Category Archives: BANKERS

FRED GOODWIN no longer “Sir”

It is amazing what happens and who crawls from the undergrowth when the “establishment” is attacked.

In order to gain the favour of the public, the very people who were courting the Bankers, the city and large corporations, are now falling over themselves to nail a banker to the wall and then take the plaudits.

It is all very amusing.  However, we now have the “backlash”, saying politicians and the general public are using “Fred the Shred” as a scapegoat.

Even, the ultra left wing 80’s politician turned new labour “Darling”, Alistair Darling, (seriously no pun intended), is now voicing concern that people who manage to obtain an honour bestowed on them by the state may refuse their honour, because the “people” may wish to hold them to account for their behaviour following their receipt of this honour.

God forbid you may say.  For then we may ask Lord Archer to leave the House of Lords and not allow proven liars, nay, even a perjurer, to make laws in this land.  A ridiculous constitutional arrangement where no matter what a Lord does, we cannot get rid of them.

Or if we give a Knighthood to a dedicated member of the community, who is then found to be a paedophile, should we not take away the honour?

The very argument that we should not take away an honour because some may think twice about accepting it; or that this will just open the flood gates to taking back honours from others that have fallen from grace, is pathetic in the extreme.

I say, let the flood gates open, and let the great and the good and yes the “not so good”, think twice before taking an honour.  They should know full well that if they behave in such a disgraceful manner that society deems it necessary to take back that honour, that this is exactly what we should do.  Not to gain a percentage point in the polls, but on principle and because it is right.



Sir Mervyn King has stated about the World Economic Crisis that:

This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever.

Just the latest in a line of adjectives to be uttered by world leaders; economists; the IMF; the World Bank; politicians and commentators.

This latest declaration of doom is nearing the end of the last roll of the dice for the Euro and the current system of capitalism as we know it.

Even John Major is being seen as being back in vogue as he waded in to the debate on the economic crisis by stating that the Euro is unbalanced and that Germany has massively benefited while the weaker Euro nations have suffered. His argument is that the Euro was formed with the wrong exchange rate causing massive imbalances within the Euro zone, so it was formed at the wrong time, without the right convergence policies in place and at the wrong rate.

He may well have a point, but sadly, his analysis probably comes from his own personal inadequacies on economic policy in the early 1990’s when he himself made those very same mistakes when entering the ERM.  The result was a massive home grown recession.

The past week has been another turbulent week for the markets, banks, investors and savers.

The latest of many shocks to the system has been the downgrading of British Banks by the credit agency Moodys.  A bizarre evaluation of the Vickers report which  actually means that the UK government is less likely to bail out banks in future.

I have thought about the logic of the markets and credit rating agencies a lot recently, and this latest news just confirms many of my suspicions.  Basically there really is no hope for the system as it works at the moment.

The markets are so divorced from the realities of the real world that the two cannot coexist.  Those that profess to believe in the Capitalist system as we know it today, are the very people who seem to forget how it works and why.

The Vickers report, although welcomed by many, may well be seen as weak in some areas, but is the least that could and should be done to try to make the capitalist system within the UK work. Indeed, reform of the world system is required, but few are contemplating such a move.

Capitalism works on the basis that those that take unnecessary risks that do not succeed are allowed to fail.  The survival of the fittest is crucial to it working properly within the boundaries of laws and regulations.

Sadly, the way the markets and credit rating agencies react appears to be without any logic.  Some might say, in a simplistic sense, almost Socialist in intent.  You couldn’t make it up.

The idea of Vickers is to make those that take the biggest risks and fail, to be allowed to fail and for the burden not to be taken by the tax payer or government.  What the credit agencies appear to be saying is that we should not let anyone fail and the government should intervene.

By downgrading banks in this way, it causes a further climate of fear which is already in a severe cycle, much like a whirlwind, causing havoc across the world.

The credit rating agency Fitch on Friday, proceeded to downgrade the credit worthiness of Spain and Italy.  This further exacerbates the problem by creating difficulties for those countries financing their debt.  This in turn puts more pressure on the Euro zone and in itself creates more debts for governments making the overall debt crisis worse.  The cycle just goes on.

The credit rating agencies are now a part of the problem rather than a solution to guide where the money should go.  Rather than deal with economic realities, the agencies are concerned with only what is a safe bet, based on little more than hear say, and intuition.  Every downgrade leads to more turmoil and more reactive policy making.

The economic realities are bad enough, with many more shocks to the world economy to come, but after the many downgrades recently from credit rating agencies like the downgrade of the US from its triple AAA rating, can we really any longer take them seriously?

We know, until the capitalist system collapses, the US will still be a safe haven for investment as seen by the negligible effect this downgrading has had on the US.  This is the difference between real economics and speculation.

Is it time to finally knock the credit rating agencies on the head when it comes to their influence?  It is a wonder anyone is willing to listen to what they have to say anyway, after they AAA rated sub-prime mortgages that partly caused the financial crisis in the first place.  Perhaps a part of the failure of the capitalist system is that the credit agencies themselves cannot fail.  Indeed, at the time they themselves “failed”, and rated sub prime mortgages and the assets of banks so inadequately was the very time that they made the most money.  Does this make sense?

At home in the UK, the government has had a narrative of Austerity for the whole of its term so far.  The consequence is that people and businesses are scared to spend and invest, and banks are scared to lend, even to businesses with a strong order book.  Project Merlin has all but completely failed and the cuts are only just biting.

With a narrative of austerity and fear, along with every whisper on the grapevine of economic expectation being downgraded, it is no wonder that there is a race to the bottom economically.  We have effectively been in recession for the last 9 months, and the prospect of economic growth is bleak.

There are systemic problems with our capitalist system, but no politician or mainstream economist is even discussing it.  The credit rating agencies, banking system and speculators are all a part of this system that no longer works. Rather than dealing with the real problems, politicians and heads of central banks are chasing their tales with each bit of bad news reported.

FD Roosevelt said

 let me assert my firm belief that the only thing we have to fear is fear itself

Although, like any saying, this is simplistic, there is much in this simple statement about the predicament we face.  Much of the problems we are encountering on a day to day basis with the economy, is based on fear created by people who have no interest in economic stability, but in making money whatever the cost.

There are real underlying problems, but while speculators; credit rating agencies; the ideological madness in financial institutions like the IMF and World Bank; and the markets continue to have their hold over day to day political decision making, the chances of sorting out our problems are slim. Democracy itself is being subverted by the vested interests of the markets.

We have dark days ahead, but to see the light at the end of the tunnel, we need a radical rethink of how our capitalist system works.

THE US ECONOMY AND THE LOSS OF THE AAA RATING: Why do we maintain faith in failed institutions?

As we all know, habits are hard to break, especially when they have been reinforced by repeated behaviour for so long.

The fall out from the US losing it’s triple A rating will only be known in the coming days.  The comments in the business pages are fairly predictable on the whole.  The Spectator through Fraser Nelson writes that Obama is “addicted to debt” while at the same time stating that the triple AAA rating may not affect US borrowing at all except make it somewhat more expensive to borrow.

It’s kind of amusing that Obama is being blamed for high debt, when it was President Bush who ran up the deficit at the same time as cutting taxes they could not afford on the same ideological grounds stated by commentators on the right. Apparently the same arguments used for Cameron et al for “inheriting the crisis”, cannot be applied to Obama by the very same people.

Yet at no point does Fraser Nelson, or many others question the legitimacy of the credit rating agencies themselves.

World leaders are bracing themselves for a volatile week ahead where the markets have us all on the run, and could well create the crisis they are worried might happen by making the Italian debt too expensive to service.

Since 2008, responsible governments have been trying to contend with a catastrophic financial crisis by dealing with the symptoms and not the causes, because as usual the causes are very difficult to confront.  A financial crisis that was not predicted by most economists, the IMF, World Bank, world leaders, think tanks or credit rating agencies.

Indeed the IMF and the credit agencies were at the forefront of causing the crisis by   a) an economic orthodoxy of encouraging or even forcing countries to deregulate, sell assets and open up markets   b) valuing assets and financial products with AAA ratings that were in fact junk, thus encouraging frantic trading in worthless financial products that were too complicated and/or no one could understand or value.

Yet now, whenever a country justifies it’s economic policy or deficit reduction plan, it immediately quotes the endorsement of the IMF as an authority on sound economic management, which it quite obviously is not.  Then we trot out the belief that we have to satisfy the credit agencies, which have been completely discredited.


In 2008 governments looked to the only crisis in the recent history that matches the extent of the crisis today – the 1930’s –  and attempted to ensure that a depression did not ensue.

The US tried to let some institutions fail, like Lehmans – this was a disaster and the realisation of banks being too big to fail led to the effective state ownership of the banking system and coordinated  stimulus packages.

Recession hit, tax revenue fell and deficits increased.  Since then, rather than bouncing out of a deep recession, the western economies are stagnating and are being hit hard by other external factors and economic shocks – natural disasters, war, commodity prices, food prices and raw material costs.

While some discussions have been had regarding ensuring that the financial crisis does not repeat itself, the world financial system and the ideologies and agencies that influence it have not changed.

The IMF and World bank are at the forefront still of economic prudence; credit agencies still have the ability to sink economies and companies; neo-liberalism is the mainstay economic ideology; while the banking industry and derivative products have not been reformed.

In short – the CAUSES have not been dealt with.


Next week could see the other credit rating agencies downgrading the US – if this happens the costs of borrowing for the US will increase and further undermine markets. It could also call into question the dollar as a banker currency.

The markets could well ensure the crisis hits Italy as the interest costs to service the deficit rises toward 7%.  This would lead to a default position, even though their deficit is relatively low (under 5%) and their debt is largely held by Italian investors.  The self fulfilling prophecy of the markets acting hysterically could be the straw that breaks the back of the Euro zone with the dithering of northern European leaders.

The markets are held as the bastions of correct decision making by marketeers. “The markets are always right” is the mantra – but in reality, they can “create” the very problem they are afraid of.  Akin to the phobia of having a mental breakdown, and worrying and getting so stressed out that it creates one. Hardly logical.

When we consider the underlying problems of the world economy, the debate over how deep to cut the deficit seems “almost” irrelevant.  If we do not reform how we create money; the undemocratic and ideologically driven IMF; and allow the banking sector to be too big to fail, then a further crisis and financial collapse is inevitable.

GREECE – The End of the Euro is Nigh


The Greek Parliament voted through the austerity Bill yesterday with a larger majority (155 to 138) than expected while the riots continued out side. More riots are expected as culturally the Greek society goes into shock.

Of course there is no way that Greece will either pay back its debts or actually achieve the austerity measures past.  Yet continue to live in this nether world of make believe as the Euro leaders congratulate themselves on the stay of execution for the Euro.

Original article

Greece may or may not vote for the Austerity of a nation for a generation or more, but it seems clear now that the Euro cannot survive in it’s present state.

Right now hundreds of thousands of people are demonstrating on the streets of Athens with a few thousand people committed to a day of violence around the Parliament buildings, rioting and setting fire to cars and vans.

The classic signs of a fractured society being asked to pay a massively high price for a problem they did not create.

Greece has become the fall guy of the Euro zone being asked to have several decades of austerity; falling living standards; a burden of debt it cannot hope to repay and the selling off of it’s national assets in order to prevent the collapse of the Euro and to prevent a massive shock to the European banking system.

Realisation is now hitting many within the Euro zone, that for some countries, including Greece, the only way to bring prosperity back, is to obtain economic growth.  To do this they cannot be subjected to a generation of austerity, where a downward spiral of division and poverty is the only future they have to look forward to.

Around 70% of the debt of Greece is held by German and French banks, and austerity measures is the price Greece is being asked to pay in order to prevent a shock to the banking sector that could yet again freeze up the wholesale banking system and grind the world economy into another recessionary dip.

The sticking plasters of the last 4 years have not worked and the Ostrich like behaviour of the European leaders to deal with the structural problems of the Euro has led us to a slow motion Domino Effect.

The Euro was never a united currency with a fiscal and monetary convergence within Europe.  The Political ideology of the French and German political leaders of the past led to a blind eye being shown to certain economies within Europe.

GREECE is a sacrificial lamb in such a disgraceful way, leading to the sell off of national assets quicker than Margaret Thatcher could ever have dreamed of.  Selling national assets in a quick fire sell off to satisfy such undemocratic organisations like the IMF at rock bottom prices just at the time when investors are least likely to pay a fair price for them is madness.

The IMF has become the standard barer yet again to impose an ideology imposed by the US and other western governments.

How the IMF has been able to rise up the ranks of importance in world financial affairs is staggering.  When we consider that 6 months prior to the financial crisis they were arm twisting governments all around the world to deregulate the financial sector to follow the UK and US banking systems, just before they collapsed.  Yet we are now swallowing medicine from the same doctor that should have been condemned 4 years ago.

The real loser however is democracy.  Democracy is fragile and evolves over time.  The flag barer of democracy is legitimacy.  Legitimacy of governments, laws and policies is paramount for democracy to work.  However, now we are in a cycle of democracy that is disconnected from reality and legitimacy.

The power is no longer with the citizen, but with the banks, IMF, European Commision, and politicians who no longer speak for their own electorate. Unaccountable institutions now have a disproportional amount of power in society.

The Domino Effect will continue  – in slow motion – until the inevitable defaults occur, and the Euro is restructured.  This is just one economic shock that is inevitable, and unless we wake up to the necessary reforms of the financial sector more economic shocks are on the horizon.


For George Osborne the Economic News gets Worse

So we have austerity Britain, and the narrative is set.  David Cameron and George Osborne insist on the biggest cuts seen since WWII, the deficit must be eliminated within this parliament, and the UK economy will be stagnating for some time.

The Labour Party have contributed to this ridiculous narrative by also stating they would halve the deficit within 4 years and these alone would have been bigger cuts to public services than Mrs Thatcher achieved in the 1980’s.

The phrase, “cutting too far too quickly”, is becoming as sickening as the insistence that every single policy of the government is justified on the basis that we have a deficit.

However, figures out today have both the left and the right rather questioning their own rhetoric.

Over the past few months we have seen the blame for bad news in the economy blamed on the wrong type of snow; the late Easter holiday; too many bank holidays; and even a dry year! Every growth forecast is revised downwards and every time we think the last bail out has been carried out, another one comes onto the horizon.

Today figures for government borrowing show that despite the flat lining of the economy; no growth for 6 months; higher taxation; the cutting of funding to countless charities; the reversal of promises on not increasing VAT – not getting rid of EMA, Sure Start or reducing family allowance; that the deficit is INCREASING.

As the diagram below shows, kindly provided by the Spectator, borrowing is increasingly rising.  In short the rhetoric is not matching reality.

Over the past year, each month the government has spent MORE than in the equivalent month under the previous government under Gordon Brown.

The austerity narrative has been written and people are scared about their jobs and their standard of living is constantly reducing, yet the problem that the government has said is their main priority, is not being dealt with.

So far, we are experiencing all the downsides of an austerity Britain, but not any of the upsides – the deficit is still growing.

This is especially hard to take when many are now worse off than they have been in the last 7 years, yet the actual real austerity measures have not even taken effect.

The question has to be asked, when they do finally come through, how bad will it get?  If the economy is already flat lining, will we be plunged back into recession?

Time after time we are told that we avoided a slump.  Yet the evidence may not support this view.  It is 3 1/2 years since the crisis started in the financial sector and there is no end in sight.  There are many more shocks to the world economy still to take effect and we are yet to employ the stringent medicine advocated by the IMF and others to reduce the deficits in the UK and elsewhere.

The Labour party have nothing to offer either.  Their policies are incredibly similar to  the governments, yet you would never believe it with the rhetoric we are offered.  Both parties are so hell bent on providing a rhetoric of difference between them, yet in reality there is little difference.  Just where is the alternative?

In recent weeks David Cameron has started changing the governments tack on this as they are pointing out just how similar the spending cuts would be.  The government has recognised that they have been so successful in their rhetoric and publicity machine that they are taking the flack of austerity that the Labour party should be at least taking in part.

So people are scared and confidence is low; banks are still not reaching their lending targets to small businesses; consumer behaviour has already changed affecting growth – yet the real cuts are yet to bite.

I think the understatement would be “This will be a tough year”.



The current figures so far show a 12% short fall in the lending of the 5 main banks to small and medium sized businesses as based on their commitment in the weak Project Merlin.

No one is really panicking yet as ministers will wait until the end of the year before responding, but the figures are certainly interesting.

First of all, of the main banks it is the almost wholly state owned bank that is making the most commitment to lend, with RBS having a share of 46% as opposed to their market share in this sector of 30%. Perhaps state ownership does have an affect??

On the one hand this shows how RBS have been intervening in this sector, but perhaps highlights that the other Banks, Lloyds, Barclays, Santander and HSBC are frankly not doing enough.

There are two aspects to this tale.  One, that there is plenty of enecdotal evidence to suggest it is harder to obtain credit by companies with healthy order books, especially in the service sector, as there is less or no collateral for the banks to feel happy about lending against.  There is also evidence that Banks are no longer providing the close support networks that successful small and medium sized business had prior to the crisis.

Secondly, the Banks insist, with some evidence, that the demand for the loans is just not there.  Some ministers and the Bank of England are less than sympathetic to this argument.  But this could well be, at least in part true.

All indications with the economic figures over the past 8 months show a poor, stuttering or stagnating economy, with rising costs and a lack of demand with rising taxation affecting the consumer.  The lack of growth could be the reason for the lack of companies even applying for loans.

But then we have to ask, if RBS can do it, quite spectacularly, why cannot the other banks?

We are now 3 1/2 years since this all started and there is absolutely no sign within the UK economy that the problems either in the financial sector or the real economy are any where near over.

In the type of economy we have, we need growth, without it, were doomed to a decade of declining standards of living and an ever increasing deficit.

Banks Admit Dishonesty Yet Again: The Lessons of PPI

So there we have it yet again, the Banks have been caught out and have clung on to a view that they are untouchable and can do what they like by appealing and fighting the regulator, customers and the Courts over their dishonest selling of products that many did not even know they were paying for.

Of the 200,000 complaints received by the Ombudsman over miss selling allegations regarding Payment Protection Insurance, 3 out of every 4 were upheld against the Banks.

This is a damming situation and finally the Banks have capitulated and agreed that they have been miss selling products and will give compensation to those who have been miss sold.   This could involve as many as 3 million people.

Were talking about a potential of around £6 billion being put aside by Banks for the losses they will incur when paying out compensation.  This is enormous.

The only reason this is not considered the biggest banking fraud of the 21st Century is because we have been dealing with such large losses, disgraceful behaviour and dishonesty by the banking industry over the last 4 years, that we no longer blink an eyelid after hearing banks are having to put aside £6 billion.

The culture of the banking industry is still bumping along the bottom of the cesspit in the way it deals with customers and the way they see their industry within the economy and society as a whole.

Yet, there is a wider problem of discourse and stupidity. There are still people, even today, stating that the problems with our financial system is that we have too much regulation.  These people are simply ridiculous, however, it is these voices are are still driving the narrative of economic policy in this country.

Is this another example of the Banking industry not learning vital lessons, or Leopards never changing their spots? Or is this one small step towards the Banks accepting their responsibility for the disgraceful behaviour shown by the Banks over the past 15 years.

Only time will tell, but at the moment I would bank on the former rather than the latter. (no pun intended!!)