Britannia Radio

The situation is becoming ludicrous verging on the disgraceful.  The 
government, backed by the media (always looking a scapegoat!),  is 
demanding that the banks lend more (Even the Telegraph's leading 
article today is right in there with the mob! )

But right beside the Telegraph leader is a letter [below] from 
Barclays which has NOT taken state money!  A similar letter from the 
British Banking Association (sent by me earlier) told of record 
lending in October.

So this looks like an orchestrated campaign by this disgraceful 
government presided over bu a grinning Brown (with the Prince of 
Darkness at his elbow) , to shift the blame for what is clearly a 
failure of policy onto 'evil bankers' rather incompetent Labour 
politicians.

John Redwood calmly points out the error of their ways but even he 
omits a crucial equation in the whole shambles, namely that all this 
government money which SOME of the banks have received comes with a 
12% per annum price attached.  So how does Brown-Darling expect them 
to lend out money at low rates?   And now the government is urging 
them into lending recklessly again when it has been reckless lending, 
encouraged by Brown for 11 years , which has caused the crisis.

xxxxxxxxxxxx cs
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TELEGRAPH   27.11.08
1. Letter from Barclay's Bank

Sir - The economic environment is creating obvious difficulties for 
small business. Let me be clear that Barclays is not "severely 
cutting back" on lending (Vince Cable, Business, November 25). 
Barclays has increased lending and overdrafts for small business year-
on-year, up by over 5 per cent from the historic high of 2007.

We also offer all business customers the ability to credit check 
their customers, enabling them to chase up some of the £8.3 billion 
we estimate is owed to small business on any given day.

Barclays will continue to take decisive action to get local business 
through this turmoil. Their success is our success.

Steve Cooper, Managing Director, Local Business Barclays, London E14
=====================
2. Bullying banks is not working
By John Redwood

I am close enough to the public mood to know that bank managers are 
far from popular. I also understand enough economics to know that 
bank managers, by the decisions they will have to make in the weeks 
ahead, are going to make themselves even more unpopular.

Someone, however, does have to tell this Government that bullying the 
banks, threatening them with legal actions and more nationalisation, 
is not the way to work us out of this banking crisis.

Indeed, the Government needs to understand that it is in the 
glasshouse with the bankers, so throwing boulders at them is an 
especially dangerous pastime. Like it or not, Labour's future is now 
heavily hitched to what the bankers do next.

So far no amount of hectoring, and no amount of money promised in one 
form or another, has been enough to unblock the banking credit arteries.

Instead of grandstanding and getting cross, the Government needs to 
ask itself why this is the case. What went wrong over the last 
decade, and how can they now fix it?

For be in no doubt, this is not just a story of greedy senior bankers 
who overdid the lending in the good times.

This is also a story of monetary policy lurching from boom to bust, 
interest rates kept too low for too long and then kept too high for 
too long, banking capital rules which were too lax, now supplanted by 
rules made much tougher at the very point where banks are finding it 
difficult to lend anyway.

We have lurched from boom to bust in every aspect of banking and 
monetary control.

We all want the banks to work better, and for some more credit to 
flow in the private sector again. That means revisiting the huge £487 
billion pound package of guarantees, loans and share capital the 
Government announced in early October.

Too little of the loans and guarantees have been used, whilst the 
taxpayer is about to be put on massive risk at share prices well 
above current market valuations.

That the main parts of the package - the short term loans and 
guarantees, a good idea - have not been employed enough, implies 
there is something wrong with the pricing and the terms. The 
Government should discuss with banks what they do need, and 
renegotiate the package in a way sensible to both sides.

At the same time the Government needs to revisit the issue of banking 
capital. They insisted on banks holding far too little in shareholder 
funds in the good times.

Northern Rock directors were famously discussing how they could get 
down to the low levels required by new regulations just a few weeks 
before the run on their bank.

Now the Government is arguably wanting too much, too soon. Of course, 
over time the banks need to increase their reserves. There are many 
ways to do that, by cost cutting and more revenue.

This can be supplemented by some choice from asset and business 
sales, lower dividend payments, seeking more private capital and 
cancelling the annual bonus for a year or two.

The regulator should have short and longer term targets for more 
capital for all the banks, agreed with them in private.

Where a bank is currently on low capital the regulator should take a 
close and running interest in progress in rebuilding it. In the 
meantime it should be reaffirmed that the Bank of England, as the 
banks' banker, stands behind all the leading banks, and will make 
whatever money they need available to them in the form of short term 
loans against proper security.

This Government has both demanded that banks have much more capital 
relative to their lending than they needed to have a year ago, and 
demanded that they lend more.
The two are contradictory positions. The easiest way for the banks to 
hit the new, more prudent capital targets is to lend less and charge 
more.

The taxpayer capital is both too much for comfort for the taxpayer to 
afford, and too little to solve the banking crisis. The banks could 
lose further large sums with another round of write-offs from their 
loan books as more companies and people find it difficult to repay.
The Government should do more due diligence on how good the different 
loan books are before buying.

The banks in which the Government are buying shares have balance 
sheets of more than £3 trillion. If things went wrong and they lost 
another 1 per cent of their assets overall, that would lose us most 
of the defence budget. Once nationalised, the bill is sent to the 
taxpayers.

So, Government, please stop playing politics with the banks, and 
start trying to manage the monetary and banking system properly. It 
has always been a Government task to ensure stability of the system 
and to control the overall amount of lending. [But this 
responsibility was denied for 11 years - the 'Brown' years - cs]

You have lurched from too loose to too tight. You are now asking the 
impossible of the banks, so try again - it is better to talk than to 
row.

We need both banks and Government to function properly. At the moment 
neither are.
=====================
3. Sketch: The Chancellor, the chancer and the strange case of a rise 
in VAT
The House peered into the Black Hole of Darling and did not like what 
it saw.
By Andrew Gimson

In the gloom at the bottom of the hole, the despondent figure of the 
Chancellor of the Exchequer could just be descried, still digging by 
the feeble light of a torch held by his assistant, Yvette Cooper.

It would be unfair to accuse Alistair Darling of enthusiasm for his 
work of getting us deeper and deeper into debt: the poor man looked 
like a bewildered and resentful under-gardener, obliged to follow the 
incomprehensible orders of his obdurate Scottish superior, Gordon Brown.

Rumour has it that that Mr Brown has himself fallen under the spell 
of the nobleman for whom he works, the great Lord Mandelson. The 
black hole in the nation's accounts is said to be the idea of that 
hereditary Labour grandee, for Lord Mandelson is what is known as a 
chancer, and has lost, during a prolonged stay in Brussels, what 
little respect he may once have had for conventional accounting methods.

Lord Mandelson was sitting in the peers' gallery for Prime Minister's 
questions and smiled as he heard some of his own lines recited by his 
protégé. The sight of Lord Mandelson laughing at his own jokes was 
the one bright moment in the day.

To general astonishment, some small part of Lord Mandelson's 
aristocratic insouciance, his willingness to gamble the future of the 
Labour family on one Pre-Budget Report, has rubbed off on the Prime 
Minister during their one-to-one coaching sessions in Downing Street, 
with the result that Mr Brown can now defend himself rather better 
when he comes to the Commons.

No such help has been extended to Mr Darling, who looked as 
vulnerable as ever during the three-hour debate on his Black Hole 
which followed. The Chancellor sounded Pooterish as he tried to 
explain the strange case of the rise in VAT to 18.5 per cent which 
the Government is not planning to introduce after the next general 
election, but which somehow got announced on an official website: "I 
asked the permanent secretary of the Treasury to find out what had 
happened."

Experienced observers such as Ken Clarke, the last Tory Chancellor, 
suggested that the Treasury very much wanted to announce this planned 
increase, in order to reassure the markets that it knows how to fill 
the Black Hole of Darling, but Mr Brown forbade any such disclosure. 
If there was any justice in the world, it would be known as the Black 
Hole of Brown, or simply as the Brown Hole we are in.

Mr Clarke warned that if we cannot fund the debt we are taking on, we 
will be "in quite appalling trouble", and accused Vince Cable, 
speaking for the Liberal Democrats, of being "utterly reckless" for 
defending the need to borrow so much.

But if Mr Darling hoped for support from Mr Cable, he did not get it, 
for Mr Cable had looked at the figures and discovered that the 
Government is going to cut investment by 16 per cent over the next 
three years: "How on earth is this meant to strengthen the economy?" 
According to Mr Cable, the country's mood has changed in the last few 
days "from hope to despair and anger".

We sat through the whole of the three-hour debate and could not 
detect one ray of sunshine for Mr Darling. In repose, he looks like a 
beaten man who does not yet know he is beaten: an over-stretched 
technocrat who is finding life as Mr Brown's stooge almost unbearable.

Peter Lilley, another former Tory minister, pointed out that 
"expansionary measures" have often have "a contractionary effect", 
because people decline to spend the extra money handed out to them, 
and instead save it to pay future tax bills. The Black Hole in the 
nation's finances is already vast, but is about to get very much larger.