One Harry Redknapp

One Harry Redknapp
There's only one Harry Redknapp
One Ha-arrry Re-edknapp
There's only one err.... Roy Hodgson
One Ro-oy Hodgson
There's only one Ro-oy Hodgson
One Ro-o-oy Hodgson ......

Lest we forget, although Roy Hodgson scored no goals during his time as an 18 year old on the books at Crystal Palace in the 1960s, this was hardly his fault because he never actually made any appearances. However, he did go on to forge a successful playing career at such household names as Tonbridge Angels, Gravesend & Northfleet, Maidstone United, Ashford Town, Berea Park, Carshalton Athletic the last of which recently made its mark by winning League Division 1 and earning promotion to the Championship, oh no, sorry that was Charlton Athletic.

Rough Diamond

Barclays have an AGM coming up so it is just as well for Bob Diamond that they announced an increase in basic earnings per share to 13.6p from 10.7p, although they held their interim dividend at 1p. After all, Mr Diamond is going to face a lot of criticism over his £11 million pay package for 2011, and that figure excludes a lot of tax liabilities the bank assumed on his relocation. Apparently another £7 million.

However, things are not so rosy in the Barclays cap because the £2.4 billion that is being reported to shareholders omits two big chunks of dosh.

First, the bank put aside another £300 million to meet the cost of mis-sold PPI (payment protection insurance) policies. This comes on top of £1 billion already set aside to pay compensation to swindled borrowers. Funny how the bank booked the PPI sales as ordinary income in the past, but when it comes to pay compensation this is not part of its reported trading profits.

 In the same vein there is an even bigger biggie, a loss of more than £2.6 billion on the fair value of their own debt. We have covered this before. When the credit rating of banks deteriorates, they claim that the fair value of the debt they have already issued reduces because a higher discount rate is applied to value that debt, so they book a profit.

Similarly when the creditworthiness of the bank improves and the spread on their debt tightens, they will suffer a loss. To my mind there is nothing wrong with saying that there is an extraordinary loss. The prior debt was always going to be repaid so I would happily forget this fair value charade. However, in the first nine months of 2011, Barclays' results were flattered by a £3 billion gain in the value of its own debt, so I see no reason why this figure is not also included in ordinary profits.

Taking these two figures into account, Barclays actually lost £475 million before tax, compared with a profit before tax of £1.7 billion last year.

Some people might think that makes them worth £11 million. Shine on you crazy, Diamond.

Root and branch

Not particularly interested in the media conflab about BSkyB, Murdoch, DCMS, Lenson but a couple of things are quite clear.  First of all, none of the current set of ministers, let alone the lot from the last government, has a clue about straightforward business dealings, open and fair discussion.  The difference between politicians and businesses is that businesses have to face up to reality because if they don't they will be wiped out whereas politicians try to abuse their power, hide from the truth and obfuscate. It works for a while or until enough people  have forgotten about a particular slip up and the politicians get away with it, but it makes for poor government.

Anyway, the one thing that is glaringly obvious is that Jeremy Hunt was inept in his handling of the BSkyB takeover, and it is clear that such rank amateurs should be nowhere near important decisions.  But it raises the bigger issue of whether we actually need a Department of Culture, Media and Sport, any more than we need a Ministry of, say, Bricklaying?  Sport and Culture existed long before the dead hand of government came into play, and while some aspects may benefit from government funding, that could probably be better handled by local government, by large national institutions (e.g. the National Gallery) funded directly by the Treasury or the National Lottery.

And as for media regulation, why should it be any different from any other business regulation? It is after all a business not an art and should be treated no differently than any other industry.

If there is one thing that can be learnt from the NOTW closure it is that incompetence and ineptitude can be most easily rooted out by closing down the whole organisation.

Yellowwash

Lots of bleating in the media today about Michael Brown, particularly from the LibDems about the Electoral Commission allowing them to keep £2.4 million of stolen money because they acted in "good faith".  Actually the Electoral Commission did nothing of the sort.  The good faith contention came from the LibDems, but as we all know, their leadership was drunk at the time. What the Electoral Commission said is recorded here, and the relevant extract was:

To be a permissible donor, a company must be registered under the Companies Act 1985, incorporated within the UK or another EU member state, and be carrying on business in the UK. The Commission has concluded that 5th Avenue Partners Limited met these requirements at the time the donations were made, and therefore was a permissible donor.

The Commission also considered whether there was a basis for concluding that either Michael Brown, as an individual, or 5th Avenue Partners GmbH (the parent company of 5th Avenue Partners Limited) was in fact the true donor. Neither of them would have qualified as permissible donors under PPERA.

The Commission has concluded that there is no reasonable basis to conclude that the true donor was someone other than 5th Avenue Partners Limited.

which all sounds fine and dandy except that when Brown was tried and convicted oif fraud, the High Court convinced themselves and made clear in their judgement that there was absolutely no business involved in 5th Avenue Partners.

The fact that the Electoral Commission didn't prosecute is down to a "political decision" by the Electoral Commission, originally by Sam Wardle the former Chief Executive.  I was the original complainant in May 2005 about Michael Brown, a few hours after the donation was announced (and I had done enough checks to spot that the donation was fishy).  I complained through my MP.  When there was no response after several months, he collared the Sam Wardle at his party conference.  Still nothing happened, and months later when pushed, the Electoral Commission said that they couldn't comment while Brown was under investigation by the police.  When I eventually reached Wardle by telephone, he said that it was unlikely the Electoral Commission would do anything because it was their job to preserve democracy, not to bankrupt political parties.

Would you drive a car designed by Ed Miliband?

Mercedes team boss Ross Brawn has expressed his frustration with politicians criticising the decision to go ahead with the Bahrain Grand Prix.

Labour leader Ed Miliband was among those who said it should be cancelled amid ongoing civil unrest. "Politicians in the UK were saying we should withdraw once we'd got here," Brawn said. "Why didn't they say something beforehand?"

Brawn also criticised calls for British drivers to boycott the race. Must be particularely irksome for people who are at the cutting edge of their industry to listen to drivel cxoming from someone who has never done anything of note in his adult life.

Can you write with your eyes shut?

Former Foreign Secretary Jack Straw has  admitted that he signed off the decision to capture  Abdel Hakim Belhadj  and hand him to Colonel Gaddafi, but only after Foreign Office officials showed Mr Straw evidence his signature authorising them to arrange the abduction  in 2004.

Mr Belhadj claims he was jailed and tortured in a Libyan prison after his ‘extraordinary rendition’, and is suing the UK Government for £1million in compensation.

Last year Mr Straw denied any knowledge of the operation, saying: ‘The position of successive foreign secretaries, including me, is that we were opposed to unlawful rendition, opposed to torture or similar methods, and not only did we not agree with it, we were not complicit in it, nor did we turn a blind eye to it.’

Blind eye or not, he obviously did not see what he was signing. Writing with your eyes shut; now that's a real talent.

Give me a break

There seems to be a lot of hot air in the media about tax relief for charitable donations, notably a letter to the Telegraph with 40 signatories. But take a closer look and you will find that most of them are self-proclaimed philanthropists acting on behalf of their own family trusts. I have no doubt that they are all generous and well intentioned but they don't seem to fit the general description of charity donors. To explain: imagine a charity donor earning more than the average, perhaps £40,000 a year but with little other liquid assets. This donor deciodes to give donations of £2,000 a year to various charities, and this genuinely reduces the amount of disposable income that he has to live on. It doesn't seem unreasonable to reduce the amount of ioncome on which he is assessed by £2,000. Now consider the situation of a very wealthy family that owns perhaps £100 million of income producing assets quite apart from the assets that they rely on to live (houses, cars, grouse moors i.e. the basic necessities). At the beginning of the year, the family invests its £100 million and gets a measly return for the year of £5 million, which it decides to donate to a charity, namely its own family trust. Now, there are many ways that you can look at this, but it seems to me just as reasonable to treat that donation of £5 million as being made out of the family's accumulated wealth of [£100m + £5m] than just out of the £5m income, so why should anyone expect it to qualify for tax relief in full against income? In summary, since every one is guaranteed 100% relief for charitable donations up to £50,000, tapering down to 25% relief at the first £200,000 and 25% thereafter, it doesn't seem unreasonable to me for the government to treat donations above £50,000 as being paid out of capital not income.

Shysters (part 3)

Tony Blair says he has no memory of the 2004 rendition case involving Abdel Hakim Belhaj. The former prime minister said Britain had always opposed rendition and "absolutely adhered to that position".

OK, as I said before that sounds like a lie and a guilty verdict.If he and Straw were adamant with their opposition, then he would hardly forget it if he was told about any extraordinary rendition, and if Straw was opposed to it, he would hardly have kept quiet about it.

Mr Blair told the BBC that the security services did an "important, dangerous job" and generally deserved the full support of the country. Which we all iknow already and we don't need to hear it from him. An what we really want to know was which Secretary of State authorised the extraordinary rendition of Mr Belhaj.

Shysters (part 2)

Belhadj was rightly miffed that the UK government had a hand in his kidnap and torture, and did what any sensible person would do and sued.  Such is the watertight case of UK plc that MI6 has allegedly offered a million spondoolees (of your money, dear tax payer) to get Mr Belhadj to forget the whole affair.  Fortunately he is more principled and greedy than that and is looking forward to his day in court.

It now gets more interesting, because according to press reports, the Met is going to take a look into the affair, and may be about to question Straw or even Blair.  The latter shouldn't be hard to find because you dear tax payer are still paying for three of the Met's finest to keep him out of trouble 24 hours a day 7 days a week.

No doubt there will be the usual bluster and fobbing off, but things do not look to good for either Blair or Straw, because our legal department have been hard at work and ferreted out that under The Intelligence Services Act of 1994, ‘authorisation of acts outside the British Isles’ can only be signed off as a result of ‘authorisation given by the Secretary of State’. No chance of blaming a lowly Home Office minister then, although some authorities think that "the Secretary of State" could also include the Prime Minister, although I find it hard to agree with it on the facts, although equally I don't see that stopping Blair.

Let's look forward to some doubletalk from Straw about "always being opposed to extraordinary rendition" (even when he or the Prime Minister authorised it), and the same from Blair along the lines of "well, I may have authorised it (or some play on words to that effect), but I am not the Secretary of State so I am not responsible".

Last year, Richard Dearlove, formerly head of MI6, told us it was a political decision to hand over opponents of the Libyan government, and a few years ago David Miliband told Parliament that Diego Garcia had been used by rendition flights on two occasions in 2002.

Join the dots to get the full picture

Always knew Jack Straw was a lying shyster

The evidence against Straw and Blair about the rendition and torture of Abdel Hakim Belhaj, who was taken off a plane while in transit in Bangkok and flown to Libya, probably via Diego Garcia after a friend of Mr Belhaj had gone to the British Embassy in Malaysia and sounded out his chances of political asylim in the UK. MI6 tipped off other agencies and the CIA nabbed him. Damningly for MI6 and the government of the day, the MI6 agent running the show, Sir Mark Allen wrote a letter to Musa Kusa, Gaddhaffi's chief of intelligence, not only congratulating the Libyans on the "safe arrival" of the "air cargo", but asking that any intelligence received form the interrogation should be passed to the British and not through the Americans.

Of course, Sir Mark Allen never thought this letter would come to light, but it has, and there is a prima facie case for prosecution, although the likelihood of that is minimal.

Jack Straw was the Labour Foreign Secretary in 2004 when the rendition took place. In an interview on BBC Radio 4 last year he said: "We were opposed to unlawful rendition. We were opposed to any use of torture or similar methods. Not only did we not agree with it, we were not complicit in it and nor did we turn a blind eye to it."  You can tell he was lying because his lips were moving.

Of course it wouldn't be so bad if this supposed terrorist, on which we have been able to pin nothing apart from having been in Afghanistan when bin Laden was on "our" side, wasn't now head of the Tripoli Military Council in the new Libya, and thus the head of the faction that the West had been supporting for many months.  Politicians can twist and spin as much as they like, but in the end the dishonest are caught out by the facts.

How Robert Rubin and Bill Clinton screwed the middle classes

BILL MOYERS: Welcome to our third episode about the powerful players in high places who rewrote the rules of American politics and the economy. You can read all about it in this book: Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.

If you missed the first two programs, you can see them on our new website, BillMoyers.com. The first is with Winner-Take-All authors Jacob Hacker and Paul Pierson; the second with David Stockman and Gretchen Morgenson on “crony capitalism.”

In this edition, we’ll look at a seminal moment when Wall Street and Washington stacked the deck against the rest of us.

Remember, this is the political equivalent of a crime story, a mystery. How is it that our economy stopped working for the broad majority of Americans? How did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? In other words, how did politics create a winner-take-all economy?

Well it didn’t happen by accident. This was an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head: giving to the rich and taking from everybody else. It’s all on the record.

The richest of the rich was Citigroup, at one time the world’s largest financial institution. When the 2008 meltdown hit, the bank cut more than 50 thousand jobs, and taxpayers shelled out more than $45 billion to save it. So how are Citigroup executives doing these days?

Nicely, thank you. Last year, its CEO, Vikram Pandit, took home almost two million dollars in salary, almost four million dollars in deferred stock, stock options that may be worth as much as six and a half million dollars, and a $16 million retention bonus. And yet just a few days ago, Citigroup failed the latest stress test by the Federal Reserve. It may not the means, in order words, to survive another financial fiasco.

There’s no clearer example of the collusion between government and finance than the deal that created Citigroup in the first place.

At a standing room only press conference in April 1998, Sandy Weill, head of the investment bank and insurance company Travelers group, and John Reed, the longtime CEO of the commercial bank Citicorp, announced a gigantic, $140 billion merger.

Just one problem: the merger flew in the face of this law.

You’re looking at the Banking Act of 1933, also known as Glass-Steagall. Glass-Steagal was enacted during the Great Depression to prevent investment banks from ever again gambling with people’s life savings, as they had before the market crash of 1929. Glass-Steagall protected us against a repeat of that calamity for seventy years. It’s a little bitty thing -- just 37 pages -- for the big job it did for us.

Glass-Steagall was still in force when Travelers and Citicorp went ahead with their merger. So what made them think they could get away with it? They had friends in high places. That's how. Friends who helped them exploit a loophole giving them two years to get rid of the Glass-Steagall Act.

Among those friends, the laissez-faire, libertarian chairman of the Federal Reserve, Alan Greenspan; the right-wing Republican Senator from Texas, Phil Gramm, who once called Wall Street “a holy place,” and later would become a high priest at the global banking giant, UBS; and the democratic Secretary of the Treasury, Robert Rubin, former co-chair of Goldman Sachs and tireless advocate of taking down Glass-Steagall. In the weeks before its repeal Rubin left government to join, are you ready for this, Citigroup’s board, the very financial giant made possible by Glass-Steagall’s elimination.

And so it was – the fix was in, the path cleared all the way to the top.

JOHN REED: Sandy called his friend the President last night and invited me to join in on the conversation and we had a good talk. So the President was in fact told last evening about what was going to happen.

BILL MOYERS: You got that, I’m sure. Wall Street was telling the President of the United States what was going to happen.

Within two years, Glass-Steagall was deader than a doornail. With the stroke of a pen, President Bill Clinton signed legislation that eliminated its protections and gave Citigroup the green light.

John Reed retired from Citigroup a year later, after losing out in a power struggle with Sandy Weill. He went on to serve as interim CEO of the New York Stock Exchange and now chairs the board at MIT. As Wall Street collapsed in 2008, Reed watched in disbelief, and began to have second thoughts about it all including the wisdom of repealing Glass-Steagall.

You were a key player when Traveler’s and Citicorp merged. How big was this to you at that time?

JOHN REED: It was not that big. You know, it clearly was an important transaction from our point of view. And it was hopefully -- it turned incorrectly -- but it was hopefully going to transform sort of the opportunity space in which the bank operated from a business point of view.

Our customers were saying, "Hey, we don't want to come to you for loans. They're too expensive. We can sell our paper into the capital markets more cheaply. We can finance ourselves more cheaply."

BILL MOYERS: Your customers being?

JOHN REED: Being large companies. And these customers were saying, "We want you to intermediate the capital markets.” Now that is the traditional business of what we then called investment banks. And Glass-Steagall had separated out those who were principally engaged, which is a very important phrase, in the capital markets, which were then the investment banks and the brokers and so forth, from the commercial banks.

BILL MOYERS: Glass-Steagall was the act passed during the New Deal back in the 1930s that was designed to put a firewall between the investment firm and the traditional banking firm. So you couldn't take my deposits or grandma's deposit and take risk with it, right?

JOHN REED: Well, that and even more importantly, or equally importantly, since the FDIC came into existence at approximately a similar time where the government was guaranteeing deposits so that people didn't lose if a bank got into trouble-- people didn't lose their lifetime savings. My father lost his lifetime savings during the Depression. And it was quite a family event. And if he had ever known I worked in a bank he would have died yet again.

But not only did they want to keep the banks from the business for reasons of not risking the money. They didn't want them to use the guarantee that the government provided for those deposits to leverage their position. Because, you know, if you have a deposit base that's guaranteed by the government, it sure puts you at a great advantage in terms of going into the market and playing around.

BILL MOYERS: The government's going to pick up your losses, right?

JOHN REED: Yeah. And you don't have a funding problem.

BILL MOYERS: That was what the FDI--

JOHN REED: Because you have guaranteed deposits.

BILL MOYERS: That was Federal Deposit Insurance Corporation was designed to protect my --

JOHN REED: That's right.

BILL MOYERS: My deposit in your bank.

JOHN REED: That's right. And they wanted to make sure that it was used for that purpose and not as a basis for doing other things in the capital markets.

BILL MOYERS: So this is why the financial community wanted to repeal or eliminate the Glass-Steagall Act. They wanted to get rid of this firewall?

JOHN REED: Yes. And the reason was our customers increasingly said, "Look, we can't use you banks for finance because there are opportunities in the capital market that are much cheaper. And if you can't help us go there then we're going to go to the investment banks. And so all of a sudden we saw our customers migrating out towards the investment banking community to do the business that we would have preferred to have done. So from Citibank's point of view, our point of view, this merger gave us access to the capital markets. And so we were in a position to offer our customers the services that they wanted.

NEWS REPORT: They plan to attract new customers with one stop shopping: Stocks, bonds property and life insurance and banking. Federal Regulators must approve the deal. Most banks are now prohibited from selling stocks and insurance.

JOHN REED: When Sandy approached me on the merger I knew that it was right on the forefront of the legal thing. But there’s a technicality Citibank could not have bought Travelers because that was out and out illegal. Travelers on the other hand could buy Citi because they were buying a bank and they had two years in which to correct for the deviation from the law. And what we basically were told was, "If you all want to do this within the two years we'll get the law changed."

BILL MOYERS: Because if in that two-year period as I understand it, Glass-Steagall had not been changed, this merger -- which had already taken place -- would have been illegal.

JOHN REED: We would have to take it apart. And we took steps to make sure that was possible.

BILL MOYERS: But you got the blessing in this two-year period of President Clinton, of the Fed, of--

JOHN REED: We had that blessing prior to. In other words—

BILL MOYERS: What? They assured you that this—

JOHN REED: Yes.

BILL MOYERS: Glass-Steagall would be--

JOHN REED: Yes. In other words, I went with Sandy to call on Chairman Greenspan. We told him we were contemplating this merger. But that it would required that the Fed would be prepared to grant us permission. And we were assured that they would.

We went and saw the Chairman of the House Banking Committee, the Chairman of the Senate Banking Committee. And we said we're talking about this merger but it could not take place if we were not assured that it would be approved at the Congressional level. We talked to the Secretary of the Treasury, I don't recall--

BILL MOYERS: Robert Rubin? He was the Secretary of the Treasury at the time.

JOHN REED: Yeah, we would've spoken to him, I'm sure. And had Bob Rubin said, "No, the Treasury feels this is wrong," we would've been careful. Because obviously, the Treasury recommends to the President on an issue of this sort. And there was no argument. No one said, “We’ll have to think about it.” And so a consensus built up. I don’t think it started in the Fed. I would guess it started in the industry, it certainly got into the Congress.

SENATOR TIM JOHNSON: By eliminating the Glass-Steagall restrictions we free our financial services industry to maintain its place as the world leader…

SENATOR PHIL GRAMM: We dominate the world financial market, and we’ve done it with one hand tied behind us because we have the greatest economic system in the history of the world. But we can untie that hand that we have had tied behind us. And we do it in this bill by repealing Glass-Steagall.

JOHN REED: Lawmakers inevitably learn as lobbyists tell them things. It’s sort of like a doctor being sold new medicines, they can’t stay on the forefront of the pharmaceutical technology, they rely on being educated to some extent.

SENATOR CHARLES SCHUMER: This bill is vital for the future of our country. If we didn’t pass this bill, we could find London or Frankfurt or years down the road, Shanghai, becoming the financial capital of the world.

JOHN REED: There was no one in the press who said, “Oh no, that’s wrong.” There was a celebration. And the industry, including myself, didn't recognize the danger.

BILL MOYERS: The danger being?

JOHN REED: That we could make a mistake that would then be transmitted in a much more drastic way throughout the system.

BILL MOYERS: Which happened later.

JOHN REED: Which happened, yeah. I mean if you had asked me under oath, what probability I would have given that you would have gotten the whole group of Wall Street participants to get it wrong so to speak, I would have said zero.

SENATOR BYRON DORGAN: We are with this piece of legislation moving towards greater risk. We are almost certainly moving towards substantial new concentration and mergers in the financial services industry, that is almost certainly not in the interest of consumers, and we are deliberately…

BILL MOYERS: A handful of politicians who tried to sound the alarm. Among them was Senator Byron Dorgan of North Dakota.

SENATOR BYRON DORGAN: What does it mean if we have all this concentration and merger activity? Well, the bigger they are, the less likely this government can allow them to fail.

BILL MOYERS: Were you aware of the few senators who raised real concerns about removing Glass-Steagall, about what would happen?

JOHN REED: No one that I’m aware of it saw it clearly. You point out to some Senators and Congressmen who did, but somehow we described them as being peripheral. And I simply said, “They’re wrong.” Turned out they weren’t.

SENATOR BYRON DORGAN: I think we will in ten years’ time look back and say, “We should not have done that, because we forgot the lessons of the past.”

BILL MOYERS: Senator Dorgan predicted disaster. Disaster's what we got in 2008.

JOHN REED: Yeah, no, they -- and disaster-- it wasn't solely Glass-Steagall, because much of the disaster of 2008 would've occurred independently of it, I believe. But certainly the propagation of the problem throughout the economy was greatly aided by the absence of Glass-Steagall. You know, we would've hit the iceberg anyway, I believe.

But the ship would've had compartments which would've been flooded. And question is, would the whole ship have gone down? Because had it been compartmentalized, we still would’ve had a disaster. It still would've involved very important institutions. But it might not have spread throughout the whole ship. That's the real issue.

BILL MOYERS: What do you think they saw that Wall Street didn't see?

JOHN REED: They simply didn't participate in the exuberance. But I do think that, you know, this setting up the deck of cards so that we could produce what we currently are trying to withdraw from. Turns out to have been something that the word disaster is maybe not strong enough.

BILL MOYERS: Well, some people now say the deck was stacked, that the game was rigged against the broad interest of the public.

JOHN REED: No, I definitely agree. And, I mean, the proof is there. It doesn't take a genius to figure out that we'd been wrong.

BILL MOYERS: But it takes somebody principled to admit that, "I was wrong."

JOHN REED: No, no. It's not something you'd like to end your career with. That is for sure. No, look. We got carried away. It wasn't any small group, it was a consensus that reached the press, it reached the political world. It certainly had reached the intellectual world. I'm now, as you know, at MIT, and I say to some of my academic friends that the intellectual underpinnings of this was created at MIT and places like that, I mean—

BILL MOYERS: With the technology of the computers?

JOHN REED: Well, no. It's the mathematics. It's all of this mathematics of finance and the presumption in much of this mathematics that you can capture risk by looking at historical volatility and so forth and so on. As soon as you say something appears not to be risky, you get an over investment in it, because the capital requirements are less. And then if something does go wrong, the hurt is all the more because you don't have the capital to take the risks. And you know, if somebody says, "Walk across that sheet of ice, there's no danger whatsoever you're going to fall in," you know, you're fine. As long as you don't fall in.

BILL MOYERS: Are you saying, suggesting that -- the chairman of the board of MIT's suggesting --that human intelligence no longer runs our financial system?

JOHN REED: Well, it's a little wisdom balance that judgment wouldn't hurt.

BILL MOYERS: So how, when you look back on it, how did so many people, including yourself, get it wrong?

JOHN REED: We were carried away by the enthusiasm. And like everything else, you know, once you start you probably go a little further than you should have.

We started out lending mortgages to customers and putting them on our balance sheet. Then in the '90s, when the mortgage-backed securities came in to being, we found that you couldn't economically do that, so we would package our mortgages and we'd sell them to a Wall Street firm, who would then pass them on to their customers. Pretty soon, we were in the business ourselves, after the merger.

And so all of a sudden, these mortgage-backed securities could be distributed throughout our own company. And pretty soon people said, "Well, why only package the securities that your customers create? Why don't we go out to mortgage brokers and start buying some of their securities? And we'll package those and we'll sell them."

And then, I was retired at the time, but you read in the press and you may even have seen on television, no doc and low doc. Now, no doc/low doc means no documentation or low documentation. Low meaning less than the regulators would require of you.

BILL MOYERS: You didn't ask the person, the homeowner who was buying the house, "Show me proof of your wages. Show me proof of your savings."

JOHN REED: That's right. But can you imagine that you publicly acknowledge that you were creating products and selling them into the market that had no documentation or less than normal required documentation? And this was -- it's sort of like taking a product and putting a skull and crossbones on it and saying, "This might be poison," and putting it on the supermarket shelves.

BILL MOYERS: You know, I hear you talk. And I think, "Well, human beings certainly can go insane. So can systems, right?"

JOHN REED: Yeah, and so can groups of human beings. In the 90s, the investors took over. And they basically said to management, "We don't care what you do. We don't care how many private jets, houses, golf courses, swimming pools, whatever you have, as long as you keep the share price going up. If share price goes down, we're going to get rid of you even if you're good.”

And managers started being scared of their stockholders and this idea of shareholder value came into being. I never heard the word "shareholder value" until the '90s. It was customers, customers, customers. How are the customers? Are we doing well? Are we losing place with the customers? But all of a sudden -- and Sandy was a total proponent.

BILL MOYERS: Sandy Weill?

JOHN REED: Sandy Weill. I mean, his whole life was to accumulate money. And he said, "John, we could be so rich." Being rich never crossed my mind as an objective value. I almost was embarrassed that somebody would say out loud. It might be happening but you wouldn't want to say it.

But you know, the biggest bonus I had ever received when I was at Citi was three million dollars. The first year I worked with Sandy it was 15. I said to the board, "I'm the same guy doing the same job, same company. There are two of us. The company's bigger but there're two of us. What's going on?" "Oh, you don't understand." And it was just totally different culture. And see, Wall Street developed that culture.

BILL MOYERS: That's what happened, isn't it, in the --

JOHN REED: Yeah. No, and it happened. It happened in Wall Street and there's a subset of the world, that self-selects, for whom money is an overriding value. And being personally rich somehow is something they aspire to. And you know, it's a minority of the population. Bill Gates certainly did not start Microsoft to become rich. Nor do I think Steve Jobs went back to Apple because he wanted to be rich.

These were byproducts. They became rich, but as a byproduct. But there is a subset of the population that self-selects and they go to Wall Street because that's where it's somewhat legitimate. You could do the same thing illegally. And there are people who do that. I mean, there is a drug cartel and so forth and so on. But the thing that has amazed me is, A, it's fairly large and, two, it's sort of been accepted.

BILL MOYERS: Is this an accurate thumbnail sketch of what happened over this period of time? Banks took too many risks, right?

JOHN REED: Yes, they did. But there are worse things, but they certainly did.

BILL MOYERS: What were the worse things?

JOHN REED: Well, they originated and sold into the marketplace things that should never have been originated.

BILL MOYERS: Derivatives, unregulated derivatives?

JOHN REED: Well, it was the excess mortgages, the no-doc, low-doc mortgages. And then the derivatives were a byproduct. Once you had those, then you could chop 'em up and so forth. And of course they had changed their mindset. They were in the business to make money, period.

BILL MOYERS: The exuberance, you said, took over. Isn't it, isn't democracy supposed to be a brake, B-R-A-K-E, on greed and power in the private sector? To keep the balance-- to keep the exuberance from going too far, as it did in this case?

JOHN REED: It should. But you're a better historian than I am. I don't know, but I would guess the democratic systems tend to go back and forth.

BILL MOYERS: Like a seesaw.

JOHN REED: Like a seesaw.

BILL MOYERS: But when you take the watchdog off the beat, as happened in the 1990s, when you lift Glass-Steagall and throw it on-- into the dustbin of history, you're removing any check in behalf of the public on the exuberance of the private sector.

JOHN REED: You're-- I mean, a consensus developed. The fact that we took it out was a byproduct of this mistaken belief in this modern financial system that was, quote, "more efficient," was very lucrative for the United States and the U.S. economy in global terms.

And which was supposed to handle risk better. In fact, it handled risk worse. I mean, this is what the facts are because there was a much greater concentration of risk created. And so we got it wrong.

But the restraint of the government and it's agencies disappeared in the enthusiasm.

And so it was this combination of the participants getting carried away, the normal checks and balances that should exist against participants.

And the thing that is astounding, frankly, and there's a lesson here that we probably haven't yet learned, is that the system can get it so wrong. It wasn't--

BILL MOYERS: So wrong?

JOHN REED: Wrong. It wasn't that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did. And then the whole system came down. You know, it became illiquid, the government stepped in. Had the government not stepped in, it really would have come to an end.

BILL MOYERS: Should the government have spent billions of dollars of taxpayer money in bailing out the banks?

JOHN REED: I think they had no choice. I think they had to do it, yes.

BILL MOYERS: Why?

JOHN REED: The alternative was worse. Letting the banks all collapse, which would have spread across the world, because banks lend to banks. So the interconnections were such that they just couldn't allow a meltdown of that scale. And we see in the Lehman bankruptcy that we're -- I don't know how many years since but it must be three or four. And they're still unraveling the bits and pieces.

And had it been the whole system, it simply would have been a calamity that from a societal point of view would have been worse. So I think they had no choice. They did have to bail them out. And they did do it. And it did succeed.

BILL MOYERS: But they left in place the very people who had driven the ship into the iceberg.

JOHN REED: I'm quite surprised at that. It clearly has not been a clean sweep. In other words, those of us who made mistakes, and so forth and so on, are still floating around the system. And--

BILL MOYERS: Floating it? You're running it.

JOHN REED: Well, I am not, but --

BILL MOYERS: You're not running it, they're running it.

JOHN REED: But there are many who are. I wasn't involved, obviously. I had retired in the year 2000. We're now talking 2008. So I was a knowledgeable spectator, but certainly not a participant. I was quite surprised because, frankly, the worst thing that can happen to a businessman is to go bankrupt. That's the sign of ultimate failure. You ran a business and it was unable to succeed under the terms and conditions of private capital. Namely, you went bankrupt.

It's not a crime. But it certainly is a mistake. And these companies, even though they didn't have to file for bankruptcy, de facto went bankrupt. And so the managements and the boards and the regulators should have, in my mind stepped aside.

BILL MOYERS: How hard was it for you to go before Congress in 2010 and say, "I was wrong. I made a mistake." In fact, you said, "We created a monster."

JOHN REED: No, we -- look. You don't like saying this. The hard part probably preceded my testimony by two or three years, where I came to recognize and feel, and I still feel bad. And I feel bad for the people at CitiBank who lost jobs and so forth and so on. Not to mention our stockholders. But I am a realist. I try very hard to be honest with myself, and honest in what I, you know, say. And facts are facts. I've seen Sandy a couple times. Not --

BILL MOYERS: Sandy Weil.

JOHN REED: Yeah, Sandy Weil. And I sort of say, "Sandy, you know, we didn't do very well." And he's not comfortable with that conversation at all. I think he would still defend that it was a good merger, it just went off the tracks afterwards. I --

BILL MOYERS: When it went off the tracks, John, you know, millions of people lost their jobs. Millions of people lost their homes. Millions of people saw their savings --

JOHN REED: If you look at the lost product in the United States, in other words, the difference between our current economic trajectory and the potential economic trajectory, you're talking about trillions of dollars. And those dollars are jobs and output and so forth and on so. I mean we over leveraged. And that was because we were creating mortgages so as to sell them into the market. And we're creating them from customers who probably should not have been borrowing. They didn't know what they were originating, didn't know who was buying it, and they didn't care. They were getting paid commissions along the way.

And that's a fundamentally flawed system. If you say to a businessman, "What is your objective?" and he says, "My objective is to make money," there are no boundaries on that. I mean, it's only the law as to what you do in the middle. It would be better if you said, "I'm in business to serve my customers,” or “to create a product like an iPad or what have you." But something that has intrinsic value. And all of a sudden, we changed to, "Hey, I'm not totally sure what we're doing here. Maybe it's not right. But you know what, I'm getting paid my commission." And that mindset took over. And a lot of that money did flow into the political coffers. There's no question--

BILL MOYERS: What do you mean?

JOHN REED: Donations. You know, if you're rolling in money in a business, it's very easy for you to have a PAC and to contribute to campaigns and so forth and so on. And we went through a period of time when there was an immense amount of money. I don’t mean small. I mean, we took-- this is the biggest economy in the world. And we went from 15 to 25 percent of the economy.

BILL MOYERS: The financial community did?

JOHN REED: The financial--

BILL MOYERS: Industry.

JOHN REED: The financial sector, yeah. But the point is our government is designed fundamentally to be dumb but to listen. In other words, no one is elected to the government because of their personal expertise in the various issues that they're going to have to deal with. We have a system that is designed to listen.

BILL MOYERS: But if money gets you greater access--

JOHN REED: But unfortunately the talk of what you're listening to gets distorted by the money issue. They're not randomly listening to the population at large. They're listening to people who have a strong voice, because they're strong contributors and so forth and so on.

BILL MOYERS: I think you've taken us to a very fundamental issues that's roiling the country at the moment. And it is that this is an-- democracy is no longer a level playing field or even approximately a level playing field. The big institutions have so much money that they can flood into the system. There's one study I saw just the other day that reports the number of people lobbying today on behalf of the financial industry to try to weaken Dodd-Frank, the bill passed after the disaster, outnumbers consumer, union, and other groups by a ratio of 25 to one. The financial industry outspending everybody else 25 to one to try to weaken Dodd-Frank.

JOHN REED: I'm quite surprised that the political establishment would listen to groups that have been so discredited.

BILL MOYERS: You're saying despite what happened in 2008, Wall Street still has too much power?

JOHN REED: They have too much voice. They certainly are being listened to. I find it incredible. I would have guessed that society, at large, would have said, "Hey, we made a mistake. Let's get some rules." You know? I used to tell my kids, "Why do you think a car has brakes?" And they all would say, "To stop." And I'd say, "No, a car has brakes so that you can drive fast. If you got into a car that had no brakes and you knew it, how fast do you think you would drive? You wouldn't drive very fast at all." And that's the same reason we have rules. You want the private sector to be free to be creative and exuberant and whatever, within a framework.

BILL MOYERS: You testified in front of the Senate Banking Committee, you came out in support of what we call the Volcker Rule. For the layman, what is the Volcker Rule and why do you support it?

JOHN REED: The rule simply says, "If you have a customer who wants to issue a bond, you could help him. But you can't trade in the bond market for your own account."

And so what the rule does is it basically puts the banks back into the customer business and allows the Wall Street community to be in the pure trading and the business of speculation and hedge funds and so forth. And it separates those.

BILL MOYERS: Sounds to me like you're calling the Glass-Steagall Act back from the grave.

JOHN REED: I think I am.

BILL MOYERS: Because?

JOHN REED: I just think it’s better that we have that barrier than not. It makes sure that the FDIC guarantee doesn't provide a funding base for proprietary trading activities. Remember, the government guarantees your savings account and mine in the local bank. And, correctly, we don’t want the government's guarantee for those accounts to act as a funding base for somebody who's speculating in the market. And so it’s that kind of separation.

It's a prudent barrier. And I'm astounded that anybody would be against it. And mind you, I'm a private sector guy. I'm not suggesting over government intervention. But you need rules. I would never let you or a friend or my kids drive a car without brakes.

BILL MOYERS But when the financial community can buy the rules they want --

JOHN REED: Then you've got an unstable situation. That's an intolerable situation. I mean, obviously.

BILL MOYERS: So do you have any sympathy for Occupy Wall Street?

JOHN REED: Yeah, no, I definitely do. I mean, I think it's symptomatic of the disconnect that exists in our discourse now. Where you have a set of folks who seem not to understand fully what went on and the implications of it. And a political establishment that doesn't seem to respond very well. They know a lot about the concerns, but they seem not to be able to do anything about them.

And the folks in the financial system are not listening. They're not saying, you know what, there's some correctness in these views. And so I think these people are giving voice to a frustration. And I am quite understanding of it. I hope the political establishment has some ears. I understand the political divisions. But they've got to start understanding that at some point you have got to come together

BILL MOYERS: John, thank you very much.

JOHN REED: Thank you. I’ve enjoyed it.

Breaching your privacy

There is a lot of fuss in the media about the new measures proposed by the government to monitor telephone calls and web access, and quite right too. But there is nothing new about this.  Until now the UK has been quite happy to record similar information outside the UK where they were able to get hold of it.  No UK laws against that.  And they were fairly passive about the US listening in to the calls of UK citizens, in the hope/expectation that the US would share the juicier bits with the UK (and vice versa).

So now the UK is simply trying to do to its own people what the US and others may have been doing for some time.  I am not an expert in what actually happens, but several years ago I met regularly on business with people from a state that has not been on the friendliest terms with most western countries.  i was dealing with very substantial businessmen in that country, with very close ties to the leadership, met with senior employees of state companies and on a few occasions had meetings with ministers.

And this is what I was advised by someone who was very knowledgeable about the surveillance undertaken at the time:  Throw away your mobile phone, or don't let anyone you meet know your mobile phone number.  If any surveillance target calls you, you will go on a suspect list, likewise if you call them back. Don't take your mobile phone to meetings even if you don't use it because your position and the position of the "target" can be matched by time and place.  Do it once and it might be a coincidence. Do it twice and the link is obvious. At the time you wouldn't be dealing with the UK authorities, but your entry into the US might have become difficult.

Worth remembering if this law goes through.

Cash for policy

When you hear Ed Miliband or the BBC going on about Conservative donors having dinner with the people to whom they have handed a six figure number:

Labour pledged to ban tobacco advertising in its manifesto ahead of its 1997 General Election victory, supporting a proposed European Union Directive banning tobacco advertising and sponsorship. At this time all leading Formula One Teams carried significant branding from tobacco brands such as Rothmans, Benson and Hedges, West, Marlboro and Mild Seven.

The Labour Party's stance on banning tobacco advertising was reinforced following the election by forceful statements from the Health Secretary Frank Dobson and Minister for Public Health Tessa Jowell. Ecclestone’s legal adviser, David Mills, was in fact Jowell’s husband.

Ecclestone appealed 'over Jowell's head' to Jonathan Powell, Tony Blair's chief of staff, who arranged a meeting with Blair. Ecclestone and Mosley, both Labour Party donors, met Blair on 16 October 1997, where Mosley argued:

"Motor racing was a world class industry which put Britain at the hi-tech edge. Deprived of tobacco money, Formula One would move abroad at the loss of 50,000 jobs, 150,000 part-time jobs and £900 million of exports."

On 4 November the "fiercely anti-tobacco Jowell" argued in Brussels for an exemption for Formula One. Media attention initially focused on Labour bending its principles for a "glamour sport" and on the "false trail" of Jowell's husband's links to Benetton.

On 6 November correspondents from three newspapers inquired whether Labour had received any donations from Ecclestone; he had donated £1 million in January 1997. On 11 November Labour promised to return the money on the advice of Sir Patrick Neill.

On 17 November Blair apologised for his government's mishandling of the affair and stated "the decision to exempt Formula One from tobacco sponsorship was taken two weeks later. It was in response to fears that Britain might lose the industry overseas to Asian countries who were bidding for it."

In 2008, one year after Blair stepped down as Prime Minister, internal Downing Street memos revealed that in fact the decision had been made at the time of the meeting, and not two weeks later as Blair stated in Parliament.

Recent Correspondence

I emailed my MP this morning (I paid nothing for the access):

Dear Sir [Bufton Tufton],
I welcome the news that MPs will be debating the provision of iPads to all Members of Parliament.
It is to be welcomed that the House should be so concerned about the use of technology to improve productivity.
May I however point out that whilst such tools improve the productivity of MPs, the services provided by the MPs do not change, and thus with the extra productivity afforded by the iPad, the amount of work required from each MP will decrease.
It would therefore seem appropriate to reduce the salaries of MPs by an appropriate amount, perhaps £300 a year, and the saving would repay the cost of the new technology over 2 years.
I admit that I haven’t done a precise costing which would have to take into account VAT, income tax and national insurance, but I suspect my proposal would represent value for money for the tax payer.
Best wishes
Alex

I received a reply 10 minutes later:

Dear Alex
Thank you for the email.
We are not in fact about to debate iPads; the House of Commons is going to consider whether they should continue to be purchased individually by MP’s or whether the House of Commons should provide them centrally.
MP’s workloads continue to rise, as more and more constituents contact us by email. IT helps us to keep abreast of this growing pressure and provide a good service to our constituents. MP’s salaries are, rightly, frozen for two years.
Best wishes, [Bufton Tufton]

Moral: Write to MPs about their pay, and you will have their undivided attention. 

Utter Balls

Ways and Means Budget 

Resolutions and Economic Situation 

 AMENDMENT OF THE LAW 

 12.55 pm Ed Balls (Morley and Outwood) (Lab/Co-op): The British economy is stagnating, unemployment is rising month by month, the Government’s deficit reduction plans have gone wildly off track, middle and lower-income families and pensioners are facing rising petrol prices, rising energy bills and falling living standards—and what did the Chancellor do in his Budget yesterday? Did he admit that his economic plan has failed? Did he act to kick-start the stalled recovery? Did he give any hope to young people facing long-term unemployment? Did he set out any vision of how, over the next 20 years, Britain can compete in the world and win the investment and skilled jobs we need? Did he ease the pressure on families by cutting fuel duty, or by cancelling perverse and unfair cuts to tax credits and child benefit? No.

The centrepiece of the Chancellor’s Budget, his top priority, and the political imperative for this oh so political Chancellor, was to spend more than £3 billion next year cutting the top rate of income tax for existing top rate taxpayers. People earning more than £150,000 a year—300,000 of them—are getting an average tax cut of £10,000 a year. How out of touch can he get? To add insult to injury, the Chancellor sprung another surprise tax rise by freezing the age-related personal allowance for 4.5 million pensioners and abolishing it entirely for soon-to-be pensioners. People on modest incomes who have worked hard and saved hard all their lives will be hit by the Chancellor’s tax grab on pensioners while he gives a £40,000 tax cut to 14,000 millionaires. What can we say about that?

Let me say to the Chancellor today: some of the electorate he really cares about—the selectorate in his own Conservative party—may be cheering, although after this morning’s headlines, I am not so sure. As the Financial Times reports this morning: “Some Tory backbenchers offered support for the measure”— on pensioners— “although they refused to be identified for fear of alienating their elderly constituents.”

Perhaps in a second some of those Conservative Back Benchers will break cover and back the pensioners tax grab in the Budget, but they are right to be worried, because all across the country, the real electorate will be thinking, “A tax cut for millionaires, paid for by millions of families and pensioners across this country? Same old Tories: looking after their friends while families and pensioners pay the price.” We will have to wait to see the details. There will be some winners and some losers, but the one thing that we can categorically confirm today is that thousands of pensioners in the hon. Lady’s constituency will lose up to £300 a year as a result of yesterday’s Budget. She did not say whether she supported that—hardly a clarion call of support for the Chancellor’s pensions tax grab.

I will make it absolutely clear: we will vote against the change in the Budget debates and I hope that he will join us in the Lobby. We will vote against it, but the Chancellor knows very well that I will not go through every tax rate, relief, allowance or spending commitment and make commitments for three years’ time. But if the election were called tomorrow, our manifesto would be clear—we would rescind the measure and the Government would go ahead with it. That is the difference.

PROCEDURE (FUTURE TAXATION: RATES OF INCOME TAX) 

Question put, 
That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions about income tax taking effect in a future year— (a) provision that for the tax year 2013-14— (i) the basic rate is 20%, (ii) the higher rate is 40%, and (iii) the additional rate is 45%, and provision about other rates of income tax.

The House divided: Ayes 319, Noes 22.

Hang on Dave

Prime Minister David Cameron has said there will be a inquiry after secretly filmed footage showed the Conservative Party co-treasurer apparently offering access to the prime minister for a donation of £250,000 a year.
In a claim made to Sunday Times reporters, Peter Cruddas said £250,000 gave "premier league" access, including dinner with Mr Cameron and possibly the chance to influence government policy.
Mr Cameron said that it was right that Mr Cruddas had resigned and said he would make sure there was a Conservative Party inquiry.

Which doesn't really answer the real question. Was there any truth in Mr Cruddas' assertion that a quarter of a million quid gets you dinner in the PM's private apartment at 10 Downing Street?  One of the people who knows the answer is the Prime Minister.

There are times when I really hate all professional politicians.

Make money fast - maybe

An interesting paper has been published by some US and one UK academic looking into how to make money from Ponzi schemes without going to jail.
For the benefit of those unfamiliar, a Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going, until suddenly it disappears.

OK, so how do you make money?  Well the easy answer is to get out before the crash, on the basis that while money is still coming in, the organisers are hardly likely to refuse a redemption if that would cause suspicion, so there is a window of opportunity, and this is monitored by specialist websites.

An extensive online ecosystem has developed in support of HYIPs, involving discussion websites, digital currencies, and third-party ‘aggregator’ websites that track HYIP performance. These aggregators list dozens of active HYIPs, tracking core features such as interest rates, minimum investment terms and funding options. They operate forums in which individuals can report their experiences; but more significantly, the aggregators appear to make their own investments in some of the HYIPs and report on when interest payments cease.

But as the academics wisely note:

Given that all HYIPs are fraudulent, it is natural to ask whether the reports from aggregators should be trusted. While ascertaining ground truth is impossible, we have devised a number of measurements to assess the relative accuracy of data reported on HYIPs.

One of the websites quoted in the report has already gone offline. It it looked too gopd to be true, it probably was.

Red Ken's 20/20 foresight

In an interview with BBC London, Ken Livingstone said “When I was leader of the GLC I said to Mrs Thatcher we needed broadband linking every home and City in the country”.

Here is a timeline for those whose memories are measured in nanoseconds:

1969: The first node is connected to the internet's military ancestor, ARPANET using 56 kbit/s circuits.
1973: University College of London is one of the first international connections to ARPANET.
1974: The TCP/IP protocol suite is adopted for use on ARPANET.
1984: Joint Academic Network (JANET) built to connect UK universities over the internet.
1986: The GLC is abolished.
1988: The backbone (now known as NSFNET) is upgraded to T1 (1.544 Mbit/s) links.
1988: First Interop trade show for vendors to demonstrate systems supporting TCP/IP.
1989: Tim Berners-Lee and his team at CERN fuse markup languages and internet protocols to create the World Wide Web.
1991: The NSF decided to move the backbone to a private company and start charging academic institutions for connections.
1990: Mrs Thatcher resigns as PM.
1992: Dial-up access is introduced in the UK by Pipex.
1992: Demon Internet is established as the second UK ISP.
1993: ANS builds a new internet backbone using T3 links (45 Mbit/s).
1995: The NSF awards MCI the contract to build the very high performance Backbone Network Service (vBNS) to replace ANSNET, operating at 622 Mbit/s.
2000: ADSL launched as a commercial product by BT.

So whenever the conversation between Livingstone and Thatcher took place, it was at least 14 years before the commercialisation of broadband.

Let us not forget that 25 years ago, the typical IBM PC was based on either a 4.77MHz 8088 or a 6 MHz 80286 processor.  There probably wasn't a communications port and either way it would have cost about £2,000 (other makes are available) at a time when average salaries were less than £10,000 a year. If you wanted a modem to connect to your serial cable, you would probably have to pay another £200 and it would give you 4800 bps; 9600 bps modems didn't really become standard until the late 1980's, and 64k ISDN wasn't standardised until 1988 and the modems initially cost £1,000, but higher speeds didn't come along until the mid 1990's with cable connections and then ADSL.

How prescient, Mr Livingstone.

A gendarme told me and he ran away

Nobody can be too surprised about the identity of the gunman in Toulouse.  I think its OK for me to say that without being accused of prejudicing a fair trial, because he appears to have declared his guilt and chucked the murder weapon out of the window.  We like to be fair-minded and I suppose his defence lawyer will plead a stitch up and extreme mental pressure  to extract a confession, but on the whole the French police are to be congratulated on a speedy resolution.

Except it isn't quite like that over at the BBC, where the story all day yesterday was  that this was likely the work of the far-right, or at least that was the "theory" http://www.bbc.co.uk/news/world-europe-17441244

But why the widely differing choice of targets: soldiers and Jewish children? One theory is that the man is a deranged far-rightwinger. It is noted that the three dead soldiers were of North African origin, and a fourth who was injured is from the French Caribbean.
The killer has a clear affinity with guns. Could he be a neo-Nazi type - maybe an ex-soldier or a member of the criminal underworld - with a hatred of all minorities, Jews and Muslims?

This "theory" featured prominently on the BBC website all day yesterday.  When the truth emerged, the BBC spun this as being a line being pout out by the French police.

This of course could hardly be further from the truth.  The French police actually made a statement yesterday that they had checked out a suggestion that three former French paratroopers had been responsible and found that they all had alibis and were cleared from all suspicion http://www.lefigaro.fr/flash-actu/2012/03/20/97001-20120320FILWWW00445-toulouse-ex-paras-nazis-hors-de-cause.php  Meanwhile, the BBC kept running their anti-right wing story.

As the the media now report, the actual suspect had been on the police radar for some time and a police official  told Agence France-Presse news agency the suspect had been "in the sights" of France's intelligence agency after the first two attacks, after which police had brought in more "crucial evidence". If the police had been following this line, why would they be telling the BBC that it was the work of the far right? Obviously they didn't.

It turns out that he had been arrested in Kandahar, which is a long way from home for a Frenchman, even one of Algerian extraction, and he had rather given the game away by trying to get his scooter resprayed and have the GPS tracker disabled.

Sounds like his contacts with al-Queda weren't that close or they would have given him a bit more training.

Also sounds like the BBC could do with some training in impartiality, reporting the facts and not jumping to conclusions.

They don't like it up 'em

For years wee Alec Salmond has been making a meal of the Scottish position and has been telling the people of Scotland people how much better off they would be if they followed him to the promised land of oil-powered prosperity.  All a load of tosh of course.  The oil industry provides employment for many around Aberdeen, which would not change on independence, but the total UK government revenue from Scottish oil (excluding English gas) is less than UK Government gives away in foreign aid.  If Salmond thinks he is going to continue to pay for the Scottish NHS and free university education with less than the amount of UK foreign aid, he has got his sums very wrong.

But more than one can play at that game, as the Orkney and Shetland Islanders have discovered for themselves. Perhaps they read this blog.  Anyway they have taken a shine to the several billion of oil revenue and figured that it will go much further if kept in the islands rather than being shared with the Glasgow trade unionists and Edinburgh lawyers. They might prefer to stay with the rest of the UK, or they could go it alone.

Salmond, caught on the hop without a real answer, resorts to personal abuse and calls them "troublemakers".

Stupid times 5

One of the less flattering comments about George Osborne comes from Professor Laurence W. B. Brockliss, of Magdalen College, Oxford, courtesy of a daughter who studied there a few years back.  I cannot vouch for Professor Brockliss' impartiality on the subject (he is by all accounts a bit of a lefty), but his statement is unequivocal:  George Osborne was by far the most stupid person he had ever tutored.

And based on Osborne's pronouncements, that is not surprising.  Magdalen is one of the more academic colleges at one of the top three universities in the country, but even so, Osborne is living proof that that is no guarantee of smartness.

Stupid #1: Last week, we had Osborne's announcement that he was going to investigate the possibility of issuing long term bonds because of the UK's currently low cost of borrowing.  Elementary schoolboy mistake, George.  Or rather the sort of mistake that a dim banker makes at the lunch break on his first day of training on interest rate swaps and the yield curve.  Short term yields are low, but longer term zero coupon yields tend back towards historic norms and par trading bond yields will be an arithmetic blend of the two; except that as there is no market in 100 year bonds, there will be a premium to pay for the lack of liquidity.  If you really think you can outsmart the yield curve, you are in the wrong business.

Stupid #2: Then we had the idea that Civil Service pay should not necessarily be fixed at national levels (I can't disagree with that), but that it should be fixed at levels comparable to pay in the private sector (dumb, dumb, dumb).  There is of course very little employment in the private sector in many parts of the country, with the inevitable result that any pay comparison would drive down public sector pay and drive the more able public sector workers into the more prosperous parts of the country.  Do we set the pay of nuclear scientists at Sizewell according to the average Suffolk agricultural wage or the pay of brain surgeons by reference to the pay of FX traders or glass factory workers depending on whether they live in Mayfair or St Helens?  Thankfully no.

Does he think that MP's would accept their pay being calculated on the same basis?  Of course they wouldn't, but here is an alternative: pay MP's less in safer seats and fix their pay from the time that they enter parliament.

Stupid #3:  A still unresolved point, but as it stands it still looks as though a family with one wage earners on £43,000 will not receive any family allowances but will contribute to the allowances of of a married couple who may earn a combined salary of more than £80,000.

Stupid #4: The government is planning to privatise part of the road network - not a bad idea in itself if done properly, but Osborne’s preference is for the road network to be handed over to private companies on long leases. He thinks that means the government can avoid the word “privatisation”. Yeah, sure thing George, just like Eaton Square is on 99 year leases from the Duke of Westminster, so it doesn't really belong to the leaseholder.  Nobody is going to be fooled by that, nor by the enormous risk the government takes in getting the roads back in an appropriate condition at the end of the lease term.

Stupid #5: The Conservatives made the same mistake over rail privatisation, and they will probably do the same again, but for the really stupid comment of the week, year or maybe decade, we have Osborne's question:

"Why is it that other infrastructure - for example water - is funded by private sector capital through privately owned, independently regulated, utilities... but roads in Britain call on the public finances for funding?"

Why? You really want to know why?

I guess that it has something to do with the £40 billion (I'll write that out in big numbers: £40,000,000,000.00) that we pay every year in fuel and vehicle excise duties.

Let me ask a question back: How do you get to be Chancellor when you are so unbelievably stupid?

Mordorous lawyers

An American firm that rejoices in the name of SZC (for all I know that stands for Saruman, Zigur and Carcharoth), is threatening a Southampton pub with legal action because it using the name "The Hobbit". SZC says it owns the worldwide rights to several brands associated with author JRR Tolkien, including The Hobbit and The Lord of The Rings.

Well bully for them, but I happen to know that the word "Hobbit" is not a brand name but a generic term for a folkloric supernatural creature that appeared in the works of Michael Aislabie Denham (d.1859), printed in volume 2 of "The Denham Tracts" [ed. James Hardy, London: Folklore Society, 1895], a compilation of Denham's scattered publications. Denham was an early folklorist who concentrated on Northumberland, Durham, Westmoreland, Cumberland, the Isle of Man, and Scotland.

What a happiness this must have been seventy or eighty years ago and upwards, to those chosen few who had the good luck to be born on the eve of this festival of all festivals; when the whole earth was so overrun with ghosts, boggles, bloody-bones, spirits, demons, ignis fatui, brownies, bugbears, black dogs, specters, shellycoats, scarecrows, witches, wizards, barguests, Robin-Goodfellows, hags, night-bats, scrags, breaknecks, fantasms, hobgoblins, hobhoulards, boggy-boes, dobbies, hob-thrusts, fetches, kelpies, warlocks, mock-beggars, mum-pokers, Jemmy-burties, urchins, satyrs, pans, fauns, sirens, tritons, centaurs, calcars, nymphs, imps, incubuses, spoorns, men-in-the-oak, hell-wains, fire-drakes, kit-a-can-sticks, Tom-tumblers, melch-dicks, larrs, kitty-witches, hobby-lanthorns, Dick-a-Tuesdays, Elf-fires, Gyl-burnt-tales, knockers, elves, rawheads, Meg-with-the-wads, old-shocks, ouphs, pad-foots, pixies, pictrees, giants, dwarfs, Tom-pokers, tutgots, snapdragons, sprets, spunks, conjurers, thurses, spurns, tantarrabobs, swaithes, tints, tod-lowries, Jack-in-the-Wads, mormos, changelings, redcaps, yeth-hounds, colt-pixies, Tom-thumbs, black-bugs, boggarts, scar-bugs, shag-foals, hodge-pochers, hob-thrushes, bugs, bull-beggars, bygorns, bolls, caddies, bomen, brags, wraiths, waffs, flay-boggarts, fiends, gallytrots, imps, gytrashes, patches, hob-and-lanthorns, gringes, boguests, bonelesses, Peg-powlers, pucks, fays, kidnappers, gallybeggars, hudskins, nickers, madcaps, trolls, robinets, friars' lanthorns, silkies, cauld-lads, death-hearses, goblins, hob-headlesses, bugaboos, kows, or cowes, nickies, nacks necks, waiths, miffies, buckies, ghouls, sylphs, guests, swarths, freiths, freits, gy-carlins Gyre-carling, pigmies, chittifaces, nixies, Jinny-burnt-tails, dudmen, hell-hounds, dopple-gangers, boggleboes, bogies, redmen, portunes, grants, hobbits, hobgoblins, brown-men, cowies, dunnies, wirrikows, alholdes, mannikins, follets, korreds, lubberkins, cluricauns, kobolds, leprechauns, kors, mares, korreds, puckles korigans, sylvans, succubuses, blackmen, shadows, banshees, lian-hanshees, clabbernappers, Gabriel-hounds, mawkins, doubles, corpse lights or candles, scrats, mahounds, trows, gnomes, sprites, fates, fiends, sibyls, nicknevins, whitewomen, fairies, thrummy-caps, cutties, and nisses, and apparitions of every shape, make, form, fashion, kind and description, that there was not a village in England that had not its own peculiar ghost. Nay, every lone tenement, castle, or mansion-house, which could boast of any antiquity had its bogle, its specter, or its knocker. The churches, churchyards, and crossroads were all haunted. Every green lane had its boulder-stone on which an apparition kept watch at night. Every common had its circle of fairies belonging to it. And there was scarcely a shepherd to be met with who had not seen a spirit!

So you can pile all you malice and hatred into your pursuit of world domination, Sauron, but you will never destroy those plucky, little .... cont p.94

Bank of Scotland guilty of serious misconduct

The FSA has found the Bank of Scotland guilty of serious misconduct in the way it lent money to businesses between 2006 and 2008. They say the bank pursued "an aggressive growth strategy" that focused on high risk lending. That policy contributed to the bank having to be bailed out by UK taxpayer.

The bank has escaped paying a substantial fine. The FSA said imposing a fine would have meant the taxpayer effectively paying twice "for the same actions committed by the firm".

OK, same old whitewash. So who was running the FSA at the time.  Well one of the board members was Sir James Robert Crosby, Deputy Chairman of the FSA from January 2004 until he resigned on 11 February 2009. Surprising that he didn't nip it in the bud, particularly because he was also chief executive of Halifax Bank until its merger with Bank of Scotland to form HBOS, of which he was Chief Executive until July 2006, when he stepped down in favour of "his young protégé" Andy Hornby. Hornby was an HBS alumnus whizz-kid who had gone through starring roles at Asda and Blue Circle, but new next to nothing about banking before Crosby let him into the top spot at HBOS, which was a bit like letting the lunatics run the asylum.

Any chance Crosby will be stripped of his knighthood? Doubt it.

The sting in the tail

Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors, the International Swaps and Derivatives Association said on Friday. Greece said it would use this legislation, known as a collective action clause, to force private creditors into a bond swap. This follows creditors' voluntary tendering of 85.8 percent of the 177 billion euros in bonds regulated by Greek law. The use of CACs should boost participation to 95.7 percent.

The ruling means a maximum of $3.16 billion of net outstanding Greek credit default swap contracts could be paid out, though the actual amount is likely to be lower because bondholders do not lose all their original investment. The payout is not immediate and the exact amount of money changing hands will be determined by an auction procedure which is expected to take place in the coming weeks.

But the big question we want to know is: how many of the private bond holders who were resisting any compromises over their bond swaps were doing so because they could pick up big payouts on a credit event?

Nicolas Sarkozy says France has too many foreigners

I quite agree, and most of them are French.

Does my deficit look big in this QE?

Hows yoiur pension looking? According to the National Association of Pension Funds, not so hot. In fact, in total net pension fund values are down £90 billion, with a deficit of nearly £500 billion since the start of quantitive easing.

This isn't so much due to the loss of interest to date, or even the loss of asset values, although both are a factor, but is mainly due to the fact that in the current interest rate environment, the discounted value of the funds' liabilities look a lot bigger.

So expect your pension pot to be cut again or capped, all to keep those nasty banks in business.  First they screwed the tax man, now they are taking your pension.

N.B. this of course does not apply if you are on an unfunded public sector pension scheme, notably working at HM Treasury. Your pension is unaffected by this measure.

Overblown, over budget, over here

In 2004, Tony Blair's Labour government said it would establish cost-saving centres to save £159m by sharing "back-office" functions such as information technology, personnel and procurement between Whitehall departments.

The initial start-up costs were budgeted at £900m.

Assuming a cost of funding this at about 6%, which was the gilt rate in 2004, this would have given a payback over 7 years, which frankly isn't that fantastic.

By 2011, the total establishment costs had risen to £1.4 billion, so that if we still believe the purported savings the payback period with interest has jumped up to 13 years and we are still 5 years away from seeing any saving. The most amazing statistic is that increases in the budget for this £159m cost saving exercise were running at over £70m a year.

Moral: when a politician says they can fix a problem, don't.believe a word.  They have neither the ability nor the commitment to do so when they are chasing the next soundbite. And don't believe the Treasury when they measure value for money on PFI schemes

Frenchman caught with trousers down, sues Google

As you would of course. A Frenchman living in a little village in the Maine-et-Loire is suing Google over a Street View photo that shows him peeing in his garden As with most people in Street View pics, the image is somewhat blurred, but seeing as how it is a small village, everyone knew where he lived, so it was a bit of a give away. He also thinks €10,000 worth of Google Ad revenue would repair his hurt feelings.

Being such a provincial, he thinks that he can sue Google France, whose crafty avocat says that he should be suing the parent company who are actually the publisher.  This seems a bit petty given that Google seems to hide behind a myriad of offshore companies and yet projects itself onto our screens wherever we are.

Pay up Google or expect to be pissed all over in the French courts.

Hat tip: Ouest France, details in French here