Tobin Tax: Political Caste in Germany wants your blood!

Norbert Lammert is the current President of the German Lower House (Bundestag). Today a headline tells us that he is also 'supporting' the introduction of a financial transaction tax. While some might argue in favour of such a tax it is revealing that its supporters have mainly one common denominator: they are supporters of more state spending and indirectly in support of 'robbing Peter to pay Paul' (or pay themselves or their political clients). Particularly galling is the fact that people such as Lammert - who as far as we could find out has never held a proper job in the private sector - have the temerity to put more and more onerous taxes and 'charges' onto the shoulders of the powerless citizens. In the case of Germany one also has to say that the country has a long tradition of putting (too much) faith into regulations and top-down dirigism. Despite the economic and political success after 1945 one should not forget that this was just to compensate for the disastrous policies pursued in the decades before and as a consequence the net balance is not that encouraging. The irony is that Germans worked hard in order to deliver goods on credit to all their customers in the Eurozone who now can not repay the loans. So there is a huge bill coming due and the good standing of Germany in the credit markets is to a large extent only the reverse side of the fact that many other countries are in distress. So by necessity some markets must have low interest rates as they offer a refuge - but they are not of much higher quality. Putting another tax on business will not improve things for anyone - but it will guarantee that the German financial markets will become even more a backwater.
PS: Readers who want to support a fundamental change in political systems that allow professional politicians and lobbyist to run roughshod over the interests of citizens may want to support Dirdem - Campaign for Direct Democracy here and here

Who wants to submit to the degrading 'FSA approval process'?

News that Richard Moore, a very senior and experienced financial market executive that Lloyds TSB wants to hire as its global head of trading, 'has yet to receive FSA approval' before his appointment can be finalised illustrates the absurdity of recent regulatory 'innovations' in the UK.  It reminds very much of the old boy network that 'regulates' entry to British Universities where personal interviews are nothing but a smoke screen to weed out 'undesirable' applicants or favour those who appear 'politically correct. In a rational system of regulation one should assume that an executive with more than twenty years experience in senior and responsible roles should be more than suitable to take on a role such as head of trading at Lloyds TSB. If he has done something that contravened regulations or laws that would be a reason to prevent him from taking a senior appointment. But to give unaccountable bureaucrats - often with hardly any or much less practical business experience - the final say in an inquisitorial and secretive procedure will do nothing to help London its pre-eminent role as a global financial centre.

Hire and Fire backfired!

The disaster that is currently played out in many banks and brokerage firms stems from poor judgement and (irresponsible) people management. There was no reason to indulge in a renewed frenzy of hiring after the 2008-09 credit crunch and staff that now has to be fired was hired based on speculation that the business would follow. Unfortunately playing with people's lives carries very low penalties for those responsible higher up the hierarchies.

No more listing schools on job applications - British Deputy Prime Minister

Given the abysmal approval rating that the British Deputy Prime Minister already receives this 'proposal' confirms that the lunatic fringe is alive and well in the ruling establishment. Logically the only way to hire people would be not to discriminate at all and just pay everybody a salary from the sheer inexhaustible money spigot the Bank of England provides. No questions asked about previous experience, pay, age, skill, 'race', political views, - that is unless you are a right-wing 'extremist'. We do not support the BNP in any way but it is noteworthy that some of their supporters have been deemed to be politically not correct enough to be allowed into certain jobs here in the UK, so this might well be the thin end of the wedge.

MF Global - famous last words

"If there is a relevant risk, we will have a relevant measure and limits around that risk"
Thus spoke Michael Stockman, Chief Risk Officer of MF Global (Risk Magazine, April 2011)

Banks may lose Euro 1 Billion in Hungary

A Fiat Law imposed on banks in Hungary by the 'democratic' Orban regime could cost them nearly Euro 1 billion. This is due to the setting of an artificial exchange rate on foreign currency borrowings by Hungarians (mostly to finance mortgages at cheap Euro or Swiss Franc interest rates).
We have always scratched our heads when we read about the absurdly high prices that were paid for East European banking 'assets' before the credit crunch. The financial structure was also wrong - the subsidiaries in the individual countries should have been organised on a stand-alone basis so they could be cut loose in a worst-case scenario. Local funding would mean than devaluations would not be a problem for the parent company.

MF Global Trustees fighting over customer funds

This pathetic spat between the US and British trustees in charge of administering the MF Global bankruptcy demonstrates that even the seemingly simple procedure of segregating customer funds poses a tremendous challenge for management, auditors and regulators. If you take money from Uncle Bill, to make an example that even these 'experts' can understand, and put it into an account you open in the name of XXX favor Uncle Bill it should be obvious for anyone who the money belongs to. Otherwise it must be apparent that all parties involved pay not the blindest bit of interest to the protection of investors.

Big loss on copper trade at Barclays?

Reports of big trading losses at major investment banks seem to indicate that the human species - especially the one responsible for oversight in trading rooms - seems to be incapable (or unwilling?) to learn from experience. Time and again highly paid professionals make mistakes that only a novice investor should be making. Two of the golden rules of investment are not to over trade and not to throw good money after bad by adding to a losing position. We would think that several factors are at work when the inevitable big losses occur: (1) it is other people's money that is lost, (2) the so-called 'trader's option' means that the risk-reward balance is skewed in favour of the trader(s) and (indirectly) management who get paid large bonuses when the bet succeeds but at worst lose their jobs and (3) the bureaucratic structure of large (investment) banks that are (over) staffed by number crunchers and risk managers but sorely lack people with common sense.

Danger of unnecessary rebranding

We are not so sure if the decision of Unicredit to rebrand its motley collection of brands is such a good idea. It might be an idea that has its uses for the Italian market but name changes usually destroy Goodwill that has been built over many decades. Especially in the banking sector one should therefore be extremely careful - and above all not listen to the insinusations of 'underage' management consultants who have never been in the real world of business themselves. The same warning should be heeded with respect to 'image' and 'branding' consultants who will always suggest changes as they want to earn their fees that way. In Europe there is an extra dimension as names that are successful in one country/culture don't necessarily travel well. The result will usually be a synthetic name that means nothing to most clients. In the case of Unicredit there is an additional problem as it is not that clear if the collection of banks will stay together for that much longer.

UK: Regulatory Black Hole?

The amounts hidden from balance sheet in the shadow banking system are truly frightening and can only be described as a house of cards. That hardly any regulatory capital has to be set aside for derivative positions and guarantees borders on the severely negligent. It is simply no excuse for regulators and their overseers in politics that this field of finance has grown exponentially during the past 10-15 years and has clearly overtaken the capacity of the authorities to deal properly with this relatively new phenomenon. If is accolade for London as a leading global financial centre to be seen as the epicentre of the global re-hypothecation game that played a significant role in the downfall of several major financial service firms during the past few years.