For those demanding more regulation in the financial sector...

...read Jackart's screed on the increasing and pointless admininistrative burden imposed by the FSA on individual brokers. Go read the whole thing.

I would wholeheartedly endorse Jackart's blog on this subject. Having myself taken exams from the Chartered Institute for Securities and Investment in the past, they are clearly designed to force the student (or the financial institution for which they work) to purchase the textbooks and attend their taught courses in preparation for the exams, because the pointless minutae and badly phrased questions mean that even a background in financial services won't help you that much in the exam. They had some of the worst course material I've seen - and believe me, I've seen some pretty bad things. (For reference I passed first time, but I'm good at memorising pointless crap. I have no illusions that this made me a better financial advisor.)

As Jackart notes pithily:

It [the Retail Distribution Review] will virtually ban those on average earnings from receiving decent financial advice. They will be driven instead into the arms of the Banks who will sell them "products" whose performance is utterly opaque, larded with fees which will be virtually impossible to get out of. The banks will call this "advice", but you will never see or hear from the hair-gel and bri-nylon school-leaver who sold you the "product", ever again.

This was a perfect example, and sadly far from the first, of the insecurities and political position of the FSA being shamelessly used by the vested interests (the CISI, for instance) to drive trade to themselves. It'll be interesting to see if the Bank of England can regulate any better, since at least they should be a little bit less insecure. I don't hold out much hope, however.

Grandstanding MPs turn out to be impotent

After yesterday's entertaining head-to-head between Bob Diamond and the Treasury Committee, today various MPs are clamouring for Bob to give up his £20mm leaving package:

Nick Clegg, the Deputy Prime Minister, said it was wrong for Mr Diamond to take a "socking great bonus" in the good times and not give it up when wrongdoing was uncovered.

Well, Nick, what are you going to do if he doesn't give it up? Get him fired?

I was pleased to see BoJo actually standing up for London financial services: whether you think he was right to do so or not, he's taking a stand on what he thinks is good for the London economy, and that's what he's supposed to do:

Boris Johnson, the Mayor of London, was a rare voice defending Barclays, as he warned against "an orgy of self slaughter" over the scandal.
"I'm not going to run down Barclays Bank. I'm going to stand up for financial services and London's pre-eminent role in supplying those services," he said.

What's really scary to me is that Barclays was the first bank to come clean about the LIBOR fixing. What about the other (seven?) banks that participated and have so far been out of public attention? If they see this happening to Barclays, they're going to take a far tougher stand in announcing the part of the FSA, Bank of England and former Government ministers in the mess - after all, what's to lose?

Who'd be an Argentine banker?

Dear Cristina's latest wheeze is a corker: forcing the top 20 banks in the country to lend to businesses. Those UK readers may think this sounds familiar, but Cristina has an extra spin on the affair:

She said the loans would carry a maximum interest rate of the Badlar reference rate, which was 11.9pc per year for private banks in June, plus 400 basis points. The minimum loan period would be three years.

For reference, Argentinian inflation is running around 25%.

Banks will therefore be starting at an effective loss of 30% on the loan, before any default considerations. Who's going to specify how much they have to loan (and hence, lose)?

"The central bank's going to establish the conditions," she said, adding that state-run banks should not have to shoulder the entire responsibility for business loans.
...
Fernandez recently reformed the charter of the central bank, which is led by a close government ally...

Fantastic. I foresee a period of rapacious looting where the central bank sets high targets for loans, and the 20 major banks either refuse to meet them (thereby receiving swingeing fines), or make the loans for a quiet life and then get their faces ripped off by (at best) business owners borrowing the maximum amount at 11%, swapping it into dollars for three years, then swapping it back before deadline at a net real profit of 20% allowing for FX charges. Or, they may just not bother swapping it back and default on the loan. Why not? It's going to be a great time to pretend to be a small business.

The child support Laffer curve

A fascinating story from Ontario, Canada where an ex-wife finds out the hard way that there's a downwards slope to the demand/income child maintenance curve:

The 53-year-old education software expert said a court ruling which made him pay $4,000 a month to his ex-wife in child support would financially ruin him.
And so, with extensive work contacts in South East Asia, he sent his former love Donna Mills an email saying he had left the country for good.
...
Mr Mills left the country before the trial could take place. He now lives in Dasmarinas City, 30 miles south of Manila, with his new wife, former caregiver Rosemarie Espiritu.

So far so good: a deadbeat dad having run off with a foreign hussy, classic Daily Mail fodder. But wait, what's this?

The trouble began when the couple split in 2005. After a two-day trial, they agreed Mrs Mills would have sole custody of the children and stay in the $1.2million Lake Ontario house.
He would pay child support, and she would pay $175,000 to buy him out of the house, which had a $600,000 mortgage on it. She would also receive $2,000 a month in rent from a separate flat.
But Donna later said she was 'rushed and pressured and did not read' before signing, and that she did not understand she would never receive any future spousal support.

Ok, let's calibrate here. You can buy a very nice house in a good area of Toronto for $300k-$400k. She makes a $1mm capital gain (the property) and receives recurring income of $2000/month. But five years later she decides it's not enough and goes back to court.

You can just imagine the discussion between Mrs. Mills and her lawyer. "Courts hate separated fathers - you should be able to get a few thousand per month extra with no problems. What's to lose?" I do like her claim that she was "rushed and pressured" in a 2-day trial. Presumably she had legal representation there - is she suing her then lawyer, or is he/she the brain behind last year's attempted renegotiation?

What Mrs. Mills has discovered is that there's a Laffer curve to child support. If you demand too much, you give your ex-spouse every reason in the world to run off to an obscure corner of the world and thumb his nose at you. Sure, he's going to have a hard life there away from his family and friends - and yet, at some point, it becomes a financially rational choice.

And what of the ex-wife now?

Former teacher Mrs Mills, a Danish immigrant with both a Canadian and European passport, in the meantime said she cannot work because of her 'onerous' family responsibilities.

That's a ten year old whose cancer is now in remission, a 14 year old Downs Syndrome sufferer, a 17 year old "who is fighting depression" and a 19-year-old drug addict. It's clearly been a hard couple of decades for the family - and yet, Mrs. Mills thought she'd be better off without her husband. Good call.

I'll take that driving licence, sir, you won't be needing it

A small prize for the most pathetic excuse for driver incompetence seems to be indicated for Mr. Jawad Hassan of Bradford:

A family narrowly escaped disaster after their car got stuck on a level crossing with a train approaching, forcing them desperately flee the vehicle.
...
Mr Hassan told the police: "I did not mean to cross the barriers. I knew it was wrong. It just happened."

"It just happened." No doubt the car had a mind of its own and accelerated under the descending barrier despite the desperate efforts of Mr. Hassan to stop it.

Had his people carrier been hit by a train, his life would have been no great loss, but the death of his four passengers would have been devastating for the train driver concerned. So what is the penalty for gambling with the lives of five innocent people for no good reason?

Mr Hassan was sentenced to nine months' imprisonment, suspended for 12 months, with 150 hours of unpaid work.
He is banned from driving for 18 months and must take an extended retest before getting back behind the wheel.

Frankly, I would prefer that this "extended retest" take approximately 1 minute. "Are you Mr. Jawad Hassan?" "Yes." "Congratulations, you've failed, you irresponsible bastard. Come back in ten years."

Polly's NEETS

I hope my readers appreciate the sacrifices made in bringing this blog to the Net: after reading today's Polly missive on how to save the NEETs I have to admit to throwing up in my mouth a little.

In common with so many Polly columns, it takes a small collection of relatively undisputable facts ("the number of 16-year-olds staying on in education has fallen for the first time in years, raising Neets – those not in education, employment or training – by 8%", "Numbers of Neets were falling steadily until 2010, when the Cameron government snatched away that crucial £30 a week.") and builds an increasingly tall and rickety tower of a column whose base spreads beyond the rock of facts to the sand of speculation and the marsh of Polly's opinions.

Polly's pivotal contention is that it's far better for the unemployed youth to remain in any form of education than to seek a job:

At a time when leaving school without plans has never been a worse life choice, more teenagers are walking away to do nothing at all. Unemployment when young scars for life: studies show most are destined for a life of underpaid work, punctuated with no work.

I suspect that here Polly is (once again) falling into the trap of confusing correlation with causation. I would totally believe that the average wage of students with one or more A-level is at a statistically significant measurement about that of students with just GCSEs. What I would find harder to believe is that the marginal wage gain of the least able 20% of A-level students from their 2 years studying will outweigh that of equally-able GCSE students working 2 years in their chosen employment. Let's not forget that Educational Maintenance Allowance only pertains to the 16-19 age group so you can forget the degree premium for this argument.

Polly's claims centre around two propositions:

1. The withdrawal of EMA for most students caused many of them to drop out of further education; and
2. More NEETs are therefore unemployable due to their reduced educational qualifications.

I can believe the coupling of these propositions in the case of some students, but frankly find it hard to credit that it makes a material difference in most cases. Most students live with their parent(s) until age 16. At that age they became eligible for EMA. Are we to believe that they moved out of the parental house on that princely £30/week? I find that hard to credit. This was additional money for the household. In most cases, if the household could afford to support the student at age 15, they can do so at age 16. I'm sure the £30/week made life easier in many cases, but find it hard to credit that it made much difference to employment needs for the majority. Rather, I suspect that the prospect of a salary and cash-in-the-pocket trumped the nebulous benefits of A-levels or equivalent. And frankly, I can't blame them. Unless you get qualifications directly relevant to your area of employment, I can't see two years out of the job market doing half-arsed studying giving you much of an employment premium to someone demonstrating two years of employment in the area.

What the abolishment of EMA is about is making students do a practical calculation of what two years of education is worth to them. Why should the taxpayer (and, let us be clear, this means the full-time minimum-wage worker) be on the hook for the student's studying time if doesn't materially benefit them?

Lest we forget this is Polly, she reminds us:

Michael Gove as education secretary seems entirely preoccupied with more able children.

Yes Polly, God forbid that we should focus the spending of taxpayer money on those students who are most able to benefit from education. FFS.

Whenever he talks of "social mobility", he speaks of those from humble backgrounds soaring up to Oxbridge.

Precisely why this aim is a bad expression of social mobility escapes me. Maybe her own Oxbridge experience put her off studying:

...she won a scholarship to read history at St Anne's College, Oxford, despite gaining only one A-level ... During her gap year she worked for Amnesty International in pre-independence Rhodesia, before being expelled by the government ... After 18 months at Oxford, she dropped out, finding work in a factory and a burger bar and hoping to write in her spare time. She later said "I had a loopy idea that I could work with my hands during the day and in the evening come home and write novels and poetry, and be Tolstoy... But I very quickly discovered why people who work in factories don't usually have the energy to write when they get home."

Ladies and gentlemen, that is education. A shame that it burned up that scholarship money for Polly to make that discovery.

RBS meltdown - Edinburgh, not Mumbai

All is revealed: in his letter to the Treasury Select Committee, Stephen Hester admits that the batch payments screw-up happened in the Edinburgh office:

The initial reviews we have carried out indicate that the problem was created when maintenance on systems, which are managed and operated by our team in Edinburgh, caused an error in our batch scheduler. This error caused the automated batch processing to fail on the night of Tuesday 19 June.

India is in the clear. All the frantic briefing by the RBS UK IT managers has been in vain - the finger points squarely at Edinburgh.

Credit to Hester, he's declining his bonus this year before anyone raises the issue. You can bet he's not pleased though. I'd be pretty annoyed if some clowns in the IT department had just cost me £2.4 million. I'd bet he's going to send a troubleshooter to that office, equipped with a sharp axe and a very high quota for necks. In a sense, this is possibly the best outcome for RBS because at least Hester is motivated to find out whose actual fault this was:

I will ensure a full and detailed investigation into the causes of the problem, overseen by independent experts and reporting to the Board Risk Committee and then the improvements we will make subsequently.
...
We will publish relevant findings from this investigation in due course.

If I were a mid-level or senior manager in IT at RBS Edinburgh, I'd be doing some CV polishing right about now. The published findings should make very interesting reading and be a near-required citation for papers in risk engineering and business-critical systems conferences.

I'm not sure about the Mail's characterisation of this letter as "grovelling". It seems pretty solid and workman-like to me, high on content and low on spin. In fact, I'd say it confirms Hester as a pretty good head of RBS and the Government should look at slipping him some additional compensation in a year or two once the fuss has died down. Heaven knows I don't envy him his job.

Update: Dominic Connor at The Reg has top tips for surviving the oncoming storm, aimed at RBS IT grunts. Helpfully, though, he addresses management as well:

If you're a senior exec at RBS
You're only reading this because someone printed it out for you and other media are quoting us. That's because your IT staff trust random tech journalists that they’ve never met with the truth more than they trust you.

Genius. Read The Whole Thing.

Thank God for the TSA's vigilance

The TSA - fearlessly guarding America's frontiers and shanking elderly starship captains.

Winner of "best comment": rezzyboy

Was George Takei anywhere in the vicinity????

RIM - all over bar the shouting

I'm going to go out on a limb here and hazard a guess that RIM is dead, along with Blackberry. Delaying Blackberry OS 10 until 2013, thereby missing out on the Christmas rush? They must be seriously slipping on internal delivery dates to make the delay announcement 6 months before.

RIM have taken a near-dominant position in business email and handed it out for free to anyone that wanted it (by the look of things, for now, Apple and iOS). They have forced their loyal retail consumers to go elsewhere for anything approaching an up-to-date smartphone; I've played with a Gingerbread full-keyboard device from Verizon and it's quite the match for anything RIM currently sells, never mind what Ice Cream Sandwich / Jelly Bean bring to the party. What is going to RIM announce in 6 months time that will trump what Apple and Google are shipping now?

For RIM, it's all over bar the shouting. A steady decline in market share until they are bought at an insulting discount for what few marketable patents they have. If I were a good engineer in RIM, I'd be reaching out to my buddies in Apple and Google right about now.

How to fill out a customer satisfaction survey

Courtesy of the inimitable James Lileks, trying to help Panera improve their customers' experiences:

Accuracy of your order. When you ask for coffee you get an empty cup and directions to the urn. The way the lady held out the cup so I could take it was highly accurate and professional.
Availability of the menu item you wanted. Well, I wanted calorie-free pizza, and they don’t have it, but that's my problem.

My personal rule of thumb is that a company from whom I've bought something moderately expensive gets three minutes of my time for their online survey. If five minutes have passed and I'm only 30% of the way through, it's 50-50 as to whether I blaze through the rest of the questions with deliberately misleading multi-choice answers and subtle abuse in the text sections, or I forward a ranting email to their head of customer service pointing out that they're not paying me for my time helping them, and if they want any useful information they can bloody well spend some time making the survey as short as possible. The bastards.