Labour's bonking mad!

No this isn't a story about over-sexed socialists (unless you maybe include Rev. Paul Flowers) but please do read on.

Ed Miliband, the figure-head leader of the socialists in the UK, the real leader is union boss, Len McCluskey, has indicated that Labour would try to create two new large banks in the UK, so as to promote 'competition.

Now think about that.  We already have 5 big banks in the UK.  We also have building societies (akin to US savings and loans/credit unions).  Indeed, two of these banks are largely owned by the UK people.  The 'people' own more than 80% of Royal Bank of Scotland.

It is entirely unclear what benefits this extra competition will bring.  We now know that Miliband's words have cost the UK taxpayers more than £ billion from the reduction in share prices seen for RBS and LloydsTSB.

Consider also, what happened last time Labour were in power.  This champion of greater competition, then forced through the takeover of the HBOS banking group by LloydsTSB, thereby reducing the number of banking chains!

Consider also, the Labour party's closest banking ally - the Cooperative Bank.  This bank had Rev. Paul Flowers appointed as its chairman, under Labour's 'light touch' regulatory regime.  This is the same Rev. Paul Flowers that is accused of hiring rent boys and using illegal drugs, including Ketamine.  The same Rev. Paul Flowers who is accused of abusing his position as a church  minister to allegedly defraud a charity.  Oh yes, and the same Rev. Paul Flowers who took the Co-Op bank to the brink of bankruptcy!  In the last action, he perhaps proved that he was as qualified as other leading bankers, at least!

So Labour, whose record with banks is, shall we say, patchy, wants to interfere and create competition?

Since when has Labour been so keen on competition?  When did they become the champions of consumer choice?  I ask because there seem to be some areas for which Labour is absolutely opposed to promoting competition.  These are not areas where the incumbents are actually performing well.  Indeed, quite the opposite.

These areas?  Well, the NHS and Education, to name just two.

With the NHS, the UK effectively has a monopoly supplier of health care that is controlled by its provider union personnel.  Can you imagine the uproar that would have followed, if a private health supplier had treated patients the way that the 'envy of the world' NHS treated people at Mid Staffs and other scandal-riddled hospitals?  Does anyone think that Andy Burnham, the Labour minister in charge at the time of these scandals, who tried to hide the truth, would remain in the role, if he were in a private company?  Hundreds of people died unnecessarily and in appalling conditions when their very lives were entrusted to this monopoly provider but, according to Labour, that's okay.

Look also at education, where Labour, again repaying the debts to its union paymasters, consistently opposes any and all reform.  Here the Conservatives have pushed ahead with supporting the establishment of independent schools but much still needs to be done and Labour, and its local authority allies and other members of the payroll electorate, will continue to oppose much needed reform.  As with health, Britain's education system is failing as successive governments have failed to address the core issues because they have focused on 'politically correct' solutions and ignored real world problems.

Apparently, Labour want to see more choice on the high street but I seriously wonder how many people still rely on physical branches and how many use online banking?  When was the last time you went into a bank?

Anyway, usual stuff from Miliband and his socialists.  The 'cost of living crisis' is seen to be being solved, as real wages start to exceed prices and so it is time for another soundbite!  Worryingly, Labour still have a chance that they might be in charge of the UK economy, after the next election.  Miliband the banker - be afraid, very afraid.  Remember who ran the economy alongside the disappeared Gordon Brown?


   

RBS, LIBOR and the Public Interest

Think about the LIBOR issue for a moment.

I believe we all know or strongly suspect that Barclays were not alone.  That there is a strong likelihood that other major banks, such as RBS and Lloyds were also manipulating their LIBOR data submissions.

So let's posit that these two were.

Would it be in the public interest to issue fines against them?   Given the level of taxpayer ownership, the bulk of any fines would be tantamount to the taxpayer transferring money from one trouser pocket to another!  Of course on the way though, some or much would be lost due to fees from our noble (?) legal brethren!

Indeed, to go further, since publishing such fines and censure then leads to share price falls, is there maybe a case for doing nothing, in the public interest,  at the Corporate level?  Of course seeing share price activity in recent days, maybe the negative implications have already been 'priced in'?

I don't suggest that the authorities let the individuals concerned, get away with any criminal activity, quite the contrary, I would like to see them imprisoned - not fined, imprisoned - though with the Serious Fraud Office (mis) handling the case, the likelihood has to be low!


Any thoughts on this?


Incidentally, listening to Bob Diamond's light toasting in front of the Treasury Select Committee, the other day (simply appalling service on BBC TV World News, with constant 'talking head' interruptions to give us statements of the obvious!),two things came to the fore, for me.

One, Barclays seemed to be always on the high side and it was suggested that they were advised/told or somehow or other encouraged to lower their rates.

Secondly, the method of deciding LIBOR seems to be to take the submissions from the 17 banks,  and then eliminate the 3-4 lowest and 3-4 highest and then find the rate amongst the middle.

So in both cases the actions of Barclays (and it's traders) , while possibly criminal (mis-representation and conspiracy etc)  has either had no effect or any effect was to reduce the potential cost of borrowing for anyone.  Have I got that right?

 Oh! and still no resignations from Labour or apologies for their complicity in this issue.  This all happened on their watch - loose or invisible regulatory institutions, nods and winks approach to economic (mis) management and Gordon - no more boom and bust - Brown telling us all how he saved the world's financial system! 

PFI - Call their bluff

The Private Finance Initiative was a great 'wheeze' dreamt-up to park long term liabilities off of the balance sheet of UK Inc.  You know, the kind of thing that got Enron into trouble and caused UK politicians, of all hues, to rain down criticism on these people.  No hypocrisy there!

 NHS hospitals are under increasing financial pressures and are faced with long term liabilities (PFI contracts) that they simply cannot sustain.  If the NHS was a commercial organisation it would approach it's landlords and seek revised terms - bluntly stating that they can't afford the payments, any longer. 

So why don't they or rather the individual trusts do just this?  What will these finance companies do - sue the NHS trusts?  If the NHS just turned back the property to the funding institution and each trust declared itself bankrupt, what then?  I can't think that there would be anything to stop other organisations immediately (or even in anticipation) setting themselves up as trusts (authorised by the Department of Health) and then offering to make use of these facilities but at reduced rates.

It is only because the PFI companies know that at the end of the day, the UK Taxpayer sits behind and acts as financial guarantor for the NHS Trusts, that they do not adjust their rates. 

So, take away that guarantee. 

I know, some will say 'it is unfair to change contractual terms after signing a contract' but that happens all the time in business.  The majority of these contracts were signed when the UK was living in denial and way beyond its means.  Times have changed.  These contracts need to do likewise.

The smart PFI people will read the writing on the wall and volunteer to reduce rates.

If we can't do the above, then let's tax the gross income from such contracts at a higher rate - say a special levy of 25% might be a good start.

Banking again

Help me to understand.
We are told that the financial crisis started because of the sub-prime mortgage business in the USA (so not Gordon's fault?) and this contagion spread around the world.

Now the solution offered by Sir John Vickers & Co is to segregate Investment and Retail banking and thus put outside the realms of state protection, the 'casino antics' of investment banking. 

Presumably, mortgages will fall into Retail banking and thus be protected?    So if a bank has a 'run' on it or has insufficient funds Sir John & Co expect that ignoring recent history, this will hit the investment side and not the retail side?

Remember, Northern Rock was a building society (Mutual) as was Bradford and Bingley.  Both of these effectively went bust, VERY early on, in the financial crisis, and had to be rescued. 

I don't recall hearing anything at the time that they were indulging in investment banking.  

I do recall hearing that Northern Rock was handing out mortgages based on six times a single earner and on 125% of property value.  Tell me that that isn't irresponsible lending - some might say casino practices?

Hey though!  The solution has to be to pander to those that look on the UK's financial sector with envy and anger, and instead impose a 'solution' that won't address the underlying issues (when does a committee ever do so?) but does impose additional costs for the consumer (there's a surprise!)

Comments?

Banking "Reform"

So here we go. 

We will 'reform' the UK banking sector and add between £7 billion (Government estimates) and £10 billion (industry estimates) of cost.

Three guesses who will actually pay this.  No clue?  Well, no surprise it's me and you, UK bank account holders.

Oh and remember that we are to put this in place and it will be more draconian than in any other country as will the capital requirements we set for the banks that remain here, before any other country, including our major competitors are even contemplating such restrictions.

You could call it madness but that might upset the Lib-Dems and we mustn't do that!! 

Now if we could get the Lib-Dems party members to pay the  £7 -10 billion, I might not be so angry!

Northern Rock

So, having Nationalised Northern Rock and then agreed, with the EU, a timetable for its de-nationalisation, te Labour Party now say that the deal with Virgin Money should not be implemented because the National Audit Office (NAO) are conducting a study!

Labour agreed the deal with the EU.  Labour nationalised Northern Rock and pumped in taxpayers money.

The current government, as with so much of their activities, is now cleaning out the mess left by Labour and is seeking the best value for money that they can get, for the UK Taxpayer.  The process to sell Northern Rock was (very) long-winded and one presumes that all interested parties put in their offers and these were weighed and measured. 

The UK Government should proceed with the sale unless by January 1, 2012, Labour or the NAO can produce concrete proof - a large cheque payable to UK Gov will suffice - that there is a more lucrative alternative. 

The UK Government has gone for the bird in the hand rather than some pie in the sky two in the bush!