Financial Crisis and Banking
Go on. Admit it. You don’t feel altogether sorry for those bankers, do you? When you read about the collapsing pillars of the temples of mammon, you don’t feel the tears beginning to prick the corner of your eyes.
The City is a global industry in which Britian excels: we should not exult as banks fold.
When you read that the masters and mistresses of the Universe are being expelled from their glass palaces, ferrying their possessions in cardboard boxes, you can’t quite find it in you, somehow, to mourn.
Oh no. On the contrary. You snuffle and truffle your way through the yards of newsprint, searching for fresh news of folding banks and speculating who will be next.
So Lehman Brothers has bitten the dust, and the gloomy reverberations are being heard in Porsche dealerships on both sides of the Atlantic. Merrill Lynch has been sold, and now the tide of destruction is lapping about the feet of Morgan Stanley and – can it be true? – Goldman Sachs!
Amid the anguish, amid the despair, I am afraid I detect in the coverage a tiny but audible batsqueak of glee, and sometimes it is more than a squeak.
Every Lefty from Alex Salmond to Gordon Brown is queuing up to kick the “spivs and speculators”, who are apparently the authors of their own destruction, as well as the destruction of immeasurable wealth across Britain and the world.
At the very moment last week when banking stocks were a sea of gore, and thousands of jobs were being lost, the Prime Minister thought fit to announce that the “City must clean up its act”. In respectable conservative free-market newspapers you will find yammering columnists demanding new laws on usury, so that nothing of this kind can ever happen again.
As the banker-bashers survey the wreckage of Lehman Bros, the main complaint is that the carnage does not go far enough. Why, when ordinary people are suffering from plummeting house prices, are these ex-Lehman partners allowed to waltz off with multi-million pound bonuses?
Why, when they have so terminally stuffed the financial system that most people are finding it tough to get a mortgage, are these incompetent loan sharks still cruising the world in their yachts and Bugatti Veyrons? Yes, there are some pretty strong feelings out there: Schadenfreude at the bankers who have been punished, indignation at those who have not.
Which is why it is time for this column – ever alert to the noble but unpopular cause – to enter a note in defence of the banks, the City, and the general practice of lending money for profit.
Let us be clear: the banks have been greedy, sometimes hideously greedy. And they have collaborated in encouraging the greed and credulity of home-owners, on both sides of the Atlantic, who have taken on more debt than they can manage.
The banks have made it worse by taking that bad debt, and chopping it up into funny parcels called derivatives, and selling these products to each other to make even more money; and then they have made things much, much worse by lying.
They have been lying to each other about they extent to which they hold this toxic stuff, and so trust has broken down, and the banks have stopped dealing with each other, and no one can get any credit, and the short-selling hedge funds have begun to close in – quite reasonably – to sell the banks’ shares and start the bloodbath.
Last week we seemed to be faced with a full-scale run on the banks, and governments in America and Britain had no choice but to act. The Labour Government has flouted competition rules to protect HBOS, and both governments have banned short selling.
It is an incredible turn of events, and for a free marketeer it is quite dizzying. There can be no doubt that government has a duty to get involved, not least to protect innocent depositors. Someone needs to make sure there is no more sharp practice, and that someone is government.
How come Lehman was allowed at the last minute to whip an £8 billion cushion away from London, and transfer that cushion to New York? The result was that the defenestrated bankers of New York had a softer landing than Lehman folk in the City. It looks damn suspicious.
We need an answer, and fast. But we should also remember that whenever government gets involved in the market – whenever they use taxpayers’ money to defend the price of a share or a currency – they create a risk and they create an opportunity.
When Hank Paulson nationalised Fannie Mae and Freddie Mac, he was issuing a feeding call to the sharks, as obvious as the boasts of Norman Lamont that he would fight to the death to protect the parity of sterling against the German mark. The hedge funds saw a one-way bet, then and now, and the paradox is that Paulson’s initial actions may have made the banks more vulnerable, not less.
What will happen in January, when the rules on short-selling expire? And whatever else government does, we must remember that regulation introduced in response to one crisis almost always helps to create the next one.
London’s recent success as a financial centre – and our edge over New York – has been at least partly to do with the post-Enron Sarbanes-Oxley rules that fettered American markets.
Before you attack the bankers of London, remember that this is one of the few global industries in which we truly excel; the City contributes about 9 per cent of Britain’s GDP – think of all the professions and trades that feast, directly or indirectly, on the nourishment provided: the lawyers, accountants, PR firms, architects, interior designers, builders, taxi drivers and just about everyone else.
And before you go whingeing to me about house prices boosted by City bonuses, I leave you with one final thought: whatever the disasters of the sub-prime sector, these products allowed millions of Americans to own their homes, and the vast majority are making their payments.
They will enjoy the long-term benefits of home ownership, and that is thanks to the ingenuity and enterprise of people who lend money for profit. Of course there are spivs and speculators out there.
But before we get carried away with neo-socialist claptrap, we should remember the huge benefits brought to this country by bankers and the City of London.
[First published in the Daily Telegraph on 23 September, 2008 under the heading ' Financial Crisis: Bankers and the City of London provided a roof over people's heads']
114 Comments
Sorry, I was only joking ! I know there is something about Boris that even when he looks scruffy he still looks very posh and yet endearing. I don’t know what it is but it just there.
Have you seen an oil painting of him when he was about 10 – a thick mop of unruly blond hair, thick lips, those faraway eyes… so lovely !
Rate This:
0 
0
Boris never ever pretends to be anything he is not. People just love that, don’t they?
Did anyone see Hazel Blears on Question Time last night? All she needed was a red duffel coat to be a dead ringer for the killer that finishes off Donald Sutherland on the streets of Venice in the renowned movie DON’T LOOK NOW.
The Blairites are all ganging up on Gordon to make him their scapegoat, but it won’t work. Nobody wants GB as PM anymore, if they ever did, but they want other Labour ministers even less. They are the most unappealing shower EVER. None of them stands out as a potential replacement, and most of them would be even more disastrous than GB. In fact, they all would.
Rate This:
0 
0
I would feel so much happier and safer if the Conservatives were in charge of running the economy.
Rate This:
0 
0
Thank goodness Nick Clegg will never be in charge of the economy. He can’t even manage his own finances, as he moans he is mortgaged to the hilt, and even with two healthy salaries coming into his household, he and his wife are struggling. Keep him away from the economy then!
Rate This:
0 
0
I would feel so much happier and safer if Sooty was in charge of running the economy.
Rate This:
0 
0
Jaq! Huge laugh from me! I do hope you are feeling better and recovering, we have missed you.
This is a very serious worrying time for our country. It doesn’t make me feel any better to think that Gordon Brown’s main priority, above what is best for the economy, is staying in power and doing down David Cameron.
We have seen how he was prepared to sacrifice poor people and let them suffer if it meant he could steal a march on DC and gain points. What else regarding our safety is Gordon prepared to sacrifice to hang on by his toe nails as Prime Minister? His own party are sick to death of him, but deep down they know they are doofuses and wouldn’t do any better.
How much damage could Gordon do in the years up until an election in 2010? REALLY A LOT.
Rate This:
0 
0
“Before you attack the bankers of London, remember that this is one of the few global industries in which we truly excel”
Banking is not an industry. For years I have been at pains to point this out to people who told me that everything was OK. Well things weren’t OK. This very misconception is at the root of how our economies and our people became so over valued.
Rate This:
0 
0
3 ways to beat the economic crisis and keep your money safe :
- Buy gold bullion bars.
- Buy gilt.
- Put your money in National Savings or banks like HBOS or Northern Rock as these banks are 100% backed up by the British Government so if they took your money and run away you would get your money back, up to £35,000 max. Of course with the other banks, you might get your money back, but it would be a very long process. Warren Buffet said so.
Rate This:
0 
0
Why don’t you just bury it in your back garden like everybody else?
Rate This:
0 
0
The troubles in the City are having a huge knock-on effect on the taxi trade. A cab driver told me today that their fares are right down because the City boys are either sharing cabs or not taking them at all.
Anyone who gloats at the demise of bankers should think of all the people they keep in employment, who will now suffer.
Rate This:
0 
0
I wish we had the the US democratic system. Then we would never have been made to suffer a PM who was not elected by the country.
If the Labour Party kick Gordon out before the next general election, we will have another dummy inflicted on us undemocratically, unless they call a general election. You would think they would not dare to do that, but I bet they do dare.
Rate This:
0 
0
You say ‘the City contributes about 9 per cent of Britain’s GDP’, but I ask you, was this calculation before or after the crash? I think you will find that when this disaster has run its course, the ‘gain’ will have become a loss.
Rate This:
0 
0
How totally right were David Cameron and Geroge Osborne to disagree with some major Tories and refuse to make promises of tax cuts. Recent events have shown how right they were.
Rate This:
0 
0
In one Sunday Paper they showed the pic. of David Milliband holding the banana at a weird angle and said it matched his yellow streak!! Tee hee!!
don’t forget to catch Boris’s speech today at the Conference in Birmingham, I think he speaks around 2 pm. not sure of the time. It is on Freeview, British Parliament Channel.
Also, Boris is working on a brilliant idea with the Mayor of Beijing, (with whom he developed a rapport – but whom doesn’t Boris develop a rapport with) to embark on a joint educational project, in which China would invest £2.5 million for our Olympics! That’s the spirit Boris! Let the Labour talk, you are working to save the cash of Londoners. Others talk, you perform!
Rate This:
0 
0
correction: scrub the £2.5M figure. The investment has yet to be confirmed. We have a £250M black home in our Olympic funding because of the credit crunch and falling house prices. Therefore Boris is negtiating a possible investment from the Chinese in exchange for a share in a university which could one day “be run jointly by Institutions in Beijing and in London.” (today’s Sunday Times).
The Chinese government is also interested in investing in other large scale infra-structure projects in the capital, such as Crossrail, the London underground and the proposed Thames estuary airport, knicknamed “Boris Island”.
What a great idea, Boris you are our star!
Rate This:
0 
0
I loved William Hague’s speech at the Tory Conference today. SOOOO witty. quote “Gordon Brown’s years of plotting have moulded his ministers in his own image”. Oh well said William Hague. Made fun of Miliband’s remark about his Heseltine moment.
Strongest comment by Hague “Britain cannot move forward until we get rid of them all!”
George Osborne is now taking a strongly practical line to our economic troubles, giving really practical advice for us. Very good line to take. The conference led with this economic line, some excellent helpful suggestions.
Rate This:
0 
0
David Cameron has totally united the party. They all seem to get on excellently well and be good friends as well as colleagues. The Labour Party preen,bitch and back stab worse than the X Factor judging panel!
Rate This:
0 
0
I agree with Ros. I would aswell. But Gordon Brown will not give an election now as his pathetic party are not ready. He will stick it out until the last minute which will be when there HAS to be a election, and I will be voting since i will be 18! Many of my friends are not interested with politics and many do not understand, I do understand what is going on and I understand that this country is in turmoil and needs to be saved and cleared from this loss of confidence in our own government.
Rate This:
0 
0
Can you believe it? Nigelle’s husband Charles Saatchi loses 4 stone eating 9 boiled eggs a day and nothing else !
Rate This:
0 
0
Stacy, I know, gosh fancy sharing a bed with him! A very unhealthy way to lose weight, but he has lost tons! And he lives with a cook!
Rate This:
0 
0
yes Mr Hague’s speech was wonderful today! He is absolutely right and Boris your speech was brilliant too, not only were your words wonderfully creative and infomative, but you never cease to make me laugh! The bit about the different places you may or may not have insulted! Great stuff!
Rate This:
0 
0
I was chortling at the way Boris described Arnold Schwartzenegger as a monosyllabic cyborg. Very droll. Who in the Labour Party has any sense of humour at all? They trot out a few feeble jokes, obviously thought up by some tired spin doctor. Boris has no trouble writing his own jokes!
But Boris’s vision of London is inspirational and he was brilliant in his focus on reducing knife crime and tackling its root causes and also in his steely determination to slash waste expenditure and keep costs down for Londoners.
Rate This:
0 
0
Yes, Boris was referring to Operation Scouse Grovel, ha ha ha!
Boris has galvanised politics into something truly exciting, if Cameron was not the outstanding leader he is, Boris would lead the party.
William Hague was outstanding as well. He is a brilliantly witty speaker.
Rate This:
0 
0
I am glad Boris spoke up for the bankers. when the City is functioning efficiently, they are supporting so many other people and keeping them in healthy employment.
Also, we see from history, how certain people envy the acumen of bankers and financiers. Philip IV of France first targetted the Lombard bankers and stripped them of their wealth in the 1290′s. His next target was the Jews. The financial talents of the Jewish race have excited the bitterest envy throughout the centuries from peoples not as talented.
In 1295, Philip forced them to reveal all their financial dealings, which the ruthless greedy monarch then plundered.
“In the July and August of 1306, all Jewish property throughout France was seized and the dispossessed owners were expelled from the country.”
THE KNIGHTS OF THE HOLY GRAIL.” by Tim Wallace Murphy, chapter 12 – “Philippe Le Bel, the Templars and the
Spanish Inquisition.”
After Philip had robbed the Jews in France, he set about robbing the Knights Templar, as described above.
Rate This:
0 
0
Thank you for your good wishes, Angela. Blogging may be sporadic as I recover but I’m on the mend
I’m yet to be convinced by David Cameron and felt rather sorry for Gordon Brown. Boris for PM.
Rate This:
0 
0
No, I don’t feel sorry for them.
Nor do feel sorry for Arnie in the wake of your remark about the “monosyllabic Austrian cyborg”. Serve him bl**dy right too, he’s had that coming for ages.
Well done, Boris!
Rate This:
0 
0
Jaq said:
Thank you for your good wishes, Angela. Blogging may be sporadic as I recover but I’m on the mend. I’m yet to be convinced by David Cameron and felt rather sorry for Gordon Brown. Boris for PM.
Sorry to hear you’ve not been well, Jaq, and glad to hear that you’re now on the mend. I didn’t realise you’d been ill, I’m behind with Boris’s blog since it seemed to become deathly serious then shut down around the time of the mayoral campaign. I’ve only recently realised that Boris is back online and back to normal – thank goodness.
Rate This:
0 
0
Thanks for taking a keen interest in my boiled egg diet. Indeed ! I appear to have lost a huge amount of weight and look even more like Nigella’s Pa than I did before.
Charles Saatchi
(Paarp !)
Rate This:
0 
0
Mr. saatchi, did you find it hard? Also, did you take any medication, to assist your digestion? You must have a will of iron, because you were faced with your wife’s tempting cooking on a daily basis and really we are all jealous of your success!
Rate This:
0 
0
Have you seen that NI is to scrap NHS prescription charges? That leaves England, once again, contributing mightily to the paperwork mountain and landing the chronic-ill (but taxed and working) paying while those who don’t pay tax – but are resident – pay nothing. Rather like one of the arguments against BBC licence fees, it is time someone in England did some joined-up sums and worked out the whole-transaction costs of prescription charges.
Rate This:
0 
0
oops. Just in case there’s any doubt: no I certainly do not advocate charging the chronic-sick resident non-tax payers. It’s a question of double-taxing the genuinely ill – some of whom earn very little and may, for example, still be paying back student loans or be looking after children and ineligible for free treatment because their spouse is paying tax.
Rate This:
0 
0
Sorry, Mr. Saatchi. We were not making fun of you. I did not know eating boiled eggs makes people windy. Sorry.
Paaaaaaa……. aaar . .. ……. aa.. … .. .a . . . ………. .. aaa……arp…p..
Rate This:
0 
0
That would be many peoples’ idea of hell. To be dieting and to have the beautiful Nigella in your kitchen on a daily basis, concocting recipes that would tempt a saint! What kind of man are you? (JOKE – Answer – IRON MAN.)
Rate This:
0 
0
I agree William Hague spoke extremely well and his speech was as funny as Boris’s. Fluid, witty, thoughtful, it was gripping stuff, and shows the high calibre of Cameron’s team. George Osborne also came over well. He knows how to clarify without making it seem that he thinks we are idiots. A huge advantage in a politician nowadays!
Rate This:
0 
0
Gordon was rocked last night when his Chief Whip Geoff Hoon refused to be moved in a reshuffle by publicly declared that he wanted to stay in his job, fuelling concern that Gordon is struggling to keep his Cabinet in line, despite delivering a powerful speech at the Labour’s conference last week. As Chief Whip, he’s meant to be responsible for keeping discipline in Labour’s ranks- NOT telling the Prime Minister how to reshuffle his Cabinet !
Asked by the journalists about reports he could be sent to Brussels as Britain’s next EU Commissioner, Hoon said:” I would like to remain a member of the government. That’s obviously a matter for the Prime Minister !”
He also made clear he wanted to stay on as MP for Ashfield, Derbys. There were reports yesterday that a number of Cabinet ministers have threatened to quit if the Prime Minister tries to move them.
Rate This:
0 
0
Stacy, the lunatics are taking over the asylum. Gordon has marvellous control over his ministers, doesn’t he? They are all so busy rebelling, they don’t have time to do any work.
Rate This:
0 
0
Agree with you about Gordon. One man’s trash is another man’s treasure.
Rate This:
0 
0
ps. In one paper, a journalist said Boris might be in trouble for calling Arnie a cyborg. How’s that, he was a cyborg in the Terminator movie! He built a whole career on being a cyborg!
Rate This:
0 
0
They’re like a circus, aren’t they? Now Ruth Kelly says she’s very doubtful of Brown’s leadership and is praising David Miliband – her real life ex-boyfriend.
And Cherie has furious row with Tony’s ex No 10 “gatekeeper” Anji Hunter whom Cherie claims Tony once referred to as ” my first defeat “.
( Google: CHERIE FURIOUS WITH ANJI HUNTER )
Boy, this lot should go on Oprah Winfrey Show and tell all !
Rate This:
0 
0
Oprah is too classy for them. Make that Jerry Springer! or worse (I like Jerry, but not the show) make that Jeremy Kyle!
Rate This:
0 
0
Powerful, honest and practical speech from George Osborne, powerfully, honestly and practically delivered. Well done George.
Rate This:
0 
0
So Ruth Kelly dated Monkey Boy with the banana! Ruth and David Milibanana! David M. and Ruth! What a combination!
Apparently the Little Britain sketch was in a show on the best political comedies showing David Walliams smooching all over the Prime Minister acted by Antony Head. Michael Howard and Charles Kennedy were the presenters and they were making naughty remarks that the sketch was just like Tony Blair and Peter Mandelson. I was told that they said that when the two of them were together in a room there was always an air of something going on that nobody else knew about.
Whatever could they have meant? Naughty naughty!
Rate This:
0 
0
Boris got really good press for his Conference speech. After the jokes, he got Very serious. He wants to control the Met. Police. He is aiming for air conditioning on the Underground and hopes to get the Routemaster back on the road. He wants to deal with not just crime, but its breeding ground. River travel for the Olympics is still on the agenda. Bicycle ranks for all. 10 new City educational academies. He VOWS he will fix it so we pay no more for the Olympics. We have his word he will stay within budget. I believe him. Boris we love you.
BORIS FOR PM.
Rate This:
0 
0
When you are doing such an important job as Boris is doing, you have to remain true to yourself and to what is in your heart.
More than any other politician in politics today, Boris Johnson is true to himself.
LET JOHNSON BE JOHNSON!
Rate This:
0 
0
right: the banking crisis, and what would Osborne do?
Apparently George Osborne’s speech contained the truth about Gordon Brown.
Well here’s some truth about George Osborne: he was in the Bullingdon Dining Club at Oxford.
http://www.dailymail.co.uk/news/article-447223/Oxford-1992-Portrait-classless-Tory.html
For those new to this, it was a club which meant public-schoolboys at Oxford could mix with their old public school chums rather than have to rub shoulders with boys from other schools. This must have added greatly to the sense of unhappy alienation that a northern state-school boy would have felt on arriving at a largely public school dominated college.
The club seems to have gone out every now and again to a pub, smashed it up, then paid for the damage with some of daddy’s money.
Boris Johnson and David Cameron were also in this club. What is going on, when the 3 most important Tories in the country belonged to the same exclusive little club at Oxford?
Rate This:
0 
0
Wrote a tune about this:
http://www.youtube.com/watch?v=tvllSpeZuoM
Borus appears in first chorus …
Rate This:
0 
0
What has happened is done … we need to move forward as one and try to make it a better world for all … a banker being rich is not the cause of others being poor. We can blame Brown
or the US, lock people up. Take their money off them and make them poor. That is not the way. The way is for all to have what they need. And the world has enough for all. The city is a part of London like a heart is a part of a human. It must be saved.
Rate This:
0 
0
lock people up. Take their money off them and make them poor
Rate This:
0 
0
We are about to make matters far far worse with the clamour for the Bank of England to slash interest rates. A rate cut will have no impact on mortgage or business lending rates in the short term since the banks will use the increased differential between bank and Libor rate to generate more much needed profits. Inflation will explode in the medium term for the simple fact that the money governments are pumping into the economy doesn’t exist – they have to print it. Zimbwabi has been printing money for years and now has an inflation rate of over a milliom percent! This is the economics of the asylum!
Rate This:
0 
0
One word FRAUD
Rate This:
0 
0