Daddy Alex has already updated you on today's FLYING PIG headlines, though he DIDN'T mention the The Today Programme's interview with the man who should sort out all the confusion because he's in charge of Planning for Pandemics, or "Lord of the Pandemonium" to give him his full title. Erm…
Anyway, I'm going to tell you about the OTHER annoying BUG that's doing the rounds: Mr Balloon's apprentice chocolate button counter, Master Oboe.
Today he claims that he has a PLAN for SOUND BANKING… hmmm, Master Gideon is something that SOUNDS like BANKING? Whatever do you think THAT means?
Well, you would be RIGHT! It's a SILLY plan, which involves altering some brass nameplates and nothing of any substance.
The centrepiece is to tighten banking regulation by abolishing the banking regulator. No, bear with me… Master Gideon intends to get rid of the FSA (Financial Services Authority) and replace it with the BoE (Old Boy Network). This is the system that we had before Mr Frown was Chancellor, which successfully prevented the collapse of banks like BCCI and Barings… oh, hang on a minute…
At the moment, we have a tri-partite system of regulation: meaning everyone tries but no one does their part. With responsibility DIVIDED between the Bank of England and the FSA and the Office of Fair Trading, it's too easy for the actual DOING of regulation to fall into the gaps as no one takes responsibility.
What Mr Oboe wants to do is get rid of the FSA, take some powers away from the OFT, give some other powers to the Bank and bung the rest into a new body called the CPA. This will sweep aside the old, failed tripartite system and replace it with a new, modern, er, tripartite system… no, hang on again…
(Incidentally, that's CPA for "CONSUMER protection agency", not "CHILD protection agency", though the track record of Government Quangos with those initials is, let's say, UNCERTAIN.)
There IS a good case for saying there should be CLEAR lines of responsibility. Make the Bank of England ultimately RESPONSIBLE for the banking sector and then everyone knows where the buck stops. Assuming you CAN stop the buck before it disappears down the plug hole.
But if you want the Bank actually to ENFORCE the regulation, then they're going to need a whole load of new employees trained in inspection and investigation and where are they going to get them? Oh, look: here's a whole bunch or people recently made redundant from the only other inspector of banking in town… good golly gosh, all the same people would end up doing all the same jobs, only with a load of confusion and an expensive redundancy payment in the middle.
We listened to Mr Oboe trying to sell his
(This was to do with Mr Oboe slightly exceeding Daddy's parameters for accepting the phrase "telling the truth", viz:
"…first of all, myself, David Cameron have come on this programme and warned consistently for months that there is a debt crisis…"
"Um, surely that was Mr Vince," interjected Daddy.
"…First of all, we have been the people who have highlighted this. We're also the people who've said the cupboard is bare…"
"No, that was Mr Vince, again," says Daddy.
"…that the country does not have limitless funds in the future. We opposed the temporary VAT cut…"
"No, no, that was definitely all Mr Vince!" repeats Daddy, going slightly purple.
"I think it's important because it is has established our credentials as people who are telling the public the truth"
"Grk! Urk! Strangulated-Growl!" says Daddy.)
Before we got to that, though, Mr Oboe had already ALARMED us with his somewhat casual attitude to what banking regulation is actually FOR.
"First of all…"
(Yes, he really DOES say "first of all" that many times. UNCHARITABLY I wonder if he can count to SECOND at all?)
"First of all, if this retail bank - a bank that's got branches in a high street taking your deposits or anyone else's - is engaging in very risky activities, very risky investment banking activities like large-scale proprietary trading or internal hedge funds, then it will have to set aside very large amounts of money as an insurance policy to protect the taxpayer."
Now, what worries me about this is how do you define "very risky activities"? And for that matter, why do you NEED to define "very" risky – shouldn't the banks be insuring their depositors against ORDINARY risks of banking?
It seems to me that the ORDINARY business of banking is to take deposits from investors and return them a rate of interest, then use that money to advance loans to other people and charge them a SLIGHTLY HIGHER rate of interest. The risks involved in this are that some of the loans go BAD because people can't always repay what they owe, if the business doesn't work out.
What is NOT the ordinary business of banks is gambling the deposits on the stock market or the 4.15 at Kempton Park or putting the lot on 26 Black.
People who WANT to put their money on 26 Black go to a CASINO. People who want to back a nag in the 4.15 go to a BOOKMAKER. And people who want to gamble on the Stock Market should go to a broker to do it and then they know what they are putting their money into and can accept the risks.
People going to a BANK want somewhere safe to put their money, with some reasonable interest on their savings.
What they DON'T want to do is discover (usually after the fact) that their high street bank went on a drunken bender down in the City of London and backed a whole super-casino's worth of options and securities and derivatives.
For many, many years following the INFAMOUS Wall Street Crash, America made their banks do EITHER stock market banking OR high street banking, but not BOTH. Then they stopped making the banks make that choice and then there was another massive banking crash.
I believe that this is called TESTING a theory to DESTRUCTION.
Mr Oboe appears to call it Business as Usual.
He spells it out for his chums in the City in the foreword to his plan:
"We must not allow ill-conceived or badly designed new regulations, either from home or abroad, to undermine the prospects of an internationally successful financial services industry based in London"
"We will defend the vital interests of Britain’s financial services sector in Europe."
This is not a difficult code to break: the Conservatories will not allow "ill-conceived new regulations" by opposing ALL new regulations; they will "defend vital interests" by preventing Europe from requiring banks to protect their CUSTOMERS' interests.
Finally, Mr Oboe is going to ask for a report from (i.e. pass the buck to) the Office of Fair Trading about the "effects of consolidation in the banking sector".
What he means is he's going to have to ASK someone to tell him if it's a BAD thing that we now have fewer, larger, riskier banks.
Is it very wrong of me to expect someone applying to be CHANCELLOR to understand that in a free market LESS competition IS automatically BAD?