Mr Mandelson said tonight that the government is not a bail out fund.
He was talking of the car industry.
Meanwhile down the road at the Treasury that is exactly what the government is – a bail out fund for mega banks which have lost mega bucks, still wanting to pay their top employees mega pay.
The contrast in treatment between the car makers and the banks is exteme.
When will they stop being such a soft touch for the banks, to put some fairness into the situation, and to put some discipline into those banks?
March 20, 2009
Indeed.
This has not gone unnoticed by the general public as the banks are rewarded by Labour for being bad international gamblers whilst UK industry collapses.
I agree wholly with your previous analysis that suggests retail and commercial banking must be split from investment banking to restore a semblance of sanity to this sector.
March 20, 2009
When The Labour Government is no longer in their thrall. Brown bulit his financial house of cards on the back of his cosy relationships with the likes of Goodwin and Blank. He has a natural aversion to manufacturing and manual labour. A minor academic and a fraud attracted to fraudsters.
March 20, 2009
Mandy is right, the “government” are not a bail out fund, they are simply stitching the taxpayer up to act as a bail out fund for the next few decades. They probably think they are doing us a favour too, just that we’re too stupid to see it.
As for cars, civil servants in Whitehall don’t like them. I can’t blame them, having a car is a right old hassle in London.
After a few years of commuting on the Underground, travelling for work using a combination the Eurostar, Virgin Trains and minicabs and just jumping on the Picadilly Line to Heathrow when they want a week in the sun they can’t fathom why anyone actually needs a car to get anywhere.
March 21, 2009
This, of course, does not apply to Senior Government Ministers who all have their own limos – complete with chauffeur. They also have their own roads, called “bus lanes”.
March 20, 2009
Gordon Brown’s latest pronouncement on Northern Rock, apparently, is “nationalisation was the better option and the alternative was to allow it to go into receivership”. Which is clearly not true. We were told at the time that Lloyds were interested in buying the Rock, but needed government guarantees on Rock’s losses to do so. And the government refused to give those guarantees.
Regardless of the merits or otherwise of these courses of action, it is very clear that there was indeed a third way open to them, which they chose not to take.
Mr Brown seems still to be in denial over his role in the recent financial disaster.
March 21, 2009
I still do not understand why they did not let Northern Rock go bust.
What is the difference between letting GKN go bust, for example and letting Northern Rock go bust. Each has creditors and each has debtors and the process of letting them go bust would be to release the debtors to the market, to be purchased without the encumbrance of the creditors.
All the creditors are people able to asses risk and chose to accept higher returns for the higher risk.
As for the retail depositor why the hell does the government want to extend a guarantee?
Left to the market place the retail investors would find insurance companies willing to offer protection and that would take the government out of the picture.
People offer obscure arguments when explaining why the banks should be protected and even more obscure arguments when explaining why Lehman should not have been allowed to fail.
Yes, there was some dust but now it has all settled there are no obvious fall-out effects.
The proponents of saving Lehman would have it otherwise but there is no single issue that points conclusively to such fall-out.
We seem to forget that we have perfectly good rules for bankruptcy, but we continue to behave, as did Ted Heath with Leyland, in a purely emotional way.
And bu**er the Audit commission, they don’t always get it right either
March 21, 2009
Nonsense there is a huge difference between letting a bank go under and any other business go under.
Northern Rock went as a domino affect of the US sub prime crisis, the customers of Northern Rock have had the domino affect damage them and if that was not bad enough letting them go bust which was not a foregone conclusion would have made the domino affect ten times worse.
March 22, 2009
You offer no more than a series of statements: What is the difference between letting a bank go bust and letting a corporate go bust? What “domino efffect” damage have the customers of Northern Rock suffered? And what domino affect are you talking about anyway? There is absolutely no reason to believe (certainly no precedent) that letting a bank go bust would lead to other banks going bust
Northern Rock went bust because it was borrowing short on the wholesale markets and lending long to mortgage borrowers. This is a flawed way of funding a portfolio of long term receivables which have traditionally been funded through retail depositors. Nothing at all to do with USA sub prime.
Reply: If you look at the back history on this site you will see I set out many positive ways of preventing Rock bankruptcy without us having to nationalise and feather bed it.
March 21, 2009
After a bottle of red wine (which incidently cost more than £4.50) I’ve had an idea, so I thought I would share it.
A theme seems to have been developing on this blog to the tune that a rather large ‘casino’ has sprung up in the banking sector, inextricably linked to retail banking. I don’t think anyone really disagrees with this either after recent events.
A lot of people also seem to agree that durig the height of the boom years that the money supply (in both USD and GBP) got out of control.
The US and UK governments have embarked on a program of ‘quatitative easing’, whereby they print new money to buy back the debt that correlated (before both currencies were debased) to some of the new money, thus putting more money into the ‘system’.
I venture the idea that the new globalised electronic economy is actually a two tier economy. Let me explain, the banks were (prior to globalised deregulated electronic trading) split into ‘investment’ and ‘retail’ arms and the ‘real’ world economy was ‘one thing’.
Now that ‘investment’ and ‘retail’ banking are ‘one thing’, the global ‘real economy’ has seperated into a ‘casino’ and a ‘real economy’. Every action has an equal and opposite reaction?
Surely (rather than reward the winners from the ‘casino economy’ with QE) we need to find the winners and create incentives (whilst they are in a state of panic hiding away in T-bills and gold) for them to invest in real new businesses in the ‘real economy’ that will improve quality of life for the future?
March 21, 2009
Thats all very well, but for every winner there is also a looser, so who plays the better game????
The problem with gambling big money, is that it does not seem real to anyone, so whats another zero on the end, its just a number.
If the Telegraph headlines this morning are to be believed, RBS was not very good at the game, so it do not tell anyone it was loosing.
Remember a man called Nick Leeson who brought down Bearings some years ago.
Bank did not know, FSA did not know, Auditors did not know, sounds familiar.
Lesson not learned.
Guarantee it will happen again, it always does, the huge bonus culture encourages it.
March 21, 2009
Exactly the same issues were made in America, with the Detroit pack arguing, very simply for $21 bill initially, while the TARP etc assistance to banks ran into the trillions. They argued that the employment implications of a $21 bill injection into autos (and backward (eg supply chain) and forward (eg dealer networks) linkage effects) presented a compelling case when compared to those in financial industry. Unsurprisingly, they got their money. The hearings were open, frank and often brutal – in particular arguments from Sen. Bob Corker. It was a real pleasure to watch that level of debate taking place over a few days. On matters of such importance the Yanks make what I have seen by way of debate in the UK parliament look like a nursery school tiff. Though of course, this wasn’t the case during Paulson’s shoehorning of AIG and TARP through the US chambers – the functions of US democracy seem to be on a recovery path from that low. I wish I could say the same about the situation in the UK chambers, but I cannot unfortunately. Most politicians are wasting the public’s time and resources as they are not properly up to speed on the issues and therefore ill-equipped to make decisions, let alone contribute to any meaningful debate. You are, fortunately, one of the rare exceptions.
March 21, 2009
It’s a good question. I’ve noticed that Max Hastings is getting angrier! I suppose it will happen when all the main stream media realise that their pensions have been stolen to pay for the banks, or when the currency collapses.
What will the trigger be? Still unknown at this point.
March 21, 2009
Banks own the Government and have done so for 25 years. They wine, dine, and staff political parties. Every mainstream party is funded by ‘hedgies’ and bankers have the ideal political attribute of flashing money around without any sense of its provenance – no factory, no inventory, simply electronic screens.
It appeals to the political elite used to working in offices and never seeing metal bend….and now they need extra capital and the bankers seconded to Government – Vadera, Crosby, Myners et al – are there to secure taxpayer funds to keep the show on the road.
Victor Blank found how to sideline shareholders completely and sold Lloyds Bank to the Government so he and Eric Daniels now have UKFI to keep them in situ instead of pesky fund managers are shareholders.
Corporatism is institutionalising itself into a Putinesque State of oligarchs and political power – no doubt this will be matched by heavy user-fees and taxes to transfer more real resources from the populace to the elites. The nexus between self-serving political and banking elites has rarely been more blatant and looks increasingly like the Ancien Regime heading for revolutionary upheaval on the streets.
Having used the EU to stage a creeping coup against democracy in nation states the final act seems to be for de-legitimised governments to plunder the taxpayers by cancelling interest on savings, devaluing capital through QE inflation, and letting banks rip off customers with extortionate credit card and loan interest rates whilst loading huge debt burdens onto public spending on key services.
It is hard to know of any state that has survived such disaster without being under military control or in a state of war.
March 21, 2009
It is strange to see how what was once a mass working class party formed to defend the industrial working class has entirely melted away from within & is now a completely different entity existing to protect the class of paper shufflers (which includes bankers though they are far from the most egregious) & government employees.
I don’t say that Old Labour were right to subsidise coal miners & car makers but that had far more logic than subsidising wind farmers & quangosits. I doubt if Keir Hardie ever thought Labour would end as the party that exists to subsidise bankers.
March 21, 2009
Peter Mandelson is one of the most faithful Tories in government. He seems to (discount-ed) the poor, to get on extremely well with the very rich and to be living off an enormous salary.
We are light years away from Nye Bevan and Hugh Gaitskell.
Conservatism, I devoutly hope, has nothing to do with this “Tory” attitude at all, despite what Mr Brown and some dinosaurs on the Labour benches think.
I really do hope that all this IDS (Duncan Smith) stuff about actually looking after the poor who have been neglected, persecuted and fed with Liberal lies about how to behave for so many years is genuine. There won’t be any votes in it, of course. Have you seen the Jeremy Kyle Show recently? The underclass is pretty zonked out now.
But it is right. It is a crusade.
Please may we hear the trumpet sound?
March 21, 2009
To the best of my knowledge car makers and car workers cannot grant a mortgage or provide loans.
They just make cars in a super competitive environment whilst attempting to meet constantly changing regulations, which take no account of design time, and they are thus taxed more for failing to meet new regulations.
The goose has now come home to roost, as the Tax take is down, since no one can afford to buy a car, because the value of their old one has massivly reduced, whilst the annual cost of taxes (fuel, car tax), and buying new (showroom tax) is due to go up.
When will the bail outs stop ??
Anybodies guess, but you cannot bail everyone out.
March 23, 2009
What I want to know is when/if the banks are reprivatised, will the English assets be sold into foreign ownership, while Scottish assets are returned to Scotland?
I can’t see either Brown or Cameron permitting BOS and RBS not returning to Scottish ownership, even if it means them being gifted to the Scottish Parliament as nationalised organisations.
I forsee England (85% of the population and a greater proportion of the UK’s GDP) being saddled with all the toxic debt, but no assets, whereas BOS and RBS will be in Scottish hands once again, as small, standard clearing banks.