Politics

[Christmas Tree 3997]

Deep Throat

Heard on the news yesterday that it was the top 20% that lost out due to yesterdays changes.

 

On Newsnight?

Jacob Rees-Mogg was clearly shown that was bollocks when he stated it. The top 1-2% of the top 20% is the actual stat you're referring to. As well as the entire bottom 20% suffering equally badly.

 

*breast stroke*

 

TBF all the news channels were running with the same story.

 

Whitehall insiders last night said that top earners would be hardest hit. Treasury sources said an estimated 21 million on incomes below £35,000 a year would be better off.

 

Around 500,000 people will be freed from paying income tax after a £1,000 hike in the basic rate threshold to £7,475.

 

A lone parent with one child would be on average £10 a week better off. A double-income couple with one child and an annual income of £25,000 would be £12 a week better off. Figures from Treasury sources suggested that the top 20 per cent income bracket would suffer most. They also face a new five per cent stamp duty rate on £1million-plus properties while pension tax relief will drop from £255,000 a year to £55,000.

[Christmas Tree 3997]

Brown finally owns up for Labours part in causing the banking crash......But doesn't apologise. (Not party political)

 

Gordon Brown has admitted he made a "big mistake" on financial regulation before the banking crisis - but has emphasised he did not act alone

 

The former prime minister said the regulatory framework he put in place as chancellor failed to address the "entanglements" of different institutions and "how global things were".

 

Mr Brown said at a conference organised by the Institute for New Economic Thinking in Bretton Woods, New Hampshire, that he accepted his responsibility for the mistakes, but added that he was not alone in making them.

 

He said in the 1990s and the years up to 2007, when he was chancellor, he was under "relentless pressure" from the City not to over-regulate.

"We know in retrospect what we missed. We set up the Financial Services Authority believing that the problem would come from the failure of an individual institution," he said.

 

He explained that the "big mistake" was the creation of a monitoring system looking at individual institutions.

 

"We didn't understand how risk was spread across the system, we didn't understand the entanglements of different institutions with the other and we didn't understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system.

 

"That was our mistake, but I'm afraid it was a mistake made by just about everybody who was in the regulatory business."

 

The aftermath of the 2008 banking meltdown had made people think again about regulation, Mr Brown said.

 

"I have got to accept my responsibility and I do, and I have been very open about saying we made mistakes on that," he added.

[Meenzer 14030]

We're getting there. Doesn't change the fact that the Tories would have done exactly the same as Brown, but it's progress all the same.

[trophyshy 6432]

not sure this has been mentioned anywhere, but this is a good watch about the state of the nation.

 

 

http://www.channel4.com/programmes/britain...ory/4od#3153186

 

Especially worth hearing what the narrator says at just over 1 hour 1 minute in.

Edited April 11, 2011 by trophyshy

[Rob W 0]

We're getting there. Doesn't change the fact that the Tories would have done exactly the same as Brown, but it's progress all the same.

 

 

yeah 3 years after the crisis started, and a year since he ran for office denying everything he's just owned up to...........

[PaddockLad 14576]

We're getting there. Doesn't change the fact that the Tories would have done exactly the same as Brown, but it's progress all the same.

 

 

yeah 3 years after the crisis started, and a year since he ran for office denying everything he's just owned up to...........

 

If you think the tories wouldve introduced tighter financial regulation then you're living in a parelell universe....theyve had 11 months to come up with something and theres been nothing yet....don't hold your breath on this one either

[ChezGiven 0]

The banking regulatory issues are global, its a global industry so regulations are not specific to one place. If the US, Hong Kong etc implement a change in regulations, then London has to follow suit and vice versa. Brown is accepting his part in the global problem as he clearly saw himself as a global leader. Remember, it was Brown that led the world on how to respond, using bailouts and QE as the primary policy tool.

 

The issue of his culpability from a regulatory point of view is interesting. First of all Brown doesnt sit on the regulatroy committees, those positions are held by industry experts. They are responsible but clearly accountability lies with the government. Does anyone know why the industry experts sitting on the regulatory bodies were unable to foresee the problems? How did the banking industry push through the changes which allowed them to create toxic credit assets?

 

The answers to those questions tell you where the blame lies.

[NJS 3976]

I've always thought the way King is portrayed as some kind of hero who stood up for the common good to be bullshit.

[ChezGiven 0]

I quite like Merv, he was in the NE in 2009 sorting out funding through One North East to encourage export markets and wanted to devalue the pound further to help kick start some growth from the industrial north.

 

The BoE didnt really understand the problem but you cant really lay the blame at their door. Its the same reason why any highly complex industry is virtually impossible to regulate proactively. The best you can hope for is reactive regulation for one simple reason. All the best experts and therefore information, is on one side of the fence. You dont spend your life becoming a genius in an industry to end up working for a regulator, especially in the banking industry. All the whizzkids and their analysis of potential profits are on one side and a load of elderly 'experts' who are in their 60s and learnt their trade 30 years before are on the other.

[Matt 0]

We're getting there. Doesn't change the fact that the Tories would have done exactly the same as Brown, but it's progress all the same.

 

 

yeah 3 years after the crisis started, and a year since he ran for office denying everything he's just owned up to...........

 

Brown was banging the drum of the UK's light-touch regulation as he went around the world- he can hardly say he was pressurised into it. And he certainly enjoyed the tax revenues while they came flooding in. He is one of the architects of what happened to banking sector- the fact he put out a book on it is staggering.

 

King equally was in a powerful position. It's all very easy to have such great hindsight- his comment the other week 'I wish I'd said more at the time' is alarming. He was governor of the BOE! On the other side, Hector Sants. the man who was in charge of the failing FSA is STILL involved in forming regulation!

[ChezGiven 0]

We're getting there. Doesn't change the fact that the Tories would have done exactly the same as Brown, but it's progress all the same.

 

 

yeah 3 years after the crisis started, and a year since he ran for office denying everything he's just owned up to...........

 

Brown was banging the drum of the UK's light-touch regulation as he went around the world- he can hardly say he was pressurised into it. And he certainly enjoyed the tax revenues while they came flooding in. He is one of the architects of what happened to banking sector- the fact he put out a book on it is staggering.

 

King equally was in a powerful position. It's all very easy to have such great hindsight- his comment the other week 'I wish I'd said more at the time' is alarming. He was governor of the BOE! On the other side, Hector Sants. the man who was in charge of the failing FSA is STILL involved in forming regulation!

 

You'll have to reference that opinion for me. One thing i do know is that light touch regulation of the banking sector wasnt his idea, was it...

 

You seem to be suggesting that during the early part of the decade Brown was campaigning globally for financial de-regulation and led the global market changes? Wasnt it the Fed in 2002 that led the way?

 

The tripartite split in regulatory oversight was his idea and people say that 'contributed' to the impact of the crisis but thats bullshit. The crisis was caused by banks and their customers.

[ChezGiven 0]

His speech to the CBI in 2005 included the following Matt.

 

So regulation came to mean that government routinely and continuously inspected everyone and everything, demanded information from all of us on a blanket basis, required forms to be filled in for all issues subject to regulation and inspection -- the only barrier to complete coverage usually being a lack of resources.

 

This approach, followed for more than a century of regulation by governments of all parties is outdated.

 

The better, and in my opinion the correct, modern model of regulation – the risk based approach - is based on trust in the responsible company, the engaged employee and the educated consumer, leading government to focus its attention where it should: no inspection without justification, no form filling without justification, and no information requirements without justification, not just a light touch but a limited touch.

 

So yes he advocated not just a light touch but in the context of a risk based model, identifying risk and justifying regulation based on that risk.

 

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Neither of these fundamental changes in law can be compared to a speech made to the CBI really.

[Matt 0]

Google only throws up this rather dubious source- http://www.socialist.net/brown-light-touch-regulation.htm

 

“I want us to do even more to encourage the risk takers”

 

This feller has been Chancellor and PM. It's easy to go along with things in the good times, but you can't then start pointing fingers. Brown wheeled out Paul Myners to castigate the banking sector- this a man who has made millions from- you guessed it- the heady days of 1980s banking deregulation!

 

This wasn't a truly global banking crisis. Plenty of countries' systems survived. Some because they'd already been burnt in the past, others because they were fundamentally more prudent. The UK was making hay for a decade with banks, their shareholders, employees, the government and the public all enjoying benefits of bumper payouts and easy credit. Demutualisation brought about windfalls for building society members. As home to a global financial centre, the UK was always likely to be at greater risk, but had enjoyed significant rewards before that.

[NJS 3976]

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Interesting - I knew Clinton's administration had some "blame" but didn't realise there was an earlier one under Carter.

 

I do know the legislation allowing retail banks to be investment banks in the UK was Thatcher's bag.

[ChezGiven 0]

Google only throws up this rather dubious source- http://www.socialist.net/brown-light-touch-regulation.htm

 

“I want us to do even more to encourage the risk takers”

 

This feller has been Chancellor and PM. It's easy to go along with things in the good times, but you can't then start pointing fingers. Brown wheeled out Paul Myners to castigate the banking sector- this a man who has made millions from- you guessed it- the heady days of 1980s banking deregulation!

 

This wasn't a truly global banking crisis. Plenty of countries' systems survived. Some because they'd already been burnt in the past, others because they were fundamentally more prudent. The UK was making hay for a decade with banks, their shareholders, employees, the government and the public all enjoying benefits of bumper payouts and easy credit. Demutualisation brought about windfalls for building society members. As home to a global financial centre, the UK was always likely to be at greater risk, but had enjoyed significant rewards before that.

 

Forgive me for closing that link after the first two sentences. The CBI speech is here

 

http://www.cbi.org.uk/ndbs/press.nsf/0363c...02570c70041152c

 

The criticism of Brown and his role in the crisis based on this speech is found here

 

http://www.economist.com/node/17796996?sto...96&fsrc=rss

[NJS 3976]

As home to a global financial centre, the UK was always likely to be at greater risk, but had enjoyed significant rewards before that.

 

That's the key to me on 2 points - the importance of London did/does make us central but as you suggest a reduced role and risk would cost good times as well.

[ChezGiven 0]

The UK was making hay for a decade with banks, their shareholders, employees, the government and the public all enjoying benefits of bumper payouts and easy credit. Demutualisation brought about windfalls for building society members. As home to a global financial centre, the UK was always likely to be at greater risk, but had enjoyed significant rewards before that.

Securisation is the real culprit.

 

Securitization accelerated in the mid-1990s. The total amount of mortgage-backed securities issued almost tripled between 1996 and 2007, to $7.3 trillion. The securitized share of subprime mortgages (i.e., those passed to third-party investors via MBS) increased from 54% in 2001, to 75% in 2006. A sample of 735 CDO deals originated between 1999 and 2007 showed that subprime and other less-than-prime mortgages represented an increasing percentage of CDO assets, rising from 5% in 2000 to 36% in 2007.

 

American homeowners, consumers, and corporations owed roughly $25 trillion during 2008. American banks retained about $8 trillion of that total directly as traditional mortgage loans. Bondholders and other traditional lenders provided another $7 trillion. The remaining $10 trillion came from the securitization markets. The securitization markets started to close down in the spring of 2007 and nearly shut-down in the fall of 2008.

 

If a credit ratings agency like Moody could not evaluate the risks from this, how do you expect Brown to have done so?

[Happy Face 29]

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Interesting - I knew Clinton's administration had some "blame" but didn't realise there was an earlier one under Carter.

 

I do know the legislation allowing retail banks to be investment banks in the UK was Thatcher's bag.

 

It's lush how the debate still rages as to who deregulated most to allow it to happen....while there's no pressure whatsoever on the current power holders to re-introduce any regulation that will stop it happening again.

 

The horse bolted 3 years ago and we're taking a mosey on down to the stable to have a look at the manufacturer on the door hinges.

[ChezGiven 0]

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Interesting - I knew Clinton's administration had some "blame" but didn't realise there was an earlier one under Carter.

 

I do know the legislation allowing retail banks to be investment banks in the UK was Thatcher's bag.

 

It's lush how the debate still rages as to who deregulated most to allow it to happen....while there's no pressure whatsoever on the current power holders to re-introduce any regulation that will stop it happening again.

 

The horse bolted 3 years ago and we're taking a mosey on down to the stable to have a look at the manufacturer on the door hinges.

 

Nice.

[NJS 3976]

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Interesting - I knew Clinton's administration had some "blame" but didn't realise there was an earlier one under Carter.

 

I do know the legislation allowing retail banks to be investment banks in the UK was Thatcher's bag.

 

It's lush how the debate still rages as to who deregulated most to allow it to happen....while there's no pressure whatsoever on the current power holders to re-introduce any regulation that will stop it happening again.

 

The horse bolted 3 years ago and we're taking a mosey on down to the stable to have a look at the manufacturer on the door hinges.

 

I agree - but too many are falling for Cameron's shite as CT proves.

[Matt 0]

The rating agencies were put under colossal pressure from the big I-banks to give their securitisation conduits good ratings. This was mis-selling on a global scale and securitisation gave the perfect cover to carry it off. The instruments were too complex to fully evaluate and too many supposedly complex institutions simply looked at the rating and swallowed it up. I'm still amazed that the agencies have manage to emerge relatively unscathed from the whole affair. They banked nice fees for what could well be argued as fraud.

 

Securitisation itself is useful as a risk distribution platform and it's vital to keep banks flexible enough to adapt to the prevailing economic conditions- but what was seen in the last 10 years has simply been a massive con and in many cases the willing buyers are as guilty as the all-too-willing sellers. Warren Buffet said something along the lines that to invest in a bond, you should read the prospectus- that could be anything from 200-500 pages- to fully understand the risks. If you were investing in CDO-squared you would have to read 100x100 that amount, so how could anyone truly evaluate the risks they were taking?

 

On Brown, he's a very intelligent man who held positions of great power. He has to take a great deal of the blame. Between the Chancellor and later PM, the chairman of the FSA and governor of the BOE- nobody could have perhaps slowed things down in the UK (albeit to our detriment at the time)?. It's not like you man on the street who was mis-sold an insanely complex mortgage product. These guys knew what was going on.

[Christmas Tree 3997]

The WSJ in March 2010 highlights http://en.wikipedia.org/wiki/Community_Reinvestment_Act as the fundamental cause (1977) whilst many other point to http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (1999) as the problem.

 

Interesting - I knew Clinton's administration had some "blame" but didn't realise there was an earlier one under Carter.

 

I do know the legislation allowing retail banks to be investment banks in the UK was Thatcher's bag.

 

It's lush how the debate still rages as to who deregulated most to allow it to happen....while there's no pressure whatsoever on the current power holders to re-introduce any regulation that will stop it happening again.

 

The horse bolted 3 years ago and we're taking a mosey on down to the stable to have a look at the manufacturer on the door hinges.

 

I agree - but too many are falling for Cameron's shite as CT proves.

 

 

Ahem ahem, I was referring to Browns speech accepting blame. Cameron was nowhere near that statement. It was all Brown.

 

P.S. I love that word mosey. It should get more use.

[ChezGiven 0]

The rating agencies were put under colossal pressure from the big I-banks to give their securitisation conduits good ratings. This was mis-selling on a global scale and securitisation gave the perfect cover to carry it off. The instruments were too complex to fully evaluate and too many supposedly complex institutions simply looked at the rating and swallowed it up. I'm still amazed that the agencies have manage to emerge relatively unscathed from the whole affair. They banked nice fees for what could well be argued as fraud.

 

Securitisation itself is useful as a risk distribution platform and it's vital to keep banks flexible enough to adapt to the prevailing economic conditions- but what was seen in the last 10 years has simply been a massive con and in many cases the willing buyers are as guilty as the all-too-willing sellers. Warren Buffet said something along the lines that to invest in a bond, you should read the prospectus- that could be anything from 200-500 pages- to fully understand the risks. If you were investing in CDO-squared you would have to read 100x100 that amount, so how could anyone truly evaluate the risks they were taking?

 

On Brown, he's a very intelligent man who held positions of great power. He has to take a great deal of the blame. Between the Chancellor and later PM, the chairman of the FSA and governor of the BOE- nobody could have perhaps slowed things down in the UK (albeit to our detriment at the time)?. It's not like you man on the street who was mis-sold an insanely complex mortgage product. These guys knew what was going on.

 

Unscathed? They now effectively run social policy for certain parts of Europe.

 

I dont agree with your last paragrpah, you cant run a country and personally monitor market risk in more depth than those paid to.

[Matt 0]

It's more that governments give them the credance to dictate policy. Ratings are relative, ultimately the price of debt is governed by demand and supply of risk, which is why the whole paranoia over the UK's AAA rating is so comical.

[Matt 0]

Peston writes a lot of guff at times (though not nearly as much as some of his regular comment contributors) but I think this article is on the money- and should be the absolute focus of the IBC's report in September:

 

http://www.bbc.co.uk/blogs/thereporters/ro...bsidy_wise.html