COMMERCE UNCOMMERCIAL?
Friday, December 5, 2008 at 12:14PM "Gordon Brown issued a stark warning to banks today, demanding that lenders must pass on yesterday's full 1 per cent interest rate cut to their customers. The Bank of England yesterday cut the interest rate to 2 per cent — the lowest level since 1951 — following a surprise 1.5 per cent reduction in November. The Prime Minister said this morning: "I think banks should really pass on the interest rate cut. We are talking to the banks. “Remember last time there was a cut, we had to speak to them before it was passed on and we will be speaking to them again.”
Now listen, I am no fan of the banks. As a business-man, they cost me money and I would continually seek to see their costs reduce. But I hate the idea of private enterprise being bullied by government and THAT is why I do not support Brown's strong arm tactics. Brown is messing about with commercial practises as if he knows better. He doesn't. This man could not run a whelk stall and yet he dares to tell British banks how they should run themselves.
First they came for the banks......
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Reader Comments (7)
First they came for the banks......
Yes David, ap choice of phrase - because this is exactly the same as the Nazi's and the Jews. Seriously, you should really put a bit more consideration into your use of language. Even if it was tongue and cheek, it still is a very inappropriate use of the phase.
David -
Guido sums it up:
http://www.order-order.com/2008/12/banks-have-to-make-profit.html
As the politicians all start to bash the banks for not passing on the full rate cut, Guido asks how can the recapitalisation of the banking system be successful if they don't make a profit? This is the danger with quasi-nationalisation - once you start putting political considerations before commercial imperatives, banks will be perpetually loss-making burdens on the taxpayer.
I see also that the government is to force banks to double their holding of government bonds. That the government has bankrupted itself can surely only be coincidental.
Yet the 'free' market has failed.
And more regulation is needed, apparently.
Surely it takes a certain genius to pull off a trick so magic that bankers and free markets get the blame while a fascistic, corporatist State becomes yet more fascistic and corporatist.
The UK's banks are being ordered to increase their holdings of government bonds. Is this because nobody with any sense is buying them, so Brown instructs the banks to which he has given our money ot give it back to him to keep his re-election campaign afloat and trash our currency as preparation for joining the Euro?
"First they came for the banks..."
Apt and well chosen phrase, David.
In both the UK and the US, politicians are doing a poor job at running the governments; I don't see why they all now think they can run the private sector. What hubris.
Pete - "Yet the 'free' market has failed.
And more regulation is needed, apparently."
The free market hasn't been applied to banking. The insolvent badly run banks need to be let fail, otherwise it's not capitalism. As a consequence we give the bankers the whip hand over us.
If they don't operate in a capitalist system, where risks have consequences, they operate in a socialist one where risk taking needs to be regulated out of existence.
I know which option would be more successful long term...
But Mack, the banks, or rather the self-awarding clique at the top of each bank, have been taking enormous risks with OTHER PEOPLE'S MONEY: savings, pensions, insurance funds etc.
Let us assume that the collapse started in the US through the sub-prime lending catastrophe (has the Communities Reinvestment Act been repealed yet? If not, it will happen again) in the US. British banks were invited by American banks to contribute to that scheme because the American banks knew exactly what the term 'sub-prime' meant and decided to share the risk.
Did any of the heads of the British banks which allocated money to 'sub-prime' do any checking on the risks of such investment? The answer is 'no', and those bankers who paid themselves the huge bonuses during the period of such risk-taking should have their bonuses returned to the banks under threat of prosecution.
Allan - "But Mack, the banks, or rather the self-awarding clique at the top of each bank, have been taking enormous risks with OTHER PEOPLE'S MONEY: savings, pensions, insurance funds etc."
Yeah, that's where it gets complicated. But either we ban them from doing so through regulation, or we must ensure the system allows the Good to drive out the Bad, rather than the other way round. If we have no consequences for imprudence, then, by being prudent - first you lose market share, then later you're forced to fund the bail out via higher taxers and / or funding costs. Among the 'Bad' profits are privatised and loses are socialised. That doesn't strike me a system that will last.
In theory, I think the best way to do this - is to have some level of protection for those who really do need it (depositers, consumer assets ringfenced etc ), but beyond that the imprudent banks should be let crash and burn - so that the well managed banks can have their day, and the process won't repeat.
I suspect, though, it would be an incredibly painful process.