| Given that there are indications that some of the | | | | government-owned zombies. |
| dust may be settling for some of the banks, it is | | | | There are important reasons for this. |
| perhaps a propitious time to reflect on these | | | | Firstly a tectonic shift in sentiment of major |
| events from an SME's perspective. | | | | proportions occurred when clients woke up one |
| The first important observation is that though the | | | | fine morning to find that," the bank where I have |
| UK banking sector appears to have reached | | | | my (Offshore) Account is now owned by my |
| calmer waters, the same cannot be said of the | | | | government..". A national survey by Raddon |
| US. As Robert Kuttner noted on 7th June 2009, | | | | Financial Group in the US confirms this, with 37% |
| "..the government has bent the accounting rules to | | | | of existing clients saying they were less likely to |
| allow banks to carry nearly worthless securities | | | | continue banking with Zombies and 88% saying |
| on their books at their nominal full value. ...the | | | | they were "not very likely" or "not at all likely" to |
| banking lobby and legislators pressured the | | | | ever become a Zombie customer. Extrapolate this |
| Financial Accounting Standards Board to suspend | | | | to Europe, and you get the picture. Millions of |
| its rules requiring assets to be carried on banks' | | | | potential clients. |
| books at their current market value... Cooking the | | | | Secondly, the leveraged mish-mash of conflicts |
| books to inflate the value of depressed securities | | | | (bank, asset manager, stock broker, prime |
| also explains how zombie banks like Citigroup could | | | | broker, market maker, govt adviser, part time |
| pass the government's "stress tests" with flying | | | | Master of the Universe) as represented by the |
| colors. Citigroup, which has depended on $45 billion | | | | Lehman business model is dead. Quite apart from |
| in straight government cash and hundreds of | | | | being an imbroglio of conflicts too far, hidden off |
| billions more in guarantees, was found by the | | | | balance sheet losses, frauds, scandals, |
| stress-testers from the Fed and the Treasury to | | | | bankruptcies, lawsuits and abject regulatory |
| need only $5 billion more to be adequately | | | | failings have all served to highlight the value of |
| capitalized. This is, of course, preposterous if you | | | | conflict-free services offered by independent |
| value the junk on its books accurately" | | | | financial institutions with no conflicts and no toxics. |
| This places the $68 Bn of loans repaid in June by | | | | Thirdly, an era of financial specialisation appears to |
| ten banks squarely into context and underscores | | | | have started within the post-Zombie paradigm |
| the many hundreds of billions more in government | | | | where the mantra "too big to fail" has been |
| guarantees continuing to sustain their very life | | | | replaced with "too big to exist". Jurisdictions that |
| blood. 'Early' repayment was thus probably linked | | | | followed this flawed policy of least risk based on |
| to the lifting of Obama executive bonus | | | | bigger = less risk = less work have had the likes |
| restrictions because these banks would have been | | | | of Lehman, Madoff/ Medici, Stanford et al cut a |
| unable to repay any government loans (never | | | | swathe through their ranks to destroy extremely |
| mind executive bonuses) had their toxic debts | | | | brittle regulatory careers. |
| been correctly valued. The focus now shifts on to | | | | The flip side of the coin for independent financial |
| how (and whether) the US Government has | | | | SME specialists is that they now get to pay |
| planned to prevent any return trips by Zombie | | | | Zombie sized bills, including those related to that |
| Banks to the "too-big-to-fail" money trough at the | | | | Cathedral of Bureaucratic Overreach called MiFID |
| Taxpayers' Fest. | | | | which was espoused by turbo leveraged Zombies |
| The second observation is that while we should | | | | right as they were bringing the world's economy |
| avoid the mushrooms the UK Chancellor was | | | | to its very knees. This will make economic |
| munching when he based his Budget on a magic V | | | | recovery more painful and longer lasting. The |
| shaped economic rebound starting January 2010, | | | | problem is that no lessons seemed to have been |
| we should equally be aware that the Zombie | | | | learned. EU Regulocrats continue to expend time, |
| implosion has opened commercial opportunities of | | | | money and precious human endeavour building |
| a life time for small and medium sized independent | | | | new catch-all regulatory cages when what they |
| financial institutions in Gibraltar. Recent software | | | | should be doing is to make all participants in the |
| advances on the Net have further levelled the | | | | process accountable. After all, the last cage they |
| competitive playing field for SMEs dreaming of | | | | built signally failed to get within a Square Mile of |
| locking horns with Big Banks in a specific area and | | | | catching the Zombie Banks at their skulduggery. A |
| especially if they are specialist financial institutions | | | | coffin would have been more apt. |
| not linked with government or | | | | |