Can we afford a banking sector?

[sw2borshch]

George Monbiot in the Groan today writes

"The government maintains that if its regulations are too stiff, British bankers will leave the country. It's true that they have been threatening to depart in droves, but the obvious answer is: "Sod off then." The government wrings its hands about the potential loss of revenue. But in the year before the crash the entire financial sector (of which the City of London is just a sub-station) generated only £12.4bn a year in corporation tax. According to the Office for National Statistics, the government's interventions in the financial markets have already added £141bn to public sector net debt. Its potential liability is £1.2 trillion. It would take, in other words, between 12 and 97 years for the government to recoup the money it has given to the banks, assuming that its failure to regulate doesn't result in another bail-out in a few years. The City of London is a net drain on public accounts."

Is this correct?

The full thing.

[Rogin the Armchair fan]

Can we afford a banking sector?

I'm amazed any of the major banks paid a fucking penny in corporation tax. No wonder they're all up shit creek, if their own bankers and lawyers are now unable to remember how to channel their profits via their own subsidiaries in Jersey or the Cayman Islands.

[Ginger Yellow]

Can we afford a banking sector?

The City of London is a net drain on public accounts."

Is this correct?

Yes and no. The numbers Monbiot gives don't really allow us to work it out. For instance, the net debt figure has been increased by government guarantees on bank debt. But that isn't technically money that was given to the banks, and there is a fee for it which more than covers the interest the government is paying on the additional debt. Likewise the capital injections and the Asset Protection Scheme provide current revenue.

I'm not certainly not saying the numbers do stack up in the banking sector's favour - there are far too many unknowns at this stage. I wouldn't be surprised if they didn't stack up over this cycle - we've had the mother of all bailouts and there are a lot of dodgy assets. But the picture is a bit more complicated.

[sw2borshch]

Can we afford a banking sector?

Rogin, I couldn't possibly comment.

And GY, as I suspected, but was hoping someone would throw more stuff at me! But, you're a busy man, I know.

I noticed in yesterday's Guardian a piece about how the banks were overvaluing their property portfolios so as to squeeze out more taxpayer brass. The rogues.

[Anton Gramscescu]

Can we afford a banking sector?

Monbiot-in-comparing-apples-and-oranges-and-concluding-capitalism-is-evil Shock!

[Ginger Yellow]

Can we afford a banking sector?

That Graun article is pretty much utter bollocks, as becomes apparent if you read beyond the first couple of paragraphs. Basically, the issue is that the Asset Protection Scheme still isn't formally in place, but when signed it will cover losses from the start of 2009. Naturally, that's when the loan valuations are from - if they weren't, it wouldn't cover the losses. And the (hefty) fee for the insurance was set based on the December 2008 valuations and the expectation that property values would fall further. Now there's an argument to be made that the loans were overvalued at that time, but a) the Guardian doesn't make that case at all, and b) the government's doing unprecedented due diligence on these loans from what I'm hearing (way more than in any other bailout in this crisis).

[caja-dglh]

Can we afford a banking sector?

George rather conveniently forgets about Income Tax for the several thousand earners he has decided should "sod off".

[sw2borshch]

Can we afford a banking sector?

So the moral of this story is that a little knowledge is a dangerous thing?

Wait until y'all see my next post on economics.

[caja-dglh]

Can we afford a banking sector?

His squinty-eyed shot at Gordon Brown is pretty off target as well, as he is in no way comparable to Greenspan. Yet now that Eddie George has died, I guess that target was a bit to fresh in the grave.

[sw2borshch]

Can we afford a banking sector?

Bugger the income tax. National Insurance Contributions are where it's at. Although probably not with these Higher Rate types.

[Ginger Yellow]

Can we afford a banking sector?

I've found the Guardian's reporting on the financial crisis to be pretty terrible, on the whole. There are some exceptions - Larry Elliott's commentaries have been pretty good, and the Barclays client tax dodging stuff was good too. But they've made very little effort to understand how complex instruments and markets like securitisation actually work (or don't work), which has led them down the garden path on quite a few occasions, and they've spread a lot of misinformation and confusion. To be fair, that's true of many mainstream papers (the Times in particular was awful at the start of the crisis), but it's been particularly noticeable at the Graun and they don't seem to have learned from their mistakes.

[sw2borshch]

Can we afford a banking sector?

I've probably learned more of what I think I know from on here, to be honest. There should be more running commentary.