I have always felt it to be a sin of egregious proportions for governments to live, in effect, off the backs of future generations. And I say that as a man who has no issue, my only child having been killed 18 years ago. Since Canada is now lumbered with Carney as its prime minister I think it would be instructive if you could outline just how guilty he was and what a bad time we are in for.
Many thanks for your poignant comment. Carney undermined the independence of the BoE and politicised the role of Governor, and this is a subject I may well come back to.
I have carefully read your lesson here on the Bank of England.
I studied Economics in college, and attended Law School after that.
I agree with your statements, especially your criticism of the Bank of England’s lax attitude during the Novel Coronavirus 2019 Quarantine and the 2008 subprime mortgage lending crisis.
In my opinion, all financial crises begin with greed which, in 2008 for example, spawned millions of imprudent home mortgage loans by what I might call “The Brady Bunch Banks.”
There was a television series in the U.S. called “The Brady Bunch” from 1969-1974 on the ABC TV network. It starred Florence Henderson. She notably sang the role of the female lead in the touring company production and the 1953 revival of the original 1943 Rodgers and Hammerstein musical “Oklahoma!”
“The Brady Bunch” exemplified the mentality of those Americans who never accepted the need for rigorous conservative appraisal of collateral value in residential and commercial lending.
Shortly after I started practicing Law with my father in Western Kansas in 1982, the 1984 Midwest agricultural and oil crisis occurred. Land and oil prices fell through the floor and just about every small country bank in Western Kansas failed. I learned that a strong handshake of a handsome borrower is only that: a strong handshake.
Too many “men in the city,” as you say of London Gentlemen in England, have a strong handshake but that may be all they have. One must take care, be deliberate and know when to turn away.
This was portrayed excellently by British television actor Richard Vernon as Sir Desmond Glazebrook in “Yes, Minister” and “Yes, Prime Minister,” starring Paul Eddington.
I assume it is hard for some London bankers to turn away from handsome gentleman borrowers when the blue blood is coursing and the Händel is playing sumptuously.
I have an humorous American vignette along those lines from the crash of 1984 in Western Kansas.
I am reminded of it by your title: “The Failure of the Bank of England.”
My father and I represented Amos Otis, a baseball player for the Kansas City Royals. He had been involved in the blush of oil exploration lending in the late 1970s and early 1980s in Western Kansas before the 1984 crash. He was allowed to borrow as much as about $1,800,000.00 on some fractional interests in oil production or exploration in Western Kansas, 265 miles West of his Kansas City home.
The loan had gone bad in the crash and Amos Otis and his investment manager had been sued by Amos’ Western Kansas country bank to collect the deficiency.
In the beginning, while the bloom was still on the rose, Amos’ banker in Western Kansas, glad to have a professional baseball celebrity in his portfolio, gave Amos a tablet from his desk of about two hundred blank short form promissory notes, the size of a cheque. Amos kept the pad in his briefcase. Amos could sign his name and fill in just the amount of money he wanted, with no oil and gas deed, no application, no assignment and no financing statement, and without filling in any of the other blanks in what was already a very short, informal, promissory note. This line of credit was based only on Amos’ gold-toothed smile. Amos would mail the tiny note to his banker and upon receipt the banker would fill in all the details and deposit the desired sum in Amos’ account.
Without even lifting the ‘phone to call Amos to ask any questions.
As we were taking depositions, I read a large collection of loan committee notes in Amos’ file and found one which I asked the bank’s Counsel to read over my shoulder in the board room.
I pointed to the passage, which was new to him, and listened to him read it aloud:
“If the collateral for this loan is valued as stated, we must contact the chairman of the board to tell him the bank has failed.”
After the bank’s Counsel read that, he paused a moment and then replied with the slightest smile and a lilt in his voice, saying:
“Well, Caleb, the building is still here and the lights are on.”
Very interesting lecture. The Labour Party cannot be blamed for all the mistakes of the BOE but the longer they remain in power, the harder it will be for the next government (or2) to undo their disastrous policies.
Unfortunately, it seems to be another institution or group that has wandered off its "job description". What we, the people need, is to be able to rely upon truth and integrity.
Well done Jacob for taking on The Bank of England.
They have much to answer for. The last two governors have been hopeless.
Mark Carney issued short-term gilts and index-linked bonds to harvest minute gains ln interest rates compared to the then low-long term rates. This when Austria was issuing 100-year bonds. Carney’s short-term, micro savings are converting into monstrously expensive long-term costs today.
Andrew Bailey acted too slowly to tackle post-covid inflation. He then raised interest rates six times in 2022 before September. These rate rises contributed to the pension fund panic that spooked the bond markets that autumn.
Liability Driven Investments, complex financial instruments that no one had ever heard of, were the cause. Such obscure leveraged products with the potential to destabilise the financial plumbing were just the sort of unexploded bombs the Bank of England is there to defuse. Indeed to ensure they don’t exist.
Liz Truss made mistakes, for sure, but Bailey was complicit in no small degree in her downfall.
I have always felt it to be a sin of egregious proportions for governments to live, in effect, off the backs of future generations. And I say that as a man who has no issue, my only child having been killed 18 years ago. Since Canada is now lumbered with Carney as its prime minister I think it would be instructive if you could outline just how guilty he was and what a bad time we are in for.
Many thanks for your poignant comment. Carney undermined the independence of the BoE and politicised the role of Governor, and this is a subject I may well come back to.
Dear Sir Jacob:
I have carefully read your lesson here on the Bank of England.
I studied Economics in college, and attended Law School after that.
I agree with your statements, especially your criticism of the Bank of England’s lax attitude during the Novel Coronavirus 2019 Quarantine and the 2008 subprime mortgage lending crisis.
In my opinion, all financial crises begin with greed which, in 2008 for example, spawned millions of imprudent home mortgage loans by what I might call “The Brady Bunch Banks.”
There was a television series in the U.S. called “The Brady Bunch” from 1969-1974 on the ABC TV network. It starred Florence Henderson. She notably sang the role of the female lead in the touring company production and the 1953 revival of the original 1943 Rodgers and Hammerstein musical “Oklahoma!”
“The Brady Bunch” exemplified the mentality of those Americans who never accepted the need for rigorous conservative appraisal of collateral value in residential and commercial lending.
Shortly after I started practicing Law with my father in Western Kansas in 1982, the 1984 Midwest agricultural and oil crisis occurred. Land and oil prices fell through the floor and just about every small country bank in Western Kansas failed. I learned that a strong handshake of a handsome borrower is only that: a strong handshake.
Too many “men in the city,” as you say of London Gentlemen in England, have a strong handshake but that may be all they have. One must take care, be deliberate and know when to turn away.
This was portrayed excellently by British television actor Richard Vernon as Sir Desmond Glazebrook in “Yes, Minister” and “Yes, Prime Minister,” starring Paul Eddington.
I assume it is hard for some London bankers to turn away from handsome gentleman borrowers when the blue blood is coursing and the Händel is playing sumptuously.
I have an humorous American vignette along those lines from the crash of 1984 in Western Kansas.
I am reminded of it by your title: “The Failure of the Bank of England.”
My father and I represented Amos Otis, a baseball player for the Kansas City Royals. He had been involved in the blush of oil exploration lending in the late 1970s and early 1980s in Western Kansas before the 1984 crash. He was allowed to borrow as much as about $1,800,000.00 on some fractional interests in oil production or exploration in Western Kansas, 265 miles West of his Kansas City home.
The loan had gone bad in the crash and Amos Otis and his investment manager had been sued by Amos’ Western Kansas country bank to collect the deficiency.
In the beginning, while the bloom was still on the rose, Amos’ banker in Western Kansas, glad to have a professional baseball celebrity in his portfolio, gave Amos a tablet from his desk of about two hundred blank short form promissory notes, the size of a cheque. Amos kept the pad in his briefcase. Amos could sign his name and fill in just the amount of money he wanted, with no oil and gas deed, no application, no assignment and no financing statement, and without filling in any of the other blanks in what was already a very short, informal, promissory note. This line of credit was based only on Amos’ gold-toothed smile. Amos would mail the tiny note to his banker and upon receipt the banker would fill in all the details and deposit the desired sum in Amos’ account.
Without even lifting the ‘phone to call Amos to ask any questions.
As we were taking depositions, I read a large collection of loan committee notes in Amos’ file and found one which I asked the bank’s Counsel to read over my shoulder in the board room.
I pointed to the passage, which was new to him, and listened to him read it aloud:
“If the collateral for this loan is valued as stated, we must contact the chairman of the board to tell him the bank has failed.”
After the bank’s Counsel read that, he paused a moment and then replied with the slightest smile and a lilt in his voice, saying:
“Well, Caleb, the building is still here and the lights are on.”
He later became a United States Bankruptcy Judge.
Have a Dovely.
Sincerely yours,
Caleb Boone.
I hadn't realised how dreadful the BOE has become. Thank you for this enlightening article
Very interesting lecture. The Labour Party cannot be blamed for all the mistakes of the BOE but the longer they remain in power, the harder it will be for the next government (or2) to undo their disastrous policies.
I agree, it is going to be very difficult to put Humpty Dumpty back together again.
Unfortunately, it seems to be another institution or group that has wandered off its "job description". What we, the people need, is to be able to rely upon truth and integrity.
Well done Jacob for taking on The Bank of England.
They have much to answer for. The last two governors have been hopeless.
Mark Carney issued short-term gilts and index-linked bonds to harvest minute gains ln interest rates compared to the then low-long term rates. This when Austria was issuing 100-year bonds. Carney’s short-term, micro savings are converting into monstrously expensive long-term costs today.
Andrew Bailey acted too slowly to tackle post-covid inflation. He then raised interest rates six times in 2022 before September. These rate rises contributed to the pension fund panic that spooked the bond markets that autumn.
Liability Driven Investments, complex financial instruments that no one had ever heard of, were the cause. Such obscure leveraged products with the potential to destabilise the financial plumbing were just the sort of unexploded bombs the Bank of England is there to defuse. Indeed to ensure they don’t exist.
Liz Truss made mistakes, for sure, but Bailey was complicit in no small degree in her downfall.
I agree entirely, you have said in six paragraphs would it took me over 1,000 words to say, thank you.