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Mervyn should resign. He is clearly about to become the next target for the prime minister's dirty tricks department. Ed is probably already sharpening his pen. This government doesn't change. Petty viciousness is its hallmark, especially over anything that questions our unelected prime minister's record aa chancellor.

So we are no nearer to a real change in the way the financial system works.

The bad money still exists in the current system, and haven't even been fully flushed out yet. Meanwhile the authorities are tinkering around the edges for future reform - on a highly misplaced assumption that things will pick up again.

You can't re-inflate a bubble if it's still at risk of bursting.

A slow unwinding of credit and a gradual return to 100% reserves is the only way we can prevent more funny money:



We need to deflate the enormous pyramid of debt that is precariously balanced atop the real economy, threatening to crash.

The New York Times had the bottle to publish this point of view. What about UK journalism?

Oh no, it's still all going bad........

I still think that no one actually understands all this, on either side of the political divide, despite protestations to the contrary.

Yourself excepted of course Robert :-)

It is just so difficult to say that you dont understand, especially when you are Chancellor or Governor of the BoE, of course Merv has had more experience. It must be very difficult to one day be MP, then The Chancellor. Maybe they should go on a course!

Mind you I still think that half the mess is the result of MPs making an untaxed killing on rising house prices and wanting to keep the gravy train running. It is often the simplest explanations that involve human veniality that are at the root of many of our problems.

#3 Bimthedandyandy wrote:
Oh no, it's still all going bad........

I still think that no one actually understands all this, on either side of the political divide, despite protestations to the contrary.

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Oh I am pretty those those in the government know and understand it extremely well, but modern politicians are no longer interested in what is good for the country, only what will keep them and their party in power regardless of the cost.
At the moment if the government can keep a lid on everything it doesn';t like until the election, it may even stand a tiny chance of squeaking a victory and then they have four or five more years to try and sort it out.
Additionally, acknowledging that the economy is in much worse shape than the government would have us believe would also put huge pressure on our dear leader Mr Brown. Anything that dents the economy would dent his position and place in the history books still further. If he is forced out he would be only the second person ever to have held the post of prime minister without ever having fought an election and that's the sort of political epitaph that today's image obssessed politicos will do anything to avoid, even if it means lying to the public.

Robert wrote:
"But the governor of the Bank of England, Mervyn King, is getting far less than he wanted.
He asked for the legal right to inspect individual banks. And he hasn't got it."

It makes you wonder where this great reluctance to firmly control banks comes from. Amongst politicians there seems to be an almost religious awe for banks that hold large amounts of money .... on paper. Paper (computer) money that can easily disappear given the wrong macro-prudential conditions. Why does all of this remind us so clearly of the dance around the golden calf and how little has changed over the past 3000 years?

You can find more facts about the foolish world of international finance here:

Anyone get the feeling that GB is exerting a lot of pressure to keep the roll of the FSA strong. How would he look if it was downgraded or abolished by Darling. The opposition, and anyone with a brain actually, would instantly blame the FSA - quite rightly too _ for contributing to the mess, and blame Brown for creating it and by association for the financial nightmare we face. All accurate accusations, just more easily leveled id the FSA went the way of the dodo, as it probably should.

If Merv resigns, what does that do for Sterling's reputation? Would he do something that would risk undermining the currency and the ability of the government to sell gilts (albeit only the Bank is buying them at the moment anyway)?

Clearly if he thinks the Tories will win the election, he should stay on and take the additional powers he wants, but is it not more likely that they will want 'their' man at the Bank anyway? The sop could be Merv at the head of the new Office of Budget Responsibility.

Reinforcing a failed regulatory system certainly doesn't seem to be the best way to solve an obvious, and on-going problem that ultimately threatens the entire UK economy, but perhaps it makes an early disposal of the nationalised banks more likely.

Where does the Treasury figure in the Conservative plans. What does this say about George Osborne's confidence in his own ability, if he is prepared to hand responsibility for the economy to the Bank of England lock, stock and barrel. Why do we need a Chancellor of the Exchequer if this is the Conservative game plan? The FSA has done a good job with Adair Turner at the helm, why remove it and its experienced members? Mervyn King was late in recognising the banks had serious cash flow problems; the crash was already upon us before he even noticed. In his view, the glass offered by Alastair Darling is half empty, whilst George Osborne's is only half full. Which ever party wins the election, Mervyn King is on a hiding to nothing.

The failure to allow deep investigation of a bank's accounts just allows them to go on legally hiding the precarious and risky.

This power should have been made available, preferably to BoE but if Mr Darling persists in being spiteful and mindful of his patron then FSA should have got it and compelled to carry out BoE requests to act.

All in all another turbidite layer aimed at stifling the bottom feeders

Another example of Gordon and ALISTAIR taking revenge on any of their employees who dare to question their judgement.
The FSA has failed in the past under Govt guidance and is now given more authority.
Incredible logic .
Is it possible for them to do another u turn and dis band the FSA TO HELP THE BUDGET.
Gordons big boast was the BOE WAS THE CORRECT PLACE to control national fiscal matters.Obviously forgot to say provided they do as I say.
He becomes more insular from the nation each passing day.
Roll on the elction.

Nice to see that you have re-discovered paragraphs.

Transfer all governance and supervision to the Bank of England, the FSA is predominently funded by the financial services sector and is shy of "biting the hand that feeds it". Instead it focuses on over regulating the sharp end of the market, the financial advisers in the retail sector, as they are the softest target, as opposed to ensuring that the products designed by the sector are actually fit for purpose. The latter approach would serve two purposes, it would ensure that retail financial products were what they purport to be and that for example, the word guarantee actually meant guarantee rather than what some highly paid legal parasite thinks they can get away with. The FSA is patently ineffective in regulating the retail sector and it has amply demonstrated that it is incapable of regulating the wider banking sector, the latter still essentially self regulating via its voluntary code of (mis)conduct. Place banks under strict BOE control, including remuneration packages, which by any measure have been irresponsible and unsustainable, but which are making a come back whilst Darling and the FSA turn a blind eye. Disgraceful and reprehensible state of affairs which cannot be allowed to continue unchecked and effectively unregulated.

Meanwhile we all sink into poverty and debt and become a third world state. what sort of plan is that AD? We need a proper policy with new ideas and good regulation.

Hi Robert

Surely one of the lessons of the last few years is that the FSA has been a complete failure as an institution. I find it hard to see how much worse it could have done.... Yet our current leaders who are obsessed with the type of bureacracy it brings cannot see it or perhaps they do not want to admit their own mistakes.

The FSA is also very expensive in two ways as not only does it cost in terms of salaries but its rules impose costs on business. It needs to be shut down.

I doubt if any regulator would have been completely sucessful in recent times but the Bank of England is likely to have done a better job.

The country is now in a state of flux and uncertainty and will remain that way until we have a general election.

Brown is not going to admit that his own creation the tripartite system is a shambles and should be abolished.

They will all go on holiday for the next few months and everything will be allowed to drift.

By the time they return the election campaign will begin in earnest.

Let 's hope there are no crises in the meantime but that's just too much to hope for.

Too many cooks - one regulatory body for banks with sole responsibility. The Tri-partate approach has patently failed at great expense. The FSA was created after BCCI, arguably its failure to identify the risks of syndicated loan packages and reliance on wholesale deposits are a far greater faux pas. The BOE should be the regulator, The Treasury should stick to looking after the public finances i.e. repaying the horrendous debt we face, and not be involved.
On bonuses it is probably necessary to have large ones to obtain/retain skilled staff but they should be no more than a maximum 10-20k in cash - any more should be in ordinary shares held in trust that cannot be traded or used as collateral for say 10 years or on retirement. This should help avoid the excessive risk taking by forcing a longer term view.

So will the Council for Financial Stability be in addition to the MPC. Will it just hold the coats while the three players slog it out. Where does the Government come in to orchestrate economic and fiscal policy or is it another example of New Labour stepping back from active management of the economy, etc etc. One certainty is a good opportunity for City boys to get another lavishly remunerated sinecure. Am I confused? - ex Labour parliamentary candidate losing the will to live!

Labour message. Keep something that doesn't work, just improve it. Labour doesn't work and I could name a few ways of improving it. I'd rather get a new government in though so bring on an election.

Robert

Is anyone really surprised that this rotten government has failed once again and this time to put in essential reforms to a wayward and unstable banking system.

I was almost amazed that Naked Goon Darling and Goon Mynas openly admit that some of the UK's banks are big and complex and that right(down)sizing them and making their operations transparent would not be beneficial to the UK taxpayer. This means that the taxpayer will almost certainly have to step in every time a large bank fails, if, among other things, shareholder value is to be protected.

Making banks smaller and transparent means that with depositors' accounts 'ring-fenced' operations like the Dunfermline BS could be allowed to fail and 'yes' while they are a large local employer and jobs are at stake - this should be a good incentive to those who work there to run the wretched 'bank' properly. As for the mortages and other 'assets' held by a failed bank, well there's always a vulture lurking somewhere?

The other issue that is not covered by Goon Darling's 'reform' is new legislation to seize the assets, monies, pensions of characters such as
Goodwin and other criminals where their are issues over criminal negligence, farud, theft and over-payments to them by incompetent government officials like Goon Mynas. Senior Bankers need to understand that higher standards of honesty, performance, etc are expected of them and when things go seriously wrong and they are at fault or negligent - then they will lose out financially before their subordinate employees, shareholders or the tax-payer. This should include over-payment of salary, bonuses etc.

Goondog Trillionaire Brown and Naked Goon Darling are not bothered though really - they're showing that they think that the next general election is a lost cause and effectively are leaving the mess they have created to the next Chancellor.

Speaking of the next Chancellor, and this looks increasingly like being G Osborne - I though he spoke very well today and is becoming to sound more and more like he is the next Chancellor.

Many probelms with Naked Goon Darlings' 'reform package' - too many to list here but one point that did occur while listening to Darling's announcement today - is I think that one of the reasons that Darling is shy of real reform is that - and I think this is an interesting point that even you Robert may have missed - is that some if not most of the UK banks (even some of those now controlled by the government) are now far to gloablised and internationalised that they cannot be properly regulated from a UK point of view because their internationalisation has gone too far.

The UK does not now have its own banking system - it has a virtual UK banking system that is a small part of a global banking system which is mostly owned and controlled overseas by a bunch of non-dom spivs and speculators who reside in various tax havens throughout the world - that is the underlying reason why Darling has produced this limited set of reforms - the government knows it has lost control of the UK banking system and has little influence on its performance.

Of course, Darling, Brown, Mynas know much of this because the banks will have told them this to frighten them off - and they appear to have succeeded.

This is a real problem because the government have lost precious time dithering and tehre will be a flight of capital out of the UK if the next government try and regulate properly as overases spivs withdraw monies if they cannot keep fleecing a weak UK government and weak UK regulatory system.

A fine old mess isn't it!

The Bank of England doesn't have an unblemished record as a regulator. As pointed out above, the FSA was created specifically in reaction to the BCCI fiasco. Regulators may believe that they are in control but they don't know what they don't know until it is too late.

The lessons from the banking crisis seem to be that different forms of regulatory framework don't seem to have made much difference. Countries which have weathered the storm a little better than us have a wide range of regulatory structures.

It was both predictable and inevitable that the primary considerations would be political rather than practical. The preservation of Brown's reputation (sic) is paramount and thus the FSA, the least competent element of the tripartite system is given more power. We did not have a run on a bank for 150 years when the BOE was responsible for banking regulation and this authority should have been restored. Mervyn King might perhaps resign in protest but that would leave the people of Britain unprotected from these vandals and is thus not a practical option. I suspect that even as we speak, Ed Balls is dipping his pen in the vitriol to further besmirch the reputation of decent honourable men like Mervyn King. We can only hope that in 11 months time we will be delivered from these cowardly, arrogant and bullying hooligans (Brown, Balls and Cypher) who seem so determined to lay this country to waste.

Oh the irony - The Government introduces legislation to allow one of the largest anti-anti-competetive mergers in history, and now want to empower the FSA to encourage more competition?? I do wish we could equip our Politicians with a memory.

Are New Labour continuing with the tri-partite system because, to do otherwise, admits their own failure?
A "clean sweep", as suggested by George Osborne, would be my choice.

Nice to see everyone getting whipped up into a frenzy. Is it a bird? Is it a plane? No - It's Goerge osborne to the rescue............

We as a country are finished, thanks to Labour AND the 'Conservatives'

16% Interest rates, everyone up for that? The whole thing is a CON TRICK!

Heaven help us! Gordon wants to keep on printing money. Merkel wants sensible spending.

He's talking about investment but it's more funny money he wants to use.

He just can't make tough decisions on spending. This was always the danger. Once QE started it would be too difficult to stop him.

Problem is Obama wants to do the same so where will it all end?

Perhaps the Chinese President left the G8 for reasons other than those stated so was that just an excuse?

Well, the good news is that voters now have a real reason to vote.

End of the FSA.
Surely not punishment enough.
Big bonuses all round until the next election then eh !!
The FSA did not just miss a poorly managed, operated, and designed bank imploding on a flawed business model, it watched the whole financial system do this.

Much is mentioned about the seemingly new requirement for banks and financial institutions to allocate more reserves in times of growth. (David's 7 fat and thin cows story for the modern day I suppose), but this will surely be introduced as a 'guideline' only and direct quantifiable legislation will be omitted.

All this means is, it won't happen. As soon as the good times return, so will the natural human characteristic of greed return as these institutions try to maximise earnings at all costs.

What happened late 2007 was not unique. It was a human herd driven bubble of which throughout history there have been many.

Even politicians (as they have before) will jump on the bandwagon of economic success and repeal any laws and or guidelines at the time for political advantage and normally due to lobbying from the very institutions it pertains to.

The trouble with politics is that no-one ever has the bottle to say that they were wrong. They think we will hold it against them, and they know that their opponents will. Thus Gordon Brown will go to his grave defending what he did in 1997 even though his own constant whining about the problems of boom and bust all being global rather than of his making is really an admission that the world of 2009 doesnt look remotely like the one of 1997.

And as for 24 saying it is all a Con trick - where have you been since 1997? This is the biggest disaster of my 72 years, and has nothing to do with George Osborne, who may or may not be the answer. The country (and my grandchildren) are saddled with a lifetime of monstrous debt interest, busted pension funds, busted banks and ... (fill in the blanks of Gordon's legacy). Step aside Eden, Douglas Home, Callaghan, Major - you have all been superceded as the worst Prime Minister in the last 70 years by the dynamic due of Blair and Brown. Still, at £160k a gig Gordon has always got the lecture tour to look forward to.

# Majorroadaheadagain - U have summed up this terrible Govt exactly - the taxpayers WILL be paying for generations for this Clowns stupidity and despite the usual Liebour bloggers on here all sensible people know it.

Yes the whole thing is a mess, No we should not tinker with a descredited tri-partite system, but sweep it away (Mervyn King talks a lot of sense, and should be given a chance).

But most of all, we should remember that this whole sorry mess happenned on Gordon (no more Boom and Bust) Brown's watch.

Trouble is that I do not see David (what a lightweight) Cameron having the policies and gravitas to do any better.

I am Conservative by nature, but Vince Cable talks more sense than many. He would make a good chancellor

The news that Nationwide is offering 125% mortgages to certain people in negative equity is an interesting development. The first point is that they have come out and explained themselves before anyone found out. I suspect that will be the norm for any bank or building society that would come under the spotlight for apparently lending in a manner that has been the subject of huge criticism as the housing bubble has unwound. However, it looks to me like a bit of reality creeping in. Provided they do all their checks there are some people who have to move, and who would otherwise have to scale down drastically as a result of the move. I assume it those people that Nationwide is targetting?

As several people have been refering to BCCI in this blog I would recommend the following:

[Unsuitable/Broken URL removed by Moderator]

It makes very interesting reading and really berates the accountancy profession (even more that he BoE IMO).

<RICHPOST>Nice one @Hawkeye.<br><BR />Re posting as I reckon everyone should read the <a href="https://www.nytimes.com/2009/04/12/opinion/12zencey.html?pagewanted=2&_r=1"><b>last few paragraphs on second page of this NYT article.</b></a></RICHPOST>

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