Category Archives: Financial arcana

Feared by the banks, loved by the gullible

In explaining how he avoided falling into the common liberal trap of supporting the Iraq war, Dan Davies listed the maximGood ideas do not need lots of lies told about them in order to gain public acceptance“. The fact that all the main proponents of the Iraq war were lying like rugs about WMDs inherently casts doubt on the case for war, even if you believe that a war for regime change would have been justifiable in its own right.

I was reminded of this when looking at the website for the Robin Hood Tax campaign (the Robin Hood Tax is the new, nauseatingly cute, name for the Tobin Tax on financial transactions):

The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’. 

If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.

The Robin Hood Tax consists of a levy on:

financial assets such as stocks, bonds and foreign exchange, traded both physically and as derivatives (options, forwards, futures and swaps).

Hence, any money you change (whether for a holiday or for remittances) and any investments that your pension fund makes will, very obviously, be taxed under it. The tax will, definitely have a negative impact on ‘good’, non-casino-y transactions like people buying shares in companies to generate income for their retirement, or companies converting euros from their export sales into pounds.

This doesn’t, in and of itself, make the Robin Hood Tax a bad idea. That negative impact could well be outweighed by the benefits of the revenue raised and of dampening the speculative excesses of the global financial system (I’m sceptical of the latter: we all know with each successive crisis the speculative excesses of the GFS turn out to be concentrated in areas that aren’t regulated or taxed or indeed understood. But that’s for another day).

But the tax’s proponents are simply lying that the negative consequences for the real economy simply don’t exist, rather than acknowledging them and saying that the benefits are larger. And that definitely triggers my Iraq filter.

Obvious ‘Madoff with the money’ gag

Over at Bystander’s, some sanctimonious caants are talking a load of sanctimonious cant about one of the financial services community’s finer comedians, Bernie Madoff, and why he’s a Very Bad Man Indeed.

They pointed me to this document, which is absolutely superb – the self-pitying ramblings of people who, having grown used to receiving copious quantities of pretend money-for-nothing, now believe their lives are ruined because they have to live off their employee pensions.

My comment there was:

Some people who were super-rich are now rich; some people who were rich are now on the same level as everyone else. And all of them were *utterly, unimaginably stupid* to entrust their money to someone like Madoff. Their whiny sense of entitlement doesn’t exactly contribute to one’s sympathy for them, either. “Oh noes, I’m no longer a gazillionaire, instead I just have to live on my pension like every other bloody pensioner…”

For those who’re wondering ‘what happened to the money’, there never was any – he paid out the $60bn that he received as fake profits to his investors. In other words, he took $60bn from gullible shmucks, and paid it out mostly to the same gullible shmucks. That’s why ‘harmless redistribution’ above – the scheme’s only impact was to reward early investors at the expense of latecomers, like all Ponzi schemes.

…and if I were a US taxpayer, I’d be marching in the streets against the greedy morons getting a penny of my money in compo.

…and I stand by every word. I simply don’t understand tough sentencing for financial crimes, given that money simply doesn’t matter that much, and nearly everyone who loses out in a financial scam thoroughly deserves to do so.

We write letters

Just sent this letter to the Observer’s readers editor:

Re: ‘Light-touch’ reforms raise fears of new bank disaster

This article from Sunday 12 June has one of the most inaccurate sentences I’ve ever seen anywhere:

“Critics point out that it was a subsidiary of Northern Rock, Granite, that contained the liabilities that led to the collapse of the bank: Granite owned £49bn of mortgages that were sold by Northern Rock and moved offshore to the tax haven of Jersey.”

1) Granite wasn’t a subsidiary of Northern Rock, it was an umbrella term used to cover several different offshore organisations that were structured as charitable trusts and that specifically weren’t owned by NR.

2) Northern Rock didn’t have any liabilities through Granite – the whole point was that NR wasn’t liable for Granite’s debts. Rather, Granite’s bonds were secured against the mortgages that it bought from NR.

3) The collapse of the bank had absolutely nothing to do with Granite – it was because NR was reliant on short-term financing to cover the mortgages that it *hadn’t* sold to Granite, and this short-term financing dried up as the crunch began.

Perhaps Nick Mathiason should read the article I wrote on Granite last February before writing any more pieces that mention Northern Rock…


John Band

I’m genuinely not sure that I’ve seen a sentence that wrong-headed in a serious newspaper before, ever

Nobody who gets anything wrong should ever be allowed to do anything again

Let’s assume you’re an excellent journalist (yes, I know for most bloggers this would be a bit of a heroic assumption, but never mind). You spend 15 years working your way up through various jobs until you’re editor of a national title. You do the job very well.

Then the chairman of the large media company that owns your title offers you a job as head of finance. You take it on; you fail to spot the risks in the strategy your predecessor was running and so continue with it; the company gets run into the ground; and you’re rightly fired.

In a reasonable and sane world, should you:
a) apply for editor jobs, and be taken seriously as a candidate because you’ve a strong proven track record in editorial, and the fact that you messed up corporate finance isn’t at all relevant
b) never be allowed to work again, save perhaps as a cub reporter or a night sub?

The sane answer is a, right? So why the hell is there such a fuss about Andy Hornby, who was an extremely good manager at Asda and running HBOS’s retail division, but didn’t understand the systemic risk of reduced liquidity or the lack of controls in HBOS’s corporate banking department, being hired to run retailer Alliance Boots…? He’s a good candidate for the job.

(more generally, I don’t get the public’s general anger against bankers, politicians, etc. Yes, they messed up. You messed up. We all mess up. We’re people, it’s what we do. The bankers didn’t kill anyone, they just cost us a bit of money. It’s only money. Nobody in the UK will ever have to starve on the streets, so the money doesn’t really matter, beyond ‘it’d be nice to have a new car this year’. So stop being such pathetic childish bitter twats about it…)

Longer Fraser Nelson

What the ignorant paranoiac says:

The threat [of Terribly Bad Things if the Tories don’t abolish all public services, taxes, etc] is abstract, but needs to be made real.

What this means:

There isn’t actually a disastrous crisis that means we’ll need to abolish all public services, taxes, etc, but if we lie that there is one then we might get away with doing so anyway.


As far as I can make out with reference to the Grauniad/Barclays tax evasion dossier:

1) Barclays has done nothing illegal
2) Barclays hasn’t receieved any aid from the UK taxpayer.

…so this isn’t an issue.

Should Barclays request aid from the UK taxpayer at any point, its activities should, obviously, be taken into account when deciding how much of a haircut its shareholders deserve to be given. But at the moment, it’s trying to stop the UK taxpayer from making it take ‘aid’, which is kind-of the opposite…

Fraser Nelson: ignorance and paranoia, in one simple package


As part of our implementation of FSA guidelines around Anti-Money Laundering activities, we introduced questions on Politically Exposed Persons as part of our account opening procedures.

Genius financial columnist Nelson:

what on earth is a Politically Exposed Person?

The FSA anti-money-laundering guidelines, which have been in force for three years:

customers who, by virtue of their position in public life, are vulnerable to corruption

This isn’t earth-shattering stuff; any professional or financial services firm has to ask those questions of its clients, and RBS would be remiss for not doing so. Taking UK political party membership as an indication of PEP status was technically incorrect, but fair enough I reckon – if you’re a member of a UK political party, you’re either corrupt, stupid or massively over-optimistic…

Nelson then goes off into an insanely paranoid rant about banks asking people whether they occupy any political offices. Oh noes! A majority-government-owned institution is asking me whether I’m a political party member. The gulags surely do beckon…

If you’re worried about this, you’re a moron.