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leicestersq

Listed below are comments made by leicestersq between Tuesday, 5th August 2008 and Friday, 4th December 2009.

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How HBOS escaped closure 11:59am on 04 Dec 2009 One odd thing about all of this is why did Lloyds go ahead with the purchase of HBOS?

The year before they had said no to Northern Rock. So they knew how to say no to a bad deal.

They would have known that HBOS was worthless, and that they would be breaking the law by offering a price for it. The law requires that they act in the best interests of their shareholders, and paying a penny for something known to be worthless is against the law. Indeed, they would have been breaking the law by even buying it for nothing as it had less than zero value to Lloyds shareholders, given they would have had to take on the HBOS debt as well.

So why did they do it?

One can only assume that there was coercion.

I am sure that the story will come out sooner rather than later.
Bosses' pay and WPP 11:50am on 04 Jun 2009 The block votes of the institutions are stolen votes. The real beneficiaries of the shares, pension scheme members, unit trust holders, etc, should be the ones voting.

Instead, those controlling the shares are in cahoots with the managment, and vote through ridiculous remuneration that would never be agreed to by the real shareholders.

The law should be changed to only allow voting on remuneration by shareholders, if the person voting is the actual named holder of the share. Only then will we see an end to this executive larceny.
Who benefits from rate cut? 2:32pm on 06 Nov 2008 I too would like a simple explanation of what the base rate actually is, and who pays this rate to whom.

I had heard that it was the rate at which the Bank of England paid money to the commercial banks when they deposit money with the Bank of England.

Is this right?

Before that I thought that it was a rate at which the Commercial Banks could borrow from the Bank of England at.

I would like someone to explain to me just what it is.

Thanks.
German guarantee lost in translation 9:07pm on 05 Oct 2008 Seems to me that our governments and central bankers are just doing the wrong thing all the time and exacerbating the crisis.

All of this was caused because interest rates were set too low for too long, and people were not aware of the risks they were taking when lending to banks. What should have happened was they learned from their mistakes when the banks they lent to went bust, and they were unable to get all of their money back. This is also know as Moral Hazard.

But because of the paranoia our government leaders have about letting banks go bust, every failure seems to have been met with a bailout so far in Europe, and only the shareholders have lost anything, well shareholders and taxpayers. It is wrong that the taxpayer should lose anything, because they never even knew that they were running a risk, they thought that the risk was being taken by the depositors and creditors, who after all profited from any gain.

And if you guarantee all creditors and depositors, it is like having free bets at the bookies. They will want banks to come up with all sorts of scams to allow them to profit at the expense of the state.

Lets hope this madness doesnt extend to the UK. Creditors of banks must know that they are taking risks when lending to banks, and the consequences of those risks must be felt when a bank goes under. That means no taxpayer bailouts. Depositors and creditors need to feel the pain, or else they wont learn to lend to banks responsibly in the first place.

An exception here is that I do agree with depositors should be insured up to a modest amount, and £50000 sounds about right. If you have more money than that, you should be responsible for managing that risk.

All of the problems caused by the credit crunch were caused by the separation of the borrower and risk bearer from the lending transaction. Now it seems that the separation is becoming even greater, with the completely uninvolved taxpayer bearing the risk of all European credit transactions. This is a recipe for an even greater disaster than the one now unfolding.
Insane markets and HBOS 7:35pm on 01 Oct 2008 I see some people have pointed out the error in Mr Peston's analysis regarding the net benefits to shareholders of both LTSB and HBOS.

Well that just needs to be refined a little. HBOS as we know is worth nothing to shareholders. Luckily for them, their liability is limited, and they cant lose more than what they invested.

But we can be pretty sure that the duff assets on the HBOS books means that the overall value of HBOS is less than zero. Normally that would mean it would go bust and either the creditors or the government would have to make up the difference. Given that the house price crash in the UK has only just begun, and that the value of the mortgages at HBOS are going to tank further, the size of the net liability that is HBOS could be huge.

Now if LTSB takes this liability over, they will take an immediate hit to their equity. If the net liability that is HBOS is large enough, then the value of LTSB could end up at zero or below as well.

So if you have one hundred shares in HBOS and 83 in LTSB, if this takeover went through it would hardly be neutral for you, you would actually lose everything. You would have been far better of voting against the deal and insulating your good assets, rather than using your bad assets to poison your good ones.

And all of this says nothing about the funding gap that LTSB need to make up in the midst of a credit shutdown.

And lastly Robert, the fact that you need to guarantee that the deal is going to go ahead stinks of Government interference to make this deal happen. No sane shareholder of LTSB would want it to go through. I hope for the sakes of everyone in the UK it doesnt, better for one bank to fold than have two go under.
The creation of Lloyds HBOS 5:17pm on 17 Sep 2008 Are Lloyds-TSB shareholders going to vote for this?

This would be madness on their part. HBOS isnt worth anything, why allow yourself to be diluted buying HBOS shares at a price of £2.80 above their net worth?

Worse, the HBOS balance sheet is full of the worst sort of poison, it has negative value. It will destroy Lloyds-TSB.

The very least you would have expected is some sort of subsidy or guarantee from the government for taking on this sort of risk. LTSB is not big enough to take on this risk by itself. Given that financial markets are imploding as the terms of the deal are being announced, making this deal now seems like the dumbest of moves.

Where is Lloyds-TSB legendary caution when the greatest of all caution is needed?

Barclays did the right thing with ABN AMRO, they walked away when the price was too high. It saved Barclays. When they were interested in Lehman's they didnt get the assurances that they needed from the Fed. They walked away, and are now buying the assets that they want for a song, and leaving the debt to others.

Lloyds-TSB, come to your senses and walk away! You cannot save the financial system with this deal, only help bring it down.
Meltdown Monday 10:05am on 15 Sep 2008 I am really worried about the Bank of America / Merrill Lynch deal. It doesnt feel right at all, why would they pay so much for a company that they could buy for a snip? Something doesnt seem right here, and that really worries me.

If a strong bank buys a weak bank, the transaction makes strong bank weaker. If the weak bank is really really weak, it is possible that it can bring the big bank to its knees as well. Just how much of a black hole is there at Merrill Lynch? Where is Bank of America getting the cash from the buy this lame duck?

You would have thought potential lenders to Bank of America would have been a bit wary after they were dumb enough to buy Countrywide. Perhaps they are doing this to create the illusion that they are strong as well.

I doubt that they are, and I wouldnt be surprised at all if they were to hit the headlines in the near future as they too succumb.
Lehman: insolvency looms 10:55pm on 14 Sep 2008 Is this it, the point at which the biggest crisis of confidence ever to occur in the financial markets is reached?

Everyone in the market will be thinking ahead, trying to spot who is next to go. Almost every financial institution could come under pressure tomorrow. This is all making the 1930s collapse look like a picnic. The Fed cant do anything, it is like a grass hut trying to hold back a mega-tsunami.

I guess that there will be a rush to gold now, I can think of anywhere else to run.
Lehman on critical list 12:01pm on 12 Sep 2008 Time to stick the fork in the Lehman sausage, because it looks like its cooked to me.

The Fed are going to have to start printing money soon, as the bill to the US taxpayer on all of these bailouts is going to be unpayably large.

There are lots of other big boys in the US that are teetering on the brink.

Wachovia,
Citigroup,
Morgan Stanley,
Washington Mutual,
AIG,
Ford,
GM,
Chrysler.

And thats just the ones I know about, I bet there are lots of other possibles to go under as well.

I wonder when attention will turn to the UK with all of this? Whilst banking practices have been a bit better in the UK, it seems to me entirely possible that house prices could fall 50%, and then our own financial institutions will be in the spotlight.

The Chancellors recent remarks about this being the worst financial crisis for 60 years look to be pretty much spot on. If it werent for the economics given to us by Keynes, I would have no doubt that this is the worst financial crisis ever.

So the greatest effort to print money outside of Zimbabwe is about to begin to counter the rampant ongoing deflationary collapse is about to begin. My guess is that gold is going to perform far better in the next year than it has done in the last 3 months.
Treasury injects £3bn into Rock 8:34pm on 05 Aug 2008 With every passing day the decision to take the Rock into taxpayer ownership look more and more ridiculous.

The losses today are ones that will never be repaid on a discounted cash flow basis.

The Rock is a truly dangerous precedent and model for what to do with future bank failures.

The taxpayer should never have made any of the bondholders whole and the bank should now be safely in the dustbin of history.

I see that the Government are today thinking of fiddling with the housing market in order to try and generate some activity. What needs to happen is for prices to fall to a level at which there can be some profitable activity, and government intervention will only delay falls to those price levels.

Why cant they just leave stuff alone?

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