Let Them Collapse!

I have to admit I am not a fan of wholesale rescuing of banks but I draw the line at letting a freefall for all happen, but this is the view of Nobel Economics Laureate, Joseph Stiglitz. He might know a thing or two.

I am glad that this week there has been a few notions in the press which support my often forlorn views on my blog and today saw Stiglitz questioning wholesale bail outs of banks and then there was an article questioning the freebie rides of Non Executive Directors.

Thank God - I thought I was going mad.

To Heck With The Lot of Them

Stiglitz was still at Davos and he was extolling his view that the Government should allow every distressed bank go bankrupt and set up a fresh banking system under the temporary control of the state rather than cripple the country with long term debt.

Stiglitz argues that the UK taxpayer should not have to fork out for the next 20 years and sacrifice our standard of living to undo the mistakes of a just a few executives who blew the system - and arguably continue to support their lifestyle. He further asserts that while it may cause turmoil in the short term, it is a cheaper way to deal with the whole issue in the end.

Stiglitz does say that the Government should underwrite all deposits to protect the UK's domestic credit system. It should also use the skeletons of the old banks to build a healthier structure - making the new banks more credible without the current liabilities.

He further claims the City would survive the shock of mega-default because it would uphold the principle of free market responsibility, i.e. the notion that any counter-party who entered into these voluntary agreements must also accept the consequences.

Wow!

I have to say it really echoes my thoughts on this but sadly I have no grounding to argue the points. However, I cannot contemplate the idea that all banks should be allowed to slide - the ensuing chaos may be too hard to bear. With precious few exceptions, it would argue that all UK banks, possibly with the exception of HSBC, would be in the firing line to go bust. Perhaps we should allow those with the most flawed model to go, but that does argue we would use a selective process and favour some companies over others - hardly fair and certainly not in the spirit of free market economy.

But I like Stiglitz's thinking. I also share his view that the best the bail outs, guaranatees and even a bad bank can achieve is saving the skins of failed bankers and possibly making sure Brown can survive his last years in power and cling to an ever decreasing hope of being re-elected.

Certainly, I think at last we have a credible alternative view to this senseless act of waste by Government, blindly following a theory which is unproven at best and wrong at worst. The sad fact is, as some argue right now, we have little hope of actually seeing when it it could be successful.

Non Executive Jamboree

The Telegraph today supports a big problem I have with modern corporations, sadly followed blindly by SMEs - the Non Executive Director freebie. Tiny Rowland famously described NXDs as like 'Baubles on a Christmas Tree' and I cannot think of a more apt description.

Firstly, it is a closed club. It is hard to get in unless you are a Politician, a Peer or a Senior Civil Servant or possibly a person with some notoriety from business. The whole gravy train that is NXD bypasses the raft of experienced, knowledgeable and highly successful business people who have far more skills to add value to companies than some of the idiots and hangers-on that occupy many such posts today - and that's probably being kind.

Secondly, many NXDs openly crafy a 'portfolio' of companies that they serve on the Boards of - as many as 9 or 10 at a time. At a day a month for each, what possible sustainable value can they add in such a short time? As thousands lose their jobs due to the lack of moral fibre, skill and time applied by these NXDs in questioning and guiding the companies they supposedly work with, these are the very characters who are impregnable and bear zero reponsibility for the performance of the company. They are the last to be booted out, if ever, which really must make those affected by redundancy furious.

Thirdly, once you are on the gravy train, it's a self perpetuating model. The more Boards you serve on, the higher your 'stock' and therfore the more you are sought after to serve on more. It's hilarious when you think of it but in reality it is actually very serious. Tony Blair is a classic case of former Politician serving in a non-position on a Board at Morgan Stanley earning £1.5m a year for precious little time. Here was a man who got paid less than £200,000 per annum for being a full time Prime Minister - he leaves Parliament and suddenly for no more than a day a month he is worth a pro-rata £30m a year should he do the job full time.

It's that stupid and that obscene.

There are moves afoot to get some change but back-scratching and cronyism is the hallmark of the NXD circuit and they are quite simply the easiest jobs in the world as they have zero responsibility.

In the wake of failed banks teetering on the edge oblivion, having lost billions of pounds, these NXDs served on the remuneration committees that actually allowed characters like Dick Fuld, Fred Goodwin and John Thain to hand out £ billions in executive bonuses even when they knew losses were being made on unprecedented scales. As banks worked ever increasingly dangerous models, not one of the NXDs associated with any of the banks at any time stepped in to curtail the executives and stop them driving the banks into oblivion. All will survive with not a jot of culpability and carry on serving on the Boards of corporate after corporate.

It's pointless having reviews and pretending it will change. It's the best gravy train in town and no one will stop it, least of all Politicians and Civil Servants as it is their retirement bonanzas on top of their fabulous index-linked pensions.

SFO Scams

The shiny new SFO chief, Richard Alderman, has a wave of positive press to prove he is the man to get things cracking. The sparkling articles paint the picture of a man on a mission - and currently the SFO is tackling cases worth £4 bn of fraud. Sadly, there is an estimated £14 bn of fraud committed in Britain every year but you have to make a start I suppose.

And that's the issue. There have been lots of allegations of cronyism in the SFO and after a hard-hitting review by former New York prosecutor, Jessica de Grazia, several top notch lawyers and executives have been cleared out when she questioned how the SFO operated.

Such lawyers had the last laugh as many were given large pay offs of up to £240,000, it is alleged, for the upset caused of losing the jobs given to them by benefactors. Not quite in Lord Mandelson league of compensation, but there is only one 'Dark Lord' and he can certainly look after himself one it comes to pay offs.

British Jobs For Foreign Workers

Good old Frank Field! He has echoed my mornful blast of last week by saying that the Government and more personally, Gordon Brown, is to blame for the systematic ignorance and bad handling of immigration and asylum policy. A long while ago, William Hague, lost an election campaign on this issue - and sure enough, after all the ridicules by Blair and Co, it has come back to haunt us. At the heart of the issue at the Total oil refinery in Lincolnshire is the problem of foreign immigrants and migrant workers taking British jobs and others who may end up causing strain on our welfare system.

It is not a race issue, as the Unions have pointed out, as back in those election days, the Chair of Commission for Racial Equality (Phillips?) backed Hague in saying border controls are crucial to protect the jobs and future of those already in the country, regardless of race.

If only the PM put as much time, effort and money in protecting the future of this country instead of just the skins of failed bankers perhaps we would get a more sensible approach to this crisis. He tells us that no Government has done more to saveguard jobs - he is talking rubbish.

Unemployment is now higher than when his party came to power. Then again, New Labour never did mind a lie getting in the way of a good story.