Bank bonuses and bogus arguments

Here I go again, defending bankers. It's a dirty job, but someone has to do it. Well, it's more than a hobby than a job because the banks don't even pay me to do it.

It's bonus time once more, that time of year when the unpleasant politics of envy erupts after the peace and goodwill of the holiday season. This time, RBS wants to pay bonuses more than 200% of staff salaries. That of course requires the permission of its shareholders – principally, the UK Government in the form of Chancellor George Osborne. Such bonuses are "inappropriate" say many political critics, particularly when "ordinary families are struggling with the cost of living."

But bonuses are a very sensible way to pay people in a volatile sector. In an economy that is growing, as the UK's is now, banking business is great. There are company mergers and acquisitions to do, investments to be placed, and all the rest. In a stuttering economy, business is disastrous. So banks have a system that rewards key people on the basis of results. That is a lot better than scrapping bonuses, raising salaries instead (which is what would happen), and then having to lay people off (and lose their expertise) where you hit a rough patch. With a bonus system, you just pay them less and they hang on, in the hope and expectation that things will improve.

It should not be up to MPs – and MEPs in Brussels, Strasbourg, or wherever they have decanted to this week – to decide how much bankers should be paid. They are hardly icons of virtue on the pay and expenses front themselves. Most of them don't even understand the sector. If bonus caps are to "reduce risk taking", then why did MEPs cap fund managers, who don't take anything like the risks that bankers do.

Bank bonuses are already heavily restricted. Rules introduced in 2010 cut the amount that could be paid in cash, and spread the pay-out time over 3-5 years. So people today get more of their bonus in shares - which means that the long-term health of their company is dearer to their hearts than any one-off "quick profit."

Let us not forget that after New York, London is the world's leading services centre. The sector brings in about £60bn in tax every year, more than 10% of the government's entire budget. We need it to succeed, and retain talent – which means paying them world market rates. That's what we do with footballers – John Terry is paid £6.7m a year, Wayne Rooney is on £15.1m and Steven Gerrard picks up £7.2m and got an MBE too. But football clubs are very small businesses compared to banks. Though a world footballing brand, Manchester United's capitalization is just £2.47bn; the market capitalization of RBS is seventeen times bigger, at £41.8bn. Should we be surprised if star performers in RBS are paid seventeen times what Rooney earns? But in fact we baulk when they are paid fifteen times less.

There is a problem with banking, but it is not bonuses. It is the lack of competition. The main UK banks can literally be counted on one hand: HSBC, Lloyds (which includes Bank of Scotland), RBS (which inlcudes NatWest), Barclays and Standard Chartered - though the latter operates mainly overseas. Lack of competition means customers get a worse service at a higher price, and providers can indeed overpay themselves. In a competitive market, anyone over-rewarding their staff would go out of business. So let's not try to guess what the "right" remuneration is for bankers. Let's open the sector to competition – which means scaling back the regulation on new entrants – and let the market do the job for us.

A sensible Tobin Tax

This might come as something of a surprise but there is, out there in the real world, a proposal to have a sensible Tobin Tax. As opposed to the deeply not sensible Tobin Tax as supported by the Robin Hood Tax campaign. That's a financial transactions tax which would be a completely appalling idea. The sensible one is in fact from China:

Britain’s bid to become a global hub for trading in Chinese assets has run into a major snag after a top Chinese official suggested a ‘Tobin Tax’, a levy on financial transactions to curb capital flows. Yi Gang, director of the State Administration of Foreign Exchange, called for an “in-depth study” of a Tobin tax, particularly on foreign exchange trades and flows of speculative hot money. SAFE is the world’s biggest fund, commanding the central bank’s $3.7 trillion in foreign reserves. ..... Mr Li, who is also deputy chief of China’s central bank, wrote in the Communist Party journal Qiushi that curbs may be needed to ensure an “orderly” transition as the country opens up its internal capital markets and moves towards a free float for the yuan.

It's worth recalling what Tobin himself actually advocated. Back at the end of the fixed exchange rate system known as Bretton Woods he wanted to increase the power of governments over markets. To do so he advocated a small tax on all foreign currency transactions. This would slow down, or reduce, the amount of money washing through the echanges and thus make it easier for central banks to manipulate the exchange rates. He saw this as a good thing, we now do not, therefore we're not in favour of such taxation.

However, there is still a place for such taxation: no, not such a tax to be imposed on our now free markets in currency (or anything else) but as a stage to be gone through when moving from a near entirely non-market system to a free market one. And it's in that context that China is suggesting one on their currency, the yuan. The liberalisation of such a market is a good idea, obviously. But there's very definitely an element of not quite wanting to go to complete and total liberalisation in one fell swoop. There's a good 70 years of economic mismanagement there to overcome and the shockwaves of an immediate and pure free market would be considerable. Not a bad idea at all to take it step by step.

The real problem with this of course will be that those Robin Hood, the FTT, people will say that if it's OK for China to have a Tobin Tax then why wouldn't it be a good idea for us to have one? The answer being that China having one is part of the transition from a rigged market to a free one: our having one would be an entirely unwelcome move back in the other direction.

I'm still trying to understand why Bitcoin won't fail

Anything that people happily use as money is of course money. So, if you can get people to use something as money then it is money: in which sense Bitcoin is indeed money. You can buy things with it therefore it is money. And yet I still can't quite see why it's going to be successful: successful here meaning a widely accepted form of money and accepted over the long term. There's many economists writing about it now in a manner that there weren't even just a few weeks ago: it has reached at least that level of success, that people are sucking their teeth over it. Tyler Cowen, Paul Krugman and friends, there's a lot of very clever people whose opinion I respect saying that it's not going to work.

And do note that it tends to be the nerds and the computer scientists who insist that it will and the economists who are a great deal more unsure about it.

My sticking point comes from the ease with which you can create a cybercurrency. The Bitcoin source is open, so anyone can use that. And I asked a friend who knows about these things to estimate how much work it would take to launch a new such currency based upon some tweaks to that code. A couple of days of pondering later he came back with "two man months". And that's why I just don't think it's going to work: it's too easy to copy.

Assume that, as Cowen does, the entire idea of cryptocurrency does indeed work: thus there will be seignorage profits to be made from introducing a new one. Do the two man months of work, launch the new currency, reserving some portion (20% sounds nice) of all that will be issued over time for the launch partners and, because cryptocurrencies are successful this will be a workable business plan. But precisely because it is a workable business plan then may people will be doing it and thus there will be no scarcity value of cryptocurrency. With no scarcity comes no value and thus the failure of cryptocurrencies.

In the end I see it as the Golgafrinchan B Ark using leaves as money. They end up having to burn down the forest to stop the inflation. And given the ease of launching a new cryptocurrency I can't see the extant ones retaining value.

I'm entirely willing to be shown to be wrong here but I really just don't see the long term "success" here. I see the South Sea Bubble part of it, ride the wave until it's over but other than that....

Ayn Rand: More Relevant Now Than Ever

This is a transcript of the speech "Ayn Rand: More Relevant Now Than Ever"  given by Lars Seier Christensen, Co-founder and CEO of Saxo Bank, at Goldmsith's Hall for the Adam Smith Institute's Ayn Rand Lecture on the 29th October 2013 

"First of all, I would like to thank The Adam Smith Institute and Eamonn Butler for having me here. I would also like to extend a big thank you to Yaron Brook and the Ayn Rand Institute for suggesting me as the speaker for the second annual Ayn Rand speech at this renowned institution. I am very proud of being offered this opportunity, and would also like to thank all of you in the audience for coming here tonight. I hope it will interest you to hear about both the positive aspects of deploying Ayn Rand in practical, day-to-day life, as well the more grim part of the speech – about a world that is on the wrong track and where change is desperately needed.

Now – I am going to start by quoting someone that anyone who knows me realizes is not my favourite politician. I consider him a very significant part of the problem we currently increasingly. But at least he did us a favour by underlining just exactly how relevant and important a voice Ayn Rand is even today, more than 30 years after her death. Let me quote the 44th president of The United States, Barack Obama, for the first and last time this year, I promise.

“Ayn Rand is one of those things that a lot of us, when we were 17 or 18 and feeling misunderstood, we’d pick up. Then, as we get older, we realize that a world in which we’re only thinking about ourselves and not thinking about anybody else, in which we’re considering the entire project of developing ourselves as more important than our relationships to other people and making sure that everybody else has opportunity – that that’s a pretty narrow vision. It’s not one that, I think, describes what’s best in America.”

Read the full speech here:

Bitcoin is poised to shake the world: are you paying attention?

Michael Taylor discusses the potential for Bitcoin to change the world as we know it.

If you thought technology was already disruptive enough, here’s the news. We’re just getting started.

The Roman Rallying sequence in the Top Gear Middle East Special is an exhilarating example of the old world rubbing up against the new. As Jeremy Clarkson and Co charge around the sacred Jordan hippodrome in their battered sports cars, they inevitably start to kick up a lot of ancient dust. Clarkson starts to worry: “someone’s gonna see this dust, and then they’re gonna come, and then there’ll be anger and rage“.

There was a time when Bitcoin was able to rub up against the old financial world without anyone noticing. Now that time has gone. They’re simply kicking up too much dust to go unnoticed any more. Take the recent seminar at Stockholm’s School of Economics as a case in point. A simple two hour session featuring the current figurehead of the Bitcoin movement, Jon Matonis, turned out to be their quickest selling and most oversubscribed event in their 100 year history. But for those who know even a small amount about Bitcoin, this comes as no surprise. How could anyone resist a story involving giant stone money, gold, aliens, and the possibility of displacing some of the most significant polices of modern governments with an algorithm?

International Man of Mystery

Let’s start with a little background check. It’s a given nowadays that the most innovative  internet technologies no longer emerge from the R&D labs, but from the world’s student dorms. The case of Bitcoin is no different. Well, not entirely different anyway. The twist in this particular story is that the originator – who goes by the name of Satoshi Nakamoto - is closer in style to the techno duo Daft Punk than Mark Zuckerberg. According to modern folklore, Nakamoto could be a combination of any of the following: a gifted Japanese student (or even group of students); a graduate of Trinity College Dublin called Michael Clear; and/or a group of international entrepreneurs who filed a patent for something very similar to Bitcoin only 72 hours before the domain was registered. However all attempts so far to arrive at a real person have ended in either denials or dead ends. Perhaps this is as it should be. All this anonymity is entirely fitting for a distributed P2P network that champions the (somewhat contradictory) dual principles of open source and cryptography. The simple fact that no one seems to own Bitcoin means everyone does.

So What’s Different This Time Around?

The world has seen innovation in ICT and Finance before. In fact, Sweden itself can even claim to be a bit of a world leader in the field. While things like iZettle’s iPhone dongle, and services such as Tink, Flattr and Klarna may seem (and indeed are) groundbreaking, they are still little more than a smart interface into the traditional banking world. As such they’re not creating a new game so much as simply making it more efficient to play the old one – and taking their cut to do so too. What’s cool about Bitcoin is that it’s inventing a totally new ball game altogether.

Here’s the rub. In the world as we know it, each institution, credit card, bank or financial service has it’s own ledger (or set of ledgers), and every time we ask them to transfer some money in or out of our accounts they do so by adjusting their ledgers. And when they adjust those ledgers, they charge a (not insignificant) transaction fee. Not only that, increasingly these transactions are electronic, and that means they’re tagged with our identity too. Depending on your point of view, this could be either good for tracking criminals and/or a convenient tool for governments to snoop on what their citizens are up to.

Bitcoin does two significant things which drive this traditional paradigm into the sand.

First, it makes the transactions anonymous, much like cash transactions. Any transactions you make on Bitcoin are not coupled to your identity. That’s bad news for nosey governments.

Second, it has only one giant ledger in the cloud, so the transaction costs of transfers are as close to zero as you can get, and (because of Moore’s Law) they will keep falling. Essentially, in the Bitcoin universe, there is no difference in the transaction costs between a) buying a loaf of bread at your local store, or b) sending millions of Bitcoins through the ether from one side of the planet to the other. The cost for both is more or less zero.

The Go-Betweens

But before we get all excited about hopping up and down on the graves of clearing houses, banks and other financial middleman, it’s worth mentioning that there’s actually a really sound reason why these kind of institutions exist in the first place. Convenience.

Convenience is the reason we buy our chewing gum and cigarettes from the local store and not from the out of town cash and carry. Even though we know the local store charges a premium, that’s still better than hopping in the car and driving across town for a small purchase. The same logic applies to the world of traditional banking. However unreasonable a transaction cost may be, it’ll still be cheaper than hopping on a plane with a sack full of cash. What makes the Bitcoin solution unique here is that it sidesteps this issue by making all financial transactions equally convenient. From the perspective of both the buyer and the seller that’s a very attractive proposition – from the perspective of the (possibly soon defunct) middlemen, it’s a nightmare. The emergence of Bitcoin is going to make a lot of very powerful, influential and traditional middlemen-style institutions very nervous.

Stark Contrast

Jon Matonis tells a great story to demonstrate just how different Bitcoin is to the traditional money world. When he gave a talk on Bitcoin at the monumental premises of Swift HQ in Brussels – one of the world’s largest central clearing houses – he asked if he could see the “live transactions” that roll through their computers every nano-second of every day. He was told that the ledger (the bank of computers doing the work) was private and kept in a locked room. By contrast not only is the Bitcoin clearing system totally decentralised, it is also public. Very public. In fact it’s so public you can even watch the transactions as they happen in realtime on the web, and, because the entire enterprise is driven by open source and thereby open to the creative talents of the dorm world, you can even listen to it.

One other big paradigm shift in the Bitcoin world is around credit. In the Bitcoin world, there simply is no fictional money. This would make fractional banking (the method by which banks lend out more money than they actually have in reserves) almost impossible. In the Bitcoin world, banks would only be able to lend the money they actually have. Perhaps loans would be spread across Bitcoin’s distributed network, much like crowdfunding. However it works in practice, the impact of reduced credit on a world currently addicted to the stuff is anybody’s guess.

Area 52

The key point about Bitcoin’s decentralised nature vs the centralised nature of the traditional money world is worth exploring in more detail. It’s also where our story takes a slight off-road detour into Area 52 territory.

Until recently, SETI (the project who’s aim is to Search for Extraterrestrial Intelligence) has been the number one global distributed computing network. However now that Bitcoin is on the rise, it’s been bumped down to second place. In fact the surge in Bitcoin’s distributed computing power is like nothing we’ve ever seen before. As Bill Gates said, “Bitcoin is a technological tour de force“.

This distributed nature also makes it incredibly resilient. Imagine if the SWIFT was somehow taken out, either physically or by attacks on it’s network. That would more or less cripple the money exchange markets that depend on it. Compare that to Bitcoin. The loss of a few computers in any given country on the network makes no difference – the system simply adjusts and life carries on as before. In this regard Jon Matonis likes to draw a comparison between Bitcoin and the ancient Rai Stones that were used on the island of Yap, Micronesia. These huge stone wheels were used to demonstrate the wealth on the owner and serve as a public record of significant transactions. Even though the ownership of any given stone would change over time, as long as people knew where it was, the physical location of the Rai Stone did not matter. In fact one Rai Stone even sank to the bottom of the sea during a voyage, but as the villagers could all agree it still existed, the stone was still able to be used.

A Dismal Science No More?

Despite the fact that we’ve already covered the mysterious origins of Bitcoin, its power to reduce transaction costs to zero, and its distributed, anonymous nature, we’ve still only scraped the surface of its disruptive powers. What it can potentially do to governments is mind blowing.

While some progressive governments (such as Germany) have already embraced the power of Bitcoin, the majority remain sceptical. Some – such as the government of Thailand – have even opted to ban it (and good luck with that…)

So why all the worry and hoo-hah?

Here’s the punchline. Bitcoin would not only effectively sidestep a government’s monetary policy, it would severally restrict its fiscal policy too. But what does this mean in practice?

For those of us who are not economists, we can explain it this way. First, on the monetary side of the equation, governments often like to reserve the option of setting the base lending rate (or discount rate) themselves through a central bank. They’re also keen on printing more money if needed to help pay for stuff, and they like to control the markets by buying and selling their own bonds (known as open market operations). In the Bitcoin world, it is the Bitcoin algorithm which controls the flow of new Bitcoins, not a central bank. This would make it much harder (if not impossible) for governments to rely on the fictional money they’ve grown so used to. That’s goodbye to quantitative easing for starters.

Second, on the fiscal side, as income gets harder and harder to trace back to individuals, governments would have to switch taxation to the consumption side of the equation. In turn this would rather limit the governments supply of tax revenues, and may even force them to get real about balancing their books.

As Al Gore has wryly noted, “I think the fact that within the Bitcoin universe an algorithm replaces the functions of [the government] … is actually pretty cool.”

System D

So now we’ve looked at the potential impacts on governments, we’re done, right? No.

Some of the most exciting implementations of all this kind of new technology isn’t happening in the old world, but the new. While the EU and the States are mired in government bureaucracy, restricted by powerful lobbying bodies, and stunted by military units run with half an eye on health and safety regulations, Africa and Asia are leapfrogging a lot of these issues to implement some truly original solutions.

At the Stockholm seminar, we also got to hear from the amazing Pelle Braendgaard who runs Kipochi. He told us about the everyday use of digital currencies like M-PESA in Kenya, and how people there who have been let down by the traditional banking sector have found an exchange lifeline with digital currencies that run on old cellphone technology and sim cards. M-PESA in effect gives a banking-like infrastructure to those people who would otherwise be “off the grid” and operating in the System D economy. Imagine the possibilities for anyone in Africa or Asia to either wire money in our out of the country for free (or as good as), while at the same time sell their goods without having access to a bank account. They could also shop around for a loan on a global scale, and even pay for their groceries at the local store in the same currency.

So What Happens Next?

The exponential rise of Bitcoin will no doubt start to generate some heat from here on in. It’s only a matter of time before we see the traditional gatekeepers start to cry foul. No doubt we’ll see a lot of anger and rage in the courtrooms. At least in the west. In Africa and Asia we’ll probably see things take off a little quicker. I predict it will only be a few years from now before we see Bitcoin (or other similar digital currencies) emerge as the exchange of choice for the majority of people otherwise denied access to the established money structures. And when that happens, prepare for the world to shake.

Rare sensible move from Mario Draghi and ECB

Nominal interest rates cannot be brought below zero, because non-cash assets can be sold for cash, which always effectively bears an interest rate of zero. Monetary policy affects the economy through changing nominal interest rates, which given somewhat sticky inflation changes real interest rates, which affects spending, saving and investment decisions—a cut in the interest rate makes saving more expensive and investment cheaper. Essentially working on these two facts (there are much more complex versions, but this is the core) New Keynesian economists argue there is a "zero lower bound" on monetary policy. The Fed cannot support demand by targeting a Fed Funds rate lower than zero, the Bank of England cannot support demand by lowering Bank Rate any further than zero, and the same for the European Central Bank. This means, they say, fiscal policy is necessary to stabilise demand when the interest rate that would be needed to do falls below zero.

Now I think this argument is false. Monetary policy does not mainly work through interest rates. Monetary policy mainly works through affecting consumers' and firms' expectations about future demand conditions. But even if this argument were true, the simple Keynesian story—that fiscal policy must be employed to get the Eurozone out of recession because monetary policy is ineffective at the zero lower bound—will not fly. Why? Because the ECB, headed by Mario Draghi, cut interest rates by 0.25% today, bringing them from 0.5% to 0.25%. The ECB was not yet at the zero lower bound.

Monetary policy doesn't seem to need long and variable lags of the type typically assumed in models. As I write, the Euro is down 1.4% against the dollar 1% against the pound and 0.7% against the yen. The Bloomberg 500 measure of European stocks is up 1% and the Euro Stoxx 50 measure is up 1.3%. That means the value of the Euro has already fallen. That means that money is already slightly easier. If there were a good measure of nominal income expectations—the best definition of money easiness or tightness—I'd wager that that would be up.

It's true that this is unlikely to be enough. Nominal GDP is not growing at pre-trend rates, never mind catching up to the pre-recession trend. The ECB is letting the euro area slip into deflation when it is barely out of its double-dip recession. Sovereign debts have grown to eye-watering levels despite very tight fiscal policies in many of the hardest-hit member nations. And none of this is to mention the excessive regulation and badly-designed tax systems that contribute to low long-run productivity growth and high rates of unemployment even in good times. But it's both a step in the right direction, and evidence against the simplistic Keynesian arguments that get trotted out all too often in macroeconomic debate.

The growing digital challenge to government money

The folks at the Real Asset Company have put together a very useful graphic outlining the rise of digital currencies like Bitcoin. It's big, but you can see the whole thing by clicking through the preview below.

Isn't this absolutely wonderful about payday loans?

Although the loans are marketed as a quick, flexible way to get cash for items like home improvements and holidays, almost four out of five people who turned to Christians Against Poverty (Cap) with problem debts, including payday loans, said they had used them for food. Half said they had paid gas and electricity bills with them, while a third had borrowed to meet rent or mortgage costs.

Payday loans are indeed an expensive way of getting small amounts of money very quickly. But they're also the only way of getting small amounts of money quickly. It's that second which is the point that has to be kept in mind.

Think through the alternative possible sources of money. You're out of cash for whatever reason and you've got to feed yourself and the family tonight. You're out of luck with friends and family and who else is there? The government of course: you could try applying for some benefit or other. Perhaps you wouldn't have starved to death in the six weeks it will take them to process a claim. The banks won't even think of lending someone £50 to tide them over. And even if they would it costs more to arrange an overdraft with a bank that it does to try Wonga.

So, we now find that we've got entirely private sector and profit seeking companies setting up to meet a real social need. For there really are people who need to be able to feed the kids on money borrowed for a few days or a week or two. And we find that those who do indeed borrow money from these companies do so to feed the kids, not to blow it on a holiday.

Isn't this excellent? Social need met by unplanned and uncoordinated market action? Or have I misunderstood the point that Christians Against Poverty are trying to make somehow?

What an interesting example from Zoe Williams

If this were true it would most certainly be undesirable:

We spend so much time talking about this titanic clash between the free market and the social state – yet ignore the fact that most of our major "markets" no longer operate as such. This is an oligarchy whose only governing authority is the administrator of wrist-slaps, and whose principles begin and end with the preservation of its jointly and severally managed profit. Which is to say that they're not competing against each other; they collaborate brilliantly – which would be sweet to watch were it not for the fact that they are working together the better to screw us.

Monopolies and oiligopolies are indeed undesirable things. And we here at the ASI spend much of our time pointing this out and arguing for the one known solution to the problem, more markets, more free markets. But what really surprises is the example that Ms. Williams uses to bolster her case:

Looking specifically at PPI, we could also see the counter-intuitive but obvious point that banks aren't charging enough for their services: current accounts cost money to administer. But rather than admit this, they would prefer to outwardly compete with one another, vie to see who can be the most free, while recouping the money by sleight of hand (swingeing overdraft charges), irresponsible lending or outright cheating (mis-sold PPI). This is what a market with only four or five big players looks like: amazing value in the top line, all the profit draining from somewhere you can't see.

In a truly competitive market we expect profits to decline to something around zero. In the long term perhaps to the level that just covers the cost of capital: something the UK commercial banks do not manage. In the proper economic sense they are therefore losing money: just the result we expect from that truly competitive market.

So, in the provision of current accounts we have evidence that we do indeed have that desired competitive market. Yet this is being taken as evidence of oligopoly? What is it they're putting in the water over there in York Way?

Diamond cuts to the chase

The FT reports that Bob Diamond is giving his support to our long and oft expressed view that bank regulation should be global, not national or EU.  See for example “Saving the City”, March 2013.  Big banks now operate in a global market and a single market requires a single set of regulations.  Any more, or any fewer, in the major banking countries distorts competition.  A major bank failing in one country may well bring down others and at the very least have knock-on effects.  This is one of the most important lessons from 2008.

The EU is a particular worry as each member state seeks to impose handicaps on the others in order to enhance its own financial services industry.  Furthermore, Brussels seeks to take over all financial regulation from member states. These politicians fail to see that such shenanigans can only damage not just London but the EU financial services industry as a whole.

Basel III has its faults, not least in loading up capital requirements at the wrong time.  Higher capital requirements may have been a good idea pre-2008 but introducing them now inhibits the very lending to SMEs that is essential to growth.  Likewise moves to downsize banks or introduce new Chinese walls may be a good idea in due course but not just now.  Yes, of course we need to get away from banks, or any other financial institutions, being too big to fail but they are not about to do so.  Financial crashes come around every 50 years or so, so on that metric the next one is not due for 45 years.

Faulty or otherwise, Basel is the only global financial regulatory structure we have and we need to work with it and improve it. The fact that we do not have an imminent crisis makes this the ideal time to introduce the radical revolution we need.  The EU and national governments should turn over all financial market regulation to Basel. Who should monitor and supervise those global regulations is a more difficult problem but in the short term it will have to be by nation state, in the UK by the Bank of England.

But let us not get caught up in that.  First things first means that banking regulation needs to go global now.