Wednesday, 6 March 2013

Bank of England Tourettes

Watching Mervyn King set out his views on RBS to MPs today I thought what an ignorant fucker. Here’s why.

His suggestion that RBS should be split into a good bank (to be sold off and become much lovlier as a result and willing and able to lend loads more to businesses etc., presumably) and a bad bank is already built into RBS's structure except they call it core and non-core. And the latest accounts make clear they’ve been shrinking the non-core “bank” like billy-o, cutting it from £285bn plus £85bn of undrawn commitments at the end of 2008 to £57bn (plus £6bn undrawn) by the end of last year.

Now this means a couple of things re: Mervyn’s chat. One is well what bad bank is he on about exactly, the way more than £300bn one that's already been got rid of or the rump that’s left, which continues to account for a disproportionate amount of RBS losses (these being cross-subsidised by its core businesses rather than directly by the taxpayer as might the case if Mervyn's proposals were implemented)?

Another is does this chat - and the resultant uncertainty - help or hinder anyone, like is Mervyn undermining the value of a public sector asset? And what about to what extent is RBS and other banks getting all the shite lending off their books complicating the lending data being touted as evidence of banks being unwilling to lend? *

Unfortunately, Mervyn doesn’t say. Instead, he cite Japan as an example of what not to do, which is interesting in the sense of it being "interesting" someone noted for assuming he’s always the smartest person in the room chooses to spout such bollocks. Here, quick difference – Japanese banks just didn’t ‘fess up to their problems for years ... and years ... and years, which simply hasn’t been the case here. Spain? Fo’sho, but here? Nope.

Plus, there’s cheeky wee fundamental differences about Japan and the structure and common sense of its economy and how that facilitated banks supporting “zombie” companies, which clogged up their balance sheets to an extent you just don’t and won't see here. Then there’s also how generous the Japanese government was when it finally started sorting out its banks. So yes, UK banks have received lots of aid, but they've also paid for it or to quote that banker’s friend the Guardian ”The taxpayer has now made £5bn of profit from the APS and an additional £1.5bn from fees paid by RBS for other liquidity schemes” – and that’s just RBS! By contrast Japan's banks got aid on terms that would have even made Wall Street blush.

So yeah there’s some fascinating degrees of ignorance on show with Mervyn joining Paul Tucker in making random bollocks outbursts. Given Mervyn’s vocal support for the government’s austerity policies I reckon he should ram his ego back up his jacksie, shut up and f'off early.

* Council of Mortgage Lender data on mortgage LTVs make clear we’re actually still in a credit crunch. So rather than behaving like a spoilt wee girl, Mervyn could have more usefully come out with some chat on what he thinks the mortgage market should look like given the Bank of England is in the process of acquiring levers for influencing lending into it i.e. talk about what the Bank of England can and will do and why, not headline grabbing tosh that's as ignorant as its irrelevant as its unlikely to happen.

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