Tuesday, 15 September 2009

Shock News - Brown Is Appalled

Now they are in for it. Gordon Brown has gone public on the fact he is 'appalled' having found out that some financial firms are continuing - or even extending - their bonus culture.

The world must be a constant surprise to poor Mr. Brown. I mean, he thinks and says one thing and people do the opposite. He observes how things should be and then, blow him down with a feather, things behave very differently. It must make him very excited about getting up each morning as he would keen to find out what else has happened he didn't expect.

In the case of the banks, he clearly thought that because all those executives and traders who had been making millions had run up against a wall and lost the lot, that they would feel a great deal of contrition and not want to go through it all again and earn even more money than before. How it must have shocked him that, after he saved the world, and used the hard earned cash of his loyal and worshipping public to bail out the failed financial people that they did not kiss his backside for saving their rotten necks and then all become the financial equivalent of monks - living off the land, wanting no rewards save the joy of living, weaving baskets, treading grapes and distilling fortied green liquors.

Now it has come to his attention that indeed bank executives and other financial people are not behaving the way he had anticipated. In fact, the moment their companies were saved by the global $11 trillion of bail outs, of which Mr. Brown contributed £1.5 trillion on our behalf, it seems that they immediately whooped it up and started all over again. It turned out that the credit crunch had not dried up the flow of cheap money after all - these financial genii had found a new source, the public. Even better, they did not have to seek their permission to get the cheap money, there were no rules or nasty contracts attached, indeed there were no real requirements to pay any of it back - all they had to do was to lose a load of money and the public would continue to pay. If anything, the financial world had a new instrument that allowed them to take even more risks and try to earn even more money which they could pay themselves as they had discovered the one thing that was missing from their bold scheme/scam to make money - an unlimited underwriting of all debts they incurred should they fail, now or in the future.

Mr. Brown must be shocked indeed. After all he gave all that money in good faith. He did not ask for seats on the Boards at banks he had 'invested' in, instead he wanted them to carry on with much the same staff as before as he was convinced they would not want to risk all that again. He did not go to the regulator and sack him for total incompetence and sleeping on the job as that would be churlish - instead he asked the same incompetent fool to write up the rules again with slightly different language and give them a new grand name - Macroprudential Regulation - which would help make it abundantly clear to the public how banks could not overstep the mark again. The fact the public had no idea what the title meant but could plainly see that none of the regulations had changed did not seem to occur to him. It must have sounded different when that hopeless fop, Lord Turner and his willing but intellectually challenged sidekick, Hector Sants, had presented it to him like the characters from 'Pinky and The Brain'.

You see Mr. Brown has a head for dates. He knew that one year ago from today, Lehman Bros bank failed and was allowed to collapse. Inside, he knew that was a massive mistake by the Americans as he had stepped in and saved all the UK banks. Not one of them had been lost and every saver's bit of cash and mortgage had been saved. He even went after those nasty Icelanders who had 'stolen' the savings of many people including our Local Authorities who also had played gambling games with people's money. It came as a nasty shock to Mr. Brown that in a world of derugulation and globalisation, which he decreed should be saved at all costs, that if British subjects had put their money into foreign banks who went bust, then they would not get their money back.

15 September 2008 must have been a dark day for Mr. Brown, and as he went to bed that night with his mug of cocoa he must have thought, 'Now there's something new I learnt today - what went up must come down, particularly if it was traded on hot air.' Sadly, he failed to connect the very clear dots. The financial system he was hell bent on saving was only being set up to carry on, there was no understanding that the system was flawed at its very heart and merely giving the cancer victim an aspirin may only stave off pain for a short while but it does nothing to solve the problem.

But now he is back and fighting. The new eco-friendly light bulb has gone on in his head and he has decided that banks now must be regulated more vigorously. He is going to fly to Pittsburgh in his superman outfit and tell those G20 leaders exactly what for and demand that the world once again follows his fearless lead. In aggressive language he has said:

'Now I will want an agreement - because we are talking about banks in other countries as well as banks in Europe - at the G20.' Clearly Mr. Brown has read the Ladybird version of the banking system and discovered that other countries have banks too - this globalisation thing may have some credence to it, you know.

In a rare moment where he admitted that he was less than perfect, he said. 'It's true that the mood of opinion in Britain was that we needed less regulation and not more. Now we've found we need more.' It was a clear 'No sh*t Sherlock' moment and he obviously believed he is the only world leader that had discovered that banks were out of control in the past - thanks to his own personal 'light touch' approach because he did not want the poor lambs to become uncompetitive and leave the City of London as a third rate financial centre where people came for loans of last resort only.

'We should have all been supervising more,' said Brown sternly as he neatly deflected the blame to fictional others whose role also was supervising even though it was his fault that the FSA stuck their feet up on their desks and played online poker while the banks melted down. Now he wants us all to feel we can trust banks.

At this point, it seems that Brown has lost touch with reality. You see, the public never trusted banks as they watched young numbskulls make millions by creating and trading products that served no earthly purpose and had lost all connection with the assets they purported to represent. In our feeble way, we had already guessed that the banks were trading blocks of nothing and pretending they were worth something. We also know that the same is happening again. It must come as another terrible shock to Mr. Brown that banks are buying former Lehmans open derivative positions for anything from 10 to 50 cents in the dollar in wild speculation that when the liquidators have unravelled the mess, they might find some of them are worth something.

Now, maybe I'm being naive here. We have just bailed out the whole system, we have collectively paid trillions to do so, covering the immense losses that allows liquidators to write down such derivatives to virtually zero because we allowed such contracts not to be honoured - a debt obligation was forgotten about, a default swap was allowed to disappear. Now, in the aftermath of the largest corporate failure in his history, we are going to allow the vultures in the banks to pick over the failed pieces and find small nuggets of gold in order to make money again trading the very same products that ruined us.
We must be stark raving crackers, the lot of us.

It isn't regulation that is needed - Yvette Cooper's 'Janet & John' book on the financial system does not quite suffice in situations like this. The banking system needs a fundamental reform and the time to do it was when they needed the money to survive as they would have had no choice but to comply. Instead, the whole gravy train is back on the tracks again, the banks are making money, the leaders of the countries are satisfied disaster has been averted and the system is slowly reviving. The banks have all their power restored and the very people who ruined us are being paid for their thoughts and leadership on the solution. It is not a bit of wonder that they do not want change and now they are once again 'Masters of the Universe' and the types that Blair, Mandelson and Brown bent their heads and so very gently kissed the backsides of before, are once again calling the shots.

Mark my words, there will be few constraints applied to the system - reform will not come and companies will be allowed to make money out of Lehmans' losses. 15 September 2008 was a very dark day for the world generally. 15 September 2009 is even darker because we have just reset the House of Cards to be puffed over by the gentle waft of a butterfly's wings - again.

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