From an insider
> Speaking as one who worked in the City at the time, and still does, we should have allowed more of the banks to go bust. It would have been disruptive, but would have moved us past this strop the voters persist with, making banks the new Maggie.
Agreed. But woul dit have worked? Lehman's went bust, with thousands of workers out on the street with zero notice. Do the public remember that and think that maybe thre was some balance between banks going bust and banks being baile dout? Do they fuck.
Similarly, althugh, yes, the British banks had all sorts of structural problems which made them vulnerable to the Crunch, everyne knows the Crunch started in the US. So who do the British public demand be punishd for the Crunch? American bankers? Do they fuck.
> The important part missing from your article is, of course, politics. Map the (former) labour strongholds over the head office locations for the bailed out institutions, and it becomes clear that buying votes was an equal concern with preserving an economy.
I was at Citi in 08. Without giving details of why, I firmly believe that the second round of US bailouts wre an object lesso nin cronyism, corruption, and politcal cluelessness. The first round, perhaps not, but the first round sent the message that a second round was possible, which encouraged said corrruption.
I am now in RBS. While I do believe that the problem with bailing a bank out si that it puts bad incentives into the market (as I witrnessed at Citi), I have to admt that that appear snot to have happened here. RBS are absoluitely not having a mad spending-and-risky-trading spree while not giving a shit because tyhey know they'll be baild out. The entire culture of the bank right now is very mucht hat they never want it to happen again. So that's good. Restructuring isn't very exciting, so doesn't make the news, but, believe me, there is a helll of a lot of it going on. And Ross McEwan rweally is a pretty good CEO. Knows the bank inside-out.
The government have also insisted that banks ring-fence their retail side from their investment side so that, next time a bailout is needed, the government have the option of bailing out just the retail side to protect the public while leaving the investment arms to suffer the consequnces of their own mistakes -- smoethign which they literally could not do in 08 because retail and investment were all rolled up as one corporate entity. I suppose they might use that option or mgith not, but they'll have it. Seems reasonable to me.
Another thing that is happening is... well, think of it as the writing of an instruction m,anual for the bank. Another observation the government made was thast, if bank A goes insovent and hands over all its assets to bank B, that's all very well, bank A has survived the weekend, but how do the people at bank B know how to run bank A which they suddenly own? In 08, they would have had to wing it. If it happens in the future, they'll have documentation of all the necessary procedures handed to them with the assets so that bank A not only remains solvent but also remains properly operational. Again, good plan. Pretty rare to see such a sensible common-sense bit of regulation.
As Tim says, it's amazing that poltiicians have got so much of this stuff right. But, on this occasion, they really habve. Weird.