End of an era

The New Labour Government and Gordon Brown as Chancellor and now PM, together with the FSA have been sleeping on the job.

The last 10 years of "uninterrupted growth" have been shown to be nothing more than a mirage.

Ten year of an "irresponsible government" will leave Britain down in the gutter. No doubt it will soon be be time for the final humiliating act for New Labour: Scotland voting for independence.

All the time they attempt to blame the "global credit crisis".

Sorry - realise this is an informal blog but two typos, maybe being fixed as I type: bucaneering + concensus.

Wait a minute. If the City was contributing so much to the tax take ... and now the City is set to disappear up its own exhaust pipe ... who's going to pay all the taxes needed to fund the galaxy-sized sums of public money that are now going to be needed to shore up the state?

The mind boggles at the mathematics of public accounting as it will need to be applied in the coming years. Common sense (remember that?) tells me that this almost unimagineable turn of events will surely bankrupt us? Politicians are turning out to have been the biggest waste of rations since Pontius was a pilot.

And don't forget ... we've reached the end of the era of cheap energy; the UK's energy security is an utter shambles; we're fighting two open wars (Afghanistan and Iraq) and a secret war against the nutters after us on the London Underground; the EU consumes vast sums of our cash to absolutely no good effect; political correctness and 'elf and safety suffocate us daily; Russia is on the prowl; China has not only woken up but is now crawling out of bed .... shall I go on?

Forget trusting your life and times to politicians. Welcome to the era of debt-free, low-energy, insecure, self-reliance. Draw as much cash as you can and start stocking up now.

I hope that Margaret Thatcher reads your blog. And comes to realise that she was the worst thing to happen to the British economy. Ever.

She did a really good job trashing the manufacturing sector when she was in power. And her poisonous legacy has ensured that she has done a great job in trashing the City.

I look back on my life and see that the Conservative party has been responsible for most of the ills of the British economy, from Ted Heath's three day week to the current backing crisis the Conservatives are to blame.

It is lucky that they had the spoils of Labour nationalisation to spend in the eighties or even that decade would have been a Tory disaster too.

Do I trust Dithering Broon to get us out of this mess? Nope. Do I trust David Cameron more? Ha, ha.

This is all very fine, but in reality, less than 1,000 people world-wide are causing this problem of a "loss of confidence". Is the answer to be found in what politicians do, or in what politicians don't do - to flush out these companies and their staff who are selling our banks short. Why should governments risk higher tax rates for the sake of dancing to the tune of a few people ? Rather than lurching to the tune, I would hope that Brown etc will call their bluff - it will lead to better stability and lower taxes in the long run. We cannot let market forces think that a government will interfere in market forces to give the few very large profits.

The end of the era of Thatcher and Reagan eh; oh I hear the old Tory cry of "you can't buck the market" once used as a scythe again the Labour party being consigned to the history books...! Good and its about time we learnt this lesson!!

Maybe now the Western anglo-saxon democracies can learn the value of supporting the interests of all of their peoples instead of just those earning millions of dollars and pounds. Wouldn't it be great if ordinary working people didn't have to labour longer hours and for less money just to keep the FTSE watchers and rich shareholders happy.

As a former employee, (now retired), of a major bank the only two words which come to mind to define this crisis are targets and greed.

No thought was given to the credit worthiness of borrowers but instead this was casually pushed to one side as management bullied employees to achieve impossible financial targets. Those employees who did not achieve these targets - some did try to act responsibly - were either earmarked for severance/early retirement or were subject to disciplinary action. As a result, former colleagues had to go along with this bullying and threatening behaviour since their jobs and prospective bonuses depended on it.

The only aspect concerning the bank hierarchy was what the figures looked like on a week to week basis - their attitude was the future would take care of itself and the "chickens have now certainly come home to roost, big time".

However, what can you expect from powerful individuals who only had one agenda - how to make as much money for themselves in as short a time as possible and they certainly achieved this by docking annual bonuses more than most people earned in a lifetime. Where are these guilty people now? Why are they now not in the fullest public eye - I guess they have run for cover. During the past few weeks, I have not seen one CEO of a major bank give an interview explaining why they have presided over such a mess for which the long suffering taxpayer now has to pick up the bill.

At the very least, they should give back some of their inflated bonuses which were earned on the back of worthless paper. Recently, it was announced that the CEO of Lehmann was paid about $300m in salary and bonuses in the last 8 years - I'll bet he's happy - pity about the poor employees who have lost their jobs through his incompetence.

I hope that some good can come out of this mess and, in the future, perhaps financial decisions will be based on reality - is it too much to hope that a degree of morality will also pertain to financial matters?

End of an Era? Unfortunately, the large majority of the population are now footing the bill and will be stuck with the legacy, whilst the fat cats and politicians who aided and abetted them sail off into a very secure and prosperous sunset.

Lions led by donkeys, now fleeced by jackals. Am I angry? You're not even close.

There is now a general agreement that reckless practises by city traders is largely responsible for the mess The City now finds itself in. I'd like to see some of these unscrupulous people strung up. In particular I'd like to hear in layman's terms exactly what they were thinking, because to those of us out of the loop, some of these city practises were clearly insane. I think we've yet to have an explanation from these people and, while bailing out their institutions may be necessary, the public deserve an explanation.

Until these people learn responsibility and face the consequences of their actions, why should anything change? With bonuses still unregulated short selling only temporarily prohibited etc, to what extent is the reckless culture of Wall St. and The City be tamed?

Gordon Brown said the market's need morals. He should try something stronger than words and reactionary legislation if he's serious about preventing future financial crisies.

Deregulation by Thatcher also involved the establishment of a number of Self Regulating Organisations... IMRO, SFA, LAUTRO, FIMBRA etc - they were specialist regulators to whom businesses that conducted business in a specific field had to be regulated by and each SRO had it's own rule book. The SRO's were then in turn regulated by SIB (as were a few vry large companies that had diverse business interests across a number of fields).

So most companies had specialist regulators.

These were all swept away by Gordon Brown and the FSA replaced them all.

In recent years Gordon Brown has been arguing for, here and abroad, a lighter touch regulation. He claimed that to consider that companies would act irresponsibly was an outdated Victorian viewpoint.

As can be seen from this Treasury Press Release

I wonder if he still thinks that way now.

Problem with experience is that you only have it after you first needed it - and now we all have it!

Does this mean that the hordes of government advisers who are investment bank executives will go home now?

There was one on the incapacity benefit fraud changes - that now mean even if somebody was dying of cancer they would have to attend a doctor to prove that - that could save millions. As opposed to the billions the city have probably lost us. I appreciate we will get some of the money back, provided the economy recovers.

If the economy does not recover - and I assume that its not written in stone that it will - will Gordon count this as a feather in his cap or as a black eye (Catch 22). Think its a black eye.

There must be a few wry smiles amongst the Union leaders.

You are so right Nick.

It's not just the politics of the parties and the city and that breaking down. The whole financial model that got us out of the doldrums of the 69 - 82 period is shown up to be a fraud. So it is back to miners marching? No they have all gone. Then back to what?

The truth is we are post industrial but we need to find a new business the product of which we can offer to Kenyan bean growers and Arab oil well owners to ballance our books. Lets say it is not offering financial services, so what can we do? Reinventing Britain would hardly be a job for the architects of this current mess. So we will suffer untill we find a will to kick all this fraudulent nonsense out and start again.

Not more left-wing 'this was all started by the conservatives' clap trap?

I'm sick of reading such biased views everytime I visit the BBC.

I would happily go elsewhere, but then why should I pay for a service I don't use?

'The City' has been an incredibly important part of our economy for the past 20 years. It is only over the past 10 years during Brown's 'era of irresponsibility' that things have got out of hand.

I don't remember 6 times stated salary, self-cert, 125% LTV mortgages being widely available in 1994. Do you?

The really interesting thing is that until the ICEsavers were denied access to their money the momentousness of the times does not seem to have hit the public.

It seems to many little more than a soap playing out in front of them. As you say Nick the end of an era.

If this works then it may provide a reprieve for this Govt, if it does not it should surely be the end of New Labour.

Thanks Nick, At last, someone else remembers the contribution of the Iron Lady, so beloved and revered as a populist leader. I was beginning to think I was the only one left who could point the finger at the triumvirate of Reagan, Friedman and Thatcher as the architects of our present problems.

Unfortunately in the city, the 'self interest' of Adam Smith was interpreted as 'selfishness' (and greed). now we are reaping the rewards.

Sorry Nick surely you mean acne on Britains freetrading etc etc...as far as I have been concerned the city has always generated a feeling to the rest of us as being a place full of greed and bloated egos where too many people took too much money out of the system for their own use..But you know in reality it is the firms, who set contracts up allowing such high returns, who are the guilty parties..I would like to see the authorities trying to get a lot of that excess returned to the banks

Dave Rogers has an essay on the financial singularity. It's thought provoking reading for folks who want to look beyond this crisis and consider how they may fit in to the new world.

I've never been a fan of the untrammelled power of the city and the damage it's wrought. Perhaps, now this ego bubble has had some air let out of it, folks who do more meaningful things might get a chance.

When I was a boy and read history of ancient Rome and similar places I always wondered what it would be like to live then. I guess, it's not much different and, of course, the future begins now.

With the diminished influence of gamblers and spivs, proper jobs that demand rational reasoning and a sense of reality will become more prominent. Their industry and cultural influence should help make us happier and richer.

As I've commented before, Ieyasu Tokugawa reined in the Daimyo and this began a period of trade and low crime that ushered in the Japanese renaissance. This moment seems equally auspicious.

Thus, we write ourselves into history...

Nick,

this is an absolute disgrace. if what I am hearing is true that all we get in return for our 'investment' is Preferred or Preference shares is that the taxpayer will rank higher than the Ordinary shareholder in the event of any bankruptcy.

What upsets me most of all is that there will be no government involvement in the running of the banks which receive this money. This is the worst f all options. If they also issue warrants to purchase shares at a fixed price at some point of time in the future then by then the government will have disappeared into the void.

If I, as a taxpayer,am going to put my money into the banks then I want to share in the control of the salaries, and dividends, and general remuneration policies.

This must not be allowed to happen, I am not going to have these failed bankers to continue to receive their huge salaries and bonuses when they have seriously messed up. I want the authorities to implement an urgent public inquiry into this, who is responsible, the executives, the dealers, the traders, the accountants, the bank managers who authorised the mortgages, and loans. The people who were responsible for allowing this to happen. I am so angry.

lets hope its also the end of the yaparrazzi blogging every secret plan they hear about?

Over those twenty-two years some people did very nicely, but much of the social fabric was damaged beyond repair. That was the great disappointment of the Blair-Brown era. When they had the chance to build a more cohesive society they chose business as usual instead, and here we are.

But with to much control we will see financial centers appear in Dubai etc ..... if a Muslim state can hack the immorality! And the loss of all that 'talent' what a disaster!

"Buncaneering free enterprise" is all well and good, the term implies knowledge and a sense of a gamble.

The reality is that those gambling over the past years have long since recouped the profits of their greed. As Warren Buffet has recently demonstrated an eye for a canny deal should not be underestimated.

The question has to be how can a part-nationalised "city" continue to compete with the global financial centres? Without that "greed" motivational factor why should our financier's take that gamble ... what's in it for them?

Why have no questions been asked of our regulators ... are they not their to ensure our financial institutions act responsibly?

These are sad times and we should act with humilty during them, remember those less fortunate than yourself.

Andy, London.

Where will Nu-BoringLiars steal their money from now? Oh yeah... us.

But YOU will pay in the long run Nu-Labour. An eternity of suffering awaits you in the sulphurous pits of Hell.

Are you saying that you were not the cream and the BBC was left with the dross as the reporters.

Quite right Nick. Thank you.

You're right nothing will ever be the same again.

This is a very sad day for the 60 million people in the UK who have worked hard to earn that money that is being given away to the banks.

You said all the cream went to the city, does that mean the BBC was left with all the dross as reporters?

Why do I pay such a huge licence fee for a sleeping moderator? Or is he down at the bank, liquidating his accounts?

Nick,

Capitalism will be heavily reigned in and more heavily regulated going forwards - a good thing.

But surely government also needs reform as well (whoever is in power)?

Brown and Darling may be working hard, but they inject a similar level of confidence into the market as Laurel and Hardy.

Surely in any flavour of government, we need well paid, hardcore financiers who know their way around the finance sector - working on the governments team. People who can regulate and also inspire confidence during bad times.

Also surely government budgets should not just talk about tax changes - the Chancellor should also be required to demonstrate the financial health and the availability of the reserves of the country to deal with the very expensive and unforeseen.

(Although......... I'd argue that 'boom and bust' is entirely predictable and government should always be ready do deal with the bad times.)

As I understood it, the Big Bang was designed to re-juvenate and modernise the activities in the City of London.

I don't recall anything intended to enable finance houses to create money from thin air.

I do recall a period when banks took deposits, make careful decisions about where they lent or invested that money on behalf of depositors and were fairly boring.

I have no idea why banks were allowed to create "financial instruments" that were treated as though they were equivalent to investments in product or service companies, when they were just made up stuff.

Wasn't that what regulators should have focused on?

The Dot-Com bubble was driven by banks and individuals buying into a hope. But at least those hopes were invested in an idea that someone would buy stuff that could transform the way the world does business.

The Sub-Prime issue is just staggering. I still have no idea how or why banks around the world bought "financial packages" that seem worthless.

Traditionally, banks were very conscious of risk.

Where did the common sense go?

Where did the regulators lose touch with what the people they were supposed to regulate were actually doing?

(Let's be honest, there has been a lot of sub-prime lending in the UK - i.e. lending greater than the value of a property (asset) or more than an individual could reasonably afford to repay. But it's still difficult to grasp how many homes in the US were sold to people who simply couldn't afford the costs.)

I'd like to see a few cases of fraud brought against organisations who bundled up worthless stuff and flogged it to others.

And some mechanism to claw back bonuses from idiots who bought junk on behalf of their investors.

I just don't know what the FSA was supposed to do, if not to monitor and control financial institutions.

If they couldn't understand the "products" being traded by organisations, they should have closed them down.

Funny, but I don't see reports of many Indian or Chinese banks buying junk and recording it as an "asset". Maybe I missed something.

"In the next few days, leading politicians on all sides will insist that the City remains a cornerstone of the British economy."

That is progress of a sort. It's not the cornerstone.

There's a whiff of massive change in the air, and clinging fanatically to the insubstantial mist of financial services is not the best option. Sadly, Labour is unlikely to display the leadership necessary to lead us through the fog onto solid ground.

That solid ground is sensible house prices and a healthy, science-driven manufacturing industry, not housing bubbles and an economy based on managerial gimmicks and flim-flam.

My main worry is that people simply don't have what it takes to adapt. Generations of young people have been raised to associate 'work' with 'office' (or possibly 'shop'). Even now, the media is fixated on what this means for the High Street, whilst Factory Lane hardly matters in comparison. Think about how often Marks and Spencer is in the news compared to, say, Unilever.

Sorry, Nick, but you are wrong in your assertion that a "political consensus grew up that it was best not to ask too many questions about spiralling debt". The Tories and Lib Dems have long been vocal in their criticisms of Brown's profligacy, his burgeoning public debt, fiddling of his fiscal rules, cost of off-the-balance sheet PFI expenditure and acceptance of excessive credit card and mortgage debts that people have run up. The unsustainable asset and debt levels predicated the bust that we are now beginning to suffer. So much for Brown's prudent Chancellorship. God help us all!

#3 moraymint -

No, we're fighting a secret war against the people who control our money supply, have been since at least 1694.

This is just the latest phase. Except this time, the populace have the internet to help them, and the dirty, smelly secret of fractional reserve banking is being exploded before our eyes.

The web isn't the best place for info though. The P2P networks have the real deal. The People-2-People networks. Because information costs even less than debt.

Public/private partnership, eh? Looks like the NWO / Common Purpose plan is working nicely.

The Thatcher-bashers might consider the alternative scenario: if OldLabour had stayed in power, by now it would be young Brits who were going abroad to try and make some money working on farms in Poland and Lithuania, not plumbers and dentists coming the other way.

At least we wouldn't have an overpopulation problem. Everybody who had any marketable skills would have emigrated by now - assuming the pound hadn't gone the same way as the Zimbabwe dollar, and nobody could afford a one-way plane ticket to anywhere.

'The end of the City's mesmerising hold on politicians'.

If only it were true. The government have been dazzled by management consultants and co-opted ex-CEOs into believing they are the board of UK Plc, whose primary mission is to follow the mantra, what's good for the city is good for the country.

Now it's all gone horribly wrong I doubt they have the vision to reinvent themselves in any other image.

FINANCIAL CRISES

When bank customers receive their new bank cards will clause IV be printed on the back of them?!

When it comes down to it, we can dance around all day saying it was the bankers or, it was the politicians.
Personally speaking, I don't give a big rat's bum who's to blame; I want someone to sort it out and pronto.
And that, I suspect, is the feeling of the overwhelming majority of the British people.
So why don't we all stop trying to score political points off each other. This country is in danger of going down the pan....fast.

Good morning fellow bank owners,
should be an interesting day at the office.


I'm fairy sure some openminded people
will be relieved,that their bank account has been protected?

So its people power once agian that comes to the rescue of insolvent banks.

I cant see there being a recover in the housing market although, well! house prices were OTT, thats for sure.

Lets hope it works................surely that must also mean that the post offices are safe to.......thats got to be part of the deal.

38:
Some people might be relieved but my sister will most certainly not be one of those. She had £150,000 sitting in icesave after her husband's life policy was deposited there as a result of his untimely death. She has 4 children to support. Although The Government was boasting that only 2% of depositors would be affected by what is going on there are many cases cropping up of people possibly losing out heavily e.g.
1. Those who have just deposited their final pension payment.
2. Those who are in between having sold a house and buying a new one and have the proceeds in their account.
3. Families who have just received inheritances from deceased parents.

I wish the government would stop dithering, pull their collective fingers out and guarantee that all our savings accounts will be protected to the tune of 100%.

Let this be the battle cry of the new British Republic, no taxpayers money without taxpayers representation.

Our pensions are destroyed, just as the main post war birth bulge will hit the retirement market. Where is the money, just gone! There will be great anger when people fully understand what exactly has happened.

The demographic time bomb is just going nuclear. We could not afford to pay the older pensioners money far in excess of that which they had put into the system. They have been funded by the real wealth generators those now coming to their retirement, now the money is gone, it has been spent, not invested.

Good grief, interest rates must rise, taxes must rise, if they aren't then abandon hope, because this is just the timer being inserted, you'll see the mushrooms all over the world. I am no doom mongerer, I like to think I am a just an ordinary bloke on the Clapham omnibus. We are so doomed.

A COMPLETE RIP OFF

Money is being taken from tax payers (via the treasury) to underwrite interbank banks loans, enabling the banks to lend money back to the tax payer (as bank customers) at a profit.

If there was Tax Payers money available (and evidently there is/will be), then it should have been left with the taxpayer (in the form of tax cuts), so they didn't need to borrow so much from the banks in the first place.

A COMPLETE RIP OFF

This comment was removed because the moderators found it broke the house rules. Explain.

Nick,

I am just listening to Darling, the man is an absolute idiot. Reduce the fear factor, making available new capital to the banks, where we will receive dividends.

To buy non voting preference shares without any guarantees. We have talked to the banks, discussions with banks, looking after depositers, an Icelandic bank, exceptional circumstances stand behind the Icelandic banks, what is going on. Why, the depositers were just chasing higher interest rates, which funded take-overs of British companies and funded football take-overs.

He talks of talking to the banks, he has not, he been talking to the bankers, banks are not persons, he may have talked to the bankers but where is the consultation with the bank shareholders, workers, pensioners. I will do whatever it takes to bring down this government, they are incompetent.

He is making obligations for three years into the future, there must have been an election between now and then. This is like the enemy who destroys everything whilst retreating, leave nothing but scorched earth. This must not be allowed to happen.

There must be a general election, now.

This comment was removed because the moderators found it broke the house rules. Explain.

Not going down to well with the market, this new plan.
The Chancellor is way out of his depth here. The trouble is, he is proving it with boat loads of our cash!!

Surely with a likely complete implosion change now of all Government economic policy, strategy and forward planning, the British public have a right to decide whether this is the correct approach.
A general election is both timely and essential.

"Nothing will ever be quite the same again"

Bit am-dram don't you think, Nick?

Wise old sages like you are supposed to resist sensationalising issues like this.

If the city were to disappear off the radar creen of politicians for good then why bung the city 500bn of taxpayers money?

That is the reality..it's so important they have had to give it three separate support mechanisms..50bn of pred, 200bn of special liquidity and 250bn of guaranteed long term assurance on new debt issuance. 500bn in total.

Mind boggling but hardly illustrative of your point.

Go put your head under a towel and have another think about it.

' ... Or, if you prefer, to become a public/private partnership.'
So the bottom line is we're getting ripped off then!
I like to think of the banks as an enormous fat sow and feeding at her teats are the various bank managers, speculators and politicians that haven't, at that time, got their snouts in the public money trough. So mixing the public and private money together will at least save the feeders the time it takes them to switch from teat to trough!

How utterly predictable that a few rabid lefties should still blame Thatcher and all her works for the current mess. Two points to remember, firstly de-regulation happened in 1986 and yet the next "bust "was in the period 1990-1993 but the big banks weathered the storm because the banks were not as highly geared: they had not used off balance sheet vehicles, i.e. hidden borrowings, in any significant way. So to blame Thatcher's deregulation is farcical.

Secondly, the boom in the use of off balance sheet vehicles and other securitisation techniques, i.e. hidden borrowings but with the same amount of total capital, really took off in the period from 1999 in this country and this trend has been accelerating. This, unfortunately for the Thathcher haters, occurred after Gordon Brown created the FSA, who clearly had not a clue as to the implications of it all, and went on his own spending spree.

I am afraid this Government had plenty of opportunity to amend the deregulated system if they wished, but they didn't. They could have reined in the excesses through the FSA but it was not up to the job. Above all Gordon should not have believed his own rhetoric of abolishing "boom and bust" economics, as he did we are all picking up the tab and will continue to do so for many years to come. Nothing new there then from Labour!

DocJon @ 49

Sure, Labour could have reined it in and didn't. But the root cause was the deregulation of the eighties, the "setting free" of financial services ... that's the point being made, yes?

Those who blame Margaret Thatcher for the current situation need to get real.

Let’s go back to1945. With the country in dire straits and desperate need of modernising impetus, the new Labour Government embarked on a massive nationalisation programme. An underlying aim was to ensure there were jobs for the returning armed forces. Very worthy. Unfortunately, the outcome was disastrous. The ability of management to manage was weakened whilst a Marxist rabble seized control of the unions. The resulting over-manning, low productivity, inefficiency and lack of competitiveness led in a direct line to the wholesale destruction of British industry and, inevitably, massive job losses.

The problems were made worse by the 1974-79 Wilson/Callaghan Administrations. Following the usual Labour instincts of spending taxpayers’ money, they poured so much into the public sector the country became bankrupt with the Chancellor of the Exchequer going cap in hand to the International Monetary Fund for a bail out.

After a Cabinet split, even Labour realised public sector cuts had to be made. The unions reacted with the Winter of Discontent. A series of strikes led to rubbish, overrun with rats, piled up in the streets, parks and squares whilst bereaved families were unable to bury their dead.
It was that mess Thatcher had to sort out.

Fast forward to the current day and what we find? Yet another Labour Government, pouring money into the public services, with little improvement in productivity, has once again pushed the country into dire financial straits.

Indeed New Labour has landed us in an even more toxic mess than Wilson/Callaghan with a worryingly high level of indebtedness fuelled by irresponsible spending and funded, in the short term, by the worst excesses of capitalism manifested in a housing bubble and hedge fund gamblers.

Now the chickens have come home to roost Labour is pumping what is described as "government money" into what appears to be a bottomless pit. But it is not "government money". It comes from the taxes of ordinary people. And it is not just this generation of taxpayers who will foot the bill but also the next, and the next. And the one after that. That is Labour's legacy: a country that has a millstone of debt around its neck that is likely to last for generations to come.

The shock troopers of free market capitalism have been brought to their knees by a combination of their own mindless excesses and the inherent instability of the system they have milked for so long.

In the long term (apart from being all dead!) we will be much better off without the essentially parasitic activities of the City in its current form. The people who traditionally work there, many of them quite bright, will have to do something useful instead of frittering away their time doing non jobs which create nothing other than personal enrichment at the expense of others.

A cruel and flawed ideology is heading towards its very own Berlin Wall moment. I am so pleased.

BIG BANG THEORY

If you continue to inflate a balloon, it will, inevitably go bang!

Simplistic, I know, but it neatly sums up a theory that many of us put forward regarding de-regulation and unfetterd economic growth, when we had a Labour party.

As Gondor (son of borrow-more) Brown and his little Darling (Sir lendalot) prop up a failed banking
system, perhaps they may contemplate returning the billions of pounds the pinched from our pension funds?

Sean Appleby-Simpkin.

I am sick of these Labour apologists seeking to blame Thatcher for the current Governments failings. Thatcher did not decimate manufacturing - it was already in terminal decline (mainly thanks to Labour and the unions refusing to get with the modern times) and all Thatcher did was pull the plug on public money being poured in. If it was not for Thatcher, there would not have been a healthy economy for New Labour to inherit and for Clown McBrown to claim credit for.

Still, we can all now see what he was doing to Prudence for the last eleven years, can't we?

The current appalling ecomonic problems of this country lie at the feet of Blair and Brown. No-one else. The sooner we, the electorate, are given the chance to pass judgement with a General Election, the sooner we can get rid of Labour and get the country back onto a path of recovery.

Okay. Somebody please help me out here. Did Alistair Darling say that he would guarrrantee 100% of total UK investors deposits in icesave or just 100% of the £50,000. It's rather unclear.

Nick, have to say I was disappointed by the quality of the questions asked at the News Conference. At the risk of being facetious, if your question was so good why didn't you ask it years ago?

The market model almost works, and most of the time it delivers relatively efficient capital allocation and economic growth. Of course it goes wrong, and the failure will be different each time: in this case it was that rating agencies, being corrupt or incompetent, assessed the risk in sub-prime mortgage-back securities wrongly. Their part in the financial ecosystem needs to be reappraised, but it was a localised (and fixable) error that had massive consequences. The real failure however is in the authorities’ economic modelling and management: detecting the housing bubble, they misjudged the danger and vainly hoped for a gentle deflation. Perhaps they missed the way in which the associated securities had been distributed so widely and their quality so misjudged and perhaps they were unwilling to risk the political unpopularity of action.

Bubbles will always develop and will always end unhappily. Detecting them and dealing with them safely is the responsibility of governments – a responsibility that has been neglected. This doesn’t mean we have to retreat from market control of the allocation of capital for enterprise – we know from our own history that the market does it better than the state.

#55 misswaldorf

Okay. Somebody please help me out here. Did Alistair Darling say that he would guarrrantee 100% of total UK investors deposits in icesave or just 100% of the GBP 50,000. It's rather unclear.

Good heavens! Surely you don't expect clarity from Brown/Darling? They don't do clarity. They like to promise the earth, but hide the reality in the small print.

At long last I can now see widespread discussion about a point I made back in February concerning the Thatcher years and the role that deregulation made in the demise of Norther Rock (on a BBC blog of that time). Some agree, some do not! Even the Democrats in America are now blaming deregulation for the current crisis!

But because this soaking of the British economy (and the world economy) with bad money has reached such proportions in the last 10 years it is very easy to lay the blame at the door of New Labour.

It was a necessary part of the policy, to reach out and increase debt of those who didn't have any, mainly because they couldn't afford it, otherwise it would have ground to a halt much earlier.

But it wasn't just the deregulation of the economy that the Thatcher years have to answer for. They also broke down the system of social housing, the very thing that led to a "sub-prime market". And social housing is one scheme that will now have to be (and with all the government schemes in place is now in full flow) put back in place.

It was Thatcher and her government that tried to eradicate social housing from local authorities and push for home ownership at all costs. It was this traditional market for "roofs over our heads" of the lower paid that led to the self propelling "buy to let" market, no longer fulfilled by local authorities, that pushed up the price of our housing stock, which in turn made us all seem so "rich".

But what I hope, and I am afraid I have no idea how, is that we can put back in place a model of a new economy based on manufacturing which was also destroyed by the Thatcher years (ably assisted, I might add by some of the worst union leaders ever experienced). Consumerism based on perceived wealth of a rising cost of housing assets is no model for the future!

Well at least it will shut up that New Labour mantra trotted out every week on BBC programmes about Gordon Brown being the best Chancellor of the 20th century. Let's hope that if it does surface the BBC commentators has the nuts to challenge it, something that they still allow to go without comment.
He can now be seen as the main character in Hans Christian Andersen tale of the The Emperor's New Clothes and we have paid for it.

Gordon Brown now stands naked in front of the taxpayers of the UK with his legacy in tattered shreds around his feet.

Well we have experienced 10 years of Gordon Brown, today is "Brown's Wednesday", the realisation that we have at long last come to the end of Labour Government experiment at some huge cost to those of us that pay tax.

Lets hope a quarter of a trillion sterling plus the other costs such as Northern Rock etc is enough to make it work, it could easily move higher and now the UK is hooked into this deal more good money will have to follow bad if things falter. If things stablise then the taxpayer gets the money back but there will be economic costs. Brown is assured of a place in history which is what he has always wanted. The UK still has to disengage from the equally flawed policy of a war on 2 fronts which cannot be won. The UK has been damaged by Blair and Brown in the same way the US has been damaged by Bush. More damage has been self inflicted by US and UK domestic and foreign policy since 911 than Osama bin Laden could ever have aspired to. It is very difficult to see how the US or UK can be described as winning on any count.

I guess it's not surprising that people use these dramatic events to support their previously held views, and as a result we see a lot of left and right wing political justifications within the posted comments.
I have my own views on the causes, but would prefer to comment on the issues that remain, primarily asset prices and loan affordability.
Against established long term historic norms we should see base rates around 5% with mortgage interest rates above that level and maximum lending at 3-3.5 times annual salary with a maximum LTV of 90-95%.
I think these levels need to, and will eventually, be re-established. Given that situation, house prices need to fall by a good 50% (or an equivalent amount of genuine wage inflation is needed).
As the banks have recently been offering high LTV's (100%+ in some cases) their loan books are in effect only partially secured as house prices fall. Unfortunately it has never been easier to opt for personal insolvency and it is highly likely that the banks will need to engage in a significant level of re-possession activity, especially if unemployment rises.
With banks having loan books much larger than their asset base, their value (and share price) will reduce in a highly leveraged relationship to property price falls.
This is a structural failing in respect of lending criteria and capitalisation ratios.
We do not want the system to go back to this, we need this Era to end, but it is going to be very painful for us all.

misswaldorf wrote:
Okay. Somebody please help me out here. Did Alistair Darling say that he would guarrrantee 100% of total UK investors deposits in icesave or just 100% of the ?50,000. It's rather unclear.

The way I read it suggested that it would be 100% of the total deposit, which is great for those who were happy to take their money out of our economy for a little extra interest but bad for those of us who pay taxes :(

Pehaps I should write to Darling while he is being so generous he might be willing to pay off my mortgage. At least that way I will get some benefit rather then just a higher tax bill.

That isn't to say that I feel the bank bailout was a bad idea - it was the best choice that was left open to them and I think it was a brave decision. I just don't agree with his guarantee to the savers of icesave.

We've known for years that house prices were unreal. We've known for years that buying holidays on credit was folly. We've known for years that not paying off your monthly credit purchases was very dangerous. Yet we all participated in behaviour we knew was wrong. And lo, here we are, removing our heads from the sand.

Within the financial markets, the problem was lack of transparency:

The riskiness of loans was not costed properly, there seems to have been a failure by ratings agencies to properly discount the value of dodgy debt. Moreover. banks did their best to hide the debt exposure off their balance sheets.

Financial derivatives were allowed to be sold that were so complex in terms of risk measurement that only computers could properly deal with them.

The Financial Services Regulation in this country it seems has been utterly incompetent. As the experts in finance they should have had a handle on what was true market value and what was merely nominal. Yet their heads seem to have been the deepest buried.

I think some extremely frank questions need to be put to the people operating the Financial Services Agency, and I'd like to see quite a few heads role - to be replaced by a few housewives with common sense who manage their household budgets quite nicely thank you and with no ties to the 'old school-tie network' .

Oh yes, let's not forget that the Financial Services policies allowed mortages to be sold using an endowment policy, which is essentially a gambling vehicle. Beggars belief.

Re; Comment #54 youngerap

I apologise! However, you are mistaken if you think that anyone sane is not apologetic for the NOO LABOR party. I certainly am. Please bare in mind the fact socialism has had very little time to prove itself, as a political alternative, to rampant capitalism that has historically contributed to the rape of Africa, the Indian sub continent and a myriad of of other nations and their cultures who either got in our way or had something we wanted.

Tory Blair and Brown have nothing in common with socialism and are, in my opinion, carrying out insane policies that even Thatcher did not dare. I am not a religious person but, didn't Jesus chuck the money lenders out of the temple? I would have thought that Christianity, which I believe Thatcher Blair and Brown purport to be, would have much more in common with Socialism than Capitalism.

Still , as a good Socialist, I turn the other cheek.
Sean Appleby-Simpkin

No Nick, the City did not "cream off" talent which was "denied" to industry or media. People worked where they chose to work: talented people work in the media, and talented people worked in the City: no one stopped anyone else working in any particular sector.

Clearly, the financial rewards available in the City in some cases far exceeded those paid to those in other occupations, but I don't believe that BBC journalists (to pick a wholly random example) are particularly poorly rewarded. No doubt your salary is well into 6 figures- so it's hardly as if people are prevented from going anywhere other the City just to keep the wolf from the door when they can achieve pretty high salaries - and lots of non-material job satisfaction - in other careers.

This blog sounds ever so slightly bitter and jealous: but it's taxes on City incomes and City businesses which have provided a of this country's tax receipts (which go, not least, to the BBC in subsidy), and, almost certainly, will do so in the future despite the current crisis.

Nick, Great to have PMQs back on. I thought it was a pretty good exchange of views and was pleased to see some measurement of co-operation,.I also listened to ADs speech and thought that was very good and explained the situation as clearly as could be expected in this current fast moving situation.
GO did his best to be supportive and was quite amusing but couldn't quite achieve full support.
On the other hand I thought that Vince Cable made a great contribution to the debate and once again brought some humour without diminishing the seriousness of the situation.
With regard to Miss Waldorfs sister, I am sorry that she finds herself in the position she is in. in my opinion , which doesn't account for much, I think that she was ill advised to put her money into that foreign bank, it was always a risk and if you take that risk then if it goes wrong you only have yourself to blame.
To all those rather thick people on these blogs that keep telling us that its tax payers money not government money.
Do they honestly believe that there is anyone who doesn't know that there is no such thing as government money, we elect a government to handle the money paid in by the tax payer, thats how the country is run its been that way for generations.
There is no such thing as government money, can we please leave it there.

Friendly @ 29

... "I don't see reports of many Indian or Chinese banks buying junk and recording it as an "asset". Maybe I missed something" ...

Yeah, for so long patronised by the City and Wall Street as the "emerging markets" ... people who didn't quite have our level of sophistication and know how.

Boot on other foot now.

Delicious, isn't it?

Re 67

Is there anyone out there who doesn't know there is no such thing as taxpayers money?

Gordon Brown, Darling and most Labour MPs for starters.

69 dwwonthew
Rather a irrelevant remark to make after reading my post you are obviously one who is not listening or don't want to, probably the latter.

How much money is on deposit compared with Mortgage Debt?

What would happen if everyone rushed out now, took out their savings and paid it off their Mortgage debt. Would the banks go under?
Lets face it with high inflation just how much interest are you making. Pay it off your mortgage now and reduce your monthly outgoings.

I saw the writing on the wall last August, cashed in all Bonds, Shares, Funds and brought a property abroad. There is now no way that some greedy incompetent banker is going to get his hands on my money. It’s 100% safe, I can touch it, feel it and use it for holidays. It will appreciate in value until I retire, and when I retire I can live in it.

I don’t have to worry about sub prime, credit crunch, Iceland, share prices.

I now have a growing list of unregulated so called professionals I no longer trust.

Estate Agents
Solicitors
Bankers
Pension fund administrators
Insurance companies
Fund managers

The City of London is a much longer established and, we hope, a wiser player in home and international finance than Wall Street. It depends where the current international financial panic originally stemmed from.
Were the quaintly named Freddie Mac and Fannie Mae American mortgage financiers attracting investors from around the world, or did the investment in these mortgage companies come purely from within the United States?
How many finance companies outside the US were persuaded to invest in the "sub prime" (shack) property market which seems to have created the big red debit hole and triggered the anxiety of world finance companies to hang on to cash and assets rather than loan it out, creating an acute liquidity problem.
Governments have been forced to intervene in borrowing and lending markets in an unprecedented way to reassure us that our savings and investments are safe. All this is has happened within a few weeks.
It seems the quaintly named Freddie Mac and Fannie Mae have effectively been nationalised in the US. In view of this would Wall Street perhaps attract more confidence from Europe, Russia and the Far East if the United States of America were to rebrand itself? Would the United Socialist States of America (USSA) perhaps create a more attractive brand for us all to invest in?

Nick – I don’t think Britain’s buccaneering spirit has been squashed at all. Is it not just that in an increasingly sophisticated financial environment we have come to realise that the banking system is important to every person living in the UK in that when functioning properly it provides the credit lifelines that finance the everyday activities of both our people and our wider business endeavours.

As such although banks will make profits and losses as the economic tide ebbs and flows, in very challenging times there is a role for the UK government to support the sector in order to keep credit flowing between the banks themselves and between the banks and the people and businesses that remain solvent, in a bold attempt to stabilise both the British banking and wider economic system itself.

Rather than stopping Britain’s enterprise economy surely albeit in very difficult times the UK government is providing the necessary framework to allow it to continue. There are likely to be tough times ahead, but if the British business community can show the resilience and courage of the World War One generation and pull together in what amounts to a period of economic trench warfare then we can emerge the stronger in time.

But the realisation that the banking industry is a sector that affects us all must surely mean that some of the extremely high remuneration packages that we have seen in recent years in the banking sector for a select few are unlikely to be acceptable to the British public in the future.

FSA SAY THEY COULDN’T PREDICT THE CREDIT CRUNCH CRISIS

On 8 October 2008 Sky News, Lord Turner Chairman of the FSA said, that the FSA couldn’t predict the credit crunch crisis. Mr Hector Sants is the Chief Executive.

to 27 October 1986. That was "Big Bang" day - the day Margaret Thatcher's government deregulated the financial markets and again in 1997 the financial system was further deregulated by Gordon Brown. Up until 1997, the Bank of England controlled the Banking system. Mr Brown decided that he didn’t like that anymore. So he introduced a system were we had, the Financial Services Authority, the Treasury, and the Bank of England, carving up the job amongst them. Just one big problem – when there was a crisis, apparently nobody knew who was in charge. The effect of all this – the system unregulated.

Prior 1997 Legislation and regulation established over many years had already predicted such future events. The existing legislation set in place regulations and enforcement sufficient to prevent such conduct most foul and its principles, still remain and in law. If Mr Sants hadn’t the ability to detect and predict future events all he had to do was to remind financial firms of their obligations by putting them on Notice that in principle and in law the legislation, regulation and the law established prior to 1997 still applies and of the consequences should they be breached. But having been asleep, here is another one of his answers to the Treasury Committee on Tuesday 22 January 2008:

Mr Sants: “Back to a comment I have made at other times to this Committee: I do not think that it is reasonable to expect financial regulators to have perfect predictive powers—nobody has perfect predictive powers—you cannot expect us to get everything right all the time in terms of predicting what will happen to the market places and I think you cannot expect us, nor would it be a desirable outcome for society, to run the market place.”

Was it surprising that Mr Sants, the FSA and the Treasury were supposedly incapable of detecting what had been going on for over ten years? But yet the Bankers most certainly knew they were operating in a laissez-fair environment.

Mr Sants in his job, is expected to detect and predict future events and to enforce existing law, that is what he is paid to do otherwise he shouldn’t be in the job. Someone should tell him that the reason the designer of his car had the wit to put breaks on it, was done in anticipation that he might have an unpredicted accident.

Reported in the Daily Mail, Tuesday, July 1, 2008.
By Becky Barrow, Property Correspondent.

PAY RISES FOR THE SLEEPING WATCHDODS

The two men in charge of the City watchdog that failed to spot the impending collapse of Northern Rock received inflation-busting pay raises last year. Hector Sants, chief executive of the Financial Services Authority, even received a £114,000 bonus during a fiasco that resulted in the first run on a UK high street bank in 140 years.
His total pay package for the year rose from £482,829 to £661,948 – a 37 per cent rise, partly explained by the fact he was promoted to the top job halfway through last year.
Outgoing FSA chairman Sir Callum McCarthy was also generously rewarded, despite drawing heavy criticism from MPs for the FSA’s failure to spot the problems, which ultimately led to the humiliating nationalisation of Northern Rock.
He saw his pay rise by 11 per cent to £480,553, although he received no bonus.
The rises were sanctioned despite a damming report by the FSA, which labelled its handling of the affair as ‘unacceptable’.
Northern Rock was nationalised in February with guarantees from the taxpayer amounting to £100billion.

Like other commentators I sense that the regulators on both sides of the Alantic are getting of scott free in terms their failure to stop this happening.
Are the FSA really telling that for 10 years they have been oblivious of the sub prime morgage situation in the States.Through their job as regulators they must have spoken to the senior members of the banks and asked how this wholly fictious "growth" that was eminating from the finance sector worked.
In America,the regulators have been watching the likes of S&P and Moody handing out willy-nilly AAA credit rating to doggy dealers without a wimper from the US regulators.
The whole finance sector is a mess and I feel that with State intervention regulation should be increased and not allowed to continue as is.
These are the same regulators who extradited the NatWest to the US for embezzelling ten of million of dollars while they oversaw a national embezzellment of hundred of billions of dollars.
There are a few of these chaps who surely should go to jail for their failures.

I object to MY money being used to bail out the greed of investors who want that liitle bit more out of their investment. What has happened to capitalism and the concept of risk and reward. I would propose that anyone whose savings are "rescued" should be forced to invest in a new government bond at a relatively low rate of interest for at least a year. Cheap money for the government and a salutary lesson for the investor. Also a better solution than total loss of capital.

The world must learn to live without credit cards and use debit cards only. Small businesses should be allowed bank credit with a time limit buit in. All CE's and senior bankers should have their incomes made public and the government should increase tax on the rich. Non doms should pay tax as everyone else.

I am happy Thatcher is still around to see the mess she caused!

Shame she might not be up to understanding quite how wrong she was.

No change there then!

moraymint at 3

i've been saying this to people for the last few years.

All I get is "here he goes again, mr gloom"

The 'city of london' and their unholy pact with politicians since 1986 have led us like the pied piper - and we have believed that what they were doing was in the interest of the nation.

The bad news is that our financial sector has lost credibility and unlike most of our competitors we no longer have a manufacturing sector to fall back on - Oh sorry I forgot the much loved (by Gordon Brown) house building sector, surely that will see us through - what's that, you can't get a mortgage - oh damn, back to the drawing board.

Em.. With the upcoming impending State Nationalisation of the Banking Systems around the World by most if not all the G7 Nations, it will mean in the future when any Bank's lend money across Border's ineffectively Governments WILL be lending Cash more openly to each other!

I wonder what such a New Wave of such an everyday open System will be called, and what CEO's will demand as a Golden Bonus everytime they spend Public Money, for don't hold your breath. "They will" , and our stupid Government at lease will willingly pay them.

Re: 70

So, I am not only an idiot, I don’t listen either. On the first point no doubt it takes one to recognise one. At least my stupidity is not compounded by rudeness.

And whilst it is true we elect a government to handle the money we pay over in taxes, in return we expect that government to act responsibly and - yes - with prudence.

As for listening, well there are several levels at which that skill can be applied. On a surface level I listened when Labour promised it would not increase basic level tax. On a deeper level I have listened very hard for any acknowledgement from Labour that, instead, they have increased stealth taxes and Council Tax has almost doubled. I listened when Alan Johnson caved in to the unions so that public sector workers can still retire at 60 with final salary pensions. I also listened when those not in the public sector were told they would have to work until at least 67. I have listened very hard but have not heard anyone in the Labour Government making a connection between the two and admitting that future generations will also have to bear the burden of paying for those final salary pensions.

I have listened as Ministers have boasted about investment in schools and hospitals but have not heard them admit the extent of the below line PFI debt that, once again, future generations of taxpayers will have to bear.

I listened when Brown boasted that he had ended boom and bust. I am still waiting to hear him acknowledge he was wrong and that he is, at least in part, responsible for the bust.

I have also listened to the remarks quoted from the latest World Competitiveness Report that ranks the UK 58th in the macro-economic league because of “low national savings, a growing public sector deficit and consequential public indebtedness”.

That public indebtedness - or the burden on taxpayers - is increasing by the minute. And Labour, and Brown, must bear a good deal of the responsibility for that.

Anyone complaining about losing money placed in high interest (and therefore high risk) foreign banks should read the not so 'small print' on every financial services advert, 'the value of investments can go down as well as up'.

You are quite willing to turn a blind eye and have your money used in sometimes questionable ways to make big profits, but when the returns dry up you are oh so quick to complain that you have been hard done by - if you expect governments to secure your money at taxpayers expense then why didn't you buy UK government bonds - where the money would benefit your fellow UK citizens.

as said yesterday that all this fuss about osbourne is just a diversion by the pm and his new/old spin doctors from the real problrms. the bail out of the banks and the credit of the this plan went to gordon brown, but the whole plan didint make any emprouvement in the life of small & meduim busness or the ordinary people who losing thier jobs and not been able to pay their bills. we still hearing today from peter mandelsson that the banks are worry to lend money and is will take time to restore the confidence between the banks in one hand and the customers in the other, the funny thing that when the taxpayes money been use to save the city didin't take long before they take the offer.
is time for the tory to put thier act together and start coming with new ideas because the labour bail out as pakage looks good but when you really look closer to practical side it still favour the city and the banfs than the ordinary british poeple .

Dear Nick...
I must confess my surprise at your own confession of laying off Mandlesons part in the Corfu incident.
My wife and I are keen followers of your political observations. Regarding them unbiased and non partisan, unlike some of your predecessors.
The Beeb, over the last few days, have been acting like kids, who are re-discoverering their lost toys.. at the discomfort of the Conservatives...
Around people like Mandleson and certain Russians, people have a tendacy to die. if they cross their path. I need not remind you of Dr Kelly etc....
Since his arrival back on the scene, we are now witnessing gutter politics that only remind us of the Blair years.
I hoped you were above that.....
Never-the-less, I shall look forward to your future observations
Regards....tonyfmarsh