At last - too late? - the commentators are reacting to the dangerous nonsense our politicians are talking and the destruction they are deliberately planning of our whole economic wealth and well-being. Brown’s surrender commits Britain to national economic suicide.
And as for Lord Turner. He was a disaster at the CBI, he is a global warming fetishist and a failure at the Financial Services Authority and a NewLabour supporter. His successor at the CBI clearly shares my view that the man is too dangerous to be allowed near any of the ‘levers of power’ .
Allister Heath in City AM spells it out in devastating detail.
George Osborne. The Shadow Chancellor, quoted in The Independent
“There's a fundamental contradiction at the heart of Alistair Darling's argument [about continuing Quantitative Easing’]. He says that he expects, as we do, that Britain will come out of recession this year and yet he wants to go on with large increases in public spending next year, when he knows the country cannot afford it. His position has everything to do with the politics of a looming election and nothing to do with the economic interests of the British people." - [Ok as far as it goes but he doesn't yet seem to have grasped the enormity of Brown's astonishing volte-face yesterday -cs]
What could be interesting is the US reaction. Obama is in no mood to listen to Brown and he may face up to Merkel (whose domestic popularity is lower than low today it seems) and Sarkozy
Christina
TELEGRAPH
4.9.09
1. Capping bankers' pay may be revenge but it's no solution to a crisis
Gordon Brown's decision to outsource his thinking on solving the financial crisis to Nicolas Sarkozy, the French President, is final proof of Labour's chronic inability to handle Britain's problems.
By Damian Reece
Importing statist instincts into the already depleted intellectual gene pool in which Brown and his Chancellor swim is deeply depressing.
Brown and the other bonus-bashers are putting the wrong subject at the heart of attempts to change how international capital markets work. The G20 finance ministers will spend this weekend devising pay controls for bankers so that their heads of state and other leaders can score some transparently political goals – albeit own goals in the long run.
Bonuses were never the cause of the credit crunch, they were a symptom of the poorly regulated and opaque markets for assets and their derivatives to which some highly dubious values were attached. Re-introducing pay controls is the last thing this economy needs.
Government and regulatory action since the crisis has so far resulted in fewer, even larger, banks being formed to which the tag "too big to fail" applies even more. Hedge funds and other investors, far from the epicentre of the credit crunch, face being regulated out of existence just when we need them as alternative conduits for liquidity and capital.
A G20 communiqué that bored most people to death with detailed reform of over-the-counter derivatives, mortgage-backed securities and credit default swaps, while insisting that regulators worked out how to monitor systemic risk properly, would be worth a million times more than the amount saved by capping bankers' pay.
The plumbing of financial markets, where the blockages were first allowed to build up unnoticed, still needs fixing. We're being sidetracked by bonuses when we should be obsessing about topics such as imposing fully transparent exchange trading on banks. Why? Because the one lesson the credit crisis should have taught is that we desperately need to know what banks are doing, not necessarily what they're paying
2. Lord Turner 'focusing on the wrong issues', says CBI's Richard Lambert
Lord Turner's call for a Tobin tax is "irrelevant" and his recent outburst on investment banks' pay and bonuses are the "wrong issues", according to Richard Lambert, director-general of the CBI.
By Louise Armitstead
Mr Lambert used his speech at the CBI's annual dinner in the north-east of England last night to urge the chairman of the Financial Services Authority to concentrate instead on the "real" problems facing business such as credit lines and bank competition.
He dismissed Lord Turner's argument last week for taking a slice of profit out of every transaction to restrain bankers. "You may or may not be in favour of a Tobin-style tax on financial transactions: for the record, I am definitely not," he said. "But as Adair Turner himself acknowledges, you'd have to be mad to impose such a levy unilaterally without it being imposed at the same time in the rest of the world. Since there is no chance of this happening, this is not a point on which to linger."
Referring to Lord Turner's suggestion that investment banking is "socially useless" Mr Lambert said: "In a free society, it's not the job of a politician - or, for that matter, of a regulator - to argue that a particular form of activity is or is not of social value."
He added: "We badly need a sense of perspective about what the financial sector is, and how it works. It's not a walled garden, barricaded off in the City. Rather, over 70pc of the workforce is located outside London, generating output per head which is well above average and spreading decently paid jobs right across the UK.
"Nor is it some bloated excrescence throwing the whole UK economy out of balance. It's true that the contribution of the sector as a whole to gross value added across the economy picked up in the years ahead of the recession. But on the most recent figures, the share still stood at no more than about 8pc, which is roughly where it was in the late 1980s. Expressed in a different way, total pay of financial services employees represents a bit less than 4pc of GDP. For comparison, the public sector equivalent is over 16pc. Which figure is too big?"
Mr Lambert said pay and bonuses were not the pressing issues. He said: "There are only two questions that really matter in the banking market today, and they are not about bankers' pay and rations, or the social value of credit derivatives.
"Instead, the right question to ask is: how do we get credit flowing properly through to the private sector, especially to small and medium sized enterprises? And what kind of shock absorbers do the banks need to have in place so that they can get off the taxpayers' back, and do what they are supposed to do in a competitive and open marketplace?"
The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce.
Lord Turner also faced criticism from other City players for his calls this week to force systematically important banks to draw up "living wills" or contingency plans for winding-down in the event that they fail.
City experts warned that the plans would require radical restructuring at the banks that could hundreds of millions of pounds to implement.
CITY AM
4.9.09
Brown has finally killed off New Labour
EDITOR’S LETTER - ALLISTER HEATH
WHAT a waste; what a u-turn. For the past six months, the FSA, the Treasury and many top banks had been beavering away on innovative proposals to reform bonuses. Their idea, which had been gaining influence globally and even been accepted by the Tories, was to retain basic freedom of contract and the incentivising properties of bonuses, while making them less short-term and allowing them to be clawed back if the profits on which they are based eventually turn out to be illusory, subprime-style. The entire endeavour was a bit of a distraction given that no serious economist really believes bonuses were the primary driver of the crisis; but at least it was a calm, level-headed attempt at making financial markets function better.
All of this work has now been thrown away. Gordon Brown, who until a few days ago was an enthusiastic supporter of this measured, reformist approach, and had little time for hysterical opponents of all bonuses, has suddenly switched sides. The Prime Minister is now officially committed to crude, arbitrary limits to compensation, just as he was in the 1980s and 1990s before he grudgingly accepted capitalism. What was left of New Labour finally died yesterday.
The Franco-German letter signed by Brown says it all. “We should explore ways to limit total variable remuneration in a bank either to a certain proportion of total compensation or the bank’s revenues and/or profits”, it says. Yet capping bonuses in this way won’t work, even if every country in the world were foolish enough to sign up. Basic pay would jump; high performers would be given regular pay rises; poor performers would suffer pay cuts or be fired. Bonuses would reappear, albeit in hidden guise. Caps would severely damage efficiency and make banks even more likely to fail. Linking all bonuses to overall profit would make it impossible to reward star performers in loss-making organisations, a recipe for disaster. Even worse, the proposal would only apply to the largest banks, triggering an exodus of bankers to unregulated, smaller firms, hedge funds and start-ups.
The letter states that “our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers’ money having been mobilised to support the financial sector”, without defining “reprehensible”. Clearly, Brown and his new allies believe in the disgraceful concept of collective punishment: even banks such as HSBC, which didn’t take taxpayer cash, apparently deserve to be punished for the sins of others; individual bankers who weren’t involved in sub-prime lending or other defective practices need to pay for the minority who were (most of whom, by the way, have long since been fired). Brown used the wages and profits of the City to fuel his reckless spending spree; he now appears to consider all big bonuses, even those that don’t endanger stability, as “reprehensible”. [He’s a hypocrite too -cs]
Many argue that nationalised banks should not award large payouts, even to key members of staff who create value for the taxpayer. I disagree – but at least this would be a principled approach. But then why did Brown sign off huge bonus schemes for RBS, a bank he owns? Brown’s inconsistency and hypocrisy are breathtaking.
He has no interest in creating an economy less prone to boom and bust; he just wants to stir up populist hate ahead of next year’s election. Let us hope the Tories have the guts to stand up to him.
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