Ethical Record The Proceedings of the South Place Ethical Society Vol. 113 No. 10 £1.50 November 2008

EDITORIAL: THE CREATIONISTS HAVE NOT EVOLVED — THEY ARE LIVING FOSSILS

When our Appointed Lecturer E.W.Swinton lectured here on dinosaurs (see Mike Howgate's article on him on page 4), there was little audible opposition to the concept of evolution of life on earth over billions of years.

There were then (in the UK) only a pathetic handful of believers in the literal tnith of Genesis - that around 10,000 years ago, God had specially created each species of plant and animal which then William Elgin (Bill) Swinton reproduced 'after their kind' and did not evolve. Mike's tiny (3 person) Association for the Protection of Evolution (APE) had trouble in finding anyone to argue with in those days.

Today the clamour for teachers to spend the same time discussing Creationism as they do expounding evolution has even disturbed the calm deliberations of the Royal Society. The Library here has just been given a massive 15Ib expensively produced tome entitled Atlas of Creation by Harun Yahya, full of factual errors. However, it accepts the scientific figure for the age of theearth and the life on it but proclaims on almost every page 'God did it' ie special creation of each species which never subsequently evolved. It seems that ideas follow life - new ideas (or new species) emerge but the original ones often can keep going.

ROBERT BLATCHFORD Terry Liddle 3

WILLIAM ELGIN (BILL) SWINTON Mike Howgate 4

THE BANKING DEBACLE Chris Brateher 8

VIEWPOINT: Jennifer Jeynes 14

ILSE MEYER (1906 — 2008) JenniferJeynes 15

ETHICAL SOCIETY EVENTS 16 SOUTH PLACE ETHICAL SOCIETY Conway Hall Humanist Centre 25 Red Lion Square, London WC1R 4RL. Tel: 020 7242 8034 Fax: 020 7242 8036 Website: www.ethicalsoc.org.uk email: librarygethicalsoc.org.uk Chairman: Giles Enders Hon. Rep.: Don Liversedge

Vice - chairman: Terry Mullins Treasurer: John Edwards Registrar: Donald Rooum Editor, Ethical Record: Norman Bacrac SPES Staff Executive Officer: Emma J. Stanford Tel: 020 7242 8034/1 Finance Officer: Linda Alia Tel: 020 7242 8034 Lettings Officer: Carina Dvorak Tel: 020 7242 8032 LibrarianIProgmmme Coordinat or: Jennifer Jeynes M.Se. Tel: 020 7242 8037 Lettings Assistant: Marie Aubrechtova Caretakers: Eva Aubrechtova (i/c); Tel: 020 7242 8033 together with: Shaip Bullaku, Angelo Edrozo, Nikola lvanovski, Alfredo Olivio, Rogerio Retuema, David Wright Maintenance Operative: Zia Hameed New Members We welcome to the Society: Dr Donald Beal of London E2; Christopher Byrne of London SEI9, who generously donated £200; Stephen Clarke; Dr Colin Leakey of Lincoln; David Lyons of Haddenham in Buckinghamshire; Huseyin Murad of London NI1; Adrian Peeler of London N14; Bill Wheeler of Uxbridge

Obituary We regret to report the death of Mrs L Blegvad

ANNUAL ART SOIREE CHANCE AND COLOUR: Rules and Rulers Illustrated talk by Chris Gough who has a 33 year background devising imaginative ways of teaching visual art and visual thinking to adults in London and the South East. The talk teases out some formal, sensuous and procedural threads that weave into his work. The focus will be on the interaction of material, number, sequence and control. A chance to ask questions after the lecture. Wine ••• all welcome ••• no charge 1930h Friday 21 November 2008

SOUTH PLACE ETHICAL SOCIETY Reg. Charity No. 251396 Founded in 1793, the Society is a progressive movement whose aims are: the study and dissemination of ethical principles based on humanism, the cultivation of a rational and humane way of life, and the advancement of research and education in relevant fields.

We invite to membership those who reject supernatural creeds and are in sympathy with our aims. At Conway Hall the programme includes Sunday lectures, discussions, evening courses and the renowned South Place Sunday Concerts of chamber music. The Society maintains a Humanist Reference Library. The Society's journal, Ethical Record, is issued monthly. Memorial meetings may be arranged. The annual subscription is £18 (El 2 if a full-time student, unwaged or over 65).

2 Ethical Record, November 2008 ROBERT BLATCHFORD Terry Liddle Lecture given to the Ethical Society 28 September 2008

The last two decades of the 19th century saw the revival of as a national movement. The Social Democratic Federation, the and the (ILP) were all founded in this period. While some socialists such as Edward Aveling and Annie Besant came from the ranks of secularism, others such as and Philip Snowden were evangelical Christians. In a Unitarian minister John Trevor founded a Labour Church. Naming one of these churches after William Morris was as absurd as suggesting he become Poet Laureate after the death of Tennyson.

Among the lecturers at the Labour Church was South Place's Stanton Coit and a Manchester joumalist Robert Blatchford. Blatchford was born in Maidstone on St Patrick's day 1851 into a family of itinerant entertainers. His father died when he was very young and his mother's life was a hard struggle to survive.

Determined to follow a respectable trade, his mother appenticed him to a brushmaker. Bored with this he ran away to London. Being penniless he joined the Army. He gave his recruitment pay to a homeless girl. He served six years, becoming a sergeant. Sadly. many of the militaristic and jingo attitudes he imbibed in the army remained with him.

He later became a time keeper on a canal and by dint of self-education a journalist on the Sporting Chronicle. At first he opposed socialism, declaring it would mean a society where Hyndman was Lord Protector, Bradlaugh Archbishop and Kropotkin the Messiah. But an investigation of Manchester's slums and a pamphlet by Hyndman and Morris converted him. His nomination as a socialist candidate led to a parting of the ways and with little capital he started a penny weekly, The Clarion, nickdined 'the perisher'. This became the most popular socialist paper of its day, a better example of radical political journalism than Hyndman's dogmatic Justice or Keir Hardie's moralising Labour Leader.

Blatchford's Clarion The Clarion was more than a paper, it was a movement, almost a way of life. There were field clubs, handicraft guilds, vocal unions, a cycling club (this is still going) and propaganda vans; the hostile reception these sometimes received is depicted in Tressell's Ragged Trousered Philanthropists. More people were converted to socialism by the writings of Blatchford, in particular his Merrie England which sold over a million copies, than by those of Marx. Among the converts was the Countess of Warwick. It was rumoured she blackmailed her lover, the Prince of , for funds for the socialist cause. Her stately home became the venue for the ILP's summer schools.

In 1903 The Clarion published a review of Haeckel's Riddle Of The Universe which led to a rush of orders to its publisher the Rationalist Press Association. The review was welcomed in JW Gott's Truthseeker. later Blatchford attacked Gott, who accused him of jealousy. Blatchford's close colleague Alexander Thompson had been greatly influenced by the Secularist lecturer Charles Watts and that year Blatchford published a series of articles critical of Christianity which were issued as a book, God

Ethical Record, November 2008 3 and my Neighbour. Blatchford must have been well frequented with secularist literature as he recommends several books and pamphlets published by the RPA and Watts including works by JM Robertson and GW Foote.

In the tradition of Thomas Paine and in the same strong, plain English, Blatchford mercilessly criticises both books of the . Like Paine, he says 'my religion is to do the best I can for humanity'. He sees his socialism as part of the sum of Humanism. '1 oppose the Christian religion because I do not think the Christian religion is beneficial to mankind and because I think it is an obstacle in the way of Humanism', he wrote.

He attacks the Judeo-Christian God Jehovah (YI-IWH) as immoral, unjust and cruel, writing : 'It is time to have done with this nightmare fetish of a tribe of murderous savages...We should think him too horrible and pitiless for a devil, this red-handed, black-hearted Jehovah of the Jews.'

In examining the New Testament, he asks whether the documents had been tampered with and concludes: 'Since alterations have been made in the text of scripture we can never be certain that any particular text is genuine, and. this circumstance militates seriously against the value of the evidence for the Resurrection.'

WILLIAM ELGIN (BILL) SWINTON Lecture to the Ethical Society 25 May 2008 Mike Howgate William Elgin (Bill) Swinton was an Appointed Lecturer. for the South Place Ethical Society for most of the 1950s. He was also a palaeontologist who spent most of his career working at the Natural History Museum mainly on Plesiosaurs, the marine reptiles which look like the fabled Loch Ness monster. But if you remember when dinosaurs were dinosaurs, when they were up to.their necks in the primordial swamps, dragging their tails around in the mud, every colour, just as long as it was some shade of grey and unremittingly dim, then you will remember Bill Swinton. He wrote the world's first dinosaur book in 1934 and is probably best remembered by people of my generation for the trilogy of booklets he wrote for the British Museum (Natural History) on 'Dinosaurs', 'Fossil Reptiles and Amphibians' and 'Fossil Birds'. William Elgin Swinton was bom in Kirkaldy, Scotland on the 30th. of September 1900. Educated at the Morgan Academy•in Dundee, Whitehill School, Glasgow , then Trinity College, Glenalmond (The school which has has recently been in the news for the thav hunting' video produced as an end of year prank by a group of their posh students.) He joined Glasgow University in 1917, gaining the equivalent of a First (Principal Standard) in 1922 and even played Rugby for the University in 1917, 1918 &1919. After a couple of years of post-graduate research in Glasgow, mainly writing up the results of an expedition to Spitsbergen and working on fossil marsupials from Australia, he was lucky enough to fiud a job with the British Museum (Natural History). The keeper of the department, Dr. Bathers,

4 Ethical Record, November 2008 thought that Swinton sounded like 'the sort of man who might be useful on our Tanganyika expedition'. This was to be to the famous dinosaur locality of Tendaguru which had provided such spectacular dinosaurs to the Berlin Natural History Museum before the First World War. He was accepted as an Assistant Keeper (second class) on the 25 October 1924 and on 19 November he left Glasgow for good and he later remembered that on the train journey heading for London 'When the train neared Watford...I saw washing hanging on a Sunday! I realised that I was in a foreign land.' And no doubt a more Godless one than his native Scotland. Having worked on marsupials at Glasgow, he was put in charge of fossil reptiles while Arthur Hopwood, who joined the museum at the same time and who had studied reptiles at Manchester, was put in charge of fossil mammals. The rationale being that if one were absent the other could fill in having some knowledge of the other person's subject area. He soon settled into the routine of work, mainly on the plesiosaurs of the Leeds collection, but unfortunately due to the condition of his teeth and a dyspeptic condition he was not recommended for work in the tropics and was unable to join the dinosaur hunting expedition to Tanganyika. Swinton found the Keeper of Geology, Dr. Frances Arthur Bather, a friendly and sympathetic task master and following his advice he joined both the British Association for the Advancement of Science and the Museums Association; two organisations which were to loom large in his later career. He may also have been encouraged to develop a side-line in dinosaurs by Bather. Bather's daughter ran a craft shop in Bognor Regis which also acted as an outlet for wooden and plaster models of dinosaurs and other prehistoric animals made by the sculptor Vernon Edwards under Bather's direction. Bather also planned to produce a series of cigarette cards for British American Tobacco which did not material ise. In between the wars there was a huge collecting boom among children for cigarette cards. Many featured 'educational' subjects particularly natural history but only a few of these featured dinosaurs. Perhaps the most spectacular were 'Peeps into Prehistoric Time' given away with Army Club cigarettes produced by the firm tavanders'. The 48 photographic cards in the series came in pairs • to be viewed through a stereoscope ( available for the exorbitant price of one shilling and sixpence, postage included). The cards came in two series, the smaller with packets of 10, the larger with packets of 20. The 24 stereo- photographs were produced by the firm 'Camerascope' from dioramas made by the model-maker/sculptor Vernon Edwards who also made the fossil fish dioramas in the old fossil fish galleries of the B.M.(N.H.). Swinton provided the text for the pictures. There were collected together and published in a small cloth bound volume prosaically entitled Prehistoric Animals. Swinton's career as a populariser of Dinosaurs was launched. In 1933 Swinton decided to write a comprehensive book about dinosaurs. As he records later 'There had been papers on the group for more than a hundred years but a comprehensive account was lacking'. He was allowed to proceed with this venture by the museum provided that everything was done "outside the

Ethical Record, November 2008 5 museum and outside official hours. The book was, he recounts, written mainly at his parents' house in Hampstead and in the library of the Royal Society's Club in St. James Street. In due course The Dinosaurs was published by the geological publisher and supplier Thomas Murby & Co. in early 1934. The majority of the plates were from plaster cast models arranged in dioramas, once more produced by Vernon Edwards, and the other somewhat sketchy illustrations were provided by Swinton himself. The book, however, was popular and set the pattern followed by nearly every dinosaur book produced since. By this time Swinton's extra curricular activities began to blossom. He was secretary of the BM(NH) Staff Association and prominent in both the British Association for the Advancement of Science and the Museums Association. He also became very much the public face of the museum, in 1938 taking the Princesses Elizabeth and Margaret on a private guided tour of the museum and his beloved dinosaurs. It is thought that they made several visits, so maybe the Queen is a closet dinosaur fan. Swinton's War Work On the 19 May 1939, as war fever mounted, the Admiralty wrote to the Trustees of the museum 'requesting the services of W.E.Swinton and Mr. A.C.Townsend... in the event of an emergency'. Just why Swinton was requested at this early date was probably to do with his proficiency in German and possibly his O.T.C. record from his school and university years in Glasgow. It was not just any naval post he was to fill — he was to become part of the famous room 39 of the Naval Intelligence Division of the Admiralty.

The museum's initial reply was that they would release Swinton after material had been evacuated from the museum. Some material was evacuated but the priceless London specimen of Archaeopteryx was housed by Swinton in a sandbagged bomb-proof house in the museum's basement. On 4 September 1939 he was placed at the disposal of the Admiralty. He then underwent basic training with amongst others Ian Fleming and vividly remembers a conversation when he and Fleming were told by their naval tutor 'I understand the balloon goes up tomorrow, so you had better turn up in uniform'. Fleming confided in him 'I don't know about you old boy, but if anyone ever salutes me I'll burst into tears'. 'Not quite 007 stuff' noted Swinton in his reminiscences. In January 1940 Swinton was mobilised with the rank of Lieutenant in the Royal Naval Volunteer Reserve, but he was never more than what the ship-borne navy referred to as 'chocolate sailors'. He was based in Room 39 of the Admiralty which was the nerve centre of the Navy's intelligence operations, famously involved in the Battle of the Atlantic, the hunt for the Bismark and the naval side of the D-Day landings. A large amount of the work was turning the Ultra de-crypts from Bletchley Park into operational information on which tactical and strategic decisions would be made. And who knows, maybe bits of the personalities of 'M' or 'Q' are based on Swinton, who was a friend of Fleming's. On his return to the museum things were changing. The grades of Assistant Keeper and Keeper were replaced by civil service grades Scientific Officer and Principal Scientific Officer and the almost routine end of year 'note' from the 6 Ethical Record, November 2008 Keeper was replaced by a questionaire full of tick boxes and which had to be filled in 'in detail' with a recommendation or not for promotion. Swinton's end of year reports make sad reading. There is the year in, year out refrain of "not yet qualified' for promotion. He was overlooked for promotion at least four times. In the late 1940s Swinton started a series of Christmas lectures for schoolchildren and in the 1950s he became increasingly involved in what we would now term public outreach. He wrote the three popular handbooks Dinosaurs, Fossil Amphibians and Reptiles and Fossil Birds the first of which went into several editions right up to the mid 1970s, but his academic research suffered.

However he appeared regularly on Animal, Vegetable and Mineral, children's television and several natural history television series. He was always in demand as a public speaker. He was prominent in the Museums Association, of which he became President in 1958 and he became General Secretary (Life Sciences) of the British Association. A SPES Appointed Lecturer The 1950s also saw Swinton beconie a regular fixture at Conway Hall. His first talk for SPES was 24 October 1950: The title 'Some Prehistoric Monsters' was an obvious choice for a palaeontologist. It was soon followed by 'Some Lessons of Evolution' on 17 December. Evolution was to be a dominant theme of these contributions. In 1952 one of the Appointed Lecturers, Professor G.W.Keeton, resigned, and with the alacrity which is still the hallmark of SPES nothing was done for over a year. Swinton was finally installed as an Appointed Lecturer in 1953, a position he maintained until he left for Canada in 1961. His topics ranged far and wide, covering obvious topics such as Missing Links, Darwin and the Origin of Species, Lamark and Alfred Russel Wallace; areas of popular interest at the time such as the Cult of Mithras (the Temple of Mithras was excavated in London in the early 1950s) and the 'Religion of Albert Einstein'; to his own travels to America and the USSR. These were often printed in The Ethical Record and its predecessor The Monthly Record between 1951 and 1960 Following the death of his mother and the lack of regard for his obvious talents at the museum Swinton at the age of sixty made a remarkable career change. A vacancy as Director of the Royal Ontario Museum came available. He was approached to fill the post, accepted and thrived in the new position. On his retirement five years later it was noted that there had been a year on year increase of 25% in admissions to the museum and he became Canada's first professor of 'The History of Science'. To the end he was writing popular books on dinosaurs for children and revising his BM (NH) booklets. He died in Toronto on 12 June 1994. Thanks to- Natural History Museum Library — archives section — especially James Hatton Jennifer Jeynes, librarian to the South Place Ethical Society. Gregory, Botley and Lloyd Ltd.

Ethical Record, November 2008 7 THE BANKING DEBACLE - THE REAL PRECIPITATING CAUSES AND THE NATURE OF TRE BAIL-OUT Based on a lecture to the Ethical Society, 19 October 2008 Chris Bratcher

I am not an economist, or a banker, but, as a former tax inspector dealing at various times with most of the foreign investment banks in the UK, I have had to unravel their products, which the wider world is now doing. The saga is ongoing, and any talk on it is work in progress; in fact, I have appreciably rewritten parts of the talk I gave.

Everyone seems agreed on the apparently obvious; that the banks were being driven down by 'short selling'; building societies and US home loan providers should not have lent so recklessly to the indigent and buy-to-let gamblers; that providers should not have been so reliant on wholesale money markets for doing so; that the funding mechanism of selling-on packages of the mortgages in the form of bonds (securitization) was wrong; and the further dispersion of risk by derivative instruments was even more wrong; as a matter of practice, as well as ethically.

The conventional wisdom is that the temple of Mammon must be saved: a) by marrying off foolish non-virgins to retail/commercial sugar-daddy banks; b) by throwing liquidity at the less prudent of the latter; c) by taking the bonds off their hands a la Paulson, and d) finally (with extreme distaste in the US), by dowries in the form of 'hands off ' part-nationalisation. The pious hope is that more temple police with new regulations, and some sort of ceiling on remuneration, will save it from itself next time. I shall argue a somewhat contrarian view, both as to the causes of the debacle, and as to the efficacy of the proposed plastering job on the temple, its orders of service, and its high priests. As to the latter, I am reminded of Chaucer'sPardoner's Tale: a sermon that the root of all evil is cupidity, coupled with a collection for the preacher and his church from the congregation of the rest of us.

The Obvious Roots Of All Evil? Short selling is where you borrow shares for a fee, sell them, and buy back the same shares later, hopefully cheaper, to hand back to your lender. No more wicked, in my view, than buying shares with borrowed money for short term gain. And, notiee, since it has been banned, shares have relentlessly gone down. Because there are more sellers than buyers out there: precisely the conditions that bring about short selling. The device itself does not alter that. Although, of course, there was reckless lending, there was a political demand for it as an alternative to social housing. We now pay for that choice. The mortgage financing and risk mechanisms were not so much wrong per se, as their nature lost sight of, once their products became detached.

There might have been another way of enabling the banks to gradually get themselves out of the immediate crisis; and that the world would not have ended had the bail-out not occurred, which does not cure the underlying problem. Fixing the banks — if this has been achieved - has not averted a depression, and we will not have to wait eighty years for the next crash. Who wants to fix the conventional banks anyway?

I'll start by being technical, and leave the ethics and broader issues 'tit later. Ask

8 Ethical Record, November 2008 yourselves why the banks did not crash and freeze up in crises of the eighties and nineties that you may never have heard of: for example, the 1980s Latin American bonds defaults, and the 1990s Japanese property collapse of values, propped entirely by bank lending, that had made a Tokyo garden by far the most expensive place on Earth. Bonds and property, then and now; what is the difference this time around? It is not just locality and scale. Part of the answer is something called 'mark-to-market', or 'fair-value' accounting.

On Your Marks, Get Set, Crash A bank now has to mark up or down much of what it holds on its books to its current value, as if it were trading stock, where the assets are capable by nature of being so, even though it may have no wish or possibility of selling them in the short term, and will be likely to hold them to better times, maturity or default — i.e., to the bitter end spread over time. If 'mark to market' did not apply, it could carry them in its books at "amortised" cost (roughly, a discount to future projected value), above instant sale value. You may wonder why the banks submitted to this. Partly it was the increasing artificiality of a distinction, founded on little other than supposed purpose, between a trading book' and a banking book, and pressure to be more transparent, and volatility in value was the price to be paid; but in good times it provided an accelerated recognition of profits, and hence dividends, bonuses and share values.

In the good old days , everyone might know that such and sucI; a bank was stuffed with mbbish, but could largely ignore the fact, and even its possible technical insolvency were that bank to be liquidated overnight — because that wasn't going to happen — because the ongoing operations of the bank enabled it to pay its way. Normal inter-bank and commercial lending would occur. Banks would re-capitalise themselves slowly through earnings, and through inflation. Now, a bank's ability to operate in the Western world depends on its being able to value, if not sell, its assets overnight, to show it can pay full whack on its liabilities, and have something left over for shareholders. If it cannot demonstrably do that, it is a bad risk, and bust. The situation can be artificial. If Bank A and B, as they do, take in each others' washing, they may find themselves each having to recognize the full value of their liability to the other, and the depressed value of the same as an asset.

The effect of 'mark-to-market' was brought home by the exemplary hanging out to dry of Lehmans, after it could not bring itself to be married off cheap. It backfired in that the impending fire sale of its `toxic bonds' and compulsory settlement of its credit derivative positions put every other bank on the spot. The result has been 'procyclicality', as banks simultaneously recognised losses. It also blew away any Central Banker fears of rewarding, let alone a wish to punish, delinquent banks; the so- called 'moral haiard' problem.

Accounting doesn't alter the facts, but as it is current news, I have given space to explaining it. Interestingly, the small print of the regulations enacting the Paulson package included a power to suspend mark-to-market accounting; something the impressive French Finance minister had already proposed. On 15 Oct, an EU regulators' committee voted unanimously to accept emergency proposals by the International Accounting Standards Board that banks would be able to 'reclassify'certain financial items; effectively, they could move them from their trading books to their banking books. The European Parliament endorsed the vote and member

Ethical Record, November 2008 9 states gave their unanimous support. However, the Board has since had second thoughts; there has to be a level playing field.

My Name Is Bond, Toxic Bond Mention of 'toxic bonds' brings me to securitisation, i.e., financing mortgage lending by flogging the mortgages, or rather, something backed by them. To sell blocks of mortgages, other than by transfer of business, which would include the tiresome business of interfacing with the mortgagees, you need something that stands in their stead; a bond (i.e., a loan secured only on them) that represents them, purportedly at their average value when the bond is issued. Issuing bonds to finance a company is as old as the hills, but it is expensive in terms of the coupon that has to be paid, which reflects the ability of the issuer as a whole to 'cover' the interest payments. The latter I will call 'the cow', in honour of the US regulator who admitted that an investment vehicle "could be structured by cows and we would rate it.". How much better to issue something directly related to cuts of meat off the cow that it is your business to produce: perhaps a mix of sirloin, rump, and scrag end, with the mortgage provider undertaking to pick up losses on the 10% or whatever of the scrag end that is estimated may turn out to be unfit for investor consumption. This made it easier to get more for it — in other words, cheaper finance. The buyer thought he got a lovely juicy stake in steak that gave them more (like the Halifax singing advert) because the whole included the high yielding scrag end mortgages, and everything was covered by a top 'AAA' rating, which we now see as sauce in and to disguise: an old restauranteur's trick. Part of the trick was to make the legally distinct issuer 'top notch'. Some bonds dropped from 'AAA' to the lowest junk status in a single month; the commercial rating agencies, whose job it was to categorise the bonds, are now being sued.

Pass The Parcel: Swaps In the talk I tried to explain what a financial swap is more fully. The nearest most of us get to swaps is our stamp collections. Instead of swapping the stamp, you swap the value of the stamp, which in the case of sticky bits of finance lies in the security.for them and interest rates. Say you want to protect yourself against, or gamble on, a rise in interest rates. (Protection, and taking a bet on the future, are two sides of the same coin.) Rather than sell a bond, you undertake to pay the bond's fixed rate of interest on to someone else, for an entitlement to a floating rate of interest on the same amount for a set period of time. It is called a derivative, because no underlying asset changes hands. Now, credit default swaps (CDS) are no different in principle, except that you exchange not interest, but default risk, and pay out sums akin to an insurance premium, set at the time of creating the swap. In short, you fix the risk, and you no longer have to have a pile of capital in reserve to back up the item.

The party that now has the risk needn't be in the insurance business, and will want to pass it on. So he re-swaps with a fresh instrument, which takes on a detached life of its own, producing a cat's cradle of obligations and guarantees. The ability to be bought by people who don't own the asset turns the swap into a bet — like taking insurance on someone else's life — with endless bets either way. When Lehman defaulted, the total amount of CDS on its debt was unknown. To make matters worse, it was itself a writer of CDS to insure other people's exposure. When one side of a trade defaults, it starts a chain reaction. That's called 'counterparty risk', and is what spooked investors into selling off assets and lenders into desperately conserving cash. The underlying asset turned out to be worth approx 10c to the S. was eventually estimated, • 10 Ethical Record, November 2008 even so, that only about $6bn needed to change hands, and much of the extreme cash- hoarding by banks and distrust in each other's balance sheets was unnecessary. So much, then, for the immediate causes of the crash.

Foolish Lending: The Emperor's New Clothes Ponder this quotation: With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets, cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s. Chairman (and high priest) Alan Greenspan of the US Federal Reserve Bank - 8 April 2005.

'Sub-prime' has somehow become the prime cause for congratulation. The American dream and economy depends on home ownership spending; social housing is not on the agenda. The policy climate was set by Bill Clinton, who required the banks to make an increasing percentage of their loans to what the Americans laughably call the aspiring middle class — poor Whites and Afro-Americans, as part of the price of de- regulation: effectively, 'now you have the tools for mass production of lending, deploy them for the huddled masses'. There is no more 'efficient' way of judging risk than have the punters effectively do it themselves, through self-certification and 'fill the form in for you' salesmen. A model of risk is only as good as its data. Outsourcing and mechanising the traditional safeguards to lending was not such a good idea.

No doubt the apparent risk was priced 'appropriately.' It is not widely realised that lenders expected that a large number of loans would go bad once 'teaser' periods of low rate loan expired, with penalties if the punters tried to exit. They simply expected a rate of foreclosure that did not depress the resale price of houses. The banks were considered healthy on the assumption that 8% of a bundle of mortgage loans would fail, and the collapse occurred when the market down-valued them to 11%. The high rates of interest charged reflected the risk, in a vicious circle; if you charge a lot, the risk grows, and so the cost of bank borrowing to fund it grows: it is a classic 'chicken and egg problem'.

Not Some Rotten Apples, But A Decayed Tree At the root of the problem is population growth, and a system that leaves an increasing percentage of that population on subsistence wages. For nigh on a century to the mid 1970s, America had parallel growth in productivity, profits and wages. Then wages levelled off, partly because labour power waned as America de-industrialised. For wage-earners to continue to buy, they had to be lent increasing amounts of money — a sort of top-up wage that had to be paid back. That relied on ever spiralling working hours and housing values to be mortgaged.

Over here, the traditional remaining mutual building societies prudently stuck to their model of largely funding themselves from their deposits, and so couldn't help. In truth, the market cannot help, but where there is demand for the creating, it will be

Ethical Record, November 2008 11 easily perSuaded that it can. The loan companies there, and the building societies- turned-banks here, went to the money-market, that lends for a shorter term than many mortgages —sometimes even for shorter periods than the fixed rate period of mortgages they were selling. The money-market is not a local affair. The institutions with the cash to lend are those holding petro-dollars, and other mountains of money gained by exporting to the West. Selling them banking goods and services does not alter the shift in power.

The Solutions —Not. Marriage a la mode What an irony that, whereas after the Great Wall St Crash, the investment banks were forcibly kept apart from retail/commercial ones in the USA, some of their remaining investment banks have now been forcibly married to the same; which will mean that the new conglomerates will have to be saved next time, because depositors and commerce will be directly at risk. You could say it's all our fault. The separation of types of banking (by the Glass-Seagal Act) was repealed in 1999 by Clinton partly in response to the UK removing such distinctions, enabling the 'Big Bang', and the City as it is today, in 1987.

The Flawed Paulson Solution — Buy Up The mortgages This looks as if it has been overtaken by 'follow-my-leader-Brown' recapitalisation. Assuming it is pursued, the buy-ins will be piecemeal, at banks' requests. What little we know is the intention to guarantee to buy, and not when; at a market value. Putting a buyer of last resort under the securitisations has driven their value up (and bank shares, very briefly, with them) and the potential cost of the exercise, but further evidence of underlying mortgage failure may drive their price down further. If so, and the true market value is paid at the time, it would not save the banks in question. This is the essential flaw: either it doesn't help, or it is a fairly naked hand out.

Let us be clear that this does nothing for the mortgagees. They will still have to try and fail to pay the mortgages, or seek low cost alternatives. These will presumably be issued, directly or indirectly, by (F for Federal) Freddie Mac & Fannie May. Those remortgages will pay off the toxic ones, giving a windfall to the banks that still hold them, as well as reducing the cost of the buy-out (the cost is just shifted to the re-nationalised TM's should they have to foreclose on the replacements).

If the US Treasury had not stepped in, what would have happened? The US investment banks would have gone to the wall. They were heading that way, despite it, until the US got 'Browned off' and bought in. The European, Oil & Tiger economy State banks would have taken them or their business over. Let us be clear; the action was taken to save the US from loss of financial hegemony, and is disguised protectionist state aid. Because the underpinning was to the loans, not the banks as such, they could get away with it. Now, of course, all the major countries with banks in peril have recapitalized them: almost universal state aid sort of doesn't count as such, and the restriction on dividends (which RBS/Lloyds and their shareholders are beefing about) is the price of it. Though if I were the healthy (Franco era regulated) Spanish banks, I'd be complaining.

Northern Rock And The Brown Bail-out Remember, remember, the 8 October : £5Obn investment + f250bn guarantees of loans + increase from 100 to £200 bn of short/medium term lending. Government debt will

12 Ethical Record, November 2008 hit an estimated 49% of GDP. Cost, maybe £2000 per taxpayer. The result: an immediate 5% shares fall (because of the restriction on dividends), that has since increased across the board, as the real economic woes are being recognised.

Gordon Brown, rather an improbable Mark Anthony, came to save capitalism, not to bury it. Despite this being patently so, one blogger said: 'Is the real philosophy of New Labour, and of Gordon Brown in particular, no more than a duplicitous strategy to wreck the free market in the UK, to free the path for the introduction of the sort of State authoritarianism that has all the time been their idea of utopia?'

The problem with half-way nationalisation (especially if you don't have executive directors or votine shares) is that you start with the premise that you are not going to change the nature of the beast on which existing shareholders are riding. The problem with half-sector nationalisation is that you have to introduce an artificial level playing field between those that are backed by Government money, and those that are not. The same goes for guarantees for retail deposits. So we have the ridiculous situation that Northern Rock has to refuse deposits, and decline to give mortgages —the very opposite of the aim of overall rescue, so as not to a) borrow more from the Government, and b) not `poach' business from the 'good' boys. Truly, it is difficult to avoid rewarding institutional 'moral hazard'

Riding The Tiger: Pay, Capital And The Bizarre Nature Of Banking The issue is not Board members' pay, but the culture. Lehmans used to `let go' 5% of staff every year 'pour encourager les autres'. Teams within a bank, particularly of traders and bank treasury operatives, are driven by bonuses. There is no automatic identity of interest between them and shareholders, let alone the wider community, not least because their timescales, and their downside risk, are different. Recompense in shares that 'vest' in years to come will help align these, although the scope for this solution is limited, as it is equally unacceptable that people should be rewarded or not by a distant share price dependent on others.

Regulating Practices: Better Luck Next Time In 1999 or so, the Financial Services Authority brought in `principal regulation'. This did not mean that they were telling principals (i.e., firms) what to do, but rather, that they would regulate themselves, and tick boxes to show they had checked, and complied with, their own risk models for what they were doing. This reflected Alan Greenspan's assumption that their self-interest was the best possible protection for shareholders, which he now admits was mistaken. There is no way that derivatives can be forswom en mass: they are too useful. What will happen is that the mathematical models and functions than churn out their values will be reassessed; and not by regulators: and there will be no market for the more exotic. The main curb on banks is their capital requirement; a calculation based on a complex matrix of types of capital and sorts of exposure. It may seem strange that banks try to minimize their share capital, as it does not cost them interest, but issuing new shares dilutes the return on existing ones, and it is difficult to raise. But there is another reason.

The Bizarre License Given ToBanks The ability to loan money that is not transfened from a piggy bank, and is not backed even 10% by shareholder capital (known as the fractional reserve system) allows banks to create money that in funding terms costs them only the interest, etc, on that reserve.

Ethical Record, November 2008 13 It happens every time you take a loan, which gives them an asset. It is clearly to the banks' advantage to create as much money as possible, because the more they create the more interest they earn. Variations in the rate of money creation are the major factor behind booms and busts.

The Long Term Solution The economic problem is that the Keynesian way to mitigate recessions is to create yet more money/purchasing power. Brown's solution is to urge the banks to lend more, thereby attenuating their capital. Which is where we came in. A better solution is to do away with the private middle man. If the banks were nationalised/absorbed into the Bank of England, the lending profit would not go into tax havens, but would accrue to the government, which now just pays up when things go sour. The interest on your loan would effectively be a form of taxation for credit, enabling a reduction elsewhere. One might even see progressive taxation in the form of cheaper loans for the scrag end of society. There will never (?) be a better time to buy the banks for a song. Come on you Tories, you are in favour of reduced taxation. Why not steal another policy from the Green Party, trump Gordon, and win the next election!

VIEWPOINT Proper Democracy The late Virginia Clark had two houses in the United States, one in democratic Connecticut and the other in Ohio which was one of the two states, along with Florida, in which there was some psephological inadequacies leading to the possible illegality of George W Bush's last victory. Virginia hated George W with a passion surprising to some in such a demure, elderly retired librarian and passed on some very rude jokes.

When the fact that Ohio and Florida both voted Democrat came through on the news when America voted for another President last week and these made the result certain, I felt very exultant on Virginia's behalf. She would have been so pleased, that Ohio was the critical result. Hilary Benn said his mother Caroline, another American and Tony Benn's late wife, would also have been delighted with Obama's election. And election is the important Ni/ord.As I wrote to the Times,

Today's letters (12111)on racism in British Politics and Trevor Phillips miss the point. We can't have a Barack Obama here because we aren't at liberty to select (i.e. vote for) our own Head of State from a choice. Roll on the relegation of an outmoded hereditary principle to the history books with bear baiting and public hangings; include the disestablishment of the Church of England and we can then hold our democratic heaclsup high as equals to USA citizens. Jennifer R. Jeyfies

THE HUMANIST REFERENCE LIBRARY The Humanist Reference Library is open for members and researchers on Mondays from 12noon-4pm and on Tuesdays to Fridays from 2 - 6pm. Please let the Librarian, Jennifer Jeynes, know of your intention to visit the Library. Tel: 020 7242 8037/4. Email: [email protected]

The views expressed in this Journal are not necessarily those of the Society.

14 Ethical Record, November 2008 ILSE MEYER (1906 — 2008)

Ilse Hildegard Dorothea Meyer died aged 10 I on 21 July 2008 and was given a splendid secular memorial gathering at Wolfson College Cambridge on 5 August organised by her daughter, Eva Simmons. This followed a burial in the Jewish Section of Cambridge Crematorium where we were invited to follow the tradition of digging a spadeful of soil and throwing it on the coffin. Ilse was, however, a staunch atheist and communist and the programme ended with singing of the Internationale. The writer was asked to speak on Ilse's Humanism which she was happy to do. Ilse was a member of the Ethical Society and Hampstead Humanists, also often visiting Ealing Humanists. Ilse came infrequently to Conway Hall but of course she attended the lecture given by Eva about Voltaire and Orinoco.

Aubrey Bowman was sorry to miss the event but at 90 had to prepare himself for conducting the next day at Tavistock Square for Hiroshima day. Ilse would have approved of the reason for his absence. Aubrey knew her from 1935 when she first came to England as a refugee, as the wife of his close friend, her husband Ernst Hermann Meyer. Aubrey dedicated his 2nd string quartet to Ernst. He remembers often seeing Ilse's pram containing Eva as a baby on Finchley Rd in Hampstead.

The secretary of Hampstead Humanists, Nigel Barnes, was impressed that Ilse used to enjoy walking from her flat in Parliament Hill to meetings in Keats House and with her determination, sense of humour and lugubrious way of speaking. He particularly remembers the Yuletide Party when she was 98 — to quote him, she was tucking into the food and knocking back the wine! The writer thinks 98 year olds should feel free to knock back the wine! Indeed, Nigel has decided to give free life membership to all Hampstead Society members once they reach the age of 100.

Me was featured in an article in the Camden New Journal in 2003 to mark 70 years of living in Hampstead. She Considered that independence and moderation were the twin forces behind her longevity and at the age of 97 enjoyed playing table tennis with her 11 year old great nephew. She still did her own food shopping and had a life long interest in, even greed, for food due to the war rationing when,she was a child. Ilse's father was a doctor during who looked after Russian prisoners of war in Spandau. Ilse married Ernst in 1931. In England she taught German and Ernst taught music.

Ilse managed to get the help of Ralph Vaughan Williams to rescue one of her closest friends who was arrested in 1937 and thrown into a concentration camp. He later composed music and sound effects for the government's wartime documentaries. She remembered carrying Eva up Haverstock Hill in a gas mask and sheltering from the bombs in Belsize Park tube station. She was very sorry to miss the anti-Iraq War march in February 2003 but said she was there in spirit. Her younger sister was considered the 'normal' child whereas she was considered the weak one. However, her sister had died at 81 and Ilse reached 100 in relatively good health. Jennnifer R. Jeynes Ethical Record, November 2008 15 PROGRAMME OF EVENTS AT THE ETHICAL SOCIETY The Library, Conway Hall. 25 Red Lion Square, Holborn, WC1R 4RL. Tel: 020 7242 8037/8034 Registered Charity No. 251396 Website: www.ethicalsoc.org.uk email: [email protected] NOVEMBER 2008 Sunday 16 1100 THE LAST DAY OF THE WAR (11.11.1918) video 1430 SPES AGM (Members only). Registration 1400h Monday 17 JAZZ APPRECIATION CLUB 1900 Benny Goodman cds 1 Tues 18 (postponed from 23 October) 1900 INDIA: The Dark Side of Superstition and Ignorance Sanal Edamaruku Wednesday 19 1900 DEFENDING ENLIGHTENMENT VALUES - Rationalism, Universalism, Self-criticism 3rd seminar by Ibn Warraq, author of Defending the West - A Critique of E.Said's Orientalisin (2007) Friday 21 ART SOIREE 1930 CHANCE AND COLOUR: Rules and Rulers Illustrated talk by Chris Gough, artist and teacher of visual thinking Wine Sunday 23 1100 WHY RATIONALISM ISN'T WHAT YOU THINK IT IS Bob Churchill, BHA 1500 ETHICAL DISCUSSION Sunday 30 1100 AUGUSTE COMTE (1798-1857): HIS CONTINUING RELEVANCE Tom Rubens DECEMBER Sunday 7 1100 THE BIGGEST MISTAKES IN MODERN CELL BIOLOGY Dr Harold Hillman 1500 To Mark Human Rights Day 10 December THE HUMAN RIGHTS ACT 60 YEARS ON. Mazin Zeki Wednesday 10 Joint meeting with the Socialist History Society 1900 JOHN MILTON's RADICALISM Prof Thomas Corns on the Revolutionary, Regicide, Republican Thursday 11 BOOK CLUB 1900 Anarchy fnAction by Colin Ward. Facilitated by Volodya SUNDAY 14 1430 YULETIDE PARTY. £2.50 Quiz. Esther Williams (piano). All welcome.

SPES's CONWAY HALL SUNDAY CONCERTS 6.30pm Tickets £17 16 Nov Keyboard Trust Ensemble: Mozart/Clementi Symphonies Nos. 40 & 41 23 Nov Ibuki Trio: Beethoven, Ravel, Tchaikovsky 30 Nov Carducci Quartet: Haydn, Janacek, Beethoven 7 Dec London Mozart Trio: Rachmaninov, Shostakovich, Schubert ww.conwayhallsundayconcerts.org.uk .

Published by the South Place Ethical Society. Conway Hall, 25 Red LionSquare, WC I R 4RL Printed by 1E. Bryson (Printer) Ltd. 156-162 High Road, London N2 9AS ISSN 0014 - 1690