Dear old pals

But the truth is out there….via Goldman Sachs and the IMF
Britain’s biggest banks have slipped the leash again on major restructuring…..allegedly until after the planned 2015 general election. This is being positioned as what the FT calls ‘a political consensus that they should focus on business lending to sustain the faltering economy’.

It is also, of course, complete bollocks. Dave and the Draper’s chums cut up rough again over the weekend, and a Chancellor who was hot to trot in the Spring now has cold feet come the Autumn. As long as Establishment politicians are in control, the banks will continue to do exactly what they want when they want to.

Vince Cable, the cabinet’s most vocal bank critic, has accepted it may be impossible to implement extensive banking reforms before the election, according to government officials, although the legal framework for the changes would be put in place before the poll.

The business secretary’s position echoes the approach set out on Wednesday by David Cameron. “I think the key thing we want from banks is lending into the economy so we can support growth and jobs,” the prime minister said. “We need to make sure we are not taking risks that put jobs at risk.”

Hands up all those who can remember the last time a bank created a job? (Apart from UKplc needing more auditors to tot up the National Debt).

What a very odd, bunkered world the Government must inhabit. What a remarkable level of self-belief in the face of contrary evidence the Bob Diamonds of this world must have. Restructuring after 2015? Well, think the bankers, we’ll have a majority Camerlot government then, and thus all will be fine. Neither group of people has a handle on the coming cataclysm.
But the truth is out there. ‘They’ don’t want it to be out there, but it is: yesterday, a 54-page report sent to hundreds of Goldman’s institutional clients dated August 16th last was leaked. The author Alan Brazil—a Goldman strategist who sits on the firm’s trading desk—argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable. Were he to write it again two weeks on, I suspect the picture would be blacker still…especially as Christine ‘Swivel-Head’ Lagarde is refusing to lie down….now she has at last decided to start telling the truth about the ignominious mess she left behind here. A week after Brazil’s gloomy paper, Lagarde shocked Jackson Hole by predicting eurobank disaster unless emergency action could be coordinated. Ben Bernanke tried to wrestle her to the ground, but had not come to a studied position on the use of force by the time she finished speaking.

Since then, the ECB’s Jean Claude-Trichet has refuted Lowgrade’s claims, but there is no doubt who the markets believe. Anyway, last night the IMF ratcheted up the war with eurozone authorities by circulating estimates showing serious damage to European banks’ balance sheets from their holdings of troubled eurozone sovereign debt. The analysis, which was discussed by the IMF’s executive board in Washington on Wednesday prior to its release, has been strongly rebutted by the European Central Bank and eurozone governments, which say it is partial and misleading.

Settle down children, settle down….

Related from the archives….Decision Time on Banks v People