Bankers in sack-cloth & ashes!

[doodab]

In short, the bankers could get away with their reckless behaviour because of the rewriting of the rules by the Financial Services and Markets Act 2000 - legislation introduced by Gordon Brown.

While I've no doubt that Gordon Brown was a bit of a pillock suggesting that the whole mess is his doing is borderline retarded. In the grand scheme of things, his actions were a tiny drop in a very big cesspool and suggesting that he had the power to prevent the financial crisis is giving him far more credit than he deserves.

If you have to try and pin it on one individual Hank Paulson is far more culpable, but even that misses the point. The failure of regulation, capital adequacy rules and banks own risk management practices is a collective triumph of greed and stupidity and suggesting that those who acted stupidly or maliciously should be exempt from dealing with the fallout because those responsible for stopping them failed to do so is simply idiotic, it's like saying we should lock up the policemen because murderers murder.

[Gonzo]

While I've no doubt that Gordon Brown was a bit of a pillock suggesting that the whole mess is his doing is borderline retarded.

About as retarded as suggesting that the entire economic woes of the country are single-handedly the fault of the bankers, as in the OP.

The failure of regulation, capital adequacy rules and banks own risk management practices is a collective triumph of greed and stupidity

This is not new. They have always been like that (I should know ) Banks collapsed in the 1990s and it did not cause financial armageddon, BCCI and Barings (actually, Nick Leeson's account of what happened at Barings while completely one-sided, if you can get past that it provides a good lesson in how big a hole one person's rule breaking can dig for everyone around them).

So what changed?

My point is that Gordon, as Chancellor, tore up a perfectly good regulatory system and replaced it with his own which proved to be woefully inadequate.


Obviously that is only one part of the multitude of issues that came to a head at once but if people want someone to blame other than themselves for their own debt funded consumption supported by an asset price bubble then Gordon is a good place to start.

[doodab]

About as retarded as suggesting that the entire economic woes of the country are single-handedly the fault of the bankers, as in the OP.

This is not new. They have always been like that (I should know ) Banks collapsed in the 1990s and it did not cause financial armageddon, BCCI and Barings (actually, Nick Leeson's account of what happened at Barings while completely one-sided, if you can get past that it provides a good lesson in how big a hole one person's rule breaking can dig for everyone around them).

So what changed?

My point is that Gordon, as Chancellor, tore up a perfectly good regulatory system and replaced it with his own which proved to be woefully inadequate.

The former regulatory system wasn't "perfectly good". It resulted in several bank failures and a great deal of harm to consumers among other things. I don't recall a lot of noise from the other side of the house when the old regime was replaced.

The lack of liquidity in the short term money markets was an international problem, and not something a UK government of any colour could have done any thing about. The FSA was banging on for some time before it all kicked off about the need to stress test against dependence on the short term money markets. I know this, because I worked there at the time and it was in my inbox twice a week. The important difference between Barings and 2007/2008 isn't the regulatory framework, it's that this time you had multiple senior management teams with their head in the sand instead of just one.

You might argue that Gordon Brown, or the FSA, could have legislated to prevent UK banks being so dependent on short term lending. I would argue that would have been impossible because the industry wouldn't have accepted it, they would have squealed endlessly (and quite probably correctly) about it making them "uncompetitive" compared to foreign institutions, the only difference legislation would have made would have been that those institutions concerned would have probably been taken over and become someone else's problem before they imploded.

It goes without saying that it's ridiculous to suggest the tories would have passed such legislation.

if people want someone to blame other than themselves for their own debt funded consumption supported by an asset price bubble then Gordon is a good place to start.

I've no desire to blame the banks, or Gordon Brown, for my problems. I am however keen to see them take responsibility for theirs, and I've no objections to Gordon Brown being blamed for public sector overspending.

I suppose you blame Gordon for the current situation in Greece as well?

[centurian]

GB didn't want to reign in the banks because he was too busy spending the tax money earned from financial services on his beloved public sector.

The reason we're having to make cuts now isn't because the bankers lost money - that was a largely one-off event. It's because they're not making the money year on year that GB assumed they would. "An end to boom and bust" wasn't just a PR slogan - he ran the economy on that assumption - that there would never be another recession.

We're now having to unwind the increases in public sector spending that occurred since 2005 because they were never affordable/sustainable in the first place.

What I find so unbelievable is how easily sheer common sense goes out the window in these situations. In 2006 we were at the height of the boom. Things couldn't possibly get any better. What did GB do - borrow like there was no tomorrow. If you can't pay the bills when things are at their best, how can you possibly manage when things get slightly worse.

And sure, there were a few grumbles from Vince Cable and the like, but there should have been mass outcry. It was economic suicide - why didn't more people say it.

The answer - because people like being told what they want to hear - and in that respect, the public at large are to blame for the mess we are in...

[Jeff Maginty]

..

[Jeff Maginty]

..

[DodgyAgent]

GB didn't want to reign in the banks because he was too busy spending the tax money earned from financial services on his beloved public sector.

The reason we're having to make cuts now isn't because the bankers lost money - that was a largely one-off event. It's because they're not making the money year on year that GB assumed they would. "An end to boom and bust" wasn't just a PR slogan - he ran the economy on that assumption - that there would never be another recession.

We're now having to unwind the increases in public sector spending that occurred since 2005 because they were never affordable/sustainable in the first place.

What I find so unbelievable is how easily sheer common sense goes out the window in these situations. In 2006 we were at the height of the boom. Things couldn't possibly get any better. What did GB do - borrow like there was no tomorrow. If you can't pay the bills when things are at their best, how can you possibly manage when things get slightly worse.

And sure, there were a few grumbles from Vince Cable and the like, but there should have been mass outcry. It was economic suicide - why didn't more people say it.

The answer - because people like being told what they want to hear - and in that respect, the public at large are to blame for the mess we are in...

Spot on

[DodgyAgent]

The bankers are not the only ones to blame for the financial crisis. The politicians and regulators are also to blame for allowing the bankers to gamble the money away whilst getting huge bonuses for doing so. However, that doesn't let the bankers off the hook.

Look at the consequence of all this... The BOE are allowing inflation to rocket in order to inflate away the debts. This is hurting people on fixed incomes. Do they think that it's only a few old people whose pensions are not index-linked who will suffer? Many people in the working population have had pay-freezes or below-inflation pay rises for several years now, so roaring inflation will hit a lot more people than just a few pensioners on non index-linked pensions.

It will be interesting to see what happens when the masses realise just how much they are being shafted to pay for the failure of bankers politicians and regulators. It's already happening, what with public sector workers threatening to go on strike. The people who caused this financial crisis need to be made to contribute towards repairing the damage. Justice needs to be done and justice needs to be seen to be done.


Jeff
(still pissed off!)

If you dont like people who earn more than you, why not just say so?

[doodab]

If you dont like people who earn more than you, why not just say so?

The problem isn't what bankers earn, or even that some banks needed bailing out, it's the wider repercussions of the mess they made, which has had an effect on most people's lives, however prudent or otherwise they might have been. Life has been made harder for companies and in turn their employees, savers are offered -ve interest in real terms, and people, including a lot of low and mid level bankers, have lost their jobs because of it.

It seems to me that financial industry "creativity" has got out of hand, particularly in the US, and most regulators are so convinced of the benefits of free markets they no longer stop to question whether it's desirable for certain markets to exist at all. I would like to see a regulatory framework that prohibited creation and trading of complex financial products without prior regulatory oversight and approval.

Particularly in the case of many of the "toxic assets" that precipitated the cessation of interbank lending, there is recent research which demonstrates that it is simply impossible for all of the participants in a market to derive a fair value for them. Hence the over reliance on ratings agencies. It seems to me that the only regulatory intervention which could have prevented what happened would have been to prevent these assets from ever being created in the first place. This would also have discouraged sub prime lending as it would have been significantly more difficult for lenders to offload the dodgy loans.

I can't really see things getting fixed until the financial industry succumbs to effective regulation, which of course it will fight tooth and nail. Of course at that point the super profitable and ethically dubious "creative" side will disappear and it will become the boring, highly competitive and not especially profitable mechanism of capital allocation that it ought to be.

[centurian]

The problem isn't what bankers earn, or even that some banks needed bailing out, it's the wider repercussions of the mess they made.

But what is the "mess" left behind.

Basically it's a financial system and economy that was never as profitable as we thought it was. Our economy is generally fine - it's just we were led to believe it was so much better, so we spent money we never had in the first place.

We are now having to make "swingeing cuts" to put the economy back where it started and unwind the fake boom that never really happened.

If your other half tells you won the lottery - and you go out of a spending spree (including buying lots of stuff on multi-year HP), but then your OH realises that the read the wrong set of numbers... Your other half didn't "lose" you the lottery money - you never had the winning ticket to begin with.

The "mess" is that the boom of the 00's never really existed, but we spent like it did.