BBB - Brian Bollen's Blog

Just Exactly Why Can't Banks Be Allowed To Fail?

Letter to the Financial Times February 28 2009

Dear Sir,

Your editorial in today's newspaper (Saving HM Royal Bank of Scotland) makes several references to the presumed immunity of banks to normal commercial pressures (too big to fail, the banks must be saved, clearly cannot be allowed to fail). Would you please explain why? Over the past 18 months or so, I cannot readily recall reading a reasoned justification of that presumption, yet it underpins all efforts to confront the crisis.

If Woolworths and Zavvi and MFI and other businesses can be allowed to go bust, why not banks? As a provider of a range of media services to large financial institutions, and to publications that depend on selling to large financial institutions, I have a vested interest in the status quo ante being reinstated, and soon, please. But I still cannot find any real justification why banks are a special case for which the laws of financial gravity must be repealed.

Yours sincerely,

Brian Bollen

NEWS FLASH: THE SPEAKER IS ON THE LAUNCHPAD

BBC Two has announced that it will begin transmitting a new reality series about learning how to speak in public.  The Speaker has been scheduled for broadcast in April on BBC Two, airing twice a week for eight one-hour episodes. As an active member of Toastmasters International in the UK, I believe it will spark an increase in learning how to speak in public. All our clubs are happy to receive new requests from would-be members, and welcome them to our clubs as guests. If you would like to enquire, please contact me, Brian Bollen or Margaret Bollen, on 01908 234952, or via email: brianbollen@mac.com, or margaret.bollen@virgin.net. 

Comedienne Jo Brand heads the judging panel of The Speaker, BBC Two's search for Britain's best young speaker. Alongside fellow judges, performance expert and RADA tutor Jeremy Stockwell and motivational speaker John Amaechi, Jo travels to every corner of the UK to find the country's most talented young speakers in the BBC's new, primetime entertainment series.

Featuring 14 to 18-year-olds, The Speaker will see tough-talking teens, class jokers and shy, sensitive types go head to head as they learn to talk publicly and passionately about the things that matter to them.

Executive Producer Kieron Collins said: "The Speaker is a fresh, 21st century take on the traditional public speaking competition. Our teens are a disparate, diverse group of youngsters but they are united by their passion and their desire to speak out on what matters most to them.

"Britain's youth often get a raw deal in the media. This show redresses the balance; it's about communication, confidence and giving British teenagers an opportunity to be heard.

"Each week, our mentors and judges give a masterclass in a different aspect of speaking, so there will be plenty for people to learn at home, too. Whether it's going for a job interview, preparing a business presentation or getting ready to make your father-of-the-bride speech, there should be something here for you."

Long established for her stand-up comedy, Jo Brand is a leading light of the entertainment world with regular appearances on panel shows and undertaking a range of challenges from Question Time to Mock The Week.

This is the first time she has acted as a judge and she will be drawing on all her performance experience to seek out those young speakers who have a talent for getting their message across and who really connect with their audience.

Having appeared on stage with his family's vaudeville show from the age of four to 17, it could be said that Jeremy Stockwell was born to perform.

From playing the ukulele to tap dancing and then on to stand-up comedy, devising theatre, improvisation and mime, Jeremy is one of nation's leading drama coaches, working as a RADA tutor and behind the scenes on top TV shows such as How Do You Solve A Problem Like Maria? and Strictly Dance Fever. So who better to help the speakers improve their performances, use their body language effectively and inspire their audiences?

John Amaechi is a multi-faceted speaker having travelled globally to speak on topics wide-ranging and influential. He is a champion of young people and passionate about their rights and needs in an ever-changing world. John started his career as the only Brit to make a successful American basketball career in the highly competitive NBA. Whilst playing he undertook a degree in psychology and, since his retirement from the game, has focused on offering training, development and mentoring to a range of corporate and young people's projects as well as commentating on basketball for the BBC at the Beijing Olympics and acting as an Ambassador for London's 2012 Games. John will be aiming to fire up the speakers, encouraging them to speak with passion, commitment and personality.

On The Speaker, Jo, John and Jeremy travel the length and breadth of the UK, putting youngsters through their paces at the regional auditions. Only a select 20 make it through and then the contest gets underway in earnest with a different challenge and a different communication skill to tackle each week.

Helping the finalists learn and rise to the weekly challenges is a group of guest mentors who offer expert tutelage and inspiration to draw on.

The four guest mentors are: Queen of the Dragons' Den, Deborah Meaden, who coaches the speakers in the art of improvisation; Earl Spencer, who invites the speakers to Althorp House where they explore the craft of information giving; journalist and newscaster Kate Silverton who coaches them in the nuances of storytelling; and Tony Blair's former chief strategist and speech writer Alastair Campbell, who demonstrates the subtleties of persuasion.

Each week, their speeches are evaluated by the judges and their mentor. Then the three speakers who don't meet the very high standards set have to go head-to-head in a final speaking challenge, The Last Word.

One hopeful youngster is then eliminated from the contest. All of this builds to one final showdown at the end of the series in which the three best candidates make the speech of their lives.

Launching closer to transmission, The Speaker will have an extensive multiplatform offering encouraging adults and young people from a wide range of backgrounds to submit speeches to the shows website, and to share their speeches and ideas with each other. There will also be a whole host of practical advice and downloadable tips for everyone to use plus a behind the scenes look at the series.

The Speaker is a factual entertainment series produced by BBC Entertainment Manchester and due on air in April 2009. The Series Producer is Ian Carre and the Executive Producer is Kieron Collins.

The series will be 8 x 60 minutes, and will transmit on BBC Two in April 2009.

Have we overdone it?

Have we overdone it? Has the doom and gloom gone far enough?Should we stop mocking people who say they can see green shoots of recovery? Are we misinterpreting economic fundamentals to be the end of the world? Is it just that we have become so used to bright financial sunshine that we have overreacted to the shafts of financial darkness we've been seeing recently?

Having identified The Royal Bank of Scotland as a possible buy at 60 pence a share, even more attractive at 50 pence, and a must buy at 41.70 pence, I have been rendered speechless as the share price has continued to fall. This is the bank that financed my first car at age 17, but only after interviewing me and my parents in person, on the premises, did they agree to do so. I grew up with RBS as a model of sobriety. In fact, it was while standing in the banking hall of the Airdrie High Street branch patiently waiting for the return of my 'pass book' in the mid-1970s that I began to formulate the career plans that would see me join Midland Bank International (RIP) on graduation from Glasgow University in 1979.

Compared to Airdrie Savings Bank, RBS even then was slightly racy, with daylight actually allowed into its branches. But compared with its Babylonian counterparts south of the border it epitomised good old fashioned Scottish virtues of thrift and conservatism. The notion that it is now virtually worthless is one I struggle badly to accept. It must, for heaven's sake, have cash in the till equivalent to 20 pence a share. Whatever happened to fundamentals?

I have lived through several economic cycles, starting with the Barber Boom in the early 1970s, and seen a number of disasters, starting with the secondary banking crisis of 1973-74, which most people don't even know happened, because we did not have 24/7/365 news coverage to panic us all. 

I was working on the Southern European region of MBI when Banco Ambrosiano went belly-up. Virtually on the day I joined the Financial Times Group Johnson Matthey hit the news. I wrote about Latin American debt rescheduling for five years. I edited the FT's mergers and acquisitions through the last great slump of 1989-92. 

I launched myself as a freelance in the teeth of the recession in 1993. I edited a monthly newspaper for ING Barings in the post-Leeson months, being one of the few people to benefit from the Barings collapse. We've had LTCM, Russian flu, Asian contagion, SARS. And now the credit crunch. In short, I think I've seen it all before. Only the sheer scale and speed of recent events has been different.

So the question I am asking is: have we overdone it? There is little doubt that many investment banks are in complete disarray, and a strong feeling, at least for the moment, that the investment banking model is broken. 

There is little doubt, either, that many of their most senior staff, who have spent almost a lifetime making money out of taking risks with their employer's and other people's money, are in stout denial, unable to recognise that there might be some other way of making money. 

How about the old-fashioned way, executing a risk-free transaction for a client as an agent, in return for a fee, rather than as a principal looking to make money from taking risk? Or giving independent advice? To a financial fundamentalist like myself, who has never properly understood or approved of complex derivatives, it seems self-evident that we should go back to basics. I would bet a pound to a penny that the Airdrie Savings Bank isn't ridiculously overleveraged and exposed to toxic assets.

I think RBS will inevitably be transformed into as near a replica of its former self as it is possible to create: a sound high street retail-based bank running a matched book in a narrow range of products. But the process involved in reaching that state will involve the break-up of a vast organisation, generating fees for investment bank advisers of one size or another, and creating new business opportunities as the transformation unfolds. 

The money raised from sales will go to creditors, and the UK government, and then eventually to 'ordinary' shareholders if there is any left. It has to be worth more than 20 pence a share, doesn't it? Even the Bank of Credit & Commerce International in the end returned more than 100 pence in the pound, if I recall correctly. Surely RBS can't be in a worse state than that?

I believe we have overdone the doom and the gloom. To me, it seems inconceivable that virtually every single asset of every single major bank is almost literally worthless. And remember, in whose interests is it for banks to shock and awe us with balance sheet busting bad debt provisions? The new managements will benefit from writing off as much as possible against 2008 figures, so that even if they do more than break even this year, and become slowly profitable next, they can be hailed as geniuses.

Lowering expectations is something that Britain has become an expert at. I suspect it's happening again, and the wool is gently being pulled over our eyes. As the debts that have been provided for, in such prodigious amounts, largely continue to perform, at some point banks will have no option but to begin writing them back on to the books. 

 We saw it in the 1990s with Latin American debt, for instance. And what happens then, as what is effectively new capital suddenly appears from nowhere, adding to the walls of money provided by governments? The banks will be overcapitalised, and overcapitalised banks are like drunken sailors on shore leave with three months' pay in their pockets.

In resolving the current crisis, banks and governments are sowing the seeds of the next one. As surely as they have overdone it as the pendulum swings towards austerity and frugality, they will overdo it again when it swings back towards cheer and prosperity.