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Robert,

It would appear the regulators knew about the risks of CDO's and CDS's and other off balance collateralised debts, yet nothing was done to try and temper their incidious use by the financial community.
So if there was the will to act, it would have been done by now, or at least since 2002 when the FSA expressed its' concerns.

Perhaps interest rate policy decisions for a whole economy should infact take into consideration the whole economy.
CPI at 2.5% when the major portion of an economy is doubling inside 3 years (UK housing 2000-2003) is only ever going to expand the money supply and cause inflation. This is where the disconnect between wages and house prices started, and also where the debt bubble grew from.

Including house prices in CPI would safeguard another housing bubble as you would lift off the accelerator when the market started racing away.

Bankers' remuneration structure may well have been a factor in getting us to where we are today in terms of the "credit crunch". However, we really need to get serious about the root cause of the situation we're in today. Why not look at the relationship between cheap energy, the assumption that all economies must grow relentlessly (on the back of cheap energy) and the tendency to use tomorrow's "gains" to fund (mortgage) today's lifestyles? This economic philosophy could be dead in the water as the era of cheap energy ends and we have to figure out how to sustain our lifestyles rather than change them for the better (bigger house, bigger car, flashier holiday), year on year. This is a "really big issue" that few people (least of all our politicians) seem to be able to get their heads around, let alone tackle the practical implications. Someone once coined the term "convergence of catastrophes" to describe where we are today. Go on Robert, start a serious debate!

Well done Stephen Green for admitting that it is bankers themselves who are to blame for the mess we are in.

It was after all their imprudent lending which caused the credit crunch in the first place.

Money is far too important to be left in the hands of bankers.

Wholesale banking reform is what is required, not simply changes to compensation packages.

The UK money supply has been increasing at between 11% and 14% every year for the last 10 years in a huge lending bubble. The reality is that inflation is caused by this massive increase, the true rate of inflation is the money supply minus growth, and growth can only ever really be 2-3%, so real inflation has been 8-10% per year. The CPI figures are a politically manipulated fantasy with no basis in reality. 2% inflation? Who do they think they are kidding?

Stock market growth... Simply inflation.
Housing growth... Simply inflation.
Commodity increases... Simply inflation.

14% growth is a doubling period of 5 years. Is there really twice as many cars, houses, buildings, infrastructure, businesses, gold, silver, copper... everything, as 5 years ago? 4 times as much as 10 years ago?

Eh... no... Take a look around you.

14% money supply growth is all just inflation. So who benefits?

Well, if the money supply is increasing at 14% and your income (salary, pension etc) is increasing at less than that... You are a loser. All the inflated money ends up in the markets, and who takes that money home?

As I said... Money is far too important to be left in the hands of bankers.

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Horse .... bolted etc.

Yes we all agree that all those fat cats that make bad decisions should be dismissed, but should not the same apply to Mr fat cat Peston as given his exclusives such as
" sources have told me " or " the ³ÉÈËÂÛ̳ understands " when often he is guilty of just sensationalising a story Mr Peston should be dismissed.

When is Peston going to say / write anything positive about anything, problem then without sensational reporting nobody would read it.

Fine words indeed - but it's HSBCs ordinary customers who are paying for their greed.

As a small business owner my overdraft rate has just been increased by HSBC by 65% (from 4.25% to 7% over base). I run a small. well run business and I am a very easy target. Something is very wrong with our banking system.

I suppose running the Country is a bit like handling a Ship.

During calm Seas a certain tack will get you where you want to be.

During Stormy weather your Ship needs a different tack in order to arrive safely at Port.

Come on Mr Brown change tack !

Your Policies that worked well in calm weather won't get your Ship safely home in this Storm!

You could start by giving the Public Sector a better pay deal, perhaps equal to the average pay settlement of four and a half percent.


Whats a couple of hundred million when Billions are being blown on Wars and Banking fiasco's ?

A fair deal for the Public Sector would do more for the economy in the short term.

"There has been far too much focus on payments that are very short term focused, people who pick up the tab for short term profits, without having to bear the costs of long term impairments."

Responsibility for allowing this - Chairmen, CEO's and Non-Exec Directors - they have been asleep at the wheel - sackable offence.

Responsibiltiy also lies heavily with those institutions who manage the long term - pension funds and the like - where are they?

Responsibility also lies with the Treasury - allowing the fast buck culture to get such a tight grip in the City. Being beguiled by the numbers. Hoodwinked by the Corporate Spin Doctors. Not realising the "The Markets" do not have an interest in Britain or the People of thes Isles. This was a lack of education, the understanding of Complexity at work, having the vision to understand the consequences of what was going on in The City - all somewhat naive.

The crime is ultimately Lying and Falsehood. There has been a steady increase in Lying for gain, and laziness in due diligence over the last 20 years. Those responsible for supervising / managing / controlling the excessive behaviours have been guilty of lying to themselves - in denial!

As an expert in negotiating deals, I witness more and more deceit around the Boardroom Tables - CEO's being economic with the truth in their dealings with their colleagues. If you are lying to yourselves, then your dealings with others is likely to be worse.

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Many people were complaining about the greed, avarice and reward for failure at senior level in many sectors of British business a long time ago. It is simply not good enough that these people start wringing their hands after the event. The damage has already been done. More needs to be done by government to regulate executive pay and bonuses and they can do this via the tax system instead of putting all the pressure on low/middle income earners.

See my comment No 22 - Why Banks won't lend. Acknowledgement at last from the banking industry at their own failure

In other words the Banks in their usual inimitable fashion go too far again, only in the opposite direction this time. They have an outstanding ability to push the limits far too far when they see what seems like a brilliant idea i.e CDO's et al and vastly overcompensate when the house of cards comes crashing down around their ears.
We have been here before in my lifetime and every time it boils down to the same basic reasons - Greed tempting otherwise eminently sensible individuals and organisations to wander from their core business values and try their luck in ventures which they can seemingly make vast quantities of dosh without really having to work for it.

Who ends up bailing them out - Yep their customers and shareholders, oh, and this time the taxpayer - whilst the cowboys, sorry, dealers and their bosses skip over the hills and far away to some very pleasant tropical island or whatever.

All everyone wants is for financial organisations to behave in a conservative and responsible way not like they are trying to break the bank at a casino. Will they ever learn, sadly, probably not.

I spent an hour or so yesterday reading a report which basically says that the UK has an appallingly bad record in funding clean energy technology startups and early stage companies compared with just about everywhere else on the planet but particularly the USA.

I then watched Robert's interview with Stephen Green and understood immediately why this is.

What are they all going to do with those barrel loads of money they've spirited away then Robert? Will this rediscovered moral compass lead to charities bulging at the seams with guilty bankers' largesse? I can see one or two groups being formed here. How about 'bankers for poverty', or 'the bankers redistribution network', perhaps even 'bankers for affordable housing'? What do you think Robert? Is it likely? Mmmmmm.

Those of us who criticised the level of remuneration in the financial sector were told over and over again by all the major parties that the country would suffer if they were paid less, since these "top" people would take their "skills" elsewhere. For exactly the same reason, the top rate of tax couldn't be increased. Now think how much better off the country would be now without the "skills" of these idiots, whose only ability is in filling their own pockets.

How about a banking system where the bank takes deposits from savers and pays them interest, and lends the money out at a slightly higher rate of interest to people who want to buy a house or invest in a real business, and who can clearly afford to make the repayments? Too simple? Of course you could run such a banking system extremely cheaply- you don't have to pay fancy bonuses to employ steady, sensible people who actually feel some responsibility for the consequences of their actions.

Clearly such a banking system wouldn't produce a supercharged economy, and people would have to put up with their house being just somewhere to live, rather than its alleged value being the basis of their whole lifestyle. Perhaps some people would have to save up to buy expensive things, which would mean waiting a bit, until they can actually afford what they want, rather than paying a load of interest to have it all now.

Yes, that's the flaw in my plan. A nation of credit junkies just can't wait for everything to get back to "normal", so that the party can start all over again. But then why so many complaints about the hangover?

In the past few years we have seen the new-ferrari-a-year brigade and their superiors wreck their banks and the economy whilst all becoming obscenely rich.
But the biggest obscenity of all is the fact that the poor now have to bail them all out!
Reform their pay? Their assets, pensions and bonuses should all be forfeited.
What a monstrous injustice this all is.
And we havent yet seen the devastation that is going to happen to all our pension funds.

Some people have alleged that bankers, their traders and agents are now all corrupt.
Think about it.

Highly talented professionals with glowing testimonials and proven experience have no cause to worry; provided they dedicate themselves to the success of the organisations they work for. Of course this calls for pure loyalty and dedication. Of course organisations have to recognise real talent and remunerate these professionals accordingly. Failure to do so will result in dissatisfaction;

This must be the biggest bank heist in
history ..... EXCEPT THIS ONE'S BEEN AN 'INSIDE JOB'.....It is in fact the biggest commercial fraud ever!
There must be Congressional and House of Lords/Commons hearings about the wholesale national economic destruction that these FIMD's (Financial Instruments of Mass Destruction) will wreak on our economies and will wreck all our lives i.e. the toxic off balance sheet trading instruments such as CDO's and CDS's etc.
The politicians must take this opportunity to extricate themselves from this rotten element within our society and start investigations into this, the greatest of frauds, with a view to initiating criminal procedings. Otherwise, they may be found to be complicit themselves at a later stage. 'You can fool some of the people all of the time; you can fool all of the people some of the time.....but you can't fool all of the peope all of the time.....the internet will see to that!

The board of Northern Rock lost every penny of their savers money.
They also lost every penny of their shareholders money.
Whilst they were doing this, they made themselves extremely rich.
Other banks are close behind.
What exactly would you call that?...
Theft?
Fraud?
Criminal incompetence or criminal negligence?
I know what I think, what do you think?

Er, don't the shareholders approve the pay of senior management? So where is the problem?

These thoughts are surely going in the right direction. But I think the banker pay issues are only the tip of the iceberg when it comes to responsible banking. The implications of the credit bubble outfall (which is far from over) need to lead to profound changes in the way economy is being handled. Banks will always play a role, but it needs to be very different in future.

I'll tryagain.
The word "pay" hardly seems appropriate to what has been going on in our banks.
The word "ransacking" seems more appropriate.

17. At 11:21am on 13 Sep 2008, stevewo wrote:

"And we havent yet seen the devastation that is going to happen to all our pension funds."

Some of us saw this coming a couple of years before the event and switched our pension funds to bonds and cash in preparation, just at the peak. Think of it as financial ju-jitsu; don't try to fight the ravening horde, simply step aside and watch them go down.

Some of us even explained to friends, relatives, colleagues, wrote to the papers and broadcasters to say "look, this is going to happen in a year or two". But hey, who likes a party pooper.

Course the real irony is that as the smoke clears, the best investments for those who saw it coming will be in the rubble of the banks, and property bargains, because you know what? People just don't learn.

"Bankers pay" is a subject that will put most peoples blood-pressure sky-high.
Is it not true to say that a banker who piles his latest Ferrari into a tree is likely to have his life saved by a nurse or paramedic who is struggling to pay their gas bill?

Off course bankers should be rewarded ,does securitizing them and their sorry AAA's in wormwood scrubbs sound about right ,where,they are sure to find an alternate willing market for their investment vehicles .

If a butcher[in colonoosion ]after putting good meat into his state of the art sausage machine [they can be made complex],were to redirect it out through a side channel to, himself the tinkerr the tailerr and the candlestick makerr, whilst filling their ecconomically recycled 4 [AAA PERFUMED ]skins with toxic gAAAsses to be kept off balance[ha!] sheet for the old age pensionerds ,then they would get arrested ....eventually.... after the oap's ended their days with a bang ....err.

Now we all understand how banking kept the "economy "affloat whilst the Owls [of laughter]serenaded the pussycat shareholders on their way to bongoland

The fact that these sartoirirical geniasses ....are still working the easy streets despite Charles Ponzi being sent to prison for less ,only demonstrate the maeopic west bedevilment of the contemory [ob]scene

Suposedly only fit and proper persons [descended from Blackbeard it seems ]are allowed by law to run banks


They should be made to walk the plankton [FSA]to the tune of things can only get barter and the laughing policeman

Unfortunately, most people don't realise that the bankers have paid for the current crisis. For the highest paid bankers, the vast majority of their remuneration comes in the form of deferred compensation, which is in the form of the banks shares or similar instruments. This means the top bankers in Northern Rock, Bear Stearns, and current Lehman Brothers, have lost a fortune. Their pay last year might have looked a lot when they got $10m, but after a 75% loss because the share price has collapsed this year, along with losses on the last 3-5 years of compensation, it doesn't look anywhere near so good.

This is not the first time that the chair of HSBC has made comments along these lines. John Strickland did in the late '90s.

The problem is that the banks need the regulators to force change; one bank can't take a flyer otherwise all the good people will move

Robert Peston has the happy knack of saying what we would all like to say, but he does it politely.
Good stuff.
"Judgement impaired by greed". Exactly.
Now how do we deal with the aftermath...massive rewards for massive failure.

Why is the head of a bank airing his disatisfaction on the pay his bank employees get, the answer is in his hands.

A recent post conplains that people don't understand bankers perks and shareholdings have been hit. If you are a banker what do you expect, reward when things go wrong, as well as taxpayer money propping up the system directly or indirectly.

It's the Formula 1 race at Monza this weekend and as at every F1 race I am reminded by the huge number of billboards with their logo on it that the Royal Bank of Scotland is one of F1's biggest sponsors.

Sadly though they never sponsor Scottish motorsport nor of course would they financially support the development of either a race or road car. This despite the fact that Fred Goodwin is alledgedly a vintage car collector.

To me the attitude of RBS to motorsport has always summed up the way banks operate.. Flashy and shallow!

I worked for a large UK employer which went bust largely as a result of the banks', and the city's pressure for short term profits as opposed to long term sustainability. When it happened we had precious little support from the government, we were sold to a foreign company who largely dismantled the UK operations, with the loss of many jobs, and the loss of a significant sector of UK development and manufacturing.
It is galling that when these financial bodies themselves get into trouble in both the UK and the US they get support from the government, supporting the jobs of the fat cats responsible for the mess.
It is even worse that it happened under Labour's watch. It is difficult to imagine that the Conservatives or the Lib Dems would have taken any action to prevent this either.

Stevewoo 24 , pillaging is a more apt word, ransacking doesnt quite complete the task and implies a visible mess observable before the pillaging ... rather than afterwards

I wouldn't even be surprised if our gold reserves are infact now lead bullion derivatives with AAAgold foil on the outside ,why we still need big stone buildings with the pillars of norman wisdom for, a bank [ofAAA bartteries connected to lap tops ]who can say .
WHEN YOU ZINC ABOUT IT, THINGS CAN ONLY GET [AAA ]BATTERY so ,sulphering is inevitable for themAAAsses

bzzzzzzzzzz....bzzzzzzzz OK OK

Post 29 The problem is that electoral votage regulators dont work properly and they look forward to transfering their northern crocodile clips to the biggest bank of Eurocell AAA batteries

Until the rating agencies are run by monks the bankerrs promices of reform will be impossible even to foolfill ,since not participating in the latest scAAAm will make them appear to underperform and theirfore suseptable to being swallowed whole by the other pufferfish who can hold their bredth longer


Banking can never be more than brinkmanship by puffer fish pretending their AAA's is more worth having because it is unencumboured by automaticaly induced debt sindrome

Dace-H is wrong to say that "bankers have paid for the current crisis". It's true that, as Dave asys " for the highest paid bankers, the vast majority of their remuneration comes in the form of deferred compensation, which is in the form of the banks shares or similar instruments" ... but they still get many millions in cash bonuses every year, and salaries hundreds of times higher than that of the best-paid nurse.

It would be much more accurate to say that the crash leaves many bankers worth mere tens of millions, rather than hundreds of millions. Poor wee bunnikins, scraping by on stashes that are merely humungous rather than incomprehensible

Strange, I can't find anything on the HSBC website at that says that they subscribe to "deals done in haste by bankers whose judgement was impaired by greed".

But they do claim amongst a lot of HR-speak to have a 'prudent lending policy'.

That's all right then.

Look, I'm getting a bit fed up with this procession of wise-after-the-event-Captains-of-the-banking-industry. Or should that be a Recession of wise-after-the-event-Captains-of-the-banking-industry?

Sorry, but some vague talk about reforming the pay structure is not good enough.

A fraud has been committed by the bankers and the money paid out in bonuses should be PAID BACK.

It should be possible to recover at least a couple of billion, and this money should be put to good use alleviating some of the misery they have caused.

If those involved threaten to 'go overseas' then let them try and apply for jobs in New York or Japan where I am sure they will be most welcome, but only after seizing their assets here first.

Once again we hear comments which resemble a Potemkin Village. An extravagant facade covering an uncomfortable truth. The truth in this case being that there is no need to rob a bank to make easy money, no just open one.

The long term is the only term.

'It's quite another to actually get all banks and bankers to sign up for what many of them will see as a pay cut.'

So, fire this lot of bankers, who have run things into the ground, and have the boards of directors begin interviewing for others.

Administer qualification exams, to see if the andidates understand math, can evaluate risk, and know law and ethics.

Anyone with an MBA or JD is immediately disqualified.

> It's quite another to actually get all
> banks and bankers to sign up for what
> many of them will see as a pay cut.

It should be easy to get banks to sign up for this, as they are the bosses and they should be glad of lower wages that please shareholders. Who is running the banks?

The basic skills for banking operations are an ability to count, and an ability to put money in safe places. This is not brain surgery or engineering, or some other difficult trade that takes a lot of training or where safety hazards exist etc.

So we shareholders can well afford to dump the failures. We need to hire people who can count well and find safe safe places for our money - this should not cost the earth.

"Bank robbers" used to be people who came into the bank from the street to remove large sums..........
On behalf of the poor, I would like to ask all bankers..."please Sirs, can we have our money back?".

The government is responsible for the money supply. Oversupply of liquidity has been the main driver, nothing else.

"Few bankers have stood up and admitted that remuneration in their industry was one of the causes of the credit crunch.

And none have done so who are as influential as Stephen Green, chairman of the world's second largest bank, HSBC.

So it matters that Mr Green concedes that some bankers were paid too much for deals that may have yielded short term profits but ended up costing their institutions a fortune."

So, what is the thrust of this argument?

What is the dominant force behind the creation of such an apparently inappropriate reward structure? Who is it that is actively setting the requirement that the financial sector maximises the present at the expense of the future?

Is it really the individuals employed in the financial sector? Are corporate controls really so weak that these individuals have been able to negotiate eye-wateringly high levels of remuneration for following obviously unreasonable policies that are received with real-time mainstream criticism? Is it anywhere near a correct summary of the situation to allocate chief responsibility to those financial-sector employees who have created an operational raison d'être that is largely contrary to the contemporary desires of the owners of the institutions who pay them?

What if we are wrong with this analysis? What if the behaviour of the financial sector in recent years has not been contrary to the desires of the institutional shareholders, but in accordance with them? What if the sector's employees have done little more than to negotiate incentive structures that encourage them to satisfy the demands of the shareholders?

As with all social interpretation and decision-making, the most important requirement is that we seek actual, dispassionate answers - not to allow ourselves to be diverted towards the comfortable lines of thought that incorrectly isolate us, as individuals, from personal responsibility for society's faults.

Otherwise the chances are that any remedial actions we come up with will be ineffective.

"Unfortunately, most people don't realise that the bankers have paid for the current crisis. For the highest paid bankers, the vast majority of their remuneration comes in the form of deferred compensation, which is in the form of the banks shares or similar instruments. This means the top bankers in Northern Rock, Bear Stearns, and current Lehman Brothers, have lost a fortune."

How terribly sad.

Perhaps we can setup a charity for them?

Post #42 smith_it2000

NO!!!.....you are not correct!

In the US, the government is not responsible for the money supply......it's the Federal Reserve, which is a cosy club that represents a clique of PRIVATE banks. It is not answerable to any US government institution or office. Similarly the BoE here do not control the money supply here.

This is all very well but some were advising the banks and the government over ten years ago that a system of bonusses for meeting defined targets would result in major distortions to the required outputs.

It has been a well known fact in industrial production that what gets measured gets done but equally important things which don't get measured don't get done. It is known as WGMGD in pure acronym.

So the banks and the government fell for this nonsense practise of bonus payments just at the time UK industry was moving away from this anti-productive doctrine.

We need a return to professionalism in which the individual manager is rewarded with a good salary and pension and is expected and trained to perform to the greater benefit of the organisation.

Funnily enough this is the way it used to be done. It worked well until the clever boys with all their cunning arguments took over the stage. I think we need to retrace our steps, find these clever and persuasive people and send them to the salt mines.

Hollow words to buy off the regulators. 5 years hence City bonuses will be right back to where they were - having found new ways to subvert new regulations... and so what?

There is a lot of idealistic talk on this blog but for all their vices financial markets will always be preferable to an economy run by politicians and bureaucrats - especially the ones who think they can create a fairer more sustainable society. History shows they cause the most damage of all.

As a dedicated hard-working member of the credit derivatives Hedge Fund community, I am tired of hearing people inaccurately blame CDS as the cause of today's economic malaise.

These are simply insurance contracts offering vital protection to default in today's corporate world. If paying an insurance premium to a willing counterparty is a crime, then lock me up. The bulk of the credit derivatives market takes this form and has no relation to repacking of assets and resale to retail customers or other market players.

Derivatives can also be positively used to lock in the prices of commodities for producers and manufacturers, lowering prices for the consumer and providing more stability in industry.

People must also understand we are leaving the era of US economic hegemony and are seeing the credit crisis as a realization of the global realignment of economic power. When the dust settles, the Euro will be as prominent as the Dollar and we will see the vast Sovereign Wealth Funds of the middle and far east controlling substantial interests in the world's largest corporations.

Having just watched your 23 minute interview, if you tied Stephen Green's hands behind his back would he then be speechless? It seems to me as though "the nostrums" (or should it be nostra?) of banking have deteriorated since the advent of computers which have greatly accelerated the timescale in which decisions have to be made and created an atmosphere in the money markets which is more like a "mad house casino"! How many other "Nick Leesons" have contributed to the credit crunch but will never be held to account? Stephen Green stressed that bankers are investing "other people's money" and yet they employ many traders who seem motivated solely by short-term personal gain. The Canary Wharf culture is one of enormous indulgence and excess where to earn "only £100,000 per annum is "chicken feed"! This simply cannot be the right or best way to reward bankers and then have them retire at 50+ in the lap of luxury.

Remuneration is one thing, but the bigger matter is simply the type of people banks hire.

Responsible people with morals won't even make it to the interview stage - while the system is set-up to attract the greedy, reckless, maladjusted stereotype that is unfortunately all too true.

Excellent interview by Robert Peston with chairman of HSBC.
Quite hard-hitting questions, but put with a smile.
If you own any shares, better get yourself a bottle of vodka for tomorrow.
Better get yourself another bottle for your pension fund.

Right now the bankers might be feeling (just a little) contrite for creating the current mess in the finacial markets but unless they are properly regulated or suffer some form of penal sentence and lose their ill gotten gains when things go wrong, because they were less than diligent in following proper (banking) procedures when carrying out their duties on behalf of their employers, then they will soon revert back to their greedy ways. We've seen it too many times before

I cannot agree more with the sentiment that reform is required.

It starts at the top - remuneration committes must enforce that top management's bonus pay is linked to longterm performance.

It will then be in the interest of upper management to implement longterm pay incentives to those who are making the deals, not a quarterly or annual performance measure.

Put all incentive pay into a fund which then pays out to the individual based on continuing performance only.
Base vs incentive pay should retain roughly the current ratio.

Of course payment should only be on the basis that a person does a good job - but that is only half the story. I'm a lawyer now - I was nurse for 26 years - and I know all about professional obligations.

Bankers do not just store money they operate a business upon which the global economy depends. They are hansomely rewarded for this responsible task - fair enough. Because of their importance they are insulated by governement to some extent at least from the consequences of their own failure. Again fair enough.

But the people in charge of the wolds banks either forgot or didn't care that the fact they are insulated means that they have (or at lease should have) a wider obligation beyond just the immediate profit for thier customers and shareholders and they betrayed the confidence palced in them by the nations in which they operate.

It should be possible to "strike off" a banker who fails to honour this obligation in the same way that other professionals can be deprived of a rtight to practice if they do not honour their wider obligations to the public. Say to these guys that, if they behave in the reckless manner they have done over the last few years and they will permanently lose their livlihood and it won't go wrong again.

robert,

stephen green is to be congratulated for his comments on reforming bankers pay.

at the same time would he look at reforming banking charges so that they better reflect the cost to the business.

it is important to have a strong banking sector that charges fairly for the products and services it provides.
that will create sustainable long term profits
which will assist in long term sustained economic growth.

Re message 9

terminology incorrect, they don't float. Problem is these people have been playing monopoly with other peoples money and the culture of risk and greed has gone far off the scale.

The investment banking culture should be kept well away from the consumer and retail business. Note Barclays interest in Lehman and you can see where they want to go... Will anybody hold these banks accountable for the outrageous charges and arrogant/condescending attitude in the retail/consumer banking sector.

Stringent regulation is required, the idea that somehow 'self regulation' works in any major business environment is pathetic. Large cash bonuses should be a thing of the past, compensation has to be linked to performance over a meaningful period of time...I don't hear any of these guys that pocketed huge bonuses as they played with the sub prime debt..refunding them to the institutions concerned! They have been hugely rewarded for creating the turmoil and the losses. What 'incentive' do they have to act responsibly.

The problem for the future is where will the discipline and guidence to ensure unsafe lending is kept to a minimum come from.
Many see state regulation as a definate no no ( particularly in the US and UK ) on the other hand can the banking world be relied on to do it, especially in an international highly globalised marlket, where there are no standardised regulations or codes of conduct.

"Money is far too important to be left in the hands of bankers."

Well, I certainly don't want it left in the hands of a government, no matter what colour.

The main thrust of regulation should be the regulators knowing what these exotic financial instruments are about, learning to calculate the risks rather than rely on the issuers; then knowing that broker-dealers know what they are handling - most of them don't.

Next, we should insist on minimum levels in banks' capital assets ratios. I'd guess somewhere between 8-10%.

We also need to back out of the American system whereby mortgage debt can be sold on. In the not-so-long-ago days of the mutual societies, this rarely happened. It is a frivolity that, ok, helps to pump more money into the system but it's fake money. Let's get back to a system where a bank keeps a mortgage debt on its books and leaves it there. What's wrong with that? It has to be somewhere.

And that's the problem: in the market today no one knows who actually has securitised the debt.

Its very interesting to see that one of the main reasons why AIG just had to be proped up by the goverment was because it was so big and consequently the effect on the world banking system would have been a disaster if it was allowed to collapse.

While not in the same legue it strikes me as a bit odd that our regulators are very keen to see the HBOS / Lloyds merger as they feel it will make for a bigger stronger bank better able to ride the termoil in the banking system (titanic springs to mind) however if the new mighty looks like falling in the future, it will take even more to prop it up. The bigger it gets the less likely it will be that a benefactor other than the government will step into the breach.

Lets hope it never happens as our government does not have a great track record of dealing with such crises in a timely manner.

On take over of HBOS/Halifax by Lloyds TSB:

Whilst HBOS insists (radio4 this morning) insist they are healthy and a solid institution, the stock market takes an altogether different view and drives HBOS value down.

Earlier Peston blog headline: HBOS is too large to fail.

However, now that HBOS is indeed failing on stock market - the remedy, supported by extraordinary measures of government (suspending common sense regulation), is to build something a little bigger ?

How does that TRULY solve a problem?

Is the bigger thing now really too large to fail? That is of course, until it fails......

anything the current crisis has reminded us how critical banks and bankers are to our lives. The question is: How do we re-establish a banking industry that sustainably serves the broader economic interests of all.

The revelation of how acutely self serving the culture of bankers and banking has become has come as a shock to many. However having worked my whole life in the city I know that the majority of those I have worked with understood they were there to extract as much money as they could for themselves as quickly as possible. We knew we offered less to society than a surgeon or an architect. We even new we offered pretty low value for money to shareholders and clients- but that was never the point- Even though we did work hard, loosely structured performance related remuneration allowed us to secure frankly ridiculous amounts of money to do pretty average work. I have always found it surprising that people ever lapped up the idea that we should receive extra money for just doing our job properly. Also, as we all knew, superior returns were more often than not based on a)good fortune, b)under pricing of risk and c)simply being around during one of the longest periods of economic growth in global history. Find me those superior returns now that risk is being repriced and we have global recession- perhaps revealingly we are now left solely reliant on our skill and good fortune, and its not a pretty picture.

What is perhaps more astounding is that it has only been since the government has arrived as a majority shareholder that anyone has thought to challenge the idea that we should keep getting healthy bonuses even if we are losing money on a grand scale. It very much illustrates how shareholders have totally lost control of the companies they own to their executives. As new governmental owners make moves to re-establish shareholder control the range of bizarre executives responses have only gone to reveal just how over-extended their collective sense of entitlement has become. Frighteningly -if anything- the media underplays the level of hubris amongst mid to upper management. It is not a secret that some very well remunerated managers in government bailed out banks have been threatening to walk while actively leaving chaos in their wake, unless they get a substantial bonus. The argument being that these remuneration levels are low relative to the sums at stake. I think in Chicago in the 20s they used to call this kind of racket a 'Shake-down'.

The sooner this disastrously damaging culture is broken, and errant managers and executives are brought to heal or shown the door, the sooner we might feel more optimistic about a achieving a banking industry that serves our broader economic interest. Tighter regulation will help restrain the worst excesses, however it will never establish a change of attitude. Besides the city is rightly confident it will always manage to be a couple of steps ahead of the regulators. Ironically Thatcher very clearly showed us what needs to be done when those working within a whole economic sector form a self interested cabal that threatens our wider economic interests.
- You make it very clear to them that if they do not quickly adjust to the new status quo they will not survive.
- Encourage the introduction of new entrants who offer better value for money, and a more sympathetic business culture.
- Help re-establish strong active shareholder control.

It will then just be up to individual bankers to decide whether they really do just want to walk away. I would suggest our banking industry would be well rid of those who do.