As the world's intelligentsia stay on for the World Economic Forum in Davos, we get more of a picture that the global financial bail outs are not much more than guessing games.
'No Clear Map'
Perhaps for the first time, Gordon Brown, admitted that there was 'No Clear Map' for this crisis, but he was swift to defend himself by saying this was the 'first financial crisis of the global age' and therefore there was no historical precedent for tackling it. It comes as cold comfort to taxpayers generally who really look to senior Politicians and their vast rafts of economic advisers to be showing not just leadership but knowledge of how to solve these problems, particularly when such vast sums of money are at stake.
I do not think I am alone in saying that when a Government throws £900bn of money we do not actually have at a problem of this magnitude, you would like to think that either they know what they are doing or they can be accountable for every penny.
It seems Brown is getting his excuses in early, after the first bank bail out did not work and the second seems to be just good money thrown after bad.
At the same Forum, John Monks, General Secretary for the European Trade Union Confederation, told the audience that Governments were, 'close to straining the patience of the public and voters'. I am glad to hear that there is someone in a significant position who is standing up and saying this.
Use of Money
It comes as further cold comfort that newly elected US President, Barack Obama, who is not attending the Forum, is concerned that much of the monies used in the bail out is actually going to fund bonuses for banks. He seemed shocked that some $18bn had been paid to New York bank executives for performance last year SINCE the start of the crisis and the subsequent bail outs. He criticised these executives heavily for such use of the money particularly when the world's eyes are upon the outcome and more importantly US taxpayers are funding the liability for bank excesses which caused the situation. He even had to step in to cancel Citigroup's $50m private jet order as executives there did not seem to have enough morals to work out it was not the time for corporate toys having laid off over 70,000 staff as a response to the crisis.
Bankers Solving Problems
It really comes back to central point I have been making. The crisis, and I think there is a global consensus here, was caused by the over-zealous money-making activities of banks which went unregulated and unchecked. Now, Governments are turning to the very same people to try and plot their ways out of the incredible mess they created - poachers turned gamekeepers.
I have a fundamental problem with this. Yes, I agree that credit, capital raising and lending fuel business and the economy and this is fundamental to the solution, but I do not believe that bankers have all the answers to the problems.
Here are some obvious outcomes that we see - $5 trillion globally has been put up to solve the problem yet there was zero caveat for any bank to stop paying bonuses, the absolute very heart of why the situation got as bad as it did. It almost is too stupid to think about and anyone with a mere thread of moral fabric would have had the sense to have made any bail out contingent on no bonuses.
But this is what you get when you ask bankers to solve the problems - they will tell you that you NEED to have this money-making hunger in the system in order to start up the engine again as it is essential 'oil to the machine'.
That Barack Obama is upset by this is indicative that the last President allowed banking executives to lead his thinking, led by former Goldman Sachs CEO, Hank Paulson. The heads of the Feds have similar problems. In the last week or so, a company bearing the Paulson name but we understand is not connected to Hank, made £90m shorting RBS shares.
Here's the rub - on the Board of Directors of this Hedge Fund is none other that Dr. Alan Greenspan - yes, the very man who dictated US Fiscal Policy for so long.
It comes as no surprise that after 10 years at the top of Government, driving policies that made a thin percentage of the world's population rich beyond all comprehension, that Tony Blair is rewarded with a £1.5m per year Non-Executive Directorship at Morgan Stanley to advise on 'Globalisation' - the very subject that Gordon Brown says we don't have enough experience on.
Breaking Links
It is way, way too common to see senior career Politicians and Civil Servants getting involved with banks, watchdogs, lobby groups and consultancies whose very purpose is to exploit their current or future positions. It is at the heart of the problems we have seen in the House of Lords recently which came as no surprise to the public just as the whole sordid Deripaska affair seems to slip by the moral attention of Government. It seems it goes with the job.
The bank bail outs are sums of monies far outside the understanding of common people yet we know that these bail outs are the supposed salvation of our way of life. So it is not too much to ask for that when such incredible amounts of money are spent it is a) done with our best interests at heart b) that none of the money is paid to any individual for bonus purposes and c) that the people who make the decisions are held accountable for every single penny.
Legacy
The legacy of these bails out, and there are likely to be more yet, is that the UK debt burden will last around 20 years according to the independent Institute for Fiscal Studies (IFS). Gordon Brown may scoff at such numbers but there is enough intelligent, independent thought that questions much of the global response to the crisis. Joseph Stiglitz, the Nobel Laureate for Economics, at the Forum has said that creating a Bad Bank is just 'Good money chasing after bad', labelling it 'cash for trash' and would leave economies picking up the bill for years of excess lending by the banks, depriving spending on other social needs.
So while Gordon Brown tells us blandly that he has no real idea how this crisis will pan out and be solved and he commits more and more cash to the whole business on our behalf, while others in the world have actually challenged the thinking so that the legacy to the world's taxpayers might actually be more manageable.
While taking the bad debt out of the system theoretically sidelines the problem so banks can again lend more freely is one way to solve the problem, it does mean that all that toxic debt is to be paid for by the taxpayers. There is zero long term clawback of bank future profits other than some kind of insurance premium to pay it back. It is 100% assumed the public will pick up the tab.
So I ask one question - what is going to stop banks doing all it again? For all the 'New World Order' and increased regulations promised, we did not even have enough sense to stop any bail out money being used as bonuses.
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