Are Banks on the way to become Utilities?

This weekend's reports that some major international banks may be interested in joining the bidding for Gatwick Airport here in the UK raises an interesting question: will the regulators allow banks to put their equity capital at risk in proprietary investments that are basically unrelated to their main business?
The lesson of the past 14 months should be that banks (and their cousins, in particular the major investment banks) have strayed too far from their raison d'etre which is intermediation in the credit or securities markets.
Instead, managements have pursued a strategy of gambling their capital on ever-rising asset values in a variety of asset classes - be it in property or 'private' equity.
If the banking and securities industry is to be put on a more stable footing it will be necessary to for both sectors to behave more utilities. If banking provides the basic 'plumbing' for a market economy the similarity between the banking and utility sector should be obvious.
26-Oct-08

Who calls the regulators to account?

'When the going gets tough, the tough in commerce, industry and particularly finance get going -- fast as their corporate jets will carry them to Washington, begging to be rescued' (Alan Abelson, Barron's, 20 Oct 2008) Lehman executives served with subpoenas - but when will the regulators be called to account?

Hank Paulson under fire

Paulson is an 'incompetent surgeon who continues to apply bandages to a haemophiliac' (Philip Manduca, ECU Group)

Double Standards of Regulators

'When the going gets tough, the tough in commerce, industry and particularly finance get going -- fast as their corporate jets will carry them to Washington, begging to be rescued' (Alan Abelson, Barron's, 20 Oct 2008). Lehman executives are served with subpoenas - but when will the regulators be called to account?

Employment Outlook Bleak

When even Goldman Sachs has to cut its workforce by 10 pct the prospects for firms that are less successful must be truly bleak

London Financial Centre

'The international competitiveness of Britain's banking industry is being destroyed' (Tim Congdon, The Times, 15 Oct 2008)

UK Banking competitiveness under threat

'The international competitiveness of Britain's banking industry is being destroyed' (Tim Congdon, The Times, 15 Oct 2008)

Lessons from the Credit Crunch

It is too early to fully understand how it could happen that the World's Financial System got close to a global meltdown during the past 12 months. Some blame greedy bankers, others lay the blame squarely at the foot of the (US) consumers. Institutional Investors also appear entangled as they allowed managements too much leeway and even egged them on to pursue ever-more risky expansion plans. However, we tend to think that regulators - and their paymasters the politicians - may have to take a large part of the blame.
Unfortunately they are the party that is the least likely to bear the full cost of their mistakes. Shareholders have to suffer from dramatically shrunken share prices, scores of bankers have lost their jobs, or are about to in the near future. Bureaucrats are happily engaged in the blame game and are joined by academics and media people who often are also less than objective in their judgement.

Impact of taking the King's Shilling

It is too early to assess the impact of the various bank rescue packages on the future structure of the banking and securities industry. The obvious inconsistencies, however, will put a serious spanner in the works for all those firms that will take the King's Shilling. While we are not condoning the excesses of the financial service industry we think that the way the regulators handled the developing crisis since the summer of 2007 was disgraceful and added fuel to the fire instead of containing it.

Inept Regulators

Every Age has his prophet, but 'Houdini' misses the key point: the Credit Crunch is a bush-fire where inept regulators allowed a bank-run to develop.