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Yasmin Alibhai-Brown on the Economic, Academic and Social Costs of Brexit

Published by Anonymous (not verified) on Thu, 16/01/2020 - 9:17pm in

Yasmin Alibhai-Brown issued another stinging attack on Brexit in the I yesterday. She sharply criticised the Brexiteers triumphalism, that made them demand the mass celebration of Britain’s departure from the EU with a ‘festival of Brexit’, churches ringing their bells up and down the country, street parties and ‘a big, fat, jingoistic party in Parliament Square on January 31st’. She compared the proposed celebrations with the forced, state-mandated festivities of North Korea, and quoted the Roman satirist Juvenal on how the rich distracted the plebs with bread and circuses while taking away their liberties. She also bitterly complained about the way Remainers were now seen as somehow treacherous for their rejection of this wave of jingoism despite the closeness of the vote in the referendum. But she also made very good points about the immense cost Brexit had already inflicted on our economy, education, and society. She wrote

According to a detailed report by ratings agency S&P, Brexit has already cost the economy £66bn. It calculates that the amount is more than we paid into the European Union for 47 years. The economy is stagnant. The Union  of the four nations may not hold. Migrants and black, Asian and minority ethnic Britons are experiencing more hostility. Complaints are met with increased hostility or disbelief. Universities are panicking about the potential loss of EU grants and the Erasmus+ scheme – a travel bursary for young people which enriched their lives.

Musicians and artists are losing essential EU connections. Care homes cannot get workers because EU citizens are leaving. Too many feel unwelcome or are discouraged by new, costly and unfair immigration rules. NHS workers from elsewhere are becoming disillusioned.

She then describes how an Asian friend, Priti, told her about the increasing racism she was experiencing.

My friend Priti, a nurse who came over from India five years ago, says: “This is not the country I came into. Not the place my parents loved when they studied here. It has become so impolite. Even when I am changing a bandage or putting drops in their eyes, some patients shout at me to go bac. My colleagues are great but I am going – I have a job in Dubai. They need us but don’t behave well.”

We need these foreign nurses and doctors, who do an excellent job caring for our sick. It’s disgusting that they should be treated with such contempt and abuse.

Brexit is wrecking our economy, placing the Union under potentially devastating stress, and impoverishing our education system, our arts and culture, and denying needed expertise and labour to the NHS. But somehow we are meant to celebrate all this as a victory for Britain.

Alibhai-Brown herself says that Remainers should follow Will Hutton’s advice, and light candles on 31st January before going back to Brexit. She says that we must, for the sake of the younger generation and the future of this once-formidable nation.

I don’t think we can reasonable go on opposing Brexit forever without isolating ourselves politically. But I think we should be trying to get the best possible deal with the EU and trying to forge lasting, beneficial links with it.

While pointing out that so far, it is a massive, astronomically expensive failure.

When Private Eye Stood Up to Zionist Bullying

Published by Anonymous (not verified) on Sat, 11/01/2020 - 9:31pm in

Yesterday I bought a copy of Patrick Marnham’s The Private Eye Story: The First 21 Years (London: Andre Deutsch/Private Eye 1982). This was partly because I still have some affection and respect for the magazine for the really good work it has done exposing the effects of austerity and privatisation. But it’s also because I’m still really perplexed at it continuing to push the anti-Semitism smears. And there was a time when it actually stood up to Zionist bullying and accusations of anti-Semitism.

The book tells how the Israelis attacked Private Eye as anti-Semitic because of its reports of Israeli atrocities during the 1967 war. They also caught the Zionist Federation attempting to close down criticism of Israel in the Guardian by threatening to withdraw Marks and Spencer’s advertising. Marnham writes

In the first half of 1966, sales were 39,868. In the first half of 1972, when Paul Foot left, they were 98,047. Not all the readers were equally pleased about this success. Among the least enchanted were Zionist sympathisers who objected to Private Eye reporting Israeli atrocities after the 1967 war.

In fact that war found Private Eye, with the rest of the press, generally sympathetic to Israel. But the balance quickly shifted as news of events behind the Israeli publicity screen began to reach Greek Street. An article about Moshe Dayan’s political ambitions (‘One Eyed Man for King’) in July 1967 led to many cancelled subscriptions. By November the novelist Mordechai Richler had become so offended by Private Eye’s line that he complained in The Observer that the paper was making jokes worthy of the Storm Trooper, the organ of the American Nazi party. Shortly afterwards two Labour MPs who were ardent Zionists followed this up by likening Private Eye to Der Sturmer, the organ of the German Nazi party in the thirties. Unlike Der Sturmer, Private Eye published these letters, although at that time it had no regular readers’ letter column.

In 1972 Private Eye was able to show how Zionists brought pressure on more orthodox publications. It revealed that Lord Sieff, then president of the Zionist Federation of Great Britain and chairman of Marks and Spencer, had written to The Guardian in 1967 to protest against reports of the Middle East war, while threatening to withdraw all Marks and Spencer advertising unless there was an improvement. After the editor of The Guardian had been confronted by the source of the Eye’s story, he agreed that the letter had indeed been written. (pp. 127-9).

Marnham also gives the magazine’s reply to accusations that it is anti-Semitic. Former editor Richard Ingrams felt that Jews were now too sensitive, and many of those accusing the magazine of anti-Semitism were Jews, who had been caught in wrongdoing. This passage contains a nasty racial epithet for Jews, which I’ve censored. It is, however, in full in the original.

To the criticism that Private Eye is anti-semitic Ingrams replies that it is no more anti-semitic than it is anti-any other minority. He told Ann Leslie of the Daily Mail that he thought the Jews had ‘become much too sensitive; they should be more tolerant of criticism, as they used to be.’ Anne Leslie interpreted this to mean that he yearned for a Golden English Age, ‘when Jews knew their place and laughed bravely when called “***s”; not a word Private Eye has ever used, though quite a useful one for adding a little read racialist meat to Miss Leslie’s article.

Others, apart from Zionists, who accuse Private Eye of anti-semitism are those who are attacked by it. Esther Rantzen once seriously claimed that Private Eye only wrote about her husband, Desmond Wilcox, because she herself was ‘both a successful woman and a Jew’. Sir James Goldsmith also tried to explain the Eye’s hostility on the grounds that he was a Jew. The Jewish Chronicle was not very impressed. Its columnist Ben Azai wrote on 13 May 1977: ‘Apart from an intermittent concern about Israel, Goldsmith was only vaguely aware of his Jewishness until Private Eye began what he regarded as a personal vendetta against him. Scratch a semi-Jew and one will discover a full one.’ (p. 205).

The Eye has also been accused of anti-Semitism for its ‘In The City’ column, where many of the crooks and fraudsters it has exposed have been Jewish. The magazine also strongly rebuts this accusation.

The only remark made about ‘Slicker’ by Richard which I really object to is his line over Jews. When he is asked why people say Private Eye is anti-semitic he usually says that there just happen to be a lot of Jews in the City and so we happen to expose a lot of Jewish crooks. In ‘Slicker’ has attacked more non-Jews than Jews. If Jews are there it is because they are crooks, not Jews. And we have twice run stories in ‘Slicker’ attacking the City for being anti-Semitic’. (pp. 135-6).

The Eye still runs some excellent articles criticising Israel. In last fortnight’s issue, for example, it ran a story about how the Israeli authorities were not releasing the bodies of Palestinians they’d shot as ‘terrorists’ for burial. But this has not stopped it pushing the line with the rest of the press that Corbyn and his supporters are anti-Semitic, and that the very credible, authenticated allegations of Israeli involvement in the smear campaign is nothing but ‘conspiracy theories’.

I intend to talk about this in greater depth in another article, but I think there are several reasons for it. Firstly, while the Eye was first left-wing, that shifted during the Wilson era, as the book says, when it attacked the Labour governments of the day. Its network of contacts extends into the political establishment. American left-wing commenters and activists like Jimmy Dore have said that it’s because of this that the American media simply regurgitates the material they’ve been fed by establishment politicos. They’re afraid that if they criticise the people giving them this information and granting interviews, it’ll all dry up. I think the same is probably true of the Eye. I’ve also pointed out how the magazine’s founders were all very definitely members of the establishment, as is its current editor, Ian Hislop. And while there was a time when the magazine was disreputable – so much so that the Monday Club once accused it of being an organ of Commie subversion – it’s now very respectable. And I also think another strong motive is fear. Hislop and the rest may well be afraid that if they step out of line, they will suffer the same treatment as Corbyn and Momentum. And one of the accusations against the Eye is that it is the victim of its success. Other magazines were able to pursue a solid left-wing line, because they didn’t have the Eye’s assets. But the Eye isn’t poor, and so successful libel actions against it are profitable. Hislop and the others may simply feel that supporting the people – including Jews – who’ve been falsely accused simply isn’t worth it.

Privatisations Not Nearly as Popular as Maggie and the Tories Claim

Published by Anonymous (not verified) on Sat, 04/01/2020 - 2:27am in

I found this extremely interesting snippet in Oliver Huitson’s chapter on the way the media, including the Beeb, promoted the Tory privatisation of the NHS in Jacky Davis and Raymond Tallis’ NHS – SOS. Huitson states that despite the massive media bias and their highly distorted reporting, there was a sizable chunk of the British public that fully understood the issues involved and did not like it one little bit. He goes on to write that trust in politicians is at an all time low – 19 per cent of people trust them, just two per cent above journos at 17 per cent (p. 171). And then there’s this passage in which he explains that privatisation wasn’t as nearly as popular as Thatcher and her poodle press claimed:

It should also be remembered that the public have now had thirty years’ experience of the privatisation of state assets and services, as well as the rhetoric that accompanies such moves, and they are increasingly cynical about the purported aims and efficacy of such ‘reforms’. Margaret Thatcher spent millions of pounds marketing her privatisations to the public, yet polling revealed that support for this policy never rose above 50 per cent. In the wake of the Iraq War, the expenses revelations, the financial crash and the phone-hacking scandal, public trust in the political class as a whole, including in the national media, is extremely low. (p. 172).

For the past forty years we’ve had it rammed down our throats that privatisation was not only necessary, it was massively popular. Everyone was right behind Maggie and Major on the issue, and if you weren’t, you were an evil Commie. But like neoliberalism and austerity generally, it’s a massive lie.

No wonder the Tory media are now screaming that Labour lost because Corbyn was ‘too far’ left, and only a return to Blairism will make the party popular.

The Beeb’s Biased Reporting of NHS Privatisation

The Corporation’s General Right-wing Bias

The BBC is infamous for its flagrant right-wing bias. Writers and experts like Barry and Savile Kushner in their Who Needs the Cuts, academics at the media research centres of Glasgow, Edinburgh and Cardiff Universities, and ordinary left-wing bloggers like Mike and Zelo Street have pointed out time and again that the corporation massively prefers to have as commenters and guests on its show Conservative MPs and spokespeople for the financial sector on its news and political comment programmes, rather than Labour MPs and activists and trade unionists. The Corporation relentless pushed the anti-Semitism smears against Jeremy Corbyn and the Labour party. But it has also promoted the privatisation of the NHS too through its biased reporting.

Biased Towards NHS Privatisation

Jacky Davis and Raymond Tallis’ book on the privatisation of the NHS, NHS – SOS, has a chapter by Oliver Huitson, ‘Hidden in Plain Sight’, discussing the biased reporting of the NHS’s privatisation by the media in general. Here, however, I will just confine myself to describing the Corporation’s role. The Beeb was frequently silent and did not report vital pieces of information about successive privatisations, such as the involvement of private healthcare companies in demanding them and conflicts of interest. On occasion, this bias was actually worse than right-wing rags like the Daily Mail. Although these ardently supported the NHS’ privatisation, they frequently reported these cases while the Beeb did not. When the moves towards privatisation were reported, they were often given a positive spin. For example, the establishment of the Community Care Groups, groups of doctors who are supposed to commission medical services from the private sector as well as from within the NHS, and which are legally allowed to raise money from the private sector, were positively described by the Corporation as ‘giving doctors more control’.

Lack of Coverage of Private Healthcare Companies Role in Privatisation

David Cameron and Andrew Lansley did not include Lansley’s Health and Social Care Bill in the Tories’ 2010 manifesto, because they didn’t believe they’d win the election if they did. But in all the two years of debate about the bill, the Beeb only twice reported doubts about the bill’s democratic mandate. (p.152). In October 2010, Mark Britnell was invited to join Cameron’s ‘kitchen cabinet’. Britnell had worked with the Labour government and was a former head of commissioning for the NHS. But he was also former head of health for the accountancy firm, KPMG, which profits greatly from government privatisation and outsourcing. He declared that the NHS would be shown ‘no mercy’ and would become a ‘state insurance provider, not a state deliverer’. But the BBC decided not to report all this until four days after others had broken the story. And when they did, it was only to explain a comment by Nick Clegg about how people are confused when they hear politicians stating how much they love the NHS while at the same time demanding its privatisation. (pp.153-4).

On 21 November 2011 Channel 4 News reported that they had obtained a document which showed clearly that GP commissioning was intended to create a market for private corporations to come in and take over NHS services. But This was only reported by the Groaniad and the Torygraph. The rest of the media, including the Beeb, ignored it. (pp. 156-7).

Lansley was also revealed to have received donations from Andrew Nash, chairman of Care UK, another private healthcare firm hoping to profit from NHS privatisation. But this also was not reported by the Corporation. (pp. 157-8).

In January 2011 the Mirror reported that the Tories had been given over £750,000 from donors with major connections to private healthcare  interests since David Cameron had become their chief in 2005. But this was also not mentioned by the Beeb. (pp. 158).

The Mirror also found that 40 members of the House of Lords had interests in NHS privatisation, while the Social Investigations blog suggested that it might be as high as 142. The BBC, along with several papers, did not mention this. (pp. 158-9).

Sonia Poulton, a writer for the Heil, stated on her blog that 31 Lords and 18 MPs have very lucrative interests in the health industry. But this was also ignored by the Beeb, along with the rest of the media with the exception of the Guardian. (p. 159).

The Tory MP, Nick de Bois, was a fervent support of the Tories’ NHS privatisation. He is a majority shareholder in Rapier Design Group, which purchased Hampton Medical Conferences, a number of whose clients were ‘partners’ in the National Association of Primary Care, another group lobbying the Tories for NHS privatisation. This was also not reported by the Beeb. (pp. 159-60).

The Beeb also chose not to report how Lord Carter of Coles, the chair of the Co-operation and Competition Panel charged with ensuring fair access to the NHS for private healthcare companies, was also receiving £799,000 per year as chairman of McKesson Information Solutions, part of the massive American McKesson healthcare company. (p. 160).

There were other links between politicos, think tanks, lobby groups and private healthcare companies. The health regulator, Monitor, is dominated by staff from McKinsey and KPMG. But this also isn’t mentioned by the press. (pp. 160-1).

Beeb Falsely Presents Pro-Privatisation Think Tanks as ‘Independent‘

The BBC, along with much of the rest of the media, have also been responsible for misrepresenting spokespeople for pro-privatisation lobby groups as disinterested experts, and the organisations for which they speak as just independent think tanks. This was how the Beeb described 2020health.org, whose chief executive, Julia Manning, was twice invited onto the air to discuss the NHS, and an entire article was given over to one of her wretched organisation’s reports. However, SpinWatch reported that its chairman, former Tory minister Tom Sackville, was also CEO of the International Federation of Health Plans, representing of 100 private health insurance companies. Its advisory council includes representatives of AstraZeneca, NM Rothschild, the National Pharmaceutical Association, Nuffield private hospital group, and the Independent Healthcare Advisory Services. (p. 162).

Another lobby group whose deputy director, Nick Seddon, and other employees were invited onto the Beeb to discuss the proposals was Reform. Seddon was head of communications at Circle, the first private healthcare company to take over an NHS hospital. Seddon’s replacement at Circle was Christina Lineen, a former aide to Andrew Lansley. None of this was reported by the Beeb. Their corporate partners included companies like Citigroup, KPMG, GlaxoSmithKline and Serco. Huitson states ‘Through Seddon’s and other Reform Staffs’ appearances, the BBC may have facilitated private sector lobbying on a publicly funded platform without making relevant interests known’. (163).

Beeb Did Not Cover Protests and Opposition to Bill

Pages 164-5 also discusses the Beeb’s refusal, with few exceptions, to interview critics of Lansley’s Health and Social Care Bill, the rightwing bias of panels discussing it and how the Beeb did not cover protests against it or its discussion in parliament. Huitson writes

At the BBC opportunities were frequently missed to provide expert opposition to the bill on a consistent basis. the RCGP’s Clare Gerada was largely the exception to this rule. Many of the most well-known and authoritative critics of the bill – the likes of professors Allyson Pollock or Colin Leys, doctors Jacky Davis and Wendy Savage from Keep Our NHS Public – never appeared on the BBC to discuss the plans. Davis recalls being invited to appear on the BBC a number of times but the item was cancelled on every occasion. ‘Balance’ is supposedly one of the BBC’s primary objectives yet appearing on the Today programme of 1 February 2012 to discuss the bill, for instance, were Shirley Williams (who voted in favour of the bill, however reluctantly), Nick Seddon of ‘independent’ Reform (pro-Bill), Steve Field (pro-Bill) and Chris Ham (pro-Bill). It’s difficult to see how that is not a breach of BBC guidelines and a disservice to the public. One of the fundamental duties of an open media is to ensure that coverage is not skewed towards those with the deepest pockets. And on that issue the media often performed poorly.

Further criticism of the BBC stems from its curious lack of NHS coverage during the climactic final month before the bill was passed in the House of Lords on 19 March. One such complaint came from blogger and Oxford Professor of Developmental Neuropsychology Dorothy Bishop, who wrote to the BBC to ask why it had failed to cover a number of NHS stories in March, including an anti-bill petition that had been brought to the House by Lord Owen, carrying 486,000 signatures of support. In reply, the BBC confirmed that the bill had been mentioned on the Today programme in March prior to the bill’s passing, though just once. Bishop replied:’So, if I have understood this right, during March, the Today programme covered the story once, in an early two-minute slot, before the bill was passed. Other items that morning included four minutes on a French theme park based on Napoleon, six minutes on international bagpipe day and eight minutes on Jubilee celebrations.’

Other BBC omissions include Andrew Lansley being heckled by angry medical staff at a hospital in Hampstead, as reported by both the Mail and Sky News. On 17 March a peaceful anti-bill march took place in central London. Those out protesting for their national health service found themselves kettled by riot police despite being one of the most harmless-looking crowds you’re ever likely to see. The protest and the shameful police response were completely ignored by the media, except for a brief mention on a Guardian blog. On social media numerous examples have been reported of protests and actions opposing the bill that were entirely absent from national coverage.

Then, on 19 March, the day of the final vote on the bill, the BBC ran not a single article on the event, despite this being one of the most bitterly opposed pieces of legislation in recent history – it was as if the vote was not taking place. The next day, with the bill passed, they ran a full seven articles on the story. Three days after the bill passed, Radio 4 broadcast The Report: ‘Simon Cox asks: why is NHS reform mired in controversy?’ Why this was not broadcast before the Lords’ vote is a mystery. 

When the Bill was passed, the bill scrolling across the BBC News’ screen ran ‘Bill which gives power to GPs passes’. (166). Huitson remarks that when the Beeb and the other news networks reported that the Bill gave power to GPs and allowed a greater role for the private sector, it was little more than regurgitating government press releases. (p. 168).

Beeb Bias Problem Due to Corporation’s Importance and Domination of Broadcast News

Huitson also comments on the specific failure of the Beeb to provide adequate coverage of NHS privatisation in its role as one of the great British public institutions, the dominant role it has in British news reporting. On pages 169-70 he writes

Campaigners may not expect more from the Sun but they certainly do from the BBC, given its status as an impartial public service broadcaster whose news gathering is supported directly by licence fee payers. The BBC accounts for 70 per cent of news consumption on television. Further, the BBC accounts for 40 per cent of online news read by the public, three times that of its closes competitor, the Mail. Quite simply, the BBC dominates UK news. The weight given to the BBC here is not purely down to its dominance, however, but also because, along with the NHS, the BBC remains one of our great public institutions, an entity that is supposedly above commercial pressures. Many of the stories ignored by the BBC were covered by the for-profit, right-wing press, as well as the Guardian and Channel 4, so the concern is not that the organisation failed to ‘campaign’ for the NHS, but that it failed to report facts that other outlets found newsworthy.

The BBC’#s archive of TV and radio coverage is neither available for the public to research nor technically practical to research, but there are a number of reasons for confidence that their online content is highly indicative of their broader output. First, BBC online is a fully integrated part of the main newsroom rather than a separate operation. Consequently, TV and radio coverage that can be examined is largely indistinguishable from the related online content, as demonstrated in the examples given above. During the debate of Lansley’s bill, the BBC TV and radio were both subject to multiple complaints, the figures for which the BBC has declined to release.

Beeb’s Reporting of NHS Privatisation as Biased as Coverage of Miners’ Strike

He also compares the Beeb’s coverage of the bill, along with that of the rest of the media, to its similarly biased reporting of the miners’ strike.

The overall media coverage of the health bill brings to mind a quote from BBC radio correspondent Nicholas Jones, on the BBC’s coverage of the miners’ strike: ‘stories that gave prominence to the position of the National Union of Miners could simply be omitted, shortened or submerged into another report.’ (pp. 172-3).

Conclusion

The Beeb does produce some excellent programmes. I really enjoyed last night’s Dr. Who, for example. But the right-wing bias of its news reporting is now so extreme that in many cases it is fair to say that it is now a propaganda outlet for the Tory party and big business. It’s utterly indefensible, and in my view it will only be reformed if and when the newsroom and its managers are sacked in its entirety. In the meantime, Boris and the rest of the Tories are clamouring for its privatisation. Godfrey Bloom, one of the more prominent Kippers, has also put up a post or two in the past couple of days demanding precisely that.

If the Beeb was genuinely impartial, it would have defenders on the Left. But it is rapidly losing them thanks to its bias. And to the Tories, that’s also going to be a plus.

Thanks to the Beeb’s own Tory bias, it’s going to find it very hard to combat their privatisation.

And in the meantime they will have helped destroy the most valued of British institutions, the NHS, and free, universal healthcare to Britain’s citizens.

George Soros and Genuine Neo-Nazi Conspiracy Theories

Left-wing and anti-racism bloggers, commenters and campaigners have pointed out again and again how right-wing conspiracy theories about the supposedly nefarious activities of the financier George Soros, such as those promoted by the far-right Fidesz government in Hungary, conform to the poisonous Nazi conspiracy theories about evil Jewish bankers. Mainstream Conservatives have also blamed Soros’s influence for opposition to their policies in Britain. For example, Jacob Rees-Mogg, apart from accusing John Bercow and another Jewish politico of being ‘Illuminati’ – which has its own anti-Semitic overtones – also claimed that George Soros was financing the Remain campaign.

But the conspiracy theories about George Soros don’t just resemble Nazi mythology. They are a part of it, at least in some of the material that arose from the neo-Nazi fringe in the 1990s. In his book on contemporary Nazi paganism, Black Sun: Aryan Cults, Esoteric Nazism and the Politics of Identity (New York: New York University Press 2002) Nicholas Goodrick-Clarke discusses the work of Jan van Helsing, real name Jan Udo Holey, and his 1993 Geheimgesellschaften und ihre macht im 20. Jahrhundert (Secret Societies and their Power in the 20th Century). Two years later, in 1995, Helsing published Geheimgesellschaften 2. This consisted of his extended responses to interview questions. As you can imagine, despite Helsing’s avowed denials, it is a deeply anti-Semitic book. Goodrick-Clarke writes

Here he denies the charge of anti-Semitism, claiming Jewish friends and colleagues, before making the disingenuous distinction between Semitic Hebrews and Ashkenazi Jews or Khazars, who are his real antagonists in the persons of Rothschilds, Warburgs, the English royal family (!), Marx, Lenin, Stalin, etc. This ploy recapitulates the progressive disqualification of Jews from their Israelite heritage in Christian Identity doctrine. He then reprints several pages of Dr. Johannes Pohl’s vicious translation of the Talmud that was published by the Nazi Party in 1943 as anti-Semitic propaganda. On the Protocols, Helsing simply denies that their authenticity is an important issue: they exist and they are being applied. To complete his anti-Jewish rotomontade, he reveals that former Chancellor Helmut Kohl was born Henoch Koch and shows how George Soros is ruining East European economies through his liberal economic writ. Helsing’s dubious sources, his constant repetition of Jewish names as members of private and public organisations, and above all his emphasis on the assets and powerbroking influence of the Rothschilds as the top Illuminati family leave no doubt that his conspiracy theories are aimed at Jewish targets. (P. 296, my emphasis).

In case any of this sounds remotely credible, it’s worth noting that the royal family aren’t Jewish and neither were Lenin or Stalin. Stalin definitely not – he was a bitter anti-Semite. Helmut Kohl, the former German chancellor, wasn’t Jewish either. Van Helsing also believed that there’s a secret Nazi underground base in Antarctica, as well as colonies of other Reich Germans in the Canaries, the San Carlos area of Argentina, the Bermuda Triangle and the Himalayas. They also have a standing army of 6 million soldiers, including immigrants from Aldebaran. Yes, van Helsing believes the Nazi saucer mythology, in which Adolf and his band of thugs were helped by aliens from the star Aldebaran, who told them how to build flying saucers. Of which the Reich Nazis have an armada of 22,000.

When Jacob Rees-Mogg or the other Tories rant about George Soros, they are repeating an anti-Semitic conspiracy theory and should be criticised for it. But Conservative anti-Semitism has received nowhere near the amount of attention as the anti-Semitic smears against Corbyn and the Labour party. This is despite anti-Semitism being far lower in Labour. John Mann, the Tories’ anti-Semitism tsar, has shown himself completely uninterested in investigating it in the Tories, and blocked and called the children’s poet, Holocaust educator and broadcaster Michael Rosen a troll when he tried to draws Mann’s attention to some examples.

This shows how fake the Tories’ concern about anti-Semitism really is, just as the inclusion of George Soros in van Helsing’s wretched, vile anti-Semitic conspiracy theories show the real Fascism in similar fears about the financier in Tories like Rees-Mogg.

The History Book on the TUC from Its Beginnings to 1968

The History of the T.U.C. 1868-1968: A Pictorial Survey of a Social Revolution – Illustrated with Contemporary Prints and Documents (London: General Council of the Trades Union Congress 1968).

This is another book on working class history. It’s a profusely illustrated history of the Trades Union Congress from its origins in 1868 to 1968, and was undoubtedly published to celebrate its centenary.

Among the book’s first pages is this photograph show the TUC’s medal, below, which reads: Workingmen of Every Country Unite to Defend Your Rights.

There’s also these two illustrations on facing pages intended to show the TUC as it was then and now.

After the foreword by the-then head of the TUC, George Woodcock, and the list of General Council in 1967-8, the book is divided into four sections on the following periods

1868-1900, on the first Trades Union Congress and the men who brought it to birth.

1900-1928, in which the TUC was consulted by Ministers and began to take part in public administration.

1928-1940, which are described as the TUC’s formative years and the fight for the right to be heard.

and 1928-1940, in which wartime consultation set the pattern for peacetime planning.

These are followed by lists of trade unions affiliated to the TUC circa 1968 and the members of the parliamentary committee from 1868 and the General Council from 1921.

The text includes articles and illustrations on the Royal Commission of Inquiry into trade unions, including a photograph of Queen Victoria’s letter; from the beehive of 1867 to the TUC of 1967; the early leaders of the TUC and the political causes at home and abroad, for which they rallied trade union support; some of the events that led to the TUC’s foundation and the Royal Commission on Trade Unions; the TUC and the Criminal Law Amendment Act; working men voting during the dinner hour; working hours and conditions which the TUC wanted to reform, particularly of women and children; Punch cartoon of the sweated workers exploited for the products displayed at the Great Exhibition; Alexander McDonald, the man behind the miners’ unions; campaigns for compensation for industrial injury and safeguards for sailors; farm labourers’ unions, the public and the church; the advent of state education and the birth of white collar unions; mass unemployment and demonstrations in the Great Depression of the 1880; the trade union leaders of the unemployed and their political allies; squalor and misery in London; forging the first link with American unions; the TUC on the brink of the 20th century; the ‘new unionism’ and the matchgirls’ strike; the dockers’ strike of 1889; the birth of the Labour Party in 1906; passage into law of the TUC’s own trade union charter; the trade unions and the beginnings of the foundation of the welfare state by the Liberals; Women trade unionists, the Osborne Judgement; the introduction into Britain of French and American syndicalism; the great dock strike of 1911, and the great transport strike of 1912; the Daily Herald; Will Dyson’s cartoons; the TUC on the eve of World War I; the War; the wartime revolution in trade unions; the TUC’s contribution to the war effort; rise of shop stewards; the impact of the Russian Revolution on the British Labour movement; peace time defeat; the appearance of Ernest Bevin; the replacement of the Parliamentary Committee by the General Council in the TUC in 1921; the first proposal for the nationalisation of the coal mines; 1924, when Labour was in office but the trade unions were left out in the cold; the gold standard and the General Strike; the Strike’s defeat and punitive Tory legislation; the TUC’s examination of union structure after the Strike; TUC ballots the miners to defeat company unionism; Transport House in 1928; the Mond-Turner talks and consultations between workers’ and employers’ organisations; Walter Citrine and the IFTU; the 1929 Labour government; opposition to McDonald-Snowden economies; McDonald’s 1931 election victory; propaganda posters for the National Government; the 1930s; the state of industry and TUC plans for its control; union growth in the young industries; young workers fighting for a fair chance; the TUC and the British Commonwealth; the Nazi attack on the German unions; the TUC and the international general strike against the outbreak of war; the waning of pacifism inside the TUC; the Labour Movement and the Spanish Civil War; Neville Chamberlain and ‘Peace in our Time’; summer, 1939, and the outbreak of World War II; Churchill’s enlistment of the TUC and Labour Party in government; the coalition government and the unions; TUC organises aid to Russia after the Nazi invasion; plans for post-War reconstruction; the TUC, godfather to the Welfare State; the Cold War; the bleak beginning of public industries in 1947; David Low’s cartoons of the TUC; the drive for productivity; the Tories and the Korean War; TUC aid to Hungary and condemnation of Suez; the official opening of Congress House; TUC intervention in industrial disputes; trade union structure; from pay pause to planning; trade unionists given a role in industry; government pressure for a prices and incomes policy; TUC overseas contacts; and recent changes to the TUC.

The book’s an important popular document of the rise of the TUC from a time when unions were much more powerful than they were. They were given a role in government and industrial movement. Unfortunately, the continuing industrial discontent of the post-War years have been played on by nearly every government since Thatcher’s victory in 1979. The result is stagnant and falling wages, increasingly poor and exploitative conditions and mass poverty and misery. All justified through Zombie laissez-faire economics. Corbyn offered to reverse this completely, and give working people back prosperity and dignity. But 14 million people were gulled and frightened by the Tories and the mass media into rejecting this.

Strong trade unions are working people’s best method for expressing their economic and political demands along with a strong Labour party, one that works for working people, rather than solely in the interest of the employers and the financial sector. Which is why the Tories want to destroy them and are keen that books like these should be forgotten.

Let’s fight against them, and make sure that books like this continue to inspire and inform working class people in the future.

 

Trust in Beeb Falls Below 50 Per Cent

A few days ago Zelo Street put up an article commenting on a letter Joel Benjamin sent to the Beeb’s Director-General complaining about the corporation’s massive pro-Tory, anti-Labour, anti-working class bias. Benjamin had taken the step of writing to Tony Hall directly because he didn’t trust the Corporation’s complaints service. He stated that it was

a private contract administered by criminally negligent outsourcing company CAPITA. Experts in dull, pro-forma response letters, which fail to address the complainants concerns and a symbol of much that has gone awry at the BBC and in neoliberal, corporatist Britain. 

He also listed the following specific examples of the Beeb’s bias towards the Tories.

To which Zelo Street added a few more of their own.

‘(a) the use of newspaper columnists, editors and press hangers-on in paper reviews, allowing the press to mark their own homework and therefore perpetuate right-wing bias,(b) the blatant use of the BBC’s Sunday Politics by veteran presenter Andrew Neil to push climate change denial, and (c) Neil and political editor Laura Kuenssberg, along with Robbie Gibb, orchestrating a resignation from the shadow cabinet live on the Daily Politics just before PMQs to the benefit of the Tories…(d) Ms Kuenssberg effectively taking dictation from Vote Leave’s Matthew Elliott over the campaign breaking electoral law, (e) Refusal to discuss the misbehaviour of Cambridge Analytica, to the extent of having Carole Cadwalladr shouted down during a paper review on The Andy Marr Show™, (f) a whole string of instances where the Question Time audience has been infiltrated by Tory plants, and (g) loading panel shows with right-wing pundits and other hangers-on.’

Benjamin particularly resented the Beeb’s dismissive attitude towards criticism. He wrote

Instead of BBC management being responsive to public criticism this election, licence fee payers were subject to Francesca Unsworth, the BBC’s Director of News and Current Affairs – publishing a letter in the Guardian – framing complainants as peddlers of “conspiracy theories” in the wake of a highly visible series of self-ascribed “mistakes,” each, coincidentally, benefitting Boris Johnson and the Conservatives, whilst harming the Labour opposition. Despite the pushback to Unsworth’s article, you then chose to to double down, blame licence fee payers, and cry conspiracy

He also remarked that the Corporation’s bias was

clearly unacceptable, yet a natural consequence of a broadcaster answerable not to the public, but directly to an increasingly brutalising, fact free, and tone deaf Government, that ultimately wants the BBC abolished. In this context, your servile, pro-establishment political coverage looks to fee payers like feeding Conservative crocodiles, in the vain hope the BBC get eaten last.

See: https://docs.google.com/document/d/1T55oQGHV1bJUzljHSE3akPlguzrmZCYcTDZ53WBGdGs/edit

But what is also remarkable is the extent to which people share this dissatisfaction with the Beeb. Zelo Street reported that a poll by YouGov at the start of this month – December 2019 – had found that trust in the BBC had fallen to 44 per cent. 48 per cent, on the other hand, distrusted the Corporation. This was a marked drop from October, when 51 per cent of respondents to the survey trusted the Corporation, and 41 per cent didn’t.

The Street remarks that not everyone will share Benjamin’s views and his wider analysis, but they may understand his frustration, particularly at the Corporation’s refusal to listen to the people that actually support it by paying the licence fee.

He also warns that the Tories are determined to inflict further damage on the Beeb in order to create an utterly compliant media landscape. And if that happens, Hall and the rest of them may find themselves out of a job. Unless they actually start listening to their critics, and realise that there is a problem.

https://zelo-street.blogspot.com/2019/12/bbc-charge-sheet-looks-grim.html

Now I dare say that many of those, who distrust the Beeb come from the Right. People who think that the Beeb really is biased against the Conservatives, because Johnson tells them it is while running away from interviews, his comments echoed and supported by the right-wing press. I’ve come across complaints from those on the extreme Right, who despise the Corporation because it generally supports multiculturalism, feminism and gay rights. Which in their view makes it anti-White and anti-British.

But the Left have every reason not to trust the Beeb. Joel Benjamin and Zelo Street are right: the Corporation has been massively biased. And not just in this election either. One commenter to Zelo Street’s post reminded readers how the Corporation was also biased in the referendum on Scots independence.  They were. I remember how Nick Robinson was so dissatisfied with Alex Salmond’s very full answer to a question on the effect independence would have on the Scottish financial sector, that it was progressively cut down during subsequent news bulletins with Robinson claiming that Salmond had made an unsatisfactory answer. Finally it disappeared altogether, and Robinson claimed the-then leader of the SNP hadn’t answered it. Which is a piece of newspeak worthy of Orwell.

I despise the corporation’s political bias and its knee-jerk contempt for its critics. Any and all criticism of the Corporation is met with the same response: that the Beeb is criticised for bias by both Left and Right, with the implication that the Beeb isn’t biased and it’s all somehow in the critics’ imagination. But studies cited by Benjamin in his letter show that isn’t the case. And in some of the recent instances of glaring bias, the Beeb tries to excuse them by claiming that it was all a mistake.

This won’t wash. Not any more.

The Beeb does make some excellent programmes. But I’m sick and tired of its massive political bias to the point where I’d happily see nearly all their newsroom sacked. Johnson has said that he’s considering decriminalising nonpayment of the licence fee. And the Tories and their donors, particularly Rupert Murdoch, have been clamouring for the Beeb’s privatisation for nearly four decades.

The Beeb may soon find it needs all the help it can get. But it’s rapidly losing them on the Left, and may well end up regretting this.

 

 

Banking System Vulnerability: Annual Update

Published by Anonymous (not verified) on Wed, 18/12/2019 - 11:00pm in

Tags 

banks, liquidity

Kristian Blickle, Fernando Duarte, Thomas Eisenbach, and Anna Kovner

 Annual Update

A key part of understanding the stability of the U.S. financial system is to monitor leverage and funding risks in the financial sector and the way in which these vulnerabilities interact to amplify negative shocks. In this post, we provide an update of four analytical models, introduced in a Liberty Street Economics post last year, that aim to capture different aspects of banking system vulnerability. Since their introduction, vulnerabilities as indicated by these models have increased moderately, continuing the slow but steady upward trend that started around 2016. Despite the recent increase, the overall level of vulnerabilities according to this analysis remains subdued and is still significantly smaller than before the financial crisis of 2008-09.

Vulnerability Measures

We consider the following measures that are based on models developed by New York Fed staff or adapted from academic research.

  • Capital vulnerability. This index measures how well capitalized banks are projected to be after a severe macroeconomic shock. The measure is constructed using the CLASS model, a top-down stress testing model developed by New York Fed staff. Using the CLASS model, we project the regulatory capital ratio of each large banking organization under a macroeconomic scenario equivalent to the 2008 financial crisis. The vulnerability index measures the aggregate amount of capital (in dollars) that would be needed under that scenario to bring each banking firm’s capital ratio up to at least 10 percent.
  • Fire sale vulnerability. This index measures the magnitude of systemic spillover losses among banks caused by asset fire sales under hypothetical stress scenarios, and is expressed as a fraction of system capital. In this New York Fed staff report, “Fire-Sale Spillovers and Systemic Risk,” we show that an individual bank’s contribution to the index predicts its contribution to systemic risk five years in advance.
  • Liquidity stress ratio. This ratio captures the liquidity mismatch between a bank’s assets and liabilities during a liquidity stress scenario. It is defined as the ratio of expected cash outflows in times of stress to the size of the bank’s portfolio of liquid assets. If the ratio is high, it means that there may be insufficient liquid assets to meet expected outflows in stressful conditions.
  • Run vulnerability. This measure gauges a bank’s vulnerability to runs, taking into account both liquidity and solvency. It combines a theoretical framework with projections of stress deterioration in bank capital from the CLASS model. An individual bank’s run vulnerability is the critical fraction of unstable funding that the bank needs to retain to prevent insolvency.

Trends in Vulnerability

The chart below shows how the different aspects of vulnerability have evolved since 2002, according to the four measures.

 Annual Update

Next, we discuss developments of the individual measures in more detail.

Capital Vulnerability

The capital vulnerability index has increased over the past year, continuing a trend of sideways or upward movement since 2016.

Movements in the capital gap reflect the combination of changes in the starting level of capital, as well as changes in the fall in capital under an adverse macroeconomic realization forecast by the model. Starting capital ratios have increased in the past year, but have not yet returned to prior levels after the fall related to the Tax Cut and Job Act in the second quarter of 2017 (see the blue line on the left panel of the chart below). The fall in capital—the difference between the starting point of the common equity tier 1 (CET1) ratio and that at the end of the crisis redux scenarios—has also increased over the past year (see the right panel of the chart below).

 Annual Update

The evolution of the fall in capital is a way of understanding how, subject to the same scenario, bank capital is vulnerable. Although the capital fall is variable from quarter to quarter, the fall has increased in the past year (by 32 basis points), continuing an overall trend since 2014 of increasing risk should a scenario similar to that of the crisis be realized. This increase in the fall in capital arises primarily from weaker profitability relative to a year ago.

Fire-Sale Vulnerability

The fire-sale vulnerability index has been increasing slowly but steadily in the last three years, with a cumulative growth of 18 percent. Despite this recent climb, the level of the index remains low compared to its pre-2014 levels.

 Annual Update

To shed some light on the reasons why the index evolves the way it does, the chart above decomposes the index into the overall size of the banking system (total assets), its leverage, and its “connectedness.” The increasing trend since 2016 can be attributed in equal parts to increases in leverage and connectedness, while the size component has remained essentially flat.

Another way to understand the index is by studying the contribution of individual asset classes to the index. The five asset classes that contribute the most as of the second quarter of 2019 are agency MBS, fed funds and repo loans, commercial and industrial loans, residential real estate loans, and consumer loans. Compared to the pre-crisis period, when residential real estate loans were considerably more systemic than all other asset classes, the model suggests no asset class stands out as particularly systemic in the recent past.

Liquidity Vulnerability

The aggregate liquidity stress ratio (LSR) has remained near all-time historical lows over the past few years. Looking at the decomposition of the LSR in the chart below, we see that liquidity-adjusted assets have risen slightly. This was accompanied by an inching down of liquidity-adjusted liabilities and off-balance-sheet items.

 Annual Update

The LSR saw a peak in the third quarter of 2007 that was driven, to some extent, by the collapse in securitization and asset backed commercial paper markets. The LSR was improved, in part, by the Federal Reserve’s monetary stimulus programs, which drastically increased the amount of reserves in the banking system. Reserves and cash constitute a large component of liquid assets for some banks.

In part thanks to liquidity regulation, such as the liquidity coverage ratio, the largest U.S. banks are in a much stronger liquidity position, on aggregate, than at any point before or during the 2008 crisis. This is perhaps best exemplified by the fact that the LSR has remained stable, despite the removal of reserves of more than 1 trillion U.S. dollars from the banking system since 2014. While cash, of which reserves can be a large part, has fallen slightly in the most recent year, its decrease was not commensurate with the aggregate drop in reserves. Moreover, decreases in cash were countered by an increase in securities held by banks.

Run Vulnerability

After remaining mostly flat between 2016 and 2018, the run vulnerability index has been slowly increasing over the past year. Considering the underlying components in the chart below, we see that the increase in the index was mainly due to small increases in stress leverage and illiquid assets. Stress leverage has been continuing an upward trend that started in 2015 (see the “Capital Vulnerability” discussion). The other two components, the shares of illiquid assets and unstable funding, have changed less over the past several years.

 Annual Update

To understand better these two characteristics of the assets side and liabilities side, respectively, we consider their comprising parts in more detail. Illiquid assets are defined as the complement to liquid assets—which are composed of cash—Treasury securities and fed funds lending. In the post-crisis period, most of the variation in the liquid asset share is due to the variation in banks’ cash holdings, which mirror the level of aggregate reserves (see the “Liquidity Vulnerability” discussion). Since the beginning of the Fed’s tapering in 2014, however, the liquid asset share has stopped increasing and there has been a corresponding shift in banks’ liquid assets from cash toward Treasuries. Over the past year, the shift from cash to Treasuries has accelerated and the overall liquid asset share has started to decline slowly.

Unstable funding in this analysis is composed of commercial paper, trading liabilities, fed funds borrowing, repos, and unstable deposits, that is all deposits except for money market deposit accounts and other savings accounts as well as time deposits of less than $250k ($100k before October 2008). The decline in the unstable funding share since 2013 was not accompanied by large changes in the composition of unstable funding. While unstable funding increased in absolute terms, it was outpaced by a concurrent increase in stable funding, leading to a decline in the unstable funding share. Over the past year, this decline has slowed and it seems like the unstable funding share may have bottomed out.

Kristian Blickle
Kristian Blickle
is an economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Fernando DuartFernando Duarte is an economist in the Bank’s Research and Statistics Group.

Thomas Eisenbach
Thomas Eisenbach is a senior economist in the Bank’s Research and Statistics Group.

Anna Kovner
Anna Kovner is a Vice President and Policy Leader for Financial Stability in the Bank’s Research and Statistics Group.

How to cite this post:

Kristian Blickle, Fernando Duarte, Thomas Eisenbach, and Anna Kovner, “Banking System Vulnerability: Annual Update,” Federal Reserve Bank of New York Liberty Street Economics, December 18, 2019, https://libertystreeteconomics.newyorkfed.org/2019/12/banking-system-vul....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Selection in Banking

Published by Anonymous (not verified) on Mon, 16/12/2019 - 11:00pm in

Tags 

banks

Nicola Cetorelli and Douglas Leonard

LSE_Selection in Banking

Over the past thirty years, more than 2,900 U.S. banks have transformed from pure depository institutions into conglomerates involved in a broad range of business activities. What type of banks choose to become conglomerate organizations? In this post, we document that, from 1986 to 2018, such institutions had, on average, a higher return on equity in the three years prior to their decision to expand, as well as a lower level of risk overall. However, this superior pre-expansion performance diminishes over time, and all but disappears by the end of the 1990s.

From Core Banks to Conglomerates

We usually think of “core” banks as depository institutions mainly dedicated to the extension of loans. Such core banks have represented, and still represent, the vast majority of banking institutions in this country, providing services to satisfy our everyday financial and business needs. However, since the late 1980s many core banks have transformed into conglomerate organizations that use the bank holding company vehicle to extend control and ownership to other types of legal entities. In many cases, this process has turned banks into increasingly complex organizations. These important industry trends have been discussed in previous posts, for example here, here, and here.

If the main purpose of banks is to provide liquidity services and extend credit—financial intermediation in its most traditional sense—then is a “migration” of banking institutions toward other activities undesirable? Or are those “other” activities just a reflection of financial intermediation evolving into a process that is less reliant on narrowly focused banks (see this post for a deeper discussion of these issues)? If the latter, then some forms of bank conglomeration may be socially desirable.

This migration from core banking to a conglomerate model has important ex post implications on performance and risk. Do banks that change their business scope increase their profitability and become more exposed to risk? Alternatively, are there diversification benefits from engaging in activities beyond just core banking? Establishing causality from banks’ choice of business model to their subsequent performance is hard because the expansion choice itself is clearly not random. Rather, it is plausible that banking firms with certain pre-existing characteristics are more or less likely to select the conglomerate model for themselves, and those same characteristics are also the factors driving future performance.

In this post, we focus on what happens before banks choose to become conglomerates. In particular, we ask whether banks departing from the core business model are drawn from a better or worse performance distribution than banks that do not expand into new businesses. Banks that outperform their peers may be in a better position to explore broader business horizons, and thus become conglomerates. Alternatively, banks that have underperformed in core banking activities may have stronger incentives to choose a different type of business strategy.

Both the quality of the banks that become conglomerates and their reasons for doing so have important policy consequences. If better quality institutions select to expand beyond core banking services, then their “migration” to a business model where other activities will compete for managerial and financial resources might imply a deterioration in both the quantity and the quality of core banking. However, if conglomeration reflects an adaptation to modern financial intermediation, then in fact these institutions might contribute to enhanced provision of liquidity and credit services. If, instead, the poorer performers become conglomerates, this could imply a need for stronger supervision of these entities and a worse financial stability outcome.

Which Banks Become Conglomerates?

Using a database described in a previous post, we focus on the population of bank holding company (BHC) organizations that operated between 1986 and 2018. We define “core banking firms” as BHCs that are made up exclusively of (one or more) chartered commercial banks. For example, First Western Bancorp, Inc. was, as of 1990, a Pennsylvania-based BHC with approximately half a billion dollars in assets. First Western Bancorp at the time controlled two commercial bank subsidiaries, and is therefore defined as a “core banking firm.” We define “conglomerate banking firms” as those BHCs that, in addition to commercial bank subsidiaries, also maintain control over entities with other primary business activities. Univest Corporation of Pennsylvania, another Pennsylvania-based BHC with approximately half a billion dollars in assets in 1990, is an example of an institution that meets the “conglomerate” definition, since it controlled one commercial bank subsidiary along with seven non-bank subsidiaries.

The following table illustrates the dynamics of the transition from core to conglomerate banking in the U.S. banking system. The columns show the total number of BHCs that in a given range of years operated as core banking firms and, of this number, those BHCs that decided to become conglomerates. The transition to conglomeration continued steadily through the first part of the 2000s, only to slow down in the years after the financial crisis.

Selection in Banking

To evaluate the characteristics that underpin the decision to expand into businesses beyond core banking, we compare the return on equity (ROE) of expanding bank holding companies in the three years prior to their expansion to the ROE of non-expanding firms. The table below shows the results of a regression, based on data between 1986 and 2018. The dependent variable is the ROE of a bank in a given year. The variable “Expanded” is equal to 1 in the three years prior to the decision to become a conglomerate and equal to 0 otherwise. Hence, the estimated coefficient of “Expanded” indicates the difference in profitability during the three years prior to expansion between those two sets of banking firms.

The first column of the table shows that the coefficient on “Expanded” is positive. This means that on average, core banks that chose to turn into conglomerates between 1986 and 2018 exhibited higher ROE in the years prior to their decision than the non-expanding banks. This difference in performance remains robust after we account for other factors that determine ROE, such as size and capitalization (represented by the variables “Log assets” and “Capital ratio” in the table below).

Selection in Banking

Perhaps banks that choose to expand are only more profitable because they have greater risk exposures. A commonly employed metric of bank risk is the Z-score, defined as (ROA + C/A)/sd(ROA), where ROA is the bank’s return on their assets, C/A is its capital to asset ratio, and sd(ROA) is the standard deviation of ROA. Intuitively, the Z-score gauges the likelihood of default: Default is more likely (a lower Z-score) if a bank lacks the resources to face an adverse shock (small numerator) and/or is exposed to relatively large shocks (large denominator). The second column of the table above thus shows that, when the Z-scores of our sample are regressed on “Expanded,” the estimated coefficient is positive. In other words, banks that choose to pursue conglomeration were, all else equal, less risky in the years prior to the expansion decision.

Many core banks have expanded over the years. Are “better” banks always the ones that transition to the conglomeration model? To capture the evolution in the types of banks that have pursued conglomeration over time, we estimated regressions on five-year “rolling windows” of data. The results, with ROE as the dependent variable, are presented in the chart below. Each point represents the estimated coefficient of “Expanded” from a rolling-window regression using observations from the previous five years. The regression estimates throughout the 1990s display a positive ROE differential between expanders and non-expanders. This effect is estimated precisely, as shown by the narrow vertical bars that display confidence intervals around the point estimate of the effect. However, the positive differential disappears over the subsequent decade. Not surprisingly, the coefficients for the rolling regressions that include the financial crisis years are estimated very imprecisely. Few firms became conglomerates during the financial crisis, and many of those that did were likely driven by crisis-specific factors, so we would avoid making a direct comparison with the pre-crisis years. The ROE differential remains close to zero and imprecisely estimated even in the more recent years.

Selection in Banking

Excluding the crisis years, what do we make of the pattern revealed in the data? Core banking firms that chose the conglomeration path in the late 1980s and a large part of the 1990s were those with better performance, but that difference is gone by the late 1990s. As pointed out in a previous post, the transformation of banks to conglomerates began in earnest toward the end of the 1980s when regulators considerably expanded the scope of permissible activities for bank holding companies. It is plausible that the expected costs of conglomeration were high in prior years, because banks were pursuing relatively new business strategies, entering into new activities, and facing new organizational challenges. Thus, earlier in the sample, the barriers to conglomeration might have been perceived as relatively high and only firms with relatively high returns to begin with would have made the conglomeration choice. As time passed and the conglomerate business model became more prevalent, these embedded costs decreased, thus potentially inducing more and more lower-performing banks to make the switch.

This initial analysis has focused on the ex ante problem of bank selection into a conglomerate model. Because we purposely refrain from analyzing the ex post consequences of the choice to expand—in terms of future profitability and risk—we cannot draw strong conclusions about the larger impacts of bank conglomeration. Nevertheless, this analysis does indicate that the expansion choice is not random and suggests that selection dynamics affect the desirability of the conglomerate model. This preliminary analysis has just scratched the surface of the complex factors behind banks’ decision to become more complex.

Nicola CetorelliNicola Cetorelli is a vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Douglas LeonardDouglas Leonard is a senior research analyst in the Bank’s Research and Statistics Group.

How to cite this post:

Nicola Cetorelli and Douglas Leonard, “Selection in Banking,” Federal Reserve Bank of New York Liberty Street Economics, December 16, 2019, https://libertystreeteconomics.newyorkfed.org/2019/12/selection-in-banki....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Barnier Recording Shows Johnson Will Not Get Brexit Done Next Year

Published by Anonymous (not verified) on Sat, 14/12/2019 - 11:27pm in

It looks like all those, who voted Tory believing that Boris really will ‘get Brexit done’ are in for a very rude disappointment. Thursday’s I carried a story that a recording of the EU’s chief negotiator, Michel Barnier, shows him stating that a proper deal with EU will take longer than the 11 months anticipated by our buffoonish, lying Prime Minister. The report by Hugo Gye ran

Boris Johnson won’t be able to get a Brexit trade deal by the end of next year, the EU’s chief negotiator says.

Michel Barnier was caught on tape telling diplomats that 11 months would not be long enough to strike a comprehensive free-trade agreement between Britain and Europe. He predicted that the only deal possible would be a bare-bones “vital minimum” arrangement.

Mr Johnson’s opponents claimed the recording proves he is lying about Brexit – but the Tories insisted Mr Barnier will be proved wrong.

If the Prime Minister is re-elected, he has promised Britain will leave the EU on 31 January and enter a transition period ending on 31 December, 2020. He has vowed not to extend that period even if there is no trade deal in place.

In a recording published by The Independent, Mr Barnier could be heard saying: “We will not get everything done in 11 months. It is unrealistic.” He said that a “cliff-edge” Brexit was still possible if a stripped back deal was not agreed.

Labour’s campaign chief, Andrew Gwynne, said a cliff-edge no-deal was “exactly what he [Johnson] wants so he can drive the UK into a toxic trade deal with Donald Trump and put the NHS up for sale”.

A Tory spokesman responded: “Barnier also said the Withdrawal Agreement couldn’t be reopened”. 

Perhaps when the supposed transition period fails to end, some of the people who voted for the Conservatives because of Brexit might realise how they’ve been fooled, just like the British public’s been fooled before. But on the other hand, you can depend that the Tories and their compliant press will frame this as all the EU’s fault, and try to promote a no-deal Brexit as the best thing that’s ever happened for Britain.

Which it will be for the hedge funds supporting the Tories and banking on Britain’s economic collapse.

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