Elton you were wrong. In the last seven days sorry was the easiest word. Half a dozen finance bosses said ‘sorry’ about the banking crisis. Not that any of them really seemed to take the blame – still less offer to give back the money they earned causing it.
It was rather like the Captain of the Titanic apologising for the fact there was an iceberg but not saying sorry for sailing into it nor for telling the passengers that the ship was unsinkable. Though he – and the designer – did of course pay the ultimate price for their mistake.
I feel I should join in the apologies on behalf of us hacks. Because we played our part. Not only did we not see the terrible catastrophe coming – or if we did we could not quite believe it really was that bad and kept quiet in case we looked really silly. We also encouraged customers to join in the game of remortgaging, borrowing, switching, and taking the banks’ proffered shilling without realising it was in fact leased from someone else, who sold the income stream to a third party, who had themselves insured the risk that the lease would default and then borrowed money against the insurance policy which they then lent to us.
I have to apologise too for referring to the Financial Services Authority as “the City watchdog”. Even the FSA admits it failed in that task. This week it announced that what it needed to do its job better was loads more money. Its Business Plan for next year shows an increase in its total budget of 36.5% to £437.7 million. And who will pay this extra £117 million? We will of course through higher costs of financial products.
And talking of higher costs are we already seeing the effect of having just four High Street banks rather than five? When Lloyds TSB was encouraged to catch the falling HBOS the Government waived competition rules to allow the mega bank to be formed. This week the Bank of England tells us that savings accounts are paying on average 0.51% and cash ISAs 1.38%. Experts say it is too soon to blame lack of competition and the real cause is the plunging Bank Rate. But if that is true why is the margin growing between what we pay to borrow and what the banks pay us when we lend them our money? The same figures show mortgage rates at 4.67%. Over 12 months mortgage rates have fallen by 38%. But savings rates by 82%. It all smells of lack of competition to me.
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