This is so 18th Century just like most British politics - favoured contractors get a licence to rip off the taxpayer in return for employing politicians and their family.
It is the kind of behaviour previously associated with lower grade polities such as Russia, Philippines or Italy but is now common in Britain especially after the Arabs corrupted British Politics following the 1973 oil crisis and their cash boost
If you split the banks up, the devil will be in the detail. Suppose a split-off investment bank wants to borrow money. It can borrow this money from the retail banks. It can borrow their deposits, and if it wants to borrow more, it can get them to raise money in the markets. The investment bank could, of course, raise money in the markets itself--but that would be more expensive, because it wouldn't have a state guarantee.
Before you know it, you're back to where you started. One of the investment banks goes bang, and that means that retail banks will be unable to pay their depositors. At the same time, I do think this proposal is the right kind of idea. Somehow we have to stop the state guarantee going beyond retail deposits.
How about a rule that retail deposits rank above other debts, if a bank goes into administration? In many cases, that would remove the need for any public funds. A bust bank probably has enough cash to pay off its retail depositors, even if it doesn't have enough to pay all its debts. If the bank actually doesn't, the government can supply enough taxpayer funds to make up the difference. It isn't required to guarantee the bank's derivatives trading or anything else, because those debts rank lower.
I think this achieves the same thing as a retail/investment banking split, but without allowing banks to game the system, loading risk onto the retail side.
Well yes, the PFI is hardly privatization, is it? More like the Russian NEP plan.
A good post Wat, and a good counter to Guardian-reading types that whinge about 'privatisation' of public services hwne PFI and the like are nothing of the sort.
PFI (as operated by this government) is simply corporatism. Hayek warned about this - when the government decides on too much spending, then it is corporations that have the power to lobby government that get the money.
Of course, the reason why Brown and Blair favoured PFI (regardless of value for money) was that it's similar to hire purchase - get the product now, but pay more in the long term. It also, of course, conveniently wasn't counted as government debt.
NatEx hasn't walked away from the East Coast. Unfortunately Adonis muddied the water because he was first up when the trading statement came out and said that he was 'withdrawing the franchise' - wasn't true. By lunchtime, the new Chief Operating Officer of NatEx stood up and said they were not handing back the keys. Soon this settled down: NatEx is losing money on the East Coast, and, COO emphasised, "if nothing changes", will run up to its £72M contractual limit before the end of the year - and hand the keys back. NatEx is probably in bigger trouble than just the East Coast, for there is a report that it is trying to raise £400M. So what went wrong? Bowker'd, apparently.
But back to the main topic for an aside: how about the big city Local Authority that hands over to a contractor the duty to handle traffic management when said contractor is digging up the roads? When chaos ensues and one phones the LA, they don't know anything, are not watching the CCTV, "do not inspect all sites", but are very willing to send one a well crafted email that explains how competent they are (along with an excuse, of course). And they rarely get out to take a look. That phrase again "They should get out more" - trouble is, if we see them out and about, we tend to give them an earful.
For example, let's say Gove really does take us down the school voucher route. He dishes out the vouchers, and then he sits back. The privatised schools are now responsible directly to parents for providing good education, not the government. It's just like... well, it's just like the existing private school system.
No it is not. It makes the schools contractors to the government, moderated to some degree by parents. It requires the government to ensure that the vouchers are being spent properly, to mandate educational standards on voucher receivers and so on, in order to prevent somebody setting up a dame school and sharing the cashed vouchers with the parents, etc. It is the perfect excuse for government intervention. The Swedes do it, that ought to be warning enough.
If you privatise, you get rid of the state system altogether, and never hear from it again. You don't hand it money.
The one guarantee of vouchers is that the last vestiges of indepedence in education will vanish. Every shcool will be voucher funded, and every school will be controlled by inspectors, and homeschoolers will suffer similarly.
It's a disastrous idea. It's like people don't know what the private sector is any more. Handing out tax money as vouchers is not the private sector!
More on Nat Express and what has gone wrong. 9th July:
http://
business.timesonline.co.u...icle6667876.ece
"...a number of railway lawyers I spoke to were baffled by all the fuss about National Express’s decision on the East Coast line.
They pointed out that failure in some part of the railway market was inevitable — otherwise the market would not be working — and that the regulatory framework was efficiently kicking in to ensure that the service was maintained."
But as far back as May 3rd the same paper was reporting:
http://
business.timesonline.co.u...icle6210941.ece
[Selective quotes start]
Rail deal sparks £400m cash call
Dominic O’Connell
NATIONAL EXPRESS has struck an outline deal with the government to scrap its troubled east-coast train franchise, which should pave the way for a £400m rights issue and boardroom shake-up at the bus and rail group.
Removal of the uncertainty [about the east Coast franchise] should clear the way for a £400m fundraising by National Express. It has just over £1 billion in loans, with £484m to be refinanced by February.
A £400m rights issue is seen as the most likely option...
[End selected quotes]
So see the reason why that £400M is needed, and ask what the banks have told NatExpress about the chance of refinancing the £484M of borrowings with East Coast losing £40M p.a.
Commenting by HaloScan
