Tag Archives: Bank

Holding Bank Shares? Think again.

Another week, another  bank rip-off…

The Payment Protection Insurance (PPI) mis-selling scandal has only just come to a head. Banks are facing compensation claims of as much as £6bn from customers duped into buying insurance they didn’t need.

And now big UK banks will be all over the papers again – this time for mis-selling another sort of insurance, this time to small businesses.

Here’s how it works…

You’re a small business and you take out a loan with a bank. And just like with PPI, the bank wants to hit you with some “insurance”. Making interest on a loan isn’t enough for these guys. They want to optimise !!!

With a small business, banks cannot sell critical illness or redundancy insurance. So they have to be a little more imaginative.

The idea went a little like this: “Hey, that loan you’re taking… Now you’d be a fool not to want to protect your business against interest rate moves. Look, we’ll put together an interest rate swap contract. Basically, if rates move against you, this contract will pay out…”

But what many business owners didn’t realise was that if interest rates moved down (which of course they did) then they’d be on the hook for potentially hundreds and thousands of pounds.

And you can bet the banks were keen on shifting these policies. This from the Sunday Telegraph:

“The case of Adcocks (a small electronics retailer) highlights just how much of an edge the banks had. Following 12 months of what Mr Adcock describes as “encouragement” from his local Barclays relationship manager, the company in February 2007 took out an interest rate hedge on its £970,000 of borrowings from the bank. Unbeknownst to Mr Adcock, on the day he signed the agreement, Barclays Capital, the bank’s investment banking arm that structured the deal, is likely to have booked a profit of as much as £100,000 from the sale of the hedge.”

Here’s the full article

These interest rates swaps have driven some businesses into administration. The banks have been siphoning cash straight out of business accounts as a result of ‘adverse moves’ in the interest swap.

Professor Michael Dempster of the University of Cambridge’s Centre for Financial Research said: “I liken it to going to bet on a horse race having fixed the result. You’re not guaranteed to win, but you have a heck of an edge on the punters.”

All this could mean more huge claims against the banks. Prof. Dempster said “I think this could be at least the same size as PPI.”

So it’s clearly another savage blow for the UK’s retail banks. If you aren’t already out of the banking sector, then these sorts of shenanigans ought to make you think twice about holding bank shares.

All Change!!

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 19th 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?

Revenue and Misappropriation

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.

KFC is not a Knighthood, Gordon!


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.

Did you call me a Banker?


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?

The new Oktoberfest?

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.

Give us a clue


1-across is SWAT TEAM”

“I’ve got ‘T’ as the first letter”

“That doesn’t surprise me.”

The latest desperate initiatives of an increasingly desperate Prime Minister and  a Chancellor who is already packing his parachute  have just traversed the laughable and blundered into the surreal.

The plot so far: The banks rip each other off by granting a mortgage  to anyone with a pulse – irrespective of whether or not they can repay the loan. The banks then tart-up these dodgy mortgages by packaging lots of them up them up into a fund (securitisation)  and then they flog shares in these funds to each other. 

The money rolls in and  is lent to more dodgy individuals until someone realises that selling shares in  “funds” that are not producing any income because no-one seems to be paying their mortgage is not a good thing.

(The American banks started it but we aped them and then blamed them.)

The banks then decide that there is a crisis and the only way to deal with it is to stop lending – to each other and to the public.

This strange new situation is given a name – Credit Crunch.

Then these privately-owned banks go cap in hand to the Bank of England which has been “advised” to bail them out. Others, such as the Northern Rock are given money directly by the Government.

That does not seem to do the trick because the banks decide to sit on their (our) money because they don’t want to take any more risks. Why not? Because these ersatz corporate entrepreneurs can only function when things are going well.

They have no real idea what to do next – except perhaps to rip off existing customers by increasing interest rates on anything that they can get away with.

When they did play at being entrepreneurial with these so-called “securitised ” mortgages, they messed up – big time. They should all be standing shoulder-to-shoulder in the dock.

However, the banks know that if they do nothing for a few months, the desperate government will be forced into action. They know that the New Labour government has only two ways of doing business:

1. No Crisis = No Action.  

2. Crisis = Panic = Action = Handouts = Big Bucks.

Today we have the announcement that the government will lend money to first-time buyers and there will also be a package for those who cannot repay their mortgage and for good measure, Stamp Duty for properties with a purchase price of £175000 or less will be suspended for a year.

So the government lends to the banks then it lends to the borrowers so that the banks can lend some more to the borrowers.

Why doesn’t the government cut out the middle-man and give the money to the builders to build houses which can then be rented out with a post-dated option to purchase.

When will we all wake up to the fact that the “owner-occupier” skirmish with hard capitalism has not worked  and that we have to be re-educated into thinking of a house as a home and not as a commodity.

This is what Gordon Brown had to say:

“No-one in this country who works hard and plays by the rules should be left alone to bear the impact of the current global economic downturn, and I am determined to see the government do everything we can to help British families weather these difficult times.

I understand what it means to see people struggling to get mortgages or homeowners who, through no fault of their own, suddenly find themselves unable to keep up with their repayments. And it’s not just families who are finding it tough but businesses as well, with house-builders now experiencing difficult conditions after years of extremely favourable circumstances.

So to address these issues, the government’s new £1 billion housing package will give first-time buyers a leg-up onto the housing ladder, help homeowners in difficulty and support the UK’s housebuilding industry.

First-time buyers are one of the groups hit hardest by the credit crunch and are crucial to driving the wider housing market. They would usually benefit from falling prices, but a combination of the higher cost of borrowing, bigger deposit requirements and weakening consumer confidence means this has not happened.

To do everything we can to support them, there will be a one-year stamp duty holiday for all properties sold for up to £175,000 – helping to restore market confidence and giving first-time buyers the extra help they need. And, alongside this, 10,000 more first-time buyers will benefit from a new £300 million shared equity scheme called “Homebuy Direct”.

The current housing market difficulties are also leading to increased repossessions, so we are introducing a new £200 million mortgage rescue scheme that will help thousands of vulnerable families to stay in their homes.

And to do more to encourage social rented housing, we are bringing forward £400 million of government spending to deliver up to 5500 new social rented homes over the next 18 months.

Taken together, I am confident these measures and the other new steps we have announced will help create the best possible environment for the housing market to come through these challenging times – and I invite you to read more about our proposals on the Number10 website. “

You can’t beat a good bank.

Chris Blackmore, Business Editor of the London Evening Standard  is quite right in saying that there ought to be a few more bank executives either resigning or at least participating in an exit interview.

Sadly, even on the rare occasions  when they are shown the door and pushed, they are invariably given a very big parachute so they’re never in any great danger.

Spygun understands the industry and knows that there is an almost masonic bond which nurtures, develops and then protects individuals who would be eaten alive in the outside business world. It is no good expecting them “to do the right thing” because they have no concept of what that means. These men are “takers”.

When it suits them, they are the victims of “external economic forces over which we have no control”. Regrettably, they never seem to have any concept or inkling of these forces and consequently, when the solids hit the air-conditioning,  it is always a surprise.

They certainly did not see that mortgage securitisation was an accident waiting to happen. The reason why most did not see the danger is because many did not understand the nature of securitsed mortgages.

They are the “Untouchables”. These are the executives who  can lose millions and still stick £100k per annum into their pension fund.

What Chris  highlighted is their arrogance but it is not just arrogance that has brought them to this point.

In the eighties we had the Genesis of the “corporate entrepreneur”.  American banks were looking for  individuals who were by nature, entrepreneurs  but who would be willing to work within a large organisation, bend the rules where necessary and make big bucks for the business.

It did not matter if they made expensive mistakes, because they had the company’s assets to fall back on. They were encouraged to take risks, on the understanding that occasionally they would make losses..

The Americans were good at it and it is that mentality which bundled up dodgy mortgages and sold them on.

Here is the UK, we played at it, made the right noises and created what can only be described  as “ersatz” corporate entrepreneurs. We had the suit, the car, the management jive talk and sometimes even a dodgy MBA  but we were never the real thing.

The bad news is that here in the UK, the 80s corporate entrepreneurs are now in charge.

However, because they continue to lack the entrepreneurial flair of their American cousins, all that they can do is sit tight and fill their pockets until their personal final whistle sounds.

This is Chris Blackmore’s excellent article which appeared in the Evening Standard on 28th July 2008. It is reproduced here with his kind permission.

Thank God for Mark Burgess, head of equities at Legal & General. At last, an institutional investor has had the guts to say in public what many of them have been muttering in private these past few months – that not enough senior executives at Britain’s banks have quit in the subprime debacle.

Only one has gone – Bradford & Bingley’s Steve Crawshaw, and that was for angina – whereas in America and elsewhere, the sight of highly paid bankers eating humble pie has been a regular occurrence. Look at Royal Bank of Scotland. Its shares have plunged twothirds in the past year, partly because the bank followed its rivals and thought it could make millions from trading in fancy financial instruments built around dodgy borrowers in the US ( precisely the sort of people RBS would not ever lend to normally) and also because it ignored the warning signs and paid a fortune for ABN Amro.

Imagine if a business in any other sector had seen its value plummet so much. Do you think its bosses would still be in situ? Do you suppose RBS analysts would hold back from demanding management changes? Yet RBS chairman Sir Tom McKillop and chief executive Sir Fred Goodwin carry on regardless.

They’re not alone. At HBOS, Lord Stevenson, the chairman, and Andy Hornby, the chief executive, have presided over a share-price collapse of 75%. You have to wonder what sort of cloistered world they inhabit. Surrounded by fawning colleagues, lost in their own vanity, they are shielded from the uncomfortable truth. No surprise then, that Edinburgh is referred to as “Fredinburgh” in tribute to Goodwin’s hold over the home of the Scottish banking establishment.

It’s the sense of complacency I find so breathtaking. Somehow, Goodwin and McKillop, plus their compatriots at other British banks, are saying: “We’re different. Yes, we know others have gone, in New York, Paris, Zurich and Frankfurt, but we’re not like them.” This is arrant nonsense – arrogance that isn’t lost on foreigners when they look at how we conduct ourselves in this country.

Frankly, it’s the sort of old boy matiness that was supposed to have been banished from the City but is clearly as entrenched as it ever was.

It rears its head in other ways, too. One of my bugbears has always been the rank failure of our authorities to prosecute for fraud and other instances of white-collar crime. In the US, managers are frequently led away in chains – but not here. In the UK, apparently, our bosses are clean – they wouldn’t dirty their hands with a bit of crookery.

What rubbish. Jessica de Grazia, the former US prosecutor, has just compiled a report into the Serious Fraud Office. What did she find? Only that the organisation had “pass-the-buck, risk-averse culture, lack of focus and skills”.

Oh, and get this. De Grazia said the SFO had charged seven defendants in five years, against 50 in the same period by the US Attorney’s Office for the Southern District of New York. Seven in five years!

Even when we do pursue cases, we do not get them right. The SFO’s conviction rate for 2003-7 was 61%, compared with 92% in New York.

Concluded De Grazia: “A criminal justice system that produces this little cannot be said to be effective in deterring, detecting or punishing criminals who commit serious white-collar crime.”

But it’s the silence that is so damning. Where are the calls for change? Why isn’t the City jumping up and down, saying enough is enough? How can we honestly lay claim to be the world’s leading financial centre when we behave in such a lackadaisical fashion?

What is required is more like Burgess, a fund manager who is not comfortable sitting on his hands, to break their silence. Legal & General holds 5% of RBS. For the sake of the City’s reputation, the other 95% need to stand up and be counted.

The rats were digging – now they’re leaving.

karadzic.jpg Alistair Darling

We have devoted quite a bit of time and space to Mervyn King, his band of funsters and their effectiveness in doing anything at all to the economy. Currently, they are totally boxed in. 

They cannot attempt to stimulate the economy by dropping rates because inflation is running away –  it is out of control and as usual, the BoE is just an expensively suited observer.

There is as saying:

1. There are those who make things happen.
2. There are those who watch things happen.
3.There are those who wonder what happened

The BoE has just slipped from Two to Three. They never made it to One.

The USA has responded aggressively because after three years and a gradually collapsing housing market they had to stop it.

Here in the United Kingdom, interest rates will not be seriously played with until 2009.

That will not help our collapsing property market and unlike the States, we are still in the early stages of the collapse-the USA are about two to three years ahead of us.

The main growth driver of the UK economy is the financial services sector.  That sector is running for cover and because the economy is manufacturing-light, we are in deep trouble.

Past Chancellors have made a great deal of the fact that we are the world’s commercial centre and that London is that the epicentre of world trade.  That is all very well  when the world’s economies are booming but leaves us very vulnerable when they are not.

Unlike the States-all that we can do is sit and wait.

Rats deserting the sinking ship.

We thought that things were bad when Eastern Europeans started heading back home. The real reason that they are disappearing is that our own (domestic) unemployment rate is gathering pace which means fewer jobs for foreigners.

Looking at the G8 group , the best-off at the moment are the “resource economies” such as Russia and Canada. They have something to sell.Our problem is that we have nothing to sell – we are as service-based economy.

What Gordon Brown should do is to take back control of interest rates but not give them to Alistair Darling.  Alistair  can go away, grow his hair and beard, put on a large pair of  glasses and work as a new-age therapist.  No-one will recognise him.

Finally, the Securitisation of mortgages should be outlawed. It is far too easy for bad lenders to hide bad lending by bundling mortgages up and flogging them off on the open market. It is like buying a box of bric-a-brac at an auction and when you get home , discovering that you have bought a load of crap.

Lenders should take responsibility for their own lending -like they used to.

By the way…. Northern Rock….Covered Bond issue?  One thing to say. No.

Gordon the gamblers’ friend

Good bloke that Gordon Brown. He has agreed (on our behalf) that we taxpayers will subsidise the  the sub-prime gambling losses of our banks.

Imagine what would happen if you went to Ladbroke’s, put a few quid on an outsider and lost a lot of money. Do you think that if you then  went to Gordon for a temporary sub , he would bung you a few pounds to tide you over? No, me neither.

Those of us who have our houses repossessed in the next few months should remember that the lending institutions who are taking our homes are being subsidised with our own money. The taxes that we pay on our income, our food , our savings and everything else, are being used to prop up bad investments made by institutions who (wait for it!)  – give us investment advice. If it wasn’t so tragic it would be ironic.

Whenever I see the banking spivs in handmade suits meeting with politicians, I always feel that someone is being conned – and it isn’t the spivs.

The banks should make their figures available for public scrutiny.

I do not mean the sort of unintelligible financial garbage and graphs that are the norm. Let us have four columns – 1. The Bank 2. Current losses 3. Potential Future Losses 4. How much cash they have.

There is no doubt that they haven’t all made the sorts of losses that we are being frightened with.

Most banks make obscene profits which should somehow be capped or they should  use the profits from their non-mortgage sectors to subsidise their losses. Any Retail Bank also has an Institutional Bank, an Investment Bank, a Card Business and many other revenue streams which they conveniently forget about at times like these.

Incidentally, most of their losses are potential losses.

Why should the British taxpayer subsidise foreign banks such as Abbey (owned by the Spanish Santander Group), Citigroup (American) or HSBC (Hong Kong and Shanghai Banking Corporation)?

There has been a stitch-up and the banking fat cats are lapping it up.