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Swiss medicine could be painful for UK banks

Robert Peston | 08:58 UK time, Tuesday, 5 October 2010

There are weighty and potentially painful implications for British banks from a report of a commission of experts set up by the Swiss Federal Council on how to limit the risks to the Swiss economy of banks that are so big that they can't be allowed to fail.

Credit Suisse and UBS logos

In the case of Switzerland, the relevant mega banks - or too-big-to-fail banks - are UBS and Credit Suisse.

The report matters to the UK for a number of reasons.

First, George Osborne's banking commission is looking at the same issue.

Second, the UK's Financial Services Authority and Bank of England have been on the same side as the Swiss Authorities in battling for the imposition of higher capital ratios for banks - as a protection against losses - in negotiations on the Basel Committee. There is considerable mutual respect and empathy between UK and Swiss regulators.

Or to put it in more concrete terms, like the Swiss, the FSA is determined to impose significantly higher capital requirements than the new Basel minimum on the UK's biggest banks.

What would be the implications of the adoption of the Swiss approach in the UK?

Well the likes of Barclays, Royal Bank of Scotland, HSBC and Lloyds might think that would be good news, in that the Swiss have opted against breaking up their two giant banks.

But I am not sure that's quite right, because what the Swiss authorities are implementing may massively increase the costs of doing business for their banks - and presumably the banks themselves will have to swallow some of that cost increase, rather than passing it on to customers in the form of higher fees and interest rates.

What is most striking is the calibration of the capital that UBS and Credit Suisse would have to hold.

There would be the absolute minimum of equity equivalent to 4.5% of risk-weighted assets, as per the new so-called Basel III minimum.

Then there would be a buffer of a further 8.5%, much bigger than the Basel III 2.5% buffer.

That 8.5% would consist of 5.5% common equity and up to 3% in so-called contingent convertible bonds, or CoCos. The investors in these bonds would see the bonds automatically converted into equity at the moment that the ratio of the banks' equity to risk-weighted assets were to drop below 7%.

And here's what may particularly alarm the UK's big banks: the Swiss banks are being obliged to hold CoCos equivalent to a further 6% of assets simply because they are big, in what the commission calls a "progressive component" in the capital requirement.

The relevant statistics of their bigness is that both UBS and Credit Suisse have total assets of around CHF1.5 trillion (£977bn) and a share of the relevant Swiss markets of around 20%.

The commission says that UBS and Credit Suisse would have to hold even more capital if their balance sheets and respective market shares were to increase further - and they would be rewarded with a decline in the progressive component of the capital requirement if they were to shrink.

So what are the potential implications for Britain's big banks?

Well none of them hold equity and CoCos even close to 19% of assets - and only Lloyds has any CoCos at all.

So if the FSA were to adopt more-or-less the same capital approach as the Swiss, British banks would have to raise something of the order £200bn of new capital in the form of equity and CoCos. Which is a colossal sum.

Here's the thing. It's not clear that insurers, pension funds, hedge funds and the like have £200bn going spare that they would want to provide as risk capital to banks.

What's more, if the FSA were adopting the most prudent approach, it would discourage UK insurers and pension funds from buying this stuff and hope it was sold overseas, so as to insulate the UK financial system and economy from a UK banking implosion. But it would not be at all easy to persuade overseas investors to put £200bn into British banks.

As for the biggest investor in RBS and Lloyds, which is the British government on behalf of British taxpayers, I'm not sure the chancellor would want to inject a further £70bn odd into RBS and Lloyds at a time when money is tight.

Here's where the Swiss remedy could be particularly painful for British banks: there's an argument that the UK's too-big-to-fail institutions should hold even more capital than Swiss ones.

First, the gross assets of RBS, Barclays and HSBC are each between 50% and 60% greater in absolute terms than their Swiss rivals: their respective gross assets are all between £1.5tn and £1.6tn. Or to put it another way, they all have balance sheets significantly greater than the value of UK GDP.

As it happens, Credit Suisse and UBS are bigger relative to Swiss GDP than individual British banks. But that relative size disparity does not mean that rescuing an RBS or a Barclays would be significantly simpler and less dangerous for the British economy than rescuing a UBS is for Switzerland.

Second, Lloyds' market share in the UK - 30% of current accounts, 24% of mortgages, 23% of services to small businesses - would imply on the Swiss model that it should hold quite a lot of additional CoCos.

Nor is that the only pain being inflicted on Swiss banks. The commission say it is imperative that they put in place arrangements to ensure that in a crisis they can be "resolved" or broken up in a way that minimises the likelihood than any taxpayer funds will have to be injected into them - which, as I've pointed out before, will probably mean that it becomes more expensive for the banks to borrow (another increase in their cost of doing business).

What I'm driving at, in a meandering way, is that the management of Barclays, RBS, Lloyds and HSBC may be deluding themselves that a forcible break-up of their banks is the worst that could possibly happen to them - and that they've got to prevent such a dismantling at all costs.

The Swiss model of sanitizing mega banks, making them safe, would - for a transition period that could last many years - massively reduce the returns for shareholders and the remuneration of bankers.

In those circumstances, it might be rational for mega banks to voluntary break themselves up and shrink, to ward off the burden of additional capital requirements.

Comments

Page 1 of 2

  • Comment number 1.

    'What would be the implications of the adoption of the Swiss approach in the UK?'

    It would the the Govt to spend more debt free money if the policians and economists actually understood the concept

  • Comment number 2.

    It would allow (even)....
    Sorry always get excited when I'm first.

  • Comment number 3.

    > the banks themselves will have to swallow some of that cost increase,
    > rather than passing it on to customers in the form of higher fees
    > and interest rates.

    We are all working hard to ensure that the cost is borne by bankers, not banks or their customers.

    Bankers themselves have large debts to society that are nowhere near paid down. They remain on the hook until those are settled.

  • Comment number 4.

    How many huge banks can the Swiss people afford to be too big to fail? That is the question that the Swiss authorities struggle with - and that is our problem too.

    The lesson is that there is nowhere on the planet for these corrupt bankers and financiers to run. They must start acting responsibly and for the general good.

  • Comment number 5.

    ‘Too big to fail’
    Nothing is too big to fail.

    It’s not a question of what is too big to fail.
    It’s a question of what don’t you want to fail.

    Make a list, perhaps ‘society’ would come first, possibly followed by the NHS. Are banks likely to be at the top of it?

    Now ask yourself the question:
    Why is the Government always in debt?

    Why, given that the Government has the absolute and fundamental right to issue its own currency and not borrow it from anyone, do we allow banks to create money from nothing under the fractional reserve system, and then borrow it from them and pay them interest on it, when we can create it ourselves and thereby avoid the interest?

    Why has one renegade MP’s bill to change the system, recently introduced into parliament, not been reported in the media?

    Why are we allowing ourselves to be bled to death with interest payments to banks, when we don’t need to?

    Groups wishing to make changes to the system, see links below.
    http://www.bankofenglandact.co.uk/act/
    http://www.prosperityuk.com/prosperity/prosperity.html
    http://www.positivemoney.org.uk/

  • Comment number 6.

    It's the banks, stupid ...

  • Comment number 7.

    I see the same people here discussing the same matters again and again.
    Why? Haven't you people realised by now that this is just Théâtre de l'Absurde?

  • Comment number 8.

    Other and more simple reforms could be more useful such as preventing banks from writing off losses against their UK tax liabilities ... and then the 'golden troughers' sitting their laughing and skimming off stakeholder monies in the form of massive personal bonuses, as their additional reward for their own failure and 'privilege to skim'.

    This 'loophole' could be closed ...today ... if the govt is serious about and wants to do something about this continual fraudulent activity.

    I wonder where and when did the privilege to skim arise for those skimmers who cosy up to MP's, Lords and the 'establishment'?

  • Comment number 9.

    > In those circumstances, it might be rational for mega banks to
    > voluntary break themselves up and shrink, to ward off the burden
    > of additional capital requirements.

    Yes - that is the main benefit of new size taxes. It breaks up large, corrupt, lumbering businesses and encourages the growth of new, vibrant, competitive enterprises.

    I see plenty of green shoots here, once those greedy, lumbering, sunset industries have been cut down to size. Three cheers for size taxes!

  • Comment number 10.

    "what the Swiss authorities are implementing may massively increase the costs of doing business for their banks"
    Since the bulk of bank profits seem to be made from gambling - using OUR money - they won't care too much so long as they don't get split up which would reduce the directors remuneration.
    They'll still screw industry with their charges though and blame it on the government.
    And the regulators are not as clever as the banks so what chance have they got - it's different in Switzerland cos everyone follows the rules.
    And the government cannot afford to be too hard on the banks, it would reduce the tax take too much, so they attack bonuses; a populist measure but a bit of a distraction from the main problem which is to reduce the risk.
    Reducing bank profits over a long time would have a very bad affect on pension funds - c/f BP.

  • Comment number 11.

    Good comments, Robert. But you and George really ought to do some talking with Sharon Bowles, who is of course also heavily involved in this matter. Unfortunately, Switzerland is outside her strict purview - but talks with Switzerland (and Norway) go on nevertheless.

  • Comment number 12.

    According to Credit Action
    Total UK personal debt at the end of August 2010 stood at £1,457bn.

    The Office for Budget Responsibility (OBR) predicts that household debt will be £1,823bn by end 2015 which is an increase of around 25%.

    Current RPI inflation is 4.7% p.a., which when compounded up is 26% over the next five years.

    Therefore one can conclude that total household expenditure (purchases and interest payments on debt) will rise by around 25% over the next five years.

    But hold on a minute, average wage inflation is currently 1.5% p.a., which if compounded totals 7.5% increase over five years. And if average wages only increase by 7.5%, the capacity to spend more can only increase by 7.5%.

    How can this possibly work?

    ‘Nothing is too big to fail’, least of all a bank.

  • Comment number 13.

    Too big to fail means that they are continuous, out of control, very high risk, liability on the taxpayers. I think there is a serious question to be asked as to whether any Nation can continue to put its economy, and the money it holds in trust for taxpayers, at such extreme risk. In my opinion we have seen enough in the recent past to know that these organisations are not actually very good at looking after the assets of their customers and clients, despite all the claims and hype and I think there has to be serious consideration as the whether any Nation can continue to leave its economy at severe risk from what, in my opinion, is severe risk from amateurs. We have to consider a National Bank for savings and money movement because the first duty of the Govt.is to defend its people and this also means against an industry has left a trail of ruined lives who still suffer and every penny of that bonus is daily being paid on the backs of those ruined lives.

  • Comment number 14.

    #8 if setting off losses in one year against future profits is a "loophole" then it is one of very long standing (ie more than 100 years), it applies to all businesses whether companies, partnerships or individuals and is entirely deliberate.

    The reason it is there is to (a) encourage people to set up businesses so that early start up losses can be offset against tax (b) discourage accounting fiddles (if no carry forward of losses then businesses would try to carry back income from profitable years to loss making years) (c) encourage businesses that have a loss making year to continue rather than closing down, leaving creditors behind and starting again.

    It is a basic principle of business accounting and tax rather than a loophole. But of course one persons principle is another's loophole and someone else's unacceptable tax scam

  • Comment number 15.

    Message 5 from Dempster.
    I totally agree with you.
    However, even a popular movement for money reform comes up against the Dark Side that is entrenched power, fed by dynastic greed.
    Someone needs to establish an academic chair in macroeconomic progress so that money reform has the kudos it deserves.
    I would do it, but I need to win The Lottery first.
    Since Economics is really a tyrannical theology, a Reformation is needed to humanise the use of power for the benefit of all.
    As for Robert Peston's blog; how long can we discuss the number of angels there can be on the end of a pin?

  • Comment number 16.


    Here's a thought. The big banks could be looking for £200 billion.

    The Government will be looking to borrow £170 billion.

    So the banks buy the Government bonds (with fiat money)and can then lend against them. Even if the reserve is drastically increase that looks like an extra trillion (or more) of debt in the system.

    Great!

    Can anyone see a problem with this?

  • Comment number 17.

    To reflect a risk from too big to fail banks it shall be

    RESERVES = a * ASSETS + b * ASSETS*ASSETS

    This would naturally make too big banks less competitive and they will not be encouraged by shareholders to grow that big and likely shrink in size driving down size of bonuses in the industry.

  • Comment number 18.

    15. At 10:36am on 05 Oct 2010, thomas_paine wrote:
    ‘Since Economics is really a tyrannical theology, a Reformation is needed to humanise the use of power for the benefit of all’

    ‘Since Economics is really a tyrannical theology’
    That gets my vote for ‘phrase of the week’

    ‘As for Robert Peston's blog; how long can we discuss the number of angels there can be on the end of a pin?’

    Not forever that’s a fact. It’s likely a lost cause, but then the best one’s often are.

  • Comment number 19.

    To No.15. At 10:36am on 05 Oct 2010, thomas_paine
    What concerns me, is a terrible injustice, that could be stopped with ease, if only those on the receiving end of it would take the time to understand it. But I readily acknowledge that such is sadly unlikely.

  • Comment number 20.

    But the capital requirements under Basle II were fine, untill the muck hit the fan? Whats new with Basle III?

    The amount of extra capital required only shows how severely leveraged these banks were in the first place. Untill we return to a full reserve banking system, this mess will never get sorted.

  • Comment number 21.

    So the banks are not going to run off to Switzerland, are they?

    It is true: their options are narrowing.

    Just goes to prove that if you upset a lot of people, it is not paranoia that you have to worry about as they really are out to get you.

    It will be better to break up the banks, restrict taxpayer liabilities to retail banking and then do a full audit of the debt-hole the casinos have created. After that consequence the middle-class bankrupts can form a queue for watery soup with a stale crust as the bonus. There will be no pudding other than their just desserts.

  • Comment number 22.

    Obviously the people at the FSA are far brighter than I am. But from my perspective I don’t understand how Britain voluntarily increasing our banks capital requirements even further, which incidentally will coincide with the banks having to repay billions that they received to support their mortgage books. In conjunction with the MMR mortgage changes which the CML said today would reduce mortgage lending by 50%. Not forgetting the largest cuts in public spending ever, help to pull us out of this financial mess. The banks will cut lending even further; mortgages will be as rare as hen’s teeth. Implemented in conjunction with huge public spending cuts will completely snuff out any growth in our economy for decades.

    They are creating the perfect storm but seem to be completely unaware. The government does not seem to be looking at the overall effect of changes being implemented by individual agencies. No one seems to be looking at the whole picture.
    Suggesting these changes in 2006 might have made some sense. But not when the economy is, to say the least, extremely fragile.
    Or have I missed something?

  • Comment number 23.

    The regulators might think they have all the answers but,

    The timescale for all this is what?

    The next bailout might be needed in 6 months what then?

    It might be sensible to split retail banking from the rest now, at least then we will still be able to transact bill payments and salary deposits etc, although we might still need a wheelbarrow when we need cash!

    Or the gov't could wake up and start a National not for profit Credit Union. But don't hold your breath.The gov't doing something that reduces the banks influence on the economy, no chance.

  • Comment number 24.

    # 2. At 09:25am on 05 Oct 2010, Morpheus wrote:

    ......."Sorry always get excited when I'm first."

    Do you say that to all the girls?

  • Comment number 25.

    In a discipline like engineering, they accept the reality of failure.

    They say it is not "if it breaks" but "when it breaks".

    And they therefore engineer a solution accordingly.

  • Comment number 26.

    No sign that the looting is going to end anytime soon.


    UK bank bonuses 'to top £7bn this year'
    http://www.bbc.co.uk/news/business-11473352
    "Benjamin Williams, CEBR economist, said that finding might go some way to reducing public anger at the size of City bonuses being paid.
    "It seems that the wave of public anger towards bank bonuses may be ebbing a little," he said.
    "A whopping £7bn bonus payout will be easier to stomach if the lion's share goes to the nation."


    Public anger ebbing? Just before the cuts come in? That's magical thinking. An area of expertise economists have cornered the market in.

    The anger won't stop until bonuses are taxed at one hundred percent and every penny of the bank bailout monies are returned with interest. At the very least.

    Don't you 'money' people get it yet?

  • Comment number 27.

    #7. At 09:51am on 05 Oct 2010, plamski wrote:
    "I see the same people here discussing the same matters again and again.
    Why? Haven't you people realised by now that this is just Théâtre de l'Absurde?"



    Yep, sometime it does get a bit "People's Front of Judea" on here.

    Reg - "What have the Banks/Corporations/Labour/Tories/Public Sector/Private Sector/IMF/Markets (delete as appropriate) ever given us?"
    Revolutionary - "Plenty to blog about."

  • Comment number 28.

    #23. At 11:15am on 05 Oct 2010, creditunionhero wrote:

    "Or the gov't could wake up and start a National not for profit Credit Union. But don't hold your breath.The gov't doing something that reduces the banks influence on the economy, no chance."

    You first have to realise that the government IS the banks not the puppets in Westminster. Why do you think every solution is being tried to maintain the system instead of just letting it collapse as evolution intended.

  • Comment number 29.

    Benjamin Williams, CEBR economist, said that finding might go some way to reducing public anger at the size of City bonuses being paid.

    "It seems that the wave of public anger towards bank bonuses may be ebbing a little," he said.

    "A whopping £7bn bonus payout will be easier to stomach if the lion's share goes to the nation."

    Believe me Mr Williams, when i say this will go no way towards helping the many many people who are now suffering and the many many more who will join them, and your philosophy is indicative of what got us into the this catastrophe in the first place, ie would we be twice as happy to give them 14Bn bonus and get 8Bn back ???




  • Comment number 30.

    Yes, the further levels of capital adequacy planned by the Swiss have been quite surprising.

    However, with a smaller economy even more heavily reliant on banking, and the lessons they have learnt, from UBS in particular, that just because you are Swiss and a banker doesn't mean that you can't be taken for a sucker (in respect of those huge numbers of sub-prime CDO's and MBS's purchased from their good friends at the Giant Vampire Squid), they seem to have realised that stability and security are frankly the only thing they've got, and "too big to fail" really is a problem for them, if their currency is not to head into oblivion.

    It really is a problem for us too, even though we do have other industries in the UK.

    We are relying on our government to do similar things... and whether this is the route to a gradual break-up of banks, or whether it happens via a new law enforcing separation of retail and casino operations, it matters not - the end result we need is many more smaller banks serving the interests of their customers first and foremost - not the interests of their employees and shareholders alone.

    One other matter, Robert.....

    Please look at the issue of the tax subsidy of corporate debt interest.

    This is a huge issue, somewhat hidden, in that if you don't run a company or analyse company results you simply don't realise it is happening.

    In other words, the vast majority of people in the UK simply don't realise that:
    - some of their taxes are used to encourage companies to borrow money and spend it now i.e. to get into debt, rather than encouraging them to save up, and only then to invest what they have
    - this gives banks a much bigger role in our society than they should have, and encourages the UK economy to become much more highly geared, and therefore more volatile, than otherwise would be the case
    - the emergence of the UK Private Equity industry and the resulting huge transfer of wealth from company shareholders and employees, to much smaller numbers of wealthy individuals, has been the simple result of arbitraging this tax-break i.e. the tax that should have been paid to the government (.... that's us!) by companies funded with largely equity, has instead been paid to a few wealthy individuals who have managed to convince the banks to fund the company with such huge sums of tax-deductible debt!

    Just as individuals can no longer claim tax-relief on debt interest, companies should not be able to either.

    This one change will have a huge part to play in making our economy more stable and fair - in that it will do one very simple thing - it will spread risk more transparently and evenly through the economy - which, if one can summarise the type of society we want to achieve is surely about 'it'?

  • Comment number 31.

    Morpheus #1 is absolutely right.

    When banks lend more than they actually have in reserve, they are not merely taking risks with other peoples' money, they are creating extra spending power, which has a similar effect on the economy as forgery, or printing money.

    Control of the money supply is the key to controlling the economy. This should not be left to private banks, who before the credit crunch created too much credit, causing perennial inflation, and then suddenly got cold feet and drastically cut the supply of credit, causing a very bad recession.

    Reserve ratios should be set higher than Basel 3 proposed and progressively raised, until banks are lending privately only equity share capital or money deposited on the understanding that it will be put at risk. Money in current or deposit accounts would always be matched by deposits by banks at the BoE. Depositors would then be able choose whether they wanted security, or to take risks in the hope of greater returns. Governments would no longer need to take responsibility for failures or to bail failing banks out.

    Banks will scream that this would substantially reduce their profitability, but so it should, because that profitability is at the expense of causing inflation and robbing everybody's savings and pension funds. The government would lose tax on those profits, but would be more than compensated by the profits made by the BoE as a result of printing the money or providing the credit that the economy would need.

  • Comment number 32.

    19. At 10:58am on 05 Oct 2010, Dempster wrote:
    To No.15. At 10:36am on 05 Oct 2010, thomas_paine
    What concerns me, is a terrible injustice, that could be stopped with ease, if only those on the receiving end of it would take the time to understand it. But I readily acknowledge that such is sadly unlikely.

    Me too Dempster. I understand how incredibly frustrating it is to be able to see the solution but no-one wants to hear it.

    I've sadly come to the conclusion that we are wasting our time here and will need to wait for events to take their course.

    Perhaps WOTW is right after all. The whole thing will come crashing down when people see what it means for them personally or will we perhaps merely accept the resulting poverty with catholic stoicsm?

    Good luck to all! It's been emotional.

  • Comment number 33.

    22. At 11:14am on 05 Oct 2010, finance wrote:
    Obviously the people at the FSA are far brighter than I am. But from my perspective I don’t understand how Britain voluntarily increasing our banks capital requirements even further, which incidentally will coincide with the banks having to repay billions that they received to support their mortgage books. In conjunction with the MMR mortgage changes which the CML said today would reduce mortgage lending by 50%. Not forgetting the largest cuts in public spending ever, help to pull us out of this financial mess. The banks will cut lending even further; mortgages will be as rare as hen’s teeth. Implemented in conjunction with huge public spending cuts will completely snuff out any growth in our economy for decades.

    They are creating the perfect storm but seem to be completely unaware. The government does not seem to be looking at the overall effect of changes being implemented by individual agencies. No one seems to be looking at the whole picture.
    Suggesting these changes in 2006 might have made some sense. But not when the economy is, to say the least, extremely fragile.
    Or have I missed something?

    -------------------------------------------------------------------------

    The perfect storm isn't being created now. It has been slowly accumulating strength over the last ten years. As someone pointed out on yesterdays blog from RP, it's a painful route either way. We must decide which is better in the long run, which is to pull the rug from under these fools and stop the nation from being taken hostage by these goons.


  • Comment number 34.

    Robert
    You comment..."As for the biggest investor in RBS and Lloyds, which is the British government on behalf of British taxpayers, I'm not sure the chancellor would want to inject a further £70bn odd into RBS and Lloyds at a time when money is tight." and "The Swiss model of sanitizing mega banks, making them safe, would - for a transition period that could last many years - massively reduce the returns for shareholders and the remuneration of bankers." If you follow the above statements through to their combined logical conclusion then the British government (you and I) have a massive disincentive to regulate or clarify regulation before selling their stake in the nationalised banks to markets. With the potential for regulation of this sort (surely a massive potential millstone around the necks of bankers) then the value of the governments' (our) shares in the nationalised banks must be significantly reduced until the regulatory framework is resolved. Then again the government could choose to break up the banks it owns before sale (Virgin seem interested, over to you beardy!). This all points to a long time before the government relinquishes control of the banks it owns and therefore a long time for the taxpayer to finance the debt used to buy their stake in those banks, increasing the deficit and exacerbating cuts.
    What do you think Robert?



  • Comment number 35.

    #28 NorthseaH

    I stand corrected , you are of course quite correct, the "tail is indeed wagging the dog".

    With new technology, I'm sure it's easy to hide the puppet strings when we see our leaders on the box.

    At least in my day you could still see the strings on the thunderbird puppets! It gave you had a chance to tell what was fiction and what was not.

  • Comment number 36.

    When you squeeze a balloon you get another bulge somewhere else.
    The same with the banks. They will use this as an excuse to sell off assets to their chums at reduced prices.

    Consider bank owned property companies.

    The banks will have been waiting for the right moment to dispose of these "assets". Right moment being when the rest of us get conned.
    We get used as handy sources of money when required.
    Then we get told that the banks have done alright by us. Thanks for the fish.
    The property companies meanwhile will be handed back to their original owners.
    For a pittance.

  • Comment number 37.

    I haven't done a scientific analysis but it would seem to me that the pound tends to strengthen against the euro when the Footsie falls, and then weakens when it goes up. Why?

  • Comment number 38.

    37. At 12:12pm on 05 Oct 2010, Mardav wrote:
    I haven't done a scientific analysis but it would seem to me that the pound tends to strengthen against the euro when the Footsie falls, and then weakens when it goes up. Why?
    --------------------------------------

    Herd instinct and a blind dogma that this is how things happen.

  • Comment number 39.

    "In those circumstances, it might be rational for mega banks to voluntary break themselves up and shrink, to ward off the burden of additional capital requirements."

    I should CoCo!!! (sorry, couldn't resist)

  • Comment number 40.

    32. At 11:32am on 05 Oct 2010, Morpheus wrote:

    "Perhaps WOTW is right after all. The whole thing will come crashing down when people see what it means for them personally or will we perhaps merely accept the resulting poverty with catholic stoicsm?"

    There will be a division in this country - please order yourselves.

    Those who are not prepared to allow the poorest to foot the bill for the bankers, MP's, Economists - well just about everyone who has let them down whilst filling their boots - move to the left

    Those who think the poor should pay, and that this is all down to 'survival of the fittest' and that the public don't deserve the services they work hard for - Move to the right

    Those who don't agree with the situation, but who will accept cuts in their services as self punishment for any guilt they are feeling - even though it's not their fault - although they appreciate they had good times (for them) in the boom - will be in the middle.

    ...That's the lines folks - you're either blaming the poor for the mess we're in, you blame the ruling elite - or you blame yourself.

  • Comment number 41.

    At least it will stop the City threatening to move to Switzerland everytime the regulator tries to do something!!

  • Comment number 42.

    With all the changes to banking requirements over the last 12 months ,it obvious the pre crunch regulators had no idea what was going on . It shows that that firm regulation is paramount, linked to strong political will to make changes when required.

    For all its socialist bravado, the Labour party elite where up to their necks in the credit boom and subsequent bust.

  • Comment number 43.

    12. At 10:31am on 05 Oct 2010, Dempster wrote:
    According to Credit Action
    Total UK personal debt at the end of August 2010 stood at £1,457bn.

    The Office for Budget Responsibility (OBR) predicts that household debt will be £1,823bn by end 2015 which is an increase of around 25%.

    Current RPI inflation is 4.7% p.a., which when compounded up is 26% over the next five years.

    Therefore one can conclude that total household expenditure (purchases and interest payments on debt) will rise by around 25% over the next five years.

    But hold on a minute, average wage inflation is currently 1.5% p.a., which if compounded totals 7.5% increase over five years. And if average wages only increase by 7.5%, the capacity to spend more can only increase by 7.5%.

    How can this possibly work?
    .................
    It cant and it wont. We are now at the start of the death spiral, that Greece and Ireland are currently stuck in. Only default or monetary reform are the way out of it. We can be assured that the Government through QE and bailouts will try to keep the boat afloat and make us all much poorer as a result.

  • Comment number 44.

    I see that the latest wheeze the banks have come up with is to agree to set up what they call a venture fund which isn't a venture fund but designed to inject capital into companies they want to lend to to improve the chances of them getting their money back.

    Apparently this plan was put together by the dreaded British Bankers Association.

    http://www.ft.com/cms/s/0/bb1293a2-d009-11df-bb9e-00144feab49a.html

  • Comment number 45.

    Noideaatall:

    Interesting post. I wonder how hard it would be to have even a very rough guide on how much tax this would represent. Even for the FTSE100 it must be a giant figure.

    Do you think that companies suffering lower bottom line profits due to higher tax bills would skank the customer more? Or perhaps this would make the UK a less attractive place to do business?

  • Comment number 46.

    @ 21. At 11:10am on 05 Oct 2010, stanilic wrote:

    > It will be better to break up the banks, restrict taxpayer liabilities
    > to retail banking and then do a full audit of the debt-hole the
    > casinos have created.

    Timing is everything. We have to strike against them before they have the chance to move anything abroad.

  • Comment number 47.

    26. At 11:22am on 05 Oct 2010, warwick wrote:
    No sign that the looting is going to end anytime soon.


    UK bank bonuses 'to top £7bn this year'
    http://www.bbc.co.uk/news/business-11473352
    "Benjamin Williams, CEBR economist, said that finding might go some way to reducing public anger at the size of City bonuses being paid.
    "It seems that the wave of public anger towards bank bonuses may be ebbing a little," he said.
    "A whopping £7bn bonus payout will be easier to stomach if the lion's share goes to the nation."

    =================================

    Benjamin Williams, obviously living in La La Land! These people need a good, hard dose of reality. Bring on the revolution!

  • Comment number 48.

    FT headline: Ex-trader faces three years in jail and ordered to pay back €4.9bn

    Some will be pleased to see this. I wonder how long they are giving him to pay?

  • Comment number 49.

    The whole debate around adequate capital levels is not the issue. UK Banks already have the required 'core tier one' capital levels (bad debt buffers)to meet the Basel III reforms.

    The focus should be with funding and liquidity - banks relying on wholesale market for funding their loan books will face the same issues all over again if markets get spooked (like when journalists make their name by breaking reports on institutions in trouble...Northern Rock ring any bells Robert?...)

    If there's another Northern Rocks style 'bank run', then most banks will not have sufficient contingent collateral available to pay out. It was (and remains) a cash flow problem not a capital level problem.

    Unless banks move to a more sustainable method of funding their balance sheets, then we will continue to be exposed to another credit crunch style diaster, regardless of core capital levels.

  • Comment number 50.

  • Comment number 51.

    Robert your comment that:

    There are weighty and potentially painful implications for British banks from a report of a commission of experts set up by the Swiss Federal Council on how to limit the risks to the Swiss economy of banks that are so big that they can't be allowed to fail.

    --------------------------------------------------------------------

    Is it true that this panel of experts wanted to call on Norman Wisdom to provide an insight into what might be done? Perhaps they needed him to sell their ideas to Joe public? Shame - He's died.

    Perhaps they can come up with a comedy sketch of their own, you know, banks pay back hand-outs, Ha Ha

    Bring back Mr Grimsdale, oh forgot we all ready have, GO.

  • Comment number 52.

    46. At 12:43pm on 05 Oct 2010, Jacques Cartier wrote:
    Timing is everything. We have to strike against them before they have the chance to move anything abroad.

    Timing will inded be critical; it will probably take several seconds to move the money.

  • Comment number 53.

    Surely it is a good thing if we take notice of the Swiss. We have all been asking for tighter regulation of the banks and whilst this may not represent our path to utopia it surely is a step in the right direction.
    My understanding of this (and please correct me if i'm missing something) is that if we adopt the Swiss approach then our banks have 2 options:
    1 - Remain "too big to fail" and face having to meet stretching capital requirements.
    or
    2 - Become "small enough that no-one cares" and not worry about your capital ratio's.

    Either way is this not a win/win?
    "too big to fail" and The Bankers wont be remunerated to the extent they are today due to needing to keep more capital, or broken down into smaller bite size institutions which also reduces banker remuneration.
    Like i say still not our path to utopia but a (small) step in the right direction at the very least.

  • Comment number 54.

    @32. At 11:32am on 05 Oct 2010, Morpheus wrote:
    "I've sadly come to the conclusion that we are wasting our time here and will need to wait for events to take their course."
    And if they don't? There seem to have been several opportunities in the past 400 years to bring about change and this hasn't happened.

  • Comment number 55.

    Credit Suisse already has capital of over 16% of risk-weighted assets and expects to have no need to raise more capital or cease paying dividends. In fact, I think the shares went up on the original announcement of this change.

    I wonder if Robert's figure of £200bn takes into account the weighting of the assets or the behavioural changes that might occur if we went down this road. If the British banks shuffled their assets and purchased or designated the majority of their assets as AAA or AA would they really need so much additional capital? (capital required = assets X risk-weighting X 19% if we go for Swiss rules)

    They do need to have capital of 3% of total assets which can't really be fiddled with like the risk-weighting but is nevertheless a gearing of 33:1 which still appears risky!

  • Comment number 56.

    48. At 1:03pm on 05 Oct 2010, AnotherEngineer wrote:

    "FT headline: Ex-trader faces three years in jail and ordered to pay back €4.9bn

    Some will be pleased to see this. I wonder how long they are giving him to pay?"

    Not me - this guy was a fall guy....a word of warning to all those loyal to their masters - they will drop you in it, without a second thought, if it's between you and them.

  • Comment number 57.

    It will be very interesting to watch where Tory MP Douglas Carswell's ten minute rule motion of 15th September on bankers will go...

    http://news.bbc.co.uk/democracylive/hi/house_of_commons/newsid_8995000/8995686.stm

    Possibly the way of all motions.

  • Comment number 58.

    40. At 12:26pm on 05 Oct 2010, writingsonthewall wrote:

    That neatly avoids the word 'justice'.

    If an engineer was so shoddy to build structures that all collapsed leading to the injury of so many people, that engineer would be in court.

    If a 'nutter deliberately set about damaging so many lives, and then hid in a cave in some far flung part of the world, we'd fire up the fighter jets and start shipping out our soldiers to war.

    And for those who claim they didn't know, they didn't think they were doing anything wrong, how useful would such a defence be in a court of law? 'Excuse me, M'Lord. I didn't know that it was wrong!'

  • Comment number 59.

    Bank regulation, Don't make me larf:

    Hugh Schofield
    BBC News, Paris

    Obviously the $4.9bn repayment is a totally theoretical amount because there's no way Mr Kerviel will be able to pay it.

    But the bank will be satisfied because it does establish very clearly the principle of Mr Kerviel's guilt.

    The court seems to have discounted completely the argument put forward by Kerviel's defence, that the bank knew of his extravagant trades and turned a blind eye as long as he was making money.
    --------------------------------------------------------------------

    Of course the bank didn't know what he was upto, how could they.If they didn't see the credit crunch coming their not going to notice a piddly little few billion! Nick Leeson ring any bells?

  • Comment number 60.

    A useful and relevent Guardian article today with the added bonus of a mildly comical George Osbourne picture.

    http://www.guardian.co.uk/commentisfree/2010/oct/05/george-osborne-cuts-banks-bailout

  • Comment number 61.

    Please note all those who favour public spending axing as a 'solution'....

    http://www.bbc.co.uk/news/business-11474288

    "Ratings agency Moody's has warned it may may cut the Republic of Ireland's credit rating again amid concern over its finances.

    It pointed to the country's huge bill for cleaning up its banks, a weak economic recovery and rising borrowing costs for the move."

    Note - the 'country's huge bill for cleaning up its banks' - thanks to the banks
    'a weak economic recovery' - Thanks to the cuts in public spending
    'rising borrowing costs for the move' - thnaks to the previous 2

    Don't be fooled into thinking the 'hairy shirt' cuts competition curries any favour with the IMF or the ratings agencies.

    Sure they'll say cuts are a good idea - but then they don't actually care what happens to your nation if it all goes wrong.

    It seems the best solution is to face default and quickly - like Iceland - and then we can get on with humiliating parliament....and some accurate egg throwing too!

    http://www.youtube.com/watch?v=1QMBoJop69M

  • Comment number 62.

    #48 3 years for 4.9 Billion

    If there was any justice how long would the incompetents that presided over the credit crunch get?

    I don't suppose his "mates" in the casino capitals of the world, sorry financial centres of excellence, will be having a whip round to help him out?
    Let's not forget the financial sector is over regulated, according to some.

  • Comment number 63.

    ....or you could try to export your way out of trouble - lets see how that's coming along shall we?

    http://www.bbc.co.uk/news/business-11474072

    Oh dear - all the solutions fail - why? because you cannot solve a contradiction.

  • Comment number 64.

    Ben Williams CEBR economist writes:

    "A whopping £7bn bonus payout will be easier to stomach if the lion's share goes to the nation."
    ---------------------------------------------------------------------
    Now I am surprised!

    Why didn't our banker friends come up with this one, or are they leaving it for next year,What's all this fuss about our £70 x 10 billion bonus, the lions share goes to the nation- who then use it to bail-out banks.

    Norman Wisdom eat your heart out, and I thought comedy was dead.

  • Comment number 65.

    Ah just let them fail!!!!

  • Comment number 66.

    49. At 1:04pm on 05 Oct 2010, BytheCringe wrote:
    The whole debate around adequate capital levels is not the issue. UK Banks already have the required 'core tier one' capital levels (bad debt buffers)to meet the Basel III reforms.

    The focus should be with funding and liquidity - banks relying on wholesale market for funding their loan books will face the same issues all over again if markets get spooked (like when journalists make their name by breaking reports on institutions in trouble...Northern Rock ring any bells Robert?...)

    If there's another Northern Rocks style 'bank run', then most banks will not have sufficient contingent collateral available to pay out. It was (and remains) a cash flow problem not a capital level problem.

    Unless banks move to a more sustainable method of funding their balance sheets, then we will continue to be exposed to another credit crunch style diaster, regardless of core capital levels.

    -------------------------------------------------------------------------

    Complete and utter rubbish.

    Here's why:

    1) The problem wasn't just NR and other banks reliance on wholesale funding, it was the fact that they had made loans to people who could not pay. The wholesale market is just more sensitive to this as the wholesale market doesn't believe the media hype. People only started queuing outside NR branches after Robert broke the news that NR wasn't being able to access the wholesale market as it used to.

    2) Calling it a cash flow problem is like saying a pyramid scheme only collapses when it runs out of cash. Cash flow is a symptom rather than the cause. The cause being an unsustainable business model, which relies on exploding the balance sheet to generate ever higher profits and fees and then quietly walking away with your millions.

    I argued this till I was blue in the face at my previous employer who refused to acknowledge the hole in the balance sheet that would be created if some key counterparties defaulted. They simply worried about 'funding' the gap. That's like a gambler borrowing on his credit card to pay for his huge loss at the casino. He overlooks his loss and worries whether he can head above water at the casino.

    Please don't make the mistake of calling it a problem of cash flow and liquidity as they do not address the real issue of the fraudulent, unethical, greedy and dishonest method in which banks operate.

  • Comment number 67.

    #49 BytheCringe

    If there's another Northern Rocks style 'bank run', then most banks will not have sufficient contingent collateral available to pay out. It was (and remains) a cash flow problem not a capital level problem.
    --------------------------------------------------------------------
    If there's a run on ANY bank they don't have the funds to pay out, that's the problem.


  • Comment number 68.

    Given that a sizeable proportion of the Swiss are armed, I'd imagine bankers will be leaving switzerland.

  • Comment number 69.

    50. At 1:16pm on 05 Oct 2010, RiskAnalyst wrote:

    "Its bad when you have the IMF saying it."

    Well I suppose at least now all those non-believers might actually realise we're in a depression because the IMF said it - and wake themselves up.

    If they had listened - they would have known this about 12 months ago.

    It's just like the 1930's - they didn't know they were in a depression until they came out of it in 1939 and looked back

    ....somethings never change - the depression was always with us - the Governments of the world tried to create inflation as a substitute for grwoth (hence the rises in GDP) - but as Japan found out - sometimes the tools are wholly inadequate for the job - I mean to think you can turn around decades worth of built up contraction by increasing the availability of money.

    You're not producing growth guys - you're just increasing the money supply - an action which merely devalues your currency and does nothing to produce anything more than a dull spark of real growth.

    It does make me laugh sometimes - I'm accused of pessimism, but quite worringly I think I've been way overoptimistic about our chances of riding this one out - it's really that bad...

  • Comment number 70.

    52. At 1:16pm on 05 Oct 2010, AnotherEngineer wrote:

    "Timing will inded be critical; it will probably take several seconds to move the money."

    ...nobody moves any money electronically without the assistance of IT. You didn't think these bankers actually do anything unassisted did you?

    ....division of labour is wonderful isn't it? - The banker / trader / spiv - all rely on what the computer / database / network says they can and can't do.......and who controls all of that?

    The bankers think they're clever - but they're only the keyholders - they cannot go anywhere without permission of the gatekeeper.

    Mmmmwhahahahahahahahaha

  • Comment number 71.

    54. At 1:17pm on 05 Oct 2010, Stuart Wilson wrote:

    "And if they don't? There seem to have been several opportunities in the past 400 years to bring about change and this hasn't happened."


    ...are you suggesting that the world hasn't changed in the last 400 years???

    You need to watch the history channel more - we have already thrown off the clutches of feudalism and absolute monarchy - Capitalism is the next one - tried and dumped - on to something new - it's called improvement.

  • Comment number 72.

    53. At 1:17pm on 05 Oct 2010, JonofStoke wrote

    Surely it is a good thing if we take notice of the Swiss


    Yes we should. A lot of corrupt people apparently have their wealth there. Seems quite a few corrupt heads of state that have bled their country dry have parked the stolen money in Switzerland too.

    We need to deal with the those involved in crime no matter who they are or where they are. So yes, the fraud squad should be examining their books and what they do.

    At least Sen. Carl Levin is on the case.

    http://www.youtube.com/watch?v=2O602Q2HqtA

  • Comment number 73.

    @ 52. At 1:16pm on 05 Oct 2010, AnotherEngineer wrote:

    > Timing will indeed be critical; it will probably take several seconds
    > to move the money.

    Yes - we can catch them as long as we strike before then, e.g. now.

  • Comment number 74.

    59. At 1:27pm on 05 Oct 2010, creditunionhero wrote:

    "The court seems to have discounted completely the argument put forward by Kerviel's defence, that the bank knew of his extravagant trades and turned a blind eye as long as he was making money. "

    Of course it did! - I mean what else is the law there for if not to protect the minority powerful elite from prosecution?

    I mean they throw the occasional one in jail to promote a sense of 'balance' - but generally the wealthy get away with crimes you and I would be harshly dealt with for (like embezzlement of taxpayer expenses)

    I would argue that any bank who doesn't know what it's traders are up to are irresponsible - I mean do you give any employee a badget of billions and just let them get on with it - unattended?
    ...only if you're a greedy banker and then it's "no questions asked sonny"...

  • Comment number 75.

    @ 53. At 1:17pm on 05 Oct 2010, JonofStoke wrote:

    > Either way is this not a win/win? "too big to fail" and The
    > Bankers wont be remunerated to the extent they are today due to
    > needing to keep more capital, or broken down into smaller bite
    > size institutions which also reduces banker remuneration.

    Yes. The Size Taxes coupled with tight restrictions on moving assets abroad would be the best solution. We have to strike now, as AnotherEngineer made clear. Banks have large moral debts to British society that are nowhere near paid down. They remain on the hook until those are settled.

  • Comment number 76.

    46 Jacques Cartier

    The whole point of my message 21 is that the banks will find they can't move abroad as the regulatory regime there is now becoming tougher than staying here. Unless, of course they go to bandit country which they won't enjoy as that country will be run by rogues at least as big as they; if not bigger.

    With focussed leadership we should be able to manouver the banks into a position somewhere between a rock and a hard place. Let's face it; what foreign country will want to pick up the liability for a British bank that has been leeching off the British taxpayer since 2008?

    Think aboutit? We might just be able to solve this one if we can find a politician with the character to push it hard. This is the only part of the equation I am now doubtful about. Perhaps now the posh people are getting their bit of the bill they might want to find someone who will rock the boat.

  • Comment number 77.

    @ 41. At 12:28pm on 05 Oct 2010, Sean-from-south-london wrote:

    > At least it will stop the City threatening to move to Switzerland
    > everytime the regulator tries to do something!!

    It's dawned on them that most people would be chuffed to see them go. The fewer bankers the better.

  • Comment number 78.

    66. At 1:53pm on 05 Oct 2010, RiskAnalyst wrote
    2) Calling it a cash flow problem is like saying a pyramid scheme only collapses when it runs out of cash.

    So when does a pyramid scheme collapse? I would have said when not enough new members join to provide the to pay the return to the old members

  • Comment number 79.

    @71. At 2:10pm on 05 Oct 2010, writingsonthewall wrote:
    54. At 1:17pm on 05 Oct 2010, Stuart Wilson wrote:
    "And if they don't? There seem to have been several opportunities in the past 400 years to bring about change and this hasn't happened."
    "...are you suggesting that the world hasn't changed in the last 400 years???You need to watch the history channel more - we have already thrown off the clutches of feudalism and absolute monarchy - Capitalism is the next one - tried and dumped - on to something new - it's called improvement."
    Let's see - Roman republic, European Feudalism, Soviet Communism, Monarchy, American Democracy, Constitutional governments, Fascism, etc etc. What has been the one constant in all that? Debt-based monetary system. Tried and tested in ALL of those governmental systems and consistently shown to be a failure. So, I put it to you that little has changed beyond technological differences. Has it granted freedom or sinister enslavement? Have the benefits from the past 2000 years under that system outweighed the social and moral (and financial) cost?
    Has Capitalism been dumped yet? Seems to be very much in existence where I am (unfortunately). You work in the financial sector - I can't imagine there being much panic there beyond stifled mumblings.
    Perhaps there needs to be a separation of economic system and government system, in the same way state should be separated from religion.

  • Comment number 80.

    A must read- brilliant article....

    http://www.irishtimes.com/newspaper/opinion/2010/1005/1224280400401.html

    Still got faith in the leaders?

    Lest we not forget the 'greatness of the banks' - and the part they played in the crisis...

  • Comment number 81.

    72. At 2:10pm on 05 Oct 2010, copperDolomite wrote:
    Yes we should. A lot of corrupt people apparently have their wealth there. Seems quite a few corrupt heads of state that have bled their country dry have parked the stolen money in Switzerland too.
    We need to deal with the those involved in crime no matter who they are or where they are. So yes, the fraud squad should be examining their books and what they do.
    At least Sen. Carl Levin is on the case.
    http://www.youtube.com/watch?v=2O602Q2HqtA

    Great link. Seems he has the weight to back his cause!! Tax evasion/avoidance deprives our country of much needed resources so i agree with you entirely.
    Surely Mr Osbournes time would be better spent securing the millions (billions) lost in tax through avoidance schemes rather than chasing schemes that refuse to pay child benefit to non working mothers (and fathers).

  • Comment number 82.

    @75. At 2:20pm on 05 Oct 2010, Jacques Cartier

    I completely agree!!! So, thats our plan...... how do we implement it??
    You need help i'm available!!

  • Comment number 83.

    78. At 2:36pm on 05 Oct 2010, AnotherEngineer wrote:
    66. At 1:53pm on 05 Oct 2010, RiskAnalyst wrote
    2) Calling it a cash flow problem is like saying a pyramid scheme only collapses when it runs out of cash.
    So when does a pyramid scheme collapse? I would have said when not enough new members join to provide the cash to pay the return to the old members

    -------------------------------------------------------------------------

    You are describing the symptom and not the cause. The cause is an unsustainable model. It is always destined to run out of cash. No such scheme can be continued into perpetuity, so to say it had a cash flow problem is misleading, as the cash flow situation is a given.

  • Comment number 84.

    79. At 2:51pm on 05 Oct 2010, Stuart Wilson wrote:

    "Let's see - Roman republic, European Feudalism, Soviet Communism, Monarchy, American Democracy, Constitutional governments, Fascism, etc etc. What has been the one constant in all that? Debt-based monetary system."

    Does Communism run a debt based monetary system? - I agree with the rest however.

    "Tried and tested in ALL of those governmental systems and consistently shown to be a failure. So, I put it to you"

    ...don't come over all Rumpole of the Bailey on me - I refute the allegations made by my learned friend...

    "that little has changed beyond technological differences. Has it granted freedom or sinister enslavement? "

    No

    "Have the benefits from the past 2000 years under that system outweighed the social and moral (and financial) cost?"

    mmmm - not sure, I think there has been progress, but nowhere near as much as there could have been.

    "Has Capitalism been dumped yet? Seems to be very much in existence where I am (unfortunately)."

    It won't get dumped as some will always believe in it - like God - but those will become such a small and insignificant number that they will no longer be listened to - Capitalism is like religion - science, logic and reason will eventually defeat it - but it takes time.

    "You work in the financial sector - I can't imagine there being much panic there beyond stifled mumblings."

    No jumpers yet - but things have certainly changed around here - it's funny that the load noises of confidence that booms bring have all been quitened. The latest heated discussion was about the child benefit changes - there's a lot of single parents on more than £43k around here. You wouldn't believe where you are when you hear the conversations going on - but the reality is everyone, except the CEO's and those with a vested interest know exactly what's coming down the road.

    There are more vegetable growers in the city now than in rural Belgium - they know the commodity wars are underway and for the first time ever the wealthy are thinking about survival rather than profit - I mean they're actually scared.

    "Perhaps there needs to be a separation of economic system and government system, in the same way state should be separated from religion."

    Hurrah!

  • Comment number 85.

    25. At 11:20am on 05 Oct 2010, onebadmouse wrote:
    "In a discipline like engineering, they accept the reality of failure.
    They say it is not "if it breaks" but "when it breaks".
    And they therefore engineer a solution accordingly."

    Or, to (approximately) quote Douglas Adams: 'The only difference between something that can go wrong, and something that can't possibly go wrong, is that when something that can't possibly go wrong, goes wrong, it's impossible to fix.'

  • Comment number 86.

    wotw Thanks for the link at #80

    Reading the comments that follow the article it's no surprise that the majority feel let down by their/our leaders, the banks and the blind faith that banks should be restored to their former "greatness".

    Greatness at fleecing the customer and the taxpayer.

    No wonder the rich get richer and the poor....................

  • Comment number 87.

    27. At 11:23am on 05 Oct 2010, NorthSeaHalibut wrote:
    Reg - "What have the Banks/Corporations/Labour/Tories/Public Sector/Private Sector/IMF/Markets (delete as appropriate) ever given us?"
    Revolutionary - "Plenty to blog about."


    Absolutely NorthSeaHalibut! All this blogging and "freedom of speech" is just another TRAP, an illusion that people's voice is heard!

    No decision makers are reading your comments and even if they do, they will not take them into consideration. You're wasting your vibrations.

    I see many people who want to change the world, but I see few people who want to change themselves.

  • Comment number 88.

    79. At 2:51pm on 05 Oct 2010, Stuart Wilson wrote:

    Perhaps there needs to be a separation of economic system and government system, in the same way state should be separated from religion.


    What do you mean? Do you think we should be electing economists to another place where they make the financial decisions?

    Wonder how that would have worked in the run up to WWII...

    Sorry Mr Churchill, but we've decided on what we are going to do about the economy, so sorry, you can't have any more soldiers to defend the realm....

  • Comment number 89.

    WOTW 80

    So the secret is now out of the bag, is it?

    You are Fintan O'Toole and I claim that bottle of Powers.

    Such eloquence!

  • Comment number 90.

    83. At 3:13pm on 05 Oct 2010, RiskAnalyst wrote:

    "You are describing the symptom and not the cause. The cause is an unsustainable model. It is always destined to run out of cash. No such scheme can be continued into perpetuity, so to say it had a cash flow problem is misleading, as the cash flow situation is a given."

    You're putting people out of work now - some economists have been making a living out of attacking symptoms - I mean monetarism is a whole theory based on tackling the symptoms.

    You see 'root cause' is a favoured line used by politicians to impress the public - but they will never actually get to any root causes - because they choose to ignore the parts of the analysis which will impact them personally.

    I don't like the fact that Capitalism is a system built on a contradiction - which encourages....nay rewards.. greedy and selfish behaviour - but it does. To claim to be tackling any issues of overproduction, credit crunches, FRB, FIAT systems, Giant IMF sized Ponzi schemes without looking at this contradiction is just noise for the punters.

    The problem is that admitting Capitalism is flawed is like overturning Newton's laws of motion - it's a fundamental part of Economics now and there's a lot of vested interest in maintaining the status quo (I mean are we surprised that some men will put their own interests ahead of those of the human race??)

    I see it very similar to finding out your house has subsidence - you can:
    a) ignore it
    b) Tackle it at great expense
    c) Paper over the cracks that appear

    I say best get on with b) - politicans love to go for c) and the majority of the british public opt for a)

    ...as anyone who's had subsidence knows - tackling it head on is the best solution - albeit the most costly - putting it off can lead to bigger problems - like a serious widespread depression

  • Comment number 91.

    89. At 3:36pm on 05 Oct 2010, stanilic wrote:

    "WOTW 80
    So the secret is now out of the bag, is it?
    You are Fintan O'Toole and I claim that bottle of Powers."

    ...if only - but alas my musings are restricted to Peston's Blog - so you have 'exclusive access'
    However.....copies of my posts can be found in my new book - available in all good bookstores, it's called "writingsonthewall - the best of times, the worst of times'

    ...you can also get a copy of my autobiography - 'writings - the REAL me' - which is released in 2012.

    I will also be releasing a single next year for Christmas - it's a cover version of the old 'money, money, money' by ABBA - keep your eyes peeled for it in all good record stores (that are still open by then)

  • Comment number 92.

    Thomas_Paine 57.

    I had a response from my MP stating they will NOT be backing this due to other regulations being brought in.

  • Comment number 93.

    86. At 3:21pm on 05 Oct 2010, creditunionhero wrote:

    Aye. It's like a religion.

    Only some of the top dogs in religion are willing to admit that god didn't create the earth and everything on it in whatever number of days it was. But they keep up the pretence rather than giving up their coseted lives living in the luxury provided by the multitude of pennies from the peasant masses.

    Some parallels worthy of a decent anthropology research project. Shame/convenient the research grants are being brutally slashed to the bone.....

  • Comment number 94.

    OK, so when the banks that were too big to fail were in grave danger of failing the taxpayer picked up the tab. That 'seemed' to be ok because there were plenty of taxpayers to shoulder the load, so far so good.

    But now with all these spending cuts and people losing their jobs, there'll be fewer shoulders or more likely Dave and George will cut more spending and more people will lose their jobs... where did I get to? Oh yes, then it'll look like the whole country is going to fail.. Who's going to bail us out?

    Sorry, I just don't seem to have got the hang of this 'spending cuts' idea, what have I missed?



  • Comment number 95.

  • Comment number 96.

    According to the IMF “Nearly $4 trillion of bank debt will need to be rolled over in the next 24 months,” Apparently our banks need to refinance between £750bn-£800bn of funding by the end of 2012, of which £285bn is our emergency loan, which is about to expire.

    And unsurprisingly, they reckon the banks will need more ‘tax-payer’ support to prevent potential funding problems. And they’ll get it to.

    The UK Government won’t be able to afford it of course, so there’ll be more ‘quantitative easing’.

    A lot of this debt was based on promises to pay that were no good, and I reckon they intend to inflate it away, along with everyone’s wages and savings.

  • Comment number 97.

    57. At 1:26pm on 05 Oct 2010, thomas_paine wrote:
    It will be very interesting to watch where Tory MP Douglas Carswell's ten minute rule motion of 15th September on bankers will go...

    I think that you will find that it is being considered by the Banking Commission or whatever it is called.
    Did anyone use the National Giro which I believe was a utility type bank some years ago?


  • Comment number 98.

    92. At 3:56pm on 05 Oct 2010, Paul Gregory wrote:
    Thomas_Paine 57.
    'I had a response from my MP stating they will NOT be backing this due to other regulations being brought in'

    But I bet they'll back the next bank bailout coming next year.

  • Comment number 99.

    I read today that yet another bank chief is apologising for the financial mess the banks have got the UK in and admitting that banks have employed the wrong staff, but it's only words. Bankers and politicians all talk the talk about bank reform but as yet none of them walk the walk, which I would imagine if they ever do it will be more of a hobble than a stride. The sooner we realise they're just not interested in bank reform then the less attention we will pay to their occasional outbursts of self recrimination which are so obviously aimed trying to win back support for themselves from the man in the street. I for one will never be fooled by them.

  • Comment number 100.

    94. At 4:03pm on 05 Oct 2010, inacasino wrote:
    OK, so when the banks that were too big to fail were in grave danger of failing the taxpayer picked up the tab. That 'seemed' to be ok because there were plenty of taxpayers to shoulder the load, so far so good.

    But now with all these spending cuts and people losing their jobs, there'll be fewer shoulders or more likely Dave and George will cut more spending and more people will lose their jobs... where did I get to? Oh yes, then it'll look like the whole country is going to fail.. Who's going to bail us out?

    Sorry, I just don't seem to have got the hang of this 'spending cuts' idea, what have I missed?

    -------------------------------------------------------------------------

    What we need is a default. No 2 ways about it. The spending cuts will lead us there (please refer to the IMF article I posted earlier) and borrowing further will only take us there quicker.

    Don't believe the hype about the world falling apart if the US/UK or any other large economy default. People will find natural ways of transacting with each other and sustaining real growth and development. Anyone who provides real output will find their right place in society.

    People like me will become worthless, as I am just the doorman at the front of the casino. My job is to only let people into the casino that can afford to lose lots of money. This is why I have been retraining myself for a different kind of career.

 

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