Lehman bankruptcy administration costs reach $1 billion mark

Regulators worldwide can be congratulated for contributing so generously to the fortunes of lawyers, accountants and assorted advisers who reap this windfall at the expense of savers and investors. A special thank you must be reserved for Hank Paulson was instrumental in orchestrating this signature disaster during the Credit Crunch.

Kafka alive and well in US Government

The absurd consequences of the obsession with fighting symptoms rather than causes and increasing the reach of government and civil servants at all costs is demonstrated by news (Wall Street Journal, 20 Nov 2010) that major US banks are intimidated enough to refuse to conduct business with a large number of foreign embassies in the USA. In countries such as the UK opening a bank account is a major burden for consumers and achieves no demonstrable benefit in terms of fighting crime or terrorism. The costs of complying with regulations that become more complicated by the day is immense, not only in direct costs related to the governmental enforcement agencies but also in terms of additional staffing in financial service firms.

Troubled Borrowers should not be treated too leniently

One of my favourite City Commentators, Anthony Hilton, writes in his Evening Standard column that it would be in EMI's interest that Terra Firma and Citigroup 'talk' to resolve their dispute. But all too often these negotiations are a win-win situation for the over-leveraged borrowers. Any concession by the lender is in effect a gift as the really logical situation would be a write-off of the equity and the transfer of ownership to the lenders. This would also be beneficial from a societal point of view as it would redistribute wealth in a more equitable way, preventing capitalism from becoming a one-way bet for the borrowers. 

From a business point of view, banks must look after their profits, this benefits not only their shareholders but also taxpayers as any capital cushion they build up will also reduce the amount of any future bailout that may be required.