How the Public Pay
September 28th, 2008 . by DonborrowIn the face of the second nationalisation of a UK financial institution in recent times it seems that the motivation for corporate directors to be prudent with their customer’s money has all but been abandoned.
In order to avert a tremendous public outcry from the millions who would lose their savings, pensions and investments, the UK Government will, to a lesser outcry, bankroll failed Bradford and Bingley.
The tax paying public ultimately pay twice when the nationalisation option is used; first their money is injected in the organisation in staggering amounts to improve its liquidity. Secondly, if and when Bradford and Bingley manage to become profitable again and begin to look like an attractive investment, the public again will be asked to buy its shares.
The really scandal here is not the money, after all when talking in billions the figures become abstract and that most people can not comprehend. The truly dark moment in this whole scandalous affair will be the lack to accountability the directors are forced to bear.
It is unlikely that they will be shortlisted for the next position on the Bank of England monetary committee but they will none the less be charged in any criminal or civil court.
We do hear of stories occasionally of court proceedings for litter bugs, none payment of parking fines and so on, but no high profile company director gas ever (to my knowledge) spent time behind bars for negligent mismanagement of a prominent financial institution.
Corporate Governance will hardly get a mention in the news headlines as the collapse of Bradford and Bingley is sensationalised and the Labour Government are charged with re-enacting the failed economy policies of the 60s.
I will probably be the only one to say it, but thank you labour for saving the thousands of customers who needed your assistance after someone else messed up.
As a former director of a large financial institution I have to disagree with the notion that negligence had to exist in order for the Bradford and Bingley to collapse.
Perhaps you are unaware to the complexities of the American banking and finance system and how in a global economy the UK is so closely tied in to its fortunes.
Ensuring a banks liquidity is an impossible situation with shareholders insisting that returns on deposits are maximised and bank of England governance and economic pressures on the other.
We all live in a market driven society and have enjoyed the benefits of rising property prices and cheaper goods in our shopping cart. During the good times where everyone is gaining there is no talk of the banks and their performance.
Yet, when there is an economic downturn everyone seems intent on finding someone else to blame. This, I am afraid is the price we pay for growth and prosperity most of the time.
No economic theory or practiced policy is perfect but after each crisis more is learnt about the factors which control adverse market conditions and as a result, the same mistakes are rarely repeated.
When viewing the intricacies of the global financial markets, their influences and the problems of being part of the world’s peace-keeping military force, I am utterly amazed that we enjoy so many periods of sustained gains.
The public do pay, or should I say repay some of the wealth they earn during the low inflation high growth years, but that is only fair. Even if it is not fair, then that is life. What would the alternative be?