BEWARE! THE BANKS ARE OUT TO GET YOU!

[Stanley]

Deeply underwhelming isn't it. A pinprick in terms of economics and call me an old cynic but can't you just imagine the conversation that went of the lines of "We've got to make a gesture but fret not, we'll find a way of making it up to you". What I want to hear is words like firewalls and modification of basic ethics in the way customers are treated. Dream on Stanley, they're still running the economy and turkeys don't vote for Xmas.

[Tardis]

The RBS numbers are interesting. By reducing salaries they are effectively closing down their commercial opperations. By reducing assets they are decreasing share value. The retail banking arm is well within profit.

The nett loss means no Corporation Tax, and a proviso for future years profits, so they can claw back more money.

I wonder how long it would have taken to get back to the private sector if there hadn't been all this anti-business rhetoric.

Estimates now claim that RBS will be on the Treasury books for at least a decade

On top of which, if it only cost £52bn to bail out RBS (it had a loan book of over £2 trillion which is bigger than the UK economy), why is it costing over £120bn this year for the deficit when the previous administration and the big Unions are stating that it "was the banks that done it"?

[Bruff]

Forgive me if I've misunderstood the last paragraph, but is not the size of the current deficit a function of tax/spending commitments and the down turn that occured a few years back? That is, a structural bit and a cyclical bit? If so, then certainly on spending commitments at the time of the downturn these were supported by the then opposition. The promise to match spending was a major part of Mr Cameron's 'detoxification' strategy. And on the tax to fund them well arguably this would have been less, as 'sharing the proceeds of growth' as also promised by the opposition can only mean tax cuts from the mouth of a Conservative.

So both major parties were complicit in an increasing structural deficit, and one would have made it arguably worse. It's not a left/right thing, with the TUs thrown in for good measure.

As for why it all went pear-shaped, well I suppose it's either the fault of spendthrift Governments at the time (spending in this country endorsed by almost all parties, though I have to admit it's a stroke of political genius by the Conservatives to shape the narrative such that very many people have forgotten or never knew that they were signed up to such spending and so think it was just a New Labour thing). Or it was a seize-up in the banking system caused by these supposed brilliant minds (rewarded accordingly) relying on risk models for esoteric financial instruments that an averagely bright 16-year old would know were ridiculous.

Richard Broughton

[Stanley]

"Or it was a seize-up in the banking system caused by these supposed brilliant minds (rewarded accordingly) relying on risk models for esoteric financial instruments that an averagely bright 16-year old would know were ridiculous."
Richard, I think both you and I suspect that this is the root cause, aided of course by a fair wind from all governments since the 1960s because the more the banks turned over, the greater the tax take. My problem is that it is these 'brilliant minds' who are directing our course towards recovery.... You couldn't make it up.

[Tardis]

The only problem with the analysis is that the ones with the brilliant minds, the Phd's in Maths and physics who run the computers don't work for the companies that went bust. In fact they are still happily working in the hedge fund companies and doing jolly well thank you.

The reason that UK banks went bust was because of asset inflation, and they lent money on ever increasing prices. When Ireland went belly up most folk just handed back the keys.

These banks borrowed from the markets on their fractional banking. Problem comes when that money needs to be paid back and the person who borrowed has gone bust. Financial shortfall par excellence.

Even now, Lloyds and RBS are writing off debts in Ireland and Greece. So why is the UK tax payer bailing out our 'UK' banks.

Add in some of the fraud from the US that took out Lehmans, etc.

Then you ask: who was supposed to regulate this asset price inflation? The triumvirate or the government?

The 'clever' people in normal banks are normally the merchant bankers which have nothing to do with markets.

[Tripps]

Lloyds announce £3,000,000,000 loss today. They rang me up on Wednesday, and asked if they could help me to manage my savings. I'm still smiling at the irony of it all.

[Stanley]

David, that sums up the problem. Would you buy a used car off them?

[Tizer]

Nice one Tripps! They used think that Mrs Tiz and I would like them to advise us on how to run our business. They even thought we would pay them to do it!

[Stanley]

"The only problem with the analysis is that the ones with the brilliant minds, the Phd's in Maths and physics who run the computers don't work for the companies that went bust."

No, that's the point Richard was making, they worked for the ones we bailed out.

[Stanley]

If you want some really cheerful news, have a look at this link. The Interest Noose

The latest predictions I have seen are that it will be 2020 at least before incomes get back to the levels they are at now and this assumes best case. The banks and other financial institutions are skimming off £1 in every four in interest payments according to this report. If I've got it right and understood it this is madness!

[Bruff]

I thought 'finance' was an interconnected system. Is it really the case that hedge funds, merchant banks, investment banks, insurance, Yorkshire Bank, Barnoldswick, are unconnected separate business enities? That, whatever goes on in a hedge fund or Barclays capital has no interconnectedness at all? I thought it was this interconnectedness that enabled RBS to have a loan book somewhat north of the UK's GDP at £2 Trillion. Or than the market for CDSs, or some other thing I haven't got a clue about, is about $32 Trillion. And wherever they might work now, the minds that thought they'd cracked the risk-pricing, faciltated the whole thing.

I suppose one shouldn't focus on the maths folk too much to be fair. They were just doing the maths. Shouldn't expect them to understand finance. As for their clients, the financiers, well one would hope they understand the finance. Can't expect them to understand the maths. Calamity inevitable.

As for regulators, I think it's been the prevailing view of at least the last 35 years that regulation is a dirty word. So it would always be light touch. Mind you, the right in America have a narrative now that says it was the mere presence of regulation that caused the whole kaboodle in the first place. I struggle a bit to follow the argument, I have to admit. I can't help making the leap to arguing therefore all our crime is a result of the police presence? I think it's something to do with the free market.....

But then I don't understand this free-market. I thought that meant these banks etc should have gone bust. But we didn't let them. Seeing they are up their necks in trillions and trillions I can see why. And that's why I fret a bit about Greece. Some folk'll be up to their necks in Greek sovreign debt. If Greece defaults, the 'insurance' via some CDS or another bag of Juju bones, will be called in and what if it can't be honoured? What if Portugal follows? And then Spain? Folk are in it for trillions and trillions. The whole lot comes down.

Somehow this was allowed to happen. And the world of 'finance' is a part of this, and the banks a part of that.

Richard Broughton

[Tardis]

"The only problem with the analysis is that the ones with the brilliant minds, the Phd's in Maths and physics who run the computers don't work for the companies that went bust."

No, that's the point Richard was making, they worked for the ones we bailed out.

Unless you have evidence Stanley, all the people with Phd's I've ever met in the city don't work for the banks the Treasury bailed out. To continue to trail the line is a bizarre untruth.

[Tardis]

The financial system is only connected in so far as they move around the capital that is available, and HSBC today demonstrates how ably one company can move money.

The £2.2 trillion of RBS loan book was exactly that, a loan book. The base finance meant that it only needed 2% of those loans to go bad for the bank to have major issues. Ireland happened, and the Celtic Tiger went bust spectacularly. Even now the bit of the bank that speculates is still making money, and never lost any during the credit crunch.

Fractional banking requires liquidity, without it the system very quickly seizes up and any problems are massively compounded as banks try to roll over their credit in the markets.

Northern Rock was brought down by liquidity issues, which meant that borrowers were impacted, and it became a negative feedback system.

HBOS is massively exposed in Ireland, and even when the Irish banks were stopping to think, they were still piling in and offering to lend massive sums. All bad loans now with no hope of any value in the medium term.

The CDO's were financial instruments that were abused in the states, through fraud. Unless you have evidence that business practice in the UK was underhand. I certainly haven't seen anyone in the UK being prosecuted because it would certainly make the majority of the papers and beeboid world.

It certainly isn't the first banking crisis, and no doubt will not be the last

[Tizer]

"Unless you have evidence Stanley, all the people with Phd's I've ever met in the city don't work for the banks the Treasury bailed out. To continue to trail the line is a bizarre untruth."

RBS and Lloyds recruit quantitative analysts and quantitative programmers with PhDs in maths and statistics for their investment banking divisions. Lloyds increased its staff in the investment banking division by 20% in 2010/11.

[Nolic]

Nat West in Burnley got me this am.

Intent on paying in some money for Charlotte and Dan I was faced with the queue lines that funnel you to a cashier but people were queuing at both ends. Almost caused a riot when I went into the wrong line as they were waiting for appointments and as soon as they moved I went for a second cashier who had just sat down. Didn't realise that customers are so keen on etiquette.
No problem with Barclay's across the road - plenty of cashiers on duty, all smiling and helpful. Nolic

[Whyperion]

If the investment banking is only an attempt to statistically model a throw of the roulette wheel no wonder there remain problems ( and wont always show up things like wobbly soverign debt ) . If it is looking at probable scenarios for economic demand mid term for things and services world wide , becomes mildly useful in generating profits , if its to look specifically at how well a company producing things might do in the future I thought thats what bankers should do with their investments.

[Tardis]

Maybe Lloyds and RBS have learned by their mistakes, but Lloyds do not have an investment division so I'm not sure where they use them (maybe forex and bonds), and RBS is selling theirs off. I'm aware that the separate Barclays arm does, because I know one, but they too have been floated off. I'm aware that the merchant banks have them, because I know some, but none of them went belly up.

You want to see PhD's you have to visit the others, where the dealing rooms are very quiet.

Markets are all about modelling, and sometimes mathematic modelling is the best way to do it. It is not accurate because the market is not linear. At the end of the day most of it still boils down to a certain amount of luck and an enormous amount of research.

The losses of both RBS and HBOS are based upon the simple market expedient of shareholder 'greed'. It is far easier, and generates a greater profit for the bank in the shortest time if it lends to very large projects and ignores for as long as possible the smaller ones. So a banker would rather lend a £1 million, than 1000 times £1000. If you commit to fewer transactions then you need fewer staff, which means your bonus and your earnings per share increases. Let us not also forget that Northern Rock was selling mortgages that put their clients into instant negative equity based on the inflated housing market, which everyone was saying was unsustainable...and yet people still signed up. Then selling on the CDO's so that they could lend more money. At some point the merry-go-round stops and you have to get off.

Once they couldn't sell on their CDO's they didn't have a boat, never mind a paddle.

[Tizer]

"...yet people still signed up". They signed up because the bank sales staff were not saying that it was unsustainable, they were actively marketing the mortgages when they should have stopped.

[Stanley]

"To continue to trail the line is a bizarre untruth." So I'm telling porkies? Smell the coffee Michael, are you really saying that none of the banks that either failed or were up to their necks in derivative trading employed academics? Where do you think the algorithms came from? E-bay? My daughter was running risk evaluation for an investment bank and saw exactly what was going on. The warnings from her team were routinely ignored on the grounds they couldn't 'prove' they were toxic. She got out before the shit hit the fan. Apology? Not nice to be called a liar.
News this morning that someone has been reading Private Eye and has realised that Barclays (and other banks) while decrying tax avoidance schemes, have been running them for their customers. PE have been reporting this for months.

[Whyperion]

The old Northern Rock , and others often made their best headline deals for morgages only avalible on high (100k+ often ) loan advances , which if you only wanted a lower advance - funnilly in Northern Rock's base area - like around parts of Durham/Sunderland , you couldnt get , then NR wondered why it had insufficient assets to back its loans.

Notice that Halifax/HBOS and RBS/NatWest increasing their SVR mortgage rate , alleged higher cost of wholesale borrowing ( where did the EU 1% loan rate go - or is it not applicable to those due to State Aid rules ? ). Supposedly their SVR was below market rates , more like a bit of fattening up to save Govt a bit of loan interest and make the banks a bit more sellable.

[Stanley]

Just as likely that it is the banks looking forward to Firewall Day and raising the profitability of their Main Street banking ready for the day when their bloated administration and wage bill won't be supported by casino banking. Better to start doing it now than wait till Der Tag and do it all at once.

[Tizer]

We are moving my father to a smaller, more comfortable house in town, closer to shops, health centre and the like. The house buying and selling process has got even worse since we last played the game. Estate agents and solicitors demand proof of identity and proof in advance that you have funds. Perhaps that's sensible in these days of scams but it isn't always easy to meet their requirements for specific documents and you don't show up on credit ratings agency databases. As usual, the banks make life difficult. We made an offer on a house and are now about to exchange contracts then complete next Wednesday. The money from the old house is sitting in our bank account ready to pay for the new house and yesterday Mrs Tiz started making arrangements to have it transferred to the solicitors holding account in readiness.

All our accounts are online and it should be easy to make the transfer online using the superduper new Rapid Transfer system (which the banks could have set up in the 1990s but didn't). First obstacle, she would only be able to transfer £10K at a time, not very convenient for a house costing over £100K, and they won't guarantee when the money would arrive in the recipient's account (so much for `rapid transfer'). So she ended up travelling to the local town to pay £25 in the branch for a Clearing House Automated Payment System (CHAPS) electronic transfer of the whole sum direct to the the solicitor's account. She was told it might be in that account after 4.00pm that day but would definitely be there by 9.00am next morning. Guess what, this morning at 9.30am the money was still sitting in our account. Mrs Tiz rang the bank and was told "We can't help you, we don't open until 10.00am today. We'll call you back after then." When they called back they said they never guarantee the money will be in the account the next day - contradicting what the other bank employee had said (and he was `not available'). We've run a business for 16 years and always understood CHAPS transfers to be virtually immediate. Wikipedia says: "A CHAPS transfer is initiated by the sender to move money to the recipient's account (at another banking institution) where the funds need to be available (cleared) the same working day". It just confirms you can't trust banks.

To make my morning even more fun I needed to renew our car insurance. Saga have almost doubled our premium in 2 years so I did an online quote and got a much lower premium from Direct Line (who are supposed to have a good reputation). It was easy to do online and pay with credit card. But when I received the details to my email account they've got me down without the surname - it's all written with my middle christian name as my surname! I filled in the correct boxes but somewhere in the process it must have `self-corrected', perhaps from checking the car registration details. I rang and waited ages for someone to speak to, then asked for it to be corrected but they can't do it, the new policy isn't showing up on their computer yet. "Ring back tomorrow" was the advice - and wait ages again!

[Stanley]

Tiz, you demonstrate to me how lucky I am to have got all these traumatic processes off my back! Commiserations. Many years ago I had to transfer £17,000 from the bank to the building society (A lot of money thirty years ago!). I warned them I was coming for the cash, went round with a carrier bag and carried it round the corner to the Building Society. The bank thought I was crackers and wanted to transfer it by other means. I told them I'd do it my way, genuine instantaneous transfer! And anyway, I'd never seen my money in one lump. The transaction worked perfectly......
All right, I'm eccentric!

[Tizer]

They wouldn't allow you to do that now! It might be your money but once they've got it you're snookered. Mind you, it's almost as bad trying to put a large sum into the bank, they're certain you must be money laundering.

[Tardis]

Laura Kuenssberg (spelling) ex-beeboid and now of ITV, is saying that the deal for the co-op to buy those Lloyds branches has hit a snag