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New ice age for bankers

Robert Peston | 09:15 UK time, Friday, 18 December 2009

For all the furore about Alistair Darling's bonus super-tax, and for all the disclosure overnight by Deutsche Bank that it will spread the pain across all staff and shareholders around the world and not just in the UK, there is a much bigger threat to business-as-usual for banks and bankers.

Alistair DarlingThe international rulemaking body for the banking industry, the Basel Committee on Banking Supervision, has proposed a series of reforms that would change the nature of banking in a profound way (Strengthening the resilience of the banking sector [282KB PDF]).

Some will mutter about stable doors and horses: it was the inadequacy of the existing Basel rules which provided dangerous incentives to banks to take the crazy risks that have mullered the global economy.

But be in no doubt. Although its reform paper, "Strengthening the resilience of the banking sector", may seem technical and obscure, it would turn a particular kind of high-paying, securities trading, global megabank - the institutions that created and defined the boom-and-bust conditions of the past decade - into an endangered species.

If I were running Barclays, or Deutsche Bank, or JP Morgan or even Goldman Sachs, I would be more than a little anxious about the cumulative impact of the Basel Committee's recommendations on the additional high-quality capital that banks would be required to hold, the liquid assets they need to accumulate and also - oh yes - the rewards banks can distribute to employees and shareholders.

Mr Darling's raid on their cash boxes looks trivial by comparison: it's just a one-off; Basel is forever.

The Basel reforms would make it prohibitively expensive for banks to do all that wheeling and dealing in securities and derivatives that yielded bumper profits and bonuses in the boom years and brought the world to the brink of depression last autumn.

Perhaps most significant would be the proposal to limit the ability of banks to pay out bonuses to staff and dividends to shareholders as and when their respective capital resources approach the minimum allowed.

The nightmare before Christmas for bankers is the tape on page 70 of the report, which sets out the new global incomes policy for them.

It will be seen by bank boards and owners as an infringement of their basic right to pay themselves what they want and when they want.

The consequences would be profound not only for the banking industry but also for the economy - which is why they will be phased in over years.

They are likely to mean that far less credit to households and non-financial businesses will be provided by conventional banks, because the cost to banks of providing credit in any form will rise.

They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers - who may either go for real jobs in the real economy (is that such a terrible idea?) or will create all manner of new-fangled financial institutions, which won't take retail deposits, won't be banks in a technical sense, and won't be subject to such onerous regulation and supervision.

Yes, the Basel plans almost certainly mean there'll be another great sprouting of hedge funds and alternative investment vehicles.

You can decide whether that's a good thing or a bad thing.

By the way, if you want a bit more granularity on how and why an ice age just arrived for banks and bankers, look no further than the recent Financial Services Authority discussion document on reinforcing the capital strength of British banks and also today's Financial Stability Report from the Bank of England [3.95Mb PDF].

The FSA estimates that financial institutions in the UK will need to raise an additional £33bn of capital to meet new rules out of the European Union designed to reduce the riskiness of their trading activities and of securitisation (of turning loans into tradeable assets).

Now the big point about that £33bn is that it does not include the additional requirements that will be imposed by the new Basel framework. The £33bn is just a beginning.

Which gives the banks two choices.

They can try to raise the £33bn and whatever else is subsequently demanded of them. Or they can massively reduce their trading activities - which seems the more likely outcome.

Can they turn to the Bank of England for a shoulder to cry on.

Not likely.

It makes this helpful point to banks which - it agrees - are still chronically short of capital: "reducing staff costs [at banks] by around one tenth and dividend payout rates by around a third would allow UK banks to increase retained reserves by close to £70bn over the next five years".

Crikey: five years of stunted bonuses! Grown bankers will weep.

Comments

Page 1 of 3

  • Comment number 1.

    Robert Peston wrote:
    'the Basel Committee on Banking Supervision, has proposed a series of reforms that would change the nature of banking in a profound way'

    OK so they’ve now found a new method of ripping us of. Nothing’s really changed has it.

    I’m struggling to take some of this seriously any more, The Basel committee, don’t tell me; they met at Faulty Towers.

    The only way you can solve the problem properly is for the state to open its own bank and take control of the business of ‘money’.

    They’d be spiting blood and feathers if we did that wouldn’t they.

  • Comment number 2.

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

  • Comment number 3.

    "They can try to raise the £33bn and whatever else is subsequently demanded of them. Or they can massively reduce their trading activities - which seems the more likely outcome."

    In other words, loans to businesses and inderviduals will dry up!

    This is not just a ressesion its a NuLabour Long Life Ressesion.

  • Comment number 4.

    Well self regulation did not work, so what do bankers expect?
    It is as if they could do what they want and not worry about the effects.

    Oh yes Thats what they did anyway. And now bankers expect respect? Maybe it is now the time for the banks to start earning respect instead of demanding respect.

  • Comment number 5.

    Bankers are all smiles when the regulated market works for them (as it has done fro the past 15 years or so), but when the market reacts to their irrational expectations by slapping them down they complain - only to be expected.

    I was pleased to hear that even the Bank of England is now echoing the view (and my previously expressed view) that the UK has too many too large banks for it to support and that it would not be a bad thing to see a reduction to a level that we can afford to bail out when the next collapse comes unexpectedly round the corner. (I foresee a collapse caused by Carbon Trading next, but I guess it will not happen because I am expecting it!)

    Like the coal industry, I expect the bankers will sequel a bit but the market will have its way one way or another and the bankers, like the miners will find that the gravy train has hit the buffers - that is how economics works.

    What we need to do is to concentrate on creating real wealth and make use of our talented workforce in other sectors - I guess industrial sectors. We need to retrain bankers to do something useful =- they won't need paying and will not register for Job Seekers Allowance as they will leave their jobs with too high an amount of savings -as apparently if one has more than 16,000 GBP savings you don't get Job Seekers Allowance (sorry but I got this from a blog and it may be wrong!)

  • Comment number 6.

    Those in charge of banking have made an awful lot of money for themselves, but left an economic disaster and destitution for many in their wake.

    If ever there was a reason to take control of banking this has got to be it.

    If it was me I’d absolutely not stop till the state had control over the business of banking.

    No if’s why’s or but’s …. There would be a state bank, and the state would not be acting as guarantor for private banks either.

    I’ve seen the damage that reckless lending has done, seen it in shattered people’s lives, and more particularly the effect it has on the young.

    I’d take the control of the business of money off them. And I’d do it now.

  • Comment number 7.

    This committee, as I understand it, is a club for central bankers.
    If the politicians in the UK dont allow the BOE to oversee banking regulation I don't see them taking any notice of what the governors come up with on their skiing holidays

  • Comment number 8.

    The planet Golgafrincham (Britain) creatively solved the problem of middle managers: it blasted them in to space (Switzerland). Telephone Sanitisers, Management Consultants and Marketing executives (the financial services industry) were persuaded that the planet (country) was under threat from an enormous mutant star goat (bonus reduction). The useless third of their population was then packed in Ark spaceships and sent to an insignificant planet.

    That planet turned out to be Earth (Switzerland).

    (Then the rest of us worked hard doing real things, saved hard our real money, and lived, with a significantly reduced standard of life, happily ever after)

    Thanks Douglas (inside the brackets are my updates)

  • Comment number 9.

    No commas before and please Robert.

  • Comment number 10.

    I read that the banks are also trying to squirm out of putting up a few bob to support the National Investment Corporation.

    http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6961138.ece

  • Comment number 11.

    It is not possible to prevent financial crises, there is a 500 year history of them and there will be more in the future. So the key policy response surely needs to be to ensure that future crises can be resolved in a more equitable fashion, rather than bankers keeping their bonuses and the tax payer picking up the bill. Banks either need to be small enough to be allowed to fail, or restricted in their activities in return for a tax payer funded explcit guarantee.

    The Basel committee proposals would appear to encourage the separation of banking from trading and complex financial engineering. Complex financial engineering should be taking place in financial companies that do not have an implicit guarantee of a bailout should things go wrong.

    Separating the two activities will not prevent crises, but it should make them more manageable. In terms of employment it may make little difference. If a trader moves from a bank to a hedge fund that is one less job in a bank and one more in a hedge fund and with luck a little less risk to the taxpayer.

    Right now we have the worst of all worlds, except for the banks who are receiving a massive subsidy from the tax payer in the for of guarantees and nearly free money from the central banks paying out bonus on profits that could never have been made without massive taxpayer support.

  • Comment number 12.

    If there is a banker who wishes to work elsewhere in the world, I will happily take over his job.

    I think I have the skills not to lose billions of pounds for the UK Taxpayer.

  • Comment number 13.

    A lot of people seem to be thinking that the creation of money should be removed by the banks. Good idea. How can an economy work productively when the medium of exchange(money) is controlled by banks? Private interests will always trump the needs of society.

    It also seems an impossibility to 'live within your means' as a journalist from The Telegraph suggests when nearly every single £1 in the economy that circulates has a debt of over a £1 attached. If we used every single £1 in existence to pay back debts, we'd still be in debt!

    And what is worse, democratically elected governments support the banks and not the people. The banks have used Quantitative Easing to invest in shares to rebuild their profits and cover future losses. That money could have went straight to people and the debt burden could have been relieved and the effects for the economy would have been more beneficial (the banks would have benefited in the long run). We would have a non-debt cash base. Yet government backs the banks' power, and not the people.

    What is stopping the banks from selling those shares, covering their losses, and crashing the market as they do so? What is stopping a slight downturn in stocks from becoming a full-scale crash as banks panic because their balance sheet stability has been used to bet? In a sense the policy is leading to greater volatility and not greater stability.

    I would love to hear from anyone if I am getting this wrong. And why? But this is where my thinking is taking me.

  • Comment number 14.

    Come on Mr Peston let’s face it, the banks have made the biggest balls up since the Battle of Hastings, it’s about time things truly changed.

    We can’t carry on with this farcical boom and bust scenario.
    It's just plain stupidity to keep on going like this.

  • Comment number 15.

    The BIS promises that whatever it comes up with this time will be ready for implementation by 2012. Believe it if you will. According to reports emanating from Japan, Tokyo has already won the concession of a 10 to 20-year transition period for implementation. Dear oh dear. We will already have had the next two or three crises by the time anything is done. But while everyone else buries their heads in the sand and allows the ineffectiveness of the Basel Committee to act as an excuse for doing nothing, Britain isn’t hanging around.

    http://www.telegraph.co.uk/finance/comment/jeremy-warner/6828335/Banking-work-out-will-weigh-for-years.html

  • Comment number 16.

    Surely what is needed is the return of Glass-Steagall separation.

    Retail banks are state-backed but their scope of activity is strictly limited; investment banks can do what they like (and pay what they like) but there is no taxpayer support if things go wrong.

    This is simple, and worked for almost 70 years - why not just bring it back?

  • Comment number 17.

    13. GrouchoMarxist1:

    "I would love to hear from anyone if I am getting this wrong. And why? But this is where my thinking is taking me."

    You are right, on two counts.

    First, artificially-low interest rates (and a weak dollar) are inflating asset markets - when this reverses (as it must), a crash is likely.

    Second, and however much the authorities deny this, QE DOES amount to printing money and monetising debt. If this carries on, we get inflation - if and when it ceases, asset prices will tumble.

    The latter will include gilts prices, artifically supported until now by QE. When gilts prices fall, financing government deficits will become both much more expensive and much more difficult (impossible?).


  • Comment number 18.

    > It will be seen by bank boards and owners as an
    > infringement of their basic right to pay themselves
    > what they want and when they want.

    Well, they spent so much that they went broke, and
    I and my British friends ended up paying thier bills
    instead. Nope - they can only pay what they can afford.
    And they can't afford a lot, in case they go bust again.

  • Comment number 19.

    > If there is a banker who wishes to work
    > elsewhere in the world, I will happily take over his job.
    > I think I have the skills not to lose billions of pounds
    > for the UK Taxpayer.

    There are plenty of physicists on £28K who are ten times
    smarter than the spoit-rotten bankers. So kick 'em out, by
    all means. I'll hold the door open.

  • Comment number 20.

    11 Fractalfinance.
    Well summed up, agree wholeheartedly with your comment.

  • Comment number 21.

    Robert, you always forget about Joe Public in your pieces. Guess who will pay for this restructuring of the banking industry! We already see a total disconnect between BoE bank rate and the rate at which banks are prepared to loan money. Next we will see the end of free banking but no increase in efficiency. Paperless chequeless hole in the wall faceless banking is coming. And of course those Bombay call centres.

  • Comment number 22.

    I'v just spoken to someone who i went to university with who works in the banking sector:

    He has been told what his bonusn would have been, and and been offered a pay review if he forgoes his "garanteed traiding bonus". The pay rise is garanteed for 6 months and subject to a complete review in May!

    And you will never guess what the pay rise is equal to his project bonus!

  • Comment number 23.

    robert , why not discuss what will happen after the big bang ? because despite all the reports to the contrary, the economy is going to tank, too many lies and cover ups of the true picture have been told, so you are right in a way, the horse has bolted

  • Comment number 24.

    "Some will mutter about stable doors and horses: it was the inadequacy of the existing Basel rules which provided dangerous incentives to banks to take the crazy risks that have mullered the global economy."

    ....or maybe some are intelligent enough to know that the crisis is caused by a diminishing profit and that no amount of regulation will make a jot of difference.

    "the institutions that created and defined the boom-and-bust conditions of the past decade"

    ....oh dear - still trying to convince the world that "this time it was different to all the other times - each recession is caused by a new phenomenon"

    "It will be seen by bank boards and owners as an infringement of their basic right to pay themselves what they want and when they want."

    Ah yes - the old "I'm so good I deserve more" line from people who strangely are unable to identify and explain their source of profit.

    "because the cost to banks of providing credit in any form will rise."

    ...should read "because the cost to banks of providing credit and maintaining their profit margins to pay themselves what they feel they deserve in any form will rise."

    Just think - an industry where you can set your own wages and where if you mess it up the Government steps in and bails you out.

    Universities up and down the country must be flooded with applications to courses which will get you into banking - I mean it's the panacea where we can all get paid a fortune without any consequences.

    Completely baseless and ficticious concepts still being believed by the city, pumped around the world by a PR machine and backed by legislation all owned by the same minority of oligarths - and the people of Britain just accept it as they move from being wage slaves to absolute slaves.

  • Comment number 25.

    No. 1 - no need to create a state bank as we currently own a very large proportion of the banking sector. All that's needed is for the structure and policies to be put in place that ensures they are working in the interest of UK instead of a small number of people who are already very wealthy. Alex Brummer on R4 today represented the new climate of calling the bluff of these Armani magpies. Glimmers of progress!

  • Comment number 26.

    1. At 09:34am on 18 Dec 2009, Dempster wrote:
    I’m struggling to take some of this seriously any more, The Basel committee, don’t tell me; they met at Faulty Towers.
    -------------------

    Brilliant! Thanks for the laugh!

  • Comment number 27.

    The true and real annoyance about this is that the £33bn is going to have to be raised from its customers, which means us.

    It's all very well these holier than thou regulatroy reforms coming in, but not only do we have to bail out the bankers, we then have to fund the reforms to prevent it happening again!

    Then we will also have to pay on top in the form of increased charging and reduced risk loans so that the banks can become profitable again!

    Why don't these idiots see the damage they are doing to the bank customers and the economy? Surely the answer would have been to ring fence existing capital and savings including pensions, then separate services from trading rather than insist on an inaccessible insurance premiums, which ultimately we will have to pay for?!

  • Comment number 28.


    The only thing that stands between organised society and a true collapse is the average working Joe & Jane.

    As long as we keep going to work, and thereby providing and maintaining everything that there is; then there is at least some hope. However if we ever stopped, even if just for a day, that’s when the effluent hits the fan.

    Everything that there is, and everything that there ever will be, is due to the labours of the average working Joe & Jane.

    I believe that it is not unreasonable for the average working Joe & Jane to expect the banking sector to treaty them fairly and act in a responsible manner.

    And given that such has not proved to be possible, we need a state bank.

  • Comment number 29.

    And whilst I'm on the subject, I wouldn't abolish cheques either.

  • Comment number 30.

    Dempster, I agree that we need a state owned retail bank, although it needs to be independent enough of the government of the day to stop those in power raiding them willynilly but close enough to keep them focussed on the job in hand which is to provide a safe stable banking system for UK consumers.

    I think we also need a state owned investment bank to help generate our productive economy, the New Economics Foundation document 'The Cuts Won't Work' has some good ideas as to where that investment should be and where the money that needs to be raised can come from.

  • Comment number 31.

    #5 JohnfromHendon

    The JSA/benfits thing is like most Big G stuff enormously complicated in order to make it both difficult to understand and difficult to cheat.

    For 6 months you get basic (£63/week) JSA regardless of savings. If under the 'wealthy person' threshold you can get all sorts of additional benefits, which may include earnings related JSA.

    After 6 months you are deemed a sloucher. If you have the magical £16k of savings then tough cookies - nothing. Also there are some criteria which restrict what you can get if you are poor. Some of these seem to be related to what your partner earns or how many hours your partner works; both are pretty penal.

    On top of this you get taxed on whatever you receive as it is added to your total income for the year.

    You also have to take into account the need to have accumulated sufficient work-related NI payments in the past 6 months in order to qualify. This then gives people who secure short term work (seasonal) a problem as when that ends they may not have topped up enough, and thus are ineligible.

    The underlying principle is one of encouraging a return to work. But in the current conditions getting back into work for some is very hard, and no fault of theirs. I would have liked to have seen some reforms in this area that recognised this difficulty and did not penalise those struggling to find work.

    Well it looks like we are not going to get much work done on the site today, so I'm going to ski home.
    Catch up with the blog in about 80 minutes

  • Comment number 32.

    Ah well, they will probably offer restore Cheque banking later, for an extra monthly fee !

    They should have insisted on the abolition of the securitisation of Loans and Mortgages.

    Salesmen who work on commission will sell a Loan to anyone without the slightest concern. They know that they will not pick up the pieces later.

    Banks that wish to raise funds can do so by issuing Bonds secured on the Assets of the Bank , not on a package of potentially unknown Loans.


    This is very simple, but eliminates the scope to make high bonuses for a significant number of Bond Traders.

    Why are the exaggerated Salaries and Bonuses of the City being protected ?

    Is it because too many Sons and Daughters of the political elite work in those lines ?

    Probably !

    Trouble is if the Economy really sinks, their bonuses won't be worth a thing.

    Hmm........

  • Comment number 33.

    Until such point as there is some joined up thinking about banking all we are doing is messing around at the edges.

    Basel I: very simple rules about capital, probably too simple for current economy but easy to understand and implement

    Basel II: capital adequacy based on "mark to market" and capital and risk models developed by the banks themselves - very complex almost impossible to understand (not that any one needed to you just filled in the details at a computer and a programme told you what risk capital was needed) and in the end shown to be completely wrong due to a misunderstanding both of risk and crucially how it impacted on complex bank and trading structures

    Accounting rules: require banks to "mark to market" their assets even if they are loans which are performing and bank has no intention of selling on. Net result is increased volatility in bank profits due to accounting changes - there was in fact an accounting penalty imposed on old style relationship banking.

    So the previous joined up thinking positively encouraged banks to trade loans rather than hold them and mandated capital adequacy rules not of the account managers who actually did the lending had any hope of understanding. And we trust Basel III to be better?

  • Comment number 34.

    30. At 11:53am on 18 Dec 2009, BobRocket

    Actually I've thought of something else we could do with as well.
    A government to represent the people.
    I think that would go down quite well you know.

  • Comment number 35.

    30. At 11:53am on 18 Dec 2009, BobRocket wrote:

    "Dempster, I agree that we need a state owned retail bank, although it needs to be independent enough of the government of the day to stop those in power raiding them willynilly but close enough to keep them focussed on the job in hand which is to provide a safe stable banking system for UK consumers."

    ....otherwise it wil end up like Royal mail - a 'cash cow' for failing Governments to plug financial holes.

    I believe there should be a clear definition between 'publicly owned' and 'state owned' - the two are often thought of as the same thing - however when you consider the state is actually run by a minority of the population it is the furthest thing from 'publicly owned'

    ....which is why all these state owned entities cost the public so much.

  • Comment number 36.

    Here's an idea for you all.

    If the banks and financial system are the 'wealth generators of society' - then why don't we all simply quit our other jobs and sign on the dole.

    We only need a small number of 'wealth generators' to support us all and we can get on with making art, music and other socially beneficial activities.

    I mean surely that is the case - isn't it? I mean Robert and his media friends have made reference to the financial industry in this way for some time now - surely they couldn't all be mistaken?

    Profit is extracted from surplus value of Labour - banks do not create wealth. If we all stop working tomorrow the banking system would strangely discover their supposed ability to generate wealth would disappear.

    ...and yet the same lie is peddled out time and time again....

  • Comment number 37.

    8. At 10:04am on 18 Dec 2009, mellowtraveller wrote:
    The planet Golgafrincham (Britain) creatively solved the problem of middle managers: it blasted them in to space (Switzerland). Telephone Sanitisers, Management Consultants and Marketing executives (the financial services industry) were persuaded that the planet (country) was under threat from an enormous mutant star goat (bonus reduction). The useless third of their population was then packed in Ark spaceships and sent to an insignificant planet.

    That planet turned out to be Earth (Switzerland).


    And given how the gullible non-brain managers all follow ludicrous diets and vogue-ous management paperbacks, you are spot on - hilarious alchemy!

  • Comment number 38.

    Have a look at Goldman Sachs share price.
    It looks like -so they can ratchet up the value of their bonuses when they are eventually able to turn them into cash- they have been shorting their own stock.

    Money-obsessives will always find a way...........

  • Comment number 39.

    For those advocating state banks, remember this. The most reckless lender of them all during this crisis was the lender that underpinned everything - the Government. As the housing market continued to heat up, everyone was expecting a crash, but the Government of the UK set the rules for the Bank of England to set interest rates based on a measure of inflation that excluded house prices. Keeping the cost of money low facilitated all the lending that took place. In the US things were worse. First Clinton, then Bush told Fannie Mae and Freddie Mac (which to all intents and purposes were state owned) to lend more to poor people. And it was these loans that so massively blew up. The divisions of banks that created CDOs (small parts of them by the way) aren't blameless; but neither are the Governments who created a framework which almost guaranteed this would happen.

    It is no different to a car maker being told that their supply of steel will be extraordinarily cheap so they start producing really cheap cars in a mass rate, but don't consider that petrol prices could go through the roof. Then when petrol prices do explode, people stop buying the cheap cars. The only difference is that the financial services industry underpins so much else in the economy. Of course, Governments have legislated to make the rest of the economy excessively dependent on banks as well since they make it tax efficient to run a company with a high level of debt. If the Government made it tax efficient to run with no debt, then the effect of a credit crunch would be far less severe.

  • Comment number 40.

    19. At 10:47am on 18 Dec 2009, Jacques Cartier wrote:
    There are plenty of physicists on £28K who are ten times
    smarter than the spoit-rotten bankers. So kick 'em out, by
    all means. I'll hold the door open.


    and I'll lock it as soon as the last one has passed.



  • Comment number 41.

    Be careful Robert - you're coming across as bitter!

  • Comment number 42.

    36. At 12:26pm on 18 Dec 2009, writingsonthewall wrote:
    Here's an idea for you all.
    'If the banks and financial system are the 'wealth generators of society' - then why don't we all simply quit our other jobs and sign on the dole'


    Well if business gets any worse here I will for sure.



  • Comment number 43.

    31. At 11:53am on 18 Dec 2009, p45builder

    Wait for it... the guy down the job centre will let you earn £16 a week without cutting your benefits. What, I wonder is the tax rate on that little pile! It's pathetic, truly pathetic.

  • Comment number 44.

    39. At 12:34pm on 18 Dec 2009, dave_h

    ...but of course Governments kept rates low - they were trying to prevent another crisis of Capitalism so they could convince the world that they had finally mastered it.

    Unfortunately the flaw in Capitalism ensured that the crash came eventually and the game is up - it cannot be avoided.

    For the first time today I saw a piece by a City analyst which admitted the boom and bust was here to stay because it's inevitable under Capitalism - however the argument has moved as to how we can ensure the collapses are not too painful.....

    ...well at least they're staring to get the idea - but there is a long way to go if they still think they can control this beast.

    Low central bank interest rates were the medicine to stifle the symptoms of the disease - it was not an antidote and it does nothing to combat the disease itself.

  • Comment number 45.

    I'm loving this..

  • Comment number 46.

    Dempster,

    When I worked in the US, the banks were so ludicrous ordinary Jo and Josie used Credit Unions, often established by unions (like the Teacher's Union) or by the staff at large institutions (like universities). The service was much better and more cost effective than banks.

    Here, credit unions tend to be restricted in the areas with the lowest employment, though as far as I am aware, there is no legal reason for that to be so.

  • Comment number 47.

    It's all about pshycology and mind games.

    Has anyone notices that every piece of bad news is qualified by "better than Economists predicted" ?

    It's no different today with the news that the PSBR in November was greater than since records began (and consequently at the greatest since the crisis started).

    The fact that Economists (who are not known for their prediction accuracy) got it wrong is not surprise really - and yet pshycologically it makes us feel slightly more secure.

    Now it might be that Economists are simply pessimists, but it's hard to believe that they always predict worse than expected for 'bad news'.

    Start watching what you are being fed by the media and see what they are really up to.

    It's all designed so that some time next autumn when we're told what the massive public sector cuts will be, they will be able to say how they are not as bad as expected and we will suffer them thinking that it's right, fair and neccessary and better than the alternative.

  • Comment number 48.

    Couple of points:

    It is patently clear that most banks need to retain more of their profits to build up their capital reserves. So what the hell was the chancellor doing with the introduction of the bonus 'super tax' which will have the effect of doing the opposite. Moreover, it has had a significantly detrimental effect on the value of banks given the knock on effect to shareholders share of profits, in particular the banks in which we the UK taxpayer has a significant stake!! His actions have managed to significantly weaken banks further and erode the value of our investments in them at the same time, thanks Mr Darling (we have lost a lot more from the devaluation of the banks than we have gained in tax revenue not considering the loss to overall GDP of those bonuses not finding their way into the normal economy through more effecient private spending). If, as the chancellor stated, he wanted to encourage the banks to retain profits to build up capital bases there were much better ways of achieving this (e.g. requiring bonuses to be issued in shares which effectively increases the capital reserves of the banks). No this was naked politics intended to gain favour will the ignorant side of the electorate, I suppose we get what we deserve.

    Secondly, you persistently site the investment banks as the root cause of the crisis. If you don't accept the argument that the root cause lay in a failure of regulation, western macroeconomic policies, China's manipulation of the Yuan etc. then the root cause from the financial sector lay within the business models of the simplest of lending institutions, the banks/lenders that gave mortgages on terms which didn't sufficiently account for the associated risks e.g. Northern Rock, HBOS and all those lenders of sub prime in the states, not investment banks. It wasn't the operations of the investment banks in derivitives trading that led to the crisis but simply loans being provided which would produce losses in the event of a significant downturn. It is amazing how quickly history gets re-written nowadays to suite the whims and agendas of those with the platform to do so.

  • Comment number 49.

    36. At 12:26pm on 18 Dec 2009, writingsonthewall wrote:
    Here's an idea for you all.

    If the banks and financial system are the 'wealth generators of society' - then why don't we all simply quit our other jobs and sign on the dole.


    Well spotted.
    My partner is convinced that banks should provide us all with an income of 18K a year. Those that want to work can do so and those that don't want to work don't have to.

  • Comment number 50.

    I notice that a combination of government/EU action on bank bonuses, taxation and capital strength requirements has in the last quarter severely driven down the value of shares of the banks in which we have a large stake.
    I find it quite ironic that when these bankers finally announce that they will be taking all or most of their "bonus" in shares or options, that they will be locking in to an exercise price way below the future value of such an enterprise, assuming we ever get out of this mess.
    When these bankers bonuses and options vest in two to three years they will be considerably better off than they would have been taking cash today.

  • Comment number 51.

    Here's a classic.

    Check out these two stories and see what the difference is....

    http://www.telegraph.co.uk/travel/columnists/2962022/XL-holiday-firm-collapse-Avoiding-a-nightmare.html

    http://www.telegraph.co.uk/travel/travelnews/6839237/Flyglobespan-collapse-travel-companies-face-bleak-winter.html

    ....need help? Well both stories warn of a bleak future for the travel industry and both warn of further collapses expected - but these stories are nearly a year apart!!!

    It's funny because I'm sure I heard we're "on the road to recovery" - surely we're not being lied to - again?

    When will the British public wake up and realise it's time to switch to plan B?

  • Comment number 52.

    #43 Dempster
    If you stopped blogging and concentrated on work, business might be a lot better mate. Gotcha!

  • Comment number 53.

    48. At 1:01pm on 18 Dec 2009, FearandLoathing wrote:
    " It is patently clear that most banks need to retain more of their profits to build up their capital reserves. So what the hell was the chancellor doing with the introduction of the bonus 'super tax' which will have the effect of doing the opposite"

    Will it ? I would have thought it would do the opposite of the opposite

  • Comment number 54.

    "40. At 12:36pm on 18 Dec 2009, copperDolomite wrote:
    19. At 10:47am on 18 Dec 2009, Jacques Cartier wrote:
    There are plenty of physicists on £28K who are ten times
    smarter than the spoit-rotten bankers. So kick 'em out, by
    all means. I'll hold the door open"

    Wow i didnt beleive we had any science based / Physics departments any more?

  • Comment number 55.

    "Bankers lavish bonuses contributed to the collapse of the financial system?"

    ....surely not....

    http://www.moneymarketing.co.uk/regulation/bank-bailout-could-have-been-dodged-if-bonuses-20-per-cent-lower/1004226.article

    This seems to contradict everything the banks have said thus far - and it comes from the chief of all banks.

    Now do you believe?

  • Comment number 56.

    "They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers"

    Come on RP, The city is a closed shop of the old school tie, old boy network. It doesn't matter how many blogs we have on this subject, the fact remains that bonuses were paid as a result of bumper profits which were not real. The only thing massive bonuses has encouraged is crazy risk-taking, short termism at the expense of long term pain and not so clever accounting of unreal profits.

    The fact that the banks cannot face up to this is further reason necessitating their regulation.

    However i do find myself kind of agreeing with WOTW again, the banks trying to outwit the regulators and the "show me the rule which says i couldn't do that" mentality is a receipy for a future dissaster and correction.

    The whole mentality of the banks have to change and that is why i have been banging on for nationalisation.

  • Comment number 57.

    52. At 1:08pm on 18 Dec 2009, U13736045 wrote:
    '#43 Dempster
    If you stopped blogging and concentrated on work, business might be a lot better mate. Gotcha!'

    I would if there was something to do, but it all went quiet after September.

  • Comment number 58.

    52. At 1:08pm on 18 Dec 2009, U13736045 wrote:

    "#43 Dempster
    If you stopped blogging and concentrated on work, business might be a lot better mate. Gotcha! "

    ....do you mean concentrate on the customers he doesn't have?

    It doesn't matter how hard you stare at the door - it doesn't make it more likely that someone will come through it.

  • Comment number 59.

    Who would run the National Bank?
    The same people who run the banks now?
    The politicians?

    Who would regulate the National Bank
    The same people whop regulate the bank now
    The politicians?

    If we can't trust this lot now, why would the fact that it's owned by the state make any difference ?

  • Comment number 60.

    54. At 1:21pm on 18 Dec 2009, icewombat

    Physicists are rare souls - and given we live with these markets and peak cabon-based energy, you'd think their rarity would mean they earn more than they do... or is there not much demand for the science?

  • Comment number 61.

    56. At 1:25pm on 18 Dec 2009, Kudospeter wrote:

    "They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers"

    Robert - did you actually ever work in the city???

    I have met some dumb people in my time, and the dumbest I have met have been in the financial services environment. Great with maths - not so good with common sense, initiative or a wider understanding of what they are doing.

    Are the financial engineers you talk of the ones that engineered the CDO? - That was the Titanic of the financial world - 'Too big, fast and sturdy to be sunk' - glug, glug, glug.

  • Comment number 62.

    "or they (the banks) can massively reduce their trading activities"

    This would be a good idea, not only because there would be less risk of them failing, but because much of their activity has the same effect as "printing money", which is why it was so profitable.

    Central bankers have the task of looking after the stability of their currency, a task which they are supposed to do by controlling the money supply. The banks activities made this task difficult. So it is not surprising that the Basil Committee of central bankers wants to limit them. The banks also left too little room for governments to borrow in order to fund public investment, forcing them to use inefficient methods like PFIs.

  • Comment number 63.

    56. At 1:25pm on 18 Dec 2009, Kudospeter wrote:

    "The whole mentality of the banks have to change and that is why i have been banging on for nationalisation."

    ...now you might think I would be in agreement for Nationalisation - but I am not, well not on the current terms of Nationalisation.

    A state run bank will be like a state run Postal service, or a state run rail service - they run it into the ground and then call for privatisation because it's so inefficient and expensive to run.

    What we need is properly nationally owned assets. Every man and woman receives 1 share in the new national bank - regardless of thier age or wealth. This share allows them to vote at the AGM as well as to table motions (should they obtain the right number of supporters)

    Everyone who reaches the age of 18 gets a share - and everyone who dies returns it to the bank for redistribution. Profits are paid equally amongst shareholders so we all have an interest in the correct running of the bank.

    It's a pipe dream I know - simply because this would be true Democracy and not the sham we all put up with currently.

    I mean would you bank anywhere else other than a bank you have a share in?

    This mthod ensures that making excess profit is pointless as the dividends go back to the people you mke the profit from. This will ensure maximum efficiency in it's operation.

  • Comment number 64.

    To 59. At 1:39pm on 18 Dec 2009, U13736045

    A National Bank would be run by a CEO and provide a deposit and lending base for both individuals and companies.

    It would not undertake any investment banking as such.
    Regulation I believe should fall to Mervyn King at the BOE.

    The plain truth is that if the state (which is us) does not control ‘money’, the state (which is us) can only ever be at the mercy of those who do.




  • Comment number 65.

    I think #11, fractalfinance is spot on. Its worth saying that these reforms would amount to a seperation of retail and investment banking, in all likelihood (traders and the like will want minimal interference, so will move out of retail banks subject to regulation. They will also be paid more elsewhere).

    And I want to reiterate something in that post: we cannot stop financial crises. We should be trying to minimise the effect on the 'real' economy, rather than regulating to prevent it from happening.

    I dont really understand the obsession with a state bank...do you really trust New Labour with your money more than the bankers? Or any political party, for that matter. Also, the banks are already profiting hugely from consumers due of reduced competition; reducing it to a state bank (i.e. one bank) makes this problem much worse, and its the rest of us who will suffer in the end.

  • Comment number 66.

    At 1:41pm on 18 Dec 2009, writingsonthewall wrote:

    "I have met some dumb people in my time, and the dumbest I have met have been in the financial services environment. Great with maths - not so good with common sense, initiative or a wider understanding of what they are doing."

    I'd go along with that. My wife is a fund manager and I don't trust her to manage our household funds. God only knows what she's up to with the 10's of millions she deals with everyday.

  • Comment number 67.

    63. At 1:48pm on 18 Dec 2009, writingsonthewall

    Spot on. Though the single share would be non-transferrable, right?

  • Comment number 68.

    comments 56 and 63.

    I thought we had this already. It is called RBS where with an 84% holding all taxpayers, regardless of age have a large stake in the business. With this level of control we can decide who runs the bank and all other forms of decisions on risk, bonuses etc. The reason the government will not stand up and be counted with their/our control is that they want someone else to blame. Knowing that the policies they are putting in place are mostly detrimental to the long term benefit of our businesses and bank customers.

  • Comment number 69.

    Bankers' bonuses = Mass Hysteria. So insignificant.

    Just like Diana Spencer death/funeral.

  • Comment number 70.

    Okay, this might be a bit late and not exactly completely relevant - but can someone explain to me that why, if the banks make huge amounts of profit, and that then translates to huge amounts of tax paid to UK plc - the government is trying to restrict bonus payments at all the banks (and not just the ones who have recieved help)???
    The bankers have to pay 40% tax on their bonuses - so a big bonus means more money is paid to the tax man...
    ...surely that's a good thing???

  • Comment number 71.

    67. At 2:08pm on 18 Dec 2009, copperDolomite wrote:

    "Spot on. Though the single share would be non-transferrable, right?"

    Absolutely - or you end up in the same situation as Russia in the 90's where rich Oligarths offer 'bread for shares' and the people take the bread because they cannot eat the share.

    Result is the same problem we have today - a minority controlling major organisations - and in the Russian case it's a large part of the worlds energy resources (just ask Ukraine)

    No inheritance either you'll notice - this would again upset the balance of equality.

  • Comment number 72.

    68. At 2:09pm on 18 Dec 2009, poorold pensioner wrote:

    "I thought we had this already. It is called RBS where with an 84% holding all taxpayers, regardless of age have a large stake in the business."

    Oh not at all - very much not the case.

    Currently the Government have a large shareholding, we don't have a say in it. If there were any dividends they would go back into the Govt. purse and they would spend it where they see fit (maybe a new duck house or some moat cleaning etc).

    The value of RBS shares held by Government is no more yours and mine than it was when it was in private hands.

    Don't be fooled by State Capitalism in Nationalisation's clothing (wolf is sheeps clothing - quite difficult to make that one work!)

  • Comment number 73.

    Here's a summary which pertinently sums up the root of the crisis, and why no amount of regulation will work - despite what the Government (and banks) are telling us.

    "With adequate profit, capital is very bold. A certain 10 per cent. will ensure its employment anywhere; 20 per cent. certain will produce eagerness; 50 per cent., positive audacity; 100 per cent. will make it ready to trample on all human laws; 300 per cent., and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged."

    ....written over 100 years ago by a one K.Marx. - Capital Vol 1

    The people are all looking for 'new answers' - and not realising the 'old answers' were the right ones all along....

    To the Capitalist the pursuit of profit is relentless - anything which gets in the way must be removed or circumvented, and that means regulation, Governments and the morals of society - as recently displayed by the greed of the banks.

  • Comment number 74.

    73 WOTW

    That kinda suggests the mass privatisation of the UK utilities might have been a well-calculated ploy!

    Oh, no they wouldn't!
    Oh, yes they would!

    (panto or farce?)

  • Comment number 75.

    To 70. At 2:35pm on 18 Dec 2009, HaloKG

    Well they did make lots of money and that was fine, until it was found out that the loans and deals they made weren’t all that good, and the banks were in fact broke.

    Then us taxpayers were pushed into the breach to make everything alright again.

    The only catch is, us taxpayers don’t really have a lot of money individually, in fact some us are struggling to keep a roof over our heads and food on the table.

    So when the issue of £1.5 billion bonus pool at the RBS for example reared its head, some taxpayers, most likely those on a limited wage, with no bonus pool, started to get a bit miffed, I being one.

    However having got over the bonus issue, a bigger issue is being considered. Namely why do we allow the business of money creation to be controlled by private companies, that have no real interest in doing right by the taxpayer.

    In fact the taxpayer both as individuals and collectively are pretty much at the mercy of these companies, and some of us started not to like that too much, I again being one.

    It is of course unlikely that anything will change, this recession will grow deeper I think, but will one day presumably end and it will followed by another boom, followed by another bust.

    However if the state did take a significant role in banking, it is far more likely that the boom and bust scenario would, if not eliminated be less destructive.

  • Comment number 76.

    #70 "The bankers have to pay 40% tax on their bonuses - so a big bonus means more money is paid to the tax man..."

    Yes, but the bonus comes from taxpayers money that their employers have taken in extremis to keep them afloat (and supposedly lend out to keep the merry go round spinning), which they are instead paying out as bonuses. 40% returned means 60% skimmed off the top and into the offshore account.

    That's seeing the glass as 40% full if ever I heard it!

  • Comment number 77.

    It's just such a shame the Basel Committee has no such ability to impose the same constraints on Alistair Darling and Gordon Brown, who are quite happy to force the banks to rebuild their balance sheets but intent on ruining the balance sheet of UK plc.

    Just a tad hypocritical of our beloved leaders?

  • Comment number 78.

    70. At 2:35pm on 18 Dec 2009, HaloKG.

    The problem is you have not established the source of the profit from which the bonuses are paid - in order to be taxed.

    As the profit comes from you - do you think it's a good thing?

    Let me offer you the 'bankers deal'.

    I lend you your forefathers wealth (which he has no more, resulting from previous crises - very similar to the one now). I charge you 8% to borrow that wealth in the form of interest.

    As you have borrowed £100k for a year in order to start up your business, I make a tidy £8,000 from that loan, from which I pay myself £6,000 - the other £2,000 is added to the returned £100,000 to ensure my capital position is further enhanced.

    I pay 40% on the £6,000 I took as a bonus, leaving me with £2,400 - a nice sum for doing no work whatsoever.

    If you fail to pay me back the £100,000 - I take your house / business or both, valued at £150,000 - making me a winner again - and because the law backs this practice it will be used to 'forcibly remove you' should you object on moral grounds.

    As you have had to pay interest on the loan you must have got that from somewhere - it comes from all your customers paying a little extra from their wages to supplement your interest payments. It's spread out across the thousands you have so it's relatively invisible (like a stealth tax).

    So whilst I look like the good guy having paid a few thousand in taxes - really it was you and your customers who paid the extra, and the source of that wealth? (because it doesn't grow on trees you know)

    ....the shortfall between wages paid and work done - surplus value, unpaid labour - because Labour is the source of the profit - it's just many layers down so it's virtually invisible.

    Does that sound like a good deal still? Should you really tax my bonus heavily - I mean after all, I did earn it - didn't I?

    Loaning money does not create wealth - how can it? There is no explanation for this from any sector of Economics, and for good reason.

    It is the lie by which the wheels of Capitalism maintain their momentum....

    Don't forget (and this is the crucial part) - when your great grandchildren want to start a business, they too will have to borrow from a bank - and you know for a fact it's your own money they're borrowing - because you will be paying it in your tax bill for the next 10 years or so.

    However the 'profit' made from the lending off that money to your grandchildren will be taken by the great grandchild of the banker.

    ...and so the cycle continues....

  • Comment number 79.

    So to everyone who understands this better than i do, what can we the public do? how can we exercise people power to force some sort of change? How can we use our buying power to some effect?

  • Comment number 80.

    This is brilliant - finally there are steps for appropriate capital to be set against risk. This is what the govenment should have done. The result would be to reduce profit to reality and payout bonuses from numbers closer to reality. This time it is unlikely that the US will delay implementation as they did for Basel 2 (until Dec 2007, when it was too late to stem anything).

    Let us not forget that a lot of the problems were caused by banks hiring Physics Phds for the quants. Physics models do not reflect the activity undertaken by people.

    Securitisation caused the ill-formed idea tha risks undertaken could be diversified away ad infinitum. Someone forgot about the reinsurance debacle that almost brought Lloyds insurance down. The secondary models pricing securitised paper were based on quantum physics based predictive models that spewed spurious matrices of cross-correlation that had no explanatory power of the underlying relationships whatsoever.

    The other contribution has been a set of models to price structures. The model that would ultimately be used would be the one that would result in a transaction and not relects the risks of th transaction nor the risks of that transaction to the bank. This breaks the idea of an efficient market and the basis of economcs.

    So we had two anomallies:
    1. belief and mis-pricing of risk that not only did not relect reality but brought the cost of money down such that cheap loans were being offered in larger quantities and in a ludicrous manner. This increased debt in personal balance sheets and drove the economy in an unsustainable manner. It is odd that no one, especially the regulators, did not listen to the warnings voiced by Mervyn King and Chief of the US Fed.

    2. the market was operating inefficiently on misunderstanding and ill-optimally.

    It is also appalling that the banks think that math and physics PhDs are infallible gods. A PhD is a researcher expert in a small area of a very large field. It is questionable whether that field relates to finance and people behaviour. Also, if you take a PhD and put him to work in black box, there can be no peer review to see whetehr any mistkes have been made. Have people forgotten LTCM and the two Nobel Laureates producing black box algorithms.

    Further, banks are limited in trading by certain controls, hedge funds are not. But then some banks own hedge funds. there is another fundamental breakdown when they do this as they plough in large amounts of money if a hedge fund shows great return in the first year or two. This expands funds under management considerably but takes the banks funds away from the normal controls as it is now an investment of a fixed amount.

    The hedge funds borrowed securites to short sell (selling securities they did not own), this extended the efficient market frontier but again the baks credit models did not stand up to the task. Hence Lehman Brothers.

    There is more. There is a view that bankers are not sufficiently knowledgeable. It may be so in retail banking - try asking them to equate simple interest, AER and compound interest. However, the sophisticated ones find it difficult to explain their work to those not their peers as these do not have the base knowledge and it will take time and their patience to build it up to a level that an explanation can be forwarded. A bit like an actuary trying to explain his method to a layman.

    Anyway, Robert, does your father have an opinion? I was fortunate to be taught by him.

  • Comment number 81.

    Here's another observation (there's not mcuh happening on a Friday when the snow is in town...)

    How do you know when a Government scheme to 'boost the Economy' is going horribly wrong?

    ....when I hear on the local radio station, adverts for 'second hand cars wanted for cash' - but only ones over 10 yrs old.

    Why would this be the case? What could be happening?

    Some Capitalist has worked out (not that it took much working out) - that the Government is offering a cash discount on new cars bought when an old one is traded in. By buying second hand cars from the public (and if they don't run, even better) - at a knock down price.

    This car can then be traded in against a new one - earning a £2000 subsidy. The new car can then be sold on at a profit (especially if you know the trade) - and as a 'nearly new' car in a market which has been bouyed by the frantic efforts to cash in - this can be a very nice earner.

    So once again, the best laid plans of the Government result in our taxes going into the pockets of the greedy, not distributed evenly across the Economy, but all log-jammed in the same places.

    Now the Government thought they were clever by adding this criteria:

    "have DVLA documents in the name of the customer buying the new car and for the customer to have been the registered keeper continuously for at least 12 months"

    ...but who's actually checking? - and who has an interest in getting it right? The new car dealer? - I don't think so, he's just happy to get another sale. I know the Government don't have agents checking this - so what do you think the result is?

    ..nobody is checking.

    I don't make this up you know....

    "In a bid to make the most of the scrappage scheme to swap old vehicles for cut price new ones, fraudsters will need proof of a year's ownership. This is the only prerequisite for qualifying for the discount and as of yet there is little or no means of policing this," explains Daniel Burgess, Director of Automotive at HPI. "As such, we have a concern that used car criminals will use stolen V5s to prove they've been the registered keeper of a vehicle for at least 12 months."

    http://www.carpages.co.uk/news/scrappage-scheme-scam-13-05-09.asp

  • Comment number 82.

    One other comment - nationalising a bank will not work as it will make it inefficient and possibly result in higher interest rates, particluarly as diversification will be limited.

    The comment seems to be made by one who does not understand how the system works or what it facillitates directly and indirectly. But this is not suprising.

    The best kind of industry to be nationalised is a natural monopoly - in fact it will be inefficient operating any other way.

  • Comment number 83.

    ...and when it comes to the law - once again it's all about "who you are"

    http://news.bbc.co.uk/1/hi/england/london/8420473.stm

    Another member of Parliment is allowed to literally dump on us from a great (or in this case small) height.

    Wake up people, this Government is laughing at you (and me) isn't it time we turned the tables?

  • Comment number 84.

    Either the Basel comments on bank solvency have credibility or they are just rhetoric. If they credible then a full timetable needs to be put in place with no caveats available to circumvent them as of now.
    Otherwise we should ignore the fine words and wait for the next crash.
    The primary thing that needs addressing which has still not happened is whether big is or is no longer beautiful.
    My view is that it is no longer good news for either the managements or the consumers. Management can't be expected to know what the hell is going on and consumers are seeimng little difference in whats on offer.
    This country's wealth is based on small companies and local employment lets not forget that.
    So when banks say they generate x or Y tax take and they account for 10% or so of the economy that still leaves 90% of the economy contributing X or Y to the power of 9 times more contributing to the economy.
    This will never end till we have a government who understands business, and how the economy actually works.
    The tax take on banks bonuses is nominal when compared to the underlying problems we face, and so long as Labour do not get in at the next election there is still a chance of sorting the economy out.
    It will be painful and banks along with everyone will have to change the way we view so much.
    I say make Basel's statement active immediately, and lets move on, because if its just wishful commentary then we are in for a really bad time in 2010 & 2011.
    Sorry to sound so gloomy particularly in the season of goodwill but you can't ignore fundamentals.

  • Comment number 85.

    with all these calls to nationalise the banks, has anyone stopped to think what a dogs dinner the government makes of running anything? Before you know it there will be a diversity co-ordinator at every branch making sure that politically correct banking is taking place. Can we really afford to let the government run an industry when they couldn't even run the railways? In fact, can anyone name anything the government runs efficiently and effectively? I used to work as a civil servant and I agree with their former minister that if half the civil service was removed overnight, it need not make a difference to service delivery. Oh well, I suppose if the banks were nationalised it might reduce unemployment hugely, which we would all pay for in higher bank charges and taxes. Gordon and Dave, keep off, you couldn't run a race let alone a bank!

  • Comment number 86.

    75. At 3:00pm on 18 Dec 2009, Dempster wrote:

    In fact the taxpayer both as individuals and collectively are pretty much at the mercy of these companies, and some of us started not to like that too much, I again being one.

    In fact, if they only new it, taxpayers and indiviuals collectively could exercise complete control if local communities organised themselves
    We continually fall for the propaganda that we cannot live without the banks and the lawyers. If enough people do it the politicans will follow.

    Switch your telly off, go down the local and strike up a conversation

  • Comment number 87.

    76. "Yes, but the bonus comes from taxpayers money that their employers have taken in extremis to keep them afloat"

    I don't think that's the case for every bank...some have been more careful and although have been affected, have not had to beg the tax man for a bail out.

    I don't think it's just the 'bankers' that are affected by this - it's all those people who work in the Finanical services industry - who don't get paid millions and work hard enough to expect a good wage - and unlike those who don't work at all, but expect to receive benefits...it's the rich who pay the most tax after all!

    And I get it - hey, I wasn't too happy when I had to pay tax when I was serving my country in the British Army in Iraq - but I digress...most of these banks pay millions in PAYE every year - I just think that the whole Banker-bashing is a bit narrow-minded!





  • Comment number 88.

    81. At 3:29pm on 18 Dec 2009, writingsonthewall

    My mates brother works at Car dealership, he reckons he's seen some of the cars that have been 'scrapped', back on the road again.

  • Comment number 89.

    #78 WOTW
    Do you have a system for fairly pricing labour so that a buyer/consumer can get what he wants without exploiting the workers ?
    And do you attach any value /price for the organising of labour and capital so that complex goods can be produced ?

  • Comment number 90.

    82. indiajack:
    "The best kind of industry to be nationalised is a natural monopoly - in fact it will be inefficient operating any other way."

    Funny I thought the world of finance was a monopoly. or better still a cartel. Better nationalise the lot of them then. Take the power to create money out of thin air out of the hands of a private elite, and put it back into the hands of the people. Where it rightly belongs.

  • Comment number 91.

    WOTW

    I don't normally bother with these things now as I a) have a life and b) like to keep my blood pressure within manageable bounds...but sometimes....

    You infest this blog like a skin complaint with your all knowing commentary on politics and finance. You suggest that Armageddon is at hand unless we embrace your "plan B" without ever once articulating what Plan B actually is...save possibly the ramblings of a saloon bar bore. Your comments on the scrappage scheme are puzzling. Apparently if I trade in my 10 year old motor, buy a new one, then sell it again straight away I make a profit? You seem to be labouring under the illusion that cars don't strangely depreciate by about 10% just by driving them off the forecourt. It's the reason why buying new cars has always been the preserve of the gullible or status conscious. A modest profit indeed...if at all.

    What puzzled me most about the scheme in the first place was, no offence intended, that people who own cars more than 10 years old are not usually in the market for a new one, two grand off or otherwise. But like you always say...."it's a conspiracy man!"

  • Comment number 92.

    Robert you said:

    "They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers - who may either go for real jobs in the real economy (is that such a terrible idea?)"

    real jobs in the real economy!

    What a sad indictment of our society that people doing non-real jobs, so fake jobs, can earn so much. Civilised it is not.

  • Comment number 93.

    82. At 3:30pm on 18 Dec 2009, indiajack wrote:
    One other comment - nationalising a bank will not work as it will make it inefficient and possibly result in higher interest rates, particluarly as diversification will be limited.


    We used to have the Giro Bank, we've got National Savings and we even own the RBS and Nat West.

    Let’s face it, the banks have made the biggest balls up since the Battle of Hastings.

    And I think it’s high time we seriously tried to stop this farcical boom and bust scenario.

    If the state (which is us) does not control ‘money’, the state (which is us) can only ever be at the mercy of those who do.

  • Comment number 94.

    #90 Warwick. Bang on the green stuff !

  • Comment number 95.

    I'm still loving this..

  • Comment number 96.

    87. HaloKG:

    I do seem to remember although it was only a select number of banks being bailed out, the excuse was at the time, correct me if I'm wrong, that without the bailout, the entire system would have tanked. So they all benifitted, and were all in the same boat and all responsible.

    I bet when you was grafting in Iraq you worked a lot harder than you do now in financial services, and put far more at risk. But you didn't get a bonus then.

    The banker bashing is fair and justified. The only people who think it isn't are people who work in the City. Funny that.

  • Comment number 97.

    Remember the Basel ll accord from June 2004.

    That didn't do much good did it, what hope then for Basel lll.

  • Comment number 98.

    Great posts - almost too many to mention!

    However, I really like (and particularly support) what writingsonthewall said in Post 36

    "Here's an idea for you all ... If the banks and financial system are the 'wealth generators of society' - then why don't we all simply quit our other jobs and sign on the dole .. If we all stop working tomorrow the banking system would strangely discover their supposed ability to generate wealth would disappear ..."

    I've linked to this from my latest post http://poweromics.blogspot.com/2009/12/adding-value-or-destroying-value.html too.


    I also fully agree with Friendlycard's post 16 too

    "Surely what is needed is the return of Glass-Steagall separation ... Retail banks are state-backed but their scope of activity is strictly limited; investment banks can do what they like (and pay what they like) but there is no taxpayer support if things go wrong ... This is simple, and worked for almost 70 years - why not just bring it back?"

    I've highlighted/supported similar points made in the past too e.g. take a look at http://poweromics.blogspot.com/2009/09/challenging-greed-and-creating-leaner.html for instance.

  • Comment number 99.

    Robert has been promoting the idea of splitting the banks' commercial and investment arms, in order to protect the public from the risks that the latter run. He has done so in the face of a hail of opinion (almost exclusively from vested interests) stating that this is impossible.

    However, the Basel Committee has here created a proposal that would encourage the more exotic characters to quit banks and start other investment vehicles. These investment vehicles would be free from retail banking, and therefore much less risky to the structure of the financial system.

    I am amazed that Robert fails to point out that this is another means of achieving the same end. Except that this proposal removes the unpopular and unhealthy need for carving up the banks by Government fiat, and lets the market do its job. With the right rules, the market can be our friend!

  • Comment number 100.

    #78

    Thank you for sharing your insight into how a bank makes free money from loans. I needed a laugh, but can't suppress a slight concern that somebody might think you were being serious.

    They do not lend £100k at 8% interest and immediately register a profit of £8k.

    The profit on that transaction is 8% LESS what it costs them to fund the £100k loan (you can't ignore the time value of the bank's money) LESS the amount they provision for loan defaults (it is substantially this that is pushing the lending rate high at the moment).

    Take out admin, overheads, etc., and the profit on that loan will not be £8000, but a couple of hundred pounds.

    And wherever did you get the idea - stated as fact - that in the event of a default the law would allow the bank to seize assets worth more than the outstanding debt? In bankruptcy, anyway, a typical recovery rate is 40p in the pound. Not the 150p you propose!

    Your extraordinary brand of accounting recognises all the money coming in to the bank, but none of the money going out or the risks. Small wonder the commercial lending business looks like money for old rope to you.

 

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