Banditry

Executive summary: If your savings are deposited in a UK retail bank, they are safe, and if you’re wasting your time transferring your money into UK government-backed savings or Irish banks you’re a muppet. Although if you’re super-paranoid then Ulster Bank might be worth a punt…

Rationale:

1) If your savings below £50,000 are deposited in a UK retail bank, they are no less safe than they were deposited in government-issued savings products. That’s because the only context in which you would not get your savings reimbursed in the event of bank failure would be if the government was so financially shafted that it couldn’t afford to do so, which is pretty much “tinned food, bottled water and a shotgun” time anyway…

2) With the government guarantee, your savings are probably slightly safer in a UK retail bank than an Irish retail bank, because there’s no way in hell the Irish government could possibly afford to keep its promises, whereas the UK government is slightly better placed to do so (also, the UK economy is slightly less shafted than the Irish economy).

3) Savings in a UK account above £50,000 are also effectively safe: it’s impossible to imagine any situation where the UK government would be able to reimburse savings below the limit and would not also compensate savers above the limit (they account for 2% of bank balances, so the cost to the government of providing the extra bail-out money would be negligible - but the confidence impact of not doing it would be dramatic).

4) Ulster Bank (RBS’s subsidiary in both Northern Ireland and the Republic) might get covered under the Irish plan as well as already falling under the UK scheme. While it’s unlikely that a catastrophic failure that led to the collapse of RBS and the UK government’s inability to bail out RBS depositors would occur without the Irish banking system also collapsing, it’s not completely impossible - so shifting your deposits to Ulster Bank if the deal goes through is the only way to (at least theoretically) enhance your risk profile…

The excellent Rachel North is back. Hurrah! She’s been in New York addressing the UN on terrorism. Hurrah!

However, I had a bit of a double-take moment when I read her ‘I’m back’ post:

“…went to Turkey for 2 weeks with J, read a lot, chilled a lot, went to the Turkish baths a lot, turned extremely brown. Came back, had another week at home with J. Bliss.”

It took a few moments until I realised that was “with my husband J. It was bliss”, not “with excellent Irish greenblogger J. Bliss, with whom I am having a secret and passionate affair”. I think this makes me an idiot…

You know what to do (read this if you don’t know what to do…)

Right. I’ve sorted out a bizarre Wordpress permissions issue, and now have full control over this blog again. Hurrah. In other news, apologies for not posting anything for a while. I’ve been in Canada and San Francisco not working, and therefore my blogging threshold/time has been limited.

In particular, apologies for not posting anything much here or elsewhere on the financial crisis / teacup / disaster that’s going to kill us all / etc. I’d like to claim this was based on the same worthy principles as Dsquared’s lack of comment, but actually it’s more that a) I’ve been on holiday, and mountains are more fun than Congressional bills and b) it’s getting towards the ‘complexity beyond my experience or understanding’ end of the spectrum, so I’m reluctant to say anything which isn’t either very flippant or very data-driven.

Luis Enrique has some interesting thoughts at the other place, which are probably as close to my views right now as anything I’ve seen. Oh, and Alex’s piece on how anyone who thinks the Tories would be less inept at handling the current mess than Labour is certifiably mad is probably worth a read.

I’m starting an exciting period of gardening leave now-ish, so may have more time to comment shortly. Anything I’m particularly proud of will go on LibCon; anything I’m not totally ashamed of will go up here. In the meantime, I’d be delighted to hear your views and/or pointers towards interesting people on the crisis.

One thing that I will say here, though, is that the US government is not planning to give $700bn to the banks, and that the UK government has not spent £50bn on bailing out Bradford & Bingley. In both cases, they’re taking on assets that more or less everyone who isn’t mad agrees are generally worth something approximating their book value, which is perfectly reasonable.

The reason intervention is required is that if (e.g.) B&B went bust, then without state intervention it would have to liquidate its mortgage portfolio at fire-sale prices. Now, this would be an absolutely excellent deal for anyone with cash to spare - the problem is, there aren’t any non-state actors with £50bn in cash to spare right now.

The underlying house mortgages aren’t going to decline significantly in value (even if house prices fall 25-35% in the medium term, that’ll be mostly equity lost by homeowners rather than negative equity), but once a bank is perceived as weak, its asset value is the fire-sale price of its assets rather than their underlying value. Governments are among the few institutions with the cash and the long-term focus to go beyond the market’s sillyness on this (although Lloyds TSB is also getting itself a very good deal, and if I were HSBC or StanChar right now then I’d be seriously considering purchasing some distressed Western assets with the backing of my Asian savers’ deposits…)

I’m deeply annoyed that I work for a company that places onerous restrictions on my ability to trade shares, even on my personal account - if I didn’t, then I’d pile some serious money into HBOS stock right now…

September 17 update:

Fuckery. That’s £3,000 I would have made, buying at 150 yesterday and selling at 190 today. Lloyds TSB are wise - as, semirelatedly, are Barclays. Also, can the gibbering clowns who think this is the End Of The World / the Collapse Of The Global Financial System / etc please go away? Finally, this.

Unrelated October 1 update:

OK, so Wordpress is doing some deeply weird things which stop me from, among other things, writing new posts and editing or approving comments. I’ll let you know when this is fixed…

Second Unrelated October 1 update:

Fixed.

US house prices have collapsed, making mortgage loan portfolios somewhere between impossible to value and valueless. As a result, the investment banks have been devastated. Lehman Brothers has just gone bust, and Merrill Lynch has just been sold at a knockdown price. Bear Stearns went under, and UBS took a massive write-down on its investment banking business.

Meanwhile, the number of failed US local banks, wiping out small savers and shareholders, has remained low. While this might partly be tip-of-iceberg effects, it’d be frankly bizarre if part of the reason wasn’t that many of the riskiest loans ended up owned by Wall Street.

In other words, the system transferred risk from people who weren’t well placed to bear it, to Big Swinging Dicks and Masters Of The Universe, who duly lost their jobs, second Jaguars, third homes, etc, when things went horribly wrong.

Hurrah!

Buy this book. If you understand why you need to buy this book, then buy this book. If you don’t understand why you need to buy this book then - for the love of all that’s worth a damn - buy this book.

Just don’t listen to the author talk, because he’s got an unfortunately whiny voice - one of those chaps who makes those of us who’re ‘prettiest on the radio’ briefly view that as a compliment…

Bad Scientist Ben Goldacre has dug out a trial which shows the most awesome thing ever: the more exercise you believe you’re doing, irrespective of how much you actually do, the healthier you are.

I’ve joined the illustrious list of left-ish-ists at Liberal Conspiracy. Hurrah! Appropriately enough, my first piece there is bashing the unions…

[phone rings]
BJ: Wot ho, Bozza here.
BC: Hello. I’m Bob Crow, and I’m evil. I’m going to lead the Tube maintenance workers out on strike (a 5% pay rise just isn’t enough, you see) and paralyse the city.
BC: [evil laugh]
BJ: Oh. That’s dashed inconvenient. Is there, erm, anything we can do to appease you?
BC: Hmmm.
BC: [evil laugh]
BC: Well, there is one thing…
BJ: Jolly good, I always say that reasonable chaps can work things out reasonably.
BC: The guy you hired to run TfL - you know, the one with the record in taking over badly run, overmanned companies, cutting costs, improving services, breaking union strangleholds, that kind of thing?
BJ: Oh yes, Timmy. A bit of an oik - his daddy was a squaddie, what, but the only chap on my team who isn’t a completely useless buffoon.
BC: Hmmm.
BC: He goes.
BC: [evil laugh]
BJ: And that way your chaps will take the 5%?
BC: Oh yes…
BJ: Spiffing fun. Timmy goes, strike’s off, let’s all have tea and cakes.
BC: …until next time.
BC: [evil laugh]