Mervyn King wants to make the job of a central banker more interesting. After what he went through as governor of the Bank of England during the crisis, you might think it was interesting enough already, but since retiring, he has thought about why it happened, and why there’s another one coming.

Like all careful forecasters, he does not specify when, but he has an idea of how to eliminate, rather than merely postpone, banking crises. In The End of Alchemy he proposes turning central banks into financial pawn shops for all seasons, not just (as they were obliged to be in the crisis) pawn shops for the financially desperate.

Here’s how it works: when things are calm, each bank must take all its assets to the B0E’s shop, which casts a pawnbroker’s eye over the lot and grades them. Government stocks might have a pawn rating of 100 per cent of cost, while riskier assets would be good for only a percentage of their cost. Some of the cleverer examples of financial engineering would attract a savage writedown

Dennis Weatherstone, when CEO of JP Morgan, invited his bright young things to explain any proposed new instrument in 15 minutes. If he failed to understand it, the bank would not proceed. The BoE pawn shop might classify assets like a CDO Squared as financial porn, and rate them at zero.

Armed with the rainy-day valuations of all its assets, a bank could then take in deposits up to that value plus its permanent capital. Everyone would know that however bad things got, the depositors could all be paid out. A run on a bank would be pointless.

Pawnbroking was, in effect, what the central banks were doing at the height of the crisis, only they were making up prices as they went along. A tariff established in calm markets is a logical extension of the methods which evolved then. Vast swathes of prudential rules could be scrapped.

It might take 20 years to get from here to there, but this is a brilliant idea. In addition, there would be all sorts of interesting stuff that the owners failed to collect, and central banking would never be the same. Bagsie run the pawn shop.

Where there’s blame, there’s a claim

Have you been in an accident? Have you been mis-sold a claims management business? Then the solicitors at Slater & Gordon can help. They have extensive experience of what it is like to be on the wrong end of a transaction, and their shareholders will feel your pain. The shares are in the 99 per cent club, and unless some slick lawyer can make a claim stick, they look worthless.

S&G is the Aussie listed law firm that paid £763m last March for the bulk of Quindell, a bizarre hotch-potch built on a country club. Please do not call them ambulance chasers. Sheer bad luck that the beastly UK government changed the rules to tackle our reputation as the whiplash capital of the world, but the price had already looked incredible to anyone who followed Aphaville’s What is Quindell? saga.

S&G has now decided that the business is worth £400m less than it paid, and is desperately seeking a rescue plan. However, the real mystery is why three months of due diligence seems to have meant ignoring anything in the newspapers. As the FT frequently pointed out Quindell was, ahem, a less than blue chip business, and is now under investigation under its new name, Watchstone.

Meanwhile, lawyers Maurice Blackburn want to start a class action, which is surely just what S&G would recommend. You need a heart of stone not to laugh.

To be Frank, it’s a risk

Michael Roney is a low-profile CEO running a low-profile company. Shares in Bunzl, distributor of plastic cutlery and cardboard cups, serial acquirer of other low-key companies (last year’s haul included a Brazilian dental business) have tripled under Mr Roney’s decade in charge. After his valedictory results last week the shares cost 27 times last year’s earnings. Let us hope his successor, Frank van Zanten, knows what happens after a long-serving, successful CEO retires.

This is my FT column from Saturday

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