BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Obama, banks and the general election

Robert Peston | 08:37 UK time, Friday, 23 April 2010

President Obama's speech on the urgent need for financial reform was perhaps less striking for what he said, and all the more for how he said it, where he said it, and to whom he said it.

Barack ObamaThe shape of his programme to make safe America's banking system has been known for some months.

He would:

(a) set up an autonomous consumer-protection agency;

(b) give more power to shareholders to determine who runs the banks and what they're paid;

(c) put in place resolution procedures to protect taxpayers when the biggest financial institutions run into difficulties;

(d) introduce greater transparency into the trading of derivatives by directing trades through centralised clearing houses, and

(e) limit the size of banks and place limits on the ability to speculate for their own account of those that take retail deposits.

Obama was giving a push to the central elements in his programme as the progress of legislation in the Senate reaches a crucial stage.

Within a very short walk of Wall Street, and in a room which contained Lloyd Blankfein, chairman of Goldman Sachs, Bob Diamond, president of Barclays, and senior representatives of Morgan Stanley and JP Morgan, among others, he urged the big banks to surrender their arms, to temper their ferocious lobbying against the proposed changes.

This is what he said:

"To those of you who are in the financial sector, let me say this: we will not always see eye-to-eye. We will not always agree. But that doesn't mean that we've got to choose between two extremes. We do not have to choose between markets that are unfettered by even modest protections against crisis, or markets that are stymied by onerous rules that suppress enterprise and innovation. That is a false choice. And we need no more proof than the crisis that we've just been through."

Now although the rhetoric of Gordon Brown, George Osborne and Vince Cable has become increasingly critical of some banks and bankers, I don't recall any of the leaders of the main parties venturing into the City to deliver a public sermon to the grandees about the duties that must accompany their rights.

Also, some will say that there's a boldness to what Obama is proposing that we haven't yet seen in UK legislation - which to date has focussed on the palpable flaws exposed by the collapse of Northern Rock, such as the unsuitability of traditional insolvency legislation for dealing with banks that run into difficulties, and the fuzzy relationship between the Financial Services Authority, the Bank of England and the Treasury.

That said, the FSA already has a consumer-protection arm (which the Tories would like to hive off, as part of its plan to crunch the main supervisory part of the FSA into the Bank of England). Also, shareholders in British companies have greater rights than owners of American businesses to influence executive remuneration.

But what about breaking up banks and limiting their size? Well, the government is set against that.

In last night's prime-ministerial debate, I thought one of the more riveting exchanges was between a PM who defended that status quo and a Liberal Democrat leader who would like to shrink and dismember them.

Gordon Brown's factually true statement was that Northern Rock did quite a lot of damage when it collapsed, and it was not a super-conglomerate bank of the size and sort that Obama and Clegg would like to cut down to size.

That said, most would argue that it wasn't Northern Rock's difficulties which put a bomb under the British economy. The direct fiscal costs of nationalising it were relatively small, a few billion pounds (although taxpayer loans to the bank were around £30bn at the peak).

It was the much bigger and more diversified banks, Royal Bank of Scotland and HBOS, that wreaked havoc when they went to the brink of collapse. And saving them required tens of billions of pounds of direct investment by taxpayers and hundreds of billions of pounds of state guarantees and loans (mostly to them, but also to other giant mega banks, such as Barclays).

The pertinent issue is how to prevent the likes of Royal Bank of Scotland and HBOS holding taxpayers and the economy to ransom.

Right now, in the UK, the battle lines on this aren't perhaps what you'd expect.

There is an intriguing alliance between the Lib Dems and the Bank of England, which believe there's a strong case for physically separating investment banking from retailing banking. Ranged against them is the Labour government and the Financial Services Authority, which argue that investment banking can be made safe, even when owned by a conglomerate engaged in retail banking, by massively increasing the capital the banks have to hold against their trading books as a buffer against losses.

By the way, both sides are fans of so-called living wills, or explicit, legally binding arrangements for protecting and hiving off retail deposits in the bigger banks when they face ruin.

Where do the Tories stand on this? Well, their public position is that they're in favour of some dismantling of banks so long as that's what happens in important competitor nations.

But in practice they are probably closer to Clegg and Cable than they would care to admit.

How so? Well Osborne and Cameron are - as I've said - committed to giving much more power to the Bank of England over the supervision and regulation of banks. And they would transfer these powers while knowing that the Governor of the Bank of England, Mervyn King, believes that there may be no credible alternative to breaking up the banks.

Comments

  • Comment number 1.

    It's not only at the strategic level that banks, particularly taxpayer-owned banks, need regulation. It's also high time they were compelled to lend, albeit responsibly, at reasonable rates and without their current rip-off arrangement fees and charges. Caledonian Comment

  • Comment number 2.

    Osborne presumably bases his proposals on his experience, his training (education in such matters) and his general knowledge and proven abilities in business. The Conservatives must be fortunate to have found somebody with such appropriate training, qualifications and experience.

    Or maybe his role is more of an nature vs nurture argument ? If you have no appropriate experience, no appropriate training and no appropriate knowledge then your background (school and parents) can still count in your favour. Probably reassuring for some who thought you had to achieve things through your own merits these days.

  • Comment number 3.

    2. At 09:41am on 23 Apr 2010, DeimosL wrote:
    Osborne presumably bases his proposals on his experience, his training (education in such matters) and his general knowledge and proven abilities in business. The Conservatives must be fortunate to have found somebody with such appropriate training, qualifications and experience.

    Rather than Darling who can't make a decision without the approval from GB. GB has shown how not to run an economy. Passing it to the BOE means those with the experience are allowed to make the decisions. Why vote for a politician who believes he is better placed to make the decision than experts.

    Any body on this blog who believes GB has done well with the economy should leave the country and allow us to mend it before you come back. Time for Labour? Time for the IMF.

  • Comment number 4.

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

  • Comment number 5.

    Robert,

    In this debate over banks; the Bank of England; and the government there is one simple question that people would like to know:

    When it comes to the economy, who runs the country?

    The banks have ransommed this country. The U.K. is now in greater than than it has ever been. Public services are being cut; taxes raised; the cost of living increased.

    Who is responsible for this?

    The hard working taxpayer - or the grandees in the city of London?

    At least President Obama has the courage to take the fight into enemy territory. Our lot sit on the sidelines hoping that the whole mess will just go away.

    Soon the electorate will decide on who has the will, dedication, and inspiration to do what they were elected to do - govern the country!

  • Comment number 6.

    Since those doing the regulating will not even be able to get a grasp of the risks the banks are taking it is likely to be ineffective as the bank staff are a lot cleverer and will find a way round the rules, aided by the hedge funds.
    The tax take is what Gordon Brown has in mind, as well as protecting the importance of London as a financial centre. However this takes insufficient account of the risk element.
    At least we now know that there is no morality in what the banks do or sell, and it is beyond the politicians ability to stop them as no one has the guts to grasp the nettle. Obama is right to take a soft approach as otherwise nothing at all will be achieved except the wringing of hands.
    When you have the unedifying spectacle of an organisation setting up funds to make profits in completely opposite ways on the backs of the ignorant investors (ignorant as opposed to those in the know), just like Lloyds insurance as you mentioned before Robert, the only answer is to take a knife to these organisations.
    The separation of the gambling element has to be achieved so the financial system is not put at risk by a failure, however massive.
    Market forces should control institutions but cannot do so when they become a cosy cartel and prevent competition.
    "They do compete." I hear you cry. If that's so you try and get a decent loan for a small business or get a decent interest rate on a deposit.

  • Comment number 7.

    #2

    Whilst I agree with you, the same cristicism could be applied to Darling and Brown before they became Chancellor.

    #3

    Why vote for a politician who believes he is better placed to make the decision than experts?

    Completely agree. Fed up hearing Darling argue with King about banking!

    Robert,

    The banks need broken up!

    Not just separating casino from retail, but all made much smaller.

    Only Labour will protect the status quo simply becuase they can't admit The Lloyds Banking Group is too big, for obvious reasons!

    And Good Luck to Obama.

    I think we are about to see who really rules the world, the elected representatives of the people, or the banking elite!


  • Comment number 8.

    Anyone else noticed that the taxpayer is now in profit from rescuing RBS?

  • Comment number 9.

    Bank own politicians.
    They have done for hundreds of years
    Its relationship is not going to change for any country in debt

    Its called the Bond Market

  • Comment number 10.

    Yes, Robert, this is fascinating.

    Obama is really shaping up to be a world leader with guts (he's shown courage with the US Healthcare Bill, and let's hope he's now successful with the Volcker rules).

    Gordon Brown on the other hand has a deep-seated insecurity and lack of confidence when it comes to the major vested interests in our society.

    He really is just plain scared of the City.

    He accepts, totally, their line that Britain is no good, and can never ever be any good, at doing anything other than changing money.

    We really do need to get rid of him, and get the Lib Dems policy on banks implemented.

    (While it's good that Nick Clegg is intimating that he will not accept Gordon Brown being PM in a possible coalition parliament by calling him "a desperate man", he would get even more support if he stated this explicitly......)

  • Comment number 11.

    Anyone else noticed that the taxpayer is now in profit from rescuing RBS?
    I beleive we are in profit to the tune of -trillion pounds good old RBS

  • Comment number 12.

    Good article, Robert, and one of the most important issues that any incoming government will face.
    Certain banks have truly wreaked havoc on the UK economy, and their future structure and behaviour will be largely a factor of government action.
    But, of course, action must be international, or the UK will be at a disadvantage.
    Obama (and his advisors) seem to make a lot of sense to me.

  • Comment number 13.

    #5 "The banks have ransommed this country. The U.K. is now in greater than than it has ever been. Public services are being cut; taxes raised; the cost of living increased.

    Who is responsible for this?"

    Answer: the Govt.

    Total cost of bank rescues will probably be of the order of £200-300bn - a very big number although ultimately we will not know until the govt sells its stakes in RBS and Lloyds and the loans which govt has in effect guaranteed are either repaid or written off. Indeed it may well be the case that the total cost will be substantially less than that although I would be extremely surprised if the total cost is less than £100bn.

    Total public sector overspending is roughly £100-120bn per year and govt has been seriously overspending since around 2003. If we assume that the economy will definitely be growing properly by the end of next year (which may be very optimistic but lets assume that it hits the Govt estimates of 3.5% growth) total govt overspending since 2003 will probably by £500-600bn.

    In addition to total failure to control public spending this Govt made 2 very big mistakes in bank regulation

    1) Mark to market accounting for all bank assets actively encourages banks to trade loans rather than holding on to them.

    2) Basel II and credit at risk model - govt allowed banks to determine their required capital based on Credit at risk models developed by the bank - equivalent of putting a fox in charge of the hen house.

    In all the debate about "light touch" versus "heavy handed" regulation what mostly people forget is that what is needed is effective regulation. Effective regulation does not need to be heavy handed or very prescriptive. This Govt (and USA) seems to confuse sheer numbers of civil servants in charge of regulation with effective regulation

  • Comment number 14.

    So there you have it - The Prez will "limit the size of banks and place limits on the ability to speculate". So why are our chaps so sluggish to do the right thing? Come, break them up, and be done with it. Either that, or we'll set Vince Cable on you!


  • Comment number 15.

    5. At 10:14am on 23 Apr 2010, EuroSider wrote:

    "When it comes to the economy, who runs the country?"

    Well look at who the Government is 'borrowing' from - that's who owns this country - just like the bank 'owns' your house until the mortgage is completely paid off.

    8. At 10:36am on 23 Apr 2010, Martyn Owen wrote:

    "Anyone else noticed that the taxpayer is now in profit from rescuing RBS?"

    You're desperate and ill-informed. Paper profit means nothing, you try and disperse 75% of a companies shares without destroying the price. The share price reflects the scarcity of the other 25% held by investors and has nothing to do with 'profit' - work in banking per chance? - Trying to confuse the public about what 'profit' is?

    At least Obama is having a go - the people of this country are being deliberately lied to and confused by the army of political, media and financial liars who mistakenly believe they can lie their way out of the mess they have created through their own lack of understanding.

    It's almost as pathetic as when you see a man in court insisting he is innocent even after CCTV footage is shown of him committing the crime.

    Don't believe me? - well just before round 2 of the 'big debate' a selection of newspapers (Telegraph, Sun, Express and Mail) all ran a smear against the Tory's biggest challenger - Nick Clegg.

    This was followed up with a series of headlines claiming 'Cameron the victor' in these same partizan papers today.

    This is a clear demonstration of the lengths the dark forces will go to in order to deceive the voters. An accusation made against the Soviet union - but which we hypocritically cannot see in our own country.

    However one thing is certain - the truth will win out - as it always does in the end.

  • Comment number 16.

    Whilst most people outside the banking industry ,in public at least,tend towards the argument the investment and retail banking should be split.The banking industry itself are going to fight tooth and nail to stop it happening,without the retail side they have no assets to gamble with.

    But the answer is in our own hands, if you dont like what the banks are doing get your money out of them....there are other ways to make 0% interest on your investments whilst seeing huge profits being made at your expense....

  • Comment number 17.

    Certain countries may feel somewhat "agrieved" at the prospect of penalising their own banks because of "misbehaviour" by some US and British banks.
    But they must all surely realise that a financial collapse in the US and UK would have rapidly become global, thus future stability is in their best interest.
    And if AIG had gone under, the effect on their banks could also have been disastrous.
    Many countries have been under the US "umbrella" for decades, receiving support for national security and finance where necessary.....so when the USA needs their support to sort out its' financial problems, they should give it.

  • Comment number 18.

    11. At 11:16am on 23 Apr 2010, thomas barton wrote:

    "Anyone else noticed that the taxpayer is now in profit from rescuing RBS?
    I beleive we are in profit to the tune of -trillion pounds good old RBS"

    Are you paid to write such nonsense - or do you do it for fun?

    Have you got a cheque for that? - can you 'show me the money'?

    No, of course you can't - because the profit doesn't exist.

    I predicted this would be the case way back when RBS was taken over by the Government - I said that we would see many supporters of the banks claiming a taxpayer profit as soon as we reached the buy in price - I said they would ignore opportunity cost, I said they would forget about the impact of releasing shares - and claim paper profit as 'profit'

    You guys are sooooo predictable - which is why it's going to be so easy to defeat you all.

    If you want to see an indicator of the effect of divesting shares - you will notice the smaller the Govt. holding in any bank, the lower the share price is to 'recovery'.

    This is the basics of supply and demand (which it seems banking apologists don't understand) - you remove 75% of the shares in issue compared to the 40ish% in lloyds and the evidence is there fore all to see.
    It's why the Lloyds share price is still some way off it's break even for the Govt. - even though it's actually in a 'better' position (more profit made) financially than RBS.

    You see investors don't put their money where their mouths are.

  • Comment number 19.

    ...and here's another prediction come true - a Greek default (because that's what this is)

    http://news.bbc.co.uk/1/hi/business/8639440.stm

    Also, lots of chat about our weak growth figures - what about the massive hike in Bond yields across ths PIIGS yesterday?

    Mass sovereign default not relevant anymore - can we really close our eyes, stick out fingers in our ears and LA LA LA LA LA LA LA our way through this?

    Here's a summary of the CDS world - a possible predictor to default risk.

    "Credit default swaps (CDS) on Portuguese debt surged 50 basis points in a matter of hours to an all-time high of 270. Markit said the CDS on Spain reached a fresh record of 175, and Ireland jumped to 162, with jitters reaching Hungary, Bulgaria, Romania, Russia and even Argentina. "

    LA LA LA LA LA LA LA LA LA LA LA LA - CAN'T HEAR IT - LA LA LA LA LA LA LA

  • Comment number 20.

    That's just it A LECTURE! words are simply cheap and non-value adding. For sure some real bad folk who stole millions have had the key thrown away in the good ole' USA. But I'm quite sure there's a great many captains of finance / politics that breath a sigh of relief that their doors were not kicked in! We should have a global world wide devaluation of all monies / gold etc.......

  • Comment number 21.

    It is interesting and perhaps important to discuss the arrangements for regulating banks in the future, but the more immediate problem is that for nearly two years they have been failing to supplement the money supply with the credit that the economy formerly needed to work efficiently.

    It is unlikely that the pre-crunch level of credit will be reached in the near future, if ever, because of the trauma that the crunch inflicted on senior bank managers. So should governments not be looking at other ways by which the present hole in the money and credit supply can be filed now and in the future?

    Consideration should be given to continuing some of the temporary unfunded deficit measures on an indefinite basis. As long as huge productive capacity lies idle, general inflation is not a risk. Nor would there be a risk to the exchange values of the major currencies, provided the governments act in unison.

  • Comment number 22.

    No need to break them up. Just say that the government will -- from a given date, say 6 months hence -- only guarantee retail deposits that are with "narrow banks" i.e. those that only carry on traditional commercial banking (not investment banking) and only deal with banks of a like kind. Then we would put the free marketeering universal banks to the test. In effect, they would still be able to play at being casinos -- but only with their own money, not ours.

  • Comment number 23.

    Hey writingsonthewall ....

    Thousands of planes still flying through that ash that you said would make them crash.

    When exactly is it you think they are going to start dropping out of the sky?

  • Comment number 24.

    Too little, too late. Rivers of time have gone by and they're better protected than the Catholic Church is. So, what's new.

  • Comment number 25.

    Actually, Wall Street and banks collapsed in the 1930s partly because Germany refused to pay WWI rendition via extortionate interest rate loans and their coal miners were in desperate poverty as German coal was bought by France for peanuts? Obviously it's more complicated, including 'share price' bubbles. Enter - WWII?

    As for today? We know better and should have learned from history? Hmmm. Unless the 'casino'/'investment' arms and 'consumer' arms of our banks are, by corporate law, operated separately - we will have another banking crisis. It's madness and unacceptable that YOUR bank 'spot invests' your current account salary and your savings to the penny 24/7?

  • Comment number 26.

    11. At 11:16am on 23 Apr 2010, thomas barton wrote:

    "Anyone else noticed that the taxpayer is now in profit from rescuing RBS?
    I beleive we are in profit to the tune of -trillion pounds good old RBS"

    ...oh and don't forget the 'paper loss' of £2,117,810,556.00 we're sitting on in our Lloyds stake.

    It seems if you want to paint a picture of recovery - you need to leave a lot of facts out of your argument.

  • Comment number 27.

    Thanks for clarifying the FSA-Labour and BoE-Conservative alignments, it's alot clearer now. Gordon Brown did allow B0E to set interest rates, but appears to have subverted the power of regulation of banks through the FSA. The difficulty will be whether the regulators can really have the power/knowledge to keep ahead of the banks, but at least we are heading in the right direction now that Obama's on the chase. I'm sure the business world will welcome the BoE getting more involved: after all without business there are no jobs and no money for welfare. I wonder if Cameron's playing it quiet about splitting up the banks. Trouble is so much of the policies are yet to be made clear to the electorate. I think so many are really ignorant of just how bad things are and it's difficult to give this out without being accused of scaring people....

  • Comment number 28.

    Personally I would let the banks get on with it - the people who need protecting are the creditors and the taxpayers. We could do this by replacing the deposit guarantee with a government-backed insurance scheme which operates like any other. Each bank pays a premium to cover its deposits and current accounts (all or none - they can't pick and choose). The premium would reflect the amount insured and the behaviour of the bank (assessed as a risk rating NOT generated by one of the companies that thought Iceland was such a good credit risk). Banks not joining the scheme would not be covered at all meaning that they risk losing all of their customers pretty much ensuring all banks WILL participate. Banks would also have to carry sufficient additional reserves to cover the excess (say the first 10% insured). Good quality loans could also be covered with premiums taking into account the default risk of the debtors and the quality of the collateral.

    The key thing about this though is that it would not guarantee the bank's survival. Instead of pumping money into the bank if things go wrong, the government would pay the money directly to the insured creditors thus safely allowing the bank to collapse.

    In case the banks get together and threaten that no bank will participate, we can use our ownership of RBS to force that bank to join up giving it a massive competitive advantage forcing the rest to join in.

  • Comment number 29.

    Obama has served notice on Wall St.

    Reform can be done the easy way or it can be done the hard way. The choice is with the banks.

    This is real politics: raw, uncooked, chewy but very tasty.

  • Comment number 30.

    Well, Mr Peston - it would be appreciated if you could further investigate the ineptitude of the FSA and the gonads that they have/do/and still 'purport' on behalf of their members?

    'Ordinary' retired; families and single individuals, have been totally 'shafted' by financial services? The financial services 'Authority' are actively trying to clean up their persona, but sadly, not their credibility.

    The FSA have not, nor do represent, even today, the 'average' worker saving thousands over decades for retirement/their childrens' future etc., only to see those savings and investments 'disappear'?

  • Comment number 31.

    Well done to Obama for going into the lions den and telling it like it is. He can talk the talk but ultimately can he walk the walk. Will he follow through on his plans - and how will the banks react. In the UK politicians have been either in awe of the city or in its pocket. Hopefully if the Libdems manage to have some influence in the next Parliament we can begin to sort out our rogues in the City. Until then we will continue to have the likes of Goldman Sachs sticking two fingers up to us mere mortals

  • Comment number 32.

    so the RBS has made the public a Trillion Pounds ? excellent not more debt then, so we wont need to cut services, jobs, raise taxes etc etc we are saved

    yeah right as WOW says, show me the colour of the money

  • Comment number 33.

    23. At 12:55pm on 23 Apr 2010, jon112uk wrote:

    "Thousands of planes still flying through that ash that you said would make them crash."

    Did I - when did I say they would crash?

    "When exactly is it you think they are going to start dropping out of the sky?"

    Did I say that too? - can you show me please?

    Just because you're still reeling from the Boeing conformation about the dangers of flying through ash - which you had no answer for - don't start making stuff up.

    It seems you are implying that the loss of any plane is acceptable and that only masses of planes falling out of the sky will prove your argument incorrect (which is the assumption that a few tests are 'proof' of safety) - oh and the tabloid science you quoted about density of ash (because again, you did not respond to my question of how you can be certain volcanic ash clouds are uniformly distributed)

    If you think that less thean 20 test flights is a 'scientific test' then you are truly showing your age.

    I didn't say planes would be falling out of the sky - I said it was a risk being taken that did not need to be taken - and being taken for the wrong reasons.

    Clearly you cannot get over the fact this is what the airline engine manufacturers were saying - which completely destroys your 'willie is a scientist' argument.

    I think you need to get over it - bitterness is not a nice trait.

  • Comment number 34.

    What is needed is that when a bank or financial services gambles away public and private investments the CEO's and Board of Directors should be held personally liable for those actions. Laws should state that those directors should have their personal wealth and properties attached to make whole the depositors and investors who lost funds because of such actions. Accountability is the mother of caution. No excuses like faulty formula and such nonsense that they put forward to cover their criminal activities.

  • Comment number 35.

    I almost agree with Robert Peston's analysis - because he was finally readable for, silly me, who doesn't have time for cryptic clues?

    Yes, disturbing that UK Chancellors are not, yet, walking the talk in the UK version of Wall Street; The City? It's evident that 'casino'/'investment' and 'computer run' arms of our 'consumer banking/savings have to be separated?

    It's 'unethical' for 'consumer banking' customers to be 'exposed' by 'spot investment' as they gamble the expected income stream from current account salaries; insurance payments; pension payments and pathetic and low interest savings accounts of you and me?

    Well, we know it goes on. They don't have to 'break cover'. So much cover the worst ostrich are the dealers recycling the sewage they created that spread the banking infection?

    Actually, that would be OK if a decent percentage proportion of that 'silent' gamble, minute by minute, was actually 'fairly and reasonably' distributed to us, the 'pond-life' income stream?

    PS: why would the UK population be remotely concerned to receive help from the IMF? The UK has paid £trillions into IMF - let's have some back?

  • Comment number 36.

    15. At 11:35am on 23 Apr 2010, writingsonthewall

    And the press are wondering why they have to give their product away!

    Depending on who wins the election we might see something. If DC gets in, then there will be no action to protect the UK - tho' he'll spin it that way.

    If either of the other two make it in, I reckon they will join forces with Obama - once they have the keys to ten downing street, there isn't that much the press can do to defend their City pals.

    Can't wait for the Wade-Brooks Murdoch Kelner exchanges to be published.


    What some people in the business sector haven't understood is this. We turned on the politicians after the expenses scandal.
    But we are just as angry with the press - hacking phones, not reporting expenses, not reporting on lobbying, not reporting on the economic bubble strongly enough - because lots of people saw it coming, just not the 'in crowd'

    The dark forces are about to be taken out and dumped with the expense abusers. This election can be quite a bit of a spring clean! And then, then the bankers just might realise they have no where to go.


  • Comment number 37.

    32. At 1:48pm on 23 Apr 2010, romeplebian

    Guy's you need to reread that. I think they said minus (-) trillion (I may be wrong)

    23. At 12:55pm on 23 Apr 2010, jon112uk

    WOTW did not say that.

  • Comment number 38.

    #33. At 1:49pm on 23 Apr 2010, writingsonthewall

    You said ...
    "Clearly you have no idea about probability and why a few test flights have no bearing on the 10,000 flights a day which operate out of European airspace and the probability of a disaster."

    Now we have the 10,000 flights a day flying through the dust. Still no planes falling out the sky.

    Normally it would be reasonable to listen to other peoples opinions and just move on. But you were so polite in the way you were saying things I thought we could revisit this one.

  • Comment number 39.

    36. At 2:38pm on 23 Apr 2010, copperDolomite

    We can but hope.

  • Comment number 40.

    36. At 2:38pm on 23 Apr 2010, copperDolomite wrote:

    "The dark forces are about to be taken out and dumped with the expense abusers. This election can be quite a bit of a spring clean! And then, then the bankers just might realise they have no where to go."

    The papers are trying to fight elections 'the old way' - but they don't realise the majority of the public have worked out their game. Their readership is down and the Sun can only claim "It was the SUN what won it" - by backing the favourite and claiming they had some influence (whereas the majority of remaining SUN readers don't bother to vote)

    It truly is a change in the old way of doing things - I even heard a bloke on the bus the other day talking about Keynsian Economics - truly a first - there may be a large turnout as the great ignored speak out (and it won't be what the Tories, Labour or possibly the Lib Dem's want to hear)

  • Comment number 41.

    38. At 3:13pm on 23 Apr 2010, jon112uk wrote:

    How do you get from

    "Clearly you have no idea about probability and why a few test flights have no bearing on the 10,000 flights a day which operate out of European airspace and the probability of a disaster."

    to

    "Thousands of planes still flying through that ash that you said would make them crash.
    When exactly is it you think they are going to start dropping out of the sky?"

    My point still stands - Clearly you have no idea about probability and why a few test flights have no bearing on the 10,000 flights a day which operate out of European airspace and the probability of a disaster.

    You are clearly in need of a translator. I did not say they would crash - I said the test flights prove very little - and they certainly don't prove that flying through (any) ash cloud is safe - which is how this all started.

    It's like betting on 3 winners in a row and then claiming "I've got a watertight formula for betting success" - and sinking everything you own into it - which probably seems like a good idea in your little world.

  • Comment number 42.

    18. WOTW
    The Governement IS in profit with its Lloyds shares. 63.7p is the in price adjusting for the APS fee.
    Close today 68.48p.
    Typically, when fact comes to the fore, your 'argument' seems to evaporate.
    So, once again, where does the £1.4trn of debt by 2014 come from?
    And that assumes 3-3.5% growth. Fanciful considering the current run rate of 0.2% per quarter, 0.8% pa.

  • Comment number 43.

    37. At 3:01pm on 23 Apr 2010, Squarepeg wrote:

    "32. At 1:48pm on 23 Apr 2010, romeplebian

    Guy's you need to reread that. I think they said minus (-) trillion (I may be wrong)"

    I think that may have been a mistake - I'm quite willing to take it back if I were wrong - but coincidently RBS is showing a paper profit of £2,369,442,000.00 (well it was this morning).

    Not bad for a 2 year investment of £21,738,000,000.00 - that's almost 5.5% a year on a high risk investment that no other institution could provide (making the Government the only possible investor)

    ...and that comes with the largest dollop of sarcasm you can imagine.

  • Comment number 44.

    If you want to make yourself heard - Clerkenwell - London - Saturday May 1st.

    A large turnout will create the 'climate of fear' these politicans need to feel so desperately.

    I shall be there.

  • Comment number 45.

    42. At 4:49pm on 23 Apr 2010, hootsmon wrote:

    "18. WOTW
    The Governement IS in profit with its Lloyds shares. 63.7p is the in price adjusting for the APS fee.
    Close today 68.48p.
    Typically, when fact comes to the fore, your 'argument' seems to evaporate."

    ...and once again you try to decieve.

    Your claim is based on the premise that the APS was offered for free therefore bringing the average share price down to the 63.7p you claim.

    However - if you are confident that the taxpayer is happy to insure a £260bn portfolio of bad loans - for nothing then you are correct.

    ...I fear the public will feel differently once they see how you came to you 'in profit' figure.

    I'm sure the average member of the public (or for this theatre - blogger) is not used to their bank advancing payment protection for their income free of charge. and therefore might find your premise somewhat hypocritical.

    Desperate times lead to desperate measures eh?

  • Comment number 46.

    Is this a little bit of evidence to suggest there really is a walk-away from the "business rules OK" economy?

    BBC's Working Lunch show to end
    A BBC statement added: "The size of the Working Lunch audience has suffered a slow but steady decline since 2001.

    "A re-launch of Working Lunch in October 2008 has failed to reverse the audience decline which now appears to be stable.


    http://news.bbc.co.uk/1/hi/entertainment/8640504.stm

    What could that mean for the Tories and Mr Daily Fail Owner?

    Chancellors it is time to sort out the banks and businesses - catch up with the electorate!

  • Comment number 47.

    (a) set up an autonomous consumer-protection agency; We have got one of these already (OFT) only problem is that only in the UK would govt draft legislation designed to protect real people and then make it so complicated that only lawyers who spend their life working with this legislation have a hope of understanding what it means - basically USA do not follow our Consumer Credit Act, to call it useless would be a massive overstatement of its abilities

    (b) give more power to shareholders to determine who runs the banks and what they're paid; that would be bringing shareholder rights more in line with current UK legislation which did not exactly stop abuses.

    (c) put in place resolution procedures to protect taxpayers when the biggest financial institutions run into difficulties; Good idea, but I think Gordon Brown (and "living wills") got there first

    (d) introduce greater transparency into the trading of derivatives by directing trades through centralised clearing houses, Excellent idea only problem, as already pointed out in UK, is that this does not work for companies who genuinely need derivatives (for example BA hedging the oil price) as they will not be trading on clearing houses but setting up specific derivatives with their banks.

    (e) limit the size of banks and place limits on the ability to speculate for their own account of those that take retail deposits. As has been pointed out many times, there is no link between the size of the banks and the likelihood of failure nor between the speculating banks those (NR for example) who simply failed to keep any grip on their lending practices.


    So Obama has created some wonderful soundbites which signify....nothing

  • Comment number 48.

    Obama versus the banks.
    They are both vying over who gets to suck us dry.
    The banks will point out that without them nothing happens.
    Obama will point out that without a funtioning society nothing happens.
    Brinkmanship.
    Who will win?
    One thing is for sure - we will lose.

  • Comment number 49.

    There are a lot of posts demanding the banks are split - retail versus investment. I may be being ignorant but I understand the costs of running the retail bank - branches and staff to man them - mean that they alone do not make a profit. If they are split wouldn't this mean more closures of branches.

    I do not mind this as I use online banking/telephone banking however I know a lot of people that don't.

    Please feel free to put me right if you know better!

  • Comment number 50.

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

  • Comment number 51.

    The Fed and Wall Street have a cosy relationship based on keeping the US in prime position. The UK Gov and Threadneedle Street have the same cosy relationship to keep the City of London ahead of Frankfurt, Paris etc.

    I praise Obama for his oratory but don't believe for one moment that anything significant will happen - it'll just be window dressing - just as the SEC fraud case against Goldman's Sackfull of Dosh will whittle away when the moment is convenient.

    And, as Max Keiser suggests, if the UK authorities start to rummage around in Goldman's closet the lovely Mr. Blankfien may well decide to pull the rug out from under Sterling to 'punish' Britain for its cheek.

    It has all been a giant con. We are the ones who were conned and we are still being conned all the while I type these words...

  • Comment number 52.

    And I've always wanted to know if WOTW signifies:

    1. I am writing these words on a wall because I have no paper.

    or

    2. These words are writings I have already seen on the/a wall.

    John Cleese's latin lesson in 'Life of Brian' springs to mind...

    Go on, please enlighten me.

  • Comment number 53.

    45. WOTW
    No, you are wrong.
    A lump sum was paid for the APS.
    You must add that back for the net figure.
    Defaults in the UK are not the issue, tough I agree, the policy of forebearance may be storing up trouble.
    BTW, the reason Lloyds has not been able to recapitalise as quick as RBS is because it does not have an investment bank.
    The share price given is actually the Government and UKFI's figure.
    And again, I am not a banker, just more objective, and better informed than you.
    You go figure.

  • Comment number 54.

    45.
    Once again I decieve(sic)?

    baffled.

    Facts over rhetoric is what I was taught.

    How badly were you bullied at school?

  • Comment number 55.

    47. At 5:42pm on 23 Apr 2010, Justin150 wrote:
    (a) set up an autonomous consumer-protection agency; We have got one of these already (OFT) only problem is that only in the UK would govt draft legislation designed to protect real people and then make it so complicated that only lawyers who spend their life working with this legislation have a hope of understanding what it means - basically USA do not follow our Consumer Credit Act, to call it useless would be a massive overstatement of its abilities

    (b) give more power to shareholders to determine who runs the banks and what they're paid; that would be bringing shareholder rights more in line with current UK legislation which did not exactly stop abuses.

    (c) put in place resolution procedures to protect taxpayers when the biggest financial institutions run into difficulties; Good idea, but I think Gordon Brown (and "living wills") got there first

    (d) introduce greater transparency into the trading of derivatives by directing trades through centralised clearing houses, Excellent idea only problem, as already pointed out in UK, is that this does not work for companies who genuinely need derivatives (for example BA hedging the oil price) as they will not be trading on clearing houses but setting up specific derivatives with their banks.

    (e) limit the size of banks and place limits on the ability to speculate for their own account of those that take retail deposits. As has been pointed out many times, there is no link between the size of the banks and the likelihood of failure nor between the speculating banks those (NR for example) who simply failed to keep any grip on their lending practices.


    So Obama has created some wonderful soundbites which signify....nothing

    >>>>>

    Justin, on your final point I'm not sure that you are entirely correct:-

    The problem we had with our banks was that the retail side was intertwined with the commercial/investment side. When all that nastiness with toxic CDOs which were supposedly AAA rated (but werent really!) happened the problem is that the potential black holes in the group as a whole would pull the retail side with it - they became "too big to fail" since the retail depositors would still be bailed out by the government up to the limit at that time but the government would end up with nothing. If they were not 'too big to fail' then investment banks would have failed and it would only be the shareholders who would suffer (although that would include pension funds as well as individuals) since provided the retail side is well managed there is relatively little risk (but also lower potential profits hence the banking groups needing the investment banking side as well to satisfy their 'growth' targets).

    I think while we have banks that are too big to fail the moral hazard argument is very strong - why would they be sensible if they know they can get bailed out.

  • Comment number 56.

    21. At 12:44pm on 23 Apr 2010, stanblogger wrote:
    It is interesting and perhaps important to discuss the arrangements for regulating banks in the future, but the more immediate problem is that for nearly two years they have been failing to supplement the money supply with the credit that the economy formerly needed to work efficiently.

    It is unlikely that the pre-crunch level of credit will be reached in the near future, if ever, because of the trauma that the crunch inflicted on senior bank managers. So should governments not be looking at other ways by which the present hole in the money and credit supply can be filed now and in the future?

    Consideration should be given to continuing some of the temporary unfunded deficit measures on an indefinite basis. As long as huge productive capacity lies idle, general inflation is not a risk. Nor would there be a risk to the exchange values of the major currencies, provided the governments act in unison.

    Are you saying stanblogger that money should be provided by the government/Bank of England as debt and interest free money, rather than allowing the banks to create more debt money ? An extension of quantitive easing if you like. There is no risk to inflation if new money is created gradually, and is not multiplied up by being lent out several times again by the banking system. Even the BNP have cottoned on to this, I wonder why the three big parties do not advocate public debt free money ? All they talk about is getting more bank lending, as though creating more debt money is the only solution in town. Anyone would think they were bankers...

  • Comment number 57.

    # 47. At 5:42pm on 23 Apr 2010, Justin150 wrote:

    > As has been pointed out many times, there is no link between
    > the size of the banks and the likelihood of failure

    Who cares about that?

    We don't care about the risk to "them" - we only care about the risk to us! Big banks cost a lot to bail out. Make them small, and I don't care whether or not a link exists between the size of the banks and the likelihood of failure.

  • Comment number 58.

    I don't think that we need take any lessons from the USA on regulation. Their track record of failures and subsequent knee-jerk reactions is legendary.

  • Comment number 59.

    Wall St regulators spent hours watching porn instead of monitoring crisis
    http://www.timesonline.co.uk/tol/news/world/us_and_americas/article7106889.ece

  • Comment number 60.

    9. At 11:59am on 24 Apr 2010, DebtJuggler wrote:
    Wall St regulators spent hours watching porn instead of monitoring crisis
    -------------------

    I bet that is a smear campaign paid by Goldmann Sachs.

  • Comment number 61.

    Having just read the "Hidden Debts" story, (http://news.bbc.co.uk/1/hi/business/8640611.stm%29, I reckon that all the politicians need to re-think the UK's relationship with debt - at every level of society.

    Kind of like how you might look at treating those with some sort of drug or alcohol addiction or perhaps might think about some sort of re-education process that you would use for someone who is "addicted to sex". Everyone seems to need some sort of 'weaning off' process.

    The fact is, however much the older generation is hooked on credit, many of them will remember when you spent what you had in your pocket and then stopped when that ran out. But who is teaching the twenty and thirty somethings how to live in a non-boom time, without credit?

    Quite the opposite, our media continues to throw adverts for loans, credit cards, banks and mortgages at people in a way frighteningly similar to how they were, say, three or four years ago.

    So just what is going to make people change their ideas? What will make people change their expectations? Who'll put their hands up and say, actually we've run out of dosh for most things - health, education, roads, defence, etc., etc?

    If governments can prop things up and hold things together on massive amounts of debts, why shouldn't they do the same?

  • Comment number 62.

    Anyone else noticed that the taxpayer is now in profit from rescuing RBS?
    ------------------
    So, a friend steals money from your pocket and later returns in victory from the betting office to repay what he stole and give you a pound on top to say thanks.

    Do you trust him more, or less than before ?

  • Comment number 63.

    And the rich are getting richer in a 21st century Neofeudal Kingdom of Britania.
    http://news.bbc.co.uk/1/hi/business/8642021.stm

    Neofeudalism literally means "new feudalism" and implies a contemporary rebirth of policies of governance and economy reminiscent of those present in many pre-industrial feudal societies.

    The concept is one in which government policies are instituted with the effect (deliberate or otherwise) of systematically increasing the wealth gap between the rich and the poor while increasing the power of the rich and decreasing the power of the poor (also see wealth condensation). This effect is considered to be similar to the effects of traditional feudalism.

  • Comment number 64.

    This is all just rubbish. There is no point making new rules. What happened was criminal fraud, from the counter staff mis-selling mortgages to the executives packaging them up, everyone expected them to fail before their expiry because even those that weren't fraudulent applications, had unsustainable income multiples. Prosecution and compensation is called for.
    Without the rule of law international and domestic business' will leave. It's not just us who were defrauded, so to were the foreign banks and pension funds who were customers of UK based financial services.
    Initial 30% cuts in public services will be the first of a never ending process, growing unemployment, falling real wages.

    We still have a window to return to the rule of law. Not doing so will reverberate thru the rest of our lives and down the centuries. This is the moment we chose between a future of honest enterprise and one of decline born of corruption.

  • Comment number 65.

    It's not only banks that need regulation, it's CENTRAL banks that need "supervision". Why was the Monetary Policy Committee moved from the House of Lords to the Bank of England?

    Why does the MSNBC present the Federal Reserve as the godfather of the greates con and cover-up? See http://bit.ly/9pAMSe

    Why did Alan Greenspan offer his "consultancy services" to Gordon Brown?

    Why does the Bank of England have the same inflation target as the Fed?

    Because, together with the Bank of International Settlements (BIS), they form the invisible government that rules the world by manipulating currencies, gold and silver.

    It's incredible that they've been getting away with it for such a long time and that, still, only a few people realise the significance of their wrongdoings. "Quantitative easing" is the latest camouflage. See http://bit.ly/cVPxOJ

    In the UK, the Bank of England Act 1694 was written with the intention NOT to suppress Their Majesties' subjects. But what is happening? More on http://edm1297.info and http://PublicDebts.org.uk

  • Comment number 66.

    Just been listening to the news on BBC World Service. So the Goldman Sach's employees were sending gleeful emails to themselves (including the bosses) enjoying the fact they were making money as the housing market plunged! The investigative committee have released the emails.

    Robert they were shorting the loans, the mortgages. I think that would mean there was no risk. They won if people managed to pay, and they one if people couldn't. So, with the general election due would it be possible for you to have the politicians of all parties in the studio, one after the other, and ask each of them why any of us should be facing a tough time? You could perhaps suggest that whoever wins will have to be come up with a means of reclaiming all of our money now. That should wipe out our debt instantly leaving us to decide what kind of future we want for ourselves and future generations.

    If what has happened isn't criminal, then the government of the day could always enact a retrospective law. I'm sure Greece, Iceland, Ireland and every country that has suffered will do likewise. Won't they???

    Who ever wins (please David, just go away and stop frightening the electorate with your promise of more Goldman Sachs Capitalism because no politician should ever frighten the electorate so much as to give them nightmares the way you do!), I think they should give serious thought to inviting Democratic Senator Carl Levin, who chairs the US Senate permanent subcommittee on investigations (PSI), over to the Palace so he can have the Queen wave that sword of hers at him and pin on lots of medals, give him lots of titles etc.

  • Comment number 67.

    I'm not sure the big vs small banks argument actually addresses anything substantial. From outside it looks as if the system is so close-coupled that everything follows more or less the same analyses and assessments, regardless of what the institutions are called. Going back to the pre-crunch era, could any small saver or investor make a choice about the level of risk he was asked to take?

  • Comment number 68.

    Breaking up the Banks may be a solution to stopping a mega collaspe of a 'too big too fail bank' BUT taxpayers need to look ahead and consider the consequences of this action. The existence of prue retail banks- the less profitable part of current banks-would generate the need to raise their profits. Failure to improve their performance would mean that few investors would invest in them.
    The consequence-new bank charges for all. How expensive would that be to taxpayers?
    While making this comment I would also like to say that although I am against massive bonus payments to the top bankers taxpayers should always remember that half the money comes back to them -in tax. Perhaps not so bad after all!

  • Comment number 69.

    68. At 10:12am on 25 Apr 2010, tm123

    Smaller banks can fall over. Who cares because they won't take the global economy with them, they won't leave hordes living in tents all across the US check out youtube). The collapse of smaller banks won't lead to food riots in far off lands. Make no mistake, the cushion we've been living on for the past couple of years is what has kept you, me and most of the UK population from hitting the streets and demonstrating loudly as has been seen in Greece. 20% wage cut not just for tax inspectors but for the kids stacking supermarket shelves - fancy that? That's the kind of thing held in store for us, that's what's been going on in Ireland, Greece, and who knows what kind of nightmare people are living in Iceland.

    What cost is there to banking? Haven't you noticed the push for online banking, for call centres rather than face-to-face customer service? It hasn't been for the benefit of customers. That increases profits and you don't get a better interest rate as a result. Wake up!

  • Comment number 70.

    Oh the irony, as Obama's bank (Boradway Bank) seems to have just gone bust (along with 6 others)
    Is this what recovery looks like?

    http://www.fdic.gov/bank/individual/failed/banklist.html
    http://en.wikipedia.org/wiki/2008-2009_bank_failures_in_the_United_States

    "Among people with bank accounts at Broadway were Barack Obama, Illinois Secretary of State Jesse White, and Chicago alderman Walter Burnett, Jr."

    http://en.wikipedia.org/wiki/Broadway_Bank_%28Illinois%29

    Does he claim on his FDIC insurance like everyone else?

  • Comment number 71.

    http://news.bbc.co.uk/1/hi/business/8642021.stm

    The accumulation of capital continues apace - just as predicted by the sacred scrolls. The end-game is near.

  • Comment number 72.

    Robert
    I still don't understand you. Why do you drop the name of Barclays among those that were bailed out by government intervention and still weigh as a stone on the UK taxpayer?
    This is factually incorrect. I know you will argue that there was an "indirect implicit support" to all UK banks, but it's like blaming Renault for the stuck accelerator pedals of Toyota.
    I find it unacceptable.
    Regards

  • Comment number 73.

    The absolute requirement for feedback loops in control systems
    Take a thousand small companies run by the Good (at business), the Bad and the Lucky.
    Five years later the Good and the Lucky will still be in business, Ten years later only the Good and the very Lucky will still be up and running.
    The Bad and the Lucky-to-start-with will be either un-employed or better employed in something they are more suitable for.
    - This is the basic dynamic behind real capitalism. The banks don't suffer such feedback loops : If you start a bank and issue $50 Billion in loans to unemployed Hill-Billies in "Florida Swamp Deals" the recipients of these loans will deposit this new money in other banks so that your bank then has 'assets' of $50 Billion in loans backed by a dime's worth of swamp land and liabilities of $50 Billion owed to other banks.
    These other banks then owe current accounts of $50 Billion to regular 'Joe' and have 'assets' that 'say' '$50 billion of inter-Bank account loans owed from your bank' but in reality are worthless.
    When your bank admits this and goes under, the other banks have to admit their $50 Billion shortfall and then it's time for Mr Taxpayer to bail them out.
    If the banks were smaller - a good idea - this would hugely improve the situation as once they are small enough to be 'fail-able' they would be a lot more concerned with not just what loans they were making but what loans other banks were making. However, given the nature of the banking World, a lot of this 'let's be careful' leg work would be hived off to 'agencies' who would issue ratings - However, such 'credit rating agencies' have proved themselves far less than adequate in the build up to the 'Credit Crunch' - so you'd end up with 30 banks losing $10 Billion each, based on the rating of an agency rather than 1 Bank losing $300 billion based on the same rating of the same agency - not much of an improvement, but.... if you take the idea, one of the best ideas on this site for a long time, from ghostofsichuan in #34 "Laws should state that those directors should have their personal wealth and properties attached to make whole the depositors and investors who lost funds because of such actions" then suddenly you get a lot of very clever 'top' people, who will normally be on the Golf course on a Friday afternoon, looking in great detail and focusing their long experience and huge ability on the risks their bank has or is about to accept.
    It needs to be stated now that allowing 'Profession Indemnity Insurance' to cover such risks will set at nought much of the practical benefit of such a measure.
    Further, given that when ‘perfectly adequate Businessman A’ goes to a bank and request a £1 Million loan to set up – pardon the crude nature of the example but I use it to focus the attention – to set up a strip club in the local town, in a few weeks time the daughters of the town will be working there as strippers, ‘perfectly adequate Businessman B’ asks for the same loan from the same bank in order to set up a computer centre, in a few weeks time the same daughters of the same town will be computer programmers. The bank manager has huge amount of power over shaping society depending on who he issues loans to. There is a very strong case for having those who issue loans to be also voted upon in elections or at least licensed by elected officials.

  • Comment number 74.

    # 53. At 8:31pm on 23 Apr 2010, hootsmon wrote:

    "45. WOTW
    No, you are wrong.
    A lump sum was paid for the APS."

    ...and how was that 'valued' - I mean the premium charged for a scheme to insure bilions of assets in a time of financial crisis would be worth....a lot more than Lloyds paid, I mean I wonder what 'the sage of Ohama' would charge for such a facility?

    "You must add that back for the net figure."

    ...and take off opportunity cost - the 'risk free rate' of the investment in Lloyds and RBS - i.e. US treasuries, or have we abandoned investment principles to make the pisture look better.
    Come on, be fair - all the costs must be accounted for.

    "BTW, the reason Lloyds has not been able to recapitalise as quick as RBS is because it does not have an investment bank."

    You mean no access to funny money - well isn't that a good thing?

    "The share price given is actually the Government and UKFI's figure.
    And again, I am not a banker, just more objective, and better informed than you.
    You go figure."

    You may not be a banker, but you seem to be a bit keen to start calling profit on these two - a picture which is not true. I am objective, otherwise I would be telling you how they are going to both end up nationalised once sovereign debt exposure is revealed - but that would be pessimistic.


    # 54. At 8:58pm on 23 Apr 2010, hootsmon wrote:

    "Facts over rhetoric is what I was taught."

    ...and have I not just presented the facts. Every bedroom investor knows that profit isn't profit until it's realised, opportunity cost has to be deducted and removing 75% of a companies shareholding will always create a rise in the remaining 25% - just through supply and demand.

    It's the sale of that 75% that will restore the balance. Give me a few weeks, I'm sure I can find a formula to reflect the effect on a share price when 75% of the shares are sold back into the market.

    "How badly were you bullied at school?"

    Is that how you subdue your fear? - people like me are just angry at the world and make up stories to frighten you?

    It won't help you know.

  • Comment number 75.

    WOTW - just seen the anarchist May 1st demonstration. What are you going to replace the current system with?

  • Comment number 76.

    52. At 7:43pm on 23 Apr 2010, ElEnfadado wrote:

    "And I've always wanted to know if WOTW signifies:
    1. I am writing these words on a wall because I have no paper.
    or
    2. These words are writings I have already seen on the/a wall.
    John Cleese's latin lesson in 'Life of Brian' springs to mind...
    Go on, please enlighten me."

    It's just a username - didn't put as much thought into it as you clearly thought I did!

    It's just a blog mate - not the writings of Socrates or anyhing.

  • Comment number 77.

    WOTW.
    1. Theoretical profit is as illusory as theoretical loss, therefore(cart before horse) your premis is popped. You can't therefore, argue about losses.
    How the fee was valued is irrelevent, the fee is the fee, irrespective of the assumptions on it. It has not been called.
    The price the Govt paid for the stake in Lloyds and RBS is the price they paid. History is irrelevent. The price is the point. If the call on underwriting (bad) assets does not happen,then it is all the more irrelevent. The price per share is, a finite amount, and if they sell it to the market at a profit, then they have ridden the storm, and your objections evaporate.
    The shareholders are pari parsu with the Govt., and if the Govt are no longer a shareholder, then you would surely be delighted.
    It's very simple. the Govt bought a stake. An APS fee was paid. There has been no call. The Government are in profit.
    2. The Sage of Omaha did step up, and he has made a considerable profit too. He did not take a specific underwriting of any debt, but toof pref shares in GodSbanker....As people did with our banks and the Prefs have been paid out. Buffet got a pretty penny, and deserved to.
    3. The 'risk free' rate is rising in this country because of the £1.4trn debt mountain, and the prospect of Gordy/Coalition continuance. (and I say that as a Lab [ex] voter)But looking at the benchmark, the adjustment for the risk free rate, and the equity premium to it,still puts the Govt in profit.
    Your wording implies a thin understanding here. Carrying value, is rarely a factor in equity markets, hence emphasis on volatility, beta etc.......ie equity premium.
    Many international corporates now have less risk premium than UK sovereign debt. McDonalds, Tesco and The Gap for example. Look at the CDS rates.
    4. I thought everyone got the fact that QE was there to recapitalise the banks. Weird. Yes it's a good thing that banks recapitalise. Sorry, genie's out the bottle. The economy, in all respects needs banks.
    You can't change that.
    5. Because 25% is available to investors does not mean that 100% is demanded. Quite the contrary. RBS does not carry a full market weighting, so most institutions cannot hold full weightings, due to the Stock Exchange benchmark weightings. The effect of hedge funds means that they create selling pressure on a marginal trading volume, so, unless they were confident in prospects, would they buy it. Also, the market anticipates such obvious issues.
    6. Facts/rhetoric. I see no facts from you, just opinion.
    7. Bullied at school....just trying to understand why you lack any spectrum or objectivity to what you scribe. It comes across as very bitter. I listen. I find I learn more that way.
    5. You have an obsession with US Treasuries. It was US CDOs caused the trouble. Bear in mind, it was not the UK mortgage market, or even UK Mortgage backed securities that have caused defaults. Treasury and risk issues yes. Investment banking per se, no.

    This spittal fuelled, populist rant at the banks is, in essence correct, strategically, ie,. those at the top deserve castigation. But bear in mind, countries with decent regulation and well manged economies escaped....Australia, Canada, even Italy!
    In context, history will show Gordy bust the books.

  • Comment number 78.

    WOTW.
    The RBS stake is not going to be sold in the next few weeks. Maybe some LLoyds, but not RBS.
    Do you think they'd do it

  • Comment number 79.

    you think they'd do it all at once?
    dear me.

  • Comment number 80.

    PLEASE .... 'writingsonthewall' and 'hootsmon' DO exchange 'phone numbers or organise a meeting in a chat room?

    You have so much to say to each other - THIS is not a chat room? (yet)

  • Comment number 81.

    fair enough!

  • Comment number 82.

    # 75. At 7:40pm on 25 Apr 2010, truths33k3r wrote:

    > What are you going to replace the current system with?

    You call what we have now a "system"? That's far too generous.
    It's chaos, so anything at all could not be worse.

  • Comment number 83.

    75. At 7:40pm on 25 Apr 2010, truths33k3r wrote:
    What are you going to replace the current system with?
    ----------------------

    Natural resource economics
    Natural resource economics deals with the supply, demand, and allocation of the Earth's natural resources. One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to develop more sustainable methods of managing those resources to ensure their availability to future generations. Resource economists study interactions between economic and natural systems, with the goal of developing a sustainable and efficient economy.
    http://en.wikipedia.org/wiki/Natural_resource_economics



  • Comment number 84.

    61 sutara "So just what is going to make people change their ideas?"

    This is the trillion dollar question. Do people ever change their ideas? However destructive their ideas are, doesn't history show that humans repeat mistakes endlessly?

    That being the case, the best course is to build safety measures into any system. The primary aim of those measures should be to take into consideration the fact that humans are likely to deceive themselves over and over again.

    The financial world has been given too much margin lately, and that has to be corrected, again!

  • Comment number 85.

    Every world leading country had, has and will be having financial problems and issues with monopole banks; no matter if it is about the UK or Switzerland. The situation and periodical collapse in UK banking world should not be a matching point to US banking system. What should be a basic point of start in reforms is the existing autonomous consumer-support agency in the UK, which should be established in every country. Millions are in need of this support, because of their lack of knowledge in the field of finance, banking and lending. Maybe this is the first issue every bank and financial institute should understand before going on to bank size and power limiting.
    All of Obama’s desires connected to the financial reform seem good and promising, giving more knowledge and help to consumers and limitation to banks, transparency and more power to share-holders; but let’s think realistic. Since the financial situation of the globe has become centered, banks are holding the high cards, having the last world with the freedom of managing fees, rates and taxes as they wish, and unfortunately, although some appearances in the UK banking system show some changes, this will continue for a long time.

 

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.