A satirical look at the banking crisis

Readers may remember the satirical John Bird/John Fortune video on the causes of the housing crisis. Now the Financial Times Diary has provided a satirical view of the causes of the banking crisis:

A new bank model

1) Take money from members of the public in savings accounts on pretext of keeping it safe
2) Use that money to lend to people who are unlikely to repay it.
3) When loan defaults rise and wholesale markets dry up, start refusing loans and credit to those who are able to repay.
4) Resist paying more for insurance scheme to guarantee savings accounts. You can always take money from the public, through nationalisation, as the price of keeping their money safe.
5) As investors notice structural weakness, start hoarding cash.
6) When this leads to system crisis, take money from the public by offloading bad loans by swapping for Treasury bills at Bank of England.
7) As turbulence continues, stop lending money to businesses.
8) Take more money from the public through government recapitalisation, in return for promise to keep lending people their own money.
9) Slash dividend. Create new executive remuneration scheme.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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