Source: Private Eye No 1231
Recently I wrote
something about British Prime Minister Gordon Brown and Sir Fred Goodwin, erstwhile Royal Bank of Scotland chief executive.
It was reassuring to find today following the arrival of my copy of
Private Eye, that Lord Gnome seems to agree as the cartoon reproduced above suggests.
There is interesting coverage in the same issue from "In the City". "Slicker" writing about the pension row says:
"What has followed has been little more than political posturing, not just by Harriet Harman but also by Brown, Darling and Myners. They all know that legally, Goodwin and his pension are probably bombproof but cannot admit that because of their failure to act back in October." "Slicker" of course has a lot more to say - generally indicating that the situation has arisen ultimately for reasons of saving face - and of course Goodwin was reportedly a pal of Browns...
Finally, this evening I received an excellent email from a friend. For those of you who are baffled by the complexities of the "financial products" that led to the current crisis here is a straightforward explanation:
Heidi is the proprietor of a bar in Berlin. In order to increase
sales, she decides to allow her loyal customers - most of whom are
unemployed alcoholics - to drink now but pay later. She keeps track of
the drinks consumed on a ledger (thereby granting the customers
loans).
Word gets around and as a result increasing numbers of customers flood
into Heidi's bar.
Taking advantage of her customers' freedom from immediate payment
constraints, Heidi increases her prices for wine and beer, the
most-consumed beverages. Her sales volume increases massively.
A young and dynamic customer service consultant at the local bank
recognizes these customer debts as valuable future assets and
increases Heidi's borrowing limit.
He sees no reason for undue concern since he has the debts of the
alcoholics as collateral.
At the bank's corporate headquarters, expert bankers transform these
customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These
securities are then traded on markets worldwide. No one really
understands what these abbreviations mean and how the securities are
guaranteed. Nevertheless, as their prices continuously climb, the
securities become top-selling items.
One day, although the prices are still climbing, a risk manager
(subsequently of course fired due his negativity) of the bank
decides that slowly the time has come to demand payment of the debts
incurred by the drinkers at Heidi's bar.
However they cannot pay back the debts.
Heidi cannot fulfil her loan obligations and claims bankruptcy.
DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs
better, stabilizing in price after dropping by 80 %.
The suppliers of Heidi's bar, having granted her generous payment due
dates and having invested in the securities are faced with a new
situation. Her wine supplier claims bankruptcy, her beer supplier is
taken over by a competitor.
The bank is saved by the Government following dramatic round-the-
clock consultations by leaders from the governing political parties.
The funds required for this purpose are obtained by a tax levied on
the non-drinkers.
Until the next time
Sorry about the formatting of the story above; HTM 'ell refuses as usual to let me do anything