Plus cas change…

The World’s largest bank is J P Morgan. It makes on average around US$460 million every week. On the fifth anniversary of the collapse of another large bank, Lehman Brothers, regulators announced that J P Morgan had been fined $920 million for violating US laws about security trading and for attempting to cover up those criminal actions. In essence they pretended portfolios were worth more than they were worth to cover up massive losses they had incurred. Continue reading

The Banking Crisis Continues

The banking crisis has not gone away, but is still with us. Banks have thinly disguised their shortcomings. They are still diseased, even though they have the appearance of modest health. Regulators, at the behest of governments, are trying to cure the patient without killing it. Whether they will succeed remains to be seen. Regulators are prescribing unpleasant medicine which will prevent banks from being as profitable as they once were, in order to try and reduce the risk of bank failure, which is catastrophic not just for the banks and their shareholders, but also for society. Continue reading

The Euro in Intensive Care

You can get used to almost anything. It may be that we get used to things because we are innately resourceful, or it may be that we get used to things because custom and time blunts the barbs of troubles, but we all of us get used to almost everything.

Sometimes an illness creeps upon you in very small steps that you confuse the disease with aging, and believe that you will always feel like this as you get older. There is a financial illness that afflicts the world today. Continue reading

Bank lending to small businesses

There is some debate going on in the United Kingdom about bank lending to small businesses. The Government and the Opposition hold the view that the banks are not lending to small businesses. In Kingdom, and I suspect in most other places in the world, small businesses are the major source of employment and most people are employed by small businesses. These enterprises have to create their own capital and need banks to provide lending for their working day to day operations.  Continue reading

The banks are returning to profit, but where did it all go wrong?

The news that the major United Kingdom Banks are returning to profit is welcome. In 2008 most of them were at risk, so it seemed and most of them needed taxpayers’ money directly as an injection or indirectly as a guarantee which gave people confidence to keep their money in the banks. After nearly two years the confusion surrounding what went wrong is beginning to unravel. Banks are inherently potentially insolvent businesses.  There are two definitions of insolvency and these apply as much to the large financial institutions as they do to individual people. Continue reading

Markets panic but still make money

Across the world stock markets are in panic. Panic is good for business as it creates the high swings in prices that enable dealers in the market to gamble with better leverage. Thus a bet will, if successful, pay bigger than if the prices swings were lower. After a day or two’s worth of panic share prices return, making us all wonder what was the point of the price variation, except to enable the market men to make money. However the problems may run deeper. Continue reading

Gordon Brown’s error – being directed by the bankers

It is refreshing and admirable when a politician admits to making a mistake, because politicians spend so much of their time professing their infallibility. Of course, as soon as one admits to a mistake his or her political enemies and commentators circle around like sharks smelling blood.  Gordon Brown has admitted what he regards as a single small error. I get the feeling that he admitted it to demonstrate that he is after all human. Continue reading