Why do we put up with it?

A quiet week?

Lake Wobegon Lake Wobegon
In 'Lake Wobegon Days' the author Garrison Keillor always began an observation with: "it's been a quiet week in Lake Wobegon". Well it was a quiet week beginning 8th September 2008, very quiet, in fact we didn't notice a thing. I refer to the great non-news story of that week when the cabinet meeting was held right here in Birmingham and, for the first time in, well ages, so they say. Just what was the point of this, why did they do that? Personally it was a quiet day and I was working in the garden but I'm sure, in the fullness of time, my life will be the better for this Birmingham meeting. No, only kidding. But I think if Gordon Brown and his cabinet keep this sort of thing up then we will all start to feel sorry for them. Hang on, was that the reason? Then again we all deride the EU for shuffling back and forwards between Brussels and Strasbourg, we can only hope there is not too much gypsy in Gordon Brown otherwise we are stuck with this expensive and futile stunt as a regular feature.

Perhaps at the Birmingham meeting the details of how we can build an extension to our homes without planning permission, see HERE.

This has been promoted as a great help to us all in the depths of the credit crisis and the downturn in the property market. This I doubt and may after more research be the subject of another post.

By contrast the week from the 15th September 2008 has been far from quiet. The collapse of Lehman Bros bank roused anyone who had fallen for the notion that, as far as our financial woes are concerned, 'the end's in sight'. I'm very aware of the personal risk of becoming obsessed by this subject having posted at great length on the financial downturn see HERE and HERE and HERE.
Shanty Town Shanty Town
So I held back from posting anything on a previous event, the fate of Fannie Mae and Freddie Mac. The background to Fannie and Freddie is complex and the sums of money involved huge and it is 'over there' and not a UK problem, unlike Lehman Bros who had a base in Canary Wharf. There is still much to come concerning Lehmans so we shall have to wait.


Likewise the big noise of this far from quiet last week was the state of HBOS. The problems at the Halifax Bank of Scotland may not have been on the scale of troubles in the US and for this we should be thankful. It is already being said how Gordon Brown and Alistair Darling helped out, see HERE.

The memories of Northern Rock are still fresh so a second UK bank in crisis and queues of depositors at the door would have had the capacity to sink our PM's hope of recovery, personal and party. So the line -

"To lose one bank may be regarded as a misfortune. To lose two looks like carelessness".

- may still appear in the future. And what of the future? Well the possibility is that the financial downturn still has a long way to run yet. The voters will want more tricky questions answered too, especially from the growing ranks of the jobless, like - why me? And voters will want more than an opportunity to put an extension on their negative equity home and make a contribution to Shanty Town so future Prime Ministers beware.

But back to Northern Rock. It is now a long time since that crisis and only just to have put the brakes on Hedge Funds and the practice of short selling does seem awful slow but then 'shorting' by hedgies might not be the real problem. So just what have the government and the regulators been doing in all that time? As pointed out in a previous postings Hedge funds and short selling have been around for a long time.
Norton Norton
Also it is not as if the problems, real or created by shorting, suddenly came out of the blue as HBOS was wobbling months ago.

Some of us here in the Midlands can remember Tony Benn and others and their attempts to save the British Motorcycle Industry.

First it was one thing then another brave try until finally it was all over and the factories closed and names like Norton had gone. These days the battle to save our banks starts with Northern Rock then goes to HBOS and rumour has it that Bradford and Bingley is the next, see HERE.

Is there a parallel here? You bet there is. Way back in the 1970s the UK was a manufacturing nation, exporting motorcycles was important. Well all that has gone now and proudly we tell ourselves how time has moved on and now the UK makes so much money out of financial services there's nothing to worry about. That I doubt but banking is now about the only major industry we have left. So there is a logic in at least having a try to save our earning potential.

I also doubt that propping up rickety bits of the UK banking industry by banning short selling will 'save' it from the same fate as befell the motorcycle industry.

So far it seems that the dead hand of the EU might not stop the merger of Lloyds TSB and HBOS. Although the EU being what it is, very slow, we will not know for a while. It is said that the new Lloyds-TSB-Halifax-Bank of Scotland group will have about 40% of the UK banking market so perhaps Neelie Kroes, the EU Competition Commissioner, will be pushed by the other UK and EU banks, (Santander?) into at least having a look at this mega-deal. And was this deal 'straight'? Not according to some, see HERE
Serious people?Serious people?
But today, 22nd September, saw the start of Nulabour's Party Conference so a little show-boating was to be expected and the Guardian had the headline -

Brown plans crackdown on world markets - I'll bet they're worried on Wall Street!

See HERE.

Here in Gordon Brown is a man who year on year is losing power to the EU but is going to clean up the financial world; using what power and what mandate? And you thought Tony Blair was delusional.

Here is a man who would stop bad banking practice like poorly secured loans but for every lender there is a borrower.

And here is a government living well beyond its means by continuing to borrow, the Times headline is -

Public borrowing in August hits 15-year high - see HERE.
Why, tell me?Why, tell me?
As ordinary people wonder what to do to reduce their personal financial liabilities the government racks up their future taxes. Why should they put up with it?

No doubt the voters will devise their own 'crackdown' see HERE.