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Market nuts

Flying around Europe today gives you plenty of time to read the papers back to front, which kind of showed that the banking market is a bit nuts right now, as if we didn't know.

For example, I normally read the Financial Times online, but scouring through its pages in tactile form is more satisfying in some ways, as you catch the bits your eye would otherwise miss.

I missed David Cameron’s announcement that the Bank of England would get its old powers back, which would allow it to step in and take control of any UK bank if it suspected weakness or foul deeds. In other words, the Bank would be the core powerbroker in UK Finance, not the Financial Services Authority, should the Conservatives win the next election.

I would have missed the footnote in the FT Notebook that comments on one of my favourite Web 2.0 services, Zopa – an eBay for loans – which has seen 140% increase in lending year on year with £35 million ($50 million) in loans flowing through the upstart thus far. Sure, that’s since launch in April 2005 but there’s definitely a movement starting here.

I would have missed Nicholas Stern’s call for an unbiased global risk assessor. Unbiased means one that has no lending operation or policy themselves, which immediately demands a risk assessor that is not part of the financial system.

Radical.

But, in particular, I would have missed this critical article about a return to 1950s style savings vehicles and the end of the equities era. There are some key statements in the article that all of us would find useful to consider:

"The crash has forced professional investors and academics to question
the theoretical underpinnings of modern finance. The most basic
assumptions of the investment industry, and the products they offer to
the public, must be reconsidered from scratch. Indeed, the very reason
for the industry to exist – a belief that experts make the smartest
decisions on where people's money will do best – is up for scrutiny as
a result."

Lots of stats and facts flow through the article and it convinced me that equities is not all it's cracked up to be.

Some light relief needed and so it was then on to the Daily Mail.

This rag had some laudable stuff, such as the letter from Lloyds TSB encouraging borrowers to take more money out on their credit cards … in order to gamble.

Not the best advice, but then Lloyds did do the same in taking over HBOS so at least they practice what they preach.

There was also the column about Charles Darwin’s accounts from his student days of 1828 to 1831, which have just been made public, and show that he spent the equivalent of £250 in today’s money on shoes each year.

Stiletto’s or flats, Mr. Darwin?

Equally, there is good news in the Madoff hills at last, as one chap used Bernie’s prison number to gamble on the lottery and won $1500 for a $3 ticket. Brilliant, although I wouldn’t suggest doing that for everyone as you might end up with some complex sales scheme where that first $1500 is used to pay the next wave of $3 investors who think they have then won and, before you know it, you have a massive scheme in operation … now, what’s that called again? (ed: Ponzi)

Finally, jumping off the flight and sitting in the taxi, I start flicking through emails and have time to checkout the New York Times updates, which has this letter from an AIG executive:

"Dear A.I.G., I Quit!

"The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

"DEAR Mr. Liddy,

"It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

"I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

"After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials.

"In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself."

It goes on and on, and on and on, and on.

Almost like an essay in fact.

Not bad for a brief leaving note to Mr. Liddy …

… or was it an email to the NYTimes editorial desk I wonder?

Either way, lovely stuff.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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