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Peston And Osbourne - Bank Regulation... Bbc

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http://www.bbc.co.uk/iplayer/episode/p03g89n5/this-world-the-great-chinese-crash-with-robert-peston

I'd like to draw your attention to the quote at 26:45 to 27:15.

Peston: <Note potentially dangerous UK bank exposure to bad debts in China. Waffle... question...>

Osbourne: "<Waffle about China trading...> We're also got very good regulators and a tough system at the bank of England that make sure, that're constantly checking, y'know, that we've got our house in order, that we've got our economy secure."

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It just seemed like it wanted to place blame for this recession and bank failures on the BOE.

I think trying to get close which China is the right thing to do, if we were 10 years in the past.

Right now it's a pretty terrible idea.

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I think trying to get close which China is the right thing to do, if we were 10 years in the past.

Right now it's a pretty terrible idea.

I was taken aback at the idea - after the epic failure of high street banks (that remain state owned, because there is no private sector appetite for the remaining risks); in the wake of scandals like LIBOR - that there can be any claim that UK banks are safe, because they are brilliantly regulated.

As for forging links with China... surely that's a good idea? The bad idea is (and was always) the (ab)use of leverage to inappropriately concentrate risk.

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^

Peston bbc link.

Use the word UK instead of China and that could be a documentary about the UK (apart from any rebalancing) - the pictures would be a bit different of course.

The main virtue the UK has relative to China is its size - but the UK politicians are of course and as usual doing their very utmost to destroy that advantage.

From some of the video (the vibrant street markets and new technology for instance) China is already in advance of the UK in many terms. Yet another country that is starting to look prosperous compared to the threadbare and decrepit UK - but usually portrayed in the UK media far differently.

Osborne


..don't underestimate the amount of economic fire power the Chinese authorities can throw at their problem

More and more debt and "stimulus" :rolleyes:

Edited by billybong

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I seen on mainstream BBC yesterday they were talking about china about to go under!

plinty plinty

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So they've got their reason for the continued UK downturn - and already propagated by the UK media.

First it was the US.

Now it will be China.

Edited by billybong

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We're also got very good regulators

Mmmm....

George Osborne has forced out the tough-talking head of Britain’s financial watchdog after he angered the banking community with a string of record fines.

Martin Wheatley quit as chief executive of the Financial Conduct Authority after he was told earlier this week by the chancellor that his five year contract would not be renewed next year

http://www.theguardian.com/business/2015/jul/17/city-watchdog-chief-quits-fca-george-osborne

So in Osborne's view a 'good' regulator is a regulator who is not disliked by the people he is regulating? That must mean a good policeman is a policeman who is popular among the criminals he is employed to catch- right?

Because the last thing we want from a financial regulator is that he upset the banks by....well...regulating them. That would never do. Wheatly was clearly an idiot for failing to realize that his role was provide a cosmetic appearance of regulation while in reality allowing the City fraud machine to carry on business as usual.

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I was taken aback at the idea - after the epic failure of high street banks (that remain state owned, because there is no private sector appetite for the remaining risks); in the wake of scandals like LIBOR - that there can be any claim that UK banks are safe, because they are brilliantly regulated.

As for forging links with China... surely that's a good idea? The bad idea is (and was always) the (ab)use of leverage to inappropriately concentrate risk.

It wasn't really the high-street (a.k.a retail) side of the banks that was the problem and it still isn't (setting aside the mortgage lending issues and BTL that people don't like). It was their treasury department activities like securitisation, CDOs, short-term borrowing, etc. that contributed to the financial crisis.

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It wasn't really the high-street (a.k.a retail) side of the banks that was the problem and it still isn't (setting aside the mortgage lending issues and BTL that people don't like). It was their treasury department activities like securitisation, CDOs, short-term borrowing, etc. that contributed to the financial crisis.

How can we set aside residential lending when it was the residential lending that was being securitised, and it was the securitisation that was facilitating the residential lending?

Adam Applegarth, Northern Rock's cricket-playing chief executive, was a marketeer rather than banker. He looked after his staff very well, and he came up with the 'virtuous circle strateg' that sought to gobble up market saher with cheap innovative mortgage products. 'He just wanted a headline-grabbing punchy product in the market,' Taylor told me. 'And naturally, we [in the securitisation department] were the gap. We came up and said "We can do this, this and this." And of course he was always going to bite our arms off.' Before 2007, Northern Rock securitisation meant both a source of mortgage funding and off-balance sheet treatment. 'So by securitising,' Taylor continued, 'not only did I get in funds to lend again, but I also freed up capital to hold against that lending. It was the perfect, perfect tool. I needed nothing else to fuel my mortgage business.'

[. . .]

At its peak in 2007, this sausage factory of mortgage credit on the Tyne was funding a quarter of Britain's house loans. Perhaps the most incredible thing about this whole machine, though, was the fact that there was no profit in it. Funding through these vehicles channelled a mass of credit through Northern Rock at very cheap rates, sometimes just 0.1 per cent above the London interbank market. But Northern Rock then lent this borrowed money out at a rate only a tiny fraction above that figure - as did many other mortgage lenders. Northern Rock also pioneered computer analysis, and internet rather than branch-based mortgage-writing. Costs were driven down. The end result was the allegedly 'virtuous circle' of cheap costs, cheap funding, cheap mortgages, growing market share, cheaper costs, and so on. It was a result of competition in the market. Executives at HBoS, for example, were to admit that from 2005-7 there was very little profit to be made in UK mortgages. In the first instance, new custom was essential, because new custom paid up-front one-off arrangement fees that kept a mortgage just about above water in profit terms for the first few months.

That is why Northern Rock had to grow: it had to write more mortgages in order to continue its business. It wasn't hubris when in early 2007 Adam Applegarth announced Northern Rock's ambition to become the third biggest mortgage lender in Britain. It was a matter of survival. The Rock was a Ponziistic monster that had to consume Britain's mortgage market in order to sustain itself. At the peak of the bubble, Northern Rock's profit target was the same as its growth target, because they had to grow to be able to book a profit. But the orgy of mortgage giving, the drive to flog even more new mortgage products than one's competitors, whatever the cost, was to get even crazier.

- Faisal Islam, The Default Line

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So they've got their reason for the continued UK downturn - and already propagated by the UK media.

First it was the US.

Now it will be China.

Plus they fired the regulator who was too mean and shelved the banking enquirers - it's like a 70's political conspiracy thriller, only real !

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