British Politics’s Blog

The ravings of an individual, UK voter frustrated with our politicians

Posts Tagged ‘bradford & bingley

Bankers must accept their own responsibility

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It is difficult to argue with the suggestion put forward by Power to the People, suggesting as it does, that the bankers should be held to account for their poor decision making that has, for the most part, brought about the current crisis.

When the dust settles, governments around the world need to reflect on precisely how a situation arose, where taxpayers were required to bail out struggling banks and insurers. This should be wide ranging and lead to both regulation and prosecution.

Power to the People

There is much talk about government responsibility through the poor enforcement of existing regulation and the need for more regulation and legislation. However, the bottom line is that the whole ethos of the city is that it thrives on being a free market. So yes, by all means include further regulation to avoid a repeat of the current fiasco, but don’t throw the baby out with the bath water. Instead, remind city execurtives, whether they are from the banking, insurance or any other sector, that they are trustees of the shareholders, they are expected to increase wealth, not take massive gambles, which expose the very assets they are supposed to protect and grow.

There is a very good argument for prosecuting those executives that were involved in the decision making process that brought about this calamity, no matter where they are based. Their assets should be frozen and if they are found guilty, they should be siezed, only then can we be sure that they will have learned their lesson.

 

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Bradford & Bingley nationalisation, is it a good deal?

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As I have said, not for the first time, I am no financial expert, but I am a little confused about the ‘part nationalisation’and ‘part sell-off’ of the Bradford & Bingley deal. I accept that there is probably still more detail to come about, but from the little that is available, I find myself wondering, whether the government, on behalf of the hard-pressed taxpayers of this country, worked out a good deal.

In the past, building societies received deposits, in order that they could then use that money to offer mortgages and loans to others. The saver would receive interest on their money, the mortgage payer would pay interest on their borrowings and the building society would take a commission in return for the introduction and managing of the arrangement. Although this model has been turned on its head, with the wholesale trading of these mortgages, the principle should still be sound.

Therefore, if the government have taken on all of the mortgage debt of the Bradford & Bingley, estimated to be some £50bn, why not retain the deposits as well? Instead, they “sell”, the ambitious Spanish conglomerate, Santander, some £20bn of saver deposits (2.7 million people), for the miserly some of £612m. How can this be a good deal for the taxpayer? How can the government be so sure that the savers interests are protected, given we don’t really know that much about Santander. In fact, if the government were responsible for the sale of these customer deposits and something were to happen to Santander, would the government be culpable or liable, given it was they who negotiated the deal?

This particular arrangement can’t be good for the employees either, because Bradford & Bingley employed some 3,000 people and operated 197 branches. Does anyone imagine that a foreign owned bank, will give a toss about these employees? No, from what I can see, the UK government has passed over the profitable side of Bradford & Bingley to the Spanish owned bank ‘Abbey’, whilst leaving the British taxpayer exposed with just the bad mortgage debt. What was the point in getting rid of depositors money which has traditionally been used to offset mortgages? Looks like a very poorly thought out deal to me and somebody needs to explain why? Santander must be rubbing their hands with glee at the at the apparent naivety of the UK government.

I would not normally be a supporter of nationalisation, although in this case, as in the case of Northern Rock, there was probably no palatable alternative. However, I do believe that the government is responsible for driving home a decent deal for the taxpayers, they have a duty of care to the public purse and a responsibility to the taxpayer. No matter how urgent the problem, they should not lose sight of this. Yet here, from what I can see and perhaps against the views of many other observers, I fail to see how anyone, other than Santander would be considered to a be a winner.