Banks ask chancellor for capital
When Treasury officials started working overtime last week on an emergency plan to inject new capital provided by taxpayers into our banks, the chancellor wasn't sure how our banks would react.
Would they proudly tell him to hop off?
Or would they put out the begging bowl?
Well last night a trio of the UK's biggest banks - Royal Bank of Scotland, Barclays, and Lloyds TSB - signalled to Alistair Darling that they'd like to see the colour of taxpayers' money rather quicker than he might have expected.
According to bankers, these three were disappointed that at a private meeting last night with Darling, held at his request, he didn't present to them a fully elaborated banking rescue plan.
One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.
On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital.
But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened.
Also at the meeting were Mervyn King, Governor of the Bank of England, and Adair Turner, chairman of the Financial Services Authority.
And although the other big banks were represented, it was the chief executives of Lloyds TSB, Royal Bank of Scotland and Barclays - respectively Eric Daniels, Sir Fred Goodwin and John Varley - who formed a tightly-knit caucus and gave urgent focus to the discussion.
The three banks estimate that they may need around £15bn of new capital each, with £7.5bn paid up front and a further £7.5bn guaranteed by the Treasury that would be delivered if it became necessary.
Current rough estimates are that the capital injection could be as much as £50bn in total for all British banks.
As yet however, there has not been any detailed negotiation with the Treasury on the amount of taxpayers' money that may be invested in them.
There is no precedent in the UK for taxpayers to take such significant stakes in banks.
The Treasury has been working on a rescue plan along those lines, as I disclosed in my note on Saturday.
The three chief executives will talk again today, so that they can establish a common position, in advance of any further negotiations with the Treasury on a rescue package.
The Treasury's current thinking is that it would acquire preferred stock in the banks, that wouldn't carry voting rights. But it would also take warrants over the ordinary shares, which is a device for ensuring that taxpayers would benefit if the banks' share prices were to rise.
However, the chief executives also told Darling that a capital injection of this sort would not be enough to stabilise the banking system.
The steady withdrawal of funds by other financial institutions, the collapse of the wholesale funding market, remains a serious problem - which probably can't be solved by the Bank of England continuing to provide ever greater loans against an ever wider range of collateral.
In the next couple of years, many tens of billions of pounds of asset-backed securities have to be paid off or redeemed by British banks. So the banks want a commitment from the government that it will lend to them, whether or not they have collateral of the sort demanded by the Bank of England, to allow them to redeem these bonds.
The banks are not looking for a formal guarantee from the Treasury that it will protect wholesale depositors, which is what the Irish government gave to Irish banks, but they would like a formal pledge that it will fill any funding gap created by the steady ebbing away of wholesale funding
If such a commitment were not forthcoming, confidence in one or more British banks may continue to ebb away, to a potentially lethal extent - or so the banks fear.
I'm 
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What's going to happen to the government's credit rating? Will interest rates end up going through the roof causing an ever bigger collapse, just down the road to suit the politicians.
Hairy times indeed.
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And we just all admit these banks are insolvent Robert? All this talk of on paper they are fine is rubbish - as you pointed out at the weekend there is a £625 billion funding gap - for any other business we'd all agree they should be made bankrupt. This £625 billion is going to have to come from taxpayers and is likely to bankrupt this country in my opinion.
Iceland is showing the way, investors will run away to somewhere safer and won't want sterling.
Of course all that is dependent on the whole financial system not imploding which seems like a realistic outcome right now.
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I wonder if we could hypothesise how the current banking (effectively over-valued assets) situation would develop if it were allowed to work itself out without intervention by governements or use of taxpayers' money?
Opportunities abound.
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i see yet another call to lower interest rates. If the banks are not lending and have problems with liquidity what difference would this make? the banks would probably not pass on the cut in order to prop up their margins. As it was low interest rates that caused the problem, how about putting the rates up, so they offer a ""real above inflation rate. money would flood into the banks solving the liquidity problem at a stroke. then again i may be missing something, but what precisely will a cut in interest rate do?
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I am disgusted and frustrated that as a British Citizen, I have no voice as to how my taxes are used. I do not agree that the nations taxes are used to bail out big wig fat cats who really should suffer these consequences of their greed. I would prefer that the nations taxes are used to save the lives of the people in our DIRTY NHS HOSPITALS. Its amazing to see that saving money is more important to the Government than saving lives.
Does the nation not have a voice, or is Gordon Brown just deaf?
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We all need to realise that our very monetary system is nothing short of a pyramid scheme.
One might reasonably ask, "where has all the money gone"?
The fact is, much of it has been sucked into the parasites which are the banks leeching wealth from our economy.. and now the merry go round has stopped, the banks are being caught with their trousers down. The whole fractional reserve banking system is an Enron style obfuscation.
http://www.silverbearcafe.com/private/moneyasdebt.html
Robert,
I'm getting continually annoyed that neither you, nor the BBC are broaching the subject of how our very monetary system works, and how fractional reserve banking works (and its inherent unfairness - it is a pyramid scheme).
Please do a piece on this very important subject during a very important time.
Thank you.
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I think this is like 1989 when communism failed but in reverse, time to kick the capitalist establishment out (all three political partys) and replace them with a communist one. Social housing and real jobs that pay real wages for all.
Also the end for eternal market growth, lets build a sustainable economy which would also be greener for the planet.
The only question is? can we turn around now, or do we have to go through the pain of a world wat first?
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Higher interest rates would be great to attract more people to save. The trouble is most people don't have much (if any) cash to save so it would be academic. It would also crush the economy as people would spend less.
Sooner or later we're going to have to take this bitter pill but no politician wants it to happen on their watch. From an economic perspective it's probably best to take the pain so we can all move forward afterwards, but from a political perspective lets just keep things ticking over so we can blame it on the next guy.
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you do have a say in how your taxes are spent...its called a general election.its a pity only 4 in 10 bother to vote.
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What should the taxpayer get for his money. An equity stake in the Banks?Heaven forbid. The Government should nationalise the land held by the banks (not irrevocably) and lease it back over a 100 years on terms that make economic sense now. Henry George. Your day will have finally come. The land should belong to the people!
PS Beware forecasting doom! It will be self-fulfilling if you do.
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#5 groovystewboo
The UK apparently elects by democratic process a government which they invite to run the country on their behalf.
The British citizenry do so without expectation or legal requirement for the government to refer back to the population at large, through refernda or other means, for discussion, direction or agreement on how it implements the various and individual policies is develops and implements in keeping withthe mandate it receives through the democratic election process.
If you voted. It's your fault.
If you didn't vote. It's your fault.
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The important piece of news for me in the article is that:
"On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital.
But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened."
What this indicates is to me is that these banks are fundamentally healthy and
any problems facing these particular banks is almost entirely one of lack of oil on the wheels of the world's banking system.
So, once Governments manage to address the issue of confidence in the world's banking systems, which is something they seem focussed on achieving whatever the price, then they will not have a problem and the winner will be the UK taxpayer who will benefit from the warrants as the share price recovers.
Personally I think we will look back on the last few days and, in hindsight, feel good about the fact that at the darkest hour, governments around the world worked together, albeit not entirely in harmony, to keep the world's economic system going and that the bottom line wil be increased confidence in the system.
NOTE: I am only referring to confidence which will result from the response to the problem. It is not intended to condone, nor should it detract us from addressing the issue as to, how we got into this mess and why the actions taken by Governements around the world was necessary.
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Anyone for trickle down now?
Anyone for attending the funeral for monetarism?
Anyone for a handful of geeks fidling with interest rates to manage the economy?
Anyone for a Prime Minister who spent 10 years 'managing' the economy?
Anyone for popular capitalism now?
Anyone for confusing free enterprise with free markets?
Anyone for trusting businessmen and politicians ever again?
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As I'm on a roll - here's where the money would be better spent.
Reduce the price of Oil.
Lower income families would be able to afford to heat their homes, run their cars AND pay their bills (especially their mortgages) far more easily.
Repossessions/foreclosures would reduce, over-valued debt would stabilise, cash-flows (liquidity) into lenders would increase and even with the deeply flawed FR banking system, this would still lead to a quicker trunaround in current cicumstances than simply giving banks taxpayers money directly.
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As ever, when it comes to serious decision making, HM Gov is dithering and prevaricating.
Fact 1: The banks in the UK are obviously insolvent.
Fact 2: Inflation, as in the real index is running at around 21%
Fact 3: most uk industry is in recession and business is falling away by the hour
Now is time for a radical re think.
Nationalise all of the banks and get rid of hundreds of fat cat directors and managers who have milked the system and us for years.
Streamline the banking system and kick the academics out of the Bank of England and replace them with businessmen.
Run the Nationalised banks until they are profitable and all of the shady systems and fat cat fiddles are dead and gone then sell the banks off in a massive flotation.
Put in very heavy regulation and controls in every aspect of financioal services.
Act now.
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As ever, when it comes to serious decision making, HM Gov is dithering and prevaricating.
Fact 1: The banks in the UK are obviously insolvent.
Fact 2: Inflation, as in the real index is running at around 21%
Fact 3: most uk industry is in recession and business is falling away by the hour
Now is time for a radical re think.
Nationalise all of the banks and get rid of hundreds of fat cat directors and managers who have milked the system and us for years.
Streamline the banking system and kick the academics out of the Bank of England and replace them with businessmen.
Run the Nationalised banks until they are profitable and all of the shady systems and fat cat fiddles are dead and gone then sell the banks off in a massive flotation.
Put in very heavy regulation and controls in every aspect of financial services.
Act now.
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Well I guess this "unofficial" press release will cause yet another run on bank shares today with the big three leading the way ...
I'm all in favour of reporting the news, but I can't help but wonder if a line is being crossed here ... this will in most probably make / create / trigger todays news of yet more falls in bank shares.
What would have happened to the stock prices of theses banks if this blog had not been written?
We all recognise that free speech is permitted ... and we all also recognise that shouting "Fire" in a crowded theatre is not ... which category does this fall under?
However, if this info was already in the public domain, then its just repeating that info ... or is this new oxygen for the raging fire of panic
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Robert,
I have been following everything very closely and find your blogs informative,factual and very quick after the events.
Do you have any predictions based on gut feelings or is that not in your portfolio.
This cant all be a few people not paying their mortgages after all.
In Turkey people are emptying their accounts as I speak so your next headlines will be about this economy mark my words.
Panic or sensible Turks?????
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It seems as if a massive injection of state money into all the big banks is now inevitable. In which case, I would like to see the government take a 100% equity stake in these particular companies ... full nationalisation, in other words, at a price close to zero.
Michael Foot proposed all this back in 1983, of course. Ahead of his time, wasn't he?
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This is commonly called 'Sh*t or get off the pan'
About time the government was put on the spot for its dithering ways; they are doing untold damage to the financial system.
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#6 Why keep going on about fractional reserve banking as a fundamental problem?
Yes it is a problem, but only because the glue in the system has hit the velocity of money.
The system works like this.
1. a Bank lends you £10,000
2. you buy a car
3. The car manufacturer pays its suppliers and its employees and puts the rest in the bank.
4. Its employees buy food from a supermarket and spends on other things
5. This process (3/4) is repeat in both the supplier company and in those buisinesses where the employee spends its money.
6. As a result the money the bank lent you finds its way back to the bank through the accounts of other people.
7. This money is then available to lend to me to also buy a car.
The issue is how quickly the money goes through this cycle, namely the velocity of money.
It practical terms it is analagous to the fact that water entering the upper reaches of the Thames is drunk by six people before it reaches the sea.
Tell me, what is FUNDAMENTALLY wrong with this system?
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It's not just that banks that have been irresponsible, to quote Mr Brown last night
"And where there has been irresponsibility we must now have instead transparency, integrity, responsibility, good housekeeping."
The problem is that he doesn't recognise that governments that spend when they cannot afford to pay back are as irresponsible as the banks and their over lending.
Definitely a "Sir Richard Mottram" moment.
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"Peston's Picks" seems a very optimisitic name for a blog today...
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Are we permitted to ask, who is feeding you with these 'insider' 'fresh from the meeting' updates? I begin to wonder whether your fly on the wall journalism whilst undeniably insightful, that your mole's leaks simply seek to achieve the selfish objectives of the very same people who contributed to this catastrophe?
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reduction in interest rates is a waste of time and caused the problem in the first place.the problem with the western world is that we are all greedy we want more and more for less and less.everywhere you go in uk you dont see poverty you see decent cars people living in expensive houses, most of it on credit and the expectancy of increased growth .well the reality check has arrived .
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A couple of sayings come to mind:-
1) You can't buck the market
2) If you can keep your head when all about you
Are losing theirs and blaming it on you;
Thatcher and Kipling - well if Mr Darling follows these and doesn't react to "Corporal Jones types" wanting a couple of Trillion Pounds spent to react to todays bad news then he can start planning a long term strategy for the British economy.
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At last, the first signs of concerted action. Yes, on paper these institutions are fine. However confidence is the great devaluer. Recapitalisation is the answer, combined with a good rate cut (see Down Under) to get confidence back and money moving. We have nothing to fear but fear itself has been said many times since FDR. Truer today than ever. Let's not be smug or anti-bank; anti-Gordon/Dave/Mevyn. Look forward and let's get moving again.
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'One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.'
These 'men' should have been on their knees to Darling and King. They obviously know no shame. I only hope the government have made this bailout conditional on their 'employment' contracts being terminated immediately (without 'compensation') on receipt of the first payments.
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I think most people are missing the point on 'confidence'.
The probelm (as reported) is not consumer confidence in banks, it is inter-bank confidence.
If banks don't trust each other then who are we to say whether they are right or wrong?
The solution is in their own hands -- start trusting each other (if they are, indeed, trustworth). If they don't trust each other then why on earth should the taxpayer trust them?
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What an embarrassment these banks are. They are a danger to ordinary people and to the country.
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Take radical action.
Nationalise all the banks now - take the hit and accept that the cost of taking this action will be to devalue sterling.
Lowering interest rates is pointless - if this current credit crunch has done anything, it has educated more of the population that BOE interest rates are virtually meaningless when it comes to how much they pay on their loans and mortgages. Nowadays, everyone is an expert on LIBOR...
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If the "global financial system collapes" (a much-used phrase right now), what exactly happens to me ("the man on the street")? Do I get paid? Can I draw cash? Can I use my credit card?
I've just listened on the Today Programme to a trader in Frankfurt say that the odds on a collapse of the global financical system exceeds the odds on a rescue. Oooh er.
Then, enter Sir Philip Green who says (I paraphrase), "Cheer up .... businesses will keep trading .... people have jobs .... there isn't really a problem .... get on with it".
Who's right? And, back to my first question: if the system (or my bank) fails/collapses what is the direct effect on me and over what period? Is Sir Philip right ... it doesn't much matter because we just carry on going about our business. It all seems a bit bizarre to me.
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i see another way out....lets see the whole system collapso, everybody on a level playing field(thats a new term thats come in)and pay the real money to the real people who do the real jobs.the fat cats can get to become thin cats and do some hunter gathering!!!
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Robert, I understand that you have to report the news and tell us what is happening, but REALLY do you have to be so dramatic!! STOP using words like "collasping", "collision" and so on and so on........YOU are helping to cause a panic! I have a lot more than £50, 000 in savings and shares and I am quite prepared to ride it out. YES, things are terrible at the moment, YES it is worrying and I am not being unrealistic about he trouble we are all in, but if you and your other colleagues continue to panic and dramatise your reports it will become a self fullfilling prophesy and YOU will help to start an even bigger panic than there is now!! PLEASE STOP IT!!!
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It is important that the Government cannot exert political pressure through this mechanism, given the painful process that the banks need to through (ie. trimming their balance sheets, under supervision by the FSA and Bank of England).
Lack of voting rights is not enough, the nature of the Governments exit from this arrangement must be preordained, and out of the hands of Messrs. BaD
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So the end of the world hasn't come yet. How disappointing is that. I was so much looking forward not having to hear those creepy voices of the debt junkies any more, calling for rate cuts (which wouldn't work anyway).
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A few months ago Messrs Brown and Darling were saying that the economy was well placed to avoid serious impact...
How wrong were they!
Thousands of jobs have been lost already and probably hundreds of thousands of jobs are going to be lost. We keep getting told this is a global problem, isn't it about time someone realised that a global problem can't then be solved by individual countries, this problem needs all the major economies of the world to act together.
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Just how much of the taxpayer's money will be going into Barclays purchase of Lehman assets in this process? Shouldn't Barclays be forced to sell their investment banking assets before coming to the taxpayer for a handout?
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Icesave has shut its website down this morning. I can't get in to my account to deposit or withdraw money.
The Icelandic governments steps to shore up its banks has obviously been a huge success then... or maybe not.
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yes markus i agree, the debt junkies are back and doing ok thank you very much...lets have interest rates at 0 lets borrow money till it comes out of our ears..lets live for today, lets see the house prices go up till you pay a trillion pounds for a 1 bed flat..who cares..... this is the crazy scenario that caused all these problems in the first place.
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One of the reasons the banks do not trust each other is they still have not been honest about the amount of debt they have accrued from the sub-prime fiasco. They have the capital but do not want to lend it to each other. Why should the tax payer bail them out?
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As we have an economy based largely on house building and selling money to each other it's not surprising the way things have gone, i am surprised that the tories can even open their mouths over the state of the economy as they were the ones who set us on the road to having a smaller manufacturing base as has happened in the USA. As for interest rates do you really think that cutting even half a point would make any difference in the slightest, if that were to give joe public an extra £50 a month in his pocket what would that do ?. I think interest rates need to be at least what they are, lowering rates just encourages more borrowing and what we need now is more people saving, we have tried the credit route and see what has happened!.
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isn't the problem that Darling isn't so much Dr Dolittle and Dr Do Nothing. apart from repeating the mantra 'we'll do whatever it takes' - what has he done. I suppose inaction speaks louder than words
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@21
The fractional reserve system works ok on the condition of infinite economic growth. Economic growth is tied to availability of energy.
As we enter Peak Oil we will see the amount of energy available to do work decline.
Why does fractional reserve banking require continuous growth? Because the £10,000 loan you cite actually costs much more because of the bank's interest. Therefore the bank expects more money back then it ever loaned out in principal.
The only way to pay this back is to fuel more economic growth through issuing more money (debt) but this all comes to a standstill when we finally realise the fools gold that is infinitely growing economies.
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# 5 - I'm with you. My wife is a qualified Neonatoal Nurse looking after premature babies. Three are only ever two nurses for 10 intensive care babies! Her unit hasn't seen a dime of all the billions that have apparently been spent on the NHS under GB and here we are now funding billion-£ bail-outs for fat cats with sharp suits.
# 6 - agree with you too. Come on Robert, if you're doing these blogs for our benefit - please listen to what we need from you! Tell us about Fractional Resenrve Banking - Pleease!
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Hello Robert
I have read your blog for a while and whilst I appreciate the fact that you highlight deficiencies in the banking systems, how about a positive blog about the one big bank not currently begging for tax payers cash;
HSBC
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How dare the banks try and ambush the government to use significant amounts of the UK taxpayers money to bail them out.
For too long their relentless pursuit of profit using reckless actions with unfoseeable risks, has put them in this position and to expect the average man and woman in the street to finance their rescue would be laughable in other times.
The banks have got themselves into this mess and it is them that should get themselves out of it.
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I do not understand while people are still bleating about the oil price. The wind came out of that bubble a couple of weeks ago. At 135 USD, of course it was unsustainable but it has found levels which are more or less acceptable and downward pressure on the price will continue if demand falls off in reduced economic activity. 85-90 USD a barrel is about right.
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Without the banking system we are all in the mire. Perhaps we should nationalise more banks then at least the taxpayer reaps the rewards instead of the fat cats who get massive bonuses for being incompetent.
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The translation service for the House of Congress have had to regretfully announce some corrections to news reports of the House Oversight and Government reform committee.
Mr Fuld:We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders,"
This should have read:
We told the compensation committee what we needed in an email then had a big meal with them where it was voted through--the vote was recorded ..... on a napkin...somewhere...."
Mr Fuld said I "(take) full responsibility for the decisions that I made and for the actions that I took"
This should have read instead of "full"... insert "no".
Finally... as to the remit of the committee...
" To restore our economy to health, two steps are necessary," he said. "First, we must identify what went wrong. Then we must enact real reform of our financial markets."
Should read:
" To restore our economy to health, two steps are necessary," he said. "First, we must identify what went wrong. Then we must cover it up and hope we can start it all up again with taxpayers money asap"
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Oh dear! What a let down!
After giving hope of firm strategic action by having the meeting of the EU grandes fromages over the weekend, we waited, with almost bated breath, for our illustrious chancellor to succinctly outline his plan to stop financial and confidence boats rocking so violently in his speech to Parliament yesterday, but all we got was more good intentions.
All of what happened yesterday could have been avoided if a positive plan had been unveiled, even if imperfect.
In matters financial as in most of the rest of life confidence and perception matter more than reality, as we all know, or there could never have been a stockmarket at all.
Plan to save our financial system
1. Guarantee all savings
2. lend money to banks on condition that they stick to good rules of lending which are:
a) don't lend more than 70per cent of asset value
b) don't lend long and borrow short
and, so that the perception and confidence return
i) don't refuse a person with good credit a loan
ii) re-negotiate terms of bad lending in past so that it turns into good lending
iii) don't overcharge customers
iv) look after customers and provide a real service as banks used to
and when things have settled a little:
v) put right the PPI misselling without having to be asked
vi) put right the overcharging without having to be asked
NM
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Robert,
Can you and your contributers help on this. Rather than bail out the market why didn't the $700b go to Joe Public as tax breaks or loans. Everyone gets $n, those with debts have to use their handout towards their debt. Those with money left may chose to: invest in shares, commodities, bank account, property etc or just spend in their local economy.
A bit simplistic I know but debts get paid meaning banks and other institutions get a contribution to their self made mess. And the rest can increase consumer spending giving the economy a shot in the arm.
Martin
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I was watching BBC 1 early this morning and i was sure i heard the reporter say the government might have to use tax credits money. Is this true or have I grossly mis-heard??
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Surely this report is incorrect - you say the Big three Banks are waiting to see the colour of 'taxpayers money' and then later it's what they (the big three) are going to do for the taxpayer. The only thing that I see is we will be giving them money for their 'businesses' to stay solvent! I agree with another post that interest rates going up would be a good idea as this will draw money into the Banks and solve the 'liquidity' problem (why don't they say they are short of readies).
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PLEASE RID US OF THE FRAUD THAT IS FRACTIONAL RESERVE BANKING!
You know it makes sense, don?t be a slave to debt interest all your lives!
As I have said before......one option we could adopt is the ISLAMIC banking system as model....
The ISLAMIC banking system is one based on the principles of Islamic law and guided by Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of usury or the collection and payment of interest. Collecting interest is not permitted under Islamic law.
An example of how the Islamic banking system uses methods of profit/loss sharing to facilitate financial transactions is that for some types of loans, the borrower only needs to pay back the amount owed to the lender, but the borrower can choose to pay the lender a small amount of money to serve as a gratuity. i.e. the reverse of how that fat northern bloke in the Nationwide adverts explains it (you know the one?.Xmas party?..glug, glug, glug, glug!).
Since this system of banking is grounded in Islamic principles, all the undertakings of the banks follow Islamic religious morals. Therefore, it could be said that financial transactions within Islamic banking are a culturally distinct form of ethical investing. There is no division between the spiritual and the secular in this type of socially responsible investing.
I?ve read in the press (The Daily Mail 13.09.08) that we are becoming an Islamic state in any case?.so why don?t we just adopt it sooner rather than later!
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I sympathise with people with savings in the banks(i wish i had some).but does it not make sense to sit tight with it...no bank ,in effect will go bust in europe, the system will not allow it. I would say long term invest in property there will be some bargains on the market pretty soon.
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The contrast with Belgium's remarkable. Even the Belgians, hardly the brightest light in the financial firmament, have sorted out their problems with Fortis and Dexia inside a matter of days, and have done something to keep the small shareholders happy into the bargain, realising that there's a fundamental difference between a pension fund and Joe Bloggs, who invested in something he thought was safe as a bank as he couldn't keep all his dosh in the bank, who gets at best a comparable return in dividends to his bank deposit interest, and often worse, in return for a risk which has now hit him hard.
By comparison, the UK Treasury knocked off for the weekend, the banks are imploding through lack of leadership in the government, and even worse, lack of any really new ideas. Simply rehashing the Lamont years is nonsense, we need joined-up thinking of a basic nature at an international level, and we're not getting it.
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The City sought the freedom that Margaret Thatcher gave them in the 1980s - complaining about the heavy hand of the state. But suddenly the ones who've made millions in bonuses are demanding the state intervene and shore up the economy and rescue it from the fiasco these highly paid 'Masters of the Universe' have created. Talk about having your cake... For all their 'intelligence' and needing to be paid huge salaries to maintain competitiveness it's clear that most of them have no idea what's going on or how to control money (and I mean money, not this figment of their imagination created through fractional reserve banking!).
The heads of all these organisations that oversaw the creation of this chaos are obvious by their absence - where are they all? On their yachts in the Caribbean, or in countries that don't have extradition treaties?
Jobs for the boys indeed - perhaps we need Maggie back to break the power of the inner City ring of gamblers with our futures - just as she did with the miners.
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If the banks want more money, they should offer better interest rates to savers. If the government wants to help, they could abolish the tax on savings.
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And for those who don't understand Fractional Reserve Banking - can I suggest you watch the film The Money Masters http://video.google.com/videoplay?docid=-515319560256183936 - which makes clear that state support for the banking system in this current situation will further empower those who least deserve it.
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#44
"Why does fractional reserve banking require continuous growth? Because the ?10,000 loan you cite actually costs much more because of the bank's interest. Therefore the bank expects more money back then it ever loaned out in principal."
This is plain nonsense. What matters is the total amount of credit created. The bank is only an itermediary. If the lender (via the bank) takes the interest out of the bank and uses it it buy something, money is reduced again and you are back where you started. Hence, as long as the interest rate is properly governed and effective, the total amount of lending (and re-lending of interest) stays stable.
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The monetary system is a pyramid scheme with its full weight resting on its point.
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ive a feeling that thatcher wouldnt want to come back!!! shes done all right thank you very much......and the privatisation of the railways!!! what was that all about!!!
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If we are going to have to put taxpayers' money into the banks, perhaps the best way to do it would be to invite any bank that thinks it needs the money to make a deep-discounted rights issue, to be underwritten by H.M. Treasury.
That gives existing shareholders the opportunity to stump up more cash, or see their stakes massively diluted if they don't. If the rights issue shares are left with the government, at least it gets them at a bargain price.
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3, 5, 6, 44, 45 I'm in agreement with you all. We must be told the truth about Fractional Reserve Banking. But 21, I disagree with you. The trouble with FRB is that it's ultimately unsustainable as it relies on continued growth. If that growth had been measured then it would have been sustainable for much longer than the present time. But because of rampant greed within the ethos of bigger, more, faster, where those that have financial power want to rake in as much as they can con out of the system, without a care in the world for the well being of the majority, then it's doomed to fail and is in no way sustainable. We are at that point now and the system has got to fundamentally change NOW.
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#22: What is fundamentally wrong is that the banking system has manufactured new, novel and very high risk ways of trying to make more and more money.
Their profits over the last few years have been obscene with their lending policies which have allowed people to borrow money they can't repay when times get slightly tougher (which naturally happens in a cyclical world economy) have been the foundation of their current woes.
If, and it is a very big if, the tax payer bails out the banking system it must only be done alongside a root and branch review of the banking system and significant controls put in place to curb their excesses.
Perhaps the executives and shareholders of the 'Big Three' who seem to want taxpayers money to 'oil their wheels' (and make a profit!) would like to plough back in some of the money they have made.
Or perhaps some of them want to talk down their shares in order to buy them cheap and compound their economic greed.
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The banks want a guaranteed access to money yet do not appear to want to offer any security. Funny, that doesnt sound like the banks I know. If cash is king I hope the taxpayer gets only the very best deal for their money.
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Another spread of rumours??
When is this spineless government actually going to do something? We need action NOW.
Also the FSA must sort out the rumour mongers who are profiteering from their illegal actions. These are the very people who were cashing in on short selling and made a killing out of the NR Fiasco.
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I have become increasingly concerned by the apparent lack of 'backbone' shown by the politicians in dealing with this crisis. While I acknowledge that something should be done I feel that to effectively give taxpayers money to the banks would be foolhardy in the extreme, unless the treasury can show us, the public, that they are going to recoup that money at some point in the near future (- with interest, I might add).
I would also like to point out that it was alo reported within the last fortnight that the Bank of England and other national banks in Europe have pledged money, in the order of billions of euros to 'tide through' the banks. Surely, it is not necessary to provide yet more to the banks of Britain when shares in RBS have risen this morning.
One final thought. This should looked on as a lesson: That regulation has failed and that over the coming months and years, the laws regarding finance and mortgages should be completely overhauled so that regulation is strengthened. The banks should be made to feel their responsibilities, and should made to act accordingly.
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Treasure officials, work, overtime ?? What an earth-shakingly novel idea !!
"There is no precedent in the UK for taxpayers to take such significant stakes in banks."
Robert, how do you define "significant" ?? Is 100% "significant" ?? Remember NR ??
So the "Gang of Three" has spoken !! I wonder what the fourth is doing ?? Sniggering into their nice cup of Oolong tea, perhaps ??
What price Alex Salmond's contention that Scotland is a world class financial centre when both HBOS and RBS come begging to the central government for more capital ?? Perhaps the Scots have sewn up their sporrans even tighter and with Kevlar threads just in case....
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Lets not give the banks a penny until the resignations of Messrs Goodwin, Varley and Daniels along with their boards have been submitted and accepted.
We must not reward these people who having behaved so disgracefully in the past ten years or more are now are sucking the life out of small businesses by making them pay inflated interest rates.
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It's time to have strong vetting processes for "businessmen", because of the damage they do. We wouldn't normally let an ice-cream van driver fly a 747, would we? So why let young yuppies run banks?
"Unforseeable global turmoil" seems to be a euphemism for occasions when sly businessmen disguise debt as profit, while making absolutely sure their own "nut" is safe and sound. Wasn't that the story with WorldCom and Enron too?
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What's the difference between Alistair Darling and Norman Lamont. Nothing really.
What's the differnce between Robert Peston's reporting and Private Fraser from Dad's Army. Nothing, as both think we are all doomed.
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Why can't we just borrow direct from the BoE and let these greedy bankers and their broken banks fall on their swords?
If Lloyds feels it has enough cash to buy up Leymans, then I resent handing it any taxpayer money!
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# 1
I doubt injecting £50 billion into the banks will impact on the UK?s credit rating. In any case, I think there would be strong demand for the bonds that the Treasury will issue to fund this injection. UK pension schemes are systemically short of long-dated bonds to match with the maturity profile of their liabilities. At present they?re getting the exposure they want via swaps with investment banks (which have suffered rating downgrades and insolvency in some cases, so I bet company treasurers would jump at the chance to replace these with UK government bonds).
# 4
The call to lower interest rates is to stimulate spending and investment, given that we?re in recession. Will it work? I doubt it, given the disconnect that?s developed between LIBOR and actual market rates. However, the authorities must be seen to be using all the tools they?ve got. I think what we should be looking for is tax cuts, as these definitely would feed through to households and businesses (depending on the specific taxes that were cut). Governments are going to run bigger deficits to minimise the risk of deflation. We know that, courtesy of the suspension of the Eurozone?s Stability and Growth Pact last weekend.
Incidentally, there?s no need for BoE to put up rates to stimulate savings: BB has been running TV adverts for their 12 month savings product offering 6.7%, for instance. So if you?re comfortable with the credit risk of Abbey/BB, what you want is already on offer.
# 12
I agree confidence is the issue, and with it the perception that banks may not have sufficient capital to withstand future losses. Not sure I agree that governments are doing everything they can, though. I?d like to see BoE being a bit more imaginative. I?d like to see them flood the market with short term liquidity, not just £40 billion but, say £100 billion or £200 billion ? the bigger the number the better. Why? Well at present we constantly hear that the demand for funds is exceeding the amount offered by BoE. That reinforces the feeling of a liquidity shortfall. However, if they flood the market then, sooner rather than later, we might get an announcement that the auction of funds was undersubscribed, ie not all wanted, and the interest rates banks are prepared to pay is less than BoE was targeting. We then create a feeling of excess, or at least adequate, normal market funding which may then stimulate bank treasurers to review their interbank credit lines and start lending more. It?s all about perception. I have no idea if this would work, but have got to the point where just about anything is worth a try.
# 24
RP has told us today that his sources were the CEO?s of the Big 3 banks (HSBC conspicuous by their absence: they don?t need any help). Personally, I think RP has taken the fun out of his blogs, as working out who has fed him the stories was half the fun of reading them. He?s got good contacts in the Treasury and at Nos 10 and 11 Downing Street. And, yes, his sources (and RP himself) have an agenda. My feeling is they want to overstate the crisis so that GB and Ally D are perceived as having done a good job when it is eventually solved. That?s the only way Labour wins the next election.
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at 07-51 DGAMBLE wrote that this unofficial blog would help cause a run on the market - and has been proved correct.
With the world now picking up on the irresponsible and incorrect headline from Mr P, the positive start to the days has turned into another route.
Maybe the BBC should start a blog on the impact of 24 hour "news" reporting on this crisis.
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All this harping on about Fractional Reserve Banking, appears to be missing the point somewhat. There are issues with FRB in terms of the required exponentiality of growth and it's demands on resources, but this is not the cause of the current crisis.
Most of the benefits of progress and modern life we all enjoy today are only available due to the growth created through this system - one which has served us well for 300 or so years. And why shouldn't governments support it, after all one of the greatest expectations placed upon them by the electorate is to create economic growth and increased living standards.
THE PROBLEM with FRB is the way it has recently been manipulated by the banking system. FRB is meant to create liquidity in the system by generating money supply from illiquid assets through the supply of credit against those assets as collateral. Where it has all gone wrong is with the quality of the assets used as collateral. The system is underpinned by the collateral being sound and the credit fulfilled at a later date. When unsound assets are used as collateral and loans defaulted upon, the whole system comes crashing down - a situation further exacerbated by the securitisation, repackaging and resale of this poor collateral.
The banking system is to blame for its slipshod approach to lending, primarily driven by a selfish motivation for profit growth rather than a nations economic growth. At least if the banks were in the hands of government, the strategies of both institutions would be aligned for the benefit of the electorate!
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It has all gone very quiet re bank charges recently.
I imagine that will be allowed to fade away by the government and the Banks if they can get away with it.
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So all this fuss is about share options, shareholders and share value. It's got nothing to do with debt or credit.
They're scared that their market capital will plummet on the basis of speculation, even when the fact is that they are still very strong businesses.
But you can't tell a broker not to jump on the panic selling bandwagon, regardless of the facts.
If they were all private businesses - they wouldn't be looking to the tax payer at all unless they actually were in big trouble.
Perhaps then, rather than asking the government for cash - they should simply be buying back their own share capital, with a view to getting out of the market altogether?
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#52
Because I think that works out at about $25 per head - that wouldn't go very far.
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I can't help but notice that RBS shares are a little 'off' this morning, currently almost 30%. How far can they realistically decline before the government has to step in?
Presumably this would involve slightly larger sums than BB or NR and would force Darling's hand with regard to guarantees?
Is there any suggestion / suspicion that the market could be forced downwards to achieve this for the benefit of all the others?
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#7 What an excellent idea !! The Chinese Communists seem to be doing very well. Perhaps we should institute the same here !!
There's no dole in China for a start. Get those dole scroungers into the sweatshops or let them starve !! Also ban the trade unions !! Communists have no need for trade unions !! You will do what you are told or you will be "re-educated" !!
Oh and *ALL* territory is the UK indivisible !! There will be no tolerance of separatist terrorists !! They will be taken out and shot !!
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It's time to get the politics out of this and figure out exactly the exposure and formulate a detailed plan of action.
All I have seen on here is ill advised knee jerk reactions and ignorant political jibes.
This would have happened no matter which government held the reins its roots are on the Big Bang deregulation in the Reagan/Thatcher years.
The stock exchange pressure on ever better quarterly half yearly results was unsustainable and led to greedy short term decision making by executives.
This crisis needs to be better understood in order to be remedied. Personally I'd be worried if Darling signed a knee jerk blank cheque in the manner of the US Treasury. The guaranteeing of deposits makes ense as it will stop a run on the retail banks which will exacerbate what is effectively a wholesale run on the banks. Cutting interest rates will be similarly damning in the longer term. Hopefully the downward pressure on commodities will effectively deflate prices and put money in pockets.
The hysteria must stop. Also - who has gained from this apparent black hole? the money is somewhere it has not disappeared into the ether. Even derivative positions unravel with winners and losers. The money is in the system and needs to be found and exposed. Mumbling about hedge funds isn't terribly convincing who the hell is sitting on the big pile with a smug grin?.
Until the market situation is fully understood and there is complete transparency we cannot begin to talk abou fixing "it".
We'll just have to endure more politicians/journos trying to out hype each other with just how gloomy life is.
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People,
Wake up!
You need to realise that our politicians are senior banking executives. Our reporters are the bank's Public Relations team. Our Tax inspectors are the Banks Rent Collectors. Our Police are the Banks Enforcers.
Banks == Government == Media
They do not care that you voted for them or not. They are in power and will do as they please.
The banks have a loaded, financial gun to the head of every man, woman and child of this once great country. Even the innocents yet to be born will be carrying this heavy burden.
Why do all the major religions of the world say usrury is a sin? Why does Islam prohibit interest? Why do we say "Never a lender or borrower be?" Who are we going to wars with? Why?
When any political decision needs to take place, ask yourselves does this help the banks or the people?
The credit crunch is not the problem, it is the solution. Let's purge these parasites from us for once and for always.
We are many. We are stronger.
FWIW
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what the hell do you think you are doing acting as a channel for information like this. you have just acted as a conduit for a run on the banks. tell the government that if they intend to leak to you that they should think about what they are doing before they leak. not sure if they had noticed that the markets are a little nervous right now - last night falls might have given a hint.
we will find a way to find the leaker and have him prosecuted by the fsa.
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I find it absolutely unbelievable that Barclays buy large parts of Lehman. Presumably they thought at the time that they had adequate capital to take and fund this new business. In fact they must have been confident about their capital position as they even contemplated buying the whole thing before Lehman went down.
Yet somehow now they seem to be "demanding" that they have a capital injection? If they were in such a precarious position should they not have forgone buying a new business? This sort of behaviour by the banks shows to me that moral hazard issues is a huge issue. The bankers make bad decisions without worrying about it as we the taxpayers will pick up the bill. Not that we have a choice in the matter.
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@61
The illusion of infinite economic growth is the cornerstone of modern day banking. It's the "confidence" that everyone preaches about.
Confidence in future economic growth is dissolving as global consciousness begins to understand that Peak Oil means that the 20th century boom fueled on continually expanding oil supplies is coming to an abrupt end.
The old paradigm is dying quite dramatically. We're moving into a new paradigm of stable economies and these can't be fueled by reckless issuing of debt by banks.
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Very few correspondents appear to understand that the banking system is founded on debt not on credit. The Government must stop dithering over the methodology of its next move, which has to be to support the ability of the banks to continue in business. Uncertainty at this moment is profoundly toxic to the financial metabolism of the UK. This is no time for academic niceties or Brownian inaction.
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#21
Hopefully your question was not just rhetorical and you truly want to know why the Fractional Reserve Banking system is FUNDAMENTALLY wrong.
When you borrow the original sum that sum is added to the money in circulation. When you repay the loan you pay, lets say, 3x what you borrowed. But the additional 2x that you have to pay back was never created but you must still withdraw it from the money pot to repay the capital plus the interest. Therfore, for their to be enough money in the pot to withdraw 3x what you put in there must be another 2 borrowers taking out the same size loan as you thereby putting their borrowed amounts back into the pot. Taking it to the next stage you need 4 borrowers, then 8, then 16, then 32, then 64 and so on and so on. That is called a geometric series.
For that to work[sic], the mathematical model behind the system requires a geometric growth in debt, population, energy consumption, raw material consumption, waste production and pollution (and a complementary geometric decrease in our co-inhabitants of this planet !). The word geometric means non-linear. i.e the previously mentioned list doesn't just grow linearly, it grows exponentially, 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024 etc etc. The earth CANNOT sustain geometric growth of any of the above list INDEFINITELY. That is NOT an opinion. That is NOT a political statement. That is NOT the viewpoint of a religious crank. That is NOT pathetic wish of a tree-hugger. It is a physical, mathematical, practical, undeniable FACT.
The model behind the current system is utterly flawed. Any talk of patching it up so that it can continue is unbelievably futile. The only reason it has managed to work at all until now is that a source of (almost) free energy has fuelled the previously described exponential expansion. That free source of energy (oil) is peaking out. Note: I did not say running out. I said PEAKING out. That means that since June 2006 the world's daily oil output has been in decline. i.e every day since June 2006 the worlds daily output has never been higher than in June 2006 and has been falling consistently since. It doesn't matter whether you believe in the Peak Oil theory or if you think anyone who believes in it is a nutter. The figures speak for themselves. The world's daily oil output since June '06 has been decreasing. It is an absolute fact.
In order to satisfy the base requirements of a debt-based, fiat, Fractional Reserve monetary system the consumption of energy must increase to fuel the increase in manufacture of goods and general industrial activity which in turn increases the consumption of those goods by ever increasing numbers of people taking out more and more loans to buy those goods which in turn results in more and more fiat money being printed. If the increase in energy consumption is strangled because of a decrease in the supply (which it has been) then the bedrock of that geometric system is undermined and the financial system collapses with it.
Without the creation of new loans/debt/credit (call it whatever you will) the rate at which the money pot is being filled with new money is lower than the rate at which the loans are being repaid or written off, which destroys the quantity of money in the money pot (when its repaid or written off as a bad debt the original loan amount is destroyed but so is the leveraged amount - 40x in the case of Northern Rock). Therefore, if the rate of money destruction is greater than the rate of new money creation then the money pot shrinks. When the money pot shrinks it is called a DEPRESSION.
I hope this changes your mind in your defense of the debt-based, fiat, Fractional Reserve Banking system
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Lot of drivel being talked about the solvency of the banks. No business can survive without credit- banks cannot supply credit if they cannot borrow. Their balance sheets do in fact look OK but the engine that keeps them going is acting like its got the wrong fuel in it.
The Government need to stop prevaricating and get on with it- uncertainty is the killer. If people think taxpayers money is the problem- if a clearer goes down just think how many people will not get paid - their wages as well as by their customers, how many charities and local authorities and universities will lose their funds and just how long do you think it will be for depositors to get their guaranteed amount back. And do you think the other clearers would survive? We would be talking about a major depression in the UK and look back at Germany in the late 20s to see what is likely to happen- major social unrest and a breakdown of life as we have known it. Things just are not that bad so the top bankers and the Chancellor just need to get on with it- but lets hope the Chancellor exacts a high price from the Boards of these banks- they deserve to be hammered for not protecting the assets of the banks by being ignorant of the risks they were taking - they should repay the money they have been paid in the last 5 years plus interest as they added no value and the previous bosses of RBS need to be locked up.
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"3, 5, 6, 44, 45 I'm in agreement with you all. We must be told the truth about Fractional Reserve Banking. But 21, I disagree with you. "
I might use these numbers for my next investment - £1 on Lotto!
Mr Peston, I am dissappointed that you continue to sensationalise the situation of various banks and onlu occasionally look beyond the City. At times your blog seems almost spiteful in its ignorance, that I wonder if you ever applied for a job in banking......
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Robert, you are a first-rate sleuth, reporter and communicator. I am sure you understand the ramifications of events, so why so little analysis? I'll be generous and attribute it to not wanting to add to the woes by speculation.
However, surely the portents are that globalization, free markets and the EU are shot, that the UK banking system can only be resurrected by being subordinated to the Bank of England (ie, nationalized as part of the Bank), and we face a fierce recession?
On another tack, if the City was the power-house for wealth generation, why do economists differentiate between the financial markets and the 'real' economy. Surely trade is trade, or is making money out of money something quite different?
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Why not nationalise the banks and be done with it? If it hits the pound sterling it will make us competitive in a shrinking world market. Inflation will rise. As our currency has almost lost its reserve status it shouldn't be a deciding factor. Anyway, others will react and seek to remain competitive.
There will be moaning from the bankers, but they got us into this mess. To avoid a meltdown I can't see an alternative. As a lifelong believer in capitalism it grieves me to come to this conclusion, but needs must when the Devil drives.
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Lot of drivel being talked about the solvency of the banks. No business can survive without credit- banks cannot supply credit if they cannot borrow. Their balance sheets do in fact look OK but the engine that keeps them going is acting like its got the wrong fuel in it.
The Government need to stop prevaricating and get on with it- uncertainty is the killer. If people think taxpayers money is the problem- if a clearer goes down just think how many people will not get paid - their wages as well as by their customers, how many charities and local authorities and universities will lose their funds and just how long do you think it will be for depositors to get their guaranteed amount back. And do you think the other clearers would survive? We would be talking about a major depression in the UK and look back at Germany in the late 20s to see what is likely to happen- major social unrest and a breakdown of life as we have known it. Things just are not that bad so the top bankers and the Chancellor just need to get on with it- but lets hope the Chancellor exacts a high price from the Boards of these banks- they deserve to be hammered for not protecting the assets of the banks by being ignorant of the risks they were taking - they should repay the money they have been paid in the last 5 years plus interest as they added no value and declared profits that did not really exist. Mind you Mr Brown encouraged them to lend to poorer people- he did not want the less well of not to have acess to credit!
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Hey, look on the bright side. At least Comrade Bruin promised no return to boom and bust, and he's kept his promise. After the Tory boom we had a bust, but after Gordy's boom we face a total economic meltdown instead. Nice one Gordy!
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#32
Is this the same Sir Philip Green who has his Monaco-domiciled wife as the 'owner' of many of his companies, so he can collect dividends of hundreds of millions of pounds without paying tax? The same Sir Philip Green who flew in and out of the country each week to avoid paying income tax on his salary?
Call me old-fashioned, but I'd say you need to contribute your fair share to UK-plc to have a say, never mind a knighthood.
In general
These financial institutions now demanding money from taxpayers couldn't be the same companies that were threatening less than a year ago to move offshore if they didn't like the corporation tax rate or if the tax dodges their employees benefited from were removed? Surely not? I can't see Bermuda, the Virgin Islands or even the Republic of Ireland having the tax revenues to fund the scale of funding they are now demanding (and yes, they should be begging not demanding).
The cleaners were paying more tax than some in the hedge fund and private equity industries. Unless we reform the way the financial sector is regulated and taxed cleaners will be paying for the bail out of the City's mess.
On the rescue of the clearing banks, why should the government not have voting rights for its investment? Why, if the banks are insolvent, should the taxpayer pay more than 1p? How can Barclays ask for £15 billion of tax revenues from cleaners and nurses and maintain a bonus pool of £2.5 billion for ex-Lehman employees? And, if Goldman Sachs is paying Buffet 10%, UK-plc should get an even higher figure.
The future
Before Big Bang many of the City firms were partnerships, were the owners, the partners, faced unlimited liability in the event of their financial institution failing. So they wouldn't just lose their jobs, but also the Ferraris, houses, art collections, etc. Perhaps for those who might be tempted to take risks with the stability of the financial system this old-fashioned ownership structure should become obligatory?
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#14 _ This is not a new plea. While other governments subsidise the price of oil that their citizens use, our government *tax the hell* out of what we use !! Then they have the barefaced cheek to blame the oil companies for the high price of fuel !!
And they ask us to trust them ??
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whilst iam not a fan of brown and darling,i think its unfair to blame them to much.I would shell more blame on the get rich quick culture by a certain woman pm who will remain nameless. money is king ...society doesnt exist. (her words)
.. no money isnt king.....long live money. friends family and health are the things that really matter..and pressure is a enemy machine gunner pointing at you, not a few quid lost here and there...all our priorities are wrong.
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THIS GOVERNMENT SHOULD EITHER STOP LEAKING INFORMED RUMOUR OR SOMEONE SOULD BE FIRED ? TREASURY OR DOWNING STREET. If we want an orderly market in this country without the stock market falling completely out of bed, then order should be restored sooner rather than later. If there have been deliberations with Sir Fred Goodwin and John Varley about the lack of working capital and contingency plans to improve it, then announce them ? bosh! But for goodness sakes to drip feed sensitive information of this nature to a market whose confidence is shot to ribbons is just insanity. This government is either naive or stupid or conceivably somebody has let them down badly. Time this irresponsible behaviour ceased. Otherwise we shall be the laughing stock of the world?s financial community which will result in London surrendering its premier position as the leading financial centre of the world.
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Do we have any idea how British Banks are exposed to derivatives such as Credit Default Swaps? Insurance policy's sold and traded in case of debtor bankruptcy such as Lehman Brothers. Bonds that must now be paid.
Are they asking for taxpayer money to pay off these debts?
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Robert,
In all of your reporting, you are getting dangerously close to creating a panic in the real economy. Please, for all our sakes, cool it and look to be a little more optimistic. This isn't 1929-37, it isn't cataclysmic - it is bad, but a situation capable of rescue. Deflation will follow in any event, and an interest rate cut followed by a restructuring of bank debt allowing interbank lending again will help reflate the economy.
The economy may enter a shallow recession - that is still what most forecasters are predicting - and we'll probably be out of it by the back end of next year...if, IF, you and your journalist colleagues don't try to precipitate a full scale depression for the sake of rthe atings for the 10 o'clock news...
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Having read this blog since well before the NR fiasco, I find it incredibly amusing that people still post on these blogs about Robert Peston being too negative, and in some cases being blamed for the whole mess we are going through.
Firstly, bearing in mind this is a global crisis, how can he be the person to blame? Or the BBC? Or the UK press? Open your eyes folks - every global index took a hit so look at the bigger picture!
Secondly, we can't be anywhere near the bottom of the market. We've taken a hit but if we still have loads of people confidently suggesting that the market can be "tallked" back up through positive reporting then I'm pretty sure that we haven't been burned enough yet to realise we are slipping into a much messier situation.
We are still a long way off the bottom, and I fear the slump is going to be a long one.
As long as we have knee jerk reactions to day to day events, no one is in control of the roller coaster. No one knows where we are going nor how to stop it and this shows by the short term fixes and apparent lack of consistency shown by any of the western governments. Only once long term fixes can be put in place will the rollercoaster start to slow.
It'll be some time before anyone gets back on in significant numbers.
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Terrific comment by Chusam - thankyou
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Isn't the talk about the overnight LIBOR rate a red herring ?
If one bank charges another an extra 1.5pc for overnight money what does this mean ?
An extra £41 a day for every One Million Pounds lent !!!
Now if you don't trust the bank / counter-party to repay why would an extra 41 quid convince you ?
In fact hasn't one to be aware of people paying too much for their money ?
Unless Bank A trusts Bank B, or has some guaranteed assurance of repayment, why would Bank A lend money at any price to Bank B?
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We seem to have moved on to supporting banks rather than people - something that nearly killed the US bailout. Since taxpayers and accountholders are much the same people what is the justification for excluding half of account value (albeit 2% of accounts) from the guarantee?
Does one see ugly party politics here? Is the reasoning that few of those 2% who hold half of the deposit value vote Labour and so they do not matter much? How does that leave my wife - a hard working cancer doctor who wants to keep her earnings safe? Is she more or less valuable to the country than, say, a Labour minister?!
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I'm no fan of Adam Applegarth (ex NR CEO) - I had shares in NR, I know people who have lost their jobs, but wasn't he criticised by the 'professional bankers' for not being a real banker, for not having worked through the system and therefore made a mess of running a bank by his inexperience?
Can anyone tell me what the difference is between him and the 'old boy's club' who have made an even bigger mess of the global finance industry?
I would suggest it's merely the size of their pay off.
And why is it only now that USA politicians are questioning the fat cat salaries of these professional bankers? Most of us have been complaining about them for years, but they were allowed to carry on withdrawing vast sums from institutions that are now being bailed out by our taxes.
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I have started watching The Good Life again on tv. After all these years Tom was right......
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Why preferred stock? I would expect the government not only to want voting right, but also a seat on the Board in any bank that receives government funds.
Having said that, I'm against any of this intervention that benefits only the government (shows activity) and the banks. Why didn't the banks accumulated sufficient risk provisions? Why not making the shareholders of these banks (considering the repurchased shares, the banks themselves) to do their duties as shareholders (take losses for once)? How will any additional liquidity or capital funding help the cause of the current problems?
Free market does not work, but neither do dubious agreements made in cosy offices which ignore rights and the related responsibilities.
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Its time to close the share market in financial stocks,while the banks get recapitalized.
This is plain crazy..Its also time to censor the news output.But our politicians have not got the spine to do this until the time when doing it would have no effect..you have to be ahead of events to control them!!
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#26 Actually, he seems more like Captain Mainwaring - all dither and no action !!
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We seem to have a Chancellor who is as usuall dithering; it is noticeable of course that whilst his hair is white his eyebrows are black and I wonder if this denotes that his utterances being vague and not exactly giving addurance where it is needed reflect a greyer than needed stance. Maybe when he has seen a few more days of slip and slide he will be bold and give the necessary direction.....or maybe not.Who knows....
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#83 we know where the moneys gone..its gone into keeping house prices at a very very high level. this is where the problem is. like it or not your house my house is not worth anything like the market says its worth.banks lending out 8 times peoples income!!! 125% mortgages..its not rocket science to see where the moneys gone.
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77 Chusham:
Absolutely right, and perhaps the best thing I've read on the subject. It isn't the system that is at fault; it's the irresponsible way in which it's been managed.
When we get through this - as, in some shape or form, we will - then the priority should be to re-introduce sound financial principles. The aim should be to ensure: responsible behaviour; conservative financing; transparency; management of asset inflation and early deflation of bubbles; and effective regulatory oversight.
Where home lending is concerned, we need strict rules on income multiples and loan-to-value. Where other lending is concerned, collateral quality and LTV need to be regulated. The proportion of their funding that banks derive from wholesale markets needs to be capped. Interest rate policy needs to be calibrated by reference to asset as well as retail inflation. The tri-partite regulatory system needs to be unified. The historic separation between investment and general banking activities could usefully be re-introduced.
None of this is rocket-science. It is to be hoped that the current crisis - albeit rather overstated in the media - provides a shock sufficient for sound financial principles to triumph over narrow sectional interests.
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The sum needing redeeming at some point (not too far away) by the UK banks was floated as 650Bn (growth in borrowing above domestic deposits, up from zero in 2000 (serviced mainly by US money)), the 50Bn aired in this article is still way short.
As the 650Bn was just the tip of the iceberg just how much is going to be needed to sort the mess, the 650Bn grows as the problems grow and spread to other accounts.
If the banks want cash they have to put sound security down or sell part of their business to the taxpayer, or go bust.
The liability is over a Trillion for the UK, has to be in that area, although not all of it will be high risk, it is still in that orbit. The 50Bn is just a get by.
When is Darling going to come clean about the size of the problem.
Brown still doesnt get it, or if he does he is being ingenious, he keeps chuntering about morals in the market, there are no morals in the market and never will be, the morals have to be founded at the regulator as directed, (or not directed to date) by the government.
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The "carry trade" ... heard of that one, anybody?
That's borrowing money in a low interest currency (usually the yen) and investing it, via an FX deal, in a high interest currency. Done in enormous size over the last few years, mega profits for some, causes massive instability when unwound.
That's how "sophisticated" these hedge fund and investment banking guys are.
These are the "benefits" of free for all deregulation.
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#33 "pay the real money to the real people who do the real jobs" This will utterly destroy the unions who want unreal money for doing as little as possible !! Is it any wonder that the Communist banned them ??
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I notice that Barclays are categorically deying having approached the government for capital. That's good, because as a taxpayer I would be loathe to fund the exploits of a bank which upped its dividend by 10% last time out (I do hope they weren't enjoying cheap central bank funding at the time), and grabbed the knight in shining armour headlines by trying to buy Lehman's as a going concern. With a huge, huge funding gap at Barcap I am surprised that they don't need a little help at a straitened time like this. Fools or knaves? What's for sure is that taxpayers should not fund increased shareholder returns, and bonuses for Lehman employees in NY, that's plain scandalous. Has anyone else noticed that all the management incumbents at the banks are STILL the ones who got us into this mess?
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85:
Absolutely right. The information flow needs to be managed in a far more responsible way, and the FSA needs to look into it - urgently!
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Darling fiddles while London burns...
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Robert, I do find your analysis interesting. But to fully appreciate this, I think it would be very useful, if you could perhaps cover some basic topics that can act as a backdrop to understanding the crisis better. Some of the topics I can suggest would be:
>Difference between commercial banking and investment banking?
>What is a derivative?
>What is a CDO (colateral damage obligation)
>what is the glass spiegal act, how and why did it come to being?
>What is fractional reserve banking?
>What is leveraging?
>the role of the FED and BOE, FSA, Goverment?
>Economic cycles (Fred harrison Cycle for e.g)
>How does the mortgage market work with special explanation of the subprime market?
>how wealth is created? and what is money?
>the role of the far east in terms of banking and industry?
I think if some of the above questions are are looked at in the context of the current crisis, then most people would be able to make up their own minds, in terms of how we got here in the first place. Please Robert, do us a favour, we dont need spoon feeding now, give us the tools to think for ourselves. Thanks
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The solution is pretty obvious.
Stop Bailing out the banks.
They are hoarding the cash that they have because they dont trust each other and as such they wont lend to each other and therefore they cant make any more cash.
If the governments of the world stop bailing them out and let some more players go down in flames with no assistance pretty soon the rest will realise that they better start trusting each other or they will all go to the wall.
If they continue then not to lend to each other under those circumstances then they are not fit for purpose and should go to the wall anyway.
The only cash the governement should supply is to pay depositors that lose out and they should recharge all of that back to the surviving banks.
The banks need tough love now!
It truly is the only solution that will work.
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Banks telling the Chancellor to pull his finger out?
Which hole in their dam?
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#46 I agree.
Quite a few financial institutions in the UK have behaved responsibly setting aside large reserves to augment their balance sheets (for a rainy day so to speak). This also means posting a lower Net ProfiT figure and lower dividends.
However, the finger of blame cannot be pointed at the Chief Executives of these firms alone. Specifically:
1. FSA requires company reporting to demonstrate that each firm is solvent, has sufficient capital reserves for the long term and has a robust risk management process in place amongst other specialist reports. Their overview clearly has either not been carried out, or the precise detail of what their overview was not made explicitly clear. Over the last decade we have seen huge profits being declared by banks with subsequent large dividend payouts, which also generated large tax receipts for HMRC (no complaints from them!). Indeed it appeared at times to be some sort of competition - who could outdo the other.
2. B of E received the above reports believing that the FSA had at least looked at them and approved them. I am at a loss in knowing if the FSA did anything with these reports apart from filing and sending copies onwards.
3. Treasury would also receive a copy, but the I suspect that the political view would welcome the larger tax revenues and also view these as a sign of a healthy economy.
4. External auditors have changed their approach from a pure auditing of the books, to one of being more management consultancy. To be fair as some of these firms have merged quite a few times a rigorous annual audit where IT systems are diverse is probably next to impossible. NB Firms that grow too quickly over a short period of time (organic or acquisition led growth) tend to lose sight of the core values of the business and consequently are harder to manage.
5. After Enron more rigorous Accounting standards were mooted, Sarbanne Oxley and a new International Accounting standard, but again after much initial enthusiasm these were watered down. Given that we have a global economy, it is strange that reporting standards are not uniform across the globe.
All in all what we have now is a hotch potch of some regulations enforced, others flouted; some Chief Executives with a finger on the pulse concerned about the longetivity of the business, others slapdash looking at the short term.
There is the old cooking saying - too many cooks spoil the broth. rather pertinent here I think.
The bonus culture can continue but needs to be refined to reflect the type of business. If the deal is concluded over many years the bonus has to be apportioned over those years. The vast majority of deals/loans are profitable IF the capital is repaid in full plus interest.
Most importantly we now live in an era where responsibility and accountability from the Prime Minister down to middle management are concepts that we only pay lip service to.
The statements put out recently by the politicians have been abject. They seem to be waiting around form something to happen - they clearly have not read the script, as they are supposed to be leading us. Dithering will only compound the problem.
An idea might be to exempt banks from tax for 3 years, allow nominal dividends and bonuses but ensuring that the profits are used to bolster their capital reserves. Non compliance of Chief Executives could result in residing at HM's pleasure - the FSA already have these powers. Stricter controls would have to be introduced on executives pay, but these should have been introduced many years ago anyway.
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Robert as i stated last week one of the big high street banks are in trouble and it doesnt take a city whizz kid to know which one it is,but Robert can you explain to me that when the Bank Of England and THe European Central Bank and others pump these billions into the market where
1 Does the money actually go to?
2 Who actualy adminsters this injection?
3 what does the bank get in return?
It appears that these billions are not making any difference to the system,no matter about the stupid statistics the country has been in recession from last march why is it taking so long for people to act ie why doesnt the bank of englad cut base rates today by 1%?,why doesnt the goverment gurantee the banks just like the irish did? why isnt the RBS made stop spending so much money on corporate hosipality like he money they spent in taking a few large borrowers to the ryder cup,why doesnt the goverment gurantee the first 15% of borrowings for first time home buyers so that this will start the housing market again and will also start te retail sales?
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"But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened."
At risk of sounding like an American Redneck might I suggest that the banks ought to consider that they should have built their businesses in such a fashion as to not give the impression that they might be short of capital?
I would be happy, well not happy but I'd accept, for our elected representatives to discuss their needs with the newly appointed leaders once someone has opened a can o' whoopass on their predecessors and sent them scarpering (without any sort of pay off).
For me the bottom line is that the banks should be eternally grateful that the taxpayer would consider bailing them out of their failings and not harassing our representatives because they haven't got what they want yet. Cheeky gits.
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# 76
RP's blog was posted at 7.00am, well before markets opened, so I don't think he's to blame for share prices falling after first rising. Actually, I'll bet that RP's blog, indeed the entire BBC, is not even close to being the first source of news for most people in financial services.
Most banks probably require more capital, if only for perception purposes. That means dilution of existing shareholders, which means a loss of value. If RP's numbers are right, then the government is looking to invest GBP 50 billion into companies which (ex HSBC which does not appear to be involved) have a market cap of under GBP 100 billion I suspect. The Treasury is going to want big dividends (10%?) on preference shares it buys, meaning far lower dividends for ordinary shareholders in future, and the Treasury will want warrants to buy ordinary shares (so as to participate in any increase in the value of ordinary shares) that will dilute existing shareholders by at least 25%.
That's why bank shares are down, not because RP has been irresponsible or incorrect in his reporting. If the Treasury and the banks had not wanted this story hitting the wires before the markets opened this morning, they wouldn't have fed him the story last night.
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Where is the IMF and the World Bank in all this mess? The crisis can only be stemmed at the international level by those who sponsored it in the first place through market deregulation and financial liberalization. We desperately need Bretton Woods 2 - and all we get is stunning silence!
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#89 more blatant nonsense.
"But the additional 2x that you have to pay back was never created but you must still withdraw it from the money pot to repay the capital plus the interest."
And at the other end, there is someone who lent you the money, probably now in retirement, withdrawing your repayments and buying bread down at Tescos and playing bingo. Your interest (and repayments) pop out the other end of the bank and goes back into circulation. Amazing isn't it?
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#21
re: fractional reserve banking.
You managed to miss the most important point.
The creation of debt by banks increases the money supply. This is the primary cause of inflation. Inflation "skims" money from anyone with a currency position.
So a transaction between two parties (lender/borrower) causes a third, unrelated party, to loose out.
think about it.
it's wrong and immoral.
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What we need the chancellor to do is listen to the people and cut the interest rate now!!!! we need to speed up the economy and give banks their lenders the condifidence so that it can work smoothly, it's just a total waste to use taxpayers money to buy out the financial problems, you need to get down to the real source and that is to cut massive interest rates , i understand that the country needs to make the capital back, but thinking political buy throwing money in the banking system just does not work as you can see for yourself!, you must use all actions nessesary now their no time for fancy hand movements and political spin (Allister Darling/ G:Brown) talk is cheap it's time to speed up and face the real problem don't waste much time..
(do =+1 Will Improve for better) (Don't Will only get Worse=-0)
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It's the rumour mongers and the irresponsible reporting of these events by the media that spooks investors.
My view is that the short seller?s are now cashing in on spreading rumours to bring the banking shares down, just so they can buy them at a pittance to make a profit later. The FSA must prosecute these people, take their assets and throw them is jail.
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98
...not fan.... but unfair to blame brown, etc
Why limit going back in time to Thatcher, why not go back to the Knights Templar who were the first bankers allowed to charge interest in the 12 century, thats where their wealth came from. The simple fact is Brown was asleep at the wheel, he was driving things, not Thatcher. How many years has Brown been supposed to be driving the economy? 11.
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#58 She tried but she got stabbed in the back by those Tories with mates in the city. There are good Tories and bad Tories just as there are good Labour and bad Labour, etc.
Broadbrushing everyone is not a viable practice in the long run !!
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#9,
You are wrong!
?you do have a say in how your taxes are spent...its called a general election.its a pity only 4 in 10 bother to vote.?
You have the choice of Conservative or Conservative or Lib Dem (Who will NEVER get in), personally I think we should give them a try but Thatcher mark 3 (sorry Cameron) will win the day.
What a disaster!
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Robert, if your story were true (which I doubt), it is frankly astonishing.
Barclays just dropped several hundred millions on buying bits of Lehman Bros. And now it says it's short of capital and needs some more from me, the taxpayer?
The US bank rescue plan amounted to $700bn - and now it's passed, nothing's changed. Stock markets are still tanking. So why would a smaller UK bailout help?
Robert, you can't add up. If Lloyds, Barclays and RBS want £15bn each, total £45bn, then how could the total for all the UK banks only be £50bn?
I actually think Alastair Darling has been right so far. Stay calm and make sure savers don't lose out if any bank does fail. A big bailout package would just tell the world that UK banks are not solvent. Which is actually NONSENSE. And nonsense that you, Mr Peston, have been peddling for all you are worth for weeks now. You are part of the problem, and have as a journalist become part of the story. Which is of course BAD JOURNALISM. Go and do something useful.
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One Business Editor does not a crisis make.
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#77 Chusam
Agree with your comments, apart from that FRB does *not* require exponential growth. See comments #61 and #128. People demand growth, not the system.
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#21 is wrong is ony seeing one side of the equation.
No one can question the principle of leveraging but the free movement of cash and cash management doesn't give a monkeys about anyone.
The wholesale market is as tough as any street market and if necessary money will be offered or withdrawn on the turn of 1p.
There are no Queensbury rules nd its one huge bun fight.
The real problem is that the very point of leveraging has been abused, so we now have leveraging based of a special derivative that is made up of any old garbage but looks nice as a packaged unit.
Joe Pension fund and Insurance company see a rate of return offered and take it becaus it fits into their portfolio but don't do effective research.
The bottom line is that now pure garbage previously ranked as the same quality as real AAA stock via slick bank and investment sales forces is now reverting back to its true status.
We arte left with aright mess but one that can be sorted. It just needs banks to accept that this was theor business model and they need to take the losses.
With that in mind teh treasury makes available to the banks any part of £300 billion and they pay it back in full throughover 10 years. In the meantime they arehave to learn to eat humble pie and accept that their profits for teh next 10 years will be low to non existant and save for dividend payments flat at best.
Too much credit and ranking has been given to the banks who are nothing more than basic utilities.
Now we revert back to normality rein in somewhat and get on with life.
We also need to stop governments and political parties promising crazy spending without appreciating there is nothing in the kitty to use.
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I noticed RBS' credit rating dropped a little last night...rumour mongers-everyone says the same, not just Robert-just read an article elsewhere that said RBS categorically will not accept government funding!
Banks are still so very arrogant-they need to apologise and get down to sorting this mess out. How dare they ask tax payers to clear up their mess-IF we do, I want a significant reward-payback for all the money they've nicked over the years in charges-how about a tax rebate. Oh and a letter of apology hand signed for their blatant disregard for their customers?!
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I really lost confidence in this country and the goverment Why because when we want help the govment just turn a blind eye on us when we want a refurendum the govment would not give us a say this is a big problem this why we are here in this whole mess today!!! the goverment are big frausters with our tax money and we always make us pay the bill I don't no next what they will bail other thinks out for next time, maybe for there own personal crises.. goverment a big gimmick and fraud
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I feel the chief executives and boards of directors of all the banks should be closely examined, one by one, to see exactly how they came to such monumentally bad decisions in all areas of their work. Let's have a VERY public enquiry into the banking industry.
If they are found to be wanting they should be stripped of their jobs and assets as would any other criminal.
If the government are serious about restoring confidence in markets they must demonstrate that executives will be held to account and that bad work will be rewarded accordingly.
Corporate governance is a joke if it exists at all, and so long as there is no accountability for these misdeeds how can institutions and the public have any confidence in the system.
Playing games with peoples lively-hoods and hard earned savings should rank alongside treason and be punished accordingly.
..
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I agree with #102 - we need a long term fix but we won't get that for some time to come, I guess. It is human nature to wait until the situation has become almost impossible before admitting that things can't go on as they are and we absolutely have to change our ways. We have been acting like alcoholics for some time now - suggesting that all we need to fix the world is to have another drink. The investment bankers, the PM, the chancellor and others not only caused the problem - they are the problem! Their actions show they wish things would return to the way they were a few months back. They are avoiding the real issue - that financial liberalization hasn't worked. We need is to get away from the idea that alcoholics can fix the situation and put people in charge who have recovered from their addiction. What we need is the financial equivalent of Alcoholics Anonymous.
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#69 It is not that the banks should be overhauled as much as the bankers should be keelhauled !!
It is they that caused this problem by lending totally and utterly irresponsibly to those who have no hope of repaying their loans !! By freezing all that cash into toxic assets, they effectively sucked out the liquidity from the financial system. All other talk are just red herring !! RBS, in an attempt to get more assets at fire-sale prices, threw more hard cash at Lehmans and now have to beg for more !!
Today's issue is about this very thing - liquidity - and how to get more !! One bank seemed to have solved that problem, methinks !!
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If Darling is going to use any of my money to prop up these reckless institutions then he needs to make sure that he gets even better terms on the preference shares that Warren Buffet.
He must also extract huge concessions from the board vis a vis remuneration.
Going forward minority shareholders need to be given more influence on actions a board level. This must also be part of the concessions on the table. (Like 2/3rd of shareholders have to vote for the CEO etc)
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For those of you blaming poor RP for all the ills of bank share price falls, please note that today's Wall Street Journal (European edition) has a story headed:
"UK banks in talks to lift capital"
It states that 4 banks (Barclays, HBOS, Lloyds, and RBS) may issue shares to the UK government. In other words, exactly the same story as RP reported here. There's the same story on Bloomberg too. I bet the Treaury even provided them with the Press Release.
The Treasury wanted this story on the street this morning. It's another tool to see if it instils confidence in the interbank market. What it does to bank share prices is irrelevant right now. Actually, it's in the Treasury's interest to drive down the share price in order to get a better deal for taxpayers when the money is actually invested.
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#75 Tax cuts are an anathema to *ANY* Labour government !!
#84 Strange, but I didn't know that usury is a sin in Hinduism and Buddhism and they *ARE* major religions !! And then there's the worship of Great God Dollar who has his major temples in Wall Street and Canary Wharf !!
Correction !! It was Barclays that bought a chunk of Lehmans, not RBS !! RBS bought a huge chunk of ABN-AMRO.
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Posts 102, 126 and others - this is not an anti-Peston rant on my part as, whilst I may disagree with some of his comments, it is his view and clearly being negative at the moment has no real downside
The issue I have is the sensationalist headlines being used to grab a reader's attention - which invariably fails to match the underlying story
I think most rationale people will agree that in todays very fragile markets sensationalism really doesn't help.
Case in point - whilst No 126 said, correctly, the blog was started well before the markets opened, at about 08.30 the newswires picked up on the Peston headline - e.g. Bloomberg flagged "BBC: Banks ask Chancellor for capital"
Between 08.30 and 09.15 RBS share price fell almost 40% to 90p. Barclays did something similar, falling from about 320p to 260p. The FTSE also fell during that period, from about 4700 to about 4515
I think the above proves my point about the impact of the press in the current mess, especially when fear stalks the world. It's even worse when the connotation is negative i.e. the UK's main highstreet banks need to be recapitalised
As an aside, ignore the headlines and discussions on Fractional Banking and instead spend a few minutes on the relevant bank's web-sites. Have a read of their balance sheets, which even given the falling UK housing markets remain pretty strong
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#137 Crisplog
Point taken, 'requires' was the wrong choice of word, 'leads to' would have been better. But, this does not change the fact that exponential growth is a by-product of the system, no matter the cause.
Your further point on people requiring growth is exactly right, as per my comment on our expectations of government.
There is nothing wrong with the system, just it's management and if this were in the hands of government (who would hopefully be acting in our interest?) then the interest (usury) that appears so damned by many would benefit us all rather than just the few as at present. There is nothing wrong with managed, controlled growth of either the economy or money supply as long as it is built upon solid foundations!
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It is interesting how ignorant some contributors are with respect to the present crisis and how they think that it is all about financing the "Fat Cats". If the Bankiing system is allowed to crumble and the present woes of the stock market etc continue then it is the majority of people who will suffer, whether it be the small investor, bank depositors or beneficiaries of persion funds. The sooner that Brown actually does something rather than making hollow promises and stupid statements the better it will be.
Also if the EU finance ministers can't come up with a common concensus, rather than looking solely after National interests, then one must question the purpose of being a member of the EU in the first instance.
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Wouldn't it make sense to guarantee the Retail Customers money to 100% but have a floating charge on all the assets of the bank in return; i.e. become a preferential creditor and charge interest at Bank of England base rate plus 3%.They could ask for a personal guaranntee from the directors of the banks as well.
This is what the bank would expect from me with my businesss.
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What price RBS to be 'rescued' by the end of the day/week?
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The banks are lending a great deal of money to the British taxpayers at exorbitant rates of interests.
For some, in these difficult times it will be too much. They risk losing their homes. Their disposable income has suffered leading to impacts on the wider economy.
Why is the money being lent to the banks at minimal rates over base, so that the banks can, in part, continue to provide these loans to taxpayers at much higher rates.
Would a solution not be for the Government to lend the money to taxpayers, on condition that it is used to repay the loans to the banks (so the money goes to the banks anyway).
The taxpayer then has a debt to the government which should be at just over base rate, with repayments coming first from any state benefits the recipient of the loan receives - thereby guaranteeing repayment.
The government could then sell off the loan book (as it did with student loans) when the economy improves.
The banks get the money in the short term.
Taxpayers save money on interest payments so have more disposable income, helping the overall economy.
Banks lose out longer term as a penalty for their reckless lending, as they have lost large amounts of their high interest paying loan book.
Taxpayers - whose money is being used by the Government will gain an immediate benefit, whilst the banks that have caused the problem pay the penalty.
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#131 Buying low and selling high is the very essence of trade. Are you going to ban trade ??
However, spreading false rumours is against the law. It is called defamation. I'm sure the various tabloid "newspapers" know all about the laws regarding defamation. They see enough of that in action !!
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So we now know why Banks where so free to lend money to anyone - with no guarentees.....Because that is what they have been doing amongst themselves behind closed doors.........So there has been a culture built up within the banks.
And now all at the cost to the public through higher mortgage rates and the starting of the "blame the government" as they now seek financial support from the government aka the general public.
What a business.
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I really lost confidence in this country and it's goverment, Why because when we want help the govment just turn a blind eye on us, when we want a refurendum the govment would not give us one i work hard as a taxpayer and i speak on behalf on others, we should address the situation have a say!and the goverment should listen, this is a big problem for me and what we face with this british justics system, what happens if you don't listen to the people we fall in a mess!!! the goverment to me are a big spong and cream off the taxpayer on every thing including breathing AIR" think I speak on behalf of the british people? the gov'ment to me failed and playing catch up, goverment are frausters how i look at this fraud is taxpayers money is being used for mistake not mistakes by us but by politician we don't pay them for making mistakes we pay them for improvent even my 6yr old knows that! and that money we give to the goverment goes wrong? i personelly lost all confidence!!!!, I seriously don't no what the next bail out would be, but I guess will bail out their own personal crises.. such as 2 jags and a pint of beer, cheers... goverment? a big joke ,gimmick and fraudsters
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#145 Are you saying that the Treasury is using the same dirty tricks that the "short-sellers" were and, perhaps, they too should be banned ??
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Re 132: OK lets follow your suggestion and take a look at the Knights Templar. They were a significant organisation for around 200 years and their core modus operandi was pretty consistent throughout this period.
I assume that it is non controversial to suggest that it wasn´t the same individual person who maintained and implemented the policies of the Knights Templar for the full 200 years.
Provided the foregoing is accepted then it is not to difficult to see how all who have followed Thatcher could merely be implementing a continuation of her core policies.
Now take a look at the actual policies (stripping away the spin and the rhetoric) and highlight those policies that are materially different from the policies developed and implemented by Thatcher.
Once this is accomplished take a look at some leading indicators - such as average real wages and explain why, notwithstanding the materially different policies already identified, the graph shows a steady and continious decline throughout the entire reference period (1979-date).
When we have answered these questions we will be in a position to explain exactly how the policies of New Labour differ from Thatherite policies and the different outcomes that have resulted as a consequence.
We can then all appreciate the benefits of change. Maybe the results of such an analysis can be sold to Barack Obama - who is also peddling a message of change, but just seems unable to explain exactly what he will change and why he will change it.
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#129 So, by your reckoning, all those with property bought on a mortgage, got nice new cars, HD TVs and games consoles, or a foreign holiday, etc. are immoral ??
Surely, the Brits will all go to Hell !! Must be getting very crowded down there. I wonder if the Devil needs a good computer system to sort out who's there and who's not ??
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what an interesting concept guaranteeing 100% of all deposits seems. Surely such a move would only give the banks carte blanche to carry on their gambling with ever increased stakes until either one hits it big and buys up all the rest or they all go under. If the goverment wants to provide liquidity surely a better solution is to do it through the vehicle of the recently nationalised banks in the form of buying up the mortgage portfolios of the faltering banks at a discounted rate, that way the money is secured in bricks an mortar and there is an extra incentive to boost the economy to recoup the value of the mortgages
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# 147
The same story was in the Wall Street Jounal this morning - almost word-for-word the same as RP's blog. It was also on the front page of the FT, I think, ie available before RP released his blog.
The Treasury wanted the story of bank recapitalisaion being close to happening on the street this morning. As I said before, if the Treasury didn't want BBC/WSJ/FT reporting on this, they wouldn't be feeding them the story.
If there is price sensitive information around, and there is no doubt this is price sensitive, then there is an obligation to get it into the public domain specifically to ensure that prices reflect it. This is particularly true given that the companies concerned were involved in discussions with the Treasury. Failure to do so could leave the Directors vulnerable to accusations of allowing a false market to exist in their companies' shares. I suspect that's why it was necessary to put this information into the public domain this morning.
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#90
"..no business can survive without credit.."?
We do but then we are small and careful who we do business with.
#96
Heard the gentleman this morning and thought along similar lines.
Banks, top business people, accountants, the media, MPs...., have behaved in an atrocious manner for many years regarding their complicity with each other; their greed, arrogance, and disregard for those lower down in the pecking order.
They now have the cheek to ask for help from us the taxpayers. No sign of humility or recognition of past mistakes.
I just hope when this mess is sorted we don't have their selfish lifestyles rammed down our throats yet again and be told we are merely envious of their wealth.
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# 156
Firstly, I don't agree short sellers used any dirty tricks, just information freely available in the public domain. For every share shorted, there have been 50-100 sold by investors who were long and have now disposed of holdings in a variety of banks. And short selling has been suspended for a couple of weeks, and I haven't seen too many banks' share prices rallying.
Secondly, my post at #145 was highlighting that putting the information into the public domain was possibly of benefit to taxpayers when it comes to making the inevitable capital injections into banks we are going to see. Most people here appear to be unhappy at using State resources this way, and I was just pointing out taxpayers would get a better deal as a result of the information being in the public domain. My post at #160 explains the real legal/regulatory reason I think everyone felt the information had to be made public.
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#128 crispblog,
"#89 more blatant nonsense."
Arrogance and ignorance in equal measures.
"And at the other end, there is someone who lent you the money,"
This is your fundamental error of judgement. No-one lent you the money. It did not come from someone else's deposit. The bank printed brand spanking new pound notes to furnish you with your loan.
If the system worked as you describe we would have a Building Society model whereby the total value of money out on loan does not exceed the total value of the deposits.
That being the case how do you account for the massive monetary expansion of this country (and the other countries around the world)? How do you account for the mind-blowingly massive amounts of new money being printed in Zimbabwe?
Are you really saying you believe that the money coming out one end of the sausage machine just gets ploughed back in at the front end in exactly the same measure?
Without wishing to descend into ad hominem attacks I suggest, respectfully, that you take 40 minutes out of your busy day and watch the videos on youtube or google. After which we can have a reasonable and sensible discussion based on the facts.
It is clear from your statement above that you have missed the central tenet of the system ie the debt-based, fractional part.
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"One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf."
Did he buy bank shares after the fall?
Did you?
Should you pass on what this guy said?
What was he doing talking to you?
Has he been fired?
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All the money[atached to a bung ee]that "the city" was supposed to have contributed to the economy ,will have to be paid back to them as a subsidy to stop a colapse of the house of cards [jokerrs]
Should we now revise down what passed for GDP figures over the last decade [without the miracle gro]
All that boasting ,all that delusion and wishful thinking backed up by fraudulent accounting, but the tide still came in and washed away Gordons sandcastles ,clothes and bottom line in the sand [the golden rule]
What are the potential scale of bank losses from the outreach of their tentacles into the cAAA'sino economy,losses that taxpayers will have to pick up ?
Toothfairy economics at its best
This is "the stuff" that legends are made of
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Last night I learned that the Government are going to guarantee savers funds up to £50,000, a move which will protect 98% of the population's savings - myself included. Unfortunately, I also learned that this move only protects 50% of the money because 2% of the population own 50% of the cash!
Can someone explain to me, how it is that after 10 years of a socialist government, 50% of the nations wealth is in hands of 2% of the population.
Maybe I dont understand socialism? I wonder, is there any chance of the governemnt being tacked by the BBC on this issue?
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Anyone still worshipping at the altar of Thatcherism? Any chance of returning to nationalised utilities, a manufacturing industry, mutual banks, council houses, British Rail and stricter control of the financial markets, or is it all too late?
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#167:
Please no!!! Do you REALLY want to go back to "The Gas Board" making appointments and not even turning up? To a six month wait for a telephone line from "GPO Telephones"? To grovelling to a local worthy at the Building Society for the favour of a mortgage? To continual railway strikes? To a class system firmly embedded in the council estates that kept the poor in their ghettoes, away from the middle classes? And to endless national decline?
No thanks. I saw all that in my childhood and teenage years, and I want no more of it.
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So Bob. Now they have all come out and denied this and you have manipulated the stock market and spread false rumours. I understand the FSA investigation on HBOS is still running. This one seems much simpler? All fingers point to Bobby P!!
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Robert,
If the banks are short of money because they are not lending to each other, why doesn't the government lend to them at the Bank of England rate + 0.5%.
This would get the money market moving again. The government would make a profit on their loan instead of giving them cash in a bail out.
It would be effectively, the govt. undercutting the money lenders and beating them at their own game.
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Re:82.shakandar.
I don't agree with your blog.You are obviously in work( at the moment ) in today's climate for how long? You will not receive a penny from the government if you have a partner in work no matter how small their income.
Not all people out of work are scroungers.
I hope to see a blog from you one day crying poor you how you have paid your tax's for x number of years and now through no fault of your own are out of work and about to lose everything.That is the real world I may be welcoming you to it.
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If HMG ends up with a significant equity interest in UK banks, will it benefit from seats on the banks' Board and their Remuneration Committees?
Just think of the headlines "My Granny cannot afford to heat her home, but the Labour government's representative has just approved multi-million pound bonuses to 21 year old traders".
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166:
I think the confusion here is the idea that we've had a socialist government since 1997. We haven't. It's been a conservative government under a Labour banner. Tony Bliar was the logical heir to Major. There were reasons for this - in the early 1990s, 'old' Labour looked unelectable, hence 'New' Labour was created.
The sad fact about New Labour is that both ends of the economic spectrum have benefited and the middle has suffered. At the top, Labour was committed to free markets, so a minority did well. At the bottom, what remains of Labour's social conscience was directed at "the poorest in our society", i.e. benefit claimants.
The big problem with this was that the losers were those in the middle - working people neither (a) rich enough to benefit from the market, nor (b) poor enough to get help from Labour.
Now one might think - I certainly do - that if Labour stands for anything it should stand for helping ordinary working people. It has forgotten that historic purpose. That's why it's likely to lose the next election - swept out on a tide of working class indifference and sense of betrayal.
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BANKS GUARANTEE 100 PERCENT TO DEPOSITORS IN FEAR OF BEING SUED.
Banks are afraid that depositors might sue if they do not guarantee one hundred percent to protect the savings of ordinary retail savers.
BROWN AND DARLING?S LEGISLATION IS UNLAWFUL
IN PRINCIPLE AND IN LAW THERE IS NO LEGAL AUTHORITY BY WHICH ANY GOVERNMENT CAN AUTHORISE THE USE OF TAXPAYERS MONEY TO BAIL OUT PRIVATE INVESTORS.
No matter how desirable Brown and Darling?s legislation to nationalize Northern Rock may be, they have set a dangerous precedent, which is in fact, unlawful. If they think by making it a temporary measure will somehow give validity to it, they are wrong.
There is no authority by which Gordon Brown and Alistair Darling or any Government, can initiate such legislation - the effect of which, transfers the risk-liability from the private investor unto the taxpayer and homeowner-mortgagor that ultimately ousts the authority of the Court in the UK, and the same checks and balances apply in the USA. Any attempt to oust the authority of the Court, and in such a manner, is contempt and a criminal offence.
ALL LEGISLATION MUST MAKE PROVISION OTHERWISE IN PRINCIPLE AND IN LAW IT IS NOT WORTH THE PAPER IT IS WRITTEN ON. BUT THE PROVISION FOR YOU THE TAXPAYER AND HOMEOWNER IS THAT?
A TYRANNICAL PRECIDENCE HAS NOW BEEN SET WHEREBY YOU ARE LIABLE TO BAIL OUT UNSCROUPLOUS BANKERS TO THE TUNE OF ?WHAT EVER IT TAKES? TO FILL THE BOTTOMLESS PIT OF GREED OF THE UNSCROUPLOUS GREEDY SUPER-RICH BANKERS TO BE ENFORCED EVERY TIME THEY CAUSE A FINANCIAL CRISIS.
At no time did homeowners and taxpayers give authority to any bank, building society, institution or any government to create, or gamble with instruments used as collateral putting their homes at risk. At no time did your lender in principle and in law have the authority of the regulators, or authority of law.
Why should you pay for the greed and ruthless behaviour, most foul, of the super-rich bankers, who caused the credit crunch and contributed to it? ? Not only is it the biggest modern-day bank robbery but the biggest robbery of the economy leaving it vandalised. It was all avoidable. It didn?t have to happen.
At no time has the taxpayer been responsible for the conduct and dealings of private investors or for loses incurred by private transactions of banks, mortgage lenders or any financial institution.
Many homeowners struggle for years to get on ? and stay on ? the property ladder. Why should they pay for bank loses by way of: Increased interest rates; negative equity; repossessions - made homeless with predatory bailiffs plundering their property?
Why should they pay with: financial hardship; not able to put food on the table; mental stress; and devastating effects of it all for the rest of their lives and their children s lives - whilst the bankers are having a party?
REGARDLESS OF A BAIL OUT - IT IS AND ALWAYS WILL BE UNLAWFUL
REGARDLESS OF A BAIL OUT OR THE ARGUMENTS OVER WHETHER OR NOT THERE WAS REGULATION AND NO MATTER WHAT LEGISLATION IS PASSED BOTH IN THE UK AND USA - IN PRINCIPLE AND IN LAW WHAT THE BANKERS DID WAS UNLAWFUL AND WILL ALWAYS BE UNLAWFUL. TO PUT IT MILDELY IT IS A FORM OF CRIMINAL NEGLIGENCE INTER-ALIA.
LEGAL PROCEEDINGS CAN BE TAKEN AGAINST EXISTING REGULATION, LEGISLATION, ORDERS AND AGAINST THE DECISIONS MADE. THIS WILL BE THE NEXT PHASE.
THE ONLY THING THAT WILL RESTORE CONFIDENCE AND STABILITY IS A PROPER DETERRENT
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#168. Go on, admit it: in the words of Monty Pythons' Northern businessmen "we were happy then..."
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To date I have worked for Citibank, Bank of America and HSBC, with responsiblities for the treasury in various currencies. I am now a director.
On the One o'clock news just now (Tuesday) Robert Peston said that RBS, Lloyds and Barclays are looking for a capital injection of around £50bln in total. Robert said that the government is the only possible source of this new capital. But this is really is not the case. Thanks to easy credit for a decade there are huge amounts of cash in all sorts of institutions around the world; for starters nearly £1 trillion is deposited in our retail banks.
If any of these banks did a rights issue with a maximised discount they'd get their cash, e.g. if RBS, Barclays and Lloyds each did an issue of 200 shares at 1p for each existing share this would raise more than the £50bln Robert mentioned. Despite market turbulence they would get their cash. Unlike a government equity stake this would be compatible with rules protecting shareholders and wouldn't use tax payers money. If the government wished it could underwrite these Rights Issues - tax payers would get fees for old rope. And such an approach would put the UK in a good light.
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Can we stop the FRB nonsense?
1. There is no more money in circulation.
2. There is no less money in circulation
3. This is a new accounting issue (FAS 157) which forces banks to reflect (at fair maket value) on a daily basis, the cost of their insured debt against their reserves.
4. Suspend this accounting requirement and you'll stop pouring petrol on the fires of the debt market and the banks will stabilise.
5. Once stabilised, regulate the CDO and the CDS market and re-instate FAS 157.
Problem solved.
Where's my nobel prize?
Tom
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Can anyone remember when Gordon Brown last spoke about the financial crisis?
One message from the US TARP debacle is that delay makes everything worse, and measures that might have been received well by the markets then flop becasue thery are seen as too little too late. Any novice knows this!
We are in desperate need of leadership to sort out with the banks what is needed to stop the rot - and to do it today. If all that is on offer is meeting after meeting and the empty grins of Mandelson et al, then we are truly at the mercy of a novice.
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It's 14:43 and I posted a comment over an hour ago along same the lines as the excellent contribution by JohnSmithJS (2:16pm), but my thoughts have not yet appeared. Should I re-post?
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Whilst the meetings between the PM, Chancellor, Mervyn King and Adair Turner, and the remaining major banks are of importance to the economic situation, one wonders if it is the wrong Adair attending - should it not be Red Adair who had immediate and satisfactory resolutions to the crises which confronted him in the 1970's?
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#76 and others.
If you agree with me that Mr Pestons online and broadcast comments are ill thought through alarmist hyperbole that is damaging the financial and social well being of our country by exaggerating an already bad situation can I suggest you send your own thoughts to the BBC via their official complaints channel.
http://www.bbc.co.uk/complaints/complaints_stage1.shtml
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This comment was removed because the moderators found it broke the House Rules.
177 good comment - necessary step
Provide amnesty on mark-to-markets for existing portfolios but definitely on newly originated business
PS Where's my post from an hour ago???
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Before these hooray henrys get a penny of taxpayers money, and as their greed caused this whole disaster in the first place, they should return every penny that they paid themselves and their staff from their gambling, and then resign. To give these people taxpayers money would be like slapping them on the back and saying "brilliiant, wish we had thought of making millions like this before"
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#183
Correct... 'Mark-to-maturity' for existing positions.
FASB needs to do some explaining about the timing of FAS 157.
Deputy heads will roll.
Tom
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Dear 168. I was around then as well. The failure of any business is due to to bad management. WE were told by Thatcher that you have to reward the best managers with high pay (paraphrase of one of her diatribes). Can you please explain to me, why we are in the present state of economic decline since the Captains of industry took the helm?
There is not a political system under the sun than can claim perfection, but one based on lining your own pockets, must be less desirable than one that tries to cater for the majority's benefit.
I would like to quote another bit of Monty Python #175 "What have the Romans ever done for us"? Well they ruined many perfectly good cultures that were based on commerce, religion, science, and maintaining an infrastructure that was far more democratic than the one inherited from the Greeks and their conquerors. And they gave us the model for modern Western society.
And now a quote from me (Democracy was a wonderful gift from the ancient Greeks. Unfortunately it did not work as well for their Women or slaves".
Sean, still smug still socialist, still worried about my fellow humans.
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The banks can not borrow enough money, well what is happening to the miilions of pounds that the majority of homeowners repay each day on their mortgages, what are they doing with this money?
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Re. #176, JohnSmithJS at 2:16:
Perhaps the fees for the government underwriting rights issues could go to the Financial Services Compensation Fund for savers.
We also need to be clear of the risks to the taxpayer in the alternative solutions: rights issues or preference shares.
The worst case in the rights issue plan is that the taxpayer ends up with some (very cheap) bank shares which is essentially what is proposed in the preference share solution anyway.
On the other hand, taking on preference shares is equivalent to guaranteeing ALL other bank debt, not just retail savings, up to the amount put in by the taxpayer, since in a liquidation the preference shares would be next to be wiped out after the common stock. This seems an extraordinary risk for the taxpayer to take on. It makes running down the Northern Rock and Bradford and Bingley mortgage books seem positively prudent.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
185
I meant to say they shouldn't be allowed to hold at book value on new business. Just draw a line on the exisiting books.
R u kidding? No government heads will roll. No-one understands how incompetent the politicians are, whether Tory or Labour.
I've given up on being exasperated by the woeful incomprehension and inadequacy of politicians and "financial journalists". That's why I'm scared the government may even do something that may make things worse, not better. If they don't create confidence for real money accounts to come back in, this all just collapses.
While Rome burns, politicians are not just fiddling, they're pointing fingers to divert attention away from their mistakes. This is not helping people understand what the stakes are here and there is no public support for action which is neccessary if we are not all to see the worst decade in our lifetimes.
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So -
"On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital"
Can somebody please explain to my way then they seem intent on buying HBOS at some inflated rate and at the same time have asked for money from the Treasury?
Reckon the Treasury should nationalise HBOS and leave TSB to get on with it's own business.
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Pesto....you seem to have been enobled with some incredible super human powers!
It would appear that you have the power to shift collossal global markets of speculation this way and that.
Please can you report tomorrow that the earth will stop rotating at 1pm this Friday.
I/we wait in great anticipation.
Yours faithfully....
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#192
To illustrate the perverse impact of FAS 157:
Now that the credit markets at a standstill, FAS 157 will allow banks to switch to Mark-to-maturity (They can do when there are too few trades to determine a Mark-to-Market) when they publish their next results.
Next quarter we have the very real prospect of banks reporting massive surpluses.
FAS 157. A feed-back loop brought to you by the Federal Accounting Standards Bureau. Enforced by the Securities and Exchange Commission to clean up the unregulated mess that was ignored by the Federal Reserve.
I've just read that Sarkozy has just figured this out.
So maybe there's hope yet.
Tom
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AS IS BECOMING USUAL YOUR SENSATIONAL HEADLINE IS FAR FROM THE TRUTH.
YOU WOULD BE BETTER OFF WORKING FOR A TABLOID/ RED TOP....
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So these greedy beggars want more of my tax money, but wont pay me back with the shocking bank charges, which to me seems day-light robbery.
Look you greedy self-serving, shareholder caring gits.
You deserve what you get, and if it comes from my taxes, then i hope you go under!
and a message to the current pathetic govt, YOUR FINISHED!
It wouldnt matter even if you got GOD down here to help out, not when the devil is running our damn economys!
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I hope either you or your banker friend enjoy the money you could have made on spread-betting the FTSE changes resulting from your rumour.
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Are we all insane, the banks would not lend you £50 billion if you were a losing gambler so why should the government give my tax money to a bank that is busy in the process of losing my savings, is it so i can pay twice again to give the major bank shareholders a huge payout for messing up again?
What will be my income from my share of my money which is lent to these banks? or again will i just be worse off and expected to bear the cost of the banking overlords so they can continue as if nothing has happened.
Worst case bail out the banks and they mess up yet again then everything is lost that i have worked all my life for!
NO!!!!!!!!!!! THE GOVERNMENT NOR THE BANKS FILL ME WITH CONFIDENCE.
I wish i knew how to help, i am pretty sure though most of these ideas are blind gambles and the people making them have no more idea than me GOD HELP US
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So all you doubters, Robert stands vindicated. Bow your heads in shame.
The three banks DID go cap in hand to the Chancellor last night. This has been confirmed from a 'Treasury source' on Sky News.
Which means that when RBS released that statement this morning denying it, they were being cough economical with the truth cough.
You should bear that in mind whenever they say anything ever again.
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Peston says
"Banks ask chancellor for capital"
RBS Stock Exchange Statement says
"Contrary to press speculation, RBS did not make a request to government for capital"
Is this a case of irresponsible journalism or a Bank lying to the Stock Exchange?
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T
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A simple question:
Did you just have one source for this story? Ig just one how does this fit with the BBC's updated editorial and management processes.
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Strange how comments criticising the "reporting" which were accepted yesterday, are suddenly disappearing from the blog one by one now that Michael Howard has asked for an fsa investigation.
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Is someone telling me that between 9.38pm on 7th October 2008 and 2.26pm on 8th October 2008 there were no posts on this subject?
Were there any posts?
If there were any, where are they now?
If they've been deleted, why?
This has been copied and posted on Guido's Blog.
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Going back through the comments posted on this blog, there appear to be huge gaps in the timings. This indicates to me, at least, that a large number of posts have been deleted.
I should be grateful if someone can explain why.
Again, I've copied and posted this on Guid's Blog.
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At 07:28am on 07 Oct 2008, AvensisTom wrote: (refer back...)
He's too busy talking to Darling, Tom...
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All the deleted comments are still cached on Google. Got a copy... Oh BBC - naughty, naughty - do remember, our license fee means you speak for US - not New Stasi, occasionally known as the government.
I never, ever thought I'd catch myself saying this, but well done Michael Howard.
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Do you think the banks will remember how trh taxpayers are rescueing them when they withdraw working capital from medium small businesses, before sending in the receivers?
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Robert, I was just wondering if you knew that informing the world of market-sensitive information in advance of any confirmation from the institutions involved is illegal.
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Why have large numbers of critical comments on this blog been removed?
Since when did we fund the BBC to censor us?
Do you really think, in this day and age, websites are not cached elsewhere...??
Your actions speak volumes - Peston has clearly broken the law in reporting what he was told, and this had a catastrophic effect on the stock market...
Do you think this is all a game? Your desperation to spin every story on behalf of the government has backfired spectacularly this time and your attempted cover up will not work.
"New Stasi style propaganda & cover up?
We're the BBC, it's what we do..."
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I'm sure that Robert and the BBC have behaved impeccably. I would be disappointed at the BBC if they closed down debate just because a formal complaint has been made and a question asked in the HoC.
Perhaps someone should send a copy of the google cache to the FSA, purely in the interests of fairness and objectivity, as a true and accurate record of events. I will.
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In line with the above comments relating to missing (removed?) posts etc.
I'm more interested to know how on earth we got to the point where the government felt it had the authority to spray hundreds of billions of pounds of taxpayers' money at dodgy banks, at no notice and without so much as a 'by your leave' to parliament? How does that work? Where in the hell have the other parties been throughout this farcical debacle? Cameron in particular: prime minister in waiting? You must be joking!
And how come Godon Brown can casually invoke anti-terror laws to freeze the assets of an Icelandic bank without the slightest whiff of, er, terrorism involved. Is this not fascism?
One wonders how our politicians will behave over the next decade or so as the UK economy disappears up its own exhaust pipe bearing the burden of 85% of its GDP directed towards bailing out bad banks, whilst the end of cheap energy means that the assumption of infinite economic growth is now dead in the water. Terrific decision.
As our society takes the strain of this disaster (oh, and don't forget the ongoing influx of millions of immigrants over the next decade or so, as well as our crumbling energy infrastructure and the billions of pounds needed to shore up our welfare state and state pension system), one wonders what other unchecked, unbalanced measures our glorious political elite will visit upon us in the years ahead.
I sense a new world order emerging here.
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..... oh, and another thing. If the BBC really has been removing posts from its blogs, then the situation is much more serious than I thought. I do find it hard to believe that the BBC is indeed going into 'cover up' mode. Surely not? If it is, then what on earth is happening to our society and its institutions?
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it is new world order moraymint and it's really scary.
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Mr Preston,
As a Celtic fan, I'm used to poor journalistic standards - it's what we've come to generally expect from the Scottish tabloid press.
However, whils those hacks may take solace in that their ultimate effect on our daily lives is usually pretty minimal, someone who is Buisness Editior for the BBC really does have an overarching responsiblity to be correct with the facts, and to portray them objectively.
With regard to the banks asking for public money, and the claim that the public will own them through some sort of backdoor nationalisation, I think you fall way short of the mark on both of thse counts, and that your lust for sensationalism serves no-one on this crucial matter - except yourself that is.
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Obviously I have found this post quite late, but it doesn?t really matter as it makes it even more interesting reading. So many months later, just Barclays is still standing. Lloyds TSB and Royal Bank of Scotland have lost their independence and joined Northern Rock. However can we proudly say that government bailout succeeded and as a result we have a more stable banking system, customers are filling better, financing available once again. Unfortunately not. Despite all the efforts, banks are not willing to lend and customers with mortgages are stuck in a rat run, left at the mercy of their providers as it is not an easy task to find a remortgage, especially if they are looking for buy to let mortgages. When will we see the light at the end of the tunnel and will be able to say that our system is now sorted and this credit crunch is a history which will never repeat itself.
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