Any of you who were watching the end of the Sky News Unplugged budget coverage yesterday will have caught me having a somewhat aggressive exchange of views with a New Labour automaton called Rachel Reeves (actually, when she's not in "Look at me I'm a Labour candidate" mode, she's quite nice). She irritated the hell out of people in the studio, and no doubt watching at home, by repeatedly referring to "my constituency" and "my constituents". Er, you ain't elected yet, love. [note to those about to accuse me of sexism - it's a term of affection in "her constituency"].Anyway, she's written this in Progress today...
The only way we will be able to pay back our borrowing is through getting growth back on track. Today's budget is another step along the line in doing this. As an aside, Tory blogger, Iain Dale was on a panel with me on Sky News yesterday. He argued that the government should have allowed a bank to fail – as the US allowed Lehmans to fail. Having watched HBOS come to its knees and contemplating the impact of that on the 74,000 people who work there, including 14,000 in West Yorkshire, I was reminded on how callous the Tories can be.
For Leeds West, the seat I hope to represent after the next election... [blah, blah]
She writes as if I am supposed to regret my words. Do I think bailing out all the banks at a cost of - well, we don't really know yet, do we - was worth it? Actually I don't. I think if Northern Rock had been allowed to go to the wall it might have actually prevented some of the disasters which followed. If you are a banker and you come to believe the government will always come to the rescue if it all goes wrong, it's only human nature to carry on as before.
It's not being callous. The failure of Northern Rock would have caused untold misery for many people - actually it did anyway. But what about the thousands who might not have lost their jobs if some of the other banks had learned lessons from Northern Rock. You can't run an economy like you run a co-op.
I think what's callous is that Rachel Reeves supports a government and a Prime Minister which introduced a regulatory system which allowed these failures to happen in the first place. Oh, but it all started in America, she says, parroting her leader. But who was it whose regulatory system seemed to actively encourage Northern Rock and HBOS to buy toxic American mortgage debt? Answers on a postcard to Rachel Reeves...
Iain, you're wrong - allowing Lehman to fail was a huge mistake and marked a huge turning point in this crisis.
ReplyDeleteI doubt given the chance again, a second Lehman would be allowed (see the propping up the goverment is doing of Citi, others).
Unemployment will top three billion because of Labour's bungling. Callous.
ReplyDeleteThe moment the economy picks up, interest rates will rise, choking those with mortgages. Callous.
Thanks to a poor grip on the public finances for six years, a whole generation will have to live under austerity. Callous.
Tax rises on cigarettes and alcohol will raise more from the poor than the 50% Supertax raises from the rich. Callous.
Labour, even some unknown candidate, can't lecture anyone on economic ruin, they've perfected it.
how old is she?
ReplyDeleteIain,
ReplyDelete"...Actually I don't. I think if Northern Rock had been allowed to go to the wall it might have actually prevented some of the disasters which followed."
I couldn't agree more and I am surprised this view isn't more common amongst economic liberals.
There was a very good article today along these general line in Von Mises blog. Have a read and see what you think:
http://mises.org/story/3413
Not only should a bank have been allowed to fail, but there should have been some public "executions" of those who ran the banks so badly that they did not even know how much debt was on the balance sheet.
ReplyDeleteThere is a statutory duty to keep proper accounts. I would say that if a bank cannot tell the level of debt it has bought then it has failed to keep proper accounts and prosecutions would follow.
Those running a business need to know that if they negate their legal responsibilities then there will be consequences. A few high profile prosecutions would soon get the message across.
And lets not forget, they are loads of homeowners on NR's variable rate that are being cruicified by a non-competitive to the market rate, but who's credit rating is to shitty to move to anothewr lender.
ReplyDeleteWhere's Labour compassion for those poor sods?
Iain, you've changed your mind a little!
ReplyDeleteI suggested to you about 6 months ago that the banks should be allowed to fail and you posted back to call me 'deranged', 'I've seen some ridiculous posts but that takes the biscuit'.
I've come to the conclusion that you are missing your vocation - as a politician.
I pity poor Leeds West. Yet another NuLab zombie being thrust onto them. Where do they find these people? Is there a special training school for them? I imagine she's expecting a sinecure for the next 50 years.
ReplyDeleteAs Andrew picked up, she claims Tories allowing people to lose thier jobs in 'her' constituency is callous. What does she think about rising unemployment rate?
ReplyDeleteGoing to stick my neck out here, and expect to get shot down but could someone with a better grasp of things than me explain why it would be so bad to allow a bank to fail?
ReplyDeleteFrom what I have read (and understood) about "fractional reserve" lending, the banks were lending out say 8 times what they held on deposit. So wouldn't it have been cheaper to let the bank fail, and then merely compensate depositors?
All those outstanding loans would be written off, and all those individuals and companies would immediately be better off?
And shareholder loss of value would not be that great as share values in the whole banking sector had plummeted anyway.
Wouldn't that be cheaper than the £200 billion cost of bailing out the banks and the additional costs of supporting individuals and companies with welfare payments and aid packages?
And on a callous level, surely the loss of banking jobs would have been less than subsequent job losses in the wider economy?
Just a thought!
she`s just an inexperienced member of the New Nasty Party.You have to make allowances Iain..
ReplyDeleteIs it just me, or has Labour's answer to the crisis not been like scolding a child and then giving him a bar of chocolate to feel better?
ReplyDelete"Oh, you're in trouble. Well that's very bad of you. Oh don't cry. Here's a sh*t load of money"
Iain, are you aware that she's a former BOE economist, and could clean the floor with you debating this?
ReplyDeleteA news item recently mentioned that the last maker of piano's in the UK was about to close. In 1930there were something like 360. Things have changed since 1930. In the first decade of the 21st Century we have had far too many people employed in financial organisations of one sort or another, including banks, and estate agents. If Rachel Reeve thinks that mega borrowing to keep this lot going makes any remote sense then she is far removed from any reality. Perhaps she should take up the piano?
ReplyDeleteUmmmm... why would anyone have watched Sky News Unplugged if the best pro Government comentator they could find was a young candidate?
ReplyDeleteNot worth arguing with, I'd have thought.
"You can't run an economy like you run a co-op."
ReplyDeleteI'm hope you are not having a pop at the Co-op. It may be a little too close to the Labour Party, but The Co-operative Bank seems to be the only one that knows how a bank should behave.
Anonymous 5.16. I am indeed. And I think most people watching the exchange would probably have said that it was the other way around...
ReplyDeleteI would. Whoops - sorry - wrong thread!
ReplyDeleteAll the people who have lost their jobs wghile their taxes are paid out to bankers, and they are forced to docaual menial tasks for minimum wage, if they are lucky. Callous!
ReplyDeleteWhy are you wasting your time and blog space on such a nonentity? Her ramblings are worth nothing. They don't make sense and she is unelected, her opinions count for nothing and she is of no importance.
ReplyDeleteWe''ll hear no more of her Mr D
She does have a remarkably safe seat to contest (if Labour lose that they'll be in double figure total seats!) so we may yet hear more from her. Nevertheless, I wonder how John Battle, the incumbent, feels...
ReplyDelete...while all their taxes are paid out to bankers...I can understand the visceral dislike displayed by many for "fat cat bankers", but how about trying to think with your brains rather than your "Eds" for a second?
ReplyDeleteIn the gadarene rush to scupper the, at most, few hundred "fat cats" who have, admittedly, managed to trouser rather a lot of our dosh, nobody seems to give a damn about the couple of hundred thousand ordinary employees of the institutions concerned. What about them? And the bank shares held by pension funds - on behalf of literally millions of other working people?
It might have been "satisfying" to have let the major banks go to the wall, but it would have been utterly catastrophic.
Andrew, was that the turning point where it was all getting better until Lehman was allowed to go bust and since then it's been getting worse? Or is that the turning point where it was getting worse until Lehman and then would have got better if it had been saved?
ReplyDeleteAllowing Lehman to go bust was certainly a disaster for its creditors and employees, the people who'd been encouraging it to make risky loans. Saving RBS/Northern Rock/HBOS has been a disaster for taxpayers. Call me an old fashioned socialist but I know which group I think the government should be supporting.
Investment banking should be separated out for clearing banking (as it used to be). If you take deposits on the high street you shouldn't be allowed to gamble them on the international casino. If you did this nobody would care about them going bust. They could then even be less regulated.
Digger asks, "How old is she?"
ReplyDeleteWell, I cannot answer that question, but she looks older than "Lord" Gould's newly graduated 22-year-old daughter who is being parachuted into a safe seat in London. I don't wish to sound cruel, but it had better be a pretty sturdy parachute. Have you seen her photo?
More like..
ReplyDelete'Bitter, grumpy and middle-aged ? Moi ?'
If you read the reports, NR couldn't be allowed to fail because its IT systems were so crap that it couldn't physically have coped with returning deposits to savers even if the govt had guranteed them 100%.
ReplyDeleteOf course, it must come as a shock to know that a fine institution such as NR could have been so incompetently administered. After all, the Non-Exec responsible for its Risk Committee was, I believe, Derek Witless.
The same Derek Witless who decreed that National Health spending should rise exponentially, secured on the tax yield from a ballooning financial services sector. Whoops.
R56
p.s. Bradford and Bingley was allowed to go under and there was barely a ripple as the retail arm was taken by Santander and the loan book by the Govt.
Anonymous 5.16
ReplyDeleteA BOE economist? - you mean like that economic expert Kate Barker who insisted that we should concrete over the south of England because the high house prices were due to lack of supply?
Strange that house building has stopped but house prices are still falling....perhaps easy money might have been a factor... but the economic expert didn't think of that.
It is a conspiracy, as all of the greatest crimes are.
ReplyDeleteIf this extremely serious criminal case could find an honest judge, which of course it could not. Then half of the big brass of the national and international banking system, along with the entire cabinet would being doing life without parole very soon.
IMO anyone that indicates otherwise is either being conveniently and desperately economical with the truth. Or is directly in on the conspiracy. Or knows less about the vastly evil history of banking, then the average Sainsbury's check out girl, or prospective New Labour MP.
Therefore Iain. Can I sell you some double glazing?
Atlas shrugged
Iain,
ReplyDeleteYou need a database of what these Labour spokespeople have actually done in their lives.
You'd be hard pressed to find one who's actually been involved in wealth creation.
Most of them have done PP&E at Uni then been researchers. Most of them would struggle to read a balance sheet.
she`s just an inexperienced member of the New Nasty Party.You have to make allowances Iain..
ReplyDeleteApril 23, 2009 5:15 PM
Time to get a new spell checker.
You don't spell Nazi, n, a, s, t, y.
A bank is a Ltd Company with shareholders and employees - just like any other Ltd Co in fact.
ReplyDeleteThey are in business to make a profit - just like any other Ltd Co in fact.
If a bank goes to the wall, its employees lose their jobs and its shareholders lose their investment (from which which they have been happy to take profits for decades) - just like any other Ltd Co in fact.
If a bank disappears, its competitors will grab the chance to fill the gap - just like any other Ltd Co in fact.
NR should have been allowed to go down the pans - it would have gee'd up the others and Lloyds would not have got involved with RBS, the only reason NR was saved and Lloyds coerced into the RBS disaster was to protect Nuliebour's votes...
Broken window fallacy.
ReplyDeleteBy saving those 74,000 jobs, how many other jobs elsewhere had to be axed?
You're a mug if you think it would have been cool to allow some big banks to fall over completely. The effects would have been catastrophic. A Tory government might have fine-tuned it differently, but they would have done the same basic things as every other western government.
ReplyDeleteAnyway, Northern Rock is actually substantially repaying it's taxpayer loans.
If only someone would give the same treatment to that obnoxious woman who goes on news programmes and disgraces the title of Chief Secretary to the Treasury.
ReplyDeleteJumped-up, hypocritical, Socialist trollop.
ReplyDeleteSafe seat and large majority are they politically correct speak for "Does my bum look big in this?".
ReplyDeleteOne for Tottywatch I think
ReplyDeleteAs Ritchie Blackmore of Rainbow would say (but probably not in Iain's top 100)
"Don't know about your brain but you look alright"
You are not callous - she is epically economically clueless.
ReplyDeleteyellowbelly @ 5.14 "So wouldn't it have been cheaper to let the bank fail, and then merely compensate depositors?" Yes.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteWhat you, Anthony, Andrew Efiong, digger, Hawkeye said.
ReplyDeleteIain, you are not callous, you are pragmatic and a giver of tough love.
Lehmans was right to go down. How many US banks are state owned? Northern Rock should have gone down, but did not.
If you look at it, Nat West (alas tarred by RBS), Lloyds (shotgun "marriage"* by HMG), Barclays (still refusing Gordon's silver and good on 'em) and HSBC would all have survived. I bet if RBS had gone down, Nat West could have been plucked from the rubble. So, all 4 main English banks would NOT have gone down.
This was about Northern Soviets and Gordon's ego at seeing the risk to two Scottish banks, including a note issuer.
The housing bubble would still have burst and that can be laid at the feet of Gordon and all those oh-so-clever BoE economists who appeared to be happy to follow (and some still think it is worth following) the price index even in the face of a downward price trend and upward volume trend in imports.
To me the job of the BoE is to fulfil its obligations, namely to keep Sterling stable in value. They failed and are still failing.
* there is a more robust term for what happened on that wedding night...
Exactamundo, Ian. These idiots in British banks took on toxic American debt. You have to ask why, since they are traditionally risk averse. They only offer you an umbrella when the sun is shining and want it back at the first hint of rain. I think at least one bank should have been let to go bust to encourage the others. In the long run the jolt of reality might have been efficacious. It isn't up to governments to protect limited companies or building societies, even if it is a Labour voting heartland where they are mostly situated. Ooops, I wonder why I wrote that?
ReplyDeleteVerity: I have just deleted your comment because it appears to have been missed by the blog author's comments policy.
ReplyDelete"Comment deleted
This post has been removed by the author.
April 24, 2009 4:57 AM".
LOL. Iain!
Hat-Tip to Dizzy Thinks.
Hmm innacurate article and nasty, innacurate comments. Thought the Tories were "nice" now. How many of you have actually met Rachel?
ReplyDelete