Any alternatives to Dogs and Vomit?

After much apocalyptic huffing and puffing last year, which involved touching each one of us for three grand a taxpayer to bail them out, UK Bankers seem to be back to business as usual. Holy Scripture (Proverbs 26:11) suggests that it is the nature of dogs to return to their own vomit, and sows, having washed, to go back out there and roll in the mud. Nick Baines reflects some of the anger and frustration many feel at all this:

Let’s get this straight. Some of my friends are bankers. I don’t have a problem with bankers getting paid for the work they do. Some bankers should get paid more than others. Big bankers should get paid big salaries. But bonuses should be rationalised and spread about the people who work at all levels of the business. How do you justify a single individual getting a one-off (almost guaranteed each year) payment amounting to many multiples of what the ordinary bank staff earn in several years? And whose money is it that they are playing with anyway?

It’s certainly a shame if a good crisis has been wasted.

One development I will be watching this year, after discovering philanthropic microfinance through Kiva, is the growth (or not) of Zopa. Billed as the “eBay of banking,” this is a microfinance site that enables people to borrow or lend directly with minimized middleman profiteering. Risks are potentially higher, but not perhaps by as much as you would think, and returns rates have held up much better than convnentional banks in the past year or so. For a small investor, there’s more flexibility and returns are substantially higher than anything you would have got last year from the UK high street with its pathetic levels of customer satisfaction, up t0 20 point differentials between bank rate and their rate, and fat markups for the fat system.

As ordinary low-risk borrowers and lenders increasingly use microfinance sites, what’s holding back change? Personal inertia — apparently disgruntled Brits are more likely to change their partners than their banks. Also Brits are not currently awash with cash, being legendarily more inclined to borrow than to save. Finally, the UK tax régime around savings income isn’t (yet?) favourable to such direct ways of saving — or indeed any ways of saving?

However, the times are a’changing, and if direct lending sites, presently a bit of a joke, develop, the Drones Club with its fat bonuses and useless customer service could be begin to experience an interesting run for our money.

Microfinance: trading Real Futures

One powerful moment in the Leadership Summit was an appeal by Andrew Rugasira, founder and CEO of Good African Coffee, social enterpreneur from Kampala, for Trade not Aid. He drew attention to the distorting effects of aid on economies with significant proportions drawn from overseas aid, that could unintentionally suppress the life and economic skills of poor people, whilst feeding a huge and sometimes corrupt panjandrum of dependency. We need a new paradigm that will read Africa in terms of potential as well as need and deficits.

This is not to say all aid is simply bad, but that it has to be applied for emergencies, short term or infrastuctural pump priming, not as a substitute for regular economic activity. By analogy, you can employ people in a social or vokuntary enterprise, but there is a law of diminishing returns about the benefit, and whatever you do, it is important to build, not kill off the voluntary capacity of the organisation.

This put a great context around the session with, IMHO, the most impressive entrepreneur at the summit, Jessica Jackley, founder of Kiva.org, a microfinance site that lets anyone with computer access invest small loan sums in a targeted way, mainly in the developing world. The clever bit is marshalling all the agents into a slick process that connects loaner and entrepreneur as directly as possible, making it easy for anyone with a credit/debit card or paypal to get involved at the click of a mouse.

This is not an entirely rose-tinted process — some have criticised Kiva’s recent inlusion of US small businesses in its portfolio, as well as some interest rates the other end (not astronomic by UK small finance standards, but high and largely dictated by the partners who make it happen, in a way that’s almost inevitable with microfinance). Potential collywobbles some feel about child sponsorship might apply; Microfinance investing from home may not be for everyone. That said, Kiva does boldly go to places conventional banks don’t and makes the connections. Kiva would be the first to say microfinance is not the magic bullet to end poverty — but some involvement in microfinance certainly seems as defensible as sitting around on your spotty behind, beefing up the bottom line of conventional banks to the tune of £3,000 a taxpayer, which is what we’re all compulsorily doing anyway.

In terms of Leadership learning, kiva.org shows how someone in their twenties can impact world development to the tune of 86 Million dollars in four years with a good idea, creative use of technology, and the guts and stickability to pursue her vision out of Sunday School, through Business School, and out onto the streets.

Banking: The Way We Were (1964)

Financial Intercourse began
in Nineteen Seventy Nine,
Between the end of Callaghan
and the Flying Lizards’ Line:
I want money, that’s what I want...
What was life like before we entered Mrs Thatcher’s brave new world? Did they have money? And if they did, did most people keep it under the bed?

Well in 1964, bank managers were slightly stuffy people working for low wages in what were often family businesses, some of whom, according to the TV advertising of the day, lurked in people's wardrobes offering financial advice to the family. O tempora! O mores! Rooting in the attic the other day I found a copy of the Twentieth Century for Spring 1964, featuring an interview with the chief cashier of a high street bank on the subject of his career in Banking and its temptations. Read, mark and learn from this delightful vignette of Banking, and the kind of people who did it, 45 years ago, before Fred the Shred and his chums got their grimy hands on our cash:

Today, on £1,240 a year, plus a London allowance, I have reached, at the age of 57, a moderately comfortable level. I rose to be number two man in a five-man branch, and took my present post as chief cashier in a busy commercial branch when I discovered that I was not going to become manager where I was. I have succeeded in making a home, and paying off the house. We have no crying need for any major item of domestic equipment. We were able to buy a washing machine before the war, and five years ago I was able to afford a refrigerator, We have no television, and no desire for one.

I allow my wife £8 a week for housekeeping and £2 a week for herself. My lunches average 5 shillings (25p) a day, and I spend 10s (50p) a week on tobacco, We do not live to a budget - there are no boxes on the mantelpiece. But we do put 5s, a week by for Christmas presents. Our only extravagance is a theatre once every two months, when we have dinner in town. We always have sherry in the house, and a bottle of whisky for medicinal purposes. We do not deny ourselves, But I feel this is a point we should have reached ten years ago. It is only recently that I have been able to gather any savings, and only recently that I have been able to ride out the surprise bill, say, £30 for repairing the chimney, that comes along. Ten years ago we would never have been able to go into a shop and buy there and then something that took our fancy, in the way that we bought a nest of coffee tables last year for £20, and a gas fire to replace a coal grate. As it is, a large part of my salary is set aside for routine bills. I have two life assurances that I took out early in life. They come to £49 a year. My gas bill is £25, my electricity £10, and my coke £12 a year. I have a new suit every year. In the bank you must maintain a certain amount of tidiness. They still say that bank men are the tidiest of office workers, and I know that I have never gone to the office in a scruffy suit. Nowadays we spend £80 on our annual holiday (we never go abroad) and I take a week each year with my mother in Scotland that costs me £25 ...

The way things have turned out has not embittered me, I am just not of an envious nature. I look on that not as a virtue but as just a kind of kink in me. If I had been a bit more envious, a bit more covetous, I would have been more ambitious in life and taken chances with my career; been the kind of man who makes up his mind exactly where he is going, and plans out step by step how to get there - as my son-in-law has. But I do not believe that money is conducive to happiness. That doesn't mean I believe that one should be contented with one's lot in life. But surely happiness to a large extent devolves upon oneself, and on one's immediate friends and relatives, on one's wife and family.

Of course I would have been happier with more money - I would have been able to run a car, to take more expensive holidays, for example - but the lack of money has never tempted me to gamble or be dishonest. I believe a person who would be tempted to embezzlement would be tempted not because of his circumstances but because of his character and failings. I have never gambled, but I spend 5s (25p) a week on the pools, I don't daydream about getting a large win. If I did win a big sum it would make no difference to my way of living at all. I would invest it. It would simply enable me to live a little more comfortably than now - and of course, a man with £50,000 in his pocket can afford to risk expressing his opinions a little more forcibly to his employers.

...A young chap who joins the bank nowadays and finds the work boring after a year or two is not afraid of giving it up. He hasn't the loyalty, the fantastic loyalty,that the older bank officials have. A loyalty bred by their personal upbringing, by living through the depression, by handling a trustworthy job. A loyalty that for so many bank men now reaching their sixties has gone unrewarded.

Rebooting

Madness is doing something over, thinking it will yield different results next time:

If all you do is what you always done, all you’re ever going to have is what you always had. (Def Leppard)

Saturday’s Board of Social Responsibility reflected on the need to reboot, using excellent materials from the CTBI Conference in January. At the centre of these was a paper by Bob Goudzwaard, Dutch economics professor, on money and idolatry.

Even in narrow financial terms, some wondered why we are now loading money so freely into the top of a discredited system, rather than financing businesses on the streets, refloating the economy, as it were, from the bottom up. Perhaps it’s time to re-read our own Scriptures in the light of experience, including such concepts as Jubilee, Shalom, and household. This might even mean challenging usury — the making of money out of money alone, with no added work. This cornerstone of recent practice is consistently condemned in the Hebrew Scriptures as unjust, immoral and oppressive in itself.

We need to reboot. But how?With the question ringing in our ears, and the Scriptures at our right hand, it’s interesting to begin by remembering that everything impacts everything else in interesting ways:

It was thirty years ago today...

Mrs Thatcher taught the band to play. On this day in 1979 the Callaghan government lost a confidence motion in the house of commons (by 2 votes in over 600, I seem to remember) bringing to an end postwar concensus government — In Blairspeak, a pivotal point in British political history. The story may demonstrate the peril of delay in politics— it’s arguable that had Sunny Jim gone to the country the autumn before the winter of discontent, he might well have squeaked home on a sympathy vote. Still being counterfactual, had General Gaultieri managed to keep his army in his trousers and off the Falklands, the fortunes of the first Thatcher administration, deeply unpopular in 1982, might have been different. Who can say?

Thirty years on, the historical jury is out on what followed. One narrative says unions were tamed and the economy renewed as an enterprise engine, driven by financial wizards, unbridled by regulation. Another points out that social inequality soared, driven by a housing bubble and short-termism. Both narratives are right on their own buttons. Certainly banks ceased to be rather dowdy traditional “word is my bond” institutions, like the place Mary Poppins kept her umbrella.

Woody Allen once suggested all nature was a vast restaurant, everything eating everything. In that spirit Thatcherism released the genie that transformed all commerce into a vast betting shop. Recently, imagine if instead of bailing out banks from the top, government had helped people paying sub-prime mortgages from the other end. Could we have refloated the banks, through the micro-economy, bottom up? Of course not! That would be subsidizing fecklessness and irresponsibility.

So instead we've squirted billions into the banks from the top down to avert commercial kismet, hoping they’d start doing lovely things with the lolly. I do wonder what Mrs Thatcher’s old dad, a paragon of thrift and hard work, would have made of Fred the Shred, flying in fruit every day from Paris, replacing carpets rather than cleaning them, and sacking staff over the colour of the biscuits, whilst studiously ignoring abundant evidence that he was steering his liner over financial Niagara Falls. Apparently that was not feckless or irresponsible. It was wealth creating. Really?

If RBS had been allowed to go bust...? Among other things, Fred’s pension would have to have been be paid by the guarantee scheme, capped at £27,000. And if he had thought that sum insufficient he could, at the age of 51, have gone out and got a job. I can imagine Alderman Roberts wondering what would be so terribly wrong with that...

The International - Guns ’n Poses

Tom Tykwer’s thriller The International does for corporate bankers what The Firm did for corporate lawyers. Fact is, there are some really nasty people out there — If you are an Idi Amin lookalike with a big ego, alleycat morals and ambitions to take over Liberia, you don’t keep your spondulicks under the bed or in the Post Office. The Royal Bank of Scotland is a little unethical, but there’s always the International Bank of Bent Crooks (IBBC).

IBBC is run by a tasty geezer called Skarsen. He’s a (literally) bloody nightmare — like Fred the Shred, but competent. HQ is a cavernous Docklands Glasshouse in Strasbourg, containing no more than a squad of half a dozen suits who spend all day striding portentiously around the building, plus a girl on the front desk to make the coffees. From here various bent arms deals, political assassinations and devilish Whale Nuking expeditions are planned and executed, cynically ignoring all risks. The aim is to control everything by indebting everyone.

Clive Owen is Louis Salinger, an Interpol goodie, accompanied by a very nice but slightly underpowered Naomi Watts, the New York DA who does most of her best work on her blackberry. Clive is just the man for the part. In a Newsweek interview promoting the movie, he boasted about not being afraid of badgers, and drinking his afternoon tea solo “because He-men don't need biscuits.” Tough Guy. Jason Bourne isn’t afraid of badgers either, but he does nibble the occasional hobnob.

Pitted against the dynamic duo is the International Bank of Crooks and Conmen, aided and abbetted by some unpleasant Teutonic bent coppers with steelrimmed glasses and Gestapo Dentist manners. There could be badgers, too, but I didn’t notice them. Kind of underground fifth column. Or was that Narnia? Anyway, everyone becomes a busy bunny banging away at all the others with various shooters, including a shootout to die for in the Guggenheim, which zaps the entire building until it’s an oversize concrete Swiss cheese full of holes. Boring? I don’t think so.

Locations are well handled, from Haghia Sophia to an Italian Arms manufacturer’s Tracy Island HQ. The plot is complex, sometimes slightly in danger of disappearing up its own rear end, but just manages not to. You’ll have to discover its full complexity for yourself, but the basic dea is that big banks are run by ruthless greedy people, who enrich themselves by indebting others, whose hubris brings the whole lot crashing down without any regard for decency, ethics or international frontiers. How insane is that for a plotline?

Finally, I won’t spoil the ending, but Agent Salinger ends up as yet another self-sacrificing redeemer. So we’re good for passiontide. This is a kind of two-and-a-half out of five movie, best avoided by the squeamish. I suppose the big question I was left with as “If international Bankers are indeed crooks and conmen, why bother with shooters, when they could make far more dosh perfectly legally by just being their own selfish incompetent hubristic selves — they still get to control the world by indebting governments and the old ladies lose their pensions without a shot having been fired in anger?” It’s all a powerful argument for keeping your sponduliks under the bed or in the Post Office.

Credit Crunch Bank Bust: King Rat?

Brilliantly rendered graphically by Jonathan Jarvis: h/t Euan Semple:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
This side of the pond, Sir Fred Goodwin wrestles internally with Jiminy Cricket over his £650,000 a year life pension from age 50, his reward for delivering the biggest cockup ever in UK corporate history, a record breaking loss of £24,000,000,000, at a cost to his fellow citizens of £20,000,000,000, including the ruin of many of his colleagues and customers.

Give it back, or what be stripped of it? I don’t believe anyone should do anything illegal or vindictive. There are plenty of others out there as bad, but less public, no doubt. But if I were Sir Fred, I’d scrabble up as much of the offending money as I could and do something genuinely altruistic with it, perhaps an investment that helps poor people through hard times. That way some good comes of his cockup, nobody breaks the law, and he can recover a bit of respect in the community. Howzat?

Meanwhile the Long Johns (Bird and Fortune) explain the matter perfectly clearly, as is their wont:

Gang of 4 Bankers Group self-criticism

Today Four Big Bankers were wheeled into the Treasury Select Committee for Ritual Humiliation and Group Self-Criticism. There they confessed publicly to various errors of judgment, crimes against the workers, and sundry false consciousness. I hope we all feel better. I’m slightly surprised these Titans had no idea anything like this might happen. People reading, for example Kevin Phillips’ Bad Money, appear to have been better informed about these comrades’ businesses than they were themseles. Cost? £17·39 for awareness these comrades couldn't manage on £4·4m a year. Why, Jon Molton warned them a year ago on national TV. Heigh-ho.

Simple minds thought the Gang of Four got paid telephone number sums of money every year because they took big risks. But apparently they didn’t. We did. They just got the money anyway. Big sorry. Surprisingly, I’m told none of the four had done any banking exams. Really? So they were only amateurs anyway. Big Multimillion pound Banking, like flower arranging, Gilbert & Sullivan, and Morris Dancing, turns out to have been a mainly amateur activity in the UK. Perhaps we should all have a go. Mary Poppins will be revolving in her grave.

I don’t think they will need to be beheaded. Instead someone like Mr Darling should be very cross with them. Furthermore he should write them a letter telling them he is very cross. Then, when we have all stumped up a few more billion pounds, it can start up all over again, and the good times will roll? or maybe not. Perhaps we will not be returning to 2007 again, any of us. Make no mistake. We have all been collectively foolish, fuelling what Andreas Whittam-Smith calls our banking “Doomsday Machine.” (h/t Ruth Gledhill, for a really helpful link) We’re all in this thing, like it or not. These were just ordinary people, doing their jobs as best they could; we mustn’t let their extraordinary wages blind us to that disturbing fact...

HBOS: Personalised Credit Crunch

Welcome to the share offer that enables you to have your very own credit crunch at home this Christmas. As a student I earned some holiday money and put it in the building society. Then the building society became a bank and my shares were converted into, er, more shares... Imagine my joy, then to be sent an “important document” this morning that “required my immediate attention.” It’s my opportunity to bail the bank out by taking them up on a very special offer — They are willing to flog me 261 shares, as a special favour, at only 113.6 pence a share. Here comes fate, tapping me on the shoulder, offering me a career as a major capitalist, and all for only £296·49! Deep Joy! One or two questions:

1. Why would I spend 113·6p a share on this very special offer, when I could go out and buy as many HBOS shares as I wanted anyway @ 67·5p yesterday, thereby saving myself, click-click-click, £120·32 on this joyful transaction. Presumably I’ve got MUG tatooed on my forehead somewhere I don’t know, or they wouldn’t have sent me this very special offer in the first place, but I’m a cheapskate mug.
   
   
2. Unless my math is totally duff, only the other week Lucy and I, as UK taxpayers, compulsorily invested approx £2,800 in these jokers anyway. Perhaps we should see how that little speculation goes before we bring another £176·13 along to the party.
   
   
3. It might be fun to have our own little micro credit crunch, personalised for the Wilson household, like a Micro Brewery, or a Minibeasts jungle, but I think I’ll pass. All the more so, as dread small print warns me this priceless offer is not something I can trade to any other mugs out there.

Please, somebody, tell me. What have I missed? As bit of a muggle I was sorry to miss out on the Bernard Madoff thang, but why, for Charles Ponzi’s sake, would I stake any more of our our kids’ dinners, other than compulsorily as a taxpayer, on HBOS just now?

FTSE 4435: Bank Crisis. Bingo!

Whilst heading for the Earth’s Core yesterday, the FTSE-100 plumbed the magic depths of 4366, passing 4435 on the way — its monthly low when the Blair government was elected in 1997. So there you have it, folks. All the puff and funnymoney was soapy bubbles after all. When everybody gives up making anything or saving anything to become a property wideboy instead, we all end up in the poorhouse. Bailouts follow overtrading as night follows day. Borrowing short and lending long is fun for an afternoon, but hopeless long term. Big unearned bonuses make wasters. Loss is loss, and as poor old King Lear pointed out years ago on his way to the Funnyfarm, nothing will have nothing. Fancy that. Now What?