Integrity (what are you doin' to me)

An enquiry is a powerful means of giving the impression you’re doing something about something. Thankfully if it’s set up right at the outset you can sound all hard and (Spanish) inquisitive in a we're going to cluster-fuck you like hedgehogs on a broom kinda way and yet guarantee nothing actually happens and no one is found to be at fault.

Some obvious ways of doing so include:

1) Making sure the remit of the enquiry is so narrow it can’t enquire into anything that matters
2) Ensuing its status is such that you can’t place too much faith in the answers given to its questions e.g. fibbing isn’t a crime and/or there’s no immunity for witnesses
3) Get as many placemen on it as possible, ideally starting with the chair so no nasty questions get asked
4) Conduct it in secret so no-one is aware of what actually gets said
5) Drag it out for as long as possible to the point where everyone loses interest and rather than the results getting scrutinised the cost and time spent becomes the story.

Those things certainly sprung to mind when I read the Financial Services Authority notice that it’d completed its enquiry into the Royal Bank of Scotland and that no further actions were to be taken. Rather, the biggest fuck up in British corporate history was due to “bad decisions” and most definitely “not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the Board. The issues we investigated do not warrant us taking any enforcement action, either against the firm or against individuals”. So there you are then.

Alternatively, lets tick off, which of the above techniques for guaranteeing no action apply here. Definitely 1) given the reference to “(t)he issues we investigated” is clear code for if there are other things that fucked it up well tough tittie cos that wasn’t in the enquiry’s remit and is fuck all to do with us give or take the FSA was responsible for regulating the whole shebang regardless. Don’t know about 2), but 3) definitely does apply given PWC was used to investigate the fecker i.e. a company that makes its living selling accountancy and consultancy services to banks was used to investigate a bank that its business development managers (i.e. salesmen) regard as a major customer/cash cow, which in turn means there was one fucking monster of a conflict of interest. 4) also applies in spades given “The FSA cannot publish the content of the RBS review as information gathered from the bank during the course of the review remains confidential under the Financial Services and Markets Act 2000” and 5) also, but to a lesser extent given in enquiry terms 21 months is kinda quick.

Except, I think the FSA fucked up big time because they’ve created a ginormous, humungus hostage to fortune that should (emphasis on the should) apply in spades to all their other reviews by stating there wasn’t a lack of integrity. Now, integrity is a powerful word; its use here is intended to convey the impression that the RBS executive and board made honest mistakes i.e. they may be utter fuck-ups, but they were fuck-ups who fucked up in good faith.

Fair’nuff, except how the FSA defines integrity can be publically stated because it is in no way a commercial secret, rather it’s a generic quasi-legal notion. And the notion of integrity in British banking, or at least parts of it is open to serious question.

In the absence of an FSA definition I looked up a few definitions of integrity and would say wikipedia’s is the best (for my purposes anyhow). It goes on about how integrity as a concept concerns consistency of actions, values, methods, measures, principles, expectations and outcomes. It continues to describe how in ethics, integrity is regarded as the quality of having an intuitive sense of honesty and truthfulness in regard to the motivations for one's actions. Moreover, integrity can be regarded as the opposite of hypocrisy, in that it regards internal consistency as a virtue, and that parties holding apparently conflicting values should account for the discrepancy or alter their beliefs. …… As such, one may judge that others "have integrity" to the extent that one judges whether they behave according to the values, beliefs and principles they claim to hold.

Now that is some powerful shit for a regulator. Put simply did senior bods at RBS and all the other banks being looked at actually behave according to the values, beliefs and principles they claimed to hold and/or espoused? More straightforwardly, and relevant here, did they behave in line with their company’s stated policies and processes when they lent money or did they do things like lean on more junior staff to do what they were told and not what they thought was right, did they take short-cuts when it came to following documented and established credit sanctioning procedures, did they "finesse" the analysis of financials and subsquent fulfilment of post-sanction drawdown conditions, beforehand did they always emphasise the positive as opposed to the realistic when it came to assessing a proposition's propsects despite credible, contradictory views being readily available and so on and so on etc., etc., in ways that are fuck off easy to find out given credit applications are well-documented things people remember?

Hmmmm. By this definition most lenders know for a fucking fact some senior bods did not behave with integrity and made lots of bonus cash for themselves by doing so. There again given the FSA said everything about British banking was hunky dory until it wasn’t it's got a mucho vested interest in its utter fucking shiteness not being disclosed, In fact I'd guess there’s no chance any of its enquiries will generate anything other than more whitewashes. Rather the best we can hope for is for the UK economy to not end up like Ireland by default and for only a few million more taxpayers’ fivers getting pissed away proving the great and the good might not be great, but at least they had integrity.

A Dec 6th P.S. - aside from revisions to the above that friends of Sir Fred Goodwin are asking for the report to be published lets you know how fucking shite it is. There again he's probably hacked off with being the scapegoat, which is fair play cos then mebbe some of the other fuckwits who fucked things up would start getting scrutinised. Except given what actually passes for scrutiny that'd simply generate more expensive wastes of time give or take pointless op-eds by financial commentators so clued up they keep forgetting/don't know Sir Fred first earned his "Shred" nickname when he was at Clydesdale Bank.

stop it

Latest comments on the current mortgage market taken straight from the BBC website - "The lender said potential buyers were being deterred by the uncertainty generated by the government's public spending cuts." - no, actually that's utter fucking shite.

The reason the mortgage market is at historic lows is because people can't afford the deposits now required to buy a house. I mean for fuck, fucking sake. Like seriously, for fucking, fuck, fucking, fucky, fucky, fuck, fuck sake - people can't afford mortgages anymore. That's it, that is why the housing market is fucked for the forseeable future. Sure there's some consumer confidence uptown downturn wank pissing about on fringes, but the overall state of the market is (like it has fucking been for 2 years now) explained primarily by the restricted supply of new mortgage finance. That is fucking it.

So why in fucking, fucking cunt of a christ on a syphilitic bike is that utter fucking in your face like an ambidextrous jizz lobbing pervert gone fucking mental down the high street with his willy banjo fact not simply accepted and every alternative factor told to go shut up and fuck itself rough in a shitty corner with a hard, jaggy stick so our esteemed political and economic leaders can be left to debate how to respond and how to address the factors that underpin the current situation as well as the possible impacts of any policy responses? Utter cunts.

Aaaarrrghhhh!!!!!

Nov 24th P.S. I guess the above is part rhetorical question part rhetorical request. If there wasn't this rigmarole of tossing one off over some mortgage lender's latest self-serving press release we'd have to consider actual important shit like:

- should there be a maximum loan to value and if so what should it be?
- securitisation, the rocket fuel that drove the housing market, is fucked. Is that a good or a bad thing and should or can Britain try to start it again?
- what is the role of the state in the mortgage market, a lender, a guarantor and so on?

Much better to ignore shit like that and let politicians fixate on banker bonuses/wank on about lending targets, etc.,

Going, going ...................... fuck you

I’d be grateful if you would be kind enough to ignore the recent banking reality and concentrate on the theory in the next paragraph.

How much to charge when lending money is relatively straightforward – the greater the credit risk i.e. the risk of the debt not being fully repaid, the higher the interest rate that should be charged. Hence, whereas I’d charge a fine upstanding nun with a million pounds in the bank say 2% to borrow £50 off me for a week, I’d charge an insane heroin addict living on benefits and already owes Big Ian £10,000 say3% or mebbe even 150% to borrow £2,000 off me for 10 years.

Much the same principle applies to government debt. Hence, the successive spikes seen in how much Greece, then Ireland and Portugal and latterly Spain have to pay to borrow money; all these countries are heavily indebted and are suffering the after effects of a mixture of mental public spending, property crashes, making lots of Port etc., So it all seems perfectly fair I guess, in fact the spread that’s emerged between how much Germany pays to borrow and what PIIGS pay could arguably be presented as a good thing; it’s the bond markets (government debt being sold as bonds) inflicting the necessary discipline on otherwise unruly governments, there’s no such things as a free lunch, no pain no gain, etc.,

Except, that argument can go fuck itself up the nose with a shitty, rabid dog cock. For starters all these countries previously paid pretty much the same as Germany, that insane bunch of inflation haters with an incredible manufacturing base/export record. So err yeah, the people currently doing the disciplining where “experts” whose institutionalised methodology could barely tell the difference between Germany and Portugal for fuck sake, the latter being a country whose capital city is absolutely fabulous and totally worth seeing, but from personal memory was backward enough to have street beggars suffering from horrendously advanced elephantitis.

But, setting that general fucking utter and total ineptness to one side, there’s the lovely wee causal chain now in motion that raises a number of questions:

1) Bond investor suddenly gets the willies about country A and herd mentality kicks in big time
2) What country A has to pay for its debt spikes as a result
3) Country A is no longer able to borrow/can’t afford to borrow any more cos of the spike
4) Country A gets a bail out from the ECB, the EU, the IMF, MFI, WTF, etc.,

The thing is though throughout this process Country A makes this simple claim (in amongst a raft of others) – our bondholders will be fully repaid, we will not default on any government debt.

Obviously, given it’s a politician, it’s perhaps wise to take this kind of shit with a grain of salt, but because the Eurocrats don’t want any member state defaulting, there’s a huge fucking in your face dollop of truth in it. Hence when defaulting becomes a real possibility the EU steps in and hey presto the bailout means country A doesn’t.

Now lets get back to banking basics here for a mo, which is the risk should be reflected in the reward. Except, for investors in bonds this simply isn’t the case; they get the rewards, you fucking bet they get the rewards, but when the risk starts to appear and push comes to shove allova sudden a bailout happens and it disappears again because France and Germany have stumped up the readies.

But, hang on in the case of Ireland its up shit creek because the government put the Irish people on the hook for the Irish banks whereas now the day has been saved because Germany (and France) have in turn put themselves on the hook for Ireland, so shouldn’t this same indirect on the hooked-ness now apply to Irish sovereign debt i.e. shouldn’t their cost of borrowing fall back to German levels? Not yet it hasn’t, which leaves me thinking we’re in a heads you lose tails I win situation as far as it goes with investors in government debt because as the cost of government debt increases so the risk of default (due to this forcing a default) recedes.

The one caveat and potential saving grace here is Spain. Ireland and Greece (and Portugal) are all very well, but their actual economies just aren’t that big so as a result can all be readily sacrificed/bailed out to appease the sovereign debt gods. Spain on the other hand is big. In fact in credit crunch banking parlance it’s arguably to big to fail, so as bond investors and speculators start speculating for their own short-term personal gain with this ramping up what the Spanish government has to pay to borrow as a result, one obvious option that emerges is to let the risk-reward aspect of lending reappear. In fact fuck it lets get co-ordinated on their fucking asses and have a pan-European sovereign debt default, which would leave the greedy fuckers looking about for someone else to lend to and then after realising perhaps North Korea isn’t the safest of options at the mo, mebbe a 10% haircut on debt I was already getting 6% or whatever on isn’t so bad after all. Except we won’t because we’re sad cunts.

Daft laddie and the magic porridge pot

Most people in social housing (two thirds according to this note) claim housing benefit. It’s kinda confusing then to read the lovely new government proposal to allow social housing rents to be raised to 80% of the local private sector market average. So is housing benefit going to be increased to cover any (and all) increases then? That seems a tad unlikely given the emphasis is on cutting or at least capping housing benefit spending, which leaves me thinking tenants will be expected to pay the difference. Except, as already noted, most social housing tenants receive benefits to pay their rents i.e. they are by definition poor, so where exactly are they going to find the cash to pay any increased rents, the magic porridge pot?

The other thing that gets me is the notion of introducing regular means testing of social housing tenants. The rationale for doing so is so obvious enough if somewhat disgusting – if you can afford to rent from the private sector, in other words you’ve got a job, you shouldn’t be in social housing. But, given the proposal to allow social housing rents to rise only so far as 80% of the local private sector average, it’s very clear that even at its worst social housing will still cost less than the private sector alternative i.e. a policy that forces people out of social housing into private accommodation actually creates a clear incentive to not find work (or to only find very low paid work) because if you do (a) you lose your benefits, (b) you’ll have to move house, with all the uprooting that entails, and (c) you’ll have to pay more in rent so could well be no better or even worse off financially.

This perverse disincentives argument also applies to the waffle being spraffed about making it easier for social housing tenants to move between housing associations in search of work; if you do so successfully, then again by definition you render yourself ineligible for social housing. There again capping the housing benefit individual’s receive is likely to make moving in search of work less of an option anyway given high employment areas tend to have higher private sector rents.

Picking through those obvious contradictions (and the punitive approach to being a benefit claimant they embody) is quite an interesting thing I think. There’s a rhetoric of get on your bike and various other moralising shite being used to legitimise them at the same time as the market signals they actually send out are hopelessly contradictory to the point of being arguably counter-productive. Given that I’d categorise them as being more ideological gestures than anything else, in fact I’d categorise them as being expressions of dogma especially given unlike say the bankers’ bonus tax they are permanent rather than temporary measures. Following on from this is the extent they appear to exemplify a reworking of the relationship between the state and the individual and associated expectations as to what the limits of the welfare state should be i.e. this is some pretty heavy shit.

Looking to the left though, well Labour, I’ve no sense of there being any especially meaningful response let alone critique. Partly, this represents a Labour elite’s focus on power politics and tactics – lets have a 2 year policy review so we can come up with a strategy for the next election and in the meantime avoid any meaningful engagement with what’s actually happening give or take the odd huff and puff. Partly part II itts because of a depressing failure of imagination on the part of Labour’s grassroots where the universal response to pretty much anything is to (a) identify a problem and (b) recommend throwing more state at it to solve it in an environment where because the rules of the game have been accepted (by the Labour elite), this simply won’t happen.

The end result of all this is rather straightforward – just in time for Crimbo it looks like single mother’s the length and breadth of the country will be looking forward to living without something else to make sure their kid(s) have a roof over their heads. But, that’s all good cos its not as if they’d ever take to the streets in protest (government nursery arrangements being what they are), so fuck them I guess. Now, Kate Middleton aside, whose next on the list for getting royally fucked?

No idea what to call this post

I was lucky enough to directly hear one of the best comments I’ve heard or read about the credit crunch. It involved someone I'd recruited to a job well below his abilities (in my defence he gave an atrocious interview) and some other bloke who was a refugee from a much sexier part of the bank who had previously taken part in some of the big deals that made my employer the institution it is today. Anyhoo, the guy I recruited was moaning about how things were post August 2007 to which the former dealmaker replied “Aye, but you didn’t complain before when you were getting your annual bonuses did you?”

Touche you might think. Check mate even. Except as the guy I’d recruited quietly explained he’d have happily foregone the extra £500 his dealmaking superior’s antics had generated if it’d meant he’d still have a job next year, what with his bonus just scraping into 4 figures as opposed to the high 5 possibly 6 figure bonuses dealmakers were paid.

To me, that perceptive appraisal has much wider applications. The way the good times actually worked out for the most part meant most people only ever got crumbs off the table – a new arts centre here, an income tax call centre and associated shit pay job there i.e. a wee bitty extra, but not too much. By contrast, the people that caused the credit crunch profited from it big time and for the most part still are.

Except, now what with the January 2011 VAT hike, pay freezes and April 2011 onwards government spending hack backs and so on we’re moving into a reality when as many of the crumbs as possible get taken away. In fact I’d guess millions of people will be handing back more than they ever received.

On a lighter note the guy I recruited recently jacked it all in to travel the world to the envy of everyone who knows him. The dipshit he had the discussion with on the other hand is still there, still clearing a fat pay check.

Stupid cunts (being us)

Reading Robert Peston’s recent blog about how Ireland, the nation that is, is propping up its banking system, which in turn is being propped up by the European Central bank, a coupla things struck me. One, obviously, is the fact Ireland voted no to the EU constitution as recently as 2008, so it’s a big ha ha there. The other is the extent to which successive Irish governments have chosen to prop up their banking sector on as easy and no questions asked wherever possible basis (e.g. the blanket guarantee given to Irish depositors, which put the Irish taxpayer on the line for fuck knows how many billions of Euros in the event of a bank going bust). But, what really put all that in perspective was an email from a fabulous person today telling me how yet another Scottish local authority is hacking back its spending on musical tuition for children.

I’ll explain; the credit crunch that we are now living with and ain’t going away for the foreseeable future (no its not gone away, look at any mortgage comparison website and compare the loan to values on deals available today with what was available before August 2007. Then tell the British Bankers Association to piss off every time they claim mortgage lending stats reflect restricted demand rather than a conservative step change in supply) may have originated in some super duper complex sub prime securitisation financial engineering shite in the US that in turn engendered a crisis of confidence that rapidly destroyed the unproven balance sheet financing models adopted by banks and former building societies here and in Ireland, but actually, from a UK and Ireland perspective it was to do with shite lending.

Put simply, bog standard commercial bankers and retail i.e. mortgage lenders adopted the view that property values could only ever increase. In fact not only could they only ever increase, they could only ever rise rapidly to the extent entire banking organisations (and government policy lets be honest) were structured around that one, simple over-arching principle. Only lend 70% loan to value? Nah, fuck that make it 80, 90, 100 or even 120% in some cases cos it don’t matter cos the property market will only ever keep on rising.

Now, this isn’t rocket science and neither is it casino banking (Well it is in that its taking a punt, but its not the pointless split of investment banking from retail banking shite Vince Cable has a hard on for). The end result was they lent way, way too much against property. Like seriously, way, way too much.

Except in Ireland the property market has fallen into an utter fucking blackhole leaving the following reality:

1) With positive noises from fund managers providing the mood music bank CEOs (and their marketing and strategy departments and what not) ordered their people to lend more cash. Pronto.

1) Basically if you want to do that in banking you do so by lending more against property, hence fuelling a boom.

2) The people who did the lending met sales targets set by the great and the good and as a result got good bonuses (not investment bank mega bonuses, but good bonuses relative to the national average wage).

3) Anyone who queried this kind of lending got fucked over by organisational politics, hence all the backroom bods quickly learned to say yes to every deal so they’d get a promotion/get a not as good as the schmoos doing the actual lending, but still quite healthy bonus.

Now picking through all that the reality we've all been let with is incredibly straightforward and is as follows; the fund manager fuckwits that looked positively on massively increasing shit lending are most likely still in place.

All the CEOs, corporate bigwigs etc., who gave in to the fund managers, didn’t know any better, but set sales targets regardless are either still in place, are already earning mucho cash working for a different financial services company or have fecked off to the Algarve to piss away their early retirement pension on being cunts.

The cunts that did the actual lending? A LOT of the schmoos that did the shit lending in the first place to meet those targets/get those bonuses have moved over into bank business repair teams to sort out the shite they put on the books in the first place, but on the same salaries.

So there you are then. Few if any people that did well out the boom times have done badly during the subsequent crash they helped engineer. And that’s kind of it (in fact there are some scum who did well out the boom and are going to do even better out the crash, but that’s a different post).

Except, its not the end because to save their banks entire nations have been put on the line and to be able to afford to do so, as fabulous person informed me this morning, because of this governments are doing things like denying hundreds of kids music lessons.

What I don’t get to the extent it confuses the pants off me is the utter failure to connect these two realities and take real umbrage as a result. I mean back here its not as if its hard to work out who the worst mortgage or commercial property lenders are in British banking history, nor is it especially challenging, given what's in the process of being done to say family allowances, to spell out how the personal decisions these gits personally profited from have ultimately done more damage to things like the family than Josef Fritzl.

Social housing vs the free market

Right I’ll try some pseudo academicky stuff for a change.

Social housing; while the housing element of the term is straightforward enough to conjure up images of high density housing units clustered into secondary and tertiary urban locations, the social, especially now, is a politically contested notion. The use of the word “social” rather than “council” in itself reflects the fundamental shift in government policy with responsibility for the provision of housing having been moved from local authorities to housing associations. Ironically, “social” has arguably been a more accurate description given it reminds us of how social housing originated in explicitly socialist politics that in turn highlight how competing ideological notions of the social have played a part in shaping the very geography and architecture of social housing, most obviously via the influence Welwyn Garden City had on the first generation of social housing. However, rather than any idealised notions of communal or "proper" living, right now the terrain is shifting once again, becoming seemingly narrower in the process as “social” becomes largely a matter of eligibility.

The origins of this partly reside in the Thatcher years when the housing acts of 1980 and 1988 started unpicking then historic constraints on private sector rental accommodation. These originated in WWI as a response to rent strikes along Clydeside that threatened to undermine the war effort. Confronted by this the government chose to sacrifice the petty capitals tied up in the private rental sector to the interest of the nation and the big capital of munitions manufacturers; it did so by introducing rent controls (for which read constraints) that, in an age of galloping inflation, squeezed private providers out the market by limiting their ability to charge profitable rents. The resultant hole would in turn be progressively filled by the invention of mass council housing that over the subsequent decades saw the state become the landlord not so much of the working poor as of the working class.

However, while Conservative governments started the process it was the last Labour government that fundamentally changed this relationship. The graph on housing tenure presented above neatly shows how the decline in social sector renting was matched by increased renting from private landlords, a transition driven by the successive tightening of eligibility criteria used to ration a shrinking social housing stock. Put simply this graph tracks the emergence of today's situation where being able to afford private sector rents in itself largely disqualifies people from social housing. Instead, social housing, for new tenants at least, has been rendered almost entirely an issue of social need, a safety net instead of a universalist aspect of the welfare state.

With this as context the take off seen in the buy to let (B2L) market over the 10 years to 2008 makes even more sense. This was partly a consequence of a cheap credit fuelled housing bubble to be sure, with small-scale investors seeking to prove their financial acumen by riding a passing wave. However, the take off in B2L was also integral to the deeper reworking of the relationship between the state and its citizens. Indeed, I would argue every B2L investor who borrowed to buy a 2 bed newbuild city centre flat is as much the embodiment of Labour policy as any right to buy former council tenant is of Thatcherism. Unfortunately for Labour's electoral fortunes, this was too tacit a process and too predicated on market signals as to have largely gone unnoticed. Unfortunately, for us the ConDems either don’t understand what happened or frankly couldn’t give a damn.

To be fair to Labour they did try quite cleverly to exploit the housing bubble. New housing developments over a certain size had to include and/or pay for new social housing units. Plus, they actively encouraged housing associations to borrow more to build more in the now passed NICE decade. And that is the problem we now have; Labour part-hardwired the provision of new social housing to a property bubble that has long since burst and is unlikely to re-emerge, if at all, for the forseeable future. To give a brief example, encouraging housing associations to borrow to build is all very well, but it's no longer clear banks actually want to lend to them given the relatively low returns on offer.

So what we now have is a situation where the number of households in Britain is set to increase faster than the actual housing stock with no sign of anything or anyone stepping in in response what with government focused on avoiding any form of capital spending and bank led credit constraints limiting the scope for B2L investors to re-emerge in especially significant numbers. This is especially unfortunate given the reworking of social housing policy now underway, most obviously the (re)introduction of caps on the rents government is willing to pay. As I understand it the current government view is that if it pays less rent, then rents will fall. Except, that was tried before, in 1915 in fact, and it simply didn’t work. Rather, what we are going to see in an already crowded nation is more people being squeezed into ever shabbier accommodation.