Mervyn King - The right to be angry
Discussion
Over the past 30 years, Mervyn King says: “We changed Britain away from a sclerotic economy with inefficiencies and problems in labour relations. Everyone got to the point where we no longer expected government to bail us out. Everyone bought in to market discipline. We were all better off. It was working very successfully.” But now, people have every right to be angry, because “out of what seems to them a clear blue sky”, the crisis comes, they find they do lose their jobs and there’s the sharpest fall in world trade since the 1930s. “But, surprise, surprise, the institutions bailed out were those at the heart of the crisis.
The key question, in his view, is not why an individual bank says it needs to pay bonuses (the reason cited is always the need to keep talent), but: “Why do banks in general want to pay bonuses? It’s because they live in a 'too big to fail’ world in which the state will bail them out on the downside.” They are tempted to excessive risk and excessive payments: “It is very unproductive to single out individuals. Bankers were given incentives to behave the way they did. That’s what needs to change. We must resolve this problem.”
We must get rid of the idea that “if something is growing rapidly, it must be good. Every supervisor should say: 'The banks I should worry about are not only the ones that are losing money but the ones who are making a lot of money.’ ” He goes on: “What I’ve tried to do my whole time at the Bank is to set general rules. You can’t rely on the wisdom of individuals.
http://www.telegraph.co.uk/finance/economics/83629...
The key question, in his view, is not why an individual bank says it needs to pay bonuses (the reason cited is always the need to keep talent), but: “Why do banks in general want to pay bonuses? It’s because they live in a 'too big to fail’ world in which the state will bail them out on the downside.” They are tempted to excessive risk and excessive payments: “It is very unproductive to single out individuals. Bankers were given incentives to behave the way they did. That’s what needs to change. We must resolve this problem.”
We must get rid of the idea that “if something is growing rapidly, it must be good. Every supervisor should say: 'The banks I should worry about are not only the ones that are losing money but the ones who are making a lot of money.’ ” He goes on: “What I’ve tried to do my whole time at the Bank is to set general rules. You can’t rely on the wisdom of individuals.
http://www.telegraph.co.uk/finance/economics/83629...
Police State said:
ahh, but according to conventional PH Banking Guru wisdom, the short term was the preserve of the borrowers; no?
i was at a presentation by a certain Scottish bank recently and someone asked why the short end of the yield curve was lower than the long term .. and he curtly replied "that's because borrowers, businesses and pressure on the government by both these groups tended to keep rates lower, but in the longer term, the BoE would need to curb inflationary pressures" - so in a nutshell, everyone likes low interest rates but it has to be paid for in the end.as with the above comments, MK failed to do his job properly, even if it was due to fear of retribution from Winky.
anonymous said:
[redacted]
But that's not his sole job is it."The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment."
Raise interest rates, crush overstretched borrowers who will the default bring down the banks who lent to them.
The banks should be very happy they are just getting a lecture from Mr King, would they rather he got all Volcker on their arses?
Police State said:
ahh, but according to conventional PH Banking Guru wisdom, the short term was the preserve of the borrowers; no?
It is both. But banks have to look at short term for profits annually to appease the shareholders.And let's not forget that the Bank of England have not exactly maintained the economy as efficiently or effectively as they could have or indeed should have.
Jasandjules said:
Police State said:
ahh, but according to conventional PH Banking Guru wisdom, the short term was the preserve of the borrowers; no?
It is both. But banks have to look at short term for profits annually to appease the shareholders.And let's not forget that the Bank of England have not exactly maintained the economy as efficiently or effectively as they could have or indeed should have.
NoelWatson said:
Fittster said:
And what would happen to the banks profits if he raised interest rates?
Not sure it would make much difference, what did you have in mind?And that's forgetting the sweeties of QE he dished out to the banks.
He's been bloody good to them, a few nasty words in the Telegraph isn't going to hurt the banks that much.
NoelWatson said:
Fittster said:
Lots of defaults and that isn't good for lenders is it.
Nor overleveraged borrowers. So why are they angry at the banks?I'm disappointed that capitalism wasn't allowed to function as that would have given the story and far more dramatic climax.
But for the banks and their supporters to through a hissy fit at the article seems a bit rich considering all the support Merv has given them.
NoelWatson said:
Fittster said:
Rather unfortunately those without guilt will have to join in the suffering and they should be angry at a lot of people.
We should get a list together of the innocent parties. Fittster said:
Well first on the list poor pensioners, stuck on fixed incomes/savings with no way to protect themselves from higher tax and inflation that's going to be needed to reduce them debt.
No, they have ridden the unprecedented property bubble and got off at or near the top. Next....
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff