Page last updated at 17:49 GMT, Thursday, 6 August 2009 18:49 UK

City Diaries: 'Anthony'

Man looking at a falling graph

"Anthony" (not his real name) works for an investment bank in the City.

He gives us a view on what it is like to work in the City in the current climate.

15 October: Is the City under threat from the East?

Singapore skyline
Could Singapore rival the City?

The location of the annual meeting of the IMF in Istanbul recently was symbolic in that it paid homage to emerging markets. It was also symbolic because history has always put Istanbul as the gateway between the cultures of East and West.

Why is that significant? Because there is about to be a seismic shift in the way capital flows are directed. In the past few years, Asian economies that worked hard and saved would place their surplus cash with the West to fund its huge deficit and mortgage boom. That is now changing and capital flows will in future be directed towards the East. HSBC, for example, have seen the writing on the wall and relocated their chief executive to Hong Kong.

Capital flows East

The days of cheap money which banks would throw at so called Ninja loans has gone. That's "No Income No Job Accounts" in case you were wondering.
What worries me is that how we reconcile the need to keep interest rates low to compensate for the public sector deficit and at the same time fund the debt mountain. With capital flows heading East, the only way is to let the currency fall to compensate for low interest rates and even that may not be enough. The Centre for Economics and Business Research has been saying precisely that and see the Pound/Euro rate falling below £1 to 1 Euro for the first time and the US Dollar falling to $1.40.

This is why cutting the deficit is so important because, borrowing will become more and more expensive in terms of a falling currency as the East competes for those surplus capital flows.

The City contributes 9% of GDP which pays for schools and hospitals

This will also affect London which may have won the crown as world leading financial services centre but that position is very precarious. As Boris Johnson points out, the contribution to GDP of the City is around 9% of GDP which pays for schools and hospitals. But I believe the future of the City is under threat not from New York or Frankfurt but from Hong Kong, Singapore and Shanghai.

Technology means that there is no need to use London to raise global funds and if you provide an over regulated environment, as the FSA now seems determined to do, then there is no reason for you to stay put in London.

The FSA recently published its feedback to comments made on their Turner report on the global banking crisis. In that response it made the following comment:

"While the FSA is certainly required (and will continue) to have regard to 'the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom', this is only one of a number of considerations that the FSA is required to take into account. More importantly, the FSA's overriding concern is to achieve its statutory objectives, in particular maintaining market confidence and protecting consumers. An effective regulatory regime that delivers those objectives is the FSA's highest priority."

In other words, maintaining the City as the world leading financial centre is not their main priority.

Meanwhile, City traders are a pragmatic bunch and don't get too excited about all this hot air about bonuses. City AM, the free City financial paper, recently ran a supplement about buying property in Switzerland. Do I need to say more?

24 September: G20

Dollar bills
Most City workers support a responsible approach to bonuses

In previous diaries, I have said that bonuses can only be controlled if there is an international consensus and it seems likely that just such an agreement will be forthcoming at the G20 meeting in Pittsburgh. Controlling bonuses by paying a higher proportion of bonus in stock with some claw back when short term profits turn into losses in future years makes sense.

Most workers in the City will actually support a responsible approach to bonuses because they also suffered financially when the stock price of the bank that they worked for plummeted. A key part of remuneration was share options and many staff would convert these to stock. Many employees who had nothing whatsoever to do with sub prime lending lost huge amounts of their savings because they had bought shares in their bank.

Agreement on bonuses and financial regulation at the G20 will be easy because politicians love to please the voters.

Senior bankers are more worried about announcements on financial regulation which will also be made at the G20. The proposals will have an inevitable downward impact on profitability, some say by as much as 30%. The changes proposed are already being discussed in papers issued by the EU and the Basel Committee on Banking Supervision. One proposal is to restrict leverage which is the ratio of total assets to capital. This is a good thing because Lehman's allowed its leverage to grow rapidly to over 40 times capital when a more appropriate level would have been around 15. High leverage was one of the reasons why Lehman's went bust.

Agreement on bonuses and financial regulation at the G20 will be easy because politicians love to please the voters. It also deflects from the real issue which is how we begin to pay for all this.

In this regard, the G20 will make an announcement steeped in rhetoric but not much substance such as the one made by the Prime Minister that now is not the time "to switch off the life support".

Wall St workers looking at graph
Will this be a 'W' recession?

We are now reaching the most critical stage of the recovery which is why the PM has at last felt able to say the dreaded "C" word. Those who have followed my diary will know that I have always predicted that this would be a W recession. My reason was that public sector cuts would take billions out of the economy which would increase unemployment and cause a renewed fall in house prices and lead to a second dip into recession.

Many commentators share my concern but despite this markets have defied gravity. Jaime Caruana of the Bank for International Settlements said in an interview with the Financial Times this week. "It is not the right time for complacency."

Indeed, as I write Sterling was falling rapidly and the FTSE was turning red.

I hope I am not right. A double dip recession can be avoided if interest rates continue to remain low. Sterling will fall to redress the balance and enable foreign investors to reap a higher return buying enormous quantities of debt to fund our deficit.

It will make our exports cheaper and staycations more likely despite the absence of a barbecue summer this year. This will fuel growth and compensate for the cuts that are coming.

A bit of rain never did anyone any harm. At least you don't get sunburn. My staycation in Britain this year was a great success. I felt a strong sense of satisfaction that I was doing my bit to save Britain from the recession and had avoided those awful airport queues.

9 September: Aftershock
Men hug outside Lehman Brothers
The collapse of Lehman's plunged the banking system into freefall

The credit crunch may have started two years ago but it was the collapse of Lehman's just one year later on September 15th 2008 that plunged the banking system into freefall. Two years ago we had a crisis but one year ago we had a catastrophe the like of which no one had seen before.

Before September 15th, the demise of Northern Rock was a disaster for the general public but not for the City. Financial institutions had failed before such as Barings in 1995 and the hedge fund Long Term Capital Management in 1998. We had had financial crises before in Asia in 1997 and Russia in 1998 and survived.

It is true that markets were worried as banks reported huge write downs but action was taken. CEO's were replaced and banks were able to raise more capital to bolster their balance sheets. The failure of Bear Stearns raised the collective blood pressure but this was quickly dealt with as J P Morgan stepped in to buy the bank.

But nobody expected Lehman's to go. The US Government made a catastrophic error allowing it to fail and in this respect the UK government deserve praise for the way they rescued RBS. They may even make a profit for the taxpayer. In the US, nationalising a bank was something that politically they could not handle but this was no time for politics.

Lehman's had $639 billion of assets to unwind, but not all were bad. There was real value in the business Why else would Barclays and Nomura step in quickly to buy the juicy bits of the failed bank?

And yet Lord Turner of the FSA recently decided that certain aspects of banking are "socially useless" and that some banks have grown beyond what is "socially acceptable". Was he thinking of Lehman when he made that call?

The UK government deserves praise for the way it rescued RBS

Just because products lost the banks billions does not make them "socially useless". The mistake was in the way these products were risk managed and that is what the regulator needs to address. There was nothing fundamentally wrong with the product. Securitisations, where loans are packaged and sold on as asset backed securities are a major source of finance. The collapse of the system that provided this second line of funding is one of the reasons why credit is so hard to find.

The remarks of Lord Turner are reflected throughout the FSA. What we are seeing in the new world is an uncompromising regulator which no longer sees its role as a defender of the City and its vital role in the success of the British economy. The FSA have lost sight of the big picture and now their actions are affecting both small business lending and mortgages to first time buyers.

They demand the banks keep more capital to support a further collapse which is like shutting the door after the horse has bolted. If the FSA relaxed the capital rules for lending to first time buyers and small business then the lending would start flowing again.

So where are we now? Risk management is being reformed. The regulators have become more confrontational. Markets have corrected but volumes are low so, the problem is not completely resolved. A downward correction is imminent.

7 August: Bank Results

The press are back into "bash a banker" mode. As usual, they are getting hung up on bankers' bonuses.

The message is that the banks are making hay while the rest of the economy suffers. It makes good copy and reinforces the public's indignation at the insensitivity of the banking industry towards the economic plight we are in.

For me, and many of my colleagues, it's annoying because these payouts are reserved for a small fraction of the investment banking community. If you look round the bars in Canary Wharf and in the City, you will not see the champagne corks popping.

Unless we can get an international consensus on bonuses then these stories will continue. Restricting them only in London will undermine this city as the world's leading financial centre and damage the UK economy. Managers of banks would be irresponsible not to pay the going rate for the best talent.

The losses at Northern Rock and Lloyds TSB... show the true picture of the state of the banking industry

The profits of Barclays and HSBC were distorted by the performance of the investment banking divisions of these banks which accounted for a third of Barclays' profits and three quarters of HSBC. These profits are very volatile and can disappear very quickly.

Barclays and HSBC each made £3bn over six months. That sounds like lot. But as a percentage of the total invested it is not even a reasonable rate of return. Barclays needs to make about £10bn in a full year to create an acceptable return on capital invested.

The real story is the losses at Northern Rock and Lloyds TSB in the retail and commercial lending sectors. These show the true picture of the state of the banking industry as they are not so influenced by the performance of investment banking.

Northern Rock's bad loans have tripled in six months. Look again at Barclays and HSBC. Their bad debt charges have increased by 86% to £4.5bn for Barclays and $13.9bn for HSBC. Suddenly the profits don't seem so good after all.

There is no sign that bad debts will stop being a problem in 2010. And, although the housing market is up slightly, there is a growing feeling in the City that prices will start falling again until the 2010 election.

It will also be harder for the banks to lend more because the Financial Services Authority (FSA) has increased minimum capital requirements by around a quarter. This means that the banks have to put more money under the mattress rather than lending it out small businesses.

They are also forced to hold more of their assets in short term blue chip securities such as government bonds in order to deal with tighter liquidity rules. So cash is being tied up in government bonds rather than being lent to small businesses.

These are rules set by the government through the FSA which discourage the banks from lending.

So if I am right, why is the stock market rallying? It's because we are over the worst and prices had fallen too far but watch out for the second V of the "W" recession and another correction in October.

22 July: Can you control bonuses?

The relatively good results from US Banks over last week - particularly Goldman Sachs and J P Morgan Chase - were good for the markets in both the UK and US. But it was the size of the potential bonuses that caught the eye.

Unless you control bank remuneration at a global level, the high earners will just go somewhere else if you clamp down on pay

The timing of these announcements could not have been worse as the banks seem oblivious to the political storm that huge bonuses cause.

Let's not dwell on the fact that these two banks were less affected than others by the credit crunch proving the soundness of their business model. Let's also not consider that only a tiny few were involved in subprime lending. These businesses have continued to be profitable right through the downturn. The public do not care about these arguments and rightly have no sympathy for the view that bankers deserve these rewards which run into millions.

The problem is that unless you control bank remuneration at a global level - which is almost impossible - then the high earners will just go somewhere else if you clamp down on pay.

Carlos Tevez
Anthony compares star bankers with top footballers

A good analogy is with footballers. The current antics of Manchester City and Real Madrid are bidding up salaries and transfer fees. Given City's previous record, I do not sense that Carlos Tevez has moved across Manchester for the sporting glory. It is for the money. It is much the same in the City.

The Walker report on banking governance made some healthy recommendations. It's right to put a greater emphasis on risk assessment. And directors should be independent and able to challenge executives. The formation of a risk committee which has real power in the organisation is essential. But the report is flawed in calling for tighter control of bonuses. This will cause star bankers to leave - especially when coupled with the new 50% tax rate. Ultimately this will be bad for the economy.

There is a much simpler way to control bonuses - become more risk adverse and reduce the expectation of vast profits.

I remember meetings before the credit crunch where credits running into hundreds of millions of dollars were approved in a matter of minutes. A scenario might play out like this. The deal-makers would circulate a hundred page document to the credit committee the night before so no-one had time to read it, and then expect them to rubber stamp the transaction in a short meeting. If there was any resistance, the committee would be reminded that the bank stood to lose a stream of revenue running into millions. The transaction had to be closed that night. If you made a stand, you would not last five minutes in a credit-related job.

That is the problem. Nobody would say no.

You can control bonuses without directly hitting pay structures. If risk and credit committees have real power to say no and high-risk deals are avoided, then the bankers will not generate the short term revenue or get the mega bonuses. Of course, this would make profits lower and so shareholders would have to accept lower returns. "Casino banking" has to stop because it does not help the long term welfare of the economy.

Problem solved.

16 July: Regulating the City

The economy is in the doldrums. The markets are drifting, up one day down the next.

Some think we are still in the recession and others think we are out. Even the Bank of England seems unsure what to do next - announcing last week that it was not extending the quantitative easing programme. I believe it is holding back just in case the second wave of recession hits the economy.

The problem with this so-called recovery is that it does not take account of how sustainable the upturn will be

The government's White Paper on Financial Regulation did not pull the City out of this limbo. It is an inconsequential piece of political window dressing designed to show that the government is doing something about those nasty banks. The Paper advocates increasing the Financial Service Authority's powers and the establishment of a new Council for Financial Stability - but this is just a restatement of the existing arrangement with knobs and whistles added. And how long will it last if the Conservatives win the election? The Tories seem committed to switch power to the Bank of England.

The problem with this so-called recovery is that it does not take account of how sustainable the upturn will be. Companies have cut costs which improve profitability but if there is no sales growth then they will run out of ideas very quickly. It also takes time for people who have been made redundant to run out of money and be added to the dole queue.

The lack of an election is another reason why the economy has begun to drift. People are convinced that the Tories will win. The brakes have been successfully applied but nobody will give the government credit for this. The sooner we have this election, the sooner the economy can move forward.

If we cannot have an election until next year, then the government should bite the bullet and begin cutting public expenditure. The markets understand that cuts need to be achieved in a finely balanced way. Making controlled cuts would at least send a clear signal that the government is tackling the deficit. As long as we are in the position of postponing inevitable cuts then the markets will continue to drift.

McDonald's fast food restaurant in Enfield, London
City types with their Savile Row suits could be sharing the Swiss Air shuttle to Geneva with McDonalds employees

The City should not be complacent about changes in regulation. This week the EU announced proposals to amend the Capital Requirements Directive - raising the level of funds banks are required to hold. They also want to look at bankers' pay. To quote the EU press release, they wish to, "tackle perverse pay incentives by requiring banks and investment firms to have sound remuneration policies that do not encourage excessive risk taking".

The effect of these changes can be summed up quite simply. Banks will have to take fewer risks and lend less to support higher capital ratios. More high fliers will find ways of getting out of London to earn their huge bonuses.

It is worrying that the EU thinks that the hedge funds are to blame for the credit crunch. This is absolute nonsense. They will be first on the plane to Geneva if this happens and London will no longer be pre-eminent if the EU wins the day.

It is amusing that these City types with their Savile Row suits could be sharing the Swiss Air shuttle from City Airport with McDonalds employees - as the hamburger company is shifting its European headquarters to Geneva.

8 July: False optimism

My hotshot colleagues in the investment banking industry have been getting carried away thinking that this recession is all over bar the shouting. Big hitters have been crossing the street for more money while "Golden Sacks", otherwise known as Goldman Sachs have been setting more money aside for another mega bonus round.

I sometimes wonder what planet these guys are on and if they continue in this vein they will ruin it for the rest of us who don't get paid anywhere near that sort of money. The regulators continue to procrastinate and while the banks agree to pay these sums the regulators are likely to come down even harder on City remuneration.

Despite all these optimistic shouts of green shoots, I must only repeat my previous comments that this may be a false dawn

So what have these guys being doing to come up with money making ideas that attract the banks to pay these huge salaries? One scheme was reported in the Financial Times this week where assets can be securitised to save other banks' capital. Previously securitisations involved pooling new assets such as mortgages, whereas this one takes existing loans which can be rated with credit protection guaranteeing the first loss. By packaging the loans, the regulatory capital charges go down under existing rules.

Nothing has really changed. It is just what is known in the business as 'regulatory capital arbitrage'. It is exploiting a loophole in the rules that the regulators will one day close. It will take at least two years to pass through European law by which time it may be too late.

I suppose my failing in the City is that I do not share their optimism about the recession. At Budget time, I said that the Chancellor's predictions for growth in the economy were improbable and I am being proved right. The Office of National Statistics has stated that the economy will shrink by 2.4% instead of 1.9% as predicted in the Budget and that the rate of decline was the worst in 50 years.

Even the Prime Minister is now saying that the worst of the recession may be yet to come. Despite all these optimistic shouts of green shoots, I must only repeat my previous comments that this may be a false dawn. The double dip recession is as I have predicted a distinct possibility.

The government is also beginning to own up to what everybody knew already. There must be massive public expenditure cuts. Reports that some government departments would need to make cuts of 20% were not denied by the Chancellor.

So here is the dilemma. The government wants to lull us all into a false sense of security, tell us the recession is over and then ask for our vote at the next election as the economic saviour. So it is in the government's interests to talk recovery up and then drop the bombshell after the election. It embarks on a policy of slash and burn now, the cuts will only make the recession worse but on the other hand while the government delays, the danger of a renewed inflation becomes a real threat.

Selling the government's debt will become increasingly difficult which will only encourage the government to print more money through its quantitative easing programme and inflation will get worse. Interest rates will have to rise, house prices will fall and the vicious spiral starts all over again. By which time those big hitter bankers will have escaped with the loot.

I sound like a stuck record because I have been saying this over and over again since I started contributing to the City Diaries. At last, I think the Chancellor and Prime Minister may be listening.

Remarkable statement

Bank of England Governor Mervyn King
Anthony thinks the Governor's statements last week were remarkable

Last week before the Treasury Select Committee, the Bank of England governor Mervyn King, made two startling revelations which indicate a deep rift between the Bank and the Treasury.

First, he said that he could not be held accountable for future financial stability if he was not given more powers, and said that the government had not consulted him on the planned regulatory changes. Next, he called the government deficit "extraordinary". He went onto say: "if the economy were to recover along the path assumed in the budget projections of GDP then I think the time over which deficits need to be reduced is likely to be faster than was implied by that projection."

His statements are remarkable because it is extremely unusual for the Bank to be openly critical of the government and I think that reflects the governor's disquiet about being kept out of the loop on regulatory change.

The sidelining of the central bank in the regulatory debate is the opposite of that proposed by President Obama where the US Federal reserve is to be given more power not less. In the US, broker dealers like Lehmans were traditionally terrified of the Fed and much preferred the more hands off approach of the Securities and Exchange Commission. This fear was born out of respect and in the City; it is the Bank which is much more respected than the FSA.

The Governor was right to be worried because a speech by Peter Mandelson has confirmed that the powers will remain with the FSA. He does not want a "twin peaks" regulatory system. The government is therefore going to neutralise the authority of the Bank of England .

The Conservatives, however, want to return power to the Bank of England by giving it responsibility for the major banks. So there is a real sense that this whole issue has become a political football but not one that will impress the voters.

Unfortunately, it won't impress the City either. Respect is one thing but changing the whole regulatory structure by passing some responsibilities back to the Bank will just delay the regulatory reform needed.

The City is more concerned that the people who sit behind the desk of the regulator are experienced practitioners rather than whether they are based at Canary Wharf or in Threadneedle Street.

The lack of respect of the FSA is based on the poor quality of supervisors. I have attended meetings with the FSA where our Chief Financial Officer with thirty years experience was supposed to have an intelligent conversation with a graduate supervisor just out of university who knew absolutely nothing about Structured Products.

The FSA have to raise their game and I think they know this.

Is life in the City really like that?

Cast from Personal Affairs
Anthony says life in the City is rather less glamorous than 'Personal Affairs' suggests

This City Diary is supposed to be an insider's view so before I go any further I cannot resist a few words on the BBC 3 new drama "Personal Affairs" which is set in a City investment bank. I can honestly say that it in no way, even remotely, reminds me of life in the City, except for those quick flashes between scenes of the Bank of England, the "Gherkin", the Royal Exchange and Leadenhall Market.

Before you all rush to apply for work in investment banks in the expectation that your beautiful PA will organise a helicopter to get you back from the South of France for a client meeting - please put it right out of your mind. It won't happen.

Instead, think of late nights in a cramped trading floor, with tight deadlines following one after another and a boss who does not suffer fools gladly, and then you will have a view of the City. And if you don't shape up there is no ceremony - you are out on the street. I know Personal Affairs is meant to be a satire, so enjoy it for what it is, but don't think it is what the City represents in any shape or form.

How tough should regulators get?

The world of financial regulation is drearier than Personal Affairs but unfortunately this is the concern of the moment. Exactly how tough the regulators should be is the big question. It is all very well increasing the banks' capital requirements but if you do too much you will stifle economic growth which will be bad for everybody.

The regulators in Europe, US and the UK are all just about singing from the same hymn sheet. The main areas of focus include making the banks hold more capital to absorb losses and more cash to avoid the possibility of another Northern Rock-style bank run. They want to see restrictions on the sale of loans off balance sheet which caused Lehman Brothers to fail and also restrictions on remuneration to stop those nasty bankers being paid too much.

On top of all this is a campaign to regulate more at an international level than before and have a go at Hedge Funds who are often and quite wrongly blamed for the mess we are in with their short selling of bank shares.

Bank of England

Just maybe the wisdom of the Old Lady of Threadneedle Street is preferable to the young pretender the FSA

What does this mean? All of these areas of control will restrict banks growing. The knock on effect of this will be most keenly felt in mortgage markets where the likes of Northern Rock will not be able to fund the huge growth in their mortgage book which eventually was their downfall.

I can hear you say that we don't want another Northern Rock so that is a good thing but we also don't want property prices collapsing and businesses unable to get funding.

Getting the balance right is key so that the economic recovery is not stifled. The question is whether the FSA are up to the job. I must admit I felt some sympathy for Mervyn King when he raised the point at his recent Mansion House speech that the Bank needed more power. He said that without this the Bank could be likened to "a church whose congregation attends weddings and funerals but ignores the sermons in between".

The Bank warned about the banking crisis before it happened and was laughed at. The FSA did nothing. I also remember the days when the Bank in charge of supervision quietly and efficiently dealt with the collapse of Barings, Johnson Matthey and the various banks that were supported by the Bank of England "lifeboat" in the seventies.

Just maybe the wisdom of the Old Lady of Threadneedle Street is preferable to the young pretender the FSA - who has yet to prove its worth.

Some advice for Sir Alan Sugar
Sir Alan with Apprentice pick Yasmina Siadatan
Sir Alan Sugar shouldn't be so keen to push lending, says Anthony

Sir Alan Sugar fresh from appointing Yasmina as his Apprentice has been drafted in to provide some tabloid friendly spin to the dire state that Gordon Brown finds himself in. Apparently, he is going to lead a road show to boost bank lending.

Sugar states: "The banks have been told to help out and lend, but from what I hear that's not happening," but then goes onto say, "I can't put pressure on them but I can offer practical advice."

Well Sir Alan, or should I say Lord Sugar let me offer you some advice.

Instead of going round the country twisting bankers arms, visit Lord Turner at the FSA. Ask Lord Turner about the FSA stress tests. Ask him how the banks should apply the same risk criteria to lending that they did before the recession while staying within the new more stringent stress testing that will now be applied.

Here is an extract from the FSA announcement.

"The key challenge now is that the weakness of the financial system has produced an economic situation which may in future produce significant loan losses and further impair the strength of banks and building societies in an adverse feedback loop. The crucial issue for stress testing is not therefore, as it is sometimes suggested, to 'identify the bad assets on the bank's balance sheets', but to identify future potential loan losses even among loans which currently would not be considered impaired on an accounting basis."


"The current stress scenario models a recession more severe and more prolonged than those which the UK suffered in the 1980s and 1990s and therefore more severe than any other since the Second World War. It assumes a peak-to-trough fall in GDP of over 6%, with growth not returning until 2011 and only returning to trend growth rate in 2012.  It models the impact of unemployment rising to just over 12% and, crucially, the impact of a 50% peak-to-trough fall in house prices and a 60% peak-to-trough fall in commercial property prices."

Now think about this - a 50% fall in house prices. Currently, we have a fall of less than 20%. Imagine the impact of another 30% drop.

These stress scenarios are far worse than anything we have experienced so far and in the end will mean that banks have to ramp up their capital as a buffer to pretend that lightning will strike twice and a worse recession than we have currently will knock the economy flat. What this means is that the capacity for banks to take risk has been severely curtailed.

So, Sir Alan what this means is that the slightly risky small business start up which the banks may have taken a punt on before will simply not happen because the regulators are paranoid about getting it wrong again and want the banks to be more risk averse and hold sack loads of capital to cover their risks.

Cash will be king

The reality of this recovery might be as David Smith Economics Editor of the Sunday Times has suggested that recovery will have to be financed out of income rather than borrowing.

In short, cash will be king which is probably the oldest and very first principle of good business.

Freddie Mercury
The mentality of I Want It All, I Want It Now no longer applies, says Anthony

I think that is exactly where Angela Merkel is coming from when she slammed the Federal Reserve and Bank of England about printing money with its quantitative easing.

She says we cannot continue borrowing ourselves out of trouble. It is like my mother used to say. If you wanted something after the war you had to jolly well save for it and if you did not have the ability to save you did without.

The mentality of the Queen song - I Want It All - I Want It Now - no longer applies.

As I said Cash is King! And if the FSA is right about the stress test then World War Three cannot be far away! My point is that the stress test is so extreme that if that event occurred then we are all doomed. In those circumstances nobody would take risks least of all banks.

Meanwhile the value of Sterling has weakened with all the excitement over Gordon Brown's future. That is a classic foreign exchange market trader position. If you have uncertainty, Sell.

Black Swans and ways out of recession

A Hummer and a Cadillac at a General Motors dealership in Burlingame, California
The City focuses on tangible events like the collapse of GM, says Anthony

There is a book called The Black Swan by Nassim Taleb which discusses in some detail the impact of the highly improbable. 9/11 was a Black Swan event because nobody predicted it. The book's argument is that the impact of these random events will have a major effect on our lives.

It is these events that we should look out for. Trying to predict when we will emerge from recession is not important. In the end nobody knows least of all City forecasters.

Events in the world such as the underground nuclear test and firing of missiles by North Korea is a potential Black Swan event, but for some curious reason, the City have ignored it. Clearly, if North Korea moves from a test to a nuclear engagement then the Black Swan event would have occurred and the markets would literally fall off a cliff. But nobody seems that concerned about this in the financial markets.

Instead, the City prefers to focus on more tangible events such as the collapse of General Motors. This is something it understands and in economic terms, it is on par with the demise of Lehman Brothers. It was not a Black Swan event and was very predictable as the car industry has had excess capacity for many years.

The message in the City is that the car industry must contract and if workers in Luton suffer because the prospects for the Vauxhall brand are inferior to Opel in Germany, then so be it. It's a simple law of the market, but not one I share.

Unfortunately, I am just as bad as the other forecasters because it is events such as this which has made me argue in earlier diaries that talk about "green shoots" are premature.

I am an advocate of the double-dip recession - a so called "W" recovery, where there is a steep fall, followed by a steep recovery and then another fall before another recovery finally appears which becomes more sustained. I suppose my pessimism is because I know the City will always want to talk up a recovery and therefore take all this optimism with a pinch of salt. The reason for the optimism is simple. If there are more buyers, the City will make more money as volumes go up as punters become convinced that they cannot lose money on the markets.

But it seems that investors do not share that level of optimism. A study by Barclays Capital published this week reports that most investors are sceptical about this rally being sustainable. Investors are not interested in MP expenses. What they have noticed is rising bond yields reflecting market concerns about how governments will finance the huge debts that are being run up with toxic asset purchases and quantitative easing.

I am an advocate of the double dip recession - a so called 'W' recovery where there is a steep fall, followed by a steep recovery and then another fall before another recovery finally appears which becomes more sustained.

And Gordon Brown has time to phone Simon Cowell to enquire whether Susan Boyle is OK. It seems that concerns about the economy are taking back stage. But I am afraid Rome is still burning.

My colleagues therefore remain cautiously optimistic if nobody else does. Alan Clarke, an economist at BNP Paribas says that an improvement is unsurprising. He says: 'We have had such a huge contraction that when the cogs start whirring again then by definition output has started to expand.'

My concern is that the "cogs will start whirring" in Asia and not in the US and European economies. We have to face up to the simple fact that there is a major shift underway in the balance of economic power from Western to Asian economies. "Go East, young man" is what the City really feels at the moment. And if there is money to be made, the City big hitters will be there.

If we regulate and tax these guys out of London, then "goodbye London, hello Shanghai" may not be a pipe dream. But if the Black Swan occurs in North Korea, then whatever I think is irrelevant.

I for one won't be going to Shanghai, but I am not a Master of the Universe. I don't care if Sterling is recovering. It is still cheaper to holiday in Barnstaple than Barcelona and there is one forecast I am optimistic about. As The Sun would say, "Phew. What a Scorcher!"

Tax and expenses logic in the City
I must admit I have rather enjoyed the continuous revelations about MPs' expenses over the last week or so, if only because it has pushed the nasty bankers out of the spotlight. I also could not resist a chuckle that one MP on the Treasury Select Committee, Sir Peter Viggers, has fallen foul in press revelations about his expenses.

People in the City approach the expenses issue in a rather pragmatic way
He (Sir Peter Viggers) spoke at one of the Committee sessions about the injection of capital by the government into RBS. He said: 'How much more angry should we be that the government has taken on commitments and made investments in banks without knowing, even now, the full extent on the tax payer's behalf.' Isn't this a case of the pot that calls the kettle black?

People in the City approach the expenses issue in a rather pragmatic way. City firms have whole departments dedicated to finding a way of reducing tax liabilities in a legitimate way.

They do not question the moral aspect of what they prefer to call tax planning. Applying that logic to MPs' expenses and the view in the City would be that they were acting within the rules and the rules were deliberately lax, which indicated that this was a reasonable way to supplement their income without incurring the voters' wrath about an old fashioned pay rise. In the City morals do not come into it which is probably why so many people outside the City detest the way we operate.

New York skyline
Anthony says he tries to minimise costs when he travels for business
But expenses are closely scrutinised in the City. I travel abroad for business quite a lot and if I go to New York I will always fly back overnight so that no work time is lost. When I go to Frankfurt I go there and back in the same day to avoid the expense of hotels.

Unfortunately, the resignation of Sir Victor Blank, the Chairman of Lloyds Bank shows that bankers are not completely out of trouble. I must admit I feel rather sorry for Sir Victor. He is a big man and I have seen him many a time driving around the City scrunched in a little electric bubble car, he clearly did not have delusions of grandeur unlike Fred the Shred.

At the time Sir Victor was cosy-ing up to the prime minister he had no idea as to the extent of the damage to the HBOS loan book. He did the government a favour and that has not been repaid. It is rather amusing that a banker who has lost the public trust should trust a politician who has also lost the public's trust. Ironic don't you think?

And while we are being ironic, note that the Bank of England is paying higher bonuses to staff.

Despite the lead from the Old Lady, have no fear bonuses will be capped. And regulation will be strengthened. The Basel Committee on Banking Supervision will be publishing extensive proposals over the next few months. The worry is that, with the regulators feeling guilty by their failure to properly regulate the banks, they will overreact. If they do, their actions will prolong the recession as they restrain the banks' ability to grow their business and provide credit.

But let me leave economics and end with a moral note which is often in short supply in the City. Let me tell you about a secret place that is well known in the City but often missed by tourists. It is called Postman's Park and is found just off King Edward Street. It is an oasis of peace. A place to reflect and forget the credit crunch.

There is a wall commemorating ordinary people who lost their lives trying to save others. One such hero is Mary Rogers, who was a stewardess on a ship called the Stella. She sacrificed her life giving up her life-belt and voluntarily going down with the sinking ship. There is a lesson here for politicians and bankers alike about honour and selflessness which we should all observe.

The recession: no end in sight

George Soros
George Soros said the recession was ending
George Soros, the man who broke the Bank of England; the hedge fund billionaire who never gets the market wrong, announced this week that the recession was coming to an end. Even the OECD thinks that things in Britain are picking up and the market generally has had a great run into positive territory. Many punters are calling the end of the bear market. I am not so sure. I sincerely hope I am wrong but to me this feels like a "Dead cat bounce".

I can hear you say: "What does he know?" And I would not blame you for not believing me. After all, I am one of those nasty bankers who got everything terribly wrong. But hear me out and in the end draw your own conclusion. The fact is experts get things wrong, and the truth is few people predicted the severity of this downturn. Not even Vince Cable thought it would be this bad.

Alan Greenspan
Did Alan Greenspan see the economic downturn coming?
In fact nobody knows. Not governments, not bankers, not journalists and certainly not Joe Public. I was re-reading Alan Greenspan's biography "The Age of Turbulence" this week and was struck by how little he knew and yet before he retired he was feted as a truly great head of the US Federal Reserve, whose economic management guided this huge period of prosperity for the world economy.

He wrote "if the story of the past quarter of a century has a one line plot summary, it is the rediscovery of the power of market capitalism". He attributed this to benefits of global deregulation of financial markets. Now governments want the exact opposite.

We are all to blame

So let's call a truce to the blame game. We are all to blame. Governments for encouraging deregulation, banks for lending irresponsibly and Joe Public for maxing out on his credit card or financing exotic holidays on the paper profits of house price rises.

We will get out of this but I remain downbeat about our prospects in the near term. In a previous diary I cast doubt on Alistair Darling's forecast and now the Bank of England is agreeing with me. Its concern has caused it to increase quantitative easing by a further £50 billion. What this means is the money supply is growing and that can only mean inflation and eventually higher interest rates. Financial advisors are telling us all to lock into fixed rate mortgage deals now because rates are going to go up.

False dawn

My concern is that this is a false dawn and this rally has been caused by the enormous fiscal stimulus boosting the economy. But it cannot go on forever. Governments have reduced the likelihood of a depression and that should be applauded but now we have to pay and that may lead to the so-called "double dip" recession.

The financial impact of unemployment has not worked its way into the economy yet
I think the financial impact of unemployment has not worked its way into the economy yet and when it does house prices will resume their downward path. Affordability remains an issue for a young first time buyer with average house prices still around five times average earnings.

Working in the banking industry, my pessimism is probably not unusual. Although banking stocks have rallied, the future still looks bleak. My bank experienced more redundancies recently which has not lightened the mood.

Banks are still exposed

Banks are also still heavily exposed to unsecured credit card lending and their earnings are restricted by this and increased capital requirements that I discussed in my last diary. Payments to governments for the bailout of the banks will also suppress bank earnings for many years to come. The desire to be more risk sensitive will also restrict the opportunities for profitable banking in the future.

So what! I hear you cry. Why should bankers make huge profits? And you may be surprised to hear that I agree with you.

I am fed up with bankers, the industry has lost its excitement
Just like you, I am fed up with bankers. The industry does not have that sense of excitement any more. I remember the last recession and it did not feel like this one. This feels different. All the hard work put in over many years seems to have all come to nothing.

Like so many others in the industry there is a sense that the career might have been put to better use doing something truly productive like teaching or manufacturing. So if you are an undergraduate reading this and thinking that you would like to have a career in the City, I advise you to think again, the days of the Masters of the Universe are over.
Trust in the City
It was rather surprising that last week the Fabian Society, a left wing think-tank, debated 'Can we regain the public trust in the City'. It is certainly not the place where you would expect much sympathy for the banks and therefore it was encouraging for such an organisation to recognise that regaining public trust in banks is an important issue.

Jacqui Smith
Anthony compares MPs expenses with City bonuses
One of the panellists was John McFall, MP, who has just published his Treasury select committee report on the Banking Crisis. In the debate he used the powerful metaphor of a thrombosis on a human body to describe the impact of lack of trust in banks on the economy. But his report did nothing to alleviate the public's distrust in banks and instead in typical politician blame game mode went for the headlines.

The report talks about the "unresolved inconsistency between on the one hand, bankers' assurances that they are increasing the lending and on the other hand, widespread and clearly sincere complaints that credit is hard to obtain". There is no analysis of why that may be and thankfully Robert Peston recognises only too clearly what the issue is. Perhaps Robert should have written the report for the select committee and save us all the sight of the politicians' egos on heat while they made the bankers squirm.

Shutting the door after the horse has bolted

Robert's blog 'Making banks safe' points out the importance of a bank's capital ratio to its survival. Let me develop Robert's point a little further. Before the crisis the banks' minimum capital ratio required by the regulator was 8%. That means that for every £100 of exposure a bank must hold £8 in capital to meet the possibility that it might not get its money back. The impact of the crisis has proven that this is simply not enough to meet losses. In a clear case of shutting the door after the horse has bolted the FSA is already indicating very strongly to banks that it wants this capital to increase substantially.

How do they do this? The FSA says that banks should stress their exposures by introducing severe risk scenarios which might cause them to lose their shirt and then calculate the impact on their capital if such an event should occur. And what scenario should they use?

The FSA says banks should stress their exposures by introducing severe risk scenarios

Not surprisingly the bankers collapse of 2008! What that means is that banks have to hold more capital to cover the eventuality that the events of 2008 may occur again tomorrow.

So if the banks have to hold up to 30% more capital now then that is billions that they cannot lend to get the economy going again.

Mr McFall's report also says that "due diligence has been seemingly ignored" which is another way of saying that banks have been lending irresponsibly. What that means is that lending that was available before the crisis is no longer available because banks cannot be irresponsible and take undue risk.


There is also the problem of liquidity. Banks traditionally borrow short term and lend long term. Doing that caused the Northern Rock failure when all those short term depositors wanted their money back so now the FSA requires banks to keep a larger pot in easily saleable assets such as cash or government bonds to meet a liquidity shortage should one arise.

In summary, regulators are requiring banks to hold more capital, hold more cash and not lend irresponsibly. This is why "credit is hard to obtain". The banks have had to divert funds to meet those needs. The government, through the FSA, is telling the banks to stop lending for these three reasons while telling the public that those nasty bankers won't lend.

If trust is to be regained something has to give

But if trust is to be regained something has to give and the only way that can be done is with government support.

First, governments have to ensure that deposits are guaranteed up to £100,000. Second, banks have to be allowed by regulators to take more risks but not in the highly speculative private equity market or in derivative trading but in the areas where small business and first time buyers are helped most. If governments are to guarantee lending to first time buyers and small businesses that provide real jobs, while at the same time requiring banks to hold more capital for speculative market risk, trust will be rapidly regained.

To regain trust, the mission of banks has to change from maximising shareholder value to being socially aware organisations that have a fundamental responsibility to ensure the survival of the global economy.

'Green shoots' of recovery?
Around the City, people love to drink outside and the fine weather last week contributed to several pavements being overcrowded.

Lehman Brothers employee leaving with box in hand
Everybody knows that the job cull is not over yet -you just carry on as normal and hope you don't get the tap on the shoulder

Two particular spots are the Globe on the junction of London Wall and Moorgate and the Pavilion Bar on Finsbury Circus which were full to bursting. The former is a major junction for traffic but there is a small patch of grass where people congregate in their hundreds, oblivious to the traffic around them.  

In Finsbury Circus, there is a lovely small park with a bowling green surrounded with blooming flowers. Spring is here and people were smiling. The Budget seemed to be the last thing on their mind. So was this a sign of 'green shoots' of recovery?  I don't think so. 

Remember Lehman Brothers when we saw people walking around Canary Wharf with their cardboard box of possessions?

Those interviewed showed no signs of panic. They are survivors who will move on and if there is nothing in the City, they will do something else. If it is no longer financially beneficial to stay in this country they will go somewhere else.  

Swiss property

The people outside the bars were not drinking champagne, and some were probably still reeling about the small print on the increase in tax for those earning over £150k. Interestingly, hits on Swiss property sites showed large increases this week as people consider their futures.  

The wealthy will always find ways to avoid tax

The City has a highly mobile and international work force. In times of austerity few feel wedded to these shores. The wealthy will always find ways to avoid tax and, as I said in my last diary, the tax take will not go up.

We may see more financial services businesses relocating to places like Dubai where there is 0% tax and the Dubai Financial Services Centre is an excellent place to work.

I really do not see how the government can stop a tax haven like this continuing to thrive. If the City loses talent, then its position as a leading financial services centre will also suffer.

Economic decline

The FSA will also contribute to this decline if it tries to run ahead of the rest of the world in introducing new draconian regulations. An example of this is the FSA's new rules on liquidity published last week. If they are introduced on schedule it will damage London as a world leader in the Eurodollar market. 

A report from the ONS published last week said that the economy is the weakest it has been for 30 years.  

The decline in the economy in 2009 will be marginally better than the Great Depression of 1931.

The implications of that decline are only just beginning to be felt and has been cushioned by the government's huge economic stimulus package. 

The decline in the economy will be marginally better than the Great Depression, says Anthony

What I cannot understand is why the chancellor did not have access to this report when he was making his grossly over-optimistic statements about growth restarting next year in the Budget.

It is true that retail sales have grown by a miniscule 0.3% but that is just a reflection of the fact that people in work have seen a sharp reduction in their mortgage payments. Those out of work are still spending their redundancy packages.  

The problem is that interest rates will have to rise to attract investors who have to fund our huge borrowing requirement. It is expected that those in negative equity will see their variable mortgage rates rise to 9% in the next 12 months. When that happens people will struggle to repay their mortgages. Green shoots may wither if we get a late frost. That frost is a cut in public spending and rising interest rates.

The better-than-expected results from Ford helped the US market on Friday to rally. It is a good sign that traders were ready to bid up prices on such a small bit of good news. But the stock market always runs ahead of itself.  

I am reminded of that old stock market saying: 'Sell in May and go away'. I might just do that, but maybe Bognor Regis this year instead of Portofino.

Budget reaction

It is very difficult to believe the Budget forecast that the recession will end this year. Even more improbable is the chancellor's forecasts for growth in 2010 of 1.25% and 3.5% in 2011. He had to say that because there is an election coming in 2010. His previous forecasts on public sector borrowing have been grossly understated and now he owes up to £175 billion.

Alistair Darling
The City did not like this Budget. The increase of the tax rate to 50% did not help, but more important is the lack of a clearly defined plan to make public expenditure savings. Yes - Darling mentioned savings of £9 billion but did not say when. Call me a cynic - but after the election seems likely?

I know you all think bankers are the lowest of the low and won't care if we have to pay more tax but, excuse the pun, bankers would not sink to such a level as to claim for a bath plug!

Taxing the wealthy will not increase the overall tax take. It will just encourage people to ply their wares in other countries. It all comes down to trust about the motivations for this Budget being election driven rather than thinking what is best for the country. This is why I don't believe the chancellor's forecasts.

Disappeared permanently

The prime minister has also stretched his credibility with his earlier statement that Britain was better placed than other countries to cope with the recession. I think not. I prefer to believe the IMF who said the exact opposite.

We rely too much on financial services to power our economy. Jobs have disappeared permanently in this industry.

Twenty pound notes being handed over

If I was David Cameron, I would not be looking forward to being prime minister

A new report published this week by Greater London Authority Economics said that London's growth rate would continue to fall until 2011. It also predicted that 290,000 jobs would be lost in financial services over the next two years. Where will all those redundant bankers find new jobs? It is still early days for the effects of the recent sharp rises in unemployment to filter through into the economy. Financial services companies are usually generous with redundancy pay offs.

This money would delay the immediate impact until it runs out and when there is no job on the horizon, the only alternative is to sell your property or default which will drive prices down further.
One reason why the chancellor may be right about the recession in the short term is that he still has not done anything about public finances. The music has to stop and the medicine has to be administered. Fancy ideas like the car scrapping scheme only delay the inevitable. The increase in capital allowances is to be welcomed but only if it is offset by proper savings like stopping the ID card scheme.

This Budget has not made concrete plans to cut spending only slow down the rate of growth from 1.1% to 0.7%. Cutting spending may save on tax rises but it still makes civil servants redundant who spend their wages in the real economy.

When the government cuts expenditure it takes money out of the economy in just the same way as tax rises. Take out the stimulus and the economy will contract and the recession will go on.

This is why we still wait for these cuts until after the election. It would be ironic if the British people re-elected them to sort out the mess.

If I was David Cameron, I would not be looking forward to being prime minister.

Who actually benefits from buyouts?

It was reported last week that the Bank of England is examining whether Britain's biggest banks should formally separate their investment banking and retail banking operations.

As I work for an investment bank you might expect me to be against the idea but you would be wrong. Being against it is probably why I languish in middle management and have never received a mega bonus. The guys who receive these bonuses will certainly disagree with me.

So why am I a supporter of separation? Let me give you an example of a deal which may never have seen the light of day if investment banks did not have a source of funding from retail savers.

Cristiano Ronaldo, who made United's winning goal, with the trophy
Anthony points out that the Glazer family's takeover of Manchester United was financed by debt.
Consider the buyout of Manchester United by the Glazer family. This family could not afford the purchase but financed it by debt. The interest on that debt meant that the parent companies behind the most profitable football club in the country actually lost money in 2008. The reason for the loss is because the hedge funds who hold the debt are charging astronomical interest rates. The funding and advisors who get these deals off the ground are the investment banks who provide bridging finance before selling bonds to investors.

So who actually benefits from these buyouts?

I am not saying investment banks do not have a purpose in a sophisticated economy. They are advisors and traders who buy and sell. They are more accurately described as broker dealers who underwrite share issues or trade foreign currencies or advise companies on how to grow their business in an organic and controlled way. What they should not do is lend money financed by our hard earned savings deposited with retail banks.

So when politicians talk of banks lending again, they do not include investment banks.

Banks share prices rallied last week when Wells Fargo announced that they would have a profitable first quarter but this does not mean that we should think the crunch is over. We still have to pay for all this and now the focus turns to the Budget.

Without City taxes the chancellor has a difficult balancing act. It is probably too early to take money out of the economy and we cannot put more money in
The City has been an enormous contributor to the UK government's budget and the traders spend their bonus providing work for others when they buy a Bentley, Jaguar or an Aston Martin. Indeed, Porsche's had become less common in the City as your average trader is a very patriotic guy who loves Jeremy Clarkson.

Without City taxes the chancellor has a difficult balancing act. It is probably too early to take money out of the economy and we cannot put more money in. Instead, the government should look at ways of providing stimulus in a focused way that is fully funded by cuts in public spending where there is unnecessary waste. For example, the ID scheme should be scrapped and nanny state initiatives which are obsessed with targets in education and health.

What the chancellor should not do is introduce the car scrapping scheme adopted in Germany. The average person will not buy British cars because they cannot afford an Aston or a Jaguar. They will instead buy cars made in Spain, France and Germany which will not help our economy.

What he should do is increase social housing stock by buying up blocks of flats that stand empty and also spend more refurbishing derelict properties. It should increase the subsidies available for solar panelling and other green initiatives. It should also provide help to small business by cutting their taxes and red tape, particularly with health and safety initiatives in work.

Protests and the G20 summit
My daily commute into the City on Wednesday, 1 April was noticeably different. The train was unusually empty and my fellow commuters, despite their best efforts, still looked conspicuous dressed in their designer jeans and expensive trainers.
Photo: Anonymous
Workers stuck in offices watched protests outside the Bank of England

Seeing these rather feeble attempts at disguise, I was pleased that I had decided not to pander to the "bash-a-banker" fears and instead wore a jacket and trousers.

There were some traders who had decided to go to the complete opposite extreme and dress in bowler hats. This is typical of a trader's sense of humour and the bravado of City boys fuelled by testosterone.

I half expected to be met by a hooligan ready to hang me from a lamp post, but there was nothing untoward and if anything, the City was less frenetic than usual. Fortunately, my walk to the office did not take me past the Bank of England and so I was oblivious to the crowds beginning to build.

'Mood change'

One thing I want to stress to those who watched this on the BBC News channel is that as windows got smashed at the Royal Bank of Scotland, the rest of the City functioned perfectly normally. My office is less than five minutes from the scene where the trouble was and yet my only source of information was the television coverage. Everywhere else was calm. As I walked back to Liverpool Street at the end of the day, City people were outside the pubs having a quiet drink, enjoying the evening sunshine.

Photo: Tom Riddington
Police prepare for large crowds in the City

The fact that the trains were unusually empty suggests that the mentality of guys in the bowler hats might be out of step with the new younger City workers who want a quieter life. Maybe City bravado and the Masters of the Universe are things of the past.

The mood has definitely changed. The voices shouting on the trading floor are more subdued. It will be difficult for banks to make money in trading of any type, because one of the proposals in the Turner Report on finance is to sharply increase the amount of capital banks have to put up on their trading book.

Traders will be let go because they won't make any money relative to the cost of capital and may go back to being barrow boys and selling vegetables on Romford Market. That is probably not a bad thing.

The surprising thing about these two days is how Gordon Brown recovered from his whistle-stop trip to the Americas prior to the G20 summit and actually managed to do rather well at the summit itself. Markets were expecting that the G20 would not yield anything particularly useful and in the end rallied, because something was definitely achieved.

Gordon Brown
Gordon Brown at the G20

The increased financial support for the IMF is to be welcomed if only to ensure that the emerging economies such as Hungary are protected. Reforming of tax havens is not easy to resolve. If it was so easy, why are we turning to it now? This issue has existed since the beginning of time and no government has been able to do something.

If the experience in my office shows what is happening right across the City, then there is a mass outbreak of empty-desk syndrome. Modern City Offices have large floors and people sit at work stations in Orwellian rows. As people disappear, pockets of empty desks are breaking out across the whole floor until whole rows are empty. It is looking like a scene from the BBC drama Survivors, where we assume everybody is dead but there are no bodies.

Perhaps some of those people will reappear in the FSA or the Bank of England to address the appalling lack of skills the current regulator possesses. Maybe some will reappear as teachers. If some of the so-called City Rocket Scientists could teach real science to teenagers, then some good may come out of this sorry business after all.

The vitriol levelled at bankers is disturbing

The hardest thing to take about the furore around bonuses is that all employees of financial services firms are being tarred with the same brush irrespective of the size of their bonus or whether they were personally responsible for the mess we are in.

The securitisation gurus who packaged up the sub-prime assets that turned toxic were only a tiny fraction of the employees who work for these firms and yet everybody is suffering for their mistakes.

The vitriol levelled at bankers is disturbing with suggestions that we should commit suicide and take compulsory courses in morality
If you are a 20-year-old cashier in a high street bank with a salary below the national average, you might feel aggrieved to be singled out for blame. If that cashier worked for Lloyds Bank, she might feel even more aggrieved that after a nod from the Prime Minister, the board of directors of that normally risk-averse institution agreed to take over HBOS and plunge the company into disaster destroying the value of the few shares she had accumulated through a Save as You Earn scheme.

The vitriol levelled at bankers is disturbing with suggestions that we should commit suicide and take compulsory courses in morality. It's interesting that bankers are being asked by politicians to repay bonuses because it is morally right!

Jacqui Smith
Anthony compares MPs expenses with City bonuses
Will Tony McNulty or Jacqui Smith repay their living expenses because it is morally reprehensible that they should claim expenses for homes that belong to relatives? Let us also not forget the bonuses paid to FSA staff despite their incompetence in supervising the likes of Northern Rock. The FSA supervisor of Northern Rock did resign but nobody has asked him to pay back his pension.

These politicians have not broken the law but neither have the bankers? I am not a supporter of Fred the Shred but throwing bricks through his window and levelling abuse at his children forcing him to remove them from school is unjustified and has been encouraged by politicians who want to distract Joe Public from the real issue of economic meltdown. I am genuinely dreading coming into the City on 1 April when we are reliably told that protesters are mounting a "bash a banker" protest which the police are warning could involve violence.

I may work for an investment bank but don't have a Porsche. I have a long commute because I cannot afford to live in central London and my salary including bonus has fallen by nearly 20% over the last two years. We still work long hours but don't get paid overtime. We are also experiencing huge redundancies.

My point is that the vast majority of financial services employees are taking their share of the pain for something they did not have anything to do with.

Being made redundant in an investment bank is not very pleasant. I came into work the other day and said hello to a colleague who sits near me. At 10am his office was empty and remained so all day. It was only then that I discovered that he had been 'let go' - nobody likes the word redundant). He was a guy I had worked with for over seven years and had not been able to say goodbye.

I am sorry if this sounds like I am bleating and I am really not asking for sympathy but the mood in the office has become pretty dire. I read a report in the Times today that stress and depression related illness in City workers has risen sharply and frankly I am not surprised.

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