All change at RBS
As I said on the Ten O'Clock news last night, the UK's big banks are racing to raise capital, most of which will either come directly from taxpayers or will be underwritten by taxpayers.
The reason is that the Government has said that without the injection of new capital, banks won't be able to take advantage of a £250bn state guarantee for what they borrow from other banks and financial institutions.
And without this taxpayer guarantee, banks will continue to find it immensely difficult to raise vital wholesale money from other banks and financial institutions.
So it's a no-brainer for most of them to attempt to solve their capital and liquidity problems simultaneously.
What's more, the Treasury has made it easy for them to obtain the capital: the Treasury has offered to provide up to £50bn in aggregate directly; or if a bank wants to try to raise the capital from shareholders through a conventional sale of new shares, the Treasury will underwrite the shares, thus providing certainty that that the bank will get its money.
Which bank will be first to tap taxpayers?
Well I would expect Royal Bank to raise the capital it needs over the weekend. On paper its balance sheet looks okay. But its board has concluded it needs a further cushion of capital, perhaps as much as £10bn.
This need not spook any depositor or saver with RBS. In fact the contrary is true. RBS will be all the stronger for strenthening its balance sheet and accessing the Treasury's interbank guarantee.
But it's a terrible humiliation for RBS's chief executive, Sir Fred Goodwin - who broke all British records by raising £12bn in a rights issue less than six months ago.
After the eyewatering fall in RBS's share price at the end of last week, RBS's entire market value is now less than the cash it raised just a few months ago. And in terms of what can damage the credibility of a chief executive, it doesn't get much worse than that
Goodwin has told colleagues that his priority is to raise the desirable new capital, and that he wouldn't stay in his job after that if shareholders wanted him to go.
That's his coded way of saying he's off, possibly as soon as Monday - and he'll be replaced by the former Abbey finance director, Stephen Hester, who is currently chief executive of British Land.
But, to be clear, RBS won't be the only bank raising capital in the next few days.
I expect HBOS, Lloyds TSB and Barclays to disclose that they're raising up to £25bn between them - all of it underwritten by us as taxpayers or simply given to them by us (aren't we generous?).
It won't be long before we know how much of the banking system belongs to us. Which means we'd better start thinking about what we want in return.
Some might say a return to old-fashioned, prudent, know-your-customer banking mightn't be such a terrible thing to ask for.
I'm 
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In the light of the collapse in the RBS share price since the rights issue, I would expect investors (and in particular any underwriters who were left with under-subscription) to be taking a very careful look at the RBS Board statements issued at the time and of course any role the auditors played.
At a time when HM Gov are investing taxpayer money, are they relying on the same financials that pertained 6 months ago? How sound are the assets in these balance sheets? Or, is GB relying on a the assessment of a junior minister as reported yesterday with regard to the Icelandic banks?
Thank God I am not an investor in any of these banks, but I feel truly sorry for those who were encouraged to invest and have now caught a cold.
This has got to be an upcoming prime time for lawyers and insolvency practitioners.
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I have no sympathy for banks. Why when interest rates fall the banks did not pass it on to customers? Who are the most important people at this time? Customers. Why dont you go and give them a hard time and work for your money. Also what about the treasury spending? Only a few weeks ago the treasury was broke. Now the treasury can rewrite the fiscal rules. When will you ask about that instead of flapping about?
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No shares can be sold unless there is a buyer; a tritr remark. So with all the shares plummeting in value who is in the market to buy? Will we find in time that the owners, ie the majority of shares being held are in nominee names of the Middle East, China or Russia. Shares are dealt independently of the company to which they refer, are they not. The fall in price affects the owner and the buyer of the shares. The company carries on making widgets until the widget market is saturated or there is no longer any interest. Am I right Mr P?
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I'd settle for a few old-fashioned things from my bank like a return to some integrity and them serving me instead of them trying to make money out of me at every turn eg trying to sell insurance when I'm just going in to the branch to pay in a cheque or massive charges for sending a letter.
I would also like to be reassured that my bank was not borrowing more than say 10% of its capital ie a low level of leverage. This would probably seem very boring to the average city wizz kid but at least we could all sleep soundly at night knowing our money was safe.
I think most people would agree and that we need some sanity to return to what is essentially a support service or that's what it should be.
In exchange the average customer should spend within their means and not run up massive overdrafts but then of course the banks fail to make any money so a bit of a contradiction there. Time for a re-think on how they do business perhaps?
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and thus it starts.
taxpayers who are forced to pay tax to a government that seems inept and beyond dangerous they are gambling that things will straighten out before they have to cut government spending on health,military,police etc.
so they have put there shirt (thats our taxpayers money) on a hope that overseas countries will do the same.
they would be better off betting on a three legged horse winning the darby.
they dont care they will still maintain there high wages and expences thus its us who will suffer yet again.
the people of this country needs a good and fair government for the people not rich overpaid bankers and stock market sellers.
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The Stephen Hester isn't by any chance the same one that was at CSFB. If so, he singlehandedly mis-sold the famous put option convertibles to Hillsdown, Tesco etc. These absurd instruments all had to be bought back in and were basically toxic paper of the 1980s. Way to go Steve.
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V. interesting info.
I can't understand why they are getting off so lightly.
Can't our government just grab them , change the management and then look at compensating shareholders at realistic rates?
Who knows what they will get up to next with a new fix of our money!
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Perhaps it's time to stop "banker bashing" and the latest craze "Peston bashing".
Robert Peston and the BBC are duty-bound to tell the facts, unless a government D notice applies, or for legal reasons.
RBS and all the other banks still have big problems, but they are being addressed.
German president Angela Merkel has said " we have to redirect the markets to serve the people, and not ruin them".
That's the most sensible thing I've heard a politician say in a long time.
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Let's hope that things are only as bad as Mr. Peston reports and that there are no 'D' notices hiding worse things.
I found the video 'Money as Debt' most instructive!
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#8
Whilst it is wrong to engage in banker bashing there is a percentage of people employed in that industry who have acted rashly and recklessly and have been paid very well for doing just that.
As for Preston bashing...I do think that some of the language used in the reporting of this crisis have been imflammatory to say the least...and if we start to think that the German president is going to be the guiding light out of this mess, heaven help us.
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Compensation for loss of office at RBS?
It always cheeses me off that top men who get ejected from their post for having done a bad job get huge pay-offs. If Fred Goodwin is to go from RBS, what price he gets a huge payoff that he'll no doubt be "contractually entitled to"?
There was a piece on Radio 5 Live yesterday in which Andy Verity criticised the bonuses paid to two of the top men at HSBC. Surely this is misdirected as they run the only UK based bank that doesn't need to join the goverment bail scheme, thereby preserving hundreds of millions of value for shareholders and providing confidence for customers?
If we are to believe the government when it says it is going to control excessive bonuses for bankers in the future, then surely Sir Fred's pay off (and others who go down with him) should be minimal, if it all, given all he has presided over and taking into account all the huge bonuses he received getting RBS to where it is now?
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The financial world is coming to an end and all you have to worry about is the welfare of Sir Goodwin?!
Do you realise he has made in one year more than most ordinary folk will not make in a lifetime, and he is laughing all the way no matter what happens. And not only him but also an army of drones (upper level managers and directors) who have devised, recommended and implemented those strategies that brought us to this sorry state.
Instead of worrying about Sir Goodwin, who is doing very well thank you, and who has no personal accountability and who will not end up his days in a prison, you should be worried about the common people who will lose their jobs.
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The RBS Chairman Sir Tom McKillop must be wishing he was back in the ethical world of pharmaceuticals!
LOL
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Re #8 banker bashing, we the tax payer are being forced to failout these greedy arrogant bankers. The very least we should have in exchange for our good money is an end to huge bonuses and a shareholding that adequately represents the value of the cash injected.
Fred the shred has been raking in huge amounts in his urge to expand his empire at any cost. The measure of a good deal maker is knowing when to walk away and not overpay and ABN was a bank too far.
How much value has been destroyed by his rash move? He should be turfed out with no compensation and no pension since his actions are certainly going to harm many many people in the UK far beyond the shareholders.
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Every senior exec in these companies that have created this scenario should only be allowed to access the rescue fund capital PROVIDED they personally put in the value of 50% of their bonuses for the last three years.
They can all retire happy and wealthy as it stands, why shouldn't they all pay a personal price too? Everyone else will after all.
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Robert
I have liked your articles and comments but I am about to say what may sound different to compare to the normal comments regarding the crisis.
Firstly the root problem is not the freeze in the interbank market , this is only a symptom of the disease NOT the disease it self!
The real underlining problem for the world as a whole is that there is too much debt and too much leverage.
Only a few years ago banks in the UK had no funding gap and used the interbank market as a top up source of funds not the main river of funding. Browns plan will not work as he is pushing on a string.
For example there are 4 major UK banks relying on the interbank market and the real plan must be to shrink and break up these failing giants up so that the smaller units can become self funding as any other viable business has to be.
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There is no point in tinkering with an essentially unsustainable, greed-driven system. Think of the ideas thrown up in such videos as 'Money As Debt' as the designer fashions on the catwalk: few people (at least the financial powers that be) would 'buy' these designs as they stand, but it should be possible to take these ideas and come up with something that folk actually would buy on the highstreet. There is a dire need for radical monetary reform: at least meet us halfway.
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This is a very interesting situation and a fascinating observation. I am now a part owner of a bank ( I hold shares in Barclays anyway) and I am an implied owner due to the Taxpayer's underwriting of the recapitalisation.
Over recent years we have seen a number of individuals try to reclaim charges that they were levied because they failed to keep within the terms and conditions of their current accounts (namely they went over their overdraft limits and were charged accordingly).
These are the very same people who 'blame the bankers' for the errors that they made in investment and lending decisions.
I, for one, will be most agrieved if these individuals have their charges returned when they have made their own errors in budgeting.
Let's not see OUR profits eroded by refunding those who have been charged for 'borrowing without asking'.
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Let's buy Gold with the 50 billion and use gold coins again to trade! Can't be worse!
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If as taxpayers we really do have a say in the way banks are run, then I propose they gradually move to a Full Reserve system rather than the fallable Fractional Reserve system that is currently in operation...
FWIW
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"Some might say a return to old-fashioned, prudent, know-your-customer banking mightn't be such a terrible thing to ask for."
Some might also call for the return to an era where those leaking market-sensitive confidential information are prosecuted by the FSA.
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We made a major mistake when we nationalised Northern Rock and now Robert Peston and Vince Cable are trying to make us do it again.
The banks are at our mercy but hurting them is a bit like cutting of your nose to spite your face as we are all inter connected.
What they need is a loan and we should give them it at a decent rate of return for the taxpayer. Anything e.g. demanding an equity share is basically socialism and all the problems associated with that,
So give them the loan they require make sure they pay for it so prudent banks such as the Clydesdale are not disadvantaged and lets get on and put this unfortunate development behind us.
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The horizon is bleaker than written so far. As a pensioner investor with a small stake in RBS I relied on its dividend for income. Now that income will go along with my 20% contribution to HMRG. Worse the shares will be worth nothing from a lifetime of thrift. Join the queue at the benefits office? Hard standing around in the cold at 80+.
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Well, we've bet the farm without the slightest reference to parliament and casually invoked anti-terrorism laws to freeze a foreign bank's assets without the slightest indication of a terrorist offence having been committed.
Fascism is, as fascism does. Watch out for an interesting decade or more whilst our political elite run fast and loose with democracy as they grapple to deal with debt and contingent liabilities at close to 85% of GDP.
Throw in the end of cheap energy (the lights could well be going out as early as 2012), untramelled immigration, a monstrous welfare state (6 million households on some form of state benefit or other) and staggering state pensions' liabilities - and you have a recipe for social unease, at best.
We have the politicians we deserve, I suppose. They're all as bad as one another.
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Peston, you mentioned the CDS auctions twice and have yet to comment on the outcome of it.
Please do so!
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Re 'banker bashing':
When the leaders of a sector act in a way that places short term personal and corporate profit above what they must realise (unless they are wholly unqualified to hold their posts) is in the ultimate best interests of their customers and, I would guess, their organisations then a 'bashing' seems to me the very least they deserve.
It really is about time that the Government got a whole lot more directive in sorting this situation out.
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"Some might also call for the return to an era where those leaking market-sensitive confidential information are prosecuted by the FSA."
Has Robert Peston not passed on what information/ideas he had, where else would anyone find out about such matters???
Like a lot of other people who read his columns, I find the information both informative and useful, and I hope that he continues.
It is far too simplistic to say that he is leaking 'market-sensitive' information. By the time that he gets hold of it, the information is probably already third or fourth-hand if not more.
Peter
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No. 18, thank goodness our bank is somewhat more understanding and customer orientated than the dreadful behaviour of a few banks you are commending. When we went over our limit a couple of times the bank called us and arranged to increase the limit. That's what I call customer service.
No 16, viable businesses, by and large, aren't "self funding". There's usually a gap between selling the item and receiving payment from the customer. For a business to be viable, it needs to be profitable. The banks are there to take care of cash flow issues. If we had to wait for the customers to pay us before we could pay our suppliers, none of us would be in business.
There's a lot of focus on the excessive bonuses bankers have received up until now - it will be interesting to see if this practice survives the Government intervention. But I would have to say, having worked in a large organisation for many years, that the wastage, excessive expense accounts, lack of accountability, overstaffing, far outweighs the cost of any bonus scheme the city could dream up. Why does a middle manager with no sales responsiblity need a Porsche as a company car? Or how about a sales executive with a several thousand a month expense account who makes no sales in three years? Or IT departments getting internal contracts worth several millions to design systems that halfway into the project are abandoned and never implemented.
Perhaps everyone should pause before investing in these wasteful giants via the stock exchange, because for sure we can all make a lot more money investing on our own account, first by eliminating our personal debt and then by investing in assets that we have complete control over. Even NS & I makes more sense as an investment strategy, rather than gambling on the FTSE 100.
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"Some might say a return to old-fashioned, prudent, know-your-customer banking mightn't be such a terrible thing to ask for.". Yes, but Culpability Brown wants the banks to restart the housing market and to line the pockets of consumers to start spending again. And what is Culpability Brown going to do about the rocketing Government borrowing requirement? There are plenty of icebergs ahead for the UK Titanic.
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The FSA should be prosecuting ITSELF, FOR INCOMPETENCE.
Talk about asleep on the job.
Oh, we "missed" the fact that one of our top-ten banks was going broke (Northern Rock)", and that all the others were so over-leveraged they would need government help to get them out of it.
And this is the great "City watchdog".
The FSA should be scrapped, and replaced by an organisation with teeth.
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I never have understood why any government would be prepared to put the power to create money in private hands, and then borrow that created money back.
It seems as odd a decision as abolishing the army and hiring Group Four or Halliburton (ahem) to replace them -- here's LOTS of power, why don't you take it from me for free and sell bits of it back to me?
I can only assume that financial pressure is used on a person-by-person basis to sway individual decision makers to vote in favour of this sort of idea.
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I haven't heard you talking about derivatives much, how does the $650 trillion aprox. of these effect the equation?
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If it weren't for Pesto et al we'd all be in the dark cos as far as i've seen nothing of substance has been said in Parliament except the usual platitudes "everything will be done to maintain [sic!?!?!?] financial stability etc". Comrade Paulson has at least fleshed out the G7 plan with some specific actions in a press conference and their Govt and bankers are being held to account in public by Congress.
No such transparency here. Indeed HMG has to be forced to tell us what the hell their plan is. Bit rich of this govt of all govts to squeal cos a hack reports an off the record briefing by a banker, idiot or no. Live by the leak, die by the leak. BBC hold firm.
More solid, useful, informative information comes in a Pesto/Mason 2 minute report than an entire parliamentary statement from GB, AD, and especially from quite possibly THE most pointless minister in all this, our wonderfully informative and erudite Chief Secretary to the Treasury Yvette Cooper.
Maybe it's not a "Blood, toil, tears and sweat" moment just yet but that kind of brutal sentiment is right. Of telling it how it is, that it's gonna be tough, painful, possibly ghastly but we shall come through this, scarred yes, maybe, traumatised even, but we shall come through this and prosper once more. It's the inability of politicians to acknowledge the possibility of disaster when it's plain for all to see which drains confidence in them no matter how earnestly they are working to prevent it (and boy, however much we despise some of them they are truly feeling the pressure right now and i do feel sympathy for them as they face something for which there is no handbook)
If they treat us like adults we MAY begin to behave as adults and prepare ourselves for a possible hellish few years. This might give us some confidence. Then we could cope with, if not exactly avoid, the inevitable pain.
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While we are setting terms and conditions, why not insist on a return to British call centres, or even have someone at your own actual branch to answer customer calls?
A lot of UK citizens are going to be looking for new jobs as a result of bankers' shenanigans and it would be a very small recompense to let some of them answer the phones down at the local HSBC, Barclays etc.
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1987 remember that year?
Remember a certains Iron Ladies sternest vow?
"The U.K. banks will now under go reform in self regulation to stop this irresponcible lending?''
Why self regulation, because government regulation would strangle the 'Free Market'
2008... BAD LOANS have hacked out the legs of the whole system, so to all you Banks. Bravo, well done you have failed us all. I never went to Oxbridge but I do know a Debt (I.E. Mortgage is not a 100% asset until its paid off) so how do you make an I.O.U. a real and tangible asset. Never.
In the free market you take the risk and if you fall off the swing THERE IS NO SAFETY NET!
Our government should not bail out the banks, they should help the public by putting that money into a State High Street Bank. Let market forces run there course if the PLC Banks survive they survive.
But at least we the public get a safe haven for our money.
Extreme, maybe but for a government to borrow money to prop up a system failing due to over borrowing is madness.
So Gordon Brown lets keep the Post Office and make it a state bank, and let the city keep the free market. I can't wait to buy an ex brokers porsche for a fiver!
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"It won't be long before we know how much of the banking system belongs to us. Which means we'd better start thinking about what we want in return."
Should we not have known that first?
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'Some might say a return to old-fashioned, prudent, know-your-customer banking mightn't be such a terrible thing to ask for.'
That sounds good, but the branches are gone already.
Banks moving away from customers is also virtually solely responsible for ID theft. It is all their fault because they wanted to do business over the phone, internet, via so called financial advisers.
There is no ID theft when you are known by real long term bank employees who recognise you in your banks. No piece of paper ever used to be needed to prove who you were, nor should it now. Let alone ID card database!
You want a loan for anything you borrow from banks you have history of saving with and are known by.Yes it restricts cheap fly by night operators cutting costs and undercutting and so would need a regulator's eye on it. But better by far. Same with all debt (credit) cards.
Of course regulation has to be brought in to limit the amount anyone can borrow relative to the value of the purchase. Max 75% mortgages would seem about right.
Other than that interest rates should be considerably higher all the time, rewarding basic no risk savers who are the ones now paying for all the greedy borrowers defaulting, so far with a 10% income cut, try that out on all wages, balance the pain.
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Banks started to go downhill when they discovered "customer service". of course that doesnt mean what it says, it means each customer becomes a profit centre to screw for as much as possible. The bank manager became a sales director, bank clerks became salesmen. At every point money was to be made. they made it impossible to call the local branch, so we spend often hours of precious time trying to make a poor call centre operator understand. They are also incapable of upgrading their systems, Why in this day and age cant i open and account without the need to send a cheque? they can debit a cheque in a nano second but "allow five working days" for a cheque to be credited.
Pumping billions into the banks and lowering interest rates hasnt worked so, why does anyone think this latest scheme will work. It is time to leave the banks to live or die on their own, give 100% deposit guarantee and instead of giving the banks money the central banks become retail banks and cut out the middleman. I bet the banks would start lending pretty quickly once they realised there was no more "support" to keep them in luxury
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How about: first that the shares be underwritten at par value; second, that all banks agree to resolve the charges issue equitably, and halve their present fee for over-overdraft transactions.
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This comment was removed because the moderators found it broke the House Rules.
It is the final sentence of Robert Peston's article that will strike a chord with the public.
The UK banking system has long since lost touch with its high street customers.
Everything has been automated an/or outsourced to cut costs, and to hell with the concepts of client service.
I work abroad, but have my accounts with UK banks.
I have had to make countless, expensive phone calls to improperly trained staff in "call-Centres" , to raise questions or issues on simple matters.
Even though banks are informed that I work abroad, they persist in sending communications only to my home address in Essex, by postal service.
No notice is taken of continuing complaints, and neither the FSA nor the Banking Ombudsman is interested.
Who are the chief perpetrators of idiotic service delivery in my experience ??
1) Citifinancial..... the most disorganised and the worst service provider in my life's experience
2) Barclaycard..... I am a customer for 30 years. For the last 15 of which they have never sought to update any information on me, but still seek to impose "over-limit" charges on my account when the "over-Limit" is caused by Barclaycard internal account charges, NOT through transactions on my part.
3) Morgan Stanley....... sold my card account and personal details to Goldfish without my permission
4) Goldfish..... sold my M.S./Goldfish account and personal details to Barclays without my permission.
Also, why is it that, since the de-regulation of the banking industry began in the late 1970's, the Regulator has not been more fully aware of the need to ring-fence speculative "investment-banking" activity from the more mundane, but more economically useful commercial-banking activity of UK banks ????
This is not rocket science. Just plain common sense. The problem however, seems to be that since G. Brown gave Regulatory responsibility to the FSA, the FSA management has prioritised the employment of conceptualising rocket-scientists at the expense of plain-speaking commercial bankers, to the detriment of the Country's businesses, and taxpaying citizens.
It is time to return to old-fashioned principles in the banking industry.
Size is not everything, as we now clearly see. Principle and soundness of judgement are the foundation stones of banking.
It is hard to see how sound judgement can be exercised by inexperienced latecomers to the industry, motivated more by self-enrichment and authoritarianism than by any compassion for the poor (and getting poorer) bloody clients.
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Wealth is being destroyed but people will start buying when the price of an asset fairly reflects its worth. It is certainly painful, but the western world has been living on debt for too long, unrealistically inflating prices.
Government attempts to 'fix' the problems will simple extend the duration of the pain and more than likely make it ultimately worse.
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Where's the smart money (if there's any left) for when the markets open again on Monday? I see the IMF has just issued an Armageddon press release from Washington as the G7 and Euroland crew fail to say anything new or meaningful, let alone DO anything useful.
My money's on another week of mayhem followed by an extended bank holiday (which I think the headline writers refer to as a "global systemic collapse of the banking system").
Time to stash some cash to tide me over methinks.
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Yes, no doubt bankers (generic term) must take some of the blame. But I also feel that had a large proportion of our gold reserves not been sold off at rock bottom prices, that the government had not squandered so much of the huge tax take from the last ten years, that had the golden rule of borrowing only to develop as opposed to maintain been adhered to and the rules not changed at the Chancellor's whim, that the same Chancellor had resisted the temptation to build his 'stability' on a sea of debt this country would be in a very much better situation to withstand this downturn than we appear at present.
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Sir PG is talking about purchasing. Just as I thought, there must be money to be made already if you are super rich and can afford to take a risk of losing some money at the outset.
Who else is buying into what might seem high risk? If you can spread that risk across a range or buy specific stocks that you know are now at too low a value, say mining, energy etc, stuff that will always be needed. Oil now seems like a bargain. We should be building reservoirs for the stuff to stockpile, or refilling the North Sea reserves. Who would have thought that? Only a few weeks ago we were about to run out of the stuff and the price was running out of control.
If the bankers have been naughty so to has the stock market. Have all the shares been overvalued to such a degree? Or is it like house prices in as much that there was no real basis for their value? Do investors not look at the accounts before making a judgement about these things?
I guess not or else there would not be wild swings up and down or are published accounts a waste of time? That opens another can of worms?
There is not enough honesty and openess throughout finance and business, not that that is new!
It is just worse and more immediate now.
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I am afraid that ROBERT PESTON and a few other "sensationalists" are only out to make a name for themselves.
The problem is that they will RUIN many ordinary people's lives in the process. (Self-fulfilling prophesy springs to mind)
Read the sensible comments,on the BBC News page, made by Sir Philip Green.
Why can't we have a few like him to run the country?
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How's about we get back to real, proper money. Y'know, the one based on actual stuff - hard labour (physical or intellectual) and useful, long-lasting goods. Here's how to do it.
Join a time bank. There's loads starting up and although at the moment your "time" is not "worth" anything other than "time", that'll change soon enough.
Because pretty soon, local businesses won't have the "money" to pay for goods and wages (or there won't be any banks left to provide that type of facility) and will need another way to pay for these things. If those businesses start accepting "time" as payment from their customers, they can then pay staff and suppliers in - you guessed it - "time".
Because you can only earn "time" by actually DOING or PRODUCING something, the money supply cannot be vandalised by money-makers betting on the future value of stuff - the stuff is always worth the "time" invested in it (this should have the added side-effect of effectively eliminating interest. This is a good thing. Think about it.)
Join a time-bank - it makes sense.
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quote42: "Government attempts to 'fix' the problems will simple extend the duration of the pain and more than likely make it ultimately worse".
Very well said. That statement doesn't need further explanation. Yet it has to be heard by someone and I very much doubt that the people in charge are even able to listen to the truth. If they are, why didn't they listen in past years when they were warned over and over again of the disaster waiting to happen.
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Sounds like a sack race, can't they televise it as a reality show. You know bit like a pancake race but with toxic bonds, dont drop them banker. Or three legged banker races, points awarded, no that wouldnt work you would never get two bankers to work together. Golfing weekend for the winner who picks up the most taxpayers muney, can't do that AIG have had that already. Vote off the banker you dislike the most. Could raise more money than the treasury on the phonelines. Open the box, oh youve got the icelandic bonds, sorry you have latrine duty. Or how about a memebr of the public interviewing them and asking pertinent questions before they are allowed to have their application considered. Still the bankers want us back in the stone age. How many bankers does it take to change a light bulb in the stone age - A light bulb - who needs a light bulb if you have a wicker man.
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re Banker Bashing.....
we all need to remember that one of the main problems has been the general greed of the public. This wasn't caused by bankers, but they did help facilitate the greed, by loosening lending standards to those that it seems really can't/couldn't afford it.
We all know people that probably spend too much money, and we all know some of those people fuel excess spending on credit cards, and we can even read about people paying their mortgage on their credit card!
Now where does the blame lie for this? probably the bank should of simply said no, been stronger in credit checks, or quicker in taking back assets.
The Times ran a story earlier in the week showing a perfect example of the utter nonsense that individual members of the public were allowed to get away with. The article (Tues I think) related to a chap who was unsure if he'd lost circa £180k due to having a bank account with Icesave. Where did his money come from? a buy-to-let mortgage from Northern Rock!! So this chap decided to speculate on the property market (as have far too many people - the root cause globally) and then decided to be greedy (perhaps) by putting the money on desposit at the highest interest rate possible, by a bank that needed to advertise high rates because nobody would lend it money. There is a reason HSBC don't offer the best rate on the high-street. They don't need the money that much.
You could simply argue that society has become too materialistic that many would rather be seen with it than without it, and they do this by borrowing on credit cards/topping up the mortgage when they really should know better.
It was far too easy for everyone to become a property developer. In fact, just for fun, why don't we blame Property Ladder! :)
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#28 dktreesea
I have to disagree you and hope that I do not work for a company that you run as it would eventually collapse.
Ask any accountant and they will tell you that most business failures occur because of cash flow not lack of profits.
Indeed look at Northern Rock which at the time was making good profits but died as a commercial company because of the collapse of its cash flow.
Young businesses do need help with cash flow but beyond a certain point that business as to fund itself or at some point it will fail.
Returning to the banks 2001 virtually all UK banks were self funding and indeed HSBC , Standard Chartered , Co-op , Nationwide and many others ARE self funding not relying on the interbank market as their source of funding.
We need to break up RBS, the Halifax has a huge depositor base and can be easily salvaged even with a falling housing market, shrink the RBS side.
UK has 1 person every 5 minutes going bankrupt or insolvent and the average household has a non mortgage debt of £9,500.00 .
So who is left to borrow?
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If I go to the bank and ask for a loan right now, mortgage or personal, there's a very good chance I'd be turned down flat for some reason like my credit rating's only 99.9% (or some similar excuse)!
Why then, can't I say NO back when the banks come calling to me, the taxpayer?
I could be paying for this for many years to come. Does that sound like a loan to you? And one I wasn't really looking for at present.
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We're throwing more and more money at the problem but what if the markets just don't accept this fix? When the markets open on Monday heavens knows what's going to happen. Has anyone yet thought just how we could manage without a viable banking system?
I've worked through bank strikes but that was different. Then you stock piled cheques and moved cash around between businesses so the system did manage to keep going. But this won't be the same. Then you knew that an operational banking system would return. If the banks fail how do we cope?
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#28
I'm a contract analyst/project manager in IT.
I worked in a financial organisation in IT for a period of time and was very shocked and disappointed.
There were no procedures, no standards - infact ex students were encouraged to find their own path etc. Seeing the chaos in the organisation and the do as I say work ethic I fast came to the conclusion that little work was being done. The department was nothing more than an exercise in justifying profits within the organisation.
I couldn't stand to "work" there.
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"I expect HBOS, Lloyds TSB and Barclays to disclose that they're raising up to £25bn between them - all of it underwritten by us as taxpayers or simply given to them by us (aren't we generous?)."
Peston at his irresponsible best. Sensationalist guff that a tabloid journalist wouldn't get away with.
An analyst would not be able to advise his/her clients with unsubstantiated hunches or hearsay. So why is this man allowed to significantly sway investor sentiment on a massive scale?
Auntie, you should be ashamed of yourself.
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No 25 (Hiddenranbir) - re: CDS auctions
There is some info here . . .
http://www.cds-market.com/
Though - for some reason - there seems to be very little media coverage of this subject.
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I believe the high st banks' position is untenable now. These are the emergency steps I would introduce.
Nationalise all of RBS, Barclays, Lloyds, HBOS and HSBC. Sell off all their assets to recover tax-payers money.
Use funds recovered to reimburse depositors. The shareholders lose everything and all the banks assets (such as buildings) have to be sold.
Introduce exchange controls so that money cannot be syphoned off abroad. This will also stop the bankers themselves from hiding their money abroad.
Allow new banks to form (eg Tesco) with clean balance sheets to provide a clearing service so that customers can pay direct debits etc. These new banks can employ some of those laid off by the majors.
The current measures are simply mortgaging our children in the form of future tax. We should take ourpunishemnt now and refuse to put more good money after bad.
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+51
Halifax belongs to HBOS not RBS!
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#46
Isn't this the same Sir Phillip Green who gave an Arcadia dividend of 1.3 billion ?
Holding 92% of the shares both himself and his wife earned a total of 1.17 billion pounds.
As I understand it he paid no tax what so ever.
Why ? because he lives in Monaco.
IMHO a person who doesn't live and pay tax in this country should not be allowed to run any company or be a director. They should also have strict limits on the amount of money they can take out of the country without paying Tax.
I am totally DISGUSTED by your comments.
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RBS NatWest seems to be a 'poison chalice' for its leaders -
Remember the previous senior executives, including Tom Frost, who had something of a roasting from the press after Blue Arrow and had to step down some 18 months ahead of his planned retirement date. According to the International Herald Tribune of 31.3.1992 "the recession and its puny profits are forcing the bank to re-examine its forays into investment banking and into the United States, and to take an axe to costs across the board".
He was followed by Derek Wanless who, according to the BBC News website report of 25.2.2004 was ousted as Chief Executive of NatWest bank in October 1999 after the RBS takeover of the bank "after the once-mighty (NatWest) bank fell prey to a number of hostile takeover attempts from much smaller firms"
And now, Sir Fred appears to be another pending casualty.
Perhaps he too will subsequently be asked to report on the failings of the NHS or some other hapless part of our State machine (as did Mr Wanless).
As for Mr Peston's views, my feeling is that he comes across as an economics 'guru', whereas in reality he is simply the typical BBC reporter sewing the meltdown scenario. That approach surely cannot be helpful to anyone, public or Government, at this very difficult time!
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50 tommy sm
If you have looneys borrowing looney sums from looney bankers that are regulated by looneys that is what you get. Ladders and Snakes, or should that be Snakes and Ladders. Better not mention the snakes they bite.
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Have you ever tried to fix something whilst being intently watched by others? Your abilities are dimiished as you constantly answer questions and are distracted from the task.
Whilst there is a role for being informed, is there not also a time when the bigger picture is best served by avoiding constant microscopic scrutiny. Those attempting to resolve this awful mess stand a greater chance if they are not constantly firefighting rumours.
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Sorry, but I fear the 'banker bashing' won't stop until those in the financial industry guilty of criminal negligence, false accounting, incompetence and fraud have been found, tried in a court of law, and if guilty, imprisoned, and their assets stripped from them as proceeds of crime.
Anything less would be a cover up and a farce.
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This comment was removed because the moderators found it broke the House Rules.
No 56. Vegetable_Grower
Firstly I am assuming that Derivative are CDS's.
Maybe it's because this market is so huge ($640 trillion), agains't the total World Wealth ($170 trillion), that even a minority % loss in this market would bankrupt the World's economy. No one want's to peer over the edge.
No. 46 I see the IMF are now warning of a Global meltdown tonight - are they sensationalists too ?
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#55
You said it "Analyst".
An Analyst is a person that advises clients.
Is Robert Peston a Financial Analyst ?
Is he getting paid as a Financial Analyst ?
Is he on commision ?
Are you paying for his "advice" ?
If you are an "Investor" then what are you doing on a BBC blog trying to get Mr Peston sacked and the BBC blamed to boot ?
I think you will find that the companies involved have a far greater and important role in ensuring they report the facts to the market in a timely manner.
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History suggests that very large organisations have an internal philosophy /stream of ethics / morality which is very difficult to shift without very urgent cause.
Tunnel vision is not limited to banks and politics (organised religion and the legal system must come close), but it does take clear heads and very strong action to change and improve matters.
Most up to date banks have so espoused computer models of financing and custromer services that it will be like stopping a mega tanker at full speed. Nothing will change instantly.
So for a small factual diversion - the 'latest' Bankers' Almanac ratings on world bank assets. (Quoted in million US$ but relating to global business).
1 (1) The Royal Bank of Scotland Group plc , Edinburgh , UK $3,782,880
2 (2) Deutsche Bank AG , Frankfurt am Main , Germany $2,953,727
3 (3) BNP Paribas SA , Paris , France $2,477,272
4 (4) Barclays PLC , London , UK $2,442,996
5 (5) Crédit Agricole SA , Paris , France $2,067,577
6 (6) UBS AG , Zürich , Switzerland $2,007,224
7 (7) Société Générale , Paris La Défense , France $1,566,904
8 (8) ABN AMRO Holding NV , Amsterdam , Netherlands $1,498,849
9 (-) UniCredit SpA , Milan , Italy $1,493,799
10 (9) ING Bank NV , Amsterdam , Netherlands $1,453,382
11 (10) The Bank of Tokyo-Mitsubishi UFJ Ltd , Tokyo , Japan $1,362,598
12 (14) Banco Santander SA , Boadilla del Monte , Spain $1,334,671
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Stop me if i'm wrong, but I still fail to see what the politicians or the banks can do to solve this whole mess.
Surely the problem is with the off balance sheet derivatives called CDS. It seems to me that the governments of the world have done enough to manage to stabilize these banks by pumping many billions of dollars into the system, but neither the banks nor anyone else actually knows what liabilities are actually out there so will not lend until they can work out the mess. With the SAME money being used to underwrite many differant CDS obligations (sounds a bit like a Ponzi scheme doesn't it?) once one bank goes there will be so many defaults it will bring down the whole system.
The politicians are actually doing all that they can do, which is absolutely nothing. All they are doing is telling us that the system is sound and reliable - blah di blah.
They lower interest rates around the world - WHY? That doesn't affect the rates that banks lend to each other at. Why use a tool that governments use to tweak and fine-tune the economy when the sword of Damacles is hanging over the banks.
Are they seriously just going to play a waiting game and see what happens over time. That would be a serious waste of money.
We need to cut out the crap now. Create a new banking system that will lend to us to keep the economy going and dump the rest of the rubbish - unfortunately that may mean Gordon and Alistair's directorships with various banks going up the swannee but there you go.
So what now? Well it looks as if we shall actually see how the film The Italian Job actually ended doesn't it? Wealth beyond our imagination at the back of the bus, counterbalanced by all of us at the front of the bus - no one move a muscle - 'ang on i've got a great idea....er ..er!
This is the self preservation soci.......
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#57 wykhamist
I am totally with you my friend - we have been saying it for a while now and as more people are actually becoming aware of the real situation many more are coming to the same conclusion.
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RObert, I enjoy your blogs immensely and find your 'take' on economic events to be both insightful and precise. However, I cannot believe that you believe that we, the people will have any say in what we want from the banks, the politicians will have what they want already identified and we won't get a look in. I may be cynical but someone is lining their pockets in this 'crisis' and its most likely the speculators, the bankers themselves and their political 'friends' most of whom are in the business of setting themselves up rather than setting things right for society, despite their many protestations of 'service', most of which society could do without very well.
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The more we wriggle within the existing concepts, the more credibility we lose. The IMF thinks we're on the edge of terminal meltdown, if so, then the rulebook's out the window on a Mugabe scale.
There's firstly, as always, the evidence of the old diplomatic adage of letting someone else have your way, which in this instance means they pick up your bill. The worst offender here is, of course, the World Bank, whose role in this crisis has been remarkably silent.
Then, secondly, it's arguable that politics as a whole is discredited - the average Tom, Dick or Harry was happy to leave politicians to their sand-castles as long as they didn't affect him. Now that it does, then he perceives them as having failed. What their vengance may be will be interesting; I'd be watching the emigration figures like a hawk.
Thirdly, there's still the question of cashflow. Where's the cash gone? Moreover, has anything been done to stop the haemorrage, and remove the cause of the harm? The first rule of crisis management is get rid of what's been doing the harm, BEFORE stabilising the situation - the governments have been doing the second without tackling the first, which means everything done so far's probably wasted - fortunately there's a difference between proposing a 700bn injection and actually doing it, we're probably only 10-20 bn in. It's surely time to clear out the sceptics by force - mass redundancies in the City will tend to concentrate minds wonderfully.
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Almost said this when I happened to bump in to you in cheltenham today. I think you are in danger of becoming part of the news rather than just reporting on it. This is real money affecting real lives. The more we whip up the story the worse it will get. Why can't the bankers and news reporters do us all a favour and take a deep breath and calm down a bit. People are creating the panic so it will take people to stop it.
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Dear Mr Peston,
I am looking forward to buying your book in a few years time (assuming an economy still exists). I am sure you know a lot more than you are allowed to print!
As to a title, how about "The Economy, my part in its downfall".
Keep up the good work ;-)
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No 65, landrace :
"Firstly I am assuming that Derivative are CDS's."
I believe it's the other way round, ie: CDSs are ONE type of derivative. Though I am certainly no expert :o) I think the CDSs are only a "mere" 58 trillion dollars. Whatever, still a very big number.
I think you may be correct . . . too scary to look into.
Another source of info:
http://en.wikipedia.org/wiki/Credit_default_swap
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I'm not an academic, an economist, a city trader, a politician or a chief executive so please can someone tell me if I am correct in my assumptions.
1. The banks have created this problem through reckless lending. This isn't just the American banks but the UK ones too.
2. If this situation wasn't bad enough the banks concerned then, in a bid to maximise short term profits and bonuses, bought the very same reckless loans when they were bundled together into investment packages.
3. Nobody thought at any stage, including those paid to do exactly that (CEO's and FSA), that this was completely irresponsible.
4. The government finally get involved and tell the UK public that the banks must be saved to protect the wider economy.
5. They give the banks (private companies) our money which will result in higher taxes or less government spending on public services.
6. The banks then refuse to play their part in the rescue they so desperately need by still refusing to lend to each other.
Should this not tell us that they know something we don't?
My guess.......they know that house prices are going to fall by at least 50%, more mortgage defaults are imminent and a massive recession is on the way. They know very well that the good times are well and truly over and it's time to pay for their (both govenrment and banks) irresponsible behaviour.
The problem is that it is the people that didn't borrow excessively, lived within their means, were prepared to wait for a better car, larger house and more exotic holidays but did put money aside for a rainy day, 'invested' in a pension and maked do with what they had are really going to pay the most.
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Robert is at it again!
More doom and gloom.
Is there any need to report such negativity?
This only leads to more investor uncertainty. Stock markets hate this uncertainty and fall as a result.
Governments are trying hard to install some confidence and then we have this type of reporting.
At this time I would ban this type of reporting as it is dragging the whole market down, especially the banking shares.
How is the market suppost to recover whilst this continues?
The novice invester will become spooked, sell their shares at a massive loss when in reality it could well be prudent to sit tight at this time.
Many people are going to make a massive amount of money out of these stock market falls by purchasing some of these shares at rock bottom prices.
How far will these shares fall on Monday due to Roberts comments. RBS for example could well fall another 20% and savy investors may then move in and make a killing.
There is a famous saying that surely should apply during these times: If you have nothing positive to say, then say nothing at all.
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WHAT A CROCK!!! of, you know what.
The more I read, the worse this mess becomes. AND, all this blogging, bulliten news and economic mumbo jumbo, funny money , hocus pocus, TRIPE...COMES DONE TO THE SAME OLD THING. HONEST, TRUSTING CITIZENS ARE BEING HURT EVEN MORE BY THE SAME FRAUDS THAT CREATED THIS ECONOMIC BREAKDOWN IN THE FIRST PLACE. This crisis has turned into a worldwide PANIC, and this needs to be settled down or frozen until a real PLAN is inplace. No more just running about throwing trillions of dollars at problems before they have been sorted out and understood abit. At this rate most citizens will lose faith in the entire process soon, we are on The Sinking Ship of State! SOS, SOS, SOS.......
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Well, well, well.
We all knew it was coming - check out the IMF statements!
Perhaps Mr Goodwin would be kind enough to sell his house and return his bonuses so that RBS can compensate all the businesses that have gone bust and families he's caned.
At least he's had the guts to be first up to the plate.
Robert, just a little point - didn't Barclays say on Friday that they wouldn't be using the government funds, as they had secured what they needed from China? Or was that HSBC?
No, I'm sure it was Barclays.......
It's so mad at the moment, I apologise if I've got this wrong.
Did I see you say balance sheet - can we see.....pleeeeeaaaaase?
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Hey, #23, Tantivvy, please don't worry about standing in the queue at the benefits office at your age. They do it all over the phone now.
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Robert
Here you go again. Can you stop bashing the banks for a while.
It's not helping the situation.
Did you learn anything from the complaints made about your blog on Monday.
Is this all about you? About you getting the 'scoop' irrespective of the damage causes to banks' share price.
So, will RBS open down on Monday - based on your speculation that Sir F will be replaced?
Less speculation and more news please.
Less about being the first to report news - and more about hard facts please.
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Robert
Please less of the stirring......comments such as the following are not useful at all.
"I expect HBOS, Lloyds TSB and Barclays to disclose that they're raising up to £25bn between them - all of it underwritten by us as taxpayers or simply given to them by us (aren't we generous?)."
Stop speculating. Please!
You are doing more harm than good.
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This comment was removed because the moderators found it broke the House Rules.
Just read the FT "State to save HBOS and RBS".
Seems as though the financial gurus are still willing to shaft the public at the first opportunity:
"A handful of Treasury officials have grown concerned about the potential for conflicts of interest emerging between the advisers working on the bailout deal and the financial implications.
For example, Goldman Sachs, which is advising Royal Bank of Scotland, also has large financial exposures to the bank."
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The shareholders of banks gave all this the thumbs up. they are the true owners of the banks, and the largest pension/insurance funds keep a very close eye, and give very frequent opinions on how they think things should be run.
No chief exec or senior mgmt has suddenly started shredding paper because they have been up to no good. There has been no dark magic trick.
Banks require enourmous amounts of funding to sustain their businesses, and most of the time, the money they borrow gets passed on to individuals, businesses, local authorities etc. When they can't borrow because of a crisis of confidence then they have to go to the lender of last resort, in this case the government. Too many things fall down if banks can't pass on their funding.
Jail? you serious! nobobdy claimed whilst the stock market kept going up and people were getting divident cheques posted through their letterbox.
There are so so so many wrong things related to this blog, it is worrying. I can understand the anxiety, but please take a step back first.
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#57
What complete nonsense. Other than the tens of thousands of bank staff you seem to want to lay off, any tax payers money used by the banks will be repaid. This will not necessitate having to sell assets such as buildings as you seem to advocate. Major UK Banks are liquid and depositors funds are safe contrary to what the press would have you believe or like you to believe.
This is a global issue and not specific to the UK. Let's get some perspective here. Yes banks are seeking help from the government. Yes this means using tax payers money. Banks have put tens of billions of pounds in to the government coffers over many years for the benefit of tax payers and non tax payers alike. Did the banks get any praise for this? Of course not.
Oh and Mr Peston when you say that banks should return to 'know your customer banking' then i invite you to my office to see how we have been doing exactly that with out customers for many years and continue to do so.
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From FT online:
"Angela Merkel: the woman who saw the crisis coming"
"Merkel has declared that Britain and America are to blame for the crisis by repeatedly blocking her efforts to introduce better regulation into the markets. Steinbrück declared the US was now a busted flush as a financial superpower.
The German stance should not come as a surprise. When Gordon Brown claims nobody saw the crisis coming, Germans could reasonably take that to mean he wasn?t within earshot of Merkel.
At the Davos World Economic Forum in 2007 Merkel said: ?We want to minimise the structural risks in the international capital markets through greater transparency.? Nobody listened.... "
"Steinbrück said: ?They [the proposals] elicited mockery at best or were seen as a typical example of the German penchant for overregulation.?
The Germans finally got their way at the Paris mini-summit a week ago....."
"Further details on the Paris agreements are expected to emerge during the EU summit this week in Brussels. For the Germans it would mark the end of years of lecturing from Brown over their reluctance to embrace free-market liberalism. Neither Brown nor Blair ever missed the chance to remind the Germans that their treasured social-market economy was a bit fuddy-duddy and not a patch on ?Cool Britannia?. Berlin is thankful it only half-listened. "
Seems Tony Blair and Gordon Brown were warned some time ago but mocked the messanger instead.
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As an ex-bond trader for natwest (now rbs) to me it's obvious that we are engaging in a catastrophic waste of money attempting to fill those black holes of stupendous losses in bank balance sheets and to shore up their woefully inadequate capital. Banks are *conduits* for capital but they are not *sources* of capital as we are painfully discovering. We need to to go directly to those current fonts of wholesale money, wherever they are, and find the means to attract it back to financing the british economy and reasons for doing so. How do you do that? Ask them!
My solution: by starting pristine new investment conduits ('banks') and providing investment opportunities that are no-brainers in this environment (easy). But chucking money into the black pits at the centre of the banks' balance sheets will merely ease the pain for their shareholders and **especially** their bondholders. It will do nothing at all to get lending restarted. It's scam. Good money after bad. You are merely reimbursing 100cents on the dollar to the bondholders for their lousy decisions.
What i would like to see is some investigative reporting from yourself talking directly to these sources of intl capital and ask them straight: 'what would convince you to lend money directed toward the british economy? what return? how much risk? what guarantees?.....'
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Robert,
The Government has decided to buy, on our behalf, shares in the ailing banks to support them in their time of need and improve liquidity. It is repeatedly being said that this is taxpayers money at stake. What does this really mean?
My question - is this money actually from tax returns as this phrase sort of implies? When Ms Yvette Cooper (and Mr Brown) was asked the other day by a BBC correspondent where the money was coming from for this bail-out she did not offer a straightforward answer. When pushed Ms Cooper, rather surprisingly I thought, indicated from the markets!
Does this mean the big investors ie the pension fund managers? Will they be encouraged to buy into the banks brokered by the Government? If not then who? I thought it might be the IMF, Japanese or Chinese investors. But this would not be our money of course.
If it is our money and it is not actually from the tax returns pot then it's is our pension funds at stake here. Worrying to say the least. People should be made clear on this; our tax returns are one thing our family silver is quite another. I think the Government has a duty to be transparent at this time but I am not an accountant and find much of the vocabularly of finance goes all too easily over my head. Keep on picking it apart for us Mr Peston so we know where we stand.
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I I was investing a large sum of money in a company I would want to do "Due Diligence". For that I would require a full set of accounts and open access to the books and the officers of the company would have to fully and openly answer any questions that I may choose to ask.
If confidence is (ever) to be restored the Banks MUST, as a matter of the utmost urgency, produce up-to-date audited accounts. Throwing money at them will NOT work by itself. In fact it is throwing money away, and taxpayers' money to boot!
I would recommend suspending the listing of all banks and related financial companies until they have produced a full set of audited accounts. This will steady the markets and prevent destructive speculation.
(I would wish to see particular emphasis on the valuation of assets and liabilities both on and off the books. I would also like to see assets valued at mark-to-market as well as on a net present value of future cash flows income basis with significant risk analysis, including the risk of counter-party default. Valuation should be on the bases of both a going concern and bankruptcy. There are plenty of honest professional accounting skills out there and they must be used. OK it will take some months, but at least when it is done we will al know where we are and then perhaps confidence will return, indeed I do not believe that confidence can return without full and open disclosure, given where we are today.)
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For all those people blaming the media for causing the crash - the real effects are already in progress.
This one is a real corker recommended by FT online:
"The crash of 2008: now the pain sets in"
"Klaus Baader, an economist at Merrill Lynch, predicted a rise of 350,000 in unemployment as companies shed staff to protect their profitability. ?The real recession in the UK hasn?t even begun yet,? he said.
Economists expect unemployment to rise sharply over the next two years, with some forecasters anticipating a rise of 1m in the jobless total. Already, say business groups, the impact of this is being seen."
Some of the price movements are due to realisation of profits coming down for the next two years.
"The stock market has already got wind of what will be a string of huge earnings down-grades as businesses suffer from the downturn. Consensus forecasts were for 6.7% profit growth for 2009, but Philip Ish-erwood, equity strategist at Dresdner Kleinwort, said investors were only now coming close to predicting the extent of the damage heading their way.
He predicted a 5% drop in UK corporate profits this year, plus a further 10% fall next year. ?And this,? he said, ?could be optimistic.? "
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Sir Fred Goodwin? Who cares? How many of his customers in RBS, Nat West or Direct Line Insurance (and all the rest) have even heard of him, let alone talked to him, or seen him? How many of them are going to be saying 'Oh, poor old Fred'? 0.001% perhaps?
That's perhaps the whole trouble with the financial industries, they think their bosses are their customers and their customers are nobodies.
This Government has - amazingly - over the last few years managed to get many parts of itself, local government, the nhs, social care and education a lot more focussed on delivering evidenced, measurable, customer outcomes. O.K. still way to go, but it's better than some years ago in many places.
Perhaps this 'nationalisation by stealth' process will help banking and associated financial service industries get back to basics, i.e. delivering services to their customers as opposed to squeezing money out of their customers by every means available to them, many of which are, in all honesty, quite unscrupulous.
But, in the absence of properly implented, effective, regulation, that's what greedy people will do.
Just as, if given the chance, some will take on the role of school bully for no other reason than they had that chance.
We read every day just how much many consumers do not trust bankers, but now they are even untrusted by each other. How did these 'wonderful', highly paid and allegedly worthy of such vast remuneration, bunch achieve getting their profession into this mess?
It seems to me to have been by bad management, poor judgement, being greedy and not having the skills and abilities that matched their huge wages ... in the main.
So, another one bites the dust.
The world needs a new breed of banker for a new type of bank.
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Nationalise the banks. The government could pick them up for a song and sell shares in them to institutions and individuals in the form of government savings bonds. I don't really see the point in the government lending money to the banks and having shareholdings when it could own the whole shebang.
I'm tired of hearing the market's mantra and myth about how much more efficient it is than government. It's cosmetic nonsense readily accepted by a gullible public that's all. Look at the idiotic duplication among the utility and rail companies!
Governments might not be much more competent than business but at least you can kick them out after four-five years and they are more accountable and less lightfingered (at least in properly functioning democracies).
We must do something to avoid the spectre of the robber barons making huge profits from the taxpayer at regular intervals (Black Monday and now this) by rigging the financial markets so that everyone else carries the can. These people are parasites and should be recognised as such. They are souless creeps who have reduced life and everything it to the status of a commodity.
It's lamentable, two thousand five hundred years after Croesus and Midas, we still haven't got the moral of the story.
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#59
What an excellent comment. I couldn't agree more. Green's knighthood is a disgrace. Who should be more ashamed: Green for his disgusting greed which exceeds even his retailing expertise or the government for rewarding it?
Nothing shows this government's abandonment of morality and its technocratic worship of money better than this: the government gave a knighthood to a man it should have been imprisoned for tax evasion and shamed as the unacceptable face of capitalism.
This is not irrelevant either, beyond Green's nerve to comment on UK-plc but refusal to contribute. The unthinking worship of capital is what has allowed us to get into this mess. And, we'll need to ensure that people like Green contribute to the enormous cost of cleaning up this mess.
I also wonder why the BBC continues to refer to Green as the owner of companies of which he isn't. His wife, the Monaco-domiliced Tina Green, owns these business to avoid UK tax. The BBC shouldn't flatter Green or dignify the tax avoidance.
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81 - JimsterBond007:
RBS needing to raise £10bn + Lloyds TSB and Barclays needing £25bn between them is hardly "speculation". After all, these banks agreed to raise extra capital last Wednesday. If anything, Robert is only going over old ground here (but aren't we all encouraged to recycle nowadays?). The exact figures may turn out to be slightly different but they seem to be in the right area.
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Is the Govt applying pressure and guarantees to get the £4bn owed to investors in the Icelandic banking system released because it knows those same investors will breathe a huge sigh of relief at having not lost their money and will then look at keeping their current & future savings much closer to home?
- from a (former) Icesave customer
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If you want to know why we're in this mess please have a look here: [Unsuitable/Broken URL removed by Moderator] It explains how the fraudulent Fractional Reserve Banking system works
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From FT online:
"Pound 'will keep falling'"
"STERLING will continue to slide against the dollar as long as financial turbulence persists, analysts say, as international investors dump the pound and euro."
Seems as though the UK is not "best placed to survive the storm" as some would have us believe.
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#81
It's not his job on the line, whatever happens to the financial markets. Reporters exist in a moral vacuum, free to criticise others for their decisions that affect the economny, yet amazingly touchy about receiving criticism themselves for the same thing. Somehow they believe they alone are immune from considering the consequences of what they do.
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Since I have no training in finance or investing, I'm hoping someone will explain what it means to say (some?) derivatives are carried "off the balance sheet," and what the implications of this are. Does this have some implication other than the fact they are unregulated and no one knows who holds them?
I've tried to follow what's been going on with the auction of Lehman Brothers bonds and the fact large sums must now be paid by those who sold(?) the credit default swaps (i.e., those who have been receiving an income stream from the insurance "premiums" paid by the CDS buyers who wanted to insure their Lehman bonds against default). (Please correct me if I've got this wrong!)
Do (did) banks as well as insurance companies (like AIG) also underwrite (sell) CDSs, or did they just buy them themselves as insurance against bonds they have purchased?
Does what applies to CDSs ("off the balance sheet") also apply to other derivatives? People mention the huge number and amount of these other derivatives. Are they significant in the same way as the CDSs, or are the latter the only kind of "bad" derivatives?
Any clarification would be appreciated.
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No. 50 tommysm
"we all need to remember that one of the main problems has been the general greed of the public. This wasn't caused by bankers..."
You have a point; there's no irresponsible lending without irresponsible borrowing.
But the problem here is not that individuals succumbed to temptation, so much as that our whole society was reshaped around debt-financed lifestyles of conspicuous consumption.
It's very difficult to opt out of society, and very costly, not least in terms of mental health.
I rent a flat from a housing association that's taken on our local council housing stock. Nothing wrong with that - ask the Singaporeans, a hard-working, disciplined people who live mainly in public housing developments.
But I would never tell my office colleagues where I live - they would be shocked. In Britain, having a mortgage is like having a regular job, a badge of virtue and social competency; living in social housing is a badge of failure, like being long-term unemployed, a sign that I've joined an 'underclass' living in 'sink estates'.
So while I'm glad I'm not burdened with a mortgage, I have some sympathy for people who've got out of their depth in debt.
And who reshaped our society around debt-fuelled owner-occupied hyper-consumption? We all have a responsibility, but in practice it's rich, powerful, well-connected people in politics and business and media, and not least the bankers, who pull most of the levers of power most of the time.
When we rebuild our society after the coming crash, we need to insist, if not on 'shared values' (a bit too much to hope for in these postmodern times), then at least 'arms control' mechanisms to restrain the upward spiral of greed and envy.
Don't envy the greedy, fearful rich. Pity their lost souls!
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For all those posters like Number 76 I´ve got news for you.
This crisis is real, it is not going to go away, and it will rip into the wider economy, and its effects will be devastating for a great mass of people.
There is nothing that banks, bank executives, Governments, politicians, academics or journalists can do about it, and, irrespective of what they say, neither can they do anything for you.
No-one is coming to rescue you, and a lot of the institutions that you think will be able to support you will themselves fail and be revealed as impotent.
The longer you spend in self delusion or trying to blame individual people then the harder it is going to be to adapt.
The "system" became all powerful and each component part of the system served to reinforce the inflation of asset prices and the debt bubble.
The people that created lunatic derivative instruments did so to prolong and develop the bubble economy. That´s what their employers, managers, shareholders, suppliers and customers wanted them to do. They were merely the enablers. Had they refused to do these things they would have been out of work. What would you do -earn a great deal of money, or be unemployed on a point of principal? If they hadn´t done these things then someone else would have and nothing would have changed.
What is happening and what will happen is all necessary - do not greet this with fear, do not seek to apportion blame, and do not delude yourselves that what is happening is not happening.
People can live just fine without banks, without plasma screen TV´s without giant all intrusive businesses, without alligator shoes, without selling each other insurance, and without selling themselves into modern day serfdom to live in million pound houses.
Sure most people will lose money and a very few will make out like bandits - but this is no different to any activity anytime anywhere.
Be peaceful and be happy, because if you´re not then history tells us that great tragedy will flow.
The first step to peace and happiness is in understanding what is going on. This ¡s a failure of the system, and pretty much everyone was part of the system, therefore no individual is to blame (no matter how stupid or egregious they appear).
If you don´t like the system, and what its about to do to you, then it can be changed -today it is weak and has few defenders. Maybe you´d prefer local banks and local shops where people know you and where you know the people running the banks and the shops. If you want them, if you will work for them, if you will support them then you can have them - now is the moment of opportunity
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G7 meet, PLEASE, PLEASE NO COORDINATED RESPONSE!!!
Anybody that understands a market knows that they operate on the basis of difference - gold is safer than stocks or pounds are better than Euros - this is the basis of markets. Parity is stagnation. A united policy is going only one place, not disaster for some, but disaster for all.
Secondly, bailouts will come and bailouts will go, the only point at which banks will lend to each other and free up the credit market is when they believe they know the truth and how bad it really is. Now is not the time for a bailout, now is the time for a government enforced audit and then bail them out - it will be a lot cheaper in the long run! - there is no point trying to re-inflate a balloon with a hole in it Lord Melchett Brown/Capt. Darling
I feel like Herbert Lom...Please spare us the Inspector Brown solution - in the dark, looking for a bumb!
best
Nick
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From Times online.
"Lehman Brothers demise triggers huge default"
"An auction of Lehman?s bonds yesterday determined that the bank?s borrowings were worth only 8.625 cents on the dollar. The valuation leaves the insurers of the debt a bill of about $365 billion. It is not clear whether the insurers, which are required to settle the bill in the next two weeks, will be able to pay ? a development that could further undermine increasingly stressed capital markets."
So expect the stock market to keep going down. Also note that these debts have very little real value in todays market. Which seriously makes me wonder about why the public is investing in any bank. Add to this the potential exposure via CDS's - why risk the exposure ?
"About 350 banks and investors are thought to have insured an estimated $400 billion of Lehman?s debt through complex derivatives, known as credit default swaps. These include Pacific Investment Management, the manager of the world?s largest bond fund, Citadel, the US hedge fund, and American International Group, the insurer that the US Government recently bailed out with two loans totalling about $123 billion.
The Times has learnt that the US Treasury has been overwhelmed with requests from executives of other beleaguered sectors who are seeking a similar bailout scheme for themselves...."
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Robert as RBS shareholder who was fool enough less than 6 months ago to take up more shares in the rights issue, I would like someone from the RBS board of directors to explain to me how they can publish to the shareholder what looks like a healthy balance sheet as you mention, and still I have no visibility of all the toxic off balance sheet debt the bank is clear liable for. All I have to go on is the conjecture from you the media!!Surely this lack of transparency is illegal and the fact this wasn't declared to shareholders at the time of the rights issue is a fraud by the RBS board. Perhaps you can advise if we have a case to sue?
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Hang on - 'aren't we generous?' A large proportion of that comes from the institutions themselves. Not to mention the fact that as far as one institution is concerned, it wasn't personally responsible for getting into this mess, before it was told to swallow a large piece of undercooked balance sheet. Now it needs help digesting.
I wouldn't mind, but the last thing we need right now is smarmy, self-righteous reporting. Pension gone south, Peston?
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tester
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#98
"It's not his job on the line, whatever happens to the financial markets. Reporters exist in a moral vacuum, free to criticise others for their decisions that affect the economny, yet amazingly touchy about receiving criticism themselves for the same thing. Somehow they believe they alone are immune from considering the consequences of what they do."
Hmm, I (and many others I suspect) could say almost the same as you, expect for changing one word...
It's not his job on the line, whatever happens to the financial markets. Bankers exist in a moral vacuum, free to criticise others for their decisions that affect the economny, yet amazingly touchy about receiving criticism themselves for the same thing. Somehow they believe they alone are immune from considering the consequences of what they do.
Might I ask that both Bankers and speculators examine their own morals before picking fault with others - and I suspect that I'm not alone in asked that either.
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Who gives a damn about old fashioned banking? Nobody seems to be questioning how will the government finance the bailout and its effect in future. Same lack of forethought when easy credit was made available.
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Credit default swaps for beginners.
http://vimeo.com/1915392
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Ralph M. Hawtrey, former secretary of the British treasury said: " Banks lend by creating credit. They create the means of payment out of nothing."
This power to create money out of nothing must not be with a bunch of greedy bankers but rightly belongs to the elected government, which is subject to the people at the ballot.
Bailing out banks at the expense of citizens will only end up burdening us with additional taxes.
The only option we have now is for the government to take control of all the banks including central banks. This will help boost the confidence of the markets and return the power of creating money to the people where it rightly belongs.
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poor moderators have had to take their break late today.
#89
I've been asking for balance sheets at least once a day since this began-thank you for joining my crusade-full up to date audited accounts sounds even better......but probably more unlikely still to appear!
Did anyone look at the world economic forum site yet-loads of funnies there regarding strength and competitiveness of our banking system-guess who gave them the data...?
The international Monetary fund were good to also point out that loans promised to countries in danger of not being given. So now we may not even be holding true to our promises in favour of the banking black hole?
Can GB force CEO's to resign?
And guess what? We all have to wait until next week for the juicy details-surprise surprise!
I don't think the country will be happy,Mr B until we've had our pound of flesh!
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I'd take a reduction in the amount of junk mail offering loans I don't want.
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Also, can anyone confirm if I remembered correctly about Barclays already borrowing from China to make up their reserves or something to the level required by GB?
There seems to be quite a delay on news stories on the web-site? Has anyone else noticed?
Where can I check the overnight Libor rates? Bloomberg said it had gone up again on their news ticker earlier.
Random thought -I assume the bank of England doesn't function in the same way as high street banks...and that our national money is not in Iceland!!!!!!!
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I wanted to post something about a report from Times online about Santander being shorted but I cant copy the report.
Oh well it's happening anyway by the same guy who shorted Northern Rock and then HBOS.
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Mr. Preston your work shoud be applauded.
However;
Are you a reporter or a speculator?
A specific example would be;
"That h's coded way of saying he's off, - possibly as soon as Monday"
If we are speculating;
Sir Fred Goodwin leaving RBS cannot be beneficial to any RBS shareholder or stakeholder. Especially in the current climate.
He is who has the experience and know how to deal with the ABN integration and make it a success. Have we all forgotten how he turned RBS into a major player through the integration of NatWest?
If we put ABN and global financial crisis to one side for a minute - NatWest and RBS are one of the best high street banks with the lowest loan delinquency rates for example. I'm not here to scream and shout about the success' of RBS;
However I think it is suicide for RBS to let go of Sir Fred in the short term, and long term with ABN part of the bank. He might not be perfect - but we need the 'shred' in this current climate.
For all those ABN acquisition critics;
The shareholders could have rejected the deal at the time - THEY DID NOT.
To let go of the main person who has the highest chance of completing the integration successfully is definitely commercial suicide.
However - I do think a stronger board may be required as Sir Fred is not the only person in the decision making process.
Am I the only person thinking that we need an experienced captain steering the ship in the current climate? - we are all looking to Gordon Brown are we not? And not David Cameron?
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German president Angela Merkel said " we have to redirect the markets to serve the people, and not ruin them".
I would go further in the case of the UK banks and suggest they also need to reconnect with the rest of the economy.
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The moderators have left the building!
An hour delay now-
Blog blackout?
Who knows!
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I wanna open a bank!!!
Through the miracles of fractional banking,
I shall be able to turn my meager savings into
a fortune.
Not only that, I can bring cash to the table,
making me more solvent than every established
bank on the planet!
Who would have thought that we would get
to this point?
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Over 7m personal pension savers are invested in RBS and other major banks, which probably means about 10m adults are affected. The banks up until relatively recently made up about a third of the value of the FTSE and were very popular with pension funds because of their dividend yield and "blue chip" credentials.
The Government is going to steal the largest share of these banks as its actions have driven down share prices and confidence so much that the shares are extremely cheap but few wish to buy them because of the lack of confidence. Investors, even if they have sufficient cash left, are also reluctant to subscribe to rights issues given the recent history of rights issues.
This leaves the way open for the Government to pick the shares up for a song, substantially diluting exisiting shareholders and stealing the bulk of the growth in values which will come over the next few years.
What a mess for the people who have saved for a pension. They are also the largest taxpayers and they are certainly paying for the government's failures through their pension funds.
And Brown's ratings have gone up despite fuelling the credit binge and mishandling the subsequent crisis.
How gullible can the British be???
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Why spend so much money, time and effort protecting a sector that only made 9% of GDP last year ?
While other sectors continuely get hampered by the government - manufacturing, transport, agriculture.
1% of the workforce stuff the country up well and truely. Well done, our grand parents shouldn't have bothered fighting the world wars - we certainly are losing the peace big time.
From Times online:
"The party is over for shrinking city."
"The other day I heard an eminent businessman on the radio suggesting the City accounted for perhaps 20% of Britain?s economy. He was not even close. According to International Financial Services London, using official statistics, the financial sector accounts for just under 9% of the economy, measured by gross value-added.
The City?s share of that is no more than half, perhaps 4% on a generous estimate. That is consistent with the City?s small share of employment, 300,000 out of total employment of 30m, or 1%."
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Seems as though the government has been to Japan. Hence the moves with our banks,,,
From Times online:
"Can anyone save us from economic turmoil ?"
Last Monday, before the latest turmoil erupted, members of the British House of Commons Treasury select committee were in Japan seeking to learn from its experience of financial crisis 20 years ago. Through the 1980s, share and property prices in Japan had roared and soared, with the Nikkei stock market index peaking at just under 39,000.
After the bubble burst in 1989, the Nikkei fell by 80%, finally bottoming out in 2003 at just over 7,600. Property prices crashed. For years the economy stagnated and the stock market never fully recovered.
Japanese officials were keen to explain why the sclerosis has persisted so long. One big problem, they said, was the banks. Their primary instinct is self-preservation, not each other, nor the national interest. So they are slow to admit the full scale of their losses, which holds everything else back. Only government action eventually forces the issue.
?The Japanese told us that Britain will have to nationalise not just a few banks ? that would be just the first step,? says Michael Fallon, the deputy chairman of the Treasury committee. ?They told us that we would have to nationalise the entire banking system....?
"Nouriel Roubini, a US economist who has done better than most at predicting the course of the meltdown, fears we are now close to being too late to stop it wreaking havoc. ?Corporate defaults will surge during the recession,? he predicts. Huge US companies such as Ford, General Motors an Chrysler are already struggling. That will in turn mean that ?massive losses will occur among the credit default swaps that provided protection against corporate defaults?.
Credit default swaps (CDSs), which are unregulated complex financial instruments, are another bubble, having grown in little over a decade into a market estimated at more than £50 trillion. They insure against losses when credit deals turn bad, and financial companies used them to rake in fees or boost assets on the way up. On the way down, however, their value evaporates if parties to them cannot pay up. On Friday credit derivatives linked to Lehman Brothers, the failed US bank, were being valued at less than 9 cents per dollar of notional worth...."
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#118 - gunsandreligion
Can I get a loan?
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Want a thorough analysis of and a possible way forward? Not jargon free unfortunately so if you don't know your LIBOR from your SIVs from your liquidity traps open up a wikipedia window alongside. If only we heard such candour about what's happened, is happening now (IMF "meltdown" statement apart), and detail from our leaders of what's to be done i'd feel a bit better.
Maybe Roubini's wrong but in terms of a comprehensive attempt to get the measure of the situation it is far more reassuring than the warm words and platitudes of our leaders who ought, rather than the "we're doing everything in our power (but we won't say exactly what yet)", to be giving it the "Blood toil tears and sweat" treatment so at least we are prepared for a tough time, and therefore, paradoxically, confident in our ability to cope with a very uncertain and difficult future.
enjoy (?):
http://www.rgemonitor.com/blog/roubini
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Want a thorough analysis of and a possible way forward? Not jargon free unfortunately so if you don't know your LIBOR from your SIVs from your liquidity traps open up a wikipedia window alongside. If only we heard such candour about what's happened, is happening now (IMF "meltdown" statement apart), and detail from our leaders of what's to be done i'd feel a bit better.
Maybe Roubini's wrong but in terms of a comprehensive attempt to get the measure of the situation it is far more reassuring than the warm words and platitudes of our leaders who ought, rather than the "we're doing everything in our power (but we won't say exactly what yet)", to be giving it the "Blood toil tears and sweat" treatment so at least we are prepared for a tough time, and therefore, paradoxically, confident in our ability to cope with a very uncertain and difficult future.
enjoy (?): http://www.rgemonitor.com/blog/roubini
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I have to say I think your right but I think the expression "whatever role the Auditors played"is one we might all look back upon in times to come..but...who are the the Auditors..?
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#122, threnodio, we are first taking deposits
in our new currency, the "crook bill."
Bernanke goes on the 1, Bush goes on the 5,
Hamilton goes on the 10 (because we yanks
still don't like Hamilton), and Richard Fuld,
the former CEO of Lehman, goes on the 20.
We were going to put Paulson on the $700B
bill, but the number keeps going up, so we're
just putting a question mark on the amount.
However, this is not a complete list.
One of our concerns is that because of the sheer
numbers of guilty executives in the banking and
insurance industries, and of the necessity of giving
each one their own denomination to honor their
place in history, has created such a huge cardinality
for the set of notes that we may inadvertently
inflate the money supply just by printing one
note for each denomination.
As always, the depository notes for the
"Bank of G&R" is backed by all major whiskeys
and liquors. (thanks to british-ish for correcting my
spelling.)
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#126 gunsandreligion
I was already to volunteer our entire whisky industry to underwrite your new bank, when you decided to limit the spelling to the Irish/American versions, and exclude Scotch and Canadian Whisky.
Global booze problems require a Global Celtic Booze solution!
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#127, oldnat, you can start up the "whisky" branch.
You don't want those Irishmen showing up at
your branch anyway, because they'll probably start a
run on your bank!
Let's just not insure each other like those idiots
in the now defunct "real" banking industry did.
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Isn't it about time for the tax authorities to comb those off-shore tax havens where companies and weathly individuals have squirreled away billions in earnings and not paid tax on them? Surely it's time for New Labour to call in the favours they assidously gave in the first place. Every little bit helps.
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#128 G&R
Fair deal. We'll trade on the basis of the actual proof rating (adjusted for the UK and US definitions) with no derivatives.
Whisky will always trade at a higher value than whisky and soda (a disgusting concept anyway!)
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If we for a moment put aside the state competition rules that the EU have implemented which stops the state from running the retail banking sector, then the simplest solution to everyones woes is to let Northern Rock and B&B operate to their fullest capabilities, take in deposits, and also give loans and mortgages at the cheapest break even rate to their customers.
If the Lloyds and Barclays of this world go bust, then so be it. It will mean far, far less pain the long run that bailing them out with tax payers money so that in a generations time they can do it all again!
Or better still, lets drop the whole notion of FIAT currency, go back to gold backed notes and coinage, abolish the Fractional Reserve Banking system and hey, we might not have sustained high levels of growth, but we also wont have rampant inflation, high levels of consumer debt or over inflated house prices. Imagine a world where your kids can afford to buy a house at sensible prices, your savings don't devalue because of inflation and banks operate to look after savings and make sensible loans for the important things like homes, not the latest in consumer electronics.
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"Bad news on Lehman CDS
The pay-outs on around $400bn of defaulted credit derivatives linked to Lehman Brothers are likely to be higher than anticipated after initial results from auctions to settle these credit default swaps resulted in a lower recovery price."
..continues at http://www.ft.com/cms/s/0/25137702-972d-11dd-8cc4-000077b07658.html
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#132, Isi-92, I guess this means that not bailing
Lehman out was a bad idea...
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Robert, 'as I said on the 10 o'clock news last night..."
Hmmmm....
You're fond of quoting your own provenance as if that in some way strengthens your provenance.
Like most media prognosticators, you conveniently forget those (far more numerous) occasions when you get it wrong. What surprises me is that you seem to get it wrong even more frequently than a random coin toss would allow.
I refer you to your recent TSB takeover of HBOS blog where you were absolutely emphatic this takeover HAD to go ahead. Simply couldn't not.
Well, as I reported to you then (LOL) it absolutely will not go ahead. I don't have 'sources close to the action', and I don't do their bidding either consciously, or more likely, unconsciously, but I do have experience and commonsenciously, but I do have experience and commonsense. A lethal combise. A lethal combination when it comes to dealing with sound-bite merchants who need to have an opinion when none is justified by the reality.
TSB are currently looking for an immediate rescue line of £10Bn, HBOS for £7Bn.
Robert, just do the math.
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@ #109 polit2k:
"Credit default swaps for beginners.
http://vimeo.com/1915392"
Thanks for the link. I didn't previously know about the "collateral call" aspect of CDSs and the video did a good job of clarifying the way they work.
I'm now plowing my way through the Wikipedia entry at:
http://en.wikipedia.org/wiki/Credit_default_swap
but am still not sure what the significance is of derivatives "on or off the balance sheet." Can CDSs be carried on both sides of a bank's blance sheet depending on whether the bank bought or underwrote (sold?) the derivative?
Since I gather that CDSs can be bought and sold even if neither the buyer or seller owns the underlying bond or other instrument, the web of CDSs and collateral calls must be unbelievably complex. And they're unregulated?!?!?
For anyone interested there is an analysis of the possible outcomes of Friday's Lehman bond/CDS auction and the next big derivatives player that may come a cropper at:
http://georgewashington2.blogspot.com/
(But I just realized this may be "off-topic" for this blog -- sorry!)
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Isn't it time to start naming and shaming the aniimals in the banking world who have most probably brought about the financial crisis for their own personal greed and satisfaction?
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"It won't be long before we know how much of the banking system belongs to us. Which means we'd better start thinking about what we want in return.
Some might say a return to old-fashioned, prudent, know-your-customer banking mightn't be such a terrible thing to ask for."
My understanding is that the taxpayer equity does not have voting rights, hence we cannot through this influence anything about the banks, and rightly so. There is a supervisory system already in place, lets fix that instead, and keep the playing field level. No equity needed. And please please don't allow Gordon to use this public ownership to bully banks into pumping up his beloved housing bubble again. It needs to deflate.
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Mr Peston, can you correct me on this please.
Over 300 billion pounds has been wiped off the value of shares in the past few weeks.
That means it has been converted into 300 billion pounds of cash and bonds.
So the banking system must now be stuffed full of cash now, exactly what it wanted.
And if shares remain low, that situation would remain the same, banks fully funded.
Yes or no?
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Well, what I've been saying for weeks now looks like coming true. We NEED nationalisation of the entire retail sector, as we all need banking facilities to live in our society. The objective of competition is for these to be free, so why should the banks be interested, on the other hand? None, other than as a cheap source of funds. On the other hand, it's a daydream for the taxman - immediate access to all our cashflow, watch the black sector shrink to cash overnight. The last question is, will the banks be allowed to compete, and what port-of-call should there be when the entire thing adopts civil service methods...?
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The more I read about these banks being rescued with tax payers money, I just want to puke. Reasons why:
1. These are the same banks that do not show any mercy (to these tax payers)when it comes to repossessing the same tax payers properties from them.
2. These are the same banks that forcefully and deliberately overcharge tax paying customers on over draft fees, have no sympathy whatsoever for customers when they are in financial difficulty!!
3. These are the same banks that employ inept and incompetent directors who take short term risks for short term gains (eg RBS) at the expense of the (hopeless and helpless)taxpayers who don't have a say because they are nobodies!!
In conclusion, the current Labour govt has been a failure to the entire UK electorate, a disgraceful bunch of opportunists...they have nothing else to offer, we dont want to be ruled by a bunch of scrambling buffons in govt.
Lets get rid of LABOUR NOW!!! QUICK!!
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There seem to have been few comments about councils wanting a full return of their deposits in Icelandic banks. This money was invested by professionals. They knew that the higher the return, the higher the risk. They have taken the return, now their authorities must suffer the risk coming to fruition. However, as it's public money down the pan (and how much will not be known until the liquidator of the bust banks pays so much in the pound to the creditors), perhaps the top finance department officers at the local authorities concerned should be surcharged for the loss.
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Bob
Why all the negative energy towards the banks?
Did they ever do something to you in a previous life?
Fair enough, you could report the facts (as the BBC should). But you seem to be putting your own 'spin' on it.
If you wanted to provide your own 'take' on it - which is what your blog is, shouldn't you work for one of the National newspapers and not the BBC - which is publicly funded?
Report the facts - and not your opinion.
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From a political viewpoint, Alex Salmond must be mightily miffed - his two most substantial claims for autonomy, the competence of BOS and RBOS dissappearing like summer snow right under his nose must be somewhat galling at one level, although at a second level he might be grateful it happened on another Scotsman's watch!
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how do we stop the bonus culture? If the government goes ahead with its Bank share purchase scheme surely 'we' can start dictating terms! Don't tell me , 'if we do that then we will lose all of the best talent abroad' ........hahahahahahahah... i don't think so. I wonder if all of these 'fast track' graduate entrants schemes nonsense has something to do with all of these problems, they don't know squat, in my experience. (Northern Rock found this out the hard way).
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Five years ago our bank's 'Business Relationship Manager' demanded that the directors of our company signed personal guarantees to support the possible need for an overdraft facility, despite the fact that at no time have we ever had such a requirement. When questioned, the 'Business Relationship Manager' said that, "a personal guarantee was a sign of commitment by the directors to their company".
Currently we have on deposit with the same bank considerably more than £35,000 (or even £50,000).
Today, in a spirit of partnership (and maybe reflecting the times in which we live), I have written to the directors of our bank demanding personal guarantees to support the security of our deposits. I did remind them of their stated position that a personal guarantee is, "a sign of commitment by the directors to their company".
Now the boot is on the other foot, I wonder if their position has altered?
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Um...
Not to make too much of a point of it, but...
Money is simply a means of exchange, it allows sellers and buyers to exchange goods and services at an agreed upon price.
The Great British Pound is going to be in extremely short supply over the next couple of YEARS as the debts eats all of the credit that is out there. The banks are collapsing the supply of money to the economy at a very rapid rate and I suspect that Darling doesn't understand what is going on, so I don't think he is going to print replacements...
If you want to reduce your exposure to this lack of money in the coming years, I strongly suggest that you start investigating alternative forms of money outside of the control of banks.
This means things like gold, silver, Euros[1], local currencies[2] like LETS and Time Banks.
[1] Euros are based on Fractional Reserve Lending in exactly the same way as Pounds and Dollars, (which is why it's irrelevant whether our currency is pounds, dollars or euros) so may also be in short supply. It depends how safe the European banks are.
[2] http://en.wikipedia.org/wiki/Local_currencies
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Next up, Foreclosures, repossessions and an utter collapse in the housing market.
I have / had massive equity in my home so I'm not too pleased at the prospect. What you are witnessing is the biggest heist in human history, this is a robbery by the fat cats!
Not long now for fiat currency based economies, we are ALL bankrupt now!
Still at least I will get the pleasure of seeing some hangings, come the revolution.
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I am watching Andrew Marr and I am astounded at Mr Peston using the words "fair" and "balanced" to describe his reports this week. He has screeched and relayed such a hyper one-sided doom and gloom scenario that how he feels no responsibility for the concern he has delivered in to the living rooms of the many households this week is astounding.
Robert please look at your reports with "fair" and "balanced" in mind!!
You have been a menace and totally irresponsible.
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143,
At least we can vote to get out of your slave driven money as debt culture, while people south of the border will be too busy borrowing money for their grand children to repay for generations to come.
Wake up and smell the coffee, there are much larger issues at stake here!!!
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On paper its balance sheet looks okay. But its board has concluded it needs a further cushion of capital, perhaps as much as £10bn.
If true doesn't that say it all ?
How can anyone judge the quality of anything if the information available to them is insufficient?
If the accounting practices are insufficient then all bets are off -- why hasn't the FSA defined standards that would be useful to them?
What have the FSA been doing all this time (with all that money)?
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If banks won't use the facilities provided to help them start lending between themselves and to others in need, then they may need to be coerced in the short term.
They need to look beyond their own self-interests to the needs of the country/world and the greater economy, together with a return to good old-fashioned values such as prudence.
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Post 146, True Liberal
This is exactly what is happening, the money in the ecomony at present is being using to repay interest on the debt created during the bubble.
How can the governemtn get money into the economy to ensure that the supply of money doesn't run out? The only way I know is via the public sector spending, any other ideas?
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I listened to Robert Peston's defence of his leaking damaging stories to the economy this morning on the Andrew Marr show and I have to say it made me very angry. To say you are just looking for stories of interest to the bbc is a terrible cop out - is the bbc looking to make the economy even worse and damage this country? No they're not - you're in a position of power and need to take some responsibility and think about other people apart from yourself and your next "crisis" story that adds to what is turning into a crisis of confidence more than anything else.
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By the way...
It is TOALLY the governments fault that this discussion is even being had.
In a freemarket you must EXPECT businesses to fail -- that is how the poor ones fall by the wayside and the good ones grow.
The government foolishly built a structure that (aparantly) made the welfare of the whole country dependant on these businesses not failing.
What fools... Gordon 'canute' Brown - built his castle below high tide mark and now we are paying the price of protecting it...
Too MUCH regulation is the problem - it gave a VERY expensive false sense of security (as it was intended to!).
More regulation will just cost more - less regulation will ensure people are fully aware of the risks they are taking.
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About 15 years ago, one of my best friends was retired early, aged about 54 by Barclays. He was a branch manager and a Methodist. He would argue for a return to prudent banking amonst his peers, other local branch managers. However his role was being measured by sales targets e.g. selling more mortgages, car loans etc with little concern as to whether people would ever be able to pay back these loans. He had a fundamental concern for encouraging people to get into debt that they could not manage.
I also can't see the point in sharing financial risks with other financial companies when you don't know how risky they are in comparison to your own prudent lending policy? Isn't this a failure of risk management.
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I've just downgraded Jeremy Clarkson - can we now have Robert Peston as Prime Minister please.
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This is a good start, but to get true "moral hazard", we should do much more to the yuppies than simply fire them. They have spent years building up their "nuts".
We need legislation to get at those "nuts", and put them in public ownership, in order to achieve two goals:
First, we need to make sure that "moral hazard" is applied on _this_ iteration of the boom and bust - we have a habit of forgetting about the end-results of greed between each cycle! So let's stop this crowd from exiting until we've charged them all they have for the damage caused.
And second, those "nuts" will slightly offset the effects of their greed. Roll on the revolution!
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No. 41
Perhaps Barclaycard wouldn't have charged you if you had actually operated your account within the terms and conditions of the account. Interest is not an internal charge it is a charge created by you by your purchasing on the card.
Maybe you should think about decreasing your overall level of debt and stop being so close to your limit.
Just a suggestion, but in this current banking enviroment, a very prudent one!
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The American ASB has dropped the need to mark to market, according to the Telegraph. This will allow banks to continue to conceal the true exposure as the fallout from the payout of Lehmans works it's way through the system.
Gordon Browns ever more frantic calls for other countries to "Follow my lead" worry me.
The UK has guaranteed intabank lending. If the unknown exposure hits other banks, causing them to fail, without Government guarantee, the knock on effect will be largest for the banks with those guarantees, with liabilities ending up with the taxpayers of the countries that provided them.
Does this not leave the UK taxpayer uniquely exposed whilst other countries fail to follow the GB plan?
If so it might be a bold plan from GB, but without having first gained the assurance of other countries to follow suit, it appears perhaps an irresponsibly reckless one.
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Observer reports
"The Prime Minister told The Observer that within days he would reveal how the bail-out would protect livelihoods in the UK by forcing the banks that accept government help to make money available to businesses and homeowners."
http://www.guardian.co.uk/politics/2008/oct/12/gordonbrown-economy
Is this the way that Brown will avoid the bust?
The banks will be used as a conduit to pump billions into the economy to stave off recession. Money that if pumped in directly by the Government would blow a hole in the Golden Rules, but under the guise of Bank support will be argued away as simply that, money lent to the banks.
Effectively, it will be business as usual. Brown will be relying on ever ballooning personal debt to sustain the economy.
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#138: No, the money just disappears back to where it came from, nowhere. They haven't really lost £300b, they never really had it, 'we/market' have effectively just decided that they are worth £300b less than previously.
Share price is based mostly on what we think they will earn (or be repayed in the case of banks) in the future, not so much what actual assets they have now.
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I note there are still those who seem to think this crisis is all being got up by the media in general and by Mr Peston in particular.
For a short while yesterday I had concerns about Philip Green until I heard his very wise comments in full. Mr Green argues that the sense of crisis is frightening his customers and this can only make the matter worse than it already is; bearing in mind that retail has had immense problems for the last eighteen months. A valid point.
However, we need quality reportage and informed comment particularly at this time. Some of that reportage will not be in the interest of certain parties: tough! The people need to know what is happening in their lives so they can understand and take as much control as they humanly can. I will never forget in the Seventies hearing from employees who had just been made redundant that they had been told three days previously that their jobs were safe. We can't have that nonsense going on again.
During the good times there was an almost total disregard for those who were sceptical. Now those sceptics have been proved right. I have notice Jon Moulton being brought out the cupboard a bit more often and rightly so.
I must however suggest to Mr Peston that he should purchase some decent ties. Perhaps he can come to an arrangement with Mr Green? He should try to follow the excellent standard set by the very dapper Mr Moulton. Nothing like a crisis to demonstrate who is the real gentleman.
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I was listening to Robert Peston saying how all he is doing is reporting facts in a fair, accurate and balanced manner but when I read his blog it seems we are "giving £25 billion" to the major banks"aren't we generous". I thought the plan involved buying a stake in the banks.So much for fair, accurate and balanced reporting.
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#146
Local currencies/Lets are no good as an 'non-bank' investment, as generally they seem to use the UK pound as its 'reserve'.
So if a local pound is equivalent to to UK pound then you get all the inflation, but no interest on deposits...
The face value of a local currency would have to be something 'real' to make it worth while, and some thing that is not subject to outside influences, and 'creatable' by most people - say 1 hours labour - if all else fails you can knuckle down and actually do the work...
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Anyone who blames RB for the current financial turmoil is either naive or part of the problem.
The people to blame are faceless, very powerful and extremely dangerous.
Politicians, Financial bosses, Bankers, Economic journalists etc. are purely puppets of the 'World Order'.
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#160
Yes that is precisely it.
So Brown doesn't 'lose face', and can claim that he has been consistent, we are getting a third rate attempt at a solution.
Typical of the left in power - follow the letter of the rules, but sod the spirit.
This thread has run though all of labour current reign -- they insist they haven't 'lied' but the outcome is never what any one was led to believe.
All this from the man (Brown) who has been complaining about 'off balance sheet' transactions by banks... I think he is just jealous that they got away with it, while PFI is generally recognised (but NOT REPORTED) as precisely the same behaviour...
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#137
Sorry but I don't really understand your logic here, are you suggesting an ever increase in self regulation, it this self regulation that has caused the problems in the first place! I'm not exactly in favour of the state owning the nations banks but if it's that or a total fiscal melt-down I would be more concerned with the terms of such control. State owned (by which I mean run) banks might have ethical problems but the other option is even more unpalatable.
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In response to the "The real truth" comment 154
I agree that the govt is to blame for all this mess.
Its just incredile that the govt is actually interferring in what is "supposed" to be a free market economy...if these banks are not sustainable as "going concerns", then they should be allowed to fail -just the same way decent tax payers are pushed to loose their properties when the dont meet up with their mortgage payments to these banks.
The tax payers are the victims of all this, and it makes me sick that they have no protection in this visious economic matrix created by an incompetent Labour govt.
This is a govt without a plan, and the Mr Brown is all puff but hopelessly incompetent.
I really thought he had some substance, however its now apparent that he needed Tony Blair to make him look shiny & credible.
Now Tony is gone...he looks like a fish out of water.
LETS GET RID OF LABOUR!! QUICK!!
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#142
He (RP) and others - like Blomberg for example - are reporting the facts and then putting them into context for others to understand, and this is what bankers and speculators don't like. What will be the difference between 1929 and now, assuming that we do in fact go into deep recession or depression, the difference will be that everyone will know what is happening and not just the few.
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It is surely time for Mr Peston and the other media 'specialists' to explain that 'we' are the major investors in the banks through pension funds, insurers and annuity providers.
The current market frenzy reflects fear rather than known facts and there is a high probability that the government will end up buying equity in the banks on the cheap without reflecting the underlying value of the businesses.
The result will be a significant gain to the UK government within the next 5 years when markets stabilise and a significant loss to everyone's pensions and savings.
The problems created in significant part by a failure of government regulation will be paid for by a second Gordon Brown raid on future pension pots - yet another stealth tax !
The recapitalisation of the system by redeemable preference shares with a reasonable coupon of 10% (the same level as indicated by the current market price of HBOS preference shares) would be fair to all concerned - whilst issues of capital adequacy could be resolved by making the shares convertible into Ordinary Shares.
The convertability could be on a put/call basis where the givernment could convert at todays price or the last rights issue price depending on circumstances.
This is a problem that needs to be solved on a fair basis to all concerned and where the government avoids the temptation of yet another raid on equity savings and investors whilst still maintaining the viability of the market.
And it is time that reporters explain that the banks are generally owned by everyone that has a pension, insurance policy or savings.
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Thats a great post by 160, and answers my question on post 152
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I gather that a response to #154 is that we have not had a free market society since the war (WW2). In Western Europe since then we have had Social Capitalism, in which, in return for high taxes, populations expect their governments to protect their welfare, including their savings. Apparently 'we' voted for that in 1945 after so many more people had been dragged into paying tax to pay for the war.
America does not have this. They let Lehman's go, whereas we have not let any of our banks go.
What I do not understand is whether the American sub-prime lending led our banks to lose touch with their capital, or to buy their bad debts on the world markets - or even to take the Government's guarantee for granted.
Market forces have not been visible in the housing market, as they perhaps should have been.
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#154
Don't blame Blair or Brown, all they did was inherit a fiscal system put in place many, many years ago, even the fiscal policy was put in place by someone else (Thatcher and Reagan), true it would have been nice to have had either Blair or Brown turn back the clocks so that the country wasn't so dependant on the financial sector and the importation of non EU (or even UK) goods but - to put it simply - most of the UK's industrial base was destroyed in the 1980s and made that more an aspiration that a possibility or a need - until now...
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#167 - I'm not sure that tightening up the existing supervisory regime amounts to increasing self regulation, I would hope it puts further constraints around some of the less regulated activities that have contributed to the crisis.
The government through their agencies would still have the responsibility to ensure overall stability, but I don't think there is much evidence that publicly owned banks are any better at allocating capital efficiently than private ones. The last thing I'd want is political influence over where money is lent and how much - if you think there is moral hazard involved in the current setup, try putting a politician in charge.
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Seems to me a bit strange that the problems caused by a few £1000000 plus a year earning bankers are getting sorted out by our £200.000 approx supposably useless politiciansas our leaders are very fond if saying nowdays there are lessons to be learned
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unresolved questions:
Have the EU actually approved GB's plan as consistent with their 'State Aid' rules? (mentioned and simultaneously buried as things went from bad to worse)
When can we, as future bank shareholders, see up to date management account? (required by banks when u have a business overdraft)
As above, but in respect of the 'off-book' debts
When will fraud and tax evasion investigations begin?
I'm no company law expert, but something distinctly whiffy offends my sense of Justice!
Full disclosure is needed and demanded with increasing urgency.
The longer we are kept in the dark, the more we all suspect there is something very wrong. So what if speculation is proved right-better to tell the truth, then deal with the aftermath.
It's the continued secrecy and treating the electorate like mushrooms.
We can think for ourselves (just look at the blogs), and (contrary to government and bank apparent opinion) we are not stupid.
There should be no more rhetoric-just tell us the truth.
In any crisis, our country pulls together-but we need to know how bad it is-we're frightened enough as it is-the truth will be a relief!
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#121 interesting advice from the Japanese who do know how the story goes:
The Japanese told us that Britain will have to nationalise not just a few banks ? that would be just the first step,? says Michael Fallon, the deputy chairman of the Treasury committee. ?They told us that we would have to nationalise the entire banking system....
I'm reluctantly persuaded that this is right. Banks interested in self-preservation will not take the help offered to unfreeze the financial system, so they will have to be compelled.
But how to do it? Wiping out shareholders would be in nobody's long-term interests, least of all anybody about to retire. So the answer is to nationalise the banks, turn shares into convertible bonds, pay interest on those bonds as and when the banks become profitable, and permit the reconversion of those bonds into shares when eventually the banks are privatised again, albeit under a Germanically strict regulatory regime.
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just read in an article that 'strings' will be negotiated on a 'Case by case' basis!
What's that all about!
How ridiculous! So we're to lend money on sights unseen, and the banks can negotiate the terms and conditions?
Great Britain should be called Cloud Cuckoo Land!
GB-you really really need to wake up to your electorate-give us full disclosed and spank the bank-you could be on the verge of a vote of np confidence!
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"152. At 10:00am on 12 Oct 2008, JavaMan1984 wrote:
Post 146, True Liberal
How can the governemtn get money into the economy to ensure that the supply of money doesn't run out? The only way I know is via the public sector spending, any other ideas?"
Other than pay the public sector in crisp new 1000 pound notes...
Let the banks fail and declare bankruptcy, simultaneously set up a national commercial bank to lend credit to businesses and individuals as required... Or... Since he has already nationalised the Northern Rock, simply rename it to National Rock and expand it's operation to the whole country.
Course that goes against everything Labour stands for... Oh wait...
This is just tinkering though, it doesn't fix the fundamental problem of Fractional Reserve Banking or that debt is exponential and money is not.
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If the bailout money is to be used to buy RBS shares on Monday it will not work. The stock price of RBS will rise firstly then plumit as those still left with their RBS shares decide to get out while they make no loss. All eyes on RBS Monday!
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Well!! Is the problem much bigger and has our PM camouflaged it with a wonderfully designed rescue package (nearly $800bn) to take away the true negative exposure our banks are facing.
And has the opposition leader accepted that he is a novice and has absolutely no questions?? I work for an investment bank (technology) and my colleagues on the trading floor are already casting the bonus dice with the news of this tax payers rescue package (sic).
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Can Robert Peston comment on these serious and highly unusal allegations by the Mail on Sunday today?
Many savers and senior UK bankers are concerned that Robert Peston's scoops and leaks of highly sensitive market information on public service broadcaster, the BBC has destabilised the UK banking system. At the expense of the taxpayer, who is now required to pay for the nationalisation of the banking system.
Many bankers are furious that the private meeting of leading UK banks with the Treasury was leaked, like other market sensitive information over the last year about UK financial institutions, which hold savers deposits.
A Daily Mail journalist called LEAKE has done an expose 12. 10. 2008 on Robert Peston and his links to a John Kingman a senior treasury offical and former colleague at the Financial Times.
Unanswered, these allegations will inevitably end up in a public inquiry.
This has overtones of another BBC journalist, the MoD and Dr David Kelly.
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Wait, wait, wait.
What G7 proposes for tomorrow is basically:
1. Push more credit into the market
2. Use "too big to fall" doctrine
3. protect the banks
4. lower the interest rate
Now, what put us in this gloomy situation?
1. Too much credit
2. "Too big to fall" doctrine
3. bank protecting
4. too low interest rates
Hmm, so would You cure alcoholism with alcohol?
Listen to the austrian school. It`s predicted that mess.
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#81 Jimster
'Please less of the stirring etc'
Veggie (#94) is quite correct in that none of this is 'new' news.
The speculation about certain Banks going for Gov loans was around on Friday, so Robert isn't the first.
However, it shouldn't be a surprise to anyone that Banks will be dipping into the public coffers.
The 'consideration of the probabilities', is that there would not be a lot of sense in the Gov agreeing with the BoE to set up an arrangement to provide funds - and then nobody taking it up.
So the real 'speculation' as I see it, is not a question of 'if', but of 'when'
regards
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#174
re regulation
At the moment there is a lot of self regulation of the market by the market, so if one tightens up the "existing supervisory regime" all one is doing is tightening up on the the regulations within the self regulation regime - but it's the very regime that is the problem and not just the regulations within - if you see what I'm getting at?
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"164. At 10:44am on 12 Oct 2008, the-real-truth wrote:
Local currencies/Lets are no good as an 'non-bank' investment, as generally they seem to use the UK pound as its 'reserve'.
So if a local pound is equivalent to to UK pound then you get all the inflation, but no interest on deposits..."
Ah but local currencies are generally designed to *deliberately* *devalue*. Have a look at the case of the Wörgl local currency in Austria during the Great Depression. It was designed deliberately to devalue and therefore to be passed rapidly in the economy.
You don't use the currency itself as an investment, the investment is what you buy with it. The currency just keeps going round.
What I find obvious, is that our monetary system *defines* the society we live within. Yet politicians seem to ignore something as fundamental as the nature of money when they tell us society should be X or Y.
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#178
I think it means that each banks needs vs. what they will have to do to get the 'loans' will be different in each case - so no hard and fast rules can be pre-made. I don't see any issues with this.
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Well, we can all go on about where the money's comming from to put back into the Public Kitty Bag after all the Local Council's and Police illegally invested Public Money into foreign bank account's, which is what the crim's do in all the movie's, but no one seem's to realise that according to the original British Constitutuion, if your Vote's are counted in a General Election, then your eligible to pay National Tax and IN, and that mean's the Brtiish Armed Force's are eligable to pay N-Tax & NI, and that's enought to patch the hole the Labour Government created in the Public Purse by Freemason Blair, who got Brown into Number 11! So shoudn't the Government stick to the real British Constitution of of this Country, because according to the original, not one of the Armed Force's Election Vote's should have been counted in any election, they are void the monute a soldier sign's the M.O.D's Oath, so factually, Labour Blair shouldn't have been Prime Minister in the first place, and should be arrested for Treason along with Brown, because that's how the Nazi Freemason Reverse Psychology establishment's been robbing the Public for year's!
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I have not read all the posts so forgive if already said.
Why cannot the government set up a loan scheme for the people instead one for the banks.
It would be similar to a Student Loan .
We could have Home Loan and Business Loan schemes. Banks would be paid off and customers of both schemes charged a nominal interest rate or better still, none at all. The loan would have to be paid off over the years but consideration and time given to those who lost their jobs/businesses.
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188
Nice rant, one point though, the UK doesn't actually have a constitution, just a collection of (often conflicting) laws that set down basic rights and privileges. Anyway, the main question I really wanted to ask was, more nutty fruit-cake Sir?...
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I have held an account with NatWest since it was quite simply Westminster Bank, I had a mortgage with NatWest until 12 months ago. I decided to take out Equity Release on my property in order to clear the mortgage and carry out some VERY essenttal repairs, new windows, guttering etc., etc., In order to do this, the mortgage had to be converted into a single name, mine.
Never have I encountered such incompetence and unhelpfulness from NatWest Mortgage Services. I had not had cause to contact Mortgage Services since NatWest became part of RBS and my experience proved to me yet again that the larger anything becomes the less efficient it becomes.
What should have been a simple procedure turned into a stressful experience and at the end of the day led to my receiving monetary compensation. Only a miniscule amount but the bank's loss owing to it's inefficiency!
Needless to say the equity release was not from NatWest.
I am not a saver or shareholder with Natwest but do have three current accounts, one of which does have an overdraft facility.
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#185 boilerplated - I think we're talking semantics, but I'm not sure that regulation by the FSA is the same as self-regulation. By self-regulation I would understand something like the way lawyers or doctors regulate their own profession. The FSA regulates financial institutions directly (albeit by supervising the institutions own risk management activities and controls). You can argue that it is "light touch" but I don't agree that they are left to regulate themselves (although you would think so listening to GB).
However certain credit derivatives and "off balance sheet" activities could be said to be unregulated, because the view was they didn't pose much of a danger, I suspect that view has now changed radically. Basically yes, more of the same, and stricter. Not ownership :)
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1. Why cannot the government demand the resignation (or just sack them) of the current Boards of Directors as Iceland did? Any business that can make 3 billion disappear in weeks should take a hard look at its management competence
2. The taxpayer gives (without being consulted) "incompetence capital" to said banks who are allowed to retain their punitive charging systems (surely a quid pro quo for the bailout would have been a forfeit of these usurious practices), levied against the funding taxpayers
3. Having taken our taxes, the banks will apply tightening lending criteria to the general public so we cannot get improved services and/or financial relief or support from the worsening economic climate as jobs disappear and/or short-time working is imposed
And, of course, the first time that any windfall tax is mooted, the Bankers will bleat about weakening their capital base - pity they never thought about that when they embarked upon the current lunacy of their approach to business.
A nice postscript - I received a marketing letter from HSBC on Friday. They "have listened to their customers" and so have stopped paying interest on their current accounts! The letter was signed a Mr Pitt - shame the Marketing Department is not co-managed by him and his brother because we could then truly say that the Marketing Department is the Pitts.
Nurse, book my bed in the asylum now.
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didnt RBS have a rights issue in April...i presume now they will be investigated by the FSA as they obviously mis-stated the health of the business and in so doing commited fraud against their shareholders.
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Some have said that the bank leaders will be ok, even if out of a job. I am not so sure. There has been, at least, disingenuousness by the banks in the last year. EG Barclays emphatically denied it needed more capital; it now does either throught he govt or from the Far East. All banks have told the select committee that their balance sheets and exposure to toxic dept was limited. In the case of HBOS (why oh why is Hornby stll there) RBS and Barclays. There will be a day opf legal reckoning and the sight of the leaders of these banks facing criminal charges is much higher than thus far commented upon.
Another matter James Crosby is someone who is on the FSA. We often listed to him pontificating. I am not entirely into the "why is the ship sinking" game at the moment, but the FSA is right up there with the bankers themselves; which Crosby (Northern Rock board as well) was.
Mr P this is all too cozy. Crosby should not be let anywhere near any board in the future. He bakced Applegarth first as well as the regualation second. He should be disqualified as a compnay director asap
Then the rest of them
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Going by the latest reports it does indeed look like the government will make the equity injection conditional on the banks "resuming normal lending to individuals and small businesses". Let's just hope that the last decade was not considered normal.
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There is no guarantee that the taxpayers money (£10bn) to be injected into RBS won't go the same way as the £12bn raised during the recent rights issue....down the tubes..!
One of the conditions being placed on the banks appears to be the resumption of normal lending both personal and corporate....the only problem here is that recession makes this lending far less desirable and so even with the restoration of medium term inter bank liquidity who are they going to lend the money too?
People trying to re-mortgage their house now have a capital asset worth 30% less that a year ago.......but their mortgage has not shrunk.....!
Business trying to re-structure their debt finance will be laying people off in the face of falling revenues.....!
The lending environment is becoming more sub-prime by the moment and this is where it all started in the first place.....time for the boffins to develop of some new derivatives on the back of this government instructed bank lending policy........!
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boilerplate are u saying the punishment to fit the crime? As in the more they borrow the more the strings? I agree with u on that, but I don't think the banks should be allowed to negotiate-it should be 'here's the money, that's the conditions, take it or leave it!
Another news site says all banks are in negotiations now with the treasury as we mere mortals are discussing it on here.
I hope the suggestion mooted by the afore mentioned news site is a fact, not rumour-namely that full disclosure of true financial situation will be part of the strings attached.
If not, then it darn well should be a standard condition for all of them.
More roller coaster rides on Monday I expect!
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#101.
"Moment of opportunity" - agreed.
It's not about the collapsing system, it's all about what pheonix might rise from its ashes.
And that pheonix might just be a whole lot better - and serve both the country and the people of the country one whole lot better - than what it replaces.
There is zero that anyone, at any level, can do to cure the terminal illness of the existing global financial systems. Even if the UK made perfect interventions in this crisis, others elsewhere would not. Many of the posts on this blog, and others, underscore that.
Perhaps everyone should be looking at how we shape the future systems to meet the demands of living with climate change and other such realities. That is, that we learn from this experience, in ways that we don't seem to have learnt from earlier crises.
I, personally, don't think there will be much of a role for 'banks', at least not as we currently perceive them.
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#195
Well said!
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#192
Semantics, I don't think so, the FSA is far to cosy in their relationship with the industry and as such mush of the regulation is for the benefit of the industry and not the wider economy.
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Just as well Scotland did not have full independence because they could never have bailed out both RBS and HBOS.
As it is, it is mainly the English taxpayer bailing out the Scottish banks.
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I see that there are suggestions that Barclays and RBS are both exposed to Lehman's CDS liabilities. Is there any likelihood that the current enthusiasm for Brown's shilling is a reflection of a pressing need to get finance in place before these liabilities need to be discharged at the end of the month?
And, if that is the case, is there any realistic prospect of significant easing of current lending constraints to either business or the public?
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#196
Or indeed the last three, we need to get back to 'old style' banking, not the whole sale selling of debt to everyone and their pets...
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Let's follow the growing UK trend of trying to find someone to blame - then everything will be ok. Everywhere you look there is someone to blame.
Politicians who can't regulate the biggest hand that feeds it (look what happenned when Major's govt tried it). The city who think playing a casino with other people's money is a good idea and worth a 7 figure bonus if it goes well and only a 6 figure one if it doesn't - forgetting completely what they are actually in existance for which is to provide investment for real business to grow. What about Jo public who apparently can't live without the latest toy or gadget, a new car, a bigger home or why not 2 homes - who cares about a little more debt.
This crisis has been on the cards for years. Isn't it ingenious to use even more debt to finance growth. What did we expect ?
Mr Green is rightly annoyed that we're not all spending in his shops - but if its spending built on debt its simply perpetuating the problems. So unfortunately for Mr G we're not talking ourselves into a problem - we have one and we can't afford to pretend its not there.
Unfortunately the longer we allow the underlying problems to go on, the bigger the debt and the bigger the fall. Giving the banks more money to do exactly the same again doesn't sound like a great idea to me.
My biggest concern is that horse has bolted and fixing the banking system is no longer the main concern. The uncertainty has moved into the real world of business and that means cutbacks - unemployment will soar which will pull even more on the overstretched tax coffers. House prices will continue to slide and hey ho repossessions and bad debts resurface in the banks.
A big correction is in order - applying masking tape isn't going to fix the underlying problems - so lets get it over with quickly no matter how painful it will be. Then we can re-build again
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No one seems to comment on the early origins of the sub-prime mortgages. The Telegraph carried a obituary of on Roland Arnall who died on 17 Mar 08 aged 68.
A one time street corner seller, Arnall founded Ameriquest a California based mortgage company. The firm, which described itself as "proud sponser of the American dream", specialising offering mortgages to people with weak credit histories and became the nations largest sub-prime lender. Profits soared during 1990s but became an early casualty of the subsiquent melt-down. The remnants of the company eventually were sold to Citigroup last year. Arnall's fortune was etsimated at $1.5 billion He eventually became a particularly generous donor to President Bush's campaign amounting to millions of dollars Law suites followed alleging that Americaquest had lied about borrowers' imcome etc The saga goes on $325million dollar consumer settlements, closing some 200 branches and 4000 employees losing their jobs.
Strangely?? President Bush nominates Arnall for the post of Ambassador to the Netherlands. The Repulican controlled Senate vetoed the appointment several times before it was eventally passed by a small majority in February 2006, after the class action settlement.
Why Oh Why ?does President Bush not declare where some of his funding support came from. How he has the bare-faced cheek to stand before the world trying to show the way forward - he should hang his head in shame.
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Robert, during your piece Sunday 12Oct08 you on many occasions stated that our "tax money" was being used to help out the banking sector. Does this just include income tax e.g. PAYE or on account or does it also include company taxes such as Corporation tax? If the money is being taken from a number of taxes what % will actually be taken from income tax? To the nearest million £ will suffice.
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I am looking forward to getting this all behind us and I truly hope that we go through a learning process and those who are found negligent punished, what better way of deterring future greed?
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#198
re take it or leave it
Yes I suspect that the banks will be on the back foot, they know that there is a plan 'B' - nationalisation!
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In the middle of this on-going financial crisis no-one mentions anything about the inflation-proofed pensions of the Civil Servants , MPs and many others that will be a burden on future generations.
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I think that Mr Peston is hell-bent on single-handedly destroying the financial world and therefore society as a whole. Have we ever seen a journalist with so much power to be able to whip up such fear and panic. Shouldn't the BBC be reporting the news, not creating it?
There's been much finger pointing at employees of financial institiutions supposedly out for personal gain and benefit. Mr Peston himself clearly has his own personal gain and self-promotion in mind when breaking such "scoops" and "firsts" in a mammoth blaze of glory.
Let's try reporting the news in a way that informs the public, without reverting to a thesaurus each time to see just how many sensationalist, exagerating and over-the-top words can be used.
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so as of the 13th banks may well be getting funds from central government.
with somany banks in overseas hands i wonder who will benefitt from these cash injections?
sadly our beloved government may as well take our tax money and give it away directly to overseas bankers thus foregoing the need to pretend to be helping the british people.
this government should have nationalised all banks weeks ago and closed the stock market and trading untill stability returns.
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Instead of using cash to strengthen balance sheets in markets where asset values are in free fall - maybe the Gordon Big Brains should do something about accounting rules and revise the nonsense of mark to market...?
Otherwise we will continue to pour state money into a leaking bucket...
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#213
You mean, allow banks to sweep their debt under the board room carpet and carry on as if all is huncky-dorey?...
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I second Hiddenranbir (#25) yesterday:
"Peston, you mentioned the CDS auctions twice and have yet to comment on the outcome of it. Please do so!"
As I understand it on Friday there were auctions of Lehman Brothers bonds, on the back of which the payments due on Lehman CDSs at the end of the month were calculated. These auctions determined that the bonds were worth less than 10 cents on the dollar.
Peston alerted his readers to the potential seriousness of the situation on Friday morning but gave no report of the result and its implications. Plus I gather that Freddie, Fannie and Washington Mutual have the same unhappy process to go through in the near future.
I realise that there's a lot to report but some further comment on the CDS situation, after the first of the auctions have been completed, would seem highly appropriate.
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I hope that Robert Peston's lastest report has more basis in truth than his claim of last week that RBS had gone cap in hand to the Treasury to beg them for a capital injection. A false claim which forced the RBS chief into making a statement to the Stock Exchange in order to try and halt the resultant fall in the groups share price.
The irresponsible actions of the banks are being compounded by irresponsible reporting in the media. Just as the bankers don't seem to have to answer to anyone for the mess they have caused, the only consequence of Bobs speculative style of journalism is an increase in his popularity amongst the UKs housewives.
Note to Bob and the rest of the BBC: Speculation is not Journalism.
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So, RBS reckon they might need upto £10 billion. We could buy the entire bank for half that price!
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#215 rdrake98
The Financial Times has an explanation of why this should be of less concern.
"Sellers of protection mark their positions to market every single day. So those firms have already marked down and provided collateral against their positions. As a result, there should be little or no unanticipated additional cost involved in the settlement of Lehman CDS,"
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Never has there been a better time for a thorough re-reading of Ayn Rand?s ?Atlas Shrugged?. David Cameron is finally showing his true colours by supporting ?New? Labour?s final phase of the destruction and Socialisation of Britain?s banking system and economy. Why do we believe that our politicians (who have got us into debt in the most major way) can run our banking system any better than the experienced and qualified people in place at the moment?
All our politicians seem to forget that while they are busy placating taxpayers, this large section of the population should not be treated as a homogenous group. They can be divided between those taxpayers who try to defraud our tax system by avoiding paying VAT and Income tax in the first place, take advantage of Gordon Brown and Tony Blair?s self-serving deregulation of our credit system by taking out further advances on their over-priced houses to have a holiday in the sun or put that Audi TT in the driveway which they would otherwise not have been able to afford. They have done this only with the encouragement from our politicians for a looser regulated banking system to support our insatiable need for more and more credit with which to satisfy our greed.
It is a short sighted mistake to lay all the blame for our self-inflicted credit crunch solely at the feet of the bankers. Sure, a few do not deserve the large bonuses they have received ? those who do not really understand the positions their employees have been taking, and who have turned a blind eye just as long as that or this department has been returning the huge gains they wish to see (as happened at Barings not so long ago. However, it should not be forgotten that the culture which existed up to recently, which has encouraged sailing too close to the wind without even understanding the rudiments of how the boat works or whether or not the wind can change direction suddenly, has only been possible through the loose regulation of the markets by our government.
Furthermore, have we now completely abandoned our principles of rewarding those who are well-informed and capable, hard-working and who take their responsibilities for their portfolios, clients, families and communities seriously? Are we to save the banking system to help all taxpayers regardless of whether they are hard-working or slackers, tax payers or tax dodgers? If a number of those companies set up under Blair and Brown?s ?full employment, jobs for all? policies to provide services I don?t need and have never bought anyhow, go to the wall, should that really disturb me? Let the banking system fail, let those (one or two) banks which are properly capitalised remain, let there be stricter controls on credit, lending to businesses, less money in circulation, more emphasis on cash-backed spending rather than credit-backed spending.
My husband has worked in the City for the past 20 years. He has taken a maximum of 10 days off sick during that time. Most mornings he is at his desk at 7am and doesn?t return until 7 or 8pm, after a two or three hour commute ? he has done this for 20 years. He is bright, and keeps himself well-informed, not by reading Hello or Heat magazine, but the financial press such as the FT and Economist. I have never ?worked? but have raised 4 children at home whilst working hard at keeping what we have earned and built together intact and running smoothly. From nothing apart from hard graft and a bit of help from our modestly well-off parents we have managed to build a modestly well-off family, putting two children so far through the private school system, while still paying our taxes to support the dreadful State school system, amongst other badly-run Government departments. In the meantime, the Labour government has been putting our country more and more into debt, giving jobs to those who don?t really deserve a job because they can?t be bothered to put in the hours, educate themselves or remain in touch with the real world but would rather spend their free time binge-drinking or escaping from reality by watching other idiots on TV ?reality? programmes. We have saved and invested in our assets, rather than spent beyond our means. We pay all our taxes rather than take cash off customers and robbing the taxman and other tax payers by avoiding paying our VAT. Why is this honesty and hard work now being rewarded by this taxpayers? huge payments to plug a few holes in the banking system which is riddled with more holes than can ever be plugged by our going further into debt? As a family, we are not unique, and this is not a feature of people of our class, but a feature of those brought up to take responsibility for themselves rather than relying on the nanny state, to work hard and take pride in just reward.
Our fundamental problem is that the economies of the world are moving into a deep and long lasting recession; the recent tax payers? spend on propping up a few banks are only going to prolong the sickness. It is like denying the need to amputate the limbs of the dying patient to save the patient; binding up the limbs may help save the limbs but it will not stop the illness spreading to the body. Why should we not contemplate the sharp short nasty medicine, and let a few more banks go the wall, allow our banking system to settle down under the free market principles of competition; the survival of the fittest. The failure of the banking system will mean that many people will lose their jobs, many their houses, businesses will fail, but some will not. Those will be rewarded then for being truly prudent, well-managed and based on sound financial principles. Those taxpayers who have followed the same principles will similarly survive, financially. Those who fail will go back to digging potatoes and working for a fair, not an inflated wage, based on their true capabilities and their ability to take responsibility and work hard. This scenario is not being contemplated simply because it is not politically expedient; New Labour think that by bringing back the Lord of Darkness and throwing more money of ours at the banking system, they are placating unthinking taxpayers and will have their ?Falklands? moment, which will save Gordon Brown?s skin. So far, their strategy is working as few taxpayers are really thinking this through properly.
Does David Cameron or Gordon Brown really expect intelligent and qualified bankers to carry on working for what a fat cat in the NHS can earn by landing a jolly job as a manager, simply because the taxpayer owns a few shares in their bank? What prevents our top hard-working, brilliant and clever people from simply withdrawing from this future public sector altogether, and setting up their own private banks or financial institutions in the future? Nothing. Where will our taxpayers? investments be then? This so called bail-out of the banking system, which is simply a prolonging of the agony, will lead to a more polarised society where those with cash and savings, and the ability to work hard and earn an honest living, will withdraw their skills and efforts, and find other ways to build capital and a comfortable life for themselves, while those who have not taught themselves how to work hard and put something aside for a rainy day will suffer the most.
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Professionally, Rahere was the financial controller of the team who saved Albania after their pyramid banking scandal - I therefore know something about what I'm talking about. The problem you have here is that the politicians are refusing to lance the boil, leaving the poison in the system. You have to purge the banks before we do anything else - we're suffering from Colonel Blimp syndrome. The next problem is weeding out the systems - the systems managers who swallowed this must also go. Then thirdly the new generation - there's too many ill-educated novices on the loose.
Otherwise it's just good money after bad.
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Let us just hope that this state-injection of share capital funds and additional liquidity is sufficient. With the markets in their current panic, one simple has no idea what will happen. I hope that 100% nationalization is still in HMG's sights - not that I would ever actually want that but it may become necessary and dithering would be harmful.
One major advantage of 100% nationalization (there are many disadvantages) would be a determination to inject liquidity not just into the banking sector (as has already been achieved) but actually into the real economy.
This is they key: the real economy does need credit-funding. In the end, Classical economists are right: the money economy may not matter per se - but for that to be the case, direct help for the real economy is vital. Of course, insofar as the UK makes £billions from the City, that does actually form part of the real economy, too. But it is the whole real economy we need to correct first.
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Re Shooting the Messenger and Robert Peston's "irresponsible " reporting.
It is not the BBC's job to ensure the nation's (broken) financial system is reported as being perfectly okay when it's not, nor is it the BBC's remit to do the HMG's bidding, though it tries its best (?) to run the country by leak and briefing:
Eg, from Paul Mason's blog 2/10/08:
"We're in a strange situation: this is the week the British financial establishment is trying to decide the shape of the bank bailout. The poltical truce called on Tuesday also, I am sensing, goes deeper than just £50k guarantee. Yet nothing is happening - there are no bank bailouts or busts, no market crashes, not even parliament in session; the only interviews are the kind where they call you in and give a statement to the camera. It's like the start of a war, or a coup - and in fact there are aspects of both these things in the reality of the situation."
"So I make a blatant appeal: will anybody who really knows what is happening start talking! The reason people are taking their money out of banks and putting it into Northern Rock, or under the mattress, is because there is more concrete information coming from taxi drivers than from the government and that cannot last..."
(http://www.bbc.co.uk/blogs/newsnight/paulmason/2008/10/british_19_trillion_bailout_de.html)
and from blog of 5/10/08
"9) Finally it is all being briefed to the papers that on Wednesday at a lecture (again, why not Monday in parliament?) Alistair Darling will signal the changing of the fiscal rules so he can raise debt to above 40% of GDP."
http://www.bbc.co.uk/blogs/newsnight/paulmason/2008/10/pretty_big_steps_does_the_real.html
Nor is it the BBC's job to cover up significant developments (market-sensitive reporting legislation notwithstanding). Otherwise we'd be reliant on our leaders (?) to keep us informed of what is going on which they singularly have failed to do. To lay the current panic at the door of a single hack when most of the major players know the score anyway is missing the point. As Paul Mason pointed out no-one at the treasury is talking. Which is quite different from the robust public debate and detail we get from Comrade Paulson who, to his credit, has been detailed and forthcoming in his press conferences recently. Contrast with that the dearth of useful information coming out of official HMG channels, especially the waste of good air(time) which is Yvette Cooper.
Re Northern Rock story:
http://news.bbc.co.uk/1/hi/business/6994099.stm
Does anyone seriously contend that he shouldn't have reported it? "Self-fulfilling prophesy" I hear people say. Well maybe, but to pretend NR was in a sound financial position and their credit worthiness was okay (when the markets knew damn well it wasn't) would have been tantamount to misleading the public by omission.
Pesto is, for good or ill, reporting what he knows and, yes, he gives his take on things, as any decent journalist should and it would be ridiculous for him not to offer an opinion on the "facts" as he sees them.
He's just the little boy who said "The Emperor has no clothes on". And if the government was THAT concerned then D Notices would be flying all around Shepherd's Bush.
Transparency from the banks to each other and from government to it's electors might help to give markets and public some certainty in such chaos but self-censorship helps no-one in the long run since fear of the unknown will occupy any knowledge vacuum it can find in present circumstances and re-fuel the panic. Seeing the fear in AD's eyes as he made the "Don't Panic" statement announcing the NR financing package 13 months ago made me realise things were REALLY serious, no matter what he actually said. "Well I am safe at least", i thought, "cos i don't have a NR account. I bank with RBS."!!
Hooray for the blogoshere tho. It seems after 25 years of popular consumerism and political/economic consensus/apathy whether we're on left or right We're All (political) Economists Now.
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Time to nationalise all the major banks. They don't really compete anyway, they are more of a cartel knowing that they can't be allowed to fail, can trust the taxpayer to bail them out and major new entrants are virtually out of the question. The Bank of England could simply identify the best Bank IT system and progressively merge all the banks customers together into one nationalised bank system. This would produce huge savings such as 50% reduction in staff and branches, eventually no need for inter-bank clearing etc. Yes lots of people would lose jobs, but these are pointless jobs when there is precious little in the way of innovation by the banks and they simply push up mortgage and other costs. Luddites of throgmorton street?
The reason the Govt are trying to shore up the banks rather than nationalise and rationalise is, like at Northern Rock, they are fearful of the effect on voters. Thus taxpayers are asked to bail the banks out without getting much if anything in return.
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Robert Peston seems to be the Oracle of the Western World. He must have some very good friends indeed at HMT.
I find what he says is correct only when he chooses to release it not the best timing.
I am relying on BBC for all my news right now.
If the bail-out does not work then UK banking is doomed and that cannot happen unilaterally and it must bring down France and Germany as well or certainly Northern European banking as a whole such is the spoilt child attitude of banks right now.
At the end of it Gordon Brown if he manages to haul the UK out of this no matter what the cost will have effectively saved his premiership and his career. Cameron can only look on and even if he does win the election it won;t make much difference because this country will be in a massive recession and there won't be much left to govern save a stratospheric public debt and huge crime and disorder as a result. Oh and the Olympics - well might as well throw in the towel there or simply make do with what we have now and house the athletes in all the repossessed homes in East London. But so what no one will care - we are past masters at Austerity !
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206
'Why Oh Why ?does President Bush not declare where some of his funding support came from'
I think you know the answer to this!
Same sort of reason
- that Chaney was never open about the billions earmarked for Iraq recovery which made its way back to US...
- that Poulson's connection with Goldman Sachs is not trumpeted
- that Blair's consultancy agreement with that major US bank isn't really questioned...,
- that both McCain and Obama cannot afford too much investigation into financial dealings
At least Bush will be going soon, hopefully replaced via the democratic process.
Back to Dylan's famous line
'where money doesn't talk it swears'
Politics is about power.
It can be made more accountable but in times of crisis it's is more likely to devolve upon the powerful 'few' than the many.
But - of course - politics isn't about politicians....they are just one aspect however much compromised by freeloading and party contributions. They are not finance experts and will have to turn to powerful interests and party supporters to put financial things right.
Don't expect fairness - if that was the case we would be spending more resources (like Bill Gates) on the real global issues
The market dips every time Paulson or Bush make an announcement? Hardly surprising!
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Billions of taxpayers' money used to bail-out the banking system. Yet, unlike bankers on Wall Street, not a single resignation from the banking community here in the UK. The arrogance of these people is breathtaking.
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Goodness me this is all very complicated. Simple at its core (borrowed it - got to pay it back), but devilish in the detail.
So Lehman's credit derivatives have gone for about 9% of their face value. This much has been reported. But even if I could make any firm conclusions from the details of the auction I'm not sure if I would be within my rights to express them here, due to an agreement I had to make before I could view the results of the auction.
see www.creditfixings.com to see what I mean.
I can't for the life of me decide on the significance of any particular bank being a buyer or seller. If someone bought the derivatives at this low price, are they the confident banks who have eyed a potential bargain? Or are they buying from sellers who they know they will owe a CDS on anyway? If so then their decision to buy could be seen as simply cutting loses.
I have a suspicion that Mr Buffet's choice of words for these things could in fact refer to the way something very scary will be used to make people accept changes they wouldn't normally accept. But once the decisions have been made and the tax payer has coughed up people will learn that in fact there was no or little threat in the first place.
However, I certainly think that those in the industry who developed these CDS contracts but so studiously avoided the word insurance so as to avoid regulation are guilty of something. It's true that the FSA should have seen it for what it was, but the fact that the financial police didn't detect the crime until it happened doesn't make the perpetrator any less a criminal.
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This financial fiasco is about bad management, reckless management and possibly fraudulent management.
The "toxic" assets have been over valued in the balance sheets of the audited accounts for several years yet auditors have said nothing about the practice or the possible consequences.These multi national auditors certainly charge enough fees to be held accountable!
People have used banks and invested in banks based on their fantastic profits in the past however it is now clear that these profits were based on grossly over valued assetts. Bonuses were paid out on these false profits and more investors were attracted.
If I did that in my business I would be jailed for fraud.
Why are the auditors not being called to account here?Why is the Financial Services watchdog not being hauled over the coals?
Why is the Fraud Squad not taking action as there appears to be more than enough evidence of corporate and international fraud on a massive scale here?
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215-rdrake98:
"I second Hiddenranbir (#25) yesterday:
"Peston, you mentioned the CDS auctions twice and have yet to comment on the outcome of it. Please do so!"
The Freddie Mac & Fannie Mae CDS auctions went through fairly well last week - probably because they are in 'conservatorship' and so people are pretty sure they'll get their money back via the US Governement.
Obviously people weren't so confident about Lehman's debt. It seems the final payout won't be known for a few weeks - when it becomes known who was left carrying the bag. I believe WaMu is due next week.
There some more info via:
http://www.cds-market.com/
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#215
Maybe this may help!
After reading Robert Preston?s article on the credit default swaps auction which took place last Friday, I decided to do some digging. The credit default market is a staggering $62 trillion, and is bleeding like a stuck pig, within the next 20 days an auction will take place in the US to settle the value of the credit default swaps outstanding on Fannie Mae and Freddie Mac which are estimated to be in the hundreds of billions of dollars in settlement terms and could well be in excess of the $700 billion already pledged by Bush and Co in Washington. These settlements were triggered by the US government takeover of Fannie Mae and Freddy Mac. What concerns me most is how much exposure the UK and European banks, hedge funds and insurance companies have to the credit derivatives market, particularly now that our banking system is about to be effectively nationalised. Will this nationalisation also trigger credit defaults for the banks in question? We are in currently a recession which is deepening by the day; stock markets, the housing markets and commercial building and property markets are in free fall around the globe. Bankruptcies and contract defaults are an hourly occurrence; the ability of insurers to pay on these contracts is virtually nonexistent, do we then nationalise the insurance company?s? Where does it stop? Just call me a pessimistic optimist, but I have a nasty feeling that we are up the preverbal creek, in a barbed wire canoe without a paddle! The banking end of the credit crunch is a marshmallow compared to what is about to come.
There are so many systemic problems, incongruities and anomalies within the entire Financial system, including the stock and bond markets that they have become virtually impossible to fix. The old saying ?For every action, there is a reaction!? describes the current situation to a tee, there is absolutely no congruity within the industry as a whole and as such, each sector is working against the rest. We are experiencing wholesale asset liquidation across all sectors, caused by lack of liquidity/credit, which is a last resort gambit to endeavour to keep their heads above water. Unfortunately the reaction to this action is an unending decline in prices which ultimately leads to default and terminal collapse, this will continue until there is nothing left to sell that is worth anything.
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#224
re Olympic village come the 'depression'
Could always house them in the Canary wharf towers, after all most if not all the floors will be empty!
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230-anglophile8:
"Will this nationalisation also trigger credit defaults for the banks in question?"
I'd be surprised if nobody at all has placed a bet (sorry, taken out a CDS) on such a credit event.
Google "Betting against Uncle Sam" for a CNN report on how CDSs are even being taken out against a whole country.
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222
You say, "Nor is it the BBC's job to cover up significant developments (market sensitive reporting legislation notwithstanding)".
If plans of how to make a nuclear bomb fell into the hands a journalist would it be imperative that that journalist published it for the "benefit" of the public?
Would you condone that?
Would that be in the public interest?
In law there is a clear awareness and practise of the "public interest" in the courts.
Yesterday journalists were all boom, boom now they are all doom, doom.
Were they right then and wrong now, or vice versa?
Time for some perspective.
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If, after recapitalisation, the Banks do not become active in the timely delivery of working and development capital to their industrial clients, (that meet reasonable borrowing criteria), then the Government should use Northern Rock for that purpose.
Once the major clearing banks identified such a risk to their client base, I suspect the tap would be "turned on".
The UK economy should not be held to ransom when HMG and the taxpayer have provided so much support.
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Does anyone know if it is possible to identify and measure the volume of "naked short selling" on any given day.
I suppose to some extent "covered short selling" can be estimated by reference to the volume of "shares on loan" - even then, how is daily volume of covered short selling identified and assessed.
Also, is any regulatory or private institution responsible for compiling and reporting such figures?
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A big set back when this government used the terrorism law against Iceland.
What sort of signal has this sent to foreign investors that the country is prepared to use such a law to seize assets.
How many have or are about to withdraw their money from British companies and banks for fear of losing it in this way?
What seemed to be a realistic plan initially is fast turning into a complete disaster.
It is high time to take the politics out of this for what else could have caused such a panic move?
If it leads to full scale bank nationalisation it is only because of incompetence by the government in the last week. They will then still have to guarantee all deposits which if done last week would have saved a far worsening situation. How long before this country goes the same way as Iceland?
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I'm surprised that nobody has called for a "Windfall Tax" on the excessive and immoral profits made by Hedge Funds arising from their short selling activities.
At least the Oil Companies and Utilities were investing in the British Economy - not trying to destroy it.
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#203
Yes that is the problem and no, small businesses and individuals will not get loans.
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oldnat (#218):
Yes, thank you, I have learned elsewhere about the daily marking to market and provision of collateral for CDSs. But not from Robert Peston. Early on Friday he was bandying around more headline-grabbing numbers: "As I noted a couple of weeks ago, there are estimates that claims under insurance contracts will total $400bn." With phrases like "serious anxiety" and "pain" of course in close proximity.
It's because Peston produces such scary language on the day of the first of the four auctions that I do expect some commentary later on why the sky hasn't fallen in (quite yet anyway).
I don't buy into all the criticism of Peston here - I broadly agree with trikidiki's "hooray for the blogosphere" in #222 - but this absence of explanation and even basic accountability from someone so influential does produce concern.
Meanwhile, though, how did you produce the nifty link to the FT article? I don't know the syntax for that and I don't see anywhere it is explained. A standard piece of blog markup I assume - but which one?
Thanks for the comment.
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Just a quick question:
I have a savings with Natwest ( part of RBS) if it went bankcrupt would i still have to pay the frist £50 of the savings?
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We have all this compensation wrong, it is they the rich take all the wealth as they believe it is their right, it is us the worker who have been well and truly stuffed who must pay, it's always been that way so I don't expect anything to change, be honest, do you?
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#202
Interesting point but whilst RBS does indeed have it's headquarters in Scotland (Edinburgh) it is a global bank with a representation in over 50 countries. As a company it has paid billions of pounds in to the governments coffers for the benefit of all UK taxpayers including those living in England. It will not just be English taxpayers money supporting the banks at this time but ALL UK taxpayers. I am also convinced that any tax payers money used will be paid back so lets's not get carried away with comments like 'the money is going down a black hole' and never to be seen again.
One final point to bear in mind regarding the remuneration of bank exceutives. Yes it is high. Whatever the rights or wrongs of these executives performance they are paid the market rate for the job they do. Will the remuneration package of all chief executives running large PLC type companies now be slashed? Of course not. Many of these guys get paid less than many premiership footballers. Is that right? I don't think so.
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Hopefully BBC and other Media reporters will turn their investigative resources to the Banks once recapitalisation has been agreed with the Government.
Executive management of each of these institutions should be required to publish, and be questioned on, their Bank Remediation Plan.
Such Plan to indicate the means by which normal banking services will be resumed to their business clients, (in the first instance), and as a minimum, specify the following:
- Client Base priorities
- Lending and volume timelines
- Transparency - Reporting against Plan - weekly or monthly
- Client feedback - Satisfaction reporting
If prudent, or required in the case where the Plan is not working, then provision needs to be made for remediation.
If remediation doesn't work then HMG should use Northern Rock to stimulate real, aggressive and sustainable competition within the Banking Sector.
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Ah, I sense a clever clever moment about to descend upon us all.
That awfully clever, child prodigy no less, Gordon against those obviously real clever city types.
Those real clever city types have clearly got us all into a bind. Being clever has enabled the city types to construct mechanisms that have fooled us all and made them wealthy.
Now all that clever Gordon has to do is out clever them and get them to believe in him and his fix. From the Red Party no less.
The problem of course is that a pig with lipstick is still a pig.
Clever Gordon will, I am sure, do his best. The bankers will still be trying to do what they are good at. Generate wealth for themselves. It's what they do.
The city likes short term gains. That is what they are going to get.
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Quote
I never have understood why any government would be prepared to put the power to create money in private hands, and then borrow that created money back.
Unquote
Not only that but the government has to pay it back at interest.
All governments operate in bankruptcy, our courts are there only to extract money from us as they operate on Maritime law and not common law. Smoke, mirrors and deception is the name of the game.
Our police are just revenue collectors, because they all use statutes. Common law has been hidden from view and maritime law prevails in most Countries nowadays.
Learn to use redemption look up Winston Shrout he is king.
All our governments look out for the bankers and big business, and do not give a fig about the good hard working people despite what you hear them say on their propaganda arm the Beep.
The proof of that is what you see now, bail out the banks and sod you lot.
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If the government do lend (our money) to Barclays and co.and have officals situated in these banks, how much of our private information will they be able to obtain,such as amounts in accounts and other deposits?
Will this info be secure between customer and bank!!!!!!!! I WONDER.
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It's amazing that while our politicos can start wars,implement universally unpopular measures,and pay themselves special benefits,only a global financial collapse has got them really frightened.We will now see what qualities of leadership and intellect they really have.I suspect that the EU will be found wanting,in this respect.
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First to those berating Mr.Peston re CDs positions on Lehamn, The first round of auction was 9.75 cents on the dollar hence a "potential loss" or payout of $90.25 cents Except what is unknown is how much has been laid off via swaps and hence until settlment date of October 21st. Counterparty risk is still huge so we just don't know is the answer, some US sites are reporting net payouts as low as $6bn - which would be a relief. It is only the NOMINAL amount that is $400bn approx.
Second point, The tripartite system introduced by GB and agreed by compatriots is now so clearly broken that it must as a matter of urgency be replaced with proper oversight. You can't do this overnight. You however have to make a start. It has been a disaster and directly due to the law of unintended consequences - ergo BofE independence a good idea smashed by a decade of incompetent mismanagemnt by the FSA. Also the BOfE has been woefully behind the curve all of the time excaerbating this crisis. The bestpectacled Dr.King may be a fine academic economist but he is woefully inadeqaute as a solid figure in markets and has NO grasp of market pyschology wahtesover otherwise there would have been far faster and direct action in the markets. You may argue that this unwinding had to come but whilst that is true it does not have to be totally disorderly and smash companies good and bad as well as destroy vene modest savings of individuals.
Local Governments have reveled themselves complately incapable of sensible stewardship ( by and large) ythey do not understand counterparty risk and have been chasing yield at the Icelandic banks. Set the wrong targets for them and this is the result. There needs to be professional management of their funds and the Govt must urgently address this too amongst all the other competing demands.
GB has been extraordinarily fortunate in presiding for years over a benign interest rate and international environment which he has claimed as his doing- it was nothing of the sort and hence he cannot claim that his intervention is anything but a last ditch effort to save a broken system, a good part of which he helped to create.
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The present expensive and completely ineffectual FSA should be scrapped (no parachutes for failure). A new system of regulation must be created. A particular problem is that auditors, accountants and city workers move around in the same circles and provide a common pool of 'talent' . This means that they move between the these areas freely. BUT, if you work at FSA policing company A but hope to work in company A later you won't make a devastatingly bad report will you (unless your plan is to get them to hire you to sort out the mess and keep you quiet)
Auditors rarely qualify accounts as much as they should and generally cosy up to companies to keep their enormous fees. The big auditors know that one of them is virtually bound to get the business as no one will trust anyone else.
Its time ALL financial matters appeared ON balance sheet (including govt borrowing such as Network Rail). The solution to the crisis of confidence is very simple. PUBLISH FULL AND THOROUGH AUDITED ACCOUNTS OF ALL BANKS.
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#239 rdrake98
Go here
for an explanation of how to post Links and other clever things - courtesy of Brownedov
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Why does the BBC and other Media invite leaders of City Institutions such as Hedge Fund and Private Equity Managers to comment on the current Financial Meltdown.
Is the purpose to heighten fear and anxiety within the viewing public?
In that Hedge Funds and Private Equity are prime beneficiaries from current market volatility and fear, should there not be, (as a minimum), a statement to the effect that these commentators are not impartial.
Why are such "conflicts of interest" not advised to viewers?
Why are these commentators not questioned about their own actions at this time - when they are advising everyone that the situation is worsening they are probably "short-side selling" or buying company's and their assets at ?firesale? prices.
It's not good enough!!!
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I am wondering what the youth of the world will do when it GETS IT. We are all in hock up to our ears but their future is dire. I can only see big trouble if guilty people are not made to pay for their enormous mistakes. Revolution? YOU AINT SEEN NOTHING YET!!!
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#236
No, what will have lead to the nationalisation of the banks will be the incompetence of the banks!
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I suspect that the threat to the UK Economy and the British way of life is as serious now, as was faced by the country during the Second World War.
Is it not time that we concentrated on the solution and not the cause.
(The cause to be addressed later).
Should the BBC, CNBC and Bloomberg be suspended until such time that reporting and commentary is made more balanced and complete, and that equal prominence is given to the solution and its delivery rather than dwelling on the past?
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Is this not a fantastic opportunity? anyone who wants to establish a new bank now starts with a clean balance sheet and a competitive environment where all the other banks are run with the "help" of the government (and we know what a terrific business manager the government is), and/or a legacy of problems that need managing, a badly tarnished image with customers etc, etc. Go entrepreneurs, go!
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#236 and#253
It is the incompetence of the banks that has lead to all of this.
Even buying CDSs could have been done properly by checking price against actual content. Would you buy a crashed car for the price you would pay if it were new or insure it as if it were new when it was crashed? That's the nearest equivalent I can think of.
The banks didn't bother to check the CDSs or to check the liquidity ratios of their insurers either.
Any bank that was lending more than 70 per cent of asset value was also taking a big risk and that, again is incompetence. Would you lend money on hot air? That's what they were doing.
We need to see some Chairmen thump their chests, accept responsibility and resign.
Maybe there will be a reality check this week.
NM
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All this has been brought on by GREED
Greedy Stock Market (never satisfied)
Greedy Bankers (eager to line their own pockets)
Greedy Spivs and Gamblers
and to be baled out by a Greedy Government!
Couple all this with the lies, half truths and hidden 'rabbits' to rip the money from the pockets of ordinary investors (RBS Rights issue comes to mind!) and it's not difficult to see why we are in such an awful mess.
All based on the American dream.......... or should I say nightmare.
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Just what is value of the Credit Reference Agencies such as Moodys and Standard&Poor. Their ratings, probably used by our local councils are now shown to be less than useless.
Do we now need a consortium of a dozen or so of the worlds least risky (a relative term) banks to open their books to each other and thereby create some trust and a credit rating for the interbank market to come back to life
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248-sonoftoad:
"some US sites are reporting net payouts as low as $6bn - which would be a relief. It is only the NOMINAL amount that is $400bn approx"
If 400 companies lent a billion to Lehman and each of these "insured" against the debt going bad with one of the the others then I can understand that the "net" payout could actually be zero.
What I can't get my head round is "where did the $400bn go?". And without costing much either - ok maybe $6bn. Surely, if we can really create money so easily then who needs taxpayers?
I admit that I don't understand counterparty risk either - but I'm willing to learn if that's all it takes to make sense of the previous paragraph.
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I`m not the brightest of sparks , but can someone tell me where has all the money gone? or was it ever there in the firstplace. Perhaps the stock market now is showing the actual true worth of what its supposed to represent. Looks like it was well over inflated along with the dealers ego`s ,and were all back on planet earth again.As you can see i`m not to bothered ,as im in the lucky position of not having a brass farthing . Well happy hunting trying to find someoneto put blame on , and happy spending to the dealers with our 400,000,000 billion .few nice bonuses in there.
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Goodwin should leave with nothing, as should all others who have shafted their shareholders and the country.
Prison is what they really deserve.
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#255 Grouchmonkey
Alas it is not easy to start a bank. You need a Bankers Licence.
Richard Branson thought that he could grandstand his way into getting Northern Rock to be his bank.
He doesn't have a licence either..
What is a lot easier is to start up local bartering schemes. We should all be doing that.
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#255 Grouchmonkey
One good outcome of the crisis is that some of the outdated restrictions on Credit Unions are to be lifted.
A return to mutualisation is long overdue.
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#254 and others
re Blocking CNBC, Blomberg, FoxNews etc.
Those media outlets commentate what is and that has happened, and just how would you stop CNBC or Blomberg (accepting that the UK media could be slapped with a D notice), are you seriously suggesting that the UK should block/censor internet and phone lines - how would satellite phones be blocked, how would you stop other media outlets outside the UK from broadcasting to the UK via satellite?
Sorry but I think you and many others who are wishing to gag the UK media (and RP in particular) have been eating far to much nutty fruit-cake of late!
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First of all I need to state that I don't understand banking or the financial world but it does seem to me that lending money to people who you are pretty sure can't pay it back is a pretty serious dereliction of duty. To then speculate on the various loans is nothing short of lunacy.
I seem to recall asking various 'professionals' how this business model differed from pass the parcel and what happens when the music stops,without ever getting a satisfying reply.
To now discover that not only is nobody facing criminal prosecution but that those responsible are still receiving bonuses beggars belief.
Banking is clearly too important to be left to bankers.
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The bail out plan is to be funded by government borrowing.
50 bn for the banks capital injection. 200 bn for the Special Liquidity Fund. Plus what has been spent or pledged for Northern Rock, Bradford & Bingley and Icelandic bank deposits.
A further guarantee of 250 bn for wholesale bank loans.
The total of UK Gilts already issued is 480 bn. These cost the taxpayer 28 bn a year in interest payments.
Who is going to buy over 250 bn of new UK Gilts and how is the taxpayer going to repay the loans?
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At last - some good news!
Our onions, peas, radish and spinach seeds have all germinated. So at least we should be able to eat if all else fails.
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#259
I think you've got things a bit mixed up.
From Bloomberg:
"Oct. 10 (Bloomberg) -- Sellers of credit-default protection on bankrupt Lehman Brothers Holdings Inc. will have to pay 91.375 cents on the dollar to settle the contracts, setting up the biggest-ever payout in the $55 trillion market.
An auction to determine the size of the settlement on Lehman credit-default swaps set a value of 8.625 cents on the dollar for the debt, ...."
So the DEBT was sold in an auction and people only paid 8.625% of the original value for the DEBT.
CDS has to cover the rest. If you read the article it says that companies have been sellling assets to cover the monies.
"Some funds may be forced to dump assets to meet the payment demands if they haven't hedged, BNP Paribas's Cicione said.
``Banks can go to the Federal Reserve, or use the commercial paper market where it is still functioning'' to meet protection payments, said Cicione, who said a 9.75 cent recovery rate would lead to payments of about $270 billion. ``But fund managers or hedge funds, once they've used their cash, have only one option: to sell assets.''
The Pimco Total Return Fund, with about $130 billion under management, has written protection on a face amount of $105.4 million of Lehman debt as of June 30, according to regulatory filings. Pimco spokesman Mark Porterfield didn't immediately return a call seeking comment."
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With the nation a new major shareholder of these banks, I would like to propose that all of the jobs offshored in recent years are planned for repatriatriation. Offshoring/Outsourcing is all part of the same collective madness that has consumed the banking industry (and other industries, for that matter) over the past decade or so. At least that should help recoup some of the imminent job losses due to us in the UK. Yes, it will increase their costs, but presumably we, the taxpayer, will be happy for them to take a little hit - when compared to the massive hit that we are collectively taking...
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In general Reporters and Commentators within the Media have the benefit of hindsight and are accountable for delivering nothing in terms of a solution.
However they often use their position to aggressively attack Politicians who are working diligently to solve the problem.
Is this fair and reasonable - have they redefined the role of "Reporter" and "Commentator"?
Are they abusing their power?
By the way - great interview by Boris Johnson on Friday's "Today" with John Humphries.
Well done Boris!!!!
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I hope the Boards of all the Banks that take the taxpayers injection will be radically reformed.
All their Chairman and CEOs should resign on Monday and stay on with no pay till their successors are appointed.
Despite what the headhunters and other commentators say, there is a large talent pool available, namely former clearing bankers (many of whom were "retired early" because they looked a bit old fashioned). They understand liablilty management and credit and who were never afraid to question aggressive proposals.
The CEOs and Boards should all be people who follow the late Dennis Weatherstone's words "If I cannot understand it , you cannot do it"(Dennis rose fron the trading desk to Chair JP Morgan).
David Potter
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#268-JackMaxDaniels wrote:
"I think you've got things a bit mixed up"
How so, exactly?
"CDS has to cover the rest. If you read the article it says that companies have been sellling assets to cover the monies."
That's my point really - maybe not made very clearly. The missing hundreds of billions may have been / are still to be paid out. And for anyone to claim that the total cost is only $6bn is a bit misleading.
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How will the performance of the Joint Party "Financial Stability and Transparency Treasury Committee" be reviewed?
This Parliamentary Committee has been convened for over a year with specific responsibility for delivering "Financial Stability and Transparency" within the Financial Sector.
The "Joint Party" Committee were rightly critical of Bank of England and Financial Services Authority systems, accountability and performance.
However the Committee was charged with identifying and implementing a solution.
How will their performance be assessed and by whom.
Can any of the major political parties criticise the performance of Gordon Brown when their tasked representatives appeared to have failed so miserably?
Are these statements unfair?
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@ #186 true-liberal who wrote:
"What I find obvious, is that our monetary system *defines* the society we live within. Yet politicians seem to ignore something as fundamental as the nature of money when they tell us society should be X or Y."
I didn't find it obvious until I started trying to understand the current crisis, but now I completely agree with what you said.
Unless a holder or candidate for public office is committed to at least considering a reform of the current monetary system, he or she is side-stepping the single biggest political issue of our time.
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oldnat (#250)
Thanks a million
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#275 rdrake98
The thanks are due to my tutors Brownedov and Ed_Iglehart.
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Great to see the concerted actions being taken in Europe tonight, and probably being replicated around the world.
Hopefully Reporters and Commentators will not devalue the proposed solution by reference to the fact that it has not been delivered earlier.
I suspect that we, (everyone except Reporters and Commentators), acknowledge that the Politicians could not have proposed and achieved any such Agreement until the Banks, Taxpayers and Investors realised that there was no alternative.
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#270
John Humphries and Boris Johnson, are you sure you were not listening to the a revamped "Sorry, I haven't a Clue" show?!
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Great time for a buy-back, using money I lend the banks, shares are cheap enough now, and of course the price goes up, sell and repay loan and so the merry go round resumes...
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279,
Buying bank shares?
The taxpayers own the banks now, do you work in finance? Do you know something I dont?
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The Chairman of RBS should go as well,after all he allowed Sir Fred to go ahead with the buy out ABN AMRO which everyone said was overpriced and at a time when the credit crunch was starting they should be ashamed of themselves
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Why is G Prudence Brown looking so happy at this very serious time and when it his and the bankers policies that have wrecked our economy ?
Why does HMG not want to dictate Bankers pay on behalf of the taxpayer ?
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One of banking histories greatest CEO's is being hounded out of his job. Not by the thousands of employees of RBSG, who continue to support him, and believe in him, but by a pack of baying hounds whose only joy is in predicting death and destruction, not recognising what is good and worthwhile. And why? because he is the 'face' of RBS, because he truly believes 'the buck stops at the top'. Because he has masterminded sucess they can only dream of. Fred Goodwin is only human, he does not single handedly run RBSG. He does not personally process the 1 billion transactions per day that RBSG conducts. He is part of a team, a team of 130,000+ people. All of these so called experts who write anonymously on these blogs, pointing the finger or blame and telling the world why we are such deep mire, well if you are such fantastic business people. Why are you not running RBSG, or where where you when this all started 1 year ago? Banks only make money because people want what they either can't afford, or can't wait to save for.
Feeling sorry for yourself, because you have bought RBSG shares, and you relied on them to boost your pension. Well that's tough, everyone knows that shares go down as well as up. you are constantly remined when investing in shares, so YOU made the choice, rubbing YOUR hands together thinking of all the money YOU were going to make without actually doing any work. Now it is time to pay the piper. YOU made the investment, now stop moaning and live with it.
As for the rest of you. The money is still there, the world hasn't stopped working, and it certainly hasn't stopped spending. so Back Off.
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#283
Well said, katiewill. although I do think the RBOS directorate have been economic with the truth throughout and there is no doubt that whilst the RBOS staff are a fantastic team they were severely let down by the high risk/high borrowing games being played out by the RBOS Board - thesame Board which reassured investors time and time again that they had been conservative etc.
That does not engender trust and whilst as leader of the team he is no doubt well supported, he, by his own ego led the team and the shareholders up a dark ally in what looks to be the poorest part of town.......and the rest is already history.
The Chairman is another story - a non event and the sooner he goes the better
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