Posts Tagged ‘Alistair Darling’

Tory leader David Cameron details plan for bank tax

March 20, 2010

» Tory leader David Cameron details plan for bank tax

Opportunist. Still, some kind of levy seems only fair, although the assumption that only banks are too big to fail continues to baffle me (AIG? General Motors?)

I’m assuming the word “details” here is some kind of joke. As is the reminder that David Cameron is leader of the conservative party.

What really confuses me though is this:

Treasury sources say Mr Darling favours a tax over an untouchable insurance premium because he fears that banks could feel they were insured against the consequences of their actions and take even greater risks.

It’s analagous to saying “we oppose people getting car insurance because it just increases the risk that they’ll drive carelessly”. Although I suppose we all had so much fun in the last big bank bankruptcy that another one would be so much fun. Somehow, a chancellor favouring a tax always gives me a certain amount of cynicism.

Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

February 1, 2010

» Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

In On the Brink, the first book by a key player in America’s $700 billion banks bailout, Mr Paulson concentrates on the crazy months surrounding Lehman’s filing for Chapter 11 bankruptcy protection on September 15, 2008.

Barclays negotiated to buy Lehman during the weekend before the bank’s collapse, but the talks fell apart after both countries put up obstacles to a rescue deal. The British bank eventually bought Lehman out of Chapter 11.

Yes, all those barriers. Surely buying the firm that is about to be the world’s biggest bankruptcy is not really that big a deal? Do we really need to vote on it?

Not being a shareholder, it’s hard to speak on their behalf. One of the few things I own is this laptop – if it had decided to buy Lehman Brothers (and, let’s face it, that would be weird in so many ways) then I might feel some resentment at not being consulted, but then my laptop screws me over in all kinds of ways so it wouldn’t surprise me if it was planning a short squeeze (oo-er) on Goldman as I write. Perhaps I should have a say, But then I am just the owner.

It is odd, a few years ago people thought Paulson was machinating on behalf of Goldman Sachs. Now it seems he was just a nutter.

That Mr Obama seemed like such a nice man (and not a crack whore in sight)

January 29, 2010

Mr Obama seems not to like the banks. You can hardly blame him. Banks’ reaction to news that they will be prevented from trading speculatively (prop trading), cut down in size, not allowed to be too big to fail, and be forcibly separated from their retail banking arms was strangely muted. Perhaps they are in shock. Perhaps they think it’s not going to happen.

This all goes back to the concept of “casino” banks. Banks lost stackloads of money because they gambled it all away like a crack whore with a misappropriated suitcase of laundered drug money.

In reality, the casino analogy is quite neat (not so sure about the crack whore comparison though), not because investment banks are gamblers, but because they are the casino. Banks put up capital and risk money, but like any casino they should always end up on top (back to the crack whore again?) as long they keep an eye on the numbers, are careful about the risk and don’t get over-excited … which they unambiguously failed to do. In that sense investment banks and retail banks are not that different: don’t be stupid and it’s a guaranteed money-earner, get stupid and, well, credit crunch all around. Much is said of their complexity, but banks are no more complicated than, say, a hospital – an institution most people feel more than qualified to comment on.

The separation of investment bank and retail bank is a red herring. In the UK it was the retail banks (Northern Rock, HBOS, RBS) which lost devastating amounts of money, on retail business! Follow this technical detail carefully: they loaned money to people who could not pay it back. Oops! But, strangely, the massive shift in regulation could actually be good for banks. By forcing a true political conflict and getting into the detail, the banks may force some people to be on their side and, even, win an occasional debate. It could be even better for London; most US banks have a huge London presence, and it should not take much to move there. Alistair Darling will be pleased. There is even speculation that some of the banks will turn themselves into hedge funds and so side-step the regulation.

Is this a good thing? After all, banks can be destructive, but then  so can hedge funds – anyone remember LTCM?* – but then so can building societies, and car companies, and pension funds, and tulip bulb markets, and … and crack whores? Well, they’re strictly a bilateral transaction, when it comes to getting fucked on a big scale, you need larger institutions.

* Long Term Capital Management, a hedge fund that went spectacularly wrong, losing almost $5bn in 1998. There were significant fears its bankruptcy would cause a chain reaction in the markets, and so the Fed organised a bail-out, funded by, errrr, investment banks.