The banking system: lessons from my childhood

One of the questions on Politics Home this morning (I am a panel member of this daily tracker of opinions political) was do I think the banks should go back to a separation between our old safe, solid high street retail bank – and the speculative, take risks, make loads of dosh type investment banks?

Yes I do! I can remember being absolutely irate when our reliable, responsible banks were freed of such regulation and zoomed off to the realm of the speculative. I was upset because I liked slow and steady.

Perhaps this was because of a salutary experience I had about risk and loss. I had a very early example in my life of the dangers of the offers of a higher return on savings than the norm. In the flats where I grew up was a young financial buccaneer. He had his own merchant bank at the age of about 23 and all the families who lived in the block thought he was just the bees knees. All our families had seen this man grow since he was a little boy – and so when he had his bank all set up – he went and sought investment from lots of people who lived there – friends and neighbours. Many of these ‘investors’ were coming to the end of their working lives and I guess the offer was too good. I don’t know too much about the rates etc as I was a teenager at the time and not much interested in boring things like investment.

Anyway – however ridiculously high the promised return was – I expect a mixture of hope and trust and familiarity persuaded quite a few of the residents to place their life savings with this young man.

Of course, like all morality tales, this ended badly for these trusting folk – and all their money was lost. And the moral of the story was if it looks too good to be true etc.

The young man went to prison for about six years I think – so justice was done – but quite a few properly lived lives were ruined. These were not rich people – just people who had worked all their lives and put away their savings. They may have made a mistake in putting too much money with one person – but it was a harsh, harsh penalty for that.

Anyway – that was a merchant bank and therefore it was ‘buyer beware’. But when our safe, high street banks, changed into risk-takers – I guess many people didn’t really understand that they could play fast and loose with our money the same way investment banks could and did.

For those of us who had to literally beg for our first mortgages – when it was a case of being judged suitable to receive a loan on the basis that you would be capable of paying it back – the idea of a 100% or 125% mortgage is inconceivable as a model.

Were we, the population, collectively guilty of partying thinking we wouldn’t get a hangover? Maybe a bit – but if we thought the party would never end – it’s because the banks and the Government led us to believe that was the case. We couldn’t imagine that banks would be allowed to behave that way – let alone with the tacit encouragement of the Chancellor latterly Prime Minister.

But I think we relied on the banks to know what they were doing in the way they used to. If they said we could borrow like there was no tomorrow – live now and pay later – then there couldn’t be a problem with it. The banks led us up the garden path (albeit we were happily led) and now we find they were full of avarice and greed.

So when Gordon yesterday talked about a return to the separation of banks back to the old style high street banks – he is right but how dare he not accept or understand that it was under him that this dangerous financial model was given license and bred the monsters who have led to such a downfall. And yes – Gordon – it may be a global financial downturn – but the seriousness of our situation is laid at your door. No one else’s.

I can’t help feeling sorry for the prudent in all of this. Yes – of course those who suffer direct hits on job and home are first in line for help. But what about all those older people who supplement their meagre pension by the interest paid on a lifetimes work savings? As Vince Cable (Lib Dem Shadow Chancellor) says – time for thrift and sensible behaviour. But we need some assurance that thrift and sensible behaviour will be rewarded – not punished – as is currently the case. Now – there’s a novel idea!

Voting done, voting still open

A big thank you to Iain Dale’s readers for his 2008 political poll where, whilst I trail Vince Cable miserably (and rightly), I am a) in the frame and b) second! as Lib Dem MP of the Year! Thus I continue my saga of always the bridesmaid but never the bride! I also notice that his magazine Total Politics has me as one to watch – and that’s what my teachers used to say – ‘ better keep a close eye on her’ – although I think their meaning may have been different…

On my own side – I likewise see (thanks to those who have brought it to my notice) that in the Liberal Democrat Voice poll I again am trailing Vince! Well – the man is a star and being even near licking distance of boots is honour enough! But there is still time for you to vote…

Vince Cable is coming to town

And a special treat for Haringey Liberal Democrats – but not exclusive as we are happy to share our very own superstar soothsayer – Vince Cable – with anyone interested in coming – and stomping up the price of a ticket:

Haringey Liberal Democrats present ‘An Evening with Vince Cable’
Date: 26th November
Time: 8pm – 10pm
Venue: Christ Church C of E Church Hall, Waldeck Road, N15 3EP
Cost: £10 members / £20 non-members

Numbers are limited so will need to purchase a ticket. These can be obtained from Monica Whyte: 233b Alexandra Park Road, N22 7BJ, 07976 665 110.

David Cameron's speech

Happy Birthday to me. Happy Birthday to me! Well – actually – it’s Happy Birthday to my blog – five years old today.

And I’ve just finished listening to David Cameron’s speech. Long – very very long. But as with most things – it’s not always the size that counts. Strong on image creation, short on tangibles – even in this time of crisis it seems DC cannot come up with the goods. Perhaps once a PR man always a PR man.

‘Fresh answers to the challenges we face’ he said – but none of the ‘fresh answers’ were available for critique. He seems to believe that appearing to be something is enough. The rest of it was rather ‘back to basics’ but without using the actual words. Mending the broken society by sticking it together with platitudes and £6.00 to stay married doesn’t really do it for me.

I guess he is impotent at the present. He doesn’t have the track record of someone like Vince Cable – who actually understands the economy and warned about the debt bubble that was bound to burst (for years). It’s all very well for DC to come now to the table and say how irresponsible this has all been. It’s his mates in the City who took the risks to get their ridiculous bonuses. Dave didn’t utter a word over the last ten years to warn of this – and now he is all too pleased to blame Gordon (who is undoubtedly to blame) but as the Her Majesty’s Opposition – all we got was a deafening silence as Tory types took the money – leaving us the taxpayers to pick up the bill.

Anyway – as you will gather – I didn’t rate the speech. The last thing we need now is more vacuous image style politics. And – he did my pet hate thing of bringing his wife on stage at the end. Those who know me are well aware of my aversion to this – and he kissed her about four times in the space of one minute. Afraid that the snappers didn’t get the photo first time round. Cynical – you bet!

Congrats to Vince Cable

Went to the House Magazine annual awards last night. The House Magazine – is just that – the magazine of the Commons and Lords. The voters are the MPs and Peers and there’s a range of categories. Just a quick big up for Vince Cable – who not that surprisingly won Opposition Politician of the Year. He is such a star! Congrats to Vince.

PMQs: Parliament shows how out of date it is – again

Well, well – so Vince Cable tried to ask a question at Prime Minister’s Questions today – and it was ruled out of order. His heinous offence? Mentioning the Queen in his question:

It is reported that Her Majesty the Queen cancelled her Diamond wedding party because it would be ‘inappropriate’ to indulge in extravagance when the country faces recession and economic gloom. Is this another good example of Her Majesty’s unerring instinct for the national mood; or does the Government think she is simply overreacting?

Well excuse me – but what sort of out of date organisation is it that has this sort of ban? So much for being a modern democracy!

Three sentences you should read about Northern Rock

Saying something is a ‘soundbite’ isn’t normally meant as a compliment in politics! There is though a role for short, pithy statements – soundbites if you will – that get to the heart of complicated matters and pulls out the essence of them.

All of which is a prequel to praising Vince Cable for his Northern Rock soundbites yesterday. Once again Vince got to the heart of the matter, and rather than losing himself in the massive financial details of the Northern Rock saga, he got right to the heart of the matter:

The Government has ingeniously come up with a private sector sale that doesn’t involve any private sector money.

In order to save face Brown has decided that losses of Northern Rock should be nationalised, but that profits should be privatised.

Taxpayers now face years of underwriting Northern Rock, giving the opportunity for a private bidder to make an absolute killing.

Well said Vince! (And you can sign his petition on the topic here.)