While I was on holiday, the financial markets have been quite 'unsettled'. The fact that the UK's banking system has now been partially nationalised seems incredible . Lots of job losses are predicted in the banking sector, on top of the job losses which have already occurred. However, for now at least, I still have my job.
A couple of days ago while walking in the street, I bump into an ex-colleague who works for one of the newly partially nationalised British banks, so I ask him how things are going:
"It was scary GB," he says, "the day our share price plummeted the dealing room went completely quiet. Everyone was scared. The clients stopped calling, apart for one or two who phoned up wanting to cancel old deals."
"So I guess you were all expecting to survive without becoming government employees!"
"Well yes," he replies, "things must have been a lot worse than we were led to believe. We've got lots of good businesses, but we've been brought down by a few bad ones and irresponsible management. Now we're all tarred by the same brush :-(. There's a lot of resentment. When it was announced that the chairman and chief executive were quitting, a huge cheer went up in the dealing room!"
But an old university friend who I met the following day, and who works for an asset management firm, was more up upbeat.
"These banking stocks are so cheap now," he tells me, "so I bought some! It'll all recover eventually :-). And if you ask me, I think the government is playing a mug's game by buying those bank preference shares. Preference shares give you all the risk but no control ..."
Hopefully this partial nationalisation of the banking system coupled with government guarantees for bank debt will be the low point of this crisis. It's a bold plan which in my opinion tackles the problem in exactly the right way. But if things go wrong now, with governments having already made their move to shore up the banking system, it's not clear that there'll be anyone left to prevent a very deep global recession.
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