Morning:
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I can't think of a time in history when a bank's board members were allowed to keep their jobs after losing $10 billion on top of a multibillion write-off just a few weeks earlier. Yet that happened yesterday when the giant Swiss bank UBS wrote another chapter in the subprime bestseller.
There are still hundreds of billions of losses out there which no one has yet owned up to, and the thought of all those other banks that might shortly have to follow UBS down this road could have sent bank shares lower. In fact, they had a relatively good day. Which shows how quickly we are adjusting to the fact that the banks are in the midst of one of the biggest disasters in a generation.
Either that or money loses its meaning after the first few billion - so think about it this way. If a $10,000 pile of dollar bills is as tall as a six-foot man, a $1 million pile would be the height of Canada Place in Canary Wharf.
On this basis $1 billion would be the equivalent of 1000 towers the height of Canary Wharf. But UBS lost far more than this. The $10 billion it wrote off yesterday would be the equivalent of 10,000 Canary Wharf towers.
It is a huge amount of money - as we, the banks' customers, will no doubt find out in the coming months when the banks jack up interest rates and charges to rebuild their balance sheets.
THE Whitehall publicity machine has unofficially let it be known that Chancellor Alistair Darling will this week modify his proposals on the reform of capital gains tax with a view to taking the sting out of some of the most virulent criticisms.
In this he may succeed, though if he does it will most likely be by granting special concessions that will add layers of complexity to what was supposed to be a measure to simplify. The net result is therefore likely to be much more onerous than where we are currently - par for the course with hasty and illthoughtout government interventions.
The yield from capital gains tax is forecast by the Treasury to be significantly higher in future years because of the abolition of indexation and other concessions, which fact shows this "reform" up for what it really is - a disguised tax increase.
The true worry, though, is that Government seems to have no understanding of how its recent actions have significantly changed the perception of Britain as a business-friendly environment with reasonable and predictable taxes. There are already signs that hedge funds and similarly mobile people businesses are opting to base themselves in Switzerland rather than London. There is also much anecdotal evidence garnered from lawyers and similar advisers that the wealthiest among the much talked-about non-doms are badly unnerved by moves to bring their offshore trusts within the capital gains tax regime, as well as proposals to hit them with a £30,000 levy. They sense that the political mood has changed, and they are becoming a target.
This is potentially bad news for the City and the wider economy. Some just finalised research by Cass Business School on behalf of Stonehage, a consultancy firm that advises non-doms, estimates that the amount they spend in the UK, let alone what they invest, is £16 billion a year.
If one believes that these people bring far more to Britain than they take out because of the business and wealth creation they engender, it seems ridiculous for Government to take even the smallest steps to make them feel uneasy or unwelcome. There can be no positive outcome from such actions.
Government sticks to the mantra, however, that the increased tax burden on non doms will be so small that few, if any, will opt to leave. This begs two questions. First, if the tax yield is indeed going to be that small, why bother with it at all? Second, even if few of the affected people actually leave immediately, it is impossible to calculate how many others might well be dissuaded from coming. This is a highly mobile community. It can see the way the wind has shifted and, understandably, it doesn't like it.
It is astonishing how we have contrived to shoot ourselves in the foot with a series of tax measures that between them would not be enough to keep Northern Rock in business, let alone make a major difference to Government expenditure.
We have been pleased in recent years to mock the Americans for their heavyhanded regulation, exemplified by Sarbanes-Oxley, which has driven so much business from New York to London. But now it is our turn to look stupid by shooting our golden goose. These tax measures are already showing signs of driving business from these shores. Zurich and other rival centres can scarcely believe their luck.
