Novelist. Author of APSARAS and tales from the beautiful Saigh Valley. First person to quantify spiritual values.

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Monday 14 December 2009

More thoughts on Banking

People in high places are striving to distance themselves from banker's greed including the US President who has said he didn't become elected to serve the fat cats in the banking industry.
Governments seem unable to do anything to stop the payments of bonuses but I believe that they are not trying hard enough because they mistakenly approach the problem from the wrong direction. Instead of assuming that all aspects of banking are welcome and in the public interest, look at it a different way.
How are the Investment Banks making so much money? Why don't ICI, for instance, go into Investment banking? It must be easier than making chemicals and employing all those people with Britain's complicated employment rules and taxation regime. For that matter why doesn't every company go into Investment banking; every curry house? It must be easier. Of course it isn't as easy as that, but I make the point. One legitimate way the Banks make money is to sponsor new share placements and take huge commissions for the risk of not selling the whole placement. Why can't the Bank of England do this and make the money for the taxpayer?

The government can make it harder for bankers to trade. Short and Long selling, with its intrinsic possibilities for fraud, can be carried out without actually owning the shares. As long as you trade within the settling date, share certificates do not change hands. Stop this. Insist that the banks can only trade shares that they legally hold.
If the Investment banks are making so much money on share trades who are the losers? Somebody must be losing! The investment bankers are the hard nosed experts at market science (I was going to say manipulation) and I can only imagine that the losers are less adept. The general public are one class of losers. I know to my cost that financial advisers always took their fifteen percent even though my porfolio was losing money by the bucket load. Another source of huge amounts of money, ripe for exploitation are pension funds. Every week we hear of pension funds being a billion short; this week it's BA. Why? Most pension funds trade in Gilts and local authority bonds to be safe but not all do. Financial advisers to the pension funds will not be reigning in their percentages because of a recession. After all, recessions are for poor people. I suggest that huge banker's bonuses are being made from people who are relying on the pension funds for their future well being. As the pension funds of the poor and vulnerable are shrinking in value, the profits of the artful investment banks rise inexorably. Is there a connection?

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