Commission tackles too-big-to-fail banks

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The commission will also look at whether retail banking should be carried out by so-called narrow banks, only permitted to invest customers' deposits in the safest, most liquid assets, such as UK government bonds (the commission doesn't sound breathless with enthusiasm for this option, because of the damage it might do to the credit-creation process).

If the commission does not want to do damage to the current credit creation process, the whole exercise is pointlesss in my view.

RP 'But that's probably just another reason to make sure that in a competitive market, bankers know that they and their institutions - and not taxpayers - will suffer if they take crazy risks.'
------------------------------------------------------------------------
Robert, you are working too hard and have been reading too many of WotW's and JC's posts.

Banking is not known for taking crazy risks.

The derivatives thing took hold, remember, because it was a hedge against risk.

The actual banking 'crash' - Winter/Spring '09 - came about because investors (include individual traders, Sovereign wealth funds, wealthy individuals, hedge funds, investment managers for unit trusts, investment funds and pension funds, etc) did not wish to take a risk with Bank share values due to doubts about their bad debt positions and provisions. Either that, or they were deliberately selling down the Banks hoping to buy good assets cheap.

Nothing to do with Banks 'take crazy risks'.

Hey! Let's be careful out there, today.

#1 Yeah and GB could have done something about from 97-2010 but did not beacuse they were financing hi sdebt filled boom and bust.

We may have more HMG real estate like hospitial etc BUT we could not afford to build them and the future generations are going to pay big time for that.

We need a bit less "Credit Creation" and rather more hard work from UK PLC.

Setting up commissions or preaching to the financial community is unproductive. It's only through the BoE's counterfeit money and low interest rate policy that they are able to create ever more complex instruments, and continue to gamble with fake money. The banks are laundering the counterfeit money, and are charging a percentage for handling it, hence the big profits and big bonuses.

Good piece Robert. The only missing point is how did we get to this position seeing as we supposedly have a Competition Commission to prevent the scenario above? - I suppose it proves the point about how utterly useless banking sector regulation has been in the past (and probably will be in the future)
It is a real dilemma as forced action to break up the banks could damage the sector and therefore the general economy, on the other hand it is pretty clear than more competition is urgently needed.
In my business ( a small asset finance and leasing brokerage) we deal with the banks every day and the line they trot out about being ready to lend is utter rubbish - underwriting criteria has tightened to such a degree that most small businesses without a strong balance sheet or assets (i.e those that really need to borrow) are finding it impossible to get credit for vital business assets such as machinery and vans. It seems if you want to borrow £300M to "buy" a football club (gillette/glazer) the banks will fall over each other in the rush, but try getting £15K to buy a van and you probably will struggle - world's gone mad!

This comment was removed because the moderators found it broke the house rules. Explain.

If a bank (or any other business for that matter) is in the private sector it should not be supported by public funds should it fail. This means that government should ensure - through legislation and regulation - that any failure does not have a major systemic knock on effect, appropriate insurance/compensation structures are in place to cover such events (funded by the businesses in question), which in turn means limiting the size and activities and exposures of these banks and businesses.
We have seen in the recent crisis and subsequent 'boom' in banking (bought about by cheap money for banks - expensive money for customers) that neo-liberal global capitalism wants to privatise profits and socialise losses - well they cannot have it both ways....unless of course their buddies are in power, then of course all is fine and dandy

Too true the UK banks are less competitive. They act as a cartel. Borrow from BOE @ 0.5% and then lend to HMG @ 3%, mortgage lenders @ base plus 4%, overdrafts @ 20% and credit cards @ 25%. They then have the temerity to say that the profits made on these transactions should go into their renumeration pool and consequently award themselves obscene bonuses. The whole thing is a disgrace especially as it is the taxpayer who picks up the bill for government borrowings, the charges levied on individual customers and the charges made to business through higher prices. None of this "profit" should go in the form of bonuses until every penny of the bail out plus interest has been paid back to the taxpayer. Once this is done, we can then look into fairer pricing for bank loans, whatever form these may take. Competitive at the moment? Don't make me laugh.

"Another is to ensure that where a universal bank owns both a retail bank and an investment bank, formal "walls" are erected between the two, preventing any subsidisation of the investment operation by the retail bank, and making it unambiguous that the investment banking arm or subsidiary can go bust without harming the retail bank."

This would be my prefered option Bobby P. As an ACA, I can think of many ways round this right off the bat. Its a good thing that banks are able to invest as this creates wealth.

And it wasn't the banks that said they were too big to fail, it was the government. Banks are rightfully recognised for the social good they do.

It is very hard to avoid the conclusion that a more stable banking system requires a much larger pool of government gilts as capital. Interesting that the commission are already toying with the idea via the "narrow bank" proposal.

Of course more gilts means the government running a large deficit for a while to create them. I wonder when this truth will hit Osborne in the face?

9. At 09:06am on 24 Sep 2010, geofffromleeds wrote:
Too true the UK banks are less competitive. They act as a cartel. Borrow from BOE @ 0.5% and then lend to HMG @ 3%, mortgage lenders @ base plus 4%, overdrafts @ 20% and credit cards @ 25%.
=================
I suggest you should preface this with 'in some cases'.
For example our motgage is at base + 0.85, I know someone who has base + 0.19 and there are a few people at base minus one.

You asked the question.
"What does it mean that the three mega-bankers have quit?"

And a week later you've got the answer.

Their empires are being broken up and they are scurrying off to search for new pastures.

Retail Banks

We desperately need more competition in the retail sector it is quite a skill to manage consumer demands and make a profit and the banks have failed massively over the years, in fact with the exceptionally high and draconian charges for going into the red especially by accident many would have been better off keeping their cash under the bed and avoiding banks entirely!

Investment Banks

About 20 years ago Lloyds Of London Names got in a pickle with a merry go round of insurance which looked great until of course it collapsed with massive losses. In effect this has happened in the wider market this time a loan for a mortgage was repackaged and repackaged so that when the original deal defaulted it created an exponential failure. I believe we need a global agreement that an asset can only be 'resold' as a financial instrument or derivative 3 times. E.g. Lend the money on the asset or insure the asset x1 Repackage as a bond x 2 Sell options on the bond x3. And risk must be based on the original deal as well as the derivative as well as the asset must have a careful definition too.

There is no competition in banking (or most of financial services). The market does not operate. This is because the barriers to entry are near-nigh insurmountable.

However, banks must not become (or remain(!)) the preserves of convicted (and un-convicted) fraudsters and we need regulation.

So:

We need 40 banks not 4 on the high street. Perhaps by insisting on regional banks, rather than cluttering up every high street. Or perhaps by letting banks branches be the front office of several separate banks.

We need safe banks - 100% guarantee up to a million per depositor - financed not by the government but by compulsory insurance (and the banks must be prohibited from self insuring!)

We must completely expunge any idea that any bank is 'too big to fail' ever again.

But wait a second, isn't this all more regulation, and didn't you just write that excessively protective regulation was causal in the collapse - well yes, and no - it depends on the type of regulation.

Too big to fail means that the Nation (UK) cannot afford to bail them out - so we must gently suggest that the global banks leave London for some country that is prepared and has the resources to bail them out (if they resist, or even lobby against, being broken up).

We also vitally need the regulator to re-establish the price of money - no economy runs for very long with the total collapse in price with money priced at zero. The whole nature of financing business and trade requires that money has some positive price - if it hasn't, as now, the whole body of the national (and global) economy becomes only able to operate like this and what is more the National (and global) economy will still push for less expensive money. (This has been shown by the trap that the Japanese economy has descended and from which it is unable to extract itself.)

The idiots who regulated the World into this terrible position because of their completely wrong academic education (my readers will know to whom I am referring!) are still steering the global economic ship with their defective map and pushing us further and further onto the rocks.

Even today they are pre-announcing more QE - buffoons! We must reverse course and put up interest rates and start the de-leveraging of debt. It is going to happen as the result of government austerity measures and if we manage it then at least we are in control, unlike the Japanese!

We must also get our cost base to an internationally competitive level. We cannot simply accept that houses cost 12 times average earnings in London and it will take until 52 years of age to save for a deposit (if male - female 59). Put up interest rates by a factor of 10 NOW.

If the banks are uncopetetive, isn't time to lower the bariers and to allow new banks to be created ??? The main problem is that every politician speaks about competition between banks, but actually they do not want any new bank to be created:
https://thefinanser.co.uk/fsclub/2010/07/why-banks-have-no-competition.html

Too big to fail and now they are too important to compete! State ownership (in part at least) and state supervision is the only answer. However you can be sure that the issue will be fudged and why do they need a year.
The government dont need a commission to introduce banking standards for private individuals and commercial customers that end the tricks they get up to like not displaying current interest rates on accounts etc. Setting conditions for granting loans/mortgages/issuing credit cards is also important. It is not just the activities and structure of the banks that need looking at. The government abdicates responsibility for managing the economy by relying on the MPC to decide base interest rates. The volume and cost of credit should be a key policy matter - it is political and not some hands off technical issue but it is key to what the banks are able to get up to.

> the retail banking market in the UK is much less competitive
> than that of other developed economies.

How many times to I have to tell you all this? Do we have to go over it again and again? We've paid a fortune to this commission to find out what is as obvious as the nose on your face - our bankers are a bunch of gougers.

There is no need to trumpet this as though it's a great discovery - we all know this bunch of twisters caused the credit crunch and recession (thanks to Merv King) and now they have to pay us back.

It's time to quit all this hand-wringing and get busy with the neck-wringing. Only then can this be put behind us.

For me one of the issue about having retail and investment banking together is the culture that is encouraged within 'banking'. The retail bankers looked over at the traders in 'investment' banking and thought - we need these crazy salaries too so had to take on ever increasing risks to match the profits.

Jeremy Grantham (a very successful fund manager at GMO in the US) has written about this in some of his recent newsletters - hes someone who should be listened to as he was one of the few people who called time on the credit boom in 2007.
see link
https://www.nakedcapitalism.com/2007/05/jeremy-grantham-whole-worlds-bubble.html


Retail banks are a utility and a they are a natural monopoly - they should be run like other utilities such as rail, water or energy with employees getting lower salaries which reflects that fact that it is not rocket science to borrow money and then lend it on at a higher rate.

Wow - No.12 - so if I have bank base rate -1 that means a rate of -0.5% - so as an individual i would have no mortgage to pay and the motrgagor will be reducing my outstanding balance each month. Please tell me which "lender" this is or is doing that.............I doubt that they are doing this.

@ 3. At 08:48am on 24 Sep 2010, Up2snuff wrote:

> Banking is not known for taking crazy risks.

If only there were an angstrom of truth in that - but they were driven by greed, not sense.

They are well-known for paying gigantic bonuses to induce people to take crazy risks. Let's not spread any nonsense today - we have be serious if we want to stop this little game.

America has an awful lot of banks.
It also has a heck of a lot of bank failures.

We must follow the money and go higher up. It is the unified Central Bank System that is the problem, not tinkering about with X or Y number of banks.
I know that The Bank of England was nationalised after WW2 and for good reason, but the whole system is private and run for private profit of the few at the huge expense of the very many. The liberalisations carried out by Neo-Labour (on advice form bankers) effectively allowed the BoE to operate as a private organisation in that private system.

Fellow citizens, we must lift our eyes and see the true nature of this beast that enslaves us.
For this is not a crisis for them, this is just another tightening of the manacles for us.

Consider treating the too big to fail banks as a newly privatized monopoly
applying restictive regulation to the few large ones giving smaller or new banks a better chance of breaking the comfortable existence these large banks enjoy

I watched Question Time last night, I probably shouldn't have, as it never fails to make me angry. But what came across was a burning desire on behalf of the politicians and the public to blame the banks for everything that happened, with a side helping of blame for the previous government for not regulating them properly.

Of course the banks were a part of the problem.. but it seems to have been forgotten that for every lender there is a borrower. The public were running around spending on credit cards.. taking out 100% mortgages.. and feeling rich because they were dumb enough to think that their houses were going to appreciate by 10% a year forever and so they could keep borrowing against that and never have to settle the bill with hard cash.

now the banks are at fault again because they won't lend enough money.. house prices are falling because mortgage approvals are down.. the irony is breathtaking.

so, to the point, are the proposals to restructure banks really about making a better system, or are they just the next stage in the huge exercise where all the blame gets put on the heads of a few so that the public as a whole don't have accept that they made mistakes too.. and are still making the same mistakes today.

#12
I was thinking more about the Standard Variable Rate. I accept there are exceptions though, but I think that you get my drift?

By the same token the retail market is more competitive than Australia or Scandanavia, plus the stats you quote ignore on-line only services and corporate cash much of which is placed in money market funds. The problem therefore is what is meant by competition and for whom? retail only? mortgage? corporate? The new 'banks' don't want the expense of high street branches that are empty most of the day, either. Depos are also placed in building societies, insurance companies and the stock market. It is always intersting to read comments from people about monopoly practices and yet they tolerate a monopoly Royal Mail for example, which has been guilty of much more in the way of gouging.

A narrow bank that only invests customer deposit in government bonds will not make enough money to offer free current accounts or good deposit rates. Look at the rates of return on government bonds compared with the savings rate.

How much do banks indulge in casino behaviour? Perhaps, RP, there could be something publicised on this. If I remember an FT article correctly, this is minimal in the UK.

Banker bonuses are linked directly to profit they bring in or work on. The parameters were set by regulators and the bankers worked within it. If they knew more than regulators about risk, they cannot sit back and not take it because there will be others doing it. If others do so and you don't, pension funds and investment institutions, that look after the pension requirements for the man on the street, will sell your bank's stock and the capitalisation will go down, your bank will fail and you lose your job. The others do so because they hope to be out before a "Black Swan" event happens. In any case, you have gross, mediocrely intelligent and similarly talented DJs and presenters and footballers whose only contribution is how to kick a ball and help advertisers to convince people that they should buy over-priced T-shirts and unnecessary triple-bladed razors or indulge in fattening, cholesterol loaded crisps, who are being paid ridiculous salaries which are deemed "deserving". The imposition of the BBC license fee in paying some of these people does not allow us to walk away when we do not wish to use the so-called entertainment they provide.

Most importantly, and hopefully this is becoming clearer, is that the root cause of the banking crisis was the misunderstanding and mispricing of risk. Many had thought they had found the holy grail to send risk far away into the black holes at the edge of an expanding universe. PhDs in maths and physics used quantum-type models to predict credit events, forgetting that humans who use finance are not quantum particles. Black boxes were created where management were just unable becuase they did not have the knowledge to challenge and supervise these models or even understand the assumptions within the economics of financial transactions. Many had forgotten what happens when you put in a couploe Noel Lauerates (and that in economics and not quantum physics) into a black-box and turn the blender on (LTCM _Long Term Credit Management. They have no peer challenge and are unlikely to have the perspective to challenge their own work effectively at that time. Lee Merriweather discovered this but never learnt from it.

Finally, we have Mr.Vince Cable, whose PhD in Economics, seems to have left him. In addition to no longer understanding how the modern global economics systems work and the place of banks and other financial agents in promoting growth, he speaks about the Basel (especially Basel 2) international risk control framework, not being counter-cyclical. Is this not the job of governments and regulators to impose a higher capital holding requirement in good times, waiting for the bad? This is because the banks can't do it because they operte individually. Capital set aside like that is not earning efficiently and those banks who do not set aside make more profits and attract more investors and pension funds to their stock, increasing their share price and capitalisation. Why does the Secretary for Business does not understand this?

I often find I agree in general with John_from_Hendon but will still put my own tuppence worth in.

The second option in your article is the way I prefer.Seperating the investment and retail sides within banks.
I think this would work better as a set of standards for the banks to comply with if they want to, more like a British Standard and the customers can then suit themselves knowing whether their bank has a guarantee or not.

As others have pointed out we need far more competition, at least double the number of options at present.
Also we need better services, I for one expect interest on savings and not the ludicrous ammount being generally offered at the moment and move my account anytime I can get a better deal. I dont want gimmicks I want customer focused financial services.

reform

re-form
/riˈfɔrm/ Show Spelled[ree-fawrm]
–verb (used with object), verb (used without object)
to form again.

—Related forms
re-for·ma·tion, noun
re-former, noun
re·form

–noun
1.
the improvement or amendment of what is wrong, corrupt, unsatisfactory, etc.: social reform; spelling reform.
2.an instance of this.
3.the amendment of conduct, belief, etc.


This is no reform - this is a side·show
/ˈsaɪdˌʃoʊ/ Show Spelled[sahyd-shoh]
–noun
1.a minor show or exhibition in connection with a principal one, as at a circus.
2.any subordinate event or matter.

Do we have to wait for the second collapse before we take real action? - it seemed from question time last night that most people have now got the message - even if politicians remain in denial.

Is a commission the new word for QUANGO?

Considering they're getting rid of so many useful ones - it seems silly to replace them with ones which are tasked with finding answers we already know!

7. At 09:04am on 24 Sep 2010 Me!

Look mods just as Newton developed his laws of gravity, I have been developing my laws of too big to fail.

In a similar vein, the commission will tell us nothing we already know.

the banks need to be broken up. We've been banging on about that since Robert told us about Northern Rock.

So we have two laws:
Law 1 Banks should never be allowed to become so big they can not be allowed to fail. The law also applies to any global businesses like BP - pensions, remember.

Law 2
Commissions almost never reveal anything we didn't already know, ie we have no need to run a government commission to tell us how to avoid polio. It's a hand-wringing exercise, or kicking it in to the long grass. Polio, like gravity and global economies can't wait that long.


simples, really. And quite funny if you are not a mod or facing bankruptcy due to too big to fail.

20. At 09:43am on 24 Sep 2010, martin wrote:
Wow - No.12 - so if I have bank base rate -1 that means a rate of -0.5% - so as an individual i would have no mortgage to pay and the motrgagor will be reducing my outstanding balance each month. Please tell me which "lender" this is or is doing that.............I doubt that they are doing this.
===============
The "lender" (why the quotes; they handed over the money and will want it back) nis Cheltenham and Gloucester. I did say it was a few people; they had a special offer some years ago when today's base rate seemed incredible. They were disappointede to learn that they would not get a refund - they have to be satisfied with an interest-free loan, but of course they have to stay in the same house.

12. At 09:19am on 24 Sep 2010, AnotherEngineer wrote:

"I suggest you should preface this with 'in some cases'.
For example our motgage is at base + 0.85, I know someone who has base + 0.19 and there are a few people at base minus one."

I suggest you also clariffy that only those who took their mortgages before the credit crunch can be in such a position - and that anyone lucky enough to be on a negative interest rate never actually gets paid by the bank due to a clause in all mortgages

If you're going to start picking at everything - at least make sure you're accurate yourself to begin with. The number of people who are on BoE trackers taken before the crunch are a small proportion of all mortgage holders - and with the exception of those on lifetime tracker rates - this number is diminishing over time as deals end and like for like replacements are not being offered.

...oh and of course we don't need to point out that the 4% originally quoted is likely to be based on a 75% LTV - which is a quarter of the money paid down - any less and the market rate is likely to be much higher.

Your opinion of the mortgage market is tarnished by your own personal experience - the occurences of people you know with low rates is not reflective of the market as a whole (or those with the extra cash would be stimulating the 'recovery' by now)

@13 Ady

".... they are scurrying off to search for new pastures."

An imperfect analogy ... I would not compare bankers to herbivores - herbivores are prey! :-)

"22. At 09:45am on 24 Sep 2010, ady wrote:

America has an awful lot of banks.
It also has a heck of a lot of bank failures."

Do you mean like these?

https://en.wikipedia.org/wiki/2008%E2%80%932010_bank_failures_in_the_United_States

290 banks in less than 3 years - not bad for a country which technically exited recession in 2009.

I should point out that 'technically' I am heir to the throne of England (although an awful lot of people would have to die before I was made king) - which reflects the wonderful reassurance of salvation by a 'technicality'.

13. At 09:21am on 24 Sep 2010, ady wrote:

Rats + sinking ship?

#15. At 09:33am on 24 Sep 2010, John_from_Hendon wrote:

"We need 40 banks not 4 on the high street. Perhaps by insisting on regional banks, rather than cluttering up every high street. Or perhaps by letting banks branches be the front office of several separate banks."

Didn't work in Spain John. It isn't the diversity or numbers of banks or regulation its how they are financed and this will be by bigger banks or investors leading to exposure and inevitible risk, this is the way of the world.

While I applaud your stance and the "Correctness" of it all in adherence to historical models your course of action is political suicide for any government and they will not act accordingly, whether we like it or not interest rates will be negligible for some considerable time to come. Please bear in mind interest rates are relative and while other nations struggle and hold rates low increasing rates here would cripple industry, your short sharp shock treatment could be terminal.

I think that Robert Pestons 'bank bashing' is becoming very tiresome. I dont think its fair to compare our banking system with that of the USA where regional banks are much more prominent. Further more you dont do anything to improve confidence in the markets. The Banks are dammed if they do and dammed if they dont - why cant we let them get on with the job they have, and there is no hiding from the fact that the banking industry is the key piece in any economy, they play a big role because thats the way it has to be!!

10. At 09:10am on 24 Sep 2010, Lindsay_from_Hendon wrote:

"This would be my prefered option Bobby P. As an ACA, I can think of many ways round this right off the bat. Its a good thing that banks are able to invest as this creates wealth."

Well the obvious question is why aren't they getting on and creating wealth now then? I mean it's not like we're not desperate for it. Surely the banks wealth creation isn't wholly dependent on the activities of the Economy - I mean that might actually suggest that the activities created the wealth and not the banks!

"And it wasn't the banks that said they were too big to fail, it was the government. Banks are rightfully recognised for the social good they do."

Oh I don't remember it like that when the leaders of the biggest banks in the world trapesed into the Fed and the treasury with their cap in their hand begging for TARP or 'liquidity funding' - which history book are you reading - I'd like to give that one a miss.

...and can you name 1 thing a bank did that was socially useful - just one, I'm not fussy...

Rather than contemplating attempts to take down existing banks with their international status and preference for asset trading, why not create a new form of banking? There is a vacuum in UK banking at present which cherrypickers like Tesco and Virgin will occupy to no economic benefit. Why not create a new, exclusively domestic banking structure taking deposits,making transfers, providing loans, managing investment, providing stockbroking, supervising pension schemes etc, all regulated and at the local level. It would be a return to a successful past that financed the industrial revolution but would undermine the City of London hegemony of course.

...and still people ignore the fundamentals....

https://www.housepricecrash.co.uk/graphs-mortgage-approvals.php

This is the cause of your problems, the credit crunch continues - and no amount of capitalists chitter chatter is going to change this.

There will be falls in the UK housing market and it will drag down the Economy - this is because so much of the wealth in the UK has been derived from the property market in the last 20 years - earnings have been falling overall.

What they do with the banks is becoming less and less relevant - when the coallition job cuts force more people to lose their properties (which will increasingly be in negative equity) then those 'safe mortgage banks' will be the new problem.

The whole thing is totally unsustainable - and nothing will change that. There has to be either more stimulation (to put it off for a little longer) or the eventual collapse (postponed from 2008)

I mean you didn't really think it was all over yet did you? Gosh no, these things take years to get out of the system - I think there was a similar problem way back in 1929 or something...

@25 Deshnoodle

I too watched question time last night. It made me happy to see the public waking up to the frauds that have been put on their shoulders. I guess it comes down to perception.

I actually felt sorry for Cable. he will bring the coalition down, IMO. he looks like the party line is sticking in his throat.

What I saw on question time was a public who have to pay for the mistakes of the banks. the public took what was on offer as they were promised 'no more boom and bust' (broon) and that they could afford it. (banks)

Why should the public take responsibility for S.I.V.s, C.D.S.s, C,D,O.s, sub-prime lending, insider trading, industial levels of leverege, greed and rampant corruption.

the public elect the government to control the bankers and expect a modicum of control on an individual level from ALL human beings. That is what was lacking from both parties.

I doubt a lorry driver is qualified to know whether the loan he takes is going to have ballooning interest payments, or bring down the entire banking system.

The anger of the people is rightous, we're a bit slow to react, just wait till we feel safe. Then we'll start calling for justice proper.

There is plenty of cheap money available for banks to lend to the "real" economy but they choose not to. The bankers perceive that gambling money in the markets is more profitable to them than supporting real busineses and households. If we seperate retail and investment banking then the retail banks will have no choice but to support the real economy. Split them up NOW.

# 40. At 10:43am on 24 Sep 2010, writingsonthewall wrote:

"...and can you name 1 thing a bank did that was socially useful - just one, I'm not fussy..."

Put all the spivs, cheats, liars, conmen, gamblers and primordial sludge low life in one place (with one exception of course);)

#40 ...and can you name 1 thing a bank did that was socially useful - just one, I'm not fussy...
https://www.tamworthblog.co.uk/2010/05/25/bank-staff-take-leap-of-faith-for-charity/
Just one thing!

Another option is to institute an increasingly aggresive Tobin (transaction) tax on all trading. This can be used to get the Banksters to pay for their mess rather than the British public and blameless public sector workers. This would also be countercyclical and act to discourage useless speculative activities that are either socially useless or harmful (commodity trading that inflates food and oil prices).

Tax the evil mothers until they go away or behave.

At the peak of the crisis I was one of the few that was praying that the government would let the banks fail. By bailing the banks out they have made the false credit that was extended real and maintained the debt laden society.

However, given that I don't know how things would of turned out had we allowed them to fail then I'm not sure what I think any more. I do still feel like the government has acted against its peoples interests (maybe ignorance, maybe other reasons). For someone of my age (26) to be so disillusioned with the leading generation is very saddening. I understand that it is only a small proportion of people that can be blamed but it doesn't lessen the effects.

While humans are the most intelligent beings on earth at an individual level I think we have shown over and over again that we are collectively the most stupid.

I think you have all gone mad. Retail banking is lacking competition?

how many banks do you want to offer personal banking at the moment you have the following choices

Barclays
RBS Group (inc natWest)
Lloyds (including HBoS)
HSBC
Co-operative Bank
Santander (including Abbey)
NAB Group ( Clydesdale, Yorkshire bank)
Nationwide
Sainsbury's bank
Tesco's bank

and that is before I start on smaller building societies, foreign banks with a few branches (the Irish for example but there are a couple of Israeli banks who provide personal banking in London)

The mortgage lending market is even more diverse

So with at least 10 major players and a host of minor players the retail banking market seems more competitive than the football league.

Business banking, particularly for SMEs, is a different story. I suspect that there are parts of the country where (very similar to the story of supermarkets) there is not a lot of choice.

What a lot of people mis understand is that the fact that all the lenders are charging very similar rates for loans does not mean they are colluding, that result will happen in a very competitive market where no one supplier has a clear cost or technical advantage over the others.

Incidently why do you want lots of baks on the high street? Internet banking is the way forward and very safe - I can heartly recommend Smile, not the slickest website in the world, but it just works

#32 wrote

"So we have two laws:
Law 1 Banks should never be allowed to become so big they can not be allowed to fail. The law also applies to any global businesses like BP - pensions, remember.

Law 2
Commissions almost never reveal anything we didn't already know, ie we have no need to run a government commission to tell us how to avoid polio. It's a hand-wringing exercise, or kicking it in to the long grass. Polio, like gravity and global economies can't wait that long."

=============================

Agree with law 1. Law 2 is totally wrong though. Please go back to re-runs of "Yes, Minister"

Law 2: Commissions are not designed to achieved anything other than kick the problem into the long grass for long enough so that by the time they report, the politicians have found some other bone to chew on

Douglas Carswell (MP) has introduced legislation into the UK parliament with the hope, of altering banking so that it no longer represents a threat to the economy.
See link below:
https://www.positivemoney.org.uk/

As regards the current commission’s proposals to alter the ‘regulations’ concerning banks, I re-post my thoughts on ‘regulators’ and ‘regulations’.

The financial industry has been regulated in the past by the following:
The Bank of England
The Financial Services Authority
The Financial Ombudsman
The Treasury
The Basel ll Agreement
The European Union

Now that’s an awful lot of people doing an awful lot of regulating.
And let’s face it, it didn’t work did it.

The creation of money in corporate hands = Debt slavery for the majority.

And the plain truth is, if the state (which is us) does not control the creation of money, then the state (which is us) can only ever be at the mercy of those who do.

One of the problems is that the banking sector is effectively treading water waiting for the market to correct.

One thing that should have happened (but the government intervened) was that one of the Banks (RBS or HboS) should have been allowed to fail (or destructively restructured). Instead LTSB was duped into taking HBoS on making an even larger “too big to fail” bank.

I’m sure mortgages and lending have dried up because the banks know that an asset price crash has still to happen and don’t intend to get caught out.

The government/BoE know that the asset crash has still to come through, but have chosen to keep interest rates low to stave off or minimise the impact.

The last 18 months of low interest rates should have been a wake-up call for anyone who is over-exposed on borrowings (I’m especially thinking of those with BTL portfolios) to review their positions before interest rates head up and the asset price correction really kicks in.

@Up2snuff - 08.48am

"The actual banking 'crash' - Winter/Spring '09 - came about because investors (include individual traders, Sovereign wealth funds, wealthy individuals, hedge funds, investment managers for unit trusts, investment funds and pension funds, etc) did not wish to take a risk with Bank share values due to doubts about their bad debt positions and provisions."

"Nothing to do with Banks 'take crazy risks'."

Could explain how did the banks got into 'bad debt positions' if they didn't take 'crazy risks', were they just 'normal risks'?

Feel free to disagree but weren't the packages of 'subprime mortgages' partly to blame due to the fact that no-one could understand them enough to work out that they were inherently risky. In my humble opinion, this is an example of crazy risk taking.

3. At 08:48am on 24 Sep 2010, Up2snuff wrote:

"The derivatives thing took hold, remember, because it was a hedge against risk."

"The derivative things," were something bankers discovered could be used to create profits. Once they discovered that, any idea that priority for using them should still be weighted in favour of risk control was gone.

In Fact as we have discovered with Goldman Sach's novel use of these things, what they were actually used for was to create risk, not alleviate it! Just that Goldman's were making damned sure they weren't going to be the ones holding the risk when the proverbial bomb went off!

So to accuse bankers of taking crazy (Gambling) risks using these things, knows what they are talking about.

"The commission also says that it is unacceptable that certain giant banks are perceived to be too big to fail - because (no great shock to readers of this blog) that means individual bankers can take business risks to generate profits and bonuses knowing that, if all goes wrong, the taxpayer will pick up the tab."

It's not so much that they take such enhanced risks as that they are into taking them if they are not to lose ground to their competitors. The implicit "too big to fail" State guarantee is a competitive advantage available to all institutions to which it applies, and if a particular management decides not to exploit it, they'll soon be hoofed out and replaced with one who will.

It's absurd for governments to believe that their well-intentioned policies will only ever stimulate desirable outcomes. Do they not understand that an individual's ability to self-deceive means that he can do bad things even though he doesn't have a sociopath's insulation from guilt?

@44 payguy

The banks know what they are doing, using dodgy assets to borrow at the tiny b.of.e rates and plunging it straight into bonds. Lower yield than business but more secure. (We all hope) It's a merry go round and I'm no wizz-kid but isn't it just monetising the debt?

perhaps someone could enlighten me?

32. At 10:26am on 24 Sep 2010, copperDolomite wrote:

> Law 1 Banks should never be allowed to become so big
> they can not be allowed to fail. The law also applies to
> any global businesses like BP - pensions, remember.

We need to cut all the time wasting by these banks and other rubbishy organizations.

This is all going to exactly one place - size taxes. It’ll help promote a multitude of small, efficient, competitive businesses by taxing the bloated, greedy, destructive ones out of existence.

It's the only way to go - chop them all up and make them compete.

This comment was removed because the moderators found it broke the house rules. Explain.

43. At 10:52am on 24 Sep 2010, szjon wrote:

"I actually felt sorry for Cable. he will bring the coalition down, IMO. he looks like the party line is sticking in his throat."

I totally agree - Vince's performance last night was more appropriate for the TV game show 'argumental' than question time as he clearly had to defend something he doesn't believe in.

Vince is the last moral stand in the Liberal party - it was clear from the reaction from the floor that the rest of the Liberal party has clearly sold out in the public's eyes.

46. At 11:07am on 24 Sep 2010, Roger Knight wrote:

"#40 ...and can you name 1 thing a bank did that was socially useful - just one, I'm not fussy...
https://www.tamworthblog.co.uk/2010/05/25/bank-staff-take-leap-of-faith-for-charity/
Just one thing!"

I presume you noticed that these were bank employees and not the bank itself....or can you point to the part where Natwest 'made a donation.

Come on Roger - that was an easy one for you - you must be getting doddery n your old age - I suspect it's the shell shock from WWII - or maybe the speech recognition system is playing up again.

You forgot to mention that recent achievments by some clever new age Alchemists can now turn lead into gold!! Pulling your proverbial, and that probably applies to any rules meant to reign-in past financial practices.............

51. At 11:30am on 24 Sep 2010, Dempster wrote:
.........
Couldn't agree more. The monetary system has a fatal flaw, its loaned into existance and requires to expand perpetually to service the debt or it collapses, whilst at the same time eroding the value of the currency through inflation. Monetary reform is the only solution. Vested interests will prevent this commission achieving any real progress and therefore it will do nothing to save the financial system from collapse. I can only hope that from the chaos that ensues common sense will prevail and reform will come forward subsequently

45. At 11:04am on 24 Sep 2010, NorthSeaHalibut wrote:

"Put all the spivs, cheats, liars, conmen, gamblers and primordial sludge low life in one place (with one exception of course);)"

oh no exceptions please - for I shall enjoy my exile with the 'suited thieves' as I explain to them where it all went wrong (economic theory) over and over again for eternity.
I've had to listen to their baseless justification for 'profit' for the last 12 years or so - I should get my chance to make their lives hell.

Repeat after me bankers...

Capital (natural resources) + Labour = Product + profit.

Profit shared between Labour and Capital

So why does the capital return to the capitalist and not the originator of the capital (mother nature / God / the Earth)?

That's where it all goes wrong - economically and environmentally.

49. At 11:22am on 24 Sep 2010, Justin150

Is Tesco bank not a joint venture with RBS? From memmoty Sainsbury's was a joint venture with Lloyds.

How many of these are actually fully independent?

For those that are interested in actually responding to the commission the address details are.
feedback@bankingcommission.gsi.gov.uk. Alternatively, they can be posted to:
Issues Paper FeedbackIndependent Commission on BankingVictoria HouseSouthampton RowLondon WC1B 4AD

55. At 12:09pm on 24 Sep 2010, Simon Stephenson

Excellent analysis - it's all clarified in here....

https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall

58. At 12:20pm on 24 Sep 2010, szjon wrote:

"i will say this though. that speech recognition software must be amazing. the punctuation and italics you have managed to master at your age, not to mention quoting others, cutting and pasting etc Yesterday you managed 3 posts in three minutes. that is truly a remarkable achievement for any veteran of WW2."


...maybe Roger just got a little 'too into' playing Call of duty and now he thinks he's lived through it.
It can happen, I played Mario world for about 2 weeks solid and afterwards I thought I was italian and that all the mushrooms needed to be jumped on!

This is difficult to write after months of criticising banks. But, my experience of foreign retail banking is that, compared with what we have in the UK from Lloyds and HSBC, it's not very good.

The difference now is less than it was 30 years ago, but there still is a difference.

(That, of course, still doesn't justify a mega bonus.)

Robert,

Would you be able to find out what this commission is going to cost to run please?
I'd like to see how many of the 179 axed Quango's we could have saved instead of having this one pointless guff festival charade.

Lets hope it's not too expensive - I mean it's all about value for money these days. I mean if they conclude that breaking up the banks is a good idea then there are many people on this blog who have already done that analysis for free!

Do we all get a cut if the comission agrees with us?

Maybe HBOS/RBS should have been allowed to go bust but I am not sure we would be in any healthier state. Whats done is done now and to split Lloyds Banking Group up again when they have already committed billions to an enforced retail integration does not smack me as being a good cost saving for the tax payer.
It easy to speak against the unacceptable face of capitalism, something that is right, fun, cheap, popular and easy to do. No wonder even Cameron is doing it aplomb although Vince Cable and the Lib Dems make good earpiece and sideshow doing it.

I just see more jobs going down the pan, we have more than two million unemployed in this country. This is our hidden economic crises, not the real toll of the financial storms. Things are stable now. This is just a distraction when we have families struggling, mortgages going unpaid, job centres full.

Oh dear, now the capitalists are arguing about the technicalities of a recession.

https://uk.finance.yahoo.com/news/warren-buffett-we-re-still-in-a-recession-reuters_molt-c23c5895e9ac.html?x=0

So is the US in one, or out of one - and if Warren is right - then surely it's a depression as it's been going on for 2 years!

Never mind, I'm sure the banks will 'create wealth' soon - I mean they haven't done it for 2 years now - surely they must be itching to get going again.......or maybe they can't because they don't actually create wealth.

It's all in the actions people - not the words - the actions.

51. At 11:30am on 24 Sep 2010, Dempster wrote:
Now that’s an awful lot of people doing an awful lot of regulating.

They couldn't regulate a poop scoop !

#56..These are people who work for banks, where their employer has allowed them to take time off work to raise funds for charity. I'd put that down as socially worthwhile. I have no reason to promote RBS / Natwest here, as a company they made some horrendous decisions.
However, the question was name 1 thing that the bank did that was socially useful. The 7,000 hours community working (see [Unsuitable/Broken URL removed by Moderator] ) is more than one thing.
Voice recognition is great. You can shout COMMA, or APOSTHROPHE and it punctuates, you really should try it. Using this with my own defined macros makes blogging quick and simple.
Thank you for your compliments.

On the matter of competition RBS is instructed to sell off large numbers of branches (318 ish) due ti it being in receipt of taxpayer assistance. Fine - but who does it sell them to without any murmer - Santander - not a direct recipient of taxpayer assistance but did mop up Bradford & Bingley and Alliance & Leicester as part of the general fall-out.

How exactly does this deal do anything for competition ?

Why doesn't the government set up a national state owned bank that lends at 3%.
We all get cheap loans, The state makes a profit and Barclays and co can go to hell in a hand cart!

post 58 removed now, can someone please tell me what is going on? Mods, please. I appealed one and have had no reply. What am I doing wrong?

crack....crack...splinter....

https://www.bbc.co.uk/news/business-11404369

I thought this problem was 'fixed' with the ECB bond buying - did they just paper over the cracks?

Note how they hardly mention Greece - that's because it's now widely accepted that a default is on the cards.

Irish CDS's have risen by 114 points in a month - now who says that harsh austerity cuts are the way to appease the bond markets?
[Unsuitable/Broken URL removed by Moderator]

....oh yes, it's those 'highly accurate' ratings agencies - you know, the ones who rated dumped rubbish as 'investment grade'...

https://www.guardian.co.uk/business/2010/aug/11/rating-agencies-george-osborne-budget

So when it all goes wrong, can we line up otside S&P and demand our services back?

#58 - I managed to read your comment before it was removed, I see no reason why it should have been removed, shame really as I'm enjoying our little debate.

Having worked in banking (retail, investment, mortgages) I would like to confirm banks are grossly inefficient, massively monopolistic, and crudely exploitative of their captive customer bases. They are mostly very badly organised, overstaffed, overpaid, with poor use of technology.

Almost all banking is very basic and the guff about rocket science is just a smoke screen to cream off large chunks of money from clients and have ego stroking salaries/benefits. All there is to be known that is actually clearly true about the most complicated alphabet derivative could be taught in three weeks. So a car mechanic has a more complicated job.

The banking sector should probably have all the conmen thrown out the country, as they are fraudulent or negligent criminals, and be broken up into as many pieces as possible.

Small focused financial companies, where the board understands every product and is not obsessed with (or allowed) exploitative pricing (generally known as cross selling or market pricing [in an illiquid market]), would create a sector that the British could go back to running properly. A more balanced approach to risk, reward, and responsibility would warrant lighter hand regulation, improve competitiveness and innovation, and reduce systematic risk.

34. At 10:31am on 24 Sep 2010, writingsonthewall wrote:
12. At 09:19am on 24 Sep 2010, AnotherEngineer wrote:

"I suggest you should preface this with 'in some cases'.
For example our motgage is at base + 0.85, I know someone who has base + 0.19 and there are a few people at base minus one."

I suggest you also clariffy that only those who took their mortgages before the credit crunch can be in such a position - and that anyone lucky enough to be on a negative interest rate never actually gets paid by the bank due to a clause in all mortgages

If you're going to start picking at everything - at least make sure you're accurate yourself to begin with. The number of people who are on BoE trackers taken before the crunch are a small proportion of all mortgage holders - and with the exception of those on lifetime tracker rates - this number is diminishing over time as deals end and like for like replacements are not being offered.

...oh and of course we don't need to point out that the 4% originally quoted is likely to be based on a 75% LTV - which is a quarter of the money paid down - any less and the market rate is likely to be much higher.

Your opinion of the mortgage market is tarnished by your own personal experience - the occurences of people you know with low rates is not reflective of the market as a whole (or those with the extra cash would be stimulating the 'recovery' by now)
==============================
see also #20
in future I will fully qualify everything I say and make clear when I am expressing an opinion rather than stating a fact.
Will you do the same?
Will all the other posters on this board.

#60, You've still not answered my questions on #117 on https://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/09/why_rbs_looks_set_to_own_liver.html

A good game for stress relief.

https://www.mousebreaker.com/games/spankthebanker

60. At 12:38pm on 24 Sep 2010, writingsonthewall wrote:

"I presume you noticed that these were bank employees and not the bank itself....or can you point to the part where Natwest 'made a donation."

Natwest offer an employee donation matching scheme (referred to here): [Unsuitable/Broken URL removed by Moderator]

If you brought more balance to your posts then they could be taken more seriously.

@35. At 10:33am on 24 Sep 2010, Sasha Clarkson wrote:
@13 Ady
".... they are scurrying off to search for new pastures."
"An imperfect analogy ... I would not compare bankers to herbivores - herbivores are prey! :-)"
Non-humanoid herbivores also strike a reasonable balance with their environment.

#64 Sainsbury's is a 50/50 JV venture with Lloyds but Tescos is supposedly wholly independent. My understanding of the Sainsbury's bank is that Lloyds provides the back office only but I could be wrong on that

Very roughly there are 150 different "banks" regulated in the UK although there are a few more more are regulated offshore but allowed to operate here. Of these there are about 50-60 different owners.

Admittedly a lot of these 150 institutions I have never heard of because they are smallish building societies.

Basically there are a lot of banks if you are prepared to look but most people do not hence the top 6 control 88% of personal bank accounts

75. At 1:15pm on 24 Sep 2010, Governmentdept4propergander wrote:
Why doesn't the government set up a national state owned bank that lends at 3%.
We all get cheap loans, The state makes a profit and Barclays and co can go to hell in a hand cart!

Spot on. No-one seems to like that idea though.
I favour converting Lloyds and RBS into State banks

Who regulates this then? An ex banker?

And is this a case of shutting the stable door? And here was I thinking we the tax payer had control of some of the banking system and would be paid a profit on the investment........ does anyone know where the money has gone to? What actually has the tax pounds brought now that supposedly the whole country has to pay through the nose for years?
Will suddenly, just before the election, a tax cut will arrive? Cynical? Me??


Oh Yes!

##38. NorthSeaHalibut wrote:

#15. At 09:33am on 24 Sep 2010, John_from_Hendon wrote:

"While I applaud your stance and the "Correctness" of it all in adherence to historical models your course of action is political suicide for any government and they will not act accordingly, whether we like it or not interest rates will be negligible for some considerable time to come. Please bear in mind interest rates are relative and while other nations struggle and hold rates low increasing rates here would cripple industry, your short sharp shock treatment could be terminal."

I am well aware of this conundrum. This is why I advocated that we needed a National Government back in 2008 to be able to do the 'right thing'. This is also underlying Mervyn King's statement that the winner of the next election will be out of power thereafter for a generation.

Presently we are witnessing the start of a slow strangulation of business which will without doubt cripple British industry for several generations (say 30 + years) in what you see as the probably outcome occurs. To avoid this and to correct the fundamental imbalance in the economy cause by the excessive lending over the last decade that this situation needs to be corrected rapidly. This is fundamentally a philosophical stance on my part that is based upon the necessity of fixing the problem and the need to do it swiftly as this will minimise the pain as it will be short and sharp. We must at all cost avoid being like the Japanese - they have just had a lost decade and we must at all costs avoid such a malaise - for one we are in fact starting at an even worse point in terms of debt and require an even greater correction than they did (and still do!) and secondly their lost decade took place when the World's economy was still booming so lessening the pain they felt whereas ours has to take place when the rest of the World is also collapsing under excess debt. To my mind the economy that gets rid of its excess debt quickest will recover quicker and be better able to compete. So we must raise interest rates now before the Americans!

Is this a joke? Is government (who marched Lloyds down the aisle to marry them up with HBoS in order to deliver this market dominance and hang the competition implications) really going to turn round to the bankers and say "I'm sorry its time for a divorce-you're just too big."

Oh yeh- I know. Gordon Brown didn't know what he was doing. Tell me something new.

#66

There's no logical way to derive prices from labour values. There's no need to try and there hasn't been for at least over 30 years.

I have been using UK retail banking services for about 40 years. During that time I have taken advantage of the full range of accounts & access points - cheques, direct debits, standing orders, ATMs, internet banking, telephone banking, branches etc. In all those years I have never paid a penny for any of these services. In terms of my spare cash (when I have had some), it goes into the highest yielding savings accounts I can find (often not with my own bank), without taking undue risk. My bank also pays value to me on day three of the clearing cycle.
I believe the genuinely free banking that I enjoy (for that is what it is) is unusual in developed countries. Most western nations charge for pretty much every service provided.
In terms of other 'utility services', last time I looked, I pay out thousands of pounds a year for gas, electricity, water telephone etc.
I would be interested in peoples' view on how increased competition in UK retail banking will help me. If the answer is that I will pay bank charges in future, this looks to me like a backward step.

"Simple banks" won't work; they're just as dependant on credit as the rest. It was the lack of credit that caused the crisis, for all the banks.
Regulation is missing the point. What drives bank staff to use other's money to take risks?
BONUSES
Control bonuses and you diminish the risk.
Then you can introduce real competition.

Well, that's one of the most sensible things to come out of this so far: the idea of a wall - possibly a firewall - between the retail section and the investment section of a big multi-function bank. Now the financial 'cushion' of the investment bit should be hiked up to 12%, the retail half staying at the Basel III rate of 7%.
Regards, etc.

73. At 1:09pm on 24 Sep 2010, Roger Knight wrote:

I've got a better idea Roger, why don't you just tell us all you are actually Bob Diamond and that you personally instructed Barclays to donate a fiver to the local tombola stall last saturday at the church fete.

I mean we can't possibly establish that and it will allow you to win the argument hands down and 'prove' that banks do socially useful activities.

I mean why let the truth get in the way of your failed attempts to prove me wrong - it's so time consuming and it's better that we all simply believe you because you're clearly the better man. I mean surely everyone can see that - can't they?

#77 WOTW:

The credit rating agencies give/gave opinions. Which should be taken with a pinch of salt proportional to the size of fees they receive from banks involved. But at least they are opinions.

You on the other hand never express opinions. Only facts. Maybe you should set up a business as a rating agency? Given that you will definitely 100% be right about everything, you'll soon get noticed. Once you're noticed you can widen your audience etc. Eventually you can be in a position of influence sufficient to effect change directly. Thus saving humankind from avoidable misery.

78. At 1:18pm on 24 Sep 2010, Roger Knight wrote:

"#58 - I managed to read your comment before it was removed, I see no reason why it should have been removed, shame really as I'm enjoying our little debate."

It's not really a debate when one side is simply making it up as they go along is it?

76. At 1:15pm on 24 Sep 2010, szjon wrote:
'post 58 removed now, can someone please tell me what is going on? Mods, please. I appealed one and have had no reply. What am I doing wrong?'

You're probably saying something someone doesn't like. I think one of mine got removed because I mentioned a certain MP's expenses. If the person reads your post and doesn't like it, they presumably complain and it gets removed.

The question is one of why do banks fail. Recently, because of a scam and financial plan that a 12 year old would see wouldn't work. Too big to fail is usually because there are not enough reserves to cover investments. Seems like the solution is the debt to reserve ratio. Banks, those great protectors of proponents of private sector independence, rely heavily on public dollars to balance their spreadsheets and make profits. The past two years have been about the banking control of the political process more than about banking or banking regulation. Very seldom does the governments do what is right when dealing with the banks. The disadvantage of the people is the usual result.

71. At 1:06pm on 24 Sep 2010, writingsonthewall wrote:
'Oh dear, now the capitalists are arguing about the technicalities of a recession'

I am a self employed average working Joe, and have my own little business, so the question is, do you consider me a 'Capitalist'?

And it's not a trick question, I'm just curious.

80. At 1:21pm on 24 Sep 2010, AnotherEngineer wrote:

"in future I will fully qualify everything I say and make clear when I am expressing an opinion rather than stating a fact.
Will you do the same?
Will all the other posters on this board."

Probably not - but then they aren't trying to undermine the essence of what is being said by picking at specific anomolies to try and undermine the overall point.

The original point was that banks are fleecing us (or words to that effect) - which you tried to qualify as 'well not all of us' - but failed to point out that the 'not all of us' was in fact a small minority - and clearly not relevant to the point.

I mean if this section of people had any size to it then it would be leading us out of recovery.

If I were you I'd pick holes in what Robert says and not the bloggers (unless it's wildly misleading) as he gets paid for it and the poor blogger is merely doing it for free.