Where next for banking #banks #RBS #Lloyds #Barclays

Understanding Financial Leverage

Understanding Financial Leverage (Photo credit: Wikipedia)


So now what?
Barclays and RBS to name but a few have been found out for rate fixing. The likes of JP Morgan have been lying to shareholders. MF Global and PFGBest have been stealing funds from their customers. It’s going to be a hard act to clean up the City.

Next move I expect, will be the reversal of the trend in the 1980’s. Financial organisations will be split into their component parts. A retail bank will be just that. A bank that borrows money from savers and lends out the same money to others at a higher rate. This is called “Margin.” These banks will be dull, boring and their share prices will be stable. Above all else however they will be SAFE. The bank will lend money against secured assets and it’s management will be prudent and earn a modest salary.

Then there will be the ‘racy’ investment bank. It will play with other people’s money and rack up huge positions in derivatives. If the position goes right, the trader will get a bonus and the shareholders will see their asset appreciate.

In the event of armageddon the punters will lose out but critically, the average man in the street won’t suffer. The prudent tax payer will no longer be punished and thousands of honest employees won’t be dragged into the mire.

Common sense, you know it’s where we need to get back to.

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