Breaking up banks

 

             The government is busy trying to stop the next banking crisis. I want it to sort out the last one. It is all very well giving the Bank of England powers to force the break up or segregation of a large conglomerate bank in the future if it lends too much and runs too much risk. The real issue is how is this government, now, going to get RBS working properly and lending enough to the starved UK private sector?

             Giving the Bank of England an electric ring fence does not mean a future problem is sorted out. An electric fence warns but does not kill an animal that encounters it. An electric fence would not withstand a determined herd of animals wanting to trample it. Metaphors are often misleading. The issue in the future is would the Bank see the need to use its new powers at the appropriate time?  Would they turn the current on when things seem to be going well? The problem in 2006-7 was not a lack of power to rein in excess banking risk, but an unwillingness or inability to see the need to do it. Can you really see in the next boom the Governor going to a very powerful, profitable and successful world bank in London and telling them, he will force break up or better segregation? Why wouldn’t they just change domicile?

              Meanwhile, close at home and largely owned by the taxpayer lies the damaged RBS - becalmed  because it still cannot get rid of the taxpayer shareholding and rarely makes an overall profit. If ever there were a candidiate for break up, there is one. The government could agree a break up with the minority shareholders. The UK needs more soundly financed competitive clearing banks to finance a recovery. The government owns many of the components to do that in RBS. Why doesn’t it get on with it before it is too late to improve the economy before the next General Election?

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119 Comments

  1. alan jutson
    Posted February 5, 2013 at 6:57 am | Permalink

    This seems to go back to your comments of years gone by.

    Too much wrong regulation and not enough right regulation.

    I have no idea if so called electric fences, or any other such type of regulation will reign in human nature, I only hope when they press the switch for action they are not relying on wind power.

    I have always found in business that good management by committed managers/directors who really do know the product, the business and the staff is the best solution, but I realise that these organisations are huge in size, and the temptation to earn a very, very large bonus by making short term decisions is a very real temptation.
    Thus perhaps it is the bonus element that should be scaled back to more reasonable amounts over a longer performance period.

    I have always happy for people to be paid a bonus for exceptional performance, but sufficient controls need to be in place to make sure people cannot abuse the system with fake short term results.

    Oops very nearly forgot to put in required fields above before attempting to post !

  2. Peter Davies
    Posted February 5, 2013 at 7:09 am | Permalink

    Inexperience perhaps? You are in a far better position to ask these questions that we are. This should have been done a couple of years ago.

  3. lifelogic
    Posted February 5, 2013 at 7:12 am | Permalink

    Certainly Natwest/RBS/Coutts group have behaved appalling. Pulling back any loans they can and over charging on the rest. Not only that, but even preventing customer from giving second charges to other perfectly willing lenders. This sucking back of cash and handicapping of sound businesses is one of the main reasons for the lack of growth and loss of jobs that followed.

    Yet another case of the government shooting itself (and its growth and tax revenues) in the foot.

    What is needed is better control by shareholders, sensible intelligent regulation and some sort of living will that protects depositors and customers, should the bank get into difficulty.

    It is always going to be tempting to employees to put £100M on red. If you win you get a 10% bonus, if you lose the shareholders, depositors take the hit – and perhaps you just lose your job, get a pay off and a Fred Goodwin type of pension at worst.

    Real shareholder control of directors/employees, and make sure the shareholders carry the real risks.

    • lifelogic
      Posted February 5, 2013 at 7:15 am | Permalink

      Also as the government is giving deposit protection insurance to the banks they need to make sure they are judging the risks fully, charging the right fee to each bank and not insuring those a real risk.

      • Disaffected
        Posted February 5, 2013 at 9:40 am | Permalink

        Huhne is another example why the Oxbridge PPE course needs to be scrapped and why there must be a free press without parliament regulation or involvement. Undoubtedly the Lib Dems want the full recommendations of Levison to stop the free press and everyone should lobby the opposite. We would not know about Laws or Huhne without the press.

        • A different Simon
          Posted February 5, 2013 at 9:58 am | Permalink

          Disaffected ,

          Have you checked whether Huhne actually did a PPE at Oxbridge or was this just another fabrication by Geoffrey Archer the Second ?

          Pity the poor soul who is going to be locked up with him for 23 hours a day .

          This lack of humility characterises Europhiles ; Clegg , Huhne , Ashton , Clarke , Blair , Ashdown , Haine . The rest of us are expected to do what they tell us .

          • lifelogic
            Posted February 5, 2013 at 11:45 am | Permalink

            I only checked his 1st in PPE on wiki who knows?

            Oh well he seems to have finally decided he is guilty only about a year after everyone else was certain.

            Perhaps in another year he will finally work out that the Global Warming guff he has been pushing is an absurd exaggeration and a vast waste of money public and destroyer of jobs too.

            The initial signs were not good his statement saying he was now taking “responsibility” for events over 10 years ago. Was hardly the most honest way for a man claiming innocence up to just a few days ago, to sound a little repentant.

            Jonathan Aitken did repentant it rather better, albeit sadly by embracing religion.

          • A different Simon
            Posted February 5, 2013 at 6:23 pm | Permalink

            Lifelogic ,

            Mr Huhne obviously has a very forceful character and knew how to get his own way . Wonder whether he ever entertained the possibility that he could be wrong about anything .

            Perhaps I am wrong but I always felt that Jonathan Aitken was a rare talent and that his wasted talent was a loss to the country .

        • Bob
          Posted February 5, 2013 at 11:48 am | Permalink

          Thorpe, Paddy (Ash)down, Cyril Smith, Kennedy (words left out), Laws and now Huhne; and this party is running the country.
          You couldn’t make it up.

          • Bob
            Posted February 5, 2013 at 11:57 am | Permalink

            Lib Dem leader Nick Clegg said he was “shocked and saddened” after Chris Huhne pleaded guilty to perverting the course of justice.

            “but he did the right thing to resign as an MP”

            He did the right thing?
            The right thing Mr Clegg would have been to tell the truth in the first place!

          • lifelogic
            Posted February 5, 2013 at 3:32 pm | Permalink

            Not a good record and all the Libdem “BBC think” policies – of every bigger government, fake green tosh, ever more EU, ever more regulation, ever higher taxes for the rich, legally enforced “equality” and an end to UK democracy are entirely misguided too. So it is not just the individuals that are rotten to the core the party is too. They have destroyed their credibility even more than Cameron has.

            They were, I suppose, against the mad wars and occasionally do make some sensible civil liberties points – not that I really believe them.

    • uanime5
      Posted February 5, 2013 at 2:23 pm | Permalink

      Well if you want money for a business why not just avoid the banks and use Kickstarter to raise the capital. Surely if the business idea is sound people will want to invest in it.

      http://www.telegraph.co.uk/technology/technology-companies/9839540/Kickstarter-entrepreneurs-doing-big-business-in-the-UK.html

      Also you’ll only get better controls by shareholders if you have a few shareholders that own 20-50% of the company or a few organisations that represent a similar percentage of shareholders. The current system when millions of people own a fraction of the shares just results in a large number of people who can’t influence anything.

      • Disaffected
        Posted February 6, 2013 at 9:21 am | Permalink

        Socialist drivel.

        • uanime5
          Posted February 7, 2013 at 1:20 pm | Permalink

          How is raising money for projects without having to use the banks and calling for organisations that can represent small shareholders “socialist drivel”?

  4. Mike Stallard
    Posted February 5, 2013 at 7:18 am | Permalink

    We have been talking about this now for several years.
    One of the awful things about this government is its slowness in getting to grips with real problems. Why the inaction? Is it complacency? Is it fear of the electorate?
    Where’s the energy?

  5. alexmews
    Posted February 5, 2013 at 7:50 am | Permalink

    Thx John

    what does the state balance sheet – particularly the debt – later look like without the equity of RBS and Lloyds on it? If we dumped them today what is the loss?

    i too am amazed the unwinding of those positions is not a bigger focus. The economist ran a piece last week on the comparative economic success of the Nordics. In Sweden at least this is in part due to a controlled wind down of zombie banks after a debt bubble in 1990s. They cleared the decks. We are following the Japanese model it seems.

    Reply: The state balance sheet is transformed for the better without the 2 state bank shareholdings.

  6. zorro
    Posted February 5, 2013 at 8:30 am | Permalink

    You should tell us why John! Or is it beastly Nick Clegg stopping Cast Elastic doing the sensible thing….?

    zorro

    • Disaffected
      Posted February 5, 2013 at 9:12 am | Permalink

      JR, There is no hope for changing banks or the culture because of the old boy network and influence. The same is true with Oxbridge millionaire consultants for overseas aid and the green energy scam. Cameron and Clegg cannot fulfil a basic promise to clean up Westminster and raise standards of MPs and Lords to act as a role models for the rest of society. The exact opposite is true and the position is getting worse.

      Clegg wanted to shut the gates of Westminster. Where is the legislation Clegg?? Why is it not being rushed through like AV, Lords reform or gay marriage?? Parliament is over ripe for reform and change. Today it is reported Huhne pleads guilty for his dishonesty. He knew about the texts to his family when he pleaded not guilty, I hope the judge takes his deliberate act to evade justice into account, as well as being an MP and minister of the crown who sets laws for the rest of us. No right minded person should believe a word of a Lib Dem- Tuition fees, EU, boundary review etc etc.

      Start with the basics and get your own house in order, then make every public sector or private body act in the same way. The public would willing follow an honest line of direction no matter what is.

      I just saw Miller on Sky TV. Her comments appear to me to be beyond embellishment or exaggeration. Is she deliberately misleading people with her comments on gay marriage, immigration and the economy or does she not have a clue what she is talking about?

      • Martyn
        Posted February 5, 2013 at 10:28 am | Permalink

        #Disaffected – “Is she deliberately misleading people with her comments on gay marriage, immigration and the economy…” Yes, of course she was, because she was simply following the party line and script.
        Watching/listening to her I thought to myself that she was reporting to us from a different time/space continuum that the rest of us live in and known as the real world.

        • lifelogic
          Posted February 5, 2013 at 11:51 am | Permalink

          Maria Miller “having previously worked in marketing and advertising” seem to be the give away clue on wiki.

          At least she is not an Oxford PPE just LSE economics but is that worse I wonder?

        • A different Simon
          Posted February 5, 2013 at 12:06 pm | Permalink

          Yes , sadly another power crazed minister with a deluded sense of self importance and cavalier attitude towards expenses who believes her own BS .

          So few parliamentarians in the house these days . Does she even believe in freedom of speech ?

          Anyone with half an ounce of sense can see she is a disaster waiting to happen .

        • Bob
          Posted February 5, 2013 at 12:15 pm | Permalink

          If the Cameron felt that the majority of the public were in favour of same sex weddings, then why didn’t he put it to them at the time of the AV referendum?

          Answer is because he doesn’t believe they are in favour.

          What’s was the rush to push it through?
          Why not put it into the 2015 election manifesto and let the public show him how much they support it?

          • zorro
            Posted February 5, 2013 at 5:36 pm | Permalink

            The impetus appears to be from the EU. Funny how something like this can be driven through like a dose of salts even though it was not in the manifesto. ‘The Rise of the Political Class’ indeed…..deeply unrepresentative, not connected to their voters, beholden to the current politically correct dogma……all the time eating away at people’s belief in democratic government being able to effect popular change.

            zorro

          • cosmic
            Posted February 5, 2013 at 8:18 pm | Permalink

            Read this

            http://www.eureferendum.com/blogview.aspx?blogno=83592

            It’s not really to do with the EU, it’s from The Council of Europe, the UK’s chairmanship of the CoE from Nov 2011 to May 2012 and its statement of priorities and objectives.

            So really this is to do with international commitments which are taken to have the force of treaties.

            As for Mr. Cameron pushing this controversial measure through, the main reason appears to be a reluctance to disappoint his European colleagues.

            I thought it was odd, he would hardly be doing it from principle and it’s an unnecessary vote loser.

    • Disaffected
      Posted February 5, 2013 at 9:27 am | Permalink

      Why was Huhne entitled and given £17,000 severance pay when he left DECC? These sort of pay offs should stop ASAP. Times of austerity and all that.

      • lifelogic
        Posted February 5, 2013 at 11:53 am | Permalink

        I assume he will keep taking his pay for a while longer too. All those absurdly high legal bills to pay.

  7. Robert K
    Posted February 5, 2013 at 8:40 am | Permalink

    Spot on. How come no-one close to the government appears to have grasped these essential points? We live in a time when the perception of political and economic reality is entirely distorted.

  8. Roger Farmer
    Posted February 5, 2013 at 9:28 am | Permalink

    Re RBS
    I speculate on how much power the banking sector and some of the families behind it have over the actions of our present government. How otherwise can one explain the enormous waste of time there has been in the last two and a half years to do very much about anything. By all means sort out RBS and increase competition in the high street to the benefit of our cash starved economy. Perhaps we should have followed the example of Iceland and let banks go to the wall.
    When you think about the current situation you realise that nothing has changed. The banks pay next to no interest but still charge grotesque amounts of interest on loans. What are banks doing with the vast amount of quantative easing they have benefitted from, does this account for the hike in share prices. For sure it has not benefitted small busineses. To me the whole financial sector stinks from Equitable Life through the pension industry to the banking sector and goverment past and present is complicit in it.

    • Jon
      Posted February 5, 2013 at 9:05 pm | Permalink

      Yes thats something I don’t get. Over the last 30 years how much have interest rates changed? Over that time what is the norm for credit card interest rate? 20%?

      People complain about the petrol prices and them not reducing when the price comes down. Surely people and politicians must see the interest charges by the big banks don’t change with interest and inflation rates.

      How much over the last say 20 years has the taxpayer forked out in welfare to pick up the pieces of this racket? I don’t get why they are not interested in this. I watched the select committee meetings on this and it wasn’t an issue?

      Could go on but simply don’t understand the lack “of interest” in it.

  9. A different Simon
    Posted February 5, 2013 at 9:42 am | Permalink

    Even if the banks wanted to lend they no longer have the capability or expertise to deliver quality lending to small and medium sized companies .

    They spent the past 20 years sidelining the old fashioned bank manager and deliberately destroying the culture which created them .

    With the best will in the world it’s not possible to flick a switch and go back to responsible lending because the people who knew about that have retired .

    Would the new breed even be prepared to trust the decisions on lending to old experienced bank managers ?

    Look at people like Andy Hornby , (he did not know enough about banking when he was brought in?ed) , only knows about increasing market share in a retailing environment which was why he was brought in . Brought in solely to increase market share without any regard to quality of lending .

    • zorro
      Posted February 5, 2013 at 5:40 pm | Permalink

      Quite so, they went for short term profits and salesmen rather than building long term relationships with businesses and communities. These were some of the unfortunate side effects of how extreme ‘Thatcherism’ impacted on behaviours….It is not just in banking though, because a lot of public servant expertise has been lost and not replaced. There are doubtless so many of these ‘managers’ with no effective workers to manage.

      zorro

  10. MajorFrustration
    Posted February 5, 2013 at 9:50 am | Permalink

    JR – looking at this post and many others in recent weeks/months just shows that those of us, who in the main support your views, are just not on the same track as the Tory front bench. In importance do we sort out the banks or legalise gay marriage. Now that is a difficult one. Sorry JR but this lot have had it and unless there is a material change of direction at the top the Tory party will be out of power come 2015. Just look at some of the foul-ups since 2010 – EU is still a jam tomorrow isssue, Deficit reduction yeah right, MoD – can we be sure its on our side given its ineptness, Overseas Aid (good idea)but we need to borrow to pay for it(lunatic) and many more – even “when we leave Afghanistan the Afghan army will be able to exert effect control” LOLOL.

    • Nina Andreeva
      Posted February 5, 2013 at 12:14 pm | Permalink

      I remember Sunny Jim had a defence secretary called Fred Mulley who had a problem staying awake during debates in the Commons. However looking at this government they seem to have entered a new dimension of incompetence, as when Fred was in charge at least our aircraft carriers had erm aircraft on them.

      When I was dropping the other half at work this morning we came across a bunch of nurses protesting about how much they will be earning this year in comparison to what the CEO of their trust will be walking away with. I presume the trust fund kids are aware of the discontent that seems to be bubbling away amongst those that do real jobs and having trouble making ends meet at the moment? If I had the time I would have told the nurses that they should be protesting against the Cameron, Clegg and Milliband and not the CEO. As it is their money printing that is driving up their cost of living. Though this is unlikely to change, as why should it when QE is driving up the value of the underlying assets of the trusts that have enabled the real enemy to have never done a hard days work in their lives, bar the sinecures at Carlton and SKY

      • uanime5
        Posted February 5, 2013 at 2:28 pm | Permalink

        If the CEO was increasing their pay but wasn’t increasing the nurses’ pay by the same rate then they would be partially to blame for the protests.

      • zorro
        Posted February 5, 2013 at 5:42 pm | Permalink

        indeed, QE is driving up/propping up the paper value of asset bubbles nominally controlled by these big companies….

        zorro

  11. Iain Gill
    Posted February 5, 2013 at 9:52 am | Permalink

    The biggest current risk to banks is what happens if there is a house price collapse. House prices cannot be sustained at current levels forever, even with massive government manipulation as is currently going on. Too many banks depend on house prices being at unsustainable levels to maintain their balance sheets. We need some radical modelling to see what happens when house prices drop 10, 20, 30… 50 % etc and we need to plan our reaction. I don’t want to be bailing banks out again.

    • Brian Tomkinson
      Posted February 5, 2013 at 2:43 pm | Permalink

      Iain,
      The government keep saying they want more houses built which will lead to house prices falling. Does any one of them have a clue what they are doing?

      • zorro
        Posted February 5, 2013 at 5:44 pm | Permalink

        Most probably not, but let’s see what actually gets built. They are only building because they have seen the population projections driven by inward migration and are worried about the future. We really are poorly governed.

        zorro

      • Deborah
        Posted February 5, 2013 at 6:03 pm | Permalink

        Simpl answer. No. They haven’t got any clue.

      • A different Simon
        Posted February 6, 2013 at 11:59 am | Permalink

        Brian Tomkinson ,

        Without cheaper housing the next generation are dead in the water .

        The only way of delivering cheaper housing is by creating a surplus which requires new building , and being more selective when it comes to immigration .

        Seeing as we are expecting the next generation to honour all these pay-as-you-go obligations we keep making on their behalf it is in our interests to reduce the cost of accommodation as much as possible .

        I don’t know why the British psyche prevents people from realising that expensive housing doesn’t create wealth but leads to impoverishment of almost everyone .

    • lifelogic
      Posted February 5, 2013 at 7:08 pm | Permalink

      Providing that the government eventually do the right thing, lower taxes and cut the state sector house prices will not fall from here (other than perhaps in a few select areas). Indeed they are rising strongly in London. The only way they will fall is in areas with plenty of land if you open up planning.

      House are not cheap to build especially with all the OTT building regulations, utility charges and all planning costs and restrictions. Little supply and lots of demand as soon as there are some jobs that is.

    • A different Simon
      Posted February 6, 2013 at 12:02 pm | Permalink

      Iain Gill ,

      The principle of the bailout has already been established and is entrenched .

      It’s only a matter of (bonus) time before they come round cap in hand again .

      No movement on too-big-to-fail or too-big-to-prosecute sadly .

  12. oldtimer
    Posted February 5, 2013 at 9:54 am | Permalink

    Were not Northern Rock, HBOS and Bradford and Bingley primarily retail banks? Were they not significant contributors to the banking crisis? How would an electrified ring fence have protected us from the consequences of their ill-considered lending policies?

    Was not Lehman Bros, blamed for triggering the crisis, a pure investment bank? Many of Lehman`s problem, I understand, originated in their London branch. This was an investment banking operation with no retail element. How would an electrified ring fence have protected us from the consequences of their highly leveraged financial structure and unsound lending policies?

    Is not Basel 3 designed to make banks safer for the rest of us. What more does the electrified fence offer apart from an incentive for major banks to relocate to other jurisdictions?

    • zorro
      Posted February 5, 2013 at 5:52 pm | Permalink

      Yes, but they were engaging in behaviour which wouldn’t have been possible with a ‘Glass Steagall’ type wall. If their investment arm had got involved in dodgy bets, they might have failed too, but so be it. The fact is the whole bank went down because of their silly business model which was dependent on easy money and did not have a sensible margin of error. Yes, Lehman’s went down but the contagion could have been contained if there had been a proper separation between investment and retail banking.

      As for Basel III, it should not be necessary if investment banks operate on a market risk basis. It is a daft regulation, particularly so when it is being imposed in one of the worst economic crises in capitalist history. Banks need access to capital to capital and the confidence to invest in sound businesses. What we have is the worst of all worlds, far too stringent capital requirements in a depressed investment environment. QE is merely being issued to keep the banks on life support (and not allow them to lend, and cause them to call back loans), when the government should be using it to finance infrastructure projects and stimulate economic activity.

      zorro

      • lifelogic
        Posted February 5, 2013 at 7:11 pm | Permalink

        Basel III is dealing with the last old problem – and making the current position far worse.

      • A different Simon
        Posted February 6, 2013 at 12:49 pm | Permalink

        Zorro ,

        You posited a scenario where “If their investment arm had got involved in dodgy bets,they might have failed too” ….

        That seems to imply proprietary trading on a scale beyond that which would be required to provide services such as underwriting , reduce customers exposure to currency risks etc .

        Aren’t investment banks supposed to make their money primarily from fees on services provided to customers rather than proprietary trading ?

        • zorro
          Posted February 6, 2013 at 6:43 pm | Permalink

          Well, I think that we know what the reality of the situation is and what has gone on at a good many investment banks with regards to ‘proprietary trading’…..Even, the rail authority has been betting on currencies as John has previously shown on this blog!

          zorro

          • A different Simon
            Posted February 7, 2013 at 9:56 am | Permalink

            Thanks for your reply .

            As you say the reality is there for all to see .

            I don’t see a problem with taxpayer guarantees of hybrid retail-investment banks so long as they really are investment banks and not engaging in proprietary trading on a large scale , especially of synthetic instruments .

            What really frustrates me is how terminology is deliberately and routinely misused to legitimise abuses :-

            - terming hybrid banks-trading houses as “investment banks” legitimises the taxpayer being on the hook for trading activities .

            - using insurance terminology when talking about synthetic CDS legitimises CDS which in any insurance context would be insurance fraud , failing priciples such as betterment etc .

            - the proposal to roll N.I. (hypothecated taxation) into income tax (general taxation) just legitimises the abusive misuse of N.I.

  13. Robert Taggart
    Posted February 5, 2013 at 10:01 am | Permalink

    RBS – a blighted brand – why are the government dragging their heels ? – break it up.

  14. Leslie Singleton
    Posted February 5, 2013 at 11:13 am | Permalink

    I support the idea of break up when it is for the purpose of protecting real banking from the casino stuff which is not banking at all to my mind. Where I am apparently ignorant is why breaking up say RBS will, per se, make the resultant bits profitable again. My trouble is I can easily imagine a scenario of smaller bits not doing well with the proposed “obvious” answer being takeovers to make them bigger. BTW I reckon this business of the private sector being “starved” of lending is well over-egged. Why should the banks lend to poor credit risks which many companies will be given the current state of the economy (more funding is irrelevant) and in any event I understood that the big picture is that many private companies are sitting on piles of cash which they are understandably reluctant to invest right now? How is breaking up the likes of RBS going to affect that?

    • zorro
      Posted February 5, 2013 at 5:54 pm | Permalink

      A lot of money is being called back from businesses to account for bad bank debts and meet regulatory capital requirements.

      zorro

  15. waramess
    Posted February 5, 2013 at 11:17 am | Permalink

    More regulation just serves to encourage the banks to spend more time in circumventing them. The massive leverage that RBS had just before the crash was due to the Basl efforts to provide a codified basis for capital adequacy by valuing the assets against the value ascribed by the rating agencies,

    As the regulations have become more contorted the banks find comfort in circumventing them if they see an easy opportunity for profit.

    The call should not be for more regulation of the “right sort” but an acknowledgment that the regulations introduced over the past fifty years have made the banks less safe.

    Wind down the regulation and allow the markets to determine which banks they are willing to trust with their money and with how much.

    Even the Bank of England believe the Osborne measures are no more than hot air because should a major bank be on the edge of collapse the politicians would be too nervous to allow it to fail. We will see .

    • uanime5
      Posted February 5, 2013 at 2:31 pm | Permalink

      If the Government had followed your strategy the banking crisis would have been much worse because banks would have engaged in a race to the bottom and savers would have been left with a choice between banks who all offered equally bad guarantees.

      The market does not and has never raised standards, only regulation has done this.

      • Edward
        Posted February 5, 2013 at 3:27 pm | Permalink

        Uni
        What a ridiculous claim your last paragraph is.
        Makes you wonder how mankind ever progressed and improved in theany centuries before the advent of regulation.

        • lifelogic
          Posted February 5, 2013 at 7:13 pm | Permalink

          Exactly

        • Bazman
          Posted February 5, 2013 at 8:09 pm | Permalink

          They lived in a society where might was right and little else and at the end you just dropped off your perch. How long would you last home boy?

          • Edward
            Posted February 5, 2013 at 11:19 pm | Permalink

            Uni,
            The greatest advancements and the greatest improvements in the standard of living of ordinary citizens occurred in the centuries well before your idea of State regulation and the dead hand of Government interference in commerce were ever thought of.
            Uni your world is resulting inthe slow decline of standards of living for the common man and woman we see developing all over Europe today.
            You would, I expect say its the failure of free market capitalism.
            It is actually the failure of corrupt state socialism.

        • Bazman
          Posted February 6, 2013 at 7:25 pm | Permalink

          Society expects more and is much to complex for free market simplistic fantasy. It has advanced since the 1900′s and why should we accept extreme poverty as well as extreme wealth? The decline of living standards is directly related to the concentration of wealth. Move to Russia or some other second world country if this is want you want.

        • uanime5
          Posted February 7, 2013 at 1:22 pm | Permalink

          Society improved based on greed and did so by abusing the poor.

          Also regulation had existed for as long as the law has existed.

      • Bob
        Posted February 5, 2013 at 5:05 pm | Permalink

        @uanime5
        “The market does not and has never raised standards, only regulation has done this.”

        Competition is what raises standards, not regulation.

        • lifelogic
          Posted February 5, 2013 at 7:17 pm | Permalink

          Exactly the market and caveat emptor works very well. Save where governments intervene to distort the market. Such as they do with wind, pv, the deposit protection scheme, building regs, planning, Cameron’s EU gender insurance absurdity ……..

          • uanime5
            Posted February 7, 2013 at 1:25 pm | Permalink

            Caveat emptor doesn’t work, that’s why it was replaced with laws that require companies to sell products that meet specific standards. For example you can’t sell beef burgers that are mostly horse meat.

        • uanime5
          Posted February 7, 2013 at 1:24 pm | Permalink

          Competition does not raise standards, especially when you’re competing by offering things as cheaply as possible. That’s why all improvements in working conditions, employee salaries, and product safety have occurred because of regulations which were usually opposed by the companies they applied to.

      • Bob
        Posted February 5, 2013 at 5:50 pm | Permalink

        @uanime5

        There are two types of regulation:
        a) Good regulation
        b) Unnecessary regulation

        Problems with holding business to account:

        The relationship between auditor and client.
        Imagine that the police were privatised and criminals could negotiate with several different privatised “police” services before deciding which one to be investigated by. And if the chosen “police” service were to blow the gaff on the crooks, they could wave goodbye to fee income from the crooks in subsequent years, and perhaps get a reputation for being too “thorough”. The honest “police services” would go out of business very quickly. Get the picture?

        Shareholder Power
        The general public for tax reasons tend to hold the bulk of their shares in nominee accounts such as pension funds and ISAs, which means that they lose their right to vote at the AGM. There are several ways that this problem could be resolved, but the political parties don’t want to upset the fat cats with the large cheque books, because said fat cats prefer to keep the shareholder power under control. You get the risk and they get your vote.

        • uanime5
          Posted February 7, 2013 at 1:28 pm | Permalink

          Bob your failure to provide any example of good and unnecessary regulation leads me to believe that you don’t know the difference.

          So what’s your solution regarding businesses? Don’t try to hold them to account in any way because it’s difficult? That’s even worse than the current system.

      • zorro
        Posted February 5, 2013 at 5:57 pm | Permalink

        ‘The market does not and has never raised standards, only regulation has done this.’…..What utter nonsense, please look at your statement and think of something sensible to say.

        zorro

        • zorro
          Posted February 5, 2013 at 5:58 pm | Permalink

          something simple…..think about mobile phone provision, tariffs etc…..What do you think achieved that, competition or regulation?

          zorro

      • waramess
        Posted February 6, 2013 at 10:50 am | Permalink

        uanime5 you must be a pretty young guy who has no recollection or has read nothing of banking 50 years ago. Few regulation No bank collapses and banks who leveraged themselves according to what the markets would lend them.

        Civil servants and others who develop these regulations have no perception of risk because they are always playing with other peoples money. The markets do however have a keen perception of the relationship between fear and greed.

        No race to the bottom just a more disciplined form of banking provided the government moves out of the way and takes its safety net with it.

        • uanime5
          Posted February 7, 2013 at 1:36 pm | Permalink

          Had your researched banking for the last 50 years you would have discovered that there were several banking collapsed such as Bank of Credit and Commerce International (BCCI), Barings Bank, and all the banks that collapsed after the 1929 stock market crash. As a result all of these disasters lead to more regulations to prevent more banks collapsing the same way.

          Civil servants and others who develop these regulations have no perception of risk because they are always playing with other peoples money. The markets do however have a keen perception of the relationship between fear and greed.

          What about investment bankers who have no concept of risk because they’re playing with other people’s money? It seems that you have no idea what you’re talking about.

          No race to the bottom just a more disciplined form of banking provided the government moves out of the way and takes its safety net with it.

          That didn’t work in the past and it won’t work now.

          • Bob
            Posted February 10, 2013 at 1:26 pm | Permalink

            @uanime5
            ” there were several banking collapsed such as Bank of Credit and Commerce International (BCCI), Barings Bank,”

            That’s how it works. If the bank is badly run, it will go bust, and the well run banks will succeed.

            It means that customers and trading counterparts will be more risk aware, unlike the local authorities who put millions of pounds of taxpayers money at risk in Icelandic banks without even wondering why they were offering interest at rates over and above the market.

            Darwinism in action.

            Your lack of commercial experience is apparent.

  16. stred
    Posted February 5, 2013 at 11:50 am | Permalink

    One of my relations works as a business advisor for one of the largest government owned banks. We were talking about inflation and whether the published figures are realistic. Some products have gone up by far more over the past few years. For example the price of epoxy resin filler, paint, and pets seems to have doubled in 2 years. Most of these are related to the cost of energy and food.

    He told me that his job was to go around to businesses who were not making enough money and to tell them to put their prices up. The problem is that their customers do not have enough money left after expenses and tax, so when firms increase their prices then they lose sales volume and the customers. The banks then can pull the plug, reducing competition, dumping unsecured creditors and creating more bankrupcies. The increased prices of the survivors are then sustainable.

    The bank’s own survival is secured by the very customers that the government is stealing from through inflation. Perhaps the shareholders should be tougher about controlling the pay and costs of the banks that they own. As a taxpayer and private shareholder, I would vote for a 50% cut in upper management salaries and a stop to bonuses. And, speaking to a middle ranking investment banker recently he gave the impression that, if the highly paid ‘ferret’ at the top left, the bank would be better for it.

    • A different Simon
      Posted February 6, 2013 at 12:59 pm | Permalink

      Stred ,

      That weeding-out is a fascinating example of “squeeze” activities which I was completely unaware of .

      We are definitely in the squeeze stage of the great financial scam where the money men will be converting increasingly funny money into tangible assets at the bottom of the market .

  17. Andyvan
    Posted February 5, 2013 at 11:55 am | Permalink

    The problem is the existence of regulation and guarantees. The regulations prevent new efficient banks starting up and protect the existing criminal cartel that props up government spending in return. Bank guarantees mean that customers do not really care what the bank does behind the scenes. Remove both and you’d get competition and the certainty that the slightest whiff of dodgy dealing would see a run on a bank within minutes. The two would see a cleaning up of banking the like of which a million regulations would not achieve with the added bonus that government would have to stop destroying the currency as well.

    • uanime5
      Posted February 5, 2013 at 2:34 pm | Permalink

      So you want to live in a country where a rumour can destroy a sound bank and cause huge problems for millions of people. Can you not really not understand why the Government needs to have bank guarantees so that people don’t need to constantly check their bank to ensure that it won’t suddenly collapse?

      • zorro
        Posted February 5, 2013 at 6:01 pm | Permalink

        uanime5……let me give you a clue…..Rumours do not destroy sound banks…….Rumours or ‘the market’ sniff out banks which are talking BS…..What sound bank has been destroyed by a rumour?

        zorro

  18. David Saunders
    Posted February 5, 2013 at 1:24 pm | Permalink

    A sensible response by JR to same sex marriage. The number of letters and e-mails received may be multiplied many times to relflect those who do not do so.

  19. Gary
    Posted February 5, 2013 at 1:27 pm | Permalink

    This is an industry that currently cannot exist in a free market, without any taxpayer welfare either directly in bailouts or indirectly through QE. QE is a a tax on savers and pensions to bail out banks.

    Regulations are a waste of time. The banks run circles around them or capture them. Just repeal all socialist market buttressing laws, get a true free market and these useless , bloated ,insolvent banks are gone. Along with the bonuses. Let the market work as it is supposed to, and clean out the dead wood. We hear 1000 excuses why this cannot be done, most often the myth being that it would cost us too much. Well, it won’t cost us any more than if we let them just carry on indefinitely as parasites. You either believe in free markets or you don’t. The politicians won’t take the correct action, either because they don’t have a clue or are mendacious and are somehow beholden to the banks. Just another reason, among many, why people are sick to death of politics.

    • uanime5
      Posted February 5, 2013 at 2:38 pm | Permalink

      If there was a free market then the only banks that would be left would be the useless ones that contained employers with bloated salaries. There’s a reason why only these banks were were able to get so big and it’s not because of government protection.

      The free market is a magical being that removed bad businesses and constantly improved standards. More often then not it lowers standards and encourages companies in the service industry to do as little as possible because their competitors won’t offer anything better.

      • Bazman
        Posted February 5, 2013 at 6:23 pm | Permalink

        Exactly. They got a free market via the backdoor in the shape of a shadow banking system allowed by a Labour government and cheered on by the Tories. Look what they did with it. Crashed the economy lined their own pockets and are now trying to set us up for more of the same. The anti gay marriage religious fundamentalists when questioned just crumble and the same applies to capitalist free market fundamentalism, of course to two are fundamentally linked. There is no arguing with them and their supporters and this is how they should be dealt with. The very same people who claim to have the moral and scientific ground on global warming. The Religious fatalism very clearly lies with them. The top of the Church/City can afford thanks to us. Ram it.

        • Edward
          Posted February 5, 2013 at 7:34 pm | Permalink

          I’ve just realised Baz you and Uni are the same person and that person is….

          Dave Spart….. the one who writes for Private Eye

          Come on Uni and Baz own up!

      • zorro
        Posted February 5, 2013 at 6:44 pm | Permalink

        What are you talking about….?

        This has happened because there isn’t a proper free market. What we have is state funded corporatism, the antithesis of a free market, and that is why these ‘too big to fails’ survived. You have a strange view of human behaviour and what motivates people. Private enterprise just seems evil in your world, but hey state enterprise worked well in the Soviet Union….lots of choice there……

        zorro

        • uanime5
          Posted February 7, 2013 at 1:42 pm | Permalink

          Zorro my views are based on real world evidence, unlike yours which are based on wishful thinking. The fact that you believe that banks became big through “state funded corporatism”, even though they didn’t receive any money from the state until after they crashed, just shows you don’t know what you’re talking about.

          Companies are not motivated by altruism but the desire to make a profit (greed) so they will always drive down standards to make more money. By contrast the state is far less motivated by profit and more willing to treat their employees well. The fact that you don’t like this doesn’t change anything.

          • zorro
            Posted February 7, 2013 at 4:04 pm | Permalink

            When I reply to you, I try and answer your points in good faith…..In your reply, you have completely taken what I said out of context.

            I never said that they became ‘big’ through state corporatism, try and read what I wrote. I said that is why they ‘survived’ after the crash! Be assured, I do know what I am talking about…….Your second paragraph viewed through your ‘real world’ prism is hilarious…..

            zorro

      • Leslie Singleton
        Posted February 5, 2013 at 7:55 pm | Permalink

        unanime–Well up to standard I see, meaning what absolute rot you talk. You cannot even get it right by your own crooked logic. Surely what you meant to say was that in a free market the big bad employers in service industries, thinking only of lining their pockets to the maximum, compete with each other to make more money only on the backs of the downtrodden workers and of course (I don’t think) take the view that there is absolutely no need to be competitive by raising standards to win and keep customers. How am I doing so far?

        • uanime5
          Posted February 7, 2013 at 1:59 pm | Permalink

          Well you’ve managed to figure out the basics, so I’ll explain the rest to you.

          Let’s say that there are 3 companies (A, B, and C) that make cars in a certain country, and due to tariffs and high entry barriers no other company is willing or able to make cars in this country. As a result new competitors are unlikely to appear. Each company sells one type of car for £5,000 to make the example easier to understand. The profit from each car is £1,000 and they each have 10,000 customers per year (30,000 in total).

          If company A reduces their price from £5,000 to £4,800 in order to attract more customers then they’ll be worse off if they don’t attract 2,500 more customers. Thus company A may lose money by lowering their prices to attract more customer, reducing their incentive to compete.

          Assuming that company A does get enough customers to avoid making a loss by lowering their prices this will only last until companies B and C lower their prices by a similar amount. Then companies A, B, and C will all be worse off, thus reducing their willingness to compete in the future.

          Similarly companies are unwilling to raise standards if they know that their competitors are equally unwilling to raise their standards or if the increased sales will not cover the cost of innovating. This is why this particular country only had 3 types of car for decades.

          In conclusion companies won’t compete if the result is that they’ll make less money. So they’re more likely to collude to keep prices and profits high than compete which will reduce prices and profits.

          • Edward
            Posted February 8, 2013 at 9:36 am | Permalink

            Uni,
            You are demonstrating an obvious lack of experience of manufacturing industry with your GCSE level tale of the three companies.
            Companies have to respond to the requirements of their customers or they will go out of business sooner or later.
            Customer do not want products that have reducing standards quite the opposite, they demand ever increasing standards.

            Your example of a company that reduces its price cruciallyforgets that with improved internal efficiencies in, for example, improved quality defect rates and better production techniques, huge savings are made which can be passed onto the customer without having to reduce profits.
            The car industry and the computer industry are just two examples where this happens as a norm year after year.
            Improved products with better quality and specification for a reducing price and yet with many profitable and successful companies in the market.

      • Leslie Singleton
        Posted February 5, 2013 at 9:58 pm | Permalink

        I replied to unanime (with derision of course) but it’s gone and this, to judge by the many new comments, was after moderation. O me miserum!

    • Bazman
      Posted February 5, 2013 at 2:54 pm | Permalink

      The real banks of Russia are very small and independent. I’ve seen them. They’re called beds. You would end up with a Russian banking system in your scenario barter, hard currency, gold and better to drink the money on the same day then let the state or some collapsing bank steal it and hence a Russian way of thinking, living in the moment as you never know when it’s your time to go. There was no need to spend any money on nuclear weapons looking at the internet. We should have just sent them a job lot of cars and lorries.

  20. Bert Young
    Posted February 5, 2013 at 2:00 pm | Permalink

    The cultures and the skill levels are vastly different between Investment Banking and Across the Counter Banking . The role of the Bank Manager in his local community lay at the heart and success of Across the Counter Banking ; equally the training and development of the Investment Banker within the culture of his Bank was the breeding ground of his success . The difference in their fields of activity was , and still is , enormous . Sir John Vickers was right , the two fields of “Banking” should be separated ; so called “ring fencing” does not go far enough . RBS must be broken up and disentangled from the web of Government . The public should not be exposed to the level and extent of the risk in Banking and it is unfair of the political system to allow this to happen .

    • Leslie Singleton
      Posted February 5, 2013 at 2:48 pm | Permalink

      Bert–I’m with you 100% on so-called “ring-fencing”, which is pure euphemistic twaddle. I read a lot but have never seen a thing on what substance the term is supposed to have. When lending to a Subsidiary there was often talk about “ring-fencing” its assets, very likely because the rest of the Group was dodgy, but when push came to shove the only way to do that was to take security. Is there confusion with Chinese Walls not that they worked either?

      • zorro
        Posted February 5, 2013 at 6:46 pm | Permalink

        Indeed, it’s a load of old guff, trumped up so as not to put off the banks too much.

        zorro

  21. Mark B
    Posted February 5, 2013 at 2:06 pm | Permalink

    RBS and the like should be broken-up and made into small independent local/regional banks. They should be mutual organizations and strictly regulated. They should not be allowed to operate outside their locality and should only be allowed to accept monies and pay monies to local people and SME’s – No large corporates. Financial products should be made simple and competitive. As mutuals’ , they can be exempt from all types of tax. They can either borrow from BoE, local government, or from each other. They should be prevented from investing in high risk and complicated financial products. In essence, simple, competitive, safe, local banking for the community. 100% Of depositors money must be guaranteed by the BoE for this too take-off.

    As for the main high street banks, they and their savers should be under no illusions that they are saving in a corporate body with shareholder interest. An interest that is NOT local and may be more international. Only up too £85,000.00 of depositors money can be guaranteed, although they will be able to increase this too 100% if they so wanted.

    The Investment/Casino Banks investors’ have 0% safety – High profit and high risk. Caveat emptor.

    If they go bust, they go bust !

  22. Nicol Sinclair
    Posted February 5, 2013 at 2:14 pm | Permalink

    (RBS) “…rarely makes an overall profit” This bloody bank (upper case deliberately ignored) has been making a bloody profit out of me from my deposits and other accounts since 1963. I would like the whole of the management to ‘go to the wall’.

    Were I to be guilty of such mismanagement, I would have been sacked long ago…

  23. Gary
    Posted February 5, 2013 at 2:24 pm | Permalink

    Another example of the govt on the side of the bankers by underwriting the housing market using our money.

    The property market is a banking friendly construct designed to suck otherwise productive capital into a property pyramid scheme , where a steady stream of first time buyers is required so that the rest of the pyramid can trade up. Classic ponzi.

    Unfortunately , these things eventually collapse, with mathematical certainty. Only the dumb govt believes they can levitate this indefinitely, throwing more good money after bad. Our money.

    • Bazman
      Posted February 5, 2013 at 6:29 pm | Permalink

      Absolutely right. The accommodation shortage being used to threaten the workforce and line the pockets of the wealthy.

      • APL
        Posted February 6, 2013 at 7:44 am | Permalink

        Bazman: “The accommodation shortage … ”

        Only exists because of the Political class’ policy of unfettered immigration. If the population of the UK was allowed to drift back down to 55million, an awful lot of problems, ranging from stress on our infrastructure; water, electricity, health – and housing, would evaporate.

        • Bazman
          Posted February 8, 2013 at 3:43 pm | Permalink

          Probably said across history, so I don’t believe that to be true.

    • zorro
      Posted February 5, 2013 at 6:47 pm | Permalink

      Indeed, as we have said before, until housing prices are allowed to fall, there will be no recovery.

      zorro

    • Huhnes'secondhome
      Posted February 5, 2013 at 8:23 pm | Permalink

      The fact that the Conservative continues to support large monolithic banks is a puzzle. Any pressure from Libdems would in this case be for the sensible idea of break-up, as would be the democratic preference. There is clearly a strong anti-competitive hold, somewhere, on the government, just as there was on Brown to merge HBOS and Lloyds. It’d be interesting to hear your views on where this influence emanates from.

  24. uanime5
    Posted February 5, 2013 at 2:40 pm | Permalink

    I’d also recommend separating banks into savings banks and retail banks, so that the latter part doesn’t need to be bailed out to save the former part.

    • zorro
      Posted February 5, 2013 at 6:48 pm | Permalink

      You have more choices to save your money than banks.

      zorro

    • Lindsay McDougall
      Posted February 6, 2013 at 2:13 am | Permalink

      When are going to get it into your head that there never is, never was and never will be any need to bail out any bank in any circumstances? Send in an administrator, do due diligence and sell or shut down. First to take the big hit would be shareholders, then depositors and lastly (to a negligible extent) taxpayers. What’s your problem with that? What’s the EU’s problem with that?

      • uanime5
        Posted February 7, 2013 at 2:00 pm | Permalink

        Well the depositors don’t want to lose their money because the bank managers didn’t exercise due diligence.

        • Edward
          Posted February 8, 2013 at 9:42 am | Permalink

          Uni,
          Tough for them, but they will be covered for the first £85k of their deposits and the bad bank will be taken over by a successful bank or just close down.
          It seems to be OK for Woolworths and Blockbusters and Comet and HMV and hundreds of other PLC’s and SME’s that fail every year but strangely banks must not be allowed to fail.

  25. forthurst
    Posted February 5, 2013 at 3:42 pm | Permalink

    My immediate rection on originally reading about electrifying the ring fencing round the casino babking divisions was that the government was yet again busily trying to appear busy without actually doing or achieving anything; this has been the hallmark of this government all along.

    Either retail banks should be be able to focus their management time, capital and higher earning employees in their casino division whilst ignoring their larger customer base unless they have a new ripoff product to sell them, or the health of the economy as a whole is more important than ensuring that a comparatively small group of spivs can earn massive bonuses and thereby provide tax for Cameron to generously give away to the third world or use for bombing them.

    Either attempting to service the needs of a large and disparate economy with a very small number of banks which became large by irresponsible accretion under the direction of ambitious non-bankers is a fait accomplis we have to live with or the banks owned by the taxpayer should be fractured back into their previously smaller, healthy, and more focused components in order to remove an obvious encumbrance to the recovery of the economy as a whole.

  26. Denis Cooper
    Posted February 5, 2013 at 5:23 pm | Permalink

    To what extent are the UK government’s actions being controlled/conditioned by what is going on elsewhere in the EU?

    It’s long been obvious that this new system of internal government by external treaty is far too complicated for the average person to understand, especially given all the other demands on his time and energy, but when I read something like this I doubt it’s even within the grasp of the supposed experts we employ fulltime to deal with these matters:

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9841005/Catastrophic-EU-exit-would-leave-City-defenceless-against-regulatory-attack.html

    “The regulatory assault on the City has been an escalating drama since the Lehman crash in 2008. Three EU agencies have been created covering banking, insurance and markets with binding powers that can overrule a British veto on key matters in extremis, effectively stripping Westminster of final control over regulation of the City for the first time in 300 years.

    The key measures were signed into law by the Coalition shortly after taking power, before it understood the full significance. The ECB and the Bank of England will share oversight as the EU’s new banking union takes shape, but it is a compromise fraught with trouble.”

    • Martyn
      Posted February 5, 2013 at 7:13 pm | Permalink

      And that just about says it all about the utter incompetence of our governance. Having surrendered every particle of sovereignty in all vital areas the government cannot even be bothered to properly review what it is that they are signing into Law.
      Pathetic and useless as they are, they continue to strut around as though they were in command on every situation, blind to reality and for which we all must pay. Off topic I fear John, I have seen none commenting on the fact that Mr C in his drive to bring in Gay Marriage is clearly demonstrating the fact that he is against the Union of Great Britain, because it will only apply to England and Wales, Scotland and NI being exempt. Another step in the dismantling of the UK in accordance with the directives of his EU masters.
      I have written to my own hard-working and, I believe effective MP, to say that I shall not again be voting Conservative come the next GE or even local elections.

    • Acorn
      Posted February 5, 2013 at 7:32 pm | Permalink

      Dennis, this goes back further to the BIS (Bank for International Settlement). The rules for Payment; Clearance and Settlement (PCS) have been changed by BIS. If you are going to ringfence the retail banking (PCS) from casino banking (sort of Glass-Steagall), the B.I.S. Committee on Payment and Settlement Systems set the rules for the non casino bit.

      I Think it is now accepted that repeal of Glass-Steagall, in 1999 by President Bill Clinton, at the behest of the big banks in the US; caused the 2008 financial crisis.

      US News said. “In 1999, Democrats led by President Bill Clinton and Republicans led by Sen. Phil Gramm joined forces to repeal Glass-Steagall at the behest of the big banks. What happened over the next eight years was an almost exact replay of the Roaring Twenties. Once again, banks originated fraudulent loans and once again they sold them to their customers in the form of securities. The bubble peaked in 2007 and collapsed in 2008. The hard-earned knowledge of 1933 had been lost in the arrogance of 1999.

      “In 1929, the music stopped, the stock market crashed and the Great Depression began. It took eight years from the start of the boom to the bust. Subsequent investigations revealed the extent of the fraud that preceded the crash. In 1933, Congress passed Glass-Steagall in response to the abuses.

      Banks would be allowed to take deposits and make loans. Brokers would be allowed to underwrite and sell securities. But no firm could do both due to conflicts of interest and risks to insured deposits.

      From 1933 to 1999, there were very few large bank failures and no financial panics comparable to the Panic of 2008. The law worked exactly as intended.” (US News)

    • M.A.N
      Posted February 6, 2013 at 6:54 am | Permalink

      You mean Whitehall waved it through, tbh I wonder who is actually running this country, because as has been mentioned, a group of PPE grads are just useless window dressing. Any one of us could do at least as well , if not better. The recent JR piece about members of cabinet only finding out new policy from watching breakfast news tells you everything you need to know. Only one thing, and it is a huge elephant; the city has bankrolled our standard of living for the past 25 yrs, rightly or wrongly, but nevertheless it has, because we don’t export much. What is being said here is that we adhere to, or have signed an agreement to diminish our city, to actually be complicit in reducing potential tax revenue stream willingly.

      Are they actually mad????. Where will our future standard of living come from?. To who do our leaders loyalty actually lie?. It’s no good having endless eu positions lined up for retiring politicians, without a private sector to actually fund this. Already you are seeing a form of tax and spending strike in every eu country apart from Germany, people do not , repeat not, get up in the morning to fund a socialist wet dream, and help the political class redistribute thier hard earned to poorer countries. This is now showing itself in the general public reducing its outgoings. You get the taxpayers you deserve, quite frankly.

    • waramess
      Posted February 6, 2013 at 11:05 am | Permalink

      Maybe it will all be over shortly.

      Gilts strike organised covertly by the EU, run on the pound, Bof E gets paranoid about falling reserves and continuing convertability of the pound and increases interest rates in leaps, property prices tumble and bottom falls out of Stock Exchange, Cameron forced to hold an election whilst negotiating with IMF for a short term bail out, Milliiband wins and takes us into the Euro on the most unfavourable terms possible.

      Far fetched but you must admit the economy is now ripe for the perfect storm and the EU must be getting pretty tired of the risks Cameron is taking with their project and even more concerned about a coup by the eurosceptics of the Conservative party.

  27. Jon
    Posted February 5, 2013 at 7:08 pm | Permalink

    I watched the Select Committee meetings on this and it was quite clear that a major problem with getting new entrants into the market was the regulator. I don’t see the need for yet another regulator.

    Something I don’t understand is how selling swaps dressed up as loans to small businesses got to market. In my industry new products need to be cleared by the regulator and I’m sure its the same for banking. The regulator perverts the market.

    I think the idea of breaking up RBS makes a lot of sense from reading these blogs. I can also see that when the Chancellor takes advice from the regulator that they wouldn’t want it. From RBS itself they wouldn’t want it. It seems like the decision is being ducked.

  28. sm
    Posted February 5, 2013 at 7:44 pm | Permalink

    You might as well ask? What happened to market discipline? Seems it only applies to those not well connected.

    When will houseprice to income ratio’s return to mean?
    When will the private bad debts of the rich be written off rather than socialized via inflation and other subsidies.

    Lessons from Iceland needed?

    Otherwise why not just seize all private property/income, except for the 1% and then the 0.01% and be done with it? Going to plan then?

  29. MichaelL
    Posted February 5, 2013 at 10:15 pm | Permalink

    Surely, the greatest thing to be done for Bank ‘regulation’ is: abolish the Bank of England?

    It would be a great way to kill inflation and introduce sound money.

  30. Lindsay McDougall
    Posted February 6, 2013 at 2:07 am | Permalink

    Agreed 100%. And the shareholding in LLoyds?

  31. Posted February 7, 2013 at 10:12 pm | Permalink

    “The real issue is how is this government, now, going to get RBS working properly and lending enough to the starved UK private sector?”

    I am a dreamer. I wish for a world, or a UK, where success is not measured as a GDP that is driven entirely by increasing quantities of credit.

    I would like to see a flat or negative ‘growth’, with increasing real wealth, the kind of technological advances that we saw in the first half of the 20th century (without the wars), abundance in all things.

    The key to this is proper leadership and good organisation, I think, and an obstacle to this is the notion that markets fueled by an ever growing bank-centric credit bubble, like the turbulence before a tsunami, can be something that we submit ourselves to and be directed by.

    I don’t exactly know how to get to this dream, but I think ending ‘banks’ as we know them today is part of it.

  32. Derek Emery
    Posted February 8, 2013 at 8:36 am | Permalink

    If history repeated itself the new bank legislation would prevent new bank crises. Is new legislation needed anyway since as you say the problem was inaction by the regulators to tackle the problem before it got out of hand. New legislation will not prevent a new financial crisis if all regulators do is sleep at their desks.
    There was only one South Sea Bubble and only one Black Tulip Fiasco. These bubbles grow unnoticed because the majority over-optimistically believe that there is no possible end to the bubble or as Brown said “No more Boom and Bust”
    The next bubble will be decades away due to the state of the economy and distant enough for people to believe this bubble is not like the rest and can only march ever upwards. Therefore regulators will sleep at their desks yet again because it will not be seen as a significant risk.
    It doesn’t matter what financial framework is in place as human over-optimism will ensure the build up will be ignored – just like this time. At the height of boom very very few will believe the next recession therefore has to be round the corner and do anything to contain the boom.

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