Saturday, November 08, 2008

Bashing the Banks

Quite a lot in the press over the last few days about the evil banks failing to pass on the Bank of England's 1.5% interest rate cut until the government put on the squeeze. It's nonsense of course, but the media seem to have fallen for it and, after all, it makes for good copy. Following a change to the Bank of England's overnight rate each bank has to calculate the effect on its finances, and even allowing that some of that can be done in advance there is still the mechanical process to change financial products to match. This is not a small deal, typically taking days to ensure that all of the systems are correctly set up for new pricing. So, it was always going to take time for the banks to react to the Bank of England's move and the suggestion that the delay was anything other than business as usual suggests some masterful spinning from No. 10.

The other funny thing is the way that criticism of the banks has changed from lending too easily to lending too strictly. Now that the banks have got taxpayer's money it is apparently OK to write bad loans is it? The is an illogical position: public money was not given to the banks to waste it and normal credit risk considerations have to apply or else the taxpayer will be wondering in a few years where all the cash has gone.

The fact is that the banks are a traditional easy target for the press and can be castigated no matter what they do. Where were the these journalists when Icesave was running a Ponzi scheme or RBS was wrecking itself in a ludicrously overpriced acquisition? They missed the stories then, and they are allowing the government to feed them its propaganda now.

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