Tag: Governance

Diversified financial conglomerates are a bad idea. Shareholders become victims of the organisational tensions that follow, customers suffer the resulting conflicts of interest, and taxpayers see government guarantees used as collateral for speculative trading.

Private sector managers are not immune to Great Leap Forward Syndrome. They rant about organisational transformation, believing they can move mountains by the strength of their will and the extravagance of their vision.

It would be consoling to believe that the titans of finance know in their hearts they are at fault, but are advised not to admit it. However, mostly they do not express regret because they do not feel it.

Few things corrode business efficiency and effective markets more insidiously than the discovery that it is more profitable to win the favour of politicians than to win the approval of customers.

The primary purpose of government investment in financial institutions is not to ensure that the taxpayer gets its money back – although that issue should certainly not be neglected – but to ensure that ordinary banking functions operate well.

The blunt truth is that free markets are not a particularly efficient system for allocating resources. They are just – like democracy – more efficient than other systems and – unlike democracy – more innovative than other systems.

We seek regulators more competent than their private sector counterparts, we ask them to review not just procedure but also strategy, we expect the taxpayer to take financial responsibility for their failures. There is a name for that policy. It is nationalisation.

John explains why capital is the stuff you have to protect yourself and why banks can never have enough of it.

Mr Paulson has taken the bad bank for US taxpayers and left shareholders with the good bank. Mr Darling should do the opposite

John returns to his experience as a Halifax director to retrace the rocky road to last week's rescue takeover.