Standing up for our financial sector

jennywren

I entirely agree that bankers have been demonised by politicians and others who want to deflect attention from their own shortcomings.
A vast majority of bankers were not involved in the excesses of the recent past and continue to generate wealth for the country.
Many forget that the bonus system was introduced to keep the fixed costs of banks down, and if I have one real criticism of the banks it is that management seem to have lost sight of the good year=high bonus, bad year = no bonus principle.

Austin Barry

So, let's see, bankers generate huge amounts of tax, which Gordon has given back to them because of their galloping ineptitude. Mmmm....

cjcjc

Fraser - what has been the *net* contribution of the financial sector over the last 10 years taking account of the bailout costs?

And given that much of those profits were temporary/illusory products of leverage what is it reasonable to expect in the future.

NB I agree with you but don't over-egg it!
(And do stop calling them masters of the universe...)

Chris lancashire

And no mention by Meacher of any retribution for the FSA who totally failed in their job.
Oh, no I forgot, we need to increase their salaries and bonuses to attract the right quality of regulator.

I'm with you Fraser, lay off the bankers' bonuses and the 45p tax - and I'm not a banker.

boulay

here-here. more support for bankers.

if you need an analogy for the slightly less intelligent perhaps remind them of beckham being sent off against argentina in the world cup. the guy was vilified with moronic effigies burnt etc. over the next few years he produced and often was the difference between (mild) success and failure. the point is that people can make massive cock-ups but if you let them atone rather than getting rid then you often get a better future performance as they feel they owe everyone.

it really has just been an attack driven by envy.

sad.

cheers

Robert

I heard you on Today and was frantically appalled by the contradictions in your arguments. To say that regulation was unnecessary in one sentence and then say that Spanish banks had survived because of good regulation is nonsense.
Furthermore a sector which might cost the taxpaper a trillion pounds is not in my opinion being run by brilliant people and may not be the sort economic activity that the UK should rely on. I wonder if the tax revenue generated by the excessively risky banking of recent years has actually been more than a trillion pounds and thus shown a return on the taxpayer investment.
I cannot agree with Michael Meacher either. His was at least a consistent approach.
Your laissez faire attitude to regulation would be consistent if you argued against any public bail-out and advocated letting defaulting banks go bust. After all, as you yourself said, not all banks got in a mess and to let a few go under would have left profitable parts to be purchased by the remaining well managed banks.
You blamed the present crisis on the poor regulation in this country, saying that banks will take advantage of any laxity. Then why did not every single bank in the UK need to be taken into public ownership?

Publius

Well I have to say that my bank, and all the other UK banks I have dealt with recently, don't do banking "phenomenally well". The faceless call-centre jockeys I deal with are rude and incompetent. A bit like the call-centre person you spoke to recently yourself, Mr Nelson.

So what is it, quite, that bankers have done so phenomenally well? Bring down the world economy? Create financial instruments they do not understand?

I'm afraid that the only thing that is evident to me is that bankers have made themselves phenomenally rich.

As for the "Atlas Shrugged" analysis that is popping up all over the place lately, one forgets the so-called ordinary people at one's peril. Eventually, if you treat them with haughty contempt, they will come and smash your windows.

Bruce Robertson

"Because we'll certainly miss their money when they've gone."

I think you meant to say OUR money.

THX1138

Fraser-Well done, we need to stand firm against this lunacy and shout loud & proud that we believe in free markets and the right of talented people to earn huge amounts of money. We need a vibrant financial sector in this country, we're very good at it..... If you sat on trading desk and made a £50 million profit for your firm, you should get a fair share of that profit. I see that talent is already leaving RBS Sempra the Commodities trading house owned by RBS because for political reasons RBS can't pay bonuses this will be to the detriment of RBS and ultimately UK tax payers when these people move to HK or NYC.

My best friend since school is a city trader and he earns eye watering large bonuses and I cheer him on all the way. Have you any idea how hard it is to make split second decisions involving millions & consistently make money, especially in these volatile markets , probably not. He pays huge amounts of taxes on those bonuses that help keep this country chugging along and he lent me his Aston for the weekend.

The politics of envy is alive and kicking on the Coffee House of all places.

William

The mood of the nation is that if the masters of the universe wish to give up their lives in Kensington and live in the backstreets of Szechuan then they are perfectly free to do so. People are tired of feeling they have to chase around after these sorts and keep them happy even, it's argued, at the expense of the nation itself.

Forlornehope

Publius, a shameless plug for First Direct (division of HSBC, but very different to deal with); I have been with them since meeting their original MD. They have lived up to all the, very high, expectations that he set. I can bore for ever on how well they have sorted problems for me caused by other companies.

Kittler

'Britain does banking phenomenally well'

Thanks Fraser for telling me that, I would hever have guessed it.

Kevyn Bodman

If he bares his teeth, surely.

Bears are not the only animals to use this as a threat gesture.

And yes, my comment is splitting hares, which choice of spelling demonstrates why it does matter.

Fraser Nelson

Guys, I know this isnt a popular argument but it is (I think) an important one. Let me mount some defence to the above...

cjcjc, your point (I think) is that the cost of bailout counters the tax revenue. I have no idea what the figures are, but my point is that there was a segment of our banking sector that was rotten - but most of it was not. Look at the properly-regulated countries (Spain and Canada are the best examples). That is what we could have had. And Naughtie introduced the discussion with the Masters of the Universe line, which is why closed off with it (actually, a Boris line from last Tory conference)

Robert: huh? I am not making a laissez-faiure argumnet and didnt say "regulation was unnecessary". I firmly believe in the case for prudential regulation: as I tried to explain the problem was wrong-touch regulation not right touch. We had wrong regulation, a fractured and (ergo) purblind system. The pre-97 system would have worked better.

Publius, I was referring mainly to investment banks. What they do well is place wealth into areas of better growth, and in doing so create billions for pensioners. They provide capital for businesses to grow. They empower people to put their money where they want. The fact that there has been a crash doesnt mean the financial services sector is pointless. And (again) I'm not making a Atlas Shrugged anarchist argument here: I believe in tough but not stifling regulation.

Bruce: if a banker takes a client's capital and expands its value, he is entitled to keep an agreed portion of the wealth he creates and consider it earned (ie, his) money. This is a basic principle of the free (ie, capitalist) society. As Churchill said, the worst possible system except for all the others that have been tried from time to time.

Carrie

'My argument is simple: Britain does banking phenomonally well.'

Really? Looking at the state we and the banks are in, if this is doing well I would hate to see your definition of doing badly.

Stan, UK

"Because we'll certainly miss their money when they've gone."

What money? Their money has gone they've got our money now. What planet are you on?

McSweeney

Yes, I heard the Today programme interview as wel and particularly enjoyed the comment that the banks didn't cause the recession. I'd like a fuller explanation of what you meant by that since it seems to me that the current recession can be directly traced back to the point where the dubious activities of several banks came crashing to a halt. No?

Although having said that I agree with the general point that we benefit from the tax paid by bankers and don't want to entirely run them off.

DB

James Naughtie interrupted Fraser nine times, constantly butting in as he made his points. Michael Meacher suffered no such interjections.

How I hate the Today programme. It's like having George Monbiot, Robert Fisk, Polly Toynbee and the founder-member of the Islington branch of the Obama fan club standing over your bed, lecturing you from the moment your wake up.

Publius

Thing is, THX1138, we only "believe in free markets" conditionally.

GW Skeptic

The broad populace know we are difficulty and that they are worse off but don't really understand what happened or who is responsible. The usual suspects are either the banks/FIGS or with the regulators. Obviously the government will try to blame the former to deflect responsibility from their own mistakes. Although we are all affected by the crisis the banking crisis is NOT global and numerous countries have not been affected (Canada, South africa, Australia and most of Asia). The Uk has experienced a massive regulatory failure which created a vacuum within which some bankers used to their advantage and our collective detriment.
The attempt to blame the bankers will backfire in the long run and will hasten the decline of one of the few remaining sectors of real excellence in the UK. The exodus has already started and, much like a boulder rolling down hill, is very difficult to stop. In 20 years time the impoverished citizens of the UK will reflect on how it was that we turned a disaster into a catastrophe but by then it will be too late.

THX1138

Fraser not so sure about Spain remember Santander lost a ton of money to Bernie.

David Lindsay

Where would they go? Where would take them in at the moment? There would be politically serious calls to deny them entry to many countries.

Anyway, they are not really "mobile" at all. The ones here are almost always British or Irish. They only want to live in one of two cities on earth. And they don't want to live in New York in America's current pitchfork mood.

As for income tax, they don't pay it.

Radio Four and The Spectator are one thing (up to a point), Fraser. But good luck writing this in your News of the World column.

Trumpeter Lanfried

Multiple choice question. Please choose one of the following options:

A. Britain does banking phenomonally well.

B. Britain's bankers have been guilty of criminal negligence which has brought the nation to the brink of bankruptcy.

Simon Cawkwell

I am not a lawyer and nor did I hear ol' Meach do the party blather line this morning. But his bill strikes me as hybrid ab initio and seems to be very likely so to remain however redrafted.

For instance and if I may offer one problem, how does one define a banker? Could he be an IT specialist paid by a bank? (Why would he be taxed retrospectively?) Or could he be a trader employed by a bank and proposed to be taxed differently to a trader on a proprietary book at a securities firm which does not have a banking licence?

So, on balance, I think ol' Meach is engaging in a bit of banter rather like Harman's Court of the People.

These fellows are so desperate that they will try absolutely anything on. The only drawback is that it costs society money to have a Meach doing bit of Meaching.

TGF UKIP

Well said, Fraser, at least you are prepared to stand up against this absurd witch hunt while the Pusillanimous Pair, quite disgracefully, tremble at doing or saying anything that might have Gordon saying boo to them.

On the subject of regulation, the best point has been made by Mervyn King in his sideswipe at the FSA when he drew the comparison between how difficult the FSA had made it for Joe Public to even open a bank account or engage in any other minor financial transaction while simultaneously declining to ask the investment banks anything other than questions on process and procedure.

So, Fraser, why have we not heard anything from Dave or Boy George on the £33m paid out in FSA bonuses.

john problem

With you all the way, mate. I was beginning to wonder whether I'd ever be able to buy that Lambo, what with the politicians beating up on us, and all. If any of your readers are interested there is now a Sir Fred Fan Club - but only bonus earners above £20 mill are invited to join, OK?

Radio Caroline

The same old myth trotted out, if we're not nice to the bankers, try to impose fair taxation and justified regulation they will go elsewhere. That is exactly the thinking that has contributed to the mess we are in. BTW it also happens to be rubbish. Somehow I think bankers will stick with their cushy lives in London, fabulous homes, some of the world's best private schools and a world clas capital city etc. Don't expect a banker exodus anyttime soon 45% tax or not.

Tel, Spain

What has happened to the real Fraser Nelson? These days you are not making any sense in your postings and I hope to God the Tories don't follow your advice or we'll have Labour until at least 2015.

Wake up

VOTE CONSERVATIVE- WE ARE THE PARTY OF BANKERS RIGHTS.

Somehow I don't think that is gonna win the next election, do you?????????

TGF UKIP

PS. Fraser, I really appreciate the humorous whimsicality of your positing Dave as defender or cheerleader for capitalism. Nice one!

E

It gets worse Fraser - all this retrospective legislation is actually threatening the recovery. There's institutions in the US that are getting nervous about participating in some of the bond-buying schemes over there, because they think that any profits they make will be retrospectively taken away from them. Hard cases make bad law - and retrospective taxation is really dangerous, worrying about a few £million whilst endangering £trillions of investment. In a similar fashion, you may note the way that the non-guaranteed mortgage bond market cratered once Citi accepted the idea of cram-downs. Mind you, Citi have $306bn of government guarantees to play with, so they can just offload any losses they make on cramdowns onto the US taxpayer.

El Sid

You should have asked Meacher if he was in favour of a retrospective tax on the incompetent bureaucrats who were still pumping our money into Icelandic banks even after they were told not to?

http://www.audit-commission.gov.uk/reports/NATIONAL-REPORT.asp?CategoryID=&ProdID=6AF6709B-9ACD-4F5C-B6C5-09B9C23BCF83&fromREPORTSANDDATA=NATIONAL-REPORT

If not - why not?

On a separate note, I suspect that the financial sector won't be paying a quarter of corporation tax this year. :-)

Robert

I am sorry Fraser but maybe you should stick to print journalism because your efforts this morning were awful, muddled and inconsistent. Michael Meacher wiped the floor with you.
By the way in your reply to me is huh? some sort of reasoned argument?
Furthermore my blog at http://robthill.wordpress.com has a fuller account of my case against some of our bankers.

Marc

Chaps
I'm a continental European non-dom who set up a fund business and employed several people in UK. I sensed the hostile mood and moved somewhere which is warmer and where the tax rate is even lower than before the silly non dom changes. More than 5 jobs are going being created in my new country at the expense of UK, plus UK lost all my tax receipts...plus now I'm even mulling changing our head office to Dublin. From an emotional standpoint I find the populist nonsense catchy...but irrational. I am a rational human who does not like to be insulted and who, all else equal prefers to legally pay 24% tax rate instead of 40%, and who prefers sunnier climates. If you were in my shoes you would have all done the same, regardless of political orientation. The point is demonise people at your expense.

Simon Stephenson

I think that Labour's smearing of Goodwin etc. is just about the lowest act of human shamelessness that I've ever come across.

However, I'm not too supportive either of your attempt to portray the UK financial sector as a collection of wealth-creating geniuses who represent the best chance of finding our way back to prosperity.

That is not to say that there is no genius in the financial sector, nor that there is no wealth creation. But I think that you would do well to consider that much of the City's profits in recent years owed little to genius, and much to the antics of hopeless politicians. Politicians so personally dependent on the continuation of the party that an atmosphere was created in which reason and prudence found it impossible to survive.

The reality is that most of the profits were handed out on a plate, and were also illusory, being dependent on under-stating the liabilities of the future. The financial sector losses already announced, and yet to come, are more accurately considered as reversals of mis-stated profits from earlier years. By the same token, most of the bonuses paid out are in respect of "profits" that the fullness of time will demonstrate have never been made.

Resist the temptation to be taken in by false glitter.

JohnAnt

Fraser, I realise that by 'cause' you mean 'originally cause, set in motion, impel'. OK, Brown's p***-poor tripartite regulatory idea, castration of the B of E and inactive FSA - they 'caused' the breakdown in this interpretation, by allowing risk-inflation. That and an absence of Glass-Steagall separation of investment banks from retail banks.
But banks and hedge-funds also play a role. We didn't expect highly-paid bankers to recruit feckless idiots to drive their balance-sheets. We didn't expect them to kow-tow to hedge funds and asset-strip the dividends and play hide-the-thimble with the US sub-prime debt.
And, like the 'Final Solution' - there were few directly involved, but many thousands of their collegaues who knew or sensed what was going on, and they could and should have stopped it. Why didn't they? I'm just an investor, completely outside the banking world, but I received emails in 2006 that made it all deadly clear in cogent detail - clear enough for me to sell early. And we're saying the entire government and the bankers didn't know? That strains my credulity.

Fraser Nelson

Simon, I hear what you say - I have no doubt the City will come back shrunken (and, El Sid, will probably never again contribute a quarter of coproration tax receipts). I am simply saying that it is a legitimate goal for Britain to defend its share of the world finance industry, and that the crackdowns in Wall St and the EU are good chances for us to do so. But the hang-a-banker mood does make me worry that people may not consider this a battle worth fighting.

Robert, my "huh" was to express an inability to comprehend what you were talking about. I didn't speak out against regulation, and explicitly said the problem was wrong-touch regulation, not light-touch. I evidently didnt do very well if you came away from that thinking I proposed some arachistic free-for-all. I'd very much like to see more bankers in handcuffs, beause defending capitalism means prosecuting those who fraudulently went after the system (and I include auditors and credit rating agencies in this). Without identifying the bad guys, we run the risk of people thinking the whole financial services industry is bad.

Robert

Fraser, your last reply to me is totally at odds with the impression you gave on Today. So take my previous advice and stick to the printed as opposed to the spoken word.
All you have to retreat on now is your assertion that the UK banking system is so marvellous and so essential. Relying on the financial sector is a distortion and a weakness in our economy. Eggs in one basket comes to mind. That is why the IMF are predicting that we will take a bigger hit than some other countries.

Simon Stephenson

Fraser

Thanks for replying to my comment

I'm worried, however, that your reply to Robert indicates you still see the principal reason for the financial shambles as being the errant behaviour of a handful of people. You write:-

"Without identifying the bad guys, we run the risk of people thinking the whole financial services industry is bad."

This is all very well, except that most of the "bad guys" you identify were no more than figureheads of the consensus. It was not they who created the imperatives for progress/survival in the financial jungle. There was no chasm between their behaviour and that which was expected of them. Developments in ethical orthodoxy have determined that borderline crookedness is the optimal stance to take for personal advancement, and that probity and co-operative endeavour are so old hat as to rank with butter-knives and horse-drawn carriages.

It's up to society to get the consensus right, and to learn and self-criticise when it goes wrong. It does no good at all to transfer the entire responsibility to the group of individuals who just happened to be in the limelight at the wrong time.

Ask Goodwin, Hornby, Stevenson and McKillop, for example, the question "Do you think that the situation would have been significantly different if others, rather than yourselves, had held the positions you did?", and I am certain that each of them could quite truthfully have answered "No".

Housewife

Joining the debate rather late, I would like to say that, while I find the direction this 'bash a banker' witch hunt appears to be going in, is worrying, I cannot say I find it surprising. Maybe there are some great British bankers out there somewhere (who knows) but unbelievably, it's the ones who were supposed to be right at the top of the financial genius tree who appear to be the very ones who got us in to such a mess - yes I know (before some kind banker or Brown fan reminds me) that this is a global Recession blah blah blah - but can any one say the bizarre performance of the super 4 from RBS and HBOS, when interviewed by the Treasury Select Committee, was a stunning example of competence? And while it's OK to say that shit happens, those same people now want to walk away with no blame, no recrimination and millions of pounds in their pockets. It's bad enough they were stupid enough to believe their own myths and behave like feudal land owners in the first place but the stupidity they're showing now is genuinely criminal. Don't they have advisers or PR people? Don't they realise that the Country has gone to pot in a balloon and that now is not the time to stick two fingers up at the enraged public? Because, understandably, when people lose their jobs and their homes, they are not going to be sympathetic to the likes of Fred Goodwin who managed to screw a few more millions out of the tax payer even as he was walking out the door.

Of course I can see that demonising a few people will not cure anything and even locking them up would be a pyrrhic victory in terms of resolving anything but, a handful of arrogant men are making it difficult for the public to do anything else. I would remind you of a stunning statement from Lord Stevenson last year regarding insider trading and reported on by Roy Hattersley in the New statesman (15 may 2008) - “ "We've jolly well got to stop bad people doing the modern-day equivalent of bank robbery." And I'm sure he meant it. Well sorry Dennis, the public now feel exactly the same way about (some) bankers and right now, if they all trooped off to Japan or Timbucktoo, most of us would be glad to see them go.

A more logical and less corrupt Government would of course see the sense in satisfying public rage by undertaking some honest investigation and then acting on the results i.e. prosecuting those who have acted criminally and penalising those who have acted negligently. That way, the Bankers who do have integrity could get on with cleaning the mess up and the public would feel that, even although thousands will still be homeless and penniless, at least justice would have been seen to be done. But no, this Government starts off by giving them loads of money and then jumps up and down about it when the public get iffy. So Gordon Brown looks as if he has someone to blame while at the same time he is doing nothing. Result – the public are taking to the streets to protest and every genuinely aggrieved protester will be joined by a mad hatter activist who has come out of retirement and just wants a punch up. So many thanks to Gordon Brown and also to those witless Bankers who, instead of keeping their heads down during this fiasco, decided to incite riots by grabbing even more money.

Sadly the time to stop being beastly to Bankers is not yet with us – and it won't be until the Bankers clean their act up and stop rubbing our noses in the proverbial.