I get asked a lot what would make the public trust the financial industry again. The answer is remarkably simple: all you have to do, I tell the assorted bankers, fund managers and financial advisers who ask, is be trustworthy and be seen to be trustworthy. Bring a little transparency, simplicity and honesty into what you do and all will be well.
I usually say this to enthusiastic nodding all round. But that nodding means nothing. If it did, the front page of the FT wouldn't have carried a story on Wednesday telling us that Rabobank has been fined $1bn for manipulating benchmark interest rates; that Deutsche Bank has put aside €1.2bn to cover various legal penalties; and Lloyds another £750m to cover the compensation it is having to pay out for PPI mis-selling. Its bill so far is £8bn. Real money.
You might say all these sins are in the past. Today's stories are about the reckonings, not the crimes. But that would be to think that all was well today. Not so.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On the front pages on the same day were stories about the way in which the "broad system of fund-management charges lacks transparency" and more on how old pension schemes somehow manage to have total expense ratios on their funds of 2.5%-plus. It's hard to make your money work for you when it is so very occupied working for somebody else.
Then there is the debacle of the Royal Mail privatisation. Most people seem to be over this, but I just can't let it go. One reason we pay our investment bankers so very well is so that they can make the right decisions about things such as the market value of a share in the Royal Mail; it isn't easy to do.
But you might think they should be able to do it within a 10%-15% margin of error. They didn't. They got it wrong by 60%. I could have done that myself as could any of you.
When the history books look back on this, they may also wonder about how this grotesquely undervalued issue was allocated. The asset management businesses of the big banks were bidders for stock. So were the banks' biggest and most profitable trading partners.
I'm £460 richer than I was a few weeks ago. But the largest single investor in the company, a London-based hedge fund with a 5.8% stake, has made a paper gain of tens of millions. Is that really what we wanted?
All these headlines surely make it clear that nothing has really changed in decades. Forty-something readers will remember the Pet Shop Boys track Shopping, released just after a host of underpriced privatisations and before the UK's last big storm in October 1987:
No questions in the House, no give and take There's a Big Bang in the City We're all on the make Our gain is your loss, that's the price you pay I heard it in the House of Commons everything's for sale.
-
Santander axes 1% cashback on spending for Edge account customersSantander will stop awarding cashback on everyday spending for its Edge customers, limiting cashback to just bills
-
Estates without a will hit five-year high – as two in five Brits prepared to go to court over inheritanceFigures from the Ministry of Justice show the number of probate disputes is rising steadily.
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
The public may have reached its limit for tax risesEditor's letter The UK tax burden is now at a 70-year high. And, while there may be some reason to hold off on cuts right now, taxes are too high because the state tries to do too much. Perhaps it should do less, says Merryn Somerset Webb.
-
Things may look bad – but they’re not that badEditor's letter The UK faces plenty of problems, says John Stepek. But things may not be as bad as they look. Our debt to GDP ratio is lower than many other major economies, and high employment means a healthy tax take. That gives the new chancellor room to cut taxes so people can keep more of their own money.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
