The FPC: Running the financial economy?

Why is it governments wish to distance themselves from economic and fiscal policy. At least the MPC will disappear - not too soon. However if "in its opinion (FPC) be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term" it could not take actions - an in built get-out-be-nice-to-banks clause. The problem with the FPC working with the PRA and the FCA will be demarcation, overlap and possibly competition and general confusion. The banks can wipe their corporate brow and say phew I thought the government might want to expose us to more competition. Should be some nice little earners for the staff of these quangos!

This is exactly what the UK needs, a politically isolated credit officer, get ready for deleverage.....
- higher cost of borrowing
- lower house prices
- greater value of 'cash'
- everyone will feel poorer but actually be richer
- less asiprational obsessions

If this is as far as the governments reforms go, then this is a disaster.

It does absolutely nothing to remove the implicit state guarantee, and consequent tax-payer subsidised borrowing, that banks have, that your excellent series of questions to Bob Diamond addressed.

This 'solution' is predicated on the whole idea that an elite, exclusive group of bankers sitting around a table can make completely objective judgements without being influenced by their own banking friends interests.

Can't they hear us, for heavens sake?

For the last time of saying, we don't trust banks and bankers!!!

And we don't want to rely on Basle I, Basle II, Basle III or any other group of "professionals' sitting in judgement pondering this risk weighting for that type of capital etc etc etc.

We just want the guarantee that we (yes, 'we taxpayers') are giving the banks, that they won't go bust, to be removed!

And the way to do that is to split them all up, separate the casinos from the retail banks, and then to split the retail banks up even further so there are a lot more of them properly competing.

And we'd also like the tax subsidy given to corporate bank loans to removed please - i.e. make company borrowings from banks non-corp tax deductible, just like individual borrowings.

These type of regulations need to be passed to make sure a financial crisis on such a huge scale is less likely to happen again!!

This article has an interesting way to describe the financial crisis and how it can happen:
https://www.mindfulmoney.co.uk/wp/all-errors-are-human-errors/
It says – Any sufficiently complex, tightly coupled system will fail sooner or later, the example then used is the meltdown at Three Mile Island nuclear power plant.
their system was too complicated, so that even those who were experts in the areas didn’t not know how to assess what was going on, therefore when something started to go wrong, everyone was ‘completely lost’, even though the systems were ones they set up and they believed in them but the confidence was misplaced, the complexity of the system poorly understood.
The same can be said about the financial crisis.
All errors are human errors – so it’s really no surprise that the financial crisis was ‘avoidable’ which is what has been said recently – and I would definitely say those involved would claim to be experts but when it comes down to it have no idea what is going on!.

A tighter regulatory system is needed and very welcome in my opinion!.

Feels like an overcomplicated bunch of quangos that will be a nice little earner for the old boys club. The big banks are very difficult to regulate because they deliberately hide their actions behind complexity. If we split retail and casino banks up and challenged the accuracy of the account we may be able to regulate.

The banks are bust and are desperately stealing from Joe Public to maintain their lifestyle. We need more competion in banking, we need more smaller retail and business banks.

But our millionaire politicians have no empathy with the public, they just listen to their mates in the city.....

Sounds like a move in the right direction but I fear that in good times such a body would fall into toothless sychophancy and servility and told not to rock the boat of recovery.

I expect the banking lobbies to run tings round it.

And look what happened in the USA when the same trick was pulled over with the creation of the Fed Reserve. It was also created to stabalise the currency and create growth.

The money supply is out of control in the USA. Printing money gone mad. It was a good trick and it looks like our governmnet likes the look of it.

Watch our money supply sky rocket over the next few years. The good times are here again. Keep them presses rolling boys.

Hello Robert

Regarding your list of actions the new FPC is supposed to take (above).

b) When the flaws in the system are global or international in nature, the FPC will try to negotiate reforms with international regulatory bodies;


This is hoping. !!!

When the chief IMF tried to tell Gordon Brown that the fiscal deficit was unsustainable at the G20 meeting, did our Gordon take any notice? No he just slated the guy in public and only later was the IMF fellow proved right.

The trouble is, that most leaders end up as megalomaniacs and listen to no-one until the protesters are out on the streets.

Maybe that should be the lesson for all bloggers. Give up writing replies to blogs and get out on the streets. (The only problem is that you have to be willing to die for your beliefs - and maybe, just maybe, complaining about low interest rates or high infaltion or unstable banks, or crap government is just not that important.)

So the creation of the FPC may well be seen as the formal death announcement of a laisser-faire ideology that prevailed in the City of London until the great crash of 2008.

- I agree Bobby P. We are sleepwalking into communism. The Tories are supposed be the party of free market economics so this must be the work of Nick Clegg. Bring on the next election where we can have a large Tory majority and can return to ignoring these nobodies.

sounds all good in principle. However, my fear is that they won't pay the people staffing this enough so the posts won't be filled by people who have an inside track on the banks - more likely it will be ex-auditors and the like. Afraid, they could really do with attracting some fairly high level bankers looking for redemption to the top posts. The public won't stand for that which means the danger is it will be just like the FSA - overly officious, creating reams of box ticking questionnaires, and never looking in the right place........

Just because the FPC might exercise broad-ranging powers doesn't mean that it will exercise broad-ranging powers. There are way too many ifs, buts and maybes in this pitch to force the banking sector to change their ways for the better.

On another note, if the FPC is only looking out for systemic risks and unsustainable debt, it will no doubt miss the cause of the next crash completely. To paraphrase Dijkstra, such a system can only detect the presence of problems, never their absence. If you are looking only for one type of problem, there is no reason to believe that you will spot any other type of problem. That's essentially what Adair Turner admitted not long after the last crash...

The FPC: Running the financial economy" is the title of Robert Peston's blog.

Are there winds of change with the new gods of finance, primed and ready, in taking over the Bank of England Board and the various over-paid executives with the usual 'hangers on'?

We can only hope that salaries of the new wave to be instigated/slipped in under the radar, on the BoE Board will be transparent on their salaries; their nominee's funding - plus their political master's profound support of 'impartiality'?

Firstly Mr Peston, thanks for your blog today.

Secondly, you write :

'Other possible tools for the FPC would be the ability to require that banks set aside funds to cover the risks of losses on certain kinds of lending and investing, in a process known as dynamic provision - whose point is to build up reserves at banks to protect them and their depositors if the loans go bad.' [End quote]

What does 'dynamic' provisioning actually mean ?

#4 Marco82 - a lot of good points. It helps if you make the penalties for failure higher, then they will ensure they get their understanding right.

Replacement of one quango with two seems a step in the wrong direction. But in a sense it doesn't matter. The problem is not with bureaucratic structures but with the people operating them and their mindsets. The powers & structure was available 2005-8 to do something about the looming problem, but the FSA, Bank of England & Treasury chose to do nothing about it. Indeed, one might ask why the regulators at that time have emerged so neatly unscathed.
I also agree with the point that these committees will be filled with bankers & other members of the financial elite. Wouldn't it be sensible to include a senior representative from business outside the financial sector and someone representing small businesses/the self-employed and someone representing consumers? I realise that discussions may often be technical - but as they will have potentially massive efefcts in the real world, it would do the committees no harm to have to deal with issues in plain man's terms rather than the often deceptive jargon that the finance sector prefers.

Why did the original name (Consumer Protection and Markets Authority) change to Financial Conduct Authority? Let me guess, because no politician gives a hoot about protecting consumers as per usual. Every time one of the so-called regulators loses complete credibility, they just re-badge it and keep the same old industry insiders e.g. Hector Sants in the same positions.

Seems like a bit of a sideshow to me in that pre-credit crunch everybody could see that the housing bubble (how many times did Vince Cable bang on about it at PMQ's?) and all the other leveraged bubbles were unsustainable. So the problem wasn't seeing the problem, it was actually being able to do anything about it. After all, the participants were all consenting adults and quite capable of saying no if they chose to. However, hubris and political expediency took precedent and so the inevitable crash occured when the music stopped. So far, so good (or bad). In normal circumstances the participants would then have to accept the medicine dealt to them in that those investors caught in the maelstorm, in this case bondholders and shareholders would simply lose their money and their jobs. Into the void would step those organisations, or banks in this case, whom had run their businesses properly to pick up the slack left by their former competitors etc etc. Instead we were met by the unedifying spectacle of the Government deciding what was best for everybody and nationalising the debt rather than leaving it with whom it belonged. Or rather not deciding what was best for everybody, but as all Governments do deciding what is best first for themselves and then for their supporters i.e. yes, you've guessed, the bankers. So there we are, the very people that brought misery to the masses are bailed out without their permission by the self same masses and looking at the bankers bonuses paid out over the last 2 years, doing very nicely for themselves thankyou. Whilst the rest of us earn diddly squat on our savings, face higher taxes, reduced public services, wage freezes and increasingly higher inflation. And these new regulations are supposed to do what exactly? Gate, horse, bolted, go figure. The Emperor has new clothes, still the same Emperor.

Mr Peston also wrote:

'It will be accountable to the Treasury Select Committee, in the way that the Monetary Policy Committee has been for years (is there a danger of the TSC becoming over-burdened?).'

I hate to say it but shouldn't Parliament consider a significant beefing-up of the TSC : with an important sub-committee or two, continuing skills training of MPs where required, ... and a professional and direct input at hearings ( i.e. professional 'examiners' sitting alongside MPs but without any political sway when writing reports) ?

Am I correct here?

The Treasury Select Committee (elected body)

Will oversee the Money Policy Committee and the Financial Policy Committee (both none elected)

(the MPC being responsible for base rates and the FPC for regulation)

Under the FPC will be the Prudential Regulation Authority (former FSA) and the Financial Conduct Authority (former Ombudsman) (both unelected)

The FPC can dictate policy to the PRA and FCA

My questions

Will the FPC like the MPC be autonomous from the government?
Who is going to select the FPC, PRA and FCA employees
Who will set the remit/policy

My concerns

The FPC, PRA and FCA will be made up from the current crop of bankers and therefore no change in the status quo i.e. thinking
Is their enough political will to back the FPC (the FSA had teeth but no political will)
The two get out clauses (international and stifle)

Overall view

It is putting a command and control function in place more akin to republic type regimes and by doing so accepts that the FSA was inept (or inept of political will). I can see it as a step forward as long as the correct calibres of personnel are employed. I personally cannot foresee any radical changes to the system being implemented because we will still have the same personnel in charge.

So time will tell: 10/11 nothing changes and 10/1 it works!

This new structure mirrors the impossible knife edge balancing act that the BoE MPC is expected to achieve - keep the financial services industry competitive and profitable, but don't let it take too much of a gamble and end up coming cap in hand to the taxpayer.

The reality is that the global financial services industry gambles on making serious money by taking serious risks - and as long as we the taxpayers are expected to underwrite this gambling, the bankers are willling and able to go on gambling.

We face a choice:

1. accept the risk and the reward UK PLC gets for backing the gamblers
2. rein in the risk taking and accept a lower level of invisible exports and tax income
3. rein it in hard and accept that the banks will go offshore
4. break up the financial services sector to create secure, boring retail banking separate from the global risk-taking sectors, then make it impossible for the government to bail out the gamblers with public money

What is being proposed is a total fudge from the above options. It does not break the taxpayer underwriting relationship and as we all know, regulators often fail to take the right action in the right timeframe.

Breaking up the banks is the only way to stop them from coming cap in hand again - those that want to risk their shirts need to know absolutely that HMG and the taxpayer won't foot the bill again - this structure does not deliver this certainty.

The Tories promised to rid us of quangos - and now they replace them with 'commitees'
They got rid of the Tri-partite system and replaced it with.....a tripe system.

Well done.

"prevailed in the City of London until the great crash of 2008"

Robert - please stop using this phrase as it upsets the capitalists who wish to brush history under the carpet - like they always do!

2. At 13:17pm on 17th Feb 2011, Reykjavik-on-Thames wrote:

"- everyone will feel poorer but actually be richer"

You must be a politician - how will people feel richer when the slightest rise in interest rates is going to tip the economy back into recession and the alternative is rising prices making you and making you feel poorer??

11. At 13:49pm on 17th Feb 2011, Dave wrote:

"On another note, if the FPC is only looking out for systemic risks "

Robert said
"Systemic risks attributable to structural features of financial markets or to the distribution of risk within the financial sector"

Why? - is something wrong with the system?

Once again the structural issues that are the root cause of the current problems with the UK's financial system are not being addressed. Instead we get yet another agency with powers to treat the symptoms but not the disease, and is probably as likelly to succumb to regulatory capture as the FSA.

To add insult to injury this new agency will have no direct powers to intervene and instead will have to go through the PRA and FCA - a structure that looks suspiciously like something designed from the ground up to be constantly paralysed by "pass the hot potato around" politics, unclear assignment of responsibities in maters of detail and infighting.

Expect that any measures that the FPC might try to have executed that have a real impact on the way banks work will be endlessly bogged down in intra-agency discussions about who's supposed to decide what and do what. From start to execution many months or even years will pass and in the meanwhile the banks will be finding the best way to go around any such measure, so that when it does come into effect it will have no impact.

Maybe the FPC should be given the power to hire, fire and influence the careers of people at the PRA and FCA (including their heads). That would give the agency real leverage to get things done.

That said, the real disease in the UK's financial system is not being addressed. The problem is actually very easy to spot to anybody who has worked in both banking and other industries:
- UK Banks are all Fat and Slow companies. This is due to lack of competition in the industry. In any high competition industry companies are either Lean and Mean or they get eaten up by their competition, but in banking companies are not Lean and Mean.

So why is banking in the UK a low competition industry:
- High barriers to entry, be it the costs of compliance to be a financial institution in the UK or the difficulty in getting planning permits to open bank agencies in the places with the most of the UK population.
- Regulatory capture: for all effects and purposes banks in the UK have a huge influence in the laws, regulations and measures that affect them.
- Excessive concentration, leading to situations where banks in an almost synchronized way add or increase new costs for their customers. Also you get things like how the bank heads for banks having a total of more than 90% of the deposits in the UK get together and decide on a common position with regards to things like Project Merlin or banking legislation, something which would be nearly impossible if there were 20 of them instead of 5.

Address these issues and and the result will be zero "to big to fail" banks (and thus no need for state support), much thinner profit margins for banks due to increased competition (with the side-effects of much cheaper costs for banking customers and smaller bonuses for bankers) and a much more robust financial system (if deposits and loans are uniformly spread over 20-30 banks, the fail of one or more of those will not be a catastrophy).

"6. At 13:22pm on 17th Feb 2011, Reticent_Trader wrote:
I expect the banking lobbies to run tings round it."

already happened!

from the FT this morning -

"George Osborne is looking at ways in which Britain’s tough bank liquidity rules might be eased, potentially saving banks hundreds of millions of pounds and releasing funds for lending to businesses and homeowners.

The chancellor is said to be looking sympathetically at claims by the banks that Britain’s regulators have gone too far in their efforts to avoid another Lehman Brothers-style crisis and have put the City at an international disadvantage."

well there you go, George Osborne says Britains regulators have gone too far!!

9. At 13:35pm on 17th Feb 2011, Lindsay_from_Hendon wrote:

"- I agree Bobby P. We are sleepwalking into communism. The Tories are supposed be the party of free market economics so this must be the work of Nick Clegg. Bring on the next election where we can have a large Tory majority and can return to ignoring these nobodies."

Oh dear - look at the dilemma which you face - this is the consequence of attaching yourself to an ideology which fundamentally cannot work. The Tories cannot implement laissez-faire economics because history has proven that the free market simply doesn't work (if it did, then why are there so many corporations with such huge market share - surely they should have all been 'reaplced' by fitter and stronger businesses?)

It's a shame when you can only justify Capitalism by accusing it of being communism.
it's like promoting your football team as being 'the best' because you beat your rivals in a bottom of the 3rd division clash!

When you're resorting to 'ironic analysis' - you know the game is up.

This new structure, like the old structure, carefully dodges the core issue which is that our government will, in the last resort, use our money to prop up a failing bank (but not, you'll note, any other kind of failed business.)
Banks should be categorised into two types - those backed by government guarantee and those not. The latter could do what they wanted and we, the punters, would be free to invest our cash with them in full knowledge of the risks - we might even get a decent return on our cash, remember when that used to happen?
Banks backed by the government would have to be subjected much, much more stringent capital adequacy rules than now and suffer the presence of government ministers on their executive board. Our money would be safe, but boring.

Regulatory bodies will not solve the problem, they will be no better than 2008.

A possible solution is to legistrate to a) Require loans to be backed by reserves, b)Create a state owned people's bank able to take over the retail business of any failing bank (with the implication that failing banks will not be bailed out).

It was all sounding so effective, at last meaningful regulation, until that last little caveat, don't rock the boat and spoil growth. That was a killer wasn't it?

4. At 13:18pm on 17th Feb 2011, Marco82 wrote

A tighter regulatory system is needed and very welcome in my opinion.

Whilst i agree with the sentiment of the article, 3 mile island was a totally avoidable accident as if i recall correctly someone at that plant decided to continue to run that reactor even though there was an explicit rule for it to be shut down when certain types of maintenance were being performed.

Harford points out the need to simplify the system, decouple it, or reduce the consequences of failure. Information has to be organized to be useful. Or the elements of the system have to be isolated, smaller. If accidents are normal, we have to be more aware of what is happening or minimize the danger.

Agreed, and this can be easily applied to the banking sector if there is a will.


But I see this as actually complicating the system when what it requires is simplifying the rules so there is no ambiguity,the banks have shown themselves very able at side stepping complex procedure.

After all its taken 3 years and hundreds of billions of pounds to get to this position, how long will it be before we see whether these reforms actually work ?? another 5 years ??? by which time many good people will be in the gutter and the culprits getting away scot free.

Roberts article while outlining broad details says these reforms will force banks to do this that and the other, but what are envisaged as being the penalties ?? if they are to be only financial then they will be passed on to end user.

“The Treasury would be able to legislate instantly to provide those powers - with approval by Parliament required within 28 days.”

What!!!!!!!

Here we go… the beginning of the end.

MPC, FCP, FCA, PRA... a lot of acronyms to get my head round - I hope I don't confuse them. God forbid I confuse the Financial Conduct Authority with the Financial Policy Committee - I wonder who chooses whether a body is a committee, authority, board, or council?

That aside, I think the most insightful statement made here is:
"how to take risk out of the system without stymieing the supply of vital credit, or crushing those creative instincts of banks that are benign."

I'm pretty positive that rebranding the same set of suited and spectacled individuals under a new acronym will be the answer. It's genius really.

It's not like the Government will simply pass any negative press for failures to regulate banks directly onto one of the many 'independent' committees/authorities/councils/gentleman's clubs, decommission them, rebrand, and do the same thing again.

Oh. Wonderful.

Some more bloody quangos.

All of the distortions over the last couple of decades would have been avoided by using a simple mechanism.
Its called "the market". If the cost of the commodity called "money" , otherwise known as "interest rates" was allowed to rise and fall due to demand or otherwise then none of the "inventions" would yield any profit and would therefore be stillborn.

The housing boom would have self deflated if the resulting rush for mortgage money had resulted in an increase in the price, i.e. interest rates, of the money being "invested".
Instead the interest rates were held down well below inflation for ages and , well, well, what a surprise, like a caspoint giving out free money, a crowd collected around and scooped it all up!
The market interest rate method also adheres to another well tried out principle requiring no quangos at all.
KISS..for those that dont know, Keep It Simple, Stupid

Quis custodiet ipsos custodes?

> where dangerous risks are developing within the financial system ...
> and then do something about those risks.

There are known knowns ... there are known unknowns ... but there are also unknown unknowns – the ones we don't know we don't know.

Given that fact, the mission statement of the FPC is totally lame. It is not sufficient to detect where "dangerous risks" have already started to develop within the financial system. Anybody can do that.

No - the FPC must do more. It has to predict when greedy bankers again start to behave in ways that guarantee that "dangerous risks" will soon develop. Basically, the FPC needs to issue anti-social behavior orders to bankers, to get those guys out on their ear before things get out of hand.

Sounds like we are re inventing the wheel. Why can't we make small gradual changes, rather than do a full u turn on policy. The only answer to problems in the country is real democratic government, were we vote on policy direction like they do in Switzerland. Treat people like adults and they will behave that way.

Robert,
Are you aware the new committee has Dnoald Kohn on board?

When Monetarism is failing, lets put the monetarists in charge! The definition of insanity is trying the same thing over and over again and expecting different results!

It's also interesting to note that Donald was on the Fed board from 2002 - a time much indicated as the 'cause' of the credit crisis as Greenspan kept rates too low following the shock of the dot com bubble bursting.

Is this how we pick talent? - we put in those who have failed before and keep letting them try until they get it right?

We've just appointed a man who presided over the largest economic problem in history building up and he said nothing - and we've given him the job of watchman to alert us as soon as he sees a storm coming!

Classic cronyism - don't appoint people on their record or their talent - appoint them based on their ideology.

Gosh this Government is really, really stupid.

#3 Noideaatall
Seems like you have quite a few ideas and all of them good. Keep it up. Not that I expect the clueless self serving politicians to take any notice but hey we might get an unexpected result.

#4 there is a lot of truth in the idea that a complicated and complex system will inevitably fail.

Ultimately anything run by humans will fail because we are not perfect, but the more complex the system the more likely the failure

Surely that would indicate that a better regulatory system would also be a simpler one? And that is what worries me. We seem to have lots of committees responsible for different things - so when a crisis hits the opportunity for each committee to pass the buck to some other committee seems too great.

Admittedly this is still better than control by politicians but does not look a great solution to me. Would it not be easier simply to have all regulatory issues dealt by one body?

So on the one hand we are implementing a tighter regulatory framework to reduced the risk of credit bubbles and on the other hand we have the following article being published in the FT (that well known left-wing anti-market publication): -

Osborne eyes looser liquidity regime
https://www.ft.com/cms/s/0/39cf744a-3a17-11e0-a441-00144feabdc0.html

Please can somebody explain this to me!!!

OK, so far so different. But who will populate these bodies? Who decides? What if they share the culture of the folk they are supposed to regulate?

And I like the idea of Osborne et al setting up 3 quangos to replace 1... proves the guy has a sense of humour if nothing else

It would be helpful if we could start by explaining why banks and other financial institutions need to be regulated; after all we don't impose this type of control on other entities.

Is it because we can't trust the directors, the auditors, the audit committees and the rating agencies associated with these financial bodies? Published financial statements proved to be so badly mis-stated that going concern status was only ensured by taxpayer funding and guarantees.

It still hasn't sunk in: if the people producing the numbers get it wrong, if the complexity and scale of the traded instruments are beyond human understanding then it does not matter how many committees you have acting as a back stop.

By the time that a committee hears about the scale and complexity of the trades invented and contracted for by adolescent mathematicians the damage will have been done.

We have to pin any losses on the directors. If a director cannot personally guarantee the downside of a trade he should not authorise it. Currently he will authorise it knowing that if it succeeds he wins (big time) and if it fails the taxpayer will cover his losses. This would not happen in any other business.

If the argument is that we need a large scale banking industry and that risks have to be taken then we should create a "public equity" share with preferential status so that taxpayer funding is rewarded before bonus payments are made and before other dividends are paid.

"It is giving four general capabilities to the FPC to address such risks, as and when they emerge:"

As and when they emerge. I luv it.
Do you think the prospective members may have spotted anything yet?

The politicians are now setting it all up so that they can say it is nothing to do with them, it is all the fault of (insert those to blame here) and wash their hands and look to the next 5 years in parliament.
More of a blatant con? Rewriting history? I think so.

35. At 15:08pm on 17th Feb 2011, Jacques Cartier wrote:

"> where dangerous risks are developing within the financial system ...
> and then do something about those risks."

'do something' sounds a bit vague - do they mean a jig, or maybe throw a party?

I suspect this is simply the body you can blame when it all goes wrong again - something the tri-partite system didn't have (a single point of blame). That way you can remove the problem and claim you have 'fixed' capitalism....again!

Another unelected body.

(Though I do like the idea of more countercyclical tools I do worry about democracy).

Brilliant; in #34 I posted "Who guards the guardians" in Latin and it gets referred for further consideration. Doh!

39. At 15:22pm on 17th Feb 2011, Justin150 wrote:

"Ultimately anything run by humans will fail because we are not perfect, but the more complex the system the more likely the failure"

I've told you before - speak for yourself! Don't put your own inadequacies on everyone else.

"Surely that would indicate that a better regulatory system would also be a simpler one? And that is what worries me. We seem to have lots of committees responsible for different things - so when a crisis hits the opportunity for each committee to pass the buck to some other committee seems too great."

Well this is what you all voted for.

"Admittedly this is still better than control by politicians"

So you admit you don't like democratically elected people managing the economy - you would rather it done by committee?

Committee, commitment, commiterm, communism - oh no, you have become a communist asking for unelected committees to make economic decisions!

"but does not look a great solution to me. Would it not be easier simply to have all regulatory issues dealt by one body?"

Wow - that would be one giant quango - so we rid ourselves of the film council, NICE and a load of other useful bodies and replace them with a giant monolithic financial regulator!

Absolutely brilliant idea - do you know who's going to pay for all that?

41. At 15:26pm on 17th Feb 2011, fromtheedgeofthefen wrote:

"And I like the idea of Osborne et al setting up 3 quangos to replace 1... proves the guy has a sense of humour if nothing else"

Oh now I'm confused - what is not 'tri' about three regulatory bodies? Oh the Tories are taking this rebranding exercise to it's limits!

Do you think people will realise that the Tory party are Tony Bliar's Nu Labour in disguise?

Sants, Lord Turner and some bloke called Kohn from the US Federal Reserve! They're having a laugh aren't they? How on earth could you take that lot seriously. And an investment banker!

Dear oh dear. Lets laugh them out of town before they get their feet under the table.

31. At 15:04pm on 17th Feb 2011, UnionRep wrote:

“The Treasury would be able to legislate instantly to provide those powers - with approval by Parliament required within 28 days.”

Fascism - so the committee can produce legislation in 28 days to defraud the nation once again.

Here's a scenario - late in 2011 one of our banks shows signs of going bust - the FPC decides that the bank needs to be saved in order to stem 'systemic collapse' - legislation is passed and hey presto we're back where we started.

The last effort worked so well - do you think they won't try it again?

43. At 15:33pm on 17th Feb 2011, EconomicsStudent wrote:

"Do you think the prospective members may have spotted anything yet?"

Well someone spotted this mistake!

https://www.cityam.com/news-and-analysis/king-lifts-lid-inflation-error

It has to be a big step in the right direction ... and its announcement must have wrong-footed some of the Coalition critics with regard to 'lack of progress' ... probably myself included.

What I would like to know is what its relationship, if any, might be with the big society bank as the 'strategic interplay' in directing the use of UK capital, both within the UK economy and elsewhere might become very exciting indeed with regard to economic efficiency and sustainable growth output values and having the UK banks working in the interests of the UK electorate/ all taxpayers and not just the friends and relatives of the political class and establishment.

One problem is that its all still very much tied to the Treasury when the major strategic and constritutional issues should surely be dealt with by the TSC and Parliament.

One problem with these kind of bodies is that if its not asked to do something ... then it will not do it ... and so the identification of major constitutional and strategic issues is a matter for the entire country and not just for a few hiding away in UK Treasury.

An example of this is ... who gave the last govt the right to get the UK into £1.5 trillion debt by 2015 ... that kind of issue surely has to be matter that is reported direct to Parliament and not just kept locked up in the Treasury ... until it is too late.

Have the lessons been learned?

Let us hope that the UK and indeed all banks will be told for whom they are ultimately working for and what is properly expected of them viz a viz the ... UK.

However, the negative side is that there may be too many 'stinkers' on the proposed new FPC board from my point of view ... jobs for the boys again and no real fresh thinking ... too many bonus hungries, lunches and favours and conflicts of interests ... may all just end up as mini Basel twaddle ... let us hope not.

But the banks didn't do anything wrong, it was all somebody else's fault and they were just the victims. If that's the case, and I know for certain that it is because they and their apologists keep telling us, then why do we need another body to oversee the banks? I'm confused.

42. At 15:32pm on 17th Feb 2011, KKP wrote:

It would be helpful if we could start by explaining why banks and other financial institutions need to be regulated; after all we don't impose this type of control on other entities.
.........................
Have you ever seen a full and reliable set of accounts for a 'bank'?
That is one of the main reasons why they need 'regulating' ... and the rest.

If the Tories/Lib's don't get the housing market moving in the next 12 months , I will guarantee that they will be evicted from office in the next election.

Believe me, the thought of being kicked out on the streets, will be the most powerful force in re igniting future borrowing .

Consider the following statement...

"We are setting up a couple of bodies which, had they existed in 2000, would have stopped the credit boom in it's tracks".

Does that pass the laugh test? No, I think not. I wish it did, but it doesn't.

52. At 16:04pm on 17th Feb 2011, writingsonthewall

You are a right proper wind up merchant

48. At 15:55pm on 17th Feb 2011, writingsonthewall wrote:
39. At 15:22pm on 17th Feb 2011, Justin150 wrote:

"Ultimately anything run by humans will fail because we are not perfect, but the more complex the system the more likely the failure"

I've told you before - speak for yourself! Don't put your own inadequacies on everyone else.

"Surely that would indicate that a better regulatory system would also be a simpler one? And that is what worries me. We seem to have lots of committees responsible for different things - so when a crisis hits the opportunity for each committee to pass the buck to some other committee seems too great."

Well this is what you all voted for.

"Admittedly this is still better than control by politicians"

So you admit you don't like democratically elected people managing the economy - you would rather it done by committee?

Committee, commitment, commiterm, communism - oh no, you have become a communist asking for unelected committees to make economic decisions!

"but does not look a great solution to me. Would it not be easier simply to have all regulatory issues dealt by one body?"

Wow - that would be one giant quango - so we rid ourselves of the film council, NICE and a load of other useful bodies and replace them with a giant monolithic financial regulator!

Absolutely brilliant idea - do you know who's going to pay for all that?

===========================================================

1. so your saying that your perfect and have never made any mistakes in your life.
what hes saying is that human error is a natural occurence and so "WILL" happen no matter what your view of human kind and wether or not they are naturally fallible.

2."So you admit you don't like democratically elected people managing the economy - you would rather it done by committee?

Committee, commitment, commiterm, communism - oh no, you have become a communist asking for unelected committees to make economic decisions!"#

i think he was reffering to the current politicians that even yourself complains about, i dont think he was advocating a communist system (although he may have been).

3.""but does not look a great solution to me. Would it not be easier simply to have all regulatory issues dealt by one body?"

Wow - that would be one giant quango - so we rid ourselves of the film council, NICE and a load of other useful bodies and replace them with a giant monolithic financial regulator!"

again you have completely missed his point, hes is talking about a single regulatory body for all financial services not a single regulatory body for everything.

not sure if you actually bothered reading the original post at all so decided to explain some of the comments for you as you seemed very confused.

The banks
They have been underwritten with the average person's pension moneys and savings and house ownership, as well as being guaranteed not to fail completely by the same average person's government...................so they use our money to make money with us taking all the risks (as pension holders and as UK citizens paying taxes). Meanwhile they take none of the risks - if they fail they personally lose nothing, but if they win they always win big.

Its like going to a casino and knowing if you lose you can get your money back at the end however badly you played, yet if you win you can keep all your winnings, and no one can take it off you if you lose later on. If you lose you don't lose, and if you win you win a lot.

The only people that lose are the other players still playing by the old rules. These rules say if you lose you lose and if you win you win. No fallback position for the average man and woman.

Time to make the same rules for everyone?

A step in the right direction perhaps, but without radical systemic reform nothing will really change. The banks in their present form are a cancerous growth on our society and nothing about this new Authority will change that.

The key event will be the outcome of the Banking Commission's enquiry - that's make-or-break

54. At 16:10pm on 17th Feb 2011, davidbrent wrote:

"But the banks didn't do anything wrong, it was all somebody else's fault and they were just the victims. If that's the case, and I know for certain that it is because they and their apologists keep telling us, then why do we need another body to oversee the banks? I'm confused."

Contradiction, built upon contradiction, built upon contradiction, built upon....

47. At 15:53pm on 17th Feb 2011, Radiowonk wrote:

"Brilliant; in #34 I posted "Who guards the guardians" in Latin and it gets referred for further consideration. Doh!"

The moderators don't speak latin - they probably assume you are swearing...

#47

Maybe the over-zealous BBC moderators should regulate the banks . . . :-)

We were told in both 2008 and 2009 that Spain had a superior system for controlling bank lending whereby liquid capital requirements were raised automatically in boom times. We were told that - had Britain adopted that system - our Banks would have had sufficient reserves to survive a credit crunch.
So. Now we're going to have a system that will do the same as the Spanish system: raise or lower the liquidity requirements to match the perceived risks.

Which leads me to ask: why was Spain's system so much better? And how come Spain's Cajas and Banks are in so much difficulty?

@18. Amused2Death wrote:

"I hate to say it but shouldn't Parliament consider a significant beefing-up of the TSC : with an important sub-committee or two, continuing skills training of MPs where required, ... and a professional and direct input at hearings ( i.e. professional 'examiners' sitting alongside MPs but without any political sway when writing reports) ?"

Excellent suggestion IMO, in response to a shrewdly-posed question. Kudos all round.

9. At 13:35pm on 17th Feb 2011, Lindsay_from_Hendon

Lindsay - could you explain to the rest of the blog why they should respect your opinion when you just said on a previous blog.

"I've made a fortune on the BTL empire thanks. It is geared but guess what? The debt is being eroded by inflation! You are right that I get less in francs but I'm leaving it in sterling until it recovers and buying UK assets with UK profits. Don't worry, it's offshore."

...and

"She's (your boat) in the Caymans at the moment. You do undertsand that you can own things that aren't in the same place as your residence don't you?"

I'm willing to bet that not many people on this blog have much in common with the life you claim to have.

Maybe your desperation for capitalism to be accepted is driven by your own self interest and not what is good for the nation?

I may be a wealthy proletariate - but at least I don't insist the entire human race continues with a system that's grossly unfair in order to achieve personal gain.

I'm sure all these people will be only too happy to hear how you have 'contributed' to the credit crunch and unaffordable housing situation in the UK through your greed and self indulgence.

The Accountancy Profession’s Contribution to the Debate on the Crisis

Dynamic Provisioning for Financial Instruments

https://www.iasplus.com/europe/0903feeprovisioning.pdf


Have just read this most wonderful pdf. And in the process have become borderline genius.

The idea that a body like this can be non-political is naive. Many of the matters it will be considering are a matter of judgment and so its conclusions will reflect the views of its members. When appointing the members a Chancellor will select "experts" who share his own views. George Osbourne or Ed Balls would probably select quite different members.

When things go wrong, as they might well, since by implication the dangerous notion of "weighted risk" is not ruled out, the government will not be without blame.

Whilst the proposed FPC is entirely logical and consistent with how the MPC works (and who knows may even work), I have to agree with others that it will do nothing to give confidence to ordinary people. Again it is a roll call of the great and the good who made and make a lot of money as things stand and were all involved when it went wrong; fresh blood please!

67. At 16:40pm on 17th Feb 2011, writingsonthewall wrote:

I may be a wealthy proletariate - but at least I don't insist the entire human race continues with a system that's grossly unfair in order to achieve personal gain.

===========================================================

i like the way that you align yourself with the title of "proletariate" and yet you also call yourself wealthy, i got the following off google

•The proletariat (from Latin proletarius, a citizen of the lowest class) is a term used to identify a lower social class; a member of such a class is proletarian. Originally it was identified as those people who had no wealth other than their sons.

i especially like the phrase "had no wealth other than their sons", so in fact your the opposite of the proles, go give all your money to charity, sell all your possessions, go find a free web cafe and then give us your opinion

Sounds good to me, I would also like to see the break up of the banks into smaller pieces to encourage competition and so no bank is too big to fail.

This sounds like far more than I expected from this government.

My God, I think I have heard 2 things from the coalition I agree with in 2 days. Wonders will never cease!

It is often said that you set a thief to catch a thief or you train someone to think like a thief – I’m not knocking our pc’s here LOBL

So maybe by giving these experts (‘ex’ is an as been and a ‘spert’ is a drip under pressure) a 180deg change in focus it may enable trends and foul play to be spotted?

Sometimes we have to trust but I am finding it difficult to trust the players that were part of the initial problem!

I want to be positive about this but I cannot find the inclination! So I am back to the same old norm ‘it is up to us’ It’s even getting boring for me to keep asking why have you still got your money with these banks?

The FPC is all very well in theory,but what happens when they introduce real restrictions on people by rationing credit to prevent a theoretical problem that no-one believes will happen (as might have been the case if they had been around in 2005).

The Government will find it difficult to resist the popular demands of ordinary people that they should overule the unelected bureaucratic busybodies and then we'd all be back where we started.

Oh dear, it all looked quite good right up until:
"And what some will see as most important of all perhaps, there will be a legislative requirement on the FPC not to take actions that would "in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term".
That one sentence has pulled out all the teeth of the FPC and the banks will run rings round it and continue to put public money at risk in their gambling operations.

At 13:09pm on 17th Feb 2011, watriler wrote:
Why is it governments wish to distance themselves from economic and fiscal policy.


Economics 101: governments don't wish to distance themselves from fiscal policy, they define fiscal policy. In terms of the MPC/FPC, making them independent of government gives them credibility and hence more weight in making decisions. It also means that there is consistency: Mervyn King is not affiliated to any political party and it means that his views do not change with the change in political structure.

I think the FPC brings a prudent change...albeit not a very unpredictable one, they've been planning this for months...

The "FPC" seems an excellent idea.
It should stop runanaway property and asset bubbles.
The big winner could be the Stockmarket.....more stable, less risk.
Mr Gordon Brown could not see the risks....why, I don't know.
Good sense in mortgaging and borrowing is the UKs only option....another bust will destroy the City.

WOTW: so you think you are perfect - that explains a lot.

I am not advocating a single body controlling the economy merely a single body repsonsible for administering the statutory regulation of the banking system. Before Labours tri-partite solution, we had a single body called the bank of England that ran all regulatory functions. As for who should pay for it there are two obvious solutions either we all pay via general taxation or the banking system pays via some form of levy either seems fine.

Of course I cannot respond quite as well as avalance did about your comments "not sure if you actually bothered reading the original post at all so decided to explain some of the comments for you as you seemed very confused." Avalanche I am not sure WOTW reads anything that does not agree with him - why should he, as he himself says, he is perfect!

Perhaps Wall St needs an "FPC".
There are times when Wall St seems even more out-of-control than the City.

Apart from 'stable door after horse bolted' then again it would be daft to leave it open. If it is independent and looks at obvious macro-economic indicators - especially debt levels then it should be a good thing.
Looks like a step in the right direction, but the banks still need to be sorted and this is just one step.

No hay remedio...

there is no answer.

if one bank starts something and it is a success the others will try to emulate it and gain the profit. It is human nature, we all do it, it is a fundamental characteristicof humans. And anyway, if you didn't, your boss would sack you for not keeping up with industry means.

The three mile island episode is fairly succinct and in a similar theme critical software (that which has human life at stake) follows a similar vein, quote
"There are two ways of constructing a software design: One way is to make it so simple that there are obviously no deficiencies, and the other way is to make it so complicated that there are no obvious deficiencies. The first method is far more difficult. - C.A.R. Hoare"

I would go so far as to say it is some peoples interest to make things so complicated that only they....etc etc and thus we are in their power, sort of.
Quantitive easing, what the devil is that except devaluation.

Is the Prudential Regulation Authority the Gordon Brown Memorial Quango?

all and esp writingnonsenseonthewall, why do you think monetarism has failed?

Hard to justify really, one 'crisis' which has resulted in 10% unemployment is not enough to write off a system which has got us to the place we are today. Life is better than 50years ago and whatever time-range over 20years you choose to use there have been more good years than bad years. Bad times (recessions) are needed to purge market inefficiencies and aid progress (pop bubbles), that's what we have now, very simple, if it lasts another 2-3years then still we had a 15year boom preceeding this period at a cost of 5year recession, and life will still be better than 1990. By the way how many times were you blogging pre-crisis?

For all your ranting you can't find a single planned economy that has 1. Kept pace with the free market in terms of development 2. Not caused persistent unhappiness. Thus they fail/fold/convert unless they are secured by violent oppression.

Visit Cuba and enjoy a glass of brown water, then tell me planned economies work.

Enjoy your blogging, I reckon give it 2% growth and you and Prestonski will have to pack up and go to your spiritual home in Venezuela. By the way they accept skilled workers with acceptable political views there, not sure what you are sticking around for?

82. At 18:14pm on 17th Feb 2011, rogerparks wrote:

Is the Prudential Regulation Authority the Gordon Brown Memorial Quango? [End quote]

Gordon who ?

Is it just me or is the coalition just not working?

We have this horrible mutation of everything the coalition tries to launch being a mix of Conservative and Liberal ideas, and they just do not make sense.

This isn't to say I think either party is unelectable I just believe the coalition is an abject failure.

Thus I will be voting 'No' at the referendum, and hoping that the coalition will fall.

In my eyes the Liberal ideas on the banking sector are the ideas of a party that hasn't been in power for over 80 years, and we cant have this compromise situation continueing any longer.

I am reassured that there are a people on the new committee who talk a lot of sense about the need for robust and simple regulation - even if the committee structure itself seems somewhat complicated and acronym ridden.

I am clear that the financial system needs its own 'laws' and 'police' service given the damage it has caused in the last three years and a complete inability to manage its own affairs and risks.

I still believe that the population needs to be protected from the banks through the 'ring fencing' of the payments sytem and very limited use for guaranteed retail deposits to fund loans or investments which are low risk.

This is not radical. Most savings in the UK used to be held by building societies funding low risk residential mortgages before the demutualisations and deregulation.

Government backed savings and deoposits should be boring and should be fundamentally be about people with savings lending to people who want to buy real assets - generally land and property.

If a bank wants to run a casino or make unsecured loans to individuals or business it should be totally free to do so. But only with money from shareholders, wealthy individuals and investors who can afford to lose that money.

If individuals want to earn a higher return on their savings then they turn them into investments and must be prepared to lose money if the investments go sour.

If other countries are prepared to insure their savers and allow that money to flow into our 'mega' banks that is their own decision.

The argument that our banks will relocate is a scare tactic. They can still operate here - they just have to fund themselves appropriately and not use peoples life savings in the casino or investments which aren't backed by solid assets such as bricks and mortar.

We need a hero - these idiots are still applying patches to a banking system that is the direct cause of pretty well all our problems, not only here, but wherever the central bank system and fractional reserve leverage system has been implanted - and that is every country country in the world - all but a tiny few.

As muich as I would wish for my hero to be Winston (god rest his soul) or Bulldog Drummond, I have settled on Ben Dyson and his friends at www.positivemoney.org.uk

It we are to survive and not leave our children and their children up to their eyes in debt to the private bankers, we need to change the system so that their legs are cut from under them - no more could they ever steal our life value.

We need a fully funded system - you will find such a system ion this web site - it is in the hands of the Independant Commission on Banking right now - and Pos/money have been invited to present the case for change.

God help us all if we continue to the next crisis.

If the people knew just what this is all about, there would be murder, I am sure - but then, the international banksters have caused many deaths - running into hundreds of thousands and million to implant and protect their system all over the world.

we-need-a-hero

FPC/PRA - continued abrogation of responsibility by the Chancellor?

The systemic risks were well signalled before the crash to the Treasury (in writing by me and others) yet they ignored them and just continued to pump up the private debt bubble. I do not see in these proposals any mechanism that would prevent this happening.

The mechanisms which can be used to bear down on bubbles are the responsibility of the FPC yet the PRA will be responsible for prudential stability. How is the conflict between the two arms of the new tripartite system to be made to resolved? The PRA will prudentially want to up interest rates and the FPC will want to put them down - who decides? The Treasury, one presumes, as it should always have done - but they are the still at the heart of the failure of regulation! Same problem - NO ONE IN CHARGE! Matrix management gone mad!

#34 #47. Radiowonk:

sed moderatores es rex rgis (very bad-Latin!) - trans: but the moderators are king!

We aren't supposed to blog in foreign languages!!!! We can use all forms of unknown abbreviations such as FCA and PRA but only if the abbreviate things that were/are/will be/may be in English! I understand why because without the rule the Beeb would need multilingual moderators - too expensive!

8. At 13:34pm on 17th Feb 2011, PaulattheRocks wrote:
The trouble is, that most leaders end up as megalomaniacs and listen to no-one until the protesters are out on the streets.

Maybe that should be the lesson for all bloggers. Give up writing replies to blogs and get out on the streets. (The only problem is that you have to be willing to die for your beliefs - and maybe, just maybe, complaining about low interest rates or high infaltion or unstable banks, or crap government is just not that important.)

---------------------------------------------------

It's not just financial policy and crap government, we are sleepwalking into a fascist kleptocracy. If someone does die at a protest here then it will be the spark that starts a full blown riot, and only then will the 'elites' get it. They all lack empathy and are conscienceless ..the same traits as psychopaths, and they all need to be removed from power, not create new quangos that have no teeth.

Oh come on now. The very idea of regulation is nonsense.
Like herding cats.
The whole monetary system relies on confidence.
If you want a damn fine-exact-analogy sit back and listen to Mornington Crescent.
The moment you try and regulate it you will get noises off telling you that you have spoilt it.
General acclamation by those in the know is how the system operates.
And those not quite in the know get to make money from those definitely not in the know and get to pass it on up.
Where have we come across a system like this before?

79. At 17:47pm on 17th Feb 2011, stevewo wrote:
Perhaps Wall St needs an "FPC".
There are times when Wall St seems even more out-of-control than the City.

-------------------

Thats the problem, everyone focusing on the UK fails to see the bigger picture. Regardless of what we do, the world economy will be decided by the US, and the longer they keep printing money the more likely financial armageddon II will happen.

I think it will go belly up within 18 months, with serious problems in June this year due to the lag effect of futures speculation in commodities.

Robert Peston is so boring. He comes out with these statements like "So the creation of the FPC may well be seen as the formal death announcement of a laisser-faire ideology that prevailed in the City of London until the great crash of 2008." As though he's just made a seminal statement that we should all stand back and admire. I just wish he'd tone down the self-adulation and stick to the reporting.

The BOE previous and current state, when expressed in Latin, as already hinted by others is:

Semper in merda; sola altitudo variat.

Or:-

Semper in merda sumus , Variat modo altum"

Mods… this translates to “always in the s**t, only the depth varies.

A certain English politician gained notoriety by continually correcting his peer’s incorrect Latin references, many years ago.

If you’re like my and can’t remember any Latin from your youth… beware, misquotes here can cost you your job.

Mr. Preston
I think that you should answer the general thrust of the comments if you can. Perhaps you should make sure that the the Prime Minister reads them.

Although Robert put in a disclaimer about not all Wholesale financial innovation being designed to rip off ignorant and/or greedy clients the real problem is that only a few people understand (or claim to understand) the complex models on which many derivative instruments are based. Known as 'Quants' (short for Quantative Analysts) these are the people mostly held responsible for the 2008 crisis because their risk assessment models based on the US Housing market were utterly flawed.
HOWEVER...(Warning, genuine economics jargon ahead, please persevere, there's an important point to be made)

There is only a market for CDO's based on Subprime Mortgages because venal and greedy financial institutions such as Insurance companies and Pension funds wanted some 'backdoor' way of creaming off the seemingly inexhaustible profits to be made from US real estate. There are sensible rules that prohibit Institutional Investors from buying mortgages directly from the issuer, but to get to those creamy interest payments all the banks had to do was parcel up the loans into the notorious CDO's with AAA investment grade ratings and bingo, everybody could share the goodies. The triple A rating however, was only a reference to the fact that the holders of the first tranche of repayments would be paid before anyone else...IF THE REPAYMENTS WERE STILL BEING MADE. If the loan went into default it didn't matter how many A's the rating agencies gave it, you weren't getting any money back without foreclosing on the property. This is why what we call the 'repossession' rate is astronomically higher in the states than it is here.
These are the products that the likes of JP Morgan and Goldman Sachs routinely referred to as 'Toxic Waste' in their internal memos..but still had no compunction about selling to strangely financially illiterate Fund Managers and Municipal Treasury Officials around the world.
The models used to price these instruments are stupefyingly complex, a layman has no prospect whatsoever of understanding how these things are supposed to work, but thats irrelevant because when the target market is the managers of Fixed Income securities funds the magic words 'One Point Five Percent Above Treasury Yields' is all they need to know.

So basically, what I'm saying is how on earth can these Government Quangos, without any access to the proprietary models used by the banks (and someone to explain what they are) hope to have any chance at all of assessing how risky a banks activities actually are?

Will more 'disclosures' and bank 'activities' be concerned with their inward flows of funds that find there way into the City from crooks and thieves from all over the world, before being transferred 'offshore'. Have the tax havens been consulted?What will 'The City of London Corporation' have to say about this proposal?

In the old days before male grooming products and parking meters this job was done by the Governor of the Bank of England, his clerical staff and a never ending supply of brown sherry. Now it seems we have an acronym soup of the great and good languishing on this or that committee. No doubt they will receive compensation which so much better than being paid, plus expenses or just their fare up to town.

So life continues in the City with everyone being in charge but never responsible.

It is good that someone is trying to think their way through the shambles left by the Brown Terror but I think something more engaged might be a tad more suitable. It is when things are going wrong that action needs to be taken not afterwards and this organisational structure has a touch of tomorrow about it.

People in the City are no longer gentlemen; even though they all get compensation rather than wages. They should not be treated with kid gloves, those days are over. We are all supposed to be equal now and a wide boy is not necessarily someone addicted to hamburgers. We need a few collars felt in the City. Nothing concentrates the mind more than the knowledge that Mr. Plod is gagging to use those loud steel doors attached to the architraves of those smelly, basement cells.

My suggestion is to regulate the City through the use of the Theft Act as it applies to anyone using dishonest means to obtain a pecuniary advantage. This would keep our learned friends in employment for many a long year and that can only be a good thing as it will keep them out of Parliament.

John- Have you seen the 38degrees website. It is an active democracy website that facilitates petition writing and the sending of voter opinions to politicans etc.

They are the group responsible for the 500,000 signature petition that has forced the Condems to u-turn on selling off UK forests. They have had many other notable sucsseses.

They have an active campaign supporting positive money which you can join by just typing in an email address:-

https://www.38degrees.org.uk/page/speakout/tame-the-vampire-squid

96. At 20:46pm on 17th Feb 2011, mischievousCheesy101 wrote:
So basically, what I'm saying is how on earth can these Government Quangos, without any access to the proprietary models used by the banks (and someone to explain what they are) hope to have any chance at all of assessing how risky a banks activities actually are? [End quote]

I have waited a long time for a blog like this. My sentiments for the last five years. But no one ever listened. Not even Sir Fred Goodwin's crowd.

Such proprietary models should not to be 'sold' without a Regulatory Acceptance to be able to test and to challenge. The financial institutions should no longer be allowed to use them 'in camera' in the sense that qualified individuals within 'Regulation' must have access to them and that the originators of the models are subject themselves to regulation.

I have had some engagement in supervising Theses of mainly Italian Economics Students who have written up their 'research' with breathtaking complexity..which in the end means very little of import apart from exclusion from understanding by the Bankers themselves. (Some Bankers pretend to understand the models...but most do not.) This is a conceit upon which such students have leveraged themselves into jobs on Wall Street and elsewhere.