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Mervyn King: Britain At Risk Of Another Financial Crisis

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This is an interesting development. I’m sure there will be many differing opinions here as to why King has decided to give this interview to the Telegraph, but whatever the motive it’s a significant shot across the bows of George Osborne and his recent pathetic kowtowing (I would actually call it complete obeisance) to the banks.

Merv is saying all the right things here, and his outspokenness coincides with rumours that have been circulating that Osborne faced a revolt from the committee of the Independent Banking Commission due to his alleged attempt to coerce them to water down their proposals.

Telegraph leader - Britain at risk of another financial crisis

Mervyn King interview

Charles Moore - Mervyn King is right. If the banks face no risk, we shall all go down

In an interview with the Telegraph, Mervyn King says that “imbalances” in the banking system remain and are “beginning to grow again”.

Mr King urges high street banks to take a better, longer term view towards their customers and to stop focusing on the need to “simply maximise profits next week”.

He accuses them of routinely exploiting their millions of customers. “If it’s possible [for financial services firms] to make money out of gullible or unsuspecting customers, particularly institutional customers, [they think] that is perfectly acceptable,” he says.

The Governor criticises the “weight put on the importance and value of takeovers” and raises concerns that companies with good reputations have been “destroyed” in the search for short-term profits.

Mr King expresses regret for not sounding a louder warning over his concerns before the last banking crisis.

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He's a very clever man, whatever else can be said about him.

More than a few times I have noticed him with one eye on the mob beyond the realm of balance sheets and politicians and his finely honed instinct for self preservation is present strongly in the above article.

But really,

“We’ve not yet solved the 'too big to fail’ or, as I prefer to call it, the 'too important to fail’ problem.

“The concept of being too important to fail should have no place in a market economy.”

He's the head of the worlds oldest government backed monopoly, for ******s sake.

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Merv is saying all the right things here, and his outspokenness coincides with rumours that have been circulating that Osborne faced a revolt from the committee of the Independent Banking Commission due to his alleged attempt to coerce them to water down their proposals.

Osborne is a waste of space as an old Glaswegian Grandmother would say all top show and nae knickers. :rolleyes:

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This is an interesting development. I’m sure there will be many differing opinions here as to why King has decided to give this interview to the Telegraph, but whatever the motive it’s a significant shot across the bows of George Osborne and his recent pathetic kowtowing (I would actually call it complete obeisance) to the banks.

Merv is saying all the right things here, and his outspokenness coincides with rumours that have been circulating that Osborne faced a revolt from the committee of the Independent Banking Commission due to his alleged attempt to coerce them to water down their proposals.

Telegraph leader - Britain at risk of another financial crisis

Mervyn King interview

Charles Moore - Mervyn King is right. If the banks face no risk, we shall all go down

Pah, a politician warned Kunt about the banks and he told her she didn't understand banking. Grade 'A' bullshitter.

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." -Ludwig Von Mises

SHTF Plan RSS Feed

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He's a very clever man, whatever else can be said about him.

More than a few times I have noticed him with one eye on the mob beyond the realm of balance sheets and politicians and his finely honed instinct for self preservation is present strongly in the above article.

Yep, I don’t think we’re ever going to know whether King is truly as passionate in his views as he would appear from his speeches and interviews, but even if you believe he’s a charlatan then this sort of implicit public rebuke of the Government’s current cosiness with the banks is telling.

He may well see that the present backtracking in policy towards lending and risk-taking by the banks is likely to lead us into much the same crisis once again, and he probably has a good sense of history too – how in the 1930’s public anger didn’t dissipate against the banksters (that’s when the term was coined) until Ferdinand Pecora came along and hung them out to dry.

A second round of bailouts from the public purse could well see the lamp posts coming into use, and maybe Merv wants to enjoy his index-linked pension in peace.

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There are some extremely ironic statements in the interview:

It was in postgraduate work at Harvard that he “learnt that economics could be a serious discipline”. Being a bright young man, he gave “excessive weight” to economic models. “You feel, 'My models will make a big difference.’ As I get older, I give more weight to history. Alfred Marshall [the founder of Cambridge economics] was absolutely right that you should do the mathematics but then burn the paper and write it down in words.” Maths and models should be “aids to thinking, not substitutes for it”. He thinks people should have remembered that during the financial crisis.

It’s a pity that Merv didn’t frequent this site in 2005/06 then. This is exactly what we were accusing the officials at the Bank of being susceptible to. And incidentally, I’m in no way convinced that this devotion to mathematical models in economics has changed, even after the abject failure of the past decade.

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There are some extremely ironic statements in the interview:

It’s a pity that Merv didn’t frequent this site in 2005/06 then. This is exactly what we were accusing the officials at the Bank of being susceptible to. And incidentally, I’m in no way convinced that this devotion to mathematical models in economics has changed, even after the abject failure of the past decade.

...like any model the theory may be realistic ...but the size of the figures fed in were ripples compared to the waves delivered by the crooked practices which these naive intellectuals had not anticipated ....in other words garbage in ...garbage out....we have garbage....and it hasn't been collected..... :rolleyes:

Edited by South Lorne

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Shame he doesn't condemn outright all types of

PREDATORY LIAR LOANS.

:angry: :angry: :angry:

Including mortgages with multiples over 3 x single wage... :angry:

Edited by eric pebble

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As someone cleverly pointed out on here a few weeks ago

- the reason "Blitish Bank imbalances are growing again" is the banks are blowing their wads lending for short termist gains(= bonuses) in other parts of the World - tactfully not mentioned in his blurb!

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Shame he doesn't condemn outright all types of

PREDATORY LIAR LOANS.

:angry: :angry: :angry:

Including mortgages with multiples over 3 x single wage... :angry:

I'm not sure he ever could.

As a central banker the only tool he has to aid "economic growth" is increasing the amount of credit in the economy. That must inevitably involve lending to people who wouldn't have got credit before, or increasing the amount of credit existing borrowers are carrying, and both actions increase the risk of default.

Mervyn King ought to know a lot about risk. He is the one creating it.

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I'm not sure he ever could.

As a central banker the only tool he has to aid "economic growth" is increasing the amount of credit in the economy. That must inevitably involve lending to people who wouldn't have got credit before, or increasing the amount of credit existing borrowers are carrying, and both actions increase the risk of default.

Mervyn King ought to know a lot about risk. He is the one creating it.

Exactly.

"The search for yield goes on. Imbalances are beginning to grow again"

The imbalances were created by the central banking manipulators intentionally then. They have done everything they think they can get away with to pervert the market based assessment of yield and risk - directly manipulating the yield for gilts and treasuries by creating false markets in them. This they are doing for the second time this deacade. The result of the other bout of manipulation was insurance companies, investors, pension funds and others buying securitised mortgages in their "search for yield".

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Yep, I don’t think we’re ever going to know whether King is truly as passionate in his views as he would appear from his speeches and interviews, but even if you believe he’s a charlatan then this sort of implicit public rebuke of the Government’s current cosiness with the banks is telling.

He may well see that the present backtracking in policy towards lending and risk-taking by the banks is likely to lead us into much the same crisis once again, and he probably has a good sense of history too – how in the 1930’s public anger didn’t dissipate against the banksters (that’s when the term was coined) until Ferdinand Pecora came along and hung them out to dry.

A second round of bailouts from the public purse could well see the lamp posts coming into use, and maybe Merv wants to enjoy his index-linked pension in peace.

Don't forget he knows who he's lending too in secret, I'm more of the opinion King knows bank bailout 4 is imminent and this time the public might be a little bit p155ed. After the Irish/Greek bailouts which was for the bankers rather than the people, I think King knows that the game might possible be up so he's hedging his bets.

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...like any model the theory may be realistic ...but the size of the figures fed in were ripples compared to the waves delivered by the crooked practices which these naive intellectuals had not anticipated ....in other words garbage in ...garbage out....we have garbage....and it hasn't been collected..... :rolleyes:

The model system is fatally flawed, we don't have any accurate future prediction machines.

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Official statement from Angela Knight, chief executive, British Bankers' Association, in response to Mervyn King’s remarks:

"We view the Governor with the highest respect, but in this instance there are a number of points with which we disagree.

"The banking industry recognises that some of its number got it badly wrong during the crisis. Since then the industry has reformed radically. We work closely with our customers of all sizes and types and in doing so have created one of the largest financial centres in the world and a great contributor to the British economy. We achieved this together by doing our business well - not by doing it badly.

"We entirely agree that no bank should believe it can fall back on the taxpayer. The changes from top to bottom within the industry have ensured the risks are well controlled, and all banks have put recovery and resolution plans in place to answer the too-big-to-fail question and so safeguard customers and the taxpayer against the remote consequences of any future failure.

"This is a responsible industry which believes in working with its customers of all shapes and types. A special programme launches this month specifically to help small business customers, for instance.

"Internationally the importance of the programme of change that has been implemented is well recognised, as well as the huge strides the industry has taken to restore stability."

BBA link

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"We view the Governor with the highest respect, but in this instance there are a number of points with which we disagree.

"The banking industry (banking isn't an industry it produces nothing) recognises that some of its number got it badly wrong (yes, they got caught defrauding investors, lying, cheating and stealing their way to bonuses and commissions, setting up dummy charities and peddling shit) during the crisis. Since then the industry has reformed radically (no it hasn't, if anything it is worse than before ripping off its customers with charges and rates 10's times base rates). We work closely with our customers of all sizes and types and in doing so have created one of the largest financial centres in the world and a great contributor to the British economy (how well has the uk economy done since bankerisation of it - appallingly). We achieved this together by doing our business well - not by doing it badly (banking is a piece of piss compared to nearly every other venture where you need talent, skills, business acumen, well planned resourcing, IP and the ability to operate in a competitive global market - the banking sector has a fraudster's charter).

"We entirely agree that no bank should believe it can fall back on the taxpayer. The changes from top to bottom within the industry have ensured the risks are well controlled, and all banks have put recovery and resolution plans in place to answer the too-big-to-fail question and so safeguard customers and the taxpayer against the remote consequences of any future failure (******** - hide the losses, take cheap/free money and carry on as before).

"This is a responsible industry which believes in working with its customers of all shapes and types. A special programme launches this month specifically to help small business customers, for instance. (after having raped them for years, PR fluff and more ********)

"Internationally the importance of the programme of change that has been implemented is well recognised, as well as the huge strides the industry has taken to restore stability."[/i] (stabliity only derived from putting the taxpayer on the hook).

BBA link

Edited by OnlyMe

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In an interview with the Telegraph, Mervyn King says that “imbalances” in the banking system remain and are “beginning to grow again”.

Mervyn King and other central bankers have gone to enormous lengths to make sure that the people who created this crisis, ie banks and property speculators, are not only protected from the consequences of their actions, but are actually being allowed to profit at the expense of people who behaved prudently.

For example propping up the Wilson's property scheme in Kent with ridiculously low rates while punishing savers.

This is what you get when you remove moral hazard from capitalism, if he doesn't understand this he should resign.

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It was in postgraduate work at Harvard that he “learnt that economics could be a serious discipline”. Being a bright young man, he gave “excessive weight” to economic models. “You feel, 'My models will make a big difference.’ As I get older, I give more weight to history. Alfred Marshall [the founder of Cambridge economics] was absolutely right that you should do the mathematics but then burn the paper and write it down in words.” Maths and models should be “aids to thinking, not substitutes for it”. He thinks people should have remembered that during the financial crisis.

That's rich him criticising peoples' memory when his own doesn't seem to extend any distance at all back in history or give enough weight to UK history to remember the devastation caused to the UK during that bout of out of control inflation that helped towards the 80s/90s recession - an inflation yet again out of control which he has helped to stoke. He says "you should do the mathematics but then burn the paper and write it down in words" - waffling as the UK economy continues to burn.

So when was he saying all that stuff as the crisis approached. Whatever he was doing then, doing the maths, burning the paper (he probably meant shredding the paper) then writing it down in words (for later shredding?) or whatever, it didn't work then and it isn't working now.

In summary Mr King has no credibility and is just a grade "A" twister and manipulator of stats and figures as well as a grade "A" waffler of rubbish.

Edited by billybong

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Yep, I don’t think we’re ever going to know whether King is truly as passionate in his views as he would appear from his speeches and interviews, but even if you believe he’s a charlatan then this sort of implicit public rebuke of the Government’s current cosiness with the banks is telling.

He may well see that the present backtracking in policy towards lending and risk-taking by the banks is likely to lead us into much the same crisis once again, and he probably has a good sense of history too – how in the 1930’s public anger didn’t dissipate against the banksters (that’s when the term was coined) until Ferdinand Pecora came along and hung them out to dry.

A second round of bailouts from the public purse could well see the lamp posts coming into use, and maybe Merv wants to enjoy his index-linked pension in peace.

When we have our full-on housing crash, and if it follows the typical profile of a housing crash, the banks in total will lose hundreds of billions. For example 30% of rbs's loan book already has an LTV of >90%. 60% is above 70% LTV.

The only question is whether the needed bailouts will be large enough to sink the UK soverign if they are undertaken. My guess is they will. Thus its a choice of only the banks being let go and going bankrupt or the UK as a whole going bankrupt.

Edited by alexw

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Mr King expresses regret for not sounding a louder warning over his concerns before the last banking crisis.

Mervs "regret" and three quid will buy you a cup of coffee at Starbucks.

Cheers Merv.

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Should think he regrest ****** all as he walks off with his pension pot. Just a little bit more of history rewriting so people don't think he is a thick Kunt or possibly worse utterly complict Kunt in causing the bank runs through monetary policy and turning a blind eye to everything that was going on around him, depsite apparently facec to face warnings from people inside the banking of which he obviously knows nothing as it all went pear shaped.

http://www.dailymail.co.uk/news/article-502590/Bank-England-governor-warned-Northern-Rock-collapse-years-ago.html

Bank of England governor was warned of Northern Rock collapse two years ago

By SIMON WALTERS

Last updated at 23:29 15 December 2007

* Comments (0)

* Add to My Stories

Concern: Gillian Shephard forecast trouble

Mervyn King

Mervyn King was alerted to Northern Rock's possible collapse two years ago

Bank of England governor Mervyn King was warned two years ago that Northern Rock was in danger of collapse ? but he brushed the concern aside dismissively.

Former Tory Cabinet Minister Gillian Shephard told Mr King she feared a 'day of reckoning' because Northern Rock was consistently offering cut-price home loans.

Mr King responded by telling her she did not understand banking and insisted there was nothing to worry about. The confrontation took place in 2005 when Mr King went to the House of Lords to address Conservative peers.

Read more: http://www.dailymail.co.uk/news/article-502590/Bank-England-governor-warned-Northern-Rock-collapse-years-ago.html#ixzz1FjqJTI5g

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More, differerent rules indeed - we'll get the taxpayer to foot the bill when it goes pear shaped.

"We simply cannot understand how building societies that become banks, like Northern Rock, can undercut us with their borrowing rates all the time. What is happening? Where are they getting the money from?"

Mr King dismissed Baroness Shephard, who was a Treasury Minister in Margaret Thatcher's government and Education Secretary under John Major, telling her: "Northern Rock operates under different rules because it is a bank."

Read more: http://www.dailymail.co.uk/news/article-502590/Bank-England-governor-warned-Northern-Rock-collapse-years-ago.html#ixzz1FjrvWrnh

Also he's one of those property retards, not only is astronimic pricing of housing a problem, it is in itself a source of stability because all this debt it is lent on housing - only if you keep dishing out dishonest, grossly excessive lending. What a cretin.

"The vast majority of the debt is secured against a property and it would be of concern only if that was not the case," he argued.

Read more: http://www.dailymail.co.uk/news/article-502590/Bank-England-governor-warned-Northern-Rock-collapse-years-ago.html#ixzz1FjsRTfl5

Edited by OnlyMe

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This is a copy of a post I made on another thread, added to this one for context. I said in the OP that Mervyn King’s criticism of the banks in a public interview was an interesting development, and now the Financial Times has added its support.

There’s a great deal of political manoeuvring going on at the moment regarding banking reform, and George Osborne is being very cleverly boxed in by those who disagree with his apparent willingness to allow the banks to return to their bad old pre-crisis ways.

---------

In an editorial that pulls few punches, The Financial Times has tonight come out very much in support of Mervyn King’s stance re the banks.

In the same way that King’s interview was a highly significant development, this is as well. It’s interesting because it’s possible that Martin Wolf, the FT’s chief economics commentator and one of the most respected financial journalists in the world, may have had some input into this editorial. Wolf is one of the members of the Independent Commission on Banking which is due to outline some of its thinking on banking reform in its interim report next month, although its final report won’t be released until later this year.

The UK banking community is becoming increasingly isolated, even though at present it appears to have George Osborne very much in its pocket (despite HM Treasury’s frantic attempts to argue to the contrary after King’s broadside). If this pressure persists, it’s not inconceivable that we may see some much-needed reform. I’m not holding my breath yet, but Mervyn King’s interview and this latest editorial in the FT are tipping the scales.

Mr King’s plain speaking is particularly welcome because too much deference has crept into the dialogue with the banks. Despite some populist anti-finance flashes from the coalition, ministers have treated the banks as their equals – if not their superiors.

For instance, the attempt to negotiate a deal with the banks – the so-called Project Merlin exercise – was misguided. Although the government never spelt out what its quid pro quo would have been, the implication was that it would go easy on regulatory reform in return for more lending. That comes dangerously close to the mentality that led governments to invite trades unionists to have beer and sandwiches at Number 10 in the 1970s.

Financial Times

[For non-FT subscribers, try Googling "King helps the case for banking reform".]

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When we have our full-on housing crash, and if it follows the typical profile of a housing crash, the banks in total will lose hundreds of billions. For example 30% of rbs's loan book already has an LTV of >90%. 60% is above 70% LTV.

The only question is whether the needed bailouts will be large enough to sink the UK soverign if they are undertaken. My guess is they will. Thus its a choice of only the banks being let go and going bankrupt or the UK as a whole going bankrupt.

Chilling... :ph34r::unsure:

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