We have a President who, in his displays of pique against banksters, can work himself up to calling them “fat cats”. But immediately after that, um, display, he met with bank CEOs (well, the ones that didn’t stand him up) and was conciliatory, when the right move would be to show some steel. And when, after chewing out lobbyists in the State of the Union, which department in the Executive branch was the first out of the box to call lobbyists to set up private briefings? The Treasury.
It sure isn’t hard to discern the yawning chasm between word and deed and decide which to take seriously.
By contrast, the authorities in the UK are more united in their stance and are taking steps that show far more determination as far as reining in the financial services industry is concerned. Even if the bonus tax did not work as planned, it was a bold move, and at least showed seriousness of intent. And the UK regulators are pushing measures sure to elicit howls of pain from the banksters. The latest is that the head of the FSA, Lord Turner, has suggested a crackdown on currency carry trades. And more important, look at the basis of his argument: carry trades serve no useful social purpose. Lordie, if banks are restricted to doing things that are productive, just think of what it will do to profits and bonuses!
Similarly, can you imagine anyone of any stature in the US (well, save maybe Paul Volcker, who is currently in favor, but who knows how long that will last) having the kind of talk with bank top brass that Alistair Downing had. From the Guardian:
Alistair Darling told the City’s top bankers today to stop feeling sorry for themselves and instead work with the government to create a stronger financial system.
The chancellor held clear-the-air talks with eight UK and foreign-owned banks at the meeting of the World Economic Forum in Davos at which he urged faster international action to strengthen banking regulation.
“My message to the banks is that it is in their interests to get off the front pages,” Darling said at a press briefing ahead of the meeting.
“The banks should do what they are supposed to do, provide credit to the economy. They must know that changes are necessary. They can all see that the regulatory regime needs to be more robust and more intrusive.
“Don’t feel sorry for yourselves. Work with the government to see how you can improve the situation.”
Today’s meeting involved executives from Standard Chartered, HSBC, Barclays, Goldman Sachs, UBS, Morgan Stanley, JP Morgan and Citigroup.
The chancellor said he was frustrated that changes to bank regulations proposed by the G20 group of developed and developing nations were taking so long to be agreed by the Basle committee of central bank governors and international regulators.
“The Basle process can be quite tortuous,” Darling said. “We don’t have years to sort it out.”
He added that he was disturbed by reports that proposed reforms to the global financial system – originally expected this autumn – now looked as if they would be delayed until 2011.
“I would like to see the Basle regulations published this autumn,” Darling said. “I have heard it may slip into next year. That would be very, very bad.”
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darling is a very decent guy, and was the first politican anywhere to say openly back in summer 2008 (pre-lehman) that we were facing the worst financial crisis since the depression (http://news.bbc.co.uk/1/hi/7589291.stm). there are other good people as well, like mervyn king at the bank of england.
unfortunately for the uk however, these intelligent and informed people are hamstrung by (a) a delusional self-glorifying lame duck prime minister with an allergy to spending cuts, and (b) an opposition party that is ideologically opposed to deficit spending and that will cut spending to the bone after the elections in may this year, and to hell with the liquidity trap.
Bank bailouts:
The UK and US spent the most, with the UK spending far more, 94% of its GDP compared to 25% in the US.
That equates to £30,000 per person in the UK and $10,000 in the US, that’s roughly 47,000 $ a piece…Gordo, to say the least
http://www.truthdig.com/eartotheground/item/your_bailout_bill_10000_so_far_20100107/
charles,
Thanks for the link, but I think you left out the best part, which is included in the headline and I emphasize in bold here:
“YOUR BAILOUT BILL: $10,000 (AND COUNTING)”
I don’t think the back-room and under-the-table bailouts have been tallied yet. For instance, Yves has had several posts on the Maiden Lane I, II and III “assets” which the Fed purchased.
CNN Money had a story on the Maiden III assets yesterday:
Wanna see for yourself the confidential AIG documents that lawmakers are up in arms about? Go to SEC.gov.
On Friday, the bailed-out insurance giant made public the complete details of the most controversial aspect of its $181 billion bailout: a decision to use taxpayer funds to make the troubled insurer’s business partners whole.
[…]
Though it is hard to divine much understanding from the unredacted filing, it has become clear that Goldman had more involvement than previously believed: In addition to the credit default swaps it bought from AIG, the filing shows that Goldman Sachs also originated many of the underlying assets that AIG and the New York Fed bought back from Société Générale.
http://money.cnn.com/2010/01/29/news/companies/aig_sec/index.htm
(Get a whiff of the comments! Folks are royally pissed!)
Yves promised us another post with more interpretation about what it all means.
I have some basic questions. I surmise that the notational value of the assets the Fed acquired is $62.1 billion.
1) On what date was the acquisition?
2) How much did the Fed pay for the assets?
3) What is team Yves’ best estimate of the market value of the assets on the date of acquisition?
4) What is team Yves’ best estimate of the market value of the assets today?
5) Is there anything to CNN’s claim that “Goldman had more involvement than previously believed”?
Good points. It infuriates me when people talk about the bailout having been “mostly repaid”, and as though bailouts weren’t continuing. I’m still waiting to see what they’ll do with the Christmas Eve lifting of the cap on Fannie and Freddie (Christmas Eve, and we used to criticize Bush for making announcements on Friday evenings!). Dean Baker has a good rundown on America’s Christmas present:
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/wall-street-war/
Its the same substance less bullshit in the UK as in the US — they just have a much more polished pretense and better sense of theater. Its top hats vs cowboy hats.
Look at what they are putting Tony Blair through over the Iraq invasion and killing of over a million Iraqis and consider that scum bag Bush was recently seen at a Colts football game …
Excerpt;
“As Sir John Chilcot was at pains to point out before the long-awaited appearance by Tony Blair, the Iraq inquiry is not a trial.
But outside it was what that eminent dispenser of frontier justice Judge Roy Bean might have described as a “hanging crowd” – the same sense of seething resentment, and the hunger for justice – or revenge – that one sees at crown courts as child murderers are whisked past in prison vans, their heads covered in blankets.”
More here …
http://www.telegraph.co.uk/news/worldnews/middleeast/iraq/7110769/Iraq-inquiry-hanging-crowd-bays-for-blood-as-Blair-faces-his-inquisitors.html
Deception is the strongest political force on the planet.
Darling is being cynical. In effect, he’s scapegoating the City for the failings of his own government to properly regulate basic nuts-and-bolts banking.
1. The UK bailed out banks located in Labour heartlands (Northern England and Scotland) – Northern Rock, HBOS (which Lloyds was forced by the govt to buy), Bradford & Bingley, Royal Bank of Scotland. These banks failed due to excessive reliance on wholesale funding (esp Northern Rock) and bad mortgage lending (eg HBOS was big player in “buy-to-let” mortgages) – and in RBS’s case, an ill-conceived acquistion of the toxic assets of a Dutch bank ABN AMRO. These banks failed due to poor regulation by the government in power, not bonuses or the like.
2. The UK govt spent like drunken sailors during the boom times and so has no margin to maneuver. It will now have to cut spending and raise taxes…at the worst possible time…in order to avoid a buyers’ strike of all the debt it has to issue. Most of the spending has brought little value – eg health and education spending doubled in real terms but outputs / results have scarcely improved. The reason is that Brown frustrated attempts at reforming these public sector institutions and most of the money went to its core political constituency (government workers and their trade unions)
This isn’t populism. It’s demogaguery, it’s hypocrisy and it’s incredibly damaging to the UK.
Actually … the “Guardian”is really the … ‘Guardian of the Rich Man’s Wallet.’
This viewpoint is from a socialist web site in the UK, “Lenin’s Tomb” … the similarities in the co-option of the UK New Labour and the scamerican Democratic progressives are striking and reflect the more global nature of this neocon middle class takedown and its Noble Lie methodology …
Excerpt;
“New Labour has run, in many ways, the most right-wing administration since the Second World War. This is true in terms of its privatisation of housing and public services, in terms of its tax cuts for the rich and services to the City, in terms of its warmongering, and on any number of other axes that you could name. It has adopted neoliberal economics, neoconservative foreign policy, and the New Right’s agenda on race relations. Yet, the party still depended on the backing of the trade union bureacracy, and still had to deliver something in the way of improving the situation of at least some workers. Hence the minimum wage, some welcome reforms of trade union laws, higher public spending, and new tax credits for the poor. Modest reductions in child and pensioner poverty resulted, though these started to reverse after 2004/5. Even so, the massive inequality unleashed by Thatcherism has barely been touched and, according to some studies, has now reached record levels.”
More here …
http://leninology.blogspot.com/2010/01/labour-and-inequality.html
Deception is the strongest political force on the planet.
I have to think dear old Yves is being a little naive here. The Labour government is facing an election within months, and the state of anger is such that they have to make more noises than in the U.S. It should be noted that even Barack Obama has begun sounding less like a marshmallow than before the Massachusetts senator race debacle. But the financial sector is every bit as much a part of the ruling establishment in the UK.
Carry trades have actually been cited as harmful in New Zealand. In the last two years the New Zealand dollar has been as high as 80 US cents and as low as 50 cents. This adds a considerable element of risk to export-based businesses, which may be economically unviable at high exchange rates. Opinions differ on whether the “right” value is at the high or low end of the range, but nearly everyone agrees that less volatility would be a good thing.