If US banks are coining it in now, what's going to happen when the economy really recovers?

The first results come in.

If you look hard enough, you can just about find evidence of the US economy moving in the right direction.

Figures released yesterday highlighted that US banks re-possessed 17 per cent fewer homes in 2012 than in 2011. Meantime, a report from the US Commerce Department showed that housing stats rose by 12.1 per cent in December year-on-year to hit their highest monthly level since June 2008.

The slow rebound in US house prices provides further evidence of possible green shoots of recovery. The huge tide of negative equity has been a disaster for the US economy. Almost 11m US homes, or about 22 per cent of all residential properties with a mortgage were in negative equity at the end of the third quarter. The recent slight rise in US house prices meant that around 100,000 mortgage customers slipped back into positive equity in the quarter running up to Christmas with scope for a further 1.8m US homeowners estimated to have some equity in their homes during 2012.

From the evidence of the first banks to post annual results as the reporting season kicked off this week, US banks are already coining it in.

The largest US bank, JPMorgan Chase reported its highest ever annual profit after tax, $21.3bn, up 12 per cent for the year.

The country’s fourth-largest lender, Wells Fargo also hit a record high net profit: $18.9bn, up 19 per cent from 2011.

Hot on its heels, the fourth-largest lender, US Bank, posted a record full year profit of $5.6bn, up 16 per cent year-on-year.

Stand by, perhaps in a year or two, for commentators and politicians to express moral indignation at excessive bank profits if and when the US economy really does start to recover.

US unemployment remains stubbornly high at almost 8 per cent, but just a 1 per cent fall will feed through into a further sharp rise in US bank profits. At JPMorgan, 2012 earnings would have been even higher but for a $6bn trading loss at the bank last year.

Chase "punished" CEO Jamie Dimon by slashing his 2012 pay package to a mere $11.5m from $23.1m the previous year. He should however be able to jog along on his reduced pay package. At the last count, he owned bank shares worth $263m.

Sky's the limit. Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Show Hide image

The boy who lies: what the Daily Prophet can teach us about fake news

The students at Hogwarts are living in an echo chamber of secrets.

They can make objects levitate, conjure up spirit animals and harness the power of invisibility. But perhaps the strangest thing about the witches and wizards of the Harry Potter universe is that despite all their magic, they still rely on old-fashioned print media for their news.

Although the Daily Prophet bills itself as “the wizarding world’s beguiling broadsheet of choice”, the reality is that its readers have no choice at all. Wizards don’t have their own television network – the risk of muggles accidentally tuning in was deemed too high – they don’t generally use the internet, and rival publications are virtually non-existent. (No, Witch Weekly doesn’t count.)

JK Rowling clearly sought to satirise the press in her portrayal of the Prophet, particularly through its poisonous celebrity journalist Rita Skeeter and her tenuous relationship with the truth. And in doing so, the author highlighted a phenomenon that has since become embedded within the muggle political landscape – fake news, and how quickly it can spread.

In the run-up to the recent French presidential election, an Oxford University study found that up to a quarter of related political stories shared on Twitter were fake – or at least passing off “ideologically extreme” opinion as fact.

While they don’t have social media at Hogwarts – probably for the better, despite the countless Instagram opportunities that would come with living in an enchanted castle – made-up stories travel fast by word of mouth (or owl.) The students are so insulated from the outside world, the house system often immersing them in an echo chamber of their peers, they frequently have no way to fact-check rumours and form rational opinions about current events.

When the Ministry of Magic flatly refuses to believe that Voldemort has returned – and uses the Prophet to smear Harry and Dumbledore – most students and their parents have no choice but to believe it. “ALL IS WELL”, the Prophet’s front page proclaims, asking pointedly whether Harry is now “The boy who lies?”

While Harry eventually gets his side of the story published, it’s in The Quibbler – a somewhat niche magazine that’s not exactly light on conspiracy theories – and written by Skeeter. He is telling the truth – but how is anyone to really know, given both the questionable magazine and Skeeter’s track record?

After Voldemort’s followers take over the Ministry, the Prophet stops reporting deaths the Death Eaters are responsible for and starts printing more fake stories – including a claim that muggle-born wizards steal their magical powers from pure-bloods.

In response, Harry and his allies turn to their other meagre sources such as The Quibbler and Potterwatch, an underground pirate radio show that requires a password to listen – useful to some, but not exactly open and accessible journalism.

Rowling is clear that Harry’s celebrity makes it hard for him to fit in at Hogwarts, with fellow students often resenting his special status. Do so many believe the Prophet’s smear campaign because they were unconsciously (or actively) looking forward to his downfall?

We are certainly more likely to believe fake news when it confirms our personal biases, regardless of how intelligently or critically we think we look at the world. Could this explain why, at the start of last week, thousands of social media users gleefully retweeted a Daily Mail front page calling on Theresa May to step down that was blatantly a poorly-edited fake?

The non-stop Hogwarts rumour mill illustrates the damage that a dearth of reliable sources of information can cause to public debate. But at the other end of the scale, the saturation of news on the muggle internet means it can also be hugely challenging to separate fact from fiction.

No one is totally free from bias – even those people or sources whose opinions we share. In this world of alternative facts, it is crucial to remember that all stories are presented in a certain way for a reason – whether that’s to advance a political argument, reaffirm and promote the writer’s own worldview, or stop an inconvenient teenage wizard from interfering with the Ministry of Magic’s plans.

Now read the other articles included in the New Statesman’s Harry Potter Week.

0800 7318496