The longer this credit crisis goes on, the more surreal it becomes. Today, we were told that the Government has become angry with banks after discovering that 80 percent of lending activity went to overseas clients.
How could the government "discover" this now? For a start, banks are supposed to be regulated institutions. Banks are obliged to provide their balance sheets to the FSA, which is, at least in theory, a government agency. The Bank of England publishes this data, on a consolidated basis, every month. It is available on their website. Anyone with a computer and an internet connection can have a look at it.
Today's story is even more disturbing when we remember all that New Labour guff about London being an international centre of excellence for financial services. Did Brown and the gang ever stop and think who might be the customers enjoying all that excellence offered by city banks? Seems not.
Thus, it would appear that Brown and New Labour really didn't have much understanding about financial services. Nor did they have much idea of the risks involved by the unfettered growth of bank lending. Therefore, we shouldn't be too surprised if they are now struggling to diffuse the growing financial crisis.
Here is the story from the Telegraph
Whitehall sources said that they had discovered that some major UK lenders - including RBS, HSBC and Barclays - have had only 20 per cent of their balance sheets made up of "traditional" loans to UK households and firms.
Meanwhile, up to 80 per cent is tied up in loans to foreign nationals and companies, bond issues and other investments. The discovery is understood to be behind Gordon Brown's demand this weekend for bankers to come clean about the scale of their "bad assets" - including loans which have had to be written off at enormous cost.
The Prime Minister, speaking as ministers and officials drew up the second phase of their bank rescue programme, said in an interview: "One of the necessary elements for the next stage is for people to have a clear understanding that bad assets have been written off."
British banks increased their exposure to foreign individuals and companies during the booming financial markets of the last few years, a practice which raised few eyebrows at the time.