Bankers Bailed Out

[manshimajin]

A quote from the current Economist:

 

The Bank of England's bold initiative should calm frayed financial nerves

 

EVER since the money markets capsized last August, top bankers have criticised Britain's central bank for a tardy and inadequate response to the gravest financial shock since the early 1930s.

 

Who created the gravest financial shock since the early 1930s? Why is it that when they've blown up the house and burnt down the neighbourhood they blame the fire brigade for not getting there in time?

 

At least they dashed back into the house and rescued their bonuses from the blazing wreck...

[thebees]

The fire brigade had to get called eventually, this smoke/mirrors economy has been smouldering for years.....

[Albert Tatlock]

Another legacy of the Bush/Blair/Brown era, during which many people have been crying out for tighter regulation, as this was the only likely outcome. These years will truly be seen as a dark age of human history.

 

Bad investment is someone else's problem too now. Many of the speculators have moved into bio-fuels and taken to starving to death a load of foreigners instead and whacking up our own food bills. Yet another reason why well meaning, idealistic but naive environmentalists should think more carefully before they mouth off.

[Chinahand]

Who created the gravest financial shock since the early 1930s? Why is it that when they've blown up the house and burnt down the neighbourhood they blame the fire brigade for not getting there in time?

 

At least they dashed back into the house and rescued their bonuses from the blazing wreck...

Its easy to tar everything and everybody with the same brush - who exactly is "they" in the above? Most - please note the caviat - of the problems in the UK financial markets are due to an external shock from the US sub-prime mortgages freezing the credit markets. It is perfectly reasonable for the BoE to intervene to reduce the consequences of this shock.

 

What would you prefer - a couple more UK banks collapsing because they can't raise funds due to the credit crunch? Northern Rock didn't fall due to bad debt, or sub-prime mortgages (its mortgage book was about its only valuable asset after it collapsed) - it crashed because it couldn't raise funds due to frozen debt and money markets.

 

Are the banks getting off scot free? No. The owners of Northern Rock lost over 95% of their investment. There is a huge amount of restructuring on going by the banks to shore up their reserves - HBOS, RBS etc. Plus large numbers of redundancies in banking and finance.

 

Also comparing the current situation with the 1930s seems to me to be overblown.

 

And Albert - a dark age of human history!!!! WTF?

[Slim]

Who created the gravest financial shock since the early 1930s? Why is it that when they've blown up the house and burnt down the neighbourhood they blame the fire brigade for not getting there in time?

 

The governments/central banks created the shock. This squeeze isn't soley the result of the US Sub Prime issue, that's just a small part of it. This is more about the cheap lending that was initiated by the central banks to kick start the economies after 9/11. Now that cheap lending has dried up and there's a lot of distrust, the money isn't flowing.

 

I don't understand why people are slagging the central banks for doing their job. Ignorance I can only guess, oh and the Lib Dems, same thing...

 

Albert, it's it a little early for smoking crack?

[Albert Tatlock]

And Albert - a dark age of human history!!!! WTF?

Er...do you want the whole list or just the top 10?

 

1. Illegal war

2. Non-regulated lending leading to massive financial problems

3. Torture/Rendition

4. ID cards

5. 25% of the world's CCTV cameras in the UK

6. Cash for honours

7. Rush for biofuels leading to people starving around the world

8. NuShite elected on 23% of the actual vote

9. Rich got richer poor get poorer

10. The rise of the binge drinking-benefit-fuelled pondscumic chav

 

etc.

 

Though I concede things would probably have been worse under the new tories had they been in power.

[Mutley]

Though I concede things would probably have been worse under the new tories had they been in power.

 

So you're just moaning for the sake of it?

[gazza]

if a few banks went under it woulden worry me,

i have bugger all cash in the bank anyway!!!!!!

cant get blood out of a stone

[Albert Tatlock]

Though I concede things would probably have been worse under the new tories had they been in power.

So you're just moaning for the sake of it?

No. Get some Liberal Democrats in (Labour, Conservate or LD) - aren't we supposed to live in a 1000 year old Liberal Democracy? When you get to my age, it's only then you notice how NuShite have now become the 'right' and the Tories the 'left' (until they get back in that is) - and that whoever gets in, the real people in power are only those with the money.

 

In the 80s we used to point all our weapons toward the East, partly on the basis they advocated much of what we are allowing to happen to this country today (UK and IOM), especially in terms of civil liberties. Ironic, when travelling across Eastern Europe, you realise they have more freedom and less government interference than we do, or that we are likely to have in a very few short years.

 

I can understand now why many people in their 80s/90s say 'Let me go, I've had enough'.

[Chinahand]

And Albert - a dark age of human history!!!! WTF?

Er...do you want the whole list or just the top 10?

I think I'm going to have to insist on the whole list.

 

You list basically consists of Gin Lane, Rotten buroughs, corruption and war. Your list could be altered to fit in with basically any period of history (How about Elizabethan England - a pretty good example of a survailance state, along with the Pox and the Rot giving a life expectancy far below what it is today). I totally fail to see what would single out this era as a dark age, quite the opposite, there have been huge gains across the world in the last few decades.

 

To try to be generous I believe that you, Albert, are a pretty good exemplar of the fact that increasing prosperity and longevity is no longer correlated with happiness. IE you're a grumpy sod!

 

Increasing Longevity

Increasing Prosperity - no negatives just slowing growth

Gini coefficient for equivalised disposable income, UK - inequality has been approximately constant for decades

 

The Gini coefficient stuff recording inequality is interesting - partly what is keeping it constant is benefits offsetting gross income inequality increases - so I accept more state dependence and lower pre-tax income - but hardly a sign of a dark age if you were to ask me.

[Albert Tatlock]

IE you're a grumpy sod!

You've noticed my avatar and associated 'Grumpy Old Man' text at last then. Yes - I'm having a 'political' day today.

 

I must have been watching different news channels to you. What channel number on Sky is 'BBC Naive' on?

[manshimajin]

Who created the gravest financial shock since the early 1930s? Why is it that when they've blown up the house and burnt down the neighbourhood they blame the fire brigade for not getting there in time?

 

At least they dashed back into the house and rescued their bonuses from the blazing wreck...

 

Its easy to tar everything and everybody with the same brush - who exactly is "they" in the above? Most - please note the caviat - of the problems in the UK financial markets are due to an external shock from the US sub-prime mortgages freezing the credit markets.

 

OK, I'll admit that there may be one or two bankers out there who didn't get paid a bonus for increasing their lending by offering 100% mortgages and 0% credit to move your debts around and to take out a bit more. But as a group they have managed to shoot themselves in the foot - and the economy with it as this rolls through.

 

Now UK banks are starting to look for additional cash injections and writing up their bad debt provisions. What did they do that makes them so keen for help from the BoE? Why are they reluctant to lend money to each other on the inter-bank markets? Was it really smart of RBS to offer so much for ABN Amro at the time the US market was already looking dicey (now they have written down £5.9 billion in iffy US mortgage loans)?

 

Blaming the BoE seems to me to be an attempt to escape their own responsibility and accountability.If the US sub-prime market and the UK 'crunch' were not freezing the credit market you can bet your bottom pound that the UK bankers would still be out there pumping inflation into the housing market.

 

Of course there is probably a very nice banker in the golf club - but as risk managers they have been awful. What is it that they say - "a banker is the person who lends you an umbrella on a sunny day and then wants it back as soon as it starts to rain".

 

The same edition of The Economist has an article on Spanish Banks. Whilst over-supply in the housing market and fire sales by cash strapped expats is causing a drop in property prices, to quote them:

"Spanish lending policies were certainly more conservative (than US banks). Loan to value ratios usually do not exceed 80%. Borrowers were even required to provide documentation proving things like income."

 

Sounds like - 'old-fashioned' banking

[Slim]

What did they do that makes them so keen for help from the BoE? Why are they reluctant to lend money to each other on the inter-bank markets?

 

Basically the banks dont trust each other. There's a lack of transparancy, so nobody knows what exposure they have. Many banks weren't exposed to the US Sub Prme at all, Abby for example, yet they're still suffering with interbank cashflow. Thats why the BoE's scheme of swapping assets for bonds might help, because the bonds are sellable.

 

Blaming the BoE seems to me to be an attempt to escape their own responsibility and accountability.If the US sub-prime market and the UK 'crunch' were not freezing the credit market you can bet your bottom pound that the UK bankers would still be out there pumping inflation into the housing market.

 

Might have accelerated things a bit, but the problem was there all along. Interest rates have been rising, borrowing becoming more expensive. The boom was fueled by cheap lending, and that was coming to an end.

[Albert Tatlock]

Many banks weren't exposed to the US Sub Prme at all, Abby for example, yet they're still suffering with interbank cashflow.

The same edition of The Economist has an article on Spanish Banks. Whilst over-supply in the housing market and fire sales by cash strapped expats is causing a drop in property prices, to quote them:

"Spanish lending policies were certainly more conservative (than US banks). Loan to value ratios usually do not exceed 80%. Borrowers were even required to provide documentation proving things like income."

 

Sounds like - 'old-fashioned' banking

Hardly surprising since Abbey are owned by Spanish bank Santander. Nothing wrong with self-regulation and 'old-fashioned' banking - pity many more didn't do that.

[Slim]

Hardly surprising since Abbey are owned by Spanish bank Santander. Nothing wrong with self-regulation and 'old-fashioned' banking - pity many more didn't do that.

 

 

They may well be owned by santander, but they certainly didn't follow the example above, quite happily dishing out 100% mortgages and more seven times your salary with no documentation. Shit comparrision basically.

 

Did you read the full article Albert?

 

"The initiative is a modern version of the time-honoured central-banking practice of ensuring that solvent banks do not trip up in troubled times for want of ready cash."

 

Pretty much the opposite of what you were saying eh? I guess you're used to it though, sprouting lib dem bollocks word for word must harden you to being proved wrong.