Wednesday, Oct 21, 2009
Brown slaps down Merv, I wonder why?
Telegraph: Gordon Brown rebuffs Mervyn King's suggestion that banks need breaking up
Mr Brown told MPs that "the difference between having a retail and investment bank is not the cause of the problem."
The Prime Minister added that "the cause of the problem is that banks have been insufficiently regulated at a global level."
Posted by tyrellcorporation @ 04:05 PM (1184 views) Add Comment
23 Comments
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1. tyrellcorporation said...
GB wants a global regulator - is he thinking of his predicament in 6 months time? Jobless. You betcha!
2. cat and canary said...
oh please no!
.. then we'll have Blair as the President of Europe and Brown as the world CFO!
Laurel and Hardy all over again!
3. 51ck-6-51x said...
What a load of ****. The currency markets are the inter-country regulator and the state is the intra-country regulator. All he is saying is that all countries were weakly regulated by their respective states. How would a global regulator have any power without a global government? ...Oh, right. I see.
4. crunchy said...
Browns future employment like Blairs is a done deal.
A part time non job with a fat paycheck. No back handers for past services rendered there then!
5. tyrellcorporation said...
At least Laurel & hardy made me laugh...
6. crunchy said...
3. 51ck-6-51x
You bet!
7. cat and canary said...
Ollie: "Shut up and get this mess cleaned up. Do you know that my wife will be home at noon ?"
Stan: "Say, what do you think I am, Cinderella ? If I had any sense I'd walk out on you."
Ollie: "Well it's a good thing you haven't any sense."
Stan: "It certainly is."
8. crunchy said...
global government?
I have not heard the words ballet or vote on this matter when it comes to our future.
The word communism springs to mind. Not that much of a leap really the way things are going..
Those "government owned" new builds are starting to look larger already.
9. crunchy said...
That brings me to another point.
Could it be the same as in borrowing our own money from the government/banks with interest that we end up renting our own funded
houses from the government/banks with interest. Genius plan!
10. Bear Of Little Brain said...
I guess dear Uncle Merv isn't up to speed with the NWO agenda yet.
11. tyrellcorporation said...
@Crunchy
'I have not heard the words ballet or vote on this matter when it comes to our future.'
When did this little matter ever trouble Brown?
12. house said...
Here we have the govenor of the Bank of England who presumably understand more about the banking system then say GB and is being told by GB that the banks do not need any changes as suggested by the Governor. Surely it makes sense to split the normal safe banking from the casino style banking system. As suggested by the earlier comments, it stinks as I came to the same conclusion ie. self or vested interest.
Before the credit crunch I understand he congratulated the bankers of the innovative way of running the banking business.
You can see that Mervyn King is trying to the right thing but he being blocked by the current administration. Shame, I bet he did not want to print the money either. I have said this before on this site that it was Mervyn King warned in the Daily Mail that the property prices is overpriced and it could go down. He was criticised for it by the vested interest.
I feel this site should start a petition for safe banking for the future as suggested by Mervyn King.
13. drewster said...
Could you fine folk please enlighten me a bit. I understand that there are calls for a separation between "normal" banking and "investment" banking. Normal banks would be government-guaranteed (like they are today) and would appeal to ordinary citizens who just want to save some cash. Investment banks would be higher-risk, non-guaranteed, but potentially offering higher interest rates and more tailored services.
However where does the boundary lie? If a bank lends billions in mortgages to buy-to-let investors, is that "normal" or "investment"? Is a self-cert mortgage just like a safe normal mortgage; or is it risky and should be categorised as an investment? What about lending to companies? What about lending to a property developer who wants to build two thousand luxury BTL flats in Coventry?
Perhaps I'm missing something, but it seems that the distinction between a "normal" bank and an "investment" bank isn't as clear as it first seems.
14. justwatching said...
What a poor, poor example Gordo quoted though. Northern Crock, a retail bank failed. Why? Because it lent poorly, very poorly.
15. Roomelephant said...
Just before failure, Northern Rock had a loan-to-deposit ratio of 322%.
16. crunchy said...
10. tyrellcorporation
Quiet.
I was also referring to future voting within the senario of a world government.
That is worth some thought along with post 9. As we do not know how bad things will really get could we not all end up working for the
government?
17. Wageslavex14 said...
Drewster, as I understand it, investment banks don't actually lend money to anyone. The closest they get is when assisting with bond issues for companies and, more particularly, private equity firms when they will take the risk for making sure the bonds are sold, i.e. if they can't find greater mugs to buy the debt, the investment banks will have to keep the stinky private equity debts on their books. However, they have the small consolation of having charged an absurdly large underwriting fee.
Splitting investment banks from commercial banks won't cure all ills because, as you mention in your post, reckless lending to bad companies, BTL investors and uncreditworthy institutions can easily bring down a bank. However, lending to businesses and individuals is an essential part of a capitalist economy, and which does require some form of goverment safety net, largely because they take customer and business deposits. Investment banks don't take customer or business deposits, and for that reason (there are other reasons, but these are largely a result of there being no division between investment and 'narrow' banking) they don't deserve taxpayer support. Proprietary trading doesn't provide any benefit at all to the wider economy, commodities trading by financial companies causes harm to the wider economy, and there is no reason whatsoever for the taxpayer to underwrite this. Underwriting share and bond issues is a genuinely valuable service, but it does not require rocket scientists to do it, there is no justification for the exorbitant fees charged.
18. 51ck-6-51x said...
drewster
A retail bank issues loans ( inc. mortgages ) to and accept deposits from consumers.
A commercial bank issues loans to and accept deposits from corporate bodies.
An investment bank advises and provides services such as divestment corporate bodies & sovereign bodies; issue, buy and sell securities in capital markets - to make markets; provide specialised products ( e.g. bond insurance: CDS ) and to perform propriety trading; performs underwriting services; provide book-running services; etc...
A bank performing your example of lending to a BTL investor would be retail if that investor was a private individual and commercial if that investor was a company ( much more likely, even if the company is only one individual! ) - so it would depend upon the implementation of such a split. The usual proposal is for commercial & retail to be split from investment as per Glass-Steagall 2.
As regards deposit insurance I think it would be better to remove this entirely - the individual saver should be able to purchase such insurance from a market if they wish.
19. Yoss said...
You are hereby committed to 10 years hard taxation to cover the crime of Banksters that are to big to fail..... Yet the FSA, Who are probably also in-line for massive bonuses and overtime payments....failed to stop it!
Gut the pointless quango and put the BOE in charge of regulating the industry, at least then we might get some much needed reform!
After all how many MP's thought about "Moral Hazard" when they claimed their "Drive Way Re-Surfacing" costs on expenses (Cough, Cough, John Redwood!)? It may have been allowed by "The Rules", But who chuffing created "The Rules"!
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21. drewster said...
666,
Thanks for the clarification. Seems to me that the difference (in terms of riskiness) isn't that clear-cut at all.
I don't think the free market can provide deposit insurance. If it existed, it would have been incredibly cheap in 2006, but then by 2009 all the counterparties (insurers) like AIG would have gone bust.
22. uncle tom said...
This is so pathetic..
GB can't let go of the idea that it's not his fault - that it's not his problem, but a global one. No-one believes him.
It beggars belief that he thinks the public will buy this. Even the girl in my local shop, who is not the sharpest chisel in the box; is getting angry.
She has probably never bothered to vote before, but I'll wager she does next time..
..but for who??
23. Jojo said...
The crisis is global, in that Britain followed America into dismantling Glass Steagall. Surely Brown made big mistakes.