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Victor Blank may be proved right (eventually)

Robert Peston | 08:48 UK time, Monday, 18 May 2009

The most colossal amount of lending capacity has been taken out of the banking system.

That is another way of saying that we've been living through a credit crunch. D'oh!

But for all the damage that the collapse of some banks and the shrinkage of others has caused to the global economy, there is an attractive consequence for shareholders in those banks that are still standing.

barclays and rbsYou can already see it in investment banking, where the few remaining independent investment banks and the investment banking arms of Barclays and Royal Bank of Scotland among others have been coining it since the start of the year.

Whether it's underwriting and distributing issues of bonds and equities, or trading in currencies and fixed interest, it's boom time again for those firms lucky enough to be alive.

And for banks more widely, including retail banks, the reduction in capacity means a reduction in competition.

So the margins that banks earn on lending - the gap between what they pay for their funds and what they charge to borrowers - has widened very considerably.

Actually, that's not quite true yet for those banks disproportionately dependent on special taxpayer-supported funding and asset insurance from central banks and finance ministries.

Finance provided by taxpayers tends to be pricier, which most would say is only fair: we wouldn't want the banks to make a habit of coming to us with the begging bowl.

So the likes of Royal Bank and Lloyds aren't yet coining it.

Also, of course, any widening in margins they achieve this year may look irrelevant when bad debts on conventional lending to households and businesses are rising so fast.

To put it another way, since Royal Bank and Lloyds will make massive losses this year, you may think that I'm bonkers to be extolling their intrinsic profitability.

But make no mistake: these are giant money-making machines with enormous and rising market shares in a relatively closed retail banking market called the UK.

If you thought that they were monsters before the credit crunch - and many did - you ain't seen nothing yet.

They face far less competition than they did a couple of years ago: the American and Irish banks have reduced their presence in the UK; the Icelandic banks, former building societies and newly created specialist lenders have crumbled and most extant mutual building societies simply can't raise sufficient deposits to pose much of a threat.

Yes, the mighty Tesco is coming in and promising to be a formidable competitor. But the sensible way of seeing Tesco's ambitions is as proof of the huge profits to be made in a market where the balance of power has shifted decisively from the consumer (that's you and me) to supplier.

Against that backdrop, the claims of Lloyds that buying HBOS represented a once-in-a-generation opportunity don't look exaggerated.

Lloyds' shareholders will argue that they've paid far too big a price for this opportunity: HBOS's losses on its reckless loans hobbled Lloyds and led to it being semi-nationalised.

But there will come a moment when it has absorbed all the losses generated by imprudent loans and investments made in the bubble years.

At that point, Lloyds will be a gargantuan collector of our earnings and savings.

So if you believe that wholesale sources of funding are unlikely to gush again for years, if ever, Lloyds will have a mind-boggling competitive advantage: disproportionate power in banking will reside with those, like Lloyds, able to hoover up precious cash from households and small businesses, for recycling into loans.

Perhaps, therefore, Sir Victor Blank - jumping from Lloyds before being defenestrated (see yesterday's Picks) - will, in two or three years, be able to blow a raspberry at his critics.

Comments

Page 1 of 2

  • Comment number 1.

    Once in a LIFETIME OPPORTUNITY??

  • Comment number 2.

    So on that basis the world will be well when we have a TOWER OF BABEL.

    ONE BANK

    ONE FOOD SUPPLIER

    ONE GOVERNMENT

    A JOB FOR GORDY THE ONE THAT SAVED THE WORLD??

  • Comment number 3.

    You are quite right Robert, they will hover up the savers funds, for free or 0.1% and lend it to others at significant margins, all allowed by the BOE and Brown ! Is it any wonder they are certain to make exorbitant profits whilst savers go to the wall ? Is that fair ?

    Another scandle of the highest order, but I wouldnt bet my shirt on Cameroooooon and his merry men sorting out this appalling injustice either.
    Is there ANYONE who sees this unjustice and stands up for savers and pensioners ?

  • Comment number 4.

    I am sorry, Robert, but I thought banking was going to get boring again yet you seem to be getting excited by massive money making machines.

    We have to remember that these banks are only there by courtesy of the taxpayer. So when is the taxpayer going to get their collective payback? I see no reason why the taxpayer should be expected to wait until the assets in public ownership are eventually sold off. How about some income in the mean time as we are all stakeholders now?

    As the principal shareholders in RBS and Lloyds are we going to be forced to watch even more profits being privatised whilst the losses become socialised?

    I know it will take time for all this debt to wash through the system and as a saver and an owner of assets I can see that process continuing with my own eyes. I do fail to see why the taxpayer should not also start to see some sort of reward for her/his heroism of last autumn.

    I would suggest that the argument that we no longer want banks which are too big to fail is a very good one. We need to be addressing a strategy of breaking up these massive money making machines into more manageable units whilst at the same time not affecting their international effectiveness. A version of the old US Glass-Steagell Act would not go amiss for a start.

  • Comment number 5.

    One is reminded of the adage (slightly modified!):

    How to create a small business? - Start with two big businesses.

    Undoubtedly, from the available data, HBOS's lending has already proved to be ill-judged and would have destroyed the business. However if the business had been liquidated in the normal manner it is unclear how this would have been less beneficial than the present scheme.

  • Comment number 6.

    Robert
    Surprise, surprise another banking story!!! One day you may realise that there is more to business than just easy to write stories about banks. Start earning you money Robert and have a real look at the ecomony and things that effecting real people out there working hard at getting UK Ltd back on its feet again.

  • Comment number 7.

    Robert, you didn't finish your blog. The conclusion will be that Lloyds and probably RBS will be broken up to create a more level playing field in the Consumer Banking sector. The shareholders might benefit but if British Energy, Qinetiq and others are the example, I doubt it!

  • Comment number 8.

    HSBC SVR was about 115bps over 3m libor, now it is 260bps - if that is not profiteering I don't know what is. Hopefully once the govt feels the banking system is stable there will be a competition enquiry. It is bad enough making borrowers and savers pay for banks to rebuild their balance sheets, if they are forced into permanently bolster their profits it will make a mockery of govt claims to have the consumers interests at heart.

  • Comment number 9.

    I for one would rather BURN my money than DEPOSIT with Lloyds/TSB/HBOS.

  • Comment number 10.

    Robert,

    Actually, I think you're right.

    What worries me, however, is how these mega-banks are kept within control.

    We all know the Government and the regulators failed hands down with the previous (relatively) smaller banks.

    How long, I wonder, before they're back trying to con everyone again into living on vast amounts of credit, as if the downturn never happened and was never ever going to re-occur.

    With the current farce of MPs expenses rocking Parliament and Government to the core, just who will keep the banks in check?

  • Comment number 11.

    Yes Bobby,
    That is why we rely on you lot in the fourth estate to expose the monopoly/cartel that these guys operate.

    Split 'em up into little pieces, and remove their fellow-travellers from the regulatory bodies.

    These banks don't need to be 'global behemoths' for any other reason than to satisfy their own greed and egos.

    Regards,

  • Comment number 12.

    #3 (GrumpyBob) - Spot on. This injustice is appalling. And spot on again - it just doesn't look like someone is going to come along and try to make things fair for the taxpayer. The bigger trouble I think is that the majority of the people don't seem to realize what is going on around them. While the masses might cheer at the fall of Lehman or RBS the are woefully ignorant of the the new and far more sinister monsters that are rising from the rubble.

    It used to be the onus of media to highlight these issues to the people and spread awareness. But alas the media has now become a machine fuelled by thirst for higher and bigger profits. I wish there were more writers like Mr. Preston, more such platforms like this blog and more such readers as yourself to highlight these things to those need help understanding.

  • Comment number 13.

    Your attempt to belittle Victor Blank on the sunday news with continuous shots of his bubble car were an embarrasement to you and the BBC.

    lets face it the government strong armed Victor Blank and Lloyds into this "merger". without it who knows where the panic would have ended.

    just report facts and trust us, the public to make our own mind up, otherwise i believe you will find yourself in a similar position to gordon brown and the labour party.

    when will the BBC licence fee be seen as no more than a stealth tax?

  • Comment number 14.

    Claiming that everyone's taking deposits at 0.1% is unfair; yes, the banks' defaults are hopelessly customer-unfriendly, but it's a matter of three clicks at Lloyds to get 2.5% on £10k or more with instant access. Natwest, an actually government-majority-owned bank, is offering 1.1%; Northern Rock, a fully government-owned bank, is offering 2%, and our kind friends of Hong Kong and Shanghai call 2.25% a 'High Interest Deposit Bond' and offer 0.2% on the account on which you're graciously permitted to withdraw money when you want it.

    It would be very nice for legislation to keep the banks from setting such ludicrous defaults, but the current situation where you need to look at six web sites and fill in two forms annually to get a reasonable rate of return isn't completely unreasonable.

  • Comment number 15.

    Good news for millions of folk in this article, R.P.
    But there are some things that most of us would like to see come out of this economic disaster.
    1.Common sense in banking, something that had largely evaporated for years, and perhaps the banks now have no choice but to follow that route.
    Part of that common sense must be in remuneration.....we can't go back to "get in quick and make yourself 10 million before it all comes crashing down"....or it will crash again.
    2.Good sense in the property market. It is property which does the most damage to banks, individuals and companies. I believe that repossessed people should have the right to sue the estate agents and valuers for compensation for their losses,(using a no-win-no-fee lawyer)just as vendors have the right to sue them for under-valuation. And if banks haven't got the message about sensible valuations, then trouble will again follow.
    3.Protection for the British public against banking losses, probably best achieved by dividing banks up into smaller units, and guaranteeing only the high-street operations.
    4.More protection for ordinary folk against "city wide boys".
    Millions of private pensions, endowments and savings plans have been severely damaged by all this......people just haven't found out yet.
    The financial industry must be losing customers for its' products by the million. I for one, wouldn't dream of buying any investment product again from the industry....I will surely lose. And where have all the ordinary folks losses gone?...into the "wide boys" pockets.
    This economic crisis was, and still is, severe. We almost got to the point where banks locked all doors and switched off the cash machines.
    If this degree of damage had happened in France there would have been a revolution. British apathy saved the government, and the bankers.
    And let's make the City fairer to the working man, like it used to be, or the crowds with bricks may return....this is NOT a feudal society.
    It is all indicative of one thing above all else.....rotten government.


  • Comment number 16.

    Robert, what I don't get is; why the ignorant public, feel that their ill-informed opinion, is of any relevance. Why has journalsim gone from the educated, educating, to the educated reporting what the uneducated think?

  • Comment number 17.

    I see we are still talking banks, any news on the real economy?

    What are LABOUR doing about encouraging investment in order to create REAL wealth when the upturn comes?

    Oh thats right, they still have their snouts in the trough, I hope BNP get in come the election! 5 years of that and the UK, will have something to shout about, being British!

  • Comment number 18.

    Does it matter what happens in the long term..... NO!!!

    This is Financial Services, where short-termism is king....

    Blank is out because the shareholders (including UKFI) want their cake now....

    ..... thank god they learnt their lesson

  • Comment number 19.

    #9 alexandercurzon

    £5.60 up in smoke then!!

  • Comment number 20.

    So what it comes down to is either

    a) Lloyds-HBOS will collapse. Since HBOS was "too big to fail" the combined group certainly is, and will be kept afloat using taxpayers money.

    or

    b) Lloyds-HBOS will turn it around, and their combined size will give them a huge advantage, allowing them to rip-off savers and mortgage holders.

    So either way it is the taxpayers who lose out.

  • Comment number 21.

    You are right that Lloyds will have a tremendous competitive advantage in a few years. However, it came at the cost of abusing the market and the taxpayer and manipulating the system in order to build a disproportionate competitive advantage. Ultimately, however, they should be stripped of HBOS considering that they sidled up for taxpayer funds immediately after.

    In other words, Lloyds didn't buy HBOS - we did.

  • Comment number 22.

    Side Bar

    Noticed the launch of the Car Trade-In Scheme this morning - BBC had a guy on from Citreon UK!!!!! ... and my local Toyota and VW garages are the only ones I've seen running it locally!!!!

    We saving the Industry or the Dealers?

    More Keynesianism economics..... unfortunately we are a massive net importer of consumer goods - if you spend to 'pull' sales then by definition most of the money, pre retailer, goes overseas.....

    ..... try thinking from the 'other end' Gordon..... you'd have more control... (intended BTW)

  • Comment number 23.

    #14
    Three clicks to start the process and copy passports and then enough copies of ID to fill a parcel van, all to satisfy over the top money laundering regulations which the bent criminals avoid anyway and only the honest have to jump through the hoops for. Not to metion the significant ID risk with all those sensitive and detailed copies going to dubious data centres. We must have enough duplicate passport copies in our financial institutions, Councils and Government offices to provide false ID the the entire Republic of China and half of Asia.
    The rates look good but it isnt worth the hour stood at the photocopier and then live with the worry of your own ID being compromised. Thats why England is so Grumpy, hence the name of the writer.

  • Comment number 24.

    Of course there is an elephant in the room that is called government debt. There will surely be competition for deposits from not only other banks but also to fund the ever larger government funding deficit.

    Where do you expect all this money to come from, overseas investors will be looking very hard at the strength of Sterling?

    My view is that "we" will inflate our way out of problem. Current Gilts will take on the same status as the old War loans.

  • Comment number 25.

    "Being right eventually" may take a while for Victor, and in the meantime his government-encouraged acquisition of some extremely troublesome retail banking 'assets' could prove very painful.

  • Comment number 26.

    For this to work you are assuming that people and businesses will actually want to borrow money at exorbitant rates, and be prepared to deposit money at derisory rates.

    Anyone who has any cash will choose to pay off any outstanding loans, and look to invest any capital in equities or commodities, not put it in the bank.

    These banks will just be saddled with a loan book that will continue to default as unemployment continues to rise and companies go bust. it will not be long before they have to go back to the tax-payer for more money.

    So I for one will not be rushing out to buy bank shares, however much you or the Government tries to ramp them up.

  • Comment number 27.

    The problem about lack of competition in retail banking is that banks -- unlike, say supermarkets, are terribly run businesses. In the last few weeks Lloyds TSB has erroneously taken £45,000 out of my account, failed to apologise or explain the error, failed to renew my debit card by confusing two of my accounts, failed to keep any coins in the branch, installed gruesome piped music reminscent of Costcutter but with less style and taste, and they almost never return calls. Any other retail business that worked like this would be dead: it's galling to think this one will stagger on thanks to the tax payer.

  • Comment number 28.

    Your prime assumption begs the question, Robert. It takes as read that the current, continuing lack of real control over bank excesses will remain in place three years from now and that, as a result, banks will return to making obscene profits without oversight or restrictions on their activities.

    Will that happen? Substitute "MP(s)" for "bank(s)" in the above paragraph and see if it stands up to scrutiny.

    One hopes not.

  • Comment number 29.

    So the banks are coming out of this so-called crisis smelling of roses. What a surprise.
    But what use are retail banks which have turned their face away from the public? All they seem to do now is clear public wages, and for public you might as well read 'public sector'. They then send most of these off to the utilities, and to other banks, and put what is left on the corner in a hole in the wall, pretty much like drug dealers do. They pay interest which doesn't remotely keep up with inflation, and unless you have substantial assets they won't lend to you.
    So it's a fait accompli, but what has been accomplished exactly?

  • Comment number 30.

    So, what we are saying is that the banking sytem was allowed to bring down our economy, and then, we, the taxpayer, lifeboat the few banks to ransom us for the future. UKFI will flog the shares with no regard to anything other than making the bigest return they can....leaving the banks " too big to fail" again...........you couldnt make this up.

  • Comment number 31.

    Shares go up, and they go down. When they go up, it doesn't 'prove' that the director was 'right', any more than a win on the lottery 'proves' the deep insight of a gambler.

    Give a collection of chimps a bunch of bananas, a 'buy' button, and a 'sell' button, and some of the chimps are bound to press the correct button at the 'right' time. Despite the sophistry, the not so distant relatives of those chimps, who work in the finance industry, are not as smart as you give them credit for.

  • Comment number 32.

    There's one name that keeps coming to my mind.....Arthur Scargill.
    I wonder what he would have made of the damage that bankers have done to the ordinary person. He fought a long fight against "the establishment ripping off the working man", or at least, that's how it appeared to me.
    Whilst I never agreed with his ideas, when I think about the British financial industry, it comes to mind "you know what, Scargill may have had a point".
    And there's one other thing....when the banks are again healthy and prospering, the British public would like its' money back, please.

  • Comment number 33.

    I don't think so, Robert.

    The taxpayer just won't have it.

    We are not going to bail out the financial system, and then, once things are on an even keel just sit back and allow ourselves to get ripped off by banks and bankers in a totally monopolised market.

    We need:

    a. the hybrid banks to be split - into retail/commercial and so-called investment banking etc.

    b. new monopoly laws introduced specially for these retail/commercial banks setting much lower ceilings on allowable market share than with 'normal' products, before they are deemed to have anti-competitive positions. The rationale for this 'special' treatment of banks would be based on the systemical importance of banks and the guarantee which, whether stated or not, is implicit that taxpayers underwrite depositors money.

    c. we need to make it much easier for new groups and organisations - not just Tesco - to enter the banking market to give the existing guys a harder time of it.

    How about this idea too....

    Impose an increasing (i.e. a progressive) corporation tax rate on banks and all financial intermediaries (say 5% for small credit unions, building societies, small banks etc up to say 40% - i.e. not far off the existing rates - for the very largest banks). This would reflect the impact on the tax payers purse in bailing out such organisations if they ever did run into trouble.

  • Comment number 34.

    27. At 10:13am on 18 May 2009, PattrickM wrote

    "The problem about lack of competition in retail banking is that banks .... are terribly run businesses"

    I ABSOLUTELY AGREEE!

    And due to their 'never mind the customer, where's the fast bucks?' attitudes they always will be.

    Almost without exception, customer services and administration is cut to the bone - er, 'rationalised' - to cut outlay and demonstrate bigger profits in order to get bonus rewards.

    I've had the same problem of lack of quality of customer services and just poorly managed systems and administration from Abbey/Santander for years and years. They can't even hack dealing with changes of address!

    But that's why the financial industries have to change.

    It's because they got away with that nonsense by everyone being distracted by their great con-trick that they went to phenomenal efforts to sell to everyone, i.e. you can live life on vast amounts of credit, just sign here for this loan, and just put this credit card in your pocket and you'll virtually live like a film star.

    Having said all that, I've had limited dealings with the Co-op Bank, who I really must admit have been very good and very reasonable in their dealings. I obviously can't comment whether that is due to better standards of admin management and a better quality of customer service, or if I've just been lucky.

    But, in the main, bankers and the financial industries just don't believe that investing in the admin systems to deliver customer satisfaction actually 'pays' them. So they invest in admin systems to be cheap to run and the customers get rubbish treatment.

    They're inclined to treat their shareholders pretty similarly.

  • Comment number 35.

    Robert, all you seem to be seeing is the opportunity. I think it's more relevant to focus on the risk.

    What we are seeing at the moment is a lack of competition in banking that's driving down returns for savers and driving up costs for borrowers. It is not sensible to have a situation where too much of the wealth generated by commerce and industry ends up in the pockets of bankers. And it is madness to allow the capital involved to end up with too few banks.

    What's more, this is fundamentally unfair when it is public money that prevented the whole sector from collapse (Barclays and RBS may not have taken public money directly but they have certainly benefitted from State interventions). Never let it be said that banking was not on the brink.

    This may mean the government (and indirectly the taxpayer) profits nicely from its bank 'investments' but that does not make the situation right or sensible or an efficient way to minimize the impact on the taxpayer for that matter.

    We need to break up the behemoth banks into smaller units. This is true of ALL banks, not just those in which the government has a large stake. Then we must not not allow any one of the new smaller banks to monopolize to the point where it threatens the system. The next bank that fails should be allowed to go under without cause for wider panic. This is right for the financial system long term and right in the short term for ensuring a healthy balance of power between banks and their customers.

    We need to push other governments around the world to enact similar laws. And we need to get on with this while the memory of the problems caused by having too many of our financial eggs in too few bank-baskets is fresh.

  • Comment number 36.

    Ha ha, 'may be proved right eventually'.
    I broke my watch yesterday, the hands don't move at all. That said, it's still right twice a day, which I suspect is rather better than Sir Victor's average.

    As for the banking system. We've known for a while now Bobby that it's heads they win, tails we lose. We know the British aren't going to revolt over this issue, or the many others that would have the streets of our European neighbour Capitals burning. Perhaps you should move onto something that isn't going to keep riling the good people who still read this stuff.

  • Comment number 37.

    Yawn!

    Back to banks I see-can't keep away! Didn't we all know this anyway?

    Meanwhile, in the world outside ivory towers......

    House prices going up

    Repossessions at obscene rates

    Unemployment increasing at an alarming rate

    Real world, real business, real people, REAL LIFE!

    C'mon Robert-take a walk on the wild side!

  • Comment number 38.

    How long before we see the UK banks being taken over by Chinese or Indian conglomerates ? With the backing of their governments and teh shift in global financial power it seems only a matter of time before they become attractive to overseas investors who wish to take their expertise and transfer financial power to thier own cities.Rather like the shift in industrial power which began with Japanese and Korean shipyards taking engineers and ideas before selling these products back to us after we had surrendered millions of manufacturing jobs

  • Comment number 39.

    Alexandercurzon - how can you be so badly informed. LloydsTSB should be congratulated. Without their support of HBOS the Taxpayer would have had a whole bank to underpin as per Northern Rock. Why they did it I do not know. The small shareholders are not happy with the action as over recent years LLoyds shares underperformed the market, Lloyds having been too conservative. Just when the bank would reap reward for this they take over a toxified bank and the shareholders suffer again. Victor already had a Knighthood so what else could he get?

  • Comment number 40.

    "in two or three years, be able to blow a raspberry at his critics."
    I doubt it - in two or three years time we will have just about bottomed out and be thinking about a very slow 'recovery'.
    People will be mostly alergic to credit and if someone (Tesco?) is offering banking services at minimum price but still well above cost (1p per transaction not 70p or 3%) theres no way for behemoths to profit other than illegal use of their monopoloy positions. And then the EU will be fining them.
    I have some crappy bits of paper that used to be Lloyds shares - I'm not stupod enough to beleive they'll be worth anything for a long long while.
    If we are on some kind of noticeable rise in the market by then we will just be back to the old bubble ways and if so all hope is lost.

  • Comment number 41.

    Just more spin about spin about spin, and that is where this all started - the HBOS takeover that is. GB spun the deal to a gullible Blank who nearly wrecked a solid Lloyds to get what - a SUPER bank that will be bad for most except the top bankers themselves.

    Anger is not strong enough.........

  • Comment number 42.

    #16 bringmemybow

    I hope for your sake your tongue was in your cheek when you said this:

    'what I don't get is; why the ignorant public, feel that their ill-informed opinion, is of any relevance. Why has journalsim gone from the educated, educating, to the educated reporting what the uneducated think?'

    Recent history should remind you that the public has no monopoly on ignorance. Educated 'experts' are quite capable of it too especially when they are not exposed to sufficient scrutiny.

    Perhaps if more people had asked more 'stupid' questions sooner and pushed for answers we would not have been in quite this mess. Journalists need to do this.

    Those that feel they are too superior to provide answers should not be given much authority even when these answers may be obvious to those 'in the know'.

    And the implication in your missive that public and expert opinion falls neatly into two quite separate camps is ridiculous and simplistic.



  • Comment number 43.

    With recent and expected gains in banking stocks and stability (of sorts) in the money markets, there must be now some hope that HM Treasury will recover most of the taxpayers outlay of the past 18 months to the financial sector.
    Can we have a summary of where all the money has gone to date and a possible repayment scenario based on a 3/5 year horizon?

  • Comment number 44.

    If you are right in what you say then, Robert, Lloyds shares (and RBS) are grossly undervalued. By the end of next year when both should be trading normally and profitably, would it be unreasonable to expect Lloyds shares to be trading at around a fiver?

    That doesn't make Blank's decision to buy up HBOS a good one. A penny a share would have been too much to pay. Not the 60p Lloyds shareholders were stuffed with.

  • Comment number 45.

    And when you have picked up shares at an average of 60p and are about to get a further 63% at 38p you know that Victor Blanks was a legend, I guess if you held them at £7 or whatever they were then you might be a bit peaved, but hold your nerve and this baby is going to make you very very wealthy

  • Comment number 46.

    Yes, it will be really interesting when Tescos comes into the banking market in a big way.
    Tescos is a very well-run company, based in thrift and common sense, and it could take a big slice of the market, after the perception of "bankers' greed", by the public.
    Good luck to them, I will certainly open an account if there's one near me.
    It could really shake the others up.
    Perhaps the usual big names in banking will just be left to deal with all that middle-eastern and far-eastern money.
    Tescos may end up handling most of our current accounts and savings accounts.

  • Comment number 47.

    Robert,

    You need to get your fundamental philosophy correct before you start mis-leading the public again.
    "But make no mistake: these are giant money-making machines"

    By this - I presume they are in the business of printing notes and making coins etc.

    I can't believe you are implying these are 'wealth or value creating businesses' as these businesses do not create anything of value.

    What they do is speculate on future production and future consumption - spending today what 'might' be earnt tomorrow. When the predicted production or consumption comes to bear - they cash in - when it doesn't - we all crash in a pile of speculated debt - as we are at the moment.

    It's funny how so many intelligent men can be mis-led so easily. It never ceases to amaze me how the herd mentality can take the most intelligent of people along on it's journey.

    Maybe it's because the financial industry wrap all their actions in exciting sounding words that the public is in awe of these charlatans.

    Make no mistake - what has happened in the world is very, very SIMPLE.

    1) Investors speculated on future production increasing

    2) Production increased for 10 years, the speculators were made rich by 'being right' and made money by taking their cut (in cash) of that future produciton or consumption when it happened.

    3) The consumer and producers (you and me) woke up and realised we weren't that interested in buying more and more stuff (especially when the cost of credit started to rise) and that maybe '1 plasma TV is enough for my 1 bedroom flat'

    4) The over-extended investors stood to loose money they bet - which they didn't have

    5) The Government steps in to save the investor, the Government 'make the predicted production and consumption happen' by handing money to people (by lending it cheaper), by offering money back on your scrapped car and by subsidising the production of new goods - by taking stakes in the houses of production and lending (banks, factories, workshops etc.)

    What the general public has hidden from them is that this is simply creating a 'false reality' where the actual production of this country / the world is no longer related to the demand of this country / world. It creates consumers that normally wouldn't consume.

    All this simply serves as a means to destroy the worlds resources by 'faking the market'.

    We will all be dead soon, the market won't realise the raw materials of this world are disappearing - until they have actually disappeared.

    As with all Government solutions - they are tackling the symptoms and not the causes of the problem.

    If I am a factory, I need to produce what the market needs - the Capitalist Government plan is to allow the production of 'loads of stuff' and then simply convince the consumer (through advertising), or supply him / her with the finances - to buy it all - regardless of whether they need it or not.

    The car scrapping scheme is a prime example of this - people will scrap their perfectly good 11 year old cars and buy new ones - not because they need it but because the Government is making it 'un-naturally cheap' with it's subsidy.

    The folly of this is obvious - wasted metal, wasted plastic, wasted resources of the car that gets scrapped - and why? To replace it with something that was built in expectation of a higher level of consumption. We could let the new car sit on the forecourt until the consumer is ready to buy again - but this is called a recession and the Government needs to keep the wheel turning.

    In effect the Government is subsidising the pillaging of world resources and wastage.

    ....so Robert - can you now see where this will take us?

    Someone needs to start dismantling this system before it destroys us all.

  • Comment number 48.

    OK Robert - enough about the Banks.
    How on earth are we going to get out of this mess with the spectre of Public Service Pensions hanging over us? The burden on private taxpayers is increasing daily, with fewer & fewer bearing the load. An increasingly large proportion of Council Tax revenue is already being swallowed up for this purpose. Are the Private Sector working population going to spend the rest of their lives paying for this?

  • Comment number 49.

    Blank was given carte blanche by his pal G Brown to circumvent the system, and a fat load of good it has done anyone.

    Big companies have shown to be uncontrollable and run by those who are anythoing but nmastrs of the universe yet Darling and Gordon B, still cant see that socialist marxist centre control just won't work.

    The Big banks in particular with so much off shore support are making life for the customer murderous.

    We need smaller suppliers with a lower cost base who are prepared to appreciate their depositers and customers ot monoliths who truly don't give a damn, regardless of their adverts.

    We can't expect a lame duck government to see the wood from the trees but certainly the FSA should be able to say something let alone the treasury. Or maybe there is actually no one running the financial show anymore!!

  • Comment number 50.

    I assume his share options will be frozen to the price prior to his announcement, otherwise by admitting he has done a rubbish his pension has just increased by 6% !
    grrrrr - more reward for doing a rubbish job!

  • Comment number 51.

    "To put it another way, since Royal Bank and Lloyds will make massive losses this year, you may think that I'm bonkers to be extolling their intrinsic profitability"


    No I do not think you are bonkers but BIASED in your reporting.

    You need to what the musical We Will Rock You.


    Having one of anything is NOT good, period. And that is the story you should have been reporting and about the involvement of El Gordo in creating a vitual monopoly.

  • Comment number 52.

    It always struck me as outstandingly naive to trust this Government or any other. When times improve, and all these gigantic profits start to roll in, what do you think will happen? What will happen is, "gee, thanks, you got us out of a hole, but this is unfair competition, too big a market share - divest or else!"

    Plain as the nose on your face.

  • Comment number 53.

    51 IR35_SURVIVOR

    ''Having one of anything is NOT good, period. And that is the story you should have been reporting and about the involvement of El Gordo in creating a vitual monopoly''

    Spot on - and the fact El Gordo brushed aside monopoly and competition critera is not good, quite extraordinary. This is going to be paid for twice, once as a taxpayer handout and the second time through bank charges.

  • Comment number 54.

    The simple solution would be to simply mutualised the proportion of those banks that are held in public ownership, in favour of the depositors. With a 43% stake in the business, the Government could, likely, do this with an EGM. By studiously parcelling up each mutual society at the branch level, competition would increase, banking failures would be insulated from destroying economic sucess outside of banking and the Government would cease to be involved running a Business. Liberal Economists wish to see a return to the free market. This solution does that most elegantly.

    Yet it is unlikely. Economics reporting is returning to the excited cheerleading of money led free markets that created the situation. The situation that is destroying a wide array of businesses that are engaged in the productive creation, use and distribution of wealth. Wealth that was not concentrated into huge bureaucracies attempting to lumber this way and that in response to the whims of shareholders and markets.

    Returning wealth to depositors and distributing the fruits of growth more widely results in a kind of stability that Banks oppose. Quite simply, instability results in profit growth by concentration of wealth into fewer pockets. Profit, in this respect, is a form of taxation. Stability results in cohesive communities, with wealth distributed widely, low taxation and higher levels of self motivated economic participation. The proposed course you are outlining here would systematically destroy that. Replacing public taxes with private taxes; replacing cohesive communities with work based association; replacing self motivation, innovation and independence with a kind of drudging adherence to fixed process, unquestioning obedience.

    The break up and mutualisation of the Banking System, while it might not suit 57% of the shareholders is likely to benefit 43% of the shareholders to such an extent that the Directors would seem to be remiss in their duties not to just get ahead and do it now.

  • Comment number 55.

    Everything will fail, apart from Tesco, which will grow from the ruins.

    Maybe by the year 2025, the Tesco Party gains a majority in government, changing the name of the country from the UK to "Tesco Land".

    We could have a national anthem called "Every Little Helps"...

  • Comment number 56.

    *33 noideaatall:

    "I don't think so, Robert.

    The taxpayer just won't have it.

    We are not going to bail out the financial system, and then, once things are on an even keel just sit back and allow ourselves to get ripped off by banks and bankers in a totally monopolised market"
    ---------------------------------------------------------

    What the hell are we the taxpayer going to do about it?. What the hell have we ever done about such things in the past? We've all sat here for years and years whilst the city boys made billions in bonuses. We've all wondered exactly where this money came from & we've all gasped (some in anger, some in delight) when the banks have made astronomical profits. The same will happen again, there will be mutterings and grumblings but we won't take action. Why not?

    The British physche has been battered into grumbling acceptance, no matter what they throw at us since the Thatcher days. The last public protest that achieved anything was the poll tax riots. The difference here was that the poll tax directly impacted everybodies pockets, their bottom line.

    This is why I'm hoping in a way that things become much worse, substantial amounts of jobs are lost, more stories about banks greed come out, reposessions rise rapidly, more companies go bust.

    We need to galvanise ourselves and only through extreme adversity will this happen, only then will things really change. Whilst we have this bunch of trough munching, "let's claim for everything" (I thought we all worked to get paid, to house ourselves, buy food & look after our dependents - silly me for not choosing one of those employers who pay for all that too!) bunch of inept thieving scoundrels in charge, nothing is ever going to change.

    Up the revolution! (I'll lead it off - any one care to join me, I'll bring custard creams??)

  • Comment number 57.

    Let's be honest for a change, shall we.

    All this nonsense about investment opportunities here and underwriting there; it's all tosh.

    Where banks are coining it in is in the grotesque widening of margins in the consumer market.

    At a time when the BoE rate has dropped from 5% to 0.5%, and Libor has fallen from 6.5% to 1.5%, my svr mortgage, which I cannot move because of personal circumstances, has dropped by a mighty 0.5%.

    As a matter of interest,(sic) I compared loan quotes from my bank (Britain's biggest with a huge taxpayer shareholding) and guess what?
    Absolutely no difference.

    Furthermore, I have both Mastercard and Visa credit cards, and there has been absolutely no reduction in interest rates there either.

    Basically, since the Govt. through UKFI, owns a huge proportion of the banking sector, we are being taxed through the banks on our borrowings for the purpose of repairing those banks' accounts.

    Brown is complicit in this loan-sharking by fault of omission.

  • Comment number 58.

    Well Robert, another great observation, but there's only future value in this business because the current board under the leadership of Lord Blank eroded any current value they had with the disastrous decision to buy HBOS

    There is no reason I can see why they couldn't have waited until the full scale of the HBOS losses became apparent, ACT IN HASTE SHAREHOLDERS REPENT AT LEISURE!

  • Comment number 59.

    @57 - therrawbuzzin

    As you mention - you can't move because of personal reasons - not meaning to speculate what these might be but it could be that there is a risk element for it - part of the interest is to cover the risk of default and the loss that the bank would then suffer (hence one of the problems early in the crisis when LIBOR was completely divorced from BOE rate - it had a risk element in it that BOE will never have). As for Visa/Mastercard - you will find that historically the credit card interest rates have very rarely tracked LIBOR/BOE as these incorporate a much higher risk element. Indeed at present with all the job losses and additional burden on cc companies (rising redunancy, lack of pay and the shared liability they take on as (Eg having to pay you back for the £5k you lost to MFI for your kitchen)) it is not a surprise that APR on CC's are high (saw one on an internet advert the other day with APR of 184%!)

  • Comment number 60.

    56,

    Spot on (unfortunately), I'll bring the lager :)

  • Comment number 61.

    I am afraid I detect an undertone of disgust if not horror that the banks are now accumulating substantial profits - even if not reserves to the extent they would wish. One of the problems of the finance industry is that it is highly complex and crucial to all of our lives. Strong banks give re-asuurance both to businessmen and foreign clients and investors.

    Of course they behaved extremely foolishly at a certain level by failing to deternine risk correctly but the sooner they become strong and fit again the better it will be for all parties.


    Let's move on and recover from the recession hurt but wiser.

  • Comment number 62.

    Robert, you make it look like we the taxpayers (through our infinitely unwise/conniving government) were no more than easily manipulated pawns used to provide bridging finance to the likes of Lloyds. We fund them with our deposits, we fund them with our loans, we fund them with our, er, taxes. Can such a monstrous thing be true?

  • Comment number 63.

    All those people worrying and fretting over banks gouging the average Joe in the street - relax and stop worrying. All parasites have problems if they grow larger than the host.

    We live in a global world - that is why there is nothing that can be done to stop the decline in real wage rates - there is always someone who will work cheaper. It is all global.

    It is all global, that is the non answer to every complaint. Speaking of global GM seem to have less than 2 weeks left as a non bankrupt company. That will lead to an awful lot of unemployed Americans - still Americans are well known alturists so not much chance that they will seek to export their unemployment problem. Lucky for the UK that GMAC stayed in Detroit and lucky that none of the British "global" banks ever understood that the US was part of the globe - so no chance of any more losses coming from that direction.

    Vast swathes of Eastern Europe are on the edge of sovereign bankruptcy. Ireland, Spain, Greece and Italy don´t seem to be celebrating the joys of the Euro. The German economy is on a downward trend - with the only thing growing being the queues of countries all looking for a German baliout. Lucky that British "global" banks never realised that Europe was part of the globe - so no chance of any more losses coming from that direction.

    After years of differences the Chinese and the Japanese have found common ground - a mutual loathing of the vast amounts of debt to be issued by the US. Apparently they are not too keen on buying, and the US have reminded them that they have 12 aircraft carrier battlegroups available to defend pax Americana. Should bode well for Asian economic growth. Lucky that British "global" banks never realised that Asia was part of the globe - so no chance of any more losses coming from that direction.

    I think UK house pries will rise strongly and that all will be well in the UK banking sector. British jobs for British workers and British banks for British house mortgages. Onwards and upwards!!!!

  • Comment number 64.

    We Brits seem to have a liking for "oligarchs" in our banks.
    Single individuals who wield so much power that everyone else is terrified of them.
    "Dictators" in their own organisations.
    Has it been the cause of some of the most spectacular failures?
    A panel or board of 4 or 6 individuals with equal power might be better, and no decisions unless all-agreed.
    Is it the same in other countries leading banks?
    Re 47 Writingsonthewall.... "intelligent men can be misled so easily" and "herd mentality"....that's so right.
    But herd mentality is the basis of the stock market, the property market, capitalism, fascism and communism.
    In fact, it just seems to be a human condition, which has led us up so many dangerous cul-de-sacs in the past. Shame Mr Brown didn't recognise it. Roberts' "giant money making machines"....well, it's true that they have been exactly that in the past, but in the last few years they seem to have been making it strictly for themselves, or at the EXPENSE of the working man.
    Re 56 Averageworkingjoe....while I don't want to see too much hardship, I think you're saying that we need a severe shock to get us out of our apathy....and you may be right. And your "thieving scoundrels" in Parliament who supported and promoted the bankers' "greed machine", have discovered that it has come back and bitten them on the ****.

  • Comment number 65.

    Bank review meeting this morning.

    Current odraft 1.75% above base.

    New offering 3.5% above base.

    Hmmmmmmmm - so bank are now making twice as much money on basic banking to fill the hole left by the end of the 'creative banking'.

    Of course way to avoid this is not to have an overdraft or any bank borrowings so as a company we are working on this.

    But of course this is unlikely to generate growth and investment and will lead to stagnation and contraction and rationalisation.

    Ultimately the problem is this - if the few at the top take out too much in pay and bonuses - which is certainly what the 'City' boys do - there is not enough left for those down the chain so people lose their jobs.

    How many bank back office staff have lost their jobs so that the boys in the City can still have their bonuses?

    How many companies will cut back and rationalise to reduce their borrowings to avoid the high borrowing costs which will result in more jobs lost - high borrowing costs that are only there to enalbe banks to make big profits to feed bonuses to the City boys.

    Its always been like this its just much more obvious in a recession.

  • Comment number 66.

    #56 AveragWorkingJoe

    I completely agree with your sentiments, I'll bring the bourbons....

  • Comment number 67.

    #57 therawbuzzin

    "Where banks are coining it in is in the grotesque widening of margins in the consumer market."

    Absolutely behind you 100% - why should we congratulate the banks for 'finding a better way of ripping us off and making sure we'll always be in their debt'

    It's a game that requires no skill as far as they're concerned - but you watch them pay themselves highly for the 'excellent investment skills' in about 5 years time when bonuses are back on the slopmenu for the hogs and pigs of the city (now do I mean 'the city' or the city of Westminster?)

    Oink Oink

  • Comment number 68.

    #59 Horned_devil

    Classic Capitalist reasoning

    "- part of the interest is to cover the risk of default and the loss that the bank would then suffer "

    So it's fair to charge interest on money you lend because you have taken a risk.
    .....but wait a minute, the Banks have all the Capital - sure if I lend therawbuzzin 150k to buy a house - on my wages and with my savings this would constitue a sizeable risk.

    However if I am a bank with 500,000,000k to play with - and on top of that I spread the borrowing across as many 'unsuspecting investors' as I can find - then what justifies the cost of risk then?

    I also have the advantage of the law being on my side - and if therawbuzzin doesn't PAY ME then I will take his house, sell it for what I can and then get the Government (through the courts) to hound him until he pays the excess.

    WHERE IS THE RISK?

    THERE IS NO RISK - that is the whole point. Banks are printing money and then telling you and me that they are honestly earning it by 'taking risks'.

    SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM, SCAM

    That's all it is - and you, me and every other person in this game is the SUCKER.

    The ONLY solution is a REBELLION AGAINST THE MONEY LENDERS.

    .....a bit like that chap about 2000 years ago, somwehere near Jerusalem I believe..

  • Comment number 69.

    Oy veroy goood blog (Peston speak is much more entertaining than text)

  • Comment number 70.

    61. At 2:04pm on 18 May 2009, Barnabas wrote:

    "... but the sooner they become strong and fit again the better it will be for all parties."

    I'm not sure I understand exactly why you come to that conclusion.

    One could say, cynically, the sooner banks become strong and fit then they will all start selling people the primary myth that eveyone can live on almost limitless credit again. (They're already working on a sexier, more techno, credit card that will be 'safer', to aid seducing the reluctant converts to the religion of excessive credit).

    That, of course, belies the second great myth of the banking industries, i.e. that everyone 'needs' them.

    The third myth is that their bosses are SO intelligent and sharp-minded and clever, they need to be paid vast amounts of money.

    None of those myths are even particularly credible ones.

    But, if the British public is in the mood for a good myth, could I proffer the one about the Loch Ness Monster, perhaps?

  • Comment number 71.

    The remaining banks equate to the Khemer Rouge having significant political positions in Cambodia. The biggest criminals escape any punishment for wrongs committed and placed in responsible positions that will give them more power in the future. The likelihood of a repeat performance have just increased. The idea of shoring up a failed system with no new oversight or signifiant regulation is ignorance beyond belief. As the politicans were culpable the bankers and investors know that no real investigation is forthcoming. We will deal with dishonesty by being dishonest. Illusion is being presented as reality. They should take a vacated bank and fill it with the letters everyone received informing them that their retirement accounts have been diminished by whatever amount and home foreclouse notices and make it a public museum as a reminder of what can happen. We are all Cambodians.

  • Comment number 72.

    @#59 Horned_Devil

    If you're not working in the PR department of a bank you should be. But what you're saying doesn't stack up.

    1: Fair enough margins must increase for risk. But when you look at the decrease cost of borrowing to banks and the increased cost to their customers it is impossible to justify the difference on that basis. Especially when you account for the fact toughening lending criteria, as the banks have done greatly, is in itself a powerful risk management tool and a more intelligent approach than simply charging more and paying for the fallout.

    2: While you're right that the relationship between Libor and credit card interest is vague there should not be no relationship. There'd be at least a loose relationship if it were a properly competitive market. Again, look at the massive reduction in credit limits and the fact that net credit card borrowing is actually falling as people pay of their debts.

    3. If you really think it's the credit card companies that bear all the liability you mention you've clearly little or no experience of being a vendor accepting credit cards. The fact is that every opportunity is taken to shift the risk way from the credit card issuer. It is the retailers/vendors that end up bearing the cost of many fraudulent transactions for example. And if you've a legitimate reason to get your money back from MFI for that kitchen you mention then it is MFI that will pay in the end, even if it's credited via your credit card company. If you don't have a legitimate reason, no amount of appeals to your CC issuer will get you your money.

    I think you need to wake up to the profiteering that is going on right now rather than being an apologist for banks and financial institutions. They have their own spin doctors. Perhaps you're one of them?





  • Comment number 73.

    Sutara

    What is your alternative to banks if "we don't need them"?

  • Comment number 74.

    We have been fleeced by bankers and Govenment there is nothing more left now the people in the street are never going to forget this and will never believe what they are told by those who think they are in power so it does not matter if Gordon leaves or Blank tells the truth they have deeply hurt the naive British public on most levels not all but the lower orders and this will never be forgive. I may self have never believed that there was a credit crunch but I do know robber Barons when I see them and those who cover up for them because they are getting back handers, we as the public are reaping what we have sown, allowing bankers and Govenment to forget their place they serve us not we serve them.

  • Comment number 75.


    The banks left standing will, as Robert says, have greater opportunity to make significant profits as the level of competition for business is greatly reduced. Greater profit for the part-nationalised banks is a good thing as profits are distributed to shareholders via dividends. The UK Government is therefore likely to make a significant profit on its investment.

    Also, post 71 - your comments are blown out of proportion and insulting to those that have lived through genuine attrocity and genocide.

  • Comment number 76.

    Robiati

    Yes, I have experience of Credit Card transaction - it's true that chargebacks are generally forced through to the merchant (I currently work in online retail so I am very aware of the potential problem of chargebacks and the issue of accepting the risk of a cardholder not present transaction!) however in the case of MFI it went out of business meaning that the credit card companies foot the bill for transactions under the section 75 of the consumer credit act - the administrators were even referring claims made against them onto the credit card companies. As the risk of business failure increases then the risk to the credit card companies increases. Remember one of the issues was that interest was too LOW a couple of years ago (0% balance transfer anyone) - I don't remember anyone complaining it was stepping out of touch with a (rising) LIBOR at the time...

    I'm not saying that the risk is the justification for ALL of the increase in the distance between LIBOR and bank rates but it is for some. Yes all of the points of lending you make are valid but then banks still have to cover themselves on existing risk (eg businesses and people they have already issued loans to). With house prices reducing their asset to loan ratio will have reduced (increased risk of recovering if a debtor goes into default) and with the recession there is a greater risk of non-payment as people and businesses struggle with their finances. These wouldn't necessarily have been factored into the original risk profile (despite a lot of "I told you so's" the current crisis was generally not prepared for) therefore the banks need to mitigate current and future risk by increasing their charges.

    There is also the need to recapitalise - a nice little requirement from the government a little while back - so yes, they are needing to increase margins to meet government targets on that - simply put they need more profits to not only recoup their losses but to meet new legislation. So yes, there is a degree of profiteering but look at it with a degree of objectivity rather than "all banks and bankers must be evil"!

  • Comment number 77.

    My personal circumstances have not changed in four years.
    The risk of lending to me has thus not changed in four years.
    My credit history is impeccable, and I have access, should I wish to use it, to tens of thousands in credit card limits, including one at £14.5k.

    The cost to me of borrowing has, however, remained unchanged at a time when interest rates are historically low.

    That is not risk management, that is plundering consumers to compensate for previous mind-numbing incompetence.

    I, or anyone else who has responded to this blog, could do that.
    That Brown has given this piracy the nod is disgraceful.

  • Comment number 78.

    You think that because Lloyds/HBOS are/will be so big, they will be this massive money making machine in the future.

    There are many BT shareholders who have thought along the same lines... communications is the future, BT have near monopoly control... a great company to buy shares of.

    What you seem to forget is that these large organisations become hopelessly inefficient, slow to adapt to changing markets, more interested in their own internal politics (and empire building) than customers' needs.

    You also are forgetting that an enormous overhaul of the banking market is likely over the next 10 years, with small nimble new players entering the market, with excellent online facilities, aimed at the iphone/blackberry generation.

  • Comment number 79.

    Both banks are bust to the wide. Trading out of that situation is not impossible, but would be highly unusual. The so called profits are no more than that, so called until it is demonstrated that all of the chickens have come home to roost and have been fully written off. That alone could take another five years before any true profits are to be earned. I still wouldn't buy either stock with counterfeit money!

  • Comment number 80.

    isn't the simple reality merely that the widening of profit margins at the banks is more or less a "tax" on (particularly) savers, borrowers, and - in the investment banking field - corporates. We are all "sharing the burden" of making these institutions great again, even though we are already sharing the burden via the enormous explosion in public debt and the increased visible taxes that we and our descendants will incur.

    Either the government should be asked to quantify, and then justify, the extent of this excess return that the public is expected to fund, or it should be recouping it directly for the benefit of all via scaled banking taxes as suggested by another contributor.

    Typical corporate return on equity will be (I would guess) 8-9% in the next cycle. In the last cycle the banks regularly clocked up 20-30% on their domestic business. This cannot be the "right" number this time round.

  • Comment number 81.

    It's only boom time until the printed money runs out.

    If someone gave me billions of pounds out of thin air I would certainly think it was a booming time.

    And if they said I could lend this money at exhorbitant interest rates and pay no interest on the savers money that funded some of the lending I'd think all my birthdays had come at once.

    Blank will never be thanked for what he has done like the rest of this seemy lot.

    As soon as we have some sort of normality back and who has a crystal ball that will tell us when that will be these banks will be broken up because that is what the people will want. Competition!

    Taxpayers should demand every penny back with interest that they have lent to these banks so it will take forever and a day before they will be booming ever again.

  • Comment number 82.

    It seems absolutely extraordinary to me that, in order to deal with perceived corruption and greed in the financial sector and government we've got to vote CONSERVATIVE, (or any of the others).
    The "Labour" party....propping up a greedy, self-rewarding ESTABLISHMENT?
    You wouldn't have believed it even 10 years ago.
    Strange old world.

  • Comment number 83.

    #73 Horned_Devil

    I've said all this many times before on this blog, but the gist of it is:-

    Do we 'need' the big banks? No, or at minimum, not as much at the banks would like us to believe that we need them.

    Alternatives for deposits / savings and some services: "ethical banks", Credit Unions, Mutuals, NSandI, cash.

    As for the credit facilities, well, do you really 'need' them? It's all about how you manage your finances.

    Manage them right and you don't need (or end up paying for) overdrafts, credit cards, personal loans, etc., etc. (This is, by the way, what rather a lot of people are actually doing at the moment - paying off debt). That leaves the mortgage market which, as we know, is highly linked to the property market and banks are hardly the sole provider of these.

  • Comment number 84.

    #76. Horned_Devil

    I'd buy the argument that too much credit was extended on credit cards but not that rates were ever too low. You can still get 0% balance transfers but these are only ever for a limited period and are a cost effective new business strategy (which is why they're still being offered). Your point about MFI and other companies going bust is fair enough to a degree BUT that still doesn't excuse the excessive margins currently being made. For one thing, think of the lag between the transaction and the hand-over of money to the vendor. This will mitigate that risk substantially or entirely in the case of some liquidations in that money credited 'back' to the cardholder will not have been paid to the vendor in advance or product/service delivery anyway.

    For bank lending in general margins have increased at levels vastly greater than risk. If I'm charging you 1.5% over Libor and I up this to 3% I am doubling my take. There is no way post credit crunch risk has doubled compared with that pre credit crunch. Even if it had it would not justify a bank doubling its take since only part of this reflects the risk. Yet there are PLENTY of examples of such margin increases (and worse) by banks even where individual risk profiles are fairly low.

    On the issue of recapitalization... it is ABSOLUTELY NOT the job of bank customers to recapitalize banks. That's what the shareholders are for. If the amount needed is too great for them then alternative funding must be sought and whomever provides it (be it government or middle eastern wealth, for example) will do so for a share in the bank, most likely at serious discount to the prevailing share value. Since this will already be depressed due to banks' foolishness the investment should be attractive enough without the bank needing to resort to short-sighted tactics like bilking its customer base.

    I am not suggesting bankers are evil. And none of us should kid ourselves we can achieve objectivity even though it's a state of grace we should persist in pursuing. All I am doing is looking at the facts and not seeing the justifications you describe for the extraordinary margins being charged by banks at the moment, even though I accept higher margins are necessary.

  • Comment number 85.

    Horned_Devil

    Oh and I've said this one before, as well:-

    It's like the 'Tesco chicken' thing really. For years 'experts' specifically bred chickens for more 'yield', ignoring factors like animal welfare, texture, taste, customer views, etc. And they delivered more yield, but at 'costs' which resulted in many customers - at the 'business' end of the chain - being no longer interested in buying what was on offer.

    Bankers for years have lived in a world of increased 'yield' - more profits, more bonus, need to be up on last quarter. But people have seen through the con-trick of living on credit. Credit driven by your bank manager's need to be kept in a fashion to which s/he would truly love to remain accustomed. The truth is - it's unsustainable.

  • Comment number 86.

    DallowWalker 39

    HBOS needed winding up that would have been cheaper.Then the network of branches should have been split into regions set up as state owned banking divisions for 5 years or so.

    The LloydsTSB deal was an EGO trip PURE & SIMPLE.

    What BLANK gets is GORDY'S guess.

  • Comment number 87.

    Victor Blank may be proved right (eventually).

    So might Nostradamus(eventually).

    Chimpanzees might paint the Mona Lisa (eventually).

    The Speaker might go (eventually).

    And Gordon Brown may call an early General Election (eventually).

    Victor made his decision to buy HBOS after some second hand car salesman - no that's unkind - a Prime Minister sold him an investment that he described as being all boom and no bust.

    Too bad Victor didn't look at the small print.

    And Robert, of course it will work out alright in the end. Lloyds have received the people's money and will survive. Too bad the greedy bank didn't pass it all on to the many home owners and small businesses who have gone to the wall.

  • Comment number 88.

    I'd suggest it is unlikely that Lloyds Group will be allowed to hold a monopolistic position in the mortgage market unchallenged, once this government is out of office.

    Bland and Co could see an opportunity. It was politically manipulated by the PM, who simply shoved the Competition Commission aside. I thought that the Commission was supposed to work in the interests of consulers, NOT government.

    Blank took a nutcase finance house under his wing with virtually zero due diligence. Why? He changed a realtively stable, well disciplined bank into 40+ per cent state ownership. Why? So Brown could avoid nationalising yet another failing bank.

    How on earth is it better to guarantee hundreds of billions of toxic assets in a PUBLIC COMPANY, than to look after a state owned institution? What does that tell the market about how the UK operates?

    If Tesco went off the rails, would Brown consider rolling them under the wing of M&S or Sainsbury's and guaranteeing the "new owners" against any losses or bad debts?

    It was smelly from the start. Lloyds shareholders are quite right to be incensed, because they have ended up with a state presence deciding their future, rather than a bunch if directors they could complain to about poor performance.

    Brown and Mandelson say they will pump GBP750MIL into "promising innovative UK companies". I wouldn't trust this government to make any decision about any technology or innovation that could deliver future growth for the UK. (Happy to be proved wrong, but I see no great track record of any government-sponsored company really delivering the commercial works.)

    Maybe Blank's opportunistic approach could have worked if Brown continued in power for a decade or so. I doubt he (or Lloyds) will get any protection if - probably when - there is a change of government.

  • Comment number 89.

    Robiati, although my tongue was not in my cheek, I accept it was a generalisation. Nothing wrong with getting the views of educated civilians. However if you have ever read the Daily Mail and friends, or watched Sky News/Itv News you will see journalists seemingly hunt out the most ignorant individuals and look for their emotions on an issue, and conclude a news story based on the opinions of people who are completely unaware of the bigger picture.

  • Comment number 90.

    The main thing to do with the banks in my opinion is to limit derivative trading. They have effectively gambled away billions to give us the credit crunch, and nothing I have read from the UK regulator has suggested that their powers are going to be curtailed. This would be a simple measure to put into place, and while the banks would not like it the rest of us could sleep easier.

  • Comment number 91.

    So we can look forward to more of the same, but we're going to win this time cos we will have UK plc Uber Cosmic Bank to scare the world with? Makes a lot of sense if your an amnesiac cretin, or even John McFall MP, but I'm keeping my dosh under the mattress for the time being.

  • Comment number 92.

    Another bank story but nothing of the real world. Our / our children and our grandchilrens work is to be taxed at a higher rate to bail these harbourers of slavery out.

    My advice to my kids is to spend every penny they earn, then retire and let the state pay for EVERYTHING!

  • Comment number 93.

    Might be tempting to buy into this story. Until I read again the bit about, "there is an attractive consequence for shareholders in those banks that are still standing."

    I know I have been living in denial, thinking shareholder power could not come back in the way it was before. But all Gordon Brown and just about any other politician, business person, the pundits etc, want to discuss is GROWTH. Of increasing shareholder returns, infinitely until there's nowhere left to grow. At which point, further illusion is created to make stagnation look like growth. Rules are bent, risks are taken that are hopelessly optimistic, everyone has to take part in the charade or risk being excluded, the leaders turn a blind eye and wave away all warnings as foolish talk.

    Getting back to growth, yet no Regulation, no promise to never again Bail out the banks, no new laws created to make bankers culpable next time? So that's it then, Shareholder Greed is what we do, the (only) way we do it and no alternatives considered - just back to that bankrupt, debt-ridden, unregulated, greed is essential, insane business mentality that will ultimately deliver us an economic wasteland, again?

    OK so I never made it to top of the class, but I reckon I'm bright enough to appreciate if we don't change much, there's a darned good chance we will be here again.

    Is this then the model for future Capitalism? Huge debt growth, followed by calamitous bust where the taxpayer bails it out again. Are you really so sure the world will buy our Bonds if we do this again? Mindless stupidity, surely!

    You wrote about a New Capitalism Robert, the way things are stacking up, doesn't look a whole lot like it yet, matey.

  • Comment number 94.

    #86

    I bow to your amazing wisdom, that at a stroke of a pen you can state without any facts to back you up whatsoever that it would be cheaper to wind HBOS up.

    Lets look at that.....oh, you've not put any facts to back it up. I can play that game too!


    As for splitting HBOS into separate banking divisions, well I can tell you for a fact that from a logistics and infrastructure point of view that would be hugely expensive and complex. Think of the costs banks spend merging their systems, IT, back office etc and imagine how much it takes to break that up. It would take a year or two to achieve by itself! To be honest I can't see any benefit what it would achieve.


  • Comment number 95.

    Have you been reading my comments Robert, said prety much the same thing on here last night. Sorry to plug a rival channel but watched Dispatches tonight and low and behold nothing has much changed regarding the old and new banksters. The old banksters walked away with staggering amounts of money, and the new banksters are following in their foot steps, no change there then. As I commented last night almost ready for the next bubble to start inflating.

    The only way to break this cycle of boom and bust, at the expence of ordinary people like us, is to remove the cosey club of politicians and bankers. The only chance available to the ordinary people of this country to force change is through the ballot box. All three main parties are wallowing in their own mire, and have little if any credibility when it comes to actualy representing the people of this country, as opposed to their own self interest. Bring on the elections and lets send them back to the other planet they obviously come from.

  • Comment number 96.

    May I remind posters that there was a serious fear that the local [international] banking system would collapse.
    It was an emergency. Governments did and are collaborating to avert the follow-on possible consequences. The emergency seems to be over but it's resurgence may be built in to the exceptional global economic disturbance.
    By all means blame the rr0s who are falling on their golden swords. Nonetheless, the disturbance still exists.
    Some pundits talk about twenty + years for global economic recovery.
    I think that the actions taken were immediately apposite and, globally, will continue positively for the global economy.
    BoE, Fed, etc. the game requires concert to avert another emergency.

    N.

  • Comment number 97.

    The theft and publication of data from the forthcoming review of MP's expenses seems ill-timed from the viewpoint of electoral advantage. So can it be seen as a retaliation to, or simply a diversion from, the similar attacks made recently by parliament itself upon the behaviour of the financial community, now suddenly all forgotten? This is a serious question rather than a conspiracy theory! But, however odious MPs' behaviour, given the forthcoming data publication and Kelly review, the practical result of the illicit leaks amounts to an assault upon the democratic process per se. I note with some surprise that no commentator seems ready to say so. Outside your remit, RP?

  • Comment number 98.

    How can the country survive the decimation of an agricultural economy? It did.
    How can the country survive the demise of the shipbuilding industry?
    It did.
    How can the country survive the death of the steel industry?
    It did.
    Coal-mining, car building, heavy engineering, etc, etc,.......?
    It did.
    How can the country survive without a huge manufacturing base?
    It did.
    How would the country survive if hopelessly inept, corrupt to the core, financial institutions were to fail?
    End of life as we know it.

    I don't think so.

  • Comment number 99.

    #97 REDHEYLIN

    I personally would have the editorial boards of the Telegraph and Mail in the Tower under charges of sedition and treason.

    As to Mr. Peston's article, 1) spot on as to these banks prospects.
    2) As to these banks margins, they are having to churn their toxics a little at a time (working it in) and to do that they need the margins, about 3 years to be able to detox to a "liveable" extent.
    3) Monopoly? I can place my money with upwards of 100 companies for either savings, current accounts or investment accounts.
    4) An earlier poster was going to restrain his companies investment plans due to his bank now wanting 3.5% above base! If he can tell me when commercial money was available to SME or even fairly big boys at 4%!
    What does he want? Knobs on?
    5) Someone complained that the BBC no longer performs as the Educated, educating. That is the truest statement on the entire blog, the entire media have succumbed to the lowest common denominator race (and do I mean Common!)
    6) The guy with "personal circumstances" who is complaining about rates; if you're sub-prime you take what you can get, which should be very little and at 100% apr.

  • Comment number 100.

    Oh, one last thing; people keep talking about amounts of as little as 5 or 10 million pounds as being "Staggering" to quote one of you.

    To live the life I would prefer;I would require a net worth north of 30 BILLION, the first billion would just about pay for and maintain my Mediteranean yacht and my Caribean yacht and the personalised, private A380 to transport me between them. As to the London, New York, Sydney, Paris, Vienna and St Petersburg town houses and staff added to the Malibu beach house, Gstaad/St Moritz chalet,apartments in Zurich, Hong Kong and Abu Dhabi. And the STAFF! Did I say 30 Bill? Who is going to pay for the Artworks, Stark furnishings, the designer clothes for myself, wives and mistresses, boxes at the Arc de Triomph, Ascot, Bayreuth, Glyndebourn, The Met. Cars and drivers, its just endless.
    5 million......TIPPING money.

    Uk gdp approximately 2.3 TRILLION

    2,300,000,000,000 pounds.

 

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