At last, there were public figures prepared to reject the political and financial blackmail of a debased White House-Wall Street elite.
This is an unfashionable view; it runs counter to The Daily Telegraph’s editorial line. But the hard-sell of President Bush and the US Treasury Secretary felt too much like the pressure patter of a door-to-door hawker. Their message was crude: “Trust us. You are in a terrible place. Only we can get you out of this mess. No need to check the details. Hurry now, or it will be too late. Here’s a pen. There’s the dotted line. Just sign.”
But with the President’s ratings so low, few would let him leave the House with anything more than small change. Congress asked, not unreasonably: “If you guys know so much about banking, how come we are in such trouble?”
Having spent most of the year telling America, contrary to mounting evidence, that the US economy was just dandy, Mr Bush’s credibility is threadbare. When making statements, he’s beginning to look as if he doesn’t even believe himself. As for Mr Paulson, his long association with the jackpot culture of Goldman Sachs is, in the eyes of many outsiders, a gilded millstone.
Predictably, the refuseniks have been pilloried as ill-informed nihilists. They have been lambasted for failing to understand the consequences of their actions. They are, according to the Big Bail-out Brigade, condemning the rest of us to be buried alive in the rubble of a disintegrating banking system.
Try a different take. Yes, the West’s financial infrastructure is in severe distress. Yes, more banks are going to crumble. Yes, there will be a recession. But allocating $700bn (it would almost certainly turn out to be more) to a clean-up programme for toxic assets, in effect socialising the poison of private greed, has no merit other than to delay the inevitable. No amount of federal cash can rewind the X-rated horror video.
There is a conspiracy of bankers and politicians whose self-interest is masquerading as sophisticated policy. They want us to believe that they have the keys to salvation. I have not seen a scrap of evidence to confirm this.
There will, of course, be a renewed effort in Washington to push through a package of national deliverance. Concessions will be made. The US taxpayer will be offered improved terms. And, having made their point, having stood up for “traditional American values”, some of the naysayers in the House of Representatives will cross over, enabling a deal to be done. Their consciences will be salved, but the crisis will not be solved.
Meanwhile, in Britain, the ban on short-selling bank shares has done nothing to make them more attractive to investors. Having blamed hedge funds for driving down the price of supposedly healthy businesses, officials must be at a loss to explain why bank shares keep falling.
Halifax-Bank of Scotland dropped another 14pc yesterday to 122p. There is now a yawning gap, about £3bn, between the offer made by Lloyds TSB and HBOS’s stock market capitalisation. This is the share price’s way of telling us that it doesn’t think the takeover is going to happen.
Both boards insist the deal will go ahead, but shareholders may have other ideas. Which is a shame, because the creation of Lloyds-TSB-HBOS would help perform the much-needed service of consolidating a bloated industry, clearing out thousands of unwanted bankers, and ridding our high streets of too many branches. It baffles me that we’re closing Post Offices (2,500 out of 14,000 to go) and yet we have a multiplicity of banks.
I recently visited Kingston-upon-Thames, where there is a blight of banks in the centre. On one street alone, there were five or six. I checked online and discovered that in this one wealthy town there are three Barclays, two HSBCs, plus branches of Royal Bank of Scotland, Halifax, Cheltenham & Gloucester, Alliance & Leicester, Northern Rock, Bradford & Bingley, Lloyds TSB, Co-operative Bank, Abbey, NatWest, Household Bank, and Beneficial Finance – I may have missed a couple.
This, perhaps, will surprise you, but traditional banking – collecting retail deposits and making loans to ordinary customers – is barely profitable. Compared with the potential gains from a day at the currency-swap races, or a night in the derivatives casino, current accounts are cold potatoes. That is why bonus-hungry executives, at what we used to think of as boring banks, were so keen to spin the red-hot wheel of fortune.
In these troubled times, protecting customers, especially depositors, is the right thing to do. The Government should extend the guarantee it has given to Northern Rock to all bank deposits. Beyond that, however, Britain’s over-banked economy needs a Malthusian cull.
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