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...
Steffan said:
Over the last thirty years the Financial Services industry has become more and more self serving and less and less interested in the customers and the economy.
AgreedSteffan said:
If the Banks go on as they are the economy will nosedive into recession for many years to come. We have to find a way to resurrect industrial effort and manufacturing output.
Agreed. The problem may have begun 30 years ago but it will only get fixed through structural change in workers attitudes, the benefits system and bank participation. Steffan said:
Putting the entire assets of a bank on the 3.30 at Kempton may be a gamble that pays off BUT IT IS NOT CONSIDERED BUSINESS. It is NOT Banking.
Absolutely agreed. Some have lost sight of the fact that although both involve "risk", investment and gambling are NOT the same thing.Steffan said:
The commodity traders and investment traders CANNOT be supported by Banks.
Agreed, and I expect there will be changes on the way to ring-fence the activities. There is no need to break up the banks to achieve this.Steffan said:
Buying a commodity, holding it for a while, doing nothing to it and hoping the market will rise is NOT business.
Hmmm. I think it is business but isn't investment. Steffan said:
The banks should be out of this completely.
Hmmm. I don't see why - so long as such activity is ring-fenced away from "banking".Steffan said:
Unfortunately the likes of George Osbourne and David Cameron (and Nick Clegg and Edward (Ed!!) Milliband) are all too pally with the Bankers.
Agreed. but regrettably "financial services" is the only game in town for UK right now. Re-establishment of manufacturing is a dream at the moment. And bear in mind the global competitive environment.Steffan said:
We need a fundamental reform of our Banking system. The current one allowed Northern Rock to be ruined in 5 years of utter madness and over lending on an unsupportable mortgage base after 150 years of unblemished trading.
Agreed. The NR situation was simply mind-boggling stupidity. Greed in a bubble.Steffan said:
They have lost nothing and gained everything at the taxpayers ultimate expense.
More particularly, at the expense of savers. The taxpayer will probably get his money back in due course.Steffan said:
Who are the fools?
The banks (and Blair/Brown)Steffan said:
I fear there will be a second banking collapse unless major changes are made. AND AS YET THERE HAVE BEEN NO MAJOR CHANGES.
Don't panic; there will be changes; collapse is very, very unlikely IMO. More likely the banks will continue to write back their bad and doubtful debts and congratulate themselves on how well they are doing. All thanks to the taxpayer (and the raped savers).
IroningMan said:
Because I presume that, had they [NR] fallen over, whoever bought their debt book would have sought to get more than 0.44% over BoE from me?
In fact your mortgage would just continue as before but in the hands of whoever bought the wreckage of Northern Rock. In fact, some borrowers might simply have stopped paying thier monthly instalments and waited to see what happened. It would take new owners a long time and a great deal of effort to get that lot sorted out. Needs caution over possibly awkward contract terms though. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff