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"CULTURAL PROBLEM"

Would it be reasonable to see money as 'male/yang' Paul? If so, I suggest your reference to 'a cultural problem' is right at the heart of all this (while still insisting the Money Mess is only a symptom).
The Goals and prizes of the modern world are intensely male because the Feminine Principle has been overtly in decline, since male-god monotheism (especially Christianity) took hold, and probably even before.

A cultural problem indeed!

Who exactly were the carpet baggers that caused all these buiding societies to be de-mutualised ?

Have they made a huge amount of money, retired to their yachts in the mediterranean in left the rest of us picking up the pieces ?


p.s. I always voted "No" for these demutualisations...

the all seeing eye is the bond market. it tells you where the debt is and how much they have. maths has 'a gravity' that will drag people down to earth if they try to ignore it.

the current problem showing up in the bond market is that the usa has sold lots of bonds upon which it must pay interest. It has issued so many bonds it cannot now do that and has had to start borrowing money to pay off the interest. Which is like someone using a pyramid of credit cards to pay each other off. At some point the gravity will drag them back to earth?

We need analysis of what has been done so badly, but parallel to that we need consideration of alternative paradigms and priorities e.g considering what we actively want a banking system to do, and to provide -maybe something different to what it has been.

So not just shuffling round in the same frame, but some new frames, and discussion of alternative models.

I don't think that should be beyond the ambit of the public media.

A priori, we need clear information on the very basics of finance and the current financial situation - like who do 'we' now owe all this money to? Can we get out of PFI deals? Can those who have profited be penalised in cash terms? What's the practicalities of closing tax havens

I have been promoting the idea of a public inquiry almost since the scale of this economic disaster became clear.

In fairness I think Mr Moore is probably better place and better informed and more likely to stimulate the calls for a full blooded analysis of what went wrong - and perhaps what went right. I am still surprised that the politicians are not baying for such a response.

#3 bookhimdano

That sounds like a very good question. Part of me does not want to hear the answer!

I suppose it would be cynical to suggest that a senior executive who is made redundant might feel less than loyal and sympathetic towards those who dumped him?

EU MONEY TO HELP SMALL BUSINESS (but left to bank discretion to fork out)

What government either cannot or will not recognise, is that collection of invoices-due, by small businesses, is a psychologically loaded exercise. A technically viable business can look a bad risk to a bank, if it is not getting its money in. The bank will then refuse to lend - EU or no EU - and another business folds.
For decades this has prevailed for want of a simple law to prevent offering or acceptance of credit terms over - say - 14 days. But, in general, banks make money from companies who can't get their money in. And who is best chums with the banks?

Sounds like more of a Halifax problem rather than a Bank
of Scotland cultural problem?

The takeover/merger was in
2001, wasn't it? I also note
that Brown's HBOS banking
guru James Crosby went on
from running Halifax BoS to
Deputy Chair of the FSA???

He succeeded consumer
affairs specialist Dame
Deirdre Hutton - also
chair of that other FSA
the Food Standards Authority
(sic?) and wife of a former Tory MEP. Why did she stand down?

And have all these good folk gone to ground - or will they
be talking to Newsnight too?

Given the societal impact of the banking failures, not least the huge burden being laid upon the tax payers, an open parliamentary enquiry seems an entirely justifiable expectation. That enquiry should hold both government and the finance community to account. Whilst those such as Mr Moore might want targeted enquiries relating to individual banks, we as citizens and tax payers have every right to demand a more coherent and wide ranging investigation be conducted.

Come, come Paul.....this is far too tame!

I suspect Mr Moore was probably far more effective than ‘a man in a rowing boat trying to slow down an oil tanker’ as he purports. So much so, that his bosses didn’t want him ‘spoiling the party’. With responsibility for risk management at the bank he probably became an obstacle to them making ever increasing (and obscene) profits via ever greater reckless lending. It’s probably the reason why he was made ‘redundant’ in 2004. His position would have become untenable and redundancy was the 'gentlemans agreement' way out. It would be interesting to know what the details of his severance package were and the conditions imposed for ‘leaving silently’. I hope he and his former employers sleep well at night (not). All he is doing now is covering his backside as this crisis turns into a catastrophe.

This whole scandal stinks; the call for an inquiry is just a smoke screen. Every government inquiry only ends up as a whitewash, no one ever to blame, no accountability and deliberately strung-out over time until people lose sight or memory (remember the Hutton inquiry).

However, the greatest stench emanates from Downing St. The government were complicit with their wealthy backers in this fraud of all frauds.
[you can only suspect that there is a strong relationship between Blair’s well documented attack on the FSA in 2004 (and general services to banking) and his subsequent employment with JPMorgan Chase earlier this year (at $5m per annum….part time!)]
The BoE and the FSA were either complicit, incompetent or muted for political expediency. They probably all belong to the same ’gentlemens’ club in any case.

The regulatory failure was politically schemed and motivated by pure greed for mutual profit.

What has happened within the banking system is in essence, identical to what happened at ENRON. That is the false accounting of liabilities via off-balance sheet trading. A shadow banking system was created in order to post huge profits and hence bank (sic) huge bonuses. Banks made ever more money by selling ever more loans and trading in markets like the derivatives market. It provided them with the means to bypass their capital adequacy requirements (and leverage restrictions) demanded by the regulators. The vessel for this massive lending spree was, of course, the burgeoning property bubble which the IMF warned the government about on several occasions, alas, to deaf ears.

The banks were all lending long and borrowing short along the same lines as the Northern Rock model. As the property market began to slump (first in the US and then here), their assets (loans) started to become worthless. They were massively over leveraged to the point where they could not service their own debts and hence the wholesale money markets froze. The banks weren’t prepared to lend to each other. They did not trust each other and this situation remains to this day. At this point their only way out was to borrow big time from the BoE followed by the taxpayer bailout package. They have effectively privatised the profits and socialised the losses, aided and abetted by the current government.

The unbridled expansion of credit (and therefore corporate and private debt) all for the purpose of boosting bank profits is what caused the greedy banks to ultimately fail. The model relied on ever increasing property prices to be perpetuated and was knowingly doomed to failure. It was done wilfully and maliciously by the banks’ senior management complicit with the government.

There should be legal proceedings brought against these malicious individuals that have already started to bring so much pain and devastation to our economy.

GB knew he was lying when he promised an end to boom and bust. He's fooling no one now.

Re today's little story about supporting SMEs:

Alistair Darling is not suggesting any compulsion re how banks lend, even the ones we own, so they will never lend in general societal interest, but only in the firm's interest. This is capitalism.

It is the role of the state to enforce the social, but its not happening. We are still being lied to.

I was at the BusinessEurope event in Brussels on Tuesday - transnational capital sharing its spin about pursuing the deregulation agenda.

Support for SMEs was in there - but no mention of the credit support that these businesses actually need.

The big business/ Trade Commission version of support for SMEs is just to stick SMEs in the front, as the excuse for further deregulation.

Actually when its in relation to SMEs, for real or otherwise, its called "getting rid of 'red tape' ". That language is a bit more 'high street/suburban' than 'global deregulation in favour of transnational capital', which is what it really is.

So - there is nothing genuine in this support for SMEs, it is just a front, and I have no doubt that the UK Government's agenda matches that of BusinessEurope. Its too much of a coincidence that they banged on about it all day in Brussels, with the EC, and now A Darling is talking about it here.

The main spin at the big Brussles meeting was that a Doha deal is the answer to the global financial crisis (just as it was the 'answer' to global warming and global terrorism, previously)

Further spin - the deregulation problem was isolated in the financial services sector, so continued pushing for deregulation in everything else is fine, even though investment etc is a key part of all economic activity.

Dont use the work 'liberalisation' any more becuse it is associated with fianancial services fiascos

And it emerged that the US/EU Transatlantic Economic Committee is not just about establishing similar transatlantic regulations, whereby obviously the lower US standards will be the benchmark (there goes the precautionary principle), but also gettting into the actual legislative processes both sides of the Atlantic and actually designing the shared regulation. (There goes democracy).

The latter means we need to be very wary of being conned into 'global governance' scenarios.

It certainly emerged in Brussels how the concepts of 'competition' and 'co-operation' are conveniently and strategically used to push forward the one same agenda - deregulation in favour of transnational capital.

There is a need to look beyond the horizon of the national to recognise the pattern of how we are being conned.

Paul,

The emphasis of this piece is on defective risk controls, as in phrases like the risk controls had "not kept pace" with the sales culture. The implication is that more extensive and intrusive risk controls are required - presumably backed up by a risk control department with more power, money, autonomy and so on. However, it seems to me that an organisation of that sort will always have problems. In the bad times (like now) it is redundant because no one is doing reckless things anyway. In the good times it will be seen as an obstacle to prosperity and dealers that break the rules and then turn a huge profit will be seen as buccaneering heroes.

It occurs to me that there might be a more direct way to limit risk that will get the whole bank involved rather than pushing it into a special "nasty policeman" department.

If the salaries, bonuses and so on of the senior executives were mainly paid in shares that could not be traded for several years then the senior management would have good reason to think for the longer term. I know some companies claim to do this sort of thing already but usually the mechanism is flawed because the delay period is too short and the proportion of executive income that is restricted in this way is too small to be effective. I'm not claiming that this is a new idea; only that it should be applied more extensively with a much larger share of executive compensation held back for longer.

I assume that some companies would go right ahead and make reckless deals anyway. However, when the senior executives then watch 80-90% of their earnings from the last five years (say) evaporate in a Northern Rock style takeover then I think we can be confident that their contemporaries will become a lot more sensible.

HBOS was only doing what every other Bank did/does!

The sheer absolute size of the banks made/makes them all act as if they are/were invulnerable. Regulation in the last 20 years made it almost impossible to set up any new bank - the more so because the existing banks were acting in an imprudent way.

There was a time no so long ago that all you needed was a top hat, tail coat, hire some accounting services and turn up at the Bank of England every so often and you too could be a bank.

It is a bad error to think that HBOS is the only rotten apple - the media will sell this line, but in years to come it is me belief that many of our banks will be seen to have been acting in the same way as HBOS.

You can see my report on Credit Crash Britain at 7.30 on ´óÏó´«Ã½ 2 tonight.

....er except in Scotland

We have our own programme, in Gaelic....with English sub titles.

What was your programme about again?

I agree with 6 - funny how the guy from HBOS left when the FSA report came in? He was responsible for risk between 2002 and 2004 and yet HBOS didn't hit the mark at that time! It's also true that future FSA reports were OK - once this guy had left - sour grapes.

Just watched the programme - nothing new and nothing that hasn't been in the papers - trying to jump on the Peston bandwaggon Paul?

After seeing the performance of Barlays, let HBOS and RBS go under, start again. The banking system is rotten to the core and run by vile, pig ignorant executives who put self interest before all else.

#16 Lord John Hunt

"executives who put self interest before all else."

That is exactly how the banking system was supposed and designed to run especially in the US.

A possible variation of John Nash's Game Theory.

Neil Robertson was very diligent and put Greenspan's quote from last week at the Senate hearing on the Newsnight blog.

Why seem so surprised? Self interest was intentional.

/blogs/newsnight/fromthewebteam/2008/10/thursday_24_october_2008.html

Financial Addiction

The global spasms that are contorting the financial markets and the body politic of the entire world are the consequences of the disease of addiction as it has ravaged individual's lives whose occupations impact globally. These small numbers of people who have been so work addicted and dysfunctional show in a graphic manner the spiritual ferocity of a condition that Moses encountered in the society of his day - the 'golden calf' syndrome will destroy a society.

How do we resolve the situation? First step is for everyone to accept their complicity. A society is a collection of individuals. The bankers have not got that much power that they could destroy a civilisation. We are the civilisation, every single individual. The balance of the number of individuals who are financially and materially sick has reached a tipping point that is being exposed by banking failures. It is no use blaming the leaders - those who have been mislead need to ask themselves why they empowered the misleaders in the first place. Was it not personal disorientation in the first place that looked to solve problems with erroneous solutions?

Money is like oil in an engine. It is not even the fuel for the engine of the world. People and their intelligence are the fuel. Money is simply the lubrication. You would not pour oil onto the driving seat of your car and then try to drive it by taking a back seat.

The way forward is to engage again locally with life in understandable small units of influence that fit together with a global harmony only because they are lived locally - in other words by not taking a back seat in your local affairs - service, recovery, unity, as they say in Alcoholics Anonymous.

Accountants should be servants not masters. Money is not a commodity, it lubricates the commodities markets. Money is not a product, it facilitates the production process. Money is akin to feelings - feelings are not facts. Feelings lubricate the human instincts to provide the pressure for emotions to move human creativity and expression. Money should lubricate the machinery of service and utility in the material linkages of human emotion - money should not pretend to be the machinery.

Feelings pretending to be emotions are adulterations of the system. Money pretending to be a thing in itself adulterates the system and distorts value and worth. It is like the oil pretending to be the gauge on the dashboard.

Simple spiritual principles are required to restore trust and confidence once the mess and spillage has been cleared. The mess is akin to an oil tanker hitting the rocks. Vast amounts of detergent are needed to contain the spill. What is the detergent?

Truth ... as it says in the Qur'an, 'we made this world with nothing but water and truth.'

IS THERE A PHILOSOPHER IN THE HOUSE? (#18) WELCOME!

The enlightenment of 6.7 billion people, starts with a single blog. On a good day.

Sharon Beder has written both:

Selling the Work Ethic
&
Free Market Missionaries

#12 A better way is to pay bonuses *when* the deal has finally run its course and not on the sales alone.

Far too often, salesmen are remunerated on pure sales with total disregard to the profitability of their sales.

I know of many instances where sales were made and commissions paid, only for the management to discover later that the deals were loss-makers !! This is because it appears that many managers seems not to know the difference between sales income, gross profit and net profit !! Commissions based on sales income is a recipe for disaster !!

I feel for Mr. Moore. He is the modern day equivalent of Cassandra; hoping against hope that he is wrong, but knowing full well that he is right !!

Your all wasting your time.....

.....read the truth...

KEYNES AND THE GALTON INSTITUTE

Paul, with all due respect (and you've earned my respect through your contributions throughout this debacle) what do you think light touch regulation means in practice? It means light staffing, i.e. sinecures which enable management to claim compliance and say that risk assessment is an important part of their business, but...

The same has been going on in the Criminal Justice and Education systems (and probably much wider) for well over a decade now as I've tried to highlight in some of these blogs over recent years. The cynicism reached its zenith when government departments began claiming that their polices were 'evidence based' and 'evidence driven' when in fact, it was frequently the case that the executive summaries of commisioned reports (see SEAL for example) stated something quite different from what was in the main reports themselves.

As one of your other contributors above has highlighted,

Perhaps you should give Susan Watts a nudge or two as some of this needs looking into far more than the other subjects she seems inclined to cover. Brain Gym was a start...but she didn't do it.

How about looking into:

'Future Leaders'
Aiming High
SEAL
SureStart
Adult Literacy and Numeracy
Cognitive Skills for Offenders
Community sentences

In the context of Leitch (and in the USA, ETS and 'American's Perfect Storm') try to get Richard Lynn on the programme along with Tatu Vanhanen, and

More people need to be .

RE: 21. ishkandar

"A better way is to pay bonuses *when* the deal has finally run its course and not on the sales alone."

I see the sense in what you are saying, however I think we are addressing problems in different parts of the organisation. What you propose would constrain individual dealers, who would have a clear incentive to ensure that their deals made a real profit over the full term rather than an apparent profit in the short term.

I was looking for a way to get the whole organisation from the top down to be similarly constrained to create real added value that lasts rather than a brief surge in the share price. The two are clearly different, and both, I think, are necessary.

UNHOLY ALLIANCE

The more links I am directed to follow, the more I become convinced that the (almost) inevitable immaturity of Homo Sapiens (a 'design flaw') has led, during an anomalous period in the planet's climatic history, to an unsustainable 'model' being pursued. Farming, concentrated habitation, mechanization (including warfare) global interaction and retreat from nature's constraints, all contribute to the current mess; money is just a factor.

Characteristics of the juvenile are well known, and become magnified in those who gain power (kid in a sweetshop). The one eyed are not leading the blind; the shifty-eyed are leading the sleepwalkers. Only force majeur will end this. A cosmic event, climatic drama, disease or aliens. Then you'll see devaluation!

CROOKED BEHAVIOUR

Barrie (#24) It's politcal although I have no doubt that some of the agents/activists are unwitting. I suspect. I appears to be a case of one minority, politically active group using other groups innately less competent/competitive than themselves to weaken, if not oust, (note the negative demographic growth projections) their original hosts. It's akin to benevolently inviting refugees to a party and have them not just turn up with their extended family, but with everyone else who they think might not only have a good time, apprecite them for inviting them along, and accuse you of nepotism and racism if you object.

It's very odd behaviour, but .

I worked in the money markets for 23 years and when I started (pre-computers) we were given a thorough grounding in how the markets worked by those who had the experience. It can't be learned through a university degree.
Now there is no time for this. If the computer says 'yes' the dealer isn't bothered about anything else. The culture of ' it'll never happen', particularly prevalent once securitisation became king, took over.
Everyone involved should have been required to read the history of the near collapse of Lloyds of London through the spiral, as it was all there.
So what now?
Firstly the rating agencies must be globally funded and completely impartial.
Secondly the accountants who signed off the banks' books should be educated in banking instruments and pricing methods.
Thirdly the FSA should do unannounced spot checks and also set up a whistleblower site guaranteeing anonymity.
Fourthly and most importantly, the Bank of England must show leadership in regrowing confidence in the banking system. It is not all broken.
We had to attend lectures on money-laundering. Perhaps the FSA should also require every bank to prove a dealer's competence and understanding of the risks involved in the product they trade before they are allowed out to play with the bank's capital.