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Governor criticises government (again)

Robert Peston | 20:01 UK time, Wednesday, 17 June 2009

Mervyn King has tonight said that the Bank of England has insufficient powers to carry out its new legal responsibility to promote financial stability.

In remarks that are likely to prove highly embarrassing for the government, he said at the Mansion House tonight that: "It is not entirely clear how the Bank will be able to
discharge its new statutory responsibility if we can do no more than issue sermons or organise burials."

His reference to "burials" is a reference to the Bank of England's role as the administrator of the assets of banks that have collapsed.

He is bound to be seen as attacking the man sitting next to him at the annual Mansion House dinner in the City of London, the Chancellor of the Exchequer - in that the Treasury has resisted significant changes to the allocation of regulatory responsibilities between the Financial Services Authority, the Treasury and the Bank of England, the so-called Tripartite.

However, what he said may well be music to the ears of the shadow Chancellor, George Osborne, who is understood to have been planning to call for more powers to be given to the Bank of England to oversee financial institutions.

Mr King's complaint is also particularly resonant today, because the US President is announcing that he would be giving sweeping new authority over financial institutions to the US central bank, the Federal Reserve.

The Governor appeared to differ from the Chancellor - in tone if not explicitly in content - in respect of another hugely important area of banking reform, which is whether some banks have become far too big for the health of the economy.

The Governor said: "If some banks are thought to be too big to fail, then, in the words of a distinguished American economist, they are too big. It is not
sensible to allow large banks to combine high street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure."

By contrast the Chancellor told the same City audience that "The solution is not as simple, as some have suggested, as restricting the size of banks. We have learnt that you don't necessarily need to be a big bank - or indeed a complex one - to threaten to bring the system down."

Mr King also gave a sound ticking off to his City audience for the way they had let down the people of Britain. This is what he said:

"The costs of this crisis are not to be measured simply in terms of its impact on public finances, the destruction of wealth, and the number of jobs lost. They are also to
be seen in the lost trust in the financial sector among other parts of our economy.

"For a generation or more, businesses and families up and down the country were told, not least by the City, that the disciplines of the market economy were essential, even if painful in the short run, for greater prosperity in the longer term. That belief in the merits of a market economy was embraced and for many years was not misplaced.

"But out of the blue - in this case the financial sector - came a crisis that did not stem from weaknesses in the real economy. It has wreaked havoc on those same businesses and families. Unemployment, as we saw in today's figures, is rising sharply.

"And yet it is the banking system that has received financial support on an almost unimaginable scale. We who work in the financial sector have much to do to regain the trust of those who work outside it. "My word is my bond" are old words, but they were important. 'My word is my CDO-squared' will never catch on."


Comments

  • Comment number 1.

    Yet again we have the only man standing between this country and ruin is Mervin King.

    A stallion amongst geldings - Merv HAS the Cahoonas.

  • Comment number 2.

    Mr King seems to have some integrity and a conscience regarding the Finanical Disaster which took place under his watch. it is nice to see someone in authority growing some "balls" and keeping an eye on the true Public Interest, rather than just short sighted personal gain.

  • Comment number 3.

    DON'T ROCK THE BOAT!

    This just confirms that Brown and Darling are lining themselves up for lucrative 'positions' in the finance world after they have departed from government. Most likely they will be within the big banks.

    The compliant politico's are always well rewarded after their tenures in 'public office'.

    Time will prove me right...just wait and see!

  • Comment number 4.

    The Governor is quite right. Regulatory control of the banks should be returned to the Bank of England. FSA has enough to do to sort out the investment management industry which needs an major overhaul.

  • Comment number 5.

    It appears that Mystic Merv is developing some balls.

    Although to be fair he doesn't appear to have got the message that the govt plans to pay the money back by getting the BoE to print it and inflate the debt away.

    Or he has got the message which is why the BoE pension scheme is betting on inflation.

    Clearly this plan is lunacy but when the country is run by a delusional megalomaniac what do you expect.

  • Comment number 6.

    Surely it would make sense to vest powers to regulate equally in all members of the Tripartite, perhaps in voted meetings, much like those held by the bank its self, this would ensure that risks were likely to bee seen earlier and addressed.

  • Comment number 7.

    Has there been a financial crisis? What impact has it had? Do we need an Iranian solution to the complete ineptitude of the political class?

  • Comment number 8.

    Given a choice of helping the real economy or helping the banks Mervyn will choose the banks every time.
    When push comes to shove he knows that the moral hazard lies with the ministers in Downing Street.
    He is just posturing.
    Preparing his ground for when Osborne is his boss.

  • Comment number 9.

    It must be difficult to have it shoved in your face that your Tripartite Committee failed the country when you or your boss gave it breath. He should listen when another warning is given of regulatory fudge. Slice n dice the banks? How much will that cost? Sounds superficially attractive but who has done the feasibility. Bang on right re : trust and respect. Hear hear!

  • Comment number 10.

    Very good, well said Mervyn King. Fortunately there seem to be a few independent minded, critical thinkers left in a vast pool full of lemmings.
    Also, President Obama's speech today outlining stronger and more efficient regulation, both nationally and internationally, was very good.
    This is extremly important for having a change of cleaning up a very corrupt international financial system. Excellent news!
    Many arguments, explaining why strict regulation of global financial organisations (including hedge funds) is essential,
    can be found here:
    https://globalinsights.wordpress.com/

  • Comment number 11.

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

  • Comment number 12.

    I think Mervyn understands that the rocket scientists in the investment banks will always be one step ahead of any regulation and is just getting his 'retaliation in first' for when the next inevitable debacle unfolds.

    For example Insurance companies and Mutual Funds have always been forbidden from investing in the higher risk 'securities' that caused the crisis. However, by placing their money through subsidiaries with third parties who ARE allowed to invest in such things, they managed to get their fingers burnt anyway.

    As one former SEC employee said 'We are paying guys $112.000 a year to regulate people who are paid ten times that much to avoid regulation..you do the maths'

  • Comment number 13.

    The chancellor doesn't have to say anything. It all started in America and is nothing to do with the UK.

  • Comment number 14.

    Mr. King is talking good sense-He is a man of integrity who is telling the truth-Can't say the same for The Government/Treasury, Banks or the FSA who have no financial credibility. Taxpayers need to be told exactly where they stand on UK Debt and the Banking Bail-outs but to date it has been virtual silence or misleading comment at best. It is time for the financial fraternity to come clean, accept financial contraints/responsibility for putting their respective houses in order and for adopting a new code of financial conduct, eliminating obscene bonuses, shorting, underhand equity trading and other less than acceptable practices to which the markets are being subjected.

  • Comment number 15.

    No doubt in my mind that the BoE and Merv are on our side whereas Brown and Darling are on the City's side.

  • Comment number 16.

    Interesting article in the WSJ.

    https://online.wsj.com/article/SB124500992205413331.html

    Watch it fall like a pack of cards. Brown knows he's finished.

  • Comment number 17.

    Just a great, great shame we can't have Merv as Chancellor. Darling just hasn't got an earthly about anything financial. It is, quite frankly, essential that Darling gets sacked as Chancellor of The Exchequer instantly. It would be in Gordon Brown's interest to do so, because Darling is only serving to make Brown look more useless than he does already.

    Laurel and Hardy could have made a better fist of running this country than those other clowns, Brown and Darling.

    As to the people of Great Britain, it's very simple. If the Govenor of The Bank of England says he does not have enough power to control the lunatic activities of our banks, yet The Chancellor (Darling) says he does. Then Darling is WRONG and Mervyn King is RIGHT. If for no other reason than Mervyn King is a career banker. If his industry is in the biggest hole of its life then Mervyn King should be able to see this. It is to his credit (no pun intended,) that not only has he has seen this, but also had the guts to say so as well. Darling, on the other hand is a mere politician and, typically, has chosen to use a bunch of (typically) weasel words to solve nothing. The only thing Darling knows about banks is that they are where his expenses get paid into. If it wasn't so serious it would be cryingly laughable.

  • Comment number 18.

    Robert. The BoE should have total oversight of all Banking regulation
    Retail Banking / Investement Banking et al
    Investment Banking (gambling / speculation / investment / take your pick) should be regulated only in so far that the BoE is confident the the clever players in these markest have enough CASH to play in the casino. The problem we have is a basic liquidity problem. If the guys had more cash / had smaller bets/ the problems we experiance today in the REAL econony would not have occured.

    Also we can't go backwards, the Investment houses are part of the big boys, and politicians etc can't change the jungle. If they try they'll make a complete hash if it... What we must do is ensure that the players in the market have the liquidity to support the positions they take... if not and when the default, send the FD and CEO to prison.. then we have oversight.... (sorry folks dreaming again)

  • Comment number 19.

    I heard PM questions today and I reckon Gordon and Badger have got a deal with Ocean Finance to consolidate the nation's debts. That or they confused a stash of LSD with L.s.d.

  • Comment number 20.

    Well, in my view, what Mervyn is saying makes more sense than what Alistair is saying!

  • Comment number 21.

    #12 citygambler

    Are these the same rocket scientists who couldnt see that using short term lending for long term lending was inherantly risky ?
    Or the same rocket scientists who placed a CDS value based on there being an end of boom and bust ?
    Or the same rocket scientists who didnt even bother to check if those buying the CDS's had the capital reserves to backup claims ?
    Or the same rocket scientists that developed the CDS system that combined with shorts can be used to destablise an otherwise healthy company ?

    Good job they dont design rockets ?

    Perhaps a better and more apt comparison would be to say that prior to the BoE powers being removed the banks were somewhat more stable, reliable and honest than they are today.

    #13 ezzler

    The UK has a hole of £800 billion from wholesale funding being unavailable - notice UK not US.

    Do you work for the Labour Party ? An MP perhaps ?

    Perhaps the trillions being used to bail out the financial system and millions unemployment is just a figment of our imagination ?

    Oh the Dorothy principle, it was all a bad dream - Toto come back here ! So who is the Scare Crow ?

  • Comment number 22.

    #16 littleholt

    Brilliant, personally I would have added some insults but otherwise brilliant.

  • Comment number 23.

    As a taxpayer I would welcome the idea that the BOE should be given increased power and authority to carry out its new role in promoting finacial stability in the UK.

    However until the rules and the law is changed to ensure that negligent and/or reckless banking directors (and traders) who are guilty of allowing a bank to fail, in the way that many recently have done, can be declared bankrupt and have their ill-gotten gains frozen, there is nothing anyone can do to stop greedy reckless bankers from carrying on as they have always done regardless of the consequences for the rest of us.

  • Comment number 24.

    Just one thing, how much would banking losses have to amount to before even the taxpayer would not have deep enough pockets to bail the banks out? Then what, will paper money be worth what it is printed on, or have we long since gone past that point anyway?

  • Comment number 25.

    I seem to remember that the BoE was stripped of its bank supervisory role because of the collapse of BCCI. At least they only had one bank fail whereas the FSA and the Treasury have had the whole banking system collapse. I think the BoE should have its supervisory role returned to them as the Treasury and FSA don't know what they are doing. At least the building in Threadneedle St will be fully occupied with staff instead of being an empty shell.

  • Comment number 26.

    #16 (littleholt): that link is not really a considered and objective analysis by the Wall Street Journal but an opinion piece by Keith Marsden, who works for Tory think tank the Centre for Policy Studies (founded by Keith Joseph and Margaret Thatcher).

    Of course he would say it was all Gordon Brown's fault. It's incorrect to imply that the editorial authority of the WSJ is behind this.

  • Comment number 27.

    #15 Wee-Scamp

    You seem to have a short memory.

    https://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/mervyn_king_insures_the_banks.html

    Mervyn will protect the banks on the premise that he is defending the real economy from collapse.
    Oh how the bankers must just love him. All the way to the bank..

  • Comment number 28.

    Whoever provides the regulatory cover can only do so on the basis of legislation passed in the HoC, so if Darling admits that the BoE has insufficient powers then it would be tantamount to admitting that the existing legislation isn't up to scratch. So that little admission is unlikely to be forthcoming, is it? Because would not such an admission lead to the inevitable conclusion that at least part of our present predicament is down to... inadequate regulation.

    The BoE has an unenviable task; keeping things "stable" while somehow enabling HMG to siphon off large (and increasing) wads of our money (Income Tax, VAT, Stamp Duty et al) to fund its pet projects. Oh and of course the new proposed "telephone tax" to fund broadband developments. How about an extra car tax to enable the manufacturers develop new cars; sorry - OT!)

    The needs of government - at least this one - and the electorate do not coincide.

  • Comment number 29.

    Kitty Ussher's gone!

    Good!...she was completely clueless.

    I always thought her appointment to the Treasury was in...'bad taste'.

  • Comment number 30.

    Just watched both men talking at the dinner. No answers and no clue what they have did wrong!

    Neither the Chancellor nor the Governor seemed to grasp that the way that interest rate policy was designed was one of the causes of the problems. (I have previously explained** the mechanisms that work through from too low interest rates to financial collapse via CDOs Squared! (Mervyn King joke! - a joke from the joker!!!)

    MMG - Mervyn Must Go

    ** if anyone is interested I'll run through the argument again.

  • Comment number 31.

    The reason why Obama can come up with lots of good ideas is because he is not responsible for the mess in the first place.

    Brown is responsible for the mess (tripartite agreement). If he changes it, he admits it was his fault.

    Obviously it needs changing but Brown cannot personally do it.

    Another one of many good reasons why this country will be better off once we have had an election. The sooner the better please.

    Cannot Brown for once in his life do what is best for the country and not for himself.

  • Comment number 32.

    Q. When is a cut not a cut...and is actually an investment?

    A. It's an investment when we have a totally deluded PM!

    I think Alistair knows something about Gordon that the rest of us have known for quite sometime now...
    https://news.bbc.co.uk/1/hi/uk_politics/8102596.stm

  • Comment number 33.

    21. At 9:30pm on 17 Jun 2009, JackMaxDaniels wrote:
    #12 citygambler

    Are these the same rocket scientists who couldnt see that using short term lending for long term lending was inherantly risky ?
    Or the same rocket scientists who placed a CDS value based on there being an end of boom and bust ?
    Or the same rocket scientists who didnt even bother to check if those buying the CDS's had the capital reserves to backup claims ?
    Or the same rocket scientists that developed the CDS system that combined with shorts can be used to destablise an otherwise healthy company ?

    Good job they dont design rockets ?

    You are missing the point, CDO's, CMO's, Interest Rate Swaps and the like weren't invented in order to reduce the risks of high finance..They exist purely so that various organisations can circumvent laws and regulations that are ALREADY IN PLACE to stop them from putting money into non investment grade (but potentially enormously profitable) financial instruments. Or in the case of swaps so that they can borrow money at significantly below the going rate but at the cost of enormous fees to the banks that arrange the swaps and with the potential of it all going wrong if LIBOR (Usually anyway, but these things can be horribly complicated)goes up.

    This stuff isn't referred to as 'Nuclear Waste' by the people who peddle it for nothing, the banks KNEW this was all going to blow up in their faces, it was about making as much money as possible before the doo doo hit the fan. They just got fantastically lucky that the Nuclear Waste had spread its radioactivity throughout the worlds financial system, rather than just one or two banks, thus practically guaranteeing that they would have to be bailed out when it all went wrong..

    In short it has nothing to do with genius level mathematicians finding 'true' prices for options, but just a bunch of market traders flogging stuff to people that don't understand how they work, but don't want ot be seen to be financially ignorant, like dear old Robert Citron in Orange County all those years ago..



  • Comment number 34.

    Who do you believe, one of the world's leading economists or a couple of politicians with a law and a history degree....why on earth are we even talking about this. It's so obvious that banks need to be broken up, even the country's top banker is saying so. I can't believe I live in such a cackhanded country. They're still trying to push water fluoridation through when other European countries have abandoned it because the evidence says it isn't necessary. What next? Phrenology in the courtroom? Homeopathy on the NHS? Oh no wait, we already have that last one....

  • Comment number 35.

    I liked Mervyn Kings' speech.
    He seems to have grasped that some of these banks are too big and too risky for the public to guarantee, and that it may be better to seperate the riskier parts from high street operations.
    He also recognises that public trust in the financial sector has been lost.
    In fact, it's probably true to say that most people think of bankers as a "bunch of crooks".
    I think that King is more in favour of heavy regulation than the government.....my view is that Mr King is right.
    Pres Obama seems also in favour of heavy regulation.
    But Mr King did make one extraordinary statement....that the economy was "very stable" during the years leading up to the crisis.
    This is wrong...the property market (the biggest financial market in the country) was in a state of "free for all, runaway, and going through the roof".
    THAT was the cause of the crisis (in the US and UK).
    Staggeringly, Mervyn didn't see that as "unstable".
    Mervyn....property "free for alls" are economically lethal....if we don't get rid of them, we face oblivion.
    A 300% rise in prices in 7 years?....that means that banks are pouring money into a lame-duck and are very likely to go broke.
    Alistair Darling also hinted that "those who can afford it" will face higher taxes.

  • Comment number 36.

    #28. Radiowonk wrote:

    '...new proposed "telephone tax"..' don't you mean "Telephone POLL Tax"!!!

  • Comment number 37.

    Would be easier to get rid of the bank of england and stop giving banks (including BoE) free reign to create money out of thin air. Credit crisis solved, need for central banking removed.

    But obviously that will never happen.

  • Comment number 38.

    How about MK carrying out his inflation target and raising interest rates.

    Lo and behold I predict inflation still has not fallen this Thursday.

  • Comment number 39.

    Interesting that the problem which "started in the US and was nothing to do with NooLaburr" according to he who is very dour may well be solved in the US as well, due to Obama's actions.

    While his dourship and darling try desperately to keep their City of London/Caymans banking chums out of jail the new US regulation will filter across the pond and make their efforts irrelevant. Sadly we shall never see the grubby culprits in jail and the dour one will delude himself that he saved the world to his last breath which at least will be worth a giggle or two...

  • Comment number 40.

    If there is not satisfactory regulatory systems in place,we can only expect the carry on as usual on a repetitive cycle of bumbling on with the casino system where a number of in the know get very rich and the many lose their life savings and also their jobs.BUT WHY BUCK A SYSTEM MADE WHICH IS SO SUCCESSFUL TO MAKE THE RICH RICHER AND IF A DISASTER OCCURS AND THERE IS ENOUGH PEOPLE WORKING THEY CAN PICK UP THE TAB AS TAXPAYERS AND ALL IS WELL AGAIN.{ HERE WE GO,HERE WE GO,HERE WE GO TO INFINITY £££$$$£££$$$.}SAME OLD MISTAKES EVER SINCE 1930,s

  • Comment number 41.

    Eh, maybe the MPs' expenses fiasco has taken our eye off the ball... this financial crisis may be far more serious than the US and UK governments are letting on. What does King know? What does his gut tell him about the arrest of two men attempting to smuggle $134 billion of US bonds over the border from Italy to Switzerland? The implications of this report are terrifying... Peston, you should drop everything an investigate asap!

    You can find the story in the today's Sydney Morning Herald, written by William Pesek.

    https://business.smh.com.au/business/what-to-make-of-mystery-us134b-us-bonds-20090617-chap.html

  • Comment number 42.

    City bankers and politicians helping out themselves at the expense of society - many politicians end up working for banks. Labour made a Faustian pact with the City aome time ago and don't rely on the Conservatives to be free from bankers' interests either. The City may contribute much to our GDP but much of it is gambling and they are the cause of this recession with their excessive risk taking with other peoples' money.

  • Comment number 43.

    #41 ftse_muppet

    Have a butchers at these graphs,,, now vs 1930 depression.

    https://ftalphaville.ft.com/blog/2009/06/17/57526/depression-tracking-graphic-edition/

  • Comment number 44.

    The Mighty Merv King is culpable in all this. He and the BoE had control of interest rates and increased them 5 times over a 13 month period to cool the over-heated property market and control inflation - these increases were too much and too fast. They then waited for what seemed like an eternity to reduce interest rates when it was obvious to 'workers at the coal face' that BoE was far too high and had to come down. They only conceded when the crisis was upon us all using this as an excuse to slash the rate to 0.5%. If the BoE had reduced interest rates earlier then we could have had a softer landing. Of course Merv won't remind of this but lets not forget the small details before they disappear into the mists of time

  • Comment number 45.

    This Fiat system of currency will hopefully come to an end sooner rather later.
    Most mortgages & loans are already fraudulent in law due to non-obsevervance by the banks of the 4 corner rule of contractual law.
    A contract requires as its first tenet: full disclosure eg: the resources from which the bank got the funds... As banks cant use deposits or assets, It created the money out of thin air. Hence no consideration or disclosure. Practically all funds for loans & mortgages are brought into existence by the signature of the applicant on an application form... Hence no contract existed. This is the debt society we live in. Its going to fall apart.

  • Comment number 46.

    now its time for the old lady of threadneedle street to grab her hand bag and realy give this inept government a bashing to knock some sense into them.

  • Comment number 47.

    On reflection of the 2007-2008 US financial crisis and its aftermath, only 2 US 'industrial groups', both large employers, have maintain their 'credibility' and institutional credo as to be able to elicit admiration and faith in value exchange as per Adam Smith's 'invisible hand'.
    They are Hollywood and the US militrary.
    Hollywood, in general the US entertainment industry is worth billions of dollars, but its customers: the movie-goers, the TV( both cable and terrestial) audiences, the radio listeners, the CD buyers and the music downloaders are never in doubt as to the value of their 'purchased' entertainment. I have never seen a movie without enough 'warnings' like the motion picture rating system, it being adaptation of some history books and the coincidental nature of the movie charaters to that of real life. Where I live, there is a consderable Muslim population; movies about Jesus, Moses, etc comes with screening of the proviso that this type of Hollywood movie was made based on the Bible. So as not to anger the adherents of the Quran.
    My point is that the audience/customers are forewarned to have no doubt as to entertainment value.
    The US militrary is essentially a weapon of mass destruction. The soldiers, airmen and sailors honoure their occupations by going as far as to sacrifice their lives. Look as USA giving only optimal resources to preserve and save the lives of their soldiers in Iraq and Afghanistan. Yet they continue to serve their political masters' subservience to the public relations objective of proportionate response. And this same government gave billions of aid to financial institutions so that the bankers can maintain 'living the lifestles of the rich and famous'. If you doubt this disconcertion, observe the bankers 'gaming' for bonuses. No conscientious efforts to understand 'self sacrifice' against a backdrop of patriotism and fair play.
    What are the implications of these 2 industries on financial regulation?
    Firstly, with reference to the exotic products of the financial institutions: these products are 'dreamlike' in nature and potential to be nightmares.
    The regulators should not be embarrassed if the products' are beyond your comprehension. Just assume that if you do not understand it, it must be no good. Let the burden of proving the "nightmarish" nature of the products lie with the financial institutions.
    Secondly, the regulators must have absolute or near-absulute control over the financial institutions, who are potentially 'weapons of monetary distruction'. The government is now funding the financial institutions: put your controls where your money is placed. This is capitalism at its best: deference to those who put out the most capital.

  • Comment number 48.

  • Comment number 49.

    The FSA was, in its original form, never intended to serve as a regulator of banks. That was strictly the repsonsibility of the BofE. Gordon Brown botched the whole regulatory system when he created the tripartite as it was never clear, apparently, who was responsible for what; although it was always clear that the Treasury would never be culpable but would have the authority to meddle in affairs. Typical Brown control freakery. The City was warning first Brown then Darling, of the dangers building up in the financial system a number of years prior to its recent collapse, yet the Treasury chose to ignore these warnings, no doubt because it was taking massive amounts in taxes during this period. In the face of its total failure it appears that it is business as usual and the FSA is continuing as regulator of banks. How Lord Turner can continue in post defies reason and logic as his was one of the hands on the tiller when the FSA failed. He is discredited and by has about as much honour as some the MPs who have been caught cheating on their expenses who are, and will continue, to dstay in Parliament. Mervyn King has proved his professionalism by recently reining in Brown, more than Turner has ever done, and is a more appropriate and suitable person to be heading a regulator than all in the FSA could hope to be. As a matter of common sense, the BofE should be reinstated as the one and only regulator of banks, to the total exclusion of the FSA and, in general, the Treasury. However, it is probable that Brown would never be able to support such a change to the regulatory system.

  • Comment number 50.

    People are able to discharge any debt under contractual LAW that requires full disclosure. Systematically banks are unable to provide evidence of their observance of the LAW they hide behind legal acts & statutes to foreclose and ignorance of common law. Many are becoming aware of this massive failing and are becoming more confident and versed in the ability to discharge even the largest liability. Its the banks own fault for not appreciating or been too complacent & greedy to bother with understanding the inaleanible rights and intellect of the individual.

  • Comment number 51.

    Most people can make opinion about our government as it stands, but the nitty gritty of it all is that in the year 2000 you were told to save a deposit for a mortgage, now, after bailing out so many of our high street banks a mortgage is is nigh on impossible to come across, without disproportionate deposits and extortionate interest rates.
    Having been a so called model citezen, leaving school at 16, studying part time, starting on the old YTS being in employment since 1972 continuously, without break, now after saving up frantically cannot get a mortgage, my wife is expecting our first child, she is South African, a citezen of the UK,who could not get the relevant visa, again without extortionate fees, and needless to say a long period of time. So now we will wait patiently until the summer of next year for the proposed upturn of fortunes. Gordon, i know its difficult, but there are ordinary people, your voters who need help, and no wonder the BNP is winning seats.

    Help

  • Comment number 52.

    Anything the Americans do we can do later

  • Comment number 53.

    One day Mr King talks sense (for example today) and the next day he just does what Brown and Darling want him to do.

  • Comment number 54.

    I have said on Pestons pages previously that Brown is just waiting for the men in white coats ! Darling is obviously keen to join him. At least King has more balls than Browns cabinet. (Ecuse the pun)

    However, more shame on the back bench MP's who dont have the backbone to protect the British people and stand up and be counted and stop this damaging charade. I hope they sink in the stinking cess pit along with their beloved leader when the day of reckoning arrives. Not a man amongst the lot of them.

    They all show utter contempt for the electorate.

  • Comment number 55.

    The governor is wasting his time and our time, Gordon Brown says he and his cabinet are going to listen and then tells us all the time what they Labour are doing and what the Tories would do only they a rot in power and it is all useless hypothetical talk

    He does not know that to listen you open the orifices both side of your head and shut the one at the front

    More important that once you have listened you evaluate then act in the interest of the majority not self

    This is where the whole thing breaks down and we finish of the poorer because self interest governs not the common good.

    We will never get anything worthwhile from this lot now because we have gutless wonders, a defeated team wandering the field of the House of Commons waiting for the ref. to blow the whistle and put them and the crowd, out of their misery.

  • Comment number 56.

    It is interesting to see how the BBC/Roger ignore Merv's simple message to the government "tell us how you plan to reduce national debt" instead focus on peripheral reporting. Oh well what do you expect!

  • Comment number 57.

    #16


    Perfect.

    Just a shame we have to let this mismanagement continue for another 10 months.

  • Comment number 58.

    Not surprising he differs with the Government.
    Seems he is more in tune with the Obama administrations belief that the financial regulations are broken and need serious repairs.

    I also note 10 banks in the U.S are to pay back their TARP funds.

    It would be nice to know (because I cannot find out from my Internet warrior chair) how much interest these 10 institutions have paid on top of the original advance.

    I would find it a very strange form of capitalism if they have been required to pay none.

  • Comment number 59.

    # 20 Sutara
    My view too.

    #16
    Excellent.

  • Comment number 60.

    Oh great, yet another Labour cockup, how surprising.

  • Comment number 61.

    The Governor of the Bank of England, "But out of the blue - in this case the financial sector - came a crisis that did not stem from weaknesses in the real economy."

    It's always so amazing that those in power don't understand how the economy works.

    The financial crisis does indeed stem from the real economy - it is the rate of profit that actually determines whether capitalists produce.

  • Comment number 62.

    Brown/Darling and others are keeping everything in the long grass including themselves and will spend the time from now to the election on trips/tours around the world calling them ' meetings of importance' so that they can travel free when the rest of us have to pay for holidays. They will also be working themselves into well paid consultant jobs so that the lifestyle is improved after government. They have the cheek to say the join government and politics to make better changes for our life.
    Nothing changes !!!!!!
    The Telegraph deserve an award for the work on expenses - Next maybe they can look into the MEP's and then the BBC.

  • Comment number 63.

    The Treasury preferred "tripartite " controls is in keeping with the long standing Whitehall tradition.
    Have one fall guy with the Responsibility,
    Have a political nominee with the authority,under threat of dismissal, id he steps out of the Whitehall line.
    Have a third guy from the "Regulated" to ensure that nothing threatening their freedom to carry on doing what they want.x a 5 year old.
    That way the ministers and madarins ensure not only their fat pensions but also a sinecure job.
    Mervin's Right

  • Comment number 64.

    How can this be...

    After all Darling only yesterday stated that their was NOTHING wrong withd the tri-parttde system of regulation between the FSA, Bank of England and his department. All that was needed was a few minor tweaks brought about because of the current globale situation.

    Surely the govvernor would have had quiert words with Darling and discussed his thoughts / problems a long long time befroe he publically criticises the government?

    Surely Darling/Brown would listen to his views?

    Surely given its the BofE they would act of his conserns?

    After all Brown keeps telling us he listens and acts?

  • Comment number 65.

    Second Thoughts

    Brown/Darling can't even read/understand a document that they both spent a long time prepairing IE Aprils 2009/10 Budget which clearly shows in its forcast spending in 2010 to 13 yet dispite claiming to meet those forecasts AND pay off a large amount of national debt they still claim that in real terms overall spending in ALL departments will go up!

    So how can we expect them to listen to the Govenor of the Bank of England?

  • Comment number 66.

    #41. ftse_muppet wrote:

    "What does his gut tell him about the arrest of two men attempting to smuggle $134 billion of US bonds over the border from Italy to Switzerland?

    You can find the story in the today's Sydney Morning Herald, written by William Pesek."

    Old news. It was in the British press days ago.

  • Comment number 67.

    Up until now I have not been one of Mr King's greatest fans, but I give him full marks for his speech last night.

    The tripartite arrangement as it currently stands is nonsense. It is a recipe for indecision and obfuscation. As for the FSA, it needs to be directly responsible to the Bank.

    As for rebuilding trust, that is a different matter. A trust betrayed is seldom regained. It is unfortunate that so many people have had to learn the hard way that banks and bankers should never be trusted. (It's a money thing!)

  • Comment number 68.

    "63. At 07:51am on 18 Jun 2009, EdwardDowty wrote:
    The Treasury preferred "tripartite " controls is in keeping with the long standing Whitehall tradition."

    Long Standing as in 11 years after Brown set it up?

  • Comment number 69.



    We need an answer to what this Government is going to do about credit default swaps, its a very serious matter if it does nothing. We absolutly can not have a pair of punch drunk gamblers in the casio with of all of us forced to pay up on their mistakes. If this is the situation I say we need to hit the streets -




    Iran style.

  • Comment number 70.

    "55. At 03:36am on 18 Jun 2009, hack-round wrote:
    The governor is wasting his time and our time, Gordon Brown says he and his cabinet are going to listen and then tells us all the time what they Labour are doing and what the Tories would do only they a rot in power and it is all useless hypothetical talk"

    Yes Brown listens but thru Rose Tinted Ears and only hears what he wants to.....

    Speaker, "UK debt levels are unsubstainable...."
    Brown Hears, "You are the universes best ever PM...."

    Speaker, "Your opinion polls ar5e at an all time low...."
    Brown Hears, "You are the universes best ever PM...."

    Speaker, "UK is passing debt onto our kids kids..."
    Brown Hears, "You are the universes best ever PM...."

  • Comment number 71.

    I'm glad Merv does not have extra power(s), the man is useless and largely responsible for whats gone on in the uk.

    He should have walked with the head of the FSA (or is that SFA?), the chancellor, the head of the treasury and the PM!

  • Comment number 72.

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

  • Comment number 73.

    The fact of the matter is that big banks run by unregulated/unqualified/inexperienced executives are a serious threat to national security.

    It's time the government work up to that fact!

  • Comment number 74.

    Quite right by Mervyn K re at least part of the problem, the greater embodiment of which is in the form of the man who was sat next to him and his respective boss. Whether it was political manouevring by King or just getting some cahones we may judge in time.

  • Comment number 75.




    Listening to John Mcfall on Newsnight was just not good enough - "they can get together and talk about it" so John, what have they being doing all these months while people became unemployed and lost their homes ? You talked a good talk when you had the bankers lined up in front of you but with Brown and Darling - in effect your boss's your talk is different.



  • Comment number 76.

    #66 rbs_temp

    My, how the 24/7 news cycle has turned us into such cynics! Old news? Don't make me laugh, rbs_temp... the significance of this story of astounding. Why isn't it headline news?

  • Comment number 77.

    I heard in a report on TV that our Chancellor said that the UK financial regulation is way ahead of that in the USA so we do not require the sort of changes announced by Mr Obama.
    Could Mr Peston do a piece comparing the Regulations in the UK & USA? specifically dealing with the US changes so that in my ignorance I can judge whether our Chancellor is either telling the truth or just covering his boss' backside.
    Failing that, since his contacts in government may not like it if it was found that UK regulation did not meet US requirements, can any blogger help point to articles which may throw light on this?

  • Comment number 78.

    63. At 07:51am on 18 Jun 2009, EdwardDowty wrote:

    "The Treasury preferred "tripartite " controls is in keeping with the long standing Whitehall tradition."

    The "Treasury preferred" or the Brown/Darling preferred?

    The problem here, some cynics might say, is that Brown and Darling are trying to ensure some degree of 'life after parliament' and are working on the basis that they will have rather a lot of spare time available to them after the next election, so they'd better keep the financial 'establishment' fairly sweet.

    No more waffle. Let's be 100% clear and open about things.

    The fact is that if the legislative structure, or the regulatory systems, in the UK are dysfunctional or ineffective it is because it politically suits some individuals, who currently have the power and influence, for that to be so. It is absolutely zero to do with what the best thing to do is - it is about the political convenience of individuals.

    The fact that failure to restructure the regulatory system is imprudent, endangers long term investment in UK businesses, fails to regulate risk-taking and other business and economy-critical aspects of corporate management in the financial sector and that it feeds into the highly socially damaging boom and bust cycle are all, of course, irrelevant.

    When these characters retire from the Board of some bank (the Bank of Failed Politicians, perhaps) they will not be bothered about how many people are unemployed, or how many businesses have failed, or how much people are screwed by credit arrangements with vastly increasing interest rates, just as long as their own pensions are being paid out and their shares earn big dividends.

    Of course, they can't admit that at the moment, because it wouldn't be 'politically wise'.

    But there's the rub, isn't it? In this day and age political wisdom is about making the right noises and getting the best photo-opportunities, it's not about delivering outcomes or actually managing any situation.

    Parliament is full of actors, poseurs and wannabe celebs, not do-ers, managers (in the literal sense), or achievers of anything very much.

    So, if you're waiting for someone to come along and solve the situation, I suggest you don't hold your breath, 'cos there ain't no-one coming!

  • Comment number 79.

    Reassurance for the bankers via Darling- lets maintain the status quo...reassurance for the tax payer- I appreciate your pain.

    Call me a cynic, but aren't this pair simply playing to different audiences? Taken in the round the bankers will be satisfied as without Darling giving him teeth it doesn't matter what Merv thinks (or says). Consumers (more concerned about employment and/or interest rates) will be pleased to hear that Merv is our man in the establishment.

    As two ostensibly independent socio-political speeches, when taken together they have the effect of appeasing two distinctly separate audiences. It wouldn't surprise me if there was at least an element of collusion, though perhaps Merv overstepped slightly in impliedly criticising AD.

    The combined message leaves very little boat rocking at a time when the world continues to feel aftershocks. The political effect of purported economic stability needs no amplification here.

    And all at a time when Crash (Ah ah) Gordon is trying to fob us off with 'increased' (actual you understand) spending plans despite record debt repayments. Does he seriously think we aren't sharp enough to work it all out?

    Just a thought.

  • Comment number 80.

    If you really want to focus the minds of Bankers you give the BOE prosecuting authority able to direct teams of Police Officers to make arrests and then you nick the suspected transgressors, march them out in handcuffs in front of the press like they do in the US and throw the book at them. They might then get the message

  • Comment number 81.

    Surely this is no more than a power struggle? King wants to concentrate regulatory powers in the BoE - ie to make himself the no.1 guy in all of this. Darling, on the other hand, does not trust King further than he can throw him so (understandably, in my view) does not want to give this dangerous man so much power.

    Come on guys, don't let King pull the wool over your eyes like this.

  • Comment number 82.

    #16 - thanks for the link.
    #29 - thanks for the noting the political bias in the link

    No doubt the stats are selective; its not just GB/AD that play that game of deceit.

    But the key points are important to show that we were duped into playing in the world economy chess game using only our queen ('Effess' to her friends) as strategic and tactical defence and offence. Rooks were sold off to finance the queen's extravagances, knights sent out on suicide missions to protect the queen's arrogance, bishops forced into syncophantic platitudes, and the pawns sacrificed on the altar of short term profit. The king of course was emasculated, but dare not resign and admit failure.

    I'm surprised we lasted this long.
    Probably cos the other players were tripping on the same acid, thinking they were flying to nirvanah.

    It's June. Well over ayear since Northern Rock. How long does it take to give the powers of detailled risk scrutiny to the regulators. And HMG has the power now to seize the assets of those committing treason (working to bring the country to its knees)

  • Comment number 83.

    #76. ftse_muppet wrote:

    "My, how the 24/7 news cycle has turned us into such cynics! Old news? Don't make me laugh, rbs_temp... the significance of this story of astounding. Why isn't it headline news?"

    People have been smuggling goods and currency for millennia. And people have been attempting to hide money from the authorities for almost as long. Those bonds might not even have been genuine.

    Why don't you tell us what you think the "astounding" significance of this story is, and why it should be headline news rather than a curiosity on the inside pages?

  • Comment number 84.

    #83 rbs_temp - You really do like your news sanitized and then spoon fed to you don´t you.

    There are only 2 possibilities (i) the bonds are genuine, and; (ii) they are forgeries.

    If they are genuine then it indicates that a government (these bonds are of such large denomination that they are only dealt with by governments) is surrepritiously seeking to offload exposure to the US state. This has significant implications for the US$ and the ongoing viabliity of planned US debt issuance.

    If the bonds are forgeries then it begs the question as to why anyone would bother forging something of such high denomination. It also raises the question as to why the US authorities are unable to immediatley verify their authenticity. Again 2 possibilities would seem to exist - the forgeries are of such high quality that the US is unable to readily verify authenticity or, the US control systems are materially deficient.

    In either case the question is raised as to the consequences of any further fogeries actually entering the market. These consequencies are likely to be similar to those for genuine bonds - i.e. there are implications for the US$ and implications for the ongoing viability of planned US debt issuance.

    So, what kind of criminal would forge $134 billion of bonds? and how might they expect to get away with a crime that would yield them something similar to the GDP of New Zealand? I have no idea what the answers are - but North Korea would seem to be as sensible a shot in the dark as anything else.

    What caused the Italian police to stop these gentlemen in the first place? Did they know what they were looking for, and if so how did they know?

    Overarching all of the foregoing is the question of the likely destination of these bonds - namely a Swiss freeport. This might raise the question of the exact function of Swiss freeports, and prompt an analysis as to whether they have any function other than than to assist wealthy criminals.

    So, all in all, I think it reasonbable to suppose that any entity sctually interested in providing a news service would run with this story.

  • Comment number 85.

    #84. armagediontimes wrote:

    "#83 rbs_temp - You really do like your news sanitized and then spoon fed to you don't you...

    So, all in all, I think it reasonbable to suppose that any entity sctually interested in providing a news service would run with this story."

    The questions you raise are all valid, and interesting, but also extremely obvious. They are the first questions that would spring to anyone's mind, and all have already been asked and discussed in news stories across the world, in print, online and in the broadcast media. Do you not have anything more insightful to add?

    Why do you believe that this story deserves to be headline news rather than a curiosity? Do you honestly believe that every news organisation in the world has failed to recognise the significance of this story?

  • Comment number 86.

    THE ANARCHISTS' THEATRE

    They'll say one thing and do (or more accurately not do) something else. They'll create new 'structures', but like the diligent clerk who diligently files items away very carefullY and then pulls them out again, it really won't amount to much at all. It's all just props in the anarchists' theatre.

  • Comment number 87.

    #85 rbs_temp. I did not say that every news organisation has ignored this story. I did say that any entity interested in providing a news service would run with this story.

    Let us focus in on the BBC. Do you think the BBC has given more prominence to the matter of the $135 billion in bonds or to Fred Goodwins pension arrangements? Which do you think is more relevant to the world economy - some rich guy living in Scotland, or something that may have the potential to destablise the currency and debt of the worlds largest economy, and may be traceable to a nuclear armed and belligerent North Korea. Even if it a simple matter of crime then $135 billion is a larger amount of money than GBP 16 million - which in any event has nothing to do with crime.

    If all of the questions are obvious and have already been dealt with then please tell me where, on the BBC, I can find a detailed explanation as to the role and function of Swiss freeports and an explanation as to how in aggregate the average taxpayer benefits from their existence.


  • Comment number 88.

    Armegediontimes

    Who are you to judge newsworthiness?

    It seems to me that the general public (for reasons that are not entirely clear to me) are fascinated by the Fred Goodwin story. Similarly, they are far more interested in a few hundred pounds worth of dodgy MP's expenses claims than they seem to be about the billions of pounds used to bail out the banks and provide an economic stimulus. Not everything can be measured in amounts of money at stake.

    Just because you think something is important, that doesn't mean that the rest of the world must agree with you.

  • Comment number 89.

    I think perhaps the near total collapse of our banking system and economy might have woken one or two of the slumbering giants who should have been as alert as Meerkats sniffing imminent danger. However it does rather appear that the government has now assumed its usual position of burying its head in the sand again and hoping for the best now that the Titanic has sunk and its lifeboats deployed.

    I find it astonishing that our financial structure has hardly been changed at all and the gov. closes the book and walks away having committed huge amounts of public money to the banks. Brown is quick to say that the Conservatives would do nothing to save the country, yet he and his puppets are content to do nothing in the wake of this crisis.

    I'm not sure where the money is supposed to come from next time.

    The gov. is also plainly guilty of dishing out public cash to the banks and the bankers and not doing the same to manufacturing. It all looks very palsy walsy and there will be no "Rocking the Boat" from the side of the gov. To me it looks like the gov. has given up trying and is hoping to lose the next GE so someone else can take charge and put things straight, because they either do not know what to do or are too scared to do anything.

  • Comment number 90.

    @12 Speaking as an ex-regulator from a different industry (i.e. not the financial sector), a large part of my job satisfaction came not in my monetary rewards but in the pure joy of telling the generally self-inflated marketing/sales/commercial people that their latest and greatest ideas were total non-starters - it's a fantastic feeling, believe me ;-) When you've nipped something nonsensical in the bud, you go home on a high!

    All we need to do is to empower the financial regulators to say the same to the likes of Goodwin et al and you'll find no shortage of able recruits for that function.

  • Comment number 91.

    Why these gems of insight from "Merv the Swerve" now?

    Why were they not being as forcefully spoken before?

    Just another "yes" man kicking someone who is down. We need people of integrity in charge who speak as they find, not speak what they are told, when they are told.

    Too late for the much abused and oft quoted "hard working families and small businesses"!

  • Comment number 92.

    #88 GHBRich - Rather than enquire after my personal qualifications you may be better advised to stick to objectivity.

    Objectivity would require that you explain precisely why a story involving the attempted smuggling of $135 billion into a secretive freeport is not newsworthy.

    The role of a news service (in this case the BBC) is to report news. If they do not do so then they are obviously not a news service and must threfore be something else.

  • Comment number 93.

    Armegediontimes

    "News" is not objective, it is subjective. News is whatever the public at large is interested in hearing about.

    For whatever reason, the public at large is more interested in Fred Goodwin's pension than in the smuggling of $135bn of bonds.

    You need to get over yourself. It is not up to you to decide what is newsworthy and what is not.

  • Comment number 94.

    #93 GHBRich So "News is whatever the public at large is interested in hearing about." Really! Do you think the public at large displayed any preemptive interest in hearing about fictitious Iraqi weapons of mass destruction?

    Who would possibly be interested in having lies presented to them masquederading as news?

    Do you remember Pol Pot and the Khmer Rouge? - this made the news. Do you think that once people became aware of what was going on in Cambodia they were happy about it? Do you think people may have been interested to know that their taxes were being used to prop up this regime, and what do you imagine their reaction would have been had they knowm?

    Answer these latter questions and you may be able to deduce why it was not widely reported in mainstream media.

  • Comment number 95.

    #87 armagediontimes

    You raise the right questions. Please continue with raising them and investigate them. It is indeed astonishing, if not suspicious, that most major news media showsl little determination in investigating the huge glbal shadow banking system, maintained by tax havens and offshore banks.
    Somewhere between 11 to 16 trillion US dollars are estimated to be stashed, hidden, locked away in tax havens and offshore banks worldwide, and therefore not accounted for in the regular tax income of the countries of origin. Several trillion US dollars are lost in tax income in this way. This is an astonishing amount and most mega-rich people and most, if not all major banks have some interaction with this global shadow banking system. Why no investigation and no exposing these fraudulent activities? This is arguably much more important then some thousand of pounds that some MPs failed to declare. Occasionally The Guardian makes a bit of an effort, with little results yet. It will take someone like President Obama to force some of those heavily locked Swiss and Cayman Islands bank vaults open. Please, dear readers, continue to ask the right questions. Where is the BBC in reporting this massive worldwide fraud and/or tax avoidance?
    Some relevant information and research can be found here:
    https://globalinsights.wordpress.com/

  • Comment number 96.

    #83 rbs_temp,

    The US treasury paper is either a) real or b) fake

    If real: the UK, China, Russia or Japan has abandoned the USD. This takes us into Depression II, and to get us out of it, WWIII

    If fake: it's another clever stunt by Bruno. Because we all know counterfeiters prefer to make money and not get caught. It's the first rule of being a successful criminal. $132 billion in fake bonds is an absurd proposition. There are a few intel agencies that could play this card, I suppose, but only because they would like to see point a) realised.

  • Comment number 97.

    It appears strange that the pinnacle of the financial institutions in the City of London,the govenor of the Bank of England, should make such a speach in front of the world's media. No less that he should make such a speach to his peers from the financial world all gathered together sipping their brandies and toasting each other with expensive cigars.
    This is clearly a man of honour and integrity.
    However, how will such a speach be greeted amongst the great and the good of the capital's leading financial institutions?
    As my old mother used to say "In one ear and out the other."
    Who thinks that for one moment the grandees of the financial services are going to give up their massive bonusess and personal retirement benefits.
    The general concensus appears to be....let the heat die down, and then it is back to business as usual.
    If we learn anything from history it is this; history repeats itself.

 

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