Fred Goodwin should accept responsibility for his decisions

Clearly, "Sir" Fred Goodwin should be parted from his £650,000 pension, because he was personally responsible for the foolish acquisitions policy of RBS while he was CEO.

However, Government should go much further. The overriding aim of policy should be to build a fence between good and bad money. Good money is the real deposits made by savers into banks for safekeeping, and bad money is the manic, irrational, notional, speculative, casino type "financial instruments", the CDOs, CDSs, and Minsky's Ponzi-type derivatives. Bad money is what Warren Buffet termed "financial instruments of mass destruction", whose total "value" is counted at 10 times the GDP of the whole world economy. They are hovering on the financial horizon, and the banksters are unable to put a market value on them. Someday, these malign financial birds of prey will come home to roost, wrecking the institutions that own them, turning the recession into a 10 year global depression.

These derivatives must be neutralised.

Minsky characterised them as Ponzi schemes, schemes that make money while the system is growing, but which become valueless when growth in the financial markets grinds to a halt. Like now.

When Ponzi schemes collapse, the suckers who bought into them lose everything, except what they can scrape back from the estate of the scheme originator, if they are lucky enough to catch him.

Now. Bonuses are paid to top bankers for their performance. They exist to motivate, and to reward success. They are sacraments of the holy ritual of wealth creation. They symbolise the cult of the individual.

So. Just as the bankers were paid handsome bonuses in recognition of their personal entrepreneurial skills and brilliant financial judgment, now that their plans have gone tits up, they should accept the converse, accept the consequences of their personal misjudgments.

What I am proposing is that the responsibility for the fancy instruments that they bough into should come back to the individuals. Anyone who put his (or her, in the case of Nicola Horlick) signature on the purchase agreement of a toxic asset should now accept personal responsibility for that asset. They should own it.

The great likelihood is that they will go bankrupt. This is tough on them, but capitalism is tough, as the Tories never tired of telling the unemployed back in the dark days of Thatcherism. They will go bankrupt, along with the 30,000 or so ordinary people who go bankrupt every year. They will of course qualify for SS benefits, along the lines sketched out by Wanda.

Naturally, there will be a court battle. The banksters will claim that they signed on behalf of their institution, and that the negative values of the toxic assets should therefore go back to the banks, and thence to the taxpayer. Lawyers acting on behalf of us, the people, will argue that their bonuses show that they were acting on their own behalf. The judges will have to decide, and it will to all the way to the very highest courts. We may win, we may lose. We must try, because if/when these toxic assets come home to the banks, it is going to bankrupt the world economy, and that will certainly end in global tears.

It is therefore right that the few ubermensch, the ruthless free market fundamentalists like Fred "The shred" Goodwin, who referred to some of his acquisitions as "mercy killings" should bear their fate philosophically.

I will ask m'learned friend what he thinks.

Meanwhile, here is an alternative, slightly less radical, approach to this problem.