Spygun

There is a very unpleasant ripple which is in danger of growing and engulfing the banking–world.  One has already seen the first stirrings of Madame Défarge-like blood-lust being directed at the “evil” bankers.

It may be a surprise to many but the “post-meltdown” banking boards  still bear a uncanny resemblance to the pre-meltdown ones. Little has changed. There have been NO real adjustments to bankers’ remuneration packages. OK, there have been some grand gestures from some very rich bankers - usually immediately following a half-hearted complaint  or exposé by the media.  PLUS the banking industry has succeeded in persuading everyone that it really was not their fault but that they were victims of a “Global Economic Downturn”. (Every Treasury Official’s favourite phrase)

The fact is that senior bankers did not make costly mistakes because they were either evil or greedy. They made mistakes because of crass incompetence.

They did not (and still do not) understand what they were doing.

In management there are only two questions to ask if an individual under-performs or performs badly:

1. Who hired him?
2. Who managed him?

As  far as bank Chief Executives are concerned, the buck stops with the Board. They hired and they should have managed. If they hired the wrong person, they should take responsibility . If they hired the right person and then did not manage, then they should all be standing shoulder-to-shoulder in the dock with their protégés.

Question: Would you hire a blacksmith to perform plastic surgery? Would you hire a bus driver to build a rocket?

One of the iconic moments of the whole banking fiasco was he sight of Fred the Shred, Andy (Boots) Hornby and their respective chairmen sitting like a row of fairground ducks in front of the Treasury Select Committee.

These ”bankers” who were put through the wringer, Nuremberg-style  were  an ASDA-trained MBA, a Media man, an Accountant and a Chemist.

What the hell do you expect when you hire individuals who are definitely Not Fit for Purpose? And it is still happening.

Current legislation decrees that those within Financial Services  who come into contact with the public have to show a degree of financial competence  by studying and passing examinations. They are then registered with the Financial Services Authority.

OK, some of the “examinations” are a bit Janet and John but they do serve a useful purpose.

However, it now appears that those heading-up the Banks continue to be less qualified than those they manage.

Recently, the Chief Executive of the FSA, Hector Sants, tightened his FSA “cilice”  yet again by admitting that they (the regulators) had “screwed-up” (his words). Yes they have screwed-up.   

Mr Sants had no choice but to own up because it was so  blindingly obvious that the gross incompetence of the bank boardrooms has been compounded by the headless-chicken negligence of the FSA. The FSA spends about £400million per year yet it still does not have the manpower experienced or qualified enough to undertand  and take-on the high-level machinations of our banks.

That is why many of us are paying 20-30% on our Credit Card balance and Overdraft rates bear an uncanny similarity to those before the Bank Base Rate fell to 0.5%.

If you think of money as a commodity,  you may understand:

If you bought five pounds of apples and paid £5, and then a few weeks later, the greengrocer contacted you and said that you owed him another £2 because the price of apples had gone up, you would probably tell him to get lost and you would possibly complain to the Apple Regulator.

Yet the banks will sell you money at  certain rate and then keep adding charges at will. The ONLY thing that they have to do is to give you a bit warning. There’s no point in complaining to them and there is very little point in complaining to the regulator (FSA) becuse it can do ABSOLUTELY NOTHNG because the FSA does not have the power to give us, the consumers any real support whatsoever.

For most of our financial problems, the FSA is at best, cosmetic.

The FSA was designed to make sure that when Mrs Smith signed-up for her pension plan, all the boxes were ticked and she was happy with her financial advisor. The FSA is very good at sending its representatives to rifle through the filing cabinets of financial advisors and writing reports. That is a very long way from understanding credit derivatives and the forensic accounting skills needed to understand “written in smoke” bank balance sheets and the Masonic-like relationships  and code of silence at the highest levels of the banking industry.

The so-called  Tripartite system of regulation, which consists of the FSA, the Treasury and the Bank of England is just what the banks need. In the confusion, they are again getting away with financial murder. Murder of the Economy through not lending the correct amounts at the correct interest rates to the right people.

Make no mistake, the British economy as well as the banking system are currently doing no more than treading water. The politicians are attempting to soothe us with craftily-honed platitudes and promises of imminent economic sunshine.

Never has it been clearer that you get what you (over)pay for.

The “Real “World

There is still one contentious Westminster issue which has yet to be properly resolved and that is the question of whether MPs should be allowed “outside” jobs and how much time they should dedicate to  non-parliamentary interests.

There is little doubt that some MPs are financially stretched - otherwise why the expenses scandal? There is little doubt that both their personal and financial “healths” suffer under the present remuneration rules. The generally accepted solution  is that they should be paid a much larger salary but of course, now is not the time and it seems that the present political and financial climates dictate that it will never be the time.

The most common argument put forward is that outside work enables MPs to remain in touch with the “real world”. However, we don’t see too many MPs driving delivery vans or lorries, doing the odd shift in a widget factory, shovelling coal or cleaning puke from an old person in a hospice. Their “real world” is elsewhere. Their real world is a gentle orbit on a comfortable chair around a Boardroom table.

Their “work” consists of drinks, followed by a light lunch (brought to the table, of course) , culminating in a two hour “meeting”. That is THEIR real world.

There are MP solicitors, barristers, union men, teachers and ex-local councillors whose blind vanity enables them to  perceive themselves as advice-dispensing businessmen but who themselves have had no previous business experience whatsoever.

Wake up and smell the Frappuccino, boys. You are rubbing shoulders with people who don’t want you for WHAT you know but……………(fill in the blanks yourselves - if you can bring yourself to do so).

Business has always sought and been willing to pay for influence and political networking.  We are now in a situation where politicians sit on Boards as advisors and yet the Cabinet hires businessmen to give the Government advice. (I don’t know about you but I can see an immediate streamlining of that particular system!)

There are other Members of Parliament who have gone into part-time showbiz to deliver paid after-dinner and corporate speeches. Nothing wrong with that, except that it is again a blatant example of commerce purchasing personality and influence. The odd free speech or talk is fine but there are MPs who are registered with professional entertainment agencies who procure work on their behalf. The message to those MPs is simple - if you enjoy show-business, go into it as a full-time professional and not as a representative of the British Parliament. Then see how long your career lasts.

The most equitable solution to the conundrum of MP v Part-time Job is to phase-out  the outside jobs over a couple of years and hope that sooner-or-later an inquiry or committee ( I’ve lost track) comes up with a sensible salary recommendation which will allow our Members of Parliament to dedicate themselves full-time to their constituents and their country.

Perhaps I was looking at a different transmission of PMQs today. Perhaps BBC political commentators have more finely honed telly-senses than I will ever have. I am not sure what the problem was. They saw a good performance by the new Speaker, whereas I cringed at the awfulness and boredom of it all.

I saw John Bercow as  a little grey-haired bloke with the faux-accent, mannerisms and looks of a Comprehensive Geography teacher whose turn it was to be staffroom monitor. It was the gown and the high-street haircut that did it. Mind you, it was still an improvement on Gorbals Mick who had the charm, looks and presence of a  cracked “Cash in the Attic” Toby Jug.

New Labour is going to spend the next few months trying to convince itself that it has made the right choice. As we all know, in supporting Bercow’s election to the Speakership, New Labour’s motives were simply to wind-up Cameron and the majority of the Opposition. Until recently, Bercow was Gordon Brown’s favourite “lèche-cul” and for a long time was odds-on to defect to the Socialists -  had he not sniffed the possibility of scoring himself the Speaker gig.

Bercow has lectured and coached others in the art of public speaking and  has taught “leadership” - and therein lies the problem. He is not a leader because he has never “led” and in common with so many other modern politicians, lacks the breeding, training and charisma to become a successful leader. The ultimate triumph of bought-in style over substance. That is a shame because what Westminster needs today is an inspired and inspiring leader who not-only commands universal respect but when needed can scare the bee-jaysus out of all MPs.

In the Westminster of fifteen years ago Bercow may have passed for “trendy” but time has not been generous. So today, in that huge Speaker’s chair, he looked like a latter-day Ronnie Corbett  attempting to deliver a “Two Ronnies” monologue. 

Where was the glamour of Betty Boothroyd? Where was the pomp  and magnificence of Bernard Weatherill? Where was the preening vanity of George Thomas? Where was the haemorrhoid-itching tetchiness of Michael Martin?  By 12.05, I would have settled for anything!

I’m sure that I could see chalk marks on the sleeve of his black Geog teacher gown as he shouted “hors d’œuvres!” and spoke to Honourable Members as if asking them to line-up in the playground. I was surprised that he didn’t throw the board-rubber at someone.

We shouldn’t be surprised. It seems that everything that the current Government touches is doomed and I do hope that Sir George Young continues to stand by.

p.s. One of the new Speaker’s intended changes should be to ask the Prime Minister to give answers to questions - preferably to the questions that he has been asked  -  rather than (as he did today) constantly harp back to the old Tory days. For instance “Under the Tory Party, capital expenditure was only £16millions. Under Labour, it is £44 millions.”  Yes, Gordon  - but in those days, you could buy a row of houses for £200K. Stop being silly. You cannot answer EVERY question by attempting to create conflict and comparison between Labour and Conservatives. Try a couple of other techniques - such as remembering that a question is usually a simple request for information.

Gordon Brown is perceived as a bumbling, rambling carthorse of a man who, by all accounts, 7 short days ago, was dead and buried. Keyboards were clattering, HBs were being sharpened  and metaphors  polished in readiness for the unavoidable event - his political death. Obits needed to be written and the “He was a good guy really” sincero-talk had to be prepared for the Newsnight tribute.

Harold Wilson was right - because here we are, one week later and PMQs yesterday saw an invigorated, more confident Brown at the Dispatch Box, admittedly still stuttering his way through the unexpected but nevertheless giving the impression of control when dealing with the choreographed and planted questions which had so obviously been crafted by the Labour Whips Office and Lord “Darth” Mandelson. David Cameron looked his usual exasperated self as Brown repeated the same answer to any number  of questions but the fact remains that little damage was done and one felt that once again, the man had got away with it!

There are positive ripples flowing from the odd economist and although we are not yet in the sunny uplands of economic recovery, those elusive green shoots do appear to be trying to break through. Some economic sages even claim to have seen the so-far mythical shoots!

Are we about to leave the dark dark winter of recession and blink our way into a long hot summer of economic sunshine?  No.

The banks are still in trouble but bankers continue to pay themselves huge bonuses, unemployment is rising, the country is  “over-borrowed”, small businesses are collapsing , credit card companies are still charging over 20% per annum and we are governed by credibility-free Members of Parliament. Yet inexplicably, we are all feeling slightly more positive because we have enjoyed the multiple distractions of a phantom leadership challenge, a Cabinet reshuffle and mildly interesting results in last week’s Euro and Local elections. Oh yes, the sunny weather has returned and that coupled with the news that Ann Widdecombe has “reluctantly” put her name forward for the Speaker’s job  is making us all smile again.

Both economically and politically we are in a fantasy land. None of us (and I include politicians) is thinking straight.

Our Prime Minister is indulging in a bit of displacement activity. For instance, he has busied himself with the two grandiosely irrelevant concepts of Constitutional and Voting reform. Why? No-one knows but the clue is probably in his own background as a historian. Socialists such as he  usually see themselves as social reformers but Gordon Brown has “The Great Dictator”-type pretensions of a Constitutional reformer. He sees himself in the history books. His activities over the next 12 months will be driven by  self-indulgence and a misguided sense of purpose and history.

The spanking-new Cabinet members have the air of a pack of back-parcelshelf nodding dogs and the leftover ones from the previous Cabinet appear to be burdened with a sense of fatalism and pointlessness which afflicts those who have come to terms with their own mortality and imminent death.

Brown does not need the aggravation of a Cabinet which contains the odd firebrand or original thinker. He needs “yes” men but apparently, not too many “yes” women. He is still reeling from the Caroline Flint experience - so intelligent and opinionated political totty is definitely out.

The Westminster Summer Recess is looming large and the Press will soon give its attention to Crop Circles, “Phew What a Scorcher” and the myriad other lightweight and trivial distractions of the silly season.

Could it be that events are conspiring to keep The Great Dictator afloat? Let us hope not.

Today, many United Kingdom voters are going to “dump” their votes. They are going to dump them either by voting  for a fringe party or for an Independent. In the United Kingdom, fringe parties (quite rightly) are tolerated but that doesn’t necessarily make them acceptable.

For instance - this is a quote from the leader of the BNP Party, Nick Griffin: “……the chimneys from the gas chambers at Auschwitz are fake, built after the war ended.”

Although we tolerate this type of Party, many of us have no idea exactly what they really stand-for because we do not really believe that anyone would seriously hold such views. If you Google BNP and have a click on “IMAGES”, you will see the type of view that the BNP expresses on its posters and slogans.

Let us have a look at  Local Elections - they tend to be the ones with the lowest voter turnout, yet on a day-to-day basis, we are affected far more by our local politicians that by the Westminster Mob. Currently, our perception of members of Parliament has taken a big “hit” and we now regard them as a load of unscrupulous self-serving Muppets.

There was a time when party politics had nothing to do with local elections. Hopefully, one day, local politics will return to us electing individuals who are best suited to manage and control local issues and budgets. Unfortunately, the local politician, much like his Westminster cousin is a pack animal rather than a free thinker who only has your interests at heart.

Every Party has individuals that we can all admire, irrespective of our own political affiliation. Ken Clark (C) for instance, has to be admired for his “no-nonsense” political skills and tenacity. Gordon Brown (L) was arguably the best Chancellor that we had for many years. Norman Baker (Lib) is also a great Parliamentarian and has developed a reputation as a campaigner and conscience of the House. These three are examples of three politicians who are or were good at what they do, but importantly, their skills and abilities have little to do with their political allegiance or Party.

You should not be voting Labour in your local or European election because , for instance, you have a good Labour MP within your constituency. Conversely, you should not be voting for a total unknown of indeterminate political persuasion because you have been upset by the Westminster expenses scandal or by the excesses of a particular Conservative, Liberal or Labour MP.

At local level, we should all be asking ourselves just one question: ” Can this individual be entrusted with the responsibility of representing us  effectively in Europe or on the Council and will he (or she) have our best interests at heart.”

Forget expenses, forget Gordon Brown’s leadership issues, forget the fact that the Tory front bench is portrayed as a bunch of “yaboo-sucks-to-you” Toffs and forget Clegg’s silly hair. Vote for the European or Local candidate that you believe will do his best for YOU.

There is too much political posturing at local level - many of them fantasise about being at Westminster  consequently, too much energy is given over to political in-fighting rather than concentrating on the needs of the voter.

Finally, remember that not all Liberal Candidates are vegetarian lecturers and white-collar public-sector workers. Not all Conservatives are barristers, middle-managers and skinheads and not all Labour candidates are teachers, media people and union members. But DO remember that all BNP members are Euro-sceptic Fascists.

At local (and European) level, vote for individuals and not (just for the hell of it) for the wrong political party.

Avoid the Muppet Factor.

We are currently a single-concept country.  It is still MPs’ expenses - although Susan Boyle has also embedded herself in our psyche, providing very welcome relief from the ridicule and vilification of our Parliamentary representatives.

The most disturbing thing though is not the range and volume (and ingenuity) of our Members of Parliament but the inertia of all our political leaders. It is now dawning on  Joe Taxpayer that there isn’t a single political leader who has any idea how to attack the problem.

David Cameron favours kangaroo courts and a General Election. Gordon Brown favours the grand gesture of Parliamentary Reform (whatever that is) and an enquiry or two. The Liberal bloke….whassisname…Clegg is trying hard to capture the non-existent middle ground and is wheeled out occasionally for an insignificantly ineffectual bleat.

If you have got into the habit of listening very carefully to Gordon Brown, you will have noticed that he keeps making vague promises but there are no “doing” verbs in his lexicon. David Cameron is like Wily Coyote. Trouble is, it’s too easy. Gordon “Roadrunner ” Brown is mentally-stationary and not really providing any sport for the increasingly frustrated Leader of Her Majesty’s Opposition. Vince Cable throws out the occasional soundbite but that’s about all.

This is also a time for opportunists to slither onto the political stage. Where are the intellectuals, the industrial leaders, the economists? They are not that stupid. Instead we have Esther Rantzen and David Van Day. Perhaps that is all that we deserve. After all, politicians are OUR representatives, they reflect our beliefs and behaviours - so one could argue that we have the politicians that we deserve.

Maybe the next stage for politics is another negative quantum leap to synchronise with what we have become in 2009. We are a skint has-been nation which finds its solace in the pursuit and worship of celebrity. Perhaps a future Cabinet which consisted of Esther Rantzen, David Van Day, Jordan, Kerry Catona, Biggins, a (any) footballer’s wife and Stan Collymore is what we deserve.

So, I hear you say - “If you’re so smart sunshine, what is the solution?”

The problem of MPs’ expenses has been caused by a total lack of management  within Westminster. Gorbals Mick has the brief is to provide Speaker-type leadership and a nominal amount of management. The “nominal” bit was OK in the good old days when Members were an honourable lot but not today. ( I have to admit that I am not sure quite when the “honourable” period  was but please bear with me on this one.)

Comparison with the “good old days” is important because up until as recently as ten years ago, we the Brits had a healthy fear and respect for authority. We used to be fed RESPECT with our Cow & Gate plus we have a class system which helps us along the way, with our “They’re the same as us really” attitude.

MPS are “the same as us” in all senses of the phrase. Therefore, they need as much management and control in their day-to-day jobs as the rest of us.

For instance, let’s look at the management of Parliamentary expenses. Simple measures such as giving senior MPs a group of others to “look after” and sign-off their expenses BEFORE they go to the Westminster Finance Office. A simple “signing off” system would stop most naughtiness and would certainly stop a bunch of lowly finance civil servants from being bullied by loud-mouthed MPs. “Accountability” will have been introduced.

I would also consider allowing the Government to sign-off the Oppositions expenses and vice versa. That would have an immediate impact. That’s what I would call REAL transparency.

Nowadays, we actually believe that they (the politicians) are the “same as us”, that is to say, disrespectful, self-serving, celebrity-worshipping, selfish scumbags. Just think who people such as Tony Blair, Gordon Brown, Fred the Shred and others like to be seen with. Do they respect us, their “clients”?  What is more important to them than their big houses, mortgages, pensions and expense accounts? Nothing, it seems.

These attitudes and behaviours have killed not-only our banking system and possibly our economy but have exposed “New” Labour as “Pretend Socialism”. Orwell was not only right but he was more right than others.

Then there’s Conservatism. “Nice” Conservatism should be about encouraging the individual  and giving him the tools to be able to look after himself and his family without looking to the State for charity whereas at the same time providing proper support for the weak.

That is where our best chances lie - within the gentle conservatism of the Major/Blair days.

Finally, there are two other negative contributory factors - namely, bad candidate selection and nepotism. There are too many “hereditary” Members of Parliament - especially within the Conservative Party.

Candidate selection should be done more scientifically. I once attended a selection interview and was surprised to see about ten “crumblies” sitting round a table, without a plan and obviously not having a clue which questions to ask. They did not stand a chance. That has to stop. What is needed is rigorous, tested selection. Filter-out the bandits way before their mugshot appears on a campaign poster.

So as you can see, a few gentle tweaks will do the trick. Not the procrastination of “Constitutional change”, nor the prevarication of Commissions and Enquiries or the chaos of a General Election. Those approaches may all be good solutions but not to the current problem.

Just a few tweaks and normal service will be resumed.

Three eminent gentlemen were on the 18th green -just about to complete an afternoon  of golf. There was an eminent architect, an eminent surgeon and their Member of Parliament. The men were accompanied by their dogs. They had named their dogs after the tools of their trade: Sliderule, Scalpel and Bullshit.

The architect said to the other two, ” Watch this!” as he called his dog. ” Sliderule! Go boy!”

Sliderule was a solid Black Labrador and he spent a few minutes rummaging in the undergrowth picking up sticks and within five minutes he had built a perfectly stressed cantilevered bridge across the stream adjacent to the green. The surgeon and the MP were impressed.

Then the surgeon called his dog - an elegant Saluki. He commanded his dog ” Scalpel, go boy!”

Scalpel also ran around and foraged in the undergrowth - occasionally he did a bit of digging  and within four minutes, he’d laid out a perfect facsimile of a human skeleton on the 18th green.

The others were even more impressed.

The politician then said “That’s nothing  - watch this.” He summoned his dog. ” Bullshit! Go boy.”

Bullshit was a clapped out old Bulldog but he still had a few moves left.  On his master’s command, Bullshit ran around aimlessly for a bit, then he knocked down the bridge, ate all the bones, fucked the other two dogs, claimed some expenses and took the rest of the day off.

Elliot Morley MP did not “made a mistake” when he fraudulently claimed £800 per month for a non-existent mortgage. Likewise,  Andrew MacKay MP and his wife and fellow MP, Julie Kirkbride knew exactly what they were doing when they were claiming for two “second homes”. Two Labour Lords have allegedly been exposed as a couple of crooks who were willing to take cash in exchange for altering Laws. Again, these were not mistakes.

The “It was within the Rules” mantra is no longer being trotted out because MPs have realised that Rules express no moral or ethical responsibilities. Chequebooks are being waved about, yet only just over £100,000 has been pledged by increasingly panicked MPs who are not promising the return of cash through any sense of “right-and wrong” because it’s far too late for that.  They ignored the concept of right and wrong and because they have been caught with their closed hands in the till, their self-preservation instinct has kicked-in.

Andrew MacKay has fallen on his sword in order to  save his wife’s career because his has peaked. She should now be nailed as “accessory” and also asked to resign.

That bug-eyed louche, professional Mr Clever-pants, Peter Ustinov wannabe and Royal butt-kisser Stephen Fry has offered an opinion and believes that it is all a storm-in-a-teacup and that “we’ve all done it”. No we haven’t Stephen. Mind you, Stephen’s been banged up for naughtiness so his judgement will always be suspect and hopefully he has learned a good lesson. Never talk to a reporter when you are pissed. At best, you end up sounding like a know-all uber-opinionated cab driver. At worst, an ersatz upper-class prat.

By the end of this week, it will be the end of the beginning for our naughty MP chums  but also the beginning of the end for Gorbals Mick (Mr Speaker) and Gordon Brown, the er…Prime Minister.

Brown is currently swaying from foot to foot wondering what to do . We have established that his decision-making is on the dodgy side and that he manages through the joint media of the “enquiry” (Macro Management) and the thrown mobile phone and shouting (Day-to-day or Micro Management). He has probably already exhausted his entire repertoire on this one.

David Cameron has managed to overtake Gordon and will hit the first corner well in the lead because he has made a decision and ordered his MPs to get their chequebooks out and start reimbursing the Public Purse. Gesture Politics at their finest!  He too has a surprise coming because this is not about money any more, it is about the authority of our Parliament. Had the Party Leaders managed their troops effectively and had the grand chequebook gesture happened say a year ago the matter would, by now, be at the “tidying-up” stage. Instead we have what looks like a badly-written Crisis Management case study underpinned by empty words and blind panic.

Meanwhile, whilst Cameron is temporarily cooling-off in the calming breeze of two hundred fluttering chequebooks, Gordon does what he knows. He looks in the direction of an enquiry. Any enquiry. The ideal enquiry for him would be a “Please make it go away, Mummy” type.

Meanwhile The Speaker of the House, scarlet jowls quivering as the berates the most upstanding  (and innocent) MPs and sees everything that flies in his direction as a personal threat, also does what he does best. He fails to understand the gravity of the crisis.

Make no mistake, the Speaker and Prime Minister are now standing shoulder-to-shoulder on the trapdoor and there will be a massive fight as all hands attempt to pull that lever.

The next stage (hopefully) will be in the hands of the Police and the Inland Revenue.

Unlike your MP, at least Dick Turpin had the grace to wear a mask.

The taxpayer is looking for two things as a result of the current MPs’ expenses campaign. Retribution and Restitution.
 
Retribution can be delivered through the medium of the ballot box but  the matter will not be allowed to rest until there is at least some attempt by Members at restitution. Apologies are no longer hard currency.
 
How about if some of the more frivolous Members’ claims were dealt-with by the Inland Revenue as “income” and subject to taxation at 40%. Any such amount could then be collected by an adjustment to the MPs’ tax codes and would be collected by the Inland Revenue over say, a couple of years.
 
There is little doubt that there has been some “naughtiness with intent” but in the main, I believe that the vast majority of MPs are honourable people who currently appear to have but one weapon with which to defend themselves.That is the “It was within the rules” mantra. Unfortunately, that phrase is a little too reminiscent of  “I was only following orders”  - and just as believable.
 
The suggestion appears to be that if you are caught with your hand in an open sweet jar - it is perfectly OK to blame the jar for being open.
 
It would appear far more honourable for certain members to come over the parapet with their hands up and admit that there has been confusion. Rather than be subjected to any possible hardship as a result of having to make repayments, the matter could be left to the Inland Revenue. Meanwhile, that nice little earner for retired Civil Servants, the enquiry, could grind along at its own pace.
 
I hope that soon we shall see the green shoots of trust - currently they seem more important that those other shoots which keep threatening to emerge.

According to the Maastricht Treaty, EU member states are not  allowed to finance their public deficits by printing money. That is one reason why the Bank of England will buy government bonds from financial institutions, not directly from the government.

It is called naughtiness-with-intent.

The danger is that so much money will be pumped into the economy that hyper-inflation will occur ( Weimar Republic and more recently, Zimbabwe)

This was all tried in Japan ten years ago and did not work.

Low interest rates are supposed to stimulate spending because the cost of borrowing is low and savings rates are unattractive, so people (theoretically) spend, not save.

Quantitative Easing is the last throw of the dice.

These are the wines that were served up to the G20 delegates. The total bill for the wine was a bargain £6000 which is a small fraction of the total wining and dining bill which was approximately £500,000. Perhaps the taxpayer should be grateful. Here is the list:

Château Pichon Longueville Comtesse de Lalande 1986 - 19 bottles @ £140 per bottle.

Château Leoville Poyferré 1989 - 29 bottles @ £60 per bottle.

Concha Y Toro Merlot Sunrise 2006 - 11 bottles @ £6 per bottle

Domaine de Planterieu 2006 - 13 bottles @ £5 per bottle

Nyetimber 1998 - 10 bottles @ £23

Louis Roederer Carte Blanche - 2 bottles @ £35

Fonseca 1977 - 5 bottles @ £137

Chapel Down Lamberhurst Eatste Bacchus Reserve 2004 - 30 bottles @ £10

Three Choirs Bacchus Estate Reserve 2004 - 17 bottles @ £10

The G20 weekend of excess  produced a statement and a document which has already been forgotten.

It was all designed to boost Gordon Brown’s image. He is now seen as the Walter Mitty of International politics.

A twisted  fusion of capitalism and socialism is being forged in the white-hot heat of political panic.

No-one should  complain because we  are all being forced to run  blindfold towards  a world where profits are privatised and losses are nationalised. We cannot lose.

Competition within financial services will be a quaint throwback to the last century because both the US and UK governments have now demonstrated that if a company is big enough, it will have Federal and Treasury support. It is the smaller companies who will be allowed to go to the wall because it is only then that they can become financial fodder for their fat hungry cousins.

The new financial conglomerates now know that they cannot fail because the State will bail them out.

The lesson that has not been learned  is that the sheer size of companies is what  makes them difficult to govern. The only way to manage these fiscal behemoths is to impose rules that are so draconian that eventually, the spirit of capitalism will be totally expunged. The State will be calling all the shots.

There has been debate as to who is to blame for the current chaos. The bankers know very well what has happened but  they mutter vague generalisations, citing worthless  sub-prime bonds and a general lack of confidence.

There is no way that sub-prime (the greatest euphemism ever?) lending is to blame for the entire financial house of cards tumbling down. The real issue is that  the banks DID NOT HAVE THE MONEY that they were lending. They have behaved like a banana republic which prints more money in order to pull itself out of  the financial quicksand.

Yes, they have been using “pretend” money. Mugabe is doing it now, the Wiemar republic did it  70 years ago and  the entire banking system is still doing it.

The banking system has relied on “electronic money” for years. It was not real money and they have probably known for years that they were sprinting towards meltdown. George Soros knew.

The regulators are not to blame because 90% of their efforts are designed to control the “little man”.  The big picture eludes them . Last September, the FSA was still issuing statements as to the solidity of HBOS - that’s in spite of the “investigation” that it carried our six months previously on the possible manipulation of HBOS shares.

Now that the financial chaos has moved  from “boil” to “simmer”, the Government must take the opportunity not only to take a close look at the regulatory regime but also think about a complete restructure of the financial services industry.

The FSA grew out of a need to control mis-selling in the Pensions and Life Assurance industry. That is still its main thrust.

In spite of the increasingly bureaucratic Pensions and Life industry, the bandits are still out there and always one step ahead - they can never be eradicated.

One hates to agree with Sarkozy but a new global authority must be formed that specifically carries out high-level audits and ensures the implementation of  proper business controls within the banking sector.

However, we do have to accept that the ratcatcher can never catch all the rats.

If you have read a good balance of the reporting and commentary on yesterday’s budget, you will have realised by now that this was a political budget. The Chancellor and his puppet-master know that their stewardship of the economy has a maximum of 12 months to run and then , as is the fashion nowadays, the lecture and non-exec circuits beckon. There is light at the end of the tunnel for some but unfortunately, not for all.

There is no point in raking through the coals of yesterday’s return to Old Labour and the 21st Century embrace of the Politics of Envy.

“Let’s do the rich!”and the great unwashed and the slack-jawed champagne Socialists will most likely follow. Trouble is that the great unwashed is fast becoming the great unemployed and Tony Blair’s Champagne Socialists (teachers, media people etc.) are now more Cava Sippers than being able to afford the real thing. Some have even moved to pink Zinfandel!

The Budget was delivered with all the panache and conviction of a  tortoise that knew that it would never catch the Conservative hare. And did you see the Hammer-horror grin that Brown’s face morphed into when Darling sat back down into the wet patch.

Cigarettes - √. Booze - √. - Petrol - √.

Let’s make it look as if we are going to upset the rich - “It’s always good to piss on their strawberries”. -√.

Oh yes - Pensioners  - √.

Did you notice that the Chancellor looked a bit uncomfortable talking in mere pounds and pence. After all, he is used to lots of noughts now. When the scale of Government’s borrowing was announced there was a definite shift in the Earth’s orbit as economists’ scrotums shrunk to a tenth of their size - at the speed of light. Some may remain dysfunctional for years to come. Like the banks.

This was a Budget by Numbers when what was needed was a masterpiece. The trouble is that before this Government is run out of town,  Chancellor  Darling will touch up an already impossibly bad economic picture with another Budget. What was that Chris Rea song? Oh yes - The Road to Hell.

You may be wondering why all seems to be well with the Banks  - they should have all completed rehab by now and should be ready to score us some readies. Their Social Worker - otherwise known as the Treasury is telling us that they still need a bit of time to regain confidence. That is why they are currently being fed a “money substitute” through the medium of quantitative easing.

How is it that a few of the big banks have declared such surreally fat profits? Have you never wondered why or how they seem to have been rehabilitated so quickly? They are still cooking the books, ignoring the fact that they are still insolvent. The difference is that now they are doing it with this and other Governments’ connivance. To put it simply - it is a world-wide con trick. There is naughtiness afoot.

If we knew the real figures, we would panic. The fact is that for every pound or dollar that the Banks once had in their coffers, they lent or gave away at least 50. They tied the modern Gordian Knot not with rope but with worthless paper and they have fashioned what  appears to be the most complicated paper chain ever conceived. Currently they all owe each other billions because they screwed each over, many times over. The screwer was also the screwee and vice versa.

This has been institutional fraud carried out by banks on other banks and  the only reason why they are not all standing in the dock is that there isn’t enough dock available.

The other important factor is that instead of doing what Alexander the Great did and cutting through the knot, Governments still think that they can untie it . If they carry on their random attempts, it could take a generation.

The banks have the Governments by the balls.

That brings us neatly to a rather pathetic silver-haired Edinburgh Solicitor predicting that we are soon to experience a recovery with a growth rate of 3.5%. That statement really is not worth commenting upon because of the poor man’s past record - which is similar to Russell Grant’s. In fact…………………………..

There are billions of pounds stashed away in funds, in banks and in insurance companies. That money belongs to us and many of us will have to wait years before we can get our hands on it.  I am referring, of course to Pensions. Personal pensions, group pensions, small company pensions… they come in a hundred delicious flavours.

There was a time when someone leaving a company  - whether voluntarily or otherwise could take their accrued pension with them. Let us say that the Chancellor announced that for the next two years, anyone being made redundant or who wanted to stop working could have all of their accrued pension immediately. What effect would that have.

Firstly, we would have “spenders” in the economy. who could provide a massive buying stimulus to all retailers. The Government would save on benefits because many of these individuals would suddenly have “savings”.

Secondly the institutions holding the pensions would not have to be “persuaded” to part with the money because if they refused, they would be breaking the law. And if the didn’t have the money, then we would all know.

Thirdly, employers would think twice before sacking anyone if they knew that they would not-only have to fund their redundancy pay but that they would also have to hand over accrued pension benefits.

Too simple? The alternative is to keep feeding the banks with money that we do not have and that has a time limit which is not as far away as we seem to think.

The Government has a vested interest in allowing us to assume that suddenly the comparatively modest bailouts and part-nationalisations of our banks have somehow solved our economic woes. They would have us believe  that we can now sit back and await the often-mentioned green shoots of economic recovery to somehow poke their way through the concrete of economic failure. We have even had “estimates” as to when the recovery will kick-in. Where were these soothsayers one year ago?

I am using this blog to put on record - to predict, what will really happen.

By Q4 of 2009, the FTSE 100 will be below 2500 and UK unemployment will be above 10% and there will be no proper recovery for at least three years.  Why so negative? Because we are being conned by the Unholy Trinity : government, economists and bankers. How are we being conned?

During any economic turn-down there are comparatively short periods of “ersatz” recovery - the so-called bear-market rallies. Those nuisance false-dawns when astute traders can continue to make a few quid for themselves will act as an occasional shot in the arm which will make us all feel better when the real trend is DOWN.

The banks will be allowed to inflate the book value of the so-called toxic assets and their profits will be further inflated by them “losing” most of their losses - if that makes sense - and this will all be done with the Government’s connivance.

Politicians, regulators and economists are simultaneously scamming us and themselves not understanding what is going on because the amount of the so-called bank bailouts is a mere fraction of what is really needed.  If the banks had really been bailed out, we would by now be back to normal. Vague talk of “we are awaiting banks to regain their confidence” have been repeated so many times that we are beginning to believe without understanding. Exactly what the banks themselves were doing for ten years.

The Budget will be no more than a little man, putting a little finger in a hole as big as a (rapidly depreciating) house.  The Chancellor is hawking snake-bite like an old-school medicine salesman  who is punting useless medicine which will do nothing to ease the pain to come.

So What?

As a businessman I have always been a great believer in applying the “So-what?” test to any management problems or initiatives - just to test any effect - positive or negative. The rule is simple - Write down the phrase or problem, then add “so what” and then attempt to answer the question.

For instance, Kobe summit - so what? Global warming - so what? Tomorrow’s Budget - so what?

There are many phrases that I have tested in this way - my most recent favourite being: G20 - so what? The answer is WINDOW-DRESSING. But the worrying thing is that the whole thing was based on the premise that you cannot overestimate the collective stupidity of people in large groups - that’s us.

Susan Boyle?

Over 100,000,000 hits on U-Tube. It’s those pesky Americans and their uber-sentimentality. Make the Yanks cry and the world is yours. Don’t forget, they know what they are talking about. They must do - they invented Country Music and Cabbage Patch Dolls. There’s your answer.

Seriously, we all have to admit that Susan is not classically beautiful. What do you think the reaction would have been  if there had not been such a mismatch between looks and voice?

She’s a lovely lady but the Americans love a freak show and that is what they will turn her into - and she does not deserve it.

The current Labour government is having a very tough time  and a very bad situation is made worse by what appears to be a lack of leadership and management skill. Gordon Brown seems to feel that you can manage by changing the rules or by organising enquiries. You can imagine Brown being informed that more and more people are on the breadline and solving the problem by having an enquiry whose purpose would be to confirm that the breadline is in the right place and if not, recommending where it should be placed.

We are currently in a post-collectivist society which has lost several compasses, ranging from the moral and social to the economic and political, resulting in an upsurge in crime, family breakdown, violence, drug abuse and poverty.

We are existingin a morally sterile, Left-wing, politically correct State and because we have forgotten how to self-manage, we will have more and more regulations imposed on us - otherwise, we are in very real danger of lapsing into anarchy. That is exactly what has happened in the Banking industry. It has taken a mere twenty years to move from what started as a self-regulating, rock solid service industry to arrive where we are today. An every-man-for-himself rip-off business which will now have such a raft of rules and regulations placed on it that it will suffocate. Collectivism has morphed into Neo-individualism which needs rules.

The word “equality” used to be a concept - albeit a good one - definitely unnattainable but nevertheless, worth striving for.  “All men are created equal” and all that…..

Nowadays, we all have to appear “equal”. Inequality has become an evil which has to be eradicated at all costs and it now stands in the dock, shoulder-to-shoulder with poverty and global warming as one of the Three Bogeymen which has to be killed-off through the medium of meetings, promises and large cut-and-paste documents.

The sad fact is that we will always have both inequality and poverty. That is Society and Normal Distribution.

But if we decide to subsidise the poor so that they are more equal to their rich cousins, then it is those rich cousins who have to generate more wealth in order to pay for those subsidies and thus we create a tranche of society which becomes totally dependent and more resentful because they not-only have poverty but also, courtesy the media, a direct window on the lives of their better-off cousins. Africa is a good example. We are in very real danger of creating a wholly-dependent continent which is simultaneously grateful and resentful.

Elsewhere, the Equality Mullahs have substituted “qualifications” for education resulting in an insipid education system where excellence has become the property not of the FEW, as it used to be. It is now in the hands of the VERY FEW. That is what happens in any system where there is an attempt at “forced distribution” - whether it is A-level grades or income.

All systems, whether political, physical or economic are self-adjusting with what appears to be a strong unwritten self-preservation programme buried in them - especially if there has been an attempt at “forced distribution”.

Even the banking system has self-adjusted recently.

We are now moving into the third generation of people who know nothing but emotional and physical squalor, who cannot communicate, eat properly, relate to “the others” and who will automatically resort to aggression when thwarted in any way.

We appear to be at the stage when we need Victorian-type social reformers and not mediocre political management whose tools of the trade are slogans, meetings and enquiries.

We are very good at uttering the slogans of equality but the sad fact is that over the last few years, the poor have been getting poorer, the thick have been getting thicker and the violent have been joining the police.

There has been a build-up of social pressure which is in real danger of manifesting itself as social unrest - the sort that will have  to be dealt-with by means of state violence by uniformed men carrying sticks and Perspex shields.

Tinkering ( VAT, green cars etc) is not the answer. The ONLY solution lies in massive CHANGE - and if that change comes late, the entire system will crash before it has to be rebooted..

Brian Reade of the Dail Mirror has created a tribute to the victims of the Hillsborough disaster and it was distributed with the paper on 15th April 2009 - the 20th anniversary of one of the darkest days.

I had several attempts at reading Brian’s very moving piece. Every time I tried to have a run at it, the tears seemed to get in the way but I persevered - not as a Liverpool or Nottingham Forest fan and not because I was there but because I love football. All who love football share an indefinable bond, an empathy and even a language which Brian expresses better than anyone.

Yesterday’s most harrowing quote: “I used to be a mother and a wife. Now I am neither.”

Please click on the picture for the tribute but before you do, see Brian’s short article published two days after the disaster - it is pasted below. The words are simple but if it was the red-white heat of his anger which  fired each furiously denunciatory sentence, who would blame him? He was there.

This article was first published in the Daily Post on April 17, 1989 - two days after the Hillsborough tragedy.

Nearly 100 people lost their lives on Saturday - because they didn’t count.

They didn’t count because they were football fans and in the eyes of authority, and indeed the general public, that placed them beneath contempt.

As I watched young policemen frantically trying to pump life back into corpses on ripped advertising hoardings, the shattering numbness of that night in Brussels returned.

There was a difference. In Belgium we were riddled with guilt and shame. At Sheffield it was just deep, deep pain.

But as men slumped heavily into their seats around me and threw their heads into their hands, the same angry word was being spat out through the tears: WHY?

The answer is: Because you don’t count. Because society has allowed itself to view the football fan as a moronic caricature. And the people who make decisions are happy to play along with this image because it makes their jobs easier.

Take the police on Saturday. Because of them, for the second year running, 28,000 tickets were allocated to Nottingham Forest, whose average attendance is 20,000 while 24,000 tickets were given to Liverpool whose average gate is 39,000.

There were ticket problems last year and they were forseeable this time. The fans complained and Liverpool FC complained to the FA and to the police. Nothing changed. The decision stood. For “safety reasons.”

It depends on your definition of safety. Mine does not include cramming one end of a ground while leaving enough space to play five-a-side on the opposite terracing.

On Saturday afternoon as I looked down at the heart-breaking sight of bodies piled up on the pitch below me, to my left there were clear gaps in the huge bank which had been set aside for the Nottingham Forest fans.

The families of the dead will not agree with the police idea of safety, especially as many policemen were assigned elsewhere. Ensuring safety.

As the Liverpool fans drove off the M1 they were greeted by 20 to 30 police who pulled them off the road and searched their cars, vans and coaches for drink. For safety reasons. On the main road into the city all pubs were shut. For safety reasons.

Your civil liberties go out of the window if you happen to have football in your blood.

Outside the ground this year police say they saw large queues forming, so they opened the gate. For safety reasons.

Inside the ground when people turned blue as the life was crushed out of them they pleaded with the police to let them out. But they were kept in their cages. For safety reasons.

When people needed medical help as they lay on the pitch drifting near to death, the response of the police was to form a line round the terraces and across the pitch, and to bring on the Alsations. For safety reasons.

The Alsations got into the ground but the ambulances didn’t. Dozens more police were drafted in but the doctors and nurses weren’t.

There was no shortage of boys in blue in the stadium but there was a critical shortage of oxygen machines.

But then this was only a football match. You wouldn’t expect the authorities to have any contingency plans for dealing with people being crushed to death in a 50,000 crowd.

No. Just keep the animals in check in their cages. That’s all you’ve got to worry about. That way there’ll be no trouble and everyone will be safe. And if there is trouble, well, they’ll probably deserve it. They’re only football fans. They’re only hooligans.

I’m not critical of the average policeman who was on duty on Saturday. I saw many trying to save life and comfort the bereaved.

But I’m criticising their bosses. I’m criticising the people on very big salaries who sit around tables making decisions.

I’m criticising a society, led by a government, which has lost touch with what a real football fan is. You know football. The national sport. Watched by millions of normal people every year - 99 per cent of whom are as violent as the average crowd at The Odeon.

Authority hasn’t listened to football fans. It hasn’t wanted to. It hasn’t had to. Because society has been happy to live with the myth that every football fan is a potential criminal.

Well nearly 100 people have just paid the price for this woeful misconception.

Gordon Brown’s letter to Sir Gus O’Donnell, the Head of the Civil Service has seven paragraphs. Five of them begin with “I”.

Unpopular leaders realise that their enemies are all around them and ultimately they feel threatened by every one - even those whose careers they enhanced and who they feel should owe them allegiance. When they reach that inevitable stage, they are well and truly in the arms of the hired help - the advisors. And it is no surprise to learn that most advisors are just as unpopular as their masters.

Blair’s hitman and “friend” was Alistair Campbell. Brown had McCain.

A good dictator eventually makes enemies of all those close to him. The really big trouble starts when even the advisors are alienated. The hired help does not have to like its master - but it helps.

By nature, Brown is an analytical -he has that in common with ex-Accountant-CEO, Sir Fred Goodwin. When dealing with analyticals under pressure, those close soon discover a dark, sinister and nasty side. Ask any senior ex-RBS executive.

Analyticals under pressure become not-only nasty but “personal”. They are not the most likeable individuals in the first place but if you intend to put them under pressure, make sure that you take a tin hat and full body armour - otherwise you will get hurt. Luckily, unlike the “expressives” like Obama, analyticals do not have a strong need to be liked. They are natural loners and find it difficult to interact. When there is trouble, they will look to solve matters by either using or creating rules and regulations. Hence Brown’s letter to Gus O’Donnell and hence Brown’s liking and reliance on enquiries and Commissions. Analyticals paint with a very limited palette.

Brown already knows that he will lose the next General Election and that there is a more than 50% probability that there will be a challenge to his rather flaky leadership. G20? What G20? Brown’s only long -term political future may lie in a Ken “Lazarus” Clarke-type resurrection. Otherwise he is finished. He certainly is not capable of doing the Blair thing and going into showbiz.

McBride’s emails suggesting some “jolly japes” aimed at Cameron and Osborne had more than a whiff of Senior Common Room than any seriously heavy political substance. Therefore, Brown should have smiled a wry smile (he does those well) , apologised unreservedly and then hung McBride out to dry. The focus would then have been on McBride and not on Brown.

Cameron and Osborne have a very good reason to feel outraged because in spite of the occasional endearing lapse into  neo-Abbott and Costello, they are a pair of  thoroughly decent blokes. McBride has done them them both a great political favour: they are now firmly occupying the moral high-ground, they are offended and Brown will not say “Sorry chaps - it won’t happen again.”

You could not plan or pay for a better image boost.

Back to the Gus O’Donnell letter and all those “I”s. They suggest two things - the first is that Brown ’s ego has taken a bashing and he is attempting to reassert himself. Secondly, the letter did not have the benefit of an advisors red pen prior to release. Brown is on his own.

Cameron knows exactly how these Spin-Advisors (SPADS) work - he used to be one under Margaret Thatcher. Remember, at the end of her reign she ended up feeling as lonely and as isolated as Brown is feeling today.

This coming Wednesday, PMQs should be the best yet. Cameron will look serious, vulnerable and wounded. Brown will make his weekly error of indulging in pointless muck-raking through Tory recent history - and Cameron will score yet more points.

Brown will continue to perfect the unique skill that he has developed over the last two years by driving yet more nails into his own coffin.

p.s. McBride wanted embarrasing photos. Here’s one:

“Now down again. Slowly.”

The G20 conference was the most orchestrated, pre-determined piece of theatre that we have had the privilege of seeing since the 1968 Morecambe and Wise Christmas Show. The primary motivators were to somehow please the banks, instill confidence in both the markets and the voting public and lift Gordon Brown’s approval rating.

The three main devices  used were the over-wide smile , the already well-tried method of “let’s throw more money at it” and a long document.

Make no mistake - this amazing show of unity was for the voters back home. Gordon Brown was being so transparently Party Political that the G20 conference should have been funded by the Labour Party. He no doubt he sees himself as some sort of latter-day King Canute in an M&S suit but he does not wear it well - the image or the suit.

Barack Obama and his wife were the undoubted stars of the show - not because they are still new and shiny and unsullied by any of the recent banking shenanigans but because they are stars. Obama’s demeanour throughout was that of a modest thinking man who did not feel the need to stand either in the middle of the picture or at the front. Likewise, Michelle Obama did not put a foot wrong - although there was a moment when the Queen should have sent a flunkey to fetch a stool for her to stand on - such was the height mismatch between her and Michelle.

The communique produced after the meeting is vague in the extreme but there are a few quite interesting items. The first is a sop to the Franco-German alliance - or as I prefer to think of it - Vichy 2. A Financial Stability Board will be established. One presumes that this will develop into the Global Financial Services Gestapo so that if there is any financial naughtiness or even naughtiness-with-intent - “there vill be reprisals!!”. One serious point that has constantly been ignored is the fact that the banking issues are more to do with financial bandits completely confusing incompetent bankers. Any Financial Services Authority will train its beady eye on the incompetent bankers. The bandits will continue to operate but with even more stealth and guile.

The Head of the International Monetary Fund (currently Dominique Strauss-Kahn) will now be elected through “an open, transparent and merit-based selection process”. That simply means that any future encumbents can be  non-Europeans of any colour. Progress indeed. Likewise, the President of the World Bank (currently Robert Zoellick) can be non-American! Presumably, however, both will still be required to  attend the Bilderberg conference.

Those are just a couple of minor concessions. The rest of the document reads as if it had been written a while back. It is full of non time-stamped “cut and paste” rhetoric, e.g.

” We have today therefore pledged to do whatever is necessary.” 

” We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles.”

 ”We are determined not-only to restore growth but to lay the foundation for a fair and sustainable world economy” 

There is much more of this sort of turgid nonsense and padding which looks as if it was drafted by a Civil Servant from the Ministry of the Bleedin’ Obvious.

The main single item from the whole circus was the agreement to recapitalise the IMF to the tune of $1.1trillion. One could argue that in these times of recession (and extreme poverty), all this could have been achieved through the usual channels without all the showbiz.

Meanwhile, somewhere in the depths of a thousand bank strongrooms, there are “papers” which represent billions of dollars-worth of damaged assets. The surviving hedge fund managers  are ready for the new game. Incompetent bankers are still in place. Retailers are being strangled by a lack of credit. Manufacturers are shedding millions of jobs. Governments are printing money that they don’t have and the City screen monkeys are still confused.

And yet today we feel optimistic. All because of several days of fine words and political sleight-of-hand.

“Sorry! That should have read: Monsieur Sarkozy is regarded by many as a cult”

There ought to have been just the one hymn sheet because if there are several hymn sheets, we are in for a very discordant Thursday.

Barack Obama is hoping that: “ G20 countries will do what is necessary to promote trade and growth.”M le President Sarkozy wants to create a Financial Interpol to police the financial services industry. The delusional Gordon Brown’s not-so-hidden agenda is to rescue his image and somehow emerge as King of the World but he persists in spouting inane generalisations such as  “clean up of the world banking system” and “more regulation of tax havens”.

Sarkozy is right. A Global Financial Services Authority is what is needed. If there are at least 20 Financial Services Authorities and the only thing that binds them is the hope of “greater co-operation” then all that is being thrown into the heaving fiscal mix are more junkets such as this G20 and more opportunities for the financial bandits to operate between even wider cracks within the world economy.

Somehow, it has been decided that “protectionism” is bad. Perhaps Mr Brown should spend more time thinking about the United Kingdom’s issues rather than constantly trying to put alleconomic problems in  the context of the “Global Economy”. Where was the Global Economy during the years that he stood at the Dispatch Box preening and accepting the plaudits? There was little credit given to the Global Economy when the British economy was behaving itself and Brown was  self-actualised and not self-delusional . History has already demonstrated that the Iron Chancellor’s image was so frail that it could be shattered and buried by one sentence from Vince Cable.

So the modern-day equivalent of the Tribal Elders will be talking economics but they will be thinking politics. Any summit such as this G20 meeting enables the leaders to discuss world economics but always with one eye on domestic politics.

Brown is very aware  - as are all the other G20 leaders that he is a dead man walking and the long-term fallout from the current economic crisis will be managed not by Brown but by the Conservatives led by David Cameron. (Somebody had to say it!)

So is this G20 summit necessary?

Brown is a historian and knows that Chamberlain was the first Prime Minister to engage in the sport of Summitry. Churchill’s meetings with the American and Russian leaders continued this fine tradition and in the 80s, Margaret Thatcher travelled as did Tony Blair in the 90s.

Currently, the technology is in place to make Summitry an obsolete sport but large numbers of politicians sitting round huge tables  still seems to be a popular diversion. Each already knows the other’s views and the odds are that there will be more conflict than accord. For instance, M Sarkozy is being backed as the first to flounce out.

The fundamental question is ” What is the problem and how do we sort it out?”.  That approach could  be a very fundamental error. In recent years, politicians have grown into the habit of putting themselves under tremendous pressure by asking the above question and then feeling the need to produce almost instant solutions - and of course we have become conditioned to expect that approach and more crucially, so have the media.

Brown the historian should know that the real question should not be “What’s the problem?” ( the modern politician’s approach) but ” What’s the story”  (the historian’s approach),  that is to say - let’s establish 100% how we managed to get into this mess. This approach takes time but in the long term , will produce the correct solutions.

Most Governments have already shown by their random actions of the last six months that they prefer to treat the symptom and not the cause.

In this respect, Gordon Brown should learn from both John Major and Tony Blair who both understood that firstly, the story of the Northern Ireland problem needed to be understood and that the solution would then follow as a by-product of that understanding. The whole process took a very long time but as recent attempts at destabilising the situation have shown, the solution is rock-solid.

This could be a time for reflection and not necessarily the customary politician’s sprint to action.

“Ooh look - something has bounced off the fan and it appears to be coming my way!!”

The Dunfermline Building Sociey had the temerity to go cap-in-hand to the Government. The Chairman Jim Faulds was rude about the Chancellor and accused him of making the wrong decision, based on erroneous information. Bad move. The truth is that the Financial Services Authority has been hawking the Dunfermline around the indutry for a few weeks  - without too many takers. Jim Faulds’ outburst was nothing more than an 11th-hour face-saving attempt. It was not the Chancellor’s fault that the Dunfermline Buiulding Society has managed to build a terminally toxic commercial mortgage book.

The Society has always managed to produce a modest surplus and it is quite amazing that the Board (in common with many other Financial Services Boards) has acted as if it did not see any of this coming. The solids hit the air-conditioning many months ago and have been flying in their direction ever since.

The Dunfermline B.S was Mutual Society. That means that it was owned by its members and therefore had no pressure as far as profit or shareholder dividends were concerned. All that a Mutual needs is a small operating surplus.

Therefore it takes a special kind of incompetence to run up such huge losses   and then to expect an automatic Government bailout. However, it would again seem like a case of provincial directors mixing it with professional investment sharks and the commercial world. Vanity over pragmatism.

The DBS appointed a new Chief Executive in December 2008. His name is Jim Willens and until last year, he was on the Board of Nationwide. Coincidentally, it is the Nationwide which has now bought the DBS branches, investments and good loans. Jim Willens has been fighting a losing battle for several months - ever since Deloitte’s, the Society’s auditors refused to sign-off the accounts because the Society was insolvent.

Graeme Dalziel was the previous Chief Executive and the spotlight will soon be trained on him. Regrettably, he is in the frame for the failure of DBS. He is a former Finance Director and in common with another CEO of a failed north-of-the-border financial institution - he is an Accountant.

So what is it about Scottish Accountants who have power thrust upon them? Mind you, the British economy is currently being run by a Scottish History Graduate and a Scottish Solicitor - so we should be all right.

What a laugh - Jacqui Smith’s husband has been watching porn movies at the taxpayer’s expense!!!! The red-tops are in a frenzy and poor Jacqui is both angry and embarrassed and there have been the usual mutterings of  “We will of course pay it back.” 

“Schadenfreude” was invented for this situation.

The fact is that the type of film that he has been watching is irrelevant. The real argument is about MP’s expenses. How many of us have never watched a porn movie? Admittedly, the fact that on this occasion, films “with an adult content” have been watched does add a certain piquancy but once again we are in a very British situation.   The sin is not in the act but in getting caught.

Men enjoy watching porn movies but most men do not watch them with a box of Kleenex,  “spanking  the monkey”,  whilst drooling  down their grubby shirt fronts. Most XXX movies are   ridiculous and funny  - not seedy.  Sometimes the watching of porn is a social event. I have been to many “gentlemens’ evenings” where at some stage in the evening, after a skin-full, we have sat down and spent the odd hour watching filth with a nudge-nudge and a wink-wink. Great fun - and harmless and a bonding-session “par excellence”.

I have attended these functions in the company of bank managers, solicitors, barristers, policemen, businessmen, high-ranking executives and all manner of “respectables”. Are we perverts? Not all of us.

Womens’ attitude towards filthy movies is a bit different. There is a joke which asks ” Why do women watch porn movies right to the end?” Answer:  “To see if the couple gets married.”

Let’s face it - a “Chick Flick” is all about romance, love, passion and fantasy. A “Boy flick” is about sex and violence . (I am only bracketing “sex” and “violence” together because that is the British convention.)

Today, a certain Fleet Street Grande Dame has written that Ms Smith has been “betrayed” by her husband because the watching of porn is tantamount to unfaithfulness. No it isn’t.

Several years ago, my secretary phoned me and told me in a hushed and embarrassed tone that a bill had arrived for a week-long stay at a hotel and she wanted to know what she should do about “the extras”. The “extras” consisted of a list of about twenty porn films which (apparently) I had been watching in my hotel room.  I told her to phone the hotel and ask them to “lose” the items from the bill. I then phoned the hotel myself and was pleased to discover that when I scrolled through the films (as you do) - every film that I scrolled through registered on their system and through a system fault, it looked as if I had spent the entire week watching porn. An attractive proposition but untrue.

The point of the story is that at no stage did I feel that I should go onto the back foot and be defensive. There is no way that I would put on my slacks, shirt and pullover (the weekend politico-casual look), read a prepared apology from a piece of paper, apologise again and look terrified or ashamed.

Richard Timney has apologised for embarrassing his wife but otherwise, he has nothing to apologise about. Neither should he feel embarrassed about watching porn - although, quite understandably he is -  but that is only to appease the pruriently frustrated over-50 females and the God Squad. 

Jacqui Smith is as good a Home Secretary as there has been in the last few years so it would be a pity if (yet again) a perfectly respectable lady were to be forced-out by the lubricious hounds of Planet Media. No need to force her out - next May’s General Election will do that.

Currently, the Labour government is on the run and of course anything that we can throw at them seems deserved but let’s please keep it in perspective.

The perfect line of curly tails has temporarily stopped flicking with pleasure because it seems that the trough of plenty is about to be removed. The squealing and slurping has stopped because the Mama Pig that is the taxpayer needs some respite. There is a real danger of drought - and it is not the drought predicted by the Global Warming Mullahs - it if the financial drought caused by the double-whammy of “on the take” bankers and their avaricious politician chums.

The Home Secretary, Jacqui “Within the rules” Smith,  argues that she has done nothing wrong and she is right. What about hanging? That  also used to be within the rules - did that make it right?  Within living memory there were those who were “following orders”. Were they right?

The debate is one of morality and not political chauvinism. If you are caught with both hands in the cookie jar - don’t blame the jar.

There have been many debates as to the merits of electing politicians who are financially “independent” - those who do not see politics as a “nice little earner”.  Many are “at it” in the Commons and no doubt some are at it in the House of Lords.  Why are they at it? They are at it because many of them are about to enter the last 12 months of comparative plenty. Nests need to be feathered before the arrival of their personal political winter. For many, this is the most that they will ever earn.

It is interesting to note that of the top 20 MPs  claiming for second homes (The Independent yesterday), 14 are Labour. All are from outer-London and the surrounding area because they are allowed to claim Additional Costs Allowance. The ACA is discretionary - it is not compulsory.

Needless to say, there has been yet more fancy footwork from Gordon Brown, followed by  yet another disturbance in the long grass as Sir Christopher Kelly  and the Committee on Standards in Public Life are mobilised.

By the time that they complete their ruminations, it may well have been cheaper to leave well alone.

We have entered a long-term bear market and equity prices are heading towards Ground Zero. All that Governments have managed to achieve so far, is to delay the decline.

The currently established pattern is very simple - investors wait and see what the government is going to do. Then there’s a short Stock Market rally.  That is usually followed by another business admitting losses, bad debts or a cash shortage and shares move down again. Then the cycle is repeated.

The whole thing is being dealt-with “piece-meal” because decisions are being made “on the hoof”  by politicians who always have one eye on opinion polls. The current economic woes are not a function of votes and governments should have taken a deep breath , sat back for two or three months and waited.

That comparatively short wait would have resulted in the bankers emerging with their hands up and coming clean. Plus  there would have been time to properly audit the investment and commercial banks (that is where most of the so-called”toxic” debts reside).

Instead, Governments and Treasuries all over the world allowed themselves to be spooked not for good business reasons but for political reasons. This over-protracted game of “pin the tail on the donkey” now looks as if it will never end.

The initial funds that were gifted (yes!) to the banks represented a knee-jerk reaction by amateurs such as Gordon Brown and Alistair Darling. Their panic-fuelled decision had absolutely no basis in good business practice. The term “due diligence” did not come into general use until after five months of chaos. Due diligence was not practiced by the banks when they were lending or acquiring bad investments. That tradition was propagated by  this and other governments who handed cash to the banks as irresponsibly as the banks had handed money to the NINJAS (No Income, No Job or Assets) and dodgy businessmen.

The amounts handed to the banks were based on a formula created in conjunction with the Financial Services Authority (FSA) - an organisation which itself is taking over £300 million out of the industry so that it can make sure that small-time brokers are completing their clients’ forms correctly, whilst at the other end of ther financial food chain, the big boys are still happily stripping money from investors and borrowers.

The amount of money handed to the banks was calculated as follows: The FSA established what a bank’s safe capital level should have been, in excess of the Basel Accord ( a formula based on assets, capital and risk which establishes a capital asset ratio).  That was the simple subtraction that was carried out : the difference  between the Basel Accord calculation and what the FSA  had established as the safe capital level.  Due diligence which really means “Let’s have a proper look at your books”   was nowhere to be seen or experienced. Why? Because the FSA does not have the in-house experience to carry out a full bank audit.

Good management practice should mean “no surprises”. The Government is being surprised at least once a week. It wouldn’t be so bad if it wasn’t costing us billions.

richard ruzyllo

Let’s get one thing straight - when an Executive  is hired by a Board, a contract is signed. That contract will contain information about remuneration, bonuses, pension contributions and a hundred other things that cannot be settled by a handshake.

Sir Fred Goodwin will have agreed such  a contract with the Board of the Royal Bank of Scotland. Furthermore, the shareholders will have ratified all pensions contributions for his benefit and that money will have been invested on his behalf.

The fact that his Pension “pot” now stands at somewhere near £16 million and that his annual pension is over £600,000 is not his fault.

There has been too much emotional tosh talked over the last few days. Subtleties are added to the reporting such as : He will receive this sum “for life”. Of course it’s “for life”. That is what a pension is - it pays an annuity until death which admittedly does tend to be “for life”. Junior RBS staff have been interviewed and asked how they feel about a Chief Executive with such a large pension…etc ….etc”. Not surprisingly, many are upset!
 
I am not a fan of Sir Fred Goodwin an according to a couple of acquaintances of mine who have worked for him, he does not have the benefit of an oversubscribed fan club. He is one of the new breed of “fair weather” Chief Executives and Chairmen who looked good during the times when the Global Economy was not mentioned. The times of plenty.

We are also just beginning to realise that we used to have  a fair-weather Chancellor   and now that the economy has rounded the U-bend - do we withdraw his pension rights as well?

Where does it stop? If we track back, we could probably lay the blame at Margaret Thatcher’s door and deregulation. Should we stop her pension? Fraudsters keep their pensions, criminals keep their pensions so why target an individual who simply made a mistake?

Andy Hornby earns over £700,000 per year as a “consultant”. Where’s that money coming from? Would it have been different if he’d been old enough to take his pension? Would ignorant scribes be baying for his blood as well?

There is a myriad of examples of those who have failed and gone on to collect substantial pensions - from policemen to politicians.

We are caught up in a financial maelstrom and the suggestion that Sir Fred is being paid with “taxpayers’ money” is not  fact. He is being paid from an accumulated pension fund which belongs to him.

All that one can say to sanctimonious politicians is “Welcome to Capitalism” but never forget that we live in a democracy and we are currently looking down both barrels of a very dangerous precedent.

What the Banks really mean

It is about time that the taxpayer was told exactly.what the banks have done with the money that they have been handed by the Government.
 
Vague statements such as “plugging holes in the balance sheet” mean nothing to most people (including politicians). “Restoring confidence” in inter-bank lending is also a meaningless phrase as is “toxic assets”.
 
Alistair Darling has just asked the banks to “tidy up” their Balance Sheets. Does that mean that the banks were handed taxpayers money without having tidied up? A company’s accounts consist of two sets of figures: The Balance Sheet - what they own and what they owe. The other bit is the Revenue and Appropriation Account. Maybe its time to re-label it to the Revenue and Mis-appropriation Account because it would seem that is where the trouble lies.
 
Where’s the money? Have they got it yet?
 
When banks do deign to lend, the terms make it nigh-on impossible for the average borrower to take advantage of their generosity. Politicans continue to throw everything that they can at the bankers, yet the bankers are sitting back, calculating how to circumnavigate their sudden bonus loss and scratching round for the next non-exec directorship. Many know that they may still be pushed out of the airplane with only a small parachute.
 
Most pundits are secretly thinking that we will end up with a fully nationalised banking system and are merely observing a game of “Who will blink first” between the Government and the banks.
 
Here in the UK, Gordon Brown is beginning to sound monotonous (!)  and yesterday, even Barack Obama’s “cut-and -paste” rhetoric was sounding jaded.
 
This terrible state of affairs has had a profound effect on the political and economic pundits.  “Punditis” is rife.
 
Financial experts are running out of metaphors and their predictions show all the conviction (and accuracy) of a pier-end astrologer. Other experts are delving deeper and deeper into a morass of incomprehensible technical detail which may be interesting to other financial anoraks but is adding nothing to the debate.
 
There was a time when Television and Radio reported the opinions of politicians and financial experts. Now, they report the opinions of Robert Peston.
 
Time to take a deep breath folks.

 A Valuer FRICS

Gordon Brown continues to speak with the conviction of a condemned man reading from a hurriedly-conceived briefing paper  This time it is mortgages (again).

No more 100% mortgages? I think that it is about time that the Prime Minister carried out a simple calculation as follows:  Suppose that the Government (sorry, Northern Rock) lends 80% on a £100,000 property - that is an £80,000 mortgage. Then let’s suppose that the property falls in value by 20%. That means that there is an £80,000 mortgage on an £80,000 property. That is what they call a 100% mortgage. When a householder has  no equity in his property - that is also a 100% mortgage. Negative equity just means that the mortgage is over 100%.
 
That brings one rather neatly to one organisation which has kept its head down throughout the whole sorry mortgage  mess. The Royal Institution of Chartered Surveyors. They should have come out with their hands up many months ago. Why? Because their members have been the ones who have been valuing properties. The most deflationary thing that the Government can do as far as property prices are concerned is to ignore the sulking banks for a while and have a serious chat with the RICS.
 
There was a time when the RICS was a leader - an organisation whose valuations were sacrosanct. The RICS has now become a follower which does exactly what the banking industry tells it and has contributed more than any other organisation to the ridiculous house price rises of the last 10 years. But wait - their blind slavishness to the banks is far worse than merely following orders.
 
Imagine that you are a Bank and you want to lend and you also want to make sure that the properties that you lend on have the benefit of  a high-enough valuation. How do ensure that there will be no problems with house valuations? How do you make 100% sure that  the valuation will be exactly the one that you need?

 Simple - YOU BUY YOUR OWN VALUER!
 
For example, Halifax  valuations are carried out by Colleys. Who owns Colleys? The Halifax. One is not suggesting naughtiness but when valuation fees are a function of the valuation and the value of  properties in-mortgage represents a lender’s assets, the temptations do not have to be spelled out.
 
The RICS should assert itself - otherwise there is a real danger of the property inflationary spiral replicating itself in a few years time. Independent property valuations and a return to more objective valuations will have an immediate impact. Currently, there is far too much reliance on the “supply and demand” argument and incidentally, the “drive-by” valuation - but that’s another story.
 
In the last few years, the pressure on valuers has been to “value up”. The valuers value up and then the accountants come along later and value down. Not an ideal system.
 
Time for the RICS to make a stand - if that’s all right with the banks.

There has always been an insatiable craving for advice on quick fixes to situations which we encounter in our daily lives. There is no other explanation for the ever-accelerating sales of “How to…” books. The very first in the field was Dale Carnegie’s “How to win friends and influence people”. The demand for Benjamin Spock’s tome on baby care – a sort of baby Haynes Manual  -  sold millions. There was even a book called “How to succeed in business without really trying”! This genre is the pulp non-fiction of real life.

Nowhere is the nuisance more rampant than in the domain of management. Those strutting and recording in the collonaded corridors of academia or in the money-scented troughs of corporo-land are in a particularly desperate situation. Once they start, they cannot finish. The new Messiahs need disciples and the disciples crave more honeyed management words.

The `Publish or Perish’ syndrome leaves them with no other choice than to be seen to be churning out something or other merely to justify their upkeep and maintain their reputation. Regrettably, because every possible concept has been worked to the death, they have to  constantly pour old wine into new bottles. The original recyclers – constantly re-bottling  pretentious piffle and insipid inanities.

Darwin would have been proud. For instance – many moons ago we had to provide Customer Care, then we had Customer Satisfaction, then we had Service Excellence  which was quickly followed by the creation of Customer Delight. I suppose that next, we will have to screw them and induce Customer Orgasm.

An article in the Wall Street Journal called  `Don’t get hammered by management fads’, says that an estimated 10,000 business books have been published worldwide in the last three years. Most of the books trumpeted management ”tools” guaranteed to make the user mega-successful in whatever he or she attempted.  There is no statistic which would show that many of these management books are bought but never read. Managers and aspiring managers buy these books as Executive Teddy Bears and file them in the hope that the alchemy within will be absorbed by the mystical process of management osmosis. Management by Ownership.

Recently, for instance, a monstrosity entitled “How to think like a CEO”, has sought to lure those fantasising about conquering the cliff face of Middle Management. They have fuzzy dreams of one day  perching on some high corporate peak  .

This book, in common with 90% of the entire market is strictly “Aphorism City”. These are some of the trite homilies that it contains: Be gutsy, even a little wild, modest and in control. Be competitive and tenacious, flexible and generous. Admit mistakes. Be self-secure, self-reliant, resilient and constantly self-improving. Be original, straightforward, and think before you speak or act.

Does that not take your breath away! Straight from the Ministry of the Bleedin’ Obvious. 

Some authors try another approach. They repackage the same stale ideas in the name of some ancient unheard-of bearded sage, thereby reaping a double dividend: Giving a new glitter to well-worn clichés by putting them in the mouth of some venerable ancient whose authenticity is often unverifiable and simultaneously exhibiting their own erudition and diligence by exploring the past.

About 3,000 years ago, in the ancient settlement of Harbin, there lived the Daoist sage called Szech-Taibong.  He was not-only a great thinker but also a benefactor, and the ancient equivalent of our modern entrepreneur. This man had it all! He said something all those years ago which still holds good to this day and should be taught in all management schools. His little-studied philosophy would make all currently written management books obsolete Here’s what he said:  Know people. Handle them kindly. Deploy them properly but within their knowledge. Be far-sighted. Anticipate and overcome threats because in anticipating they will be overcome before they happen. Exploit opportunities. Communicate effectively but always try to be result-oriented and generous to your opponents.

Nothing particularly exciting but easily on a par with everything else written in the last 50 years.

You haven’t heard of Szech-Taibong from Harbin?

That’s because I made it all up. Beware of false prophets!

I would have asked only the one question:
 
Sir Tom and Lord Stevenson……..”I sincerely and unreservedly apologise for this question but can you please describe the differences between a Credit Default Swap, a Total Return Swap and a Credit Listed Note?”
 
“Phone a friend?……….Oops, sorry, I forgot!! You don’t have any.”
 
Thankfully, this morning’s Treasury Select Committee Cringefest is over and there have been apologies. They were on a par-with and as pointless-as the Australian Government apologising to the aboriginals about nicking their land, the US Government’s apology to Native Americans about killing their buffalo or perhaps the Germans apologising for the Holocaust. ” Sorry about that”.
 
Go to any good PR man and he will show you the anatomy of a good apology. This what it should contain:
 
1. A detailed account of  what happened
2. Acknowledgement of the damage done
3. Accepting responsibility
4. A statement of regret
5. Asking for forgiveness
6. A promise that it will not happen again
7. Some offer of restitution
 
Some of the elements were missing but there is never any harm in a bit of well-placed management sincero-talk.
 
When the s*** hits the fan, don’t bother pretending to eat it because it is your audience that experiences the bad taste.

The primary reason for the outrageously high payments to the designer-labelled barrow-boy City slickers is the over-simple reward system. The City rewards the “ups” but does not penalise the “downs”. That encourages risk-taking. A trader can make a large bonus from the profit on a deal but when that deal or the share price falls, there are no sanctions.

In the good old days when life was simple, every day was sunny and back doors were left unlocked, a life-assurance salesman would be paid what was known as “indemnity commission” on any contracts that he sold. If the salesman sold a £100-per-month policy to a client , he earned say £1,000 in up-front commission. Over the next twelve months, the client paid his £100 per month and at the end of the year, the salesman’s commission had been paid for. However, if the policy lapsed in the meantime, the commission was “clawed back” pro rata. That discouraged selling policies to high-risk clients.

With systems that all financial services companies operate, it would be simple to create a payment system which took into account the often negative consequences of trading. Bonuses could be paid but with a “claw-back” period . That would have the added effect of stabilising share prices because it would not be to anyone’s advantage to, say, dump shares in order to depress a price. Such actions would affect bonuses.

It is now time for those nice people at the Financial Services Authority to bare their teeth and take control.

The argument of having to pay obscene bonuses in order to hire “the best” has been used before. “The best” used to mean the most aggressive and most ambitious and the most likely to take shortcuts. We now have the opportunity to enter an era where “the best” means the best-qualified, the most knowledgeable and the most professional.

It was Gordon Gekko who said that “Greed is good” and currently it is that greed which is popularly believed to be the root cause of the current economic downturn. But who was it that said that “Change is Good”? What if the real root cause of the crisis is poor governance , jump-started and caused by the new Change mantra?

Nowadays, the word “Change” appears on a very high percentage of job descriptions. There are “Change Gurus”, “Change Agents”, “Change Trainers”, “Change Management” and a hundred other delicious flavours of Change.

“Change” has become synonymous with progress but very often the consequence of constant change is a company which never quite achieves stability or Steady State. It has been believed for nearly thirty years that a company which does not change, risks being “left behind”. However, there may be certain industries which should embrace the Steady State Theory and not the constant-change environment. Change not-only appears to feed progress but during transitional periods, it also provides opportunities for corporate mistakes to be buried. Because a constantly-changing company never achieves Steady State, management errors and holes in accounts are always regarded as just temporary.

A mere thirty years  ago, there were four columns supporting the Financial Services Industry: Banking, Insurance and the Building Societies were the highly visible threesome and their City cousin was the Stockbroker. He was the mysterious one who spoke in a strange tongue and dealt in financial mysteries and abstracts. The sort of stuff that Bankers did not understand.

A few predicted that these four venerable institutions would, one day become indistinguishable from each other. And so it has come to pass.

Thirty years ago, Banks lent short-term unsecured money, issued chequebooks and most branches had a manager who was accessible both to the private individual as well as the local businessman. It was a “people business”. Eventually, Change decreed that Bank Managers were not skilled enough to recognise the subtle shades of risk hidden in propositions which landed on their desks. “Systems” were created.  Decision-making was taken from the branches and handed to the system. Credit Scoring was the way forward.

Did credit-scoring work? Yes, but only when it was applied.

Building Societies were still true to their 19^th Century roots. They lent money which enabled private individuals to buy a home after they had accumulated a deposit. There were only two types of mortgage. Gross of Tax and Net of Tax. There were savings accounts which were called Paid-up share accounts  and there were only two types of these - the only difference being that you could either add interest annually of half-yearly. There were also deposit accounts which paid slightly less interest but allowed the depositor first crack at the funds in the unlikely event of a run on the Society’s funds. The products were simple.

The in the late 80s when MIRAS ( Mortgage Interest Relief At Source) was removed and  the green light was given to all sorts of strange hybrid mortgages and accounts. New systems meant that even the most complicated and incomprehensible products could be administered.

Originally, Insurance companies sold peace of mind and would pay either a lump sum or an income to a family in the event of the breadwinner’s death. The first inkling of change was in the mid-seventies when the Royal Insurance Group introduced the first low-cost endowment plan - the G-plan. It sold like hotcakes. In the long term, these contracts produced hundreds of thousands of unhappy mortgagors and many red-faced Actuaries.

Stockbrokers lived in large (sometimes condemned) buildings in the City and they practiced their dark arts without too much interference from anyone.

In the good old days, the lending of money  to an individual had never been a profession - it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation. Not a Degree or MBA in sight. The same applied to the Building Societies and Insurance companies.

The Directors would make sure that they kept the bank or building society on an even keel  and well within the liquidity rules plus  they would vary interest rates when instructed  by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. There was one occasion many years ago when the Chelsea Building Society was forced to revalue its assets  in order to comply with liquidity rules but otherwise - no problems.

There were no executive bonuses because the word “profit” was not in their dictionary - but they would strive to make a small surplus. Likewise, there were no golf days, conventions or any other executive freebies.

But dark clouds were already gathering. Even 25 years ago, the Banks wanted to become Building Societies, the Building Societies thought that it would be a good idea to become  Banks and the big Insurance Companies wished that they too could become all things to all people.

The high priests of Change were beginning to take a foothold.

Then, in the 1980s, laws were changed and the “suits” came.

Until then, Directors of lending institutions used to be a crustily venerable lot and  tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in Accountancy Companies, Estate Agencies or Solicitors. They were men in their 50s and 60s who were REAL businessmen who had created their own wealth.

That is where the seeds of destruction were planted - in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree, University. 

The  pipe-smoking unqualified old duffers were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!

Once laws had been changed and the new boys were let loose, Building Societies issued chequebooks, Insurance Companies bought Estate Agents, banks bought Stockbroking firms, Insurance Companies introduced savings accounts dressed-up as life assurance (remember Unit-lined whole-of life policies?), Stockbrokers morphed into Investment Banks, Banks bought Estate Agents - in fact, everyone bought (and sold) Estate Agents.

Foreign banks arrived in the UK and began buying-up bits and pieces. It was all about Change through acquisition and the ugly phrases “client-bank optimisation” and “cross-selling” were born.

The price that the industry paid for all this change was an imperceptibly gradual loss of management control and increasingly lengthening reporting lines. That in turn,  resulted in two things: A sudden growth in regulation (SIB, LAUTRO, FSA) and  the emergence of dictatorial and “entrepreneurial” management.

It was in 80s  USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.

A corporate entrepreneur is a man who takes risks with other peoples’ money and is rewarded for his “entrepreneurship” through the medium of the profit-related bonus.

The Financial Services industry became a testosterone-fuelled orgy of  Change, Acquisition, Growth and an accelerating race towards more and more profit. Several CEOs would not have looked out-of-place in a James Bond villain’s lair.

The charismatic, dictatorial Chief Executive with a Messiah complex had arrived. This type of individual was comfortable in the company of millionaires and billionaires and his word was always final.

Many real entrepreneurs took advantage and high-level CEO-administered Vanity Lending was born. 

Thirty years of change have created a  Financial Services Industry which has become a Frankenstein and  our Government is keeping very busy patching it up here and there.

Currently, there is little else that can be done but thirty years of increasingly accelerating change may eventually need radical solutions and perhaps a return to the old ways. Simple products for what is essentially a simple process.

The Change Experiment has not been successful because current economics now owes more to the Chaos rather than the Keynes theory.

Is it time to go Back to the Future?

Here in the UK, the gossip website Twitter.com has suddenly taken off like a rocket , all because of  last week’s discussion  between His Holiness Stephen Fry and the potty-mouthed Jonathan (call me Ranker) Ross.
 
Inevitably, Twitter has the usual itinerant population of Hypnotists, Holistic Healers, Motivational Speakers and “How would you like to make $3500 per day” merchants but it is so much fun.
 
The idea is very simple – you register and put down your thoughts and deeds as often as you like – as long as each entry is no longer than 140 characters.  A sort of electronic Haiku.  You can also “follow” others’ entries and you can allow as many people as you want to follow your musings.
 
Currently, Stephen is undoubtedly UK’s  “Mr Twitter” as he has over 100,000 followers (or should I say disciples?).
 
So what exactly is it for?

In the beginning there was email but originally, that involved sentences, grammar , punctuation and all that old-fashioned stuff. All that superfluous fluff was soon removed and for good measure, vowels were also rmvd. Thus the text message was born. All in the name of as little effort as possible.
 
A few years ago, the Blog was invented. A Blog is  a personal website where you can write anything you want, in the hope that others read it, but there is a catch. Paragraphs, punctuation, spelling  and all that jazz are again the order of the day. If you want to look like a writer, apparently you need all that formal stuff. There along came Twitter – a shorthand blog.  Most of us can  write something  in 140 letters and spaces – so Twitter is a great leveller.

Those with the brain of an isopod may fashion to appear as clever as the eruditiously tumid St. Stephen of Fry.
 
Twitter.com is the 21st century version of Vanity Publishing and has all the characteristics of being of its time. It is quick, shallow and disposable - but luscious.
 
There some very famous individuals sharing their thoughts and deeds – for instance , we all knew by early this morning that “Schofe” was snowed-in and would not be appearing on This Morning and  St. Stephen was in the recording studio. Mundane? Yes.
 
Definitely a case of the  Bland reading the Bland. But wait…………
 
This morning, I was informed by email that a very well-known person was “following” me. I must admit to a slight “frisson” and am currently trying to compose something  very learned and witty – all within the constraints of 140 characters.  Hmm……………

No Government  can ever act on the basis of certainty. It is  always forced to act on the basis of probability. In other words, there is no REAL idea as to when the current financial mess will end so decisions and actions are based on a “best-guess” basis.

Stock market prices lie in expectations for the future. It is a constant battle between optimism and pessimism. When there is optimism one expects:

1. Confidence in the Banks and the Marketplace
2. Consumers confident enough  to engage in long-lasting spending sprees
3. Rising prices

 During a period of pessimism, the converse is  true.

Depending on whether you are an optimist or pessimist, you will be anticipating one of the following (most probable) outcomes:

• Uncontrollable money-printing and excess spending on bailouts and stimulus , producing a new, super-inflationary environment with a falling Pound and rapidly accelerating  unemployment. (Option A)

• A major change in capital flow  evidenced by shifting consumer and bank attitudes, thereby generating a period of deleveraging and deflation that will eventually produce a economic rebalance and a strengthening Pound. (Option B)

Needless to say, the Government is hoping for Option B but at the same time it is running up its (our) budget deficit to historic levels and will soon be printing money like confetti.

The fact that  unemployment is heading for a new record and consumers are spending far less means that the Government has painted itself into a corner and can only lead the country to Option A.

Our collective wealth in stocks and housing has been destroyed and  Sterling is at a 23-year low against the Dollar which, post-Obama, will gain strength, thus further eroding the Pound.

Yes, we are up dirty creek without a paddle.

Notwithstanding the odd Minister-induced  ”virtual” green shoot and platitudinous attempts by government to tell us that  “We’ll get through this”, the current perception both within the banking system and the real world is  one of overwhelming pessimism.

The  low Bank Base Rate and lack of consumer confidence in (what are  still laughingly referred-to as)  “lending institutions”  will result in  more and more money being kept under the mattress. The banks are doing it so why shouldn’t we?

The government should set sail for Option B (above). Unfortunately, it appears that no-one has any idea of where to start and the rudder appears to be broken.

“And it shall be a government, too, that gives this country strength and confidence in leadership both at home and abroad……………………..
It shall be a government rooted in strong values, the values of justice and progress and community, the values that have guided me all my political life. But a government ready with the courage to embrace the new ideas necessary to make those values live again for today’s world - a government of practical measures in pursuit of noble causes. That is our objective ……………………………..
Above all, we have secured a mandate to bring this nation together, to unite us - , one nation in which our ambition for ourselves is matched by our sense of compassion and decency and duty towards other people. Simple values, but the right ones.”

Barack Obama 2009? 

No - that was Tony Blair, May 1997.

There is little doubt that the words will remain memorable but history judges deeds and not intent.

Do you remember those optimism-fired stirrings of confidence and euphoria as Tony Blair concluded that short speech on the steps of No 10 Downing Street on 2nd May 1997?

Here we are in 2009. We are older and yes, maybe wiser but here is one lesson that we should have learned:

Ultimately, every political leader either fails or is found out.

Let us hope that Barack Obama is the exception because the weight of expectation is already too heavy.

“Toxic debt” has become a phrase which somehow appears to absolve the banks from having made very bad investment decisions.  Another phrase (which was used for the first time in pre-war America) is the concept of “Due Diligence”. It was used again with a passion in reference to the Bank of America not having taken a good look at Merrill Lynch’s accounts before it bought it .

Gordon Brown said a couple of days ago that “the banks must come clean”. Does that mean that the government has been gifting  taxpayers’ money to the banks without having audited their books? If that is the case then , to say the least – it is poor and irresponsible business practice.

There has also been talk of “ring-fencing” the toxic debts on the balance sheet. That simply means that purely for cosmetic and bottom-line  purposes, the debts should be ignored.

These bad investments have been made by the banks over a number of years and many have been hidden (placed off-balance sheet) purely in order to turn actual losses into fictitious profits. That means, in simple terms that senior bankers have been paying themselves bonuses based on made-up figures. Figures which did not truly acknowledge the fact that very bad strategic investment decisions had been made.

For instance Deutche Bank has suddenly surprised everyone by declaring a £6.3 Billion loss for the last quarter of 2008. A loss of that magnitude cannot be pulled like a rabbit out of a hat and it certainly cannot be blamed on the current downward adjustment in the equity market.

Here in the UK a very well-known bank decided that it would not opt for a government handout but instead try and raise capital in the Middle East. At the time , some thought that this looked like nothing more than  banking machismo but there is now a suspicion that this particular bank maybe did not want Treasury accountants inspecting its books too closely. Easy on the due diligence!

There are times when we do not learn the lessons of history. In 1933, the concept of due diligence was introduced in the USA  as a result of the Securities Act of that year. Do you know what the act was all about?  It was designed to protect investors from  investment brokers who may not have investigated an organisation or investment fully before buying shares in that company on behalf of the investors.

Nowadays, Due Diligence  means investigating a company as thoroughly as possible before investing any money in it.  For instance – a government handing money to a bank.

That way, surprises such as having to write-off a £2.5billion Royal Bank of Scotland loan would not happen and the British Government would not appear to be using the same Due Diligence standards as the banks.

As a management trainer I thought that I would give Gordon Brown and his motley band of funsters a basic (and free) lesson in management - purely to help then to concentrate their minds.  During this week’s PMQs, David Cameron referred to the “headless chicken”. His brutally eloquent summing up of the Brown style , although unoriginal is perfectly accurate.
 
There are only a few types of generally accepted styles of management. So which one is the Labour Party using?:
 
1. Management by Objectives. This is the best-known and easiest to understand  and all other styles of management have this style at their core. You set specific measurable objectives which are agreed and timebased and then you monitor progress. For instance: The banks will have lent £10 billion to businesses by 15th February. Currently, the government’s version is that the banks will lend when they have “regained confidence”.  Perhaps Gordon Brown ought to assign a social worker and a counsellor to each bank to help with their affirmation exercises.
 
2. Management by Exception. Let the system continue and only intervene when pre-defined objectives are not being met. Do not attempt to manage every single micro process such as fiddling with the VAT at a time when retailers are discounting by 50 or 60 %.
 
3. Management by Process. Define critical Macro and Micro processes, assign ownership of these processes and monitor and measure performance and progress against pre-determined objectives.
 
4. Management by Projects. Plan the entire process that you need to complete your goals and set interim goals. Intervene when it looks as if a goal is in danger of failing to be achieved.
 
Currently it appears that the government has no plan, no time-based objectives and appears to be  creating so many disparate goals that the country is in real danger of losing total confidence.
 
The government appears to be an observer rather than a shaper of events. The current style of management also has a name and is called:
 
5. Management by Pissing in the Dark. You attack as many parameters as you can in the hope that something positive happens. Unfortunately you need to hit them in the right order which is unlikely especially if  a. You don’t really understand the root cause of the problem and b. Your head is being eyed up by the man from KFC.

The Brits have a curious and unique obssession. The Royal family.

Prince Harry is currently being put through the wringer because he referred to one of his friends as a Paki. Of course, the Politically Correct brigade is collectively creaming itself because there are not too many opportunities which  enable those sanctimonious prats to be be quite as outraged as this.

The most racist people on the planet are the Brits - so why the hypocrisy?  Here in the UK, the Blacks get it, as do the Welsh and the Jocks - as well as the Micks. The English don’t like the Germans or the French - and as for anyone from the Indian sub-continent……….and  don’t even mention the Chinks. The Italians are a joke and of course, Hitler was Austrian. Don’t even get me started on fat Americans or those boorish Aussies.

The English suck up racism with their mothers’ milk. Consequently, the stem-cells of racism begin to develop in early school age. How many English people reading this  (and I include all politicians) have ever seen the inside of an immigrant’s house here in the UK? How many have had a Bangladeshi, West Indian or Chinese family over for dinner.

My own mother has lived in the UK for 60 years and has never been in any of her her English neighbours’ houses. Mind you - she does have an accent!

In the 60s, I was one of the trailblazers for Johny foreigner. My parents were from Eastern Europe and at school, I was one of the few children with a foreign name. In spite of the fact that I was born in Huntingdon and was indistinguishable from my schoolfriends, i.e no accent or colour, I was a nevertheless a target for racist abuse.

Over forty years later, I still remember the first time that I was called a f****** Pole. My accuser was a pikey (oops!) short-trousered seven year-old and I am not ashamed to say that I hit him - and guess what?  I was caned. Thinking back, I truly believe that the seven-year old’s parents should have been flogged insted of me because the eloquent slogans of racism tend to be passed down from father to son like heirlooms.
 
As recently as three months ago I was told “Go back to where you came from!” by a seventy-something Englishman who knows nothing about me except that I have a foreign name. On that occasion I reported the matter to the Police  - who did nothing except file a couple of statements.

History repeats itself. My own children went to school in France and their strange English accents really interested their French counterparts and within weeks they had fully integrated .  Within a couple of months, they were accepted as  honorary little Frenchmen. In fact it is no exaggeration to say that their French friends  and teaching staff were quite  proud of the fact that they had two English boys at their school.

Several years later, we returned to live in the UK. Guess what?  Within days, English schoolchildren were calling my children “Frogs” and I had to have a quiet chat with the headteacher . He found the whole thing very amusing and treated me to the usual “boys will be boys” routine.

So please stop the hypocricy. Leave Harry (he’s a bit German, you know) alone and take  a good long look in the mirror.

PEASANT: “So how did you come into the possession of this so-called Bridgewater Loan collection, m’Lud?”

DUKE: ” Well Brian,  that’s a funny story….. When the Froggies were busy beheading their aristocracy, a relative of Louis XVl flogged the paintings to one of my ancestors who was the Duke of Bridgewater - hence the name.   We’re a bit strapped at the moment so I thought that I might tap up the National Galleries for a few quid. I told them that we wanted to “diversify the family’s assets”. Looks like I’ve really put the cat among the pigeons this time! What a hoot!”

PEASANT: ” So where did the Froggies get the Diana and Acteon painting from? That’s the painting that everyone says is the most famous. Never heard of it myself. Titian, the bloke who painted it was from Venice, as far as I know.”

DUKE: ” Yes, that’s right. Titian painted it for Phillip ll of Spain , along with six more. Sort of a set. They stayed in Spain until   Philip V gave the painting to the French Ambassador who passed it to Louis XVl. He of course kept it until he lost his head! That’s where my lot come in.”

“PEASANT:  So it’s painted by an Italian for a Spanish King who gave it to the French?”

DUKE:” Quite.”

PEASANT: ” So why is everybody screaming that the painting has to stay in Scotland? It’s not part of either Scottish or even (if you don’t mind me saying so) British heritage - is it? Some art critic poofter is even saying that it’s the most beautiful painting ever painted.”

DUKE: “Well I don’t know about that but it is worth a few quid. About £50 mill I should think. The Duke of Bridgewater bought the job lot for about £43K - so potentially, it’s quite a nice little  earner.”

PEASANT:” You seem quite sure that they’re going to raise the cash, aren’t you?”

DUKE: ” You bet! About five years ago, I played the same trick with another Titian. It was called Venus Anadyomene - anyway it was some fat tart standing in a puddle. Got £11 mill for that one. Nothing like having a captive audience, eh? And don’t forget that there’s also Diana and Callisto.”

“PEASANT:  ”Well, I’ve heard of that  Callisto one. That was owned by another French bloke…..No…. don’t tell me…. Jacques Cousteau wasn’t it. He was always on about the Callisto.”

DUKE: “ Are you sure that you’re not Brian Sewell?”

Gordon Brown has invoked the British wartime spirit to cope with the current economic downturn.
 
He probably thinks that that we are all quite looking forward to shivering in our Andersen shelter as we pump the old Primus stove and await our turn with the teabag. Is that what he means? Or are we being gently steered towards seeing him as the new Churchill?
 
“We must not just plan for tomorrow. Our task over the next twelve months is to build tomorrow today”. Is that what he was thinking  seven years ago when he sold-off our gold reserves?

Between 1999 and 2001 the gold price stood at a 20-year low.  Rumour has it that the Bank of England counselled Brown, the then Chancellor of the Exchequer not to go ahead with his proposal to flog-off 415 tonnes of our gold. He ignored their advice and like the corporate entrepreneur that he undoubtedly is (!) , he announced his intentions. The price of gold then fell even further.

The word on the streets was that he was going to spend a large proportion of the gain on Euros. That made most banking “experts” (yes, it was them!) think that he was preparing us for  an entry into the single European currency. The European Central Bank’s announcement that countries wishing to join the euro would have to sell off their gold reserves reinforced that view. In retrospect, that may not have been a bad idea.

At the time gold represented about 17%of the country’s total reserves. The gold disposal reduced that by 10% and left us with the lowest bullion holdings of any major country. This was our first step towards third-world economics and 2009 will usher the final step.

So far, the actions of that Chancellor have cost the taxpayer at least £4billion and in the future, the loss is set to rise.

Who benefited from the Delboy-type deal? China. They bought most of it.

Currently, bankers are slithering out from behind the sofa and “predicting” (on average) that the downturn will last another 18 months and that everything will then be OK. Will it?

Having worked in the financial services industry for over 30 years, my only suggestion would be that if you need any “no questions asked” money, register yourseld as a bank. The Government will then provide you with shedloads of cash. The good bit is that they won’t ask you what you need the money for  and they won’t even inspect your accounts.

If you don’t want to own a bank, change your name to Bernie or Bernard and start a fund (role models and heroes: Bernie Cornfeld and Bernard Madoff) . All the experts who are currently making positively sunny economic predictions will probably invest in your fund. That should keep you going for a few years by which time, the world economy should have sorted itself out.

” This morning it was as big as Nigella’s arse.”

We are currently experiencing the coldest December for 30 years.
 
There are sectors of society which are welcoming the news - for instance, the antiques trade has always enjoyed a severe cold-snap - especially if it was linked to old dears not being able to afford to heat their homes. Really severe cold weather has always livened up antiques markets and auction houses. By late Spring there should  be a very welcome glut of Clarice Cliff tea sets and Edwardian walnut sideboards. The antiques trade curses Gordon Brown and his heating allowances.
 
There is another “up side” to a cold December - the Global Warming Mullahs have shut up. Are they the same people who warned us about the Millennium Bug and Bird Flu?
 
A 30-something designer-dishevelled professor from a redbrick university will soon be wheeled out on the 6 o’clock news to tell us - with just the right touch of rakish gravitas - that the cold weather is caused by man-made Global Warming. The true believers will nod knowingly - for they know that he will have spoken the “universally accepted scientific fact”. But is that so?
 
The funny thing is that since el Nino warmed the planet ten years ago, there has been no real increase in the overall global temperature. If  there is any doubt - what are the figures? Has anyone seen the actual temperature charts? We have seen lots of polar bears on small icebergs but no figures.
 
Icebergs have always been around as have hungry polar bears but nowadays, they are PROOF(!) that the planet is off to Hell on a handcart (or should that be a bandwagon?)
 
Surely, if any changes in weather patterns are man-made, the last ten years would have produced quite appreciable changes.  India and China, (to name but two) have been burning fossil fuels like the clappers. So where are the mild winters that we were promised?
 
I’m off to buy a furniture removal van followed by a quick glance at the Obits.
 
Recession - what recession?

A Hedge Fund Manager

The current banking chaos has been caused by nothing less than institutional fraud on a world-wide basis. The banks have defrauded each other and their clients. The alleged Bernard Madoff affair is only the latest but certainly not the last financial “naughtiness with intent” scam to be discovered.
 
The so-called Ponzi scheme is being referred-to as a pyramid selling scheme. It is not pyramid selling – it is simply a scheme whereby old investors are paid with incoming new  funds and the whole thing keeps rolling along for as long as there is a money-supply. 
 
Most governments are realising that there needs to be much tighter control on unusual investment vehicles. There is a far simpler answer – ban all of these investments. The Americans will no doubt accuse everybody else of an attack on capitalism. It is not an attack on capitalism  it is an attack on gangsterism.
 
Remember that the United States is the country which gave us Capone, Luciano, Bonano, Gambino, Lucchese, Colombo and of course, Ponzi himself. In those days, at least the authorities knew who the enemy was.
 
Nowadays, it is much more difficult because modern-day bandits are part of the establishment and their fame and power are the deterrents to proper investigation and control.  It is not the gun but financial and political “clout” that is their weapon of choice.
 
The United States would do well to exercise more control of its financial institutions, otherwise the world might notice that it was Uncle Sam who gave us not-only the original gangsters but also securitised mortgages and the Ponzi scam.
 
We have already heard spluttering British ministers talking about “an enquiry” and pledges to “investigate”. There is really nothing to investigate – for two reasons. The first is that they don’t know what they’re looking for and secondly, they certainly don’t know where to look.

The Gates to economic recovery and the New Prosperity were being guarded by the Bankers.

A tired and bedraggled band of travellers stood before them. They were led by “Not Flash” Gordon the legendary illusionist and Prime Minister. The Chancellor, Government and other Hobbits were busy trying to make themselves invisible - an ancient trick copied from the mythical Bank Elders.

Gordon raised his chin so as to appear less terrified than he really was. He tried one of his famous smiles. “Please let us in!” .

After he had spoken, his jaw dropped just for a second as he took a quick snatch of air. His mouth  then snapped shut again like a bear trap.

The Bankers were confused and a little frightened but they were following orders.

” You have to pay to come in,” replied the Banker.

” But we have already collected and given you all the money that we can find. And you did promise than when our coffers were empty,  we could come in. It is getting so cold out here. We are tired and hungry and we can see that behind the gates there is sunshine  and the New Prosperity. If you will not let us in, would you please lend us a little of our own money back, so that we can eat . Many are dying”

” That is not our problem. You enjoyed the Old Prosperity when we gave you more than we had. We have no more to lend. Anyway, you look as if you would not be able to repay it” 

” But who are all those smiling happy people who I can see through the gates?”

” They are the Bankers. Are you a Banker?”

” No I am not but there are occasions when I am speaking to an audience - I imagine that I can hear a whisper in the audience.”

” And what is this whisper”

” It seems that there are some who think that I am a Banker - because that is the sacred word that imagine I hear. On some occasions, I can hear it several times. There must be many who think that I am a banker. Can I at least come in? Just to see.”

” Why should anyone think that you are a Banker? Do you receive a large bonus? Do you have ridiculously large expense account? How big are your share options?”

” I have none of the sacred trappings of a real Banker  -  I am but the Prime Minister. But there are those who see me nearly as important as a Banker. In fact, sometimes I hear whispers which make me think that the people wish me to be in charge not only of the Cabinet, the country but of even …………………the Bankers.”

“Not Flash” immediately looked down at his feet because he sensed that he may have gone too far.

The Chancellor tried to make himself even more invisible and tried to stop himself from laughing by biting so hard into the back of his own forefinger that blood flowed from the wound.  As you would expect, it was clear liquid.

The two Bankers both took a step back. They had never heard such an preposterously outrageous claim. “In charge of the Bankers???? Who? You?!!” 

They knew in that instant that they were dealing with a “dangerous”  but decided to continue the dialogue.

They had heard the legend that one day, a simple man would come to the Gates and become “in charge”. No-one quite knew what this strange phrase meant but they wanted to be sure. Was this “The One?”. They doubted it but he had just used the sacred “in charge” phrase. It was a joke among Bankers because they knew that no-one but a Banker could be “in charge”.  They were the chosen ones. 

They used to serve the people but now the people served them.

” Are you ill? What are the people saying?”  The Banker took out his Blackberry and punched some buttons. His eyes did not leave “Not Flash”.

” Sometimes when I am speaking in riddles to the people - I seem to hear not just “Banker” but also “king” banker. That is the phrase. They call me a  ”….King Banker”. That is the phrase I hear.”

” But can you talk in riddles? Can you make money disappear? Are you so self-serving, selfish and thick-skinned that you can ignore the criticisms of all those around you? How good are you at offering help to those who do not need it? Were you unpopular at school? Have you ever given money and then changed your mind and taken it back?  Well…… have you???????”

It was like a bolt of lightning.”Not Flash “ knew.  He tried his smile once again. Some recoiled in disgust but there were those within earshot who were beginning to believe that ” No Flash”  was perhaps “The One”. 

“Not Flash” certainly believed it. He would ask for an enquiry - just to be sure. He liked enquiries. Meanwhile, he decided to take the bull by the horns - he would assert himself.

” Bring the head Banker to see me here at the Gates. Tell him that Gordon wants to see him.”

There were gasps, both humans and Bankers looked at each other. There even appeared to be commotion inside the Gates. Word was sent to the Head Banker. There was no going back.

A short man in a black silk pinstriped suit appeared at the gates. His gold tooth and the diamond in his pinkie ring glistened as he removed his Fedora. The black overcoat remained draped over his shoulders as he approached  “Not Flash”.

” Not Flash” noticed that the Head Banker’s white silk tie matched the handkerchief tumbling out of his breast-pocket.

They stood toe-to-toe. It was the Banker who spoke.

“Yes?”

“Not Flash” felt more resolute than he had  ever done in his life. This was his destiny. He would be the saviour of the people. This was his time. He cleared his throat.

” On behalf of the people, I command you to lend them the money so that they can enter the Gates of Prosperity.”

It was the briefest and most ” to the point” statement that ” Not Flash” had ever made - and he’d managed it without an enquiry. He felt quite exhilarated.

The Head Banker moved even closer to ” Not Flash”. They exchanged a knowing smile.

Almost imperceptibly, the Banker’s expression changed.

Swiftly, he brought his knee up.

“Who are you calling a fucking clown?”

Much of what has happened in both the financial and political world recently has simply been as a result of poor governance. The latest example can be found in  the way that the Speaker of the House of Commons has conducted himself following the search of  Damian Green’s Westminster office.
 
The Speaker has said that the police did not have a search warrant. The Police only need a search warrant if they are denied permission to search premises. All that the police have to do is to satisfy themselves that  the person from whom they are seeking permission has the right to grant such permission. Because they sought permission from the  Serjeant at Arms, they acted correctly.
                               
The Speaker is wriggling and the question of the Police search warrant is a huge red herring. Michael “Coco” Martin appears to be “doing a Pontius Pilate” and  not supporting the Serjeant at Arms.
 
The “search-warrant-red-herring” masks a much wider and more profound issue – it is the difference between responsibility and accountability. It was the Speaker who hired the Serjeant at Arms and although he has delegated responsibility, he has not delegated either managerial or constitutional accountability. That remains with him.
 
The choice that he has is a stark one. If he believes that the Serjeant at Arms acted illegally or exceeded her authority – she has to go, closely followed by the Speaker. If he believes that she acted correctly, he must give her his full (public) support.
 
No more scapegoat-hunting and mealy-mouthed statements please. This is a straightforward management issue and it certainly does not warrant what has become the Prime Minister’s stock delaying tactic  - an enquiry.
 
( I wonder how the PM would feel if the policeman who opens and closes the door to No 10 allowed the Plod to enter the premises and search through the PM’s desk because they believed that he had somehow acted illegally).

” You weren’t there.”

There is an insidious disease which spreads through organisations  and which ultimately makes them unmanageable. It is a corporate cancer and it can kill.

It killed Baby P.
 
The old British Rail became an unmanageable monster. The National Health Service is another good example, as are the Social Services, Police, our Education system and Local Authorities.
 
It is the creeping sickness of  uber-bureaucracy and continually lengthening reporting lines.
 
All of the  above organisations are over-populated by strata of management and administration which eventually  create a corporate organism which appears to exists only to perpetuate itself. The end-user or client becomes the smallest  and least significant stakeholder.
 
There are meetings, there are presentations, there is information-management and there is career-building, office politics, black designer suits and BMWs.  Somewhere in the distance though , there is a  bruised and broken child.
 
The “Management” feels smug because all “procedures” have been correctly followed, boxes have been ticked, the correct number of visits have been completed, PowerPoint presentations have been well-attended and lunchtime prawn sandwiches have been good.  Meanwhile, the child waits.
 
Baby P became a dog-eared paper-file which was passed from Social Worker to Team Leader to Manager to Social Worker. The system appeared to be working well because cardboard files are so much easier to manage than small children. A  file with a broken back  sitting in a social-worker’s designer briefcase is not a cause for concern. 
 
Of course, when really senior people become involved, there are press conferences, enquiries, suspensions and sackings.
 
We are treated to the ” lessons will be learned” mantra, the corporate apology followed by some political “sincero-talk”.  Then  senior managers are changed and  another layer of bureaucrats is introduced so that “we can ensure that this sort of thing does not happen again”.
 
The real solution is a severe shortening of reporting lines – less management, less paper, fewer black-suited “directors”, fewer meetings  and  a reaffirmation that the job of protecting children is not a social worker’s career opportunity but a  child’s sacred right.

What image does the word “grooming” serve up to our collective twisted little psyche? A drooling  pervert sitting in front of his laptop screen - sweaty comb-over  glistening in the soft glow of the TFT screen,  a trembling finger occasionally clicking a grubby little mouse, a handy box of Kleenex and heavy breathing as he leers at the  youngcivilservant.com chatroom as he types ” GT SUM IFNO FR ME TDAY? I FEEL I RLLY KNOW U NOW.” 

But enough about Scotland Yard.

The real villain in the “Groomgate” affair is not Damian “innocent until proved guilty” Green MP - it is the Speaker of the House, who by now , should have forgotten that he used to be a Labour politician.  Because of Michael Martin’s clumsy sell-out, the  debate has now moved on and questions are being asked about the Speaker’s political neutrality.  Would he have acted in the same way had Damian Green had been Labour rather than Conservative? The answer is that we should not even be asking such a question. We should not be questioning the impartiality of the Speaker of the House.

The Speaker of the house of Commons not only has to be impartial - he has to appear  to be impartial.

Can you see Selwyn Lloyd, George Thomas, Bernard Weatherill or Betty Boothroyd accepting any nonsense from the police? One can only imagine what Betty Boothoryd’s response would have been to a request from Scotland Yard to rifle through an innocent MP’s documents. 

Should Michael Martin have allowed Scotland Yard access to private information? No - because both the personal and constitutional ramifications are apocalyptic - the Speaker cannot appear to be an Establishment lackey.

The current Speaker has always looked uncomfortable, out of place and has consistently failed to provide leadership and direction. The time has come for him to be groomed for the House of lords.

I would wager that Sir George Young is now trying to remember where he stored those buckled shoes.

Alistair the house elf

This Government and the banks have a lot in common. They have both enjoyed many years of negligible economic turbulence and  zero competition.

The good times may have continued if either had noticed that Wall Street had invented the real weapons of mass destruction - the financial ones. The banks had sliced, chopped, diced and mixed bad mortgages and fashioned them into contaminative instruments of death with a built-in time fuse.

The bankers’ handiwork has created a vast financial Black Hole which has already consumed many financial institutions and is beginning to consume whole economies. So  what to do? It’s obvious - decrease VAT by 2.5%.

Decrease VAT? The Government has shown once again that it is a bit short on creative ideas. It often uses short-term tactics to deal with strategic matters. On this occasion, it is in the vain hope that when the global economy returns to sunshine and wealth , the Government  will will be able to claim that it  had controlled events. Gordon “Canute” Brown and his house elf  Darling will have done it!

(In reality it will have simply been a readjustment in the new global Stability-Chaos-Stability cycle). 

But think about this: The global economic crisis is happening because of “external forces which are out of our control”. If that is the case and we truly have no control over super-macroeconomic events, gestures such as VAT-tweaks will have negligible impact. Even Mervyn King appears to be distancing himself from this initiative.

Gordon Brown is indeed a one-trick pony who believes that the only way forward is to persuade the consumer to consume. However, he will not pull the economy out of the quicksand by persuading us to buy 42″ television sets and new cars. When the going gets tough, the tough buy food and clothing.

By pulling the white rabbit of higher taxation out of the Budget hat for those earning more than £100K, he has appealed to the “not-so-rich” (are we allowed to say “poor”) with a touch of the old “Politics of Envy”.  We can almost hear Denis Healey  ”squeezing the rich until the pips squeak” .  Let’s call it Gordon’s “hommage” to Old Labour.

In the next few years, the pips will squeak but the fact that there will be a saving of £12.50 on a £500 TV set will not dampen the squeaks.

“Osborne? Io sono huomo di cortelle e si tu no mascolta io te do na cortelatta.”

George Osborne has said Mr Brown’s attempts to secure a global agreement for a fiscal stimulus package have failed. It pains me to agree with the Shadow Chancellor but he is right.

Many (about 3500) fine words have emerged from last weekend’s G20 meeting. But what has really been achieved except perhaps an agreement to have another meeting in 2009?  Oh yes, there was a  statement that the G20 are going to “harness tax cuts to stimulate the global economy”.  

As Manuel might have said: “Que??”

The good intentions of the G20 will not prevent events such as a fire-sale of stocks by Hedge Fund managers or the accelerating erosion in the value of sterling. The sheer speed of developments within the global economy may create the real danger of politicians’ status  being demoted to that of observers rather than shapers of events because the provisional time for the follow-up G20 meeting is not until April 2009. 

In five months’ time the global economy will be in a VERY different place but meanwhile, the flow of politicians’ platitudes will continue as more financial placebos are dished out.

Brown has always indicated a dislike of political  “sound bites”  but in spite of that, his speechwriters have created some gems. Like an ageing football pundit, Brown has has increasingly relied on tired and crass political soundbites and clichés.

Brown now has a “route map” and that’s about it. “Road map” would have been a better phrase but that one has been taken. “Money map”, “Fiscal map”, “Green map”, “Mouse map”, “Door map” and even “Brown map” are all still available.

“Brown paper” is also an excellent one which has not yet been spotted by Brown’s wordsmiths.

It is a shame that these phrases cannot be registered like websites. Someone could make a fortune.

There have been many fine words but they do not seem to make much sense.

“These are extraordinary times and they require extraordinary measures”. Yep - can’t disagree with that one.  A  fine example of both a cliché and a truism  but Brown might as well have said “We are in deep  s*** and we really should think about getting out of it.”

G20 made a commitment to “boost growth and reform financial markets” is not a world-shattering assertion. Mind-numbing perhaps but definitely NOT world-shattering.

“The G20 are going to strive to draw up a timetable for a new world trade deal”  sounds like a fine statement but  would have sounded better if he’d left out the “strive to” phrase. Is Brown’s route map time-based or not?

Gordon Brown’s pseudo-Churchillian posturing and new world-leader status is looking increasingly silly and maybe a little delusional,  especially if you know that 45% of the world’s financial reserves are in the hands of the BRIC economies = Brazil, Russia, India and China. Currently they appear to be deferring to the USA, United Kingdom, Germany, France, Canada, Italy and France who collectively control less than 5% of the the world’s financial reserves.

Brown feels the hand of history on this shoulder (sorry!) and doubtless his writers are polishing a fine new set of clichés.

“Eloquent silence”  would be my favourite.

The shock treatment applied to the world’s economies was no more than a fiscal version of “Pin the tail on the Donkey”. It is a failed experiment and politicians are now doing the only thing that they really understand. They are having a meeting.

The heads of the world’s 20 most prosperous (!) economies are meeting in the USA this weekend for what is probably the first of many such meetings, the ultimate purpose of which is unclear  - both to us and to the politicians.

Meanwhile, about 6500 Hedge Funds are about to collapse worldwide - billions of shares that are about to be dumped.  That will no doubt put the world’s stock-markets exactly where they really belong - on the floor.

They will all flat-line.  Only then will we see the promised recovery.

The facts that are being fed to a curious public have all been through government sanitising machines before they are  thrown to the media who then give us their version of the  ”facts”. Unfortunately the truth is never absolute because the financial institutions (who, in many cases are still looking for cover) cannot afford to face the truth. They have spent far too long creating increasingly complex and incomprehensible financial instruments which not-only confused investors but ultimately confused them.

The epicentre of the global financial crisis remains in the USA and having learned that the very public approach to bank collapses was counter-productive, deals are now being done behind closed doors. American Express, for instance, has very recently become a bank holding-company. Why? Because they have to secure their place at the financial trough because they need a bailout of about $3.5 billion.

In the States GM is blaming a downturn in the automobile market for its sudden change in fortunes. The fact is that their financial division, GMAC which used to provide auto finance took an ill-advised  journey into the sub-prime mortgage  market. GM now needs a $25 billion bailout.

In the USA, Treasury Secretary Paulson worked very hard to arrive at a sum of $700 billion -remember the trials and tribulations and the voting?. That was not an arbitary figure but it was the amount required to purchase bad debts from US financial institutions. 

Paulson has now changed his mind and has announced that the cash will be better spent in buying company shares rather than buying-up bad assets. There has been barely a whisper after that bombshell.

The phrase “negative equity” is very popular at the moment. It simply means that there are millions of individuals who owe tens of thousands  more  on their mortgages than their houses are  worth. That means that ultimately, many will simply abandon their houses and move-on to rent. Makes sense.

Unfortunately, many of these mortgages have been repackaged and sold-on. They have been bought by banks, hedge funds and other institutional investors.

The original lenders are devising schemes that either allow mortgagors (borrowers) to have payment holidays or reduced payments. They want to keep people in their houses -primarily as a result of political pressure.

Those sorts of moves may appease the politicians but will not be popular with the institutions who have bought the mortgages. That could mean litigation. Imagine yourself investing in something and then being told that the terms were about to change. What would you do? You would sue.

The entire banking industry has painted itself into a very dark corner and if they were frank, they would concede that there is no way out.

Therefore when they have money thrown at them by frightened governments, you cannot blame them for not wishing to spend that money. They will squirrel it away  and resist all moves designed to make them spend it.

Bankers know that their jobs are on the line, the economy is in recession so consequently whatever they decide to do has an unacceptable amount of risk attached to it.  Not spending the money is the logical (and correct) option.

Bankers (in spite of what they claim) are not really entrepreneurial so they will not take undue risks. The correct thing  to do is  is to rebuild their capital bases and  tidy-up their balance sheets. When those two initiatives have been stabilised, only then they may think about lending.

What banks and fund managers have been guilty of over the last ten years is asset inflation  but those inflated assets have now deflated at the speed of a machine-gunned balloon. So the answer to ” What should we do now?” can be approached in one of two ways:

The first is the (already attempted) blunt politician’s  instrument of throwing money at the banks and fiddling with taxation and other “gifts” in a bid to stimulate spending.  Bush even tried sending people money. Half spent it and the other half saved it . Net effect? Zero.

The other method is to reflate those assets.

It can be done by way of an economic and monetary “con trick”.

The first stage will be to simultaneously DEVALUE ALL of the world’s currencies while at the same time suspending all GOLD trading.

The official gold price should then be raised enough to offset all global debts and thus reflate the value of all those toxic assets.

Finally, there is little sense in allowing speculators to fiddle with the value of the various world currencies.

The most logical step is to create a world currency.

There have been previous financial crises. This one will need revolutionary thinking.

Instead of thinking  “out of the box”, most politicians - notably our own Prime Minister - are merely standing on it.

” A large erection in Dubai - the Burj Dubai”

Dubai, in common with all other Middle Eastern States is not immune to the global financial crisis.

A few weeks ago the UAE Central Bank injected nearly $15 billion into the economy in order to maintain liquidity. It did so without the accompanying noise and self-justification that Western governments go about their business.

Dubai has had local issues which have complicated its exposure to the credit crunch - namely allegations of corruption among its banking and real estate executives. There has been naughtiness.

In recent years, during the rapidly inflating property market, “flipping” became a bit of a national sport. (”Flipping” is the practice of buying a property and then selling it almost immediately for a profit). If you have the right executives in place, flipping can be an almost instant method of acquiring a great deal of capital - sometimes with no initial outlay. It is the opposite of “shorting” shares and can only take place in a rapidly rising property market.

Dubai property prices have risen by 80% in the last 18 months but currently, in spite of Government support, they are experiencing a downturn.

Dubai’s fixation on leading-edge architecture and artificial islands, coupled with its testosterone-fuelled march towards the architectural “biggest and best” seems to be generating the vigour which is currently sustaining its PR machine - but what happens when the building stops?

This is an economy which (unusually) appears to be driven by a constant striving for a continually amplifying “WOW” factor. If we didn’t know better, we may be forgiven for thinking that the Dubai economy is controlled by a Public Relations company!!! But there is a serious undercurrent.

The glitzy celebrity-fired parties and openings are the superficial face of Dubai. This Emirate is also a uniquely-placed business hub which attracts international investment like a designer magnet.Why? Because the UAE are not “overborrowed” but have massive reserves.

Sheikh Mohammed Bin Rashid AI Maktoum has very recently stated that the federal government will ensure that no UAE national bank will be exposed to credit risks, guarantee deposits and savings, guarantee all inter-bank lending operations between banks operating in the UAE and inject sufficient liquidity in the financial system if and when necessary.

That seems pretty comprehensive.

In addition, Energy Minister Mohammed bin Dhaen Al Hamili has announced that the UAE has decided to reduce its November production ceiling of crude oil in accordance with the most recent OPEC agreement.

Those are definitely the kind of problems that most economies would give their right arm for.

More by accident than by design, Dubai has crafted a haven for big-hitting investors to shelter whilst the global financial hurricane blows itself out.

I suspect that the long-term prognosis is good - better than for instance, the USA and Western Europe.

Some commentators are saying that  here in the United Kingdom, Margaret Thatcher’s policies and the 20 year-old deregulation of the markets have finally unravelled. It is not policies or rules that cause catastrophes - it is people. In this case it is the ineptitude of those running the banks and building societies.
 
Guess what? Apart from the four sacrificial lambs that were offered up a couple of weeks ago, the same senior executives are still running the banks - or should I say should be running the banks.That is, if they weren’t hiding behind the sofa with their hands over their ears. 
 
Here’s a good Mastermind question: Who was the last bank CEO or Chairman to give a TV interview?
 
We have been regaled by the rather fatuous argument that the executives who are still in place are the ones who understand how the business works and if we trashed them then we would be in even more trouble.

That is nonsense.

I have worked for a Building Society, several large insurance companies and a large (the largest) American bank. The root cause of what has been happening in the last year-or-two is the total lack of senior technical and managerial talent within the industry. It is not a new phenomenon.

In the good old days, the lending of money  to an individual was never  a profession - it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation - usually through a combination of hard graft and company loyalty.

The directors would make sure that they kept the bank or building society well within the liquidity rules, they would vary interest rates when instructed  to do so by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. I recall just one occasion many years ago when the Chelsea Building Society was forced to revalue its assets but otherwise - no problems.

There were no executive bonuses because the word “profit” was not in their dictionary - but they would strive to make a small surplus. Likewise, there were no golf days, coventions or any other executive freebies.

Then laws were changed and the “suits” came.

Directors of lending institutions used to be a crustily venerable lot of old duffers who tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in accountancy companies, estate agencies or solicitors. They were men in their 50s and 60s who were REAL businessmen and who had created their own wealth.

That is where the seeds of destruction were planted - in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree and Insead.

 The rheumy-eyed, pipe-smoking unqualified old directors were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!

It was in 80s  USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.

The phrase CORPORATE ENTREPRENEUR is like “Police Intelligence”, ” Microsoft Works” and “Friendly Fire”. It is an Oxymoron.

A corporate entrepreneur is a man who has a salary, takes risks with other peoples’ money and is rewarded for his “bravery” through the medium of the exec-bonus.   
 

A proper entrepreneur takes risks with his own hard-earned cash whereas the boys who run our banks are just overpaid bluffers with a shelf life and a permanent hard-on.

As a result of their corporate games, our Government is now forced  to take a shortcut which is the reciprocal of what  happened in China and the old USSR.

The Russians and Chinese flipped from state control to capitalism but we appear to be heading  in the opposite direction. If the government takes on any more banks, it ought to  be reported to the Competition Commission!
For the time being, the markets will bounce along, floating on the short-term  wave of faux-euphoria.
 
We are whistling in the dark.

Soon we will all wake up and realise that if we are really seeking a new banking direction - it is the drivers and not the cars that have to be changed. The government is the short-term relief driver but new drivers need to be found from within the banking industry.

There are scores of very talented senior  “solid citizen”  gems within banking who are dependable and honest but who do not have the need  to constantly spray testosterone and arrive in helicopters. We need service-driven bank managers and directors and not self-serving ego-driven scalp-hunting prima donnas with over-funded pensions.

These corporate hidden gems have all the knowledge and experience needed to reawaken the banking system from its torpor.

They are also the ones who know where some of the bodies are buried.
 
Methinks that it may be  time to line up the current bank executives and perhaps introduce them to the concept of the exit interview.

(If you are not familiar with the phrase CORPORATE ENTREPRENEUR, please enter the phrase in Google, see the various Management Models, the smug mugshots………………and weep)

Under Mervyn King, the Bank of England has become an irrelevance.

There is no longer any correlation between Base Rate and what happens to real borrowing rates. The banks are out of control and more-or-less doing what they damn-well please - in spite of taxpayers’ handouts.
 ” Come and get it.”

Today, Mervyn King and his band of funsters at the Bank of England are attending  their irrelevant monthly monetary policy committee. Why “irrelevant”? Because it is the British Bankers Association (known collectively as “the Wunch”) that decides consumer interest rates.

Any change in the Bank Base Rate is irrelevant  because it is the LIBOR and not the Bank Base Rate which affects the consumer.

LIBOR is the London Inter Bank Offered rate and is the rate at which the Banks lend money to each other. The rate is set by the British Bankers Association. It is a rate which is controlled by the banks and can be changed at any time. Once again, they are stitching-up the Chancellor, the Government and us.

The current 3-month $ LIBOR rate is below 3% and the Bank Base Rate is 3% and soon to fall again. Why are many mortgages still at over 7%? What difference will these official rates make to  the Credit Card holders who are being charged over 20% per annum?

Not so long ago, Alistair Darling said he hoped that moneylenders (the banks) would ‘continue to take their responsibilities towards customers seriously’.

While Alistair is “hoping”, the  fat-cat banker is lighting up another Monte Cristo as the houseboy counts the bonus. The banker is not thinking how he can help Mr “In the Poo” Borrower or Mr “Is that the Samaritans?” Small Businessman. He has far more important things on his mind.

Those share options are not looking as attractive as they did a few months ago. Perhaps he should wait before cashing them. After all , once the government has sorted-out the mess, the share price should rise quite nicely……….

There is little doubt that we are currently in a bear market but this week, the markets  have been affected by the optimism sweeping the world as a result of the anticipated and now-confirmed  new White House administration.

Shares are rallying and the markets appear to be rising. Do not be fooled – this is just a temporary “blip” – a bear market rally.

The causes of the rally are artificial, psychological and temporary – borne out of hope more than fact. These rallies are not real – companies have not suddenly started to declare unusual profits, the so-called toxic investments are still there and the banks are still sulking and not lending. 

Investors are caught up in the moment and  imagine that Government  efforts to ease credit conditions  allied to the electoral success and electric rhetoric  of America’s new president-elect, Barack Obama can somehow avert  or divert a deep global recession.

Regrettably, the damage has been done. There will be no Lazarus-like recovery of the global economy.

The debt-collapse is only at its initial stage – the real New Dawn.  National economies have become well and truly unglued and all governments are acquiring record deficits.

All major governments have embarked on record borrowing binges – even the US Treasury is going to borrow ( an additional) $550 billion during  the  final quarter of 2008.

Mr Obama can do nothing to change that or to somehow halt the downward progression because it has now gained its own momentum and like a forest fire, it needs to be given time to burn itself out.

Governments are having to borrow in order to finance their deficits and to purchase bad assets from the banking industry. Unfortunately, they also have the routine problems of financing their  day-to-day administrative expenses as well as any maturing securities which they have issued in the past.

Governments generate income through the medium of taxation and in a faltering economy, production decreases and unemployment rises. That creates  not-only additional government expense (e.g. benefits payments to the unemployed) but those unemployed are no-longer paying taxes to finance the government.

The solution  -  yet more Government borrowing.

In a couple of days – the Obama-inspired stock market rally will be viewed as a selling opportunity because the fact remains that the world’s massive speculative bubbles have burst — in commercial and private property, stock markets, commodities  and above all, debts.

Even as the government sweeps piles of bad debts under the carpet, mountains of new debts will go bad — a new flood of mortgages that can’t be paid, a new raft of credit cards defaulting, an avalanche of companies going bankrupt.

Governments will  bail out  a select group of large companies but  countless small and medium-sized companies will drown.

Governments  will focus on companies which deal in money - they will inject more money into bankrupt banks, money brokerages, struggling insurers and any company that is  deemed essential to the economy.

They will pump resources into credit markets and stock markets and by doing so they will create the occasional stock market rally.

In reality though, they are treading water and buying time.

Unfortunately, time has run out and this is one fire that even a real Messiah would be hard-pushed to extinguish.

Obama orders a burger:

“As the pink fingers of dawn caress the pale face of this momentous day, I would ask something of you - my fellow American……….. Take your gnarled hand , so majestically hewn by generations of selfish and greed-inspired economic oppression and reach…………yes, reach for that burger bun ( Yes we can!) and having split it with the ice-sharp steel of your artisan knife - thrust into it the onion-laced beef  and hand it to me -  for I am like you . I am your brother and I know that you also feel my hunger and the hunger of the people, your people……OUR PEOPLE!  We are the people!  And when you have handed it to me, I will endeavour to accomplish what has been instituted by families up and down this great land since the mists of time parted, to reveal our forebear - the ordinary man ( Yes we can!). Not asking for anything more that a bite - or just the opportunity of a bite. Now if that bite seems unpleasant or offensive in any way - we neither make nor demand apology  - we simply ask the one question that matters - ketchup or none? I do not yet know the answer but…..we shall begin our journey together and  we shall find out! It will be our quest! We may not get it right first time but one day we will know! God Bless the United States of America!”

” Do you want fries with that?”

Over the last week-or-so, there has been a slight upswing in the markets as investors  focus on economies rather than on the global banking crisis. 

The sad fact however is that the banking sector is still having a vastly negative effect on the economy:

1. The banks are not lending.

2. They are “upping” interest rates to businesses as well as personal borrowers - in spite of prevailing downward pressures on rates.

One could argue that banks have behaved fraudulently over the last few years. The mere act of keeping dodgy investments “off balance sheet” (hidden) means that these loss-making institutions have been declaring fictitious profits which have enabled them to pay executive bonuses.

Barclays has gone to the Middle East for a cash injection. Why? Would their books not stand up to detailed government scrutiny and would government money have strings attached? Such as parachute-free executive resignations?

Barclays was already after a £5 billion cash injection in May 2008 and now  appears to have secured £6.5 billion jointly from the Quatar and Libyan Investment Authorities. It’ll cost them and let’s hope that when the time comes, they are able to repay the loans to their new masters.

Barclays is currently behaving like a teacher’s pet and will be the first bank to participate in the European Investment Bank’s £4billion scheme to provide cheap loans for small businesses.

In the States, the screens were placed round Goldman Sachs with almost indecent haste. Why? Did they have an unacceptable exposure to SIVs and SIV-lites? We’ll never know - unless of course the new Washington administration is in a surgical mood and decides to take a scalpel to its own banking system.

Sadly, the banks seem managerially-unequipped to deal with the current business chaos and if they need “cash in” , they simply jack-up rates and withdraw credit in the vain hope of temporarily tarting up their balance sheets, prior to the inevitable write-offs 12 months later. 

They should take their own business advice and nurture the businesses who will provide them with future cash-flow. One of the great banking paradoxes is that when a client is in trouble, the bank’s tendency is to increase his loan-and-overdraft rates. That’s banking logic - if someone cannot afford £1000 per month, increase it to £1100, sit back and watch them choke but give them lots of advice.

The other paradox is that of bankers providing “business advice”. The individuals who need  banking as a career are diametrically opposed to their clients who have chosen the risky route of creating wealth through entrepreneurship. 

Yet, it is the entrepreneurs who have to sit and nod as their bank’s “business advisor” or “consultant” tells them how to run a business. Bankrupt banks providing advice through the medium of bankrupt ideas and penniless platitudes - priceless!

One more thought: did the government complete a detailed audit of the banks prior to agreeing to support them with taxpayers’ funds? Or did they accept their word as gentlemen?

“He fuck my granddaughter so I fuck him and his friend. Pajeros! “

So Jonathan Ross told Andrew Sachs’ answerphone that Russell Brand fucked his granddaughter. So what?

The BBC has always had a bit of a po-faced attitude which took root in “the Beginning” - in (The)Lord Reid’s day. In those days, Christians did not fuck except to procreate and the Brits were still suffering from the post-Victorian sex hangover which regrettably still persists to this day.

The Brits are obsessed by sex, although the word “fuck” is still unacceptable - but only in certain contexts. Jonathan Ross can say “fuck” on television, although admittedly, there is exec-rationing of the word. Interestingly enough, people do not fuck on the radio - not even a bleep.

Georgina Baillie is a little-known member of a striptease act called Satanic Sluts and her stage name is “Voluptua”. One is not suggesting that she deserves any less respect than Mother Teresa but let’s face it - this is publicity Manna-from-heaven for the girl. Ask Max Clifford - and rest assured, he will be extracting maximum mileage from this one!

There have been many “Max-lovelies” who can only be adequately offended by appearing in a Sunday red-top with their tits out. Let’s wait and see!

Georgina’s father Charles has announced that Andrew Sachs is a “national treasure”. No he is not. He is a middle-of-the-road actor who (many years ago) created a very funny but racist interpretation of a thick Spanish waiter called Manuel.

In those days, it was perfectly acceptable to refer to black people as “Sambos”,  Anne Bell showed her pubic hair on television, Ronnie Barker took the piss out of people with a stammer, and Ken Tynan said “fuck” for the first time. Happy days!

Nowadays, we have young men getting their knobs out on telly, young women showing their fannies and people regularly telling each other to “fuck off”.

The upshot is that we are all finding it more and more difficult to be properly offended although some of us do still play very hard at it.

Jonathan Ross and Russell Brand are a pair of damaged wankers but what sets them apart  and makes them so lovable is their incredible fluency  and unique use of modern  English- although Russell covers his lack of education with strings of borrowed, pre-packaged and/or contrived “mots non-justes”. ( I hope that he’s not offended and of course, I apologise unreservedly).

We enjoy the fact that Russell’s world seems to be one long shag-fest and we’re all thinking “You lucky, lucky bastard.”  We also know that Jonathan has modelled himself on American shock-jock Howard Stern and that he captures the psychological high-ground in most interviews with a crude reference or two. Let’s face it, he was hired by the BBC to be rude, crude and controversial and not to introduce Songs of Praise.

It’s horses for courses. For instance, you would never expect Huw Edwards to refer to his wife’s big tits but Jonathan can and does.  We love him for it and again we think “You lucky bastard”.

The bandwagon is creaking as politicians jump on, there will be questions in the House but really folks, it was just a harmless prank. A storm in a D-cup.

“Manuel” Sachs has been quoted as saying that apologies belong to his granddaughter.

Congratulations would be far more appropriate, wouldn’t they Max?

Kerr-ching!!!!!

“Listen Big G - there can’t be two of us.”

Lord Turner of Ecchinswell is in an expansionist frame of mind. The FSA will expand with even more highly-paid Civil Servants being hired for a proper Blitzkreig through the financial services industry.

The FSA was originally designed to protect the “little people” It has now grown into a monster  which munches its way through a mind-numbing £300 million per year - and it wants more! Incidentally, the £300 million is raised from the financial services industry by way of fees and fines and most of it is spent on salaries of the 4000 or-so FSA employees.  

They  are the traffic wardens of the FS industry and they rule by fear.

They have made the industry far more bureaucratic, they are responsible for more paper production than the Indian Civil Service and after their recent performance,  they probably cost more to run than they save the consumer.

In the last two months, there have been mutterings about the inflated salaries of banking Chief Executives. The FSAs Chief Executive is Hector Sants and if you inspect their 2007/08 accounts, you will see that his basic salary is £417,179 with bonuses of £114,000 and “emoluments and benefits” of another £130,769. That amounts to a total of  nearly £662,000! You can inspect the figures HERE .

Lord Turner added “We will pay more than necessary to attract the best people”. They will not attract the best people because the  last thing that the “best” want  or need is to become Civil Servants. The FSA managed to get Hector Sants because he had more-or-less retired after having made his fortune in exactly the same way as those strangely mute bank CEOs who have managed the economy into its present state.

What the FSA should do is to identify the really serious risks and make compliance managers within businesses directly and legally responsible to the FSA. Manage the big risks and do not waste your time chasing provincial brokers who, for instance,  have entered the incorrect date on their KIF or missed a date-of-birth from their Fact FInd. The process is called “Management by Exception” and I commend it to the self-styled “Adair” Turner.

The FSA should also make bank directors and CEOs criminally responsible for the sort of gross negligence that has passed for management in recent years. That may concentrate executives’ minds and encourage them to install proper internal controls and earn their money.

There is no point in having a financial police force if there are no decent laws and controls. The job of the FSA is NOT to provide management and control for the financial services industry - although that DOES appear to be Lord Turner’s ambition. The FSA’s job is to ensure that proper management and appropriate controls are in place.

The FSA needs to spend a lot more of its time chasing the senior boys -although they appear to be more geared up to correct the juniors’ work. The people that they really need to recruit are more experienced individuals with a bit of boardroom credibility - not necessarily expensive ex-stockbrokers.

Lord Turner should not imagine that throwing money at this type of problem will ever be cost-efficient and he should not engage in transparently opportunistic empire-building. The baking-in of unnecessary additional expenses into the current financial system is not the way forward because “guess-who” will once again have to pick up the tab.

In the last 15 years, the FSA has all but wiped-out the large life assurance direct sales forces - because direct distribution of financial services products became non-viable as a result  of the huge additional FSA-induced fees and  management costs. Thes sales forces primarily distributed pensions and life assurance products to Socio-economic groups C2-down. The A-B-C1 groups already belonged to the broker or intermediary market. (You never hear a council house tenant say ” I’ll talk to my broker about it.”)

As a result of the additional FSA-induced expenses, there are hundreds of thousands of under-insured and under-pensioned people in the United Kingdom.

Never mind - “guess who” will pick up that tab as well.

The argument is that many policies were mis-sold. Yes they were but primarily because of bad company policies, low quality senior management and corporate greed. That is exactly what has been allowed to happen within the banking sector.

It happened to the Life Assurance Industry and now it is happening to the rest of the industry - and the FSA  is rubbing its fleshy hands  as it drools over the prospect of MORE.

A regulatory body can never eradicate all crooks and all errors. That is because it can only work with historical data, i.e. by the time that it finds out that there has been wrongdoing, it is too late.

The FSA did not spot any of the issues which culminated in the nationilisations of Northern Rock, Bradford and Bingley et al.  It was not because they were looking in the wrong places - it is because they did not know where to look and consequently, did not look at all.

Recently,  Hector Sants tightenened his FSA “cilice” another notch as he practiced his own personal brand of self-mortification by admitting that they had screwed-up. Yes they had screwed-up and Mr Sants had no choice but to own up because it was so  blindingly obvious that the gross incompetence of the bank boardrooms had been compounded by the headless-chicken negligence of the FSA.

This is from the FSA website: “One of our main aims is to protect customers of financial services - such as you.”

The FSA is very good at fining small Brokers when bad advice is given or when there has been negligence or incompetence.

So who fines the FSA?

” Mr Banker, would you please move your head just a little bit to the side. It appears to be blocking your backside.”

One of the conditions of the Government’s bailout of the banks was that no dividends were to be paid until any loans (the debts to the taxpayer) had been repaid.

It was that condition which caused the participating banks’ shares to be dumped this week. That caused quite striking drops in share prices. In fact, they all nose-dived.

HBOS shares fell so much that it is pretty definite that Lloyds-TSB will want to renegotiate the terms of their proposed takeover. At those prices - so would you! It also begs the question - does HBOS need to be taken over. I know that it’s a small price to pay to wipe the smile off Alex Salmond’s face  but as long as Gordon Brown is in the mood to over-mortgage the country (the United Kingdom - not the Caledonian “republic”), perhaps HBOS is best left alone. Otherwise  Scottish bank notes may have Eric Daniels’ mugshot on the front.  Eeek!!

Currently, the majority of bank shares are being sold by petulant institutional investors in  the full knowledge  that their actions will cause  prices to drop - and it looks like a coordinated effort which is designed to persuade the government to cave-in and agree to some sort of dividend payment.

Once the government has clarified what it intends to do and (inevitably) agrees to postpone the taxpayers “charge” over dividends - watch bank prices increase as institutional buyers pile back into the market.

Financial institutions know that the government’s biggest fear is what is currently shaping up to happen on the stock markets  and that is the inevitable mega-fall. Financial institutions  are not-only still manipulating the market but treating the Treasury and the Bank of England like idiots.

Incidentally,  has the Treasury or the BoE carried out detailed audits of the banks? Do they know the exact extent of their “losses”?

There is still a total lack of numbers - probably because no-one has asked for them.

Black Friday tomorrow?  I’m only asking because it’s about time we had the romance of something black. Unfortunately, the markets are so volatile that closing prices nowadays are a matter of timing and a reflection of current confusion. For instance, yesterdays Dow was rattling up and down at such a rate that the closing-bell value could have ended anywhere between 3800 and 4050, It just happened to end on a high. Of course the high finish will influence the Asian markets which will show the inevitable initial gains - and so it will go on.

Whatever happens, it will be interesting to watch shares belonging to the “silent” banking institutions (those which been keeping a low profile over the last month).

And prepare for an assault on insurance companies.

Even Mr Peston might mess himself.

“Come and get it, bankers. I’ve got loads!”

In the three months ending August 31st 2008, the unemployment queue rose by 164,000  and is continuing to accelerate. Current predictions are that by Christmas the total number of jobless claiming benefits will have reached 2,000,000.

This is a post from May 2008:

http://www.spygun.com/?p=99

A typical bank senior management team.

There is euphoria, Gordon Brown is the saviour of the Western economy, there have been a couple of “dead cat bounces” and all decent metaphors have been used up. Life is great! Happy sunny days! 

But in reality….. it is still raining.

The FTSE 100 index is limping soggily either side of 4500 . Last week’s red screens seem to have been forgotten - as has the fact that twelve months ago, the FTSE 100 was standing at a healthy 6500. Today, the Dow rallied and finished at about 9300. Economists are smiling. One year ago it was at 14000.

The banking diversions and shenanigans of the last two weeks will slowly be giving way to harsh economic reality as final quarter company profits loom, with the sobering prologue of unemployment and inflation figures.

Some commentators are saying that  here in the United Kingdom, Margaret Thatcher’s policies and the 20 year-old deregulation of the markets have finally unravelled. It is not policies or rules that cause catastrophes - it is people. In this case it is the ineptitude of those running the banks and building societies.

Guess what? Apart from the four sacrificial lambs that have been offered up today, the same senior executives are still running the banks. We have been regaled by the rather fatuous argument that the executives who are still in place are the ones who understand how the business works and if we trashed them then we would be in even more trouble. That is nonsense.

Spygun has worked for a Building society, several large insurance companies and a large (the largest) American bank. The root cause of what has been happening in the last year-or-two is the total lack of technical and managerial talent within the industry.

In the good old days, the lending of money  to an individual had never been a profession - it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation.

The directors would make sure that they kept the bank or building society well within the liquidity rules, they would vary interest rates when instructed  to do so by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. I recall just one occasion many years ago when the Chelsea Building Society was forced to revalue its assets but otherwise - no problems.

There were no executive bonuses because the word “profit” was not in their dictionary - but they would strive to make a small surplus. Likewise, there were no golf days, coventions or any other executive freebies.

Then laws were changed and the “suits” came.

Directors of lending institutions used to be a crustily venerable lot and  tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in accountancy companies, estate agencies or solicitors. They were men in their 50s and 60s who were REAL businessmen and who had created their own wealth.

That is where the seeds of destruction were planted - in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree and Insead. 

The flatulently pipe-smoking unqualified old duffers were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!

It was in 80s  USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.

The phrase CORPORATE ENTREPRENEUR is like “Police Intelligence”, ” Microsoft Works” and “Friendly Fire”. It is an Oxymoron.

A corporate entrepreneur is a man who takes risks with other peoples’ money and is rewarded for his “bravery”. (Incidentally, one is not being sexist when referring to entrepreneurs as “him”. There  are few REAL female entrepreneurs because most girlie entrepreneurs had a flying start with either inherited or gifted money.)

Plus, one of the vital ingredients of REAL entrepreneurship is testosterone. Most women don’t have it - although there are a few who act as if they have. We digress.

A proper entrepreneur takes risks with his own hard-earned cash whereas the boys who run our banks are just overpaid bluffers with a shelf life and a permanent hard-on.

As a result of their corporate games, our Government is now forced  to take a shortcut which is the reciprocal of what  happened in China and the old USSR.

The Russians and Chinese have flipped from state control to capitalism but we appear to be heading  in the opposite direction. If the government takes on any more banks, they will  be reported to the Competition Commission.

For the time being, the markets will bounce along, floating on the short-term  wave of faux-euphoria. We are all whistling in the dark.

Soon we will all wake up and realise that if we are really seeking a new banking direction - it is the drivers and not the cars that have to be changed. The government is the short-term relief driver but new drivers need to be found from within the banking industry.

There are scores of very talented ”solid citizen”  gems within banking who are dependable and honest but who do not have the need  to constantly spray testosterone. We need service-driven bank managers and directors and not self-serving ego-driven scalp-hunting prima donnas with over-funded pensions.

These corporate hidden gems have all the knowledge and experience needed to reawaken the banking system from its torpor. 

They are also the ones who know where some of the bodies are buried. 

 (If you are not familiar with the phrase CORPORATE ENTREPRENEUR, please enter the phrase in Google, see the various Management Models, the smug mugshots………………and weep)

Chancellor: ” I suppose that it’s going to be a bit of a lottery as to who manages to get their money out of Iceland.”

Landsbanki banker: ” Yes. But you have to be Inuit to win it. That’s an Icelandish yoke, you know.”

Chancellor: ” Very funny. I’m off to do some more air miles.”

Landsbanki banker: “The Prime Minister of Iceland would like to see you before you go.”

Chancellor:” I’m fed up with giving Kerry Katona free publicity.”

Landsbanki banker: ” It’s Geir Haarde.”

Chancellor:”It’ll be really f*****g Haarde if we don’t get our dosh back! You have been confusing running a country with running a hedge fund, you tw*ts!”

Landsbanki banker: ” We have help coming from a “friend”. I cannot tell you who it is. Let’s just say that we’re going to be “Putin on the style.”

Chancellor: ” No wonder that Bjork is as mad as a box of frogs. Goodbye.”

Landsbanki banker: ” I am not a terrorist.”

Chancellor: ” I really do have to go. Does G7 mean anything to you?”

Landsbanki banker: ” I’ve got a C5.”

Chancellor: ” Magnus must be spinning in his grave and how the f**k did Lief Erikson find his way out of the harbour?”

The government’s  rescue package has been met with a tsunami of indifference, as has the Bank of England’s announcement that the base rate has been lowered to 4.5%.

There is still a fear that there are other financial services outfits who are yet to declare that they are not viable - notably insurance companies and judging by the FTSE 100 index (which today is happily bouncing between 4400 and 4500), traders are unimpressed. How many more SIVs and SIV-lites are sitting and festering in off-balance-sheet suspense accounts?

The FTSE 100, the Dow Jones and all the other indices will continue to oscillate up and down like a bride’s nightie until we are all allowed a good look under the voluminous skirts of the entire financial services system. The money’s on the table - now let’s see what you’ve got. We already know it’s not balls.

The same people who are responsible for the catastrophe are still in charge and advising Gordon Brown, George Bush et al. There is already talk of not butchering bank executive remuneration because this “talent” will simply up sticks and go to ply its trade elsewhere. Good.

There is no explanation as to why this all happened and why nothing positive  is going to happen for a very long time. The other mantra “The Banks won’t lend to each other” is being intoned on a daily basis without real explanation. “Toxic Debt” is still toxic as far as we can tell and the fatcat bankers are still plundering executive expenses.

There was a time in the early 80s when the banks decided for the first time that they would have  a go at the mortgage market - prior to that it had been a simple affair which had been run without mishap  for many years by degree-free and MBA-less Building Societies.

On that occasion in the 80s, the banks screwed it up (Yvette Cooper’s words, not mine) for the first time and then climbed out of the market. They should have stuck to what they knew.

Lending money to people so that they can buy a house was not rocket science - until bankers and securitisers become involved. Then it goes way beyond rocket science because the banking alchemists believe that they can produce cash out of debt ad infinitum.

A few days ago , the spectacle of an angst and bile-ridden Dick Fuld answering “Janet and John” Congressional questions with all the grace of a Dodge-ball full-back with a club was sickening. He had no intention of sharing what he knew with questioners who were obviously way out of their depth. “You are confusing liquidity and collateral” really meant “You seem confused - let me confuse you some more”.

Here’s some more for you, Dick. You are confusing profit with earnings. You are confusing electronic promises with cash. You are confusing all of us because you don’t know what the hell happened either.

For years, you were holding a pair of Jacks but you  tried to make us think that you had a royal running flush.

Let me explain. The “lending” that goes on between banks is not the lending of hard cash. What they are lending to each other is a series of promises of cash at some time in the future. Our politicians who still do not appear to understand the process are about to inject cash into the system and there is nothing to show that the banking fraternity will know what to do with it.

Banks have been inflating their profits for years by concealing their debts - or as they like to put it: keeping their debts “off balance sheet”.

They have been playing Texas Hold-’em with worthless chips - and I would still like to know why a Federal screen was placed around Goldman Sachs with such indecent haste. Insider knowledge?

Yvette “tell it how it is” Cooper.

21st Century heroine.

The Treasury statement on financial support for our banking system has been made! Perhaps this hails the beginning of a new era when the Chancellor can stop flip-flopping from meeting to meeting and knocking-up air miles.

By now he should  have collected enough points to buy a couple of banks.

The Treasury statement  (all 899 words of it) is very light on numbers and has no mention of any changes in governance of any of the banks (and building society) involved.

These are the lending institutions which “have confirmed their participation in a Government-supported recapitalisation scheme.”

Abbey , Barclays,  HBOS,  HSBC Bank plc,  Lloyds TSB,  Nationwide Building Society,  Royal Bank of Scotland, Standard Chartered

Another quote from the statement: 

“In reaching agreement on capital investment the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers.”

It appears that the taxpayer is paying the banks to lend. To the taxpayer.

“A Socialist is an individual who has nothing and wants to share it with everyone.”

Perhaps that should be the new definition of a banker. 

Last year, the banks declared (mostly illusory) combined profits of nearly £40 billion. There were self-congratulory  dinners, awards, chairmen were frolicking round TV studios and radio stations, chief executives were granting interviews to the media and there was lots of corporate merriment. Sunny days.

These are the same people who, during the last few months have avoided the dark clouds of banking meltdown  by  remaining  hidden in their gold-plated bunkers. They have kept their well-coiffed heads down and  allowed their poorer politician cousins to take-on the stock market bullies.

How many reassuring statements have we heard from CEOs and Chairmen - apart from the very few self-pitying statements after a takeover  or nationalisation? Where have all the numbers gone?

It would be very interesting to see some numbers.

What is the “debt” of each of the above institutions and what does it consist of?

It should no longer be acceptable to keep blaming the American sub-prime market, because the global figures that are currently being bandied about are well-in-excess of the $1.2 trillion apparently written in sub-prime mortgages.

These mortgages are now being discussed as if they are worthless. They are not worthless because at the end of the line, there is a property which has a value. We should see a calculation whereby each bank displays two numbers:

1. How much it spent on bad investments?

2. What is the current estimated value of those investments?

We could also ask why it is that banks stop talking in numbers when they make a loss  and of course, it goes without saying that the govenment will be carrying out a full audit of the banks - or are we still taking their word as gentlemen?

And what is the smug bloke from Lloyds TSB doing on the list? Eric Daniels is his name, he is their Chief Executive  and the claim was that his bank was OK because of their ultra-conservative investment policy. More hot air? CLICK HERE.

Finally, this is a  time when we do need words - not from the bankers but from the politicians. Warm inspirational words, sentences dripping  hope - a  sunny painting of the world in twelve months time , lots of “doing” words and 100% honesty.

Yvette Copper has provided the most memorably honest quote: ” The bankers screwed -up”.

An understatement, but nevertheles memorable.

p.s. Why are we including the Santander Group and the Hong Kong and Shanghai Banking Corporation in this scheme?

This is the Treasury statement in full:

After consultation with the Bank of England and the Financial Services Authority, the Government announces that it is bringing forward specific and comprehensive measures to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers.

In summary the proposals announced today are intended to:

Provide sufficient liquidity in the short term;

Make available new capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy; and

Ensure that the banking system has the funds necessary to maintain lending in the medium term.

In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity. In its provision of short term liquidity the Bank will extend and widen its facilities in whatever way is necessary to ensure the stability of the system. At least £200bn will be made available to banks under the Special Liquidity Scheme. Until markets stabilise, the Bank will continue to conduct auctions to lend sterling for three months, and also US dollars for one week, against extended collateral. It will review the size and frequency of those operations as necessary. Bank debt that is guaranteed under the Government’s guarantee scheme will be eligible in all of the Bank’s extended-collateral operations. The Bank next week will bring forward its plans for a permanent regime underpinning banking system liquidity, including a Discount Window facility.

In addition the Government is establishing a facility, which will make available Tier 1 capital in appropriate form (expected to be preference shares or PIBS) to ‘eligible institutions’. Eligible institutions are UK incorporated banks (including UK subsidiaries of foreign institutions) which have a substantial business in the UK and building societies. However applications are invited for inclusion as an eligible institution from any other UK incorporated bank (including UK subsidiaries of foreign institutions). In reviewing these applications the Government will give due regard to an institution’s role in the UK banking system and the overall economy.

Following discussions convened by HM Treasury, the following major UK banks and the largest building society have confirmed their participation in a Government-supported recapitalisation scheme. These institutions comprise:

Abbey

Barclays

HBOS

HSBC Bank plc

Lloyds TSB

Nationwide Building Society

Royal Bank of Scotland

Standard Chartered

These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn. This is an aggregate increase and individual increases will vary from institution to institution. In order to facilitate this process the Government is making available £25bn to be drawn on by these institutions if desired to assist in this process as preference share capital or PIBS and is also willing to assist in the raising of ordinary equity if requested to do so. The above institutions have committed to the Government that this will be concluded by the end of the year.

In addition to this, the Government stands ready to provide an incremental minimum of £25bn of further support for all eligible institutions, in the form of preference shares, PIBS or, at the request of an eligible institution, as assistance to an ordinary equity fund-raising.

The amount to be issued per institution will be finalised following detailed discussions. If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer. In reaching agreement on capital investment the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers.

The Government will take decisive action to reopen the market for medium term funding for eligible institutions that raise appropriate amounts of Tier 1 capital.

Specifically the Government will make available to eligible institutions for an interim period as agreed and on appropriate commercial terms, a Government guarantee of new short and medium term debt issuance to assist in refinancing maturing, wholesale funding obligations as they fall due. Subject to further discussion with eligible institutions, the proposal envisages the issue of senior unsecured debt instruments of varying terms of up to 36 months, in any of sterling, US dollars or Euros. The current expectation is that the guarantee would be issued out of a specifically designated Government-backed English incorporated company. The Government expects the take-up of the guarantee to be of the order of £250bn, and will keep this under review alongside ongoing monitoring of capital positions and lending volumes.

To qualify for this support the relevant institution must raise Tier 1 capital by the amount and in the form the Government considers appropriate whether by Government subscription or from other sources. It is being made available immediately to the eight institutions named above in recognition of their commitment to strengthen their aggregate capital position.

The Government has informed the European Commission of these proposals and is actively talking to other countries about extending these proposals and has committed to work together with them to strengthen the international system.

The Government is moving ahead immediately with the internationally agreed proposal for colleges of supervision and other measures to improve supervision of the system. After discussions with the major economies at the G7 meeting on Friday, the Government and other countries agreed on the need for a meeting at heads of Government level.

Always look on the bright side

In the USA,  the Federal Deposit Insurance Corporation (FDIC) which currently guarantees U.S.A deposits up to $250,000  has a list of problem banks. The list  includes  117 U.S. institutions with assets of $78 billion. But the list has a fatal deficiency:

It does not include any of the large banks that have failed or been forced to merge this year.

There are 1,479 U.S. banks and 258 thrifts at risk of failure with total assets of $3.2 trillion  -  41 times more than estimated by the FDIC. This number alone illustrates the shock  ahead for anyone expecting the current bailout law to bring about a real recovery.

The U.S government seems to assume that their  debt problems can be resolved by focusing on banks with bad financial assets. But the reality is that bad debts are everywhere:

At Fannie Mae, Freddie Mac, Ginnie Mae and other government agencies, $5.4 trillion in residential mortgages continue to depreciate.

As well as the publicised residential mortgages, there is an additional $2.6 trillion in commercial mortgages.

Plus,  there is another $20.4 trillion in consumer and corporate debts - all subject to the same kind of accelerating attrition rates that are evident in the sub-prime residential mortgage market.

The $700 billion Paulson plan is designed to help clean up debts that have gone bad so far. But what about future debts ? The economic decline is very unlikely to suddenly stop - in fact, judging by today’s stock falls, the decline is gaining momentum.

The rescue plan does nothing to address the $182 trillion maze of derivative bets . Furthermore, the plan does not take into consideration the fact that the U.S.A’s three largest banks - Citibank, JPMorgan Chase and Bank of America - are exposed to far more credit risk on their derivatives than they have in capital.

The story so far:  $200 billion has been committed to Fannie-Freddie, $85 billion for AIG, $25 billion for the auto industry and  $700 billion for the Wall Street bailout.

Prior to these  bailouts, the Office of Management and Budget (OMB) projected the 2009 federal deficit would rise to $482 billion.

Now, in just three weeks, the government has effectively chartered a course to triple that deficit.

In practice, the only way the government can try to raise that much money is by borrowing  and  the only possible outcome is huge upward pressure on interest rates.  

That can’t make the debt crisis go away. It can only make it many times worse. All that  politicians can do is to keep papering over the cracks.

Today, October 6^th2008, the first full day’s trading on the New York Stock Exchange after the Paulson plan signing-off. They hoped that it was going to be the end of the beginning of the global financial crisis.

By the end of the day, we will know whether or not it is the end of the beginning  or possibly …………..well…. you can fill out the rest.

(Alistair Darling is making a statement in a few minutes and rather ironically, it’s DEAL OR NO DEAL on the other channel. NO CONTEST.)

Summary of Alistair Darling’s statement: Two more meetings scheduled, more money in the pot and the FSA to get a bigger stick. The statement was read out with all the conviction of a Prozac-fuelled Richard Dawkins fan reciting the Lord’s Prayer.

“Tomorrow morning it’s dead-cat-bounce and then, down-the-toilet !!! Yipeee!!!”

“Mandelson! You’re swimming the wrong way!!!”

Even after months of credit crunch and  weeks of banking meltdown, there are still those who do not understand the scale of the current global financial crisis.

This is the first sentence from today’s Times leader: ” The banking crisis began with a few mortgages irresponsibly mis-sold to borrowers in the United States who could not afford the repayments.”

The article has all the in-depth research of something hastily scribbled on the back of a Carlton or Reform Club menu just before deadline and just after a large snifter of Remy.

Let’s spell it out. The “few” mortgages referred-to amount to $1.2 trillion or to make it easy for our uninformed Times chum, $1,200,000,000,000. Or to make it even easier for him - a lot.  

It is  hoped that the American $700,000,000,000 bailout figure is now in some sort of context.

Secondly, it is not the fact that ” a few mortgages were irresponsibly mis-sold” that has led to the current crisis. A few mortgages have always been irresponsibly mis-sold.

The crisis has been caused by those potentially dodgy mortgages being sold and then  bundled up into something resembling funds and then shares in those funds being sold to investors, some of whom were banks and insurance companies. The banks then borrowed more money, using their purchases as collateral by referring to them as “assets”. Those assets are now liabilities.

The other misconception is how the Paulson plan is perceived in the United States. It is  a plan which was conjured-up and true to form, mis-sold to the American electorate by a Secretary to the Treasury who barely 18 months ago was Chief Executive of Goldman Sachs. He earned nearly $40 million in his final year at GS and his estimated worth is of the order of $1 billion.

The same article refers to the Irish Governments decision to provide a 100% guarantee to bank customers. It is referred to as a “bold move”. It is not a bold move - it is foolhardiness spawned by desperation. Why? Because the Irish guarantee is well in excess of all the money in the rapidly-shrinking Irish economy.

The Irish Government has taken the sort of stupid risk that has pushed the banking community into its current chaos. 

A little knowledge is truly a dangerous thing.

Liquidity - the City way

Gearing - the City way

The flush-cheeked silk-suits who used to talk loudly in London bars are quiet today.

They are awaiting the result of the Congress vote which may ratify the  U.S. $700 billion rescue package.

When (and if) the package is agreed, the politicians should take an immediate step back and the US Treasury Secretary, Henry Paulson should announce the hire of a money-man to administer the funds. He should find someone without any  vested interests or someone who cannot be accused of profiting from the distribution of the rescue package. That will not be as simple as it sounds.

Many (if not most) of the big-hitters in finance own share portfolios, so finding a financial Elliot Ness who knows what he’s doing may be difficult.

The reason that the politicians should distance themselves from the scheme is because it is very likely that the markets will not reawaken if the dealers feel that they have a politician’s boot looming over them.

Politicians have a tendency to meddle and over-analyse so there may be a danger of every single transaction being scrutinised and further costs being “baked” into the system as a result of another tier of beaurocrats being introduced.

It’ll be “Capitalism Jim - but not as we know it.”

It is generally accepted that the financial system will now be experiencing a bit of a quantum leap but unless the leap is a positive one, the markets may be stifled by administrators and legislation.

The current mess does not stem from day-to-day procedures but from year-to-year policies and lack of active supervision.

This is definitely an occasion when the monkey should be left alone. It is  the organ grinder who should have the benefit of a severe talking-to (and maybe reminders on gearing and liquidity ratios).

The Bradford & Bingley Bank has been nationalised.

B&B’s £41 billion loan book is now on  the public balance sheet and the government has guaranteed around £9 billion in other commitments related to the bank. 

Spanish bank Santander has bought the bank’s branches and savings business for £612 million. That’s about 2.7 million customers and approximately £20 billion in deposits.

Santander already owns Abbey and recently agreed to buy Alliance & Leicester - so the B&B deal will give it 1,286 branches and a 10% share of the UK retail savings market.

The Financial Services Authority (FSA) decided on Saturday morning that B&B was not strong enough to continue as a deposit-taking bank after the recent financial turmoil undermined confidence in the company. It is thought that B&B’s decision to purchase the GMAC mortgage book contributed to its demise.

B&B’s has been a feature of the British financial landscape for about 150 years and many will view this dramatic collapse with great sadness. Prior to its demutualisation, the Bradford and Bingley Building Society was regarded as one of the most prudent and conservative financial services organisations in the UK.

It will be greatly missed, both on the high street and in our collective psyche. It was the last of the great Building Societies, and in spite of becoming a bank in 2000, it retained its “solid no-nonsense” image all the way to the end.

This morning, Alistair Darling told GMTV: “My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer. We had to stabilise the situation in order to protect the banking system as a whole, just as we have done on previous occasions.”

The Treasury said it would be “business as usual” for the firm’s savers and borrowers although for the moment, quite understandably, all lending has been suspended until further notice.

B&B has around 3,000 staff and 197 branches.

Today, the shares of RBS, HSBC, Barclays and LLoyds-TSB  are all taking a bit of a bashing . That’s because of  their anticipated contributions to the Financial Services Compensation Scheme following the B&B collapse.

Henry Paulson

When the $700 million Wall Street rescue package is unveiled, remember the saying:   A camel is a horse designed by a committee.

The last few days have shown how unpopular the US $700 million rescue package is among the American electorate.

Both the Republicans and the Democrats are very mindful of the fact that a Presidential election is looming, so the fact that Joe Average is having to bail-out the Wall Street fatcats is a potential vote loser.

Neither Party wants to be seen as the one which pushed the deal through Congress - just in case. The package is currently being window-dressed  so that it will look as if it was agreed and objected-to in equal measure by both parties.

Self-preservation and vote acquisition have triumphed.

The system is supposed to have seized up because (new mantra)“the banks have lost confidence and therefore will not lend to each other.”  So why don’t they do what we used to do in the old days and use their own money?

The reason is simple - they do not have any money. Most of the mortgage cheques that lending institutions sent  out in the last few years should have bounced.

Banks are distributors of money - no more and no less. They do not MAKE anything.

They cannot conjure-up new money because all that they can do is MOVE money from a. to b.

They do not CREATE new money. They do however, create wealth for themselves.

The U.S. ringmaster, Henry Paulson who is currently United States Secretary of the Treasury has a net worth in excess of $700 million and his income in his last full year as CEO of Goldman Sachs (2005) was nearly $40 million. No-one would ever suggest any impropriety but is an executive  who spent nearly 32 years at Goldman Sachs the best man to be proposing a rescue package?

There is now talk of curbing the excesses of the Wall Street fatcats through legislation and the whole process is being overseen by a former uber-fatcat.

There are several important questions: Has Henry Paulson retained any shares in Goldman Sachs and could we please have  sight of Mr Paulson’s investment portfolio? How much is he currently worth and how much (if anything)  does he stand to gain?

The financial establishment was driving an express train  to hell but now it wants to hand the steering  to the government  -  any government -  and it wants to do it as soon as possible.

We are the prisoner- passengers and there is no possibility  of getting off the train. We’re trapped.

The Crash of 1929 and  the Crash of 1987 both have something in common. They took place in October.

October 2008 starts next Wednesday and it looks as if  our train is about to hit the painful buffers of another Black October. Inevitably there will be what is euphemistically called a single-day  “DOWNWARD ADJUSTMENT”.

Look out for a Black Monday, Tuesday, Wednesday……………….you choose.

By now, George W. Bush and his crew are realising  that a mere  $700 billion will not be enough to save the fantasy world created by the global financial system.  But they need to appear to be doing something.

What is being done to slow mortgage defaults? What will be done to encourage the banks to lend money to each other and to consumers?  How will the housing market stabilise?

It is also painfully evident that the banking establishment has no idea of  how to attack the current problem so the “professionals” are handing the problem over to a collection of elected amateurs led by Goldman and Sachs’ ex-CEO. Priceless.

The credit contagion will soon hit every company that distributes its products on credit. Will the government(s) bail them out as well?

The sad fact is that we cannot provide a solution to a problem that no-one understands . The inaction of our bank chairmen and boards suggests that they are   paralysed by a combination  of fear and what appears to be institutional intransigence.  

There is nothing easier to manage or direct than an organisation which is  in “steady state”.  It is when a company destabilises that senior managers , directors and administrators  should be earning their money.

Instead, there will be retirements, sackings, redundancies and court cases.

After  the blood-letting, there will be a shiny new train that we can all climb aboard. 

Does anyone remember the good old financial steam-trains of thirty years ago?

Building Societies took in savings and deposits and paid a small interest rate. They would then lend that money  to mortgagors at about 4% more than they were paying  their investors. That gave them their operating margin  plus a small surplus.

Then the banks, insurance companies and stockbrokers waded into the mortgage market and made the whole system super-technical and totally unintelligible. The legislators then gave the whole industry a good stir and  the rest,  as they say, is Geography.

Perhaps it had all been too simple.

The only surprise is that it took so long to unravel.

Bradford and Bingley’s shares are continuing to travel in the wrong direction and we are still not hearing any positive noises from the board.

They have an excellent management team, they are product innovators, they are responsible lenders  and the only major mistake that they have made is the purchase of the GMAC mortgage book. They signed up to purchase £12 billions-worth of mortgages. The purchase  looks increasingly like the sort of idea that materialises in the pub just before closing time.

They were to buy the GMAC mortgages in quarterly tranches but are renegotiating the deal because the GMAC mortgages are in arrears by a factor of nearly 5, compared to Bradford and Bingley’s self-sourced mortgages.

Two further factors are making things difficult. The first is the fact that they have a higher-than-average number of buy-to-let and self-certified mortgages. These mortgages are known to have a higher attrition rate but that is already reflected in the share price.

Moody’s have downgraded the BBG within the last week and that together with excessive media attention is putting additional pressure on the share price.

Nowadays, credit rating agencies such as Moody’s and Standard & Poors are  downgrading companies with almost indecent haste. They have become part of the problem and not of the solution.

The proposed redundancies at the BBG have not been announced or reported carefully enough. The initial impression given by the media is that they are to lose nearly 400 people immediately. That is not the case. There will not be a Lehman-type scenario.

We will not be seeing tearful box-clutching junior staff being interviewed on the 6 o’clock news.

The announcement that the sacking of 370 staff will produce a per-annuum saving of £15 million suggests high wages, so all-in-all, BBG is continuing to handle the whole thing very badly.

They seem to forget that much of what is happening is about PERCEPTION. 

The BBG board is probably now thinking that demutualisation was possibly not all that it was cracked up to be. Ask the shareholders.

However, the Chairman Rod Kent and Chief Executive Rod Pym need to get their fingers out of their backsides and come out fighting. They should not leave it to the FSA to flip-flop from company to company hoping for a sale. 

Has the board lapsed into “analysis paralysis”?

“B&B was an old Building society and therefore is not organised for the speed and change in the mortgage market,” is a two-month-old quote from Rod Kent.

That may be true but is not the sort of sentiment that the market enjoys - and in this business they do not forget and they do shoot the messenger.

*******************************

Gordon preparing for his speech.

A lot of amateur analysis will clog tomorrow’s newspapers, so I’ll keep it short.

Gordon Brown’s 2008 conference speech was not good.  It did have the effect of a temporary reprieve but Brown is still hoping that someone will manage to get at the jury before they deliver their final verdict. The decision will arrive sometime after the next by-election. That’s about one month away.

David Miliband looked far too smug, Starling smiled and what the hell was simpering Fiona off the telly doing there? Baroness Phillips of GMTV? John Prescott and Harriet Harman  both swayed as if they had enjoyed lunch. Harriet resembled a deputy head girl after one-too-many Crofts. Ed Miliband had obviously agreed to drive and Kinnock  had morphed into his Spitting Image puppet. Ed Balls stood as if he (or something) was about to explode and Yvette was  a pixie-puppet with one broken string.

It certainly looked as if the Pomerol ‘76 and the ‘96 Bolly had received some attention.

Some commentators have said that Brown did not say much about the economy. That was the best decision that he made. Currently, the markets are so sensitive that a wrong word or nuance could have sent the FTSE 100 due south. Congratulations to him for being prudent. (!)

So here goes:

DELIVERY 4/10. The voice is  good  and with a bit of work, he could learn proper modulation. He is a shy boy who is afraid of overdoing the metaphors, consequently he does not use them. Occasionally he sounded as if he was reading a Saga advert.

CONTENT 5/10. Mostly recycled stuff. Mentioned the eye and admit it - you were waiting for the school motto. Thankfully, he left it out. It was a Budget speech which had been topped and tailed by the stitching-in of some NHS and anti-Tory stuff.

VISION 3/10. No great leader actually uses the “V”-word. This was a senior manager’s and not a leader’s speech.

BODY LANGUAGE 2/10.He only appeared to move his head between the two stereo autocues.

FACE 3/10. He is naturally expressionless and did not let us down . There were about four examples of the  “Jack the Ripper” smile.

HUMOUR 1/10. Not a natural comedian.

Let’s end on a high note:

He is as good as Iain Duncan-Smith.

We are chewing into last week’s shares rally and the FTSE 100 is heading down to 5000 again. That always happens when there is a knee-jerk government announcement. The initial upswing caused by happy noises is then followed by a couple of days of reflection and analysis.

When the US government announced its $700 billion rescue package, the markets relaxed and rallied. Over the following weekend, everyone took time to think.

Then it was realised that the rescue package was far from a signed deal.

For instance, the U.S. Democrats want the government to take a stake in the companies that it helps.

Their proposal is that companies who effectively sell assets to Uncle Sam should give the government shares in their company.

The Democrats also require the government to come up with “a systematic approach for preventing foreclosures and ensuring long-term, sustainable home ownership…..”

That makes sense because the government is being asked to purchase sub-prime mortgages.

They are also looking for curbs on executive compensation as well as an ability for judges to modify a bankruptcy petition where a primary residence is included.

In addition, financial institutions are now coming out of shock and are confident enough to specify what they want in the new bill.

So, the current situation is that there are too many parties with vested interests for the bill to be agreed quickly. Unfortunately it will probably take some time for all the horse-trading to be concluded and if there is one thing that the stock market dislikes is uncertainty. The market likes good news and can certainly deal with bad news. No-news means some jittery trading for the next few days.  The FTSE  100 is very likely to be bouncing off the 5000 line for a few days but for as long as there is hope, it will not make that drop below 5000. If at some stage it does go below 5000 then would ther last person to leave please switch off the lights.

If the politicians cannot agree or if the market does not reacquire confidence, the drop will be so fast that we will all feel the  G-forces.

Needless to say, the U.S government wants and needs a “clean bill” to be passed quickly so that the rescue package can be put into place. Any undue delay will affect stock prices all over the world and slight “wobbles” are already taking place.

Meanwhile, there are banks and other FS companies which are holding their collective breath in the vain hope that they can keep quiet and just sneak under the wire when “the announcement” comes but there are those who cannot keep it up for too much longer.

I think that the above reinforces an immediate need for a Global Financial Services Authority so that all other economies are not “pointing” at the USA

Note to Hector:  Why don’t you ban “shorting” oil stock?

Banking : American-style

Collective noun for bankers - a Wunch?

The banking system has managed to avoid wholesale carnage - just some comparatively minor but well-earned blood-letting.

Commentators are currently busy constructing ever more grandiose metaphors to describe the last week’s events (was it only a week?) but it is now time to take a dispassionate look at the “post-blast” financial landscape.

There has been a lot of name-calling and media hysterics but here appears to be little discussion of actual numbers.   

For instance, the total amount of sub-prime mortgage-backed securities was (and still is) only about $1.2 trillion (American). That’s $1.2 billion (everywhere else) or only (!) about £0.6 billion .

Why therefore is the amount of funding being injected into the system by various governments so far in excess of that figure? Will the governments which are handing out money, carry out  retrospective audits of the banks who need support?

Of these mortgage-backed securities, only about $300 billion (American), which is $3,000,000,000 (everywhere else) or about £1,500,000,000 is held by US banks. The rest of these so-called toxic securities have been sold throughout the world to banks, pension funds and even private investors.

The question is this: Have the banks been too ready to lay the blame on sub-prime mortgages?  The figures just don’t add up - or have most of the banks been technically insolvent for some time?

For instance, many banks have been loaded up with Thirld World debt for many years. Again, they lent money at extremely high rates but these “investments” had to be written down and only worth pennies on the pound : near-worthless.

Technically, these banks must have been insolvent. Yet they were still declaring high profits and paying themselves mega bonuses.

They could argue that the way that banks have to value their assets adds to their problems. The system of valuation is called “to market” valuation. That means” How much is this asset worth if we sold it today?”.This type of valuation is meaningless if there is no market. If no-one is buying,  then  you could argue that your asset has no value.

Share prices are an exact analogy. If no-one wants to buy your shares, they continue to decrease in value until they are near-worthless.

However, even bonds which are backed by sub-prime mortgages have a value. Even if these values had been written-down by as much as say, 25%, there should not have been a problem with solvency.

Therefore, rather paradoxically, we have to blame the accountants. Even more paradoxically, it is they who run companies in times of crisis.

The accounting system in the United States started the avalanche and although the main blame does lie with the accountants, it is they who are running scared and having to value assets on a ” to market” basis as a result of the constraints placed on them by their own statutory accounting system  -  known as Fair Value Accounting.

They are bound to place a “to market” valuation on assets, instead of a true or real economic value. There IS a difference between “valuation” and “value”.

Here in the UK, Hector Sants, Chief Executive of the FSA has announced that “shorting” of financial stock has been suspended until  early 2009. Window dressing? Only a small percentage of  HBOS share were out ol loan and there is no real evidence that “shorting” has has been the cause of the current meltdown. However, at least the FSA has been seen to do something and Gordon Brown will get a Brownie Point by association.

The good thing about shorting is that weak organisations are soon found out. The fact of the matter is that HBOS share were being dumped by normal fund managers because there was no meaningful response from the HBOS board when their solvency was brought into question. They had been found out and there was nowhere to run.

Credit Rating Agencies (CRAs) such as Moody’s and Standard & Poors should also be in the dock and take part of the blame for making things even more difficult for financial institutions to raise cash. They are always in too much of a hurry to “bust” a business down so as to create a self-amplifying problem.

It works something like this:

1. The bank buys some dodgy stock or makes a bad loan.

2. The accountants (quite unnecessarily) go into down-valuation overkill mode on asset revaluation thus creating a hole in the accounts which needs to be filled with an injection of cash. 

3. The bank puts out a profits health warning.

4. The CRA reassesses the bank’s creditworthiness and downgrades it from say a B to a C.

5. No-one will lend the bank any money because of their credit rating.

Hector Sants said a year ago that financial rescues should not be in the gift of just the Bank of England and that emergency funding should be part under the control of the FSA. That is a measure that should be put into place immediately.

After last week’s bank/regulator/government (The Unholy Trinity) lash-up, serious questions should be asked about the future extent of the Bank of England’s involvement. Hector, who is the ultimate poacher-turned gamekeeper has known for some time that most banks and financial institutions have been treading that fine line between Profit and Loss or  Revenue and Misappropriation.

Regrettably, Hector lives in that twilight world in which matters have to be dealt-with by a “quiet word” in a Chairman’s of CEO’s ear - otherwise a careless word could trigger the sort of journey that out financial services industry has undertaken this last week. And it ain’t over.

This morning, many ill-informed commentators are blaming the “spivs” and crooks in the City for the near-downfall of the banking industry. IT IS NOT THEIR FAULT.

They have acted within the rules, within the law and according to the policies of their companies.

Twenty years ago, Life Assurance salesmen were blamed for the mis-selling of pensions and life assurance. THEY WERE NOT TO BLAME EITHER. They were implementing their companies’ policies and were quoting the industry’s figures. They were projecting 10% and sometimes 12% fund growths - sometimes forward for 25 years. Where did they obtain the figures? From their companies.

Nowadays, if a share dealer decides to “short” a stock, then he is perfectly entitled to do so - it is not a new device and incidentally, if you are one of the few people who is not a sudden expert on shorting, CLICK HERE.

However, “naked” dealing is much more exhilarating  - that is when you can (in common with the modern banking industry) REALLY get caught short.

“A very strange day on Hudson Street although they’re not really wanting to believe it!”

The figures below represent what is known as the “Capital Multiple” of brokerages/merchant banks  in the United States. That is to say the total capital, divided by the minimum capital requirement.

The source of these figures is the Securities and Exchange Commission and is based on the most recent financial statements.

When choosing a broker or Merchant Bank with which you wish to deal, go to an organisation which has a higher capital multiple. The CM is a good indicator of the bank’s ability to withstand losses and its ability to field other financial difficulties.

It is interesting to note that on average, the companies that are currently experiencing turbulence tend to have a low capital multiples.

Edward Jones  19.9

Bank of New York Mellon (Pershing) 15.8

T. Rowe Price 13.98

Scottrade 13.86

OptionsXpress 12.65

Raymond James 11.92

Merrill Lynch 8.62

Fidelity 7.93

Bank of America Securities 5.97

ING Direct 5.85

Schwab 5.85

Lehman Brothers 5.43

E Trade 5.00

TD Ameritrade  4.72

Citi Smith Barney  4.06

Goldman Sachs   3.90

Morgan Stanley 3.21

Below is a snapshot of prices and movements on the NYSE as at 14.45 GMT today:

Top Losers   GENWORTH FINANCIAL 8.69 1.15   PROLOGIS TRUST 37.93 4.61   MORGAN STANLEY 20.21 1.54   CONTL AIRLINES CL B 17.08 1.15   A M R CP 10.47 0.67   Northwest Airlines Corp. 9.95 0.60   US AIRWAYS GROUP INC 7.30 0.44   GOLDMAN SACHS GRP 108.04 6.46   American International Group Inc 3.24 0.09   American International Group Inc 3.31 0.09

It looks as if the market is after anyone without deep coffers, irrespective of any recent profit announcements.

After a harrowing day, Morgan Stanley’s shares finished down $6.95, or 24%, to $21.75.

Goldman Sachs Group, the largest U.S. investment bank by market value, also fell $18.51, or 14%, to $114.50.

There was a time when these two banks considered themselves as “untouchable” but the prohibitive cost of money is going to make it difficult for them to fund their businesses without some sort of outside intervention.

We can see them both running for cover and in fact, Morgan Stanley is in advanced talks with Wachovia Corp. although it is also talking to other banks.

Friday 19th September will be an interesting day for both organisations but don’t forget that the darkest hour is just before the dawn following a Treasury meeting.

By lunchtime tomorrow, all that will remain is the hazy memory of something similar to a sub-prime out-of-body experience - and they will both have managed it without flatlining.

But it will be close.

A twisted  fusion of capitalism and socialism is being forged in the white-hot heat of political panic.

No-one should  complain because we  are all being forced to run  blindfold towards  a world where profits are privatised and losses are nationalised. We cannot lose.

Competition will be a quaint throwback to the last century because both the US and UK governments have now demonstrated that if a company is big enough, it will have Federal and Treasury support. It is the smaller companies who will be allowed to go to the wall because it is only then that they can become financial fodder for their fat hungry cousins.

The new financial conglomerates now know that they cannot fail because the State will bail them out.

The lesson that has not been learned  is that the sheer size of companies is what  makes them difficult to govern. The only way to manage these fiscal behemoths is to impose rules that are so draconian that eventually, the spirit of capitalism will be totally expunged. The State will be calling all the shots.

There has been debate as to who is to blame for the current chaos. The bankers know very well what has happened but  they mutter vague generalisations, citing worthless  sub-prime bonds and a general lack of confidence.

There is no way that sub-prime (the greatest euphemism ever?) lending is to blame for the entire financial house of cards tumbling down. The real issue is that  the banks DID NOT HAVE THE MONEY that they were lending. They have behaved like a banana republic which prints more money in order to pull itself out of  the financial quicksand.

Yes, they have been using “pretend” money. Mugabe is doing it now, the Wiemar republic did it  70 years ago and  the entire banking system is still doing it.

The banking system has relied on “electronic money” for years. It was not real money and they have probably known for years that they were sprinting towards meltdown. George Soros knew.

The regulators are not to blame because 90% of their efforts are designed to control the “little man”.  The big picture eludes them . A few days ago the FSA was still issuing statements as to the solidity of HBOS - that’s in spite of the “investigation” that it carried our six months ago on the possible manipulation of HBOS shares.

If the current chaos eventually does go from “boil” to “simmer”, the Government must take the opportunity not only to take a close look at the regulatory regime but also think about a complete restructure of the financial services industry.

The FSA grew out of a need to control mis-selling in the Pensions and Life Assurance industry. That is still its main thrust.

In spite of the increasingly bureaucratic Pensions and Life industry, the bandits are still out there and always one step ahead - they can never be eradicated.

A new global authority must be formed that specifically carries out high-level audits and ensures the implementation of  proper business controls within the banking sector.

However, we do have to accept that the ratcatcher can never catch all the rats.

HBOS and Lloyds

The Republic of Mancunia’s football team (the American one , not the Arab one) appears to have a new shirt sponsor by proxy.
 
The AIG logo currently on the front of Manchester United’s shirts may soon be replaced. AIG is now 80% owned by the US Treasury which neatly completes the Americanisation of the team.
 
So what about the new logo? The Statue of Liberty? The Stars and Stripes? Uncle Sam? Or perhaps, more appropriately, a $-sign?

Will they now be known as the Manchester United States?
 
AIG  was very much involved in the once possibly toxic and now definitely lethal sub-prime mortgage market and had been drawn into substantial dealing with the now-collapsed Lehman Brothers.
 
Just to illustrate the incestuous nature of the financial services market, you may be surprised to learn that AIG owns Ocean Finance. Perhaps they can help AIG to consolidate all of their debts into one easy monthly payment. Below the belt? I don’t think so.

Most financial services institutions are nervously awaiting the  tap on the shoulder – although many will argue that death by  sadistic accounting is not fair.
 
Yesterday,  HBOS shares began their short journey down the financial toilet amid claims that they were in good shape and did not deserve the negative speculation. However, just to be on the safe side, Halifax branches were circulated with a memo asking them to monitor cash withdrawals.
 
One day later they have announced that they are in advanced talks with Lloyds-TSB with a view to a merger. Their shares are now in recovery mode but the proposed merger has all the characteristics of desperation and is the equivalent of two institutions hugging each other in a time of self-induced strife.

Who is saving who? But have you noticed how Lloyds-TSB have kept very quiet during the last couple of weeks? They must have been in discussion for some time now - but whatever happened to due diligence?
 
HBOS and Lloyds are clutching each other like Hansel and Gretel in the dark forest; comforting each other just before the Evil Witch eats them up.
 
Mind you, nowadays the Evil Witch is spoilt for choice. Many have lost their way in the forest.

Dick Fuld

Millions of words have been written on the subject of the latest corporate financial meltdown but no-one has yet explained in simple terms HOW it all happened.

Many years ago I was working in the Head Office of a small bank. One morning a little old man walked in and produced his savings book. He pushed it across to one of our cashiers and said “There’s three thousand in there. These are my savings.”

The cashier looked a bit nonplussed “Yes? Would you like to make a withdrawal?”

” No thanks,” he said, ” I’d like to see it.”

” What would you like to see?”

” I’d like to see my money - just to make sure that it’s OK”

Those were days of wide-eyed innocence and trust -  the days of “My word is my bond” and days when honest toil was rewarded with a small Manila envelope containing cash. Real folding money.

Yesterday I was reminded of that little man. I remembered that he had one bike clip and a clapped-out cap pushed into the pocket  of a grubby gabardine mac.  He had complete trust in his bank because he knew that we were looking after his savings to the utmost of our ability.

That is why I asked one of the cashiers to quickly put £3000 in a metal box and make it ready for inspection.

What reminded me? A complete antithesis. It was a photograph of Dick Fuld, the Bruiser of Wall Street and Lehman Brothers’ boss.

That old man with the bike clip of 30 years ago had been brought up to see money as something real that you could see and touch. No doubt, when Dick Fuld joined Lehmans in 1969, his view of money had been the same.

Unfortunately, Fuld is not the only unqualified bruiser who has made it to the top of a financial institution through a combination of extreme personality, bluff and what is known as “corporate entrepreneurship”. 

(Corporate entrepreneurs are only vaguely similar to proper entrepreneurs. They do take risks but with other people’s money. When they make a profit, they receive a bonus and when they make a loss…. they….er…. receive a bonus. It is believed that they invented the phrase “win-win”).

Unfortunately, their ego feeds their imagination and ultimately they self-delude into a state of what can only be described as corporo-infallibility.  Their infallibility soon invites the ugly spectre of self-interest to install itself somewhere between the bonus fairy and the pension fund.

Today, Max Hastings referred to their “hubris”. He is quite right - but their hubris is only the outward expression of their perceived infallibility. In ancient Greece, hubris was regarded as the gravest of sins because it invariably led to the most severe retribution.

The cash that they play with is found on spread sheets and within complex computer systems. It has no colour, texture or real value. You cannot see it or buy anything with it. The game can only be played by those with a system that can plug itself into their system. It is a closed shop with transactions taking place in an electronic metal box.  An XBOX with bonuses.

There will be many more financial collapses because Dick and his chums were not playing with real money.

Their perception of money is fundamentally flawed.

The billions that still pass through their grasping manicured hands is not real. 

Dick Fuld, in common with many other financial institution leaders has been managing a myth. The myth of “assets” floating on a sea of money owed.

In any one year, all of the big investment houses complete deals and churn money  to the value of well in excess of all the money in the world. So how does it work?

As an example, imagine that two banks  “give” each other a cheque for £1billion and because they are banks, they promise not to bounce each others cheques - have they created wealth? Or have they created an illusion?

Imagine, over the years,  that process being repeated thousands of times - then one of the banks collapses in spite of the fact that “on paper” it has “assets”.

Or, imagine someone walking away from  a card game which was being played for matchsticks and admitting that he does not have the money to redeem his matchsticks.  The other players then all admit that none of them has the hard cash to redeem their matchsticks.

All the banks went into the game believing that they would win. They saw the risk but imagined that the potential winnings outweighed the potential losses. Especially Dick “the Gorilla” Fuld.

Unfortunately it is now Game Over.

The following article appeared in the Daily Mirror on 11th September 2008 and is reproduced with the kind permission of its author, the delectable Polly Hudson.

Heather Mills, unable to talk about her marriage/divorce due to a gagging (not literally, unfortunately) order is writing a novel about the marriage/divorce of a campaigning model and an ageing music legend.

She’s flogging it for a million pounds. Publication is months away but I’ve managed to get my hands on her outline for the book…

“Once upon a time there was a stunningly beautiful, inspirational, pert-breasted woman called Bracken Granulates who tirelessly worked for charities but hardly ever mentioned it. She had lost an arm in an aeroplane crash but she was still a proper canny lass. “Why aye, Bracken,” one of her many pals would often say, “You are reet brave and almost too good for this world.”

Bracken moved to London to not take part in any pornographic photo shoots and definitely never be a high-class call girl. She basically lived a pure, admirable life of truth and virtue.

One day she went to an awards ceremony, held totally in her honour to commend her for all the work she did for charity (which she couldn’t even believe anyone knew about, seeing as how she kept it secret). There she met a famous rock star called Sir Maul PcKartney.

Maul had an evil daughter called Artois who tried to turn him against Bracken, but true love conquered even her dastardly vegetarian plans. Bracken fell for Maul because he cared about the world like she did (loads). She didn’t even know that he was a little bit rich.

You can imagine how silly she felt when she found out! And so she became Lady Bracken Granulates PcKartney but only because she loved him, not because he was minted. It was absolutely no exaggeration at all to say that she was the best wife ever. But mean old (and I mean, OLD) Maul began to get jealous of how much she worked for charity, even though how he even knew she worked for charity at all was a mystery to her.

He wanted her all to himself, but Bracken was devoted to her campaigning. Maul immediately became a crack and heroin addict and was really nasty to her. But she’d promised to be with him for better or worse so she bravely stuck it out. “Why aye, Bracken,” one of her even more many pals said to her, “You are a reet saint for putting up with him.”

But soon it became impossible for poor Bracken to stay. It was all Maul’s fault. So she left, taking their daughter, Dee, who couldn’t possibly be expected to live on less than ten mill a week. “I will destroy you,” screamed Sir Maul, whose mood had turned angry, like it always did when he mainlined crystal meth.

“Your name will be mud in this town by the time I’m finished, even though you are the best, kindest, most honest and selfless woman I’ve ever met. I will make you pay for doing this to me!” “Right back atcha, Maul,” thought Bracken.

Months later, she realised that her story was such an inspirational tale of triumph over adversity that it was seriously unfair of her not to let the public in on it. And so, she decided to write a book. But, as it was fiction, the lead character couldn’t be called Bracken. “Thank goodness for my thesaurus!” she thought, as she typed in the replacement name: Heather.”

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Spygun is always here to help aspiring Geordie novelists and has managed to find something which will no doubt help the multi-talented Ms Mills as she taps away :

“This time, try to hit the middle.”

OnJuly 24thSpygun wrote: “The US Securities regulators are looking at suspected manipulation of Lehman brothers Shares. In addition, Lehman brothers have booked a loss of $2.8 billion for the quarter ending June 2008.”  (That was the second quarter loss)

Lehman Brothers’ third quarter loss (announced last week)  was $3.9 billion on $5.6  billion of writedowns.

“This is an extraordinary time for our industry and one of the toughest periods in the firm’s history,”said Richard Fuld, Lehman’s Chief Executive Officer.

You said it, pal.

We also said (and continue to say) that many financial institutions are hanging in there by a combination of creative accounting and selective disclosure. Unfortunately for them, the light at the end of the tunnel is an oncoming train from financial hell.

So once again a venerable financial institution has crashed, burned and  filed for Chapter 11 bankruptcy protection. It will not be the last because all financial institutions have spent the last few years playing in the same sand-pit and their dangerous games are having to come to a end.

There will be more failures and it is rumoured that a major bank and a major insurer will be involved in upcoming collapses.

Bank of America has just announced its intention to spend $50 billion on acquiring Merrill Lynch. There will be tears.

Ken Lewis , who is Bank of America’s chairman and chief executive has been quoted as saying  “Together, our companies are more valuable because of the synergies in our businesses.”

“Synergy” is where the result is greater than the sum of the component parts. In other words, they are still assuming that 2+2=5.

Isn’t that the sort of thinking that created the current financial mess?

Synergy is a word which did not exist in the good old days before banks had no ambition for world domination and were just involved in….. well…..er……..banking.

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The weird thing is that the so-called “Credit Crunch” is being blamed for the stream of financial catastrophes. Perhaps the banking industry should learn the difference between Cause and Effect.

The current chaos has been caused by nothing less than institutional fraud on a worldwide scale.

The main game played by investment banks and investment arms of most lending institutions has been a strange one  - it does not have a name yet but it works roughly like this:

Get together with ten of your friends. Each one of you should write ten cheques for £1million each. Every cheque that you write  is payable to one of the others in the group.

Hand each one of your friends a cheque for £1million and simultaneously accept ten cheques of £1million (payable to you) from your friends.

You should all be holding ten cheques totalling £10 million each. You are all rich!

Now troop down to your bank and pay £10 million into your account. Needless to say, all of your friends should do exactly the same.

Repeat the process with a different set of friends.

Turn on the fan and wait.

When the inevitable happens, the effect will be swift and messy but such a relief!

(The global credit-market meltdown has led to more than $500 billion of write-downs and credit losses since it began a year ago)

“Joker burning money”

The Prime Minister has announced a £1 billion energy package that could help households across the UK save more than £300 a year on their energy bills.

Speaking at a Downing Street press conference, Mr Brown said the Government will legislate to channel £910 million from energy companies into energy-saving initiatives such as providing loft insulation and cavity wall insulation free of charge to elderly and low-income households and at a 50 percent discount to others.

Cash will also be pumped into a new Community Energy Saving Programme that will provide up to 90,000 homes with targeted advice on improving their energy efficiency and reducing their bills.

The Prime Minister said he did not expect energy companies to pass these costs back to consumers through future prices. Business Secretary John Hutton added that the Government “will not hesitate to intervene” should an Ofgem review suggest that consumers were getting a raw deal.

Mr Brown said the Home Energy Saving Programme would help drive “lasting change” in UK energy efficiency and consumption. Environment Secretary Hilary Benn, also at the press conference, said that each household could save £100 through loft installation and £150 through cavity wall installation in just 12 months.

Other Government plans to help people with their fuel bills include negotiating lower tariffs with energy companies for up to 600,000 homes, increasing cold weather payments from £8.50 to £25 per week in severe conditions and providing cash on top of Winter Fuel payments to the over-60s and over-80s of £50 and £100 respectively.

In common with all other Government initiatives it would be of great benefit and interest to people if they had an indication of how much of the allocated funds would actually be spent on the materials and how much on labour costs.

For instance, when the Government says that it is spending an additional £20 million on education  - that could mean any number of things. It could mean more teachers or it could mean lots of electronic blackboards. It could mean more books or it could mean a lick of paint.

Every £1000 spent on loft insulation could mean either 100 lofts insulated at £10 each or possibly one loft at £100, i.e £10 for the insulating material and £90 for labour charges by the local council.

90,000 homes are to be provided with ” targetted advice on improving their energy efficiency and reducing their bills”. Does that mean leaflets? Home visits by several more sub-strata of public servant?

Has the Government thought this one through as thoroughly as all the other initiatives?

Oh what’s this?

“Sorry, no thanks. It’s too late…… Siobhain McDonagh?  Nope. Don’t recall the name. I seem to recall a Junior Whip by that name - but that was a long time ago…..Yesterday, I think.” (Thinks) “I wonder what else is heading for the fan? ”

 ”Michael Winner and Old Dear”

The Selina Scott femino-ageist issue is still burning - the latest flaming arrow having been fired by the Patron Saint of Ego - his Esureness , Michael Winner.

Winner’s motives as ever, are suspect - probably something to do with not having been breast-fed.

QUOTE from Winner : “There’s nothing sadder than a bunch of unemployable has-beens rising up like the witches in Macbeth and moaning ITV is unfair to us because we’re old”

Winner should know all about witches - have you seen some of his girlfriends? Or perhaps he was referring to the Daily Mail’s editorial staff.

At least it will get attention-seeking Michael on the telly and a slot on Jeremy Vine’s Radio 2 show.

The whole “Selinagate” affair is being treated with a little too much levity so let’s be serious for a moment. 

Are female News presenters like peaches in a bag? Do they all exhibit the inroads of time at the same age? Do they all succumb simultaneously  to the career-dissolution fairy? 

There is something vaguely fascistic about the  media dictum:  “They shall not grow old” - on the telly anyway.

There are many old dears scribbling away and bashing their Remingtons on national newspapers: Sue Caroll, Susanne Moore, Carole Malone, Janet Street-Porter, Lauren Booth, Judy Finnegan and Vanessa Feltz to mention just eight.

These venerable old boilers even have their airbrushed photographs published and occasionally, they are wheeled-out in front of the telly cameras for the odd interview. So in spite of the smell of wee and Steradent, these old crumblies are not regarded as too disgusting for an occasional airing before a patient but gagging audience.

“Double Standard” is a mantra regularly hissed by these geriatro-lovelies.

Well, m’dears, you cannot have your gateau and eat it - even after you have picked out the odd stray facial hair.

Most media old dears scribble a lot of anti-man stuff - unless they go for the occasional toy-boy piece which is usually a bit of a piss-take anyway. Rarely do we see an article which is appreciative of men.  Their favourite subject is “women”.  Dare one use the word “sexist”?

Old men write about issues - such as politics, the law, the world. They also write about trivial stuff such as  cars, travel and football. Plus, they tend to be very appreciative of women. Very little female-negative content.

Why are so many Media “Grand Dams” either single or in frivolous “toy-boy” relationships? Are proper mature relationships not for them? Is it because they are so disdainful of men?

Perhaps it is not just the men who run the telly that don’t want them.

So that’s the sexist bit out of the way. What about the age thing?

Career-ageism is only a problem if ambition is still simmering.

It is not so long ago that this type of ageism did not exist because ambition died at about the age of 50 - as did most of the population. If you survived beyond 50 then by the age of 60, you were ready for your place in the Glue Factory queue.

Both ageism, racism and now sexism are so deeply embedded in the British psyche that they cannot be eradicated through law or legislation. They can only be killed by time because our sociological development is lagging about 1000 years behind our social development.

Sexism and ageism are both  cultural phenomena rooted very firmly in the formerly divergent roles of the sexes and ages.

These roles have only started to