Monday, 25 January 2010

Is 'Boy George' man enough for the big job?

I love the United States - though I have a special affection for the beautiful and historic states that formed the old and long-dead Confederacy - and Sue and I have had some of the happiest times of our lives whilst on vacation in the U.S. We have fine friends in both South and North and our son is now an American citizen and living and working near Seattle.

However, the last time that I was over there, I was struck yet again by how polarised American politics have become in recent years. It seems now to be factual that there is sheer hatred for President Obama from the likes of Sarah Palin, still a highly regarded Republican prospect for 2012 despite her apparent ignorance of much beyond Alaska, and Rush Limbaugh, the radio commentator who broadcasts his own special brand of bile and hypocrisy. It all worries me greatly and I still recall with fondness the eight encouraging and up-beat years of Bill Clinton's presidency. Maybe we were then living in a fool's paradise or cloud-cuckoo land but it didn't feel like it at the time.

Following the dramatic loss to the Republicans of the Senate seat in Massachusetts formerly held by the late Senator Edward Kennedy who, for all his faults, was a grand speaker and a powerful voice for his State in Washington, it seems now to have become incumbent upon Obama to try to make up lost ground by advocating punitive new measures against the larger American banks. I think that we should remember that the U.S. banking system is very different from ours with a multitude of small 'regional' banks often based in one city in an individual State and with just a handful of branches. These smaller banks are still going belly-up due in part to poor management and in part to inadequate capitalisation and too generous lending to the NINJA (No Income; No Jobs; No Assets) customers who, in this country, would be given short shrift by most of the best-known High Street banks. It is a mistake - both financially and morally - to encourage people to take out loans and mortgages based purely on the supposition that property prices can only increase. The prime British casualty in this was Northern Rock, but no depositors lost a penny due to prompt action by the authorities. We must give credit where credit is due and Labour deserves the credit.

In America, the likes of Fannie Mae and Freddie Mac went way too close to the wall, whilst the crash of Lehman Brothers precipitated a world-wide crisis of enormous and almost unprecedented proportions. We must not forget that the crisis started in America and spread throughout the world and Gordon Brown's government should not be held to blame. Indeed, some of the better ideas for dealing with the crisis have emerged from our side of 'the pond.'

Obama's latest attack on the larger American banks seems like cutting off the Americans' financial nose to spite their faces for the future. The larger American banks now have the resources and the standing to survive the crisis, whereas the 'regional' banks still have something of a question mark over them.

The President's plans, perhaps drawn up to steer attention away from the former male model's Senatorial triumph in the Yankee and formerly Democratic (though staunchly Lincoln Republican in the 'Civil War' years) stronghold of Massachusetts, were initially endorsed with enthusiasm by our own George Osborne, perhaps to be the Conservative Chancellor of the Exchequer after the 6th of May (Bob Ainsworth, the present Defence Secretary, let out the General Election date yesterday and I don't think that he is smart enough to be deceitful about it), and it was most amusing to witness how Osborne had to back-track when wiser counsels prevailed. Indeed, watching the intellectual battle between Osborne, who is still regarded as something of a lightweight, and Lord Myners, for the Government, is fascinating. Myners is winning hands down. It would be highly amusing if it were not so serious. But I ask myself, 'Is 'Boy George' man enough for the big job?'

I have to declare an interest here. I hold shares in both Barclays and in the newly-formed Lloyds Banking Group (I am not alone for I understand that Lloyds is one of the stocks most widely held by pension funds and individual investors) and I have suffered with both during the crisis. But Lord Myners and London's Conservative mayor, Boris Johnson, are right in highlighting the importance of the financial services industry, not only to London but to the whole country. If our big banks, which are comparable in size to America's big banks, are clobbered for the sake of political expediency and cheap vote-catching in the run-up to May, we shall all rue it, not least 'Boy George' Osborne - he of the Bullingdon Club - but, of course, he has lots of family dosh to fall back on and will be alright anyway. The Osbornes haven't many worries about pension funds and dividend income.                                  

I am truly sorry to be so gloomy at the beginning of another momentous week for British politics, but the above is my 'take' (as they say) on what is happening or what may happen, and it ain't looking good. Sue says that I should look on the bright side. I hope that there is a bright side but I can't see it yet.

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