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Will Obama pay Goodwin's pension?

Robert Peston | 10:00 UK time, Tuesday, 24 March 2009

Only yesterday, or the day before, financial globalisation was supposedly about making sure that capital was transferred to those parts of the world that could invest it most productively.

That so much of the exporting nations' surpluses in effect ended up going to ex-cons and former bankrupts in middle America, in the form of subprime loans, rather exploded the idea that only good could come from the unfettered flow of capital across borders, as channelled by brilliant investment bankers.

Today's iteration of financial globalisation is - in part - about clearing up the mess left behind by the bankers' extended party.

Sir Fred GoodwinHere is a topical example of the detritus that still needs to be cleared up: the bill for Sir Fred Goodwin's £703,000-per-year pension.

Now the government is mad keen for Royal Bank to retrieve some of the cost of this pension through legal action - and, as I disclosed the other day, Royal Bank is taking advice from leading counsel on whether resorting to law could recoup a bob or three for the bank and its owners.

Let's just say there is some kind of case to answer - although that's thought unlikely by Royal Bank's lawyers, Linklaters.

If there were any potential liability and if it were to rest with Royal Bank's former directors or with Sir Fred himself, they would probably be protected under the specialist insurance policy taken out by all directors of big companies, what's known as "directors and officers insurance" (D&O).

This is insurance that protects directors against the financial consequences of their boo-boos.

Which insurance company was a global market leader in D&O cover?

You guessed it: AIG, the crumbling insurance giant, recipient of almost $173bn of financial support from US taxpayers, and 80% owned by the US state.

In this instance, Royal Bank's D&O cover came from a panel of insurers, of which AIG was one: AIG is liable for something less than 10% of any claims made against RBS's former directors.

President ObamaThere is a wonderful resonance bout even the possibility that AIG could find itself picking up some of the bill for Sir Fred's pension - because in a way it would mean that US taxpayers, as represented by President Obama, would be helping to finance the most controversial pension in British corporate history.

It's another illustration - not the most significant, by any means, but one of the more striking - of how financial globalisation took a wrong turn.

In theory, financial innovation coupled with borderless flows of capital was supposed to distribute risk to those with the knowledge to understand that risk and the capital to absorb it.

Somehow I don't think anyone told the US president, or the taxpayers of America, that they might one day be underwriting Sir Fred's £16.9m pension pot.

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Comments

Page 1 of 3

  • Comment number 1.

    So technically if AIG et al had "gone to the wall" all these directors would have had no valid insurance?

    Are we now unravelling some of the secrecy within the banking industry. Lord Myners allowed the pension because it was custom and practice but we have to save the insurance companies to save the individuals who caused the mess?

    You couldn't make it up...

    I do feel that going on and on and on about Sir Fred's pension is the red herring...if it is water tight, the only one left holding the can is Myners and by implication Brown and Darling who delegated the authority to him.

    The Elephant in the room now has to be the governments handling of the whole debacle.

  • Comment number 2.

    Funny how you bring this old chestnut out in the same hour the BOE announces inflation has actually gone up (CPI). You wouldn't be trying to deflect the public from the worries that we may see inflation climb as growth continues to fall. Inflation appears far more linked to oil at present and this is going up.
    Please ignore the Goodwin story. It's happening everywhere. He is not alone.
    Tell me if inflation has surprised on the upside for the last 3-4 months yet the BOE still talks about it falling 'next month'. Only if oil collapses.

  • Comment number 3.

    However disgusting the pension issue may be it`s only a drop in the bucket compared to the liabilities that Gordon Brown has put on the shoulders of the taxpayers (and future taxpayers) of this country.

    http://creditcrunchedoutinuk.blogspot.com

  • Comment number 4.

    "Somehow I don't think anyone told the US president, or the taxpayers of America, that they might one day be underwriting Sir Fred's £16.9m pension pot."

    But then again, no one ever told me that I would either. All financial institutions are so incestuously linked to the point that everyone suffers because of the promiscuous behaviour of another. That is to say, we are all screwed directly or indirectly and suffer the consequences. Do I hear a large 'clap' all round?

  • Comment number 5.

    " ...financial globalisation was supposedly about making sure that capital was transferred to those parts of the world that could invest it most productively"

    Financial globalisation has never done that and never will. Money will go to where those handling it can make the biggest return for themselves. This is NOT the same thing as 'most productively'!

    Financial globalisation is just like Trade globalisation - fine in theory, but disastrous in practice.

  • Comment number 6.

    Gosh.. So let me get this straight - IF there is a case to answer, and IF that results in liability on part of the former directors, AIG MAY or MAY NOT be liable for "something less than 10%", a small proportion of which MAY or MAY NOT need to draw on support by the US taxpayer.. please..

    "Somehow I don't think anyone told the US president, or the taxpayers of America, that they might one day be underwriting Sir Fred's £16.9m pension pot."

    I doubt if anyone felt it was worth mentioning..

    Why don't you focus on something important, like the Chinese recently floating the idea of abandoning the US Dollar as a reserve currency?

    http://news.bbc.co.uk/2/hi/business/7960620.stm

  • Comment number 7.

    Not another blog about Goodwin's pension. Who put you up to this one? Time to change the record....

  • Comment number 8.

    This blog is quickly becoming utterly pointless; if it were moderated quickly then we could overlook the fact that Peston's pick of the day is little more than lightweight gossip, as it is interesting to chat with the other posters

    but the combination of Goodwin gossip and slow moderation is soon going to cause me to haul anchor and move to a new hunting ground

    taking today as a case in point, there are dozens of huge financial and business stories in the news this morning, starting with the Chinese comments about moving away from US$ as global reserve currency

    but instead you go back to the Goodwin story again

    Goodwin good grief!

    Robert, the Harry Hill fan, is not only in Red Top tabloid territory but quickly approaching a page-3 style

    I suppose that Stephanie F (TALF) and Paul Mason (E Europe) are covering the bigger stories better but surely Robert must have something worthwhile to say; or is he not the Business Editor any more?

    PS: I've finally decided that Angela Merckel is right!

  • Comment number 9.

    Clearly, the only real gainers from such action would be the lawyers. This further Merry Go Round simply re-inforces the need for all the institutions involved to come clean about their assets and liabilities, crystallise them and allow us all to move on. Perhaps the G20 could agree on a global settlement day for achiving this? The poor old taxpayers could then recapitalise any critically wounded instiutions worth saving, the remaining carrion could be devoured by the stronger institutions.

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    #2 is pot on, also

    RPI used to calculate pensions, welfare etc currently 0% so no increases for the poor!

    CPI used in economic policy, rose from 3% to 3.2%, so objects are getting more expensive (probably due to rising oil price (relatively as our currency devalues))


    In Short,

    Labour’s policy of eradicating poverty is in total disarray! THEY HAVE FAILED MISERABLY!

  • Comment number 12.

    It's a conspiracy - that's why some institutions were deemed 'too big to fail' and others were not.

    When you have a spiders web of deceit, there is no easy way to unravel it neatly and evenly.
    This is corruption to the core of our society - for too long have the people stood by and done nothing.

    It's time for a REAL change.

  • Comment number 13.

    Those aristocrats who were getting feudal rent because such was the law got beheaded in France in 1789. And rightly so. So should Mr Goodwin. Well, not exactly beheaded, but--bepensioned.

  • Comment number 14.

    Only good could flow......

    The major reprimand and shame of the gloablised aka western aka Anglo Saxon two decades is the complete car crash that Africa became...

    In the sixties many African nations had better prospects and standards of living than they have today...Apartheid one blot on the continent then took too many years to remove...but despite the hand ringing, the smiles at the Live aid G8 meeting at Gleneagles and all the rest, many parts of Africa have descended into a medieval chaos often derived from the globalisation effects.

    We all may be experiencing a terrible hangover after 'the party' that so benefited Messr Goodwin, Prince, Thain, et al...Africa was the innocent family crossing the road that got mown down by the drunks who didn't even stop..

    Robert has written that Africa may unfairly suffer because of the crunch/recession/depression..this would simply be the now hungover drunks rolling their car backwards and forwards over the prone bodies in the road were it to happen...

    Possibly the slump may turn out to be a good thing for Africa...but that's probably an extremely naive hope..

  • Comment number 15.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 16.

    Robert
    The Americans should pick up more than just his pension. A lot of the losses that have been picked up by you and me are denominated in dollars and incurred in the RBS American subsidiaries.
    Why are we the British taxpayers paying for American sub prime mortgages other than Gordon Brown was stupid enough to accept it?

  • Comment number 17.

    We have a few dozen men trying to solve our problems, as if they were trying to fix a car engine; they don't know what's wrong they just keep saying try this or try that. Nothing they do seems to do anything to alleviate the problem.

    We also have a few sneaky people who keep whispering different things in different ears. These sneaks are really only offering help so they can gain for themselves.

    I don't think any of these people are trustworthy, nor are they capable of fixing the mess they got us into.

  • Comment number 18.



    Why does the BBC focus on CPI as a measure of inflation until such time as the RPI is in negative territory when it then switches to RPI and talks about deflation?
    For the last 4 years the RPI has been higher than any time in the last 10 years and was fiscally ignored. Now it makes headlines.

    Who's pulling the strings?

  • Comment number 19.

    Robert,

    You're a star!

    Amongst the realities of us being a hair's breadth from deflation and all the potential consequences of that, I needed a laugh. The irony of your article gave me one.

    However, to describe the situation as farce would be the understatement of the century. Brian Rix on amphetimines couldn't have come up with the things we now hear on a day-to-day basis.

    (But perhaps I should have cried - I am increasingly uncertain as to just which to do).

    But I do have serious suspicions about the value of continuing to support globalised financial industries. National Governments, nor collections of them acting in consensus, just aren't able to act quickly enough to prevent problems.

    In my view, the pheonix that could rise from the ashes of the economire might just be national level / de-globalised banks and financial industries. (Yes, and perhaps nationalised too).

    So you want to try your luck in the US market and system? Then set up a self-sufficient company over there, get your capital over there and get registered and regulated over there. I.e. when things go wrong in the US, it doesn't come back onto your UK company, its capital, its shareholders or customers. (Oh, and of course, vice versa).

  • Comment number 20.

    As a major reason for the failure of RBS was their purchase of ABN Amro and its portfolio of US sub-prime mortgages there would be a certain irony in the American taxpayer covering Fred the Shred's salary. What goes around comes around - perhaps the ultimate lesson of globalisation.

  • Comment number 21.

    So where is this deflation that we have had to reduce interest rates to near zero and start printing money to avoid, or has that worked already.

    Well done all concerned perhaps we can start seeing interest rates going back up, which will push the pound up and food prices down, gently does it, we do not want to really have deflation.

  • Comment number 22.

    It wd be useful to know why the opinion of counsel is there is likely no case to answer. What were the terms of the policy? Insurance policies generally will not shield employees or managers from gross negligence or willful misconduct.

    At the very least, this appalling pirate should not be referred to as Sir - call him Freddie the freeloader, fast freddie, bungling banker, whatever. And help the public to understand why he is getting away with it.

  • Comment number 23.

    AIG, Sir Fred, all keeps the heat off the real culprit Brown !

    Has anyone got the brains to stop the useless spread shot and take careful aim and at least hit some usefull targets.

    Unfortunatly the Conservative leader seems to be short on ideas or principles and I fear the long hard slog will get longer and harder !

    Had Enough

  • Comment number 24.

    Sounds like RBS & AIG are in one big gang band.

  • Comment number 25.

    Robert,

    If you're not allowed to talk about the issues you want to talk about, leave. Leave now before they have the chance to completely ruin your fan base.

    The others are right this story is old, and it wasn't important in the first place, other than to highlight the fact that we the tax payer are being made to pay for the mistakes of the few.

    The death of the dollar as the global currency?

    The further declining power of the Pound and the UK in global economics?

    Inflation?

    Alt-A Option-ARM?

    To name just a few more interesting non-covered stories.

    'The needs of the many, out-weigh the needs of the one, or the few.'.

  • Comment number 26.

    #8

    Dear Mr Pirate

    Don't sling your hook for oceans yonder - yours is one of the names I scroll down to find on this blog.

    For what it's worth, I think things like Sir Fred's pension should not be quietly forgotten - I hope this blog (and others) return to it again and again until a more equitable solution is found. But, yes, at the moment the pension does seem to be coming up too frequently here even for my developed tastes.

    While I'm on the subject of equitable solutions, if enough of us keep prattling on about them - and not letting it drop - there may just be a developing momentum in that direction. See, for example Clive Crook (unfortunate name, post Madeoff), writing in the FT, talking about "fair and efficient sharing of the losses" and advocating an expansion (or here in the UK adoption) of the "resolution procedures of the Federal Deposit Insurance Corporation".
    (http://www.ft.com/cms/s/0/828b4190-170b-11de-9a72-0000779fd2ac.html%29

    Noddingly yrs

  • Comment number 27.

    I have the suspicion many suspect dear Mr Peston is sometimes 'used' for HMG purposes. Gordon and co will not stop making the bankers sole perpetrators of the GLOBAL crises we are in. To that end Gordon and co will want the bankers robbery in the limelight as long as possible. Really I can't suffer hearing about it any more. I and many I know only want to hear the ill gains have been retrieved and suitable incarceration deployed. Perhaps thjis is meant to distract from the latest HMG minister with his hands in the money pot.

  • Comment number 28.

    How is it that bankers who made mistakes are expected to pay for it with their pension, but the chancellor, treasury, BOE and FSE fat are being allowed to keep theirs with not a whisper of complaint from anyone.

    GB is at least as guitly as sir fred and is keeping his pension, and Cameron admitted he nade mistakes but hasn't offered to give up his pension either.

    The MP's responsible for dismantling the uk economy are still sticking theior noses in the trough claiming £60,000 of expenses for their parent's houses and asking for £40,000 pay rises, while the country falls apart.

    Something is wrong somewhere. We know that politicians are just as guilty as the other bankers who have been running the economy but they are getting away with hiding behind Sir Fred and his friends!

  • Comment number 29.

    #21 joeplumber

    Deflation - which seems to be where we are heading for - is prone to put interest rates up.

    The trend of RPI downwards, due to effects such as housing costs going down (i.e. particularly mortgages repayments), is likely to have CPI following it over the next few months, if food prices and energy costs also go downwards.

    This clearly put huge pressures on companies to suppress wage rises or to request more output from workers for less reward, in order to sell their products at falling 'competitive prices'.

    This article about Japan's struggle with deflation gives a gloomy view perhaps, but it is worth a read.

    http://news.bbc.co.uk/1/hi/business/7955931.stm

  • Comment number 30.

    WHAT bad news is ZanuLabour burying today??? - Peston again deflecting attention by Sir Fred and his pension - so what?? Crasha nd Al had Myners dealing with Fred and look how he screwed all of them - hilarious.

    Who cares about anything in UK - apaprt from sleazy ZanuLabour claiming all they can - it is within the rules u know!!!!! - we r a BANANA REPUBLIC - what av mess.

  • Comment number 31.

    I merely have one small question....

    If Freddie boy was knighted in 2004 for his 'services to banking' why has he not been stripped of this knighthood given that, with hindsight, he has provided no service at all?

  • Comment number 32.

    Would not the Loss Adjusters of such insurances have a thing or three to say, Mr P ?

    Kindly, Sir, I would suggest slightly less emphasis on RBS; although it is still an important story there are others.

    Just thought I'd let you know too, after a several days' visit, that your blog is followed in Germany....

  • Comment number 33.

    Why does everyone assume that capitalism "intends" anything? Capital has no motives. Capitalism is, as we can see, prone to having very bad phases. However, it is vastly better than the alternatives. The bad thing about Goodwin's pension is that it was probably legally acquired and can't be stolen back by government, which is unjust, but fact. Forget about it and focus on the real stories, such as how the gross economic mismanagement, ongoing as it is, has dumped the pound creating a toxic mix of home grown asset deflation and imported inflation.

  • Comment number 34.

    Robert

    As Mr Curzon might say....... YAWN

    I might say ..... TABLOID

    Please, in future try to stick to some facts and data.

    AIG are not underwriting this pension. The american taxpayer is not underwriting this pension. President Obama is not underwriting this pension.

    Its a final salary scheme (two actually, one approved, one unapproved). It isn't a pot. The big numbers relate to transfer value but since its in payment, it won't be transferred.

    One of your correspondents pointed out in a recent blog that the 2007 accounts for RBS detailed the pension entitlement up to the end of 2007. Further entitlement accrued up to employment ceasing. This entitlement is in funded schemes. I'd bet that before the bailout, entitlement was about 620,000 per annum.

    Even you say that AIG only cover 10% of the D&O insurance so that's 10% of any claims. Why don't you mention who the other 90% is carried by.

    None of them would just pay out. No-one covered by the insurance will admit any liability, they wouldn't be covered by the insurance. There'd be a lawsuit. I'd bet my disappeared pension pot that the insurers would not have to pay out.

    Insurance has been globalised for years. Why do you think Lloyds of London gets hit when there are hurricanes in Florida or oil spills in Alaska.

    RBS' difficulties are somewhat more local than you make out. They don't feature on the list of banks that were counterparties to AIG CDSs that got payouts from AIG to date. The 2008 losses were based on credit market writedowns and a writedown of goodwill associated with the purchase of part of ABN AMBRO. Perhaps you might like to investigate who the lender was to the many businesses that have gone into liquidation over the last year. You might find it illuminating. Perhaps you might investigate the credit market writedowns if you have to pursue this line of work.

    And finally, if I was american, I'd be insulted by your characterisation of those that had sub-prime mortgages as bankrupts and ex-cons. To be frank I'm insulted on behalf of the millions of hardworking individuals who were prepared to pay higher interest rates for mortgages to own their homes and who are still paying their way.

    Please remember that the internet can be accessed by anyone with a PC wherever they may be.

  • Comment number 35.

    According to Dr. Weiss - Six months ago, when Lehman Brothers and AIG fell, the U.S. Congress rushed to pass the TARP, the greatest bank bailout legislation of all time. But as it turned out, that wasn't sufficient either. in addition to the original goal of TARP, the U.S. government has loaned, invested, or committed $400 billion to nationalize the world's two largest mortgage companies ... $42 billion for the Big Three auto manufacturers ... $29 billion for Bear Stearns, $185 billion for AIG, and $350 billion for Citigroup ... $300 billion for the Federal Housing Administration Rescue Bill ... $87 billion to pay back JPMorgan Chase for bad Lehman Brothers' trades ... $200 billion in loans to banks under the Federal Reserve's Term Auction Facility (TAF) ... $50 billion to support short-term corporate IOUs held by money market mutual funds ... $500 billion to rescue various credit markets ... $620 billion in currency swaps for industrial nations ... $120 billion in swaps for emerging markets ... trillions to cover the FDIC's new, expanded bank deposit insurance, plus trillions more for other sweeping guarantees.

    And it STILL wasn't enough.

    If it had been enough, the Fed would not have felt compelled this week to announce its plan to buy $300 billion in long-term Treasury bonds, an additional $750 billion in agency mortgage backed securities, plus $100 billion more in Fannie Mae and Freddie Mac paper.

    Total tally of government funds committed to date: Closing in on $13 trillion, or $1.15 trillion more than the tally just hours ago, when the body of this white paper was printed.

    And yet, even that astronomical sum is still not enough!

    Why not? Because of a series of very powerful reasons:

    First, most of the money is being poured into a virtually bottomless pit. Even while Uncle Sam spends or lends hundreds of billions, the wealth destruction taking place at the household level in America is occurring in the trillions — $12.9 trillion vaporized in real estate, stocks, and other assets since the onset of the crisis, according to the Fed's latest Flow of Funds.

    Second, most of the money from the government is still a promise, and even much of the disbursed funds have yet to reach their destination. Meanwhile, all of the wealth lost has already hit home — literally, in the household.

    Third, the government has been, and is, greatly underestimating the magnitude of this debt crisis.

    * AIG is big. But it, too, is not alone. Yes, in a February 26 memorandum, AIG made the case that its $2 trillion in credit default swaps (CDS) would have been the big event that could have caused a global collapse. And indeed, its counterparties alone have $36 trillion in assets. But AIG's CDS portfolio is just one of many: Citibank's portfolio has $2.9 trillion, almost a trillion more than AIG's at its peak. JPMorgan Chase has $9.2 trillion, or almost five times more than AIG. And globally, the Bank of International Settlements reports a total of $57.3 trillion in credit default swaps, more than 28 times larger than AIG's CDS portfolio.

    Clearly, the money available to the U.S. government is too small for a crisis of these dimensions.

    Fred "the shred" and others may soon have nothing to get in terms of a pension or otherwise... All these guys will all end up with one similar fate - old, broke and miserable having done nothing for their fellow man but only amplify their greedy, selfish, ego-maniacal ways...

    Good luck to the lot of 'em...

  • Comment number 36.

    This is not a story. What exactly is being buried today?

    Of course if by some chance Goodwin does not get his dosh, by whatever means and as his reputation has been trashed he will not get another banking job, in order to make ends meet he always write a "kiss and tell" expose of behind the scenes in Downing Steet! He was Brown's main banking adviser and was a frequent guest at no. 11, so he must have plenty of ammunition to destroy Brown if he so wished.

  • Comment number 37.

    Enough already about Goodwin's pension.

    I know nothing to do with this blog but just imagine if this govt got hold of Google's Street View! This has to be stopped. Please give Mr Brown a copy of 1984 to read to see the country he is creating(having said that it is probably illegal now as too high brow!).

    PS Mr Brown is not accepting any more e-mails through the Downing St website - how predictable

  • Comment number 38.

  • Comment number 39.

    Apropos of nothing, but regarding Bank of England / banks - why has the sort code for payments to the HMRC changed from Bank of England to Citibank. Are we paying the banks off directly now???

  • Comment number 40.

    This is peanuts compared to the big picture.

  • Comment number 41.

    Summer of rage starts 28th of March 11am Victoria Embankment.

  • Comment number 42.

    Dollar weakens from 1.38 to 1.46 in two weeks
    Oil increases from 42 dollars per barrel to 52 dollars per barrel in same period

    This has real impact on business and the potential for recovery around the world

    It will have real impact on CPI in coming months



  • Comment number 43.

    Labour to romp home at next election...............
























    Thought that would cheer you up :)

  • Comment number 44.

    Clearly Mr Peston has nothing new to write and is spinning stories fit for tabloids. Money goes round and financial institutions are linked in some way or another and to insinuate this kind of connection is clearly work of a tabloid hack. It's like saying people in Britain are losing jobs due to someone in US defaulting on their mortgage. Utterly pointless.

  • Comment number 45.

    Robert,

    You are fully aware that the Fred RBS story is a minnow story and a complete red herring

    Whay are you not reporting on the Post Office possibly beocming our only trusted New National Bank? Or the US Dollar no longer being a Reserve Currency? Or when Brown is finally gong to be called account or call a General Election? Lets have some real stories. What about the 11 Million or so silent Savers and pensioners in this Country who are having their lives destoyed?

  • Comment number 46.

    Due to overwhelming popular demand (#26 noddinghomer) I will carry on with Mr Peston for a while longer but he's on a yellow card.......

    It's hard to imagine how he could become any more tabloid than he is in these Goodwin posts unless he wants to start telling us about the economic implications of Jade Goody's death.

    Actually Goody is probably more relevant than Goodwin or Geithner; she's helped to sell some newspapers (they need sales) and encouraged women to get check-ups so good on 'er.

  • Comment number 47.

    Dear Mr Pirate_SP500

    We are all marooned in the Doldrums with you. We need a change of tack.

    I assume the outboard motor has failed or that the recent 25% increase in the price of oil makes it too expensive to fill the jerrycans and that you too are dependent on sail.

    I wonder whether a galley powered by culprits might be an alternative craft. You could have a select list. The floggings could continue until morale improved.

    I hope your broadside finds its mark.

    Yours, awaiting a fair wind

    mrsbloggs13c2

  • Comment number 48.

    Forget about all this, this is tittle tattle. Goodwin's pension is a atom compared to an elephant in what is happening in the world now.

    The really important news is that the CPI is rising, which means that the overzealous interest rate cutting is already having an inflationary effect.

    And, out of interest, how come the RPI is suddenly the "headline" figure when it has barely been mentioned since the CPI was the official figure? Horses for courses I guess: CPI was convenient in the boom when it masked the asset inflation, RPI convenient now as it shows the BoE "medicine" is "working". What a farce.

    Prediction: Interest rates up again by Spring next year to salvage the pound and prevent rampant inflation from becoming embedded.

  • Comment number 49.

    #2 Well said

    Funny how you bring this old chestnut out in the same hour the BOE announces inflation has actually gone up (CPI). You wouldn't be trying to deflect the public from the worries that we may see inflation climb as growth continues to fall.

    Surprise, surprise it's the effect of the plummeting pound that has pushed up import costs. Companies hedged against this for the first few months but now the effect is coming through of a 30% fall in currency from $2 to $1.40.

    Brown always thinks he can get something for nothing. By ordering the "independent" BoE to cut rates to save house prices he has created price inflation.

    What about this independent BoE target on inflation of 2%? Let's just forget that now. It was a pledge like companies make in advertising but rarely honour.

  • Comment number 50.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 51.

    How timely

    off the Times website

    Lloyd's warns of rise in lawsuits against business

    http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5965424.ece

  • Comment number 52.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 53.

    Stories about AIG, RBS and other fat cat directors prospering while the banking and insurance systems lurch towards failure are a smoke screen.

    These are a diversionary tactic while behind the scenes negotiations go on to see if capitalism can be saved from itself.

    Most countries, including Russia and China, are now following a policy of a mixed economy with elements of socialism and elements of capitalsim.

    Let us hope the G20 are on the right track. It is about how the relatively stronger banks survive and how orderly the weakest ones are allowed to go under.

    The Bank of England and the mandarins at the Treasury could turn out to be heroes.

  • Comment number 54.

    So, all the big boys are bad boys. Banks, Insurers, Auditors, Ratings Agencies, Governments and their respective officers swimming in a sea of self inflicted economic instability borne of carelessness and arrogance.

    Previously successful and currently practical, productive people will pay the bill.

    So.....

    Let's hear it for the small guys........ If the Dunfermline Building Society can only manage a £26,000,000 loss in the current climate they look like the last standing Five Star Triple AAA rated financial institution on the planet still going in for eight digit numbers. Open an account today and watch their troubles fade away.....

  • Comment number 55.

    #25 Oh Rogan
    Your right the story I also want to read and talk about has to be Chinese suggestion of "The death of the dollar as the global currency?"

    While bobbing about with hubby fishing in sunny Torbay on Sunday, my thoughts on how to get out of the economic troubles we are all in came to the fore.
    The seven anchored bulk carriers with no cargo and no where to go were hard to ignore.
    So I though...as the global economic system has clearly failed,
    why not take the opportunity to start the game again with new global rules agreed by all countries who wish to participate.
    Write off all debts, use one new global currency in order to trade with one another.
    I though your stupid woman its too simple, now the Chinese seem to be saying the same I am feeling rather smug, well that is till fellow bloggers knock me off my perch.

    I agree with all... please Robert put Fred to Bed!

  • Comment number 56.

    Bert - go away this is really tedious stuff you are grasping at.

    if AIG had gone under the lights would have gone out - go speak to British Fuel etc and see who insures the power stations - do you think they would operate with no cover

    your grasp on this global mess is questionable at times!!

  • Comment number 57.

    In the meantime, Geithner is trying to promise future reward to the hedge funds to help "solve" a problem they were instrumental in creating.

    (Thanks jd6969preston by the way: I found this via one of your links.)

    http://creditcrunchedoutinuk.blogspot.com/2009/03/markets-rigged.html

    Crime not only pays, but is rewarded by the state!

    I am getting so angry, I think I'm turning into a Dalek: Exterminate!!

  • Comment number 58.

    My understanding is that D&O insurance covers Directors if they behave incompetently but not if they behave crookedly. It seems unlikely that Fred the Shred behaved in an illegal manner so the insurance would cover his case. The issue is that Fred the Shred is not solely to blame - other directors and institutional investors supported ABN Amro which is the immediate cause of RBS' fall from grace.

    The CPI/RPI debate is interesting. Inflation either remains a problem or doesn't depending on which index is used. Monetary policy either has to increase interest rates to reduce inflation or decrease interest rates to remove the threat of deflation, which is what has happened. A consequence of the reduction of interest rates is to reduce the value of the currency, leading to the price of oil increasing, leading to price increases. Bank and government policy is currently based on deflation and recession being a more important issue in the short term than inflation, but the CPI figures show inflation hasn't gone away.

    RPI may now be around zero, but in September which is the month used to calculate state pension and benefit increases, it was at 5% so those dependent on state pensions and benefits will do (relatively) well.

    Globalisation is in general a good thing, but it implies some form of global regulation, or at the very least a global view of how business should be regarded.

    Fred the Shred's pension is tabloid tittle-tattle and I think we've all had enough of it in this forum. It might make us all feel a bit happy if his head was on a stick on London Wall, but the real problems caused by the credit crucnh, and the effect on the employment, inflation, income, interest rates and the rest of the real economy are much more important.

  • Comment number 59.

    Robert,

    The moment I saw Fred's Photofit on this blog, I decided to give the prose a miss.

    This story is old hat. Change the record. Sing a new song.

    This blog will be lucky to make it to a 100 even with the odd gift of a bye like this message.

    Wake me up when you decide to do a proper business story.

  • Comment number 60.

    Robert,

    At the end of the day - it matters not who is going to pay Fred's pension - but whether they can AFFORD it.

    What people seem to miss is that this endless bailing out of institutions and throwing money left right and centre, and of course quantitive easing - the effects willnot be felt today, or even tommorrow, but rather in a few years down the line.

    Does anyone actually believe that the Government will be able to control the hyperinflation any better than they are able to control deflation?

    The monetary policy of this ignoranuses has laid the fuel, all we're waiting for is for the blue touch paper to be lit and - WHOOSH.

    How are the Government going to reel in spending once it's committed billions to new projects, handed wads of cash to bankers and bought all the bad apples in the basket?

    Deflation is neccesary to set the balance right for the past excesses - so why is it being touted as the devil incarnate?

    Soon the market will work out that the consequences of throwing money around will devalue it's worth. The dollar and sterling are going to be worthless - the first indication being that China (and other countries) have suggested moving away from the Dollar as the benchmark for the world.

  • Comment number 61.

    I think most people have missed the point Robert is making here.

    He is demonstrating how the network of financial friends are all interlinked and interdependent. So globalisation has failed to bring about the much promoted 'spread' we were sold on. There are many other incompetents. Goodwin is a mere example.

    No diversification. One industry, the financial industry is bringing us down. Potatoes, anyone?

    No spread of risk. Too few insurers insuring too many incompetents!

    Robert do you think there is any good business news out there? What about the new industries we need - renewables etc. Any signs of a change in wind?

    #8 somali_pirate_SP500

    Well said. I suspect there are two issues here. The bog software is badly designed yet still implemented. And a below optimal number of mods who have been struggling for months have been left to cope with rubbish software. Bet the designers and developers are insisting this is the way it should be and it is everyone else who is the problem. Give it two weeks, the developers will then start whinging there is nothing they can do about it.

  • Comment number 62.

    And why am I still seeing this -

    Where's my comment?All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it.


    sheer incompetence on the part of the development team, on a par with bankers!
  • Comment number 63.

    RPI at 0% for the second month in a row
    CPI up to 3.2% from 3.0%

    Deflation is not the monster that Brown and the BofE painted it to be when the decided to QE by printing money.

    If they dont stop printing money NOW we are in for hyperinflation.

    Mortage approvals up for the third month in a row, Ok they are at a low level but the housing market has hit the bottom. Despite those who would like it to go further down, the supply demand model has it nailed on that prices are going to start to rise, especially as property is the one place to be in an inflationary period if you dont want to be in shares.

    Interest rates will have to remain low due to the printed money and inflation. This ensures the pound remains weak against the dollar this ensures Oil will continue to rise in price which will ensure CPI inflation due to transport cost, and were back to the start of interest rates remaining low.

    The elephant in the room is Browns lack of control over the economy. He has ridden the waves until one crashed over the top filling the hull with water, now he is bailing for all he is worth but it all for nothing, as Mr Andrews puts it in the Titanic movie "she will founder"

  • Comment number 64.

    The money go round is still alive and kicking then.

    One gains something at somebody else's expense. So who insured Lehman Brothers then? And how much were they in for?

    These are the ongoing problems that make this slump so difficult to call.

    Until everyone comes clean about the extent of their own potential hazards this slump could carry on indefinitely.

    You can't possibly compare this to the thirties. No complicated financial instruments then as there are today. Therefore it was easier to see a way out of it.

    If we don't have some brilliant ideas soon the whole world will end up in a state of what we used to know as third world status. So much for globalisation. It has wrecked the developed countries when it was supposed to help the poorer ones.

  • Comment number 65.

    Surely, there is an easy way to make bankers pay? Make a retrospective tax law (say beginning in the tax year when the bubble began - 2002 anyone?) that taxes any earners over a million quid annually liable to a punitive rate of tax, if their business has received government aid....

  • Comment number 66.

    "Interest rates will have to remain low due to the printed money and inflation. This ensures the pound remains weak against the dollar this ensures Oil will continue to rise in price which will ensure CPI inflation due to transport cost, and were back to the start of interest rates remaining low."

    What was I thinking clearly this doesnt happen inflation leads to higher interest rates

  • Comment number 67.

    HSBC are advertising on the international version of the BBC website

    Yesterday I got a call from someone doing market research clearly on behalf of Citizens Bank (RBS american subsidiary). This became apparent when I was asked if I knew who sponsored the baseball ground in Philadelphia. Yes folks it is called Citizens Bank Park. Straight off the Phillies website......


    :: CITIZENS BALLPARK BANKERS


    These all-star bankers, courtesy of Citizens Bank, are here every game to assist guests in experiencing that Citizens Bank Park isn't your typical ballpark. From encouraging guests at the Citizens Bank Games of Baseball (located in Ashburn Alley) to passing out special treats, these friendly faces will surprise and delight fans with a host of great gifts, ideas and information…all to ensure that your trip to Citizens Bank Park is a pleasant one.

  • Comment number 68.

    When I saw the Citizens bank post it set me thinking about reserved names when incorporating companies....

    Royal Bank of Scotland

    "Royal" Nothing regal about its progress.

    "Bank" Stopped lending, not a bank.

    "Scotland" Not Scottish.

    Time for a name change. National Westminister .... The clue was in the takeover........

  • Comment number 69.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 70.

    Crash Gordon is on giving a speech to the EU right now and telling them that "EU is uniquely placed to meet challenges of the global financial crisis".

    Sounds familar! Where did we hear that one before??

    http://creditcrunchedoutinuk.blogspot.com

  • Comment number 71.

    "Surf red" on the crest of the wave ,who said pigs cannot fly by the seat of their pans and claim AAAir miles !

  • Comment number 72.

    #2 #49

    I couldn't agree more. This is just the start in a stark fall in the standard of living for many people in the U.K.

  • Comment number 73.

    #61 CoralBloom

    Yep - you're right.

    The bottom line seems to be that basically no national government, nor group of Governments (e.g. Eurozone, G20, whoever) can bring globalised financial industries into line, unless they de-globalise them in some way, probably through - SHOCK HORROR and DREAD - the process of nationalising them.

    (If you had suggested that to me even a few weeks ago, I would probably have screamed, NO, NO, NO!)

    The financial industries can (and seemingly do) communicate and collude with each other effectively, efficiently, secretively and quickly. It's one huge great global old pals' act - a worldwide, St James' gentlemen's club.

    Their arrogance is even underscored by today's story about Abbey basically telling their UK customers who they can, or can't, use as solicitors when buying a property mortgaged by them. The arrogance of these bankers never cease to amaze me! (Barratts - the homebuilders - tried that game on with us a while ago and we just walked away from the deal).

    Who the hell are the banks to tell their house buying customers who they can trust to act as their solicitors? Of course, Abbey will reply they're not trying to do that - it's just that if you don't use one of our "panel" you'll have to pay our costs.

    And hopefully the customers will all say back to Abbey - stick it in your ear. (or other opening). When WE buy property, WE deal with solicitors that WE trust. It's OUR consumer decision and choice, not the banks, nor the builders, nor anybody elses.

    Q: Why do bankers always think they can 'rig' everything on the planet to suit their own needs?

    A: Because they get away with doing it, time and time again.

  • Comment number 74.

    A neat little example of how the theory just does not work, Robert..... nice one.

    Like so many theories, it will be true at a certain level and under certain circumstances, but it has its limits which if approached, lead to a much more universal general theory taking over (.....kind of like energy equals mass times velocity squared in the days before Einstein had a think about it.)

    I'd like to posit the greater more universal theory of efficient allocation of resources that this rather myopic one has come up against......

    "The more intermediaries and stages there are, and the more types of packaging used, in getting financial capital from where it is available to where it is supposedly needed, the greater the opportunity there will be for obfuscation, dodgy dealings, and downright fraud by the money men, and consequent economic inefficiency".

    The other quote relevant for bankers around the world and the City of London, especially, is that famous one from Adam Smith:

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    I think in the end it all points to the stupidity of that preposterous request by the FSA Chairman that 'if only people would not act like animals' (the herd mentality thing), then we will be OK.

    We need to structure the money system around a theory that assumes bankers and financial intermediaries will behave like grubby greedy ordinary people - in it for themselves, and for as much as they can get away with.

    And then we won't be surprised.










  • Comment number 75.

    A.I.G. contributing to Loser Fred's pension: excellent. I wonder if we couldn't get them to contribute to Loser Gordon's pension as well.

  • Comment number 76.

    The truth ,the hole truth and nothing butt the truth

    Dear modireaterrs you cAAAnnot handle the truth

  • Comment number 77.

    Post 63. Pretty much sums up my views too.

    Interest rates have always been a very blunt weapon that take time to start to have an effect. Now people realise that they are here to stay for at least a year or more start to see people spending money again.

    Its time to stop Quantitaive Easing and accept that

    1) If we carry on printing money and boosting the economy like Crash wants then we are storing up hyper inflation.

    2) If CPI is actually rising then basically we need to start to rein things in a little rather than put even more oil on the fire.

    3) Accept that we are all going to pay for this over a long period of time and that now is the time to stop digging us deeper into a hole.

    If Crash really wanted to help the indebted then he should have made RBS & Lloyds HBOS come to a deal to convert credit card debts to affordable loans subject to the users returning and cancelling the cards.

    It makes no sense people having to still pay 20% plus per annum on credit card debts if they want to get out of a hole. If the banks offered a sensible option to the indebted this would do two things.

    a) Ensure that they would likely get most of the money back they have owed.

    b) Allow those hundreds of thousands of UK taxpayers on the verge of credit card meltdown a chance to get their lives back on track.

    If credit cards debts could be converted to five year loans at bank base plus 5% then there would be a reasonable increase in disposable income and a regular income stream for the banks.


  • Comment number 78.

    This continued attempt to deflect blame from our incompetent government by banging on about Goodwins pensions really is wearing thin

    When are we going to read something critical re the clowns supposedly running the country

    Where did the first few billion go that quantitive easing provided?

    Anyone?

    (PS rumor has it that it bought govt guilts from institutions who then bought yet more giovt gilts, ie they are printing money to pay for the deficit)

  • Comment number 79.

    tHE qe'ers are tangoing the taxis of evil

  • Comment number 80.

    PS

    Why can't posts be moderated reactively like most other sites?

    The current system does not allow for any real debate given the time lag before approval, I cant for the life of me see any reason why its done this way

    Maybe they dont want real debate?

  • Comment number 81.

    "All is fair in subrime loans and money". Our kind friends from across the pond shared the dodgy loans with us. They gave us this wonderful chance to take up the opportunity of a lifetime. There kindness in inviting us to join was almost in the best traditions of Madoof.
    So now the pension is on the other foot, why should we not let them share in the once in a lifetime pension for Fred. In fact what they did was to bring our banks to the brink, what they did not calculate was that most of our losses could of been insured by them. So maybe we should be smiling, we have got the assets (I know not worth much) and they have the insured liabilities. So we paid them billions for keeping a roof over their heads and now is the time for this money to find its way back from Father AIG Christmas, sorry Father American Government Christmas, sorry Father American Tax Payer Christmas.

    So Fred, all you have to worry about now is the pound/dollar exchange rate. That is of cause when you are not standing outside your local job centre. Highly trained banker, you want profits/losses ? I am the man for the job. Asking salary? not bothered, pension terms? now we are talking!

  • Comment number 82.

    34#
    "stick to some facts"

    You should practise what you preach,RP did not say that AIG were underwriting Fred's pension.

  • Comment number 83.

    78 In answer to your question as to where the billions went

    The QE'errs gave the dydl doe to the mperrors taxis of evil on their way out way to their AAAirport

  • Comment number 84.

    66#

    "will ensure CPI inlflation due to transport cost"

    Did the commercial transport costs ever reduce after the falling price of oil? Don't think so!

  • Comment number 85.

    If AIG is judged too big too fail, then does this mean that market forces do not work?

    Too big to fail implies many companies aim to grow to such an extent that they hold the power and not the electorate, not the population of planet earth.

    We are being held to ransom.

    We throw huge volumes of resources to ensure our security. Armies. Safes. Chip'n Pin.

    Globalised organisations are a bigger threat to our security are they not?

    Imagine Bin Ladin had decided to use his wealth to increase his power base by taking over banks and insurance companies, employing his friends to do the dastardly deeds.

    The authorities are just as culpable. They failed to ensure our national and economic security. We have been under a silent attack for how long, and our lords and masters claim ignorance. Not by Bin, but by the super rich. Really?

    And it is not over. This current bubble will not end until the average house price returns to 3 or 3.5 times the average salary. Any higher than that, and the economy, our lives, are not sustainable. It is the authorities who have that specific task of ensuring a secure, sustainable lifestye for every member of our society.

    Sack the lot and at the next election vote Green, Independent, but not for the big two (just as bad as each other).

  • Comment number 86.

    @84

    Did the commercial transport costs ever reduce after the falling price of oil? Don't think so!

    NO of course they didnt for two very simple reasons.

    1)The governments VAT scam reduced VAT on fuel (reclaimable) and increased fuel duty (Unclaimable) so they artificially kept transport costs high
    2)The governments interest rate policy forced a devaluation of the pound against the dollar, and consequentally because oil is purchased in dollars our fuel prices remained high as the oil price dropped.

    Now if you add in hyperinflation fuel prices and therefore food transportation costs will continue to rise fueling more hyperinflation.

    The government have main a complete horlicks of economic management

  • Comment number 87.

    So Robert, when you were in China recently, did you not put your sleuth like nose to the ground to detect the end of the dollar as the global currency? Pity you were still thinking of Fred the Shred even then. Can we have a new story please.

  • Comment number 88.

    Food, Imports like Oil and Gas are all starting to inflate as the Pound goes South.

    We now have "Deflation" in wages and salaries" with "Inflation" in essentials. Watch the Supermarket bill now rise every month.

    That is a warning recipe for true disaster, yet to come, as households run out of money each month. Credit Crunch- Here it comes!!!!!!!!!

  • Comment number 89.

    @85
    "And it is not over. This current bubble will not end until the average house price returns to 3 or 3.5 times the average salary. Any higher than that, and the economy, our lives, are not sustainable."

    You can wish for that all you like , but in this country we have a supply side issue which the recession has made worse by the construction companies shutting up shop.

  • Comment number 90.

    Robert stop going on about Goodwin.
    We all know that he is a greedy parasite but are more worried about the 'deflation' myth being spun by the same idiots who brought us the 'new paradigm' of no more boom and bust.

    A huge inflation wave is on its way. Savers holding cash have so far lost only their income but not yet seen massive erosion of their principle. Had they been watching they would have seen 'natural resources' prices rise quietly by 30% since christmas. I would add that expecting cash alone to provide a long term income and inflation protection is manifestly unrealistic.

    For those not yet moving out of Sterling you are going to pay for the debts of others with your life savings. No boring economic analysis is required - just common sense. GET YOURSELVES DOWN TO COSCO SOON.

  • Comment number 91.

    #63. At 1:39pm on 24 Mar 2009, potkettle wrote:

    "Deflation is not the monster that Brown and the BofE painted it to be when the decided to QE by printing money.

    If they dont stop printing money NOW we are in for hyperinflation."

    Or perhaps the policy is having the desired effect and is preventing deflation? The Bank of England has an unmatched track record in managing the economy and is more than able to bring it under control again following a series of major external shocks.

    Forecasting hyperinflation is a little over-the-top, don't you think? Unless you define double-digit inflation as "hyperinflation", which is not an internationally-recognised definition.

  • Comment number 92.

    #80 openside50

    You have hit the nail right on the head my friend.

    But then, who would want to debate a lost cause?

  • Comment number 93.

    Huge pensions,massive expensive accounts,numerous properties and a salary we would all like to have. Who are these lucky few you may ask....It's Mr Brown and Co ....It's time to look at our leaders not just a few ex-bankers and their pensions ...

  • Comment number 94.

    Robert, whilst I agree with others that Shred's pension is a drop in the financial ocean, you are right to suggest methods that could and should be used to prevent payment. I believe, faced with a similar set of circumstances Goodwin would do exactly what he did again -from his viewpoint it was a great success so why not? In 1125 King Henry 1st punished the moneyers for ruining the country. We must ensure Goodwin and colleagues are not guaranteed huge bonuses merely for taking nonsensical risks with innocent peoples money. If Myners hasn't got the guts, others should step forward and ensure he really is sorry.

  • Comment number 95.

    China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments. The comments, in an essay by the Chinese central bank governor released late MondayGov. Zhou Xiaochuan's essay did not mention the dollar by name but said the crisis showed the dangers of relying on one nation's currency for international payments. In an unusual step, the essay was published in both Chinese and English, making clear it was meant for an international audience.

    "The crisis called again for creative reform of the existing international monetary system towards an international reserve currency," Zhou wrote.


    Dont you just hate those people that say I told you so:

    But hey - its one of the only perks of being a 'conspiricist nutter'

    http://abcnews.go.com/International/story?id=7156932&page=1

    I TOLD YOU SO, will it have to get much worse for people to accept it - or is the threat good enough? Just how good has the main stream media done its job?

    Why are we not speaking about this. No doubt that Mr Preston has been primed and has his blogs and news articles at the ready.

  • Comment number 96.

    So the battle begins!

    The Bank of England versus Spendaholic Brown

    At last we see some commonsense coming to the fore. Mervyn King publicly warning Brown that the country cannot afford Brown's much heralded fiscal stimulus or to put it bluntly printing money like confetti.

    Forward troops Yvette Cooper and Caroline Flint on BBC and SKY simultaneously and frantically trying to avert impending crisis.

    They both looked like scared rabbits caught in the headlights.

    If Brown ignores the Bank of England warning it will show that he is prepared to sacrifice the country and the people for his own political ends.

    More interesting times ahead. This time it is looking slightly more optimistic.



  • Comment number 97.

    @91

    The reason I say hyperinflation is because all commentators including the Government and the BofE have been defending the interest rate policy by claiming deflation was the monster. Those same commentators are now today cught out by the "unexpected" rise in the CPI.

    If they read up on their economics they would have realised that CPI was going to be on the rise because of the fall in the pound and the VAT scam that kept transport costs high as I stated in an earlier post.

    The mere fact that they expected CPI to be close to zero and RPI potentially below Zero shows that they thought they needed to keep interest rates low when in reality it is already too late and they should be higher. They let the brake off and now are realising that they needed the brake reapplied last month if not before. They will overshoot because they are too far behind the curve. hence hyperinflation because Brown wont allow them to get ahead of the curve raising interest rates high enough until after he has called an election and he isnt palnning to do that for more than a year still.

    If you thought Tory interest rates and inflation trying to stay in the ERM were high you are in for a big surprise

  • Comment number 98.

    Is there a photograph anywhere in the BBC archive that does not show Fred Goodwin with a smug smile?
    Could we not just have a Goodwin tax of 110%?
    If the oil companies sometimes have to pay a windfall tax, could there not be a windfall tax on former bankers receiving big sums?
    In a way, I guess that something should be done - anything however petty and ugly it looks - just to appease the common man in the street. (ie. me)

  • Comment number 99.

    It's a pity that the equivalent of D&O insurance does not exist for government ministers! If there was, we might have a claim against the underwriters for the last 10 years. Unfortunately, I suspect that the UK is self insured.

  • Comment number 100.

    We are doomed, doomed i tell thee!

 

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