Coppola Comment

In my previous post I drew attention to the lax attitude to risk of the US investment banks and institutional investors arising from the tacit government backing of investment banking, which led to them taking ever greater financial risks in search of higher and higher returns.  There has been much discussion of the collapse of the "derivatives tower" which brought down Bear Sterns and Lehmann Brothers among others, and there has been major criticism of securities trading in general and mortgage-backed securities in particular.  I think this criticism is unjustified and distracts attention from the real issue, which is the worldwide failure of retail bank lending (more on this in my next post).  So in this post I aim to debunk securities and derivatives trading and show that the investment banks that were brought down through the collapse of the "derivatives tower" were not the cause of the financial crisis, as has been widely reported, but victims of it. Firs...

The Independent Commission on Banking  (ICB) is expected to produce its interim (well, final really except for the horse trading) report on 11th April 2011. The twittersphere, egged on by various newsblogs, is full of people attempting to pre-empt its findings by shouting for the banks to be broken up.  They seem to think that if the banks are broken up into smaller units it will ensure that no bank can ever be too big (or too important) to fail.  And in particular, they believe that if banks are forced to specialise in either retail (clearing) banking or investment banking, there will be no repeat of the financial crisis.  They are wrong. Let's consider the case of Bank A.  Bank A is a clearing bank.  Its business consists of transactional banking - current accounts, ATMS, cheque processing, automated payments.  It is big, because it needs economies of scale in order to provide streamlined processing, and it has thousands if...

This blog was sparked by my reading of Richard Murphy's proposals for radical reform of private pensions, Making Pensions Work .  I had to read it a few times to get my head round exactly what it was saying, but in the end it boiled down to the idea that the most effective provision for retirement is made by SPENDING money rather than SAVING it.  Most of the people who commented on his linked blog Making pensions work - don't duck the issues  missed this (or chose not to comment), but a few did. The last comment on the blog before it closed essentially said "Saving for retirement is a good thing. We should be encouraging people to do it." This statement runs absolutely contrary to Murphy's proposals - but it is what we are hearing all the time.   People should be saving money, not spending, shouldn't they? On the BBC's excellent Comic Relief programme the other day, a female slum-dweller was shown an expensive apartment block by the visiting journalist, ...

Well, that's an inflammatory title, isn't it? I'll probably get lots of abusive remarks, and lots of people won't even bother to read this post because of the title.  But I really feel that someone needs to set the record straight, because there is an AWFUL lot of rubbish being spouted about bankers' bonuses at the moment. The first thing to note is that banks pay bonuses to three different groups of people.  From the headlines you would think that only senior bank executives receive bonuses. But two other groups also receive bonus payments: - traders - ordinary bank staff. Let's look at the bonuses paid to these three different groups of people. 1.  Senior executives. These are the headline-grabbing figures. Bob Diamond (CEO of Barclays) awarded bonus of about £9m. Stephen Hester (RBS) paid a bonus of £2.04m. Eric Daniels, outgoing CEO of Lloyds, received £1.45m. Doesn't it make you see red? From the headlines you would think that these people...

This is my response to George Monbiot's poorly researched and inaccurate article about Short Selling in the Guardian on 15th February 2011. It is not surprising that Monbiot evidently understands nothing about short selling as a practice, and that he doesn't even seem to have understood the documents he references in his article, since in the detailed account he gives of his life on his blog nowhere is mentioned any study of banking, finance or financial markets. None the less his ill-informed writings are enormously influential, and that is why I feel obliged to write something to set the record straight, even if my ramblings are only seen by a few people. I'm aware that lots of people find financial terms difficult to understand, and I don't want to give anyone brainache.  So instead of talking about money and various types of financial transaction, I'm going to talk about makeup.  I sell it, you see.  I work for a company that sells makeup. I did a naked ...