Bank bailouts and banker bashing

Bankers have been bashed, rightly so, but there has to be a time for that to stop as it becomes counterproductive.

How about it stops when we become convinced that there is a shred of decency and responsibility within the banking sector? Are you really trying to convince me that the people responsible for:

LIBOR rigging
FOREX rigging
Misselling PIP
Money Laundering for drug cartels
Assisting Tax evasion
Gold Price fixing

as well as the reckless lending that cause the financial crisis have suddenly changed their spots and become decent people? This is the industry that we should base our economy on and bend over backwards to keep happy?

It’s a significant fact that the bailout has been profitable as well as delivering stability

We’ve already established that this is nonsense, why do you keep saying it?

The elephant in the room remains remuneration.

Why be a bank CEO earning £3m-5m when you can make £10m at PIMCO as Ed Ball’s brother does for example ?

@grum it’s clear to me you and others will never be convinced. Osbourne thinks (knows?) that raising taxes on banks is popular (financial banker bashing) so he has once more raised the banking levy (6 times now ?) and now risks HSBC relocating it’s HQ outside the UK = counterproductive. For every reckless lender there was a reckless borrower and a government turning a blind eye to excessive debt.

jambalaya – Member

it s a recovery. Perhaps not as strong we’d like but a recovery all the same and one the evny of most of the rest of Europe. Paying back debt is a slow and painful process be that for governments or individuals.

ok, it’s an extremely fragile recovery, largely fueled by a growth in personal debt, which is in turn fueled by close-to-zero interest rates, which we can’t raise, because the ‘recovery’ is too fragile.

we’re not paying back our debts, they’re growing, again.

@ernie time to move on is what I am saying, whatever you say about Tory hypocrisy the electorate found them to be more trustworthy and competent than the alternatives.

So why did the majority of the electorate vote for alternatives to the Tories then?

And I’ll remind you that there was a time when most people thought the Sun revolved around the Earth, it didn’t make it right.

I am fully aware of the power of Tory myths, such as taxation and spending, that’s why I regularly comment when you spout them.

largely fueled by a growth in personal debt

No significant increase since crisis

your graph only goes to 2013…

If you read the BOE quarterly bulletin no signifcant increase in 2014 either.

No significant increase since crisis

You wouldn’t expect an increase in personal debt during a credit crunch/crises ! As your graph shows 🙂

ahwiles point is that the “recovery” of the last couple of years (which your graph doesn’t show) has been largely fueled by a growth in personal debt.

PwC seems to agree :

Average UK household to be £10,000 in debt by end of 2016

So why did the majority of the electorate vote for alternatives to the Tories then?

They didn’t, less than 37%.

They didn’t

They did, less than 37% is what the Tories got. The majority of the electorate voted for alternatives to the Tories.

oops, missread that as the the majority voted for the Tories.

PwC seems to agree :

I’ll stick with the Bank of England, the accounting firms often have an axe to grind.

whatever you say about Tory hypocrisy the electorate found them to be more trustworthy and competent than the alternatives.

This is what I said – I appreciate you say 37% doesn’t show them to have a popular majority (ie 50+%) but they got more votes and seats than any of the other parties

I hadn’t spoken of tax/spending here though, ernie you raised it. I think we should have done more to reduce the deficit in the good years but I appreciate the political reality of the Tories feeling they had to match Labour’s spending plans in order to try and head off accusations of cuts putting services at risk. The recession meant the deficit ballooned and made it politically possible to make cuts. That wasn’t really my topic here. It was about the bailout being profitable as much of the debate focuses around money being “given to the banks” whereas the reality is we lent them money/made investments and we are making a profit.

I think we’d all like to see lower levels of debt but paying back money you owe is tough especially in a recession. I would legislate for capped levels of credit card debt, compulsory proof of income for mortgages and minimum deposits (as they have in Singapore / HK for example) but I appreciate that’s politically impossible. I suspect we’ll see an increase in personal debt as people feel more confident.

A slip back into recession is very possible, a Greek default would almost certainly lead to that which is the card the Greeks are trying to play in the negotiations.

jambalaya – Member

I think we’d all like to see lower levels of debt but paying back money you owe is tough especially in a recession.

i thought it was meant to be a ‘recovery’…?

🙂

We’ve had both since 2008

They did, less than 37% is what the Tories got. The majority of the electorate voted for alternatives to the Tories.

To be fair, the majority of the electorate voted for either the tories or ‘even more extreme right wing’ capitalist parties

It’s a significant fact that the bailout has been profitable as well as delivering stability
We’ve already established that this is nonsense, why do you keep saying it?

Because it isn’t nonsense to be fair to jambas. It was fundamentally important to restore stability into the financial markets and to avoid genuine market concerns about the impact on debt levels on our sovereign risk. Both have direct economic impacts on the rest if the economy.

This is one reason why they soft peddled on banker bashing. Why? Because it is foolish to do that int he middle of the crisis when you need the transmission mechanism to be working. As we exit that period, this is the time when they should be ratcheting up reforms and regulation but they will most likely succumb to banker lobbying instead. Plus the main instrument of policy (QE) requires banks to fulfil their transmission role effectively. At the moment, they are not which is why the policy is only mildly effective.

I hadn’t spoken of tax/spending here though, ernie you raised it.

Of course you hadn’t of course I did 🙂

Bankers have been bashed, rightly so, but there has to be a time for that to stop as it becomes counterproductive

They should have had their heads paraded through the streets on spikes for what they’ve done. Instead the ‘banker bashing’ has actually amounted to them receiving some not very favourable comments, and a bloke had to give his knighthood back, but not his enormous pension

The banking industry in this country is still completely unreformed, utterly dysfunctional, self-interested to the point of being psychopathic, and operates without giving a flying **** about the wider economic picture in the rest of the country. It still doesn’t get the damage it did to peoples real lives through its limitless greed, corruption, and immorality. It doesn’t show a shred of remorse! And why should it? There have been no real consequences whatsoever.

I think Will Hutton has it nailed by describing the entire industry as ‘just money talking to itself’

The only people who defend it are people who work in the industry, and politicians looking to their future highly paid directorships on bank boards.

Well odd Binners that many SMEs are saying exalt the opposite and are desperate for banks to return to providing access to financing – working cap and investment. Why would this be happening if banking was just money talking to itself.

It has been reformed quite obviously and there have been major job losses. The former has not gone far enough, true, but the latter is on-going

ninfan – Member

To be fair, the majority of the electorate voted for either the tories or ‘even more extreme right wing’ capitalist parties

If you are including UKIP’s 12% of the vote as I assume you are it makes jambalaya’s point even less valid.

I’ll remind you what his point was : “whatever you say about Tory hypocrisy the electorate found them to be more trustworthy and competent than the alternatives”

As you quite rightly point out even right-wingers voted for an alternative to the Tories, which hardly inspires confidence in the competence of the Tory Party.

Btw most of the electorate did not “vote for the tories or ‘even more extreme right wing’ capitalist parties” as you falsely claim. One third of the electorate didn’t bother voting at all.

Well odd Binners that many SMEs are saying exalt the opposite and are desperate for banks to return to providing access to financing – working cap and investment. Why would this be happening if banking was just money talking to itself.

Well you’ve sort of answered your own question there. All the money pumped into the banks was supposed to do exactly that. Provide capital to SME’s. All those (our) billions. Except none of those tens of billions made it there, did they? They fuelled another housing boom, and supplied more cheap credit to consumers instead.

So they’ve changed their behaviour how exactly? Its all got an awfully familiar ring to it, hasn’t it? Ignoring the actual needs of the economy, and pursuing its own short term interests instead, without a second thought for the long term consequences. Because for them there have been no consequences, have there? Unlike the rest of us. Who have paid for their greed and moral ambiguity in spades!

What could possibly go wrong eh? 🙄

You are missing the causal link – the authorities coincidently introduced regulations that meant that the banks couldn’t extend this credit. They are being forced (correctly) to shrink their balance sheets. You can’t focus all the blame not he banks either for the crisis or after. They are part of the transmission mechanism. Their actions reflect the activities of governments, central banks and regulators. All are flawed.

Couldn’t agree more THM. It’s human nature to push as far as you can legally get away with. The FSA want stringing up for the casual abdication of their responsibilities. The politicians want stringing up for their total failure to eatablish an even remotely effective regulatory framework, and for being so cheaply duped.

But what staggers me in both instances is the lack of curiosity as to what was actually going on. Vince Cable stood out as a tiny amount of voices pointing out that the Suns just didn’t add up.

You forgot the * after the word regulators.

* the word is used figuratively in this instance, and does not imply any actual regulation or oversight.

It’s human nature to push as far as you can legally get away with.

From all the recent fines, it seems the bankers were well past that point. It does seem they really thought that nothing / no one could stop them and anything, which made them richer, was OK. Way worse than just a bit greedy, completely immoral behaviour. They have collectively earnt a lifetime of bashing.

Yeah…. It does amuse me the terminology used… ‘Mis-selling’, ‘wrong-doing’ ‘rate rigging’ etc etc.

Can we not just refer to it as what it actually is? Systemic, institutionalised, Industrial scale fraud?

Mind you…. If you did that then you might have to start arresting people. And we can’t have that now, can we?

Can we not just refer to it as what it actually is? Systemic, institutionalised, Industrial scale fraud?
Mind you…. If you did that then you might have to start arresting people. And we can’t have that now, can we?

You can if you live in Iceland

Or Spain or even USA.
Fraudsters behind bars

Re levels of personal debt. This is scary…
It suggests no real rises in income, rising cost of living and an inability to deal with our addiction to shiny things/learn the lesson of 2008…
If there’s one thing you need to do in a crisis, it’s to stop doing the things that got you into the crisis in the first place…

Anecdotally, everyone I talk to who I think is a ‘critical/independent’ thinker – whether a Brit, Polish, French person is pretty negative about the future… deeply aware the problems have not been fixed and the massive levels of debt built and building up and the asset bubbles growing are just the preface to another crisis – except this time Central Banks will have no room for manoeuvre…
Just spend a bit of time on FT and Economist websites and read the comments in any story about the global economy and you’ll see what I mean. Any ‘recovery’ is an illusion… the fundamental weaknesses remain
Psychologically the shock of this one to the population as a whole is likely to be worse than 2008 – too many people ill-informed or putting their heads in the sand and buying shiny things and going ‘oh I’m loaded, my house went up £10k last month’ 😯

Just spend a bit of time on FT and Economist websites and read the comments in any story about the global economy and you’ll see what I mean. Any ‘recovery’ is an illusion… the fundamental weaknesses remain

Agreed, yet share prices are on a right roll at the moment. My ISAs have made >20% in the last year, some over 30%.

Interesting analysis of economic policy of the last 30+ years

In a wide-ranging analysis of Britain’s performance in the decades before and after 1979, economists at the University of Cambridge say the liberal economic policies pioneered by Thatcher have been accompanied by higher unemployment and inequality. At the same time, contrary to widespread belief, GDP and productivity have grown more slowly since 1979 compared with the previous three decades.

http://www.theguardian.com/business/economics-blog/2015/jun/10/growth-what-growth-thatcherism-fails-to-produce-the-goods

Anecdotally, everyone I talk to who I think is a ‘critical/independent’ thinker – whether a Brit, Polish, French person is pretty negative about the future… deeply aware the problems have not been fixed and the massive levels of debt built and building up and the asset bubbles growing are just the preface to another crisis – except this time Central Banks will have no room for manoeuvre…

That is the problem. The vast majority are not critical/independent thinkers and instead are sheep. Believing what they read in the papers on see on the news.

I think pretty much everything is overvalued at the moment. When it does eventually break it’s not going to be pretty. I can’t see the housing market breaking for a while, but the financial markets on the other hand……..

At some point I’m going to try and persuade my parents to go to cash with some of their portfolio. 20% gains for years is just not realistic for any market.

FF. The Guradian piece is brilliant in its awfulness. Completely misses the causes of current issues and mistakes what Thatcher actually did – what were people saying about problems at the Guardia today on a different thread!

But there should be surprise about asset pricing. It’s a deliberate outcome of current unorthodox policy – here and in China. Interest rates are being grossly distorted and mispriced (openly) in order to encourage more risk taking. This should have created a wealth effect (pass) and more bank lending (fail).

Crazy, crazy times. Which will be more painful the correction in bonds or Chinese equities. I am only long the latter but am exiting now.

At the same time, contrary to widespread belief, GDP and productivity have grown more slowly since 1979 compared with the previous three decades.

I thought it was a well-known fact that growth in the UK economy during the 1980s when Thatcher was PM was exactly the same as for the 1970s? Just like isn’t it a well-known fact that the UK tax burden and government spending went up, not down, during Thatcher’s premiership? Perhaps not.

…the liberal economic policies pioneered by Thatcher have been accompanied by higher unemployment and inequality.

Seriously, does anyone really need to be told that? ffs

I’m assuming you trade your own account THM? Reading your posts you seem to have that sort of mindset.

FF. The Guradian piece is brilliant in its awfulness. Completely misses the causes of current issues and mistakes what Thatcher actually did – what were people saying about problems at the Guardia today on a different thread!

They’re only quoting the source, which was the Judge Institute (MBA deviant breeding school), so it’s a bit unfair blaming the Guardian…..

Have you seen this, guys?

kudos100 – Member
I’m assuming you trade your own account THM? Reading your posts you seem to have that sort of mindset.

Yes but not too frequently – only big conviction trades and no ST stuff.

(It was a full time job quite a few years ago! 😉 )

Binners the money lent to banks in the crises was to allow them to maintain their lending commitments to SMEs etc, it wasn’t extra money to lend more. Banks lent too much, the correct response to the crises is to lend less and the regulatory changes have made it tougher and more expensive to lend. This is then set against businesses asking for more loans. It’s business reality that SMEs run on their overdrafts, not healthy. There are lots of calls to lend money to small business but it’s very risky, highly labour intensive (ie inefficient) and in many cases not very appealing. It’s why so much SME lending is really mortgages secured on the founders home, one of the things that really wouldn’t work with the “positive money” idea is no one would lend money to SMEs, if the avg guy in the street looked at the business they’d say no thanks. Getting involved in bank loan portfolios inc SMEs is what I do for a living, the new regulations are making it very tough for banks an inevitable consequence of the chosen regulatory / government response to “this mustn’t happen again”

@gofatster, I clicked in that but it’s nearly 2 hours so won’t be watching it. A quick summary from you or a link to a review ?

@brooes I agree once more with a lot of that post, I think the extrapolated graph of personal debt beyond 2015 is overdone however.

Their actions reflect the activities of governments, central banks and regulators. All are flawed.

Though presumably you’re not suggesting the banks are passive partners in this relationship? Government, central banks and regulators are all directed by external influence too.