Brain of Britain

[Mr Susan]

The critics of finance do not work within the industry and I really am that simple

[JungleDirector]

I will answer the question.  I have worked in banking as well as Trust & Company + accounting and investment.

There are no signs in my field (which is not banking) but covers the others that there is a downturn is business.

[newmac]

Thank you

The point I was trying to make is not all jobs in banking, accounting etc are what people on both sides of the argument refer to as the Jersey finance industry. As these jobs exist in all communities.

[JungleDirector]

They do all sort go hand in hand because Trust Companies and Investment companies do business with Banks etc.

The only way I could foresee a bank shedding people in Jersey would be A) If it did go down or B) If it merged with another bank and they decided to cut back. 

[boatyboy]

An interesting, easy to read article, by a clever man, and so was David Bowie.

From the Daily Mail. last Wednesday.

David Bowie started a trend of 'securitisation' in 1997 by selling the royalties for his music upfront for a large lump sum 

He produced some bits of paper - Bowie Bonds - and said: 'Whoever buys these gets my royalties.'

It meant he no longer had the money coming in but instead had a lot up front. His investors were guaranteed a decent income. It was a good deal all round.
And the banks were catching on to the idea. They thought: 'We have billions out there in mortgages which are going to pay us back very slowly. Why don't we sell those and get the money now?'

So the banks started doing what Bowie had done - in a big way.

But then it started to go wrong. As the banks were selling the loans, any bad risk became someone else's problem. So the banks didn't have to worry so much who they were lending to.

Problem number two was that it wasn't just their standards that dropped - the banks just lent far too much.
And thirdly, the banks looked at these securities and said: 'These are so good we want to buy some ourselves.' Having got rid of a lot of loans and risks, they ended up buying them back in.

It all went pear-shaped for American securities because the banks had lent to people who couldn't repay them.

No one wanted securities, their value plummeted and the banks, having bought so many, lost a lot themselves.
Securitisation was a kind of magic bullet for banks. It looked a fantastic way of making them more profitable with less risk.
But they fired this magic bullet at themselves.

They became too dependent on it and then investors decided they didn't like securities because they didn't know what was in them and the loans were often bad.

No one wanted to buy securities even if they weren't bad - which Northern Rock's were.
It was fashionable when David Bowie did it once. Ten years later, it wasn't. Suddenly the banks didn't have any money coming in, so they couldn't lend any more - that's the credit crunch.

To read full article please click on hyperlink

http://www.dailymail.co.uk/debate/article-1114650/One-Britains-leading-economic-pundits-asks-Is-David-Bowie-blame-credit-crunch.html

Boatyboy

[Durendal]

Wrong about Bowie

American Overseas Credit Corporation (a jersey Company) sold receivables from Amex cards in seccuritisation deals in the 1980's

[danrok]

The Daily Mail is littered with errors.  The Editor recently won some kind of award, presumably for their success in telling half-truths convincingly.

[Ashley]

People have been buying and selling liabilities since the dawn of time.

As for jobs in jersey finance.  If the work rate goes down, so will jobs. It's as simple as that really.

[stoofa]

People have been buying and selling liabilities since the dawn of time.

But hey, recently we started writing it down gave it its own special name...

As for jobs in jersey finance.  If the work rate goes down, so will jobs. It's as simple as that really.

Very much so.

There was a lot of flap when Lehmans was busy going under about how Jersey was doomed as it was reliant on the finance industry. The fact that all of Jersey's finance is (more or less) admin for asset management functions means that aint really the case. All the assets under management still exist, even if they are worth a fraction of the price so the admin burden doesn't really drop up front, unless the whole world collapses (hmmm). All the banks & fid companies are ticking along ok as far as I know. The lack of new structures will probably have a noticable effect in 6 months-year I would imagine. The lawyers are busy winding stuff up rather than setting up things, and that ultimately trickles through to the management side.

[danrok]

The fact that all of Jersey's finance is (more or less) admin for asset management functions means that aint really the case. All the assets under management still exist, even if they are worth a fraction of the price so the admin burden doesn't really drop up front, unless the whole world collapses (hmmm). All the banks & fid companies are ticking along ok as far as I know. The lack of new structures will probably have a noticable effect in 6 months-year I would imagine. The lawyers are busy winding stuff up rather than setting up things, and that ultimately trickles through to the management side.

So, I have just gone bankrupt, lost my house, my business, the lot.  Please, explain to me why I would need asset management!

All the assets under management still exist

LOL!

Do you even know what an asset is?

[churchill]

Jersey finance industry must be saved but not at the expence of ordinary folk.
Tourisim can still be the 2nd industry but it takes real leadership to make it work.
For one  cuts in the landing fees.

Axe condor ferries. Let a real ferry service like brittany ferries take on the route.

We have a country with a population of 65 million called france just a stone throw away . We can have short stay visitors to our beautifull island.

We need hotels like ibis here. We need the price of cigs and drinks dropped.
WE NEED A GOVERNMENT THAT TAKES CARE OF BUSINESS. LOOKING AFTER THE PEOPLE ITS SUPPOSED TO LOOK AFTER.  US. YOU . ME.

[stoofa]

So, I have just gone bankrupt, lost my house, my business, the lot.  Please, explain to me why I would need asset management!

You wont. But the people you describe above were never the ones using these services in the first place, were they.

LOL!

Do you even know what an asset is?

Ha Ha.

Please feel free to back up your statement by telling me exactly which assets held by the various paper shuffling institutions over here have fundamentally vanished. I will concede replacing 'all' with 'most' given the winding up of Lehman and a few similar events (fair enough, badly thought out choice of word), but all the underlying property, equity, etc hasn't mysteriously ceased to exist. The admin fluff done by fid companies here doesnt really matter if its worth 10p or £10million in the short term.

[danrok]

Would be more a case of you needing to tell us exactly which type of asset, managed in Jersey, could never become worthless in any possible situation.  You're the one making this bold claim.

If you want me to make a list of assets which can become worthless, we could be here for a very long time!

It is not a case of "have fundamentally vanished", past tense, it is a case of could become worthless, at any point in the future.  What's already happened, is mostly unimportant, it's what's going to happen in the future which is paramount.

[stoofa]

You're the one making this bold claim

Not really, I stated that the finance industry wasnt doomed. Look back to posts around September/October, some people thought it was going to have collapsed by now.

'All [ok - Most of] the assets under management still exist' was the comment you decided to sarcastically throw back at me. That, currently, is the case (and you appear to have conceded as much), and certainly in the short term is likely to be the case. Form filling etc still required for now.

and I currently dont see mass layoffs in the Fiduciary sector at present. I did state in the second part of that paragraph we will probably see an effect in 6 months to a year as the lack of new stuff trickles through.

What was bold about all that?

Would be more a case of you needing to tell us exactly which type of asset, managed in Jersey, could never become worthless in any possible situation. 

It is not a case of "have fundamentally vanished", past tense, it is a case of could become worthless, at any point in the future.  What's already happened, is mostly unimportant, it's what's going to happen in the future which is paramount.

In 'any possible situation'... lets not be too broad about this then

Land based stuff is likely valuable unless destroyed

Commodities are in principal physical, so should retain some value unless destroyed

Government issued paper is effectively going to be there unless the country in question fundamentally collapses or renegs.

Corporate Paper - this is the one in question I suppose. Some will go under, but there is a lot of big organisations out there. Are they all screwed to the extent they will go bankrupt? Probably not.

That leaves all the synthetic trading and securitisation bumph, which as far as I am aware is relatively small here as it was largely the preserve of London.

All assets are potentially worthless, its more a case of whether the circumstances that would facilitate that come to fruition. I happen not to think they will for the vast majority (some more companies i'm sure will drop), and as such there is enough to keep jersey's army of pen pushers ticking over in the short.medium to a degree that the island isn't in dire straits. But i'm sure many will disagree and I can't pretend to know the future - time will tell.


Hmm, thats turned out longer than I intended 

[danrok]

I think we're at cross purposes a little.

I'm not claiming that the finance industry is doomed, in the short term.  And I wouldn't claim to know what lies ahead in the longer term.  Who does?

I'm only trying to be realistic about the situation.

And, you've more or less made the point that all assets can cease to exist, at least in terms of value/paper, given the right conditions.  Even land, which can be ceased by the government, and has been in Spain I believe.  Leaving the original owner with nothing at all.

We should not assume, that just because everything was fine yesterday, that it will all be fine tomorrow.