Political divide -

[observer]

The latest timid suggestion from "Red Ed", to create more competition by creating two new Banks; seems to miss the point, just as it misses any resonance with public opinion. The problem with the Banks was their involvement in global investment speculation, distracting from their high street role; thus the answer is to separate the two functions. Most folk would support this, just as most folk support the nationalisation of the energy industry, the railways and water supplies; yet Millipede and Co are afraid to go there, in case the press label them "commies". So we have this disconnect between what most public opinion wants and what the politicians are prepared to deliver.

[inky pete]

It was their involvement in the historically very profitable global investment markets which enabled high street banks to offer free retail banking - and simply suck up all the costs of running and staffing branches and back offices.

 

While most people would support the idea of divorcing retail and investment banking, would they be equally happy to have to pay for the running of their branch through current and savings account charges????

[Bazj]

Even if he creates more high street banks; there is no guarantee that they won't be as corrupt as the big five we have now... only then there will be a big 7 corrupt banks who charge the earth for their services and still won't lend to small business because they have to have so many billions of spare cash as directed by the EU just in case there is another crash

[observer]

Think the problem was Inky, that the traffic was the other way: small investors and pension funds being gambled on the high risk investment arms.

[inky pete]

The fact remains that virtually nobody in this country has been charged a single penny for in-credit personal banking in the past couple of decades. Mortgage interest receipts of AT MOST 2 or 3% on lendings aren't going to go anywhere towards the cost of running a retail bank, and the EU have banned the practice of overdraft fees or interest being high enough to be used to cross subsidise accounts which stay in credit.

 

So, without the profits from the investment side, who should pay for retail banking?

[Robbo]

Britain's banks make more than £2bn a year from overdraft charges, with complex fees plus interest rates averaging nearly 20%.

[observer]

Think the simple idea, was to use the money from savers, to loan out to borrowers; both the banks and the savers earning interest on the deal?  Problems occurred, when "the masters of the Universe" in the City, decided to gamble on the global market and found themselves stuck with a load of toxic debt.

[inky pete]

Think the simple idea, was to use the money from savers, to loan out to borrowers; both the banks and the savers earning interest on the deal?  Problems occurred, when "the masters of the Universe" in the City, decided to gamble on the global market and found themselves stuck with a load of toxic debt.

 

But that means that you always have to pay your savers less than you can charge your borrowers. Quite a lot less, because the difference needs to be enough to pay all your staff, run your branches, run your computer systems and cash machines, etc. etc.

 

With mortgage interest rates as low as they are likely to stay for quite some time, the majority of borrowers opting for 2 and 3 year fixed rate deals - and competition ensuring that the first bank to raise it's rates substantially will simply lose all of it's borrowers - the rates paid to savers would actually have to go NEGATIVE pretty much permanently in order to balance the books.

 

The £2billion the banks charged in overdraft fees last year goes some way towards balancing, but only actually works out at £5000 towards the annual wages of each full time employee working in retail banking (there are about 400,000 full time equivalent jobs in the retail banks). So still quite a gap to bridge there.

 

Negative interest rates for savers. Charges for basic banking services. Higher charges on for retaillers for debit card transactions leading to higher prices for all. Much higher loan and mortgage interest rates. Take your pick, but it would likely be "all of the above".

[observer]

Sounds preferable to what we actually got, resulting in "the crash".  Perhaps savers could short circuit the process and spend their money in the local bookies?!

[inky pete]

Don't think you'd have much success selling the idea of paying a couple of hundred quid a year for a current account, or of 50p every time you use a debit card and £1 per direct debit or standing order, or of being charged an annual fee for holding on to your savings for you, to the average man in the street!

[observer]

Ink, I don't profess to be an expert, I'm merely taking the lead of the only politician to predict the "crash" (Vince Cable).; and Vince advises that High Street banking should be split from investment banking with a secure "firewall" between them.

[inky pete]

Cable is an idiot. He completely ignores the question when asked if we were to split the two - the historically very profitable investment side, and the historically loss making retail side - what would be the incentive for banks to retain their UK retail sides at all?

 

There are plenty of investment banks and other investment companies without any sort of retail arm, but there are NO retail banks without their own investment arm. There's a reason for that, retail banking costs more to run than it makes!

 

Without the profits from the investment banks the retail banks would have to pay their own way, and that means charging their customers MUCH more.

[observer]

Thanks to the "crash", caused by "casino" banking; we've all finished up paying "MUCH more".  More so, the thrifty and the frugal, as their savings are devalued by low interest rates and quantative easing; whilst feckless borrowers get their debt written off. Even worse; plans to re-privatise the banks; involve only the profitable bits, whilst leaving the tax-payer holding the "toxic" residue.  The "masters of the universe" in Canary Wharf, who caused this debacle, not only get away with it, but are still pulling obscene bonuses and the politicians are scared to touch them.

[inky pete]

Hate to burst your bubble, but the facts is that the bad bank in which the more "toxic" loans from Northern Rock were placed is well on course to return far more to the taxpayer than the taxpayer put in. That's due to the low interest rates over the past 5 or so years leading to fewer borrowers defaulting than the pessimistic projections predicted.

 

And with the gradual return to sustained profitability of the bailed-out Scottish banks (who said that the Scots were financially prudent!) it's an absolute certainty that the taxpayer will get back significantly more than they put in.

 

Low interest rates have also enabled prudent homeowners to pay off significant amounts of their own debts and mortgages and secure some very good deals for the years to come - I know I have.

 

OK, the pension fund and savings would have taken a fair old hit if I'd just left them sitting where they were, but by diversifying the investments across the growing economies of Japan, Asia Pacific, North America and a bit of a punt on the emerging markets - and by avoiding European investments like the plague - the pension fund is currently worth significantly more than was being projected 10 years ago and the savings have averaged a 7% annual return over the past 5. It's not rocket science, just taking responsibilty for my own assets.

 

Anyone who has lost out to any large extent has done so because they just sat back and let it happen to them.

[observer]

I bet you switch your energy suppliers too?!

[inky pete]

Of course I shop around for everything that costs me any significant amount of money, only an idiot wouldn't. Things like insurance, investments, savings, energy and mortgage are no different from physical products like food, clothes or furniture. Why wouldn't anyone shop around for them in exactly the same way?

 

Last energy switch saved me about £150 a year compared with staying put and took about 30 minutes. I'm not going to pass up the chance to earn £300 an hour now am I?

[observer]

Good for you Ink; but most folk don't.

[inky pete]

That's something I've simply never understood. People who plead poverty but then sit back and get overcharged left right and center on everything they buy - regardless of whether or not they actually need or can afford what they're buying.

 

Just stupid and lazy with an overdeveloped sense of entitlement if you ask me.

[observer]

Most are not born clutching a pocket calculator and a penchant for accountancy Ink.  The older generation grew up in a fairly simple world, where you paid the Gas Co for gas; Electricity Co for lecky; Water Co for water; Phone Co for your phone etc;  and they were all State owned monopolies; no gimmicks or scams or bulls$%t; simple and straight forward.. Come privatisation, again most stayed loyal to the same supplier, cos they really don't want the hassle of "shopping around" and changing with every spurious new offer that comes along, from a cartel. So, "lazy" - probably; "stupid" not necessarily, it's the world of privatisation that's crazy and brought on this paranoid need for a defensive posture against being ripped off, in a world of relative anarchy. Which takes us back to the original topic; the politicians remain wedded to this post-Thatcher political concensus; which is now distanced from the public one.

[inky pete]

What evidence do you have that energy, telecoms or utility prices would be any lower if they were still run by monolithic and inefficient state monopolies?

 

Would state monoplies have even been able to raise the capital to build mobile phone, 4G and fibre broadband networks in the first place?

[fugtifino]

Well, I don't suppose there is any really.

 

What's a pretty safe bet though is that any profits and any tax that's due on that profit would be paid into public coffers, not into some offshore account.

 

So in that sense it's a win win.

 

Dunno about phone networks, but state contributions to the nuclear industry have pretty much established it and kept it alive in this country - all to the benefit of private energy companies.

[observer]

Ink; State enterprises "raise capital" via taxation (preferably on the basis "from each according to their means").  As for charges; being under ultimate political control, cost would be a political issue thus subject to control through the ballot box. This would seem more honest than the current dog's breakfast, where the private sector can be feckless, relying on the tax-payer to bail them out when they get it wrong (EG the Banks).

[Rockcutting]

Wow, this is amazing! I had no inkling that people from Warrington could come up with the solution to the international banking crisis (and 3rd world debt?), and ,therefore I am very proud to call myself "A Warringtonian".

But there is something that I don't like about this thread and that is that it was started by "Observer" and it began with the words "Red Ed".

Do I detect that Warrington Forum is extremely right wing?

There is nothing Red about Ed.

Derick Hatton was Red and so was Arthur Scargill, but the Labour Party has moved on from that point in time (when Thatcher destroyed the whole of our once proud nation) and there are more important things to consider now.

Who would like to call him "Blue Dave" or "Yellow Nick"?

[Eagle]

Who would like to call him "Blue Dave" or "Yellow Nick"?

 

Why would you want to call Ed Miliband 'Blue Dave' or 'Yellow Nick'?

[observer]

Rock;  you need to adopt a sense of irony;  it was our "right wing" press that kicked off by calling him "Red Ed";  when in reality, like Labour leaders for the past 60 years, he's anything but.  Hence, the topic about the disconnect between politicians and public opinion; which demands some left wing solutions to some issues, and some right wing solutions to others; something the media elite describe as "populism".