The Solution To The Banking Problem - Hire Bankers!

In a unique demonstration of 'blue sky' and lateral thought in order to solve the UK's banking problems, the Government have surprised everyone by hiring bankers to solve the problems.

Cutting Edge Decision Making

"We have been asked to assess the amount of toxic debt and cover required for a 'bad bank' to work," said Sir Giles Flogmorton, Senior Analyst at Investment Bank Bust Bros. "Only bankers can understand the complexity of the problems at stake and have unfeasibly large enough fees to sound as if we know what we are doing."

When asked if he thought that asking bankers to solve the problem was asking the cat to protect the mouse Flogmorton answered, "I don't understand your point. What has a cat got to do with banking? The real issue here is getting Britain back on its feet again, getting confidence in the banking system and get all the lads and lasses earning big bonuses again. You cannot believe the hardship these guys have been through. How would you like it if you didn't know where your next Porsche was coming from or when you can blow £20,000 on a La Gavroche expenses lunch? The last few months have been hell."

Bad Bank - Very Bad Bank

The key issue lies in actually identifying 'Toxic Debt' and assessing it.

"Finding Toxic Debt is a tricky business but we experts know it by its smell and colour," said Flogmorton. "It has a sort poo hue and it smells like an Alsatian's fart. Once we have found it, we ring fence it with the type of long tape you see in police dramas and then stick a small flag by it so no one steps in it."

How do you assess how much the debt is worth or needs to be written down. "We are bankers, you know," snapped Flogmorton. "We can bloody well add up even if the rest of the nation can't. It's simple, once you have identified the Toxic Debt and ring fenced it then you go to the Government and ask for 90% to be insured."

90% of what, though?

"90% of the bloody debt, stupid," replied Flogmorton tersely. "Look, we bankers are very exacting people - 90% is an exact amount of the debt."

But, don't you have to assess each debt and work out how much it is now worth and insure the loss?

"Good God no," sighed Flogmorton. "If we did that we would have to unpick 10 years of hard work getting it all wrapped up in convoluted derivatives, exotics, how's your fathers and what-not. The sensible approach is for banks to just take all their debt and revalue it and give that as the sum to insure to the Government. All they have to do is pay a fee for the privilege and the they can start lending like free spirits again and get the whole show back on the road."

So what's stopping banks over estimating the Toxic Debt and just getting the entire debt written down a bit and insured, letting the public pay for it?

"And your point is?" replied Flogmorton. "It's good business practice. Now we have a bunch of mugs who'll pay for anything to get us out of trouble, why not just make up numbers and tell the Government to insure it. Nice way to get your balance sheets nice and sweet for the future."

Isn't it a conflict of interest asking bankers to advise on this? Won't they come up with a solution that just sorts out banks and not look at the bigger picture?

"The bigger picture, my dear friend" replied Flogmorton, "is that banking is the bigger picture."

So what about this 'Bad Bank'? Who will run it and what will it do?

"Well Bad Bank will be incorporated shortly by changing the name of The Bank of England to 'Bad Bank, Very Naughty Bank Indeed plc'," said Flogmorton. "It will be run by top flight bankers earning fortunes who will guard the Toxic Debts as if they were a pile of jewels to be fenced and they will make a pretty penny in bonuses for it. It will basically ensure that the debt stays put, is ring fenced and continues to smell very badly."

Will the bank pursue the debts and make people or firms pay?

"Who cares?" replied Flogmorton pragmatically. "Now that's it's been ring fenced and thrust into a bad bank, why should we bankers worry about whether its paid or not? That's what taxpayers are for - paying for the stupidity of the last 10 years. Once the debts are off the balance sheet, it's 'up yours and away', old pal. Someone else can clear that one up, but for a nice fat fee Investment Bankers like me can sort it all out. We are the ONLY ones intelligent enough to be able to do it, you know. But, my, will it cost you, old chum."

Finally, how much Toxic Debt is there? Is there a limit to how much the Government will spend on all this?

"Frankly, that's not our concern," replied Flogmorton. "It's far more important to preserve our way of life and our jobs. So I'm off to the office to collect my bonus check and get down the Ferrari garage. I don't want to be left with the last one again."

Sir Giles Flogmorton is Senior Partner at Bust Bros Bank, an Advisor on Toxic Debt and is the author of "Ya boo, it's derivatives, baby", a seminal work on modern banking available in Penguin Books.