Monday, 2 November 2009

Into the valley...

I know that I have not ‘blogged’ for a couple of days, as I promised I would. But when a chap leads as hectic a social life as I, it’s irksome having to sneak away to rattle off a post. Also it might not be appropriate to blog on my exploits this weekend. It might appear a trifle rude if I revealed that I have something going with the Baroness who invited me to dinner on Saturday night, or that her husband – the CEO of a certain multi national media corporation - knows nothing of our affair. It might be amusing, but it is nevertheless inappropriate to divulge that, as a non-exec director of his company, I'll be sitting very close to him at a board meeting later this week.
Oh, no. I told the fellows that run this site that I wasn't going to blab about my private life, however fascinating it might be. Instead I’d like to give you the benefit of my wisdom, my broad knowledge of the finance and investment industry and my take on the bozos who currently pack the Commons benches. And on that very point, I recently picked up an interesting insight into what is currently happening in the banking world. It says a lot about this government’s approach to the investment banking community. It is clear that despite the public outcry about bonuses, Messrs Brown and Darling are effectively turning a blind eye to what is actually happening on the trading desks.
You see, the other day I was chatting to a fellow who used to run the credit derivatives desk at FTP. The bank wasn’t as heavily involved in dodgy asset-backed securities as some of the players, but nevertheless had to 'hold out its begging bowl' at the time of the meltdown. This fellow, we’ll call him ‘Henry’ for now, recently moved to one of the big US institutions that are coining it all of a sudden.
Henry says that these big players are not just creaming it by trading the bonds that the government has been issuing to revive the economy. They have even returned to dabbling in the credit products we have all grown to know and love.
What is happening, unbeknownst to Joe Public, is that these clever bankers are developing brand new structured credit products on their derivatives desks – and appear to be making a mint out of them. But even more amusing, they are now actually wheeler-dealing the very distressed asset backed securities that were the root cause of the catastrophe in the first place. Apparently they can do this because they have ring fenced the dodgy stuff - they call it ‘legacy trades’ - and have reported them as losses. But they are still allowed to knock those same products out to punters at bargain basement prices – say at ten pence in the pound. They trade these products freely, as though the events of a year ago never happened. They call it ‘learning to move on’.
Brown and Darling clearly know that this is happening – or else they are as ignorant as they were a couple of years back. But they have decided that it is wise to turn a blind eye. After all, new tax revenue will flood in to the Treasury on any profits made. Plus ‘economic activity’ will appear to be returning (to London at least).
Sometimes I wonder whether I should return to the old square mile and make a few more bucks whilst the sun still shines. But then I recall my vow: Time to give something back to the community. Yes indeed, it is time to do my old mates a good turn by entering Parliament, God-willing by entering government. Because in years to come it will be my turn to do what Brown and Darling are doing right now: To encourage once more the exuberance of the trading desks of London; to restore unquestioning public faith in the markets; reignite the ‘get rich quick’ mindset of the British people; turn a blind eye to anything that ultimately wins votes; focus on jam, jam, jam today.
I feel that this is my calling: To lead my people as the General leads his troops. For it is the role of the politician, indeed the role of the General, whether times are good or times are bad, to summon those troops out of the trenches, to exhort them to sally forth, and to pursue those glorious spoils that await them up ahead.
By guest blogger Burgoyne


  1. OutrageousFortune2 November 2009 at 11:55

    Were you into the Baroness's valley?

  2. Is this credit derivatives tale based on fact, or is it supposed to be fictitious?

  3. Dealing and Brown turning a blind eye? Never

  4. The story about credit derivatives is absolutely true.
    The 'valley' reference, though, is not (of course)

  5. Who would want to kill the goose that laid the golden egg?
    The only reason that gov let the market overheat in the first place was because they were creaming it themselves in the form of tax revenue.
    All growth and prosperity is based on blind faith (or should we say confidence?)

  6. And it cannot be long before ordinary people are allowed to borrow once more in order to speculate - which was has always been the biggest issue in relation to overheating markets. That is when in fact confidence turns into blind faith and irrational exuberance.