THE BANKING TSUNAMI

The damage wrought by Hurricanes Gustav and Ike on American shores with the tails causing floods in Britain begins to look like the result of a freak summer storm as we learn the full extent of the banking tsunami .

But we should not be surprised. For years now we have been ‘living the dream’ in which homes we could not afford were only a brief chat with bank product manager or mortgage broker away - and credit cards the passports to all we have always wanted.

The frugal bank manager who wanted to know a customer’s budget down to the last penny spent on food before agreeing to a loan was consigned to history - replaced by salesmen flogging bank ‘products.’

Greed was not just good. It was the pinnacle to which we were encouraged to aspire as City traders played short selling games and won multi-million pound bonuses gambling with other people’s hard earned cash.

At the top, high in the clouds of the dream world, there was no penalty for failure. CEOs who oversaw the wrecking of their companies still walked away with million pound pay offs and their pension rights intact.

Times and the world had changed and the consumer boom would last forever.

Now the dream has become a nightmare as the toxic deals which supported the mirage have come undone and need to be bailed out.

Just ask anyone on a £25,000 year salary who has been encouraged to sign an application claiming an income of at least £40,000 to get a 125% mortgage they now have little hope of repaying on a property that’s way beyond their means and no longer worth what they paid for it.

‘But will we be paid on Friday?’ wailed the London staff of Lehman Brothers as they staggered out of their Canary Wharf office clutching champagne boxes filled with their personal possessions.

Paid?

Having helped to ruin the business, some of them didn’t deserve a penny. It would seem more fitting if they were asset stripped to help pay the people who trusted them and they let down.

The bankers must have known they were playing monopoly. But, hell, the volume of new business they were bringing in would look good on their CVs and on the bank’s books as they piled it high, sending London property prices soaring and scarring the countryside with their garish nouveau mansions. The equivalent American word, shoddy, sums them up so much better.

For a year now, even as Northern Rock tottered and they trooped through the doors of the Banking of England begging for cash bail outs, they have been in denial - hiding behind the euphemism ‘the credit crunch’ as the financial world fell apart.

The entire crisis has been brought about by their irresponsibility, bad management and sheer avarice together with the failure of the authorities who are supposed to regulate them to do so.

The most appalling aspect of the whole debacle is that the people at the top, who oversaw what was going on and actively encouraged it, will still not be fired and rightly stripped of their fat cat pensions.

The very worst of it all is that Andy Hornby, the 38-year-old brash super whiz kid boss of HBOS, gets a £2 million reward for driving the bank to the brink of bankruptcy and keeps a top job while thousands of bank workers will probably lose theirs.

Hornby’s high flying career through the upper echelons of Boots and Asda on his way to summit of HBOS says everything about what was most valued in the ‘living the dream’ work world, which put more emphasis on how to market yourself to get a job rather than to be able to do it. Clearly an ace at selling himself to employers, he was no good at the job once he got it.

In desperation Gordon Brown, whose chief claim to the job of Prime Minister was that he was the supreme money manager who had put an end to the boom and bust economy forever, this week rode roughshod over all the laws of competition when he brokered the takeover of the failing HBOS by Lloyds.

‘Stabilising the economy,’ was how he justified the deal.

Really?

This is the man who knows so little about market trends in global finance that as Chancellor he sold off a huge chunk of Britain’s gold reserves at rock bottom price, saying that the world would never again want gold.

Now the long time former Socialist Brown says job losses are the least worst option as the price of gold soars to record heights.

No wonder a lot of people in the Labour Party want rid of him.

STILL MANGLING THE LANGUAGE

In the dying months of his disastrous US Presidency, George W Bush still shows the same ability to mangle the English language as he did at the beginning.

Talking about the global money problems the other day, he must have meant to say that he would consult with financial experts. But what he said was that he would ‘console’ with them.

I am sure he needs some consolation right now but equally sure he did not intend to make it public.

Yet he’s not the only one who is altering the meaning of words.

Challenge used to mean an opportunity which called for courage and mettle. Now it describes a problem no one has any idea how to solve.

Unacceptable means people don’t like what has happened but they have no power to do anything about it. And a liquidity problem, as we all know, means a bank has huge debts and no money to pay them.

Copyright © Rebecca Hamilton 2008. All Rights Reserved

THE BANKING HOUSE OF CARDS

It was exactly the kind of rotten trick you would expect from City high fliers that they would try to make money by spreading rumours HBOS shares were heading south so that they could sell them at a high price and buy them back for next to nothing later in the day.

The truth is that beneath its veneer of respectability the City has always harboured elements of the casino and dishonesty. It’s just become more obvious since the bowler hat brigade from the Surrey stockbroker belt with their staid offices were replaced by the red braces boys from Essex with computers and mobiles.

For over twenty years now, ever since the Big Bang, they’ve been piling it high, sending London property prices soaring and scarring the countryside with their garish nouveau mansions - the equivalent American word, shoddy, sums them up so much better. Despite the banking crisis they will still get their lavish bonuses at the end of the month and celebrate by running up £50,000 lunch bills in the West End.

‘But we can’t trust each other any more,’ wail the banks as they head to the Bank of England with their begging bowls for money to stave off disappearing from High Street. ‘We don’t know what bad debts other banks may have.’

And it’s not just the investment banks which are in deep trouble. Yesterday the bosses of the big British retail banks joined them in trooping through the doors of Threadneedle Street in a desperate plea for more cash to be pumped into the system and a Northern Rock style safety net if the worst happens to them.

Can anyone really be surprised?

What happened was that the reckless, gambling streak in the City infected bank retail branches. Cautious, frugal bank managers who wanted to know a customer’s budget down to the last penny spent on food before agreeing to a loan were replaced by salesmen flogging a bank’s ‘products,’ which encouraged people who could not afford it to ‘live the dream.’

Just ask anyone on a £25,000 year salary who has been encouraged to sign an application claiming an income of at least £40,000 to get a 125% mortgage they have little hope of repaying on a property that’s way beyond their means.

The bankers must have known they were playing monopoly. But, hell, the volume of new business they were bringing in would look good on their CVs and on the bank’s books. Times and the world had changed and the consumer boom would last forever.

Except it wouldn’t and couldn’t and they must have known that too.

Credit cards will be the next to fall in the global banking house of cards. Like mortgages, credit cards have been handed out like sweeties or chocolate biscuits at a children’s party. People who can’t afford them have been inundated with junk mail inviting them to sign up for cards which would only tempt them to get into debt.

The entire crisis has been brought about by the irresponsibility, bad management and sheer avarice of the banks and the failure of the authorities who are supposed to regulate them to do so.

The most appalling aspect of the whole debacle is that the people at the top, who oversaw what was going on and actively encouraged it, will not be fired and rightly stripped of their fat cat pensions.

Their worst fate will be that after a few months they will be allowed to retire quietly with big pay offs to their mansions in the country or abroad with their inflation proof pensions intact while the little people they conned into ‘living the dream’ will most likely live the nightmare of being homeless, jobless and up to their eyes in debt as they face a very bleak future.

TYPICAL ROAD YOB

Though he may have said sorry for breaking at least four road laws when he thought the media cameras were not watching, Conservative leader David Cameron’s conduct on the streets of London is not just typical of the hypocrisy you expect from a politician but typical of the holier-than-thou cyclist road yobs who are a far bigger threat to pedestrian safety than four wheel drives.

When green lights signal it’s supposed to be safe to cross the street, no one can risk doing so without looking out for yobs like Cameron charging through the lights.

Cyclists should be required by law to have number plates and pass a road safety test. And, if he can’t respect the laws, Cameron should cut out the hypocrisy and be confined to the four wheel which follows him with his papers. Copyright © Rebecca Hamilton 2008. All Rights Reserved