Wednesday, 29 April 2009


Is there no mess that the European Union can't make worse by getting involved?  I ask this after reading an item in the Daily Mail (29th April 2009) which reported a ruling made on the 28th April 2009 made by the European Court of justice.

British couple, David and Linda Orams, have been on the rough end of an ECJ judgment which is now threatening to see their holiday home in Northern Cyprus demolished and the assets from their British home seized due to them becoming victims of Cypriot divisions between the Greek and Turkish sides of the island which have been rumbling on for years.

Their problems began when they purchased a house and land, what seemed quite legally to them, in the Northern Turkish side of the Island from a Turkish Cypriot.  Before the Turkish invasion of Cyprus in 1974 the property had been owned by a Greek Cypriot who was forced to flee south and become a refugee.  He has now gone to the ECJ which has ruled in his favour and the Oram's have been told by the court to vacate the land and demolish the property as the Greek Cypriot still hold the original deeds.

Under normal circumstances the Oram's could stick two fingers up the the ECJ (as we all like to do!) due to the property being in the Turkish side where the ECJ has no remit.  The worrying aspect, however, is that this is now going to the British Court of Appeal, which in these EU subservient times is little more than a satellite court of the ECJ, and is expected to rubber stamp this ruling which could bring economic disaster to the Oram's.  In this instance they would have to also have to hand over damages and unpaid rent, claims could be laid against their British assets.

Although the loss of his home and land in 1974 was a disaster to the Greek Cypriot, this ruling is an equal disaster to a couple who purchased the property thirty years later and considered the Turkish invasion part of the islands history.  This though, is not just a disaster for the Oram's, the misery of this ruling will be multiplied many times over as it now applies to anyone of British or other European nationality who have in recent times purchased property in Northern Cyprus, and our Government has no interest in protecting British victims of this ruling as it is always happier putting the wishes of the EU before its electorate.

In such circumstances the original owner was the victim of war, to any reasonable person he should have been compensated for his loss to help him build a new life in the south of the Island.  Sadly, thanks to this ruling, hundreds of people will become victims of this war too when they thought it was long since over.  If their is pain and misery to spread around the EU can usually succeed in spreading it wider and further than anyone else.

Tuesday, 28 April 2009


Brian Mooney of No2ID warns that plans to scrap the state monitoring of e-mails is premature.

Reports that the database to track our personal internet and telephone use has been shelved are premature.

Instead of building a centralised, government-run database costing £12Bn, the government now intends to spend a mere £2Bn and get communications companies to hold our data. Our internet and phone bills are predicted to rise to pay for the scheme.

Strangely, the minister, Jacqui Smith, feels that a central store of electronic data was an "extreme" solution that would have undermined privacy. It hasn't stopped the government from proceeding with a centralised ID cards/National Identity Register database that will intrusively track our everyday lives.

Anyone concerned about safeguarding their privacy is welcome as a guest at our next meeting in West London on Thursday, 14th May - details from 020 7385 9757 or visit the Hamersmith No2ID web-site.

Sunday, 26 April 2009


The Home Secretary today makes a delayed announcement of a consultation on proposals for the so-called Intercept Modernisation Programme. It has been widely reported for some months, and plans were acknowledged by Lord West the security minister last week, that this would place Home Office 'probes' in the datacentres of every British internet provider at an estimated cost of £12 billion. 

This would allow direct skimming of all traffic, making it massively easier to intercept email and monitor individual's web use using existing powers. The Home Office would become a clearing-house, able to provide data ad lib to other government agencies. It would also become possible for the first time to collect and store details of all communications by everyone in the country so that government agencies could investigate friendship networks and personal habits using data-mining techniques. 

Guy Herbert, General Secretary of NO2ID said: 'Just a week after the Home Secretary announced a public consultation on some trivial trimming of local authority surveillance, we have this: a proposal for powers more intrusive than any police state in history. 

'Ministers are making a distinction between content and communications data into sound-bite of the year. But it is spurious. Officials from dozens of departments and quangos could know what you read online, and who all your friends are, who you emailed, when, and where you were when you did so - all without a warrant. Tracking your your every move is more efficiently creepy than reading your letters.' 


Oh dear, I have been a lazy little blogger with no postings since Friday morning.  Well, not really as there are lots of other things to do other than blogging, including a leafleting day in Redditch on Saturday 25th April, where I managed to slip on a grassy slope and twist my ankle, which I can assure you was painful - still is.

One thing when you do things like that is you have more time to read things a little more thoroughly than would be normal.  As I could not do much after that than put my sore foot up and read the the paper I went through it from front to back and top to bottom, rather than glancing through and taking cuttings of any EU related items to keep for information.

Although I usually buy a Torygraph most days of the week, I refuse to buy one on a Saturday as I object to paying extra for all the unwanted crap that comes with it.  I don't want pages on gardening, the other half looks after that, nor do I want pages on motoring as my old banger does what I need.  Neither do I want pages on finance - I'm always skint and have nothing to invest.  Glossy magazines and sports pages aren't required either, but I am expected to pay more just to fill the dustbin - no thanks.

So, my main reading on a Saturday is the Daily Mail that Mrs B buys on her shopping trip into Walsall, and today with a lame appendage I went through it, starting with the headline on the front page: "TREACHERY".  This was the heading to an article on the appalling way this nasty, devious and shameful Government has done the dirty on the poor old Gurkhas who have come to the aid of this country and fought in our army.  In one of the most underhand and devious bit of trickery that not even Sir Humphrey could have devised, this Government has said it has bowed to pressure to allow retired Gurkhas live here, but the rules are so onerous they are like the old joke: 'Free beer for pensioners over eighty, as long as they are accompanied by their parents'!  This was not a good start to my reading.

On page five another frustrating article to get the blood boiling, but don't ask for an ice cream to help cool you down as this article was about councils banning ice cream vendors from their streets due to ice cream being fattening.  It seems the lunies who have escaped from the asylum have taken control of Harrow council which is refusing to grant street vendors licences to those who operate ice cream vans, and our PC PC's have been told to move any vendors on the moment they stop.  It seems a spokesperson for Harrow council has deemed that ice cream is "a fattening product, a luxury item."  She said: "Councils need to start thinking about how they can promote healthy communities."  She obviously missed the words: 'by order - or else'!

More woes on page six which reports that output in the UK has fallen, completely screwing the Chancellors figures.  It seems that Alistair Darling's calculations have gone completely to cock since his budget.  What can they expect though when they give £billions to the EU and screw up our business sector.  Despite this page eight reported that our beloved Government Minister have spent £4billion on consultants - brace yourself for more direct and indirect taxation chaps.

Pages ten and eight have a full two page spread on a rather naughty lady who says she is about to spill the beans on four top Tories who have paid for certain services of the personal kind - if you know what I mean.  That could prove interesting - especially in the run up to the European elections when the Cameron clan is desperately trying to prove it can beat clapped out Labour.

Page twelve, Harriet Harperson twittering on about firms being forced to show the pay gap between men and women - more bureaucracy.  Page thirteen, tucked away at the bottom of the page was a short item which did not give credit, or space, to the seriousness of what it was covering, which is the state's intention to monitor every single persons internet activity with each and everyone of us having our own internet ID to help Big Brother to watch and monitor our every movement - this stuff is seriously scary.  However, don't panic, it's all Google's fault, or so Steve Brogan says in a two page spread on pages fourteen and fifteen, in which he states: "They read your e-mails and know the secrets of your private life.  They take pictures of your home and can track your every movement.  Never in history has one firm known so much about us.  So are we mad to allow Big Brother Google to take over the world?"  Methinks Google has some serious competition from this Labour Government.

Another upsetting item on pages thirty four and thirty five was an account of the elderly lady who was put into a home due to her dementia.  Her caring daughter, Betty Figgs, was not happy with the way the home treated her mother, who was unhappy, not well cared for and always hungry.  So she gave up her business and had her home converted, all at great expense, so she could look after her old mom in her last days.  She took her out of the home and her mother began to perk up, was much happier and began to look healthier - then the Social Services Gestapo moved in.  With the help of the police they battered down the door of this kind ladies home and literally stole her old mom - the poor old soul is back in a home being looked after no where near as well as she was by her own family and Betty Figgs has been left with a demolished front door to sort out.  When I read items like this I have to pinch yourself and ask: 'is this really the free and fair country I was born to?'  

What about page thirty six, a pregnant woman told by her dentist to prove she was pregnant so she could claim free treatment?  That's small beer.  The financial pages reported the amount of jobs being lost all across the EU with Spain's unemployment figures at just over 17 per cent.  Their precious euro which give countries such as Spain the wrong interest rate is not going to help them out of this one.

This unexpected spare time also gave me the chance to read about the Roman's fearsome Ninth army which destroyed most forces that had the misfortune to face it.  Our Boadicea gave the Romans some stick, it sounded that she was a gruesome little madam and scared the Latin do-dah out of the Romans that faced her army, but sadly the Ninth finished her army off and she, it reported, poisoned herself.  However, the end of the article told of how 6000 men of the Ninth marched into Scotland, or Caledonia as the Romans called it, and they vanished forever into the scotch mist and bogs - it looks as if the fearsome tribesmen of Scotland picked them off.  Maybe we should set the Scots onto the EU.

Friday, 24 April 2009


Blogger Stuart Parr & Peter Roberts of the Drivers Alliance.
Government plans to cut speed limits will cost thousands of jobs and are unlikely to save lives, the Drivers’ Alliance claims today.

The Drivers’ Alliance, headed by Peter Roberts, says the Government’s own figures show the imposition of lower limits will cost £4.65 billion in longer journey times and lost productivity over the next ten years. 

“For British industry, struggling with the worst recession since the Second World War, this couldn’t come at a worse time,” said Mr Roberts. “It will lead directly to higher costs and fewer jobs. With unemployment already heading towards three million, it’s absurd to impose what amounts to a new tax which we estimate could add up to over 150,000 lost jobs.” 

Mr Roberts said the Government’s reason for lower speed limits was to save lives. But of the 3,000 road deaths in 2007, only 152 were the result of speeding on rural roads.

Ministers are calling on local councils to cut 30mph limits to 20mph and reduce speeds on rural roads from 60mph to 50mph. 

Road safety statistics show the 2,762 pedestrians killed or seriously injured were either drunk or drugged at the time while another 1,439 were playing in the road. A further 885 were wearing dark clothes.

“The Drivers’ Alliance fervently believes in road safety. But it is quite wrong to assume the motorist is always to blame. In the vast majority of cases, this is clearly not true.

“It is doubtful if any lives will be saved as a result of the Government’s proposals. Those people who drive recklessly won’t mend their ways because the limits are lowered.

“But the vast majority of safe, law-abiding drivers will be further alienated by these unnecessary proposals which will – according to the Government’s own figures – actually increase fuel consumption and carbon emissions. 

“It is impossible to avoid the conclusion this is being imposed as a money-making enterprise to bail out ‘safety partnerships’ which have seen their random tax reduced as motorists get wise to their ruses.

“The Government’s attitude is that drivers are inherently irresponsible and must be further controlled and restricted. Yet constantly lowering speed limits not only erodes motorists’ driving skills it also erodes their respect for sensible speed limits.” 

Mr Roberts, who organised the 1.8 million-signature Downing Street petition against congestion charging, said Government statistics were misleading.
Mr Roberts said the Drivers Alliance was highly critical of the Department for Transport’s use of massaged statistics to camouflage the failure of its road safety policy and the worst record in Europe for fatality reduction. 

“While we support the Government’s acknowledgement that technology has a vital role to play in saving lives and preventing injury, it is hypocritical to take credit for innovation and improvements in car safety made over the past decade to justify a failed speed camera policy,” said Mr Roberts.

“Transport Minister Jim Fitzpatrick has announced another round of lower speed limits, tougher punishments, yet more speed cameras and a reaffirmation of its support for the ISA in-car speed limiter programme in an attempt to ‘make Britain’s roads the safest in the world’. 

“The Drivers’ Alliance would like to remind Mr Fitzpatrick that before the Government’s obsession with speed, Britain did have the safest roads in the World.”

Thursday, 23 April 2009


April 23rd, St George's day.  Although I'm pushed for time, again, and don't have a the chance to put anything more on this blog at the time, I couldn't let St George's day go by with posting something.

No doubt every politically correct Labour controlled council in the land is trying to forget about it, we can't, nor should we.  Poor blighted and beleaguered England whose taxes support the Scots and Welsh (that will get them going!), gets the worst deal of all when it comes to our patron saints day.

Ireland, which since independence is now a foreign nation, has lavish parades organised by councils for St Paddy's day, the Scots and Welsh too, but what does our Government consider fitting for our saints day?  £116 measly quid on one flag!

This was reported in the Daily Telegraph today (23rd April 2009) which said that Scotland had more £600,000 spent on St Andrews day.  When asked in Parliament by Conservative Andrew Rossindell what expenditure  that the department of the Culture Secretary, Barbara Follett was going to spend to mark the day, she replied £116.  What a measly sum, she should be shame faced.  I've just been to my local pub, the Longhorn in Walsall, for a pint in the St George's day sunshine, and they must have spent more on flags and bunting there to celebrate Englands day than out PC Government.  Shame on them.
Larry Elliot of the Taxpayers Alliance, warns about the budget.
In response to the 2009 Budget Speech, which committed British taxpayers to record levels of debt, TaxPayers' Alliance Chief Executive Matthew Elliott said:

“This Budget commits taxpayers to a terrifying amount of debt that will burden ordinary families for decades to come. The Government’s proposals are totally inadequate to deal with the size of the crisis we face. £15 billion of efficiency savings are a welcome start, but they are dwarfed by the debt mountain that the Chancellor plans to run up. These are serious times that require radical thinking, so it is staggering that the Government have chosen to turn a blind eye to the huge amounts of wasteful and unnecessary public sector spending. Despite the pretence that he is helping ordinary people and bashing the rich, the Chancellor is in fact increasing the cost of everything from driving to work to a pint of beer. The increase in taxes on high earners is a petty political gesture rather than a serious financial solution. Millions of families around the country are in real crisis, and they need real help, not posturing.”

Tuesday, 21 April 2009


The long standing and highly regarded anti-EU researcher, Anne Palmer, has been studying the effects the treaties of Maastricht and Lisbon will have on our British defence capabilities and the increased power the EU will have over our armed services.

She writes:
You may remember reading in the Daily Papers, for the newspaper headlines on 1st April screamed out, “EU says our naval bases should be controlled by Brussels” and “Now all of our forces are put at Europe’s disposal” which nudged me into looking into and making sure this was not an April Fool’s Day joke.

I found a UK Agreement or Treaty, and then went looking for an EU binding Directive on the matter and yes, there it was in all its glory in the Official Journal of Journal of the European Union C 321/6. 31/12 2003 with signature of the people that have signed it on behalf of the Nation State. I noticed that the dates at the beginning of the Agreement, was 2003, and when printed, 2009. Noted also was that the contents of the Agreement became ‘active’ when all had signed it.

Here is the first paragraph that meets the onlooker: “Agreement between the Member States of the European Union concerning the status of military and civilian staff seconded to the institutions of the European Union, of the headquarters and forces which may be made available to the European Union in the context of the preparation and execution of tasks referred to in Article 17(2) of the Treaty on European Union, including exercises, and of the military and civilian staff of the Member States put at the disposal of the European Union to act in this context (EU SOFA) Brussels, 17 November 2003”. Which had been presented to Parliament by the Secretary of State for Foreign and Commonwealth Affairs by Command of Her Majesty, March 2009.

Here are a couple of paragraphs from Article 17 from the Treaty on European Union mentioned in the paragraph (Consolidated version Article 42). for your ease,
1. The common security and defence policy shall be an integral part of the common foreign and security policy. It shall provide the Union with an operational capacity drawing on civilian and military assets. The Union may use them on missions outside the Union for peace-keeping, conflict prevention and strengthening international security in accordance with the principles of the United Nations Charter. The performance of these tasks shall be undertaken using capabilities provided by the Member States.
2. The common security and defence policy shall include the progressive framing of a common Union defence policy. This will lead to a common defence, when the European Council, acting unanimously, so decides. It shall in that case recommend to the Member States the adoption of such a decision in accordance with their respective constitutional requirements.
3. Member States shall make civilian and military capabilities available to the Union for the implementation of the common security and defence policy, to contribute to the objectives defined by the Council. Member States shall undertake progressively to improve their military capabilities.
6. Those Member States whose military capabilities fulfill higher criteria and which have made more binding commitments to one another in this area with a view to the most demanding missions shall establish permanent structured cooperation within the Union framework. Such cooperation shall be governed by Article 46. It shall not affect the provisions of Article 43.

THIS may explain why our Government has altered over the years our forces and equipment to fit in with the European Union’s needs, which is not in the interests of our Country or in the safety of our British Forces or our National Security. Our Government says and makes sure we know that it is they that will decide whether they will cooperate and it is their national decision that will decide whether to take part, but can they now after implementation of this EU Directive? Or the Treaty ratified at Maastricht? Even without the Treaty of Lisbon? Who stands the cost of the secondment?

Article 188R. The Solidarity Clause. A new article in ‘Lisbon’ which introduces a new and wide-ranging “solidarity clause” which compels the Member states to act together in the event of a natural disaster or a terrorist attack”, which we, as an independent and once sovereign Nation have always done-though by asking any sovereign state first if they would like assistance.

This “Agreement” document regarding our forces appears not to be the same as regards our involvement with NATO, where some members have not taken part in all conflicts. The Solidarity clause in the previous paragraph and article 17 from the Maastricht Treaty (Treaty on Union=signed and ratified by the Conservatives) make clear the commitment made by the Nation States. Those countries that joined the Union after Maastricht, accepted in the joining all the previous EU Treaties.

I now ask you, if you have seen any of this printed in any News Papers? Has any British Politician that YOU have voted into power told you that they have accepted this Agreement or explained its contents to you? There are many constitutional implications as regards this matter, which for now will have to be left to another day. Anne Palmer 17.4.2009.

For more information see: Official Journal of Journal of the European Union C 321/6. 31/12 2003.

Also: UK Agreement.

Monday, 20 April 2009


Even though finding five minutes today to write anything has been difficult, none the less I couldn’t let the death of Lord George, the ex Governor of the Bank of England, go without finding a few minutes without saying something about him.

As the Governor of the Bank of England he sailed this country of ours through some turbulent times and always kept an even keel – to use some nautical puns. Because he was such a steady and unflappable person he earned his nickname “Steady Eddie”.

According to the obituary column in the Daily Telegraph, Lord George who passed away on Saturday aged 70, was considered to be a Euro-sceptic even though he did not give an opinion, he did not show any enthusiasm for the euro project and was critical of a ‘one size fits all’ interest rate.

We may not have it exactly in words, but I personally suspect that we have a lot to thank Lord George for saving us from the dire euro fate that has been inflicted on other EU countries and seen inflationary pressures in the eurozone countries as prices were rounded up.

Sadly, cancer took him at the age of 70, which did not give him a very long retirement. He will without doubt be remembered, his place in history is already embedded.

Sunday, 19 April 2009


Nigel Farage, the UKIP leader said Conservative Euro-scepticism was only skin deep.

Exeter is a beautiful city, or so they tell me, but I didn't get much chance to take a look at the place on Saturday 18th April, 2009, when we had to set off at 7 am to go to the UKIP Spring Rally which, as always, was held in the Great Hall of Exeter University.

Five of us from Walsall went down for the day, and what a day it was, UKIP is in fighting mood ready for the European elections which will be held on the 4th June.  Nigel Farage, as he always does, gave a most impressive and inspiring call to arms.  Even the BBC picked up his fighting comments and broadcast the part of his speech where he stated that UKIP could even take more votes than Labour.  He also said the Conservative Euro-scepticism was only "skin deep".

New recruit to UKIP's growing ranks, Stuart Wheeler the spread betting tycoon, walked through the thronged masses and on to the stage to rapturous applause.  He said: "I suspect there are many here today just like me - Conservative at heart but feeling let downover Europe.  I know I am not alone in this awkward position; when I decided to donate money to UKIP, many people got in touch and expressed their support for my actions - and almost all of them were die hard Tories."  You can read his full speech on the Bloggers 4 UKIP web-site.
Others who spoke and were well received were the Post Master, Deva Kumarasiri, who, despite not being of British birth, has taken great pride in being British since taking British citizenship and made the news over his frustration with others who have come to live here but have never bothered to learn to speak English or integrate.  As Post Master he insisted on English only and refused to serve anyone who did not make the effort.  He is delighted to now be a UKIP candidate for the European elections.
Anther foreign born speaker, and now UKIP Euro elections candidate, was Marta Andreasen who was sacked by the EU when she exposed
fraud and corruption - she was even told to keep quiet about it.  Now she is UKIP's Party Treasurer and valued party member.
A truly good day was had by all in the splendid surrounding of Exeter University.  We did get to see a bit of Exeter on the way home when we got well and truly lost before finding the M5 and the way north. 
Daren & Elizabeth Hazell, Walsall UKIP members at the Exeter rally.

Friday, 17 April 2009


There has just been one of the best reports on the BBC Newsnight programme (Friday 17th April) that I have seen in a long time regarding the opinions of the people of Redditch about their Member of Parliament, the beleaguered Home Secretary, Jacqui Smith.

Reporter Bernard Crick, who has a tendency to be a cynical old bugger, was out performed by two ladies buying strawberries in Redditch market.  The one lady interviewed was supportive of (I claim expenses on my sisters home) Smith, the other lady soon put paid to that and considered that the Ms Smith should be booted out of Parliament, when Crick asked her what Smith should then do, as quick as a flash the lady said she should get a job a Tesco's - after retraining, of course!  

This was without doubt the best thing I have seen on Newsnight in years.  As far as her constituents go Jacqui Smith isn't even qualified to work in Tesco's, let alone do the job of Home Secretary.


The euro project dates back well over half a century, even in the 1930’s there were proposals to create a federal superstate out of all the nations of Europe, including the UK – there was even an organisation called the European Union of Federalists back in those days. So, the idea of a European Union, a single currency, a European Parliament, flags, passports, anthem and all the other paraphernalia of a nation that the EU is putting around itself is far from new or forward looking, in fact the whole concept is stuck in a 1930’s utopia of backwards thinking.

The EU and its acolytes have this peculiar dream that the ideas and aspirations of more than half a century ago can solve today’s problems, so its no wonder most of them go around with their heads in the clouds. On the other hand, considering the words of Arnold Toynbee from those early days of this federalist fiasco, to which he said: “We must deny with our mouths that we do with our hands.” There is also a sinister aspect too. If their plans for Europe were so wonderful why the need to tell porkies about it? Why the need to deceive and deny?

All those who support the EU project constantly try to debunk the warnings andpredictions of the Euro realists amongst us, yet over and over again we in the EU-sceptic camp are proven right and their flat denials proven wrong. If I had a real British sterling pound for every time I have given a warning about something the EU is planning, only to be denied by a Euro fanatic, I would have wealth in abundance equal to that of an EU Commissioner.

One EU denier, a chap by the name of Collis Greton, who is an old adversary of mine from the days when the Birmingham Post, under the editorship of Nigel Hastilow, used to be a decent morning newspaper. We often challenged each other on those pages about what the EU was about, and of late Collis has been following this blog.

Picking up on my posting about French fishermens blockade against the mad EU inspired CFP, he has put a posting on a web-site called ‘Trumpeter 4 Europe’. He states:
“Useless Ukip’s Walsall based Derek Bennett writes in his latest blog “history seems to decree that we British are born with an inbuilt dislike of the French” but continues with the observation that one has to admire them for “standing up for their interests.” This in response to “those bolshy French fishermen blockading the ports in protest over the EU’s “mad” fishing quotas”. Followed up with the cry “why can’t our fishermen have the same guts?

“Dislike of other nationalities is not inbuilt but learnt through life’s experience and peer influence. No wonder many far right Conservatives among others are attracted to useless Ukip at European Parliament elections. And little wonder Bennett’s party is so frequently associated with the BNP.”

Hmm, this just goes to show how little people like Collis understand what is going on around them, no wonder the old deceivers such as Arnold Toynbee could pull the wool over their eyes. UKIP and the BNP are nothing alike in any shape or form whatsoever. The BNP is a rather unpleasant political party with a very dodgy background and some less than savoury characters within it ranks. It is, just like the old Nazi party in Germany that so ruthlessly massacred millions of people, is a left leaning party – hence the reason it attracts the foolish and gullible from the left of the political spectrum. On the other hand, UKIP, which may have an attraction to those of the moderate right, such as myself, draws to it people with a collection of varying political views. Within UKIP’s ranks are those who have given up on Labour, the Liberal Democrats and, of course, the Conservatives over their pro-EU stance. Those who say we should have a coalition of ideas can find it in UKIP – we have joined political forces to fight against the EU imposing its undemocratic will upon us.

Collis goes on the say:
“Mad” EU fishing quotas Ukip would have you believe are ruining the industry, not over-fishing or changing environmental factors. The fishermen out of short-sighted self interest claim there’s plenty of fish and these draconian quota measures are unnecessary. The science tells a different story and it is science data on which the quota system is based. The fishing community pain is shared equitably.”

He very conveniently failed to mention exactly how the fishing quota works, which rather than preserving fish stocks the CFP is an ecological disaster zone. Fishermen are given a species quota, when they trawl their nets and pull up fish they are not allowed to catch it has to be dumped, dead, back into the sea and they have to go off and try somewhere else, over and over again until, after a lot of effort, they finally catch what the EU allows. In their wake they leave a sub aquatic disaster of dead and rotting fish on the sea bed – this then is the EU’s way of preserving fish and Collis and he EU chums wonders why we call it mad!

Whatever those of us who study the ways of the EU say about it, and whatever warnings we give, there is this tiny rump of pro-EU flat earthers who are trained to deny, deny and deny again.

In what can be described as hilarious, or even insulting, this pro-EU web-site states that Prime Minister Ted Heath was “patriotic” when he took Britain into the Common Market because it was in our interests. Now you can see what we are dealing with. In fact Heath confessed to lying many years later when at that time he denied that we would have laws made for us by people we don’t elect and lied when he said there would be “no essential loss of sovereignty”. The EU now makes around 70 to 80 per cent of our laws and the loss of sovereignty is massive. Harold Wilson also lied during our one and only referendum in 1975 when he said the “threat of a single currency had been eradicated”, again proven wrong, and since then the pro-EU side don’t seem to know when to stop telling fibs – in fact you have to wonder if they could even recognised truth if it came up to them and slapped them in the face with a wet fish!

They denied an EU police force – we now have Europol, they denied that we would have an EU army - we now have the EU rapid reaction force. They denied we would have an EU constitution which was almost correct thanks to the French and Dutch voters, but is back in the shape of the Lisbon treaty, and no doubt they will deny that the EU will be able to order our British armed forces to go to war on the EU’s behalf too when more news of this gets out. This is something that this blog will be covering next week thanks to some dedicated research into the Maastricht and Lisbon treaties by a pro-British anti-EU campaigner, who, unlike Heath and other members of the EU Taliban, knows the true meaning of the word ‘patriotism’.

The road to Hell, as they say, is paved with good intentions. The road to a federal states of Europe is full of all the things that were never going to be but somehow are – and the EU zealots will conveniently forget they ever denied.

Thursday, 16 April 2009


The Taxpayers Alliance, which is a worthy organisation of youthful campaigners who oppose Government and EU waste and high taxes, have just launched their ‘Green calculator’.

Pop into the green calculator a few details such as the type of car you drive, gas and electricity bills, and hey presto up pops the total the additional amount the Government are screwing you in so-called ‘green taxes’ which don’t actually do anything other than make you poorer and the EU, via our subservient Government, richer.

This calculator comes with a warning, it may upset you as there are scenes of graphic and extortionate tax extraction!


UKIP fisherman, Mick Mahon, sails his fishing boat to Parliament in protest.
Although history seems to decree that we British are born with an inbuilt dislike of the French, when it comes to standing up for their interests you have to admire them and say bravo.

I personally am glad that I am not stuck on either side of the English Channel either waiting to start a holiday and watching my leisure days ticking by, or waiting to come home with nowhere to stay other than sleeping in my car, but by gum you have to take your hat off to those bolshy French fishermen blockading the ports in protest over the EU's mad fishing quotas which is imposing a cut in their catches and ultimately a severe cut in their earnings.  Why can't our fishermen, the few we have left, have the same guts?

Our British fishing fleet, once a great industry with every port around these Isles of ours boasting a large array of fishing boats, is now a minuscule rump of what it once was while foreign fishermen now fish our once sovereign waters with impunity waving their generous EU quotas while our fishermen remain tied up in port having fished their meagre quotas.  This has happened with little or no protest, while the French bring Europe to a halt and will, no doubt, get their way with the EU Commission giving way under pressure from the French government.  Sadly, we find ourselves in this mess because a British Prime Minister, Ted (the traitor) Heath, was so eager to get us into the Community he happily gave away some of the richest fishing grounds in the world thus abandoning our fishermen a once great industry to the mercy of a foreign power which has proven it has no care or allegiance to this nation.

If you are one of those who were due to set sail across that bit of water that once protected us from the rest of the continent and those there with ambitions of conquering us (an ambition now achieved), you have my sympathies, but at least the French stand up for their interests while we seem happy to roll over and do as the EU says.

Wednesday, 15 April 2009


The Green Party has to be thanked for proving what we all suspected, i.e. that it is such a daft political party it even makes the Monster Raving Loony Party look sane, not least with its raving mad comments about those who fly off to foreign climes for a week or two to get a bit of sunshine as we don't get much here - which doesn't do a lot for their theories on global warming.

David Campbell Bannerman,who is the UK Independent Party lead candidate in the 4th June European Elections, in the Eastern Counties, has exposed the Green Party’s extremist views live on an ITV programme
to be shown in the East of England. The Green Party is targeting the Eastern region for an MEP seat.
Challenging Ms Lucas of the Monster raving Green Party about her views on climate change on the TV programme ‘Leaders of Europe’, Mr Campbell Bannerman asked her whether she thought flying to Spain, for example, was as bad as stabbing someone in the street, and Ms Lucas confirmed “Yes!… because climate change kills”.
Campbell Bannerman comments:
“I was shocked at her response. This is the Leader of a supposedly respectable political party, now showing fascist tendencies. There can be no excuse for adopting such extremist language to describe ordinary people flying abroad for a well earned holiday. The Green Party has shown its true anti-libertarian, heavily interventionist colours. It is translating its misplaced fervour over unproven man-made global warming into direct attacks on personal freedom.
"She also used expressions like 'binge flying' which are absurd.  Air travel is generally a necessary part of a journey not a wicked extravagance, as the Greens think. Half the British population fly at least once a year. Yes, they should pay the true costs of that travel, including the environmental costs, but they should not be barred or vilified for doing so.“
“The Green Party is becoming reminiscent of a mad cult which maligns anyone who doesn't follow their faith. They are like 21st century Luddites trying to hold back progress, and they regard holidaymakers as environmental criminals. UKIP shows common sense on the environment, the Greens are just plane crazy!"

Monday, 13 April 2009


Due to every British Government consistently and steadily handing over the power of law making and governance to the European Union since 1973, we find ourselves in a situation these days when our elected representatives in Government can only control about one third of Britain's immigration. 

People from any of the other 26 EU states have as much right to come and live and work here as anyone born here or who has gone to a great deal of effort to take up British nationality.  Added to that, thousands of illegal immigrants pour into the country hiding in the back of lorries and by other means - with few ever being sent back from whence they came and the great British taxpayer has to find the means to house, clothe and feed them.  Then there are those who make their way here with more malicious intentions using all sorts of dubious documentation, not to forget the many suspect asylum seekers.  So, what is the Governments answer this unholy mess?

Of the little bit of control left to it to play with by the EU, in order to try to show how tough they are, our Government have laid down all sorts of rigid controls on those who want to come and work here for legitimate reasons - the red tape involved is mind boggling.  First they have to face a points system, then there are biometric details which they have to provide including fingerprints on their work visas, all of which could take nine weeks from first applying.

Sadly, those with no allegiance to this country can seem to march in and demand all sorts of rights thanks to EU rules that allow them to do so, those with long historic and traditional ties to us, such as our Commonwealth friends and allies, have to jump through all sorts of hoops just to get here - that is if they get here at all.  

This then is creating major problems our sheep farmers who rely on a temporary workforce of around 500 Australian and New Zealand sheep shearers who normally arrive in the UK in May and work through to July, then return home.  If these sheep shearers don't arrive on time to do the work when needed - or don't even get here at all - then farmers are seriously concerned that they could lose a large percentage of their flocks to diseases and other problems created by the sheep not being sheared.

The whole situation is so bonkers and full of wooly thinking those shearers who want to get here and start work, as they have always done, must be spitting in their Foster and saying 'Strewth mate, have those Pommie bastards gone mad?'


The Guido Fawkes blog, run by Paul Staines has really hit the bloggers equivalent of winning the lottery, he has got hold of some e-mails slagging off the Tories (an easy thing to do) sent out by the Number 10 Downing Street henchman, Damian McBride with accusations of Tory sleaze and sex scandals aimed at four Tory MPs.

Many in the press and media are now asking how Guido got hold of these e-mails which should have been confidential.  It hasn't yet dawned on them that this link from Guido's informer to him, if sent by e-mail or a simple telephone call, will now, thanks to the latest imposition from the EU, will be very easy for the Government to track down.

Don't forget that as from the early part of April records of all e-mails and telephone calls must be stored by the service providers for a twelve month period.  What's the betting that every e-mail and telephone call made and received by Mr McBride and all his contacts has been, or is currently being, trawled though to discover who it was that leaked to Guido.  Don't worry, Big Brother is on the case tracking Guido's sources.

Sunday, 12 April 2009


Nigel Farage MEP, UKIP's best way forward.
Over the last two Sundays the Conservative Party supporting Sunday Telegraph newspaper has included letters attacking UKIP and its leadership.  In what can only be described as a surreal letter, one writer actually declared that David Cameron was a "vibrant leader" and intimated Cameron would stand up to the EU.  Did he actually mean the very same David Cameron who promised to take the Tory MEPs out of the rabidly pro-EU EPP group in the European Parliament within weeks of taking the leadership (which we are still waiting for), or who has appointed Ken Clarke, he of the pro-EU Taliban back to the Tory front bench?  Sadly, all this letter proved was that the Tory membership have been somehow mass mesmerised into a dream world where all will miraculously be well once we have yet another Europhile Tory government again.

This Sunday, the attack on UKIP continued with a letter from Richard Shaw, a former member of UKIP who has confessed his happiness of being confined to a political backwater called the 'UK First Party', which like the mugs who followed Mr Suntan Kilroy into Veritas, will never be heard of again.  Fortunately, the Torygraph did have the decency to also include a letter from M. A. Woodward who pointed out the verifiable fact that David Cameron is pro-EU.

So why all the attacks on UKIP?  The simple answer is the June 4th European elections which loom ever closer in which UKIP is officially classed as the third placed political party due to the size of its vote in the 2004 European elections.  It is sad to say that UKIP has in the past been infected with a cancer of detractors whose aims have been to damage UKIP rather than help it.  These people have purported to have supported UKIP but did little other than attack the party and its leadership from within.  When it came to doing the foot slogging delivering leaflets and all the other mundane work that goes with political activity they were seldom seen.  However, when it came to back-biting and carping from the sidelines they were always to the fore.  

As a UKIP member and party activists since 1997 I have seen it all.  I have seen the prima donnas and their over inflated egos, those who wanted to be the big fish in their little ponds who considered themselves and their aims above the party and its members, and I have also seen a lot of them resign then gripe about UKIP from outside the party - well I am glad they have gone.  

Sadly, there have also been some good people go to because of the damage done, but since many of these backstabbers have left, despite the lies put out by the Tory media and the unsavoury BNP which will flop in the June 4th elections, UKIP is actually doing well.  Our campaigning days are proving successful and many people are quietly saying they support UKIP - they are far from happy with both the Labour and Conservative parties, they won't vote BNP as they know that party and its leadership are deeply suspect, so the only option will be UKIP once again.

Using the words of Mark Twain, news of UKIP's demise has been greatly exaggerated.  There can be no doubt that come voting day on the 4th June UKIP, under the leadership of Nigel Farage MEP will be our best option.

Friday, 10 April 2009


Neil & Christine Hamilton, extremely good company.

The trouble with blogging is there is always pressure on you to keep putting posts on your blog. If you don’t, those who are inclined to take a peep from time to time at the ramblings of Bennett think you have given up and that your blog has become static – which is the last thing I want for this blog. The problem is – life gets in the way when there are many other things to do than prattle on about what interests you, which in my case is my obsession with saving our country from being swallowed whole by the European Union.

It is due to being busy with other things which has kept me away from this blog for the last couple of days, one of which was a quite enjoyable event last night (9th April) in Rugely, Staffordshire.

The Stafford UKIP branch, which is run mostly by Roy Goode and Malcolm Hurst, with the help of Ellis Stones, organised a fund raising dinner with Neil & Christine Hamilton as the guests of honour. Neil Hamilton had to sing for his supper and was the after dinner speaker for the evening. He was introduced by the Earl of Bradford, both men were old friends from their days in the Palace of Westminster. Richard Bradford in the Lords, before Tony Blair screwed things up and mangled their Lordships house and tried to fill it with his New Labour cronies, and Neil Hamilton in the House of Commons before the incident with the Harrods boss and the advent of the man in the White suit. For both of them there have been some dramatic shifts in their lives since. However, both men have resolutely pulled through the personal disasters that have beset them in the years since and have come out of things remarkably well.

Neil Hamilton, in his entertaining talk, said that he had joined the anti-Common Market campaign back in the sixties in the days when Harold Wilson was trying to negotiate our membership. Obviously put off by Wilson’s Gannex mac and clouds of pipe smoke, De Gaule said ‘Non’. Neil Hamilton then said that he was against Heath negotiating our membership and he also campaigned in the 1975 referendum for Britain to withdraw.

On the whole the evening was a good one, everyone went home replete as there was no shortage of food, the plates were piled high and the wine flowed. Neil and Christine Hamilton sold a few of their books and signed them for those who purchased them. Although the evening was part of the campaign, it was like a night off for most of us – but now its back down to business, there is an election coming up on the 4th June and we have to ensure UKIP does well – even better than in 2004. That my friends, can only be done if you go out and are not distracted by the hubris and deceit all around, don’t be tempted to vote for some of the less than savoury political parties just because you want to shock (which includes the Tories, Labour and Lib Dims who have lied through their teethes for years about the EU) – get out there and vote for the UK Independence Party in your droves – it’s the only way you are going to send a clear message that you want out of the EU.

Tuesday, 7 April 2009


Listening to President Barack Obama’s speech in Turkey encouraging the EU to accept Turkey as a member, like so many others I wondered if he fully understood all the ramifications of what he was saying and the impact such a move would have on the millions of people living within the EU. So, using a White House web-site with a provision to contact the President, I decided to let him know my feelings, which you can read below.

“Dear President Obama,

Please answer me this, what sort of reaction would you expect from the loyal citizens of the United States if one day you stood before them and stated: 'I intend to destroy the sovereignty of the US. I want to see the Dollar replaced by a currency that is under the control of foreign bankers who will set the interest rate for the US. I intend to make the Senate and my own Presidency subservient to this foreign power whose laws will override those of this country and whose constitution will become the constitution of the US. Finally, under the laws and rule of this foreign power hundreds of thousands of none US citizens will have equal rights to come and live in our country and to take the jobs of American workers – we will not be allowed to prevent this'?

What sort of response would you expect from such a statement? One can only presume, to put it in the mildest of terms, it would not be a favourable one – you may even be branded as a traitor and demands for your impeachment to take place.

So, why do I, a loyal British subject faithful to my Monarch and my country, ask such questions of you. The reason, Mr President, is because in effect the above scenario is the fate you are promoting to fall upon my fellow countrymen and also that of the peoples of other nations in Europe too.

When you spoke in Turkey and said that you wanted that nation to join the European Union. In reality, for those of us living in the UK, it is fact that we do have that very same ‘foreign power’ which can and does inflict a control over us similar to that described above. By promoting Turkish membership of the EU you were giving your consent that the once independent nations of Europe should be subservient to a foreign power whose laws are above those of the individual nations . You were in reality giving your approval for millions of Turkish people to have free movement across all of the EU with the undermining of Europe’s nations and the jobs of its people.

If you dare not promote such a thing for the American people, then why do you promote it for those of us who are struggling with the concept that eventually our nations will be no more, our currencies and our identities gone, and have inflicted upon us this new vast power, the democracy of which will be suspect and its constitution as laid down in the Lisbon Treaty?

There are ever growing numbers of us in the UK and all across Europe that are campaigning for our nations to break free of the EU – this will happen as the only way the EU has managed to get its way so far is through deceit and by denying democracy. I urge you to please come out on our side, the side of freedom and respect for the sovereignty of nations. It is past time the experiment that is the European Union is closed down – please support that view and the freedom of the people of Europe to preserve their nations, customs, currencies and identities which to them is of equal importance to the identity of the people of America."


The founding document of the European Union, the Treaty of Rome, has within it the words: “Ever closer union”. We must never forget those words, from the moment the founding nations of the then Common Market signed that document to this very day, that one overriding principle has been the driving force behind everything the EU and it acolytes stand for and work towards. It is the one goal they wish to achieve and design all treaties and legislation towards, the eventual aim that ever closer union brings about a single nation of Europe out of the collection of the once sovereign member nations.

With that in mind, although Lord Hoffmann who made the press recently for speaking out about the roll of the European Court, was right recently to make the stance he did against the Human Rights legislation that currently blights our legal system and infects our daily lives, his warnings sadly has little chance of stopping the avalanche that is the EU from rolling down on high and obliterating all our laws before it.

Speaking at a lecture to other judges, Lord Hoffmann said that he supported the European Convention on Human Rights but stressed that he did not support the institution that applied the law. He warned that the European Court in Strasbourg had gone beyond its remit and was using this legislation to create a “federal law of Europe”.

He warned that the European Court considered itself to be the equivalent of the Supreme court of the United States, ‘laying down a federal law of Europe.’ He also questioned the court’s ‘constitutional legitimacy’ and reminded that its judges were elected by a committee chaired by a Latvian politician (Boris Cilevics) and our British representatives were ‘a Labour politician with a trade union background and no legal qualifications (Lord Tomlinson) and ‘a Conservative politician (Christopher Chope MP) who was called to the bar in 1972 but so far as I know never practised’.

The judge rounded off his comments that our legal system had evolved over centuries of constitutional struggle and pragmatic change. He also stated that how the decisions regarding how our laws should be improved should be made in London, either by our democratic institutions or by judicial bodies integral to our own society. What the judge did not point out, however, was for these wishes to be carried out the only way it can be done is for the United Kingdom to leave the EU. If that is what you want too then you will have to vote for it on June 4th by voting for the UK Independence Party and say ‘No’ to EU laws.

Sunday, 5 April 2009


The Friends Meeting House, the location of the CIB meeting.
Saturday the 4th April 2009 was a glorious day to be in London, the sun was shining, the blossom was on the trees, the sparrows were coughing and Mrs B and myself stepped off the train at Euston station, walked across the road and straight back indoors into the Friends Meeting House for the annual general meeting of the Campaign for an Independent Britain (CIB) - so much for the beautiful spring day!

The CIB has been around since the year zero, Adam & Eve were founding members, or it feels like that.  Back in its prime the CIB was the campaign against our membership of the Common Market, and I mean 'the' as it was pretty well the only voice against the Common Market during our one and only referendum on the issue back in 1975 - the CIB was the official opposition.  

These days the Chairman of the CIB is George West, a jazz loving EU-sceptic who has also been around the campaign as long as anyone can remember.  The duty of opening the meeting in the morning for the AGM fell on him.  He gave his report which included news of the CIB having to make a complaint to a trades union in the South West who inferred that the CIB was some rabidly right wing organisation that that would make Hitler blush.  This obviously was totally ludicrous not only because many trades union activists play an active roll in CIB, but for those who know the CIB and attended many of their very civilised meetings will know that the CIB is made up of some very gentle souls - they just want their country back like the rest of us.

It was nice to see Lord Stoddart present as he was the former chairman of the CIB for many years.  Under his guidance he kept the CIB alive and running through
the lean years when no one ever gave a thought to our membership of the embryonic EU and the anti-democratic horrors its directives would bring.  He and a small band of dedicated campaigners kept the campaign alive, but sadly, as George West commented, a lot of the old timers are dying off and the number of letters and e-mails he is getting from bereaved relatives to let then know of another sad loss increased last year.  Without doubt the CIB needs some new and much younger blood within its ranks.

During the afternoon the meeting was opened up as a public meeting, and the first speaker of the day was Sir Teddy Taylor, the ex Conservative Member of Parliament who had the privilege of being one of the whipless Conservative Euro rebels during the dark Europhile days of the Major administration.  When he came on to begin his talk, much to my surprise and embarrassment, he mentioned me and my newsletter - I had one of those awkward 'Aw-shucks' moments as I was standing near the podium taking photos of him and suddenly all eyes came on me as I was standing close taking photos for my Flickr site where I have posted a number of photos from the meeting.

He spoke about the trickery that goes on within the pro-EU side to manipulate some very dodgy figures to make it look as if the EU has more supporters in business and amongst the people than it really has, he said how upset it makes him that people are deceived by the politicians they have elected.  

There were several speakers that afternoon, including a fascinating talk from Dele Oguntimoju who compared Nigerian politics to those of the EU.  One of the days most pleasant tasks for George
was to give a presentation to Betty Simmrson for her years of dedication and work to the campaign. One of Betty's highlights during her many years of trying to save Britain from the clutches of the EU came when she threw a bag of flour over that bumptious traitor, Ted Heath, just after he signed the Treaty of Rome. Like Betty Simmerson, may CIB keep going in perpetuity.

Friday, 3 April 2009


Anthony Coughlan, Ireland needs "good" state banks.

Solving Ireland's Banking Crisis: Set up temporary "good" State Banks to lend to businesses and households and let the existing insolvent Irish Banks go bust

The present policy of Ireland's mainstream politicians will lead to economic bankruptcy, to be followed by political bankruptcy

Ireland's  Banks are fundamentally insolvent without continual infusions of  Irish taxpayers' money.

However the Irish Government, supported by the main opposition party Fine Gael,  has decided to keep them alive indefinitely.

That way the Banks can continue to pay their creditors and bondholders who lent them vast sums that fuelled the country's 2001-2007 borrowing binge, and  keep hope alive amongst their shareholders that the value of their shares will recover sometime in the future.

As a consequence Irish businesses and households are at present being starved of credit, causing painful  belt-tightening and job losses, in order to keep the Bank of Ireland, Allied Irish Banks and the other Irish Banks alive as "zombie banks" at  taxpayers' expense.

Bank nationalisation is not the answer. That would transfer ownership of the Banks' bad assets to Irish taxpayers, and impose on them the job of repaying the Banks' debts.

What the country really needs is one or more "good" State Banks to be set up from scratch in order to take over the essential function  of credit provision to society on the lines proposed by Financial Times  economist Willem Buiter and Nobel Economics Prizewinner Joseph Stiglitz, as well as by financier George Soros (see Buiter's important articles on this topic  at and four of them copied below for your information). 

Ireland had State-maintained Banks in the past: the Industrial Credit Corporation and Agricultural  Credit Corporation.     

The best way of freeing credit to normal Irish business and households without expecting taxpayers to protect Bank bondholders and shareholders from the results of their feckless past lending and improvidence, is to establish such "good" State banks, which could be privatised later if desired.

 These would be free of the dud and artificially inflated assets which clog up lending by the existing private Banks. The new "good" Banks could be capitalised by public money as well as the currently State-guaranteed deposits in the existing private Banks. The depositors in the latter would of course move to the new "good" Bank/Banks.

The laws of the free market should then be let take their course, so that the insolvent Irish Banks and their criminally improvident managements would move into bankruptcy or be restructured  by means of special Government legislation.    

Letting the insolvent Bank of Ireland, Allied Irish Banks and the rest of them go bankrupt will bring down radically the price of Irish land, houses and commercial property, which is currently being artificially inflated by the Banks' exaggerated loan-book valuations.

These unrealistic values in turn are underpinned by Irish Finance Minister Lenihan's largesse, for which the country's  taxpayers will be expected to pay more and ever more for years ahead - indefinitely  rewarding the Banks' incompetence and recklessness.

The "good" State Banks can take over the buildings and much of the staff of the existing Banks to administer the new clean Banks, and the State can withdraw its guarantee of the liabilities of all existing Banks,  which it was folly to have agreed to last September in the first place.

This foolish act by a handful of politicians put Irish taxpayers into hock indefinitely for the benefit of the Banks that were the main instrument of the country's banking  crisis, the builders and developers to whom the Banks lent money, and the Irish politicians themselves, who set the administrative-political framework for the borrowing binge.

These are the same politicians whose uncritical europhilia brought Ireland into the eurozone, even though Ireland is unique among the 16 eurozone countries in doing two-thirds of its trade outside te eurozone and  the country's exports are now sagging in face of the fall in sterling and the likely fall in the dollar as the Obama administration deluges the American economy with money. 

Ireland is now caught in the vice of the eurozone, unable to regain economic competitiveness by devaluing  its currency in the way the UK and Sweden can - countries that are  full EU members  but are not in the eurozone. Instead Ireland must "devalue" its citizens'  wages and salaries, profits, pensions and social welfare payments for years to come as the country's  politicians point the Irish people towards valleys of pain ahead. 

It is a fact that abolishing the national currency and joining the eurozone was the basic cause of  Ireland's credit explosion from 2001-2007.

Floating the Irish pĂșnt between 1993 and 2000 and the highly competitive exchange rate that gave rise to was what gave birth to the "Celtic Tiger" economy of the 1990s.

When did the Irish growth rate double to 7% from the 3-4% average it had been from the 1960s to the early 1990s?

In 1993, the year of the devaluation of the Irish pĂșnt - which Mr Bertie Ahern, Finance  Minister at the time, strove manfully to resist.  

When was the only period in the history of the Irish State that it followed an independent exchange rate policy, effectively floating the currency and giving priority to the real economy rather than to maintaining the exchange rate?
From 1993 to 2001, when the country's annual economic growth rate averaged nearly 8%.

Ireland already had an economic boom and house prices were rising rapidly when it joined the eurozone - and cut interest rates by half. This was the opposite to what the real economy needed. No wonder house prices rocketed as the economy shifted gears from exporting abroad to house-building at home and credit hugely expanded. 

"The eurozone will give us permanently low interest rates,"  said  leading economist John FitzGerald,  son of former Irish Premier Garret FitzGerald

Having effectively bankrupted the Irish economy, the same politicians are now preparing to bankrupt it politically.

Through the Treaty of Lisbon they are seeking to turn the Irish State into a region within a European Federation and turn its people into real citizens of an EU political Union. 

If the Irish people are bullied and bamboozled into reversing their rejection of this Treaty last year in the referendum re-run which their Government plans for next October, the Irish and other peoples of the EU would  find themselves subordinated  from 1 January 2010 to European laws, in making which Germany's voting weight in the EU Council of Ministers would more than double from its present 8% to 17%, that of France, Italy and Britain would grow from 8% to 12%  each, while  Ireland's vote would be halved from 2%  to 0.8%.

These laws would in turn be exclusively proposed by a non-elected EU Commission on which Ireland and the other EU Member States would lose their right to decide who their national Commissioner would be. This post-Lisbon EU would be able to decide the rights of 500 million EU citizens, including the Irish, and would be given the power to impose any tax to finance the EU without the need for further Treaties or referendums.  

Is this generation of Irish people fated to follow the failed politicians that currently rule them over a political cliff as well as an economic one,  like the proverbial lemmings?
Anthony Coughlan

Below are four articles  for your information on the "Good Bank" concept of Financial Times
economist Willem Buiter.  See the reference to Ireland, with emphasis added in bold type,  in the first article below. These and other  relevant  articles may be found on Buiter's Financial Times web-site:

Good Bank/New Bank vs. Bad Bank: a rare example of a no-brainer

February 8, 2009 

The truth of a proposition is independent of how many people believe it to be correct. The merits of a proposal are likewise not enhanced by the number of people supporting it or making similar proposals.  Still, humans, like other pack animals, thrive on companionship. It is therefore comforting that the logic behind my proposal (January 29, 2009) for one or more new 'good banks' to be established, capitalised with public money and with additional financial support from the state for new lending and new funding, while the toxic assets of the old banks are left with the owners and creditors of the 'legacy banks', is being echoed in proposals from Joseph Stiglitz (February 2, 2009), George Soros (February 4, 2009) and Paul Romer (February 6, 2009), to name but a few. 

I claim no authorship or originality for the 'good bank' proposal.  The idea is obvious and no doubt was floating around the blogosphere and elsewhere as soon as the magnitude of the insolvency disaster in the banking sector became apparent.

The various proposals differ in detail.  Romer's proposal is essentially the same as my own.  Stiglitz argues, according to the British Daily Telegraph that "the government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice".

Soros proposes not to remove the toxic assets from the banks' balance sheets (which would require them to be valued, which is not possible) but instead put them into a "side pocket". The necessary amount of capital - equity and unsecured debentures - would be sequestered in the side pocket. Soros' 'side pocket' is effectively the same as my 'legacy bad banks'. Soros notes that about $1.5 trillion is likely to be required to recapitalise the existing banks properly.  This money could be leveraged a lot more effectively if most of it were injected into the new good banks, unencumbered with the toxic waste of the existing banks.

Under the Soros proposal, some additional capital might have to be injected into the 'side pockets', presumably by the state.  Under my new good banks proposal, the new good banks would take on the (guaranteed or insured) deposits of the legacy bad banks (which would lose their banking licenses) and would buy the good assets of the legacy banks.  Should deposits exceed good assets, the state would have to make up the difference initially with government debt on the balance sheet of the new good banks.  Should deposits be less than good assets, the new good banks would be able to borrow from the sovereign to finance the acquisition of the good assets from the legacy bad banks.  This would cleanse bank balance sheets and transform them into good banks but leave them undercapitalized. Soros suggests that $1 trillion of the estimated $1.5 trillion required to recapitalise the existing banking system should be directed to the cleansed banks. Soros believes or hopes that some of the money required to capitalise the new, cleansed banks could come from the private sector.  Under my proposal, and that of Stiglitz, the state would initially capitalise the new banks on its own.

A common logic

The logic is simple.  Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money.  They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on.

This overhang of toxic assets acts like a tax on new lending.  Banks are required, by regulators or by market pressures, to hoard capital and liquidity rather than engaging in new lending to the real economy.  The public financial support offered in the form of capital injections (in the US mainly through preference shares and other non-voting equity), guarantees for assets and for  liabilities (old and new), insurance of toxic assets (as provided to Citigroup by the US sovereign) and possibly in the future through direct purchases by the state of  toxic assets (using TARP money in the US) and the creation of one or more publicly owned 'bad banks' has been a complete failure.

The  bad bank proposals the Obama administration and other governments are considering are non-starters, for the simple reason that they require the valuation of assets whose true value (even on a hold-to-maturity basis) can only be guessed at.  The good bank proposal only requires the valuation of those assets on the balance sheets of the existing banks that are easy to value: transparently valued assets.  The toxic stuff is left on the balance sheet of the existing banks, which become the legacy bad banks.

Offering to pay enough to the existing owners of the toxic assets to induce these owners to sell them would require paying over the odds.  That might not leave enough fiscal resources to support the new lending activities that are so urgently needed.  It would also be an unfair and moral-hazard-maximising bail out of the existing owners and creditors of the banks. 

Nationalising the dodgy banks (or even the entire cross-border universal banking sector) would only solve the valuation problem of the new owner (the state) after nationalisation.  The toxic assets could be transferred into a bad bank at any valuation, including zero.  The owner of the bad bank and of the cleansed bank are the same.  Nationalising the dodgy banks would not solve the problem of how much to pay for the banks, however, because that would depend in part on the valuation of the toxic assets.  The good bank proposal creates new, publicly owned banks which only purchase good assets from the legacy bank.  There is no valuation issue involving toxic assets for the tax payer.

Crisis fighting, moral hazard and fairness

The existing packages of support measures in the US, the UK and elsewhere have failed to get lending to the real economy going again.  In the US especially, but also to some extent in the UK, It has been a shameful boondoggle for the banks that are at the heart of the financial mess - bank CEOs and other top managers, bank shareholders, holders of unsecured bank bank debt (subordinated, junior and senior) and other creditors.

The US, the UK and several other continental European countries are at risk of emulating Ireland, where the government first guaranteed all the liabilities of the banks (other than equity) and only after that began to nationalise the banks.  This leaves the Irish government today in the not too enviable position of having to choose between sovereign default and bleeding the tax payer and the beneficiaries of normal public spending to make whole all the creditors of the banks.      (emphasis added)

Bailing out the holders of existing bank debt and other bank creditors would be outrageously unfair: they did the lending and made the investments, they should eat the losses.  In addition, many of the creditors are likely to be much better off, even after they write down/off their claims on the banks, than most of the tax payers and public expenditure beneficiaries that pay for the bail out.  Bailing out the existing creditors would also create dreadful incentives for excessive future risk-taking by banks.

Especially in the US, the disdain for moral hazard displayed since the beginning of the crisis by regulators and by the fiscal and monetary authorities has been shocking.  It has been justified with the claim that you cannot afford to worry about medium- and long-term incentives for appropriate risk taking when your  house is on fire.  That argument is logically flawed.

Two things are systemically important.  The first is to restore the operation of key financial markets that have become illiquid.  The Fed is doing a reasonable job in that regard.  The second is to restore bank lending to the real economy.   Neither objective requires that the existing banks be saved, let alone that their existing shareholders and creditors receive any financial support from the state.  We can save banking without saving the banks or the bankers.  The 'good bank' proposal demonstrates how to do this.

Regulators, central bankers and policymakers should be pursuing three key objectives.  The first is to get lending by the banks to the real economy, especially to the non-financial enterprise sector, going again. The second is to minimize moral hazard by creating the right incentives for future risk taking by banks, their creditors and their customers, by ensuring that the losses incurred by the failed banking system are born first and foremost by those who invested in the banks in any capacity. 

For reasons that are partly sensible (protecting small unsophisticated savers from financial ruin and forestalling inefficient attempts by financial illiterates to monitor complex financial institutions) and partly populist pandering, most retail deposits have ended up insured or guaranteed by the state (often at least in part ex-post).  Moral hazard should be stopped, however, beyond the magic circle the state has drawn around retail depositors.  The third objective is to pursue justice in burden sharing.

The legacy bad banks would, under their existing ownership and with whatever balance sheet they end up with after shedding their insured/guaranteed deposits and after selling their good, easily valued assets, have as their sole activity the management of their existing assets.  No new investments would be undertaken, no new loans made and no other new exposures incurred.  Their liabilities and other funding decisions would be managed in the interests of the existing shareholders.  No doubt many of them would fold.  Chapter 11 or Chapter 7 would be ready and waiting for them.


By focusing scarce fiscal resources on supporting flows of new lending and new funding to support new lending, rather than on supporting stocks of existing bad assets and/or toxic assets assets and on guaranteeing or insuring stocks of existing liabilities, the state meets its three key objectives.  First, its short-run economic stabilisation and crisis-fighting objective; second, its medium and long-term banking sector incentive-enhancing, moral-hazard-minimising objective; and third, its fairness objectives: the polluter pays or, you break it, you own it.

Establishing legal and institutional clear water between the legacy bad banks and the new good banks is a necessary condition for fulfilling the economic imperative to support flows of new lending and borrowing rather than to protect existing stocks of toxic assets and their owners.



How to set up a new 'good bank'

February 21, 2009

My 'Good Bank' proposal  and related proposals by Joseph Stiglitz, George Soros and Paul Romer appears to be getting some attention if not yet traction in a number of European capitals and in Washington.  There are a couple of questions about the proposal that crop up regularly, and I would like to address these here.  They are (1)  how do you set up a good bank, and (2) would not the senior unsecured creditors of the old bad bank be likely to take a hit under your proposal?

In a private note about my 'good bank' proposal , Uwe Reinhardt raises the following question: "..physically and time wise, how hard would it be to establish these new banks? ? People will imagine new skyscrapers being built to house the new banks, etc. So, step by step, how would this get done? I imagine one could just take over Citigroup's and Morgan Stanley's buildings, make it the new bank and move the that stays with them to another location - or , floors in the same building."

Uwe is exactly right as to how the new banks would be established operationally. First, a new good bank is created for each existing bank that is revealed (through the stress tests proposed by US Treasury Secretary TIm Geithner as part of his Financial Stability Plan for all banks with assets over $100 bn, or through some other financial forensic exercise) to be not viable without public financial support.  The new good banks would be established as legal entitities and as FDIC-insured commercial banks.  They would be capitalised using private and public money, with the state ensuring that the new entities are properly capitalised.

The new good bank (New Citi or New Bank of America, say) would get the deposits of the old bank and it would purchase any of the good assets of the old bank it is interested in. All the bad assets and the toxic (hard or impossible to value) assets would be left with the old bank. If the value of the deposits transferred to the good bank exceeded the value of the good assets it purchased from the old bank,  the difference on the balance sheet of the new bank would be made up initially through the acquisition of Treasury bonds and bills.  On the balance sheet of the old bank, the difference would be made up through a loan from the state.  If the value of the deposits transferred to the good bank were less than the value of the good assets it purchased from the old bank,  the difference on the balance sheet of the new bank would be made up initially through the a loan from the state.  On the balance sheet of the old bank, the difference would be made up through the acquisition of Treasury bonds or bills.

The old bank would lose its banking license and it would not be allowed to invest in any new assets.  The old bank bank would receive no further public financial support of any kind.  Government financial support for the banking sector would be restricted to ensuring the new good banks are properly capitalised and guarantees for new lending and borrowing by the new good banks and by those old banks that passed the stress tests.

The bad old bank It would manage the remaining assets of the old bank in the interest of the shareholders of the old bank.  Should the old bank fail, the appropriate insolvency protection regime and insolvency regime for the asset management fund that the old bank has now become will be involved.  The unsecured creditors (including the holders of senior unsecured debt) would be ad risk.  At the very least, some or all of their claims are likely to be converted into ordinary equity. As an old bad bank is no longer in the new lending business and engages in new funding only to maximise the returns from managing (down) the existing portfolio of assets, the old bad banks are of no greater systemic significance than any other asset managers.

Among the good assets I would have the new bank buy from the bad old bank would be as much of the franchises, branches, offices and other real estate and equipment as are necessary to perform the lending, deposit taking and other functions of a (narrow) bank. I would also hire many of the staff (all but the top management) of the old bank. As the old bad bank no longer has a banking license, will no longer hold or take deposits, and will not be allowed to invest in any new assets, it will require just a relatively small number of asset managers and funding specialists to manage its assets. The old or legacy bad bank would just require the expertise of fund managers managing a fund that is constrained not to invest in any new assets.

As far as the banking customers (depositors and borrowers) are concerned, they would at first only notice the change in the name on the door (from Citi to New Citi or from Bank of America to New Bank of America). The legacy bad old bank fund management team could rent some space in the basement of the new bank.  The whole exercise could be implemented over a weekend.

The senior debt  of many of the institutions that are likely to turn out to be bad banks is often held by institutional investors like pension funds and insurance companies.  If and when the old bad banks default on that debt, the holders of the debt obviously get hurt.  While that is regrettable, it is surely better that the burden of the losses incurred as a result of past bad lending and investment decisions fall on those who made these decisions rather than on the tax payer.


Slaughtering sacred cows: it's the turn of the unsecured creditors now

March 18, 2009 

Why are the unsecured creditors of banks and quasi-banks like AIG deemed too precious to take a hit or a haircut since Lehman Brothers went down?  From the point of view of fairness they ought to have their heads on the block.  It was they who funded the excessive leverage and risk-taking of banks and shadow banks.  From the point of view of minimizing moral hazard - incentives for future excessive risk taking - it is essential that they pay the price for their past bad lending and investment decisions.  We are playing a repeated game.  Reputation matters.

Three arguments for saving the unworthy hides of the unsecured creditors are commonly presented:
*     Unless the unsecured creditors are made whole, there will be a systemic financial collapse, with dramatic adverse consequences for the real economy.
*     If the unsecured creditors are forced to take a hit, no-one will ever lend to banks again or buy their debt.
*    The ultimate 'beneficial owners' of these securities - notably pensioners drawing their pensions from pension funds heavily invested in unsecured bank debt and owners of insurance policies with insurance companies holding unsecured bank debt - would suffer a large decline in financial wealth and disposable income that would cause them to cut back sharply on consumption.  The resulting decline in aggregate demand would deepen and prolong the recession.
I believe all three arguments to be hogwash.


As regards the first argument - financial Armageddon - it may have escaped people's notice that, with the exception of a few struggling survivors, the large border-crossing banks in the north-Atlantic region would be insolvent but for past, present and anticipated future government financial support.  Insolvent financial institutions on opaque tax-payer underwritten life support should instead be put into administration; if they are systemically important, the desired results can be achieved through the special resolution regime (SRR) with prompt corrective action (PCA) that most countries in the region now have in place.  A standard and desirable feature of such (proto-) insolvency procedures is the mandatory conversion of unsecured debt into equity and/or the write-down of (part of) the unsecured debt.

The financial market cardiac arrest that followed Lehman's demise was not evidence that unsecured creditors should be spared.  Lehman's insolvency and liquidation was the correct outcome, but the process was badly mishandled.

First, following the decision of the Fed and US Treasury to arrange for and underwrite the take-over of Bear Stearns by JPMorgan Chase, the market had been lulled into believing (I certainly did), that the US government had underwritten the entire balance sheet of the internationally visible US banking sector.  Creating that belief, allowing people to act on it for six months. and then to say  'well, actually, we did not mean that' would obviously rattle the nerves of many.   Letting the unsecured creditors of other banks and non-bank financial institutions take a hit would not create the same surprise today, judging from the CDS rates for most banks and the default risk premia on bank bonds.

Second, there was no SRR for investment banks at the time of the Bear Stearns crisis.  Nor was there at the time of Lehman's collapse, six months later.  The only insolvency option was to put these institutions in Chapter 11 or Chapter 7.  That problem no longer exists, because the category of free-standing investment bank to which Bearn Stearns and Lehman belonged no longer has any members.  The last two surviving members, Goldman Sachs and Morgan Stanley, became bank holding companies, supervised by the Fed and with the SRR and PCA regime appropriate to such institutions, administered by the FDIC.

Third, even absent a SRR for investment banks, it is extraordinary that the SEC, the Fed and the US Treasury did not between them come up with a way to ring-fence the 'financial infrastructure services' provided by Lehman through its role as a custodial counterparty in tri-partite repos.  Again, with all major banks now subject to an SRR with PCA, this issue ought not to arise again.  I hope that for systemically important non-bank financial institutions, including insurance companies like AIG, there now also exists an SRR, which allows the government to take over the management of the company, with full powers to sell assets, spin off business units and ring-fence subsets of the assets and liabilities.

The Fed's and US Treasury's multi-stage bail-out of AIG provided a massive windfall to a particular class of unsecured creditors, owners of CDS written by AIG.  About $58 bn was paid out by government-bailed AIG to banks headquartered outside the US.  While not all of that money necessarily represents a loss to AIG or to the US tax payer, it is surprising, to say the least, to have official US concern for the well-being of unsecured creditors of US institutions extend to foreign creditors.  An admirable manifestation of internationalism.

The global financial cardiac arrest that occurred in the second half of September 2008 (and which now has passed), was in my view due more to the sudden dawning of the realisation that most of the leading border-crossing banks headquartered in the north Atlantic region were insolvent (but for the tax payer's past, present and future favours), that occurred when AIG had to be rescued.  The insurance that banks had bought against default on their bond investments, first from the monolines and then from AIG and similar shadow-banking sellers of shadow-insurance products, turned out to be pretty much worthless.

The fear that followed the markets' realisation that the banking sector faced an insolvency rather than a liquidity problem did not abate when Treasury Secretary Paulson presented his first TARP proposal to the Congress.  This consisted of three A4 sheets, which said: "I want $750 bn.  I want it now.  I will use these funds for good works, but I cannot tell you what these will be.  Don't ask any questions.  And you cannot sue me." This political blunder convinced many that the Treasury Secretary was out of his depth.  When the initial request was turned into a 300 page regular pork-laden Congressional document, the market breathed a sigh of relief.  But when Congress then turned down this proposal at the first time of asking, the markets realised that the Congress was childish and irresponsible.

Cardiac arrest seems a reasonable response to this cumulation of bad and worse news.  A repeat does not seem likely.  Major negative surprises about the health of key financial institutions are unlikely, because health perceptions are already so pessimistic.  And compared to the Bush administration, the new administration is unlikely to be as accident-prone in its interactions with the Congress.

Unsecured creditors' strike

As regards the second argument - if banks default on their unsecured debt, no-one will ever lend to them again - it ought to be unnecessary to point to the logical flaws and to the empirical evidence to the contrary.  Unfortunately, I hear the argument sufficiently often, I feel it incumbent on me to debunk it here.

First, when a borrower defaults on his outstanding debt, his ability to take on new debt and to service it improves.  The only reason not to rush in and offer him your shillings immediately is the possibility that the past default provides evidence that increases the perceived likelihood of a future default.  If the default was a pure 'bad luck' default, it would not do so.  If the default is evidence of (unexpected) bad management by the borrower, new credit is less likely to be forthcoming.  If the default is perceived as 'discretionary', that is, a case of 'can pay but won't pay', credit is likely to be cut off.

Second, even sovereign debt defaulters have not suffered dramatically for their transgressions. Serial sovereign defaulters like Argentina tend to be back in the market after as little as three years.  The Russian and Ukranian defaults of 1998 did not banish these countries to the Valley of the Financial Lepers for very long.  Carmen Reinhard and Kenneth Rogoff have written two wonderful historical studies of sovereign defaults on external debt and on internal debt.  I recommend both papers highly.

Even more relevant is the fact that, if the authorities adopt the good bank solution proposed by (among others) Paul Romer, Joseph Stiglitz, George Soros, Robert Hall and Susan Woodward and myself, it would be the legacy banks, stripped of their banking licenses and not engaging in any new lending or new investments, that would default on the unsecured debt.  The new good bank (with just the (insured) deposits and the good assets of the original bank on its balance sheet in the version of the good bank model proposed by Hall and Woodward), could, until emotions and moods have settled, have its new unsecured debt guaranteed by the government.  Rational would-be new unsecured creditors of the new good bank would in any case not be deterred by the bad experience of the old unsecured creditors of the bad bank.  So there should be no problem attracting new unsecured creditors willing to lend to the banks.

Finally, a modicum of discouragement of new unsecured creditors is desirable.  We don't want to return to the reckless unsecured lending to banks of the past - lending that was highly instrumental in bringing us the crisis.  Greater lender caution and prudence and a higher interest rate on unsecured lending to banks will be a positive and desirable feature of the landscape banks will have to operate in during the years to come.

Pensioners won't spend

Default on unsecured debt, whether it takes the form of a write-down or write-off or (partial) conversion into equity will, through the pension funds and insurance companies holding these instruments, affect the consumption decisions of pensioners who find themselves with seriously diminished pensions and insurance policy holders whose policies have diminished in value.

I agree that this is what will happen.  But what happens if instead the government bails out the unsecured creditors and makes the pensioners and insurance policy holders whole?  The losses are still there and the government has to pay for them.

Consider the case where the government funds the secured creditor bail-out by raising taxes immediately.  Unless there are important distributional asymmetries in the incidence of the tax increase under the bail-out scenario and the incidence of the losses suffered by the pensioners and insurance policy holders under the no bail-out scenario, the negative effects on demand should be about the same.  If the unsecured creditor bail-out is financed by cutting public spending on goods and services immediately, the negative effect on demand is likely to be greater under the bail-out scenario than under the no-bail out scenario.

If the government borrows to fund the unsecured creditor bail-out, the bail out will be less contractionary than the no-bail out scenario, unless there is Ricardian equivalence (debt neutrality) - something I consider empirically untenable - or there is financial crowding out through an adverse asset market response to larger deficits.  This could happen if the government has limited 'fiscal spare capacity' - its ability to commit itself credibly to future tax increases or public spending cuts is limited.  In that case the government could still achieve a more expansionary effect from the bail-out scenario than from the no-bail-out scenario, if it were to monetise the debt incurred as a result of the bail-out.  Of course, this monetisation could only be temporary if inflation is to be avoided when the economy returns to full employment.

More importantly, the government could prevent a decline in aggregate demand under the no-bail out scenario by a conventional Keynesian demand stimulus (tax cut or public spending increase), financed either by borrowing or by printing money.  Even a balanced-budget increase in public expenditure on goods and services would be expansionary given a strict Keynesian multiplier.

So the third argument, that not bailing out the unsecured creditors would lead to a contraction of aggregate demand, may well be true but does not represent an argument for bailing out the unsecured creditors.  The superior aggregate demand effects from bailing out the unsecured creditors by borrowing or printing money, compared to a policy of not bailing out the unsecured creditors exists only if the policy of not bailing out the unsecured creditors is accompanied by the government not doing anything on the fiscal side.  The same demand-supporting effect achieved with the deficit-financed bail-out, can be achieved equally well by not bailing out the unsecured creditors and implementing a deficit-financed expansionary fiscal measure.

I conclude there are no valid arguments against forcing the unsecured creditors of bank and other financial institutions to sink or swim on their own, without any financial support from the state.  Fairness considerations and moral hazard certainly support putting the unsecured creditors at risk.  They made their bed; now they should lie in it


Don't touch the unsecured creditors! Clobber the tax payer instead.

March 13, 2009 

Good Bank vs Bad Bank

The Good Bank solution differs significantly from the Bad Bank solution as regards its distributional implications, its medium-term and long-term incentive effects and its immediate financial stability impact.

Under the Bad Bank approach, the authorities either purchase toxic assets from the banks that made the toxic investments/loans, or they guarantee (insure) these toxic assets.  Toxic assets are assets whose fair value cannot be determined with any degree of accuracy.  Clean assets are assets whose fair value can easily be determined.  Clean assets can be good assets (assets whose fair value equals their notional or face value) or bad assets (assets whose fair value is below their notional or face value).   When the authorities acquire the toxic assets outright, they establish a legal entity to manage these assets - the Bad Bank.  The publicly-owned Bad Bank either sells these toxic assets as and when they cease to be toxic and a liquid market for them re-emerges, or holds them to maturity.

Under the Bad Bank approach, the legacy banks, either sans the toxic assets or with the toxic assets guaranteed by the state, live to fight another day.  The presumption is that the state overpays for the toxic assets.  The price it pays is certainly greater than the immediate liquidation value of the assets by their owners.  It is also likely to exceed the present discounted value of the future cash flows of the assets, or their hold-to-maturity value.  Similarly, the cost of any guarantees provided by the state in the case where the toxic assets continue to be held by the banks, is likely to be less than the fair value of these guarantees.

The rationalisation for the creation of  Bad Banks and for toxic asset purchases by the state that was part of the original TARP proposal - it would serve as a price discovery mechanism for potentially socially useful financial instruments that had temporarily become illiquid - is no longer credible.  Most of the toxic assets ought never to have been created and, with a bit of luck, will never be seen again.  So the fundamental rationale for the creation of Bad Banks and for toxic asset purchases by the state is the provision of a subsidy to the banks that made the toxic loans and investments.  These beneficiaries include the top management and board of these banks, the shareholders and the unsecured and non-guaranteed creditors.

The subsidies for the legacy banks inherent in the purchase by the state of the toxic assets and/or in the guarantees provided by the state for these toxic assets are further boosted by the myriad modalities of further official financial support for these banks.  These can be additional capital injections, guarantees for new borrowing or guarantees for new loans and investments by the banks.

Under the Good Bank approach, the state creates a new bank, the Good Bank, which gets the deposits and the clean assets of the old banks.  The old bank gets compensation equal to the difference between the (known) value of the clean assets it loses and the value of the deposits it gives up.  The state may also inject additional public capital into the Good Bank, or it may invite in additional private capital.  Government financial support is given only to new lending, new investment and new funding by the Good Bank.  The legacy (ex-)bank has its banking license taken away and simply manages the existing stock of toxic assets. The legacy (ex-)bank does not get any further government support.

The Hall-Woodward-Bulow good bank solution

A particularly neat example of the Good Bank solution has been proposed by Robert E. Hall of Standford University and Susan Woodward of Sand Hill Econometrics.  It can be found on the Vox website.  They attribute the key idea to Jeremy Bulow.  In what follows I merely adapt their numerical Citicorp example to the RBS Group.

The data for the Table below come from the Annual Report & Accounts 2008 of RBS.  I am doing the exercise for the whole RBS Group.  As it is unlikely that home country governments would be willing (or even able) to support the foreign subsidiaries of their banks, it might have been more appropriate just to consider the UK high-street banking units of the RBS Group.  I leave that as an exercise for the reader.

Total equity of the RBS Group at the end of 2008 is reported on the balance sheet as just over £80bn.  Market capitalisation is around £ 8bn.  I therefore subtract £72 bn from the £2,402 total assets reported for the end of 2008, which leaves adjusted total assets at £2,330 bn.  The tax payer has already put £45 bn into RBS.  In addition, RBS has placed £325 bn of toxic assets in the government's Asset Protection Scheme.

This means that RBS is a dead bank walking, a zombie bank, with its market capitalisation much less than past and present government financial support, let alone past present and anticipated future government financial support, which would also be reflected in today's market capitalisation.  I could have done the same type of exercise for Lloyds Banking Group, for Citicorp, for Bank of America or for UBS and many other zombie border-crossing banks.

Good Bank -Bad Bank
Deconstruction of RBS Group end-2008 Balance Sheet

(following the Hall-Woodward-Bulow approach) (£ bn)
                                          RBS                 Good Bank           Bad Bank
Clean assets
(good & bad)                 1,o12                      1,012                      -
Toxic assets                    325                           -                        325

Derivatives                     993                           -                        993

Equity in other bank       -                              -                       114
Total assets                    2,330                    1,012               1,432
Deposits                            899                        899                        -

Debt securities &
other non-deposit      452                            -                         452

Derivatives                       971                           -                         971

Total liabilities            2,322                    899                 1,424

Equity                                     8                        114                             8

Total liabilities
 & equity                        2,330                   1,013                 1,432

Capital ratio                 0.34%                 11.25%                 0.56%

On the asset side of RBS group are clean assets (good and bad, but with known fair values) and toxic assets (assets with unknown fair values and derivatives.  On the liability side, I distinguish deposits, debt securities and other non-deposit liabilities, and derivatives.  In the US, the derivatives on both the asset and liability sides of the balance sheet would have been netted, which would have reduced the size of the balance sheet by almost one trillion pounds.

I assume that the £325 bn worth of toxic asset insurance offered by the authorities to RBS equals the stock of toxic assets on its balance sheet. This leaves RBS with just over £ 1 trillion worth of clean assets (and the derivatives, just under £1 trillion).  'Deposits' is shorthand for guaranteed or secured creditors.  The £899 bn worth of deposits on the RBS balance sheet is, however, larger than what is formally covered by UK deposit insurance (or by the applicable deposit insurance schemes of the foreign subsidiaries).  Debt securities and other non-deposit liabilities are claims on RBS by unsecured and non-guaranteed creditors.  They include all unsecured debt, including subordinated debt, other junior debt and senior debt.  RBS had £452 bn of this unsecured and non-guaranteed debt (plus of course some non-guaranteed and unsecured liabilities included in 'deposits').  Then there is just under £1 trillion worth of derivatives on the liability side of the balance sheet.

Equity - market capitalisation - is a mere £ 8 billion, giving a capital ratio (equity as a percentage of assets) of 0.34%.  Even with all the government support it has received, RBS group is effectively worth nothing.

The Hall-Woodward-Bulow Good Bank - Bad Bank deconstruction of the RBS balance sheet requires one key condition to hold:  the value of the clean assets of RBS has to exceed that of its deposit liabilities.  This will be more likely the larger the amount of non-deposit funding RBS engages in.

We split RBS into a Good Bank and a Bad Bank by giving the deposits and the clean assets of RBS to the Good Bank, leaving everything else with the Bad Bank, and giving the Bad Bank all the equity in the Good Bank.  (The derivatives on both sides of the balance sheet could be given to the Good Bank instead of to the Bad Bank, assuming they are clean).  Since the value of the clean assets (£1,012 bn) exceeds that of the deposits (£ 899 bn), the good bank has equity of £114 bn (mind the rounding errors!).  Its capital ratio is a healthy 11.25%.   If  I had used a more restrictive definition of 'deposits', the capital ratio could easily have been over 20% or even 30%.

The Bad Bank keeps the toxic assets and derivatives of RBS.  It also has the equity in the Good Bank as an asset on its balance sheet.  On the liability side it has just the unsecured and non-guaranteed debt securities and other non-deposit liabilities.  Its equity is, of course, the same as that of RBS: £8 bn.  Its capital ratio will therefore be higher than that of RBS, because the balance sheet of the Bad Bank is smaller.  Neither the equity owners of the Bad Bank nor the unsecured and non-guaranteed creditors of the Bad Bank are worse off than, respectively, the equity owners of RBS and the unsecured and non-guaranteed creditors of RBS.

To achieve the deconstruction/decomposition of RBS into a Good Bank and a Bad Bank according to the Hall-Woodward-Bulow principles would require that RBS be put into temporary administration.  The new Special Resolution Regime (SRR) introduced for the UK in February 2009 provides the ideal legal setting for this.  It should not take long, a weekend at most.  Basically, the Bad Bank just becomes a financial portfolio of toxic assets and derivatives, plus its stake in the Good Bank.  It would not be allowed to invest in any new assets or to engage in any banking activities.  It would manage the existing asset portfolio down and would cease to exist once the last asset has been sold or has matured.  Among the clean assets the Good Bank buys would be the buildings, equipment etc. necessary for conducting the banking operations of the Good Bank.

If the UK government had not been daft enough to guarantee the £325bn worth of toxic assets on the balance sheet of the Bad Bank, there can be little doubt that the Bad Bank I have just constructed would have failed soon after coming out of the SRR.  The Bad Bank, which is just a fund restricted not to invest in new assets, would be put into administration. The shareholders would be wiped out (more than 70 percent of RBS is now government-owned), and the unsecured and non-guaranteed creditors would determine what to do with the Bad Bank and its assets.  Most likely there would be a significant debt-to-equity conversion and/or a large write-down of the debt.

The government would focus its financial support on the Good Bank, either by providing it with additional capital or by guaranteeing new lending and/or new borrowing by the Good Bank.   Private capital could be attracted into the Good Bank too.

Distributional differences between the Good Bank and the Bad Bank solution

The Good Bank solution favours the tax payer.  The Bad Bank solution favours the unsecured and non-guaranteed creditors of the zombie banks.  'Tax payer' includes those beneficiaries of public spending programmes that may have to be cut to meet the fiscal cost of purchasing or guaranteeing the toxic assets under the Bad Bank solution.  It also includes those who lose as a result of future inflation or sovereign default, should either of these two solutions to dealing with the public debt created as a result of the Bad Bank solution eventually be adopted.

The Bad Bank solution also favours the shareholders of the zombie banks, but in the case of RBS, this is mainly the government and therefore the taxpayers.  The amount of shareholder equity involved in the zombie banks is, in any case, negligible compared to the exposure of the unsecured and non-guaranteed creditors.  The Bad Bank solution also saves the jobs and perks of the top management and the boards of the zombie banks - often the very people responsible for turning a once-healthy bank into a zombie bank.

There can be no doubt that, from a distributional fairness perspective, the Good Bank solution beats the Bad Bank solution hands down.

Incentive effects of the Good Bank and the Bad Bank Solution.

The Bad Bank solution creates moral hazard, because it rewards past reckless investment and lending.  It also represents an inefficient use of public funds in stimulating new lending by the banks.  To stimulate new lending, a subsidy to or guarantee of new lending is more cost efficient than the ex-post insurance of losses that have already been made on old lending, even though their true magnitude is not yet known.  The Good Bank solution leaves the toxic waste with those who invested in it and with those who funded these activities, freeing government funds for reducing the marginal cost of new lending or increasing the expected return to new lending.

Both as regards moral hazard (incentives for excessive future risk taking) and as regards the efficient use of government funds ('new lending bang per buck'), the Good Bank solution beats the Bad Bank solution hands down.

Financial stability implications of the Good Bank and Bad Bank solutions: saving banking, without saving bankers or the existing banks

The holders of bank debt, with the possible exception of perpetual subordinated debt (which counts as tier one capital in some countries), have become the sacred cows of this financial crisis.  Regulators, central bankers and Treasury ministers are quite willing to see shareholders wiped out.  After the demise of WAMU and Lehman Brothers, however, the unsecured creditors have become inviolable.  Somehow, those in charge of macro-prudential stability, notably the Fed, have bought into the notion that if there is either a further default on bank debt, or  a restructuring involving a significant debt-to-equity conversion, or a signficant write-down of the claims of bank bond holders, this will be the end of the world.

I just don't buy it.  Fortunately, I am not the only one. Luigi Zingales, the Robert C. McCormack Professor of Entrepreneurship and Finance at the Chicago Business School, has been advocating the case for mandatory debt-into-equity conversions, debt forgiveness and other up-tempo Chapter 11- style financialestructuring of banks and other defunct behemoths like GM,  since the first days of the crisis (see e.g. (1) and his book Saving Capitalism from the Capitalists, co-authored with Raghuram Rajan).  Robert Hall and Susan Woodward also feel no need to pay any special attention to or lavish any public funds on the toxic assets, their owners and those who funded them (the unsecured and non-guaranteed creditors) once the Good Bank has been established and sent on its way.

Part of the reason there appears to be this widespread belief that you have to guarantee all bank liabilities is that this is what the Swedish authorities did during their 1991-1993 banking crisis (see e.g. Lans Jonung's paper "The Swedish model for resolving the banking crisis of 1991-93. Seven reasons why it was successful" . First, Jonung lists seven criteria for 'successful' resolution of a banking crisis.  The paper does not demonstrate that this septet constitutes a set of necessary and sufficient conditions for success - if indeed the Swedish approach is deemed to have been a success.  Second, success is in the eyes of the beholder.  The Swedish banking system has been hard hit again in the current crisis by its overexposure (30 percent of annual GDP) to risky investments in Central and Eastern Europe, including the Baltics and Ukraine.

Every financial boom/bubble has been characterised by rising and ultimately excessive banking sector leverage, that is, by excessive lending to banks.  If all the unsecured creditors of the banking system were made whole in the previous systemic crisis, it is not really surprising that the banks, and their creditors, are back for more.

In a more systematic study of the use of blanket guarantees of bank liabilitiesLuc Laeven and Fabian Valencia find the following:

"Using a sample of 42 episodes of banking crises, this paper finds that blanket guarantees are successful in reducing liquidity pressures on banks arising from deposit withdrawals. However, banks' foreign liabilities appear virtually irresponsive to blanket guarantees. Furthermore, guarantees tend to be fiscally costly, though this positive association arises in large part because guarantees tend to be employed in conjunction with extensive liquidity support and when crises are severe."

The proposition that the consequences of inflicting losses on holders of bank debt are awful beyond our wildest imagining is voiced incessantly and loudly by bankers and by those long bank debt, especially insurance companies and pension funds.  And a vigorous campaign is underway to extend the no-default presumption to the debt of pseudo-banks like AIG.

The most over-the-top, ludicrous piece of attempted scare mongering about the systemic risk implications of default by any institution I have ever read is the internal memorandum "AIG: Is the Risk Systemic", of 26 February 2009, which is now all over the internet.  Just one small sample: "The failure of AIG would cause turmoil in the U.S. economy and global markets , and have multiple and potentially catastrophic unforeseen consequences".

I would have thought that, on the contrary, markets have discounted the likelihood of default by many of the major border-crossing banks, and by AIG, pretty comprehensively by now. After the US authorities bailed out Bear Stearns in March 2008, letting Lehman go belly-up in September 2008 was a bad surprise.  Even then, I don't accept the interpretation that it was Lehman's filing for bankruptcy protection that triggered the cardiac arrest in global financial markets in the second half of September 2008.  Instead the financial sector convulsions of the last quarter of 2008 were caused by the realisation that (1) most of the US and European border-crossing banks were insolvent without government financial support, that (2) the rot extended to the shadow banking sector (AIG), and that (3) the US authorities (Treasury, Fed, SEC) were not on top of the issue and that Congress was bound to act irresponsibly.

But even if it had been Lehman that triggered the financial upheaval, that was then.  This is now.  Banks, counterparties, investors and policy makers have had 6 months to adjust to the new reality and prepare for the eventuality of default on zombie bank debt and even on AIG debt. The bonds of large zombie banks trade at spreads over government yields comparable to those of automobile manufacturers (600 - 650 basis points).  Their CDS spreads put many of these banks well into the default danger zone.  Their stock market valuations are consistent with those of institutions not a mile away from insolvency and default.

The fact that zombie banks or AIG are self-serving when they plead systemic risk as an argument for further government hand-outs does not mean that they are wrong.  It does lead one to verify more carefully the logic of their arguments and the quality of the empirical evidence offered in support.  Let me just consider the argument that the main investors in bank debt (and AIG debt) - pension funds and insurance companies - are too vulnerable and too systemically important to permit the banks (or AIG) to fail.

Pension funds don't go broke with adverse effects on systemic stability.  If they are funded, defined-contribution funds, a reduction in their asset value means that pensioners will get lower pensions.  If they are defined-benefit schemes (including 'final salary schemes'), the risk of investment surprises is shared by the sponsors and the beneficiaries.  When the Dutch pension fund ABP took a big hit last year, my parents did not get any indexation of their pension benefit.  In past years, pension benefits had tracked earnings inflation, and occasionally price inflation.  Should coverage ratios decline enough, even nominal cuts in pension benefits can be implemented.  This may cause hardship, but not financial instability.  No reason to favour the pensioners over the tax payers.

As regards insurance companies, I doubt whether "Insurance is the oxygen of the free enteprise system", as AIG would like us to believe.  Certainly insurance companies like AIG are not the only suppliers of oxygen.  Insurance is a regulated industry.  Orderly restructuring following administration and insolvency need not interfere with the provision of any of the essential infrastructure services required for the proper functioning of a market economy.

Regulators, especially but not just in the US, have bought the 'don't touch the unsecured creditors' argument.  The Fed especially appears to have swallowed it hook, line and sinker.  This cognitive regulatory capture has turned the Fed, with the enthusiastic support of the FDIC and the US Treasury, into the most powerful moral hazard propagation machine ever.

If a bank or an insurance company like AIG is at risk of failing but is truly too big or too interconnected to fail (rather than merely too politically connected to fail), and if a Good Bank solution is not feasible, then the institution in question should immediately be taken  into public ownership or put into a special resolution regime, if one is available.  From public ownership it can be put into administration.  Once in administration or under a Special Resolution Regime, it can be restructured decisively through a mandatory debt-to-equity conversion or debt write-down. There is no case for sparing the unsecured creditors.