Date: Fri, 16 Jan 2009 10:05:00 +0000
Subject: Internal review of Freedom of Information request - Causes of the financial crisis
From: Nick Gulliford <[FOI #5156 email]>
To: Consumer Queries <[email address]>

Dear Miss Grady

Thank your your response of 14th January.

You say "the FSA has no power to require firms to publish such
information, and to do so would be a commercial decision on the
part of the firms we authorise and regulate."

The banks have shown that they are not capable of taking commercial
decisions and their actions have brought the country to its knees.
You may like to see Lord Smith of Kelvin's recent maiden speech in
the House of Lords. He is a Scottish Chartered Accountant. The
speech included this:

"Some sophistication and complexity is necessary, but the UK
taxpayer is now suffering because of decisions taken at
institutions where risk was not truly understood. Perhaps I may
give noble Lords an example that baffles me as a banker who cut his
teeth in an earlier era - that of collateralised debt obligations,
and in particular CDOs whose underlying asset is a pool of
sub-prime mortgages. To get a feel for the complexity of CDOs, the
prospectus for a typical mortgage-backed security stretches to 300
pages. To create a CDO, you take a tranche of those mortgage-backed
securities and add 50 more tranches from other mortgage-backed
securities. To understand that CDO, you have to read 50 times 300
pages, which amounts to 15,000 pages. This is not prescribed
reading over the holiday period, but if you look at the notes to
the balance sheets of the 2007 accounts of the major banks in this
country, you will read against some large numbers the legend "CDO
squared". I will leave it to the mathematically minded to decide
how many pages you need in order to understand such an instrument,
yet these products are, in part, what have laid low many of the
world's biggest banks."

Clearly this is a nonsense. The banks are culpable. The credit
rating agencies are culpable and the auditors have allowed
themselves to be duped.

Your reaction, "the FSA has no power" in the circumstances is
utterly feeble. How can you possibly continue to pretend you are in
business to "authorise and regulate" if you have no power to
prevent the continuation of 'foolish and dangerous' lending
practices by the banks?

Yours sincerely,

Nick Gulliford

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Dear Mr Gulliford

Thank you for your email dated 22 December 2008, addressed to the
Freedom of Information team. This has been passed to the Customer
Contact Centre as the appropriate department to respond to you.
Please accept my apologies for the delay in doing so.

Your email has explained that you believe one of the main causes of
the banking crisis to be the number of unmarried couples that take
out mortgages, as you believe there is not as great a commitment to
paying the loan on the part of these borrowers. You have suggested
that the Financial Services Authority (FSA) require mortgage
lenders to publish arrears statistics broken down by borrower type,
so that it can be seen how many borrowers in arrears are indeed
unmarried couples.

We have, as in previous correspondence with you, noted your
comments. However, the FSA has no power to require firms to publish
such information, and to do so would be a commercial decision on
the part of the firms we authorise and regulate.

Thank you for taking the time to prepare and send us your thoughts.

Yours sincerely

N Grady (Miss) Customer Contact Centre Financial Services Authority
Consumer Helpline: 0845 602 2185 (call rates may vary)
www.moneymadeclear.fsa.gov.uk Get clear, impartial information from
the UK's financial watchdog. No selling. No jargon. Just the facts.

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