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In an interview with the Daily Telegraph, Mervyn King has urged high street banks to take a better, longer term view towards their customers and to stop focusing on the need to “simply maximise profits next week”.
He accused them of routinely exploiting their millions of customers, stating “If it’s possible for them to make money out of gullible or unsuspecting customers, particularly institutional customers, they think that is perfectly acceptable.” [More evidence highlighting that ignorance is not bliss, and that those misusing power think it's perfectly acceptable to exploit it!]
The Governor also criticised the “weight put on the importance and value of takeovers” and raises concerns that companies with good reputations have been “destroyed” in the search for short-term profits.
Mr King expressed regret for not sounding a louder warning over his concerns before the last banking crisis [NB Is this an apology? IMHO he should have been sacked for this!]. The Governor’s remarks are a warning to George Osborne, the Chancellor, as a government commission considers whether to force high street banks to sell off their investment banking arms [NB IMHO this is a must and a no-brainer!]
Mr Osborne is thought to be against such a plan [NB as he's trying to look after his friends in the City!], but Mr King is due to ultimately become responsible for banking regulation and his views are, therefore, critical. In the interview, the Bank Governor said: “We allowed a banking system to build up which contained the seeds of its own destruction. We’ve not yet solved the 'too big to fail’ or, as I prefer to call it, the 'too important to fail’ problem. The concept of being too important to fail should have no place in a market economy.”
When asked whether there could be a repeat of the financial crisis, Mr King said: “Yes. The problem is still there. The search for yield goes on. Imbalances are beginning to grow again.”
Mr King suggested that the culture of short-term profits and bonuses within the banks may ultimately be responsible for the problems. He says that traditional manufacturing industries have a more “moral” way of operating [i.e. banks have few(er) morals!] They care deeply about their workforce, about their customers and, above all, are proud of their products. With the banks there isn’t that sense of longer term relationships. There’s a different attitude towards customers. Small and medium firms really notice this: they miss the people they know”.
The Governor added that good businesses “keep a clear vision of who their customers are, and are run by people who don’t think they should simply maximise profits next week.” He said that the payment of bonuses is part of this cultural problem. “Why do banks in general want to pay bonuses? It’s because they live in a 'too big to fail’ world in which the state will bail them out on the downside.”
Over the past 30 years, he says, “we changed Britain away from a sclerotic economy with inefficiencies and problems in labour relations. Everyone got to the point where we no longer expected government to bail us out. Everyone bought in to market discipline. We were all better off. It was working very successfully.” But now, people have every right to be angry, because “out of what seems to them a clear blue sky”, the crisis comes, they find they lose their jobs and there’s the sharpest fall in world trade since the 1930s. “But, surprise, surprise, the institutions bailed out were those at the heart of the crisis. Hedge funds were allowed to fail, 3,000 of them have gone, but banks weren’t”.
The comments will embarrass the Chancellor, who recently concluded a deal with the banks under which they would be able to resume the payment of bonuses in return for boosting lending [IMHO this is yet another act of treachery, from a Tory millionaire looking after his friends in the City, and who also fund his party].
So why aren't people more angry? ... well there's Ignorance of course ... but there's also a great deal of Apathy! Apathy is a disease in Britain ... a disease that will result in millions of lives being blighted!
