Birds and Bees

Did some gardening this morning and after lunch; pork; parsnips; a nice Australian Cabernet Sauvignon from Wolf Blass (birthday present from a friend), I read about the birds and bees.

In this case it was an article by Gillian Tett in the FT Weekend Paper. Apparently, Mervyn King, the Governor of The Bank of England, is looking to zoology, epidemiology and ecology for advice on "how to predict and control the (mis)behaviour of bankers."

Apparently, in the 70's The Bank controlled private banks with informal guidance (nod and wink). Recently this has been replaced by watchdogs and regulations. Now,"financiers are scrambling to find fresh ways to monitor the systemic risks that could damage the financial system".

Gillian concludes, "Unless we demystify finance and reintegrate it into society, it will be hard to build healthier banks".

Looking at her photograph I guess Gillian is too young to remember when the financial system was simple. You went to a building society for a mortgage, you could only borrow 95% of the house value and 3 times your salary. Furthermore, the Society could only lend you the money they had.

The Conservatives created the competitive market in mortgages and Labour let it go out of control.

Mervyn need not look any further than the basic rule of Gearing for a solution. Fundamentally the rule saysz if you haved £50 you can borrow €50. If bankers had stuck to this rule then house prices would not be out of the reach of first time buyers, Britain would not be billions in debt and the credit crunch would be a fantasy term rather than a financial one.