Hanging 20 bankers at the end of the street won't help, says Blair

[NicholasTeakozy]

Why not 30? Or 40?. Maybe not Tone, but it'll be a start.

Thing is Cote, your line that this is just about a few bad apples really doesn't cut it any more. It is clearly not just a couple of outliers. There are multiple systemic failures - the whole industry has lost its purpose and become a danger to the citizens and to the real economy. There needs to be root and branch reform, starting from first principles.

"There needs to be root and branch reform, starting from first principles."

what do you mean by this? specifics?

or just bland rhetoric?

Banking is already highly regulated!

Edam, I'd like to know how you propose to re-build the global banking system from 'first principles'. Maybe we could sort out world peace whilst you are at it.

Also, could you give examples of 'multiple systemic failures'? What do you understand by that term?

also - the purpose of a bank is to make money. banking has not lost its purpose.

After exciting everyone last week with his promise to 'do something' so the markets could move forward in a positive way, ECB chief Draghi underwhelmed today.

Last week he told the markets that he was going to do something positive, so everyone waited hopefully for the announcement today. But when it came down to it, we got more vague promises that he will do something 'in future'. Bad move.

It feels as if no one is in charge - or perhaps those in charge either don't know what to do, or are simply hoping that somehow things will improve with a few small tweaks here and there.

Edgar - the purpose of a bank is not to make money. Or at least, that may be their real purpose, but it's not their public utility, it's not what we bailed them out for, so they could make more bankers rich! The purpose of banks is supposed to be to enable those with spare capital to store it safely whilst enabling those who want to borrow money to invest in business etc to do so. Banking is supposed to be a useful intermediary, not a leech.

If banking's only purpose was to 'make money' we would not have bothered to bail them out and they would not have been too big to fail if they hadn't had all our money sunk in them...

the purpose of a bank is to make money. it may provide useful (or, for modern life, essential) services as a by-product.

the reason for the bail-out is not the raison d'etre of banking.

Rubbish. If they only existed to make money (and these days it's a moot point whether the rewards accrue to shareholders, as classic economics assumes, or senior employees) then we wouldn't have bailed them out.

Banks have an economic and social function as described by breadandbutterfly. That is why they were bailed out. Too late for them to protest now. In return for still existing, they need to focus on performing a useful function in society and in the economy. They need to support the real economy, not threaten it.

Edgar, that's silly. By that definition, the only purpose of any business that makes a profit is to make money. By that definition, there is no difference between the business of a shoe shop or an accountant or a theatre or a bank. Except there is. We can all see that shoe shops are useful because we can get shoes from them, accountants help us sort out our finances, theatres fill our cultural void ... and banks? well, what do banks do, other than store money safely in return for interest and lend it out again in return for more interest. (Plus some which call themselves banks, but are really casinos, gamble big time with other people's money. This has no social utility at all.)

When you say 'the purpose of a bank is to make money' what you really mean is that banks function, as all the private sector does, as part of the capitalist system, which - the clue is in the name - works by exchange of capital. But that's the underlying system, not the purpose. Capitalism is the reason we exchange money rather than barter sheep, say, but it's not the purpose of why we do things.

Edgar is right - businesses exist to make money. The shoe shop and the accountant may provide us with very different services but it is from the intrinsic 'selfishness'* of finding any way possible to make a living which makes the system work.

The point Edgar is, I think, trying to make, was eloquently made by Adam Smith nearly 250 years ago when he wrote "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

Whilst a bank provides a useful societal function to match people with money to lend with those who wish to borrow, long term profit, a.k.a. sustainability, is and should always be the motive.

* In this instance, I don't use the word selfishness as a pejorative term, think self-interest.

"By that definition, there is no difference between the business of a shoe shop or an accountant or a theatre or a bank"

Indeed. there is no difference - the purpose of any business is to make money. if not : see 'Charity'.
as mrjudgeypants says.

it isn't silly. you are confusing means and end I believe edam.

If that was the case, we'd be bailing out any business that failed to make a profit. But we don't. We let all the thousands of businesses whose services we deem non-essential go to the wall. But we rescued the bankers - not because they are more self-interested than other businesses (though that may be true), and certainly not because they were more successful at amassing money (or they would not have needed our help), but because they were seen as more essential ie useful to society as a whole.

If in fact they are not fulfilling their function for society as a whole, but just filling their own boots instead, then we might as well, if not string them up on lamposts as the thread title suggests, at the very least lock up the most criminal ones and stop bunging cash to all of them, and let them face market forces and see how well they can stand on their own two feet without taxpayer support.

You do realise, Edgar, that by your definition criminals and thieves are just good businessmen as they are succeeding in making money according to the supposedly iron law of everyone acting in their own self-interest alone?

MrJudgeyPants - liked your Adam Smith quote; thanks for that.

Nevertheless, profit and sustainability are not the same things. The banks do not pay huge bonuses in order to make them sustainable. They would be sustainable with much lower profits and salaries. The question is whether they are worth sustaining at all if they do not provide a social utility AND are not capable of earning enough to make themselves sustainable let alone make a profit, without trillions in taxpayer support.

It seems that those who are most in favour of unbridled capitalism in general and it being fine, indeed desirable that banks make and keep large profits in the good times, are the same ones who here argue unashamedly for the socialisation of the banks' losses in the bad times.

There is no inherent logic in that position.

Or to put it another way: Edgar, you said:

"the purpose of any business is to make money. if not : see 'Charity'. "

Given that all/nearly all the banks would have gone bust were it not for trillions in taxpayer support then by that definition are banks charities? And if they are, are they really our ideal charities of choice? Personally, I'd rather my 'charity' money (aka public sector tax £) was spent on things like making sick people better, providing support for disabled people or educating children, rather than buying another banker a new yacht.

I don't think I'm that unusual in this.

'I don't think I'm that unusual in this.'

Here are some articles by Sir Max Hastings, a former editor of the Daily Telegraph and the Evening Standard, that appeared in the paper of the people

www.dailymail.co.uk/news/article-2038147/Bankers-looters-suits-Weve-learnt-Lehmans-Brothers-crash.html

www.dailymail.co.uk/debate/article-1163623/MAX-HASTINGS-Seize-Porsches-throw-jail-Shameless-bankers-worse-Train-Robbers.html

As an aside, that paper is popular with the people, but possibly not with teh top bankers, as it tells it like it is.

"the purpose of a bank is not to make money. Or at least, that may be their real purpose, but it's not their public utility, it's not what we bailed them out for, so they could make more bankers rich!"

You people don't get anything, do you?

The purpose of a bank is to make money, just like the purpose of any company is to make money. They make this money for their shareholders, not their employees ("bankers"). Employees get whatever is in their contracts (fixed salary + performance bonus). Shareholders get the benefits of the profits (dividends + appreciation in share price).

Your state didn't bail out failing banks so their profits could henceforth be shared among people other thank their shareholders. Those banks we're bailed out to uphold the system and prevent a crisis of confidence.

If you don't even get such simple basics, you really should stick to banker hunting on Daily Fail forums.

"If they only existed to make money then we wouldn't have bailed them out"

That is a ridiculous statement. It is a good thing that "we" don't ask you before implementing financial & economic policy.

"
Given that all/nearly all the banks would have gone bust were it not for trillions in taxpayer support then by that definition are banks charities"

some banks (Hsbc for one) did not receive any money. and still turn a profit!
receiving public money (or being bought by the state) does not make something a charity.

charity = a not for profit organisation
business = a for-profit organisation.

i fail to see what is so hard to understand.

Er, HSBC...that would be the bank that made a profit by laundering Mexican drug money? So a great example of how banks SHOULD work...

Of course, in practice you'd have to be an utter fool not to understand that ALL the banks are receiving billions of pounds of taxpayer support, not only via direct bailouts but by the implicit guarantee that they will be backed up by sovereign states ir taxpayers. Hence they can get all of the reward but with none of the risk that should justify those rewards.

"
You do realise, Edgar, that by your definition criminals and thieves are just good businessmen as they are succeeding in making money according to the supposedly iron law of everyone acting in their own self-interest alone?"

criminal = someone who breaks the law.

i have placed no moral judgement on the purposes of businesses.

Cote D'Azur. Could you explain why my statement is "ridiculous"?

Stating it as such is hardly sufficient argument.

Thanks.

Edgar - you appear to see breaking the law as perfectly valid as long as it makes money. How do you prevent society breaking down in this lawless fantasy of yours?

Breadandbutterfly "If in fact they are not fulfilling their function for society as a whole... then we might as well... stop bunging cash to all of them, and let them face market forces and see how well they can stand on their own two feet without taxpayer support."

I've truncated what you wrote (hopefully sympathetically) because I think this is the absolute nub of the issue. I don't think we should have ever nationalised the banks any more than we should have nationalised British Leyland or the Lower Clyde Shipyards when they ran into difficulty. Unsustainable businesses are just that; unsustainable.

"Nevertheless, profit and sustainability are not the same things. The banks do not pay huge bonuses in order to make them sustainable. They would be sustainable with much lower profits and salaries."

The first duty of any business, whether it seems ethical or not, is its responsibility to maximise returns for its shareholders. Whilst the point you make is perfectly valid, I suspect that, like in Premiership football wages, what we've seen is an arms race where good executives, like good players, are deemed to be worth higher pay. In order to attract what are perceived to be the best staff, the company must pay ever inflating wages until we reach a situation where top executives? pay bears little relation to their actual worth.

"The question is whether they are worth sustaining at all if they do not provide a social utility AND are not capable of earning enough to make themselves sustainable let alone make a profit, without trillions in taxpayer support."

Perfect - agreed 100%.

"It seems that those who are most in favour of unbridled capitalism in general and it being fine, indeed desirable that banks make and keep large profits in the good times, are the same ones who here argue unashamedly for the socialisation of the banks' losses in the bad times."

Those people are idiots, not capitalists.

Finally, Claig, I love the way you can shoe horn an advert for the Daily Mail into every topic you post about. It must take a lot of skill, dedication and, perhaps hardest of all, actually reading the Daily Mail. I tip my hat in your general direction. Have a .