain. Some of those people have contributed to the share save scheme for 20+ years helping to towards their pension will be for nothing if the Tories do as they have indicated then thousands of people will recieve nothing, whilst the big fat cats at LlyodsTSB have recieve large pensions, they do not give a stuff about the staff who are always pressured to sell..sell..sell. Meet the targets......or you're off
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Mr Osbourne may sound like he is talking tough about not having banks that are too big to fail, giving the impression that the tories would let banks go under if they mess up, but I think he wants banks smaller so that they CAN be bailed if they get into difficulties. No Government of any colour will ever let a British bank fail, look at what happened in America when they did!!
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Two of George Osbourne's failings are that he just doesn't think things through and he is incapable of grasping the bigger international picture.
If our banks are properly regulated there should be no need for further crises of the kind we've just experienced and no further need for massive bailouts. We already have sufficient banks to ensure competition and creating smaller banks will surely just make them prey to takeover by larger financial institutions including those outside these shores.
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Labourphobic
You're hardly taking an objective viewpoint are you? I had a suspicion that you were a retailer.
Anyway, I think you just made my point for me. We live in a consumerist society. Do you really think this (very unpopular) government is going to take such a dangerous political move, or the next one having just come to power. Get real, people want cheap things - it doesn't mean it's right.
And FYI a bit about me: I'm a tory, I support Hugh Fearnley Whittingstall's Chicken Out campaign, my father is a farmer and mother owns a pharmacy. My feelings for the supermarkets are so-so for obvious reasons.
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I can't take Mr Osborne or anything he says seriously. He will have to go before the election.
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#45 Onward-ho
If you are trying to convince me that George Osborne's comments have caused the weakening pound, how do you expect anyone to regard anything you say with credibility?
Tories are enemies of the UK economy? Haven't you heard? Labour have been in charge since 1997...
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This is my very first post. I have been reading your blog most days for about 4 months, and have mostly found it informative and interesting.
I have to tell you though that lately it has become boring a repetitive. You are the BBC’s Business Editor but you concentrate virtually all of your efforts / output on one sector Banking.
I run a small engineering Company, 14 people soon to be 8 having announced that 6 people are to be made redundant. We started up from nothing 7 years ago following the closure of our previous employer a Swedish owned multinational. We had 4 people at the start and grew, through hard work, year on year. Then bang last November orders started drying up and here we are trying to ride out the storm.
I know I am not the first person to ask this but I would like to add my voice. Please move on with the story. You are the BBC’s Business Editor not the BBC’s Banking Editor.
Or is it self preservation as maybe the only Businesses left in this country at the end of this will be the Banks!
Great countries are built on the back of manufacturing things! Look at the rise of China and the decline of the UK and USA over the last 15 years.
Its time to wake up! We very much need people with your position and influence to lead the wake-up call. Not to keep wittering on about the Banks! Look where they have got us!
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This comment was removed because the moderators found it broke the House Rules.
stevesfox60
Do you not remember Georgie running the pound down and being gagged afterwards?
It is beyond dispute thet the Tories wrecked the UK economy 1979-85 and 1990-93. I lived through the dreary decline of dead Britain after the Tories smashed our industries in the 1980s, and the 17% mortgages of the early nineties and nearly 10 years of negative equity.
They were the Frank Spensers of our recent history with their bonkers war in the Falklands, and the alliance to the senile Reagan.
Nothing Labour have ever done could compare with the disasters inflicted by dumb Tories with their loony tune ideas.....remember Poll Tax?.... and uncaring policies.
Get out and read some history, Foxy!
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U.K. 'will not recover until 2012' ...
http://news.bbc.co.uk/1/hi/business/7989061.stm
... says a National Institute of Economic and Social Research study.
How many people will be unemployed by then, do you reckon? How many companies will have gone bust? And what contingency planning can ordinary people do about the fall-out, if this is true? (or SME's, for that matter).
Oh don't worry about HMG - it'll have civil disorder contingencies in place. In fact it already has - just needs orders to be signed up by the Secretary of State.
And don't worry too much about the banks, either. I suspect they'll survive in one form or another.
Worry about yourselves.
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Excellent. We don't need multinational banks doing business on our high street - keep them apart.
Could we also get multi-nationals out of our farming industry and our fishing industry. Protectionism ? Yes. Some industries need protection having been robbed and abused by the common agricultural policy.
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#33. GHBRich wrote:
'To suggest that the public school Cameron/Osbourne double act will ride in to the rescue is frankly laughable'.
I'm fascinated by your emphasis on 'public school' and imagine you typed it with the sort vituperative spite usually emanating from the left wing and a sneer on your face as you did so. Of course it would be churlish to point out that Tony Blair also went to public school, and even Gordon Brown was selectively educated (although to his political credit he openly despised it). Were I to nitpick, I might point out that Michael Foot went to a fee paying prep school, and many other Labour Grandees of the 20th Century were products of the Grammar School system which true left wingers also seem to despise.
My point, if I may be allowed to make it, is that as a parent myself, if I can afford to buy a better education than the state provides for my children, then I will. If I can get a better start in life for my children by dint of them being better educated through the fruits of my own hard work, then I will be proud to be able to have done so.
It matters not one whit to me if our political leaders have been to Eton or to the local comprehensive and it is time to stop harping on about it.
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I've said on here before that RBS in particular should sell off it's foreign subsidiaries including the former NatWest business.
It could then concentrate its efforts on working with the Scottish Govt and Scottish industry to grow and broaden the Scottish economy.
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The sentiment is right in my opinion - huge banks should not hold national economies to ransom. A sense of justice led calls for nationalisation. When the govt balance sheet couldnt take it, the UKFI half-way house was conceived which has thrown up all sorts of hazards. Avoiding ransom by banks may be more important than recovering HMG share value perhaps.
But before we get into this debate, how are we going to repair the lending capacity shortfall caused by, predominantly, the collapse of the securitised debt markets. This is like an acid dripping onto our ability to recover. What are the Govt and Lending Panel Forum saying. Where is the clearing house for securitised debts? Will there be a clearing house established, and if so when? Will there be a sovereign guarantee for asset backed securities? Otherwise, the banks will retain them as corrosively illiquid assets and continue to deleverage.
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This is a step in the right direction. These sentiments should apply to ALL sectors of industry. Not just banking and not just the UK. Business has gotten so big that their budgets are bigger than most of the countries that they operate in and are far too powerful. It is not good for citizens or consumers.
Trouble is, I don't trust the Tories to carry this through when their mates are the bankers and chairmen who will be most affected.
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"Mr Osbourne may sound like he is talking tough about not having banks that are too big to fail, giving the impression that the tories would let banks go under if they mess up, but I think he wants banks smaller so that they CAN be bailed if they get into difficulties."
And what is your problem, Muggwhump (56)?
Are you suggesting that all banks should be so big that when they go bust, as happens from time to time when dud managers or crooks get at them, they should be unrescuable to the extent that everyone with money in them on deposit loses everything?
Look at it this way. In the last 18 months, for one reason or another, 5 British banks and one building society have either crashed or would have done without rescues - Barings, Northern Rock, Bradford and Bingley, the Halifax, Royal Bank of Scotland, Dunfermline, and as an aside, Lloyds (which was busted by the HBOS fiasco).
Fifty years ago, this would have been a nuisance, as it was when a small bank named Barings collapsed in 1995 courtesy of Nick Leeson. However, pause and think about the institutions that have gone down with the others: the Bank of Scotland, NatWest, Churchill, a railway operating company (Angel trains? or one of the other ROSCOs, is owned by RBS) various foreign institutions, all in the firing line because of dud management by a handful of boards. These institutions were less a house of cards than a line of dominoes - touch the first and the lot goes down.
I like the ideas in this article, but I'm a bit sceptical about them. Osborne's suggestions if they bear fruit would mean we had less risk in the financial sector, because it would be spread. The contagion from a collapse would be less, and if the State had to do a rescue we wouldn't be crushed under a huge weight of debt that has still not fully stabilised the banks. They're what John Redwood has been screaming for for months. However, Osborne has never held a government post, and I'm frankly doubtful that he can pull off such an immense regulatory and indeed cultural change if he makes it as far as No. 11.
Finally, no Lloyds should never have taken over the Halifax. However, when it is broken up (as it will have to be in the next few years) how about the Halifax regains its independence and Lloyds goes international with the money it raises? Many of its problems would have been averted if it had taken a German bank over instead (and I believe it did consider doing so). That way they keep their size and strength, spread the risk, we get a more diverse banking sector - everyone wins! Of course, that's a best case scenario - much more likely is that Halifax is floated off as a dog and Victor Blank has to fall on his sword. That would be sad - he did his best to keep it all together, and I doubt many would have done better.
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This is a grand notion, that if the Tories were voted into power we would see a big change in stategy! I believe that even a politician with best intentions will succumb to the agenda of the 'real' powers that be, once voted into power. We have seen it time after time. The big promise of sweeping changes to 'improve' things and it is rarely ever achieved!
[Unsuitable/Broken URL removed by Moderator]
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Onward-ho ~ you are living in the past. Come into the 21st Century, this is the age of lies and spin.
Falklands - well at least it wasn't an illegal war - unlike Iraq, or an unplanned war, like Afghanistan, or an unled war like Kosovo.
I'm sure you're much happier cosying up to Dubya - a man of outstanding principles and undoubted sanity. At least Reagan could read a speech.
Tories smashed our industries - that would be Labour-speak for made them competitive I suppose.
10 years of negative equity ? Dis you have a 125% mortgage back then - I don't think so, that is aNu-Labour phenonenom, back then you had to prove your income and the value of your house.
Poll Tax - I would have thought you'd have been in favour of everyone paying their way, as against the new policy of everybody being taxed to pay for the government's stupidity.
Uncaring policies - like taxing pensions - oh no that was Gordon. Like putting the NHS into a mountain of debt - oh no that was Gordon. About making hospitals so target driven their patients die ? No - that was another for the Blair legacy.
You're giving rose-tinted a bad name.
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Onward-ho
I recall perfectly thet comments made by Osbourne - but would contend that they had absolutely nothing to do with the weakening pound other than being spun by Labour as such.
I remember power cuts, 3 day weeks etc in the 70's and feel that the Tories lifted us from that. Thatcher's policies were painful to many but ultimately necessary.
I was there also for the early 90's and yes, there was a recession, but nothing I feel that will be as severe as this. 17% mortgages now would wipe almost everone away Labour let the housing bubble get so far out of control. Better see where we are when inflation starts working back into the system.
Falklands and Reagan? Iraq and Bush ring a bell?
FYI I have in the past voted both Tory and Labour in the past. In my view the Tories seem to have proved to be the only ones capable of taking tough UNPOPULAR decisions for the greater good.
I have no faith that Brown and Labour put the good of the country above the good of Brown and Labour.
My history is fine. Perhaps GCSE Economics is something you should make time for?
Best regards
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#61 Sterling63
Makes you wonder doesn't it?
Could it perhaps be that GB wants a solution to the Banking fiasco and is using 'us' as his sounding board.
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Before deciding that breaking up the big banks will solve the future problems, we have to decide what caused this problem. Was it the size of the banks or the fact that house prices rise and fall in unison, probably across the world. If it was the latter all of what happened is that that the problems now concentrated in a few big banks would be spread over many small ones.
If a whole bunch of small banks really behaved in the diversified manner, which remains to be demonstrated, breaking them up might actually help. However, the herd instinct is strong in capitalist societies and to me at any rate this might actually make the problem worse instead of better because smaller banks may be even less able to withstand shocks. In other societies, there is no hope of diversity, so that may not be a solution either.
House prices, the prices of other assets, unemployment levels, international trade and economic activity are all correlated. They rise and fall together. What society needs to do is to develop mechanisms that operate in the opposite direction, dampening economic activity when it is too strong and strengthening economic activity when it is weak. Social programs such as unemployment insurance do have this characteristic, but it is evidently not enough. What governments need to do is to have preplanned stimulus programs ready to go when circumstances dictate. Shortening the leadtime to implement major infrastructure programs is a prerequisite for ensuring that stimulus can be applied when it is needed and that the stimulus is directed towards projects that are the most useful for long-term economic health of the economy.
Instead of reinforcing the economic cycles by spending when revenues are strong they should be building their financial strength during these times and making use of this financial strength when the economy is weak to implement infrastructure programs that are needed and contribute to sustainable economic development. There is no indication, yet anyway, I governments will behave in this manner given that their term in office is generally for years and this is not conducive to longer-term thinking.
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Overlooking one very obvious problem. Smaller, locally based branches may, at a first glance, be good for the customer in terns of increased competition but there realatively small size is likely to make them attractive targets to their larger international competitors.
Break RBS and LBG up and we could well see a rash of takeovers by the likes of Santander that coulsd, potentially, reduce competition even more.
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#51,#61 and Mr Pirate #62 (which I read before it was pulled by Moderator).
There is no hope of Mr Peston doing an article on anything other than Banks and the City - he does not seem able. The clue is in a quote in this latest blog:-
'In the City, where I am tapping out this blog, this is big stuff.'
He lives and works in the City and like many people who do that has ceased to realise that another world exists where people make things and work hard just to get by - he is blinkered by his environment and the company he keeps. Unfortunately this also seems true of all our politicians.
Soon, very soon, the Non City Class are going to revolt - the seesaw has become too tilted.
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"In fact, it only rescued battered HBOS because the deal offered a once-in-a-generation opportunity to become the unchallenged market leader in British retail banking."
This is all very nice but 100% of nothing is still nothing !! Being the market leader in Britain does not confer bragging rights on the International stage !! It's only when you have a significant share of the International market that bragging rights are conferred. Think HSBC !! Think Standard Chartered !! So, what price the "rescue" of HBOS when it beggared the loyal shareholders of Lloyds TSB ??
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An american banker pleading it wasn't all their fault.
http://abcnews.go.com/Business/Economy/wireStory?id=7274402
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Secret Love
You read my mind!
Stevesffox
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#66 Eddixon
LOL!! The emphasis is yours, not mine. I was merely referring to the 'tim nice but dim' aspect of our LOTO and shadow chancellor.
I have nothing against being public school educated. What I do object to is the ignorance of Batman and Robin, who appear to have got where they are because the rank and file of the Tory party seem to like well-spoken choirboy types. (and, before you say it, I have nothing against batman and robin, either)
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The problem is that Global corporations want/need global banks. If the British Banks can't provide for this, they will simply go elsewhere. This may therefore force banks such as HSBC or Barclays to simply relocate - with a massive loss of tax income and employment.
What is really required is to separate retail banking from commercial banking - retail banking is national, commercial banking international. Effectively return to the difference between normal and merchant banks.
How come we set up all these systems in the past, then gently dismantled them?
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If one has smaller banks, what would prevent oversaeas banks taking one or more over? After all that happened with Abbey and, of course, Santander now owns several former banks or building societies and is very big indeed. Are our banks not to be free to compete with such large overseas entities? Given our opennness to other markets I don't see why breaking up our banks can be regarded as a such a sensible move. Where is the flaw in my logic?
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Should it not be pointed out that the Thatcherite revolution was to make British commerce global (i.e. BIG). The privatisation of the utility companies, the withdrawl from ownership of BP was purported to enable these organisations to operate succesfully in an increasingly globalised market. Yet here is George Osborne saying small is beautiful, or is it rather their arte profits for chummies in the dismantling what was created for the greater reward of especially (Sir?) Goodwin. Was it not a director of BP who was involved (as non-exucitive) in the framing of (Sir?) Goodwin's exit from RBS and his hardship pension.
Do the Tories really believe that selling off "profitable" parts of these banking insitutions will not leave the taxpayer with an even greater burden for "toxic debt". Thanks again (Sir?) Goodwin and croanies for another fine mess that Britain will be left in.
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With the exception of the money that went into genuine wealth creation or went into projects that did not create net wealth the banks were engaged in a zero-sum game with the losses by the losers being matched by the gains made by the winners.
Naïvely, it would seem to me that the government really 'only' has to inject the amount of money that was put into assets that turned out to be worth less than was spent on them. Even houses in default of their mortgages have a value greater than zero. Someone can live in them and someone can pay for the privilege of doing that.
I am not sure that I understand what this means, but how can we exploit that fact? And if that is true, does the government really have to make up for all liabilities of banks like RBS to bail the system out, as opposed to the banks that placed losing bets on financially engineered products by swapping with a counterparty? The money made by the winners does not disappear from the system. It still exists and is still able to be channeled into areas that create economic growth.
Our objective is to bail the economy out, not bail the banks out.
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#45 "With friends like the Tories, the UK Economy does not need enemies."
With friends like the NuLabour, the UK will soon have no Economy to need enemies.
Over to you, Vince Cable !!
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#64 Sutara
" U.K. 'will not recover until 2012' ..."
+++
The Institute for Fiscal Studies have a graph which shows the recovery to be 2031.
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#77 GRIMUPNORTH
You are the person that got me on my soap box as from reading your posts we are in the same boat.
So what we need now is the other 5 people left manufacturing things in the UK to join us in the revolt!
I hope you are a weighty guy as that seesaw is going to take some tilting.
Keep up the good work!
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#41 "Are they in fact creationists? "
Yes they are !! They keep creating money out of thin air !! How much more creationist do you need to be ??
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#61 - your experiences are similar to mine except fortunately for me the manufacturing part of our business is only one part. I would be interested in some idea of your drop in sales since October last year.
All articles you read, eg recent BBC one re drop in Manufacturing decline eases, suggest small monthly falls eg 0.9% in Feb following 3% in Jan.
My experience is that we are currently operating in our manufacturing division at less than 10% of September output levels (all staff currently laid off)- I simply do not know what manaufacturing sector is holding up the numbers - everyone i talk to is experiencing much larger drops and the car industry output must be experiencing way higher drops than this.
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'Royal Bank's balance sheet is considerably bigger than the total output of the British economy'
Meaningless comparison. Output presumably means one year's output, but a year is an arbitrary measure of time, whereas the size of a company's balance sheet is nothing to do with the time period over which it is measured (e.g. a day versus a year versus a century).
It's like comparing the height of your house against the speed your car travels at.
Steve
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#37 "On the contrary. I sell in my store many items cheaper than supermarkets yet I don't get the footfall. Who's robbing who?
Additionaly we have become obsessed with excessive house prices, hi-tech gadgets and other meaningless non-essentials. At the same time putting less value on what we eat, what it contains, where it came from and more importantly it's true cost to produce. So on the one hand your argueing for lower cost of products (and using supermarkets who aren't aways the cheapest option) at the checkout and end up paying more tax to pay producers (around the world) subsidies instead of paying a right price at the till and you buying what you want and not subsidising products you don't use!"
I think the answer is in there somewhere. If you sell products that others do not want, then, regardless of the price, you will not get the footfall !! Your perception of what others want and what they perceive that they want may not coincide, resulting in you not getting their custom !! Have you tried asking your customers what they really want instead of trying to sell them what you think they should want ??
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#92 People do not go to supermarkets solely because they are cheap - this may be one reason but IMO the main reason is convenience - Tescos/Asda are truly one stop shops and not only that but you can park right outside too and for free.
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90. At 4:14pm on 08 Apr 2009, GRIMUPNORTH77 wrote:
#61 - your experiences are similar to mine except fortunately for me the manufacturing part of our business is only one part. I would be interested in some idea of your drop in sales since October last year.
All articles you read, eg recent BBC one re drop in Manufacturing decline eases, suggest small monthly falls eg 0.9% in Feb following 3% in Jan.
My experience is that we are currently operating in our manufacturing division at less than 10% of September output levels (all staff currently laid off)-
--------------------------
I can confirm that the manufacturing sector I work in has seen orders fall off a cliff since the beginning of the year, with corresponding reductions in our workforce. It can't continue this way way for much longer.
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It makes sense and is something I've mentioned before.
Decent competition policy, properly enforced (and not ignored whenever its convenient) would seem to make this practical in key markets.
Its a case of looking at what operations carry what risks and which require scale to operate in the international arena.
Allowing something to be "too big to fail" and having an entire economy based on 1 sector is awful risk management.
Of course politicians saying things and delivering them are completely different propositions.
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# 83. MandDEPSOM
"If one has smaller banks, what would prevent overseas banks taking one or more over?"
Well, doesn't that depend upon how these smaller banks, or whatever, are set up. I mean Santander didn't take over Abbey National Building Society, it took over Abbey Plc, after it had become a bank and had shares which Santander could buy.
Some organisations in the banking field do not have shares but are owned by their customers - e.g the Co-op Bank.
I don't think Ozzie's idea has any merit, if you take it too literally, but it could be adapted, e.g. some sort of "Son of Girobank" / Girobank II organisation available to people locally, perhaps in post-offices, or even GP surgeries, basically acting as a retail bank and perhaps even made up from the retail divisions of certain banks but "re-branded" into something new.
It just might be quite a good idea if you apply a bit of lateral thinking to it.
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#90-If you want some comparison on sales, my manufacturing operation is running at about 20% of last Septembers numbers. From October last year sales were clearly sliding, by February this year they'd fallen of a cliff.
I still have all my staff, we're currently burning through the money put aside for this years capital expenditure projects.
My expectation is for my customers to again start to want product by September, but only at very low levels and only because they have used up all buffer stock.
So by the end of the year we may only be back to about 40% of last Septembers values.
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A good idea from the Tories, there is an optimum size for any business organisation, even if real business talents are available in abundance, and we have learned they are certainly not in banking, go for it !
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Whilst I can't wait to get rid of Darling (and the rest of them!) I have serious doubts about Osborne's ability to offer us anything substantially different! To my mind Cameron is a Blair Mk.11 and Osborne is his pal.
I say bring on Ken Clarke, what we really need is a saviour!
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Before people condemn out of hand what young George is saying they should pause to reflect that after the thirties debacle the US Administration realised quite clearly that breaking up the banks into investment banks and commercial banks was essential if a repeat performance were to be avoided, and such legislation was indeed passed. Then in the free-for-all of the eighties that law was repealed. And look at what it has done!
Osborne is absolutely right. Breaking up the banks is essential. Moreover. his realisation that the banks are too big to fail and too big to bail is a refreshing new wind to blow through Westminster. He is beginning to tell it as it is, and it may even set some of the bloggers thinking. The man realises how bad the situation is. Three cheers for George.
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Perhaps we some kind of control over this kind of lame duck government so that in the final 12-18 months of office it cannot burden society and the economy with these kind of massive last ditch political gambles bank bail-outs, huge fiscal stimulus)that will live on way beyond the election. Would a super BofE MPC be able to stop these populist acts? Of course it would need to be a more competent BofE that took its job more seriously.
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83. At 4:00pm on 08 Apr 2009, MandDEPSOM wrote:
"If one has smaller banks, what would prevent oversaeas banks taking one or more over?"
- Good point though the government of the day could get really creative.
How about true peoples capitalism? Create the new organisations as business partnerships, John Lewis is one, Eaga PLC is another (hybridised form). Maybe investors can buy shares to a certain value with the company. Encouraging them to do the old fashioned thing of looking for income instead of capital growth or potential outright ownership. The business being primarily owned by the workers who would be partners in the business. The Articles of association could make it impossible to sell the business. It being held in perpetuity by the workforce.
Coupled with a law forbidding a retail high street bank from having say more than 10% of the market would encourage a number of banks to prosper. Imagine a real regional bank such as Northern rock primarily working for the benefit of those work in it and serving mostly it's local area.
Time for a new way of thinking. Though maybe not so new if your name is EF Schumacher
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stevesffox 73
Granted, as shadow chancellor ,Osborne's influence was slight, but the timing and tone of what he said dis make an impact on the perception of the ukeconomy and the strength of the pound.After that he was silenced and Clarke was drafted in to menfd the fences.Thank Goodness Osborne was not the chancellor!
Power cuts:The only power cuts we had were during the Tory Heath govt 1970-74....look it up, Foxy!
And I agree with you, 17% would wipe out nearly everyone ....in the 90s they nearly did too.But thanks to Brown and BoE, we have had bearable interest rates.
Inflation....not really a Tory strongpoint....Labour inherited such a mess from hEth that inflation reached 27% in 1975 and brought it down to 5% by 1977.
The Tories gave us 21% inflation in 80-81 and 13% in 1991.
Secretlove 72
Falklands....it was barmy.And at least TB helped Northern Ireland.
Competitive industries?There were hardly any left, it was a wipeout.
Tories and mortgages....ie endowments? How great were they?
Uncaring policies...like scrapping endowment relief and stopping indexing OAP pensions with wages.
NHS TARGETS...POT v KETTLE
Iraq and Bush?
Which Bush?
86 ISHKANDAR.....Vince who?
Is he the Captain in Star Trek?
Or is he the one who looks like a morph of D+G?
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At 1:49pm on 08 Apr 2009, GHBRich wrote:
"As has already been pointed out on this blog, it was Thatcher's devotion to low regulation (later copied by 'new labour' (old tories)) that started us along this road to ruin."
Yes, well I like a pint or 2 of beer but I know when I have had enough. If I do overdo it I ususally blame the last drink - not the first!
Government deals with current events, blaming Thatcher now is ridiculuous.
Personally I look forward to the next election which will lead to a hung parliament with a swing to the right.
Maybe then these posturing, grabbing politicians will be forced to start doing something for the country not just themselves.
Frank Field, you are exempt from these comments.
On the way out GB, please do not turn off the lights.
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#94,#97 - so from a random sample of 3 of us it can be concluded orders have dropped off a cliff in February to virtually nothing in all 3 cases. So where do the official figures of just a 0.9% drop come from?
DOES ANYBODY KNOW?
If the government believe these figures and they are so badly wrong then they are running the country and their policies on the wrong information. This may not change their policies but maybe it would.
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73 shootthetediousfox!
And the 3 day week was under the Tories too.......
History lessons are happily available online!
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This is my first post. In my view, this blog is excellent. I have been reading it regularly for some months now. I don't always agree with what is said but that is partly what makes it so interesting. It forces me to think into unusual channels and contemplate things I have not considered previously. Please Mr Robert Peston, keep up the good work. I don't see so many congratulations to you for your efforts in the comments above. Lots of critical remarks, but not much to encourage you to continue. I want to encourage you in this post.
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I should be natural Tory voter with a v good job, investment portfolio and expensive flat in central london but....George Osbourne and David Cameron.
They have failed to respond adequately to this recession and I am left wondering whether I will vote GB next time.
DC is an out an out political opportunist. A lightweight who just snipes at the govt with no real replacement agenda - waiting for the recesssion to lose the election for Labour.
GO is the invisible man and then comes up with a naive idea like this. We need strong banks.
We need them to be regulated (as lightly as poss) in such a way that they do not invest in junk products and we need stronger management controls to prevent another Fred Goodwin from driving his co off the cliff, convinced of his own genius.
Whatever happened to Ken Clarke?
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Hi RP
I think the problems that the existing bank had created so far was quite like caner in our body. Cancer can only grow or just shrink with proper treatment, or cut them out. So if you are a good doctor, what will you advise??? It appears that Osbourne did make some sense. Unfortunately, cancer can very likely come back to haunt even after operation or/and treatments. Very much like our dire economy. I am a believer in maintaining good health in holistic way because it gives you a chance to prevent illness or cancer by maintaining good diet and plenty of correct exercise. (I practise Tai Chi every morning and evening and maintain a very healthy diet. I have not seen doctor in my last twenty years and I am 56 now and hope to live till 100)
I hope what I say above make sense to everyone who is layman. Not financial guru. They have been now downgraded to sub-bench. You need a good doctor................. not a good Chancellor or economist. Let the nature take its course. CO2 emission apparently has been reduced since the crises has started. Use less fuel and waste less. Don't go back to the old way.
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Robert - you should consider carrying a lighted signbox like the "On Air" red light that you see in TV/radio studios. Your should read "Peston On" when you speak and Peston Off when you've stopped. You could always shorten it to "Pest-On" and "Pest-Off". Please say that you will at least consider it.
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The 2 scottish banks are now so powerful within the country that they can suffocate growth: neither of them has an interest in financing the third kid on the block in any type of economic activity, be it a third (fried) pizza restaurant, a third bed and breakfast or a third minicab company in town.
By the way, RBoS and Lloyds both carry too many brands in a very convoluted corporate structure that has too many people doing the same thing. Looking at Lloyds, you have 2 banking brands, 2 life insurance brands and 2 fund managers. What a waste. This does not bode well for already low UK productivity.
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Post 83 there is one very simple answer.
In order to take deposits as a retail Bank or Building Society in the UK, and pretty much everywhere else to be honest, you need a licence to run a bank on this basis.The licences are given out by the local government or one of their agencies.
The UK government passes an Act of Parliament shall we call it "The UK Banking Act."
It clearly separates the licences for being a deposit taking and commercial, shall we call them merchant, banks. Banks that currently have both operations will have 18 months to set up separate banks with separate boards and legal incorporations. Those listed on the stock market simply carry out a share split and divvy up the shares between their current shareholders and have two listings.
As a condition of their licence to be able to take deposits from UK personal customers and be able to advertise and operate on this basis the banks must comply with a number of guidelines on operations and charges for services.
As to the merchant banks well basically buy shares in them and caveat emptor like everyone else in the Stock Market.
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#90 and #63
You've just found number 3. I manufacture low volume, high complexity electronic goods for specialist applications. Some things I have found :
i) Capital Expenditure budgets have been slashed. These are the first to be cut, as it costs little money to cut them. So if you're into selling high value equipment (maybe above 10k or so) you're going to be in trouble.
ii) Component prices (electronics, cases) have gone up dramtically. Everyone thinks that the weak pound helps exports. What few people realise is that this country doesn't make much from scratch. We import components, add value to them and then re-export. The fact that components have gone up in price is an additional hit on the cash flow which hurts already hard pressed businesses.
iii) Delivery times on specialist items have gone up dramatically. This is because suppliers/distributors have reduced stock levels to try to make up their cash positions. This lengthens delivery times and hits the cash flow even more.
iv) Quality of assemblies is decreasing. This is because manufacturers are getting rid of skilled personnel and using unskilled ones (managers) to do the job - with the inevitable result.
and the good news for me .....
i) Consultancy is up. Because companies in this country only get rid of people who can actually do something (assemblers, workforce etc) and never get rid of the people who talk about doing things (the managers) there is a lack of people to do the real work which makes businesses function. Big companies only realise this a few months or so after they have made people redundant. This is an opportunity for consultants who can do the job (and by consultant I mean someone who genuinely adds value to a business, not someone who produces endless pie charts, wears shiny suits, is a mate of the MD and constantly recommends firing 10% of the workforce).
ii) Service work is up. People are hanging onto old equipment for longer (as Capex has been slashed). The old equipment requires more servicing.
iii) There is a growing pool of unemployed, highly skilled people available. People who in the past would not have considered moving jobs and working for a small business like mine as they would consider it "too risky" are now available for employment.
I know it is bad to profit from other peoples misery, but at least something good should come out of the situation. Out of the ashes of this recession comes future opportunity ...
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#16 John_from_Hendon
I'm with you, what's he talking about? Has he forgotten the first big bout of rationalisation (Big Bang) when the likes of de Zoete Bevan, Wedd Durlacher, Hoare Govett etc disappeared? I don't - I was there and clearly remember the Conservatives in power.
Rationalisation was everything.... cut costs, cut staff, sell-off the UK.
I wonder if (Compassionate Conservative) George 'Progressive' Osborne has realised that there's lots of Tory votes in the City - would make sense to increase the number of Tory voters working there.
Anyway, what's he talking about this for? He's got to survive his first term in government before any of our banks will be worth selling.
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Just a comment ahead of the government budget 22 april, following the IFS forecasts for deficits and debt earlier this week.
Any budget put out by Brown and Darling with a lower peak deficit than the IFS's peak deficit forecast of 10.5% of GDP should immediately be thrown into the bin because the IFS is by no means the most bearish commentator on the public finances. The Ernst and Young Item Club forecasts a 12.6% peak deficit, for example, and there are more forecasters out there with a dimmer view than the IFS. The difference of 2 percentage points between the Item Club's forecast and that of the IFS equates to 30 billion pounds, or 1070 pounds per person employed in the UK and 1300 pounds per person employed by the private sector. And these are all per annum numbers, so it is easy to sea the predicament the UK is in now that most commentators expect a decade of significant deficits.
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I'd hoped Mervyn King's audience with the Queen was to discuss the parlous state of affairs UK plc... perhaps begging her to step in and dissolve Parliament, before Brown bankrupts us with quantitive easing and more borrowing. Unfortunately it was only to get her approval of the proposed British Euro coin design.
Disappointed is not the word.
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GRIMUPNORTH77
Our orders are down about 65%. We are at the bottom of the food chain for the oil industry, construction / minning machinery and higher up the food chain supplying the extrusion industry. The oil and minning machinery is down 100%.
The only glimer of light is a deal we have done with a USA customer in extrusion on the back of the exchange rate we have at the moment.
Lets face it the figures quoted in the press are just wrong. If somethings doesn't change quickly unemployment will be 4 million plus by the end of this year.
Everyone I talk to is just waiting for things to change and holding on by their finger tips. When it doesn't change they will be forced to push the button.
I have just pushed the button now before I get to the finger tips stage as in my view it will not change for another 12 months plus and you need to hold onto your reserves.
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Mmmm, an ex-Bullingdonian whose circle of personal friends consists almost exclusively of bankers and hedge fund managers... just the man to be our next Chancellor and stand up for the average 'hard working family'! Let no-one forget that the Tories spent the last 10 years arguing for LESS regulation of the City and the banks - if they'd been in charge the banking collapse would have been much, much worse.
The current regime may not be the finest minds in the business, but Britain is sleepwalking towards another dreadful Tory administration whose priorities can be judged from this week's proposal on that really pressing issue for the average recession-hit voter - foxhunting...
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Osbourne is right but he needs to look at different ways to do it than simply breaking up the banks. He also needs to make sure that there are other industries where they do not become too big to be allowed to fail and put the whole economy at risk.
The banks would be easy- split boring banking from investment trading and make sure that trading is done with capital not debt- the big bucks were made by using incredible gearing- and of course A very small fall wiped out equity in so many institutions. If I recall RBS's assets were 160 times its capital so a 1% fall in assets wiped it out. The other thing that will keep the banks and other financial institutions out of trouble is that G20 has put in place something that will bring sanity to the world of credit derivatives- that mad world where risk took on a different meaning.
Non-banks are the really big problem now as well- could we afford for BP to fail? Could the US afford GM to fail or Germany VW let alone any county allowing Microsoft to fail. Somehow the world has to develop a model whereby we can get the benefits of businesses with global reach- investment- competitive consumer pricing etc-and yet have them governed in a way that stops them taking risks that can bring them down and us with them. On the other hand we do need to let some big businesses go- at the moment with 20% excess production in cars- something has got to give.
What we need I think is accountability, transparency and effective regulation that sense checks the risks taken by large corporations- in much the same way as the IMF sense checks Governments- this would only be necessary for the top 1000 companies in the world so it could be done. We could even get S&P to just do their credit checking properly- now that would be a good idea! If we backed that up with Governance where non-execs were not just the good chaps from the City but folk chosen with both expertise in business and sceptical enquiring minds (many women fall into that category as do some trade unionists and even politicians- non-execs need to thinks of all stakeholders not just shareholders)- then I think it might just work.
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Osborne is like a very bad joke ... makes you kind of embarassed, unhappy and a little bit angry all at the same time ... not the greatest way to feel
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Is George alluding to a vertically arranged break up, or horizontal break up? Both have their own distinct merits. I like the idea of splitting investment banking from retail, but I also favour the romance of ten banks on every high street. So which one is better? There’s only one way to find out …
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Interesting stuff, but I wouldn't read too much into Osborne's speech. He's a politician, so there's no reason to think that what he says will have any resemblance to what he does if (or realistically when) he becomes chancellor.
Let's see who's yacht he gets entertained on over the next year or two: that will no doubt give a better clue as to what he'll do.
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Here is the link to ONS website for all you frustrated manufacturers who know a 0.9% drop in February is nonsense. Note all the different industries that make up the figures and proportion of each (right at bottom of page).
www.statistics.gov.uk/CCI/nugget.asp?ID=198
Perhaps Mr Peston could investigate the discrepancy between actual figures reported, which companies are included by ONS and the actual reality as reported by the manufacturing posters on this blog.
But I'm not 'banking' on it!!
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Of course osbourne is right, the public hasn't the faintest notion what banks own either in the banks name or via a white lable basis.
The important thing is that breaking up a monster like RBS doesn't just go to large players but the value is spread to as many varying types of business as possible.
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Robert,
I wrote to Osbourne a couple of months ago on this subject. I suggested that they split retail banks from investment banks, with Lloyds and NatWest being retail and the the RBS and BOS being investment banks with all the toxic loans based and registered in Edinburgh.
Float the retail banks which will give the taxpayer and existing shareholders a share very much in the same way that Zenica was split from ICI, then ask the UK population to vote on devolution for Scotland, it was after all Scottish bankers and Scottish politicians who got us into this mess.
Scotland could then join Ireland and Iceland in what used to be called the Arc of Prosperity.
This concept was debated in a Scottish Government publication
http://www.scotland.gov.uk/Publications/2007/11/12115041/4
I think they have another description of it now.
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I can't believe that Osbourne has the wits to have thought this out for himself and I suspect that he may have found himself an able adviser. I won't get too excited until he says that performance bonuses will be prohibited in the banking industry in Britain. When he says that then I shall believe that there is a glimmer of hope.
People don't seem to understand that it is those bonuses that are at the root of the banking problems. The so called bankers were not throwing money away because they were innocent babes in the woods. They were throwing money away to make very easy and very large paper profits to feather their own bonus nests. Madoff is no more culpable than many of these fellows. Neither this government nor the next one has the metal to carry out the desirable prosecutions and the perpetrators will likely go unpunished. Nevertheless, if we are not to have this mess brought upon us again, then the bonuses have to go.
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Has George Osborne ever had an original thought? I heard this same comment by an economist on Radio 4, and on TV. When the Conservative party aren't accepting leaked information from their stooges in Whitehall, which they then tweak and claim as their own, they are morphing ideas from anyone who has an idea which might fit their purpose until a better idea comes along. I thought David Cameron had arranged for GO's minders to vet his pronouncements, before shares and the pound dive even further. Go away, little boy, and read your comic.
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Splitting off investment banking from High Street banking I go along with but there is one big problem with that and it's what to do with existing shareholders? They are the fund providers who want a good return for their investment and so become the engine that drives the need for more and more profit. Investing in the High Street would be unattractive to many except on a long-term basis whereas a quick buck would attract the entrepreneur type investor which brings us back to the current disaster.
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Gideon's Army?
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Grandstanding. Pure and simple.
It is what opposition politicians do.
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It sounds like populist Tory rhetoric ... If anyone tries to make the banks small, they'll starting whining that they aren't big enough to compete in "the global village" and so on.
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#36 and #96 Sutara
A "Son of Girobank" is an excellent idea, but it ain't going to happen.
Nu-labour won't do it because it smacks of Socialism
The Old Tories won't do it because it would mean admitting Maggie was wrong
And the Lib Dems won't do it for the obvious reason.
Pity really, it would be just what we need...
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I am not sure that the UK banks need to be smaller but I have become convinced that the banking system should not be allowed to have shareholders nor should it be allowed to make profits that do not stay in the bank.
It is crazy to have a banking system whose primary purpose would seem to be to get as much money out of the people of the UK as possible!
Shareholders should not be allowed to profit from banks who are forced to make huge profits which are then lost to the bank.
Nor of course should these obscene salaries and pensions be allowed.
Yes it might mean that the government has to be more involved in the way that the banks run, and be prepared to support banks who do not have huge reserves but that is what they are doing now!!
Banks should be helping the people and businesses of the UK, and not be seen as predators whose primary function is taking as much money as possible from ordinary people and businesses.
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Re organising the Chairs in UK Banking is all very well, but will they rule out securitisation of Mortgages ?
This Mortgage trading brought down the Banks in the first place.
More importantly, what do the Tories plan to do to boost British manufacturing and exports ?
This is the real problem the UK will face (is facing).
Britain needs to find products and services it can supply to the rest of the world in exchange for her import needs.
And how will they re start Britains consumer economy ?
With cost of living Inflation outstripping wage Inflation the Uk Consumer economy is in a downward tailspin.
Wealth doesn't trickle down, the rich people make their fortunes from the people who buy their mass market products.
No buyers, no profits.
I had an eye test the other day, (£21) it cost me five percent more than last year.
These bills (food, fuel etc) all add up.
And the less money a worker earns the less he or she can spend.
QED, more pay more sales.
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Ken @ 126
if we are not to have this mess brought upon us again, then the bonuses have to go
spot on
stimuli yes, boni no
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@125 if only it was a simple and clear cut as that, sounds like you will be voting for the BNP soon then ?
@ robert
this is populist no news and I find it staggering that the Tories are being presumed the bride in waiting.
What was the percentage of the votes cast in the last election based on the voting population ? 30% ish
The Tories wont get in Scotland, that is a given as they are anti Scottish and there is no point in beating about the bush about that point
So they need to rely on working class votes in the north and midlands they will not get these votes either, so either Labour could still sneak it or there will be a hung parliament which based on likely and not wishfull thinking outcomes would be favourable , then they could blame each other
Now for the True Blue Engerland knuckle draggers out there, Scotland did not cause this
A mixture of no regulation, Labour and Tories cosy with the rich elite doing deals here and there, the banks thinking its great to be doing so much business, but then being so stupid as to buy back a lot of that debt as investments , yes America has to take its share of blame, the regulators , the Government the opposition, the banks, the hedge funds, the ratings agencies and the people who borrowed to much, all down to greed.
Tell me one thing if the Bosses of these banks had a different colour of skin would you have blamed the african nations ?
Its the people in power that are to blame no one else
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# 120 sagamix
Time for your medicine...
If you can't be bothered to address the thoughful content of Robert's blog and other contributors, don't bother. At least most of the others attacking Osborne actually discuss the issues, whether you agree with them or not.
This is important stuff and although I'm not sure Osborne will be able to deliver it matters for everyone in the UK.
Attacking the messenger (or his accent, or what schoool he went to, etc.) doesn't contribute anything.
I've never complained about another person's blog before but I'm very tempted by some of this trolling....
Moderators, #120 is so off-topic I'm surprised you passed it.
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Until I read this I thought the Tories understood finance and the Economy. Now I have serious doubts re their financial understanding.
As the Government has a majority stake in RBS and Lloyds, if it were to break them up on resale to private sector, then we would end up getting less monies for its stake, and making the taxpayers poorer as a consequence! i.e. we would all lose out financially from this Tory idea.
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63. At 3:21pm on 08 Apr 2009, onward-ho wrote:
'..and the 17% mortgages of the early nineties..'
What 17% mortgage rate in the early 90's? Are you talking about the 2 hours they put the rates up to 15% on the day we fell out of the ERM?
This bit of spin is getting tiresome. Fortunately other people with better memories were also around then and can correct your selective recollections for the younger generations.
This recession is going to be far far bigger than anything the Tories achieved.
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134
...and therefore a 40% pay rise for public sector workers !
Re your other comments, I agree.
I think it's not necessarily the total amount of banks that's the issue, more the total amount and type of liabilities they have. After all, what's the difference between 4 banks having 250 billion of high risk assests each and 1000 banks having 1 billion of high risk assests ? Just that when they go bust the problems will take longer to work their way through the system.
Having lots of small banks just risks replicating jobs and lowering of operating efficiency. The split off of investment and retail banking would be better. But this won't happen because the investment bankers like gambling with someone elses money and the taxpayer picking up the tab when things go wrong because they'll be public unrest otherwise. Thus retail banking is "insuring" the investment banking sector.
Does anyone else think this is a tad unfair ? Should an investment banker get a 10 million bonus, then have himself dug out of a hole by me when things go pear shaped , and I only get a miserly 2.2% interest on my money that insures him ?
How angry should I get about this ?
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136. At 6:13pm on 08 Apr 2009, romeplebian
Some of it was tongue in cheek!!
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courage @ 137
Osborne IS the topic - possibly the next Chancellor !!
any case, the main thing is to Kill the Boni ... all the rest (big banks vs small, casino vs retail, mark to market accounting etc etc) is pretty much irrelevant
like Ken says @ 126 and Ken's a wise man
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I would suggest that the Government voices on this blog should read:
http://blogs.ft.com/maverecon/2009/04/the-green-shoots-are-weeds-growing-through-the-rubble-in-the-ruins-of-the-global-economy/#more-1276
A very sobering blog by Willem Buiter. It knocks the gloss of Gordon Browns G20 success.
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This comment was removed because the moderators found it broke the House Rules.
Will people please learn how to spell and type on this blog.
It makes reading it very hard sometimes!
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tuff @ 140
How angry should I get about this?
pretty angry, I'd say - livid even
banking is a very easy job, like delivering the post, and we don't need any of this ridiculous so called Competition ... it's a UTILITY for heaven's sake
just the one Bank is fine, thank you very much
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This comment was removed because the moderators found it broke the House Rules.
If you let my last comment get through. I'll eat my hat.
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The banks and any other organisation that is too big to fail should be broken up.
The Tories will sell it to their mates - the same mates/spivs of Labour, the same usual bunch of incompetents. The smaller banks will grow and merge and we'll be back to where we are now in no time.
The only chance is to make them ethical and for the public to refuse to deal with those who are not. After all, if we don't buy their goods and services, they won't survive no matter their size.
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the problem is nothing to do with the size of banks or whether they can mix retail with trading activities, the problem is the Get Rich Quick ethos as implemented via the Mega Boni ... impact of this was that tens of thousands of high energy, sharp and devious individuals (in the City and on Wall St) were motivated to DO THE WRONG THING - no Regulator stood a chance
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While I agree with Osborne that there is such a thing as too big when it comes to banks, it's not all about size. Function and regulation are the key things. We need to think very seriously about legislation to keep investment banking and retail banking separate. And we need far stricter reviews of the banks capital bases. It is also worth thinking about whether the mutual model needs to be revived as it existed prior to the 1986 legislation. Most of the big mutuals were fine - until they were privatised. Why not restore the Rock to mutual status? And break off the old Halifax and mutualise that too? I'm not sure why there has been no debate about this? Can anybody tell me the arguments against?
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146
Glad you answered that. Because I was beginning to wonder. After all, doesn't seem like any of the major parties think it's worth doing.
One group of people isn't proposing it. Is that because all their mates are investment bankers ?
And the other group isn't proposing it. Is that because someone stands to get a fat non exec position at an investment bank after he retires ... a bit like someone else ?
Maybe this post will flush the Lib Dem out of the tar pits ... what is he/she proposing ?
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In support of #77 GrimupNorth I would agree that REALITY will hit home to the London based Politico/Banko/Media set in the next three to six months. Ordinary people doing ordinary things do not appreciate their jobs going, their homes being takne back, or their standards of living dropping to 75% of what they have been in the past.
Truck Drivers blocking motorways were the last big wake up call to the Government, the People on MASS will be next I feel. We all know that the present "calm" cannot continue as it is all so unreal.
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#136 romeplebeian "Now for the True Blue Engerland knuckle draggers out there, Scotland did not cause this .....
......Tell me one thing if the Bosses of these banks had a different colour of skin would you have blamed the african nations ?
Its the people in power that are to blame no one else.
Absolutely!! This stupid Anglo-Scottish sniping will not help anyone. There has been a BRITISH ruling class which has sold all the rest of us down the river. Whether or not the UK breaks up we still have to live as neighbours, and deal with common problems.
For example, if we agree that banks need to be smaller, how do we deal with say HSBC, which is a multinational? I suspect that most of its shareholders are not British anyway. You can regulate - but how could even a Tory UK government break them up? There would have to be an international agreement on the future shape of banking. In principle I'd be in favour - of the right agreement, but let's not underestimate the logistic difficulties, or the resistance that the banks would put up.
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logistical difficulties? ... don't see that it's particularly difficult to set up a State Bank ... we have one, RBS, just need to sell off the non core bits, buy out the remaining 30 pc, and Robert's your Auntie's Husband
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If he means this and he implements it, I will be impressed. Particularly if they applied the same logic to other sectors (e.g. disintegrate the Vertically-Integrated Large Energy or VILE companies). It would actually persuade me to vote for them, if I believed they meant it. There is nothing more important than breaking up the corrupt, corporatist structure of our economy, which (repeated around the world) is the real reason we are in this mess.
In previous privatisations, they have shown themselves to be rather partial to creating monolithic (or oligopolistic), anti-competitive, "national champions", perhaps because it would bring in more money at sale. I'd really like to believe they've changed, but it would need to be a firm manifesto commitment before I would rely on it.
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I'm not so sure Osborne is nailed on to be the next chancellor. The composition of parliament is pretty much the same as it was in 1992 when everyone expected Major to lose. People look at the 65 majority and say 'that can be overturned quite easily' what they fail to take into account is that is the majority OVER ALL OTHER PARTIES, not just the Tories. The actual gap between Labour and Conservative MP's is 157 (350 -193). THAT is a huge margin to overturn in one election,no matter how unpopular the government.
I am born and bred in the North East of England and I have to tell you that Gordon Brown could announce a policy of killing of all the firstborn up here and the voters in South Tyneside, Durham,large swathes of Northumberland and North Tyneside will still never vote Conservative. You may have heard that we once had pits and heavy industry up here, the folk memory of the demon of Mrs Thatcher is still alive and well and a massive obstacle for the Tories to overcome.
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NEW LABOURS MANAGEMENT OF THIS WHOLE SITUATION BOTH BEFORE AND AFTER THE
CRISIS HAS BEEN TOTALLY STUPID,THE MERGER OF LLOYDSTSB WITH HBOS WAS AS
GOOD AS A SUICIDE PACT.
THE SOONER THERES A REARRANGEMENT THE BETTER!
ELECTION NOW GORDY!!
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My first thought was good idea, for a nano second I even conciderd voting tory at the next election. I then thought back to the last Conservative government and the present Labour government, and came to the conclusion that, I can not take anything at face value when it comes to politicians of any party. They will say and do anything to gain power or keep it.
In the event this comes to pass, which I doubt, two things worry me. The first would be by breaking these banks up and selling them off would the tax payer get all their money back plus interest, and secondly we would still need large banks to compete on a global scale with other multinational banks, what would stop this all happening again.
I would suggest whoever gets in at the next election passing a law prohibiting the bailing out of any future PLC bank that is insolvent, that should at least curb the notion of the bankers that no matter what risk they take the tax payer will bail them out.
As for the breaking and selling off the failed ones, I am sure that some one will make a killing from it, but doubt it will be the tax payer.
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yes gormless brown lets have an election now,do what is ever necessary to save us from your nightmare.
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Re naufacturing
grim up, last and others
My experience, not this time around thankfully, in recessions has been when a hit came it hit hard and very quickly. In the sort of order you are talking of. Sometimes there is still very strong demand for services or products but the customers cannot pay, even to the extent that cheques are issued following discussions with the customers and their banks and then bounce becasue the situation has deteriated between the discussion and the reciept. (Last recession we had no drop in demand but a total collapse in blue chip customer payment). It then becomes the game of last man standing with the diehards hanging on hoping others fall. I dont want to be a misery but sometimes the entire sector becomes so weakened that the supply base cannot function, the skills are lost and the capital plant is worth next to nothing. The continuity of operation is gone. This then causes further problems when uplift returns because the demand exceeds supply capability and sourcing turn overseas as nobody wants to wait for the supply side to regenerate. My observation is that sectors badly affected never seem to recover, it is a catalyst for change. We are doing well here but as I have posted before we are in the ethical sector and in lifestyle products. We would never operate in the supply chain again after our experience last time and retail direct via the internet. I saw your posts and stop posting for a while as it is difficult to post about an activity here doing well when so many are in trouble. All I can say is I hope you do okay and be very careful because it is actions not words from coporate customers that count. It is in their interest to string a supply chain along as long as possible. After our kicking last time around we inverted the business model and we do the reverse of what is normal, on the basis that normal has failed. Whatever the typical response is we almost always reverse it and implement that. I have to point out we changed sector and refuse to deal with large businesses. In my opinion large business ruthlessly expolits the supply chain to the point of self harm to the large business but it does not stop them. They also increasingly seem to want the supply chain to finance their activity to the point that they cannot function without the supply chain undertaking the financing. This is driven by accountants and propping up share values via dividends and is extremely dangerous to the whole economic system. However as far as BBC reported stats go - Not all manufacturing has to have been hit and in any case I cannot see much enthusiasm for releasing bad news by HMG and they are usually miles behind the curve, look at Comical Ali's 39bn GBP slipage in 6 months on the public accounts. Look at the doubling, tripling, quadrupling of recession duration and depth. if you know anything about project management and critical path analysis you will know that the slippage is unrecoverable, the management model bust and any projections uselss, game lost. There is no control and the event will pass it course.
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#157 citygambler "I am born and bred in the North East of England" Me too, though I live in Pembrokeshire now.
For most of my lifetime, the biggest divide in the UK was between those areas which grew and got mucky in the industrial revolution, and those which didn't. There was a gap in the perception of society, the perception of class, and in social relations. I am very happy amongst south Walians: their communities were built upon coal and steel, as was the community I was brought up in. And in the North East, our most popular MP was Glaswegian Manny Shinwell. My Grandad, a steel shop steward in the 1926 strike, sang in the local male voice choir. I sing in my local one in Tenby.
Of course, as times change, some loyalties are changing too, but they can't be coerced. Middlesbrough, where I grew up, still has more in common with Swansea and Motherwell than it has with Harrogate. Some tribal boundaries cut across the entire UK. I'm not saying that's a good thing, but any political movement which ignores this is doomed to eventual failure.
Mrs T's goverment ruled by coercion, divide and conquer, and may have sowed the seeds of the destruction of the UK in the process. New Labour could have made a fresh start, but hubris, incompetence and pandering to the non-productive elite has ended up exacerbating these divisions instead of healing them. For that I will never forgive them.
Tony Blair now postures and pontificates about bringing peace to the Middle East. Look at what you've done to the UK Tony, and weep. I do!
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157 city gambler
GE odds conservatives to win 1/5, from 1/3 - 2/5 at the start of the year (just search general election odds). Bookies dont tend to lose money. Further there are so many stats against Brown coming back, basically it would be a miracle statistically if he succeeded. Not least because we are all too likley to still be in the recessionary trough with 3 mill unemployed, many who have never been unemployed before and quite possibly 4 million households in neg equity. I'm not wild about the outcome either way and I take your point about those burned not wanting to vote tory. It basically is the devil you know or the devil you have known. Lib dems do not seem to be able to capitalise but you never know. PS House ownership tends to make tories, thats why Thatcher was keen on it.
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Keep it simple, small, local - that would be DE-globalisation then?
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#160 rvpisneverinjureds
Take care what you wish for my friend.
I fear that a snap election in the next couple of months would not necessarily bring about the result you would seem to be looking for.
There's nowt as queer as folk.
Read citygambler at #157 - interesting numbers.
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Break up the big banks. YES.
Put the rubbish into banking vehicles based in tax havens.
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The poor Tories will do anything to jump on a bandwagon.......at the moment they cannot remember which one they are on...If someone has the energy it would be interesting to see how many bandwagons they have jumped on in the last 2 years and how many they have forgotten to jump off
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#157 by the way there were 6 draws in the championship last weekend... to be honest i would vote for "the man made of green cheese on the moon" party to get rid of brown.that 350 lab seats will be no more than 160 I would say after the next election.
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162 sasha
Now I understand your energy. Tenby. One of my favourite towns. Energetic at any time of the year. Even when a cow escapes and tries to get on the lifeboat. St Davids is rather good but I think Tenby wins.
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#168 rvpisneverinjureds
I cannot see NuLabour loosing 190 seats under any circumstance, but if they did, we could face the prospect of Plaid Cymru, the SNP and the BNP holding the balance of power at Westminster.
Now there's a thought.
Better the devil you know begins to look less unattractive.
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139 adlibert
You have either got selective amnesia or you are too young to know.
The mortgage I had ran at 2% over base rates and base rates were high for years.I remember paying 600 a month on a 38k mortgage, and probably still have old bank statements stashed away.
It was a Hell of a long nanosecond and it nearly wped out millions of people....no way should these Tory cretins be alllowed back in to ruin things again!
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Are the tories saying that they will break up the banks to make more little banks?
And who will run them? Have they, like Labour found more new friends who have to be kept in great wealth, somehow? Or have they found experienced bankers who understanding banking, and banking regulation who will be able to do a better job than what we have now?
Do they mean that these global monsters need to be replaced with little local banks, and therefore globalisation is not quite the fantastic wonderful thing we have all been told it is?
Have they mentioned what they will do about adequate regulation? Have they mentioned anything about minimal capitalisation of these new small banks? Will these banks be casino-type banks or the boring, though steady kind?
New small banks, but no criminal investigation into those who brought us here?
Did any of the tories mention the word ethical, and if they did, did they define what they mean by that?
Or was it a quick soundbite to convince us they have changed?
By definition, political leaders will say anything to ensure they get in power.
One lot is as useful as the rest, in the end.
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Should Banks be prevented from being too big fail?
What's the alternative? That Banks SHOULD be allowed to be too big to fail..?? why not just have one big bank in that case?
The failures of logic by the government are a part of the reason why much of the situation in and around the Banking crisis IS so messed up. It is really poor management,rather any failure in the 'vision thing'.
It seems as if they HAVE drawn the conclusions that the conditions make inescapable...but then consistently tried to ignore them for some reason.
This lack of ordinary common-sense is evident even other areas, including the one under discussion in a lot of posts---electoral mathematics.
I believe they misapprehended the SNP as a party primarily concerned with independence; and not with being a left wing, Socialist party..... it's the 'left wing' part of the SNP appeal that has caused a serious collapse of Labour in Scotland, both inside the party and outside; not the 'independence' part of it.
The SNP are a more appealing version of Labour than Labour themselves.
The consequences will play out in the next Westminster election even more strongly.
And with a difference of 190 seats it's worth remembering it takes just 96 to change hands to remove the lead.... 96 is still a big number but not as big as 190.
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Just to back up what I was saying in my earlier post, in 1992 on election day the numbers were 376 Conservative and 220 Labour i.e 1 seat different to how it looks today, the bookies had Labour odds on to win that election as well and called it wrong.
Its true that there are more Labour marginals because the only way they can actually win elections is to gain seats outside of their heartlands by appealing to this almost mythical 'Middle England' which doesn't appear to exist anywhere except in the minds of Political Analysts and Opinion Pollsters but I assume refers to anyone who feels hard done by under the present administration and will switch their vote to any party that promises to give them what they want. Cameron and Osborne are keeping stum on the most important issues on the principle that the next election will just fall into their laps if they just wait it out. (Non -cynical point: Also I think its safe to say that David Cameron has had rather more pressing domestic issues to deal with lately and his refusal to make his son a political 'asset' over the years certainly raised my opinion of him as a human being, as opposed to a politician).
Unless there is a full blown economic disaster with say 20 percent unemployment and serious civil unrest I honestly think that Brown will scrape in again whenever he calls the next election. This is not because I am a Labour supporter, just an objective reading of the situation. For example the percentage of voters who run small businesses is negligible (although massively over represented on this blog!)next to the number of senior citzens who believe that the Labour Party is the only reason they have a state pension and the Tories would take away all of their meagre benefits if they could. One man one vote, thats how democracy works unfotunately..
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#161 glanafon
Your post seems to demonstrate clearly that it is nonsense to hear/see that only badly run businesses go bust.
There will be many good businesses lost in the coming months and years as a result of the deplorable activities the greedy few.
Keep working and succeeding.
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I know we are not supposed to post links but it is to the B of E.
http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx Interesting to see what the real rates were....Labour had high rates too 1975-79 but in high inflation times high interest rates had a point.
Truth is, would the Tories, in the real situation UK has been in, have done any better?...I do not really think so.
But at least we are fighting this recession with low interest rates and that is good.
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Robert Peston, I am so surprised you continue to pass comment in your very politically swayed manner. The British economy and that of most developed states of the world have the same issues, the banks are bigger than the individual economies, fact and not someting that can ever change.
Would you rather that we have no involvement. If any political intervention downsizes our banks it is as good as screwing the economy of the UK further. You and the BBC should be playing more and publicising more of the previous strengths of this market and how those that created the problems are the ones most likely to fix it.
Time, public perception and sensible less strangulating governance are what is required to return the world economy to its previous normality. That along with appropriately placed greater criticism of the bean counters who have the greatest part to play in the current mess given most of what had happened has happened on a less than material spreadsheet.
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148. At 7:14pm on 08 Apr 2009, maroon3 wrote:
If you let my last comment get through. I'll eat my hat.
It appears that your hat is safe for the moment :o)
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Secret Love, I so agree with your comments.
City.. you may come from the North East so you will be well aware that most of the 'new' money in that area is brought in by the southerners travelling northwards for the better value property etc etc. Large swathes may not be enough to 'cut it' for nulabour, many of the old labour are tired of nulabour hiding their murky blue colour under the ol' red flag.
Gordon and Tony have made a pigs mess of it all... meanwhile Tone is gettting his 400,000 pounds per hour for talking, Gordes probably hoping for something similar when he 'retires'.
Now if both had given us all that amount of money to do what we wished with, then we'd probably have spent, saved, paid off mortgages etc etc and in the end that would've been a darn sight cheaper than what they've paid to bail out the fatcat bankers... crumbs even a million quid per person would've been cheaper and got the job done far better. Grim's place would now be employing more folk instead of laying them off.. as would other businesses.
Moderators... can't the powers that be fathom out a decent way of making the posts read disappear for us instead of us having to trawl through the whole gamut again and again?..or I've missed the 'all read button'? I know other folks can do it with their blogs and message boards so why not here, please?
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169 glanafon "Even when a cow escapes and tries to get on the lifeboat" The "bullfighter" was my godson.
There are some nice pictures of Tenby on the choir website. What's good here is the sense of community. The choir's a hobby for its members and not a business, but it raises funds for charities and helps bring income to the local economy, some of it foreign currency. So, in a small way, every little helps. Our oldest chorister is 87 - still on the committee, and actively contributing. Retired people do more than just take.
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This comment was removed because the moderators found it broke the House Rules.
#139 Adilbert writes "What 17% mortgage rate in the early 90's?"
The Bank of England base rate was 14.875 for a year up to October 1990. This would be the period we are talking about, with 17% mortgage rates. John Major was Chancellor of the Exchequer. It was indeed a Tory government. Remember?
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174. At 10:52pm on 08 Apr 2009, citygambler
Alas...you may not be far from the truth (btw I'm apolitical).
Your scenario would suggest a snap election sometime soon...off the back of the euphoria of Gordon's...'I've saved the world' g20 summit blagfest.
I don't really care who wins...thy're all spiv MP's and they are all amoral.
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180 : )
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Re: 180
Free the Tenby Two, that's what I say.
And if you don't get that, you must be thick as a ...
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Osborne wishes to get one passed the Gordon Banks ,but it was really an own goal.
http://www.youtube.com/watch?v=jbgwR1pA1k0&feature=related
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Interesting curve ball this one...!
Perhaps GO has been reading the blogs!
Could be, in principle a good idea, but the devil, as they say, will be in the detail.
RBS are now going full steam ahead with behaviour patterns reminiscent of Northern Rock-rapidly increasing bully tactics to recover money, even more appalling treatment of customers than prior to their 70 percent government holding, massive staff lay offs, off shoring of call centres-sound familiar?
It seems that a political stranglehold on a bank is no encouragement for good behaviour! Quite the contrary. Anyone try to have a negotiation conversation with RBS lately over redundancy, difficulty making payments etc? I wonder what their repossession rate is? NR's was at 70 percent last year-watch RBS follow suit.
They know they're too big to fail, and predictably their arrogance increases exponentially.
government ownership has given them carte blanche to run even more amok.
Yes George, break them up. Give them a taste of vulnerability and knock them off their golden pedestal of superiority.
But please, please, include improved customer service, moral hazard, humility, honesty and transparency as part of the package, and build in a big stick too.
These behamoths absolutely MUST be brought under control.
At the moment they are behaving like financial hooligans, they have to be stopped dead in their tracks.
This corporate organised bullying of the vulnerable nation cannot be allowed to continue-they have destroyed too many lives as it is. Sadly there must be so many people who are held to ransom as their credit ratings are so smashed to smithereens that they don't have the luxury of choosing to move banks. RBS and Lloyds TSB must be cackling away at their plight.
It disgusts me. Sorry, but I'm incensed over this whole sorry mess.
So
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The problem is that we all know that once elected to office as the new Government of the day, these individual MPs and their representative cabinet ministers will be courted by the wealthy banks and finance industries, they will be lobbied and generously gifted favours to the point where their resolve will fail. Am I implying that 'all politicians are corrupt' no, just that 'all of parliament is corrupt' and as a consequence within such a system, the individuals will succumb.
We all know that the Banks should have been left to fold.
We all know that mark to market was right, and suppressing it to gloss over some very imprudent buying by the banks is not going to correct anything.
We all know that the World economy is out of balance (based on trade and debt) and that the U.K in particular as a nation, is way too over-leveraged.
We all know that a resettting of asset values should have happened as a matter of course (you can't having increasing assets being good but falling assets bad; it is a contradiction of ideology), and that actions by governments to limit or reverse this are really devaluing governments by diluting them into the banks. This invariably will undermine confidence in the fiscal stability of governments and their values (their currencies).
The money thrown at the banks would have been better spent investing in new banks, in new manufacturing, in new research initiatives, and new infrastucture builds. The banks that failed had their chance and blew it. Not many people and companies in a capitalist World are given a free second chance pass. Infact, no one.
So yes, Mr Osbourne split the reckless idiots up and by all means legislate to remove the clear injustices of capitalism. Ignore the Yanks, let them sink or swim under their own volition, but definately, set all employees to be paid (PAYE) within a strict framework, say 50-1, no one earning more than 50 times the lowest paid in the company. You could also try and legislate that any person working for a company for more than 30 hours every week without working for another company is deemed an employee and not a contractor. That will stop the bottom end staff being outsourced to elevate the mimimum wage on the company books so that the 50 times rule gives the top guys an even bigger pay packet.
So to earn your 50 times, restict half to a 5 year performance bonus. Any share options should be available on the same terms to all. If its' good enough for the board/executives, its' good enough for the workers actually earning the profits.
There you go Mr Osbourne, and agenda on which to be elected.
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And Robert?
The whole mess of the last few months has not been purely an academic exercise.
You may be quite safe and cost, tucked up in the city, but if you can travel to China for your blogs, why not jump on a train and travel to other cities, small towns and rural areas.
Talk to the people of this country: listen to what they say to you-really listen.
Then you'll have some really decent, hard-hitting, gritty stuff to blog about-not boring banking!!!
Come on, I dare you!
Be the nation's voice!
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I totally agree with George Osborne, whatever your political persuasion, some banks have truly endangered our economy. They must be regulated strictly and, if need be, broken up into smaller units. They must never, ever be allowed to jeopardise the living standards of our citizens again.
This crisis was provoked by Brown removing regulatory powers of the Bank of England back in 1997. Thus unable to monitor financial instruments involving high risk dealings, they lost the power to monitor. The substituted FSA were asleep on the job. This situation must never be allowed to happen again.
The damage has been severe and pensioners particularly, who all vote regularly, will never forgive this Government for devastating their pensions and savings.George Osborne is correct and will find much support for his practical proposals.
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so the Nu Cons now propose to tell me where I can bank.... sorry you can't bank any longer with RBS and HBOS-LLoyds... you must go to Northern Rock plc. They must be joking. It is foreign based banks mostly in Euroland which will benefit from these proposals.
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I agree with the broad sentiments of Tiger in #189. Now is as apparent that in the recession led destocking is lessening and stock building it being attempted in response to demand from the healthy parts of the REAL economy, attention needs to move to making the stimulus work in terms of trade credit, and trade insurance across the board.
Maybe the BBC could find a 'Real Economy' (previously known as Industrial) correspondant to blog on this vital part (and L P Mandelson and the Nu Cons and the Flabby LD's could tell us their proposals.)
A little counter cyclical investment in stalled near market R&D activities might also be appropriate.
And some international action on 'letters of credit' where RBS is a big player might help world trade.
But is there no one in the BBC who knows about watering the green shoots?
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RE 181 -Economicallyliterate
Yes, as Peter Snow was so fond of pointing out, the West Midlands is home to a lot of swing seats but I wouldn't put too much store in local council elections. It may surprise some people to know that Newcastle has a Lib-Dem council, overall, they have done a pretty reasonable job. You know how many Lib-Dem MP's the Metropolitan boroughs of Newcastle and Gateshead will return to the next Parliament? I'll give you a hint, it will be a round number..
Thee aren't enough marginals that are guaranteed to fall to the conservatives for tem to overturn the Governments majority on their own. A hung parliament is not out of the queston however..
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New financial dinosaurs were conceived in desperate,frenetic copulatory acts.These misbegotten institutions are an economic threat to the public at large.They are democles's swords likely to fall at any time on the heads of general citizenry.As they are "too big to fall", at moments when they are about to collapse,the policy makers are faced with a Hobson's choice.Pulling chestnuts out of fire for these institutions, the public is told, is in its greater good.By their very nature, these gargantuan institutions promote in their top managements a subculture marked by arrogance,giant-sized ego and a touch of megalomania.No tears need be shed over likely demise of these intitutions.One shuold welcome the prospect of Mr.George Osborne becoming their nemisis and playing the part of an avenging angel.
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I quite agree with George Osborne. At the very least the retail side of the banks needs to be segregated from the corporate side and investment side.
Is it possible to run RBOS, for example, under a non-quoted holding company with "Retail" non-quoted and "Corporate and Investment" quoted?
I don't know, but for the bankers with "brains the size of London" who got us into this mess it should be a five minute job over lunch at the Ivy!!!
Don't you agree Robert?
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If we are discussing the next General Election (13 months to go and counting...), then there's something important to bear in mind:
Labour must convince Scotland, Wales and Northern Ireland to vote Labour, that votes for SNP, PC, etc etc are votes for the Conservatives.
However, England will go very Blue. Very very blue. Maybe 60% of the vote and 75% of the seats and the Tories will romp home.
The economy has a long way to slump and Labour sleaze is destroying the party's credibility.
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What has happened to Guycroft, where has he gone, or has he just given up
like a lot of us that have watched this mess unfold?
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#187. Tigerjayj
As I see it, the fact is that there is too much debt in the system - it's a bit like having a blockage in a closed central heating system that has grown until it's so big the whole heating and hot water system has come to a halt.
That debt (blockage) basically needs to be eliminated in order for the system to get going. The system was not designed to be credit / debt led, it was designed that debts would be paid (fairly) promptly so that that money could be used towards the next thing along the chain, e.g. purchaser pays factory who uses money to pay staff or buy new materials or R&D.
We've had the financial system vandalised by miscreants who milked it by generating debt because the way they were rewarded encouraged them to do so, i.e. bonus for "profit" (at any cost) and they were too stupid to realise that they were wrecking the system they were themselves dependent upon for a lot more than just their bonus.
However, many more people, other than the group of miscreants, will end up paying for the 'crime'. (Seemingly whilst imprudent or perhaps immoral, their actions were not criminal).
But isn't that just how it usually goes? If youths trash a disused school, who picks up the tab? If terrorists blow up a suburban train, who picks up the tab? (Not just of repair, but of the justice processes, prison costs, A&E treatment, disrupted transport, etc., etc.)
Answer: everyone - either directly or indirectly.
The problem with this mess is the matter of scale. (And many suggest we've only so far seen a fraction of the true amount of debt come to the surface).
So, just like the blockage in the central heating system means the heat goes off for everyone, so everyone pays for greedy miscreant bankers pushing too hard for "profits" in their companies in order to get bonus rewards. (And other maverick financial trickery too - false rating of risks, the selling on of known bad debts, etc., etc.)
It IS rather appropriately named "economic terrorism" - the consequences and sequels terrify me - and many, many people will be paying for it for years and years in one way or another, lost pensions, lost employment, lost business opportunities, lost homes, lost personal opportunities, lost local services, increased taxes, increased debt recovery action, etc., etc.
The size of the blockage is HUGE and despite vast amounts of HMG money being thrown at it, the fact is that the debt blockage includes every mortgage, business loan, credit card debt and overdraft and many of those will have to go too. So, despite vast amounts of HMG money trying to unblock things, there will be many individual victims of the bankers' actions.
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Even though it maybe a good idea to break up the banks or at least stop another RBS. I am not sure if the Tories win the next election they will have the nerve to do it. I think it will be quietly forgotten. Which is a shame.
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The smaller model has to be the better one, and as other bloggers have made the point, split retail from merchant banking (as it used to be).
And so, extending a line of thought here, perhaps a better focus for all (or at least a sizeable part) this money thats being lobbed around by HMG presently would be to make it available for investment in new and green technologies so the UK could truly become THE leader in that emerging field and help restore a manufacturing base?
Such businesses would be relatively small at least to start with, meaning impact of any one failure would be confined. Whether in banking or wider commerce & industry, this has to be the model. It combines good risk management and entrepreneurialism with proper explotation of the UK's renowned strength in innovation. This, it might be added, is just the kind of forward thinking and energy which drove Regency and Victoran Britain to great heights, and has been stifled for the last few decades.
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But given all of that, I'd like to see the politicians (of all persuasions) come together and agree some way to ensure the costs of running the next election (and their campaigns) are significantly less than on previous occasions.
When folk are stuggling to rub two ha'pennies together, it would be quite sickening to see multi-million pound TV and poster campaigns.
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Ensuring banks don't get too big might limit UK risk but history indicates it won't necessarily result in safer indiviual banks. Our smaller banks, formerly building societies, have all required rescue.
The other thing we need to consider very carefully, is do we want to have British banks. Our big, and until recently, successful banks remained independent because they were too big to buy. Barclays, the smaller of the big three, was touted as a takeover target not so long ago. Fortunately it was just big enough to keep out of the clutches of the likes of Citigroup. Global competetion, yes, but if we want reamin a respected financial centre, we could do with some banks of our own. At least now if they repatriate funds it is to the UK. Just imagine the French letting Soc Gen or BNP Paribas fall into foreign hands. It will happen.
Would splitting banks into their different functions help? Well, Lehman was hardly a retail bank, and look what happened when that was allowed to fail.
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For breaking up the banks into smaller ones to actually work, all the countries who are the main financial centres of the world would need to do the same & ensure legislation is there to keep it that way. Can't see that happening as all it would take would be for one not to (same applies to regulating the banks) & their banks would then buy out our smaller banks etc which would leave us open to a foreign bank going under & taking our economy down with it - could legislate for this but is that then protectionisim?
As history shows the markets recover, lots of people are starting to make lots of money again & everyone forgets about the previous crash which everyone says is unique & won't happen again. Yes every crash is unique in it's own individual circumstances that contributed to it but like a roller coaster what goes up comes down so unless everyone does the smaller bank way forward or legislate, then difficult to see what is going to stop the roller coaster starting to go up at the end of 2010 & then starting to come down in 2021.
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This comment was removed because the moderators found it broke the House Rules.
Am I missing something? Surely there are other equally effective safeguards that can be put in place to prevent this in future. Does Osborne really want to cook the golden goose? These shares will be a windfall in future. As I understand it this country has an aging demographic and a pensions blackhole and no sovereign wealth fund to cover for that. Gordon Brown has already sold off the gold reserves at a discount now George Osborne wants to follow in a similar vein. These politicians are all the same and devoid of any foresight!
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The problem I have with the Tories is that everything they say is defined by their wish to win the next election and not what's realistically possible or good for country and economy.
They are all politics and no substance.
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The current economic mess can not be cleaned up through monetary and fiscal measures alone. To use a phrase from earlier times,the problem seems to be a "fundamental structural disequilibrium". This phrase was often used in the context of international trade and balance of payments problems and referred to chronic national deficits and surpluses.A somewhat analogous question has arisen following the new globalization model.A new pattern of trade and capital flows has emerged.It consists of shifting manufacturing and certain other activities to developing nations. The "high-high tech" and seminal creative activities are still concentrated in DMEs.And so are a host of lucrative higher end management and financial functions.But a sizeable portion of labour force is engaged in low-skill and relatively low-paid occupations. Thus at one end a miniscule minority gets fabulous rewards and the others are far below in the economic scale.This arrangement was sustainable since the general standards of living were high with moderate inflation,job stability,affodable housing and credit cards.In fact this is the explantion which Neo-Marxist writers like Herbert Marcuse gave to explain the loss of revolutionay fervour among workers. But this model is collapsing. For what will be the avenues for providing employment on a sustainable basis to the work force? Far too many are in service sector e.g. restaurants,tourism,entertainment and so forth.Unless what Russian economists once used to call "national material product" is sufficiently large,the service sector will be nonviable. The generation of material economic products has been shipped out. Though international trade is essential,some balance between material and nonmaterial segments of an economy is necessary.In its absence,the workforce [in any economy]will get progrssively relegated to trivial preoccupations. Since it will be on low-value added jobs,labour productivity and incomes will decline. If manufacturing and real jobs are to return to domestic economy,at least in some sectors,consumers should be prepared to pay more and managements have to sacrifice their rewards. All this will mean that problems may emerge in economies which depend heavily on exports. But the current discussions are silent on these aspects of the problem.Simply by tweaking interest rates or printing money [which US can afford to do for a while],the problems will not go away.Ultimately the domestic workforce has to produce some stuff which can be absorbed within the economy.Otherwise the multiplier-accelarator effects[ in economic lingo]will get dissipated.
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I found Osborne's speech at the RSA alarming because he referred to giving the BoE's Governor his eyebrow back, and did not refer to any tighter regulation of hedge funds.
Osborne appears to have a cosy relationship with the incompetent King. It is thought King gave him details of the impending recapitalisation of the banks last year, which the young Osborne casually alluded to on the Marr show, causing a precipitous fall in confidence and our pension values, and allowing the government to pick up large stakes in Lloyds and RBS, and allowing the Middle Easterners to pick up a large stake in Barclays, at much lower prices than had there been no leaks.
Osborne of course also had a lovely time in Avlaki last year, entertained by one of the biggest hedge fund managers, Nat Rothschild, who sadly must be a bit of a disappointment to his old college Wadham given its impeccable credentials for liberalism and fair play.
It is difficult to see the Tories doing anything about practices such as short selling, which seem to be a licence for printing money at times, at the expense of our pension funds, particularly if you're someone like Soros, but anyone able to spread the odd adverse rumour can also work wonders in destroying confidence. Given Soros' latest proclamations his hedge fund must not be prepared for a stock market revival yet.
It seems to me the Tories are as bad as Labour, both in the corruption and incompetence stakes.
Whilst the Libs do not appear to be currently corrupt, Mr Fable seems a bit flakey but at least has now changed his tune on the full nationalisation of the banks, it possibly dawning on him what a total disaster this would be, not to mention from a political perspective that some 3 million private shareholders and possibly a similar number of dependents have a vote.
Being an economist he has at most a 50% chance of being right and he seems to have finally got there.
We need very tight regulation, including of hedge funds and the incompetent King will not supply it by raising his eyebrows, Mr Osbourne.
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I see the nutters on here are still trying to blame Thatcher for the current banking crisis! It really beggars belief how ignorant people are - or perhaps they base their 'facts' on reading the plethora of worhtless blogs that seem to proliferate these days.
FYI in Thatcher's day any number of banking crises were smoothed over by sensible regulation from the Bank of England. It is the transfer of this responsibility to the FSA as well as the intense and often polically motivated media scutiny that has done for us this time round. during the Latin american banking crisis it is a well-know fact (now that is) that Lloyds at least was technically insolvent, but by discreet management from the BofE it managed to trade its way out of that position.
I really must stop reading these comments - life is too short
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Interesting to see 105 grimupnorth question the economic data on the basis of three comments about downturn. Can I add that I know of two companies - one is taking on staff due to new opportunities and the other has had its best first quarter ever with work blitzed out. There is no standard effect so you will always get winners and losers.
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controlling the banks is a must if only to protect the public from poorly trained and inept administrations.
the days of bank executives being paid over the top amounts has to be over and some sense brought into the equasion.
but mr osborne and the torry party has to firstly win any election then they have to proove themselves honest and reliable enough to run this country.
may be for this countries sake the best thing would be to disband parliment and the parties and have just government formed for a period to fight to get this once great country back on its feet, becouse we are at war an ecconomic war that will break this country if nothing is done soon.
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Couldn't we just bring in bankruptcy legislation like they have in the U.S.?
Then loads and loads of people (and companies too presumably) could just go bankrupt and avoid debt recovery actions - especially against themselves personally - and then brush themselves off, pick themselves up and start all over again? (As the song goes!)
I mean we're all going to get well and truly wotsitated anyhow, so why not do something popularist and make the process less painful for more people? (By people, I do of course mean voters).
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This comment was removed because the moderators found it broke the House Rules.
Can anyone please explain why it would have been so bad to let RBS, HBOS and Lloyds collapse? For the vast majority of people their savings would have been protected by the Government's indemnity scheme. By saving the banks we have all been unacceptably compromised by their risks. I heard the other day that RBS still has £300bn of 'potentially' toxic assets which government is going to insure against. It's a bizarre insurer who takes on a risk on which the outcome is extremely likely and then charges only a fractional premium.
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Apeman at 19. - since when does competition drive up prices?
I think competition among smaller supermarkets is a great idea. It will bring variety, you'll be able to negotiate deals better. Honestly, I don't see why competition is ever bad.
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The banks in their present form are a threat to national security. George Osborne is right to want to restructure. We've all seen how the "Gang of Four" (HBOS and RBS chiefs) literally brought this country to it's knees.
I'm afraid Lloyds gamble to be the biggest fish in the pond may back fire after the next election.
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193 city gambler
I see your point and unfortunately I am not sure it makes much diifernce who is in anyway. The will be little scope, it will be dominated by paying the bill for this lot. Re John of family values - Major was not seen as being to blame for a economic collpase, and all be had to face was the ginger welsh waffler. I can remember comments at the time of we'll never see a ginger in. Times change but that was the framework at that time. I can also remember a die hard labour supporter saying he was going to vote conservative. When I asked why because it didnt fit with his morning cuppa chitchat he said he 'wanted interest rates to be as low as possible or I will lose my house and I don't trust labour not to put them up'. Interesting isnt it. Same issue all the time, housing and loss of. I said to him you will likely lose your job due to conservative policies hitting this sort of activity, and he said 'that wouldnt happen for a year or so but if interest rates go up I will almost immediately lose the house'. So There are lots of factors drive the votes. NuLab focused on overcoming these resistance issues to the point Blair was standing up and saying we will financially behave like the conservatives. The problem is that the GE outcome is based on very few votes in very few locations. I can see a case for turnouts being low rather than high if people think it is all pointless. At the moment I go strongly with the bookies opinion (not with money I might note) but both the conservatives and the libdems have to raise their game and realistically both are finding it difficult because they have to let labour keep digging and diggimg. Labour have to say taxes have to go up and public spending has to go down before the conservatives can say it. Its a negative dutch auction with the first to bid losing political credit. Somebody with an interesting ID did post to me about 5 months ago to the effect governments lose, oppositions dont win, you have to have the govnmt lose, wait.
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#210 Distressed - thanks - I am as interested in hearing about why the statistics are right as why they seem so wrong to me - could I ask what these two companies do?
I illustrate my comments by my own situation however it is out of concern for the whole UK that I make them; therefore your good news is as important as the doom of others - I'll be all right come what may - I have little borrowing (small mortgage only) and a very old fashioned way of life - in my world its always a recession!!
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very odd that we are not allowed to comment on how refreshing it is to see a person taking responsibility for a mistake and resigning, when it's the lead story on the BBC News
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#213 Mr Pirate - you seem to be having problems with the moderators - perhaps once you free the US captain from that ship they will start freeing your posts?
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Was finance, banking and banks discussed, hinted, mentioned, suggested, demanded ... in a Greek gathering between a Rothchild, a Labour Lord, a Tory shadow chancellor and a Russian tycoon last year?
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Robert please move on, I am sick and tired of you portraying the world of buisness as being "the banks" it isnt, it includes small, medium and large industries, cottage industries too. It includes employment law, trade agreements, risk taking, innovation and more.
You are begining to become the epitome of the City "businessman" narrow focus and obsessed with finance, it is this narrow obsession with money itself that has been our downfall.
Also I and others have been asking why the Government who own approx 70% of RBS voting shares, are unable to "influence" RBS stratgey (as reported by the BBC) it would be nice for our "Business Editor" to report in this travesty or perhaps you should be retitled "Banking Editor".
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i seriously doubt whether the british government has the power to break up HSBC, barclays or standard chartered....... which seems to be your implication at the end of the article. and they certainly shouldn't have the power to do this.
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212 Sutara
''Couldn't we just bring in bankruptcy legislation like they have in the U.S.?''
I thought they had just introduced a no-hopers cheapy bankruptcy here as some bankrupt aspirants could not afford the cost of filing for bankruptcy. The time before you are cleared seems to shorten, not that I have aver been bankrupt, just media reports. The main thing in the US is that you can throw the keys for a house over the counter and walk away, whereas here the bank then claims on on the defaulting householders insurance which is part of the mortgage package and the insurance company then pursues the ex householder for the shortfall and bankruptcy can result. They are alarmed in the US that many people including professionals may just say here are the keys because they dont want to pay what are effectively massive negative equity based mortgages with no breakeven on the horizon. (1930s Gt Depression US law still on the books allows this clean walkaway). There have been references to WW2 finally clearing the Gt Depression effect dragging on but if you look at it is appears much more plausible that it was the US policy of moving to encouraging mass private houseownership via cheap mortgages (fanny mae, freddie mac funding and house building programmes, people getting busy doing something). Call me simple but I cannot understand Brown. All this money going to banks is totally ineffective it is just disappearing, in terms of generating economic activity its not there. But what do you expect from an activity, banking which is set up to skim ever tranaction in the economy and whose only product is debt, sorry credit, another typo. Propping short term public spending when it has to drop is stupid, it is the private sector providing the tax base that needs growth. So it returns to housing both here and the US. The housing market has to bottom to affordable levels and secure low interest rate mortgage funds have to be made available to ensure activity, not not overheat, activity. Forget the Lrd Turner SFA, sorry FSA, bit of a typo, bit about high interest rates mortgages for 5 to 8 years etc etc we cannot afford a housing trough for ever, we need house building, particularly in the face of projected need, and more not less houses help stop the market heating. But call me stupid by all means, just another hat for my extensive collection, alongside the labour, tory, liberal, radical, anarchist, livewire, layabout, elitist, socialist. I've hear the lot. : )
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219. somali_pirate_SP500 wrote:
"very odd that we are not allowed to comment on how refreshing it is to see a person taking responsibility for a mistake and resigning, when it's the lead story on the BBC News"
Just because it's the lead story on BBC News does not mean that it is relevant to the topic of this particular thread.
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DMJeffrey
You can write me down as another nutter.
Thatcher thinking has led to the greedy profiteering that has in turn put the banks in this position.
'Trickle Down' in wealth has not occurred because the tax system is stacked against to poor not the rich.
The 'Market will decide' mantra of Thatcher, subsequently of Blair and Brown has been a disaster.The 'market' consisted of a group of people chasing their own agendas.
'No such thing as society' has been a nightmare for those in society who need society.
Mrs T's economic legacy was merely avarice disguised as an economic policy.
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#220 grimupnorth you may have a point; I'd be keen to swap Cap'n Pugwash at the earliest opportunity as he's attracting far too much attention from the US Navy
anyone wonder what cargo was REALLY on that ship to require it to have an American crew willing to fight back to keep it?
strange things happen at sea
I see that over 5,000 Americans are filing for bankruptcy EACH DAY, so my interception of shiploads of stuff they don't need and can't afford is doing them a favour in my opinion; it may be hindering Gordon and Barack's stimulus policies but I'm not convinced it will work anyway
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Somebody earlier said forty percent rise for the Public Sector.
Well, I used to say that.
But it is too late for that now, the economy has tipped over the Edge, and it is going to be a long painful road back to any kind of prosperity.
I understand the Brown Gov't intends to keep Public Sector pay to one percent or less. Well, thats one very large section of the Consumer market who won't be going on holiday, buying clothes, extra food, records etc, etc.
You just have to do the Maths.
The Depression has put the Brakes on , but the Gov'ts response is to throw on the Handbrake.
Of course, Wage restraint during a Depression will only make things worse. Some people will believe it to be a good thing. Until their Company's Sales fall and their Dividends are cut or cancelled, then they will realise that it is the Little people who make the world go round.
At the end of the day, the Gov't must stop acting like an occupying army and start actually doing what is best for it's people.
All of this is down to perception.
(A quote from perception 101, two people look at a Die, first person sees a two, second person sees a Six, the Die itself remains unchanged and the same as ever, a bit like Religion really).
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#169 glanafon
#162 sasha
Tenby. Yes! Unbelievable!
I went in a pub and was press-ganged into dressing as a nun and joining in a Welly-Wanging competition on the beach.
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And what policy will the Conservatives bring forward to deal with the absolutely dire state of the housing market ?
As peoples incomes fall, their ability pay to buy Houses will continue to collapse.
What then ?
Will we have Millions of Homeless People ?
Will we have another Cardboard city under the Railway Bridges (ala Maggies Utopia) .
Honestly lets put the Banks on hold and hear some real policies to deal with the Real problems people are facing.
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Do the Conservatives have a practical policy on Science and innovation?
Will it create new jobs (and wealth) where it is needed.
There are so many things that could be discussed.
Prosecution of White Collar crime, now that would be an interesting discussion.
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#225 rbstemp so its strictly bank talk then is it? how tedious that would be
so how about the fact that the US has 100s of local and regional banks then; pretty much every week a few of them become insolvent and are temporarily nationalised by the US authorities so that they can be tidied up and re-opened; because they are not TOO BIG TO FAIL; sadly though the US authorities are allowing many of them to be consolidated into JPMorgan etc, exacerbating the too big to fail issues
is that on topic enough for you?
is it interesting; seems extremely dull to me
IMO it would be much more interesting to discuss the following question:
Should the automakers be considered too big to fail and what are the pros and cons in allowing core parts of the manufacturing base to disappear?
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When things get too big to bail, we could always (or perhaps may have to) become the 51st State of America.
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All,
I dont think even Somali pirate can compete with the level of satire steeped in truth as you will find on the link below.
'Mervyn king' talking to the troops is brilliant. Credit to who ever did this.
http://www.youtube.com/watch?v=wtIjgsxe-jM&feature=related
They have done another similar one on the housing crisis which is even better.
jericoa
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Hooray! At last, some light at the end of the tunnel!
Too many bad banks - smash them up!
Well said Ossie! X - there's my vote!
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For anyone looking for a good strong currency to invest in, the Uruaguayan Peso is quite strong.
It has steadily appreciated against the Pound over the last few years.
Funny how the South American Banks are now more effective than the US and British Banks.
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#224. glanafon:
"The main thing in the US is that you can throw the keys for a house over the counter and walk away ..."
Now THAT would win the Tories (or whoever) a few votes and also redress the power imbalance between ordinary people and banks.
(Anyone got Ozzie's phone number?)
But seriously, isn't this why we in the U.K. are so wotsitated? (What many people do to turkeys and chickens before roasting them!) We took on the American way of doing business, but then operated it within a U.K. legislation framework. The Americans could 'walk away' from some of the problems much more easily.
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For me George has gone from being an idiot on a yacht to being a monetary genius. I've been thinking something similar for months. My caveats echo those expressed elsewhere, i.e. I'll start to believe it when I see it in their manifesto. But for the moment only two cheers.
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The comments about splitting retail banking from investment banking to protect people's savings are all well and good but there is no actual thought into their practicality. If anyone is hoping for any interest on their savings then they will need that money to be invested by their bank...
With the current economic structure there is no sensible way to split out retail and investment banking without enormously damaging the economy. Without banks investing the capital represented by people's savings how would business in this country be expected to flourish?
Our current issues have been caused primarily by 2 initial problems:
1. There was a totally insufficient level of regulation restraining Traders
2. The government unbelievably emerged from a period of sustained economic strength with the largest financial deficit ever
The first problem must be tackled internationally, with a focus on tidying up and clarifying the accounting principles used to measure banking performance, the second can only be solved by a more prudent approach in future from the treasury, which will hopefully learn painful lessons from this.
When Gordon Brown redefined his own economic rules to allow him to move yet further into debt he chose this path for us and in my opinion should be directly answerable for this choice.
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This comment was removed because the moderators found it broke the House Rules.
Draft Manifesto for The 'I'm desperate to be Elected at the Next Election so I can inherit this mess and have the headache of trying to sort it out' Party.
1) Full National Enquiry into Conduct of Senior Banking/FSA executives which could lead to prosecutions for negligence. (Very popular with the public this one & Tories can't go down this route coz it would be all their mates and funders)
2) Pass legislation prohibiting the carrying on of Investment & Retail Banking by one organisation/ or separate organisations with common ownership. (Very popular with the intelligent voter who can see this has partly caused the crash).
3) Large scale investment in renewable energy - wave,tidal,wind.(popular with the young)
4) Large scale investment in energy efficient vehicle technology.(popular with the young)
5) Review of the food production capacity of this country and a pledge to introduce a programme to ensure that the farmers of this country can produce the level of food required to sustain the population of this country.(popular with farmers)
6) For any farms that have already diversified away from food production - incentives to come back & also have 'NEW Farms' where unemployed would be paid a wage above benefit levels to learn food production skills - these farms would be govt owned. (hope for unemployed in rural communities?)
7) Removal of NI as a separate tax but adding it to income tax rates at all levels with no ceiling - hence increasing higher rate tax. This will lead to savings in public expenditure. (popular with the low paid, unpopular with the high paid (but there's less of them!)
8) Accept we are in a mess and we need to work hard as a nation to get out of it.(necessary or who'd want the job!!)
9) Construction - nothing - this sector has made massive profits in the good times and now housing prices need to readjust before encouraging again.
10) Reduce numbers of MPs to 501 - no need for anymore than this to represent the country.
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229 Toldyouitwould
''I went in a pub and was press-ganged into dressing as a nun and joining in a Welly-Wanging competition on the beach.''
Are you sure it was a pub you went into not a club? Your dialect may have confused the locals when you asked for directions.
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Does anyone really seriously believe the Tories? This is a party that has to be one of the worst opposition parties of recent times. Over the past weeks whilst Labour have been busy blowing smoke into mirrors the only Tory noise to be heard has been Ken Clark and even then that was about Geoff Hoons' property portfolio.
No matter how bad the financial landscape they are never going to bite the hand that feeds them nor overly regulate financial services. This is just another sound bite to appease the core vote (tories and disillusioned labour) and a poor attempt at setting them apart from labour.
I just hope that sufficient voters remember the past and see through this..
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This is the most sensible thing I have heard.
Banks were swallowing up other banks and pension companies to groww quickly by aquisition rather than on merit.
This has led to the present situation where there is no longer enough competition.
It led to these banks becoming so big and diversified they no longer had control over what they were doing.
Hence the huge mess the banking system is now in.
Samller institutions are easier to regulate and if one did fail then it could easily be dismantled and customers absorbed elsewhere.
As far as shareholders are concerned they've already lost the bulk of their money so not much pain there.
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#234 jericoa very funny and definitely a 'must see' for all the Yvette Cooper fans lurking on here; in a German uniform very kinky indeed!
getting back to the boring banking, as implored by RBS, today's NYTimes has an interesting story about Geithner's bank stress tests; results to be top secret; certainly sounds like a cover-up to me
http://www.nytimes.com/2009/04/09/business/09bank.html?
I also understand that the US banks are being allowed to use relaxed accounts reporting rules to make their books look better in their next set of reports
It's one thing trying to restore confidence but most depressing if it is to be achieved through the support of the 'too big to fail' banks
Shiver me timbers, bank talk is sooooo boring; I'm heading off back out to sea and will converse with you scurvy landlubbers when there is a new post about something else
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Post 239 the banks could lend money for
1) home loans i.e mortgages.
2) Personal loans.
3) Small business loans to local businesses within limits.
Oh in other words what they used to do.
The could get income also from.
1) Overdraft and small business banking fees.
2) Commissions on things such as travel money and home and car insurance sales.
Building Societies have done it for generations and the banks used to do it also. Why not again?
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"So if the next government were to dismantle Lloyds, depriving it of its enormous share of the current-account, savings and mortgage markets, that would be a reputational disaster for Lloyds' management."
Come on, come on Robert...lets think about this for a minute and step off the sensational journalism badwagon that you famously/ infamously travel on!
Why on earth would it be a reputational disaster for Lloyd's management. Firstly this is a political risk, and to an extent outwith their control, and secondly the government 'told' Lloyds that they were going to buy HBOS - fait acomplit. The Lloyds shareholder value has been destroyed by Labour, not the management.
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228
I'm not sure how a bunch of civil servants sunning themselves in California and buying Japanese flat screen tellys equates to the best way of reinflating the economy. Some might argue that's just more continuation of how we got here in the first place.
I accept that this would provide some stimulus to the economy, but is it really the best use of government funds ?
My suggestion ? Build houses, for reasons outlined in 224.
239
I presume then before the advent of stuff like mortgage backed securities no banks could pay any interest then. Funny that, because I can remember getting paid interest by my building society long before this nonsense was invented.
You're right though. Without my money to gamble with how will the investment bankers stash their huge bonuses in their offshore bank accounts ? How will the economy survive ?
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#245
If there are any peter mandleson fans out there his alter ego in the clip will ring their bell also I suspect.
Sadly I know what you mean about yvette.
If there is anybody else with a sense of humour out there see post 234. Also worth looking up another clip from the same creator entitled 'Gordon browns downfall- house prise crash' on U tube.
It contains some bad language I should warn and a lot of truth.
jericoa
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Personally whoever gets control will simply use it to their own benefits. The whole system seems rotten to the core and if it fell over totally tomorrow the only people who would lose out would be the people trying to pull the strings. If you're poor you're poor whoever has control.
Burn the lot of them for me
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Smaller banks! What next? Nation of small shopkeepers instead of Tesco etc., hard-working loyal servants happy to work for a pittance, people going home to tea and crumpets with their 2.4 children, Sunday afternoon tea with granny, leisurely evening strolls by the river. I am not sure that I believe Osborne would ever really go for this solution in a big way, anymore than I believe that he would try to mend broken Britain if it was really broken. Rather I am annoyed that the Tories are trying to create an impression that they could create a world as they believe many people would like it to be- sun shining and all bad giants vanquished. We all know there was never a golden age – objectively (looking at a range of stats) the decade before the credit crunch looks about as good as it has ever been for most.
If Osborne really is thinking about reducing bank size he should think again. I think it is far better/safer to let the banks determine their own size and shape, subject to a little more regulation and existing competition legislation – past attempts by Government to interfere too much in the structure of industry have not been very brilliant –British Leyland, GEC spring to mind (Big seemed a good idea to Govt at that time, small seems good now - what happens if a big company needs a large loan –will it go to a small bank or a big foreign bank, where will all the profits from the successful loan go then).
Also why do so many on the blog pretend that economic management would be better under the Tories. On my list of the five worst (in terms of consequences, not as people) Chancellors of the twentieth century I would include Churchill (return to Gold Standard 1925), Maudling (dash for growth –in reality irresponsible unbalanced budget), Barber of the ‘Barber Boom’ ( huge rise in share of public expenditure but not for any useful social purpose, just a lot of office building speculation - Mr Inflation!), Geoffrey Howe’s over-valued pound crippled UK manufacturing (15% of capacity disappeared in a couple of years, never to be restored), and Nigel Lawson managed a boom and a spectacular bust. Darling in this century looks to have set a low bar, but as days are where we live and we had ten years of decent days under Brown I am not sure history will be as unkind to him as we feel about him at the moment. The best, in my view, was Jenkins, who from unpromising circumstances created a solid economic outlook which the Tories squandered.
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I fear for the Pirate. I imagine the US Navy will follow their normal stance on these sort of things and shoot first and worry about the consequences later.
Much like Cesare Borgia in The Prince the USN needs to make a statement "pour discourageur les autres".
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i see Wells Fargo (the bank not the stagecoach!) is forecasting record profits of $3 billion for 1st quarter...yes not just profits but record profits.......i expect the same for all UK banks, after all they offer lenders less than 1% and lend the money to borrowers on average at 13.5% now how many businesses would like that sort of margin!
http://tinyurl.com/cdyu7q
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does this mean that all us innocent bank employees will get their old jobs back as smaller institutions will need their own systems back offices and branches. or will it be to late to undo all the integration work????
I doubt it somehow.....
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people ... forget about things like splitting up banks, forcing a split of casino versus retail, none of that matters very much - fact, the risk is now too MUCH regulation, knee jerk response, locking the stable door etc - Sarbannes Oxley anyone? - no, all we need is legislation to prohibit big boni - without the big boni, individuals will no longer be motivated to take crass risks, cook the books, all that bad stuff - fair day's work for a fair day's pay, right? - why should the City be any different?
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Arrived late as usual
I think that the announcement by GO is that even the Tories suspect an early election may be on the cards and want to get in first with any new idea that may sound like they will be able to sort this mess out. Whether you/we/the electorate believe what they say or not is debatable
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Assuming your analysis is correct and that Tory high command actually get on with it this is great news. The Conservatives should not be the party of big business; a central Tory belief is in free markets and big business do not want free markets they want monopolies that they can exploit.
Like in everything else diversity of supply is essential in maintaining stability.
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It will be disruptive and it won't work. There are much more effective approaches. Give personal incentives for competence, diligence and self-policing by
(1) Making bankers personally liable for the losses proportional to rewards (salary, bonuses, pensions other perks) encompassing all managerial and executive levels.
(2) Retrospective legislation.
(3) Criminalise losses and failures in institutions vital to the nation.
Burdening and financially enslaving the nation with 100% GDP is treason.
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Banks aren't the only businesses that are currently too important to be allowed to fail. Even outside the world of finance there are companies in defence and infrastructure that are too tied up with the national well-being to be allowed to fail. These companies should be split up too – they have far too much leverage to be healthy for democracy.
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Exactly the right way to go to break these banks up and make smaller ones, I have been saying this for ages. Better still with RBS if they had broken it up before the bail out and sold some outside UK interests off, it would have saved a lot of taxpayer money.
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#255. sagamix
I so disagree. The banks need more accountability and more regulation.
They also need a complete change of professional culture whereby the maverick behaviour of those who over-expanded their companies, ensured their staff sold bad loans, got those toxic assets rated as Triple A and then sold them on knowing them to be rubbish - all for the sake of a quick buck bonus - is knocked into a cocked hat once and for all.
We must never return to the era of this cowboy unregulated nonsense. Though there will be plenty of pressure from some to do just that.
Otherwise, many many people will have had their lives wrecked by unemployment, loss of pensions, repossession and bankruptcy and worse, for what would be looked back upon, in banking history, as little more than a 'blip' of moral outrage from a few leftie loonies.
No, we really must not go down that line. Better than that would be to banish the whole industry into oblivion and set up some sort of 100% nationalised bank service, perhaps run through Town Halls. After all, if we trust them with local services (including education of our children, social care for vulnerable people and the like) why not trust them with our savings and investments?
Would they prove any less worthy than banks have?
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sutara @ 261
indeed, regulation ... but not just any old regulation, effective regulation ... which, in my view, means addressing the bonus issue
and I very much agree with you about nationalising the banks ... that's a no brainer
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242. At 2:04pm on 09 Apr 2009, glanafon wrote:
A pub. Lunchtime.
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Looks like Osborne's created a vicious circle to me. As taxpayers, we need Lloyds banking Group, etc shares to rise so that the Government can sell them at a good price to reduce Government debt. With Osborne's threat hanging over them, who will want to buy the shares? So the price won't rise & the banks won't be in a healthy enough position for the Government to sell off its shares. Indeed, there could be a double whammy - if the banks' shares continue to remain low, their appetite for lending to the more productive parts of the eceonomy - or even to "non toxic" mortgage borrowers - will be reduced. Nice one, George! Keep them coming!
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I have been saying this before , and yes it should be applied to other area's like supermarket's too, just like lady T and the pubs.
maybe someone other than use lot except Lord Bob, read what we contribute
speaking of bob has the home secretary have one and are they on the expenses ?
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264 the mistake for el gordo's in the first place and if we are not careful we will be suffering from it with our grandchildren
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157/163
at least Mrs T had some principles and could do basic maths
Bliar and Broon have none other than to be inpower.
We face an energy crisis because they failed to axe.
The NE better stop cutting its nose of despite its face, otherwise we will all be in the Sh1T together.
And is that why Northern Rock was nationalised because of the votes ?
if they continue on that negative thinking others might remember how they keep voting and when the recovery come they might well miss out
have they though of that then
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At 7:11pm on 09 Apr 2009, IR35_SURVIVOR wrote:
'We face an energy crisis because they failed to axe.'
Er, what exactly does this mean? The government is wringing its hands over the fact that our only option for the foreseeable future is to build stunningly expensive nuclear power stations when there are millions of tons of coal that could have been used for the next twenty - thirty years sitting uselessly under the rusting pitheads of once productive mines. Thatcher closed the pits A) To prove a political point, that the Unions would not dictate government policy and B) Because in her narrow minded way the fact that they weren't profitable meant they were useless..the idea of a 'national resource' that was beyond profit and loss didnt seem to register with her, although the fundamentally much more expensive and useless Trident missile program was seen to be a tremendous idea as it allowed her to sit at the top table of international junkets as a 'nuclear power'..
Whatever you all think, the next election is going to be close,if the Tories cannot produce some policies that ordinary people can see as being clearly and distinctly more favourable to them in economic terms then they will either not bother to vote (a bad deal for the Conservatives)or they will just vote the same way they have in the past. certainly in Labour areas.
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225 an who are you to say what is relevant or not,
are you mandy's cat then ?
a 5th column moderator posting as a blogger.
Maybe a mole then ?
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if we get an election they will be forced out rather than resigning
Then its on to the BBC to sort them out too. they should look in a dictionary to see what independant means
Also all HMG job adverts should also be split around many newpapers that that one that back HMG to the hilt. As that is distorting democracy to.
Like what will happend with the Banks in terms of loads to support labour polices. On the load application will be a section that you have to state that you have implemented some sort of ZANU-Labour policy to be able to qualify
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onward-ho you have a very very selective memory.
prior to 1979 the IMF were bailing us out. that why we had so many problems from 79-97 as GB was a basket case, mucg like a BSA A10 basket case you can buy and restore , but it takes bloody ages then the new bloke crashed into a wall and all your hard earned work is shattered. this time the frame is so broken that you need to find a new one.
get the similarites or have to been indoctrinated by the school of bliar and broon.
Roll on to 2020 and you will be eating your words
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I think it is right for Ozzy to be thinking about the future of the banking sector, but I also think he needs to consider how to put the ball back into the banks' court. There should never be a need for the public purse to be used to bail out a bank again. I'm suggesting that the banking industry should be responsible in the future for any other bank's demise. We all need banks today, but to throw their mistakes into the public arena is wrong, they are businesses like any other, except that they have our money, so the money needs to remain safe even if the business goes down, after all, it's never their money.
A bank need to be of a size that the industry itself can support should it fail. One massive bank would be wrong because the industry would still look to the public purse to save it if it got into trouble, that can't be right. Also if it is the banking industry looking after itself, then I doubt we would have failed bankers walking away with multi-million pound pots of dosh as a nice soft pension.
So come on Ozzy, finish the sentence: Banks should be smaller because...
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268 axe meant act C is near the X typo
They have failed to act as 30% gen pwer is come out quite soon. what they did not want to do was debate nuclear, and now we are about to get this rushed in. BUT we will not be seeing coal either
why did not your chums at ZANU-labour re-open them ? they have had 13 years to right all them wrong's ? got that 13 years BUT did do nothing ?
that makes them great then ?
And yes unions nore big buisness should be running this country.
They could have had an election that is the NUM, then perhaps they would have got wider support no but one man and one man wanted to run this country and he was never vote in as PM. ha we have someone like that today too, major did it and got elected as a result.
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#214
It would be bad for banks to crash as many businesses have a lot of money sitting there waiting to be moved on (a great deal more than 50,000 quid). A great many businesses would fail simply because a bank went down and the economy would completely collapse in a few days. Imagine thousands of small businesses and hundreds of big businesses going bust overnight - it would be calamity and you may wake up in the morning with your own stash of 5000 quid safe but no job, no business, no prospects.
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grimupnorth asks what sectors of business I was referring to who were doing well. One is an IT consultancy and the other supplying rural and livestock services. Incidentally, I understand that some wood burning stove manufacturers and retailers are also finding it difficult to keep up. I was at our local retail park last weekend and had to go round the carpark 3 times to get a space. The place was humming. Ultimately,a 3-4% shrinkage in the economy means that we are still experiencing 96% activity. Obviously this means doom for some people unfortunately, but now is the time to exploit opportunities if possible.
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I think the recession is getting worse in the "real" economy".
50 more layoff today where I work (electronics).
Local paper today reports 100 layoffs at local bus manufacturer.
300 to go at local call centre - T-Mobie relocating jobs to the Philipines!
All sectors of the economy are taking the hit.
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274 socrates
Amazing, it's well over a year now since NR was rescued, and still some like 214 don't get it...
Back to the article, this is Osbourne in pure dreamland spninnery mode. Forget it, he would never split up RBS, and nor would any mainstream UK govt.
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It's a good thing you have moved on to a new topic Robert because this one now looks really rather stupid.
It has been announced today in the newspapers that the Treasury Select Committee made up of 14 MPs from all parties are to discuss the break up of the banks in a bid to bring back the principles of Glass Steagal.
It's a shame you weren't able to say that the TSC were following GO's lead; it would also have saved me the bother of reading a lot of vacuous tribal comments from the rabble above who wouldn't have written such drivel if they had been properly informed that the government's pet poodle, McFall was heading the committee.
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248.
As far as building houses is concerned...
Absolutely - but not at the rates paid during the boom..
Basic supply and demand should mean the price of resources in this area (including labour) falls - so this is the time to invest in replenishing our social housing stock. Indeed there's also potential for the state/ councils buying up mortgage default properties at the bottom of the market.
With adequate social housing, repossessions where people have over-exposed themselves wouldn't prevent the homelessness issue - although really that's unlikely in most cases, people would still be housed. Homelessness is tending to be used as an emotive panic button to get others to support people's standard of living and protect the assets they can't afford. Just another product of the ridiculous fake economy policy of basing the consumer economy on house price speculation.
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274 & 277...
Bank failure is generally down to a lack of liquidity not a lack of net assets.
For depositors to lose (btw: I fail to see why the taxpayer should insure bank deposits FOC - surely the banks should pay an insurance fee) their would need to be no realisable assets.
As has been said before, liquidity could be found by selling assets, but: i) the banks weren't prepared to accept what people were prepared to pay for them as this would've revealed the real losses of speculative lending.
ii) repossession of homes fully revealing the illusionary economy of recent years would've been politically unacceptable.
The over exposure of pension funds to the banking sector and the failure of those pension funds to control management (probably resulting from the links between many such funds and major banks) has resulted in much ore real losses.
The main problematic issue with bank failures is the dependency of the economy on financial services and the long term impact of the overall economy of a loss of confidence.
As it stands the future of the country as a whole is being mortgaged to protect certain sectors, with the hope that they'll pay it back in the long run. (Although I doubt Capital Gains tax on residential property would be popular)
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280
By selling large chunks of their equity to the govt, RBS etc have sold us taxpayers their assets, at distressed levels. Last October, we were the only buyer at any price, hence the bargain levels [in a long-term view]. The alternative [allowing the banks to collapse] would have resulted in nothing short of global catastrophe.
In my opinion, the current situation is as good as it could be for taxpayers, under the circumstances. The economy has not collapsed, and by pumping our economy with low interest rates and the banks' assets bought by us last year will quite quickly become worth a lot more than we paid for them. The danger is inflation, but that's far less of a risk than total global economic collapse.
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When you say you would like to have smaller banks, there is always a question of how small? Even if you break the big banks into smaller banks, there is always a danger of an umbrella corporation running all the banks as subsidiaries.
Another thing to note is that in this economic downturn, it is the big corporations that have been bailed out and not the smaller ones. It would be naive to think that there will never be another recession again. It of will come of course. We can only hope that it is shorter and less severe. What will happen then? If we have a situation of all very small entities, to choice of who is bailed out and who is not will be very difficult.
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Perhaps the reason why all the blogs here are about banks is that there are only banks and financial businesses in London. Most other UK businesses are foreign owned so the real stories from the top are thousands of miles away. Local UK management of something like GM, EDF or e.ON would never talk to someone like Robert, if they did and were found out, they would be toast.
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The larger the business the less it knows what's going on at the coal front until it's too late. The Titanic should have been warning enough on both sides of the Atlantic at least.
Big is definitely not best and never has been. They exert too much power over suppliers and staff so that a few in the boardroom can live a luxurious life.
The monopolies commission was set up to prevent this happening. It has failed the small business and the economy as badly as the FSA and successive political parties.
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Osbourne is right.
We can't have businesses that *must* be bailed out by the taxpayer - it's wrong!!!!
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The problem with the current crisis is the culture of greed within the banking industry. It was to satisfy this greed that led to the level of risk-taking that caused the collapse of the banks. Just breaking the banks up will just result in more banks failing unless the underlying greed is addressed.
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I do not trust the tories one little bit. However, I think this is the most sensible thing I have heard them say of late. Definately the banks need breaking up. But not just here, all over the world. Other multinational organisations need breaking up too. And yes keep Northorn Rock nationalised.
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There is always a danger in attributing today's problems to the recent past's actions rather than seeing that present actions are what are most important.
For example, the credit crunch is attributed to a burst bubble rather than to the serial interest rate rises which were supposed to deflate the bubble but which guaranteed a property slump and debt default.
In other words we are blaming the itch, but it was the scratch which caused the damage.
That will be the lesson we will learn from this crunch, and no-one is saying this because we are all in the middle of it and we cannot see it.
I was doing fine until the interst rates went through the roof.The people who defaulted on their loans were not all overstretched loonies...they were shot down in flight by stinging interest rate rises.
Now people are criticising today's low interest rates, but they are the saviour not the problem.
If prices are falling how can interest rates not be near-zero?
Today's debacle is tomorrow's clinching victorious turnaround.....witness what happened in 92 when UK left the ERM.
And at least this time we have a leader with sufficient savvy that we were able to avoid the econo-sadism so beloved by Tories.
And if mittel-England goes Tory-bonkers with collective amnesia at the next election we will have another aeon of econo-Hell just like the eighties and early nineties all over.
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I am a pensioner and I beleive that there is a great opportunity here to partially dismantle the banks and to revive the forunes of the Post Offices. Giving the Post Offices basic banking facilities and I dont mean standing in a queue for 15 minutes to pay in or withdraw but encourage local postmasters to expand the busoiness and have a banking side and a post office side, faster service in the banking business with core services. Provide the postmasters with loans to expand/convert their premises to incorporate the Post office Bank or National Bank and give everyone the right to an account with a debit card. It needs thinking through but the principle is sound and needed. It woiuld save countless country post offices provide real servie and the extra profits would make a postmastership a thing to envy once again.
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Hang on a minute. If all British banks become small banks, what's to stop them simply being taken over by foreign banks? Then we'd have no British banks at all, large or small. Surely that's not good either!
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If you were talking about banks that deal exclusively in high street banking then it would be one thing, but these banks do so much more than that and they bring in the profits and accompanying taxes to prove it normally. The fact that the world's financial system destroyed pretty much every bank last year does not mean that these banks are too big to function. It means a bad run of luck for everyone hit them harder than it would have hit a small bank.
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I would be staggered were the Tories to break up the big banking groups when they next come to power.For example in the case of Lloyds Banking Group all the admin will have been rationalised with any duplication of staff and operations trimmed leaving a huge logistical operation to seperate them again. The legal side of things would be a nightmare and anyway big or small a bank going bust would be a disaster for the whole system with confidence being lost and panic ensuing.It's a done deal leave them alone now.
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