Banking Shambles

I don't think it's appropriate to mention that Wales defeated England 23-15 in a terrific game at Cardiff yesterday. So I won't.

I will, however, point out that I have blogged before on the subject that the series of knee-jerk, guessing-game responses to this whole financial crisis by the Government has cost the British taxpayer far more money than it should have done and I firmly believe that we are open to a great deal more liability in the road ahead. Nobel Laureate, Joseph Stiglitz, has said, we should have let banks fail and started again, properly cleared of the full effects of the Credit Crunch to get a fresh start. I do not agree that we should let all banks fail but I do believe that some were not worth rescuing.

HBOS is now a classic example of how it should not have been done. Ken Clarke has called it a 'Shotgun Marriage' and points out it was a reasonably plodding, secure Lloyds TSB which was forced upon HBOS. And he is right - this was a union which the moment it was proposed, Lloyds TSB started to squirm and doubt. The price wasn't right, the risks were not assessed, the climate and timing looked bad - but what made it occur were three things:

1) The Government in the form of the PM himself forced the issue and stepped in at the eleventh hour to ensure that doubting executives were made clear on the consequences if this did not happen, 2) Anti Competition rules were personally waived by the PM in order to prevent the move being blocked on the grounds it created a single banking group with an unhealthy 28% share of the UK mortgage market and 3) The Government shored up Lloyds TSB's balance sheet to enable it to afford the takeover even though its finances were not strong enough to do so.

Now we know why these moves were stupid and ill-advised. Ministers tell us there were no other courses of action and that not a single depositor or mortgage holder was affected. The fact was they simply did not consider an alternative and moves by the Government subsequently made sure that mortgage holders and depositors were protected anyway. This was a merger that exposed taxpayers to potentially higher costs as we took a 43% stake in the new Lloyds Banking Group and then find £10bn of losses which has slapped Alistair Darling in the face and almost greyed his eyebrows.

Bewilderment

Every single day, Darling, Brown and Mandelson seemed to have this bewildered look on their faces as they stutter and stumble out their excuses as to why Britain is worse off than in 1997. They tell us that if they had not done anything then the world would have lurched into disaster and banks as we know it would have failed. Heavyweight personal lender, Geoffrey Robinson, has been wheeled out to say effectively no matter what everyone criticises them for, at least there is still a banking system.

And that is the point. There is still the same banking system as before and it had failed previously and it was morally, if not legally, corrupt. What Brown and his Advisers have done is attempted to preserve that status quo and that's largely what we have got. Brown is now 'angry' that bank bonuses are still being proposed and paid - even £120m is proposed to be paid at Lloyds Banking Group which clocked up £10bn of losses, even Northern Rock, wallowing in losses, paid 10% of its wage bill again in bonuses just because they managed to pay back some of the money it borrowed on time - and we own them outright. And dear old RBS just cannot help itself - despite record losses it is paying executives £1b of bonuses, and we own over 70% of it.

And are we any better off due to this fantastic bail out and bank system-preservation?

With businesses failing daily, mortgages hard to get, house prices falling, unemployment rising, repossessions rising, we are far worse off. And it is because the Government, as I have said before, had zero idea what it was doing when it embarked down this course of action, no idea of the total cost, and little idea of how it would be paid back. But worse still, it had zero idea of the shape of the financial system it needed for the future. Ministers surrounded themselves with dodgy characters or 'advisers' many already besmirched by their companies' activities and whose intentions and agenda were simply to preserve their way of life.

I am not an expert, but it certainly makes me sick to the core to watch this unravel in front of us and listen to excuse after excuse - and the slapped-face innocent look with hurt-puppy eyes saying, 'What else could we have done?'

You could have popped down the pub for half an hour, guys, bought a couple of pints, listened and you could have saved us a fortune. Instead we'll be paying dearly for the mistakes of a few idiots for a generation.