November 6th, 2011

Moral Markets and Other People’s Money

Guido has just got round to reading The Big Short by Michael Lewis, author of the eighties-era defining Liar’s Poker. It is the most readable book on the American sub-prime crisis that was the catalyst for the global sovereign debt crisis we now face. Essentially Lewis has found and written the story of the few who not only foresaw the crisis but bet on it, big bets. Was it moral for traders to bet that sub-prime lending would end in disaster? Via synthetic Collateralised Debt Obligations risk was added to the financial system, purely for speculative purposes. In a free society with a free economy it is good that consenting capitalists are allowed to take risks, the problem was that the PhD-equipped quantitative-modelling geeks who inhabit investment bank trading rooms got the models for analysing risk completely wrong. The ratings agencies bought into the models because their customers demanded it. When it all went wrong governments and central banks stepped in to bailout banks out of fear that the financial system would fail. The banks had allegedly become too big to fail.

Guido was an investment banker, has a lot of friends who are investment bankers, hell Guido even married an investment banker. Since the days of the Long Term Capital debacle at dinner parties Guido has argued that the problem with investment banking was that the geeks had brilliant reasons for losing big money, in that they had complex models that impressed management better than traditional trader’s gut instinct. The second problem was that investment banks were no longer partnerships, they were publicly listed companies, with shareholders who were not involved in day-to-day management. This has proved to be a disastrous form of capitalism, with owners who don’t know what the managers of their money are doing.

Up until Salomon Brothers listed in 1981 the investment banks were partnerships. That meant the firm’s capital was provided and risked by the partners who ran the firm. The oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any Nobel Prize winning computer-calculated risk model, the old guy with the grey hair stood to lose everything when some testosterone charged 27 year-old trader bet the firm’s capital. This incentivised senior management to control risk, because they know there are old traders and there are bold traders but there are very few old, bold traders. The bosses’ desire to keep their retirement pots concentrated their minds.

Michael Lewis points out that public listings transferred all the risks from management partners to the firm’s shareholders who had no idea what risks were being taken. Now we have huge financial combines with managements incentivised to bet the shareholders capital big, win and get out with their annual bonus. If they lose, the shareholders lose, or if they lose really big the taxpayer eventually bails them out because they have retail banking High Street subsidiaries which democratic governments are terrified will be dragged under as well. Capitalism with the risk being taken with Other People’s Money has the same fundamental problem associated with socialist governments spending Other People’s Money. Why worry if it isn’t your money?

Downing Street is briefing that the PM will be promoting the idea of “moral markets”. It is of course human nature to act in your self-interest, what has gone wrong is that the incentives have been given to those who manage the capital to take risks which informed owners would never knowingly take. There is nothing moral in asymmetric markets where the risks are borne by others than those taking the risks. If taxpayers in Western democracies are to implicitly insure retail banks – in effect owning the risk – the cost of that insurance should be such that it is prohibitive for retail banks to take exotic trading risks. Proprietary trading is for proprietors. Moral markets require risk and reward to be fairly priced.


349 Comments

  1. 1
    Billy Bowden is the greatest umpire ever ! says:

    Here Here!

    Like

    • 3
      Anal Ist says:

      Seconded

      Like

      • 9
        Anonymous says:

        Thirded. Great post.

        Risk/reward is the very basis of capitalism. Remove one element and we end up with the shit state of affairs we have at the moment.

        How can markets be efficient when there are no consequences to poor decisions and/or outright fraud? What we have now is no better than the shambolic economy of the USSR, with a complete absence of price discovery in many areas. It will end the same way, unless integrity, transparency and, most of all, the threat of insolvency are restored.

        Like

        • 100
          Technomist says:

          Good one, Guido. Succinct and to the point.

          Like

          • MI6 says:

            And who deregulated the financial system in 1986?

            Like

          • Technomist says:

            Ah yes, the blame game. Always worth dicking about at that for a couple of years while the problem gets worse.

            Do you appreciate that many of today’s savers, investers, taxpayers and bankers weren’t even born in 1986? They are probably more interested in a solution to the problems of capitalism than watching a rehash of a load of arguments by people of their grandparents’ generation.

            Like

          • lola says:

            The financial system was not ‘deregulated’ in 1986. In fact quite the opposite. What Thatcher did was to remove the restrictive practices that made financial markets inefficient. The price for returning the freedom to banks to do things done by insurers and building societies (and vice versa) as well as the more exotic trading, was to apply more regulation in the form of the 1986 FS Act which set up a raft of SRO’s and similar. At the time it was stated that these regulators were there to ensure that the growth of competition – which is what is required for capitalism to work – was not frustrated.

            Like

          • Spirit of financial crises past says:

            What he said +++++++++++++

            Like

          • Budgie says:

            An excellent instructive post, Guido. Please also post on the Carter-Clinton Community Re-Investment Act, and the BoE/FSA cock up by Brown.

            Like

          • Ivor Tapeworm says:

            An important point is that Governments really only need to protect High Street banks; all Investment Banks should be allowed to fail.

            The biggest mistake was allowing the two to mix, and not forcing them to demerger when the risk became obvious.

            Mind you, High Street Banks have screwed up all by themselves too, but at least the problem could have been contained better.

            Like

          • Charlie says:

            Guido , good comment. The turning of Goldman Sachs from a partnership into a public company was a massive turning point in removing risk from reward. GS Chief economist , good oldd Gavin , was a major Labour supporter.
            Up to 1986, many jobs in the City were restricted by family and school connections. One aspect of this was that if a person undertook unacceptable actions they could be blackballed both regard to career and social life. The 1986 changes removed the the threat of being blackballed with regard to one’s career and social life.

            Like

          • Rage Against the Political Elite says:

            The deregulation in 86 allowed the flow of domestic capital to flow and be traded internationally. One of the reasons we are in the S–T it has allowed Governments to Borrow unchecked from the international financial systems and get into eye watering levels of debt. The Yanks have borrowed some 10 trillion dollars from the world to fight their WAR. No wonder the markets are jittery. It also allowed the USA Banks to leverage up 40 trillion dollars worth of CFDs from Domestic market bundle up and sell around the world. Yes Deregulation, ha ha.

            Like

        • 102
          MI6 says:

          What a load of SHIT. What caused the Mortgage default?????
          No wonder the Yanks want to promote this load of crap. THE WAR.
          1. Higher Oil price. $149 a barrel
          2. Higher Taxes
          3. Higher interest rates to slow down the inflation caused by High Oil price becasue of the instability in middle east.

          F00king wake up. Blame the banks why dont you? They do but they are trousering Millions so they dont tell the real story.

          Like

          • Anonymous says:

            I’m afraid your grasp of the maths is a little shaky. We have minor wars all the time, old fruit, and while expensive they never leave us with catastrophic structural levels of public and private debt. The cost of our follies in the east are but a drop in the ocean.

            But then, why spoil the opportunity for you to bleat about a topic almost completely unrelated to this post? Please rave away…..

            Like

          • Rage Against the Political Elite says:

            I think your grasp of reality is a bit shaky.
            The Maths are 10 trillion added to USA debt since the invasion of Afghanistan. The USA are spending 2 billion dollars a week in Afghanistan. and you dont think that has an effect on their borrowing, Mind Boggling or bending drugs. Ah sorry forgot to mention the Phoney Drug war that Europe UK and USA have been waging. What cost for the public sector on the back of the Fake State sponsored Enterprise.

            Like

      • 15
        Nick Drew says:

        An excellent, serious piece Guido. A very large part of the problem is bank employees being allowed to reward themselves like successful entrepreneurs when (a) they have little or none of their own capital at stake and (b) often when they are not even successful.

        This is an abomination to capitalism.

        However, since we know everyone will behave like this when permitted to do so (trade unions, MPs, … everyone), it behoves regulators and politicians to act accordingly. Before it happens. Which brings us back to Gordon Brown.

        Lamp-posts all round.

        Like

        • 111
          MI6 says:

          Its a complete distortion of the real cause. Corrupt politicians that made billions from the higher Oil price and Tax revenues at the pump. Sucking the spare cash out of the economy. The people in the USA couln’t pay their way due to higher tax higher interest rates on the back of inflation caused by higher oil prices caused by the conflict. Not to mention the 10 Trillion dollars added to Debt mountain that is now unsustainable. Ask the Greeks how many troops they have in Afghanistan.

          Like

        • 195
          A proper right winger! says:

          Globaliazation.. Interests that are too big to be allowed to fail! Well done Guido. More people need to know of the damage socialism and unfettered big business have done.

          Like

        • 260
          Pissed off voter says:

          Regulators, indeed. Fees office, FSA, PCC, Ofgem …
          Care Quality Commision (Castlebeck, etc.), GSCC (baby p) ….

          There are an awful lot of regulators being paid an awful lot of money for not a lot of value.

          Like

      • 69
        Anonymous says:

        Hear, hear, as well.

        Like

        • 104
          MI6 says:

          The Bankers didnt employ all the Public sector. They didnt take us to an unwinable war and they dont waste the Billions prosecuting the Phoney Drug War.
          I wish it was a simple as the bankers we could fix them, fixing the State sponsored terrorists will take a whole quantum shift. Its called protection rackateering the oldest Tax collecting system in town. ASK THE NORMANS

          Like

          • Pissed off voter says:

            gotta start somewhere and the banks seem like a good starting point to me. Too many were rewarded – and continue to be rewarded – when they should have been penalised for their actions in damaging our economy.

            Like

          • Rage Against the Political Elite says:

            Unless you fix the structure. You are only wasting time and further money trying to fix it. Nothing wrong with turning the banks over, however you have to throw the capital at something that works, Not on Phoney Drug War. The War in Afghanistan or the Bloated Public Sector. WASTE OF MONEY.

            Like

    • 4
      Chris says:

      Brilliant article. And never, ever forget that the politicians changed the rules by scrapping Glass-Steagall. If they hadn’t sold out to the bankers dollar in order to keep themselves in power then the commercial banks in the States would not have been able to strap so much unadulterated crap onto their balance sheets. And then distribute it through the issuance of “AAA” rated bonds. So my batting order for the firing squad is: 1. Politicians; 2. Rating agencies; 3. Gordon Brown; 4. Gordon Brown (just to be safe); 5. Tony Blair; 6. Too big to fail bank bosses.

      Like

      • 12
        50 Calibre says:

        Seconded.

        It wouldn’t surprise me if one day soon a perfectly sane, but terminally ill Englishman burst into a room full of banksters with a machine gun and did us all a big favour…

        Like

        • 53
          Disliker of Bankers says:

          I may well volunteer.

          Like

        • 87
          U & Me Both, Mate says:

          ‘Tis a consummation devoutly to be wish’d

          Like

        • 96
          The Jackal says:

          I’ve homed in on that Moussa Koussa fella now, and am just waiting for him to emerge from his sh*t hole. After that I will be available if you wish to hire me.

          Like

        • 314
          Foo says:

          I have been making the tap-room ‘devils advocate’ arguments lately that when the US wakes up to the reality of where their economy has gone & why then there will be some shooting involved.

          I’d say we were relatively informed in the UK, maybe 5-10% of the population could debate what went wrong & why( That’ll be those who don’t take the BBC as the foundation of knowledge any more ). In the US, I think it is far less and so may take longer for reality to seep through.But when it does, they could end up in traditional wild west territory. ‘

          I also think that their ‘occupy’ movement has more resonance than our ‘rent-a-lefty’ Muppet show over here.Their primary point is the separation of all too cosy politicians and private enterprise relationships, which is a good one.

          We shall see

          Like

    • 14
      Ed Millibland Thinks Out Loud...... says:

      Thasts why I supportst the bravf revolutionary fwont for stwugglish agaists the tywanny of the bourgeousie.

      I supprst Anarchists, Marxists, Trostkisks, wich pwivate scholsboys, studentz who aren’t attending lecturws (noone seems to notice), public sector activishs and tremndously brave trade unionish who putz me into runnisch the laboursh party.

      I stronlish support the stwruggle against the forces of capitualism….by….errr…sitting in a tent….and err….dumping on the carpez of Westminster…Abbey and leaving human excrementz on thuse World Heritage Site…..

      Rollz on thses wevoltionz, comwadz!

      Like

      • 17
        BBC Tent Dweller, Hampstead says:

        Drinks all round…..Bolly anyone?

        Like

        • 22
          BBC Executive says:

          Isn’t capitalism a nasty little way of life for the peasants to get their hands dirty?

          I’ve never had to lower myself to do any such thing thanks to the telly tax

          Like

        • 42
          Jethro's weird, insensitive, BBC cousin says:

          Bolly? What’s wrong with Louis Roederer’s Crystal? Let’s make it a Crystal-nacht to remember!

          Like

      • 20
        I don't need no doctor says:

        But surely Ed you qualify as a capitalist. You have a high salary and a million pound plus house. Do as I say comrade not as I do.

        Like

        • 97
          Grumpy Old Man says:

          Maybe you didn’t read Guido’s excellent op/ed carefully enough. A true capitalist is one who SINKS, ie risks, CAPITAL, ie money, into an ENTERPRISE, a potentially profit making business.RedEd may be wealthy, but he is not a capitalist in any way, shape or form. RedEd is a RENT-SEEKER, as are most of the banksters, ie he enjoys a generous income at little or no risk to his wealth.

          Like

    • 27
      The Paragnostic says:

      Great post, Guido.

      There’s another area where the government has historically borne the risk rather than the private investor, and that’s PFI. The incompetents who negotiated the PFI contracts on our behalf routinely left the taxpayer bearing all the risk, with ever increasing rewards for those who were only too happy to write themselves huge cheques for future income. It was akin to the incompetence shown on defence contracts, only writ larger.

      And don’t forget that back in 2008, Mervyn King was warning of the moral hazard involved in bailing out failed banks – this is too easily forgotten after he was browbeaten into QE and the ridiculous bailouts. He should have resigned at the time on principle, but that was a decision for him, not us.

      Asymmetry in risk is too often the result of government policy – the root cause of the asymmetry in the US was the pushing of sub-prime mortgages at the behest of the Democrats, while the root cause in the UK was the credit boom engineered by Blair and Brown from 2002 onwards, when it was clear that credit was already excessive.

      So yes – there is a moral component to all this, but the politicians are as much to blame as the traders, for creating the circumstances in which moral perspectives become blurred in the first place.

      Like

      • 41
        Anonymous says:

        The Republican’s encouraged sub-prime lending too. It made everyone feel rich for a few years.

        Like

        • 47
          Herman Cain says:

          They didn’t want to appear racist by telling Trevontay and Quahneesha they couldn’t get a home loan.

          Like

        • 49
          Tessa Tickles says:

          Isn’t this just a failure of the education system?

          “I am rich, because I have a £/$500,000 mortgage?”

          I have a credit card with a £10K credit limit, but I never feel as if I’m walking around with £10k in my handbag, only a means to quickly get £10k in debt. But I bet some people – the Browns of this world – would take the opposite view; it would make them feel wealthy.

          Like

        • 95
          The Paragnostic says:

          The Republican’s what?

          What is it that belongs to a Republican that encouraged sub-prime mortgages?

          Or are you a thick cunt who randomly inserts grocers’ apostrophes everywhere?

          Like

        • 122
          Mornington Crescent says:

          Clinton started it: poorly paid (mainly bl’ack) workers only had to prove they could breathe and they were showered with money to buy homes they could never afford. Many were defaulting after the first month’s repayment.

          Bankers tried to object but were threatened with being smeared with accusations of ra’cism if they continued to object.

          The Speccie did a fabulous article on this a couple of years ago – wish I could find it.

          Fucking Socialists.

          Like

          • I Got Bored Of Having A Hundred Monikers.... says:

            Rewriting history for the cause is their speciality.

            Like

          • Tony_E says:

            Actually, you need to go back a little further than Clinton. The legislation which encouraged this lending was passed by the Carter Administration – The Communities Reinvestment Act.

            While many in the US still argue that the act did not allow the Banks to lend to the generally inpercunious, and it removed the rather discriminatory act of ‘Redlining’ where whole communities were denied credit, it did create the environment for the sub-prime problem to occur. If Clinton was to blame, it was only because the legislation was already in place to aid him.

            You could go back to the previous event, the one that decided that money would no longer have intrinsic value – the removal of the Bretton Woods Accords in the early 70’s. It was an attempt by the US government to employ the old trick of ‘Coin Cropping’ to pay for Vietnam – unleashing the beginning of the inflation fuelled credit bubble which has now finally burst. Inflation is the real key to understanding bubbles – the more that currencies are devaluing, then the more incentive to pile money into assets – creating bubbles. Then when the banks or governments decide that the inlation is too high, they switch off the taps and the bubble contracts, allowing the banks to seize assets. It is in their interests to allow this to happen, because the assets are the only thig with intrinsic value, the money is nothing but paper.

            Like

          • Budgie says:

            Tony_E, the CRI was beefed up by Clinton, being fairly feeble in its Carter form. The repeal of Glass-Steagall also contributed.

            There was inflation in the 1960s well before the abandonment of the Bretton Woods Accords. What causes inflation is an increase in the money supply beyond growth – a temptation to which idiots like Brown all to readily succumb.

            Like

    • 35
      Pedant#1 says:

      Hear, Hear! —- actually!

      Like

    • 40
      What I say is gas the buggers says:

      It’s Hear Hear!

      Like

    • 51
      Disliker of Bankers says:

      What? Is this supportfor the St Paul’s campers?

      Like

    • 148
      These are not Tory policies. says:

      Applause Guido, wild applause.

      Like

    • 228
      Anonymous says:

      yeah best book is Griftopia by Matt Taibbi from rolliwng stones magazine

      Like

    • 276
      Disliker of Bankers says:

      A moral dimension to city trading? I think not. They will happily see you dead if you happen to get in the way of a trading profit.

      Like

    • 348

      Excellent post. One of your best, Guido.

      Like

  2. 2
    Anonymous says:

    Read his book Boomerang about the Euro. Its really good and relevent.

    RGDS
    Allan

    Like

  3. 5
    Helpful says:

    Ish!

    No problems with some form of guarantee for minimal levels of retail deposits but shareholders and bond-holders should know they stand to lose everything if things fuck up. The problem with the current system is that bond-holders pretty much know they will be looked after and shareholders don’t take that much more risk. In this system it makes sense for leverage and risk-taking to be maxed out.

    Slightly o/t there is another scandal brewing in the banks with the way they are clawing back loans; some teams are incentivised to recover loans and are seeking to prevent refinancing or restructuring because it affects their bonuses. I know of one situation where one division of a bank is happy to give time to permit a large portfolio of property loans to be restructured and refinanced and another division of the same bank is seeking to prevent it so that they can max out their bonuses.

    Like

    • 21
      Anonymous says:

      2nd paragraph, nothing new there, that sort of stuffs being going on for at least 15 years.

      Like

    • 139
      Arthur Haynes (Comedian) says:

      ‘I know of one situation where one division of a bank is happy to give time to permit a large portfolio of property loans to be restructured and refinanced and another division of the same bank is seeking to prevent it so that they can max out their bonuses…’

      That’s the flavour of the month right now. Guess where the portfolios are likely to end up?

      In the very pension funds of the bankers that created them in the first place! Get’s it off balance sheet, but in (the very) long term, the bankers win win win in their old age.

      AH (C)

      Like

  4. 7
    Still poor says:

    I received this as a gift and should read it but it brings back bad memories.

    I did see this coming and remember reading an article in Feb 2007 on HSBCs sub-prime problems but only found out how to make some dosh late in the day and due to inexperience blew a multi million pound oil short.

    Bugger.

    Like

  5. 8
    James says:

    Guido,

    quite right.

    It is capitalists that should be the most angry about this because these people are destroying capitalism from within while calling anyone who disagrees with them “socialists.”

    Like

  6. 10
  7. 11
    Billy Bowden is the greatest umpire ever ! says:

    Ok, am not the most intellingent or educated, but i have a question re 2007/2008.

    What would Maggie have done? I ask this as president Bush was a republican/conservitive/free market supporter yet bailed out the banks in the USA?

    Like

    • 16
      Gordon F Brown says:

      George W Bush was and still is an idiot. I know this to be true.

      I am not guilty of any wrongdoing. I did the right thing. Balls told me so…

      Like

    • 23
      The Brain of Morbius says:

      I doubt Maggie would have seen it coming, any more than she could see she was being out-flanked by the EC.

      Society is too complex for one person to understand and control. The simple solution to this situation is to simplify society – I propose this is done by sending three quarters of the population to deathcamps. Without Labour voters, civil servants, Liberal Democrats (who are neither liberal nor democratic), trade union members and everyone who works for the Guardian, Mirror and the BBC, this country will have a chance to start afresh.

      Like

    • 24
      Anonymous says:

      In 2008 Maggie would have bailed out the banks, there was no other option. Gordon Brown pretends he was some sort of genius for coming up with the bail out, but firstly, he didn’t come up with it, he was in bed when Darling and his (banker) advisers came up with it, and secondly he was told if he didn’t agree to it we would have RBS, NatWest, Bank of Scotland, Halifax, Lloyds, numerous Building Societies and possibly Barclays all collapsing within a few days of each other. Armageddon would seem like a week in Mauritius compared to that. It was after the bailout had taken place we should have started stringing them up from lampposts.

      Like

      • 33
        The Paragnostic says:

        I disagree – Maggie would have let those who could not raise private capital fail, and she would have had the backing of the BoE on this.

        It was reported at the time that King was warning of the moral hazard involved, and had he not been browbeaten by Brown and Darling then we would have seen depositors protected but RBS and maybe Lloyds allowed to fail.

        It’s a moot point anyway – Maggie would never have tolerated the shambles that was the FSA anyway, indeed the FSA would never have been set up, and banking regulation kept in the hands of the BoE where it belongs.

        And the credit boom of Blair and Brown wouldn’t have happened either – so the property boom that encouraged unsustainable mortgages and led to increased weakness in some banks would not have followed.

        Like

        • 39
          costcutter1 says:

          The FSA was Gordon’s poodle under instructions not to bark and spoil the flow of funds to the Labour party from the bankers outside London (Edinburgh RBS and HBOS, Newcastle Northern Rock)

          Like

          • Anonymous says:

            In Iceland the domestic deposits were protected and the banks remained open it was only the overseas operations that were allowed to go bust. Now I suppose the government could have done that, although The City would have been ruined forever, but with HBOS and Northern Rock the problems were mainly domestic so the comparison does not entirely stand up.

            Like

        • 46
          Anonymous says:

          The public would have had their savings protected up to £35k at the time, but the problem would have been with all these banks closing their doors they wouldn’t have been able to access their money for months if not years. Businesses wouldn’t be in a position to access funds to pay wages/bills. Cash machines would be empty within hours. The country would have ground to a halt within days. The looting in London last August would have seemed like a day at the fun fair. There would have been anarchy as rich and poor alike fought for food. The bail out had to happen but afterwords the bankers – and Brown – should have been jailed, not given massive pensions.

          Like

          • Jethro says:

            Don’t agree with the first part of your analysis – but do agree with the second!

            Like

          • The Paragnostic says:

            Bullshit.

            The cash machines of other banks would have still been open, and the accounts would have been accessible within days.

            It’s fear, uncertainty and doubt like yours that persuaded the arseholes to bail the banks out in the first place.

            Bank failures are doable – look at Iceland.

            Like

        • 50
          For what it's worth says:

          The difficulty for any regulator is the inevitability of “capture” by those it is regulating, ie businesses, banks, what have you. The frequency of interaction, over a long period of time leads to less objectivity of any scrutiny and/or penalty imposed on instances of “wrong doing”. So even if you set up a suitable regulator with a nice new set of teeth, after a while it will appear as a toothless old crone. No bite, but a possible gumming.

          Like

      • 105
        Anonymous says:

        There were no bank bailouts under Maggies because the Bank of England was still in charge and acted before things got out of hand. The midlands building societies that went broke (for much the same reasons as Northern Rock) were quietly rolled up into Birmingham Midshires. The Midland Bank was then (equally quietly) taken over by HSBC for an undisclosed sum (I have been told it was £1).

        Like

      • 142
        lola says:

        Look up debt for equity swaps. There was never any need at all to bail out the banks as Darling Brown Balls did. D for E could have been forced on the banks and the B of E could have acted as lender of last resort – at a big premium – to keep the system liquid.

        As usual Brown fucked up.

        Like

    • 215
      They're all the same says:

      Maggi would have had interest rates raised after 2003 as brown should have done. Tory politicians were saying this on their blogs back then check it out

      Like

  8. 13
    I don't need no doctor says:

    The Miliband Bandwagon Tour has now moved to the protestors outside St. Pauls.
    As anybody got the tour venues and dates?
    Just how do the protestors afford to be there for weeks? Are the protestors tax payer funded as per Tom Watson?

    Like

    • 26
      Anon says:

      I suspect the protesters are either independently wealthy (in other words, “rich”) or they’re on benefits, in which case they’ve ceased to look for work and their benefits should be stopped.

      Like

      • 65
        Plank Watch says:

        Maybe they already had their benefits stopped due to not consenting to sit in a Sencia, A4E or Atos workshop for a whole year so fat ugly old bitches can get work abusing young boys about their ‘prospects’.

        Thanksto Red and Blue Labour and their commonerhating useful idiots like you

        392,278 up against the wall thou shalt be. Traitor. Sellout. Gramsci Whore.

        Like

  9. 18
    Gonzo says:

    This is just part of the story, but Lewis tells his story well. At the time I read it I had been just been reading lots of stuff on the role of the Fed, and of the state in general in banking, and what I thought Lewis failed to do was highlight this connection. Maybe it didn’t interest him as much as the personalities behind the big short, but it felt like a significant gap. I have just finished Detlev Schlichter’s Paper Money Collapse (quite brilliant), which does shine a light into the whole rotten edifice; the lack of coherent incentives is likely to bring the whole thing down.

    Like

  10. 19
    Batshit insane fundamentalist loon says:

    ‘Capitalisim would have let the bad banks fail’ – perhaps.

    But have you really considered what would have happened had all the major retail banks failed, one by one?

    Would you have been happy to see your savings/pension disappear along with your local branch? I wouldn’t have. To know that there’s nothing left in the pot. In fact there’s no pot at all?

    Were you ready for major unemployment, riots, fuel shortages, crime explosions – COMPLETE F*CKING ANARCHY?

    I wasn’t.

    Luckily the people in government decided it wouldn’t be such a good idea either and decided to do something about it.

    Get real, Billy.

    Like

    • 25
      Anonymous says:

      Congratulations. You have just parroted the biggest fallacy of the bailouts – that there was no alternative.

      We could have guaranteed every deposit in the UK for a fraction of the cost of these (still ongoing) money sinks. Prices would have corrected, legitimate assets would have been sold for fair value and nationally we’ve have been out the other side by now. Sure it would have been painful for those who made bad bets and overextended (boo hoo), but nothing like what we’re going to get now. Currency collapse, default, capital controls – they’re all coming sunshine. I bet when they get here you’ll say ‘no one could have seen this coming’. Twat.

      Oh, and the fact that not bailing the banks would have been extremely painful doesn’t mitigate the retarded decision making which allowed them to get there in the first place. You are Gordon Brown and I claim my 5 gold sovereigns.

      Also…

      You are Gordon Brown and I’m going to punch you in the face. Again and again and again.

      Like

    • 30
      A realist says:

      Inflation ate my savings, and Brown stole my pension. Would I have been happy for the banks to fail? No, but they’re going to fail. Whole countries are going to fail. I wouldn’t be at all surprised if Britain fails.

      “Luckily the people in government decided it wouldn’t be such a good idea either and decided to do something about it.”

      They did “something” about it – they delayed it, that’s all. The inevitable is still going to happen. If it had been allowed to happen 3 or 4 years ago, we’d be on the way to recovery by now; instead, we’re still at the start, and whatever money the government had that could have been used with the oncoming financial shit-storm has long-since been pissed-away.

      Like

    • 44
      Ol' Blue Eyes says:

      Which is exactly why, as Guido and Michael Lewis argue, banks that hold people’s savings (and would either need to be bailed out with people’s taxes or drag their savers down with them) should not be allowed to expose themselves to risky investment markets.

      Like

      • 85
        Cynical-old-bag says:

        Our bank has for some time been under the misguided apprehension that we are here solely for their benefit.

        Like

        • 124
          Jethro says:

          … that’s why we’re all mere ‘consumers’ now, not Customers, still less Patrons’. The ‘Service’ part of the Economy, having become a cartel, has forgotten about the service element: ‘You want to borrow some money? What do think Banks are for!’ ‘You want to deposit some money – hang on, you’re expecting us to pay you interest! Let me remind you, in words of one syllable, if you can read that much – WE, the Banks, ARE HERE SOLELY TO TAKE YOUR MONEY & DO WITH IT AS WE THINK FIT, INCLUDING TAKING IT ALL TO LAS VEGAS, IF WE FEEL LIKE IT! Now, consumer, just hand over all your pay, and stop being obstructive. If it helps to concentrate the mind (if you have one) just think Blackfriars Bridge… Roberto Calvi. And smile, damn you, smile gratefully!’

          Like

          • Anonymous says:

            HMRC regard me as a customer.

            Like

          • Disliker of Bankers says:

            Dream on, Anon.

            I am trying to raise business capital outside the banking system- I can’t see why I should have to pay 10%+ when I can give a 5% return to investors.

            Like

  11. 28
    Barry O'Barma says:

    Note the link between Dems, Labour and Bank political donations: since Clinton, the left used this scam to generate party funding. Ditto AGW leveraged to fund Solyndra & skim donations.

    Like

  12. 29
    where do we go from here? says:

    January Jones is fucking hot.

    http://www.rightcelebrity.com/wp-content/photos/january_jones_4_1.jpg

    Like

  13. 36
    Our Denry says:

    Guido, what you have said is very true, managers do not know what is going on as long as they see paper profits getting higher and higher, therefore their bonuses getting higher and higher they will not ask any questions and then the trader is called a “rogue trader” disclaiming all knowledge when the doggy doos hits the fans, that happened when Nick Leeson was trading in the far east and Barings fell. If the managers and shareholders were actually partners I think the processes would be tightened up considerably as you say.

    Like

  14. 37
    Follow the Money says:

    Jon Corzine, former Senator from and former Governor of New Jersey, helped out in the attempt to bail out Long Term when he was CEO at Goldman Sachs, as his good friend William J. Clinton had bade him do. He was opposed in this by G-S COO Hank Paulson, later Bush’s Treasury Secretary. After being defeated for re-election as Governor of N.J. by Republican Bobby Baccala alias Chris Christie, Corzine returned to Wall Street where he has now run MF Global into the ground and has been forced out, whilst investigators are looking into a shortfall of hundreds of millions of dollars of investor money in the Bankruptcy Court filings. The bad investment that caused the tits-up of MF was European sovereign debt.

    The US always debates about the separation of Church and State. They should debate about the separation of Bank and State.

    Like

  15. 38

    “The oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any..:

    Yeah – Kyle Bass calls it the “Give a shit factor”.

    http://vimeo.com/18920437

    Like

  16. 43
    Billy's acme wanking machine says:

    Where do merchant bankers fit into all this?

    Like

  17. 45
    Mr. Putin's Stolen Cat says:

    Thanks for excellent review. Now who’s calling for a limit to the main players’ bonuses/slaries – shareholders! Nobody but the heads of financial institutions know just how the markets stand at any given point and it is they who should be left to run the ship. Surely, capital markets cannot be democratised or nationalised?

    Like

  18. 48
    Senator Blood N'Gore says:

    Brilliant precis of a simple problem.

    Like

  19. 52
    herewegoagain says:

    The key to it all is the size of the financial sector. With all the financial engineering we’re now seeing that the same few big institutions are controlling everything. Investors are not a large market, its the same few institutions selling to each other.

    The only cure is to cut it all down to size and see the profits going back into pensioners pockets instead of luxury cars, ridiculous expense accounts and lovely bonuses.

    I wouldn’t be averse to creating a new capital crime – financial terrorism – with penalties that are retrospective, and a Nurembourg style trial for all the heads of the major banks, and RICO-type powers to take back all the stolen wealth.

    Then maybe we could put all these brilliant people to work innovating, making and trading proper goods and services instead of F***ing it all up for the rest of us.

    Like

    • 66
      Engineer says:

      “….and see the profits going back into pensioners pockets….”

      Exactly.

      In common with many readers of this blog, I’m a small shareholder, looking to preserve my hard-earned savings (what’s left after the government have appropriated the lion’s share of my earnings in taxes of one sort or another, and I’ve paid the bills with the bulk of what remains), to try and give myself a fighting chance of paying my way in my old age. I’m not interested in flash cars, big country estates, show-off possessions or exotic holidays, just a decent, quiet life.

      I ask a bank or building society to put my money in a savings account, and it won’t keep pace with inflation. I ask a financial advisor what to do, and they want 6% of it up front, which I won’t get back if the investment loses money. If I put it in a pension fund, the taxman extracts a wodge every year, and I lose any control of it at all. If I buy and sell shares, I have to spend time I can’t afford watching it all like a hawk. Whatever I invest in collective funds is controlled by people I never get to meet, but who swan around in far larger cars than I could ever afford.

      The entire financial services industry is just out to rip me off. The government doesn’t seem to care. The so-called regulators all piss in the same pot as the actuaries, advisors, fund managers and all the rest of the leeches.

      Who the hell is on my side, and the side of countless ordinary people like me? The government ought to be, but isn’t – just look at the mess the pension system has become in this country.

      What the hell do I do just to look after myself and my nearest and dearest?

      Like

      • 68
        genghiz the kahn says:

        And if you do make capital gains just look at the nightmare regime Brown introduced.

        Is it moral for politicians to deliberately set real negative interest rates for savers?

        Like

      • 71
        annette curton says:

        Get a shotgun and a big stash of staples.

        Like

      • 84
        Anonymous says:

        “The government doesn’t seem to care.”

        ‘Caring’ is left-wing and you hate it, so go fuck yourself you cυnt.

        Like

        • 90
          Engineer says:

          The ‘left wing’ (supposedly) government (1997-2010) ripped me off far more than any other in my lifetime. Left wing governments are the biggest robbers out. Don’t use the words ‘care’ and ‘left wing’ together – the facts say otherwise.

          Like

        • 92
          The Paragnostic says:

          Caring isn’t left wing – patronising is what lefties do when they call it caring.

          The purpose of a government should be to care – and to take care that they don’t fuck over those who have put their trust in them. Blair and Brown broke with this idea as soon as they got into power – believing that the purpose of a government was to interfere with everything and to try to reshape Britain in their own twisted image.

          Like

          • Our Denry says:

            Trouble is that you do mention one name the one name that was not left wing, not right wing, or any other wing except his own, B’LIAR, Gordoon was reliant on his advisers Balls, he got in well out his depth

            Like

      • 86
        The Paragnostic says:

        There was a time (pre 1997) when the BoE was in charge of regulation, and had proper people, trained in banking, to regulate the system and catch wrongdoers.

        All that has gone – the experienced staff have all retired and what is left isn’t fit to regulate a backroom poker game.

        At the same time, the banks were infested with corrupt and ignorant shits like Fred Goodwin, imports from the retail sector, and young bloods who in another life would have been estate agents or door to door salesmen. The FSA was run by incompetents who employed incompetents, and the result was that Brown and Balls could try out their moronic ideas on a real economy without anyone in a position to stop them.

        How do we get out of this situation? The solutions proposed by the politicians and the failed Keynesians who call themselves economists are likely to add to the problems, or at best store the problems up for someone else to have to fix tomorrow. We have Eurocrats trying to fix a banking system they don’t understand with solutions that will only drive the skilled operators elsewhere, and a couple of dodgy PR types in Rusty and Gideon hoping that continuing to spend and tax too much will lead to growth. The good news (if we can call it that) is that the major banks are going to have to increase their reserves, but from where? By selling themselves to the Arabs or Chinese? Or, as is more likely, by shafting their customers more than they already do?

        Our best hope is that we can encourage some of the old BoE staff who retired rather than join the FSA to come up with some ideas that the UK can implement outside of the EU, to maintain the financial sector from which a large chunk of our GDP is generated, and to ensure that it is regulated properly. The sooner we start the better.

        Like

      • 89
        Cynical-old-bag says:

        Check the bank’s Head Office notepaper to see who’s on the Board.

        It can be quite a revelation.

        Like

        • 119
          Filthy Rich Capitalist says:

          The trouble is that risk taking has moved on a whole step change since Micahel Lewis wrote his book, driven by the Investment Banks and Hedge Funds. Most of the trading done these days is High Intensity Trading carried out by Algorithms written by the Phd Rocket Scientists in the back rooms of these Institutions. These programs are called Algols in the trade. Once again this form of trading is entirely unregulated and highly risky e.g. If the market starts to move down or (more recently) up, these programs all trade the same way exacerbating the move. Mark my words, we are not far from one huge downmove, when makets move hundreds or even thousands of points down in Minutes viz the recent US ‘Flash Crash’ where the Dow moved down over 1000 points in less than a minute and it still has not been explained. It was Algols all shorting and not buying at the same time. This is unregulated because the Regulators and Policians don’t understand it and are not clever enough to.

          Like

          • Our Denry says:

            Neither do some of the senior bankers and traders if they do not understand what they are doing , WHY DO THEY GET INVOLVED? The answer of course, all those lovely profits they see created, what do you you get when you get profits bonuses! If the brown stuff (no pun intended) hits the fan and big losses are made it is the fault of rogue traders and not their fault because they did not know what was going on. When I was a market trader I noticed that, it was not that you were giving your punters a bargain but they THOUGHT they were getting a bargain not that they were getting one

            Like

          • Osama the Nazarene says:

            Easy – atick the so-called Robin Hood tax onto Algol generated transactions.

            Like

      • 135
        Passing Reader says:

        A wonderful post. It made me quite tearful.

        Like

      • 146
        lola says:

        Small point ‘financial adviser wants an [unrecoverable] 6% up front’. Not this one. Ones like us can get you into an institutionally priced fund at creation price. We will, though, make a modest charge for advice (if you require it) and administration.

        Like

      • 223
        BishBashBosh says:

        Gold bullion coins. Buy them and hold them -whatever the price is today, last month, next year. But make sure you read up about why gold holds its value, otherwise you will be talked out of it by shallow fools.
        It doesn’t matter the price, whatever it is, it will treble in 5 years.
        The only way you will hold the value of your savings against inflation and parasitic financial advisers is gold or farmland.

        Like

      • 272
        stun says:

        SIPP, clearly, invested in index-linked stuff.

        Like

  20. 57
    genghiz the kahn says:

    Isn’t a bit rich of Call Me Dave Cameron to mention morality when his expense claims are ‘interesting’, but Deadwood wouldn’t know about morality of imposing high inheritance taxes whilst taking steps to diminish his exposure to the very same tax.

    If the investment bankers at the top were so smart, why did so few of them ask questions about where the profits and risks came from?

    John Cassidy consdiered that a wunch of bankers were all in it together, they all saw sub-prime loans as a means to earn supernormal profits without understanding the nature of risk.

    Great post Guido.

    Like

  21. 58
    Blinky says:

    How does this fit with post-neoclassical endogenous growth theory?

    Like

  22. 61
    Billy Bowden is the greatest umpire ever ! says:

    Like

  23. 62
    Mad, Bad & Dangerous Gordon McRuin ( Member in absentia ) says:

    THE LIEBOUR PARTY HAS ALWAYS MONITORED THE BANKING SYSTEM VERY CLOSELY…

    Like

    • 90
      Cynical-old-bag says:

      Yes they have – especially when they decided to print millions of pounds, and call it Quantitative Easing.

      Like

      • 106
        something to hide says:

        It’s kinda strange but, ‘Quantitative Easing’ doesn’t sound a bit like, ‘printing monopoly money’ does it?

        Like

        • 128
          Jethro says:

          … yeah: just as ‘having a satisfactory bowel-movement’ hasn’t quite got all the ambience of ‘having a good 5h17′

          Like

          • Disliker of Bankers says:

            Gordon had the stench of stupity from the start – I never belived him (“no more boom and bust” – remember? Sadly I have the same feeling about Osborne- a smiley faced know nowt prick.

            Like

  24. 64
    R.McGeddon says:

    MEN, MONEY AND MORALITY…..

    http://bit.ly/9t58iv

    Like

  25. 67
    Billy Bowden is the greatest umpire ever ! says:

    Now the Union Jack is under attack as EU officials try to take us closer to a United States of Europe

    Read more: http://www.dailymail.co.uk/news/article-2058086/Now-Union-Jack-attack-EU-officials-try-closer-United-States-Europe.html#ixzz1cwHy3OTI

    Like

    • 76
      Conceit is God's gift to little me(and women) says:

      U ndeniably, this flag is recognizable in every
      N ation of the world
      I nvincibly she flew proudly
      O ver the seas from the masts of the British Royal
      N avy

      J itters would run down spines when she was seen
      A ggressively bearing down on those who
      C hose to engage in battle with the
      K ing’s fleet of war!

      Like

      • 115
        Pedant#1 says:

        Maybe, but they wouldn’t be flying the Union Jack!
        The Union FLAG is only the Union Jack when flown at the jack-staff (at the bow of the ship) of a Royal Navy ship at anchor or tied up alongside!
        The White Ensign is the current R.N. flag: in previous days it would have been that, or the Red Ensign, or the Blue Ensign dependant on whether the vessel was under the command of an Admiral of the Red, White or Blue (Squadrons or fleets).
        Many people, (a) call the Union Flag the Union Jack incorrectly or (b) flt it upside down – a signal of distress, so perhaps appropriate for these bad days for Britain.

        Like

  26. 73
    WobblyJim says:

    Here’s more of the same – good reading

    Looks like the only way out is the big red RESET button

    Any chance of a debt jubilee ?

    http://www.zerohedge.com/news/guest-post-collapse-our-corrupt-predatory-pathological-financial-system-necessary-and-positive

    Like

  27. 75
    western civilsation and my part in it's downfall says:

    Guido what about those smiley debt monkeys who adorn the ads on here occasionally, you know the ones, “I decreased my debt by £16,000.00 thanks to chiseler & chiseler.com”? Little wonder they’ve got a cheesy fucking smile on their faces, every fucker who’s been sensible with their money have had to pay for their 50″ plasmas and tummy tucks, FFS. They had their part to play in all this too.

    Like

  28. 77
    Picking Olives says:

    In 1977 I went with my American boss to Peter Druckers annual lecture at NYU. The room was packed with top level execs running Americas biggest companies and banks. He began by asking them… How many of you actually own the companies which you manage?…….. I am sure that there were one or two but I could not see many more from where I was sitting. He then said and I expect that you are rewarded by the share price and some sort of incentives /bonus schemes…… all very short term measurements…… thats the trouble he said and the room was silent.

    Like

  29. 81

    “Proprietary trading is for proprietors”

    Amen

    Like

  30. 83
    DisgustedOfTunbridgeWells says:

    You bankers are all the same

    Like

  31. 88
    LMFAO says:

    Even more worried then you were before then, Greedo.

    Just accept.

    You and your liblabcon mates are going to be eradicated. Doesn’t matter how much any of you try to blame some part of your previous friendship group. It’s too late.

    Arrest, torture, slaughter. Ha ha ha.

    Like

  32. 93
    Billy Bowden is the greatest umpire ever ! says:

    Like

    • 98
      Billy's acme wanking machine says:

      Watch 32.450 HD channels on your cock. Turn your cock into a TV, it’s easy and the fun way to watch TV!

      Like

  33. 94
    albacore says:

    This is so fun. May I suggest that we classify it as the “Cast Iron Guarantee Ploy” wherein meaning is entirely transitory and infinitely malleable.
    E.g: £40 billion on offer now to the IMF. Well, it’s mostly contingent liability by way of guarantee and nobody bothers about that in a balance sheet, do they?
    Plus, none of it’s going to Greece, apart from some that doesn’t count.
    Anyway, it’s not even our money. The cupboard’s bare.

    Like

  34. 99
    Anonymous says:

    You will find that it was Bill Clinton, that paragon of morality who started it all : to ensure that he would get the votes of the poor blacks and the equally poor whites he virtually ordered the Freddie Macs and the Fanny Maes to offer the infamous “liar loans” which Northern Rock and Bradford & Bingley later copied. Remember the “self-certified” load of crap? Mortgages were given to people who did not have a hope in hell of paying them back, who in some cases could not even afford the interest but who would soon afterwards sell at a profit because house prices “were bound to go up, weren’t they?” The rest, as the saying goes, is history.

    As much as it pains me to say so, when that Kirkcaldy buffoon said that the trouble had started in America for once in his miserable life he was right. There! I’ve actually said it.

    Like

  35. 103
    Billy Bowden is the greatest umpire ever ! says:

    Like

  36. 110
  37. 113
    Fred the Shred ( knighted by Gordon Brown ) says:

    I still love Gordon and the Liebour party.

    Like

    • 203
      Handycock No1 Trougher in Parliament says:

      So do I. Thanks for you and Sir Fred Goodwin coming to the businessman of the year dinner in Portsmouth, Gordon. As well as being the businessman of the year the guest of honour is also the biggest drug dealer in the south east.

      Like

  38. 114
    Mary says:

    Why do you claim that you used to be an Investment Banker.
    a.) You never worked for an Investment Bank
    b.) You never worked in ‘Investment Banking’
    c.) You worked as a prop trader, not for a bank but trading on your own account as anyone can do for these standard prop-shops

    Are you trying to big yourself up to make readers think you were a whizz kid? Anyone can become a prop trader….

    Like

    • 147
      annomymous says:

      He’s a whiz in a sperm Bank… Pyramid Banking, Its a SCAM!

      Like

    • 199

      “Mary”:

      (a) worked for two investment banks 95 – 97.
      (b) see (a).
      (c) Have been employed as a broker and/or a trader at various times of government bonds, bond derivatives, interest rate futures and most lucratively tech stocks during a boom market. Have also prop traded most asset classes that don’t require a AAA balance sheet p/a.

      That is all.

      Like

  39. 118
    Raving Loon says:

    Never mind the manner in which the money supply and interest rates are manipulated and centrally planned by the Bank of England. We won’t talk about that or central banking in general, shall we?

    Like

  40. 120
    Kered Ybretsae says:

    So if all Bankers are Whankers…..what are the Rating Agencies, who gave sub-prime bonds AAA ratings, when they were really hardly good enough to be used as toilet paper.

    Like

  41. 123
    not a machine says:

    Thought full article Mr Fawkes , although one still cannot contain , the occurence of fraud , which perhaps makes me wonder how transparency could be improved , although I do like the concept of the smaller , partners investment group , if for no other reason than to ensure we dont arrive back at the “so big you can do what you like ” which was the kind of model that had no respect for projects of national intrinsic value .
    Of course value is what investment is about , but how do you enable some scrutiny ? or remove some of the short term thinking that spawned so many of the wonk political vehicles . It is perhaps a little unfair to cite the dodge city of wind expansion , but when I look back , its now obvious that the Labour goverment had removed so much proper parliamentary analysis and placed it into the hands of those special advisors .

    My own favourite was enquiring if by using biofuels , you would actually take the emmissions equivalent of over 1000 cars off the road (for surely taking 1000 cars off the road is a different effect) , this gem then put out by Douglas Alexander when in governement enabled a whole new business to blossom not only in the UK , but favoured the wind of change in international projects . To be able to prove his figures were spurious , by simple maths of the detailed process energy uses in making and using biofuels proved it was uneconomic in the sense of carbon reduction measures , which it was being sold around , to find a sudden lack of reciprocity to my figures or even response to my analysis , let alone an awful lot of cockwaffle , gave me first inkling somthing was a bit wrong . He of course went on to all the media , who praised his stance as bold and visonary about the future , I presumme they thought he was in a position where he or his surrounding wonk would not lie . The NGOs envoked to rubber stamp were even more alarming as they adopted the same approach.The other that springs to mind was attacking the meat and dairy industry on methane emmisions to impose an almost stalinist rule , when I asked what was to be done with the termites across the globe or for that matter , the elephants hippos, wilderbeasts gazellels and mountain gorillas , who were also as guilty as sin on the governments charge , it all went rather quite .

    If parliament manufactures and controls the spin to spend money with private capitol investment , who is to say that profits for investment do not then become engineered matters of other peoples money , to make up for the spin bloating a poor investment in the first place ??

    It was sold as an emotive investment , indeed the Blair goverment can be seen as engineering this new approach , the excuse for putting the down the phone down on a financial question , as you were asking the wrong sort of question , to be considered , should have told us all that somthing arrogant and decitfull had now taken over the very heart of what we supposedly vote for , or used to vote for unthinkingly.
    He hadnt ended boom and bust , merely denied any question of how such devices were bust , before getting it voted through.

    Like

  42. 125
    Billy Bowden is the greatest umpire ever ! says:

    Does this mean Ed is a comunist?

    Like

  43. 132
    selfimportant says:

    well said, the only people denying this are the bankers

    Like

  44. 133
    bergen says:

    One aspect I’ve never quite understood is the role of the credit rating agencies (Standard and Poor,Moody etc). Presumably they were paid good money for honest research and independent assessment of these risks of these investment vehicles and got it catastrophically wrong. Were they wilfully misled,innocently misled,heroically incompetent or had simply been “got at”. And whatever the answer, why are they still in business and their views treated seriously?

    Like

    • 186
      t says:

      Very good point, very well put, deserves a response

      Like

    • 192
      stun says:

      I can give you a serious answer if you want….

      Like

    • 264
      Rip van Wrinkle says:

      You’re the head of a ratings agency. Goldman Squid and JP Morgue come to you with these products. The higher the rating, the higher the fee. And you are promised billions if not trillions of dollars of these CDO’s to ‘rate’ in the next few years. No rating, no fee.

      What’s a man to do in today’s world? take the money and blame someone else. No one will understand what the hell you’re meant to do or what you’re trying to rate. Nailed on riches without any comeback.

      Not unlike the bankers.

      Like

      • 277
        stun says:

        Bizarrely, the agencies believed that borrowers would pay their loans back. Not one German, UK, French, Spanish or even Greek deal has ever defaulted. Non-recourse in the US has something to answer for too.

        Like

      • 330
        bergen says:

        I’m interested by your comment “without any comeback”.They are still in business and so I’m sure that you are correct.And yet they seem to be sitting ducks for professional negligence claims on an epic scale.Presumably the only people who could take action are the banks themselves and it is in their interest for them to remain “tame” and doing as they’re told.

        Like

    • 345
      FTSE shorter says:

      The answer is given in Lewis’s book; the agencies were both misled and incompetent: it was their misleading ratings that caused many highly paid “experts” to blow so much money. Only the iconoclasts who are the heroes of Lewis’s book bothered to look behind the ratings at the reality, which in many cases meant a 5% mortgage default would wipe out the entire capital of the “security”. Safe as houses eh?

      The wider lesson of this is that the madness of crowds applies as much in financial markets as elsewhere and since it is much the same bunch of people in charge as before, we should be very, very worried.

      Like

  45. 134
    Old geezer says:

    What, Guido being serious, perhaps I can join in!!!

    I have often thought that the demise of responsible business is largely due to the demise of the private investor. I do not mean the small investor, but the person who may own 5 or 10 percent of a company. These sort of shareholders had a vested interest in a business being run properly. They used to keep over enthusiastic management in check. The cause of the demise of the large private shareholder is the wish, carried on by various governments over the last 50 years, to tax private wealth out of the system

    This was started by Wilson in the 1960s, and has carried on ever since. Private shareholders tend to look after their own interests, which usually meens also looking after the interests of the employees, and the country as a whole. It could be said that the cause of our current problems can be laid at the feet of the Wilson government of the 1960 – 70s. Just a thought to add to the excitement of a dull Sunday afternoon.

    Like

    • 187
      Jethro says:

      122 You can add to their list of sins, the scoffing of the ‘Lady Bountiful’ and the subsequent need for Charity-workers to be paid…
      I’m an alumnus of New College, and I feel ashamed.

      Like

      • 210
        Technomist says:

        A lot of that has come about so that governments/local authorities can pretend to do as ‘charities’ things they do not want to be scrutinised doing if they employ people directly. A lot of charities have poor employment practices, exploiting the lower paid and over-rewarding the senior managements.

        Like

        • 218
          The Paragnostic says:

          A lot of “charities” are ways of remunerating the people who deliver the postal bloc votes – or “community leaders” as the modern parlance goes.

          Tower Hamlets practically invented the scam over here, though Chicago (where Barry O’Bama learned his trade) is the granddaddy.

          Like

  46. 136
    Anonymous says:

    Ed Balls, Yvette Cooper cuddling up in their large Town House makes me a feel really unwell

    Like

  47. 138
    Infuriated of West Mids says:

    Crikey, Guido – what a cracking post. One of your best.

    And most of the comments are thoughtful and interesting as well. I’ll have to have a proper read through after tea before I comment anything vaguely insightful.

    So, for the moment, I’ll just restore some of the balance…

    *shouts “BUM” and runs away giggling*

    Like

  48. 144

    Let us sort out this ego misconception that these guys have:

    A director of a company is nothing special. Banks are full of this type of director. They can have large offices, cars, salaries and bonus packages but, in the end, they are no more than glorified employees. Their egos often eclipse their abilities.

    A director of a company in which he is a major shareholder, having built it up from scratch, is a truly remarkable person. Here is someone who has to be taken seriously. Also, this type takes risks with his own money, not other peoples’.

    From the G20 to Europe’s banks to the political classes to the pubic servants (no, don’t laugh), they are all wrapped up with their navel gazing whilst we are about to hurtle over the Niagra Falls.

    Like

    • 166
      out of the blue says:

      Prefer Viagara myself

      Like

    • 183
      CYNICAL OLD MAN says:

      Unfortunately, because the establishment has worshipped mediocrity for the past twentyfive years, it’s not just the banks’ management that isn’t fit for purpose. In a country where the word “excellent” now stands for the barely adequate, and spin has overtaken ability, is there any wonder this country is sinking faster than a lead brick in a swimming pool?

      Like

      • 205
        Tessa Tickles says:

        This is very true.

        Going back to the OP, it’s interesting how job title inflation has crept in over the last 20 years; the lowest-grade clerk is now a “manager”. If you’re trusted to answer the phone and actually speak to customers, you’re a “senior account executive”. If you’re given the code to the office burglar alarm system, so you can switch it off in the morning when you’re first in to switch the kettle on, you’re a “director”.

        And all the while, the company haemorrhages customers and heads towards bankruptcy.

        Like

        • 220

          Everything is devalued, except devaluation itself, which is magnified.

          Like

          • Gardening b34s7 says:

            Depends on what you value or indeed choose to magnify

            For me I look at it this way

            10 pieces of KFC FOR 8.99 (With free Cola) is better value than 5 pieces (without Cola) for 4.99
            Fucking magnifing glass or no magnifying glass
            You posh twat!

            Like

          • The Paragnostic says:

            That sounds a bit Nietzschean, Cat – you been on the books again?

            Like

          • If you are happy to spend £8.99 on ten cardboard chicken bits and a plastic cup of chemically produced CO2, replete with carcinogens then, I suggest Sir, you ought to go and have your bumps felt.

            I can eat healthily for a week on that money.

            (CO2 + H2O = H2CO3)

            Like

          • I could not (and would not want to) compete with Nietzsche. I could not compete in the moustache department, nor in the pessimism department, nor in the Übermensch department.

            Anyone who states, “God is dead”, is implicitly acknowledging that He was alive in the first place. Not in my list of heroes.

            Like

          • The Paragnostic says:

            I can’t see why people insist on describing the syphilitic loon as a philosopher, myself – it’s just that your comment reminded me of “The Revaluation of All Values”.

            As for gods – they seem to live in other peoples heads. Never had a need for them myself.

            Like

          • Ah! I see where you are coming from. But there is no Nietzschean inversion here – simply reinforcement of the concept of devaluation.

            I have to say, I did think it had a Wildean tone to it when I penned it. I can resist anything but temptation. But I would suggest that it is not self-contradictory in the same way.

            Like

          • P.S. The only person who was God was Mr E Clapton and he got well pissed off with the rôle. Of course, that was before they invented unlimited expenses for those with delusions of deity.

            Like

  49. 145
    Oswald Kirk says:

    This topic has shown how few people realise that “real Money” can not be gained by investment. Real Money can only come from the expenditure of energy in work of some sort.
    Newton’s second law of motion regarding energy should be studied and then applied to Money, because money is purely a token, used in the exchange of the results of energy use from one person to another.
    Until this is realised the world will continue to bumble on in crisis and in the clutch of “the money changer”.

    Like

    • 150
      input/output says:

      On the money. Socialists especially haven’t a fucking clue how money is really a form of energy, which is why their ideas of wealth creation are so out of whack with reality. It may as well grow on magic money trees as far as they’re concerned.

      Like

    • 169
      down hill gardener in beijing says:

      A promisary note

      Fat fukka walks into a chinese restaurant with a piece of plastic walks out with 5 peking ducks and a magnum of champagne stuck up his arse

      Barter, is the only way, that and violence

      Like

    • 295

      But you also need to remember the law of conservation of mass, as altered by the energy-mass equivalence principle.

      No bank will now lend money without some equity participation by the lender. The expenditure of energy alone does not impress them.

      Like

      • 344
        Oswald Kirk says:

        Your statement proves the point that you do not understand that “money” can not be created without the conversion his own energy, by the would be beneficiary of that money, into goods or services prior to receiving that money (in what ever form of tokens are being used).

        Like

  50. 155
    MAD FRANKIE HADDOCK son of COD says:

    Do Nowt Dave : You should be encouraging public sector employees to strike
    It must save the public purse at least £200,000,000 per day not to have these bone idle fuckers sitting around supping tea for every day they withdraw their labour ha ha ha !

    Like

  51. 156
    Chris The Leatherman says:

    That was a very well reasoned article. It seems to me there are parallels with the LLoyds insurance debacle of the late eighties and nineties. The most prudent person to look after your money is yourself.

    Like

  52. 159
    annomymous says:

    Now! *would now be a good time to run around with my hair on fire??

    Like

  53. 161
    glove puppet says:

    Things are so bad, Wallace and Gromit are thinking of fucking off abroad.( and no, I don’t mean the two Eds, unfortunately )

    http://www.bbc.co.uk/news/entertainment-arts-15611244

    Like

    • 196
      Tessa Tickles says:

      “When a company like Aardman is considering offshoring stop-frame animation, which we are at the moment, something’s got to be wrong,” he said.

      Oh, right. So when tIT manufacturing and service industries, car industry, telecoms industry, banking and finance and all the other back-office jobs you could think of were going abroad, that was fine.

      But when plasticine model production goes to Bangalore, “something’s got to be wrong”.

      What a fecking tosspot.

      Like

  54. 163
    Billy Bowden is the greatest umpire ever ! says:

    My doctor has given me some of those nicotine patches and they’re working great.

    A bit of tobacco in the middle and they make the best hand rolled cigarette I’ve ever had.

    Like

  55. 165
    down hill gardener says:

    You were never an investment banker nor is Mrs Fawkes

    Like

  56. 170
    A nice hot Coco will send me to sleep tonight says:

    Yes Coco, your estimate isn’t that far out.

    http://tinyurl.com/cvhwfmv

    Like

  57. 172
    NotW_scumbag says:

    Spot on.

    Like

  58. 176
    I Got Bored Of Having A Hundred Monikers.... says:

    Guido what did you think off ”The Invisible Hands: Hedge Funds Off the Record -Rethinking Real Money” or have you not read it?

    Like

  59. 177
    Anonymous says:

    first and last time here, what a fucking set of morons

    Like

  60. 178
    T.B£iar - the People's Messiah says:

    ‘INSIDE JOB’ IS A VERY INSTRUCTIVE FILM.

    IT APPEARS THAT U.S.INVESTMENT BANKS HAD POLITICIANS IN THEIR POCKET……DO POLITICIANS THEN END UP WORKING FOR U.S. INVESTMENT BANKS ?????

    Like

  61. 179
    Jethro says:

    111 Why not learn how to spell, and how to use the space-bar, before posting here, friend?

    Like

  62. 180
    Booth bo Billy earns after hours tips says:

    Like

  63. 181
    Ed Balls, Shallow Chancer says:

    This was on my iPod when I was working for Gordon.

    Like

  64. 182
    stun says:

    For all that, the securitisations which brought the Europe_an banks down were highly leveraged instruments. It would be a terrible shame if all asset-backed stuff was tarred with the same brush. After all, even Northern Rock’s master trust continues to pay out its bondholders. The best way of ever lending to small companies will be by repackaging loans and selling them to professional investors.

    You can’t trust a government department to make sensible lending decisions – it should guarantee bank-originated loans. The banks continue to try to make money available to borrowers – and don’t forget that whilst they are being told to lend by the government, they are also being told to reduce their balance sheets – and are securitising mortgages in pretty safe instruments. CDO or CLO does not have to be a dirty word.

    On another note, I worked as a trader in the City for 20 years, trading government bonds. Up until 1998 (when I left – paid off in a takeover), it was all quite sensible – in a making money and enjoying stuff sort of way. A huge influx of MBA students and black box models changed things, and the new leverage permitted anybody with a capital base to take a big bet and caused a seachange in the capital markets. I met the head of Emerging Markets trading at one of the German banks a few years back and he said that, given the choice, he would have only ever employed older traders who had lived through difficult markets. He was replaced by new blood because he was deemed too cautious , followed not too long afterwards by some quite spectacular losses.

    Not qute sure what the moral of the story is…

    Like

    • 208
      The Paragnostic says:

      OK – someone asked about the credit ratings agencies above, and since you’ve been in the government bonds trading lark in the past, you’ll be able to answer my question on them which is: “What purpose do they have in an informed and efficient market?”

      (For what it’s worth, I can’t see that they should have any purpose, and they do appear to have been a great source of instability and misinformation. Mind you, I knew some of the people who went on to become ‘analysts’ at uni, and wouldn’t have trusted them to calculate the change at the bar, so maybe I’m a cynic.)

      Like

      • 241
        stun says:

        The agencies ran with models – like the climate change ones- which seriously unrestimaeted correlation. The first sign of trouble was the trading desks who9 used correlation getting fucked because some things which has previouslt followed patterns suddenly refused to do so. Correlation desks lost huge amounts of money on 2006/7, somewhat befere the shit hit the fan. Although then it should have become noticeable that the black boxes weren’t doing the job, it was too late anyway. In Aug-07, according to the models, we had 4 successive days of 1 in 10,000 year events. Clearly bollocks. The models are based on a stable background – they never tested for the ultimate stresses, which means they were crap. Yet for all the highly leveraged stuff which went tits up, there is about €1tn of performing European securitisation which is doing what it’s supposed to. Interestingly, there were two rating agencies who refused to rate the most extremely leveraged stuff at all, purely on the basis that it seemed too good to be true (ht Olivier Dzik, DBRS France)

        Like

      • 251
        stun says:

        Modded…hope you can see the reply at some stage. I did try the Firefox add-on, but failed fairly early on due to technoshiteness on my part. It wasn’t an excuse for them. more a modelling failure which hit all equally. As I said below, if people who had borrowed the money from the banks had actually repaid it as per their agreements, the financial crisis would only have ever been the sovereign one we have now, caused by profligate overborrowing by governments hoping to bribew their electorated andline thier pockets. Hoons.

        Like

        • 271
          The Paragnostic says:

          If you check back to the Askylist, there’s a Greasemonkey script in the comments which does the same thing. It’s a lot easier to install than the button method.

          As to the modelling – if you’d asked an honest mathematician whether it was possible to model the risks of these instruments, I think the answer would have been “Up to a point, Lord Copper” – in other words, no. The clever PhDs who were being paid enormous sums to keep credulous managements happy probably deceived themselves, or omitted to point out the level of uncertainty because their employers didn’t want the truth. Even when a system is known to behave chaotically (in the sense of having feedback built in), there is always the temptation to believe that some new technique will enable one to predict its future, no matter what the maths actually says.

          Like

          • stun says:

            I think it was the Monte Carlo modelling mainly which caused the problem and missed one major factor – people. In the US, where HPI was as ridiculous as over here, the lenders have no recourse if borrowers blank them. Jingle Mail was the term – borrowed, can’t afford it, can’t sell it at a profit, give the keys back to the bank. Doesn’t make the agencies responsible for it (PS I don’t work for one, though I’m one of the few who defend them with the blame mainly elsewhere, I believe). Models are generally crap. In Aug-07, a Lehman trader (!) said they has witnessed 4 continuous days of 1 in 10,000 year events. Sensible people would go look at their models, of course. Correlation had already hit the markets a year earlier, probably caused by too much available money to play with.

            Who do I blame? Borrowers who had no intention of paying their loans back, at the lowest level. Regulators, for not noticing. Governments everywhere, for borrowing too much when times were good. Actually, mainly governments. Every new ‘temporary’ tax which has been imposed in the last x years has only gone one way. And now thye’ve bank_rupted us all. Tossers.

            Like

          • The Paragnostic says:

            The problem with modelling sub-prime loans is that the historic data available was for people who would try their best to repay the money – the imposition by government of a requirement to lend to the feckless and indolent should have been accounted for in the models, and the value of the debt discounted accordingly.

            So, in the end, all the blame really attaches to governments, and more especially socialists – the feckless are the feckless and will never change, and although the discounting is done in other sectors, it seems that nobody took this into account for mortgages.

            Like you said – tossers.

            Like

  65. 185
    Gordon Brown says:

    I have been getting eating tips from lord John Prescott.

    I’m trying to become too big to fail.

    Like

  66. 200
    The Paragnostic says:

    Marrying first cousins is particularly popular among our subcontinental neighbours, and does indeed lead to an increase in developmental defects and a decrease in IQ.

    Like

    • 219
      Booth bo Billy earns after hours tips says:

      And late/early opening shops

      Like

    • 226

      Why are the Indians (along with the Chinese, incidentally) the best at maths at school nowadays then? I agree there is a link between problems in reproduction within the same gene pool, but would suggest that it is mostly overstated in our publications.

      You only have to go back 500 years to find you are related to everyone else in the UK that has not recently arrived.

      And no, I have not shagged any of my mother, aunts, sisters or daughters ………. not yet anyway.

      Like

      • 234
        The Paragnostic says:

        When I say subcontinental, Cat, I am thinking of the bits that were partitioned in 48. Offspring of parents from those parts are disproportionately represented in special needs schools all over the country.

        Indians are totally different – must be something to do with religion or summat.

        Like

        • 244
          nell says:

          1947 Paragnostic to be precise.

          And the difference between the two that you are seeking is less religious and more class.

          In other words the Indians that have emigrated to the UK since 1947 have been professionals , seeking qualifications , Doctors, Engineers, Businessmen….

          Those of the other origin, which this site will not let me mention, have been largely uneducated and from rural areas where marrying into the same family is still approved. It’s to do with education.

          Truth is, the UK government could do something quite decisive in education terms about those sort of people who have come here, but to date they have chosen to ignore the issue.

          Like

        • 247
          stun says:

          Reply above was in mod: I’ll try some changes (never did get the firefox app to work.)
          The agencies ran with models – like the climate change ones- which seriously unrestimated correlation. The first sign of trouble was the trading desks who used correlation getting fucked because some things which has previously followed patterns suddenly refused to do so. Correlation desks lost huge amounts of money on 2006/7, somewhat befere the shit hit the fan. Although then it should have become noticeable that the black boxes weren’t doing the job, it was too late anyway. In Aug-07, according to the models, we had 4 successive days of 1 in 10,000 year events. Clearly bollocks. The models are based on a stable background – they never tested for the ultimate stresses, which means they were crap. Yet for all the highly leveraged stuff which went tits up, there is about €1tn of performing European securitisation which is doing what it’s supposed to. Interestingly, even in 2007, there were two rating agencies who refused to rate the most extremely leveraged stuff at all, purely on the basis that it seemed too good to be true (ht to Olivier Dzik, DBRS, and Fitch)

          Like

      • 248
        Gardening b34s7 says:

        They get beaten at home for failing
        That why
        Also true

        Like

      • 257
        stun says:

        Regrettably, I think it’s ambition. Did you watch any of the programmes about English kids being sent to stricter families abroad – India, China, even evangelical Amreica? The kids had a desire – and were ‘strongly encouraged’ by their parents to strive. We have lost the will to succeed (well, I haven’t, but many I know can’t be arsed any more). Everyone who meets my son says he is polite and intelligent – yet I know he should be far more than he is, because so little is expected of him.

        Like

      • 305
        Why Lawyers love Politics says:

        Its purely down to averages. The two most populus countries in the world will on average produce the best peole in every arena.

        Like

    • 233
      nell says:

      The British did it too right through the victorian period. Nobody then understood genetics and inherited characteristics including increased risk of diseases like heart and kidney.

      It’s only in recent decades we’ve understood 1st cousin matches are not good for the resulting children.

      Like

    • 294
      Disliker of Bankers says:

      Marrying? Shouldn’t that just be inter-breeding? Bloody hell, marry my cousin? Naa.

      Like

  67. 202
    Moving wasn't an option says:

    A bit difficult when the cinema is full of them.

    Like

  68. 216
    Brown Shit Stain says:

    A moral market is a noble concept and a vote winner.
    The reality is markets-Corporations and Banks -will wear a moral mask while continuing to exploit the little guy. Disgraceful.

    Like

  69. 217
    They're all the same says:

    Good capitalism vs bad capitalism? The state IS capitalism, regardless of how the executive manages its affairs. The state is a parasite which lives off the labour of others – just like bankers, factory owners or Labour Party MP and full time Trade Union officials.

    Like

    • 232
      The Paragnostic says:

      OK – so you have some labour to sell. It may be more or less valuable depending on the value it has to others.

      Can you exploit that value yourself? It all depends on what labour you know how to do, and how expensive the equipment and premises that you will need are if indeed you know enough to exploit your own skills. Most of the time, you can’t.

      Since people started farming and then living in towns and cities, most of us have been parasites of one form or another – it is only in some sort of Rousseau inspired paradise that human endeavour would be universally symbiotic.

      I agree that we should classify parasitic occupations according to their real worth, but then your idea of worth appears to be motivated by envy (putting bankers and factory owners first), while mine would be motivated by cynicism and would put lawyers and politicians at the top of the list.

      It is more or less impossible these days for a man to survive by his own efforts alone, so we are all doomed to feed off each other, and the trick is to rely on others as little as possible.

      Like

      • 236
        nell says:

        Surely it’s more about whether you generate profit from the production of something useful from your hardwork ( ie plumber, writer, manufacturer, lender of money at reasonable rate) or whether you simply trough off someone else’s hard work (ie mp, local councillor, welfare benefit layabout).

        Like

        • 261
          The Paragnostic says:

          I view lawyers and politicians as little better than benefit claimants – if anything, being educated they should know that what they are doing is leeching.

          But yes – there is a difference between adding value and consuming it, although some professions blur the line.

          Like

          • Infuriated of West Mids says:

            I’m awfully sorry, Paragnostic, but fuck off! ;-)

            I spent 7 years qualifying as a lawyer, while regularly working 12 hour days and Saturdays for a, frankly, evil senior partner for £15,000 a year and studying in the evenings. I only started earning vaguely decent money in the last couple of years.

            I don’t deal with bloody Human Rights bollocks or dodgy immigration cases. I charge my clients a fair sum for services rendered, and I have yet to have a serious complaint.

            I’m sorry, but I thought you were one of the more educated amongst us, and I really do get sick and tired with this easy “all lawyers are evil, money-grabbing bastards” cliche shit. Try telling that to any of my many pro bono clients who don’t qualify for legal aid but have no money and are desparate for assistance.

            *rant over*

            P.S. I don’t subscribe to the “all politicians are wankers”, or “all bankers are arseholes” nonsense either. Some are; some aren’t. Unfortunately, those that are seem to have weilded the power for the last 15 years or so.

            Like

          • stun says:

            So sue us !

            Ah, of course you’re right – tarring with brushes etc. Ambulance-chasing HRA lawyers are quite different from the ones who actually get a wrong righted legally and fairly. Quite apart from wills, family law etc.

            Easy for legal industry and financial industry professionals to be dragged into a mire not of their own making. The Sun pa_edophilia headline which saw kiddie doctors targeted says enough.

            Unfortunately, not all in your profession (or mine) have your ethical view on life.

            Like

          • Back a decade or two, I worked a lot with barristers and solicitors. The best line I ever learned from them was, “I admit nothing!”

            One, a regular on TV, once said to me, “You talk like a solicitor.”

            I said, “Thank you.”

            He said, “I meant it as an insult.”

            That was it. I just replied, “I know, I took it as one.”

            Like

          • The Paragnostic says:

            Point taken, Infuriated – you work hard for your money, and it does take a long time to qualify and so on.

            But what value do you add?

            OK – the number of laws in this bloody country seems to grow exponentially, and someone has to unpick the mess left by the politicians, so in a sense, you are mitigating the cost of doing business in a dysfunctional system.

            So while I admit there is a place for the law, I still can’t see that it’s adding value in any meaningful sense. In fact the ambulance chasers and the ‘ooman rights gang do harm, pushing up the cost of insurance, allowing pen-pushers to justify their ‘precautionary principle’ nonsense and so on.

            I’m not particularly anti-banker, either – not everyone can raise capital to do what they want to in life, and banks do provide a way of doing that (though they charge mightily for the service, and don’t get me started on the fractional reserve scam).

            I do, however, draw the line at politicians with only a few exceptions – and all of them are pro small-state and individual responsibility, most of whom would reduce the number of laws we have drastically.

            Like

  70. 222
    barry says:

    Sorry if this has already been pointed out, Guido, but you were the answer to one of the clues in yesterdays Daily Telegraph general knowledge prize crossword. Fame at last

    Like

  71. 224
    Billy Bowden is the greatest umpire ever ! says:

    >Shocked to a degree about the amount of hate.

    Faith in humanity down 30% this week :-(

    Like

    • 256
      nell says:

      Bill please see post further down.

      Ignore nonsense anonymous hate posts and start to support worthwhile topics.

      As I tell youngnell about bullying – if they are not your friends what they think is of less relevance than a single snowdrop in a heatwave!!

      Like

  72. 227
    Billy Bowden is the greatest umpire ever ! says:

    This from aman the voted to ratify the Lisbon treaty.

    #irony

    Like

  73. 230
    Anonymous says:

    Well haven’t you just dazzled bullyballs into silence!

    What you say of course is common sense but labour Never thought that deep about banking!!

    Like

  74. 231
    nell says:

    Well haven’t you just dazzled bullyballs into silence!

    What you say is common sense but Labour Never thought THAT deep about banking!!

    Like

  75. 239

    I’m about half way through reading it (after a detour to read the Steve Jobs bio).

    One thing I note is that Warren Buffer was responsible for the crash because he owned a big lump of one of the ratings companies. He is now telling Obama that his tax is not high enough. If there was any real justice he would be in jail and all of his wealth taken to pay for the bailouts!

    Like

    • 245
      stun says:

      Rating agencies caused the crash? Ridiculous. Banks packaged loans from people who had no intention of paying them back. Blame greedy people instead. If they’d carried on paying their mortgages, none of this would have ever happened.

      Like

  76. 252
    nell says:

    http://www.express.co.uk/posts/view/282020/Protesters-say-Poppy-sellers-are-baby-killers

    OK Bill I’m really mad at you for not posting this on here because it was on your Twitter page!

    OccupyLSX are mocking the British Legion and Our Lads as ‘babykillers’

    And ‘militwit the lesser’ supports these people!!!

    Like

  77. 253
    Billy Bowden is the greatest umpire ever ! says:

    Strange, I’ve just farted and it smells of cheesy poofs!

    Like

  78. 259
    not now cato says:

    That’s all true but it does let the credit rating agencies off the hook.

    Banks in the USA were at the least cajolled into offering loans to those who were unlikely to pay them back. Those (potential) bad debts were wrapped up in various sneaky ways and passed off as AAA rated investments.

    If the credit rating agencies had done their work, the price would have reflected the sub-primeness of what was being offered.

    What occurred in the USA followed from that, that and Gordon Brown’s ramping up of the public sector to the point where it out-grew the wealth generating private sector.

    UK bankers were really not that bad.

    Like

  79. 262
  80. 275
    AnotherAnon. says:

    Not sure what to make of that?

    Like

    • 298
      Al Jazbeeba says:

      What a strange man.

      Like

    • 303
      nell says:

      So Right!

      But then the Beeb is never going to be a decent , unbiased, professional news programme and we all know it!!

      So aljazeera – we are listening!!

      Like

      • 311
        The Paragnostic says:

        You have to realise, nell, that aljazeera is just as biased as the BBC – it’s just that their bias is towards the view of the world as seen from Qatar, rather than from the Lubyanka.

        Having said that, the bits I’ve seen have been pretty balanced and informative, but then it’s always in the back of my mind that we should always consider the messenger’s paymaster when listening to the message.

        Like

  81. 284
    Gordon Brown says:

    My secret pleasure is a neep sandwich,yum.

    Like

  82. 292
    Mr Nose says:

    Top post Guido. I like it when you do serious.

    Just goes to prove that the jester of the court is more intelligent and wiser than the court.

    A Bravo Zulo is most deserved.

    Like

  83. 299
    Billy Bowden is the greatest umpire ever ! says:

    How can you tell an irish pirate at a fancy dress ball ?,,,,,

    He’s got a patch over both eyes.

    Like

  84. 312
    Andy JS says:

    It looks like Sir Andrew Green’s e-petition on immigration will hit 100,000 signatures tomorrow. It already has almost 95,000 after just 5 days:

    http://epetitions.direct.gov.uk/petitions/19658

    Like

    • 315
      albacore says:

      “So we call on the government to take all necessary steps to get immigration down to a level that will stabilise our population as close to the present level as possible and, certainly, well below 70 million.”
      Get real. The arguments are too obvious and too many to repeat here. They’d be better off submitting that toothless cri de coeur to our old cat. He’s still got wicked incisors for any interloper that comes a-calling.
      BTW, ain’t it curious how the size and effectiveness of the country’s armed forces and border patrollers varies in inverse proportion to that of the population? Funny, that.

      Like

    • 316
      albacore says:

      Dear me, it seems that this is a hot potato here.
      Well, it’s certainly getting colder outside right now, so I suppose that we should just be grateful for every bit of hot air that Parliament can generate.

      Like

      • 322
        1997-2010 The Years of Plenty(all on credit) says:

        Look …you’ve already been told THESE e-petition malarkeys are “Dave’s” cunning plan to avoid issues such as this,hanging and even that eu referendum from actually ever being debated in Pariament…they’re designed to act as a safety valve…he was told that it was very unlikely that the threshold of 100,000 would ever be reached for any petition otherwise he would have set the bench mark at 250,000 …..the fiasco of the eu referendum petition was a one off and slipped through the net when he was looking the other way….and will NOT be repeated….good heavens you’ll be expecting a debate on democracy next………………

        Like

  85. 317
    Fabians are Evil. says:

    Listen and weep – Daniel Hannan sums up Europe

    Like

  86. 318
    The Colonel says:

    I have been away a while so what has Gordon been up to lately?? In Parliament by chance or have they broken up for Christmas already?
    Has there been a crisis of some sort?
    I heard on BBC World Service some French Johnny stating that the eurozone was in great shape and there was no crisis at all and that it was a mirage and he blamed the USA and UKfor rumours and trying to de-stabilise the Eurozone.
    Is this true? I think I should be told.

    Like

  87. 319
    The Colonel says:

    I have been away a while so what has Gordon been up to lately?? In Parliament by chance or have they broken up for Christmas already?
    Has there been a crisis of some sort?
    I heard on BBC World Service some French Johnny stating that the eurozone was in great shape and there was no crisis at all and that it was a mirage and he blamed the USA and UK for trying to de-stabilise the Eurozone.
    Is this true? I think I should be told.

    Like

  88. 326
    Lord Chief Justice Pringer says:

    I want to say thank you for one of the very few articles which clearly explain the banking crisis. I have watched the BBC and gone on a lot of blogs about this. Never have I seen it so clearly explained.
    Thank you for taking the time to tell us the truth.

    Like

  89. 327
  90. 329
    Anonymous says:

    Philip Gould dies. In remembrance.

    Like

  91. 342
    Smig says:

    Guido, as much as I appreciate the rumours, gossip and tittle-tattle, I keep coming back for these nuggets that you post.

    I invest my money. I’ve worked for it. I don’t have a pension plan. I prefer to cut out the middle man and choose where to put my savings without a safety net. I have nobody to blame but myself if I find myself penniless.

    My call. My money.

    Like

  92. 343
    Alex says:

    One of your best ever posts Guido.

    May I take the liberty of linking to one of my recent posts on the performance of past senior executives at Goldman Sachs who made their names and much of their reputation at a time when Goldman Sachs was a partnership.

    They were mostly regarded as star traders yet it seems it was the restraint of other partners that stopped the firm losing its collective shirt, because when these so-called stars went elsewhere, they were less effective.

    http://alexmasterley.blogspot.com/2011/11/giant-vampire-paella.html

    Like

  93. 346
    Picking Olives says:

    I am sure that I am much older than anyone else who reads this site and thus I am able to correct the post by Anonymous when he states that it all began with Bill Clinton. I was a banker in Chicago in the mid seventies and Jimmy Carter was the President who began to bully the banks into lending money to…. as the phrase went at the time…to the other side of the tracks…. and he hired some very aggressive people to threaten banks with all sorts of stuff such as repeated Federal inspections and promising all kind of difficulties such as denying opportunities to expand into new territories, which many banks were then keen to do, if they failed to lend in a way that JC wanted doing.

    Like

  94. 347
    Michael Lewis says:

    The chapters on Iceland and Greece are particularly excellent.

    Like


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“I stab people in the front, not the back.”



Owen Jones says:

We also need Zil lanes.


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