Bailing Out The Banks another £300bn

[malc d]

Mel B - 2009-01-21 7:56 PM

 

So how come the staff at Northern Rock are getting a 10% bonus!!!!! For what?????

 

Absolutely disgusting ... 8o|

 

 

 

It just shows what contempt these people have for the rest of us.

They already had a bonus - they kept their jobs !

 

:-(

 

 

[william1]

malc d - 2009-01-21 8:35 PM

 

Mel B - 2009-01-21 7:56 PM

 

So how come the staff at Northern Rock are getting a 10% bonus!!!!! For what?????

 

Absolutely disgusting ... 8o|

 

 

 

It just shows what contempt these people have for the rest of us.

They already had a bonus - they kept their jobs !

 

:-( Could not believe it when I saw it on Sky News !!

Alan

 

[Syd]

Brian Kirby - 2009-01-21 2:25 PM

Rich

I don't think the flavour of government then, or now, would make/have made much difference to the outcomes.  We were, and are, just doing what we always seem to do, which is blindly following the latest American government/management/fiscal fad, instead of thinking things through for ourselves.  If we just start doing that it will help, whoever is governing.

Hi BrianThe reason that we so blindly follow the American fads is really quiet simple.Don't think that the British bankers ars so dumb that cannot work out risk because they are not and they can.Whats more they did and they knew exactly what they were doing and it wasn't being sheep, they also saw the rich commissions that they could earn and so they did it and decided that they would deal with the consequences if and when they arrived. Beggar tomorrow lets get what we can today.This crisis is a bankers crisis, entirely caused by the banks and absolutely no one else. They made money for today because by the time it all blows up they reconed they would all be retired wealthy men.Many of them should be prosequted for criminal neglect of their duty to protect their clients money, but will they be------ NO---- wonder why !!

[CliveH]

Agreed Syd. And appologies to all for focusing on a single ellement within all of this - but it is one that is pertinet to how and why the banks were allowed to get away with what they have.

 

I mentioned the RDR (Retail Distribution Review) and this article from one of the pinks outlines the evolution of said RDR and how Government via its civil servants have mucked it all up.

 

What lept out at me, such that I actually stood up at my desk and said out loud how much I agreed with this particular, sentance was the following:-

 

" By my reckoning, this makes the FSA complicit in causing more damage to more savers, investors and consumers than all the conmen and women of Britain put together."

 

I hope people find the article of interest as it outlines clearly the issues we have whereby our pensions and savings are regulated by transient civil servants whoes only claim to fame is that collectively they regularly balls things up.

 

......................

 

Reform the regulator

 

Tom Baigrie Baigrie's View - 22-Jan-2009

 

The RDR should have a fourth version but this time it should stand for the Regulatory Disasters Review. The FSA should be reformed, its transient civil servant culture abolished, its payscales and perks cut immediately, as have been those whom it regulates.

 

Like some mediaeval teenage monarch, the FSA is both naive and certain of its power and thus a most dangerous force in our market and the economy at large. It is time for real regulatory reform - the reform of the regulator, not the regulated.

 

When I was seeking new clients in the 1980s, the big marketing lie of the day was that the Equitable Life were better value than any other insurer could ever be because they paid no commission.

 

One could not challenge this as its with-profits fund had no explicit charges. The lie was central to all their marketing and was believed by MPs, the Law Society and all the great and the good.

 

I even took to the desperate measure of carrying round a job advert promising Equitable recruits salaries and bonuses far greater than I could then hope to earn.

 

The regulator's naivety meant they never dealt with that lie. Instead, it was though a separate bit of incompetence that the FSA (as it is now known, though it had other acronyms then) effectively closed the Equitable.

 

After eight years, the Government agrees with this view. Last year, the Government also acknowledged that the FSA's naive regulation of banking and borrowing, enabled the credit boom and crunch and thus the depth of the current econ- omic blight.

 

By my reckoning, this makes the FSA complicit in causing more damage to more savers, investors and consumers than all the conmen and women of Britain put together.

 

The regulator's methodology of recruiting passing bands of civil servants on inflated salaries to do what they think is best for a few years before moving on to other things has caused a culture of institutional naivety.

 

The retail distribution review is the current empirical proof of that. It has had three stages in its lifecycle. The first was born of one civil servant's simple desire to make his mark before he moved on. Sir Callum McCarthy will proudly display his hideously costly initiative on his CV as he makes his way to the Lords.

 

The second was Amanda Bowe's. She, of course, has moved on now too but during her brief tenure she listened to a lot of common sense and wrote it down. Her version would have inflicted minimal damage on the good and forced the bad to reform. It was utterly different to the first version.

 

Now Dan Waters has rung the changes once more to reveal a ridiculously naive third version. A plan designed to increase direct salesforces and so help consumers. Have they learned nothing?

 

In short, the regulation of advice has exactly resemble a compass in the Bermuda Triangle. It has gone every which way and suddenly from all that vacillation and confusion the FSA has declared that it is now immediately certain of the path it must follow.

 

Now it aims, to paraphrase Mick McAteer, to get worse advice to more consumers. Their certainty is that of the desperate and the naive.

 

They had to do something, they did not know what to do, so they did what the most powerful and latest lobbying effort told them to do.

 

As good civil servants, they pretend they worked it all out properly and are certain they are right and it will happen as they say it will, but just in some years time.

 

Surely no one believes them?

 

 

..........................

 

No I don't think for one moment that anyone believes them at all!

 

The wonder is then - how do we stop them keep ripping us off?

 

[Brian Kirby]

Syd - 2009-01-22 7:54 PM

Brian Kirby - 2009-01-21 2:25 PM

Rich

I don't think the flavour of government then, or now, would make/have made much difference to the outcomes.  We were, and are, just doing what we always seem to do, which is blindly following the latest American government/management/fiscal fad, instead of thinking things through for ourselves.  If we just start doing that it will help, whoever is governing.

Hi Brian The reason that we so blindly follow the American fads is really quiet simple. Don't think that the British bankers are so dumb that cannot work out risk because they are not and they can. Whats more they did and they knew exactly what they were doing and it wasn't being sheep, they also saw the rich commissions that they could earn and so they did it and decided that they would deal with the consequences if and when they arrived. Beggar tomorrow lets get what we can today. This crisis is a bankers crisis, entirely caused by the banks and absolutely no one else. They made money for today because by the time it all blows up they reckoned they would all be retired wealthy men. Many of them should be prosecuted for criminal neglect of their duty to protect their clients money, but will they be------ NO---- wonder why !!

Syd

I agree with your sentiments, though it was governments, and not bankers, I was referring to as blindly following American trends - usually just as the Americans begin to see their shortcomings and move on! 

It seems many of the debt securitisation wheezes that have so destructively blown up were invented this side of the pond, and then taken up the other side with that enthusiasm only the Americans seem capable of. 

I have a sort of suspicion that the problem has been a combination obscurity in how the schemes worked, leading to misunderstanding over how to use them wisely, and that infectious enthusiasm for the latest idea. 

In short, fools rather than knaves, at work.

[Brian Kirby]

Clive

No disagreement with most of that, but it does beg a few questions.

I think you are pleading for smarter, more effective, regulation - though you just might be pleading for none! However, to have expert regulators, I think they would need to be drawn from within the financial markets.  To keep them up to date it seems to me they would need to be rotated in, and out, of the market.  That would seem to create some obvious difficulties over confidentiality, and loyalty.

It seem to me that we have just had adequate demonstration that the market is not truly capable of self-regulation, and that when it fails we all pay the price.

As you set out, we have also had adequate demonstration that ineffective regulation doesn't work either, with the result that when it fails no-one gets paid.

So what might be the working solution, assuming we all survive to need one, that is?  A part of me says that if there had been no regulation, and if the shareholders had been made fully liable for the failure of their appointed boards of directors - in the sense that if the board parks the company on the rocks, the shareholders lose the lot - we might have done better.  However, another part of me says that is Utopia and, as Syd says, short term gains will always get the better of long term judgement.

[CliveH]

Morning Brian

 

I do not disagree with your assessment - I am pleading for better regulation. And by better I mean regulation by those with at least some experience.

 

But you say "Self Regulation" - However, the financial world in the UK is unique in that it is regulated by a Government Agency.

 

The medical profession regulates itself, as does legal, accountancy, Pharmacy, Opticians, Architects etc etc.

 

Not saying regulation via NGO's (Non-Government-Organisations) is better, but I am saying that from the consumers viewpoint having seen the FSA asleep at the wheel over Equitable life and now, more recently allowing the banks to pull the wool over their sleepy eyes, no one could possibly say that the FSA has done a good job.

 

In fact I would say that due to its dilatory nature, it has done a great deal of harm to the pensions and savings structure and ethos within the UK.

 

From an IFA's point of view, we are sick and tired of the constant changes in direction and focus from the FSA. And as the article I reproduced states, we can now see that the Mark 2 version of the RDR which was basically well thought out and would have worked has now been swept away by the latest Civil Servant in charge - keen to "make his mark" and his ideas are to allow the bad old days of the Allied Crowbar, Shabby life and Guardian Royal Rip Off direct salesforces back on our streets.

 

And guess who pushed for this?

 

Why the banks of course. because the Mark 2 version stipulated that if you only advised on your companies/banks products you were a salesman not an adviser.

 

We work on a fee paying hourly rate and so we would be labelled "Advisers".

 

Now the banks did not like that idea at all and applied pressure and so we now have the FSA backstepping so look out!

 

When you go into your bank and it is suggested that you see an "adviser" - the person you see is going to be anything but.

 

The FSA is failing in its duty to protect consumers and has done for years.

 

The parliamentary ombudsman is correct - there has been a decade of regulatory failure - and not JUST over Equitable Life.

 

[Brian Kirby]

I agree with everything you say with just one caveat.  Before I retired I was a chartered member of one of the professions you list.  To gain entry, one has to follow an accredited course of vocational training to masters degree level, plus two years moderated time spent with practitioners.  Only then can one register to practise, and use the title.  To practise, one must then take out a Professional Indemnity Insurance, these being required by individuals in partnerships, those trading as sole traders, or by employing practises on behalf of their employees.  The limit of insurance is set at the amount of client's risk undertaken, subject to market limitations, currently in the region of £5 million.  The intention is that in the event of negligence, leading to total loss on the part of the client, the client is fully reimbursed.  For obvious reasons most practitioners have re-formed their joint and several partnership practises into limited companies with a stated limit of liability set at the maximum of PII they can obtain.

Maybe I'm too much the cynic, but I do not see that level of entry qualification being accepted gladly by the financial services industry, which in fairness, is presumably why it does not refer to itself as a profession.  If it wishes to follow that route, with a formally constituted professional institution that controls entry, via accredited training courses, and disbars unqualified persons from holding office in companies conducting business in the relevant area, with a requirement to underwrite client losses, fine.  However, I have a sneaky suspicion there wouldn't be too much support for that notion among the bankers, traders, and insurance/mortgage salesmen, who have been the principal authors of our present "little local difficulty".

Still, its nice to dream.  :-)

[bigal55]

Brian Kirby - 2009-01-23 1:02 PMMaybe I'm too much the cynic, but I do not see that level of entry qualification being accepted gladly by the financial services industry, which in fairness, is presumably why it does not refer to itself as a profession.  If it wishes to follow that route, with a formally constituted professional institution that controls entry, via accredited training courses, and disbars unqualified persons from holding office in companies conducting business in the relevant area, with a requirement to underwrite client losses, fine.  However, I have a sneaky suspicion there wouldn't be too much support for that notion among the bankers, traders, and insurance/mortgage salesmen, who have been the principal authors of our present "little local difficulty".

Still, its nice to dream.  :-)

i don,t think you are being a cynic brian,i asked the bestman at my sons recent wedding, what are you doing now? working for a investment bank in oil futures. he has a ist from kings in war studies and served as a lieutenant in one of the guards regiments.he is obviously a bright lad, but in his own words, the best transferable skills he had was "large gonads".did anybody see the program about porche last night, they made 8 times as much money on volkswagon shares as they did on making cars

[CliveH]

I agree with you Brian.

 

Most of us have good qualifications and have PII insurance as you say.

 

Chartered status is now with us for those that want it and I applaud the constant raising of standards.

 

That is exactly why we that have taken the exams, and do run professional outfits were so pleased with the ideas from the Mk 2 version of the RDR from the FSA that stated you had to have certain qualifications and be truly independent in order to be able to call yourself an "adviser". This meant that the majority of the Bank salespeople (which is what they are) would have to be called salespeople NOT advisers.

 

At last we thought! - Some common sense.

 

Only to have it all dashed by the latest Civil Servant to take over the FSA who allowed himself to be nobbled by the banks such that the behind the counter salespeople can call themselves "advisers".

 

Personally having dealt with some solicitors that are supposedly part of a "profession" and realised that they are incompetent fools tolerated by even the good ones via the old boy network, together coming across some Doctors who I would not let treat my cat! - I actually believe that the best way forward for all is regulation via a robust independent body.

 

We do not have that in any of the professions - think about it! - Doctors are in charge of people lives - but they are allowed to regulate themselves and as such we have body parts pinched in Liverpool, an incompetent paediatric heart surgeon killing children in Bristol and a GP (Shipman) who killed dozens of patients.

 

Yet IFA's deal with investment and financial advice and we are regulated by government?

 

And I hope that I am getting across to people that despite being regulated by government at the taxpayers expense, the agency charged with doing the job (FSA) is making a right pigs ear of it all.

 

Even the parliamentary ombudsman confirms this over the debacle of Equitable Life. Her report is titled "A decade of Regulatory failure".

 

If the FSA allows the banks to get away with calling its salespeople "advisers" - then watch this space - we will have another decade of regulatory failure sitting on top of the last decade.

 

 

:-S

[Brian Kirby]

The upside of that being that if the professions are self-regulating, as at present, via their institutions, the job of a government regulator becomes much simpler, in that s/he would only have to deal with malfeasance on the part of the professions themselves, rather than with all cases where practitioners, be they individuals or companies, get it wrong.  In that way a small office, with a small, but highly specialised, staff, should suffice.  Job done!  Now, who else do we need to convince?  :-)

[BGD]

This latest analysis of the relative US versus UK situation was published this week by Bridgewater Associates.

 

 

 

US Banks.

 

Total Assets $10,749bn

Estimated Losses $1,562bn

US GDP $14,413bn

US Debt $5,765bn

Est Bank loss as % of GDP 11%

Est Bank loss as % of Public Debt 27%

 

 

UK Banks.

 

Total Assets $10,533bn

Estimated Losses $1,530bn

UK GDP $2,229bn

UK Debt $892bn

Estimated Bank losses as % of GDP: 69% :-S

Estimated Bank loss as % of Public Debt: 172% :-S

 

 

 

[Brian Kirby]

Therefore; UK banking sector far too big.  Iceland on Thames??!

[Syd]

I for one am pleased to note that slowly, very slowly, there are a few newspaper articles springing up that are beginning to mention that "Prosecutions" are being thought about.

 

Wonder what Gordon thinks about that

[Syd]

The Guardian says

 

Bank of England lent banks £185bn under Special Liquidity SchemeHeather Stewart guardian.co.uk, Tuesday 3 February 2009 14.24 GMT Article historyBritain's battered banks have borrowed a total of £185bn from the Bank of England in just nine months under the Special Liquidity Scheme, the emergency measure set up last April to relieve them of some of their toxic debts and unblock the credit markets.

 

The SLS, which was designed to remove the need for further bank bail-outs, allowed financial institutions to swap hard-to-value securities, including "toxic" mortgage-backed debt, for more liquid government bonds, over a term of up to three years.

 

Because taxpayers' money is at stake under the scheme, the Bank has demanded "haircuts", insisting that the 32 participating banks pledge securities worth considerably more than the gilts they received.

 

The SLS closed at the end of January, and in a statement published today, the Bank reported that, as a result, it is now sitting on a pile of securities with a face value of £287bn. Most of these are mortgage-backed securities, or residential mortgage covered bonds.

 

"The haircuts are designed to protect against the risk of loss in the event of a counterparty defaulting, and are therefore set taking into account uncertainty about possible valuations of the Bank's collateral, including in the event of default," the Bank said.

 

It estimates these securities are now worth £242bn; but the difficulty of valuing toxic debts has been at the heart of the credit crunch, and crisis-hit banks have been forced to take repeated writedowns over the past 12 months as they acknowledge that they are worth far less than first thought.

 

However, the Bank insists that if the value of assets continues to fall over the next two years, eroding its safety cushion, it will "call for margin" – demand that the participating banks hand over more securities.

 

The Bank will release more details this week of how it will spend a £50bn "asset purchase facility", a fund set up to buy corporate bonds and other assets, in yet another attempt to free up lending to firms, and drive down interest rates – and the first tentative step towards the radical measures known as "quantitative easing".

 

The Bank's monetary policy committee will gather on Thursday for its two-day meeting to set interest rates, and is widely expected to vote for another cut, taking borrowing costs below their current historic low of 1.5%.

 

[CliveH]

One thing I was interested to hear was that at the recent economic meeting of all the major governments, one lobby group that was always usually there as such meetings, pushing what they wanted, was, on this occaision banned.

 

Did I feel sorry for our Wunches - did I hell.

 

Let's hope the days of their influence on economic policy are long gone - never to return.

[Syd]

Herald Tribune

 

In Europe, some steps to control bonuses

By Matthew Saltmarsh Published: February 8, 2009

 

PARIS: Efforts in Europe to rein in remuneration in the financial sector intensified Sunday as French bankers proposed guidelines to limit bonuses and Britain announced a review of rewards.

 

In a statement, the French Banking Federation, which represents 450 commercial, cooperative and mutual lenders operating in the country, said it drawn up a code of conduct on pay for professionals in financial markets.

 

According to the document, bonuses across a range of banking, insurance and investment firms should be closely tied to performance and profitability.

 

No bonus should be based on future or forecast performance, and stock and options awards should not be used for speculative purposes.

 

The rules will apply from 2010 covering 2009 activity.

The proposals will now be forwarded to the economy minister Christine Lagarde, although they should not require legal changes as they could be agreed as a voluntary code of conduct, according to a French official, who was not authorized to speak publicly.

 

Last week, President Nicolas Sarkozy of France lashed out at the remuneration of financial traders in a televised address, saying he was "more shocked by the system of pay" for traders than he was for bankers' remuneration.

 

"That's what you have to forbid," he said.

 

The unnamed official said the new rules had been worked on for some months and came at the initiative of the Financial Stability Forum, a group of international regulators that meets within the International Settlements in Basel, Switzerland.

 

France expects other countries including Britain and Germany to consider similar steps soon, the official added.

 

The backlash against excessive rewards for bankers has been building in Europe, especially since President Barack Obama last week set a $500,000 cap on cash compensation for the most senior executives at companies receiving U.S. state aid and announced other steps like curtailing severance pay for top executives.

 

"I think Barack Obama has picked up on the mood of the world in what he says about greed," said Clifford Weight, a director at MM&K, an executive compensation advisory firm in London that advises large banks.

 

Paris had already said that those banks accepting the €21 billion, or $27.3 billion, that it has offered in aid would not be allowed to pay bonuses. The same rules will apply to the French automobile industry, which is awaiting its own bailout, expected to be around €5 billion to €6 billion.

 

Last week, several banks in other European countries, including BBVA of Spain, came forward with their own initiatives to limit rewards. The European Commission also encouraged EU governments to follow the example of the United States.

 

In Britain, meantime, anger has been building that the Royal Bank of Scotland, which had to be saved by the government from collapse last month, might be preparing to pay generous bonuses when it announces 2008 results on Feb. 26. The state now controls almost 70 percent of the stricken lender.

 

Speaking to the BBC, the chancellor of the Exchequer Alistair Darling, said Sunday that bankers who had lost money should not get big cash bonuses, although he added it was too early for Britain to follow Obama's lead and put a mandatory cap on pay.

 

Darling said he had discussed the bonus situation with the RBS chief executive Stephen Hester.

 

"He agrees that no one who is associated with these large losses should be allowed to walk away with large cash bonuses," Darling was quoted as saying by Reuters.

 

The finance spokesman for the opposition Conservative Party, George Osborne, told the BBC: "If the banks are proceeding on the course that they apparently are proceeding on, then I think we should actively look at a cap."

 

Darling also announced in The Sunday Telegraph newspaper that he planned to initiate an independent review into banks' management and remuneration.

 

"We cannot return to business as usual," Darling said. "I expect the review to make recommendations about the effectiveness of risk-management by banks' boards, including how pay affects risk-taking."

 

Separately, executives at Lloyds Banking Group have agreed to defer any bonus they may receive until the end of this year and to have payouts in stock, Eleanor Ross, a spokeswoman, said. "While directors are entitled to a cash bonus in respect of performance in 2008, they have agreed to take any bonuses awarded in shares," she told Bloomberg News.

 

The government has a 43 percent stake in Lloyds.

 

 

[colin]

I was carefully listening to what AD was saying this morning on AM show, it's quite obvious that banks will stick to their contracts and pay out bonus' and AD knows this, all his comments on bonus' refered to any future contracts banks will make, doesn't it give you a warm feeling inside to know your taxes are going to pay those nice bankers bonus' >:-( of cause this is the money that isn't going into the back pockets of people like the home sec. Jacki Smith.

[Brian Kirby]

I am coming to the view that just blaming the bankers is really too simple.  Yes, it is their poor judgements that have landed us all in the soup.  No question.

However, part of the problem has been the watering down, and withdrawal, of many regulations that used to constrain how the banks could operate.  In conjunction with this, there has been the adoption of so called "light touch" regulation by the Bank of England, and latterly the FSA.

It is the job of government to maintain the efficiency of markets, but also to regulate them as necessary to prevent fraud and excess, and so "protect" the gullible and the inadequate from exploitation.  Whether the present regulatory environment has resulted in the former is, I guess, a matter of opinion.  However, I would say that the more opaque the product on offer, the more of us fall into that gullible or inadequate category.  Since most of the products offered by the financial services industry are so opaque many of the industry insiders clearly didn't understand them, we were all in need of effective and timely control.  That was the job of government, and it has monumentally failed.

True, it was the industry that pleaded for the regulatory relaxations that have permitted this catastrophe.  It is equally true that, at the time the relaxations were requested and made, collateralised debt obligations, and their ilk, had not been invented.  However, prudence would indicate that when relaxing regulation you do not just take off the brake and see where the waggon goes, you check and monitor the effects closely, and then adjust existing, or introduce new, regulations as events unfold.  That, manifestly, was not the case, and in that respect above all others governments, over a prolonged period, have failed to protect our interests.

Now that the horse is three counties away, and the stable door is hanging off its one remaining hinge, there is an outbreak of tough talking.  It is now far too late for the posturing.  The damage has been done, and it would not have occurred had government done its job diligently.  It knows this, which is why it suits them to talk tough about the bankers.  It deflects attention from their own shortcomings.  The Treasury, the Bank of England, and the FSA are, ultimately, all branches of government.  Government sets their terms of reference, and has failed to put in place clear, workable, briefs for all.  This was abundantly clear over BCCI, and again with Equitable Life.  The more recent failures to identify bad and excessively risky practises and business models all have the same root.  This failure on the part of our government to so order banks and financial institutions, that our money and assets are properly protected from poor management, is perhaps its biggest single failure since the time of the Wall Street crash.  This disaster has been a long time building, and no one should be allowed to escape responsibility for their contribution.

[CliveH]

Very well said Brian.

 

My two pennies worth on what you say is to underline what we had as opposed to what we have now when it comes to regulation.

 

In the past we had Treasury overseeing certain aspects of financial activity in that Government of the day wanted certain things achieved.

 

Then we had the DTI that went in and made sure that the banks, the Life Offices and the Investment houses were prudently runs and were financially sound.

 

The old PIA (Personal Investment Authority) looked at financial promotions and applied standards, though one glaring omission was the Banks wheeze at managing to keep mortgage and debt selling in general outside of the remit of regulation.

 

Each of these organisations - the Treasury, the DTI and the PIA had expertise that was supposedly transferred to the FSA when the FSA took over as the all encompassing regulator that this wonderful Government of ours held up as being the way forward.

 

But what actually happened is that we exchanged experience and expertise of three distinct organisations for the Jack of All Trades Master on None idiocy of the FSA.

 

Rather than do what need to be done - i.e. proper regulation by those with experience, we have numpty nonsense "Reviews" of anything that moves in the financial world. We now have the RDR (Retail Distribution Review) that yet again is civil servants pontificating on how financial services should be distributed.

 

The result is a bloody mess that just wastes taxpayers money.

 

Fiddling about (yet again) with review on how an individual can access advice on finance is a bit silly, when as you say, we have no review or learning it seems from the likes of BCCI, Equitable Life, Split Caps, Northern Rock, Icelandic Banks and a debt crisis born of greed.

 

This total lack of any sort of effective regulation where it is actually needed is what went wrong. As I say, the FSA is a Jack of all trades, master of none.

 

It is a very sobering concept that a government agency set up to protect the consumer has actually been responsible for consumers loosing more money than all the "conmen" put together.

 

[Brian Kirby]

CliveH - 2009-02-09 1:51 PM ................ As I say, the FSA is a Jack of all trades, master of none. It is a very sobering concept that a government agency set up to protect the consumer has actually been responsible for consumers loosing more money than all the "conmen" put together.

Well, I'm only going to quarrel a bit with that last sentence.  It is not quite fair to say the FSA was responsible for the losses: that was the banks. 

Where the FSA (i.e. government) failed, is in preventing the banks from going where they went.  I make this distinction because I am far from convinced that the FSA has actually failed in any way with which the government, fundamentally, disagreed at the time.  This, I would say, was simply the inevitable, foreseeable, consequence of "light touch" - meaning mere, blind, box ticking - regulation. 

It is government that made the rules for the FSA to operate, it is government that decided how many, and of what type, the regulators should be, that then employed them, and set their pay levels.  If the FSA is a waste of money (and I'm not saying that in its present form it is not), it is government that so created it.  Government has, in effect, implemented false regulation - regulation that was never really designed to work to protect ordinary people but that, by looking like proper regulation, was designed to lull ordinary people into a false sense of security - while allowing the banking fraternity pretty much free rein in what they did and how they did it.  To that limited extent, I think blaming the FSA amounts to "shooting the monkey", rather than shooting the "organ grinder": the government.

[Syd]

Brian Kirby - 2009-02-09 2:26 PMWell, I'm only going to quarrel a bit with that last sentence.  It is not quite fair to say the FSA was responsible for the losses: that was the banks.  Where the FSA (i.e. government) failed, is in preventing the banks from going where they went.  I make this distinction because I am far from convinced that the FSA has actually failed in any way with which the government, fundamentally, disagreed at the time.  This, I would say, was simply the inevitable, foreseeable, consequence of "light touch" - meaning mere, blind, box ticking - regulation. 

It is government that made the rules for the FSA to operate, it is government that decided how many, and of what type, the regulators should be, that then employed them, and set their pay levels.  If the FSA is a waste of money (and I'm not saying that in its present form it is not), it is government that so created it.  Government has, in effect, implemented false regulation - regulation that was never really designed to work to protect ordinary people but that, by looking like proper regulation, was designed to lull ordinary people into a false sense of security - while allowing the banking fraternity pretty much free rein in what they did and how they did it.  To that limited extent, I think blaming the FSA amounts to "shooting the monkey", rather than shooting the "organ grinder": the government.

Hi BrianPlease correct me if I am wrong, I usually am, but when I read your post it strikes me that what you are really saying is that the government deliberately set out to allow the people to be conned by deliberately setting out legislation that was toothless but presented to the people as protection?

[CliveH]

 

Certainly the Banks were partly at fault with this latest debacle. But so was the FSA for allowing them to do what they did. Northern Rock is a classic example where the FSA gave a clean bill of health just six months before it all went pear shaped.

 

And we knew its model was risky!

 

But when I say the FSA has responsibility for losing more consumers money than all the conmen put together, I am talking about all the Equitable Life policyholders, Split caps etc, not just this latest debacle.

 

Equitable Life bamboozled the regulator by counting the same money twice to make out it was stronger than it was. We all knew it was smoke and mirrors but the regulator just could not comprehend that the "fine chaps" at Equitable were screwing with the figures.

 

As for the organ grinder or the monkey - who cares? With Equitable the result was the same, people lost money.

 

They are an incestuous circle of incompetents.

 

In fact in the recent past we had three parties, Government, Government agencies and the Banks. What many do not realise is that when things like G8 summits take place, the Bankers were there as invited guests to lobby for what they wanted and as they held the purse strings they generally got what they wanted.

 

Only in this last summit were the Bankers not welcome. "Shutting the stable door" has always been something Governments are historically good at.

 

 

[Brian Kirby]

Syd - 2009-02-09 5:01 PM Hi Brian Please correct me if I am wrong, I usually am, but when I read your post it strikes me that what you are really saying is that the government deliberately set out to allow the people to be conned by deliberately setting out legislation that was toothless but presented to the people as protection?

I wouldn't go quite that far, Syd, but it does seem to me that government regulations were more for decoration, and to give confidence to investors/savers - so that they would continue investing and saving - than it was to actually regulate.  After all, if the remit to the FSA and the BoE was to regulate firmly, to ensure that the financial institutions did not stray from the straight and narrow, both have catastrophically failed.  So, if the intention was strict regulation, and the regulator failed so badly, why are the regulators still in post?  I think the regulator did exactly what was required, but no-one saw, or understood the potential risks and consequences of the light touch approach.  Now they can all see in hindsight what they should have foreseen, it is far too embarrassing to point this out, so they just endlessly blame the bankers for the lot.  Time will tell!