What is an informed investor?

Recently people have been popping up on the TV screens suggesting that those who have lost money (others have gone off with it!) were probably "informed investors", so they should have known. Alistair Darling is one such. He explained to the general public and the House of Commons (those that may not know everything) that the local councils were "informed". Robert Peston, of the BBC, notes this:-

Concerns have been raised by MPs about local councils in England which may have invested in Iceland. Mr Darling replies to the point about local authorities, saying they are a "more informed investor" than ordinary customers of the Icelandic banks but the situation is "evolving".

When a BBC reporter asked about the Kenty County Council's £50 million, the councillor in charge said Moody's had said the Icelandic banks were top notch, so they went ahead with investing. On Moody's site they say:-

Moody's Investors Service is among the world’s most respected and widely utilized sources for credit ratings, research and risk analysis. Moody’s commitment and expertise contribute to stable, transparent and integrated financial markets, protecting the integrity of credit.

This sounds all rather hollow as nobody knows (not even Moodys it seems) what is happening and therefore I would suggest that there are no "informed investors" in the current climate. What is absolutely certain is that there have been a number of bankers who have bought dubious loan accounts at best and at worst been involved in calculated frauds on a massive scale.

We are being told constantly that "the banks don't trust each other". If that is the case, then that is the only valid information that an investor can be informed of. I would like to see two things happen. First, a complete trawl of each and every bank to find out how many and what value these toxic loans are. Second, that the present management either agrees to a set of terms or they make way for those who will clean up the businesses. How on earth will the taxpayers of the United States, United Kingdom and other European countries feel that their £20,000 a head offering will be of any use?

It beggars belief that the present situation can continue WITHOUT the necessary clean-up operation. When the toxins have been removed, we will all be "informed investors"!

Posted in: bail-out,banks,corporate sleaze,credit crunch