Banks – ‘you can’t regulate us’

For a long time now I have been saying that there would be no exit strategy and no bank reform. Now lest you think I just say these things randomly I want to point out where we are in with this.

Today the financial class stuck a double blow against any notion they should be regulated or made to join in paying for the shit storm they created.

First at the international level.

Today the ECB said it would provide ‘unlimited support’ for all European nations that needed it. Bond purchases for those who could not otherwise sell their debt would continue. Though, somehow, this was NOT a change in the ECB’s policy position of not buying up debts willy-nilly. No siree!

At the same time the Institute of International Finance (IIF) a lobby group for International finance (Banks Brokers etc) has ‘warned’ that in its member’s expert opinion if the Basil III banking reforms were insituted then – 9.7 Million jobs would be lost in Europe, US and Japan, and 765 Billion Euros or 4.3% woud be cut from GDP in Europe by 2015. (This is a variation on the Paulson ‘pass the TARP or the world will end’ ploy)

And what kind of lunatic government, eurocrat meddling could precipitate such dire consequences? Well Basel III recommends that what counts are Tier One capital holding be tightened. Tier one is the core capital of the bank. It is supposed to be risk free and therefore 100% reliable. Cash basically. But in the bubble years other stuff has crept in. Often Preferred Stock which is NOT risk free. It has less stature than bonds and look what has happened to bond holders. So basically Basel III wants banks a to hold as Tier One stuff that is actually risk free and not going to evaporate in a crisis. What kind of idiot would think that was a good response to a crisis precipitated by banks not holding enough capital? Really, I ask you – these meddling beaurocrats!

The second completely unwise proposal is that banks should also hold more liquid assets so that they aren’t so perilously reliant on over-night and short term funding to keep themselves able to fund their own debts – the way they are now.

Both of these are the very ideas everyone was agreeing to in the heat of the crisis. Now that the bankers have secured their bail outs, the banks suddenly find such ideas dangerous and unwise.

After a lot of free wine and free other things I can’t mention here, it turns out the G20 finance minsiter are apparently beginning to come round to the bankers point of view on this one. Maybe, ideally – kick it into the long grass where the electorate will forget all about it.

The IIF is quick to point out that if Basel III were to go ahead then banks would be forced to raise $700 B of common equity and issue $5.4 Trillion of new long-term debt by 2015. Frightening figures designed to amke you think the Basel II eurocrats must be potty. Well, actually the figures are indeed firghtening. But they are the amounts needed if you want the banks to be able to NOT have another melt down and come to you for ANOTHER vast abil-out.

Now which do you think the bankers prefer. Raise these figures or do nothing and just rely on you for another bail out?

Guess which policy our politicians are going to go for?

Then the National level. This example is from GB but every nation is hearing the same sort of thing.

Today, Richard Lambert, head of the CBI in GB said his members, felt the government was absolutely wrong and misguided and needed to think again about lowering the threshold of what gets taxed by the Capital Gains Tax because it would hit the wealthy. AND should absolutely reverse this silly 50% tax bracket because it too would hit the wealthy.

His argument is that such moves woud act as “a deterent to mobile talent”. He means bankers and other top earners in business and the City would leave if we ask them to contribute to clearing up their detbs. And he added the 50% tax bracket had hurt the UK’s reputation as a location to do business. And I feeled compelled to add, as does the minium wage – China doesn’t need one, Labour rights – which are a scandal and make our workforce ‘inflexible’, and of course pensions which just encourage people to think they have a right to a sit down after 40 years of being inflexible and overpaid!

If GB wants a recovery the people, by which I mean the not-so-well-off people – are going to jolly well have to pay for it. To think that the wealthy should bail them out of the mess they, er we, er the wealthy, or the bankers er um.. have caused er…well never mind. It’s all a bad idea and must be dropped now!

So there you have it. Wealth and position now thoroughly baile out and ring-fenced from the coming cuts, they’ve all found their voice again and are determined to protect what was ours and is now theirs!