I heard Ian Pearson speak last night. He like many Labour Ministers read out a script which told us he felt our pain. He told us we were going into recession. He then told us that the 3 point Brown plan was the answer to our banking woes. If only!
Appartently they have three aims from their international jet setting. To get agreement to more transparency, to get agreement to more capital adequacy for banks, and to reform the rating Agencies. Thud, thud, thud. That was stable doors you heard. No, there are no horses left, but worry not. The taxpayer will still pay the wages of the stable regulator.
Increased transparency is usually a good thing. It also normally means marking to market the values of everything a bank or other financial insitution owns. In the current situation where there are no effective markets for many of these assets, that is hardly likely to bring back confidence. The Minister did not bother his financial audience with the interesting discussion we are told Ministers are having about whether to suspend some elements of mark to market pending the re creation of proper markets in these instruments. They dither whilst the credit arteries of the nation seize.
Requiring sensible amounts of capital from banks is also a good thing. It is a pity the world’s regulators did not do this in the good times, when they were lax in their requirements. Demanding more capital now is deflationary. The UK government wiped out any benefit of its £37 billion new share capital for the banks by lifting the amount of capital they want the banks to have for their current level of lending. Further moves world wide to increase banking capital requirements will mean more banks seeking the repayment of more loans, and unable to make new loans available.
The Minister assured us “The age of irresponsible credit is over”. He did not say sorry for this passing age, nor accept that the UK government presided over this and helped it come into being through its monetary and regulatory decisions.
We know, Minister, the age of irresponsible credit is over. Do you know Minister we are now in the age of practically no new credit? Do you realise this is going to make the recession longer and deeper? Do you understand your banking measures so far have not solved the problem? Will you look again at your banking package, to see how it can be changed? Do you not yet understand it needs to protect the taxpayer more, whilst doing more good for the banks? That would not be difficult, given the manifest imperfections of the current approach.