Tuesday 19 June 2012

Danger: Revisionists@Work

June, it seems, is Re-Writing History Month.

We start with C@W favourite Hector Sants as he heads for the hills and tells us that "the Bank of England could have avoided a run on Northern Rock if they had taken up his idea to provide a loan to Lloyds TSB to buy the bank."

Alternatively Hector, if we are exploring counterfactuals, you could have supervised Northern Rock properly in the first place, which would look even better on your CV.

Eclipsing this local hero is global megastar José Manuel Barroso at the G20 summit. Evidently the old ones are the best ones, for he gives us: "This crisis was not originated in Europe … this crisis originated in North America".

Always goes down a treat, that one.  Remind us Jose, which were the first two banks to go under in 2007, even before the Crock ?  Ah yes, they were German banks. Still, if you use Gordon Brown as your script-writer, accuracy limps along in last position.

And speaking of the master, how he must have loved being in front of Leveson: so much re-writing to do, and so little time !  A pity it will be his Lordship that will have his hand on the Big Pen.



Barnacle Bill said...

You know I'd forgotten the german banks going bust first, Frau Merkel must've got in with her pencil there, always thought it was the Scottish banks first.

Budgie said...

Should I be listening to the football?

Anyway, excellent post ND, a well deserved dose of sarcasm and bile for the lying little creeps that jockey themselves into power over the rest of us.

I seem to remember the euro fanatics telling us that their project would not be following the reviled "anglo-american" path?

As for TB, his desire for government control of the press is not just creepy, it is evil.

Anonymous said...

Yes but the nationality of the banks isn't as important as where the losses took place.

The Scottish banks went down, but largely by 'gambling' on triple A rated American subprime.
America is at fault for its highly politicised rating agencies.

Budgie said...

Anon 10:20pm - rubbish. American sub prime was almost irrelevant to the failure of the UK banks.

RBS went down primarily because of the ABN-Amro takeover (FSA report: "due diligence which was inadequate in scope and depth" ... "the Board’s decision-making was defective" ... "RBS chose to be lightly capitalised").

HBoS collapsed because its business was based almost entirely on the UK property market which had been inflated by Gordon Brown's profligate increases in the money supply.

Contributory factors were all round low capital, serial poor management and reliance on the wholesale market for finance.

Anonymous said...

"RBS went down primarily because of the ABN-Amro takeover"

and ABN-Amro losses came from subprime exposure...

subprime that was previously being rated triple A.
Sold on by American Federal government owned companies, often later repackaged and sold on to international banks.

No American connection at all!

Anonymous said...

Contributory factors were also high profile 'respected' ratings agencies fraudulently rating all kinds of 'securities'.
That doesn't absolve the responsibilities of the banks , but if this stuff didn't have triple A stamped on them things would have played out rather differently in the last 10 years.

Nick Drew said...

Anon - painful as it must be for both of us, Budgie and I are in agreement on this one !

Rating agencies be buggered - Goodwin knew full-well what they are worth. Anyone who scrimps on the due diligence on something as big as ABN-Amro has only themselves to blame

Barnacle Bill - yes, we in history corner try to keep the old memory-cells ticking over (an increasing challenge in my case)

hovis said...

ND - agreed it is the lack of due dilligence that caused much pain.

The fact that the big 4 ratings agencies are legislative monopolies in the US meant people actually believed what they said. Thene ther was the problem of not actually understandin of what was actually going on...

Anonymous said...

I don't see it as either or.
Yes the Banks made a monumental cockup.
But what the ratings agencies did was also fraud, you can't rate something was triple A when it turns out to be next to worthless by mistake, I believe it was intentional.
Those agencies basically gave cover for the bankers to gamble without looking like they were gambling, allowing them to claim bonuses on a 'sure thing'.

But besides, that was not the original point anyway.
The post says this crisis didn't start in the USA, I beg to differ.
It was the garbage mortgage backed securities coming from the USA that caused a great deal of the problems for many of the big banks.

Think of it another way, if a small unpowerful country's government sponsored agencies rated a product from said country as almost fool proof, and a bunch of Americans lost a fortune after buying it.. Don't you think the US government would force that country to bare a large part of the cost.
I certainly do.
Similar to how Britain tried to make the Icelanders pay compensation for their banks behaviour only the USA bringing a lot more diplomatic muscle to the table.
No way they would accept back what they did to other countries banks.

Nick Drew said...

yes, Anon the ratings agencies are deeply implicated

but after Enron (at the very latest), no-one in the banking sector believed them ! they used them as a front

now - "It was the garbage mortgage backed securities coming from the USA that caused a great deal of the problems for many of the big banks" - well, only if they fell for the ratings, see above. Actually, of course, they played the game in full knowledge of the risks, but hoped the music wouldn't stop

given they all knew what they were doing, this is not the same as the USA causing the problem

(at least one of the 2 German banks I mentioned in the post was doing sub-prime, but in a deeply culpable way: they set up an affiliate in Dublin to evade German banking regs - this is not the action of an innocent little regional bank duped by the wicked Americans)

then look at Northern Rock: tell me what part of its downfall was due to sub-prime (ans = 0)

no, it was an entirely local manifestation of global eye-off-ball syndrome by regulators, aided abetted and positively encouraged by G.Brown et al, & eagerly exploited by banksters everywhere