From a BBC film to be shown tonight called “Britain’s Banks: Too Big To Save?” 9pm on BBC2.
“… the deputy governor of the Bank of England, Paul Tucker, said the serious flaw in the current banking system was that the bankers had got rich in the boom years while the cost of their failures had been heaped on the taxpayer.
File that one under “No Shit Sherlock”. This visionary goes on to cast this further pearl before us,
He said the priority for the coming year was to reform the banking system to allow banks to go bust like any other kind of business, with their losses falling on creditors and investors, not the taxpayer.”
Why is it that at the moment when it would have mattered, all the people and institutions involved in with regulating the financial sector and dealing with the crisis were deaf dumb and willfully blind to the truth, but now, years later, when it’s of no consequence, they just can’t resist assuming the posture of benevolent arrogance while they give us the benefit of their great wisdom.
A wisdom we are no doubt supposed to admire and be grateful for. It was only a week ago that Bob Diamond lectured us with his inimitable mixture of weary restraint and bridling arrogance that “The time for Banker remorse is over.” That’s what Mr Diamond has understood from the last two years is it? Bankers have had enough of lowering themselves to feign ‘remorse’ to please the peasants and now feel we all need to move on. Remorse? No one is interested in banker’s remorse. I want bankers facing ruin and bankruptcy. I want bankers on the streets because of the massive debts they had to pay. I want bankers at the job centre being asked if they have an NVQ (National Vocational Qualification) in customer relations? Remorse be damned, Mr Diamond.
But wait, as they say, there’s more. ‘Britain’s banks pay too much to many of their bankers’ – that’s the shock horror ‘news’ from RBS Chairman Sir Phillip Hampton. So if he knows this, and we have always known it and even our gutless leaders know it, why is it the bankers laugh and collect their inflated salaries and bonuses anyway?
For me this only piles on top of earlier revelations. Think back to the wiki leaks discovery that,
King said that liquidity is necessary but not sufficient in the current market crisis because the global banking system is under capitalized due to being over leveraged. He said it is hard to look at the big four UK banks (Royal Bank of Scotland, Barclays, HSBC, and Lloyds TSB) and not think they need more capital. A coordinated effort among central banks and finance ministers may be needed to develop a plan to recapitalize the banking system.
In other words, way back in early 2008, Mr King knew full well, what people like me were saying, that this was a crisis of solvency NOT of liquidity. He knew that the shortage of liquidity was the symptom while the disease was insolvency. And yet he like all the others went along with the public protestations the ALL the financial press unquestioningly accepted and endorsed, that this was a liquidity problem to be solved by measures to pump i liquidity. Measure which DID NOT solve anything at all other than to keep in the insolvent able to draw their inflated salaries and large bonuses DIRECT from the public purse.
What does it tell you, that these people now feel sufficiently at ease and protected, back in their untouchable penthouse of power and luxury, that they feel at ease as they smile down at us and confirm just how much they all lied to us and used us and stole from us for their benefit?
Hi Golem,hope you and yours are OK.
With regard to recent comments from Diamond and King (and any other jokers in the house of cards that is our financial industry), it's a step in the right direction, no?
Unclear,
It is a step in the right direction I think. But is undercut if we continue to treat the banks as if it were just liquidity abd continue to pump in our money while theirs continues to rot away.
Golem,
I wonder if the ICB will heed this advice that I submitted a few months back:
http://forensicstatistician.files.wordpress.com/2010/11/icb-submission-nov-2010.pdf
Apologies that it is quite long (4,500 words).
The key point is that Securitisation is a means for mis-pricing the risk of lending. Maybe they don't want to face this as it will fully expose the banks as insolvent!
an interesting piece of spam when i opened google today. At the top of the mailbox was a banner ad-link to this page.
http://moneymorning.com/ppc/US_Dollar.php?code=X304J1G4&gclid=CMrT5KOQxKYCFYYPfAodtDjxMw
"U.S. Dollar Report:
The Dollar's Day of Reckoning is Here
"The government is printing money 24/7 to paper over the bad debts of the housing crisis and Wall Street bailouts. We're about to enter a cycle of hyper-inflation that will devalue every dollar you own… but there is a way to profit! Find out how in this free report.
As the year goes on, dollar is looking more and more like a colossal short… One that could wind up being one of the biggest moneymakers of the year – if you've got the guts.
Read on to find out why it's time to bet against the dollar… and how to do it for huge profits."
I wonder how many more of Google's 170 million users woke up to this same proposal.
Things are changing…
Forensic,
I absolutely agree with you about securitization. I don't know if you were a reader when I wrote the The Undead Heart . It was three parts about securitization. If you didn't and have teh inclination I would be most intersted to hear your thoughts.
I have spoken to various bankers about securitization and the whole bankers paradigm of risk management. It is, as I suspect you also think, the heart of the folly of modern finance.
If you're interested we could chat about it.
I will try to read your submission. I am just very short of time at the moment. Family and work combine to use up all the minutes and those I have left I try to use reading to the boys.
Hey RichGB,
If you're reading would you drop me an email? I'd like a word if that's OK.
Though some of you might be interested..
Anyone come across this idea, Deficit Easing (as opposed to quantitaive easing). Involves printing debt-free money.
http://smarttaxes.org/wp-content/uploads/2010/11/Douthwaite-Deficit-easing.pdf
I don't fully buy it but it's thinking outside of the pre-existing monetary box.
David thanks again for Undead Heart. I finally glimpsed an understanding of securities, the banker's black magick.
What does it tell you…
It's hard not to be cynical & feel like this is what the dumb proles want to hear, and that they're sitting in front of their TV thinking "Yeah! They shouldn't have done that!" As if (supposedly) being shamed on the BBC really puts them in their place. They might as well have interviewed Captain Hindsight.
Granted, there's certainly more public awareness & pushback happening in the UK than here in the US. But this kind of drivel & splooge in the US is likely to work wonders in dampening down public anger, such as there is.
Golem,
Thanks for the reference to your Undead Heart series of articles. Glad to see that there’s someone on the same wavelength!
I hadn’t thought of Securitisation in terms of promoting / facilitating Leverage. This certainly rings true and the excessive addiction to growing debt creation certainly points to an inevitable breakdown of the model (almost as if it were designed in!).
We both seem to share the view that risk hasn’t actually been tamed. If we can dismantle this myth then the whole edifice comes falling down. This is the focus of my ICB submission. Risk can’t disappear or qualitatively change form. Banks either avoid, absorb or transfer risk. Securitisation gave the impression of reducing the extent of risk, but this was a catastrophic under-estimation (i.e. mis-pricing) of the risk. Instead it merely enables risk transfers, either to gullible counter parties, or to the tax payer. The quotes from the Fed about “polishing” the quality of loans show them to be complicit in the scam. We have a saying at work that goes along the lines of “you can’t polish a turd” – how apt!
Banks have always been able to control the money supply. They create credit through loan origination. However this always used to be a private arrangement. A bad extension of credit would come back to haunt the bank that created it. Securitisation now enables this to become monetised, and therefore a public problem. This is related to the notion that money is just a special form of credit, a unique subset of credit that is fungible / highly liquid. My main beef is that the banks take the upside profit, but then leg it on the downside, leaving society to pick up the pieces.
Like you, I suspect that there is a tidal wave of credit risk that hasn’t been fully recognised yet. And you can guess who will be left holding the turd! As you say, this is indeed the very heart of the problem.
Anyone seen this RealNews piece on Canadian Forensic Accountant Al Rosen? He's published a book recently detailing how dodgy accounting standards (especially from Europe) are a key cause of fraud & misrepresentation (& by extension, the hiding of 'risk') in both banks & major corporations.
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=6029
@ ahimsa
-Defecit easing- you should 'buy it', it's a good, workable idea. The only thing against it is that it doesn't come from a 'neo liberal' economist & therefore must be ignored. Btw, Richard Douthwaite has suggested for some time that brewing structural weaknesses mean that Ireland's continuing membership of the Euro – as the Eurozone is presently managed (well, not effectively managed) – is not our best option.
At least next time, and I believe there will be a next time, then maybe we will let them fail.
At least people are talking about this and even in the Western MSM, you see a tiny sliver of this rhetoric coming forth.
I give you as an example. While Iceland was grappling with their dilemma, I was trying to follow the news as it transpired. The US MSM was Johnny on the spot while the IMF was paving the path for an IMF Rescue in Iceland, but the day Grímsson pocket vetoed the whole plan a funny thing happened. The US MSM completely dropped the story!!! I had to get my news from Journalism 2.0 and local Icelandic sources. To this day finding out details of Iceland's rejection of the IMF and Western Banks takes some effort. It certainly doesn't jump out at you like it should in a Google Search done inside the US.
Birgitta Jonsdottir named in USDOJ subpeona? Well the IMF/Banks tentacles are long, eh?
Oh BTW, I think Birgitta Jonsdottir is HOT! Somebody give me her address and I'll send her large appliances and jewelry.
All money and credit is actually a claim. A paper or even paperless claim to an asset. If the asset does not exist and it no longer does, then we have the world financial system!
All those claims and yet it appears, no one is cashing out! Taking their assets and quitting their claims. Why not?? One answer is that the msm is saying that things are fundamentally sound! Your readers all know this is false but may not continue the line of logic: cash out now! No investment is safe, even currency! Farm land if cheap and productive is OK. We are in the K winter now. Deflation is king and is only beginning to bite. We are a few years along the Japan trail. They are twenty years along it. Facing "bankruptcy" ie their investors money has been lost!
Ireland can go this way or not.
Birgitta kicks with the other foot!