George Osborne & the Bank of England have a dilemma in that whenever they release funds into the system (intending that it will eventually benefit SME’s, as the engine of the economy) there is a gravitational type pull that sees it eventually in the hands of corporates or banks, strengthening their reserves.
Here’s the idea:
Prior to ‘Humpty falling off the Wall’, both RBS and HBoS (subsequently known as HLoSS and now Lloyds) built impressive teams of business development managers to lend to businesses. They were often their very best people and they also headhunted the best from the other banks for this purpose. With the tightening of lending and with pressure on business customers most of these people were ‘redeployed’ to manage portfolios of ‘problem clients’ – a role for which they were not all ideally suited and, as ‘deal do-ers’ they didn’t really enjoy.
Now that many of these problem situations have been resolved (in one way or another!) many of these capable people are looking at redundancy.
So we have a small army of capable professionals who are skilled at appraising a business and a lending proposition (which the BofE don’t have), working for banks that the tax payers own, about to lose their jobs. To use the old expression ‘they are all dressed up with nowhere to go’.
The ‘Credit Easing’ funds could be put into separate ‘ringfenced’ pots and placed with RBS and Lloyds – separate from their balance sheets with these people to lend responsibly but without retribution or criticism if the money is lost. These are people who know what makes a bankable proposition and can act responsibly.
If necessary (to avoid a flood of applicants which would detract from the bank’s core business) the application process could be routed only through carefully chosen intermediaries – good brokers also know what is a sensible deal and the exercise could be closely controlled to create a very tight distribution channel for such funding.
What’s the risk? Well the money could be lost as a result of some riskier deals getting done (but the cash will have been ‘spent’ somewhere in the economy) and some bankers may have been kept in their jobs longer than the cost cutting would have allowed (but they will have been productive and not be unemployed).
The banks could take the credit for this (“we effectively allowed someone else to use our skilled people for the good of the country”) and it would avoid setting up a whole new infrastructure or Government scheme. It would also be very quick to implement.
The banks participating could even be allowed to become the first choice bankers for opening the accounts or even later to ‘cherry pick’ the winners out of this.
Let’s just do it