Tuesday, 17 July 2012

The FSA had one official watching over two of the countries' largest banks

Just when you think you have heard it all, Lord Turner-head of the FSA-comes along with the following outrageous admission:

Part of the story of the FSA at that time is that we did have, we never used the word, a somewhat light touch regulation in particular in those areas of wholesale conduct.

We were only to a small extent focused on the activities of investment banks. We only had about five people on Barclays and five people on RBS. At one stage we only had one person that was shared between Barclays and RBS.

Yes, that is right; there were times when the FSA had just one solitary official watching over two of the largest banks in Britain. One of the banks - RBS - subsequently failed, requiring a massive financial intervention from the government. The other - Barclays - has just been found guilty of manipulating its LIBOR submissions. Pre-crisis, the FSA simply didn't understand what was happening inside the UK financial system. They missed all the signs, because they couldn't be bothered to assign any staff to watch over these two behemoths.

UK government could announce today the immediate closure of the FSA and the end of financial regulation. It would not make a jot of difference to the likelihood of avoiding another financial crisis.

For all practical purposes, UK investment banks have been unregulated since the creation of the FSA. It begs the question, why start now?

Increasingly, I'm beginning to realise that the financial crisis wasn't the result of a few deviant bankers. In the ten years before the crash, this country created the infrastructure for a financial disaster. We had a central bank that claimed to be focused only on inflation and had no interest in asset prices. Yet, when house prices started to wobble in 2005, the monetary policy committee promptly cut interest rates, sending house prices skyrocketing northwards.

We had regulators who couldn't be bothered to actually staff teams to follow developments in the largest banks in the country. It is also a fair bet that the few solitary regulators assigned to look over the Barclays and RBS didn't have a clue what those banks were doing.

And we had, inside each bank, a crew of corrupt bankers, who would, proverbially speaking, sell their grandmother to a slave galley, if they thought the transaction would pay them a groat. Over in Westminister, our elected MPs were busy writing up falsified expenses, and paid no attention to the unfolding catastrophe that the financial sector that was cooking up the river.

What did the rest of us do? Those of us who owned property loved every minute of it. Those who did not were left out in the cold.

Now, five years after the crisis, the truth about our desperate situation is beginning to slowly emerge. The economy is a wreck. It is uncompetitive; starved of credit, and cannot grow. Our government cannot reconcile its revenues with its expenditures and it is running up, year after year, massive and unsustainable deficits. The Bank of England is printing money in order to buy government bonds from the banks. For their part, the banks are depositing the money back into the Bank of England. Across the Channel, the economies of our main trading partners have begun to implode.

Who is to blame? I'm beginning to think that it doesn't really matter any more. It's not as if anyone will be held to account, because we have collectively forgotten what it means to bear responsibility for our actions.


Leggirex said...

Indeed, it is all scarcely believable.

What a mess; what an utterly dreadful way to run a country.

Jim said...

Its very simple, all roads lead to one man - Gordon Brown. He inherited an economy is good order in 1997, and systematically (in every sense of the word) f*cked it over.

He created the entire tripartite financial regulation system from scratch (helped by Ed Balls), he created the system of tax credits that means there is a huge client state of benefits claimants who can never be removed, he signed off on billions of PFI deals that will cost the country many times their true value over the next 25 years and he managed to borrow money at the height of the longest boom this country has seen for decades, overloading us with both debt and unsustainable spending levels.

Who else has single handedly managed to do so much harm?

dearieme said...

"Who else has single handedly managed to do so much harm?" Blair did more. He not only appointed Brown and gave him a free hand, he waged wars for no better reason than narcissism, flooded the country with potential labour-voting immigrants without any attempt to be selective, sold us out to the EU, and polluted everything he touched. It really takes something to be a worse PM than Heath aor Wilson, but he managed it.

ernie said...

Alice - you've summed it up very nicely. Doesn't make for an optimistic outlook does it? And my fellow posters above also hit a couple of nails on the head. My main worry now is that as we implode all over the world, the banks are (probably rightly) a big target. What happens to us all if most of the banks do fall over - what about trade and infrastructure? Do we end up with a form of martial law or something?

aitor2 said...

reading this post has reminded me that what is happening in the UK is very similar to what is happening in Spain, where the ECB "rescue" money is being used to buy Spanish Bonds and to cover the s***t in the banks themselves.

Anonymous said...

Whilst I agree Blair and Brown stoked the fire that was lit by Maggie and Major. Unfortunately none of the above screwed Europe or the USA so maybe there was something in the air sending everyone mad.

Mr Bean (counter) said...

Let's not forget that all the elite were involved in the negligent monitoring of the banks.

The obvious two are the Treasury and the FSA.

The former were complicit in the misdeeds of the banks and the latter - whilst being spectacular consumers of the Brazilian rain forest with regard to investments by parents on behalf of their three year old child - largely adopted the old Armed
Forces attitude to responsibility (If you weren't there you can't be blamed).

But let's not forget those shadowy figures who said the accounts showed a true and fair view and who trousered hundreds of millions of pounds from their clients. Step forward the mega firms of Chartered Accountants.

Strangely, firms like KPMG and PWC failed to notice that their client's accounts, stating that they were worth billions, were at odds with reality, insofar as they were, in fact, worth a small pile of poo.

So the regulators and the caretakers all failed. They were utterly incompetent, useless wretches who had not the first idea about how to provide their proper service.

But they continue to sail placidly across their oceans of riches while we peasants sit on the rocky shore.

And I haven't even started on the politicians...

Kitz said...

It's only a matter of time before the ethnicity of the top 40% of the 1% becomes an issue . Code is already being used in some financial blogs .
All because of a lack ok of law and order .

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