Humbling of our banks
The City of London has never seen anything like it in its long and illustrious history.
A quartet of our biggest banks have been negotiating all day today - and will continue to do so all through the night - with the Treasury, the Bank of England and the Financial Services Authority about how much capital we as taxpayers need to invest in them.
Right now it looks as though first thing tomorrow Royal Bank of Scotland, HBOS, Lloyds TSB and Barclays will announce they're raising up to £40bn in total.
In the case of Royal Bank of Scotland, the sum of capital it's being forced to raise is mindboggling - at least £15bn (and rising).
Which is the kind of disaster that no chief executive can survive - which is why Sir Fred Goodwin's resignation will be announced tomorrow, to be replaced by British Land's Stephen Hester (as I mentioned in yesterday's note).
Meanwhile HBOS will come second in the list of capital-raising shame: it's being obliged to raise around £10bn.
Taxpayers will underwrite or provide all of what the Banks are raising - although the banks will give their shareholders and other investors the option of reducing the taxpayer investment by taking some of the new shares on offer themselves.
It's the biggest fund-raising exercise that's ever taken place in the UK.
What it demonstrates is the weakness of Britain's banks.
And the banks that feel most humiliated by the debacle are - of course - Royal Bank of Scotland and HBOS.
But its embarrassing even for Barclays. It didn't want to raise more than £3bn but it has has been pressurised by the Treasury, Bank of England and FSA to raise nearer £7bn.
This is history in the making.
At the end of it, the state will own a very substantial proportion of our biggest and proudest banks.
What a sorry end to Britain's longest ever period of unbroken economic growth.
But with any luck, it will be clear - when the money's been raised and taxpayers are standing firmly behind them - that they're safe from collapse.
UPDATE: 19:01
I have one additional fact and one thought.
First, the City watchdog - the Financial Services Authority - has done its sums about how much capital the banks need on the basis that an economic tsunami is coming.
It's not forecasting such a tsunami, but it has sensibly concluded that the banks' foundations need to be reinforced so that they could withstand such an unprecedented battering.
Which we should probably see as reassuring.
I've also been musing on the historic significance of tonight's events, and I think it can perhaps be seen as the death of Thatcherism, or at least of an important strand of the dominant ideology of the 1980s and 1990s.
It was Margaret Thatcher who in a series of bold reforms from 1979 onwards gave the City the freedom to trade in everything and anything.
She removed restrictive practices, she encouraged the free flow of capital to and from anywhere in the world, she created the notion of the City as the Great British Success.
For the liberalisation of the City to end with a quartet of our biggest and proudest banks being forced to put out the begging bowl to Government, well that is a moment in ecnomic history - which may well, ultimately, be as significant as the nationalisations of the 1940s and the privatisations of the 1980s.
UPDATE 20:46
The amounts the banks are being forced to raise are increasing by the hour. Right now, it looks as thought the authorities will force RBS to raise up to £20bn and HBOS around £12bn.
And the total for all four may well hit £50bn.
Also, with HBOS being forced to raise so much, Lloyds is demanding that the terms of its takeover of HBOS should be changed - so that Lloyds doesn't have to pay so much.
The revised terms of the takeover may well be announced in the morning.
PS By the way, there's also been something of a breakthrough in Paris, at the meeting of the eurozone heads of government hastily arranged by President Sarkozy. If financial institutions aren't reassured by their pledge to guarantee interbank lending for five years, well then we're in the kind of mess that's simply not amenable to government solutions.
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Robert, the injection of capital tomorrow will not guarantee the banks: only full transparency will do that.
We are not at that point yet, and there is no serious attempt to do it any time soon.
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Momentarily, I forget exactly why Sir Fred had the nickname, Fred the Shred. Anyway, it will be such a relief to stop walking around the office, clicking fingers, and singing to that tune which I cannot get out of my mind, Jambalaya:
Good-bye Fred, yer gonna shred, me oh my oh
Yer gotta go pole the pirogue down the bayou
Please, powers that be, confirm tomorrow that you have let him go, let me forget this tune!
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So after all the pain and suffering, HBOS finally looks like it's owning up to a huge capital hole. If Robert is indeed right about £10 billion (or more?) being required, what does that say about the actions that the much-maligned 'spivs and speculators' took in selling down HBOS stock before the Lloyds merger was forced through? It's an amazing repeat of the short-selling 'scandal' before the earlier HBOS emergency rights issue of a few months ago. Why has the FSA wasted so much time chasing down phantoms and banning short-selling when it looks as though reasonably sophisticated investors, who refused to follow the herd, were right all along?
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If, as Robert predicts, Fred Goodwin of RBS resigns tomorrow it will be a clear admission of his reckless culpability in steering this well respected bank "on to the rocks". During Goodwin's time, greed and profit became the new euphemisms for recognised banking practices as he drove his staff to meet ever more demanding targets.
However, he will leave RBS a very rich man leaving others, principally the taxpayers, to pick up the bill for his failures. I suppose it's too much to expect Goodwin to repay some of the hefty bonuses which he has been paid over the past few years for profits, many of which we now learn were founded on worthless paper.
I seem to recall that he also got his knightwood for services to banking and for contributing to the massive profits of RBS - will he now accept that this was a false honour and give back his "gong"?
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So all the sandcastles built on (virtual) sandcastles over the last 15 years or more are coming down. Better now than later and at least the system will survive.
Lets hope that it will be run by people motivated by more than their own personal bonus scenario.
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The question is what promises has the Government extracted from these four banks for the taxpayers who are bailing them out.
It would seem inequitable for the Banks to repossess borrowers homes given that those very borrowers are taxpayers who saved the banks from bankruptcy.
Similarly, the banks control the future of many other SME businesses in the UK. What support can they expect, given that their corporation tax is supporting their lenders.
It is time to find out whether we have a symbiotic relationship with the banks, or if we are hosts for parasites.
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can anyone explain how Lloyds is in a position to buy HBOS? Or are they going to buy it with taxpayers money? If so why doesn't the government just buy it themselves?
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It goes against the grain of many contributions here so far but it seems to me that Brown and Darling, with help presumably from the likes of Paul Myners, have put together a very clever package, compared to the many alternatives discussed on this blog and elsewhere, in tying together help on liquidity and capitalisation. With all the big four having to take the medicine this weekend there may be further falls in the stock market tomorrow but a run on any of these main UK banks now seems remote.
I pray that those negotiating on behalf of the tax-payer this evening are smart enough and tough enough to get as good a deal as is possible in such unhelpful circumstances. And that sufficient confidence results to avoid the worst of crash and depression.
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"No chief executive can survive", so there will be more well deserved resignations, san bonus, soon?
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I think it's about time the banking system was reined in, and I hope that current moves mean we can finally see the end of the Thatcher/Reagan unregulated greed approach to all our financial futures.
Taking a significant public stake in the banks is an excellent approach - I believe this should be done via voting shares that give us a say in how the banks are run. Bonuses must be reined in; short-selling must be banned indefinitely; and to those who say that we won't get the right people in charge if we don't give them enormous undeserved perks, I say look at their performance: we do not need them - they can go wherever they like as long as it is nowhere near our banking system.
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Surely, in every business deal, someone wins and someone loses.
If I buy for £2 and sell the next day for £1, I lose and the person I bought from wins. And vice versa.
Who is losing here, with buying shares in the banks? The shareholders or the Govt?
The main problem is a lack of confidence.
And which group do people have least confidence in? Politicians!
So we who are now losing trust in banks are expected to believe that people we have already lost trust in - ie politicians - have a confidence-building solution.
Ha!
(or should that be Ha! Ha!)
ps
I would quite happily invest in RBS with a 10 per cent preference share and a warrant to buy another ordinary share at a quid in the next decade.
Make the deal good enough and people will buy. You don't need the government.
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Humiliation or pragmatism?
Hans-Jörg Rudloff, the chairman of Barclays Capital, said closing world financial markets for two or three days might provide time needed to work out solutions to the global banking crisis, Bloomberg News reported, citing an interview with the Swiss newspaper Sonntag. In the interview, Rudloff called the current crisis ?probably worse? than the stock market crash of 1929. New York Times
http://www.nytimes.com/2008/10/13/business/13europe.html
Oh dear!
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Forget inter-bank confidence, it's the public's confidence in the banks which is dead - and no amount of government infusion is going to resurrect it.
All that these government bailouts are doing is making taxpayers more and more angry.
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Woops last post seems to have been posted twice - sorry!
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Sounds fairly sensational...good effort Robert, however can you tell me which nations banks have not been humbled in one way or another ?
Also the fact that the banks are taking up the opportunity offered to them surly justifies the action.
I am sure that your support and lack of self seeking sensationalism is welcomed by all!!!!
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The Chines write the word 'crisis' with two characters - 'danger' and 'opportunity'. So what is the danger in this crisis and what is the opportunity?
To my mind, the real danger is not that the present system collapses, serious as that might be, but that it is simply 'fixed'; in other words, put back to a situation of status quo ante, with extra safeguards against reckless lending and so on.
We need a financial and economic system that takes into account the pressing issue of climate change and sees that the relentless economic growth we have had for most of the past 150 years is unsustainable. This is the opportunity - but which mainstream politician anywhere in the world will be bold enough to say it?
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Truly you think that a less "humbling" experience will be felt by the estimated two million extra people on the dole by Christmas?
Brown is the only prescient person in the western world at the moment.
More humbling would be to have a clueless leader accompanied by a financial engineer who is in large part responsible for this crisis--having understood the coming train wreck and continued to reap his personal profit from it--as the architects of the foundations of public good for the next few decades.
All hail the economist with preparation, power and diplomatic skills.
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So British Banks plc will dictate which buinesses or individuals get loans, under guidance from the new National Economic Council. Yet another brick in Labour's wall of control More dismantling of fee enterprise and individual freedom in the UK.
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"What a sorry end to Britain's longest ever period of unbroken economic growth."
It wasn't 'real' economic growth, though, was it? It was credit-fuelled speculation, politically-driven, and now it is the ordinary taxpayer and future generations who have to foot the bill.
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What share of responsibility does America bear for all this? To what extent is the "humbling of our banks" due to the toxic derivatives which they were sold, and which concealed vast sums of bad debt on the American sub-prime mortgage market?
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does anyone, apart from Gordon Brown, think his cunning plan will work? of course it won't as it does not address the problem.
All governments must bite the bullet, stop share dealing in banks while they are fully audited and forced to publish their real exposure to toxic debt. Only then can confidence return to the market.
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If Sir Fred falls on his sword tomorrow, I take it Andy "grocer-boy" Hornby will closely follow? (and take O'Riordan with you, please - plus the rest of your ex-Asda chums)
Remember Andy/Shane-y continuing to send out fact-free memos to the plebs saying "we are a strong bank, with strong capital, strong brand, blah-de-strong-blah" doesn't really cut it when you're caught with no shorts once the tide has gone out.
Bring back B*nking Benny Higgins!
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Why can't we just join the Euro now?
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A couple of very salient points to mention regarding the whole situation:
1. The value of Pi, or the Peston Index varies in inverse proportion to the value of the
FTSE 100. Take September 22nd, blog on Gordon Brown, 111 comments on the Blog, to Sunday 12th
October, All Change at RBS, 204 comments, an almost doubling, compared with getting on for 50%
drop in the FTSE, well after Monday maybe.
2. The new GOvernment NAtionalised Derivative Swaps give new meaning to the phrase
"They've got us by the G***ds.
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Let's see what'll happen tomorrow Robert. It's good to see one of the heads 'rolling' so to speak, it's about time more of them did so. You're right though, it's a pretty sorry state of affairs. M-Bell no1, has it right, only transparency will go some way to ending this madness. If you think about it, too many crazy statement have been made about the soundness of many of these banks. God knows what'll happen next when we find out they're after even more money. As I've said before there needs to be a criminal investigation into these rogue bankers. They're responsible for destroying the livelihoods of many many people and they should suffer the same fate as those that have seen, and are now seeing, their jobs go, their houses repossessed, and their future overwhelmed by uncertainty and debt.
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Can someone explain? I'm no expert in finance but here's what I'm getting from past blog posts. It seems that the current banking crisis is variously caused by (a) greedy members of the general public with their raging appetite for credit and upwardly mobile living, (b) stripey-shirted bank execs addicted to excessive risk taking and short termism, (c) abject failure of officialdom ie the FSA, BoE, Fed and other central banks to properly undertake their tasks of inspecting and regulating, (d) Governments for not keeping enough control or spending too much money they don't have, (e) short selling, which is a few usually the rich trying to profit at the expense of the masses and don't give a cuss about the companies or employees they sell short, (f) Peston with his catastrophic daily blogs. Any others? Haven't yet seen anyone blame immigration or climate change, but it could happen. If we believe the doom laden sayings then heads should roll. But whose? What is the main factor that has contributed? For my (vanishing) money it's (a) i.e. john q public.
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A socialist government owning capitilism?
The country forced into an EU constitution that constitutes a dictatorship?
How nice of the fed to bring the years old sub prime loans to the worlds attention?
Bush allowing ten million immigrants and a large proportion sub prime loans?
The special relationship between Bush Blair Brown and the Bilderbergers?
Well Well looks like we need a global police force to arrest the new elite villians?
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I hope that at a suitable time, not only will those chief executives and others responsible for the collapse of these institutions and the possible impoverishment of many current and future pensioners through their lack of appropriate stewardship, be made to account for their actions, but also barred from holding any company directorship for at least 10 years.
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Gordon Brown says "confidence by mid week".
I will need to see the accounts (full audited please) before I can be confident again!
You can nationalise the banks but without full disclosure how can confidence return?
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Schadenfrade is an unacceptable response to the ignominy of any banker who falls from grace. We must not forget it was the regulators at fault, one hundred percent. They created gaps for shysters to enter the portals of banking.
For any shysters who happen to have got away with it, boys will be boys.
Instead, our regulatory environment should be changed so it will not happen again. We also know that moral suasion is the most important device to get ordinary people to pay tax. Therefore, our regulatory environment must ensure that shysters are tracked down and punished, and seen to be punished, or else moral suasion and tax receipts will diminish. This will reduce the funds we will need to replenish banking losses.
So we simply have to take a leaf out of our American friends, and nail any shysters. Put them in jail. Not the junior ones, who were acting under orders, and who will be seen as scapegoats. People need to see real culprits punished according to the law.
So the Treasury must send in the accountants with their fine toothcombs. Whatever it takes. They will find something. And remember, no schadenfrade, only justice.
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Now that, as a taxpayer, I am lending money to the banks, will they continue to charge me 30% APR on my credit card? 666% of BoE base (interesting that it should come to 666). I would hope that in return for the taxpayers investment the Government would insists that these sort of rates are not allowed. The BoE has aminimumlending rate, perhaps it is time for a maximum lending rate.
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I repeat my forecast that NuLab will be calling a General Election around September next year. The rallying call will be the glorious leader Brown for leading the UK out of the huge pile of ****.
He will, of course, not mention that it was he who dumped us in it!
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The bank negotiators needn't worry. This is the Govt which got a good deal for the taxpayers with .......GP's pay!!
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What a fantastic position these banks are in. Its a no lose situation - either they use our money (as customers) to make profits which they keep for themselves or, if they abandon their business model and make losses we (as taxpayers) make up for it. They appear to be insulated from any financial risk whatsoever - because of this I would not be able take seriously any banker trying to give ME business advice. Also good point about repossessions as we now own the banks we should be cut some slack.
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"Treasury officials will meet Icelandic authorities later to try to save some of the billions of pounds that councils and charities face losing.
More than 100 councils, as well as police forces, fire services and transport authorities, have deposits running into millions of pounds each in the crisis-hit institutions."
I cannot understand how the cash strapped Local Council, Charities and Hospitals who never stop crying their poverty and shortage of cash had billions of pounds stashed in Iceland? Why the banks at home were considered at least as safer as the banks in Iceland and at other places? Now we know better!
The excuse is being offered that they were getting 'better' return on the money! Had not they known that what sounds too good is not true!!
Advisors who had advised them to be reckless with the taxpayer's money ought to be called to account.
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What is the position of an offshore bank account with one of the affected Icelandic Banks for a UK citizen. Is the sum fully protected or only to £50,000 or less.
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What really angers me in all of this is that no political party has stood up for the British taxpayer - save, perhaps, for the Taxpayers' Alliance.
It is shocking that, throughout this debacle, the Labour government has been treating taxpayers with contempt (don't forget we've already had a decade of stealth tax under the Big Clunking Fist), whilst the Tories have been standing on the sidelines bleating about, er, bankers' remuneration in the new world order. Is that it Dave?
It is alarming just how exposed we are now. I don't believe all these experts, commentators and politicians popping up here and there and talking about 'sluggish growth', 'mild recession', ' things should pick up next year' blah, blah, blah. Do you believe these pronouncements?
Do they think we're stupid? Thanks to the rank incompetence of our political class, the UK economy now has a big, flashing neon light above it saying 'Stuffed Beyond All Recognition'. It will take politicians, of all persuasions, a very long time to re-establish what little trust there ever was between them and us proletariat.
Apart from total war, this is an unprecedented economic and social disaster for this country and I for one want to see our politicians eat humble pie and get pack to representing ordinary people. Politicians' behaviour in recent years has been utterly shameful (like the bankers) and this is now the straw breaking the camel's back (some straw though eh?).
If politicians don't reconnect with the likes of you and me, and fast, I fear there will be trouble in our society in the coming years.
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Goodwin needs to resign with no reward - anything less would be a travesty. But there are other executives that need to go as well also on 'no reward' terms.
These so-called 'bankers' have forgotten what is meant by the term 'savings' - it definitely isn't a stake for banking executives to gamble with.
The executives at other banks need to go as well. Only by this taking place speedily and with complete transparency will anyone believe that it may be possible to entrust banks with our savings in the future.
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The financial titan that is Clown sold off our gold for a pittance.
His off balance-sheet PFI wheezes will cost two generations of taxpayers £££ BILLIONS in interest payments.
Hardly a good track record for puling off his next trick!
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Maybe the Royal Bank of Scotland will now be renamed the Royal BANK OF ENGLAND ...?
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Sorry, i may be being thick here but when the above and others say "we, the taxpayer" are footing the bill what exactly do they mean?
Are we going to be invoiced or is income tax going up?
I remember the same comments bandied round about the Olympics though to my knowledge that bill has still not come through. post office eh, cuh!
The British public at large lapped up the cheap credit, bought 2 or 3 houses, replaced cars, went on holidays to Mexico. Now its collection time and suddenly its all the banks fault. Its not, its everyones. From Clinton to Greenspan, to Brown to the Bankers, the analysts, to you and me. Its no time for a witch hunt. Its time to live properly once more and stop this insane desire for more and more quickly more often.
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They are NOT safe from collapse though, are they?
The Bassel 2 Accord means every time the house price drop, so do their assets. Immediately with no lag. Thus we, the taxpayer, are liable for about 1 Trillion pounds of banks liabilities.
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Why when credit is tight is the gov't through the FSA forcing banks to hold larger capital ratios, surely this is the opposite of what should happen, higher capital ratios in a boom, reduced capital requirements when heading for a downturn to ease liquidity? This seems extremely oportunistic to me, forcing the banks to increase capital ratios at a time when it is impossible to do so, with Gordon riding in on his white horse to supposedely bail out the banks by buying up a huge proportion of the business at a fire sale price.
What people seem to be loosing sight of is that this is a systemic problem for all banks with the normal liquidity channels in gridlock. The injecion of liquidity by the BOE and the underwriting of interbank loans is a necessary course of action to solve the systemic problems of the current system. The blackmail being used to effectively nationalise a large proportion of the banking system is an absolute disgrace. The end result of this is that Gordon will reap the benefits when the share prices return to some level of normality, and what will he spend this windfall on, the increased burden of a welfare system created by his own economic incompetance. Who loses out? The pension funds and shareholders, it is effectively like another form of taxation for the prudent and those who try to plan and invest for the future. If you don't own a share, investment trust, a private pension or a house you're quids in, if you do you may as well cash it in now and spend it along with the rest of the profligate!
Another thing people in the media seem to selectively ignore is that the crisis is not as a result of a huge number of defaults on UK mortgages, if you look at the figures the numbers are up but by no means justify the lack of confidence in the UK banking system. The root cause of this problem is sentiment and in particular with respect to house price falls and subsequent defaults on mortgages, this would suggest that the main focus of action should be on the housing market. Scrapping stamp duty completely is a bare minimum, we do not have the same problems as the US, there is no where near the same levels of sub-prime lending and the biggest difference is the imbalance of supply and demand for housing in the UK. We do not need to suffer the same fate as the US, we can and should take actions to address the falling housing market, this is the only thing that will return confidence to our banking system.
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You young people have not been around long enough to understand that it was the Wilson government in the late 'sixties that started messing around with banking rules. Then we had Thatcher, Lawson, Brown et al adding to the mess of deregulation. Mr. Brown wants to return things to normal so that the banks can restart lending to home owners. Mr. Brown is neither old enough nor well read enough to understand that a mortgage is a twentyfive or thirty year contract, however you dress it up. Commercial banks have no business either originating or buying mortgages - this is part of the problem. A mortgage can never give rise to a truly liquid security. We had perfectly adequate mutual building societies to do the mortgage lending job with funding gathered the hard way via personal savings on the High Street. This is what we need now in the mortgage arena and cannot possibly re-establish. We also need an outright ban on commercial banks financing home purchase on any basis. I am not suggesting that this is the cure since most probably one does not exist. We also need to go back to the pre-Wilson era when banks published their balance sheets after "transfers to hidden reserves" which resulted in solid capitalisation, low published profits, shareholders consisting of Widows' and Orphans' Funds, and bankers in the CEO positions who had spent a working lifetime in learning the banking trade. What we have now is spivs in charge of big ticket salesmen put there by the politicians.
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We may be witnessing the genius of Gordon Brown in quietly and patiently allowing the banking system to steer itself onto the rocks and have to be saved by nationalisation.
"Best when we are Labour."
Real thinkers know that what got us here is the money creation system which is privatised and for private profit, so more wealth goes to fewer people.
97% of "money" needed for the exchange of goods and services is now created by borrowing at interest from the private banking system.
If there was no borrowing, there would be no money!
Madness.
Something has to be done.
Money reform is the only way but we will have to fight for it.
See the video "Money as Debt"
http://uk.youtube.com/watch?v=rC720Cl3N-0
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m_bell haven't you learnt anything yet? Tranparency is a thing of the noughties past now. Whilst it was bandied about in every engineering, mathematical, banking and erm everything paradigm the completely ludicrous nature of the demand for transparency is at sea when you approach something hugely complex.
People don't know what the debt is, it's wrapped up in meaningless very clever mathematically proved derivatives that have obvious outcomes in the long term based on previous economic stats. Sure in twenty five years they might be right, most speculation in the markets is proved right over a long enough timescale, but they're totally out now. At the moment there is in no way possible full transparency as these derivatives now hold no value to anyone because of their 'transparently' no brainer value. When you come to transparency the underlying phillosophy has to be very simple to succeed. We will not get even a little transparency until credit debt ratios are negligible, most hedge funds are bankrupt/liquidated, many have lost their homes and CDS's are fully unravelled. Then we'll be back to old fashion retail banking and no doubt the investment banks are de-merged from under their wings. Transparency means nothing because no CEO ever understands the complexity of what they're doing.
Identity Card anyone?
We may be at the bottom of the curve for banks but it'll be a long road back for them and ultimately us.
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The mind bogles at the thought of all these Nu Labour whiz kids being decanted out of Local government finance departments to run the new nationalised banks. Will the government (aka G Brown ) be setting the interest rates, no doubt to harmonise with the new tax rates which will be needed to service the enormous debt ( I hope essential ) the government is saddling the taxpayer with. Maybe in the new banks there will be jobs also for all of the workshy this government created over the past ten years. It may also prove a useful tool to find employment for early release or unjailed criminals who already have the qualifications for working in banks ; a degree in dishonesty. No doubt also all the poor bank executives who have had to resign will be forced now to go and live in impoverished retirement in the South of France or the Amalfi coast, how can you but feel sorry for them?
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They are NOT safe from collapse though, are they?
The Bassel 2 Accord means every time the house price drop, so do their assets. Immediately with no lag.
Thus we, the taxpayer, are liable for about 1 Trillion pounds of banks liabilities.
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The mind really does boggle, seriously Robert I think its time we taxpayers had a better return. No one is coming to our rescue this cold winter, our wages have not gone up, basic fuel and price of goods keep going up. When will someone come and bail us out? This is nothing but sickening. I am very disappointed in all the major banks. Its always been ok to charge us to the hilt but in return the banks can make a healthy profit come the next term.
Beggars belief!
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hold a moment didnt lloyds tsb not buy halifax hbos just before this crisis deepened?
if they did then why are both parties trying to obtain taxpayers money?
is this a con or am i in error.
if its a con then why is this government allowing it ?
very odd i think.
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We should all be glad that this happening. The alternative - all banks go bancrupt and cease trading is hard to contemplate. Just imagine a prolonged bank holiday with all the ATM's like Iceland's saying 'This service is no longer available' and no business taking cards or cheques. Fortunately the government has stepped in. They had to. Financial meltdown has been temporarily averted but might still happen.
Thank you Robert for keeping us informed. Let me know when I should keep my cash under the mattress.
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So only one resignation predicted, what about the rest of the directors across the banking sector. The answer would seem simple - sack them - without any pay off.
Freeze their assets, reposess their houses and ban them from being directors of any other company.
They could then go along to apply for a mortgage without having a job and without having the high percentage of deposit required these days.
Probably non of these suggestions are legal but there should be some penalty for having put people into the situation we now find ourselves in and I don't think that shame would be sufficient.
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ITS ALL ABOUT THE FRAUD THAT IS THE FRACTIONAL RESERVE BANKING SYSTEM......Stoopid!
Go google 'money as debt' and research this greatest of frauds.
We need monetary reform now.
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One of RBS's NEDs is bigged up as having ..."considerable experience in very large risk management...." (for which he is paid £122,000pa.) All the directors are culpable, not just this one, and they are all guilty of a total abdication of responsibility by relying on rating agencies to justify investing in instruments that they didn't understand. It is essential for the good of the financial system that all of these incompetents should be banned from ever holding a position of responsibility ever again.
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He set up the current financial regulatory system in 1998.
He has has run up huge public debt "off-balance sheet" (PFI's etc)
He sold gold when it was at a low
He thought it a jolly jape to give a tax cut to the majority at the expense of the lowest paid (and that we were too thick to spot it)
and now he may end up controlling half the UK banking system.
"Lunatic" and "Asylum" spring to mind.
At least there will then be lots of "non-executive" directorships for those who lose their seats at the next election.
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47-starquin10:
"The Bassel 2 Accord means every time the house price drop, so do their assets. Immediately with no lag."
The latest wheeze from the States is a suggestion to allow institutions to place their own value on assets - rather than what the market says they are worth.
What's the betting we soon import this idea? Why not? After all, as a short-term fix, it might make them "safe from collapse".
Accounting board tries to clarify mark-to-market rules
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Robert
In the spirit 1 above regarding transparency in for the banks, how about some transparency in your sources for the exclusives over the last few weeks?
Just interested in knowing if you feel your exclusives are 'creating new news' before you actual report 'the news'?
I'm sure a lot of loyal readers would like to see some response in your blog regarding comments from certain papers and media?
defear
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54-starquin10:
"Thus we, the taxpayer, are liable for about 1 Trillion pounds of banks liabilities."
I agree that in spite of any smoke and mirrors that may be used (see my last post) the taxpayer will still end up with a huge liability.
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isnt it great seeing how these banks are running to the Tax payers when they have screwed up big time with the Capital they generated over the years from Intrest, charges and other forms of cash returns.
only to blow them on expensive comercials to get people to go bank with them
and other investments to promote their image or to make a quick buck.
these are the same banks that come down on people like a load of bricks if there is a slight problem or error.
if they get a chance they would take their customers for every penny they are worth
and now they are struggling and their precios shareholders stock is falling through the floor, they go begging to be bailed out by TAX payer money.
before any of the Tax money goes to them, their shareholders should lose every penny and put that to their balance sheets before begging the tax payers.
maybe in future they wont be so careless.
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Goodwin should go with no pay-off, no recompense. He has presided over such reckless financial mis-management, yet *I'm* the one who gets fined if I mess up my finances...
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The banks have no choice, they now have to return to a regime of more responsible lending.
And we don't need to guess what that means for house prices:
Before the money supply dried up, the average house price was £220K.
Average earnings were £24K.
That means with a risky 10% deposit, a couple were borrowing 4 times their combined salaries to buy their home.
The banks will now have to go back to 20% deposits and 2.5 times salary mortgages.
That will bring the average house price down to £150K - a drop of just over 30%
Enjoy...
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Surely the government could set up a Loans scheme direct with homeowners and businesses similar to a Student Loan.
The banks would get some of their debts paid off indirectly and people would not lose their homes/farms/businesses.
The thought of multiple repossessions instigated by the banks/courts is sickening. This just enables the moneyed to get more moneyed.
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I wonder if I'm missing something...
The banks are being stabilised so that they can lend to each other again. They're being stabilised and recapitalised so they can lend to companies and individuals again. The banks are going to be much more tightly regulated so that we can't get into this disaster again.
But the music has stopped. There are trillions of dollars of debt still out there. Unless banks are going to forego interest, it is going to increase. Banks are still not going to want to lend because the figures are frighteningly high. They want to survive. Regulation will further diminish economic activity - because the laxity and irresponsibility with lending was a very, very large part of the boom.
So, recession is a certainty. The debt increases further. More writedowns as we are more indebted than we've ever been. Less confidence. More writedowns. Debt increases due to interest. And so on...
These actions taken by the government are a bit like a patient with a brain tumour which has led to the legs no longer working. The doctors (government) decide to treat the legs to get them working. What they should be doing is obvious of course...BUT politically unswallowable to financial elites.
Why should the banks survive in present form so they can bankrupt many thousands, probably hundreds of thousands, if not millions of people before this is over? Why not introduce legislation which calls a moratorium on debt and repossessions? (People could just pay back over a longer period.) Or a fixed amount to be paid back say 10% on what you borrowed? That's not a bad profit! This would help people. The debt is the core of this issue but no one tackles that. Why?
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"So is this a plan then, Ed? We'll let the commentators and market analysts talk this thing way down, pick off these banks at their lowest ebb. Then we'll control their loan policy, reposession policy, and control interest rates at arms length. Then after a good few years of inflation, and with the Pound devalued beyond belief by the time you're Chancellor, Ed, we'll pump them up and sell them on to fill the Social Security black hole". How does that sound?
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Andy Hornby should go next.
He has steered a once great Scottish institution on to the rocks.
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This crisis is great so far. Fuel prices are tumbling, mortgage rates are falling. Prices of houses and eveything else will soon follow. The vast majority of people in the UK don't have any savings or investments and they don't believe their pensions will be worth anything anyway.
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We are slowly but surely moving towards one or possibly two Super-Banks in the UK. Better that these be in the control of the Tax-payer than that of private companies who have proven through their actions and deeds that they are neither to be respected nor trusted. Senior bankers and their hordes of minions have, through their actions and deeds, been interested only in feathering their own beds.
Why only one person (Sir Fred Goodwin) should feel the need to resign beggars belief. I would have thought that there would have been dozens of senior executives in all the major banks making their way towards the exit door. I am sure that what is left of the banking system can do without their kind of leadership, which has led to the wholesale destruction of an industry.
I hope they feel the pain, and have strong enough shoulders to carry the shame of a nation.
No golden cheerio?s please.
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#68
Trouble is virtually ALL the money banks want to borrow is to repay fancy financial instruments (CDS's and other off-balance sheet activities) which have become due or need refinancing. They will have no dosh to lend.
Incidentally, why aren't the banks having an asset fire-sale first before bleating to the taxpayer.
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As I have asked before,
WHy or why is Andy Hornby allowed to stay on?
Why is James Crosby, ex of Northern Rock and on the FSA whilst it so failed in its duties, allowed to stay on at the FSA?
please Robert, tell me?
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I have a solution to this current crisis - Gordon Brown should ban such sensationalism reporting. Who it is helping?
The powers at be are trying to find a solution, others are seemingly thriving on the misery in an attempt to make a name for themselves. This is costing many people their jobs, savings and pensions. Truly shameful!
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good old thatcher deregulated the city of london in 1979...wonderfull its taken 29 years to see what a bad pm she really was....its not brown blair and major that are to blame. the sight of four major banks ,cap in hand ,begging from a labour government...socialism is dead!!! long live socialism.
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Under Fractional Reserve Banking there is no such thing as a strong bank. They all by definition inverted pyramids of debt constantly circling the plughole.
They receive 100%, they lend out 97%. They only have 3% in reserve. They *rely* on *less* than 3% of customer's money being taken out. Any more and they collapse like Lehmans. In america the reserve ratio is about 10%, the UK about 3% and the EU, 2%...
There isn't a Fractional Reserve Bank in the world which isn't vulnerable.
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The government has to bail out the banks otherwise it couldn't collect any tax from us. You try collecting tax when someone barters a pound of onions and a can of baked beans for a pint of petrol!
Don't expect the bail out to fix the stock market though. Few firms do well without any customers and the British public has realised it doesn't have any money to spend.
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I'm still very concerned TBH.
Given the scale of RBS's assets (130%+ of UK GDP ?) do they have CDS liabilities at stake ?
With almost 92% of $400 billion dollars of Lehman debt to be recovered from CDS's, then there is Freddie Mac and Frannie Mae, AIG, Fortis, B & B, Hypo Real Estate and the Iceland banks.
I doubt the CDS system has been built to cope with these kind of losses without other companies going bust.
If they go bust then other companies will have to payout and face the same problems.
Will CDS's be triggered for the four big banks ? Who is the CDO for their CDS's ?
If/when we the public gain a stake in these banks what will be our position as regard liabilities in the CDS game ?
Full accounts and liabilites please before commiting to any securities.
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Robert or anyone what about the £650 TRIllION in the futures markets the hedge funds and derivatives markets ??? £250BN is small change to this amount .., what happens when some of these funds fail like LTCM!! have hear nothing in is any Gov going to bale out these sort of funds!!!! I have not read or heard anything about these funds !!##
New thought... 60 million people in the UK.. just give every person £1 million... and create a new way of banking????
Alan
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Can anyone tell me if the actions now being taken by our government - which, with hindsight, could transpire to be reckless in the extreme - will be subject to parliamentary scrutiny? Or is that it? 85% of our GDP now at risk to save the banks.
In the space of weeks, the Labour Party commits the British taxpayer to the most astonishing, unprecedented and fantastic levels of cost, debt and risk all outside of the democratic process. If so, aren't the government's actions verging on riotous? If not riotous now, then perhaps when the chickens come home to roost and widespread penury bites?
Never more than now have we needed The Taxpayers' Alliance. ALL political parties have breached the trust of the British people. From here on, political parties deserve no more than to be hammered from every quarter of society until politicians realise that they can no longer treat citizens as cash machines for their pathetic, self-serving political games. They've lost touch and they need to regain it fast.
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Interestingly the Coutts (private bank of RBS) website "currently has a problem with its service" and is unusable.
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The next crowd to milk this crisis will be the lawyers as those companies with a few bob left in the kitty take on the banks, the FSA and anyone else whom they consider fleeced them of their working capital and profits.
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'I want it, now!' - an imature child's reaction. OK but has not the West permitted the development of a naive culture of acquiring choice assets long before the work has been put in to earn the money required to pay for them. So the credit crunch might just be more positive than we think. A cruel and painful adjustment but may be necessary in our culture if we are sanguine enough to acknowledge it. It is no surprise that french institutions are, so I understand, relatively free of crippling debt because the culture of that country apart from its exquisite wines and seriously smelly, tantalising cheeses, regard debt as a rarity in their society. Credit cards are almost on a par with debit cards. My mother was French. Given that she was never really anglicised, I doubt that she could spell the word 'debt'
I had a hard time!!
It does appear that our financiers and the systems they nurtured over so long have now had their day and it will be very sad if the measures being undertaken do not eradicate from our banking operations the elements of greed and recklessness that have shown their sores regularly over the last 30 years at least to the misery of so many.
We need bankers who understand risk and not just bonuses, who understand when a proposal is not viable and can say. No! and is respected for it.
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keeping your money under a mattress is no use either...because if everybody did this then money would be worthless anyway. eg germany 1920's. all this is great for us mere mortals who have no savings ,pay rent , have a low pay rubbish job.
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Sorry for my third post tonight, but I just realised we are now world leaders in...... rescuing collapsed banks. Is this something we can export, a whole new arm of the (once) booming financial services industry....?
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How about close down the markets for a few days as suggested elsewhere AND close down the reporting and 'breaking' of news.
Just take the air out of the mess for a little while, while the potential solutions have time to take hold.
I dont see how 'breaking' more news stories about this is really in the public good - if all the media were that well informed, why not fuel this alleged transparency much sooner. The time for the breathy 'reveal' is over for the time being. Too much is at stake for this endless media chattering to prompt reactions to the headlines.
bw
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The fractional reserve should be increased to a minimum acceptable figure asap and then steadily increased thereafter.
When we got our first mortgage the maximum we would have been able to obtain was 3x my salary, in the end we got a house for 2.5x my salary - and even then we struggled when interest rates rose. Percentages available just prior to the credit crunch were suicidal madness.
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By the way - whats to become of Crosby and his report eh??? They should quietly dispose of that idea.
Bobby P - find out for us what Crosby thinks of all this - having steered HBOS to this end in large part and for some mysterious reason having been picked as some sort of guru to point teh way for the mortgage markets.
bw
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The story of the proposed merger of the Britannia BS and Co-Operative Financial Services introduced me to the The Building Societies (Funding) and Mutual Societies (Transfers) Act, a piece of proposed legislation of which I was previously ignorant. One of the key tenets of this Act is to allow the remaining mutual societies to borrow a larger proportion of their funding from the wholesale markets. You may like to read that again - I had to, so incredulous was I to see it.
Absolute insanity. Have we not recently seen what happens when building societies leverage up and become reliant upon borrowing from the money markets? Have we already forgotten Northern Rock, Alliance & Leicester, HBOS et al? Or has the government just blithely failed to learn any lessons from it and remains happy to hand out more rope for our remaining solvent financial institutions to hang themselves with?
This bill (or at the very least this portion of it) should be dead in the water now. How anyone can even countenance such a thing is beyond belief. We need our mutual societies to be bastions of financial probity and prudence given the way our banks have let us down so utterly.
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At Lehman CDS auction last week Barclays bought $1,210m, most of it with bids at the the price set by inside market fixing.
Did the UK taxpayers just subsidize this?
I'm not surprised Barclays are having to raise at least £7bn bearing in mind it is the highest leveraged bank in Europe and one with the lowest Tier 1 capital.
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Everybody ready for tomorrow?
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I find it amazing to see postings blaming Thatcher for the sins of today really you either
are paranoid or are living in a parallel universe.
The excesses of borrowings etc are down to the peddling of a belief that interest rates would be forever low so it didn't matter what you borrowed.
On the point of more substance if we are to fund the banks some rationalisation is needed it is not sense to have the govt competing with itself.Also if there is so much money invested in these banks guarantee savings to stop transfers affecting the new structures.I am convinced that many do not know how and when funds are moving intra banks .If you don't know what is happening how can you react.I am not convinced that the next headwinds are being anticipated.The bad debts from credit swaps must be excluded from public liability.For gordon beware the currency impacts of your decisions or you may make us Iceland.
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I?ve just looked at my P60 and didn?t realise that I was paying for a war in Afghanistan (I don?t live there), the NHS (I am never ill) the Olympics (I don?t like sport) and now I have to prop up the Banking system (I barter for everything using acorns)?.etc etc.
I guess when this is over we can all take out our money and keep it in a shoebox, ask our employers to pay us in cash, post it to businesses when we want to buy things over the internet , be patient if there is too much month left at the end of the money and heaven forbid want to buy something we haven?t got enough in our shoebox for - a house, car, holiday, Christmas.
There is no doubt mistakes have been made but the world needs Banks, and right now the Banks need help.
The reward packages the CEO?s gets are eye watering and they will now ?die by the sword? following their mistakes yet to put it in perspective, they get paid less than a top premiership footballer earns for playing on average 90 minutes a week!
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no 83 give everybody 1 million pounds!!!! then money would be worthless that would make zimbabwe look like a stable economy!!! what are our councils doing investing in iceland banks? this whole scenario is the biggest laugh since norman lamontable increased interest rates to 15 per cent in the erm debacle.
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I am confused about the HBOS/ Lloyds TSB deal. I thought HBOS were being rescued by Lloyds TSB. It looks like the Government have beaten them to it. I would think that the Lloyds deal will either melt away or enter very prolonged negotiations.
This also leaves a question on who is running HBOS in the meantime. I have read a report that after the injection of capital tomorrow the Govt will own 75% of HBOS. In normal situations the board of HBOS may consider cost cutting and even the dreaded redundancies. The idea of the Government making redundancies may not be the sort of PR they are looking for.
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Rather than the Thatcher/Reagan era, the seeds of the banks' problems can be traced to the Clinton presidency and its social engineering agenda that required the banks to advance money for housing to those on lower incomes. This gave rise to the "sub-prime" mortgages that are at the root of the current chaos.
And another thing that seems to have been forgotten in this crisis is that the banks were only doing what banks have always done: i.e. borrow short and lend long. Since the implementation of the BIS regulations of the early 1980s banks have been required to keep a minimum of 8% of their balance sheet as equity which, implicitly, means that 92% of their lending is funded by borrowing. If lenders decide to withdraw funds the bank fails. It has always been so.
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19. At 6:27pm on 12 Oct 2008, Buddhaman wrote:
"The Chinese write the word 'crisis' with two characters - 'danger' and 'opportunity'. So what is the danger in this crisis and what is the opportunity?"
This assertion is simply wrong!
Go to http://www.pinyin.info/chinese/crisis.html for an explanation why.
Buddhaman - never let the facts get in the way of a good story, eh?
Jim
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This is sort of off-piste but somebody a day or two ago posted a link to an interesting google video clip by some canadian paul grignon, called money as debt. It goes on for a long time and a lot of it is symantics but the main crux appeared to be that banks can create amounts to loan out using the fractional reserves system, and they can charge interest on these magical new amounts even to the government which is sort of us as well (representing our social will and responsibilty).
Now (contrary to the video i think) theoretically I don't think it really matters how much money there is in the world or what its made out of or called as long as everyone knows whats going on, has trust in its value, and can respond quickly to changes but what does matter is who has what proportion of that money. The people with a lot will always be able to dominate those with a little, and the greater fraction a person or group has the less value there is to go around for everyone else. If banks can levie charges and interest on amounts that have been created as a massive multiple of the amount originally deposited they will eventually possess a greater and greater share of the worlds wealth without having done anything at all to deserve it.
I am not an economist and can not tell if this is complete rubbish! So Mr Preston (or other knowlegeable bloggers) my question is this: Is there any practical difference between the fractional reserve system and banks actually creating new amounts to loan and make money off? This seems insane, maybe i have mis-interpreted the video or it is wrong? If it *is* true now the banks are owned partly by us we can stop banks charging for this ideocy and only charge for opportunity costs and risk on already existing cash? There was lots of high profile quotes at the end of the vid which appeared to corroborate the videos theme, maybe these are out of context? One thing seems clear that economics should be on the school syllabus :-/
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Assuming the RBS details are correct, it looks like a case of from one fat cat to another. If I recall correctly didn't Steven Hester walk away with several million whilst presiding over the Abbey sell off and subsequent bail out to Santander?? How much will he get for his role at RBS one wonders!!!
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#90 whats happened to the free market then? close everything down!!!! isnt that what karl marx wanted?
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These people have made Nick Leeson look like Warren Buffett.
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Vince Cable for King anybody?
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what a failure of regulation...how could barclays be trying to buy all of lehmans just a few weeks ago, and now require £7bn of capital?? wasn't anyone saying "you just havent got the capital to make an acquisition"?.
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re 83 & 98 the £1 miilion to everybody was a joke but the serious part was the £650 Trillion in the other markets
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quote RP: "What a sorry end to Britain's longest ever period of unbroken economic growth".
That depends on one's definition of economic growth. If gambling and shoving around money is an economic achievement, then robbing a bank could also be considered as such.
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Hm. When OFSTED conclude that a number of schools are "failing" and either rescued or closed down, do we conclude that to be the death of comprehensive education?
Some banks are failing; some aren't. Fewer would be failing if not for the EU's intrusive regulation forcing them to undervalue their assets (the same regulation which trashed my work pension, incidentally). And fewer still would be failing if not for a decade of Government-induced debt-dependency on all sides.
I'd also have to note that describing "borrowing beyond your means" as Thatcherism is a total absurdity. What we're actually seeing is Brownism in the form of overborrowing abusing the freedoms that Thatcherism had provided. So let's hope that this is indeed the death of Brownmism!
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And further, are we all ready for Mr Peston's sensational report on tomorrow's 10 o'clock news?
Sensationalism does not help!!!
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re 98
youir local councils "invested" in the Iceland banking system is because they were offering interest rate s of over 11% (i11 percent)
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Just to remind those celebrating the possible nationalisation of the banking system.
It would make a socialist government the most agressive bailiff and debt collector of all time.
The taxpayer would be funding the repossesiion of homes and personal belongings of those unfortunate people who lose their jobs through no fault of their own
It could be your home and your possessions.
Think about it.
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Since the US markets will be closed tomorrow thanks to Cristobal Colon's hyperactivity, this will be a real referendum on Brown's credibility with the un-Bushed segment of world leadership.
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Why did not RBS sell assets and contract to pre NatWest?
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#94
So where did they get the money to buy USA chunk of Lehmans? I think they should sell this (and other non-core businesses, non-uk businesses and some building assets) before coming to UK taxpayers
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no 105 - well maybe Karl was right all along.
Heck, what a turn up......
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What a day. Edmund Conway, Economics Editor writing in the Sunday Telegraph says that judgement hour for the world economy will be 1-00am tomorrow morning when the Tokyo market opens. Sorry Edmund but nobody seems to have told you that tomorrow is a public holiday in Japan. Shurley some mistake. So judgement may be postponed on Mother Browns brilliant decisions back in 1997. No wonder Tubby Isaacs looked distraught this afternoon. Apparently Ally D had called to cancel his lunch reservation because Mother Brown had been summoned to the other side of the Manche. Still that is the strength of our Gordon always leading from behind. By the time he hits Europe the Brit taxpayer will be no wiser about the true state of the nations banks. Enron accounting methods in the public accounts have left Mother B high and dry. Trying to fix this mess will require more than a plate of jellied eels and a compliant BBC. Stop press. Newsnight will be looking at the situation tomorrow night with a view to exposing what went wrong. No doubt Mother B will not be making a Cameo from the other side of the Manche. Will Paxman be talking to anyone from Moodys or Standard and Poors? Will the FSA get its full credit for its outstanding contribution? Will Mother B be in the frame. Tubby waits with baited breath.
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RP, what benefits are there of your continual leaking of price sensitive information, in the most volatile market in living memory?
Appreciate it's making you a minor celebrity and will no doubt sell your book, but it must be frustrating for those trying to steer us through this crisis.
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No mishtake things are grim.
A friend of mine was a top Seargent in the British Army. A private under his command had bored with soldiering and was determined to quit. He became disobedient and troublesome whilst his request to leave was being processed.
The Seargent went to his Commanding Officer and said, "Look, every day I put on this uniform, you put on that one. I salute you and call you sir. The men respect my authority and do what I tell them. But it is all a game. It only works so long as we all agree to play soldiers. He doesn't want to play anymore. Punishing him is irrelevant. He just does not care. Let's just get him out of here before he infects everyone else."
The soldier was gone an hour later.
The upshot of this bank deal is complete capitulation to 'moral hazard'. The prudent are punished alongside the imprudent.
This risks serious civil disobedience from disgruntled citizens. Why should they each accept a £16k debt burden to bail out greedy bankers and incompetent leaders? Why should they quietly acquiesce to something so patently unfair?
What happens when the chav's start wheeling trolley loads of groceries out of Tesco's without paying? Health and Safety means that Tesco employees can not even try and stop thieves - and why should they - so who is going to keep order?
Just as there is not enough money in the world to settle the banks black hole there are not enough Police or Soldiers to enforce civil obedience. It is a construct on which we choose to agree.
The banks have shown us what happens when that construct evaporates.
Just like the army and the banking system we live in a construct which works only so long as we all agree it does. This deal is so big and so bad for individual citizens I wonder if they will bear it. If they do not we are buggered!
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As a non-expert on financial matters, I would appreciate
it if someone in the know could illuminate
exactly what is meant when enormous figures
are bandied about for the size of the CDS
market.
Are we talking about the "market value" of
these swaps, and if so, what kind of linkage
is there from that market to other financial
markets?
If the CDS market melts down, does this mean
that there will have to be new way invented
to insure bonds?
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I disagree re Thatcherism. There was so much more to it. Destroying Union power and ending mass nationalisation, even with the banks creeping back in no one (not even GB) thinks it will be anything other than temporary.
Still, this solution will take time to work through and we are still in for a tough week in the markets.
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Can't items currently "off balance sheet" and hence conveniently invisible to us be declared on banks' balance sheets in some way, for example as "dodgy assets" on the one side balanced for convenience's sake with "potential liabilities" on the other?
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We're entering deflationary times just at the point that the banking system is grossly exposed to debt. No matter how much money you pump into the banking system, debt will become less easy to pay. 12 months from now with inflation falling fast below 1%, base rates at 3%, mortgage market still at 5%, unemployment up 750k, house prices still falling, what will the MPC do? What will Gordon Brown do? Will he tell us that deflation is good?
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Perhaps it will finally convince those who would not believe at the time of that woman, that capitalism is fundamentally flawed.
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In response to Nick Leeson, I think he was unlucky. he was ahead of his time!
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My feeling is that the Governments are going to have to declare CDS's wagers and hence voidable. The contracts are really insurance policies and have been set up by people who do not know insurance principles. (Companies have insured substantially more than their assets)
Failure to do so will just allow this chain reaction of debt forcing debt to continue so we have basically to cauterise it before the whole pack of dominoes falls.
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I have read that some people hold your Today programme interview on the morning of October 7 as the cause of the run on RBS shares on that day.
The issue was whether RBS had sought recapitilisation from the BoE over the previous weekend.
You said they had.
Their RNS announcement at 1pm on October 7th said they had not.
Care to comment?
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"73. At 7:32pm on 12 Oct 2008, mrmosky wrote:
This crisis is great so far. Fuel prices are tumbling, mortgage rates are falling. Prices of houses and eveything else will soon follow."
Funnily enough, that's what deflation does. It reverses inflation... It makes those who earn cash; ordinary people without many assets, the poor, the retired etc relatively wealthier than they were...
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It does seems that Michael Foot and the Old Labour Left were after all broadly correct. If a company is so crucial to the economy that we cannot afford to allow it to succumb when hit by competitive forces then it should be nationalised. Privatisation coupled with strict state regulation is unnecessarily complicated. Smaller companies ? cafes small shops etc ? are regulated quite effectively by competition. Natural monopolies of essential services, however, cannot be so regulated. As has happened with the banks, it seems sensible to take them into public ownership and stop messing about.
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quote RP: "What a sorry end to Britain's longest ever period of unbroken economic growth".
The debt-economy can only continue to function if there is growth ... unlimited growth requiring more and more, ie unlimited resources. Oops! It's more or less a pyramid scheme.
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I don't know how the government can keep track of all the liabilities it is stacking up. What is the agenda next weekend? They need 5 days when bank shares are not traded and silence on statements so they can all get their ducks in a row.
The taxpayer looks as though he could be wiped out.
Two suggestions to help taxpayer
1 Solidarity tax for all those who earned over say£k500 last tax year and who almost by definition benefited in the financial bonanza/scam.
2 Close down countries operating as tax havens. No country should accept payments to or from these tax havens. Give one year notice. Is it not time to stop being "soft".
We still seem to be blaiming the Americans for starting all this. But where were Brown and Co these last ten years. Please don't blame Margaret Thatcher. You can agree or disagree with her but Freedom to Trade did not mean with no rules. It was not she who kept taking money from the East and lending it out at low rates to people who could not afford it. The whole supervisory framework was too weak to understand what was going on.
Instead of micromanaging the finances they should ,as directors of Britain plc., been looking ahead. Brown needs to accept responsibility and once the immediate mess is sorted he should follow the boss of Royal Bank of Scotland. He was a member of the Blair Cabinet who lied about Iraq - how much has this cost us compared to the bank bail out? He sold gold at the bottom? He couldnt understand the 10% issue etc etc. -and whilst I am on, and angry why don't we have a truly progressive tax system fit for this century which avoids these big hikes of
20% from one pound to the next. Particularly unfair on the low paid. - and why should the taxpayer bail out those who put in over £50k into foreign banks. Just what rules are we operating to?
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Perhaps one needs a different style of banking - Islamic? Lessen the debt and the interest in a selfish society. I think the banks now should consider dealing with customers/public with ethics and responsibility. Barclays has been mean and unthical ( in my case) and I think that now there has to be whole new paradigm shift.
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Interesting comments about this being the end of the Thatcher era (and this from someone who has some doubts about RP's comments and is a card-carrying Conservative). It's dangerous to make sweeping judgements on the basis of passing events. The likely outcome of the current problems is probably going to be better than we fear (1929 and all that) but not as good as we might hope (business as usual). In short a recession - probably not that deep but quite prolonged. Think of Japan in the 1990s.
I do think RP is right that we may be coming to the end of a thirty year political-economic cycle. I have lost count of the number of my conservative (small and large C) friends who have now come to realise that the forces of unbridled City-style capitalism is not entirely on their side. It never was of course. Even Margaret Thatcher herself had a social agenda that owed very little to laisser-faire! There does now seem to be real anger against the so-called spivs (though in fairness they were mostly pursuing share-holder value and many of us through our pensions our shareholders).
I left what is usually regarded as one of our 'elite universities' twenty years ago - and many of my peers now earn perhaps twenty times what I do (and I am a by no means badly-paid public servant!). The problem is that their world has become so far-removed from ordinary experience - the world where £10,000 takes a lot of saving - that they are quite literally out of touch with the ordinary world. And that is dangerous.
I do think RP has at times been a bit too bleak in his reporting. But focusing on how the current scare is likely to lead to major long-term changes in the zeitgeist is spot on.
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The doom and gloom of Mr Peston's blog's and his observations on the banking sector never cease to amaze me.
Everyone suddenly seems to forget too the amount of money that RBS, HBOS, Barclay's etc have paid in tax to the government in the past few years far exceeds the predicted request for equity investment.
Perhaps the BBC need to re-think their coverage of this "crisis" - I have been repeatedly shocked by the predictions and observations (not just in this blog) of so - called experts that are more on the side of tabloid scare-mongering than responsible and mature reporting.
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no 103 floatingpenguin -
Your point about economics on the school curriculum is a good one and one that I agree with. However, I studied A level economics 1989-90 and as a result have been inclined to live a near zero debt and "frugal" life ever since. I can't say it's served me this way or that (I'll still have to pay the tax for all this), but the point is that my education prevented me from willingly inviting servitude, and I don't believe that the powers that be are going to educate the population at large to do likewise. It's not in their interest.
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Robert you are a voice of sanity in all this madness. But please try and remember your spell checker!
My point:
As a small businessman I take my reward when deals generate a profit. Not for doing the deal itself. In future UK bankers need to be incentivised on this basis.
Perhaps salaries in this sector will reflect it's true value to society. Essential? Yes of course. like ... er....Nurses.
Ongoing, as we recover from this mess, we need a risk averse, organic growth culture.
Just run this through a spell checker - took 10 seconds!
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#75
The government should be directly helping people who are about to lose their homes/businesses/farms. The banks won't.
I would not have though it would cost that much to set up a direct Loans scheme.
Instead perhaps GBrown will force the banks to set aside an amount to help those who lose their jobs and can't afford to pay their mortgages. And whilst he's at it he can stop the banks from massively increasing the interest on loans to businesses.
But by the look of things those who are going to suffer are the 'ordinary people'.
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Could Rob please explain why the markets won't have the same catastrophic loss of confidence in nation states as they have had in banks?
Why should HM Government fare any better with the toxic debts of the banks than the banks themselves?
Also they are still only treating symptoms - illiquidity and toxic debt are by-products of 15% inflation for 30 years or more. Just because it hasn't been measured as such does not mean it isn't the case.
The assets are massively overvalued and this crash will last until property values plummet past their historic average of 2.5x income to probably about double average income before trundling up again. I hope that worst case scenario is envisaged - divide current property prices by 4 or 5 to get final value. Then we will be past the first stage of this crisis and into the real economic problems.
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It's about the BBC started to report news as it happens... not before.
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#125 - inflation below 1%?
Frankly I can't see public sector workers settling for rises of less than 1%. What we're heading for is lot's of inflation and that will get rid of the debt quite quickly - like back in the 70's.
Also the pound in your pocket will be allowed to sink helping to put up import prices. So you'll have to buy British. But, oh dear, we don't make anything anymore.
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37. As the Brown decade solidifies you could be right.
Wonder when the first class action against those in charge will be initiated?
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""It was Margaret Thatcher who in a series of bold reforms from 1979 onwards gave the City the freedom to trade in everything and anything.""
Sorry Robert but it was not Maggie who took away the B of E responsibility to monitor the clearing banks, but one Gordon Brown!!
He gave it to the FSA, who have apparently done precious little except oversee the biggest explosion of debt we have ever witnessed in living memory, without using any of the powers they have to ensure that stability and security are maintained.
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#140
Broon or a banker?
I wouldn't trust either, but the bankers edge it!
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Apart from the FSA and other regulators in this sorry debacle, just what was it in the assessments of those famous toxic loans that made the banks buy them in the first place? Were they AAA rated by Moody's or someone? We need a root and branch revue of risk assessment.
I suspect many loans were bought on a recursive progression of over-optimistic evaluations. At the basis is likely to be a combination of guesswork, hubris and lies.
Not until we have full transparency and a proper risk assessment, based on probabilistic evidence that in turn requires a full model of the world financial system, will banks be confident about either purchasing products from other banks or lending money to other banks.
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My next door neighbour is a senior manager in Llods TSB. I heard him laughing today.
Now I know for sure that something is seriously wrong.
Where do I get the £1m being discussed in previous posts and can I have it in £1-notes. I will need some fuel to keep me warm this winter.
At least the price of gas and petrol will be back to their 2007 levels soon with the decrease in the cost of a barrel of black stuff. Gas price is linked to the price of oil, isn't it. Why have the energy companies suddenly gone quiet.
You gorra laugh. My neighbour is. Isn't he?
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I think RP is right about the end of Thatcherism, but that does not mean Thatcherism was bad. Up until 1979 we lived in a command economy.
As a child I remember all these great institutions - all hugely inefficient and loss making. Everyone knew that their time was up, she was the woman that privatised most of them - to the great benefit of us all.
Thatcher did a tough job well and we should not judge her in a changed world.
PLEASE POST ANY I MISSED!
British Rail
British Telecom
British Airways
British Steel
British Leyland
British Petroleum
British Broadcasting Corporation
British Aerospace
British Gas
National Coal Board
Central Electricity Generating Board
Water Board
The Royal Mail
Her Majesty's Stationery Office
London Transport
Ordnance Survey
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#48
Absolutely.
And British banks unlike Icelandic banks did not offer eye watering runs. I have long taken the view they were too good to be true. It looks now as though we careful savers will pick uo the tab.
In all of this Balance of Payments does not get a mention. Is this a part of the day of reckoning as far as this country is concerned. the Far East will cut down on investment so the Balance of Payments deficit will become critical??
We are on our way to much lower living standards?
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An important point made in RP's blog. Just as the arrival of Mrs T in 1979 marked the end of the post war concensus and the shift away from maintaining employment and economic growth at all costs, the events of the past few weeks mark an end to the Thatcherite free market ideal that has characterised the last 3 decades. Governments around the world are now being forced to intervene in an unprecedented fashion to sort out this terrible mess and the rhetoric coming from politicians now seems more in line with the language of that post war period again.
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I am puzzled about Lloyds TSB, I thought they were supposed to be one of our more prudent and well managed banks and thus capable of taking on HBOS. Oh well - Gordon Brown paraded his "prudence" when Chancellor and look where that got us - with a nice big black hole in the nation's finances!
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What a shambles.
Not wild to hear the treasury acting like a bank and saying - here you go you need twice as much, you can afford it, to Barclays, that sounds like a bank talking not a treasury.
What exactly were Barclays doing on the aquisition trail in the US a matter of days ago and then coming around begging for taxpayer money. If these banks cannot function without taxpayer money than it is about time some difficult questions were answered honestly by the banks.
With the banks reputation in shreds who is going to rush to borrow from them, let alone deposit.
Just where does the government expect economic growth to come from now that the City is castrated. They have repeatedly pointed to the city as the economic saviour. There certainly is no manufacturing left to speak of, what is the next brilliant idea, the Great Britannia theme park for tourists.
Technology has not exactly been well funded under this or previous governments. It is telling that the government has refused to help with the vital next generation internet infrastructure, that has to be funded privately so it will be uneven in implementation and a botched job. I do not think the government has a damn clue.
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Robert I have heard a rumour that you are going to appear on the next celebrity big brother, is this correct?
So whats next: Pop Idol? The Jungle?
Congratulations on making a name for yourself.
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This no more means the death of Thatcherism than the banning of "tombstoning" means the end of trips to the seaside.
The banks have been (and have been allowed to be) incredibly foolish and lent far too much to the wrong people.
But regulated free markets and free trade (wholly consistent with "Thatcherism") will remain the cornerstone of our future prosperity. Your hyperbolic claim is patently absurd.
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Does anyone in Scotland need to know where they can get Bank of England notes out of an ATM?
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What a good week for Gordon Brown and his team and I think they should get applause. They said they would do what it takes and they have done that so far. I think the equity markets will continue to slide but LIBOR will ease a bit now and a fair bit by the end of the week. We then need to see what can be done to kick start some investment in housing and hard infrastructure. Also I have no doubt that there will be some nasties this week too- it is clear that too many businesses were operating at the edge- often under pressure from shareholders. I suspect we need to rip up all check lists- start with some general principles and then put in place governance reporting to ensure business acts responsibly- interesting they were already supposed to report on KPIs and risks but how wrong many of them must have been. Gordon and his team have been brave with this crisis so far- let us see them be brave with putting right some of the big wrongs of the past 30 years of Thatcherite Blairism.
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Re 129 - this is really a question of semantics. Whether the banks went cap in hand to Darling and asked for cash (which they deny) or were summoned there and told to stop burying their heads in the sand and let the government re-capitalise them is really academic. This move was inevitable as anyone who works in finance would have been able to tell you weeks ago. What I would love to see is the transcript of the conversation between the FSA/treasury and Barclay's Diamond Bob where they told him to recapitalise - after he had gone and bought Lehman's US operations when the FSA were angling for them to help shore up UK operations like HBOS. If the language wasn't choice to some degree then the FSA/treasury representatives must be a lot more circumspect than I.
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This comment was removed because the moderators found it broke the House Rules.
I can't help but feel a little smug that the British banks are going cap in hand to the gov't after the way they Icelandic banks were annihilated in the British press last week for doing pretty much the same things the British banks have been doing: making money out of nothing due to cheap credit facilities made freely available.
The difference being the British government has the financial clout to bail them out without bankrupting the nation (one would hope....) and the Icelandic gov't chose not to attempt this at the risk of bankrupting the nation but now GBrown & his cronies are trying to do exactly that anyway. To use British terror laws to get their way is simply disgusting. I remember the outcry when the US did that to the NatWest 3 to have them extradicted to the US, well now the British Gov't is just as dispicable
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Hot off the press;
BBC Quote:
European leaders meeting in Paris have agreed a plan to tackle the banking crisis, saying no big institution will be allowed to fail.
End quote.
Please oh please define ' big '.
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Northern Rock is having to make itself uncompetitive so that it doesn't out compete private banks. Thus nationalised banks are able to outcompete privatised banks. Why then have privatised banks at all? We should nationalise the entire banking system once and for all, and make the banking system work for the all the people rather than for profits for the rich.
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HSBC recently made a statement to the stock exchange regarding their liquidity and level of capitalisation :
They stated that they were in a position of strength and had more deposits than loans.
People talk about the fractional reserve system, but the HSBC statement seems to imply they are above that rule base.
HSBC will also adhere to the UK Government's demands to keep cash on hand and will finance the cash levels themselves - with no need to ask the tax payer to buy their stock.
Also, HSBC stated on Oct 9th that they have been lending over $4B to the interbank markets in the last 3 days.. now that is a bank in a strong position surely..
So not all banks are circling the drain of debt like Barclays, RBS, HBOS, etc
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Would this be a good time to peg the Pound to the Euro? I have not noticed anyone discussing the merits of consolidating with the rest of the European Union and joining the Euro Zone. Surely Europe, and the UK by association, would be stronger with one unified currency.
I can't imagine a better, easier, time to do this, as the UK could include pegging the pound to the Euro as part of a European EMERGENCY package, avoiding the messy business of having a referendum.
It has to happen sometime, so why not now when it can only benefit the economy! Well it can't make it worse - can it?
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Quatermass_economics (#67) poses the right question but draws an optimistic conclusion. Average UK house prices will have to fall well below the £150K he claims.
Following the banking catastrophe, there is no chance whatsoever of _reputable_ banks lending a couple three times their _joint_ salaries. We're heading back to the sixties when mortgages were issued by building societies who knew what they were doing.
Then, a creditworthy _married_ couple, each with a good job with a reputable company, could get a mortgage of about 3.5 times the husband's verifiable salary, on three cast iron conditions: the principal was less than 80% of the market value of the property; the lender's own survey of the property was favourable; and the monthly repayments were not more than 30% of the husband's after-tax monthly income. And at that time, mortgage interest was tax-deductible!
In the UK, on average, house prices must somehow fall to about £105K for the housing and mortgage markets to make any sense at all in future. The grim prospect of recession and of painfully higher taxes to pay for the massive bank bail out merely reinforces the certainty of such stringent future lending terms.
Owing to the endowment effect alone, this will be a painful and drawn-out market adjustment. And I agree: it sounds impossible, ridiculous even. But who would ever have believed that a major part of the banking industry would fall flat on its face?
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#105, #118
I do not think that Karl Marx's view of the future was to believe that Capitalism should be 'closed down', more accurately I recall from my limited reading - perhaps that its inbuilt contradictions would inevitably lead to its own collapse, but Marxism was (and is) not nihilistic at its core and I believe that it is unfair to characterise it so.
Indeed, it is an interesting (academic) study to compare and contrast the 'progress' of capitalism as Marx foresaw it developing, and the subsequent realities. One thing that is fairly uncontroversial to observe is that Marx did perceive some of the drawbacks of the capitalist model of his day and some of these same drawbacks have led to the collapse we are witnessing.
I do not think it is at all possible to use any from of warped reasoning to say that Karl Marx had any role in the destruction of the capitalist model we are living through, unlike Margaret Thatcher or Ronald Regan!
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#128- weejonnie:
"My feeling is that the Governments are going to have to declare CDS's wagers and hence voidable. The contracts are really insurance policies ..."
Declaring them to be insurance policies would be a good start - at least they would be regulated in some way. Not that the insurance industry is a shining example of how to do things.
But we know that really this is gambling - and the people doing it don't even need to risk their own money.
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No 'real' explanations to the public about this, it is all happening way too fast.
The commitment is staggering and I for one feel like we the public are being rushed way to much.
Like the lack of a referendum, years of bad policy/lack of vision, I have been worried how the government has been spending money to curtail our freedoms.
All these things and more mean I have no confidence in any politician.
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How very BBC to manage somehow to connect it all to Mrs Thatcher.
Gordon Brown has been in control of the economy for the last 11 years. Those are the years in which the banks got it to this mess.
Why do you (and the BBC generally) never challenge him on this sort of issue?
You might ask him (for instance) whether current events:
1) show that his changed regime for oversight of banks was a disasterous idea?
2) show that his making independent of the Bank of England with a remit only to consider the inflation figure was a poor idea?
3) show that his bragging about record periods of sustained growth and an "end to boom and bust" was self-serving wishful thinking?
4) show that he will go down in history as the chancellor that led us at breakneck speed in to a dreadful depression?
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The FSA has a requirement to ensure stable markets. Sants must be asked to resign. Unfortunate, but then Tiner got away just in time.
Why is the taxpayer paying £320m for the 'regulator' when they couldn't even spot a giant mammoth falling from the sky? Why have they got a final salary pension scheme if they are not officially part of the civil service?
They are clearly 'not fit for purpose', with cataclysmic results. Last year the FSA paid its staff £14 million in bonuses - please can someone ask for the money back? Like the banks, clearly the job was NOT done satisfactorily. This is appalling, inept and the lack of ownership of responsibility is utterly pathetic.
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"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.
When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.
You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true,
gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!
You are a den of vipers and thieves."
(Andrew Jackson, 1767-1845, 7th US President, when forcing the closure
of the Second Bank of the US in 1836 by revoking its charter)
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We have heard the government and the city saying
a)enormous salaries are required to keep talent in this country.
b) if we raise top level taxes these people will go abroad.
Can we now safely wave these people goodbye and employ people whos salaries bear some sort of relationship to those of ordinary mortals?
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another small comment.
Thjs injection, based as it is on the worst-case economic scenario, seems to exclude the CDS etc scenario where there is, literally, trillions of liability out there which, is everything goes the wrong way, might lead to apocalyptic reemptions. Barclays, in particular through Bob Diamond's egomanical expansionism is very very exposed.
Good luck Kingman, Scholar King et al.
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"163. At 8:54pm on 12 Oct 2008, arthurjohn7 wrote:
Would this be a good time to peg the Pound to the Euro? "
On the contrary - thank God we still have the Bank of England!
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121 drew lg
I think you are spot on fella.
Having talked to a fair number of unemployed youngsters over the years I was left feeling that some of the problem is that they feel totally disenfranchised from society, they do not feel that they stand any chance of sharing in the benefits society can provide. They understandably say why should I play the Mans game when it know no good will come from it for me.
We know have had fear marketed to push events through, next will be anger. But the group affected will not be the already unemployed young, it will be the middle class, the middle aged, the pension pot holder, the houseowner. A whole new sector of society will start to feel disenfranchised and angry and sullen. It does not bode well. People play the game as long as they benefit, otherwise they lose interest.
I am sure there will be recovery whatever that word means, the difference will be in the mindset of the public. The game could take some time to play out.
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Something I don't understand here and it makes me believe the major shareholders at RBS haven't really taken on board yet that the world has changed..
If Fred Goodwin does go why exactly would they replace him with what would appear to be a carbon copy of Goodwin in the shape of Stephen Hester?
Surely it's now clear that bankers or indeed anyone from the bean counting establishment should not be allowed to run anything..
Shareholders must understand surely that the people no longer trust bankers or anyone involved in the financial services sector.
Read this and be horrified...
http://business.timesonline.co.uk/tol/business/article1290133.ece
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One other interesting this week was the UK government seizing Iceland's bank assets in the UK using anti-terror legislation. The laws that would "...only be used in extremis when the security of the state was threatened by terrorists."
Difficult to see how Iceland met that test.
Anybody who thinks comparing the UK (since the passage of the Criminal Justice & Civil Contingencies bills) with Nazi Germany is excessive needs to read a little history...
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Further to my earlier post I have just checked my TV Licence as well (yes, it?s an admin night) and discovered that I actually pay some of Robert Peston?s Salary!?
Linking posts 120, 129 and 141 together, as someone who pays his wages I?d like more impartial and less sensationalist ?I told you so? reporting.
I doubt smugness was a desired quality in the WW1 trenches.
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Re#112 - yes lets see how excited Mr P is at 10pm. Unbearable I suspect.
Post #97 shreddex makes some very valid points.
The people who claim it is their (tax payers) money and they therefore should be able to choose how it is spent, should enter the real world. Using that argument, as BBC license payers, we should also be able to control our business editors from irresponsible journalism and over sensationalising stories merely to boost their own pofile and dare I say, over inflated egos.
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"23. At 6:30pm on 12 Oct 2008, londonko wrote:
"What a sorry end to Britain's longest ever period of unbroken economic growth."
It wasn't 'real' economic growth, though, was it? It was credit-fuelled speculation, politically-driven, and now it is the ordinary taxpayer and future generations who have to foot the bill."
ALL growth is credit fuelled speculation... There is no difference.
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I listened to Nassim Nicholas Taleb on the television the other night. He was advocating that we abolish VaR as a precursor to getting the banking system back on the road. But I wonder, was this whole banking catastrophe so unpredictable: lying on mortgage applications, an assumption of ever increasing property prices and low interest rates, then "engineered" into instruments that left no-one able to track their exposure. Was this a black swan, or simply a case of the emperor's new clothes: no-one dared to say "look: its tosh!"
I remain of the view that risk management that is done out of cultural context and without a business context - which seems to have been the case here - is worse than useless.
Is it time that the math models and spreadheets are put away (per Taleb), or simply subordinated to a more holistic view of risk which many of us have already promulgated? Perhaps what is really needed is an infusion of new DNA into the financial services sector which is not blinded by the numbers, not burdened by the past bagage. But then, on the other hand will they be able to pay enough to attract such people???
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Re Thatcher and privatisation:
It is worth noting that in the days when I had to pay attention to such things CGBR always exceeded PSBR. The nationalised industries were net repayers.
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This City Minister Myners who is going to control compensation - is this the same man who reputedly made £30 million pounds managing funds?? Wasnt he actually a director of Natwest Bank a few years ago????
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If the FSA is responsible for deciding how much the banks need heaven help us. They have already demonstrated itis not fit for purpose - why not let the Bank of England take the responsibility?
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With reference to the end of Thatcherism, which I had understood was killed off 10 years ago. Isn't there a danger that you are buying into the current spin about the failure of capitalism and the rebirth of socialism, which is obviously politically expedient, when the reality has been the failure of 70s style tax and spend along with unsustainable growth generated by artificially low interest rates maintained by political interference in the method for calculation of inflation. Maybe its champagne socialism that's endangered!
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I have been watching this financial fiasco fo over a week nowand almost got sucked into the idea of the systems salvation
Now I have had a moment of clarity
This is all madness. Vast sums of taxpayers money are being spent catching the proverbail after a 'falling knife'
If the governement wants a bank or two why not
- Let the current bunch of bungling cowboys go to the wall.
-Stick the 100billion or so into setting up a series of new state financed banks.
use the B & B and Northern rock base to make an immediate start to trading.
Within a few weeks all the deposits which the Government are now claiming to guarantee would rapidly migrate to the new 'safe' banks which could lend from a safe capital ratio. They could also be staffed by well, but not ludicrously paid staff and the taxpayer would not be saddled with what will eventually amount to billions of pounds of toxic waste.
Once they have a stable business they can privatise it and cover the cost, or most of it
In the meantime those that deserve to perish will do so.
Why is there no counter argument to the current initiatives - we are all being enouraged to join a mindless stampede in the wrong direction
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End of Thatcherism? I hope not. It is not Thatcherism that allowed the banks to trade in sub prime mortgages and derivatives of these; that was the incompetence of the Boards of the banks who have ruined their businesses and breached their responsibilities to their shareholders. She would have let Northern Rock go to the wall thus dumping the entire Board.
What I do not understand is why the auditors did not spot what was going on. Surely they must have known.
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#61
You forget who put in place the basic fiscal system that the UK, and now much of the world, has been using for the 25 - 30 years - Thatcher. Perhaps you are to young to remember pre-Thatcher history, I expect that many a City whizz-kid is to young to remember such times, heck some starting out probably don't even remember when Thatcher herself was Prime Minister - the self same PM who shut down the real wealth creating economy of the UK, our medium and heavy industry...
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Where does the blame lie??
More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism.
Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying.
Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn't budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC "took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West," Cooper says.
http://www.msnbc.msn.com/id/27121535/
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120 Your another one of these people who should better go and live in a country where the freedom of press doesn't exist. If someone reports events of public interest, then that is not called leaking of information but journalism. In fact it is the only journalism that deserves to exist. Reporting which celebrity was in bed with god-knows whom, that is pointless leaking of information the public should not even ask for.
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I don't think anyone is sad to see the back of either HBOS or RBS as private sector banks, both had an awful reputation with personal customers up North. There were rumours some time ago that RBS paid its staff in accordance with the amount of overdraft charges collected, if not directly then it was implicit in the model used. If this is the case then Sir Fred deserves to be fired, not made to resign, be striped of his bonuses and Knighthood then sent packing. We do not need such people running key parts of our economy.
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At 9:00pm on 12 Oct 2008, crowdedisland wrote:
"Would this be a good time to peg the Pound to the Euro? "
On the contrary - thank God we still have the Bank of England!
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Why would we not have a 'Bank of England' if in the Euro? Our institutional financial base would surely be strengthened and London's role as a financial hub secured with the strength of a unified European currency.
The Euro and the Pound are just about converged now so why not peg it before the pound falls BELOW the Euro?
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Seems to an ignorant fool like me that Robert Peston gets a direct line to breaking info from Downing Street, in return for blaming the whole mess on Margeret Thatcher.
Seems to me....The BBC has been breached and corrupted !!!
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Now the next challenge for the FSA and BoE will be to ensure these banks provide full transparency.
I was involved in a bid for a fringe business on the balance sheet of one of these banks and when applying a simple discounted-cash-flow (DCF) model we found that the value was only 2/3rd of the book value. We bid on basis of the generous DCF, not on basis of mark-to-market.
Nevetheless the bank decided not to sell the business, probably in order not to show the loss.
The FSA and BoE have a huge amount of work ahead of them.
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It is with a distinct sense of schedenfraude that at the same time I find myself gloating over the end of Thatcherism (and glory at the sight of all of the old Tories on RP's HYS going purple with rage as the chickens come home to roost and they try and blame everyone else but the cause), I have a feeling of dread deep in my bones for what is almost certainly to follow. If there was ever a good reason to remember where the Tories ultimately got us this is it; remember that when the stories of breadwinners losing their homes, their families, their souls and their futures start appearing in the media. I wonder if the old guard will bluster so much then?
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As an investor who has lost tens of thousands of pounds in banks and other shares - I feel at least qualified to make a comment!
Many blame the banking executives for the current crises. As an accountant, I know only too well that an apparently 'well financed and profitable business' can very quickly turn into something else when confidence dries up.
If banks had run their businesses and only lent on terms that would have totally avoided the current crises, then the average person would not have been able to buy that new shiny car or move up the street. There was never enough savings to allow us to borrow what we wanted and without wholesale funds, we would all be on waiting lists trying to get loans or saving for years to get what we want. Perhaps that would be a good think - who knows.
Are the bankers to blame for supplying us with credit that we all wanted and demanded? Sure, they might have taken a moral high ground and said no but any bank that did that would have gone out of business years ago or been taken over by another as profits would have been poor.
Investors would not have wanted that, the majority of borrowers would not have wanted that. The Treasury have been happy to take the profits made in recent years from this 'reckless' lending. Is it not a case that they are simply now being asked to give back something that they should not have had in the first place?
No one is blameless in this crisis and the quicker we accept that and get on with solving the problem the better. As a policitican said last week, we don't argue about who sank the ship and then send out the lifeboat. Let us sort out the problems now and consider what can be done better another time.
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It seems everyone is the expert these days!
I am not sure that this is anywhere near over, in fact the partial nationalisation of the banks will be restrictive in ALL senses. Therefore the economy will ultimately suffer, again.
And what of the other dirty laundry that has yet to have it's public washing?
The current outgoing UK government's and its handling of this mess?
Let's see what folleys are exposed in the coming months!
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All I think at the moment is that the EU needs to put in place all the logistics quickly. Yes...100's millions will be mis-spent...but the system will be given a chance to save itself.
It will be interesting to see how they apportion the bill.
Also interesting how they can quickly change the accounting standards...that's a massive amount of work.
Cowen and Ireland were right and fast. 2 weeks ahead of the game Now Europe has had to follow. SECPAC is next, then South America...then California and the rest of the US (under the guise of the final details of the 700b package).
Why all them? Competitive advantage demands it. Its global baby...(in an Austin Powers voice).
Sorry for the lone nations or those without natural resources such as oil.
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Ah. It is all clear now. The real cunning part of the Red Party Brown's plan.
Nationalise the banks then give them all to the Blue Party's supporters.
Brilliant.
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#171
They use the same argument at the BBC regarding woss.
I presume the BBC would broadcast a blank screen if woss defected to other side, died or retired or got fed up counting his money. Just like the BBC talent gets replaced when its no longer available so with top bankers and footballers. Much talent stays too long and gets paid too much particularly at FSA, auditors and the banks.
If performance-related pay were introduced, politicians like Blair, Broon and Darling would nominally be paid a lot more, but after deductions for falsehoods, bad judgement, misrepresentations etc would be unable to draw any salary.
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Panic is causing this, world leaders were most likely preparing for worst case and will grab the whole thing by the neck and slap it very hard!
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101
Thanks for the linguistic correction, Jim - so good to see someone is paying attention!
No one has taken up the substantive point, though.
In this crisis I believe there is a danger that the authorities around the globe will 'fix' the financial system and so allow economic growth to start up again unhindered, all the while ignoring the unsustainable environmental damage that will do, especially to the atmosphere.
But there is the opportunity in this crisis for a complete rethink and re-engineering of the financial system that takes the finite resources of the planet into consideration.
Douthwaite's 'The Ecology of Money' has some very interesting ideas.
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RE 197
I agree.
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Mr. Brown should not spend taxpayer?s funds on City spiv?s bonuses. Rather, these funds should go towards better protecting UK armed forces in Afghanistan against the Axis of Evil and the war on terror. Let the bad banks go down, allow the good banks to survive without Government interference. At the end of this process will be a better banking system for all. Brown is adopting the political policies of Mao Zedong when he should be applying the economic wealth creation principles of Deng Xiaoping. Just look at the economic strength of China today as evidence of this. It is better to be Red than Dead.
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RE #187
Completely agree - wrote off to the Times no less to suggest the very same idea about 5 days ago but some ratchet jawed professor got some guff printed in my rightful place (tongue planted firmly in cheek).
The trouble is that we are now beyond that point - the blessed fools seem intent on bringing the entire house down on our heads just to shore the banks up. The trouble is when the markets turn their attention to currency valuations and sovereign CDS.
Saving the banks is all well and good but if there is no-one left to bank with them or the money is worth nothing there is very little point.
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(1) As many others have already mentioned, there is an army of senior executives and upper managers who all need to be sacked and investigated, not just Fred Goodwin! But the media will look for a couple of prominent scapegoats to plaster on the front pages of their newspapers hoping the public are so stupid.
(2) Our unelected PM is showing off in Europe as the person that has implemented the plan that will take us out of this mess. Nevermind that he and his government has put us in this situation, sold our gold, took us into successive wars and so on.
(3) We the tax payers, are going to have to pay for all this, and the first hit will probably be our jobs closely followed by council tax to cover for the money they so recklessly lost. How can public money be invested in a foreign country? How are we meant to get the money back? By invasion?
Just remember that every penny extra that we will now have to pay in taxes, council tax, the destruction of all our pensions, public spending on hospitals and infra-structure - all that is a result of the quest for power and greed from a few individuals.
Some have said that capitalism is not working, but I think democracy is not working either. I cannot recall being asked on how I want my taxes, local and national, to be spent or invested.
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#84
Probably but if your hoping for ther Tories to save the day you're in for a disapointment, even if they were to object to these plans Labour has a majority and in any case it looks like the Libdems support these proposals, but come to think about it so does the offical Tory party - what actually might happen though is taht the Tories split on this isue, now there is a nice thought, the party taht brought us Thatcherismn and this utter mess no more...
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Join the Euro NOW!
I fully support #27, #163
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Join the Euro addendum
and #193 (missed you sorry)
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post 199:
"Sorry for the lone nations or those without natural resources such as oil. "
And we in the UK have exactly what?
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The scientists at the Hadron Collider need to hot-foot it to London tomorrow morning to see what a black hole looks like.
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The present activities of the Financial World remind one of the two
ladies of legend who earned a precarious living by taking in each
other?s washing or the Oozelum Bird, which flies in ever decreasing
circles until with a cry of Oozelum and a cloud of feathers it vanishes
up it?s own fundament.
We have all confused Money with Real Wealth, especially the tax
gatherers who have enthusiastically backed the Oozelum, collecting taxes
each time it went round.
The result of all this for the UK is that it is ?Broke?,
The Office of National Statistics has UK assets, as of 2006 (the latest
stats available, and no doubt it'll be less now) as £6.5trillion. Less
residential property (£3.8trillion) leaves £2.7trillion.
Net debt stands at £600billion, but to include public sector pensions,
PFI, Northern Rock etc takes that figure to £1.8trillion.
Add the £500billion figure that has been bandied around this week as a
guarantee to the banking sector and we get £2.3trillion.
The Burning Our Money blog on the website estimates this to rise to
£6.5trillion if all commericial bank debt is guaranteed. i.e Credit Card
Debt etc.
It's a depressing picture, do take a look at this:
http://tpa.typepad.com/waste/2008/10/maxxed.html ?
Real Wealth comes from harvesting or mining, plus human effort.
Harvesting areas include the Land, The Oceans, and the Sky. Mining can
be by Land or Sea.
So to start collecting Real Wealth we must rapidly set on the Energy
Harvest. Those who advocate Nuclear should remember that it, central
fossil power stations, and large wind farms are preferred by Politicians
as they can tax the output. Large wind farms are probably uneconomic in
principle as compared to many other Renewable Engineering Projects
Trouble is that the UK Government has done little or nothing to set on
this Harvest other than form a new department for Climate Change and
Energy headed by someone who has no apparent knowledge or connection
with Energy or Harvesting, and may well be himself ? and presiding over-
one of a tream of scientific analphabets.
THEY MOAN ABOUT A FORTHCOMING DEPRESSION.
BUT WITH MOST UK DWELLINGS LACKING SOLAR WATER HEATING, SOLAR PANELS,
AND HEAT PUMPS. TIDAL POWER UNDEVELOPED. WIND POWER TOO COSTLY. BIOFUELS
FROM CO2 UNDEVELOPED ETC. HOW CAN WE HAVE A DEPRESSION - OTHER THAN
THROUGH FAILURE OF POLITICAL AND PRIVATE WILL TO TAKE ADVANTAGE OF THE
VAST MANUFACTURING, INSTALLATION AND OPERATIONAL OPPORTUNITIES ON OFFER
FROM RENEWABLE ENGINEERING ????
IT IS COUNTER INFLATIONARY TOO !!AND CAN DEAL WITH CLIMATE CHANGE AND FUEL POVERTY
Regards
Ferrand [Personal details removed by Moderator]
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197 reitrementdelay
I agree that there is no point in passing the buck around, as the whole of the British society, with exception of a few decent savers are to blame. Now, what I don't understand is what you mean by life boat. In the face this biblical storm from the overdue deflation of the debt bubble I would rather call for Arch Noah that takes on board the pitiful remainder of the British real economy, so it can rebuild itself when the flood has ceased and replace the life-on-debt that you have just described.
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I have to admit that after 10 years of Gordon Brown's smoke and mirrors style of raising taxes and sneaking money out of our back pockets, he does appear to be doing the right thing to help the banks.
I do have a problem with how the whole thing is being sold to us though - it is made clear that it is the tax payer who is backing the banks so they can carry on with their business, but the government is always very careful to avoid saying that this bailout will actually cost the taxpayer in raised taxes. I recognise the smoke and mirrors, and they've never worked in my favour so far. The trouble is, we will probably all have to wait until after the next general election to see if this strategy has actually worked or not.
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#106
Assuming that one believes that Nick Leeson was actually guilty as found, or just one of the many scape-goats of history...
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I have my daughter and a competing channel to put this into context - if this doesn't work, we really will be into a Mary Poppins bank run, and there will only be one word left, Supercalifragilisticexpialidocious.
That is, if they really are determined not to slap any wrists...I guess it's a European consideration keeping them from enforcing control over any of the banks they're bailing out, but it DOES deliver a very weak message.
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Can someone on here please explain? I hold 2000 HBOS shares bought at 150p ... With all this going on what to expect with the share prices ... ? I am aware they are going to nose dive but if the government take stake in these banks are the share prices expected to recover in any near future to the the same level ... In short can expect any returns from my investment ... I know very few would say yes but still thought of asking it ... Very anxious & worried as i have made a wrong decision in buying these dodgy shares ... Any comments would be appreciated ...
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The humbling of our banks?
Or, the making of them?
Surely they will be leaner, fitter and fit for purpose. Detoxed, worked-out. toned-up, tanned, re-invigorated and raring to go.
Robert Peston's comments about the death of Thatcherism are spot on.
Her "big bang" laissez faire deregulation of the city and creation of Canary Wharf banking practices has rebounded with a vengence. The other side of the coin is her destruction of the industrial base of the UK and its unsustainable transformation into a housing/service based economy sustained (and destroyed) by debt.
According to Sky news the Lloyds/HBOS deal has collapsed. Surprisingly Robert (scoop) Peston has failed to report this.
Something's afoot.
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213....UK has size, the City and still just enough influence in Europe to join the same lifeboat.
However, if the storm gets too loud technically sterling could collapse (very unlikely as it would be banks attacking and at the moment they can barely stand let alone attack).
No, the UK is ok. As is Norway with it's oil. The worst hit will be small nations with sophisticated banks outside EMU/EU. Sweden and Dematk might be feeling pressure...but they will again be supported by the EU.
Think Asia and then you might find a lone country is deep brown material!
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If the banks are getting out of the mess with my money (as an average tax payer, what is the per capita share of this bail out?) how come I still owe the banks money? I paid them probably more than I owe them, yet I still have to fork out the money to cover my debts...would it not be better to cancel the debts and leave a clean slate? rather confusing, but then again I am not as clever as all of those city people (look where their cleverness got them!)
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#111
With respect I don't think you actually understand what Thatcherism is, the fact that these banks have not been allowed to fail - free market forces means they should have failed - and that there is no way that they could be allowed to fail (also remember that even the USA have accepted that some banks are just to big to be allowed to fail) means that Thatcherism is built upon a lie. So yes, Thatcherism is dead and what is more it was actually nothing but a mirage like the funny-money that fuelled the debt we are all having to deal with now.
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#197
#205
Let me get this right.
You are saying it is okay for an elite group of extremely highly paid bankers to put the entire developed world at risk so "we" the public would be happy and maybe their bank wouldn't get taken over ?
I wouldn't class paying 300% more for a bog standard house being "happy".
As a professional I am paid to do a job within the law and to industry best practice. I can only assume that banking is no longer about:
Risk Management.
Cash flow
Asset management.
Liabilities.
"If banks had run their businesses and only lent on terms that would have totally avoided the current crises, then the average person would not have been able to buy that new shiny car or move up the street."
Yes they would.
Loans would be a lot less, paying less interest and therefore less profit for banks.
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This comment was removed because the moderators found it broke the House Rules.
#120
Nice anti RP rant, again, but you forget one important thing, all this information will be officially announced before the markets open - just like last week in fact! But heck, why let the FACTS get in the way of obsessive rants...
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What exactly is the deal here?
Seems that that the idea is to give a collection of banks 50 billion of new money and everything will be just fine - except no-one mentions that they´ve burnt through far more than 50 billion so far this year, and no-one explains why this particular 50 billion will be fire proof.
House and asset prices will still fall and more people will be evicted from their homes, and evicted from their jobs.
This is basically another smoke and mirrors deal. When you cut through the garbage this is just another transfer of wealth from poor to rich.
At the moment there are not enough genuinely poor people to carry this burden -so the cunning twist is to impoverish a few million more people. Maybe Gordon Brown can call up the IMF and tell ´em:
"We are confident that we have reinforced the ranks of the poor to a sufficient extent to support the demands of the uber rich. We remain absolutely committed to impoverishing as many more people as may be necessary in order to meet our commitments to ourselves."
Somebody´s having a laugh here - still at least the banks will have sufficient money to finance all kinds of riot control equipment.
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Think what would have happened to Barclays if it had succeeded in the very close call takeover of ABM-Ambro. And the proud Lloyds having 'saved' Halifax BOS now needs to be rescued too - I see it is wanting a reduction in the cost its paying for HBOS which is worse off than at first admitted or thought to be.
So on HSBC of the 'big five' is unscathed. The chairman came out in advertisements everywhere including all the Hong Kong papers, declaring that it is not touching any British government money and it had put more liquidity into its UK operations and is even offering lending to other banks. The HIBOR rate must be pretty high at the moment.
It does not look like anyone is trying any A & M though there must be a lot of excellent stuff on the block going very very cheap .
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It seems the incredible or impossible is happening. All our other problems of Energy, Food, Water, Pollution and Climate Change have taken second place.
A lot of conspiracy theories abound but one seems to stand out - Try Googling "The Olduvai Theory" or Wikipedia and associated links. It seems off the wall but perhaps not as mad as the Flat Earth Society or the Hollow Earth Theory.
Perhaps the world is just going mad!
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Does anyone else agree that the credit ratings systems and organisations, and perhaps the way the UK deals with bankruptcy and credit defaults should be an area that should be under more scrutiny as we proceed further with this situation?
These systems or organisatons don't seem to have assisted us very well in avoiding cataclysmic corporate and personal investor disasters, perhaps some may blame them in no small part in some aspects, such as in the Icelandic banking collapses.
Are the UK's existing credit rating mechanisms and laws still appropriate to our needs as we head out of that previous age towards potentially record levels of credit defaults or mortgage arrears, and is this (Labour) government in a position to make changes to the way people are dealt with in these circumstances to make a real impact on what would otherwise surely relegate large numbers of voters to prospects of lower living standards, increased poverty, and reduced equality in the UK.
Would it be prudent, or possible, to alter or protect the prospects of many of the UK's citizens from elements of this double whammy? Or would that simply not fit with our globalised responsibilities?
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Contrary to popular opinion, the Great Depression was not caused by the stock market crash of 1929. Rather the consensus among economists is what made the Depression great in the U.S. were the mistakes made by the Fed?especially by its decision in 1931 and 1932, to allow so many banks to fail. The Fed in 1931 stuck to the principle that it should only lend to institutions facing a temporary shortage of liquidity and that propping up insolvent banks would be throwing good money after bad.
There were two problems with this.
First, the neat distinction between liquidity and solvency had become meaningless. Many banks experiencing temporary shortages of cash were forced to liquidate assets in a falling market at fire-sale prices, and were thus driven into insolvency.
Second, allowing even insolvent institutions to go under has a very damaging effect on public confidence in the financial system. Depositors have no way of knowing which banks are solvent and which are not and so pull their money out of all banks, good and bad, indiscriminately.
http://www.newyorker.com/online/blogs/stevecoll/2008/10/liaquat-ahamed-depression.html
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#125
If anything we are entering a period of inflation, not deflation!
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#142 - I predict less than 1% inflation within 12 months and yes, there will be low wage increases for a quite long period. After all, there'll be higher unemployment and no shortage of appetite for jobs.
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Have you noticed that if you stick up for Robert Peston and his reporting, other readers complain and the Mods pull your post.
So I shall say it again. Well done Robert and keep it up.
The rest of you remember the number of this post and watch what happens
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Re- posting 197:
What you describe is a child in a sweet shop.
There will always be those that jump in whole-heartedly. They drank in the money fountain of 5, 6....nee 10 times their income and bought in to the 'dream' of home ownership and took out membership of Blingdom Club United. All this regardless of what the future might bring. Their motto was resounding.... Live for today. My house will pay for it all if it all really goes belly-up. (I kind of dabbled a bit myself for a time).
In bygone years my parents were responsible enough to stop me eating all the sweets in the sweet shop. My bank / mortgage provider would only allow an absolute maximum of X3 of me and my wife?s combined salary. Even then we worried about how much we were getting ourselves in to debt. Most of us in the ?middle-aged? bracket (and older) will be familiar with these ?olden day rules?.
For years nobody has been watching the child in the sweetshop and as long as you had the ability to sign a bit of paper you could (apparently) draw down mortgages of horrendous proportions.
Yes, individuals who over extended themselves in the good years (if we dare now call them good years) bear much of the responsibility for their own personal predicament, but not for the wholesale collapse in confidence in the banking and financial sector which now threatens(given worse case scenario) to tear all our lives apart. The root cause of where every things started to break down is the irresponsible lending by banks and other financial institutions. Every other issue surrounding this crisis can be linked to this single source.
There is nothing you can say that can possibly defend the position of the ?banking powers that be? (or were). They have been downright irresponsible to the point of a dereliction of duty. Be absolutely sure that those in the positions of power in the banking industry and in the regulation there-of, including present and previous governments bear a great responsibility for this disastrous situation. We now have to make the most of our lot, which, given the resilience of the British psyche, we will.
Hands up all those who trust any financial institution. Come on now. Don't be shy.
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Cheek!
After all your recent scaremongering (with suspected insider information), you could use a healthy dose of humbling as well!
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Are these the cavalier years? The banks have been cavalier with our money, the councils have been cavalier with our local taxes and the government is cavalier with our (many) taxes and our personal details. The latest loss of data hasn't raised an eyebrow. The little leaflets we get from our Council stating "how we spend your money" does not seem to include a segment marked "risky investing overseas". I'm probably not the only person who would like to see a little respect from these institutions we all rely on and who are our servants and rely on us in times of trouble - it is a two way relationship as we now see.
We should not at any time think that this has all happened without people in position knowing the risks and choosing to ignore them. People are responsible - government at all levels, the FSA, the BofE, the banks and we should all expect some light to be thrown on the circumstances of this crisis in time - we have the right to know, it is our money these institutions are playing around with.
Someone said that capitalism is the exploitation of man by man - and that communism is just the opposite. I feel that trust has been stretched beyond breaking point and we are now being expected to trust a government and a banking system which have both seriously let us all down.
As for #222 - keep your eyes on the FTSE. Good luck.
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I can see that the takeover of HBOS by LLoyds TSB could still go ahead. What I fail to see is any good reason why it should go ahead. With a large capital injection by the British Government it should be a viable bank on its own.
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I've been reading these blogs for over a year now.....and we have just gone into meltdown phase. Gordy and the rest have no idea what they are up against.
Tomorrow we will enter economomic armageddon.
The CDS situation has only just begun! It will be a never ending dominoe effect. The level of liability is an order of magnitude greater than the global GDP. We are well and truly doomed!
I have a yound family and I'm very worried!
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I do not clearly understand why HBOS and Lloyds are recapitalising separately when they are due to merge. Surely they should merge on the terms already agreed or HBOS should be recapitalised on the basis that it will once more become a stable bank entity and therefore presumably need to be revalued in the light of the changed circumstance . In fact, if HBOS ends up in a sufficiently healthy state to trade, is there really any need for the Lloyds buy out?
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For anyone that still believes that this is all about bailing out overpaid City executives, sadly it isn't. That would be very straightforward. This is about saving the companies that arranged your mortgage.
Picture the scene: Allied National Building Society goes bust because they can no longer get lending to cover their expiring loans which they've used to finance their mortgage lending. The liquidator is called in. The liquidator approaches Doris Smith, a pensioner who has her £100k life savings deposited with AN. She says that she doesn't feel comfortable having her money in the building society any more and wants it back. So the liquidator knocks on your door and says "Hi, we'd like the £100k that AN gave you for your mortgage back now please" and you say "But I don't have it and I can't remortgage to get you the money because everyone has either gone bust or is refusing to lend". "I'm sorry to hear that" says the liquidator. "Give me the deeds to your house".
Imagine that times by millions across the country and then keep telling yourself that it's all about bailing out City fat cats.
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Re 227
"Are you saying..." No it does not say that at all.
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#144
Semantics, Thatcher put the current fiscal system in place, the rest is history...
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What I'd like to know is who is going to bail out the Government when the true size of their liabilities hits home?
Gordon Brown has indulged in so many creative ways of disguising government debt over the years that I doubt even he has a true handle on what's left in the kitty.
He knows only too well that he'll be long gone before the true cost of his profligacy hits the taxpayer - and it'll hit harder than the present crisis!
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RE 31. joeqsixpack
"It seems that the current banking crisis is variously caused by (a) greedy members of the general public with their raging appetite for credit ... (b) stripey-shirted bank execs addicted to excessive risk taking and short termism, (c) abject failure of officialdom ie the FSA, BoE, Fed and other central banks ... (d) Governments for not keeping enough control or spending too much money ... (e) short selling, ... (f) Peston with his catastrophic daily blogs."
(a) to (d) are all true to a greater or lesser extent. For example, not all members of the public are addicted to debt, and not all bankers are greedy and stupid - but many are - in both cases.
The jury is still out on (e).
(f) is plainly drivel, but understandably popular with the perpetrators of (a) to (d) who might otherwise have to face the truth about themselves.
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It seem sGordo got there in the end, thank heavens. With a return to stability, the nationalisation of the banking sector won't be necessary. I will be watching what happens to the interbank rate over the next few days. The aftermath of the crunch will mean a recession rather than a slump.
The inquest as to who are the guilty parties will follow after the General Election. If Gordo sees a window of opportunity, following a wave of relief, he should take it hopefully that window will deservedly be on an upper floor.
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Re 227
The banks do run risk assessments based on the risk weighted assets that they have on their balance sheets. These take into account the 'risk' that they are running when a loan is made and depends on the type of loan, the length of the loan and needs to be adjusted as it falls into arrears. These take into account precisely those criteria mentioned - risk management etc.
This then leaves them with surplus capital termed Tier 1. If we look at the UK banks with the lowest tier 1 ratios we find they are Barclays and RBS. Bradford & Bingley had the highest tier 1 ratio, actually above the level that the government is now saying banks should have in order to obtain financing under the emergency bail out. How can that be? The regulators set the rules so how can a bank that is one of the most highly capitalised fail? RBS raised £12bn just weeks ago but the market is now valuing it at just £11bn. It certainly hasn't managed to lose that kind of cash in just a few weeks.
All UK banks are in dire straits. Does that mean every UK bank is run by greedy individuals? Even the Derbyshire building society that has been forced into the arms of Nationwide?
With regard to the ability of us all being able to obtain finance - everyone seems to be missing the fundamental problem that banks have. If you take in £1000, then you can lend out how much? If you lend it as a mortgage, then you have tied it up for 25 yrs. So if a saver comes in the next day and demands their cash back, you don't have it! Panic, crisis, bankruptcy. There are not enough savings in the country to have allowed everyone to buy that shiny new car and take out that bigger mortgage. Hence, the bank either takes the risk and lends more than it can afford (based on a judgement about the normal repayment demands from its savers) or it limits the amount of credit that it gives and we all go on a waiting list.
These are exceptional times and if bankers or any other business only ran themselves on the once in a century event.....very little business would be done. Who would start their own company if they seriously had to assume that it had to survive a 1930s depression?
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Maybe the banks should not have given out ridiculously big bonuses to their executives &c. I hope that the government now uses this opportunity to force the banks, which it is supporting, to stop paying such obscene wages. They have already missed it with Northern Rock, whose current chief executive earns £700k per annum plus compensation for losing out on a loyalty scheme at his previous employment that sums to £1.2M! The prime minister earns less than £200k per annum, so why should the government invest so much taxpayers' money to allow some executives to continue living a life of lavish luxury. If banks cannot cap the wages of their executives, then they should not get any support from the government.
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#148
re list of once nationally owned industries
All either gone (either sold out of the UK or closed) or giving even worse service than they did back then - with the possible exception of BT...
British Rail only eve lacked investment, it's a matter of fact that once sold off the Tories started to subsidise the private train operating companies so they could invest in the new trains that BR had been crying out for since the early 1980s!
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As a british tax payer I feel like a loser from all the sides . Bank bosses earned millions in bonuses with my deposits. They messed around so much to earn more and more. Now when the bank is in trouble than they are getting money from the government to bail out. what about punishing the bosses and get back all the money they were paid. Instead they simply enjoyed the good times and resigned when going got tough. Its so shameful that an old person is jailed for protesting against the council tax but people who reaked in millions are walking free.is
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So are all these guys (Bank executives) going to just walk away? (with their bonuses)...I mean it is just mind-boggling, when I take the bus that goes down Bethnal Green to the City I see large billboard posters warning in black and white..."benefit cheats you will be prosecuted"...seems to me grossly unfair...no?
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"It was Margaret Thatcher who in a series of bold reforms from 1979 onwards gave the City the freedom to trade in everything and anything."
Are you giving up the reporting game and going into comedy, Peston?
What absolute tripe. The same tripe Kirsty Squawk tried to hit George Osbourne with earlier in the week. It didn't wash with him and it won't wash with us.
Who told us in 1997 that things could only get better, that there was a third way, and that university students leaving uni with 20-30k of debts was right and proper?
It was your jolly friends in the Labour party.
Gordon Brown swept away the regulations of the Thatcher and Major Government and replaced them with, well, nothing. The FSA was tick box regulation at it's very worst. Idiots who didn't know what they were meant to regulate sat idle while your chums in the Labour party took plenty of money from your friends in the City. But so long as banks fulfilled the now clearly inadequate regulations, all was well with the world. And if the banks were doing things there was no rule against, all was well with that too.
Brown and his FSA have had a decade to get on top of the CDO and CDS timebomb. They didn't. They encouraged unnaturally cheap lending via fiddling inflation figures, stole billions from everyone's pensions forcing investment money to pile into the housing market and house prices were allowed to get out of control. But that too was apparently okay. Homes finally reached the point where first time buyers could barely afford a shoebox and the buy to let market also imploded. That's the buy to let market that many of your friends in the Labour party have invested large amounts of money in - Blair, Meachy Meacher et all. But such was the ineptitude at the FSA it has done too little too late.
Too many liar loans have been sold to people who can't afford to pay them back. In the US it was simply lending to poor people who could never afford the repayments. In the UK the recent boom in interest only mortgages, and re-mortgaging every few years to get discounted interest rates is what has come unstuck. People had budgeted to afford the discounted rate not the full rate, and now find that they cannot get another discounted rate mortgage.
Next you'll be parroting the line that 'it started in America'. Pull the other one.
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I predict;
RBS, HBOS, Lloyds TSB and Barclays to merge to form the Bank of UK.
Hmmm. Just might work
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Now that Government will effectively control the flow of capital we have become a Soviet style state. With Government's pervasive powers to snoop into our lives as well and the incessant use of CCTV, we in the UK are now in the most totaliltarian state known to mankind! Was this the vision Tony Blair had for New Labour?
It is fortunate our prisons are so full otherwise I'd be carted off for writing my observations on a blog!!
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The death of Thatcherism? If it really is, I will drink to that.
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For those that read this blog for advice on whether they have, or have not, made the correct investment decision.......the answer is ...you are too late!.... and yes, you have made a complete blunder!!!
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If we survive the credulity bubble pop withoutout sinking , this event will become known as the "Mary Celeste all co pop panic of 008" in which the Bank of Englaaand towed the AAAbandoned economy[the passengers opting to get closer to the lickquidity] into safe haaarbour in return for the saaalvaaage money and intoxicating aaassets
Gorden Brown is smart ,he wins as long as he stays at the wheel of fortune , wether by captaining the Mary Celeste or the Titanic ,it having just hit and sunk the Icelandberg [its the crew wot did it]
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Interesting remarks regarding the ending of Thatcherism. There is a long overdue re-appraisal of Mrs Thatcher's nefarious legacy, and this crisis is the culmination of much Thatcherite myopia.
Taking a clearer look at the post Thatcherite landscape, with our banks nationalised, utilities in foreign ownership, weak manufacturing, gargantuan budget deficits, millions on the sick to massage unemployment figures, atomised and underskilled workforce - it is ecumbent upon someone out there to declare that Margaret Thatcher ranks as the worst post-war Prime Minister given the long-run damage her policies have wreaked upon this country.
It beggars belief that there are still a number of people who refuse to accept the reality of the calamity her government unleashed upon society. Given the overrepresentation of Tory support in the press perhaps this is not a surprise, but millions are waking from the mad delusion that the wrongheaded Thatcher experiment had any benefits for Britain at all.
Clearing up Thatcher's mess is going to take a generation or more. But the first step to ending Thatcherite-driven folly is finally being taken by such a stark, long overdue recongition of her total and complete failure.
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#159
I think the comment were more about the level of debt, lets face it, Iceland (via their GDP) can't bail out their banks, the UK can - say it all really, even Thatcher would not have allowed that amount of 'Free market enterprise' go unchecked.
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I've just had a very reassuring thought.
I have no doubt that Gordon Brown will do his utmost to shield the executives at the banks, auditors and regulatory agencies.
However.
I wonder if Uncle Sam is going to start extradition proceedings against any of these execs ?
Who knows,,, even the EU may do something ?
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As an HBOS employee I am disgusted by the reckless behaviour seen to date. Shares in the bank were seen as a really good investments and additional benefit but these are now worthless and jobs are at risk. The actons of a few now make all our lives miserable with Bank employees now having a bad name. We won't be able to go to the local pub for fear of being jeered at fo allegedly causing an economic disaster.
Andy Hornby has never been the right man for the job and I really hope we see him go this week along with others at the top the bank.
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This comment has been referred to the moderators. Explain.
Since when did the banks cease to be effective managers of risk and become poker players?
It is incomprehensible that the directors of a bank do not have a reasonable understanding of the true position of their balance sheet.... If the amounts of money needed to recapitalise the banks are increasing by the hour, what are their true solvency positions? If I remember UK insolvency legislation correctly, isn't there a point at director become guilty of wrongful trading? Or worse, fraudulent trading?
The only other question I have is: will the government also rescue everyone who is behind with their mortgage payments because they have problems with their finances...due to market circumstances? Come on Gordon, fair is fair......
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The situation is incredibly serious now!
However, I still don't care if the entire system collapses......it's the only way we will get monetary reform.
Only the rich and greedy will have everything to lose.
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Why are the terms being extracted from the UK banks by the government, in return for such enormous amounts of our (taxpayers) money, less advantageous than those obtained by Warren Buffet from the less desperate cases which he has supported in the US?
Why should we accept worse terms than he gets?
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Here is an excerpt from an article in 2005 which I stumbled upon while searching for City Bankers in google:-
While few bankers discuss their bonuses openly, some details will seep out. For instance, when HSBC, the world's second-largest bank, publishes its annual report next year it will reveal the highest bonuses paid outside the boardroom. While HSBC does not say who the payments went to, it admitted last year that one banker was paid £13.6m, another £7.4m and three others more than £4.6m.
Barclays will disclose for the first time the pay of Bob Diamond, the head of its investment banking arm Barclays Capital. His pay will no longer be a secret after he was appointed to the board this year. The American is line to make £15m.
Complete article is here http://www.guardian.co.uk/business/2005/dec/15/executivesalaries.executivepay
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#178
As I'm a generous type of bloke and I hate to see anyone diddled, if I agree to pay back your share of Mr Peston's salary will you stop ranting on about how much you dislike him, tell me how and were to send your 0.01p worth of your TV licence and I'll even pay the postage! Oh, and would you like any more nutty fruit-cake Sir?...
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And this one in 2006 about the excesses of city bankers:-
http://www.independent.co.uk/news/uk/this-britain/city-bankers-on-spending-spree-as-pay-soars-421940.html
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re: end of Thatcherism
The problem with this, lovely as is the thought, is that Thatcher's deep legacy is the terrifying reliance the UK economy has on the contribution to tax revenues of the financial sector.
None of the political parties dare discuss this issue.
If I was a currency trader, I'd be selling sterling down the river.
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So is Andy Horny leaving, I think he should after ruining HBOS's good name?
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Perhaps I am very naive but with 11 plus years of this government telling us how prudent they are and with all these years of the banks supposedly having money to burn ......Where has all this money gone??
Also I have not read anywhere that states that NONE of the tax payers money will be used for huge pay outs to failed bank leaders.
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This is a debt crisis. You don't need Thatcherite reforms to have one. Instead you need a large amount of surplus capital that needs to find an investment. The recycling of 1970s petrodollar surpluses caused the 1980s emerging market debt crisis. Now it is the turn of vast Asian trade surpluses (and more recently further oil surpluses) that have been recycled into advanced countries, creating classic asset bubbles that eventually have burst.
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#186
"Maybe its champagne socialism that's endangered!"
But that is just Thatcherism with a human face, so if Thatcherism is dead so is champagne socialism - now there is a thought to cogitate on...
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#212
Why join the club when others will soon be leaving it?
The evident strains within the Eurozone will mean Italy & Greece may soon have to give up the Euro.
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1. Fred Goodwin et al go their share options should be forfeited auromatically.
2 Wasnt Hester the genius behind a recent bank failure?
3. be marvellous if Broon escapes and wine the contest in Glenrothes'
4 Note how Halifax is respected source of housing data having been dumped by BBC for Nationwide ) Remind me wasnt Nationwide a solvent lender to its investing clients?
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"our biggest and proudest banks"
In whatt sense are they "Ours".
This is the moment to scrap fractional reserve banking.
Private institutions should not be allowed to create money.
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Don't blame the traders in the banks or their bonuses. They were just buying and selling what the banks authorised them to do, Blame the rating agencies and those in each bank who approved the purchase and sale of any given securitised mortgage contract. They should be outed.
Furthernore where were the accountants and auditors who were supposed to cost the risk at any given time? They should be outed too.
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The FSA has lost all credibility. They have presided over the fiasco now afflicting the British Banking system.
So, Robert, if as you say the FSA is NOT predicting an economic "tsunami", it's a fair bet that one is on its way!
The Banks are (I think) businesses, so why haven't their books been properly audited?
Why is there what seems to be blind panic going on, behind the scenes, about just how big the debt requirements of the big four banks are? Aren't they even sure themselves how far they've sunk into the brown stuff? Or are they in denial, too scared to look into a bottomless pit?
Above all, if the government keeps on forcing the taxpayer to pay out - by the tens of billions - one thing IS certain: they will lose the next election.
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Just herd on the news "Mandy" is going to get one million for walking away from his job at EU. It isn't just bankers!
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So the RBS CEO falls on his sword....... what of the Chairman and the NEDs?
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Someone is leaking very sensitive information to you, Robert, and spreading damaging rumors.
The leaks are clearly from government sources - and there must be a reason for it.
Is the government attempting to put pressure on British banks by collapsing their share prices so that it can impose harsher terms on them?
Is the government trying to impose its political will on the banks to the detriment of, and with complete disregard for, their shareholders (and our pension funds!!!)?
Is the government putting its own narrow political agenda ahead of the interests of the country?
Plausible? Under a desperate NuLabour? Absolutely!!!
We could potentially be seeing the financial/political crime of the century going on under our very noses!
The leaks need to be investigated.
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#237
If that is happening then it's not the fact that you're sticking up for RP but what or how you're saying it.
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Re 234 - This is the best I´ve seen in terms of providing a justification to shore up the banking system.
It may buy some time (or maybe not), but it can´t work since the core problem has to do with a rapidly deflating asset base largely funded by debt.
House owners are still going to see the value of their asset declining, their ability to service debt will decline as taxes rise and employment contracts. Therefore their assets will be repossessed by the banks who will "liquidate assets in a falling market at fire-sale prices" - i.e. exactly what the capital injection is intended to avoid. (They will do this because in large part they are required to do so by law).
Falls in the values of US real estate has already wiped out a notional $6 trillion of value. Similarly $ trillions have been wiped from major stock markets.
A consequence of this notional value contraction is that both the effective demand for, and supply of, future credit will contract sharply. This is likely to result in particularly severe effects for the general economies. The example of the US automotive industry is instructive. This industry already has severe problems and the near term bankruptcy of Ford, GM and Chrysler is a distinct possibility. In aggregate this industry has $100´s of billions of debt - which presumably will not be repaid in the event of bankruptcy.
A failure of the US automotive industry has horrendous implications for employment levels - and hence tax take.
It is a mistake to think that we have either more knowledge or control than was available in the 1930´s. It is true that we have more sophisticated tools available - but it is also true that we have fiddled with every single input component for reasons of short term political optics that at a macro level none of the numbers make any sense.
If we really were so much more knowledgeable and sophisticated than in the 1930´s then it is unlikely we would be in the situation that we find ourselves in today.
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What heartens me most about this blog is that there are a whole lot more people that appreciate the mess were in than I could ever imagine. i might not agree with most of you, but I think we are all agreed we're are all in big trouble. The phrase lions led by donkeys spings to mind.
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#255
You still don't get it, Thatcher put the current fiscal policy in place, had she not, any changed since 1980 would not have been possible.
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And one thing that's not going to help is Goodwin's 8 million pound parachute - that's the jobs of 50 of his staff going to pay him that, or 100 of his pensioners now going into half-pay, just for the privilege of getting rid of a cheat and a liar. He's not even 50 yet, so there's every likelihood he'll do a Mandy as well. Anyone else who was caught out like he has been (see [Unsuitable/Broken URL removed by Moderator] as a baseline for how he misdescribed risks he should competently have been aware of as recently as a month ago) would have been dismissed for serious misdemeanours. In fact, in his position, he should be found an unfit and unproper person and disbarred as a director.
But how come none of his peers are standing up and screaming? We need a clean sweep down to branch management level to be sure of having cleared out the lot.
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#278 Tantivvy
"be marvellous if Broon escapes and wine the contest in Glenrothes'"
No idea what you mean, but when I lived n the area a pint of heavy and a whisky chaser was more common. I think Gordon knows that inviting the voters to a wine bar is not an electoral winner.
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In view of the fact that the IMF and World Bank are infested with fundamentalist free-market fanatics - the very people that have caused the current world chaos, is it time for a complete clear out?
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All these bits of paper - money, stocks,
shares, bonds, CDO's etc. etc. They are all
IOU's, all promises to return a favour tomorrow for one done today. The electrician fixes the baker's oven, the baker gives him some IOU's and over the course of time the electrician returns and exchanges those IOU's for loaves of bread. It's a brilliant system which has enabled us to become one of the most cooperative and successful species on the planet.
In human affairs, however, serious trouble starts when people don't keep their promises.
An unemployed single mother on welfare in Detroit promises that she will be able to earn enough IOU's to buy a house. Through a small army of middlemen - introducers, brokers, packagers,
mortgage companies, insurers, bond makers etc. etc. that promise ends up in your pension fund. You take it at face value and because she thinks she can buy a house, you think you can retire. You are both sadly mistaken. She will be repossessed and you will have to go on working. As to that small army of middlemen, well they were prescient enough to take their commissions, arrangement fees, processing charges, annual bonuses etc. etc. up front in the present as opposed to their optimistic
investors relying on jam tomorrow. So maybe they will have less trouble paying off their mortgages and being able to retire.
This is bad enough, but the really serious damage that has been done, the damage that will hurt us all as it did in '29 is the erosion and destruction of the mutual trust and confidence on which human
collaboration is utterly dependent. Consider this. If the electrician no longer trusts the IOU offered by the baker, he will not fix his oven and we will go without bread,
Yours Aye,
Graucho Meldrew
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Please excuse me if I'm a bit slow off the mark but... Where is all this money the banks 'must raise' coming from. Surely European governments have other priorities for, at least, political reasons (e.g. healthcare and defense) and the sums are so vast in total. Are we going to be bought-up/owned by the Chinese and Russians? If so, not such a surprising legacy for Thatcherism (where all this started).
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Great way for the Government to rob a huge number of small shareholders - particularly in the case of Barclays which (apparently) is being told/advised to borrow £9bn instead of £3bn to shore up its balance sheet.
With the main purpose of injecting state capital into banks being to improve their ability to absorb a financial tsunami (more bad debts!) then surely the government should be considering a significant cut in interest rates to make personal and corporate more affordable in these very uncertain times!
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Robert
This is not the end of Thatcherism as you state.
Other than a belief in freedom, liberty and democracy, and the rule of law and thus the need for a strong defence Thatcherism was also about economics and moreover the creation and spreading of wealth through a property owning democracy.
At the heart of the economic doctrine was a low tax economy, controlled Government and private debt, controlled public spending and the balancing of the books. This is called sound money.
Like 1976 this country has come to this parlous state because a Labour Goverment has gone on a credit card spending splurge for 11 years borrowing mercilessly and allowing individuals to do likewise without reference to the burgeoning money supply.
Once again the money supply will need to be contained as will spending and borrowing to put this economy on a even keel for the next generation. This will mean ultra Thatcherite policies will need to be applied to grapple with Brown's excesses which are even worse than Denis Healey's!!!!!!!!!
If Thatcher had been in power for the last 20 years, debt would never have got to this level and we wouldn't be having top re-capitalise the banks. I daresay Reagan would not have presided over the sub-prime lending fiasco which triggered this.
It is only the imposition of Thatcherism, control of the money supply, control of spending and borrowing and tax cutting which will bring our economy back into balance.
I keep saying if Ken Clarke had been Chancellor for the last 11 years this country would not be in this sad state of affairs. We all know that.
All this has been brought on by Crash Gordon and his complete lack of understanding of economics. Who said....no more boom and bust? I rest my case!!!!!
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Boy!!!
If the UK economy was not in such dire straights......would this this poetic justice or what!
This must be the first case of trial by internet. Except we all know who the guilty are ...and better still, we get to prosecute them (er... I mean persecute them) online as well!!! It just doesn't get any better than this!....what does schadenfreude mean?
The number of times I used to listen to that idiot henk potts on 'talk sport' radio lauding it over us saying he'd been skiing here or on holiday there...biarritz / monaco /aspen / basel / et al....and on top of that being the biggest celebrity name dropper in radio history....well boy (sorry second time mentioned!)....is the boot on the other foot now!
Answer this.......just how much do you think your precious financial 'industry' will contribute to UK GDP over the forthcoming years now?
Answers on a postage stamp please!
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I work as a mortgage adviser for one of the banks being bailed out tomorrow. I have always thought of this bank as a responsible lender.
On many occasions I have been verbally abused by customers, when I have declined them for a mortgage or further advance as they failed either a credit score or affordability check. Customers believed that house prices would never fall and the good times would never end. So they went to Northern Rock and got their mortgages there, 125% loan to valuation sometimes.
I am absolutely heart broken that this has occurred. The FSA, in my opinion, have been too tied up in the admin of mortgages, eg every mortgage customer has to see a Key Facts Illustration before making a Full Mortgage Application, than making sure all bank lent responsibly.
It is a very frightening time for everyone. A lot of mortgages I have seen recently are in negative equity and this can now only get worse. It is unbelievable that this has occurred.
A Professor on Radio 2 made the following statement on the day that Lehman went down. That for the last year we had been having the Roadrunner effect, where the Roadrunner runs off the edge of the cliff and keeps on running for a while. He eventually realises he is running in mid air and looks down then plunges to the floor of the canyon. The interviewer asked at what point in this process the world was at. "We've just looked down" he said. I think he was right.
Hold onto your hats. Here we go.
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Robert,
I have shares in Barclays and Lloyds TSB and I'm willing to contribute capital. However, only if there's a clean out of those resposnible for the debacle. I don't see why I should pay up while the board and senior staff who went with the herd regardless of the risks can continue to drive the banks. They should go - and good riddance!
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All shares trading across Europe should be suspended 'at least' until Tuesday morning so that the EU countries can agree the financing of pledged loans (announced earlier this evening). I believe that the US markets are closed until Tuesday anyway.
If the European stock markets go it alone tomorrow before solid proposed EU financing figures are announced then there is a significant risk that there will be a massive fall (possibly irreversible) in the UK markets. Am I alone in my fears?
Europe has just added more uncertainty by not announcing these critical figures before the Monday opening bells of the European markets.
Even more indecision and slow response to an ever worsening situation. I cannot believe the apparent dithering and incompetence of decision making at the highest level. Cross your fingers but I fear a rough ride is on the cards tomorrow morning.
I also believe 'The Bank of UK' (UK Taxpayers PLC) will probably be announced before the end of this week, possibly as early as tomorrow afternoon.
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I suspect that Preston?s assertion that ?Thatcherism? is dead? is on the button. She introduced the ethos of ?loads of money? and ?trade union bashing? and was also responsible for the attitudes of the then trade union leaders being exported as ?tools? to management. The ?we can do what we like, to whoever we like, whenever we like? kudos now permeates to the very top of all industries and not just banks. In the old days this was called bullying.
Many good things came out of the Thatcher era, the country gained self respect, a vision of the future, and she was admired/disliked and feared worldwide simultaneously. Tony Blair was, and still is, one of her greatest admirers but just like Cromwell when handed the keys to the throne, did not know what to do with them. One thing?s for sure Thatcher would have never handed them to Lamont; she was to strong an individual for that.
She still stands (in fact) as the last great leader of the country post Churchill. It?s this type of personality led government with to close a relationship with just one aspect of industry that has failed and this when a Labour government has (in fact) followed her doctrines for over a decade as far as financial issues are concerned.
The current situation we find ourselves in (the start of the second great depression) needs strong leadership, not fiddling about with various banks positions either here or in America.
Bush is a ?dead man walking?; Brown has no international respect at all and has an image not dissimilar from President Nixon, ?There will be no whitewash in the Whitehouse? is a haunting statement whilst not exactly relevant, sums up the already deadly events that happened? this is now outside of the control of single or even multiple governments.
We are in the second year of the second great depression.
Unlike the first great depression? we possess the skills, have the knowledge and the technology to limit this to a few short years, but will we use them or return to protectionism and a lack of social responsibilities that enabled the first depression to last for almost ten years and led to the rise of Hitler and the second world war?
This is a survival issue measured in terms of the entire planet and not a single country or small groups of countries.
A new word order is required.
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What a sorry end to Britain's longest ever period of unbroken economic growth
Sorry mate but you sound like a plumber
The world is a about to die and you are telling how to have a funeral- the nationalistic way
yeah, I know
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Great way for the Government to rob a huge number of small shareholders - particularly in the case of Barclays which (apparently) is being told/advised to borrow £9bn instead of £3bn to shore up its balance sheet.
With the main purpose of injecting state capital into banks being to improve their ability to absorb a financial tsunami (more bad debts!) then surely the government should be considering a significant cut in interest rates to make personal and corporate debt more affordable in these very uncertain times!
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For the Banking Barons who are retiring hurt to their multimillion dollar, mortgage free stately piles, to muse over their slightly diminished millions, and try and pick the bottom of tthe market to once again shaft the pensioners etc, who are not in a position to `ride it out', let alone invest:
What happend to the old theory that when a Man (Capital intended) betrayed trust he was left alone with a pen, a sheet of paper and a revolver with one bullet.
THE Lehmans CEO in front of the house was unbelievable. Sociopath anyone?
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Dear Robert
I would like to share this idea with you in the hope that you and others may give it oxygen and lets see where it might go.
Analysis:
It is generally accepted that falls in the world's stock markets are
reflective of the market's belief in where the world's economy is going.
However, the nature of the current falls, as one market follows the lead of
another is not unlike a great tsunmai continuously encircling the globe, the
self-propelled nature of which is almost certainly going to lead to an
overshoot of where market levels should be at.
Since September 30, 1985, the NYSE trading hours have been 9:30-16:00
Eastern Time, on all days of the week except Saturdays, Sundays and holidays. If Wall St ends with a big drop, the
next markets to open are in Hong Kong and Toyko at 1.00am GMT. The Asian markets then close just as Europe is opening. The almost physical nature of bad sentiment and fear sweeps from The US to Asia across Europe and London and back across the Atlantic to New York as it opens at 2.30pm GMT. The strength of the wave is amplified as it passes from one market to another. Markets appear to be reacting to each other, rather than acting as a single global market.
Aren't such defined trading hours just a bit arcane? After all the rest of us have been living in an age of 24 hr Tesco's and 24 hour online ordering of goods and services for many years. If one were to compare the world's major markets to an organisation based in a single building trying to reach
conclusions about a major problem faced by its 3 major divisions, it would not help the efficiency of their effort, if each of the divison's staff came to work just as the other was leaving. With no ability to work together in real-time how would they ever manage to get a grip of common problems and reach sensible conlusions and solutions?
The Danger:
The danger, as everyone is acutely aware of, is of markets being driven downward by this seemingly self-propelling 'tsunami of fear' to a level where structural recovery becomes almost impossible.
The Idea:
Get the world's major markets to operate a truely global market by initiating continuous 24hr trading in all of the words major markets for the forseeable future. It won't prevent us from entering a severe recession but it might just help to remove the conditions in which a 'tsunami of fear'
begins and is propelled and amplified around the world by markets operating
in an environment where the only thing driving them is the previous market's
bad sentiment. Most importantly it might help to reduce the possibility of the markets reaching the level where structural recovery becomes almost impossible.
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In what way are the Banks "humbled"?
When the dust has settled, will the balance of power have shifted back to elected governments, and will markets be governed? I think not.
There has been no "humbling", only a clear demonstration of where power really lives. And will remain, as most of us are so materialistic.
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#256 - AlisterKent
Bank of the UK (Cayman Islands) Ltd?
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Just started watching CNN news on Sky. Looks like the USA is going to follow the Brownovian model for bailing out the banks. It is getting good press in USA.
At last we are getting something which looks like a global response to this crisis.
But why are the European markets opening tomorrow before all the T's are crossed and i's dotted. I hope the Euro announcement of pledged loans is enough to steady the markets meantime. As Alex Ferguson would put it, tomorrow will definitely be one of those 'squeaky bum syndrome' days.
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What an amazing article. I have believed for a long time that this crash is a sign that even the most fundamentalist capitalist cannot ignore:
You cannot place the security of your country in the hands of the free market, it is driven by greed alone
The final few paragraphs in this article should be placed in billboards across the UK.
"I've also been musing on the historic significance of tonight's events, and I think it can perhaps be seen as the death of Thatcherism, or at least of an important strand of the dominant ideology of the 1980s and 1990s."
Amen
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Good morning Mr Peston
Please stop being such a pesimist in your reports, it's frightening the horses.
Re: "the Treasury will underwrite the shares, thus providing certainty that that the bank will get its money."
Seems to me to be an excelent retail buying opportunity this morning. Lets ressurect Sid and tell him. Remember the days when we all piled in to nationalised companies circa Thatcher?
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does it mean my 150p worth per hbos share that I bought last week will be worth nothing tomorrow by 10am? How did I do it - this is the first time I'm involved in the equity market and it ends with such a disaster - I'm a saturday child - I have to toil for money every second - I always forget that.
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#148:??
[re list of once nationally owned industries]?
"PLEASE POST ANY I MISSED!"
How about investment banking? Following the hubris of the Big Bang in 1986 came the gradual surrender (or collapse in the case of Barings) of UK owned banks to foreign ownership and control during the late 1980s until the millennium. Behind every pin-striped old school tie wearing chief exec now lurks a foreign owner.
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Now that the government (British tax payer) is a majority shareholder or 100% owner in some cases in our well known high street banks, is there any chance of the government putting pressure on the stupid money wasting bankers to bring back the many thousands of call center and IT jobs they sent abroad back to Britain.
These jobs were supposedly sent abroad to ?cut costs? and ?increase profits? for shareholders.
All sending bank IT jobs abroad ever achieved was late running (therefore expensive) IT systems.
All sending bank call centers jobs achieved was stressed out and upset customers on the phone.
The savings made (indeed, if any) are minuscule compared to the billions of tax payers money these same stupid bankers have squandered on these ?complex financial instruments? or ?lending money to people who should not have been allowed to borrow in the first place? to put it another way.
There is no doubt the British banking sector will have to shed jobs left, right and center very soon or in the new year. Please, please, please start with all the jobs these fools sent abroad, if only to lower our state benefits bill.
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Arrggghhh !
You used Tsunami !
The most overused and hackneyed phrase from the Pick n' Mix Vaults of Financial Journalism
What might we expect next from the Filing Cabinet of Trite Phrases.
'No silver bullet' ?
'No magic wand' ?
Greater metaphorical imagination and more creativity please.
Ring up the Arts Dept, they might offer something like
'...as the molten lava of future debt spews out from Brown's conduit of ever increasing credit to create a woeful wasteland amongst the green pastures of saving assets, the unprotected and disposessed are asked to turn their hopes towards a bailout plan that nobody understands and nobody can explain.
Prayers are offered up by the unfortunates, that GB isn't simply gambling that...
...'you can fool most of the people, all of the time if you make the numbers big enough''
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#300 dholbon
"A new word order is required."
OK
required a new order word is
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they are among the angriest upper- and middle-class people I have ever seen. And the most frightened and worried. (In a way, they are now feeling the way ordinary workers have been feeling for years.)
And why not? With the experiment of allowing a major investment bank, Lehman Brothers, to simply vanish, leaving huge holes in the portfolios of many other financial entities, Henry M. Paulson Jr., the Treasury secretary, threw the financial system into chaos.
http://www.nytimes.com/2008/10/12/business/12every.html
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Robert,
I was gob-smacked whilst litening to your financial piece on the 10 O'Clock news tonight. You cannot be serious linking these problems to the premiership of Maggie Thatcher and her 'freeing up' of the City. Try looking to the Clinton administration and to the history of financial regulation in the USA.
A shame you ruined your normally good reporting with such garbage.
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hi go, here we go!
We all knew Gordie would do something first so he could show off, and our Robbie P knows we are all desperate to know what's going on, so any time he 'breaks' a story he does it in our interest....thank u Robert.
Things to think on....
Blame whichever captain of our ship u like,but the buck stops with our current leader. If all this was going on, he knew about it and did nothing, OR (more worryingly) he had absolutely no idea. He has obviously tried to do something about it, but most people here don't think it will work anyway it seems. So much for confidence!
What strings are attached to these loans then? Perhaps one was for Freddie to go?
Isn't having stuff off your book illegal?
Balance sheets please
True amounts of toxic debt please (maybe why the amounts are rising?)
Bank staff on the lower levels ate paid barely above the minimum wage, and huge demands are made of them. Those staff with integrity never get promoted and generally leave.
I think the illegal gotten gains of big bonuses should go towards helping those who have lost their homes or forced to lose their houses cos of unsympathetic banks
Abolish stamp duty and house buyer packs.
Clear everyone's credit rating and start again.
Put ordinary people on bank boards
Halve mortgage interest rates
How come building societies aren't in difficulty?
Cut fuel taxes and make energy companies reduce their charges too.
Just a few thoughts.
Also, don't forget the OPEC meeting next month-apparently, a large number of them wish to slow production and raise the price....hmmm-they deride the West and capitalism, but are just as greedy!
What is GB's hidden agenda as he is banging on about this rescue plan so much? Has the government and/or BofE got something to hide too?
Is Coutts affected too through it's connection to RBS and NatWest? If so has anyone told our first fsmily?
What will Monday bring?
More chaos perhaps, until we, the people are told the true extent of what's missing! This is the real reason for the fear and lack of confidence.
Our anger at being treated as though we are not worthy of this knowledge is palpable and understandable. No wonder the whole country (apart from the fat cats!) are baying for blood. We aren't hunting witches, we know who they are, we just want them dealt with in timely fashion!
Did GB borrow a guillotine from Paris, or is AD coming back with a hatchet from Washington?
Wonder if this rant will be allowed? If so, Boilerplate I'd love some of your fruit cake, you appear to be doing a roaring trade on it!
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I stumbled over this little gem
http://www.scribd.com/doc/6489388/Demand-for-Monetary-Reform-1943-letter
in my researches on the monetary system(fraud).
It`s a letter written to the Archbishops of the CofE and other churchmen in an attempt to get their support for monetary reform.
It has 32 signatories,including MP`s,businessmen,inventors,scientists(Nobel laureates).
Nothing new under the sun as they say.
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@ #170 coldwaterjohn quoting Andrew Jackson.
As an expatriate American, I appreciate being reminded of a President I can be proud of. Thanks.
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Post 300,dholbon
"She still stands (in fact) as the last great leader of the country post Churchill"
Churchill may well have won the top spot in the "Greatest Briton Ever" competition(Michael Crawford from "some mothers do`ave em" came 17th!),but most people prefer not to think about the fact that because of him(and his Bliar/Bush-like warmongering),this country was bankrupted,laying the very foundations of our current pitiful prostration at the feet of global finance.
I`m sure Lady Thatcher mightily approved of that!
"A new word order is required"
You honestly don`t think it already exists?
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what an irony... the 2 leading capitalist countries USA and GB having to partially nationalised their bank... making money by any means, running their countries in permanent debt... perfect recipe to ruin the world economy... thanks capitalism.... Once again the people who got paid million every months won't take their responsabilities (for the few that will... be fired....I would expect them to get a copious rededuncy package) and once again the tax payer will have to pay the money government will lend...
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Death of Thatcherism? Perhaps. More like the proof that the open market - taken to its utmost extreme - doesn't actually work. Too much greed. Too much fear.
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I thank you Robert for your informative articles, but as a struggling taxpayer whom works hard everyday just to make ends meet, all this 'bailout' business is simply pressing more salt into already open wounds.
The bonuses paid to these failed executives are more than I would earn in ten years of work, even twenty. Why should I, and others like me, be expected to sit by and watch these proceedings unfold without protest?
I live in recession everyday of my life...even though I'm working; I get no help whatsoever to get me through, the government does nothing for me financially, except take a large percentage from my honest-earnings in various forms of tax.
That these 'cats' are going to walk away with a smile and cream dripping from their fat jowls is a contemptible pill to swallow. Can't wait for the election!
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"I've also been musing on the historic significance of tonight's events, and I think it can perhaps be seen as the death of Thatcherism, or at least of an important strand of the dominant ideology of the 1980s and 1990s." And, lets not forget, the present decade.
"It was Margaret Thatcher who in a series of bold reforms from 1979 onwards gave the City the freedom to trade in everything and anything." And, lets not forget, Tony Blair and Gordon Brown who continued the policy.
Thatcherism, Reaganomics, monetarism, market forces, neo-liberalism, the economic principles of Milton Friedman, call it what you will, it has defined globalisation, and the outcome was both predictable and predicted: deregulation, which, given the City's central role in our economy, is nothing less than the abnegation of responsibility for and control over our economy by our government, leads inevitably to increasingly irresponsible and often criminal practices by a financial sector which is not only unaccountable, but actually holds the government to ransom. In the process, democracy itself is undermined, as the government takes its orders from the City and those connected to it.
Why wasn't this universally understood at the time? There's nothing complicated about it, any more than Milton Friedman's law of the jungle, absurdly elevated by some to the status of an economic theory.
It's a system that favours the unprecedented rich, and those that serve them. They are the beneficiaries of the last thirty years; their wealth has grown beyond all historic measure. The rest of us got into debt.
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Excellent that Robert Preston is starting to put this in a wider political context when he says "the death of Thatcherism, or at least of an important strand of the dominant ideology of the 1980s and 1990s."
But let's go a little further. Thatcher took her ideology from Milton Friedman no?
And his school's free-market thinking still underpins much of the "Constitution" for Europe.
Can we now start to unravel that mess to put a stop to the "liberalisation" of Health, Water, Electricity, Education, the Post Office etc etc so that key services are not run by multinational companies for the benefit of shareholders.
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THERE IS NO WRITTEN GUARANTEE FOR TAXPAYER AND HOMEOWNER
Bail out will cost each taxpayer £16,000 and Homeowners £16,000 plus increase in mortgage rate and the amount their property has dropped in value with no written guarantee of getting their money back and, on average, most families in Britain are already £10,000 in debt.
The amount of money being pumped in to shore up the banks is £500 Billion. This is too little too late, enough to calm voters until re-elected after which the real pain will take hold in the form of a vast array of additional Green Taxes recently announced to increased from 60% to 80% are in the pipe-line. To restore confidence it will take at least £1500 Billion and Gordon Brown says that he will use what ever it takes of Taxpayers money to restore confidence and stability.
Don?t be fooled. If the Gordon Brown?s plan A fails to pay back the money own to the Taxpayer it will not have been Nationalisation for the benefit of the Taxpayer ? But Capitalisation to further benefit Fat Cat Bankers.
Gordon?s plan B ? The Dragon?s Den.
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Regardless of how much money the various governments throw at this problem, the banking freeze will not come to an end until the full value and worthiness of all the outstanding CDS (and other forms of IOU's) circulating around inside the money markets have been properly assessed and all banks (both here and abroad) have openly declared their true positions.
The sooner the banks do this the better it will be for all of us. It is inevitable that this will show that some banks will be too weak to survive and they must be allowed to go under otherwise they will act like a cancer, by slowly dragging the stronger banks down. A law should also be passed to say that if any banker deliberately tries to conceal the banks true position, in the misguided hope that they can ride out their luck until the credit crunch is over, then they should be sent to prison.
Unfortunately the way the banks leveraged the money supply to fund an excessive number of over imflated mergers and aquisitions, over the past decade, suggests that much of the stock (even now) remains over valued.
Finally and on a more political note I would like to say to all those people who keep attacking Gordon Brown for allowing this to happen, when he was Chancellor of the exchequer, to stop harping on about it. Had he tried to impose restrictions sooner then those same people would have accused him of being anti competitive or attacking the city establishment and destroying Mrs Thatcher's and the last Conservative governments wonderful revolution to de-regulate the city. That wonderful free for all for all legacy to allow a few spivs and theives to proseper at the expense of ordinary and just as hard working people.
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Given that the moderators appear incapable of the least financial calculation - my previous post remaining suspended for quoting a Stock Exchange release dated a mere 3 weeks ago reporting figures which the Chair of one of the UK banks must have known to be incorrect - let me put it another way. Certain of these banks have repeatedly issued equity which has disappeared within a matter of weeks, and yet continue to present their businesses as going concerns. It is not in our interests to see these organisations collapse, but none the less, it is fraudulent to present them as going concerns in this way, end of story.
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With reference to the 'spivs and thieves' - the government should continue in its radicalism and freeze/control the bank accounts of those that have enjoyed erroneously high bonuses these last 5 or 10 years. And in time, after due consideration, some or all of those monies should be confiscated and put back in the public's purse.
There has to be clear accountability; and the process must be seen to be executed (sic)
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The seeds of the destruction of the banking system and the dangerous unbalancing of the UK economy were sown by Thatcher. Robert Peston is right.
She destroyed the basic industrial infrastructure of this country by force, and told their displaced workers get on your bike and auf weidersehn, pet .
She allowed strategic industries like utilities to fall into foreign ownership, meaning that the profits of those industries disappear abroad.
She created a regulatory framework which is a toothless charade. Foreign utility owners are able to ramp prices in the UK at will and charge UK customers three times their customers back home without let or hindrance.
The Bank of England failed to require the banks to retain adequate Tier 1 capital levels to remain solvent. This is a direct reason for their nationalisation and taxpayer bail out.
Thatcher's policies humiliated this country, bust the pound and consigned Britain to whining on the sidelines of Europe rather than being a leading nation with a seat at the top table.
But Thatcher can't be blamed entirely.
Labour has been in power since May 1997. Blair/Brown's first act was the give the Bank of England independence. It was much hailed at the time, especially by the city!!!
Little noticed but in the small print was a move from RPI as a measure of inflation to CPI. This measure excluded housing costs just as house price inflation roared away by some 170% due to an excess of liquidity. But from the Bank of England's blinkered CPI point of view, inflation was ok, just as it was in fact rip roaring away with house price increases of 20% year after year.
This was arguably. the bridge too far in financial deregulation and has brought us to where we are, with a nationalised banking industry.
As the greek philosophers knew, nature abhors excess and will always return to a state of equilibrium.
From unregulated capitalism to unadorned socialism, all the "isms" are being tried.
It's time social democracy was tried as John Maynard Keynes recommended in his General Theory, as a cure to the ills which led to the depression.
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This comment was removed because the moderators found it broke the House Rules.
Ok so everyone is to blame.
Should we not start to think about the underlying priciple of our economic model. Growth.
It is surely impossible to continue with the idea of exponential growth be it at the rate of 1% or 3%
Finite resource simply will not allow it to happen.
So how does a non growth economy work?
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Something in all this talk about bailing out the banks surprises me and this is what is not being said.
Let's see who exactly is being bailed out. RBS, HBoS, LloydsTSB but Barclays are going to get their money from another source.
Now RBS, let's call them by their old name, Royal Bank of Scotland, note Scotland.
Now HBoS, now that is Halifax, in the North of England, and BoS, Bank of Scotland.
LloydsTSB, well that is Lloyds, plus TSB, the former Trustee Savings Bank, which is 'merging' with the aforementioned HBoS.
So, does a pattern seem to be appearing in respect of this bail out, by a Scottish Prime Minister, and a Scottish Chancellor, who are both Scottish Members of Parliament. The same Prime Minister seems to want to be regarded as Chancellor as well, even though he is the former Chancellor.
So, please stop this, why should we English taxpayers bail out Scottish banks, this is more of the Labour scorched earth policy, strip all the money we can from the English, they won't vote for us anyway, and labour will present themselves as the party which saved Scotland from the SNP.
Labour must lose at Glenrothes, that is what this is all about, saving labour from electoral annihilation. They, sorry the Chancellor, gave us our compensation for the loss of the 10p rate, just before a bye-election.
Mr Brown is our saviour, only the our is not Britain, the world or anywhere, it is Scotland. Where are you just when we need you Mr Peston, surely you are not Scottish as well.
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If we are requiring (rightly so in my opinion) validation of the huge executive pay outs for bankers, how can we not fairly query those of government and politicians. Does Peter Mandelson deserve this additional pay to rejoin his party and how does our Prime Minister justify this additional expenditure at this time? I thought it was all hands on deck for the good of the world economy (not self interest) at this difficult time!
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Now let me add some figures to the mix.
Nick Leeson cost Barings less than 1 billion.
RBS started with capital of around 12bn, issued another 12 bn, then 16 bn, and are now looking for 20bn. And Fred the Shred (so-called for his rubbishing opf take-ver company staff) is taking 8m as a parachute!
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Fred Goodwin will pocket £8 million for running his business into the ground and operating a business with a balance sheet that, in a non banking business would not pass audit.
Nick Leeson got jailed for losing a billion. Goodwin has lost at least 50 billion and gets a bonus!
RBS and these other banks have been operating with balance sheets that were not a true valuation of the assets of their business.
That is illegal.
Anyone who has invested or saved with the banks based on their incorrect accounts should be compensated under the Criminal Injuries act if nothing else.
That no-one is looking into the obviously defective accounting and auditing of the banks is in itself criminal.
Who is hiding what here?
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I have to agree with rahere. The banks have been presenting their companies as going concerns with false balance sheets for at least a year.
They have accepted money from investors and savers against balance sheets that should not have passed audit.
My first post on this in this blog has been sent to moderators.
Will this one??
Are the BBC protecting the banks now?
I, like rahere and others smell a cover up that deserves Fraud Squad investigation to say the least.
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I'm sure a few billion could be raised by cost cutting and cutting back salaries. But obviously the banks won't do this even though everyone else who is struggling in these uncertain times is doing so.
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"Death of ... whatever"
I guess it's like the granting of any freedom: it depends on how it is used and the effectiveness of the policing.
We have to accept that the FSA has failed. The Bank of England has failed. And the Treasury, the ultimate governor of the financial system, has failed too.
Not a pretty sight.
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The banks, humbled? Really? Tried dealing with them at branch level recently? They make the Civil Service look competent and the model of service, even when faced with someone who knows his stuff.
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#295
"This is not the end of Thatcherism"
Then, like others, you do not understand Thatcherism! If you had said that 'This is not the end of Capitalism then you would have been correct, Thatcher believed in the Free Market and free market forces, if Thatcherism is alive and well these banks would be allowed to go bust...
Capitalism does not equal Thatcherism, capitalism was alive and well before Thatcher came to power in 1979, even in the hight of the 1960s when 'Socialism' was arguably at it's hight.
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The banks used to be backed by reserves which are now assets of questionable value. This practise known as creative accountancy has been going on for years, in days gone by if a bank saw evidence of this in their customers balance sheets their end was nigh. How times have changed.
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#333
Err, you forgot one, or did you miss it out because it breaks your 'flow' (some might call it an anti Scottish rant), namely Natwest - National Westminster Bank - formed out of the merger between two of the older London banks, National Bank and Westminster Bank...
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Pity many of those who have taken out loans with the newly nationalised banks. As those of us who lived under successive Labour governments and their nationalised industries will recall, nationalised firms are anything but customer-friendly.
Nationalised firms -- telephones, railways, utilities, and others -- dictated to us exactly what we customers could and couldn't do: no discussion! It was all hideous!
All that utter nonsense ended up in a three-day week and household waste piled up on every street corner. Hail Mrs Thatcher and the Tories to save the country from bankruptcy.
To all those bank customers who have debts to the newly nationalised banks, may I say *watch out*. The days of dealing with a friendly, helpful, courteous but reasonable banker are now gone, and for quite some time. Doing business with banks is about to become a nightmare, a real PITA.
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I'd be interested to hear whether the various architects of the current disaster(s) will be called to account in the coming months and years and, if so, how. In the USA, for example, the FBI is looking into cases of suspected fraud or misrepresentation (e.g. in the course of selling mortgages) and I can imagine that hordes of contingency-fee-paid lawyers will be targeting some of the deep-pocketed heads (or ex-heads) of financial institutions. Or am I being naïve ? Will the people who raked in enormous bonuses for bringing down their companies and ruining thousands of businesses and conservative shareholders simply disappear unscathed through the fog of history to their Caribbean estates until the old-boy network decides the dust has settled and calls them back to well-bonused positions in new companies.
What do you think will happen in this respect, Robert ?
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Robert,
Stick to reporting the facts as they are released, not pre-empting news that you have that has been embargoed. Feel free to suggest what you might think will happen but saying someone is going to resign and be replaced by X before it is announced is not really the BBC way of doing things...unless they have changed their journalistic standards.
Tight Scot
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#344
Err over seas call centres the are pain of the private banks and privatised industries, closed ticket offices are the pain of the privatised railways not of BR, high utility prices are the pain of the privatised utilities, not the publicly owned - not for profit - organisations that existed prior to the 1980s. Customer service is more than just being 'efficient' or quick.
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Comment 333 T. A. Griffin.
Why should the English tax payer bailout Scottish banks in much the same manner as why should the Scottish natural reserves continue to finance the English taxpayer.
I think you should push for English separation. I, as a Scotsman, will for one lend you my vote to push towards this end.
You are most definitely on very shaky ground on any discussion of who benefits more out of the Union. You will lose this argument hands down, but alas this is not the disussion in hand.
SIC
Your comment clearly shows you have little or no grasp of the seriousness of the situation and its underlying source.
These banks are massive international concerns, especially RBS (6th largest bank in USA).
The fault lies within the regulation of banks and the irresponsible and cavalier behaviour of senior management within the relevant institutions and not with the Scottish nation.
And as a side swipe, you appear to have nothing but distain of anyone north of the Watford gap as I do believe that you had a go at the good folk from Halifax as well. I am surprised that you didn?t also kick-out at B&B also. More northern trash to you no doubt?
How insulting to all those you aimed your poor taste comments at. Grow up son and take your bile elsewhere.
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#343
I left out National Westminster Bank in the the same way that I left Williams and Glyns Bank, Martins Bank, and most importantly Midland Bank, out. Why Midland because they were taken over by HSBC and which bank has not had to go running for money, that is right the very conservative HSBC.
I do however remember that Midland had done something stupid in their past, Crocker Bank! Now what lesson did nobody remember when they tried to expand.
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When is Robert due for his trappist secondment, given that too much talk can cost lives and savings and maybe wobbly banks?
Semi-serious: perhaps he can be the good news as well as the bad news cop now and again? Always look on the bright side? in view of Keynes' mordant comment that in the long run we're all dead.
Curiously, Chinese law forbids excessive bad news reporting as contrary to China's long term economic strategy, if not semi-treasonous.
Nevertheless, I look forward to his excited succint reports.
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#349
Correct me if I'm wrong but hasn't HSBC had to go running to 'mummy' though for funds so they meet the T1 obligation set by HMT, had they not been able to extract funds from the state backed bottomless pit that is China they would have been at the talks yesterday and this morning they would have been trying to raise there funding levels just like all the others.
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This comment was removed because the moderators found it broke the House Rules.
#348
I have actually no problem you referring to me as son, especially as I am coming up to another important birthday, ie 60.
You see my problem is that I was born and brought up in Plymouth, you know that world famous port from which the pilgrim fathers sailed, and also the site of one of the most imposing war memorials in England.
Now, mothers bade fairwell to their sons in huge numbers from Plymouth Hoe and a lot never returned, the dockyards kept the navy going and the workers strived to do their best.
Now, the dockyard is no more, the work seems to be going to Scotland to keep them happy, Plymouth, it is dying on its feet, apart from the Argyle who many sailors will have watched before they sailed off. So, yes I do detest with a vengence pork barrel politics and corruption, nepotism and depotism.
Oh, and how long before the government has to admit that in this dire financial situation we have to withdraw our troops from Afghanistan and Iraq, that is unless they become paid mercenaries. So, old boy the one thing that we should stand for in this country is freedom of speech, or is that not allowed because careless talk costs lives, silence in the back, the emperor has no clothes!
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I agree that this marks the end of Thatcherism, and not before time.
Pity the old witch is now too gaga to realise what she's done.
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Now that certain banks have been effectively nationalized, will it mean that we can scrutinize their accounts and policies under the Freedom of Information Act? It would be interesting, for example, how much at any given time they may be lending in excess of their deposits, and how much lending may be based on political rather than commercial criteria.
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Isn't it funny how all of a sudden after #353 nobody seems to want to argue over the fact that this is a bail out of the Scottish financial system by a Scottish Prime Minister and a Scottish Chancellor.
So, bring it on, let's see what Gordon says when he visits Glenrothes, I doubt he will even mention his saving of historic Scottish institutions, keeping Scottish jobs. No, of course he won't. Please do not let this man get away with it.
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T A Griffin, My I continue? If you do wish to air your clearly anti-Scottish jibes, you should try to stay within the realms of what you understand; your pub talk conspiracy of a ?Scottish Bail Out? is scarily naive, especially for a man of 60! The RBS is a multi-national bank, yes its heritage is Scottish but its market place is now worldwide.
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That's the problem with the Scots, they get everywhere, why don't they stay in their own little back-yard.
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At least Brown and Darling have vision and the beginning of a plan as to how to dig out from the current international financial morass, and they are to be applauded for it. If the world had continued to wait for Paulson, Bush and company to come up with something cleverer than buying bad mortgages and CDOs we'd be watching a Depression unfold.
Brown and Darling along with Great Britain can't go it alone however, they need full participation from the Euro and American banks along with China and the rest of Asia.
Let's put this in perspective. This crisis is not Thatcher's fault. It is certainly not of Clinton's making, and in the global scheme of things sub-prime mortgages to poor people did not cause this melt down. Poor people don't have money. That's why they're poor. The billions of bad loans that they may have been scammed with as dirt cheap real estate in their communities in the US were artificially bid up never should have been allowed, but it was the banks that profited not the poor. And the amounts are a piffle compared to the world debt in derivatives. We're comparing 100 - 300 Billion dollars to 59 TRILLION Dollars. That's $51,000,000,000,000.00 in derivatives. CDOs, CDSs, SIVs and all the other little clever instruments that banks have been playing with (using our money) since 2004 is what has created this mess, along with negligible transparency in the valuation process. Now that everyone is smelling the manure instead of the roses no one want's to lend. That's where Brown's and Darling's approach comes to grips with the basic fact that when Ann Rand economics 'shrugs' and says 'woops' instead of the world being allowed to fall of his shoulders resulting in a world depression, war, or worse, pro-active involvement by responsible governments and technicians is an imperfect but preferable alternative.
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I'm still owed 400 quid from the farepak debacle. Now that i am a shareholder in hbos , i think i'll give it back to myself.
taxi for hornby and o'drearyone.
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I am not sure Mr Peston or the BBC are reporting all the facts here correctly and it is important that they are.
The Government is NOT acquiring 60% of RBS which is what Peston and the BBC are reporting.
What is actually happening is that the Treasury is underwriting what amounts to a rights issue at 65.5p.
This will be offered to all holders of ordinary shares.
Those not taken up will be bought by the Treasury which means that the Government will own all, some or none of the ordinary shares depending on how successful the 'rights' issue is.
This 'rights issue' will make up £15bn of the £20bn package reported. The remaining £5bn will be injected into RBS by way of an issue of fixed dividend preference shares.