I often wonder how low the senior management of banks can stoop and they always exceed expectations.
This move shows the straightforward contempt of the directors and senior management of these banks for everyone else in the banks and in the world at large.
Are you really surprised that I want these banks nationalised when they fall over again, probably quite soon? And that the nationalisation should require a clear out of the people who do this sort of thing, for good?
If modern banking depends on ethics like these we can easily do without it. We need banking, for sure. But not like this.
He\’s complaining about this FT piece.
So, banks have lots of illiquid bonds on their balance sheets.
At present, things that are illiquid have low values: things that are liquid, like gilts and US Treasuries, have high values.
Banks also have pension fund deficits.
So, banks are moving those, because they\’re illiquid, bonds off their balance sheets and into the pension funds. Pension funds do not care about current illiquidity. They are investing for 20-40 years recall.
The transfers are taking place at the current, low, prices for illiquid bonds, not par or face value. Indeed, some of them are even being transferred at a discount to even current illiquid values.
Further, recall that Ritchie proposes that we should all invest in illiquid bonds for our retirements.
So, we\’ve an exchange that adds value: we\’re moving illiquid assets from people who want liquid ones to people who are quite happy with illiquid ones. We\’re propping up pension funds in exactly the manner Ritchie desires, with bonds that aren\’t going to get traded on the secondary markets, they\’re going to be held to maturity.
And for this Ritchie would nationalise the banks and fire everybody? For doing exactly as he recommends?
There is also a cherry on top of the icing of this particular cake. These pension funds are defined benefit ones, not defined contribution ones. So the banks have not washed their hands of their responsibilities by making these transfers. If those bonds go kablooie they\’ve got to put more money in.
Is there nothing in this world Ritchie understands?