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Morning Robert,

So the banking reporting season is completed for another half-year. Overall the results of the banks have been positive and they are starting to rebuild their balance sheets. This is good news for the UK economy as we need healthy banks that can lend to people and businesses. It is clear from the banks results that many businesses and individuals have chosen to pay down their debts, which is showing some signs of responsibility. This should be welcome. Lending is available, but it is priced at a more sensible level. There are many contributions to the recent banking crisis, one of these was that debt was too cheap, businesses borrowed too much then. Now, debt is more sensibly priced. The low rates of interest help keep the overall costs of lending low and the BoE should be applauded for keeping rates low yesterday. It is good news for the country that the policy makers ignore some of the more extreme voices in society who want interest rates to increase. This is clearly wrong and I agree that the BoE have again made the right decision on interest rates. For the record, I don’t work for a bank, not that one’s employer should influence one’s opinion. I remain unmasked and will not be silenced. I’m sure you disagree with some of the ´óÏó´«Ã½â€™s decisions.

RBS’ recovery is slow. Their management made some horrendous decisions. They overpaid for ABN Amro and they paid in cash. That said I find it amazing that so many people solely blame the banks for this crisis. Sure RBS, Northern Rock and Lehman Brothers made huge mistakes and contributed to the whole situation. It is time, though, for individuals to take personal responsibility for the debts that they took on. No bank forces you to take out a credit card, loan or mortgage. There is enough guidance out there for people to understand the nature of the products that they buy. If someone takes out a 125% LTV mortage, they immediately fall into negative equity. The bank will price that product according to the risk, but the individual should be aware that they are taking out a huge gamble that the housing market will continue to rise. We are far too little individual accountability and as a country we blame everyone but ourselves far too easily.

I’d like to thank all your bloggers for their constructive comments to my postings. They certainly lighten up my day with their engaging points.

"...insists that in the current climate it can't lend faster than its customers want to repay their existing debts"

So basically how are the banks going to survive. They are screwing the exisitng "debtors" for every penny above margin.

What are they going to do when they repay or stop paying?

Where is the next bubble because without it they are all toast?

Robert, your opening paragraph "eccentricities of accounting rules" says it all.

RBS - Right blooming shenanigans

Perhaps the 7:44 update omitted the obvious point, with borrowings at a rate of 0.5%, its hardly any wonder that profits are up - regulators or no regulators!

I wouldn't call it a semi-nationalised bank - more a mostly nationalised bank. This is a long haul but it seems to be going in the right direction. I suspect that planned asset sales will also help. It's probably better to see the year end position as that will be fully audited. Provisions for bad debts has always been an accounting area where banks have some latitude to paint whatever picture seems appropriate. It would good if the major shareholder made some comment on the results.

#2 I'm still scratching my head over how you think 0% interest rates will improve the recovery.

Re your 0744 update. Rather than 'maintain its Return on Capital', Page 8 of the announcement shows that the Return on Equity has moved from 13% at end 2009 to 15% at end June 2010 and is targetted to increase further by 2013. What would be a reasonable level to achieve?

2. At 08:16am on 06 Aug 2010, Sam_From_Hendon

I can't help wondering how much you were offered for such a postive note! One could almost believe the world is so wornderful that all the oil in the Gom and Nigeria have been cleansed away too.

Keep it up and you just may convince the budgie next door that all is well. However, can I assume that the reason why one of my neighbours was laid off was because the banks are doing so well and his services at the housing benefit office are no longer needed?

4. At 08:29am on 06 Aug 2010, sanity4all

An excellent summary of the what Robert's post.

I agree with #2......

To an extend (yet to work through the system) the bankers robbery of the poor could backfire in dramatic fashion. Who in their right mind would ever take debt on again after what has happened? This will seriously undermine banks ability to generate 'wealth', the gig is up and we have all seen - The emperor has no clothes.

Sustainable growth or even steady state is better than boom / bust. There is little growth left in UK plc. We need to plan to improve life on current incomes. Growth will occur elsewhere in the world as global catchup takes place and isn't that the fair outcome of globalisation?

Although RBS has been a good tax payer in recent years compared to many FTSE 100 companies that claim to be UK based obviously it will bring forward losses this year.

I'm not interested in blaming the banks, I'm interested in what processes led to the crisis. On that basis you inexorably and inevitably come back to the banks. The fundamentals of the problem within these enterprises and also in the shadow banking sector are 1) A lack of understanding of the nature of the risks they are taking 2) A system of remuneration that did not reward greater understanding of those risks.

This plays in the wider context of policymakers and businesses wanting the consumer to spend spend spend for the country, and the inherent build up of instability on the basis of apparent moderate rates of increase of, e.g. wider money, GDP, inflation.

Within financial services you cannot get away with the caveat emptor principle and nor should you given the long term nature of these products and, in many cases, their sophistication.

Number 10

It is not who will take on debt again it is who will be granted the ability.

The people who currently need it do not pass the stricter credit ratings and the ones can pass the tests are sensibly not taking it and paying down existing commitments

This equals Armageddon for the banks who will only continue to make dwindling profits on dwindling debtors and savers.

They simply will not be able to pay back the special fund program in 2012

re 2. At 08:16am on 06 Aug 2010, Sam_From_Hendon wrote

Good to see you keeping up your positivity. I agree that results are mainly positive. Although we all know the banks are putting a positive spin on the requests for lending being down but it must be a good thing for people to realise they can not continue to be in such debt.

I am sure all the 'glass is half empty' usual posters will be on soon to let anyone they can tell that the banks are bad and are going to fail, and the UK will not exist in 10 years if we keep a capitalist system.

2. At 08:16am on 06 Aug 2010, Sam_From_Hendon wrote:
...For the record, I don’t work for a bank, not that one’s employer should influence one’s opinion.
----------------------------------------------------

I think you work for a PR agency.

This comment was removed because the moderators found it broke the house rules. Explain.

Has anyone determined where the accountants have hidden the bonus pool ... Er sorry I meant 'golden trough'.

Are the accounts of this nationally owned/controlled bank false?

Is this false accounting acceptable ... how does a bailed out bank announce 'profits' and not be clear about how the executive bonus pool is accounted for ... unless there is serious bent accounting in the corporate accounts?

"In the first half of this year, it went from more-or-less break-even to a profit of £1.1bn - thanks to a £2.4bn drop in the charge for loans and investments going bad..."

If the provisions for bad debt were reduced by £2.4bn and RBS only made profits of £1.1bn, surely the day to day trading of RBS showed a loss of £1.3bn?

It is so good to see that you are being a little bit more upbeat about our prospects.

However, our own personal experiences are showing that our prospects are falling at an alarming rate.

It is a wonderful thing that when discussing the economy, we can all be right!

Robert Peston - On the widening of the interest margin, RBS would of course point out that regulators are forcing it to hold more capital relative to assets, which forces it to charge relatively more for loans to maintain its return on capital...

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You see, I have always argued that Banks never hold enough capital to cover their activities. If the regulators asked RBS to hold double the capital it does now, the business would fail, because the interest margins are ultimately elastic and demand would simply tail off. If only every business in the UK was able to widen its margins and hold the public to ransom, it would be a much more level playing field.

Same old story from RBS too, bad debt provisions have been reduced, interest margins have widened.

21 minutes after Robert's post Sam from Hendon responded with lengthy panegyric which in essence blamed us for the near collapse by borrowing too much in the past. Is he a part of the Tory spin machine?

Darling and Osbourne have both begged the banks to lend money. The fact that this has been ignored suggests that the agenda is being set by the financial institutions rather than our elected representatives, who will inevitably create, as Peter's Kitchen points out, another bubble.

Camerons arrogant "big society" idea and the forthcoming cuts are merely part of the brainwashing process to transfer the costs of repairing the banks balance sheets from those who really created the crisis to the dwindling working class.

Tax the wealthy. Tax property. Keep and improve the welfare state which my dad and many others fought for.

Robert as a SME that bank with RBS I can tell you at first hand that they are reluctant to lend. We work for the large builders and have just picked up larger orders so would like additional funding to cover additional working capital requirements - proving very difficult - they never lend without wanting to secure it against something!

14. At 09:28am on 06 Aug 2010, noorwich wrote:

I am sure all the 'glass is half empty' usual posters will be on soon to let anyone they can tell that the banks are bad and are going to fail, and the UK will not exist in 10 years if we keep a capitalist system.

Banks are a bit like malaria. Herbal protection, spin protection. psyco-babble protection etc, don't work. I prefer solid evidence, you know the kind of thing, Newton looked for when he wanted to know about gravity, decent mathematics, you know like Pythagoras thought would be a good idea. Getting the boss, Fred the Shred to leave won't turn the herbals into effective drugs, no matter how much RBS try to convince me.

Glass-half full punters are what led to this nightmare in the first place. Any one, like a risk manager who saw the glass wasn't full was poopoo-ed right out the door. We're not having that nonsense any more.

Let's have the principles of Enlightenment, the principles that when applied with understanding will work.

I am not the most informed on banking rules however; simple question:


1. We have a missive governement debt
2. We are the major shareholders of these banks
3. these banks are making billions in profit again.

Why cant re wait for their profits to get to a safe level and demand our dividends just like any normal shareholder would expect.

Surely we are not going to bail them out to the tune of billion's of pounds and let them buy it all back at cost price without paying the state a dividend?

RBS should have been fully nationalised - then carefully dismantled and sold off/wound down as applicable with the least possible damage.

This would have been the honest thing to do and would have sent the message to the others - that there are consequesnces for mismanagement.

Same applies to HBOS, NR & BB.

It will be interesting to see in the fullness of time the reasons why the government of the day did not pursue this line - and the politics involved.

Number 2 - "It is time, though, for individuals to take personal responsibility for the debts that they took on"

Your comments are obscene in light of the fact the Banks have not taken responsibility themselves. Indeed they have put that reponsibility on every tax and non tax paying individual in the WORLD.

This isnt about individuals ability to pay debt it's about the FRAUDULENT packages of debt SOLD as AAA when it was in fact JUNK and then crying foul to the taxpayer holding a damn gun to all of our heads.

13,

I made this very observation some time ago.....

Those who need credit cant get and those who can get it don't want it.

21. At 09:44am on 06 Aug 2010, twinturbo wrote:
21 minutes after Robert's post Sam from Hendon responded with lengthy panegyric which in essence blamed us for the near collapse by borrowing too much in the past. Is he a part of the Tory spin machine?

No he isn't part of the Tory spin machine. I think he's part of the spin machine of the neoliberals that 'own' the political processes, you know the same rich squad that donated to the party and get seats in the Lords, own the lobbyists that love the Big Society, the idea of selling off the schools to the private sector, to increase the profits of the markets and the banks and further increase the generations of the future debt load...

2. Sam from Hendon

"Lending is available, but it is priced at a more sensible level.

Can I ask a simple laymans question.

If RBS is 84% owned by the taxpayer, shouldn't 84% of its profits be paid back to the taxpayer?

2. Sam from Hendon quote - "Lending is available, but it is priced at a more sensible level". This is what all banks will say but this "sensible level" is not reflected in a competitive market for savers meaning banks simply increase their margin on products. At the start of this crisis there were many commentators (including Mr Peston) that took up the case for savers but now there appears no interest. It is in effect savers (not borrowers) that are paying to increase the banks capital through poor returns on their capital while banks maintain lending only to low risk borrowers. Robert - when will you take up the case for prudent savers again or are we in fact an ignored minority in this story?

"23. At 09:49am on 06 Aug 2010, copperDolomite wrote:Glass-half full punters are what led to this nightmare in the first place. Any one, like a risk manager who saw the glass wasn't full was poopoo-ed right out the door. We're not having that nonsense any more."

You mean like that arrogant idiot Brown who was so sure of his own judgement that he ignored all the signs and let things escalate out of control despite all the evidence to the contrary. I agree.

8. At 08:38am on 06 Aug 2010, copperDolomite wrote:
2. At 08:16am on 06 Aug 2010, Sam_From_Hendon

I can't help wondering how much you were offered for such a postive note! One could almost believe the world is so wornderful that all the oil in the Gom and Nigeria have been cleansed away too.

Keep it up and you just may convince the budgie next door that all is well. However, can I assume that the reason why one of my neighbours was laid off was because the banks are doing so well and his services at the housing benefit office are no longer needed?

----------------------------------------------------------------

Errrrrrrrrrrr? They were over-staffed?

Robert can you please confirm which UK bank is trying to by South
Africas Nedbank. Barclays have already bought ABSA. If they have that
much money .....!!! etc need I say more .
Regards Glynn Hamilton

32. At 10:14am on 06 Aug 2010, StartAgain wrote:
You mean like that arrogant idiot Brown who was so sure of his own judgement that he ignored all the signs and let things escalate out of control despite all the evidence to the contrary. I agree.

I mean bankers, financiers, traders, business leaders, any and everyone who bought into the nonsense of neoliberal politics that brought massive wealth to the few and diminishing incomes to the many. I mean anyone who wants to talk up the banks and thinks the way to sort it out is to 'remain confident'. Thinking positive doesn't sort out your cancer and it most certainly will not sort out this mess! Talk of glass half full/empty belongs in Lourdes, not in the real world with real problems and people needing real solutions to a global mess.

13. At 09:08am on 06 Aug 2010, PetersKitchen wrote:
Number 10


They simply will not be able to pay back the special fund program in 2012

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I've mentioned previously, but don't think I've heard any comment on: Why not insist that, instead of a repayment on the Special Fund in 2012, the banks waive their rights to the lease-back payments on the entirety of the BSF programme. The main contractors that built them only funded circa 4% of the cost, and they will all shortly sell their maintenance contracts for the stock anyway. We'd have wholly owned, maintenance paid for schools for 25 year terms minimum, for free. A little bit like defaulting on the lease for your Audi, and being able to keep the car in a maintained state, which the banks could then remove from their future asset sheet.

As for the funding issue, I find it to be gross hypocrisy that they can label people according to their perceived risk via a simple electronic credit rating model when they themselves were no better than insolvent not more than 2 years ago.

It is about time we started looking at the profits these banks have garnered from our public finances to then re-distribute to the poor / financially illiterate whilst levying huge interest charges, whilst the financially savvy amongst the populace (and I can't fault them) were allowed to borrow for less interest than they got for putting their cash in a savings account; these people were making money from borrowing.

Time for a real health chack on these banks balance sheets too, I'm certain that we need to know how much negative equity we are exposed to if the market were to dip 10% and interest rates went back up.

On another, slightly linked note, it is evident that much of the UKs wealth is held in pension funds, and the performance of these funds which are linked to the performance of these banks and other large "secure businesses" ability to keep churning out huge profits that inflate the value of said funds. Therein lies the pressure on companies (from their major shareholders) to continue to grow profits and dividends beyond general inflation despite the majority holding very little actual tangible assets (bricks & mortar, not future earnings).

It is similarly true, that the recent housing market boom was sent into an ever-increasing upward spiral by people's need to see a greater return to fund their retirement through late investment in a pension / need to retire reasonably wealthy.

Maybe the key overriding objective here should be to explore ways to ensure that people start saving early for their retirement, and save at a rate that would be commensurate with what they would expect to earn.

Interesting debate about whether the banks are actually lending to businesses or not.

Here's a good srticle which covers all the arguments

This may be a radical concept, but a friend of mine just asked why we dont just keep a share of the profits from the banks that we own and use that money to pay of the deficit. I couldnt think of an obvious answer. Can anyone explain why this hasnt being considered?

I think it is fantastic that the banks are doing well.

For me the best PR exercise in history was stating that "We are all shareholders". Thus, giving all tax payers a false sense of interest and ownership. This completely deflected from the real disater. As we all really know you only own shares if you purchase them. The money invested in the banks was the Governments not ours!

35. At 10:29am on 06 Aug 2010, copperDolomite wrote:

So you have to include Blair/Brown/Straw/Hoon/Prescott et al. They were part of the establishment, complicit in every act and present at every turn??

And in waiting there is Balls/Milliband/Burnham/Milliband - are they capable of providing real solutions. I think not - so who is going to lead us out of this to the promised land?

This is not a recovery, it's the eye of a storm.

The government is running a 12% of GDP deficit. Remove that and GDP falls 12%, i.e. twice as much as it fell in the 2008 recession - and that's before you include the knock-on effects of the reduction in spending.

The maths is going to catch up with the UK economy. We have passed the debt timebomb from individuals to banks to government - but there is precious little fuse left and no-one to pass it to.

Don't expect any bank profits next year. Don't expect them to all be paying up in 2012.

I don't want 0% rates, as the local idiots will go borrow more

Not that the benifit will be passed to the consumer.

Barc issue's short term debt as medium terms notes to pricate lenders @ 3.5%
They will then lend that to us @ 7%

So they will make 3.5%, plus the discounted borrowing from other Foriegn Sources

We own RBS, so why are they charging it owners more than rates of interest, that are much above there base cost,(oh yes inflation is there) but come on, when did your wages last go up?

Since the 1930's money has just gone up, through infaltion by banks priniting money

£20 is not worth £20 as no one knows what assets are worth what

Its all fictious

If interest rates remain low then borrowing is cheaper, banks make less money in theory yet in practice profits are rocketing. Is it simply because of debt reduction or arguably better banking and less risk-taking ?
The real issue is how the economy will manage if the public sector is reduced at the rate it is now ? Private sector contractors will find it harder as the public sector work dries up and UK has no manufacturing industry and the main export market for what little we have is Europe which is retrenching as well.
Our economy is unlikely to improve for some time except negligibly and imminent increase in unemployment will not offset the savings the government has made or believes it has. Selling the banking shares may be premature though it would raise some capital which would then be ploughed back into DWP and NHS.
It could well be that the Red Revolution which is taking over at Liverpool FC will only be the start of a major onslaught on our economy by the Chinese and we will effectively be a call centre and franchise for that country. We are some way from the days of the Opium Wars or arguably we may still be waging that in Afghanistan. China is quite likely minded to take us over.

Looking at the long term.....
It seems to me that if RBS eventually becomes stable and profitable
a) the government will wish to dispose of its share-holding and that
b) the only practicable way that can come about is for RBS to buy back the shares.

Does this seem credible/possible/probable? Opinions please.

On the topic of how important bank projects are for the national economy, I have a question.

Is there any way to get information on the proportion of the total tax take in a given year comes from PAYE, corporation tax, VAT and so on? And what proportion comes from people in each, say, 1/5th of the income distribution (not how much they pay but what % of the whole lot they pay)?

It has already been picked up on by a few previous posters ... but there is a consistent theme to the stories (!?!), from Barclays, HSBC, Lloyds and RBS. Bad debt provision down, interest margin up, 'profits' up; but not necessarily by as much as they should be considering the reduction in bad debt provision. Then there's the more concerning story about lending. Generally, in all cases it's down. They may only be rejecting 20% of applications ... but with rates starting at 5 times LIBOR, how many people/businesses are just not bothering to apply? RBS's net lending fell due to existing customers paying off as much as they could probably because of the increased levels of interest.
The bottom line is that the economy is a fickle beast. Like old army generals fighting the last war, the regulators are ordering banks to increase their liquidity buffers to set aside against bad debts. They do this by increasing interest margins. This increases their income ... but it also reduces demand for debt. However, that unfortunately means that businesses eventually stop growing due to the constraint on capital ... which results in an ironic catch 22 situation of creating the very thing that the regulators were trying to guard against (ie, bad debts due to a recession hit economy).
For me, what's missing is a clear understanding of what a workable level of debt (within the global economy) actually is. Clearly the last decade was too much ... but perhaps the cold turkey approach we're facing now is too little? I am genuinely concerned that we could be facing a second dip in a couple of years time as business assets need to be renewed ... whether that's manufacturing plant and machinery, office space, new PC's ... whatever. Without that kind of renewal, our costs go up, and efficiency/growth go down. A sensible, gradual approach to debt reduction is what is required. It's not up to individual banks to fix this; it's down to the regulators and government.

41. At 11:21am on 06 Aug 2010, StartAgain

Oh give it up!

They are all followers of neoliberalism along with Thatcher, Reagen, et al

The banks are withdrawing funding to its customers by increasing heavily the rate they charge. If you compare the level of lending to 2008 to now the difference is huge. Why has this been missed.

Yes the banks performances are getting better but by cutting costs (sacking staff) and charging a lot more. With banks withdrawing credit lines it creates a supply shortage so enabling price increases........

"39. At 10:54am on 06 Aug 2010, A-Clabb wrote:
This may be a radical concept, but a friend of mine just asked why we dont just keep a share of the profits from the banks that we own and use that money to pay of the deficit. I couldnt think of an obvious answer. Can anyone explain why this hasnt being considered?"

Mainly because profit is not the same as cash available

In it's simplest form if you buy something for £5 and sell for £20 you make a £15 profit. And so you report a profit of £10 before tax. Let's say tax is 20%, so you only have £12. But you need to buy something else so spend another £10. Therefore, at a point in time, which financial accounts are, you had a profit of £12 after tax. In the bank the following day - because you bought more stock - you only actually had £2.

So to take profit is not possible unless you want to bankrupt a company as it is that which allows it to invest, expand, acquire etc.

A very simplistic example, granted, but I hope it explains it a little clearer

48. At 12:12pm on 06 Aug 2010, copperDolomite wrote:
41. At 11:21am on 06 Aug 2010, StartAgain

Oh give it up!

They are all followers of neoliberalism along with Thatcher, Reagen, et al

I would but who is going to lead us on from here - you say we are not going to put up with that nonsense any more - and that we should have the principles of enlightenment - I don't see anyone offering that unless you are putting yourself forward......

Beware of those who drape themselves in red - for as long as it takes to get what they perceive those in blue have. No change round here any time soon...

The gaggle of communists who criticise everything that ever happens with western economies are so full of hot air. It is very easy sitting in your armchair providing critique, much different offering a constructive alternative to economies work. Dismantling something is the easy part, putting it back together is the hard part, perhaps that's why most of you have all day to post holier than though waffle on here. So, what is the alternative to the neo-liberalism (if such a thing exists beyond your imaginations). 3,000 words starting now, you have 3 hours....

@2

"We are far too little individual accountability and as a country we blame everyone but ourselves far too easily."

Congratulations, a load of nonsense ending with a sweeping generalisation.

Trust me, from your post, you don't understand the issues here. Please refrain from posting further. Thank you.

#23 copperDolomite

A bit of homework is indicated, I fear.

Pythagoras was heavily into herbalism, reincarnation and numerology.
This sort of rethoric does tend to discredit the point you were trying to make, which is a pity.

Newton was into alchemy BTW, but that's another story . . . .

26. At 10:00am on 06 Aug 2010, PetersKitchen wrote:
Number 2 - "It is time, though, for individuals to take personal responsibility for the debts that they took on"

Your comments are obscene in light of the fact the Banks have not taken responsibility themselves. Indeed they have put that reponsibility on every tax and non tax paying individual in the WORLD.

This isnt about individuals ability to pay debt it's about the FRAUDULENT packages of debt SOLD as AAA when it was in fact JUNK and then crying foul to the taxpayer holding a damn gun to all of our heads."

Its not about that. Its about Mr and Mrs Smith taking an extra 30k on the mortgage to buy that BMW. People need to take responsibility. The debt was junk because people wouldn't pay it back.

#2

Unfortunately you are applying some level headed thinking in respect of negative equity and people taking responsibility for their own actions.

It will never hold with most of the contributors here for then they would not be able to repeat the chants of "Banks bad, Bankers are stupid etc"

#52 After you.

Mods please get on with the job.

My #54

/rethoric/rhetoric/

8-{(((((

Post 18 a very valid point that has been overlooked.

A simple point why do we lend to the banks such as RBS and Lloyds to cover the old HBOS debts at 0.5% when we then end up paying them 10% back? Let me explain.

Both RBS and HBOS were huge supporters of Gordon Brown'a hairbrained PFI projects. They took money in from the Corporate markets at 3% and lent it to the PFI companies at 7.5%, adding a commission and fees. they then deided these fees and commissions were profits and paid bonuses in them (ker ching). The PFI companies then extorted the UK taxpayer by adding their profit margins (New Labour referred to it as a risk premium as if building a school or hospital is a risky business!) and charged Joe Public via the PFI contracts 10% at least as a rate of return.

In the olden days we built schools and hospitals on long term gilts at very low rates now we allow all manner of companies often set up in tax havens to rip us off.

We surely should use our position as lender of the last resort to retire the 7.5% PFI loans and pay them back either by QE as we should have done or by government debt at 4%. Even a meerkat could see this is "simples".

At present many UK banks are making a huge amount off us by borrowing from us at 0.5% and then lending it back at anything up to 20% for corporate loans. No wonder profits are up.

If anyone else suggested lending money at 0.5% and then borrowing it back at 10% and upwards the men in white coats would be round pdq. Martin Lewis would beat us around the head for putting savings away at negligible rates of return and not paying down our most expensive credit cards.

#57 That is precisely my point nobody else posting on here has a definitive answer anymore than I do, anymore than the man on the moon. Anymore than Sir Fred did. The point is a lot of folk post on here as they are dealing in facts when they are dealing in opinion!

#61

There are at least two things I would do:

1) I'd create transactional accounts which would be ring-fenced from the assets of the bank. The prid pro quo would be that no interest could be added to these accounts because no return from them could be derived by the bank. If the bank goes under then the individual balances are safe (excluding fraud of course) and are so without the FSCS (and so the taxpayer and the rest of the financial services industry) picking up the tab.

2) I'd introduce a concept of insurable interest to derivatives.

I'm generally quite sceptical about the need for banks - as currently constituted - to provide a transactional account. In the electronic age it isn't necessary, e.g. Paypal.

Further from that the internet can also provide an intermediary platform to bring buyers and sellers together, e.g. Zopa.

2. At 08:16am on 06 Aug 2010, Sam_From_Hendon wrote:

"If someone takes out a 125% LTV mortage, they immediately fall into negative equity. The bank will price that product according to the risk, but the individual should be aware that they are taking out a huge gamble that the housing market will continue to rise."

________________________________________________________________________

There is always a risk with any mortgage. Borrowers do understand the need to repay these and accept the responsibility of doing so. If they have the income they will repay. If they haven't they'll soon get re-possessed. The defaulting borrower may choose to take a stoic view of their plight. Perhaps behaving stoically in this situation is the only truly responsible way of dealing with it, in your opinion?

But who created the 125% product so that such a thing was available to the general public? Did someone force the various banks to create it? And if you think banks are bastions of financial responsibility, (and why wouldn't you?) then a) why were they peddling these things at all, and b) why sell these things knowing housing was going to crash fairly imminently? Wouldn't it be stupid of them to do so?

So, if the banks were confident about property, why should their customers not be? You're idea that customers should have been aware they were taking on a "huge gamble" only stacks up in hindsight and we all know how everyone's got a degree in hindsight.

The reality is the 125% UK mortgage was a total sideshow in terms of the global economic meltdown of 2008. I'm surprised some people are still clinging to the idea that it was somehow central to it.

People who want to buy a house today need to appreciate that it's house prices that are (still) too high and NOT that banks won't lend up to the price tag set by estate agents. However much the estate agent wants to sell you the idea that the house you're interested in is an absolute bargain!

For economic meltdown in 2008 you need to be aware of many more things, like Sub-prime mortgages, Lehman Brothers, Goldman Sachs, Morgan Stanley, TARP, AIG, CDO's, CDS's, debt securitisation and Fannie mae and Freddie Mac, (that were at arms lengths from the lending criteria, that they left to the banks.)Also the repeal of Glass-Steagall, the mantra of light-touch regulation etc etc, even Bernard Madoff and Allen Stanford played their part. I know, I know, mentioning all that "negative stuff" makes me a communist, according to some lame bloggers, because saying things like that exposes the lie that borrowers were NOT, actually, 90% responsible, (unlike the banks would have you believe.) Borrowers were not even 10% responsible, in reality, they were more like victims. Sorry but people's lives have been ruined totally by these events. You're one of the lucky ones, just be grateful for that and for the fact that you no longer have a mortgage, if indeed that's the case.

#30 and #39.
Fundamentally you're saying the same thing.
Certainly 84% of the shares entitles the taxpayer to 84% of the profits (and of all the assets for that matter), but that would be a dividend, and one of the conditions of government support was that no dividends should be paid (for 5 years I think). Also, if a dividend was paid, it would have to be paid to all the shareholders, so the other 16% would have to be paid out too.
#24 and #45
Unless they get wasted again (by government encouraged injudicious lending perhaps?) the retained profits should raise the share price creating a greater capital gain when the government decide to sell, and that, I believe, would have to be on the open market.
When I was studying basic commercial law (some years ago) companies weren't legally permitted to own their own shares, or even lend to anyone for the express purpose of buying them. I know that's no longer the case, but suspect there's a limit on the percentage that can be owned. Anyone able to confirm or refute this for my curiosity?
#18
That's one conclusion. The alternative one is that last time provisions erred on the side of caution (quite rightly), were increased overenthusiastically and actually a profit was made then too! We'll all draw the conclusion that best confirms our prejudices I suppose!
Finally #62 - two questions
1) Would you compel banks to maintain these transactional accounts? Otherwise I don't see why anyone would take on the trouble and expense of providing the service, because no return at all means not even covering your costs.
2) Actually an observation rather than a question - I recently opened a Paypal account, and I needed a bank account (or credit card which amounts to the same thing) to fund it.

I hate the meaningless percentages given that convey sensationalism rather than information. Please can we have a comparison to actual profits before the crash rather than meaningless percentage increase from last year!

55. At 1:32pm on 06 Aug 2010, SmilingEdBalls wrote:
26. At 10:00am on 06 Aug 2010, PetersKitchen wrote:
Number 2 - "It is time, though, for individuals to take personal responsibility for the debts that they took on"

Your comments are obscene in light of the fact the Banks have not taken responsibility themselves. Indeed they have put that reponsibility on every tax and non tax paying individual in the WORLD.

This isnt about individuals ability to pay debt it's about the FRAUDULENT packages of debt SOLD as AAA when it was in fact JUNK and then crying foul to the taxpayer holding a damn gun to all of our heads."

Its not about that. Its about Mr and Mrs Smith taking an extra 30k on the mortgage to buy that BMW. People need to take responsibility. The debt was junk because people wouldn't pay it back.
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You sum up my statement exactly, Mr and Mrs Smith could take (add) 30k on equity which was arteficially inflated by the banks flawed believe that house inflation would continue unabated.

No checks other than they had the equity in the property - the interest on the loan was worth more than just on the mortgage and the bank believed they could not lose.

The debt was junk wrapped up and hidden amongst real AAA investments and sold.

I hope you have a house with a mortgage because in the coming months you may have to make a decision on whether you CAN pay for your BMW as well

"It is time, though, for individuals to take personal responsibility for the debts that they took on. No bank forces you to take out a credit card, loan or mortgage. There is enough guidance out there for people to understand the nature of the products that they buy." [Sam_From_Hendon]

It is time, though, for the banks to take personal responsibility for the debts they issued. Nobody forced the banks to keep putting up credit card limits, nobody forced the banks to give mortgages to people that could not afford to pay them back. There were enough risk managers out there trying to tell everyone what was going wrong in the banks, if they weren't listened to, then why should we bail the banks out. There were enough salesmen out there to make sure no one understood the products that they bought.

52. charlie_hurley:

"So, what is the alternative to the neo-liberalism (if such a thing exists beyond your imaginations). 3,000 words starting now, you have 3 hours...."
___________________________________

I reckon it will take me 3 mins....

Lets look at adopting the European 'social' model - oh wait, no that's bankrupt.

Umm... Communism could work, obviously it didn't really pan out for the Soviets, Eastern Europeans & myriad African countries but maybe it's just a case of sticking it out like the N Koreans or the Cubans? Maybe after 50 odd years we too will have a workers paradise?

How about the Statist semi capitalist society's like China or Saudi Arabia? High growth but then probably less opportunity for people to have a moan on HYS about the gov't.

Actually, could I ask for a couple more hours and I'll get back to you...