‘Kettle pot and black?’

The UK Chancellor, him of the somewhat odd eyebrows, announced last November that he forecast a contraction of 1.5% in the UK economy during 2009. If you recall it was during this time that billions were being pumped into the financial system to try to avert the worst of what is here and what is coming. The latest from Gordon Brown is that Britain could suffer a longer and deeper recession than has been officially acknowledged, so no real surprise there. Recent reports have cast doubt on the Treasury’s forecast that Britain will start to recover in the second half of the year, so no real surprise there either. Brown defended his efforts to date, insisting (well he does do a lot of insisting doesn’t he) that it was too soon to assess the impact of the bank bailout and tax cuts announced in the autumn of last year. When asked whether the ‘downturn’ (how sweetly put) could last for two years he responded “I think that depends on the level of international co-operation” Righty ho Gordon, whatever. Then during a second interview when pressed again over this timescale he enigmatically responded with, “If we spend a pound in Britain, it can have twice the effect if other countries are doing the same. So we are trying… to get other countries to work with us”. Now I am no politician, so far be it for me to judge what makes a reputation in those circles, but in my background if you wanted people to work with you, then it really required some kind of reputation of good standing, apart from which…what did he mean exactly? Does he really know himself? I harbour grave doubts.

His latest words of wisdom, which had me almost crying in my cups, included the claim that 100,000 jobs would be created by fast tracking public spending. He added that only a small fraction of an £18 billion boost for the economy had been spent. “If we have spent £1 billion of a total of £18 billion, some on public works, some on keeping people in their jobs, some on environmental and green projects, some on helping more people go to university and college . . . we have just started”. Brown omitted to say that £12.5bn of his supposed £18bn fiscal boost will be the tax revenue lost during the next year as a result of his totally pointless cut in VAT. Mind you, I did appreciate the 17 pence VAT discount on the cost of some rawplugs I bought the other day, I shall try not to spend it all at once. Regarding that it was too soon to conclude that his £37 billion bank rescue had failed, he also said, “I do not think you can judge the success of recapitalisation by what happened in one month.” No Gordon, indeed you cannot. Is a record over 11 years enough perchance?

The more this situation develops, the more one wonders how these intellectual lightweights ever got to where they are.

Without a hint of irony, in December, the UK Government announced an ‘Independent Review into British Offshore Financial centres.’ I say without a hint of irony as they must have surely had their tongues firmly implanted in their cheeks when they wrote the objectives. I quote “the review will look at the immediate and long-term challenges facing British offshore financial centres in the current economic climate, including:” ’financial supervision and transparency’. This, from a Government who are being likened to having run a huge ponzi scheme for the last 11 years. They move on to the second objective which reads ‘taxation, in relation to financial stability, sustainability and future competitiveness’. Well they would know about financial stability and sustainability wouldn’t they, the record is there for all to see. Next up they write and this is them being serious in December you understand, ‘financial crisis management and resolution arrangements’. The sheer audacity of that objective leaves one breathless, talk about making the rules up as you go along. Then finally they place ‘international cooperation’ as an objective. At this point I can only refer you to the first paragraph.

Welcoming the launch of the review, the Financial Services Secretary, Paul Myners, said:”…Offshore financial centres must play a responsible role in the global financial system..." That would be the same role HMG have played over the last few years would it?

We live in hope. However, what we live in hope for is anyones guess these days.

Some seriously clever people?

"We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe's-Home Depot did to their industry. And I think if we've done our job, five years from now you're not going to call us a bank."

This from Kerry Killinger, chief executive of Washington Mutual, in 2003.

Yes well, what can I say? Between 2001 and 2007, Killinger received compensation of $88 million, according to the Corporate Library, a research firm. During Killinger's tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers' incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients. WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank's executives. WaMu pressed appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors. "It was the Wild West," said Steven Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson that did business with WaMu until 2007. "If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan."

The above seems to sum up what has gone wrong. Far be it for mere ordinary folk such as you and me to try to figure out how this has been allowed to happen. What is now sure is that 2008 will go down in history as the year of the great reckoning. I believe it could well be the beginning of the end of the great age of mediocrity. As more scandals are uncovered it is becoming apparent to anyone who is interested that there were many in positions of authority who really did not have any good reason for being there. They had but one thing they could, and did, contribute, unabridged greed. The numbers are quite staggering, too large to condense into one article. The list of shame continues to grow by the week and 2009 is shaping up to be just as dire.

In the UK, the Government looks to ever more desperate ways to avoid the oncoming Routemasters. Now I know you are saying, “But they have already collided!” Yes, I agree. You know that, I know that, just about everyone else knows that, but the UK Government, and many across Europe for that matter, are still trying to avoid the reality of the situation, and the reality is that pain is coming. This latest idea, rolled out during the UK Chancellor’s pre-budget statement, gives Businesses who qualify, more time to pay their various taxes. H M Revenue and Customs have already received in excess of 22,000 calls from those businesses requesting time extensions on paying.

On a lighter note, and apropos absolutely nothing to do with the Finance Industry, well maybe just a bit as it does reflect these more straightened times. I read a disturbing tale from Citadel Google. Pity those poor employees at that giant. Whatever did they think when the season bonuses were issued to staff. Now remember, they normally receive a nice $1000 present, but this year the powers that be decided to give them something special. Imagine the excitement as they unwrapped their bundles thinking that maybe this year they were receiving a ‘fat wad’ (yes we know, they don’t unwrap them, but just for fun….) Lo and behold, they each received a version of the G1, Google’s mobile phone released this year to compete with Apples iPhone. Internal emails thanked everyone for their hard work and talked of a ‘Dream phone’. This mobile which runs on Google’s network, Android, was recently described by The Register, a tech website, as ‘an unattractive and uninspiring piece of plastic’. Pity those poor Google employees, first they find evening openings of campus restaurants across the world are being cut, now this!

Looks like it’s not only the bankers who are having a froogle Christmas.