tag:blogger.com,1999:blog-8764541874043694159.post6902554281264593790..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: A failure of compassionFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-8764541874043694159.post-44002033339441368702013-04-24T07:12:00.561+01:002013-04-24T07:12:00.561+01:00Economics in many ways is only a proxy measurement...Economics in many ways is only a proxy measurement for energy consumption. Where there is a high consumption of energy, there are developed economies.<br /><br /><a href="http://www.group-global.org/" rel="nofollow">too big to fail</a>ketzhttps://www.blogger.com/profile/10964307257665928357noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-90476642514869198262013-04-12T08:44:52.251+01:002013-04-12T08:44:52.251+01:00Good points, CIG. Compassion yes, in terms of help...Good points, CIG. Compassion yes, in terms of helping Cyprus restructure it's economy to more substantial sectors.<br /><br />As for "greek mentality"...well, I live in a central european country, and I remember, even back in the mid-90s, our economy teacher in high school was explaining to us that in Greece, everything is pretty much done through the black market. Back in the 90s. High school teacher.<br /><br />A country that has ballooned it's banking sector to such a point as Cyprus has, has very little room for "compassion" left now, all that's pretty much left is hard-earned lessons ahead.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-22596888993548836062013-04-05T12:15:51.432+01:002013-04-05T12:15:51.432+01:00On (3), "help via other channels" is, ge...On (3), "help via other channels" is, generally, always available. Basically if we generalise a tax (or tax-like action we have here) can always be selectively compensated by a government subsidy or tax rebate elsewhere. Unless you give the subsidy to exactly 100% of the tax base, you can redistribute. The Cypriot government could try and identify worthy haircut victims and treat them favourably compared to the less worthy. As this is relative (wealth is rank!) this remains to some level possible however limited the absolute resources are, the only requirement is to have >1 taxpayers (you can't rank a singleton).<br /><br />(5) I'd expect an SME's current account petty cash to often come from a bank loan from the same bank. Now the problem is obvious if the haircut is done on the petty cash while the loan remains outstanding, but it's a fixable problem if they wished to (even retroactively, e.g. they could accept the bank shares they get in the haircut as settlement for the loan at the notional haircut price, or something like that).<br /><br />(6) well in a plutocratic state without private property to speak of, I doubt many can become wealthy in a fully legitimate way and then squirrel their money to, of all places, Cyprus, which has had "DODGY" written on it in big letters for decades... I wouldn't use the term criminal though, having the favour of the King is not as such criminal (literally so, the King is the law!), but nor is it legit or fair in a Western sense. As your theme was compassion, I don't think Russian courtiers deserve it.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-22462389246149933102013-04-04T00:01:56.936+01:002013-04-04T00:01:56.936+01:00I've seen before this claim that Lloyds was so...I've seen before this claim that Lloyds was somehow forced to take over HBOS, but never a shred of evidence for it. Victor Blank in particular seems to have been keen to do the deal: he told Robert Peston nearly a year later "When we announced the deal in the middle of September, it did not feel like a rescue of HBOS, it felt like a wonderful opportunity that was available and would only have been available in adversity"PaulBhttps://www.blogger.com/profile/16861432701458977844noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-35234931850699793052013-04-03T21:54:06.880+01:002013-04-03T21:54:06.880+01:00" It is significant that the bank which was r..." It is significant that the bank which was run by bankers, dear old Lloyds, was only brought down when and Eric Daniels had a gun put to their heads by (yes) Gordon Brown, and effectively ordered to take over the disgraceful, irresponsible mess that was HBOS."<br /><br />Any evidence?Postkeyhttps://www.blogger.com/profile/11747509012748106827noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-62961667306230874632013-04-01T20:23:09.941+01:002013-04-01T20:23:09.941+01:00Webwright’s point is backed up by what Mervyn King...Webwright’s point is backed up by what Mervyn King said at the 6th March session of the Banking Standards committee hearing. He said:<br /><br />“I was surprised at the degree of access of bank executives to people at the very top. And it was certainly easier access to people at the top than the regulators had. I remember before 2007 that the only time there was a speech about regulation from the prime minister was when there was an attack on the FSA for over-regulation. That was the climate in which regulators were operating then. It was extraordinarily difficult. They knew that if they were tough on a bank, the chief executive would go straight to No 10 or No 11 and say this is an attack on the UK's most successful industry, even when it was a perfectly reasonable application of the regulations.Times have changed clearly since then. But the access probably hasn’t..”<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-16869324638661340392013-04-01T15:03:12.505+01:002013-04-01T15:03:12.505+01:00Yebbut, the Bank was fighting a losing battle from...Yebbut, the Bank was fighting a losing battle from 2001 onwards, after the introduction of the exciting new regulatory structure, and with the Keystone Gestapo being (initially) chaired by that ineffable, over-promoted buffoon, Howard Davies. I wrote to him with stone-cold evidence of serious 'misconduct' there, and am still waiting for the courtesy of a reply. I think I should probably give up now! <br /><br />As I said, BCCI was hardly a BoE failure, as it was a complex fraud based overseas in several jurisdictions for maximum opacity, and the bank had a thoroughly corrupt management structure. Similarly, Barings was a problem rooted entirely overseas, outwith the BoE's remit; a complete failure of Barings' own management, certainly, but not really the Old Lady's fault. <br /><br />When all is said and done, until Northern Rock there had not been a run on, or failure of, a British bank for a hundred-and-oatcake years, and the reason for that is, in my view, the close scrutiny under which they were put by the Bank, before the creation of the FSA. I look forward to it being reinstated. <br /><br />Furthermore, you rather answer the misgivings of your first sentence in your last.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-47163348263709931222013-04-01T13:33:47.638+01:002013-04-01T13:33:47.638+01:00Wow. Many thanks. :)
I'm not quite so impress...Wow. Many thanks. :)<br /><br />I'm not quite so impressed with Mervyn King. I think he got monetary policy wrong in the mid-2000s and didn't pay enough attention to financial stability as a separate remit from inflation targeting. And the Bank of England has had some spectacular failures of supervision - notably Barings and BCCI. But in general it makes sense to me that the regulation and supervision of the financial industry (not just banks) should be the responsibility of the body that is responsible for financial stability. You can't manage financial stability effectively if you have no control over the financial industry.<br /><br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-84339625432350637322013-04-01T11:44:59.975+01:002013-04-01T11:44:59.975+01:00Only because this is your most recent post, I will...Only because this is your most recent post, I will use it to applaud your performance on 'Today' this morning. It was the first time that I have heard anyone dare to defend the Bank of England (and, by inference, the Governor) against the barrage of ignorance that has been aimed at it since 2008. I have taken every opportunity to correct the popular view, in both comments and conversation, but nobody in interested in the counter-view.<br /><br />Gordon Brown's characteristically ill-thought-out reform of the regulatory régime was always a disaster in the making, as glaringly obvious a mistake as was the Euro. While the Bank of England had regulatory oversight of the banks, they were constrained by their responsibilities to the Old Lady. Threadneedle Street saw all the numbers, and was staffed by people who were at least as clever as those they regulated. They were able to detect problems first, and 'a quiet word' was all that was needed. External frauds were averted, while internal fast ones and funny business were stopped dead in their tracks. BCCI only happened because the BoE did not have a full picture of the bank's finances. <br /><br />Handing over banking regulation to the Keystone Gestapo of the FSA meant that the banks were overseen by inexperienced, under-educated, underpaid inadequates who only knew how to monitor building societies and pension funds. <br /><br />Vitally, banks were staffed by bankers, not by jumped-up accountants and marketeers like Fred Goodwin and Andy Hornby. They duly ran rings round the FSA, which was unable to rein in their absurdly vain global ambitions. It is significant that the bank which was run by bankers, dear old Lloyds, was only brought down when and Eric Daniels had a gun put to their heads by (yes) Gordon Brown, and effectively ordered to take over the disgraceful, irresponsible mess that was HBOS. It is a gross injustice that those two men are, in the popular imagination, bracketed alongside Fred the Shred. <br /><br />I trained as a stockbroker, not a banker, but I saw enough of the Old Lady in action to have been profoundly impressed by her. I can only hope that, in due course, a properly revisionist history of the crisis will put the majority of the blame where it belongs, firmly in the laps of Gordon Brown and his acolytes, and will vindicate Sir Mervyn King and his colleagues, who have been disgracefully traduced and misrepresented in a concerted campaign to whitewash the politicians.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-66145359676217649362013-03-31T23:28:32.970+01:002013-03-31T23:28:32.970+01:001) I was specifically talking about the Cypriot sc...1) I was specifically talking about the Cypriot scheme. The Cypriot PM made it very clear that meeting depositors' claims would bankrupt the state. Therefore the scheme is underfunded to the point of being useless. It is de facto an unfunded state liability. <br /><br />2) There is not much evidence for the "lax compliance" meme. It seems to be the Cypriot equivalent of "lazy Greeks" - popularly believed, and used by politicians to justify harsh treatment, but when you actually look into it the truth is rather different. See this link from Naked Capitalism (not usually known for defending corrupt banks): http://www.nakedcapitalism.com/2013/03/repeat-after-me-cyprus-is-was-not-a-tax-haven.html<br /><br />I seriously doubt if Malta is any cleaner than Cyprus, and my spies tell me that Latvia is now the haven of choice for the rouble zone. Cayman was a wild shot, I agree - maybe I should have said Luxembourg. Other tax havens, anyway. That's the point. <br /><br />3) We have no quantification. But as these two banks are a large proportion of Cyprus's banking sector, and Cyprus does have other industries and a reasonably well-off population, I would expect that a sizeable portion of the large deposits are not only legitimate but domestic. There is zero chance of them being "helped via other channels". On the contrary - they will go down with the ship. There are no lifeboats or even life jackets being offered.<br /><br />4) I am pointing out that the fallout from this decision is widespread, not limited to Cyprus or to Russia. It is up to individual governments what they choose to do to protect their own savers. Personally I think people need to learn that there is no such thing as a free lunch. But I'm interested in the economic consequences of this deal, which in my view go far beyond Cyprus.<br /><br />5) Yes, cash-rich SMEs do exist. But remember that this deal includes current accounts. It wouldn't have to be a very large business to have over 100,000 Euros in its current account from customer payments or in transit to suppliers or employees. Those people now won't be paid, and customers' money will have been lost.<br /><br />Clearly there will be new entrants into the banking sector. But that won't compensate these businesses, or their suppliers, or their employees, for their losses.<br /><br />6)Russian does not necessarily mean criminal. Really there is so much anti-Russian rhetoric going on it borders on racism. Legitimate Russian money has been seized: legitimate Russian businesses and households now will think twice before placing funds in Cyprus. So much for FDI. <br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-41169782895106845272013-03-31T15:00:47.425+01:002013-03-31T15:00:47.425+01:00Hi Frances,
While I am thinking that what is happ...Hi Frances,<br /><br />While I am thinking that what is happening in Cyprus is of the utter most disgust for its population, I am not surprise. Already during the runner up of the Euro inception, I could sense that “something wasn’t right and will ended up in tears”, my suspicions were later confirmed by an article in the years 2000 published by the Diplomatic Courier intituled the” Crash of the Euro”. Former President Václav Klaus express clearly my views in this interview http://www.youtube.com/watch?feature=player_embedded&v=MBay8O5Od7o&list=PLmvYvlekX2OeMc_63F7gXJFeNL-FwqE6xJustathoughtnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-43342242349157748802013-03-31T00:51:22.916+00:002013-03-31T00:51:22.916+00:00I don't disagree that ordinary Cypriots deserv...I don't disagree that ordinary Cypriots deserve some compassion, and help, but still some nitpicking:<br /><br />- deposit insurance being pay as you go: only true for some schemes and for large failures, some countries definitely keep the levies in ring fenced funds that are enough to cope with small failures (I assumed that was also the case for the FSCS, that is that they funded rescues the size of say Worldspread with levies rather the Treasury or BoE funding). This is important as it's one of the issues that slows down a full ECB-backed guarantee: how to unwind these funds without causing a loss of trust, and without penalising the virtuous institutions who contributed to them. This is a technicality, but a tricky one.<br /><br />- dirty money will have gone away: this assumes Cyprus did not have uniquely lax compliance standards within the eurozone. I don't know, but it's what reports seem to indicate. Let's go through your proposed alternatives: Malta seems cleaner with a local banking system which shouldn't get involved much with that stuff, and subsidiaries of big international institutions which should apply their (higher) home standards; Latvia, well given the historical tensions between the Baltics and their former masters, it sounds somewhat far fetched that Russians would trust people who hate them with their money; and Cayman, it serves a different need not being in the Eurozone. Also I suspect the same reason that explains the lack of wholesale peripheral bank run (ordinary people not digging macroeconomics) also applies to the typical dodgy Russian.<br /><br />- some large savers were good/honest people: no doubt there are some, but we're lacking a quantification of the phenomenon. Is it 1%, 10%, 50%, 75% of the uninsured deposits? The smaller the percentage, the more the haircut is fair, and the easier it is to help these people via other channels.<br /><br />- as for those "who thought that Cypriot banks offered a better deal on interest rates than their own banks", I can't believe you're defending these didn't deserve a haircut! People need to learn not to invest in too-good-to-be-true schemes and get burned on occasion if they do, for pedagogical reasons if nothing else. <br /><br />- cash-rich SMEs: do they exist? Most small businesses anywhere in the world tend to live on overdrafts rather than cash piles, I wonder if the extent of the damage here is as big as feared. More generally, if they're lucky some new operators (the smaller Cypriot, or Turkish banks?) may jump in and catch the opportunity opened because of the incumbents' withdrawal from SME banking.<br /><br />- that legit businesses who catered to Russians will fail is unfortunate but unavoidable. If someone runs a sweet store and most of their customers are burglars, you can't ask the government to support the burglary industry in perpetuity to avoid penalising the innocent sweet store owner. All you can do is help the store owner find a new job or a new clientèle.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-85268274287686415222013-03-30T21:41:28.311+00:002013-03-30T21:41:28.311+00:00You may have seen this commentary on the role Germ...You may have seen this commentary on the role Germany has played in this affair - curiously in Der Spiegel:<br /><br />http://www.spiegel.de/international/europe/the-cyprus-bailout-reveals-german-fears-of-tax-havens-a-891063.htmlJohn@MoneyPrinciplehttp://www.themoneyprinciple.co.uknoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-31964884358390623982013-03-30T19:52:51.772+00:002013-03-30T19:52:51.772+00:00It is more than simply a failure of compassion. It...It is more than simply a failure of compassion. It is ultimately self defeating. The IMF wanted a sustainable debt path. How does this achieve a sustainable debt path? Overnight liquid wealth has been reduced by 2/5 of GDP. The economic shock is unprecedented in peacetime. The service sector has been dealt a death blow. Further austerity will crush civil service pay and employment. the Cypriot middle class is decimated. The impact on GDP and tax revenue will render the IMF estimates of debt sustainability redundant by the end of this weekend. The 10 billion will not be enough and Cyprus will need a second rescue. where is the sustainable debt path? the troika action has sent Cyprus on an ineviatable if unwelcome euro exit.Anonymousnoreply@blogger.com