Morts Musings

I believe I’m far from being alone at being slightly irritated by the amount of UK tax payers’ money that’s been lent to the banks to help bail them out of a mess which they got themselves into, but on the other hand, as much as it grates, I have to accept the pragmatism of the move. Letting the British banking system fail would be a disaster for the country as a whole!

Still, I can’t help but feel that, to an extent, I’ve been bent over a desk and soundly violated. The bosses at these big banks have been creaming all the profits off during the good times, in the form of bonuses, share pay outs and the like, and now when things go bad they haven’t got anything left in their businesses pot, and so come to the govt cap in hand, knowing that the govt will have to step in. It seems totally wrong!

Annoyed though I am, my biggest concern is how we avoid a repeat of this farce the next time there’s an economic crash? The immediate instinct is to impose regulations on our banks to limit “fat cat” bonuses, and incorporate some level of legal liability for those responsible for making the kind of reckless business decisions that have lead us to our current state, but sadly it’s just not that simple. It would all be fine if we operated in a closed market, but with today’s globalised world it’s very hard to control big business, if you impose regulations that are too stringent upon them they’ll just relocate and base their business in some tiny nation that’s willing to impose far looser regulations in exchange for the cash that international business of this magnitude would bring to their economy.

So, for govt it’s a balancing act, when these big businesses are doing well they are good for our economy, and since there’s obviously a demand for banking services in this country we need a banking system, of some sort. At the same time though it’s clearly not acceptable to have a situation, like the one we’re currently experiencing, where the banks are effectively holding the govt, and tax payer, to ransom.

It strikes me that if ever the UK govt is going to be able to get away with imposing regulations on the banks which they might be less than happy with, it’s going to be at the point where they’re being lent an awful lot of tax payers money to bail them out. So my questions to Mr Brown are, “just what have you got for our money, and what steps have you taken to stop this happening all over again, in another 10-20 years, when the economy enters it’s next big down turn?”

So far I’ve not seen much in the way of details of the deal between the govt and the banks, but the fact that not all the banks have bothered to follow the Bank of England’s cut in interest rates doesn’t give me much hope that the govt negotiated sharply on our behalf.

Realistically, all I can do is wait, and see how things pan out. I’ll hope for a pleasant surprise, I’ll hope that the govt has had the guts to make some demands of the banking system, and will give the FSA a well deserved kick up the rear, but the fact that, as of lunchtime today, Northern Rock and Bradford & Bingley (two banks which the govt owns!) haven’t bothered to cut their standard variable rate yet, doesn’t give me a lot of hope!