Barclays and British investors
For reasons I explained a fortnight ago, Barclays shareholders don't like the way it's chosen to raise £5.8bn from the state funds and royals of Qatar and Abu Dhabi (see my note, "Barclays Protects its Bankers Pay").
Traditional British investment institutions don't like the substantial commissions paid to Qatar and Abu Dhabi to obtain the money (£172m in commissions and £66m in fees - and the commission would be payable even if the deal was blocked by revolting shareholders in Barclays).
Some existing Barclays shareholders think the interest rates on the novel securities being sold are too high. And they hate the way that the two Gulf states are receiving a generous dollop of warrants that convert into shares.
Put simply, they think Qatar and Abu Dhabi have been sold a stonkingly good deal, at the expense of long-suffering British pension funds and insurers.
Many of these investors simply can't understand why Barclays refused to raise the vital capital from British taxpayers, since the money being offered by HM Treasury to our battered banks looked considerably cheaper.
But although the deal with Qatar and Abu Dhabi leaves them feeling queasy, it's very dangerous for shareholders to reject the plan and deprive Barclays of the money.
Which is why, as the BBC revealed yesterday, RREV - the leading shareholder advisory service - is recommending that shareholders abstain when the fund-raising comes up for a vote on November 24 rather than vote it down.
That said, Barclays wouldn't be at risk of going bust if shareholders forced it to cancel the deal - because the Treasury has promised that all major British banks can raise the capital they need from taxpayers.
But my understanding is that HM Treasury would not provide the money as cheaply to Barclays as would have been the case only a few weeks ago - because it feels market conditions have changed (and it's also miffed with Barclays for implying that British taxpayers' money comes with horrendous strings attached - an insinuation that has embarrassed the banks that are taking shillings from the public purse).
So it probably wouldn't be rational for Barclays to go back to the chancellor with its cap out-stretched.
Is there nothing Barclays can do to placate recalcitrant British investors?
Well it could offer them an extra £1bn each of the two kinds of securities sold to Qatar and Abu Dhabi (they've already been sold £1.25bn of one class of the new securities on offer).
Barclays wouldn't have to underwrite this £2bn, because it would be nice-to-have money, rather than must-have money.
I suspect that pension funds would be ecstatic to be given the chance to buy some of Barclays' so-called Reserve Capital Instruments, which pay an annual coupon of 14% till June 2019 and have warrants attached to purchase shares at 197.775p.
Wouldn't you fancy being offered interest of 14%, with what's known as an "equity kicker" thrown in for nothing?
In fact, I've been contacted by Barclays' customers saying that they'd love it if the bank would pay them 14% interest.
If Barclays offered this investment to its millions of savers (which is not going to happen, so don't get your hopes up), there could well be a stampede to buy the stuff.
These Reserve Capital Instruments are, of course, riskier, than money held in a bank savings account.
But most of us are prepared to take a bit more risk for a bit more return - and that 14% rate, plus warrants, is a wonderfully healthy reward for risk.
UPDATE 11:49
I have just received a copy of the advice given by the Association of British Insurers to its members on how they should vote on Barclays' capital raising.
Unsurprisingly, it raises concerns about the cost of the money being raised, and signals discontent that the securities were not offered in a conventional way to existing shareholders.
The ABI's note is marked with an "amber" top, which means that it rates the deal as irksome rather than scandalous.
But, it also says that its assessment is "pending" - which implies that the "amber" may yet change.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~52~RS~)
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Robert,
You underestimate the squeemishness of the british public when it comes to risk.
Even at 14%, they would squeal like pigs if there was the slightest risk that their capital might actually be lost.
They suddenly pretend that the didn't understand that the higher rate of interest was based on additional risk.
And if the additional interest was based on additional risk, then it is wrong for the taxpayer to reduce that risk to zero.
p.s. When will you be chasing mandleson over his confirmed discussion of EEC tariffs with Oleg - I am starting to wonder if you ever will...
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cripes Robert, you're working late!
I know the overseas funds may be unpalatable to many-but I'd like to just think out loud for a mo-
Selfishly I'm glad cos it means the tax payer (me) won't be bailing out another bank
The rate to pay it back is eye watering, but since the deal was struck, won't the value of the loan be lower cos of sterling tumbling against the dollar and euro? If that's the case then those against can rub their hands with glee!
And finally, I vote the Bloggers party in now to replace GB, AD and MK-as a consumer they seem totally unfit for purpose-propping up the banks thinking this will help the common man! How much more daft drivel will they come up with until they realise, too late, that they have done precisely the wrong thing? Perhaps their next move will be to find some piece of legislation to stop Barclays clinching the deal?
Last random thoughts-look where the money is coming from-oil. It may be plummeting at the moment, but I'm certain oil countries are making more than enough-just not as much as they would like.
At least it's bringing outside investment in when we need it most. Barclays won't go bust, and neither will HSBC. And given the amount of chaos GB's actions have caused, I'm glad some banks have not taken the money. I suspect these two banks are strongly placed and don't need interbank lending. No point quoting LIBOR-link everone's lending to the bank base rates.
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"stonkingly" ?
Collins English Dictionary: Complete and Unabridged New Edition gives:
stonk: to bombard (soldiers, buildings, etc) with artillery
stonkered: completely exhausted or beaten; whacked
What means "a stonkingly good deal"?
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I understand the choice was to borrow at 14% APR from Qatar and Abu Dhabi or borrow at 12% APR from the British government and become subject to its whims and domestic political imperatives.
If you ask me, 2% APR is a pretty poor discount to receive as compensation for running the risk of being co-opted into a public relations exercise, potentially being sacrificed out of political expediency.
I believe Barclays exercised due diligence and did the sensible thing in looking elsewhere for capital. As a Barclays customer, I am happy with their decision and hope they have the guts to hold firm.
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I like the last night post, I have this image of you sitting at a massive multi-screen computer with wires carrying economic data directly into your brain.
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Robert please start another blog quickly this outfit and its board does not merit our time and effort in discussion.
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Give bankers a large room, a can of paint, and a set of brushes....and they'll paint themselves into a corner every time!
Looking forward to the vote, as the common shareholders realize they have been shafted by management.
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@2
Nice to know at least 2 banks will be ok. i can go to bed now and sleep, haha
@5
Funny
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This comment was removed because the moderators found it broke the House Rules.
The psychology of this is fascinating. Is it just a poker game between the Treasury and Barclays management, with shareholders sitting on the sidelines hoping to get dealt in on the next hand? Or is it more subtle than that?
I have written more about this at http://www.knowingandmaking.com/2008/11/bounded-rationality-and-agency.html
Comments welcome.
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Barclays has a choice between the Arabs and the Ayerob's ,by giving the Arabs a juicy piece of the aaaction they will receive stable long term capital injections of oil dosh ,to give to Debt Junkies hanging arround outside [AND IN]branches before and after closing hours like seagulls following an ocean liner
If Barclays accepts government money it will have to pay it back before paying dividends ,which means it cannot pay dividends without ruining or diminishing its capital base .
It is worth remembering that Barclays will be able to create potentialy 10 times as much credit from any increased base deposits, to give the DJ'S which should be a great hit for them .
Warren Buffet got a good deal with his bank so why shouldnt the Arabs ,and the 2% difference can be recovered everytime they use their gold to infinity and beyond credit cards to buy a disposable car or bank [difficult now that our localy run car industry has gone].
Once upon a time[before the big bad shanghai motor co. existed] barclays gave me £10 too much change ,when i realized the error and tried to return it 2 weeks later they refused to accept it, despite repeated and irritable insistance on my part ,they said they had sorted it out ! [Its true after all ,money is created from thin air just like it says on U tube]
I wont go back next time,even if they beg me not to .
It wasnt until the latest credit crunch that i realized how time consuming reaccountancy could be in the magical world of double [re] entry bookeeping
To end off topic
a quote from Peter Warburtons book "Dept and Delusion"written 1999
"What is clear is that when the next global bear market in equities and bonds arrives, the unwinding of highly geared derivatives positions will trigger financial explosions in every corner of the developed world."
[CAN YOU READ? PAULSON]
After one year of credit crunch and not one" i told you so" from PW, he must be English .if you listen you can hear him smile every time Gordon says "prudence and stability "or "no return to boom and buzt"or "the world should follow my plan"as if it had ignored his bagpipes version of amazing uninterupted grace for a decade....Where's the cliff?
I like Barclays despite they refusing me a loan ,when I HAD 80%deposit down [yes80%]in the good old days when bankers were w.......BANKERS
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Simple facts
Houseoweners cannot pay off their loans
Governments cannot pay off their loans
Banks cannot pay off there loans
Students cannot pay off their loans
Because there is not enough fiat money available to earn ,to pay off ALL loans PLUS fiat interest ,irrespective of how hard we work ,
Hard work cannot get a quart out of a pint pot
But there is no harm in trying
Trust me im an economist
If Banks would just accept used bottle tops as interest ...then theoreticaly all interest could be payed off and all debt cleared ,ultimately .
Im from the milton keynes used bottletops school of economics of course.
keynesiian economics is just a carrot on a stick that prolongs the folly long enough for hamsters to get heart attacks in their wheels and encourages the economic equivalent of the Roman practice of decimation or the more ancient practice of canibalism now making a come back under the guise of Keynes by giving the right to the state to chose which taxipayerrs to decimate and eat or remove their organs ,even if they are yet to be born . Interest payments must not be fiat ,only "in kind "fiat interest is unkind
Which brings us back to Barkleys about which i have nothing say .
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Mr Peston, one does rather wonder what our Eastern friends are thinking about this. Whilst they may be looking at a failed bank, I would sense that a viable institution would be more to their liking.
Note to all: A read of the Association of British Insurers website has them reassuring all and sundsy that in fact the UK insurance market is NOT overly exposed to toxic debt as has been supposed due to tight regulation over the past 6 years demanding sufficieant capitalisation for exotic instruments.
Thus, my view has changed regarding the position of UK plc. We are likely to come out of the doo doo faster than other countries.
The main problem is still lines of credit. Not just to manufacturing to keep the factories running, but to consumers to cover the financing to buy the goods and to the shippers to get the stuff off the docks and onto the ships.
This is where Asia is most vulnerable, they have money, they can produce goods but without letters of credit cant ship.
So, UK is a small island with large population, property values, no matter what the situation, do have a floor. UK insurers are not so precariously balanced of exposed as once thought. People are still consuming (Westfield centre opening).
Northern Rock has been in the hands of the Govt for some time now. BOS and RBS have had to allow SOME scrutiny of books to access credit from HMG. So, unless HMG is VERY VERY stupid the levels of exposure to toxicity must be known or can be estimated.
So why are no figures forthcoming....
Why did HMG insist some banks increase the levels of credit HMG provided? To cover eventuality OR to get greater foothold in these banks. (At that time HMG must have known the real value of NR exposure).
Same thing for the USA, time has passed and the Fed must be able to accurately estimate debt, is this why Paulson changed direction so rapidly?
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"BBC business editor Robert Peston said RREV's comments would be "an embarrassment" for Barclays."
In the first place, what have PREV to say about their role in the current crisis since the very people they purportedly "advised" are the biggest sufferers, having lost twice - once by being looted by Gormless Gordon and again by his nationalisation of the various banks ??
Secondly, just how sure are they that the people they advice will have any effect on this deal no matter how they vote ?? In other words, what percentage of the total Barclays voting shareholding do they advice ??
If I remember rightly, a significant chunk of Barclays voting shares are in Far and Middle Eastern hands, not merely owned by their Sovereign Wealth Funds but in the hands of various (very?) rich individuals as well !!
The roar of a lion may cause Barclays embarrassment and concern but the yappings of a poodle are just annoying !!
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" Barclays' Gulf cash move attacked" - BBC headline
Wow !! Attack poodles !! What's next ?? Suicide hamsters ?? Kamikase canaries ??
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Lets all wish Prince Charles a Happy Birthday.
Whether you like him or not,Prince Charles has served the Nation created his own Institution and done a great deal for many people with the best of intentions.
Perhaps all these Knights/SPIVs who seem to run our banks could learn a lesson or two.
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#14 "This is where Asia is most vulnerable, they have money, they can produce goods but without letters of credit cant ship."
Extend your line of reasoning a little further especially in light of this blog and you may find the answer to your question.
HSBC - an international bank with predominantly Far Eastern operations
Barclays - an international bank with major Middle and Far Eastern shareholders and growing operations in those areas
HBOS - a localised bank with access to the City that can be turned into a Letter of Credit (and Scottish banknote) issuing shell subsidiary of a Chinese bank
Need I say more ??
As for Poulson, could it be that now that the various US banks have paid the bonuses to their senior management, the "bailout funds" are used to buy the soon-to-be-useless shares from the shareholders (many of whom are the senior management because of bonuses in the form of share options) !! When the *real* extent of the toxicity is known and the banks are *REALLY* bust, it will be the government who will own the majority or all of the shares !!
I know I am paranoid but am I paranoid enough ??
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Gordon Brown wants to persuade the rest of the world to borrow money as US and UK have done, to boost the world economy. My question is, if every country borrows huge amounts, who is there to lend these astronomic sums? Is that what the Mars probe is all about? Looking for a new civilization to borrow from?
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#3 Strangely enough, the Ultra-Complete
Maximegalon Dictionary of Every Language Ever omits the word "floopily", which simply means "in the manner of something which is floopy".
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#14 Re - UK insurers - The only time to worry is when the Names are packing their remaining belongings into their last Rolls Royce and heading for the hills !!
Until then, Lloyds of London is still the most highly respected, 300+ year old insurance operation in the world !!
Insurance companies come, insurance companies go but Lloyds of London had been and are still doing business as usual.
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"Sterling has been one of the biggest victims of the global financial meltdown - losing more than a quarter of its value since July."
However, no mention was made about the perpetrator who caused it GBH (Grievous Bodily Harm, for our American cousins reading this). Could that be our Glorious Leader ??
Katie Hunt, BBC journalist further advises -
"And if you really want to maximise your hard-earned pounds, Iceland's financial crisis has made the notoriously expensive country more affordable.
The pound has gained about 25% against the Icelandic crown since the end of June, when Iceland's economy began to hit the rocks. "
Excellent idea if your family and friends would love a packet of cod and a bunch of bananas for Christmas !! FYI, Iceland is the Northernmost banana-growing country in the world !!
Methinks, Hungary would be a better bet especially as their wine industry has a smidgen of trouble selling their excellent wines and their forint has gone down too !! Cheap *tax-paid* booze and fags !! What more could you ask for, for Christmas ??
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" New recession fears ahead of G20" - also called Bretton Woods Two by some.
Methinks, it would be more like "55 days in Washington" with the BRIC diplomatic staff desperately defending their legations against the rioting Washingtonians(?) until they are bombarded into submission by tons of US debt !!
Hey, this sounds like the script for a good movie !! I wonder if Charlton Heston, wherever he may be, would like to come back and take part in it. He could be "The Ghost of Depression yet to come" !! Two movies for the price of one. Surely a good deal for Christmas !!
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#23 I trust you mean Lloyd's as in Lloyd's of London and not Lloyds as in Lloyds TSB (soon to be Lloyds Banking Group plc)
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The San Mateo County Investment Fund, California, is suing Lehman Brothers executives and auditor in an attempt to reclaim 101mil pounds. The lawsuit cites the executives were fraudulent in repeated public statements about the bank?s good health while desperate to avoid collapse - allegedly. (from the Times).
Hundreds of bankers and hedge fund mgrs today meet in the O2 arena to discuss(?) Lehmans losses. (Where is semtex when you need it {joke})
So the US can go after their banks and auditors, but can UK investors, bank staff and sundry subsidiary elements (inc taxpayers) attempt at least to exert some form of justice?
Why is the answer to this question a big NO?
Why does every HMG bury its head in the sand regarding personal and corporate liability?
There is only one answer, fat dangly carrot directorships outside government. So does this make HMG and the civil sevice, more moral and less corrupt than say A.N. Other 2nd world govt that is acknowledged as being dishonest?
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#26 Yes, Lloyd's of London. I stand corrected, sir. Blame it on a shortage of caffeine and nicotine coursing through my alcohol stream !!
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> its cap out-stretched
Is that where the term "capitalism" comes from?
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Robert....I cannot say I have followed the fortunes of Barclays very closely in recent weeks but correct me if I am wrong. Are the not board of Barclays the same board who got the bank into the mess its in the first place ? If so how and why are they still in a job, never mind borrowing even expensive cash ?
It seems to me as a person who spent the bulk of his working life employed by others that should one not do ones job properly one got the sack and that was it. So why are all the people who got the company, country, world (take your pick) still in jobs and telling us how we can get out the mess they created, yet those who did their jobs well are being laid off in thousands around the world ?
The old saw of trying explaining to an alien from another planet how to make a cup of tea should now be replaced with, try explaining why the very people who made the worlds largest cock-up are the very people we are supposed to believe can get us out of said cock-up !
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Who cares if Barclays go down the pan. Nobody likes them anyway. It's the shareholders (and pension funds) that I feel sorry for. They should sell while they can.
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I am surprised that GB nose isnt like pinocchio
http://www.youtube.com/watch?v=kKZfLZWaV_Q
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#27 "Where is semtex when you need it"
No need for such drastic measures, sir !! Just dangle a bunch of hard cash and gently lead them into the Thames. If it worked in Hamelin, I'm sure it'll work here !!
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An irrelevant discussion really, Barclays along with Lloyds and HBOS will go the way of Northern Rock in due course.
Whilst the return paid to the Middle Eastern investors looks high, they might as well sit around a table and burn £50 notes.
The full impact of the credit crunch and the shrinking economy that is starting to take place is not fully reflected in Barclay's balance sheet.
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Why is it you don't like Barclays' shareholders?
I am sure very few of them are revolting people but most surely are relatively nice normal people we'd like to have for dinner.
If the deal was blocked by shareholders in barclays revolting this would be a different matter.
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Just a couple of observations on the Treasury's latest Press Release, masquerading as BBC impartial reporting.
Firstly, if GB, Ally D (and RP) really want a debate with Barclays over accepting taxpayer investment into Barclays, the first thing we need is clarification as to what the government's position would be on Barclays' Lehman acquisition. This is clearly a major strategic investment by Barclays, but the government in other cases, most notably RBS, appears to want to divest business of this type, ie investment banking. If there is a major difference of opinion on strategy, then there is little point in bringing on a major shareholder that doesn't support the management's business plans. That can ony end in tears.
Secondly, there is a great deal of confusion as to precisely how the government will manage these stakes in banks. On the one hand we have Hampson saying that they'll be managed at arm's length, no direct appointment of Directors for instance, his job is to manage the government's investments not manage the banks etc. On the other hand we have GB and Ally D saying banks have to lend at 2007 levels, restrict remuneration, be more understanding on home repossessions etc, which sounds like managing the banks to me. Therefore, who wouldn't try and avoid taking the government onto the share register if it can possibly be avoided given these mixed messages? The investors Barclays has tapped have a long history of investment, and their philosophy in terms of corporate engagement is well understood. That's worth paying an extra couple of percent in dividends for the certainty.
Thirdly, keep in mind that the banks' effective shareholder will almost certainly change sometime before mid-2010, assuming Labour has little chance of winning the next election. A further cause of uncertainty, therefore, is whether and if so how, a Conservative government would treat State shareholdings in the banks.
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"Ms Pelosi has suggested that $25bn for the three carmakers could come from the $700bn bail-out package for the financial sector.
However US Treasury Sectary Henry Paulson has appeared to rule out such a move, saying the funds are only for financial firms. "
At least Paulson is loyal to his mates to the very end. He just might need his old job back when Dubya departs the White House.
Will we soon see a Lord Brown, Duke of Northern Rock ??
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Does anyone know if Barclays were actually offered Taxpayer funds??
Maybe they werre not and had to go to elsewhere.
Is there something lurking in Barclays we don't know about. We have all assumed they walked away, but were they asked to leave . . .
Just a thought. Trust no-one and nothing at this stage!!!!
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But Barclays would have known the scale of the fees etc from the start.
Which just goes to show how much they value the ability to carry on with their 'tax schemes' !
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#3 "Stonking"
I have heard it used in the Forest of Dean area in a context such as terrific or great.
#36
"Thirdly, keep in mind that the banks' effective shareholder will almost certainly change sometime before mid-2010, assuming Labour has little chance of winning the next election. A further cause of uncertainty, therefore, is whether and if so how, a Conservative government would treat State shareholdings in the banks."
-The Conservatives should be asked!
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Barclays have not been a British institution for many a long year - they attempted to sell out Cadbury Schweppes, as it was then, to the Americans something like twenty years ago during the Cola Wars, a matter of of pure betrayal as they were formally advisers of Cadbury's Treasury and destroyed a long-standing relationship in the process. I know, I was there during the discussion, having discovered myself what they had done and subverted their dawn raid by some nifty footwork - their man of straw heading the attack eventually ended in jail, if I recall correctly.
To this extent, then, this becomes a conflict between a pan-National and a State, and there's a certain risk the pan-National could go overseas. However, the complement to that question is whether HMG should stand behind this unaccountable body in any way, even down to allowing it to operate in the UK as a British retail bank: not only the shareholders, but more imoprtantly given the current state of Government support, the account holders as well cannot have any confidence under these circumstances that their rights under UK Law will be respected if push comes to shove.
Selling England by the Pound, indeed...
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Re No.12 I cannot believe that someone actually said "trust me I am an economist". There is still a sense of humour out there
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There's a great article by Mark Gilbert on Bloomberg this morning. It's a light-hearted, but nonetheless informative, look at who is to blame for the credit crisis etc. Actually, it gives a good insight into the pressures to which various players have been subject over the years leading up to the crash. There's a good twist at the end too.
The article is in the Opinion section of bloomberg.com, entitled "Credit-Crunch Villains Pass the Buck, Party On"
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I think Barclays just want to keep the grasping hands of The Treasury off their private parts.
I can sympathise with that sentiment.
Whether this is a good deal or not won't be known for some years so as far as the current board of Barclays are concerned this deal washes its own face.
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#1 & 9 You guys exhibit a particularly jaundiced view of the intelligence of the average man in the street.
In general people don´t have much of a problem in correlating risk/reward. Relative to population very few individuals went after the super normal returns alleged to be available in Iceland - and this despite an expensive and sophisticated PR campaign designed to get everyone subliminally signed up to the joys of Iceland.
Only someone from the banking sector would have the nerve to sneer at people who may dare to raise a timorous voice of complaint should they find they have lost money due to "fraud" or"criminal"activity.
What do you expect people to do if they lose money? Of course they are going to whine, whinge and complain. What do you GM, Ford and Chrysler are doing, what do think all the banks were (and still are) up to?
Everybody is getting into the whining and whinging business - because they are not stupid and they can see that it´s a business that pays.
Why pick on the average Joe in the street? Why not reserve your invective for the corporate whingers.
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#14
"Not just to manufacturing to keep the factories running...."
What factories? what manufacturing?
Uk plc is just one big call centre. Manufacturing was last seen in the UK co-existing with bears and wolves. It died along with Evelyn Waugh, the Railway Children and Postman Pat.
Germany, the world's largest exporter and one of the largest manufacturers is now officially in recession. What chance does this abused island have in the face of such an economic onslaught. Nil.
Where did it all go wrong?
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Dear Robert
This is not a case of going cap in hand for a Bail out, its to do with who you know, The Chief Excutive and his wife are close friends of The kingdoms Sheiks and are often seen together. This is too close for good business pratise, s it can lead to impropieties in handling the Finanaces of the Bank.
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Amazing how things turn around!
In the 1970's I was working in Qatar and I went shopping in Doha with a friend. He bought something on his Barclaycard and we were arrested and taken to the police station.
We were told that Barclays had loaned nnn million to Israel and the Arabs were not pleased. After a lecture in a like manner we were released. It was all very civil.
I was very impressed with the smartness of the uniforms, pressed razor sharp.
Now Qatar is going to invest in Barclays.
All's well that ends well.
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40 'Stonking' refers to mortaring an enemy position ( I was a mortarman in the Infantry). Because mortaring the enemy is a good and enjoyable thing (unless you happen to be the enemy) then 'stonking' is also used to mean great or brilliant.
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#12 "keynesiian economics is just a carrot on a stick that prolongs the folly long enough for hamsters to get heart attacks in their wheels and encourages the economic equivalent of the Roman practice of decimation or the more ancient practice of canibalism now making a come back under the guise of Keynes"
Have you read any Keynes at all? Or JK Galbraith who developed his ideas? If so, I would be grateful if you gave me the references which justify your assertions so I can look them up. (I have most of the relevant books in my collection.) Certainly, I do not recall any reference to cannibalism in "The General Theory".
Also, in which sense are you using the Word "decimation"? In ancient Rome, this was a practice whereby lots were drawn and one tenth of a legion was executed for cowardice or mutiny. In modern, incorrect, parlance it tends to mean that 90% of something is destroyed.
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as far as I understand it, HMG offered bailout monies to all the banks-Barclays and HSBC said no thanks we'll go elsewhere if we need to, and they did!
If memory serves me correctly, the reported reason for them turning down the offer was that bonuses etc wouldn't be allowed for shareholders-that may have reporters speak for they don't was government interference and oversight nor to have to come at least partially clean about their misdeeds of recent times!
At least it's not tax payers money!
Hope this helps!
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It's blindingly obvious that Barclays' preference for expensive private investment over cheaper taxpayer cash is due to a desire to prevent regulation, of both remuneration and risk-taking, and there is an obvious link between the two.
What the government should now do is to allow the private investors to put their money in, and then regulate the %^"* out of Barclays anyway.
The bottom line has been demonstrated- that no major UK bank can be allowed to fail, and so we taxpayers and ultimate undrwriters need to see what UK banks are holding. Send in the SAS if necessary.
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#44. stanilic wrote:
"Barclay's just want to keep the grasping hands of The Treasury off their private parts"
I was wondering if it was keeping the prying eyes from their books that was the problem?
I just do not understand the logic of paying over the market price for money unless there is a good reason to do so.
There are two reasons that I can think of:
1. by getting money from the Middle East they hope to do more business in the area
2. by not taking the Treasury shilling they avoid its scrutiny.
But why no do both? Take the cheaper money from HMG AND the Middle Eastern money too? Why offend the Treasury in the country in which you are regulated?
PS haven't they been loosing senior people recently?
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Post 13 and pretty much everyone else has missed the blindingly obvious reason why Barclays board wants to pay the Arabs 14% and not the UK Government 12%.
It allows them to keep paying themselves and their bankers huge salaries and bonuses.
The following is a long but very informative read from their 2007 annual report
http://www.barclaysannualreport.com/governance/remuneration_report
If you ever wanted to know how much the board earned and how much they got in bonuses, share options etc.
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I think it is only fair now that being as Barclays have walked away from Treasury help, they be allowed to sink or swim and no further offers of help be made to them.
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Decimation?
If we applied this to all insolvent bank board directors it would obviously only do a 10% job.
So lets do ANNIHILATION 100%.
Once again do the decent thing fall on your swords and resign.
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@36
I will tell you why GB and Ally D, wanted the banks to lend at levels of 2007.
Its been labours policy since they came to power to relaxe our boarders, reason being it help inflat house prices. if you take a look at optimum population trust you can clearly see that house prices rise faster if poplation grows qiucker, robert pointed out that the gap between rich and poor grow wider than ever from 2002-3 up until the burst. you can also see that back in the last eighties and early ninties population grew, it was only by 150,000 but house prices doubled and then 92 we had the crass and the population fell.
You see if you always keep housing stock lower than demand then the house price will never fall,
keeps going up. but something happened that GB and Ally d never expected, and you have to go to the usa to find out what.
G bush adapted the same policy when he came to power, population rose from 266,000 to 300,000 in 7 years the highest growth in usa history. house prices went up threw the roof just like here.
dont forget both the uk and usa let the banks lose, everyone happy and spend spend spend. great...............
just one problem the house prices where growing to fast and then came the risk, so the yanks packed these risks up and flog them hoping they would be ok. but as we know now it wasnt, thing is it was northern rock who fell first, and in doing so shortly after uk house prices began to fall. the very fact that just that one bank may go to the wall triggered alarm bells, so now you have the crash of 2008, thing is this is ten time worse than 92
there is nothing wrong with the free market
the transporting of goods from one country to another, but when it comes to people its a little different. take france 2004 to 2006 thousands of brits moved there and the average price of a flat rose by 16.4% and a house by 12.5%. poor germany there poplution as stayed the same over the last few years they dont have a housing problem
But they do have a uk and usa problem. we have spent up so we cant buy there goods anymore.
GB AND BUSH KNOW EXACTLY WHATS GOING OFF THEY GREATED THIS MESS.
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wow!
After reading lots of blogs over the last couple of months I am still amazed at the amount of knowledge and info that appears on here! These should be required reading for anyone studying Economics-top of the list should be would-be prime ministers, treasury ministers and bank CEO's!
Keep it coming folks! If only knowledge was a bankable asset....
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Would I be alone in feeling that a brand new British bank, with purely British money would find a lot of customers?
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The apparently very attractive terms on which Barclays has sold its Reserve Capital Instruments to the feudal rulers of Qatar and Abu Dhabi suggest that they are indeed very risky. Either that or the directors of Barclays are stupid or corrupt.
Whichever of these three possibilities is true, it is a good reason for keeping clear of Barclays.
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# 59
Before you get customers you need capital. All the evidence right now is that there is very little appetite for investing in banks. In the UK, there appears to be just one willing investor, namely the government. Just about all the private investment into bank shares for much of 2008 has come from overseas sources, a lot of it Asian and Middle East sovereign wealth funds. So, basically, you're all-British bank is a non-starter.
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Hey everyone-I have to whisper this cos I don't want say something loudly in case it is a figment of my imagination or wishful thinking...draw closer my friends...
I was just looking at MSN money-in their headlines (not Reuters) I thought I saw the following:
'bank chiefs under increasing pressure to resign'
And
'Barclays mortgage rate below 4%'
I looked at another headline, and when I returned to the page both of these had vanished!
I was either seeing things or MSN put old news headlines up!
How peculiar!
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@ #11: Once again, a misrepresentation of how fractional reserve banking works. You are assuming that *all* money created through the process is reinvested into Barclays; in reality, it won't be - it wil be re-invested into and created by a wide range of downstream banks. The initial deposit may well start at Barclays, but Barclays itself will not "create 10 times as much credit".
I made a model to help people understand how fractional reserve banking works, as too many people seem to have watched a video on youtube and become convinced that some evil magic is being performed. Try putting your own numbers in (and try a reserve ratio of 100% to see what happens when you "stop the practice of fractional reserve banking!") : http://www.novapoly.com/articles/finance/federal-reserve-banking-model/
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and what's this about the government not putting directors on the boards of bailed out banks?
The cynic in me says 'no surprise'
I am however gobsmacked!
Talk about a black comedy.
There are no words to describe this that can be published on a blog!
How much more will GB NOT do before the people snap completely?
Absolutely no chance of confidence in banks returning any time soon. Any chance we can exile him to America?!
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While it?s obviously difficult amongst so much gloom, I hope some policy makers are looking beyond the short term. As day follows night and night follows day, at some indeterminate point in the future we will come out of the present situation.
What happens then? Can the world sustain its current financial system based on high leverage that requires growing gdp to keep the ball rolling? Back in the 70s, each $1000 of gdp required about 1.3 barrels of oil. Since then, efficiency has increased and substitution by other forms of energy has occurred, but only to the point that each $1000 of gdp now requires about 0.8 barrel of oil. We can?t escape the fact that growing gdp requires growing oil production. Unfortunately, oil production is a depleting resource management proposition. The 86 million bpd of current production would be expected to decline by about 45 million bpd by 2020. The oil industry will need to speed up enhanced oil recovery projects and start up new fields to replace this amount of decline before even attempting to meet the increased demand driven by ever higher gdp growth. The oil industry will probably be able to achieve the production needed through 2020, but it has to run faster all the time as the current set of easy to find and produce fields deplete. The situation will only get worse as we go out to 2030 and beyond. Electric vehicles you all cry, well yes for a while but the problem then switches to lithium production and the salt flats of Bolivia and uranium supply.
The fundamental issue is that for our current fractional reserve banking system to function it theoretically requires constantly growing output from an infinite raw material availability. It is increasingly likely to hit up against the painful truth that the world is finite and growing output is getting progressively more difficult. Over the past century, the boom and bust cycle appears to have produced arguably about 10 good years for every couple of bad ones (obviously Gormless Gordon was full of **** when he said he?d banished it), but the future under an unchanged fractional reserve system is more likely to have progressively fewer good years and more frequent busts. What is the future for our children and grandchildren if we do not get rid of fractional reserve banking and revert to a more sustainable full reserve system?
Interesting that the bbc website included an article about Columbians rioting yesterday over a fraudulent pyramid investment scheme. At some point, will the average member of the public realise that the current fractional reserve banking system is essentially a complex pyramid scheme maintained and kept running by strong vested interest from private bankers, central bankers, politicians of all complexions, the highly populous Keynesian economic community and the media? And is one that will be increasingly unstable in the future.
Anyone interested in a more rigorous description of the current financial system should read the many books and articles available from the Austrian school of economists on the www.mises.org website. They may be too libertarian and anti-statist for many readers, but their arguments on the theory of money and economic cycles appear logical and compelling for this engineer.
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Ladies, Gentlemen and Journalists.
I, as regular readers will be aware, am unconnected with the world of finance.
However, the current situation is and will continue impact my expat life severely for some time so I seek solutions.
As an Engineer I tend to be a reductionist, thus my simplistic question...
IGNORING inflation, the effect of the availability of credit on consumers & other factors..... Would reducing the interest rate to 0.5% pull down the interbank lending rate LIBOR to sufficiently low level whereby manufacturing, commerce and shipping could thus resume normal operation??
If this is a stupid question then I apologise, but to me the economy is too complex to micromanage thus certain elements must go hang and the underlying core of the system must be supported.
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"That said, Barclays wouldn't be at risk of going bust if shareholders forced it to cancel the deal - because the Treasury has promised that all major British banks can raise the capital they need from taxpayers."
Yes exactly. Why then can HBOS not do the same instead of being forced into an absurd takeover which will create a market dominating bank which will eventually be required to break up?
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Bob,
Can you lend me a tenner until pay day? Go on, there's a good chap.
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Barclays doesn't want to take British Government money because it doesn't want the Government scrutinising its books.
Barclays has become an investment bank with a smaller low profit retail arm and if the truth was revealed regarding its derivatives contracts, the bail out required may be larger than UK Treasury could cope with.
Accepting bailouts from Arab Governments is risky. Their aims are not purely commercial. Their overriding consideration is the Islamification of Britain and they will use Barclays for that end. Wait for Sharia Banking (nothing to do with the Koran, just a 20th Century inventon for furthering Islamic cultural expansion) in Britain and Europe via Barclay's branches.
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Comment 36 : JayPee28bpr
Yes. What's the purpose of journalism? To inform or to persuade?
If it's to inform, then its central feature must be intellectual honesty. It must override the personal accomodations the writer has made within his own belief system, because these are individual to him. If the purpose is to inform, then presuppositions must be recognised and declared as such, not built into the framework of the argument as accepted truths.
If on the other hand the purpose is to persuade then it's acceptable to treat presuppositions as truths. After all, as long as the readership is aware that the writer is acting as an advocate, not an informant, it can make its own mind up as to how convincing, or otherwise, the arguments are.
To my mind, what is not acceptable is for advocates to pass themselves off as informants. The BBC has no mandate to act as a faux informant and its editorial powers to prevent this should be watertight.
Are they?
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#4, quite right, a 2% discount is not enough to risk being quasi-nationalised, and Barclays are only protecting their shareholders in this. Barclays might (retrospectively) reconsider if they believe today's statements that UK Financial Investments (the holding company for government stakes in the banks) will be ultra hands-off.
This is one step in the game of copy-thy-neighbor where the Americans made a better move than us: they strongarmed all their major banks into taking the government cash, whether they 'needed it' or not. This showed a lot of foresight (more than Brown) as it avoided any excessive stigma attaching to the welfare-recipient banks. Instead we saw cash flowing out of the deposits and equity of our welfare recipients, and into the deposits and equity of go-it-alone Barclays and HSBC. So again, from the Barclays shareholders' point of view it was a good move. Just a dumb move by our government.
However if Barclays had been smarter they might have foreseen how this was all going to play out (and maybe they did foresee it). It is more or less inevitable that the UKFI holding company will take an extremely hands off role, despite daily front page bleating by the media to micromanage this that and the other. The $64,000 reason is the Public Sector Borrowing Requirement and Brown's Tarnished Rule. Ultra-hands off is the only way to ensure the wopping amounts of debt exposure poured into the banks by the government are kept off the PSBR. This is why the wise men have been briefed to make UKFI as hands-off as possible, and why they are constantly briefing the media to this effect. Don't believe a work of what they say, it's all about protecting the PSBR.
RP, get stuck in and blow the whistle on the scam, please.
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Bert - when there is only one horse in town ...........
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#70 Brodick1
"Barclays doesn't want to take British Government money because it doesn't want the Government scrutinising its books.
Barclays has become an investment bank with a smaller low profit retail arm and if the truth was revealed regarding its derivatives contracts, the bail out required may be larger than UK Treasury could cope with."
Never mind what Barclays want. The FSA should be going round all the banks checking this out. They should have been doing this a year ago. They do have the authority to do this don't they?
Go on FSA, get into these places and measure the depth we are in. Then gp around the Credit Rating Agencies and ask them how the valued these instruments.
I offer a new term: SIVilitic
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Can you put up a warning when site is not working.
thanks
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#68 ""...the Treasury has promised that all major British banks can raise the capital they need from taxpayers."
Yes exactly. Why then can HBOS not do the same...?"
It is very naive to think that the treasury would give any bank a blank cheque to keep it going without conditions. The Barclays board didn't like the conditions. In the case of HBOS, the condition for the getting the money would be a sustainable and realistic business plan. None is available apart from the Lloyds takeover. Mr Darling is slightly disingenuous when he says the shareholders can decide. Yes, the present HBOS shareholders can veto the existing plan, but unless investors are prepared to stump up the 12 billion plus which HMG has agreed to provide, the HMG will end up being the majority shareholder anyway. Then it will decide: It already has: The HBOS business model is not sustainable. No one else has come along with any proposal other than "Give us taxpayers money and let us do what we like - we'll muddle along somehow!"
Time to get real!
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Have we all been UKFI'd ?
It feels like it doesn't it?
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The Barclays directors took this course of action for one reason (and one reason only).....PURE GREED. They simply wanted to guarantee their huge salaries and bonus payments well into the future. Any chump can see that's why.
THESE BANKSTERS COULDN'T GIVE A STUFF ABOUT SHARE-HOLDER VALUE.
I wonder how long it will be before Barclays' HQ is re-located to Abu Dhabi?
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Re PSBR:
Its all the off balance sheet stuff,Brown has never stuck to his rule due to the fact that the books do not reflect the true position.
PFI debt is HUMUNGOUS (as R.P. would say) the snag is despite numerous request Clunking Fister wont release the true figures.
Weve asked and asked again.
Remember the mortgaged parking meters,this time its our souls.
Moderators please dont censor this?
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#68
When HBOS is gone GB can finish his chapter on the demise of the converted building societies in his book without having to add the caveat - converting was dumb and illadvised (except for HBOS). It is a far better arguement to show the whole conversion process was flawed and irresponsible if all the societies which did it are gone.
It is also probably a reflection that seems generally realised that HBOS cannot stand on it's own two left feet in the current climate. So better it is taken over by a nominally UK bank than flogged to BOC or another soverign wealth funded entity.
With Barclays one has to wonder how badly damaged their balance sheet really is - want to place a bet on them having, after the Quatar/Dubai deal is done they have to go cap in hand to the treasury anyway?
Afterall this will guarantee a large coupon with warrant which insulates the Middle East current investors from lack of dividends and dilution of their shareholding in the event HM treasury imposes the advertised restriction on bonuses/divi's as the price for the cash.
The "sorry we have knackered your investment your highness so here's an idea to make up for it and look the treasury in the UK will pay for it too." approach.
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Back To HBOS.
The answer is Administration and run out the loan book.
Start again with a clean sheet.
Fund the depositors via us all.
It would be the cheapest solution in the long run.
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#81 alexander "Remember the mortgaged parking meters,this time its our souls."
Well - we've had the gold standard and silver standard. Terry Pratchett in "Making Money" proposed the Golem standard. Why not the "soul standard"?
Or will that currency be debased too by people trying to serve many masters?
;-)
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The answer to all of this seems simple to me, but will take time to implement. Never, ever again must any business be allowed to grow to a position where it is "too big to fail".
We need reformed banking laws such that whilst they are subject to existing regulation they must be made easier to set up in the first place. I would love a small local bank looking after the local community needs but plugged into the global banking system, but nobody can start one because the entry hurdles are way to high.
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I guess the Barclays situation could be oversimplified and compared to football. What I mean is that there are four clubs at the top of the premier league who have the wherewithall not only to buy all the top players, but also to pay their extortionate wages. In theory, could this put Barclays and HSBC in a position to snap up all the best "Intellectual Capital" in the Banking industry?
The other interesting part of the analogy, which extends to the wider picture as well, is how much success / failure is due to the players (bankers); how much to the backroom staff (back office) and how much to the manager (Board)? Depending on your views on this, are the parties accountable or not accountable all being treated fairly?
What I am getting at here is the discussion around bonuses, salaries, "obscene" Christmas subsidies of £10 tax deductible per person, recognition events?
I guess my own personal view is thus:
Management - those that have signed up for gov't money have effectively said goodbye to any bonus they might have been due. Probably fair though there may be one or two exceptions. From what I have seen this has largely been accepted by all concerned.
Players - I think the press treatment of the "players" is a bit harsh. These are set objectives and I think they are within their rights to expect what is promised to them if they achieve their targets - it seems to me (with the benefit of 20:20 hindsight) that the targets are what was wrong, not the players striving to achieve them.
In terms of recognition, I think it's hard to run a commercial organisation if you are not allowed to recognise and reward success. It has a big impact on morale and morale can be very important - just ask any Tottenham Fan!
I think the Christmas subsidy reporting was some of the worst journalism I have ever seen. At least this blog is clearly researched and seeks to address genuine issues, whether you agree with the analysis or not, but to label a £10 subsidy "obscene" seems red top at best. The £10 figure is largely used since this is the amount that is tax deductible, which implies that this is the amount the government thinks is acceptable.
On that basis, I would expect similar subsidies exist in many government departments so M(S)P's should be very careful when they act outraged at the news. The people this will affect most are those that work in branches or lower paid roles, effectively the youth team - how can they be held responsible for the actions of the first team? It's not like the amount in question will even be noticeable in the final P&L of any big bank.
Regrettably there will of course be redundancies and this is unfortunate for those concerned as well as for the knock on effect on the wider economy. I guess there is also a nkock on effect of all the events that are currently being cancelled by the banks since these events themselves contribute to employment (hotels, catering, taxis, etc).
Can't comment on back office since I am too closely connected but would still welcome views.
In summary, it would be nice to see someone take the time to write a properly researched article on where responsibility lies, what part the press play in this (esp. re Northern Rock), what the big picture is - rather than jumping on the populist bandwagon and shouting "obscene" every time a bank employee has a pint or a burger for Christmas!
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Fix the site already.
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#64 tam_fb - nice model good to play around with, is the reserve lower than 10%? Weren't Northern rock at 44times when the government stepped in? I don't know what levels the banks currently are at, are they building to a level or hording for a cut in their assets and so a hike in their ratio? or another scenario?
What happens when you have two levels of fractional reserve? fractional reserve in the federal reserve and fractional reserve in the banks? surely a huge increase in real money to perceived money.
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#78
!It is very naive to think that the treasury would give any bank a blank cheque to keep it going without conditions"
That's over simplistic. You haven't understood what the bail out is actually doing. It is not offering blank cheques. It is a Government guarantee with a recapitalisation.
"In the case of HBOS, the condition for the getting the money would be a sustainable and realistic business plan"
ALL of the banks business plans are not viable and that is why they require Government support (and Qatar and UAE are Government funds too), Lloyds TSB included. They are all over leveraged (13 times tier 1 capital, on average). Barclays may not like the British Governments terms, but will they like the constraints the Arabs will put on them either?
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Comment 78 : sashaclarkson wrote:
"In the case of HBOS, the [Treasury]condition for the getting the money would be a sustainable and realistic business plan. None is available apart from the Lloyds takeover"
You're obviously intimately acquainted with the workings of HBOS and the future prospects for the UK economy to be able to make such an uncompromising statement as that there is no realistic business plan available to HBOS that doesn't involve joining with Lloyds.
I see no other way of understanding the absolute nature of your statement other than there must be something about the Lloyds merger that holds out a lifeline to HBOS that no other arrangement for the future of HBOS offers.
Perhaps you'ld be good enough to put us all out of our misery and let us know what this is?
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#94 "That's over simplistic. You haven't understood what the bail out is actually doing. ... "
Hmph! I haven't understood?
"It is a Government guarantee with a recapitalisation."
But subject to conditions, and approval. NOT "business as usual but here's a bit of cash to tide you over, use it as you see fit."
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re sashaclarkson no 87
ZERO STANDARD for ZERO MORALITY IN PUBLIC LIFE & ZERO FIDUCIARY DUTY WHEN HANDLING OTHER PEOPLES MONEY.
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#95 "You're obviously intimately acquainted with the workings of HBOS and the future prospects for the UK economy to be able to make such an uncompromising statement as that there is no realistic business plan available to HBOS that doesn't involve joining with Lloyds."
Pistols at dawn!!! :-)
There may be an alternative plan in some fantasy world, but nothing which has been put to shareholders by anyone with cash backing.
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Comment 98 : sashaclarkson
"There may be an alternative plan in some fantasy world, but nothing which has been put to shareholders by anyone with cash backing.
I'm sorry to have to query you again, so soon after the previous time, but what you seem to be saying here is that anything that hasn't been put to the shareholders is in the world of fantasy. Is this demonstrably true?
I'm just curious whether someone so adamant that the orthodox line is unquestionably correct gains that confidence more from an intensive study of the other choices, or from a desperate fear that the reality may require their understanding of the world to be turned upside down.
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maroon3
I see you share my utter rage and anger,sorry your posts are being censored,i would like to see what you have to say.
I am, in Moscow just heard Putin has got his vote through for sitting in office again.
Maybe Clunking Fister & Mandy will vote themselves in for life.
Dare i say such a thing? Will i be silenced?
Should i return to the UK?
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Comment 99 : alexandercurzon
"The Board of Directors of HALIFAX PLC who include the HBOS CHAIRMAN lord Stevenson ignored a Statutory Demand,and only responded when about to be served with a Winding Up Petition.
Clearly they have no business plan of any merit."
I'm sorry if this is a bit picky, but it strikes me that it is rather a large leap of logic to infer your second paragraph from your first. Isn't it?
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Good words #90. #80, keep in mind that bank managements are mainly incentivised in shares. Tabloids complain this is obscene in times of profit, and are strangely silent about it when share prices drop and the managers take a hammering of equal or greater magnitude. This aligns manager and shareholder interests pretty well, and is good for the economy.
The only way that bonus and salary caps, or for that matter setting retail interest rates or lending policies - what we used to call in The Really Really Bad Old Days "wage and price controls"- would ever work is if they were applied globally. Or at least nationally, with currency controls thrown into the mix. Do we really want to go back to the 70s, stagflation, British Leyland, etc?
If such controls had been imposed in the brief (and necessary) burst of multilateral international coordination they might have had some chance of achieving the intended effect (but only if every possible loophole could be anticipated ahead of time - which never happens). They still would be a bad idea though.
I can see that the underlying problem is massive leveraging on doubtful assets all through the system, starting with the banks who were let off the leash to abandon historic capital adequacy levels and then cascading through to every other market participant, from corporates to money markets to punters with their mortgages. Every aspect of the system was hyper inflated in a magnified credit bubble. Now it is "correcting" and controlling that correction is going to be incredibly difficult. Never mind getting Humpty Dumpty patched up and back on the wall - the wall is tottering and half the bricks have already given way.
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Re post 101
Any business that ignores a Statutory Demand and Winding up Proceeding is in a deluded land of fantasy.
They told me that i couldnt possibly wind them up,i dont think so.
If you dont pay you pay the price in the courts.
The HBOS business model is not viable,events have proved it.
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maroon3, we would welcome you back with open arms. We need more taxpayers like you to help prop up our ailing banks. Of course you will be biometrically scanned on arrival, issued with an ID card you must carry on pain of imprisonment, and every aspect of your communications will be routinely monitored (like every other citizen). Don't worry, this is all for your own safety, and well worth the hundreds of pounds of fees you will have to pay for the privilege.
Please report to the Assessment and Reprogramming / Disposal centre upon arrival. An outsourced, private financed agency of HM Govt. Probably not included on the PSBR.
You DO love Big Brother, don't you?
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#102
Given the implications of your post perhaps the better question is will you be allowed to leave your current location :-)
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Crass lack of moral responsibility and care(Haringey can be thrown in there as an example) from the
Government and the Bankers. By the way they have handled the affair we clearly now know you can get away with anything. But in a scarier sense they are a representation of society as a whole...If the common man really cared so much(the 1.82million unemployed) would go out in the street and protest en masse but this has been lost somewhere. Say what you must about France but people are still very much in touch with expressing their grievances(sometimes to much). THE BANKS HAVE COMPLETELY GOTTEN AWAY WITH IT!!!
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And to this day nobody knows the true amount of debt the banks have on their books...what a total joke. What happened to the SOX agreements?
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Robert - time to give a real assessment of the future!
The next few months will seem relatively stable in the world economy and the major indices may bounce a bit on the back of the G20 'hot air' about a global approach to the problem etc and the stalling effect of the christmas, but, the horrendous 'real economy' figures will continue to plummet and jobs will be evaporating!
After Obama has taken over there will be more 'hot air' about US fixing the problems (with some more small bounces in the indices), but by this time next year stocks will be near (relative) all time lows (ftse below 2500, DOW below 5000) and commentators will be saying 'it APPEARS we are heading for a depression' in the same '12 months behind the curve manner' they are now saying it appears we are heading for recession!!
Get with the real story - the crippling world wide debt/credit bubble that has now been burst! The 65 Trillion CDS/derivatives black hole has only started to appear on the map in the last few months - this monster is only just awakening and the fall out means a very long deep, dark period for the generation of 'I can have it all now without the money to pay for it!!'
Oh yeah.......RBS will FAIL eventually. End of January 2009 before the banks ask the gov for more money and the Govt realise they haven't got any and can't bail out everyone!!
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@ #40 Toldyouitwould and #49 Red Lenin
re: "stonkingly"
Many thanks. I should have looked on Google (10K entries!) rather than in a dictionary.
Now, if I could just find something stonkingly good in this financial news . . .
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Comment 105 : alexandercurzon
"The HBOS business model is not viable,events have proved it."
Are you suggesting then that there are only two possible business models - one that involves merging with Lloyds TSB and the other which requires continuing with the same model that has been used in recent years?
It may seem strange to you, but it is possible for a business to remain independent and change the direction of what it is doing. So can it be shown that the Lloyds merger and only the Lloyds merger brings something to HBOS that is essential for its survival? If not, then I'm afraid that I'll just have to remain a little sceptical about the motives of those who are unequivocal in their dismissal of any non-Lloyds solution.
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I'm not sure what I said that was wrong to be censored.
I was only replying to Laughingblacksheep who derided the public for whinging and whining about losing their savings.
Apparently my reply was defamatory, but I'm not sure what bit.
But I've learnt my lesson and would like to rejoin civilised society and state that at no point in time did the banks go crying or whining to the treasury.
They did not act like frightened babies who had just done a mess in the economy and wanted their mummy (Brown) to make the taxpayer go clean it up.
They did not soil themselves at any point in the proceedings, even when the entire banking system was facing imminent and complete collapse.
I would like to point out that bankers are upright, outstanding human beings without whom, society would be a poorer drabber place. (Imagine a day in the city without the flamingo brightness of the pink shirts to remind us we are alive!)
And at no point do I think they should be investigated for fraud or be asked to hand back their bonuses which were legally obtained and of which they rightly deserve every single penny of each billion that was paid out.
I would like to go even further and state that I love them. I really do. They are modern day risk taking heroes, braver than any front line squaddie under fire in Helmand, Herculean in their valiant money-supply inflating antics.
And I'll be a good boy I will and no more will I speak out against them.
Honest.
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well then Excellencefirst
The logic is if it was worth defending it would have been defended.
All the directors were aware of the situation and simply sat on their hands just like they have re their business model.
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Very disappointed to be censored i didnt realise i was a citizen of a police state ,oh dear i forgot.
None of what i have said is either rude offensive or bad language.
A letter to the Beeb i think.
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This is a great deal for Barclays and it's shareholders.
They use the tax laws on money coming from offshore companies to avoid paying a hefty chunk of the tax on the 14%. One lot of money comes through Jersey (the Abu Dabi money I think) the other through the Seychelles.
Using Browns own tax loophole Barclays get the tax payer to cover a chunk of their interest charges, the money is cheaper than the 12% the government would charge and they stay independent. Genius. Whoever came up with this scheme is who should be in charge of putting the economy straight. Talk about running rings around the financial giant that Brown claims to be.
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MAROON3
YOU just got 100%
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114 excellencefirst.
My view is an administration order and close it down,prosecute as appropriate.
Go back to the 1986 companies act insolvency section.
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# 90
Check this article on Bloomberg for a short, amusing, but informative description of blame for the credit crisis.
http://www.bloomberg.com/news/commentary/columnists.html
Go to this link, then click on Mark Gilbert's article entitled "Credit-Cruch Villains Pass the Buck, Party On"
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Perhaps robby preston could give us his take on this.
http://online.wsj.com/article/SB122662346962726733.html
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17 posts removed not bad
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What HBOS have to do with Barclays, Arabs and their Shareholders?
Apart from the former being taken over to prevent it from going under and the latter being supported by the Arab States instead of the UK Treasury, the only thing in common are (some) upset shareholders.
Apart from the fact shareholders do not have much to be happy about on any front lately, it's all protectionist bravado.
HBOS will be swallowed up by Lloyds. Period
Barclays will be supported by Arabs. Period
The only thing that can change is whether the Shareholders of Barclays prevent the decision of the latter's Board and not that the formers decision as it is forgone conlusion.
Former or Latter will happen sooner or later for the poorer or richer of keyholder or shareholder to deflate the boom and prevent dee Bust
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#114 Excellencefirst
I think your on a sticky wicket with this HBOS thing.
If left alone HBOS would go bust in a year. Their model is bust. You know that idea about borrowing short to lend long. That is before you consider their total reliance on a mortgage market that is about to produce losses on a scale none of us are ready for.
They stopped being a bank some years ago and become mortgage brokers.
Move on and write something at your usual standard.
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Looks a rather varied set of comments with much wandering.
Robert is right to challenge whether the deal was good for Barclays shareholders and having read some of the comments, looks about on balance if it was the lesser of two evils as far as they were concerned and I think reflects Barclays medium term ambitions to be a global player. To suggest it was done to protect the pay of directors I think over estimates the influence HMG will have on the other banks. I also think bankers are incompetent rather than greedy. They were just not switched on enough to know what was going on and clearly did not identify the risks they faced. The key for the future is to insist on major PLCs using proper risk assessment. They were supposed to explain key risks in their annual reports but they got it so wrong.
Robert, are you moving on to hedge funds- I am convinced that highly leveraged hedge funds have played a large part in making risks that people thought they understood and could quantify into catastropic risks that brought the system down. I still cannot understand how hedge funds borrowed 20 times their equity and then took positions that those that lent to them either lost value in their own equity or else lost the return on their debt. It seemed that banks were bound to lose and yet they went straight in.
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"64. At 10:51am on 14 Nov 2008, tam_fb wrote:
Try putting your own numbers in (and try a reserve ratio of 100% to see what happens when you "stop the practice of fractional reserve banking!") :
http://www.novapoly.com/articles/finance/federal-reserve-banking-model/
"
Um. But under a Full Reserve System (100% reserves), the fractional model simply doesn't apply at all, just as it wouldn't apply at 0% either...
What would happen instead is the banks would become brokers for bonds, and holders of cash. Charging for both services.
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Robert
Thanks for bringing us up to speed with the Barclays situation. I guess now that the government have confirmed that they will be handling their shareholdings in the banks at 'arms length' then there is even less to fear than before in Barclays taking up their cash. So the shareholders are unhappy about being ripped off. No real surprise there. The government know that millions will lose their jobs and homes but even they will not go beyond a certain point to buy votes from what will still amount to a minority.
Whatever Barclays shareholders do they should do it quick while the money is there. Things are about to get much much worse. You mentioned AIG earlier. Perhaps you know that the founder of AIG Financial Products which is the company inside AIG, was founded by Joseph Cassano. He was one of Michael Milken's (The Junk Bond King) right hand men at the time of the collapse in 1990 of Burnhanm Drexel Lambert after which Milken was thrown into prison for fraud.
The losses that AIG are facing are truely unimaginable and it is very foggy who will not be paid when the money really runs out. AIG is going to explode once it is established the level of losses is more than even the Fed can or should cover. More banks will go and many others. Our leaders know all of this and they are just treading water praying something will avert the disaster.
Forget 2% recessions. I make no predictions but the bond market is now pricing corporate debt at a level (yield) that suggest 50% of large companies will fail in the next 5 years. This is higher yield than during the Great Depression. This may or may not come to pass but bond investors i deal with are touting figures of economic decline of 7.5% upwards from peak to trough.
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#101 "I'm sorry to have to query you again, so soon after the previous time, but what you seem to be saying here is that anything that hasn't been put to the shareholders is in the world of fantasy. Is this demonstrably true?"
It's certainly true that, at the moment, there is no other proposal on the table. If HBOS shareholders, as is our right, reject the LLoyds offer, it will not be business as usual. The terms of the baleout would have to be renegotiated. It would be very humilating for the Govt, and politically disastrous, but I guess that breakup and some repeat of the B&B scenario would be most likely - OR - the govt ends up with a majority of the shares and forces it through anyway. Given that the shareprice is consistently less than the Lloyds offer, I cannot see any white knight coming in with a better offer for shareholders. One might imagine it, in the same way that I might imagine a supermodel asking me out on a date, but at the moment there is no evidence that either scenario is more than a fantasy.
As it happens I do own shares in HBOS and Lloyds, bought in batches at various times this year. I think short to medium term that the HBOS merger is bad for Lloyds shareholders, but it may be good news in the long term. I bought the HBOS shares more recently as a hedge when they were worth about 0.5 Lloyds shares.
If the merger falls through, I think HBOS shares will be wiped out, but that the short to medium term prospects for Lloyds will be significantly better. So in a way, I don't care. I may be wrong about all of this, but at least I have put several thousand pounds of my own money where my mouth is. If I lose the lot I shan't be blaming anyone else, or holding out the begging bowl.
As for my alleged "desperate fear": it is common amongst politicians to make personal attacks when they don't have the facts to counter an argument. If you have any new facts which are relevant, please tell us.
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60# You should read the house rules and you may get your usual number of blogs thro'.
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Anyone interested in finding out more about the social credit philosophy should look here . There's a bit too much hero worship on the site for my taste, but Major Douglas' testimony to the Canadian Parliament is well worth a read if you have the patience to get to the end of it. Otherwise don't bother or you might get the wrong end of the stick.
I think I'm going to give up blogging for a month or two and catch up on some serious reading/re-reading.
For anyone who can get hold of it I strongly recommend Galbraith "Money - Whence it came, Where it Went" If you have a mathematical backround I'd also recommend Mandelbrot's The (Mis)behavour of Markets - A fractal approach to Risk, Ruin and Reward. In this, he relates the history of market behaviour to fractal geometry - the mathematical foundation of Chaos Theory. Very readable actually.
Have a good weekend everyone.
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#89 "I would love a small local bank looking after the local community needs but plugged into the global banking system,"
And what, pray tell, is this "global banking system" if not a bunch of huge banks that are "too big to fail" ??
Yours, sir, is a tail-chasing argument !!
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81#
No need to stop this one. Ramblings do not break the House Rules.
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#90 To carry through with your football analogy, those teams that do not have the funds to purchase any top players have to go to FIFA to get the funds. However, FIFA now insists that their players must play with both legs tied together (lending out money below what the government insist on being repaid to them via the 12% coupon on their preference shares).
Would it be any wonder if the teams that avoided FIFA funding will be fighting for the Cup, while the others are fighting regelation ??
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#109 When America had the Prohibition, it drove the sale of liquor underground. When it had the Sarbine-Oxley Act, it drove dodgy assets off-balance sheets !!
Hence the mess today. No one has any idea of the true extent of the damage so everyone is guessing and they will err on the side of caution (often very much so). So no one is lending unless they have solid gold guarantees !!
I would be most interested in the next auction of Gilts and what discounts they get !! The greater the distrust in the UK government's ability to pay back, the greater the discount.
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103# How did you see the 99# post when it does not appear to have been moderated on?
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Robert
I'm certainly not averse to having a look down the back of the sofa for a few bob to lend to Barclays and I might even go as low as 10%.
Let them know. They all speak to you. And if enough of us club together we could bypass the chancellor and do the deal direct.
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#50
Goodgrief do you live and breath from a text book #12 thinks for himself using his own wit and intelligence to understand the limitations of FRB and the deceit of the ponzi system maybe he is an economist irony ? but he grasps the nettle unlike many they can't or won't think outside the box.
Hail #12
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#131 Mandelbrot and his fractals gave me nightmares for months on end in my wild and woolly youth !! The Chaos Theory put me off my beer for quite a while, too !!
Thanks but no thanks !!
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#73, eventually either we pull back from the madness of taking on more public sector debt, or the credit markets will blow the whistle. The markets do not care in which bucket the Treasury dumps its new debt to keep it off the government balance sheet and stick to some arbitrary rule. The markets only care about the likelihood that available tax revenue will continue to make the necessary payments. If there is any doubt, all the borrowing will get put back on the government balance sheet for the purposes of pricing Gilts, like a SIV returning to its master. The market can be quite unilateral about this and no-one but yield chasers with cash on the sidelines will like the results. It matters not what is the exact status of the new bank holding company. If the government obfuscates too much for the market's liking, it will demand a premium anyway. Even the US is finding it more difficult to place debt in this environment. Complete transparency is the only way to retain trust and avoid a calamity.
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#138
"Ponzi scheme"
- I looked it up.
Seems that the UK NHS can be considered one. (Wikipedia)
Time for legal action, someone?
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Comment 125 : Daytrader1
"#114 Excellencefirst
I think your on a sticky wicket with this HBOS thing.
If left alone HBOS would go bust in a year. Their model is bust. You know that idea about borrowing short to lend long. That is before you consider their total reliance on a mortgage market that is about to produce losses on a scale none of us are ready for.
They stopped being a bank some years ago and become mortgage brokers.
Move on and write something at your usual standard.
Thanks for your advice. I appreciate it. Genuinely.
I think that my objection is not really wholly to do with HBOS or Lloyds, it's with those favourite-backers who latch onto orthodox opinion, and then regurgitate it as being so obviously the truth, that anyone not as sold on it as they are must be educationally sub-normal. And all this, mind you, when they have no more knowledge of the fullness of the situation than they have about who's going to win the FA Cup in 2023.
As with the prelude to going to war in Iraq, the government announcements don't add up. What has been promised to Lloyds to make it worthwhile their taking on a basket-case such as HBOS is, reputedly? And if HBOS isn't such a dead loss, why are we being told that it's future is impossible without being under, specifically, the Lloyds shelter? Just what is this piece of magic that causes such a different impression to be given of HBOS depending on whether or not it is absorbed into Lloyds? What synergies does merger with Lloyds have that are not similarly available from merger with someone else?
These are the sort of questions which this evasive government believes it doesn't need to answer. I, and Jeff Randall, amongst others, think otherwise.
http://www.telegraph.co.uk/finance/comment/jeffrandall/3442788/Whats-wrong-with-Lloyds-takeover-of-HBOS-Just-follow-your-nose.html
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Comment 129 : sashaclarkson
Thanks for your reply, but you haven't answered the question. You claimed that anything that hadn't been put to the shareholders was fantasy. I asked if you could establish this claim as truth. You haven't done so.
You suggest that if the deal falls through this will be humiliating for the government and a political disaster. Do you think this is sufficient reason for the deal to be approved, even were it to be sub-standard? What importance would you place on covering up mistakes to save a government's face? Would you be equivalently supportive of any mistaken government irrespective of its political hue?
I'm sorry you construed my "desperate fear" point as being a personal attack. It wasn't. Most people overpraise orthodoxy, and question it half-heartedly, because they are more comfortable with the familiar than with the unknown. This leads to it being more difficult than it should be to adapt to changing circumstances. I'm just throwing out the possibility that it is this factor that leads you to be so absolute in your defence of the mainstream position.
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Well, as a customer I am not happy and, after 44 years, plan to move my accounts. Sad end to a long association.
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#142 "...What has been promised to Lloyds to make it worthwhile their taking on a basket-case such as HBOS is, reputedly? And if HBOS isn't such a dead loss, why are we being told that it's future is impossible without being under, specifically, the Lloyds shelter?"
You've hit the nub there. I agree with you that there's more to this than meets the eye. My personal suspicion: I think the political costs of allowing HBOS to fail were perceived to be too great, especially in Scotland. Direct Nationalisation would have put HMG under political pressure to intervene directly and "save jobs". Any competition from a nationalised HBOS would have be perceived by other players to be unfair.
I think Lloyds was brought in to do the HMGs dirty work in winding HBOS up, with a bribe of public money to gorge upon the carcase discretely in the next few years. I also think that HMG genuinely believes that it is creating what will be a strong international player
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By the way, the reason I'm back so soon is that my post #75 was removed for being "potentially defamatory".
I genuinely don't see why, or who I am alleged to be defaming. I have been interested in Arabic History for many years, initially because of the excellent work of Arabic mathematicians.
I expect we'll have all of the arguments about HBOS regurgitated on the new blog. I don't think I can be bothered any more ... I'm off out to find the supermodel! :-)
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#143 "I'm sorry you construed my "desperate fear" point as being a personal attack. It wasn't. ....... I'm just throwing out the possibility that it is this factor that leads you to be so absolute in your defence of the mainstream position."
Me orthodox? :-) Naa - I'm a natural born conspiracy theorist. Actually a natural born rooster-up theorist too! But I do think that the mortgage bank model was wrong. Sold Abbey shares round Y2k for that reason. I keep most of my money in mutuals.
I think nationalism and wishful thinking is clouding too many people's perceptions of HBOS.
Anyway, I'm not saying anymore about this one. Have a good weekend. Genuinely, no hard feelings!
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#145 sashaclarkson
Good Post!
Wait until Alex Salmond reads this!
-Thought you were going to do some reading?
I know, this is addictive.
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#145: If the government really is playing regional politics with this, then it does not understand the severity of the situation. This crisis has the potential to threaten national solvency if mishandled.
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Today over 19 of my posts have been removed some of which are over two weeks old.
I have never used bad language i know i can be sarcastic,i know i am angry about UK PLCs economic plight.
AS FAR AS I AM CONCERNED THIS LOOKS LIKE STATE CENSORSHIP.
I will back in the UK late Sunday,its been a frantic week earning hard currency for the UK so that in the future i can pay our PAYE and VAT etc.
If Gordon Brown doesnt want us to pay we can relocate and remove 267 jobs out in a JIFFY.
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#150 alexander: Holy faecal matter!
I didn't realise so many posts on even this blog had been nuked until I scrolled down.
I think there may be a relevant legal precedent here is the famous libel case of Arkell v Pressdram (1971) - or indeed the famous dissenting judgment by Lord Atkin in the Appeal Court: Liversidge v Anderson (1943).
I hope your stay in Moscow was productive. If you can, buy/try some vodka flavoured with a chilli/cayenne pepper.
I actually make my own, including the distillation process. I've always been grateful for my scientific education!
All the best
S
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Is it or is it not a fact that Barclays position is driven by those in power in the board room?
Is it or is it not a fact that they are keeping their positions by dint of their borrowing of money at high interest?
Is it or is it not their right to utilise their position to safe guard themselves?
or ... is it their duty to protct their investorts?
Simple questions know, but is ny one realy fooled by the cold hearted calumny at the centre of it all?
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I'm seriously considering taking out a mortgage on my unmortgaged house (I have an existing pre-arranged facility) and buying a big stack of Barclays shares. I am an existing Barclays shareholder and although I have lost a lot of (paper) money, I salute their free-market spirit.
I am really scratching my head wondering why it is that the share price of semi nationalised unprofitable banks are doing better than Barclays which is not only highly profitable but also unfettered by unreasltic government conditions.
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It seems Barclays has taken this decision based on political strength of its new creditors.
Qatar and Abu Dhabi are significant investors and spenders in the UK whether military or commercial and I doubt whether the UK government will regulate a free market Barclays as strongly as other semi-nationalised banks.
The good thing with this is that it ensures not all the banks have put their eggs in one basket.
Especially as the UK government basket is at varying and higher degrees of risk due to economic and fiscal mismanagment for a number of years.
The government is NOT a guarantee of totality, the government can very easily fail and UK economy and value of £ collapse.
Banks have lost large percentages of value recently due to missmanagment of investments and unsustainable debt but it should be remembered that the £ has ALSO recently lost 25% of it's value much of it due to increased government national debt and low interest rates.
Its all very well for people to cut back and save money for tougher times, but this government is doing the opposite and anything anyone actually manages to save will actually be not enough to pay for increased government expenditure and borrowing.
This may be a more expensive deal for Barclays, but what price do you put on freedom, freedom ALWAYS has a price, it's just whether you can afford it.
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alexander curzon
Spot on re censorship and PAYE and NI!
I suspect that when posts are too close to the real truth, rather than the morsels we are fed, they are pulled in case they cause a riot!
It's a compliment to have posts pulled in your case-your comments have always been spot on.
It ocurred to me as I read your suggestion re PAYE etc that all the call centres abroad are there for precisely that reason! I wish they would move back then we would have employment opportunities for some jobless folk. Maybe a good place to put failed bank directors?
Let me know when you start your own blog site-I'll be there quick as a flash!
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Robert,
ANGRY of WOKINGHAM and a THEME for the credit crunch
Thanks for keeping this in the news. I have recently invested in Barclays - as part of an attempt to 'spread my risk', and was infuriated when I heard of this move. My money is now on the way out again!
If you ever need a theme for the Credit Crunch - try 'Liberty Row' by the band 'Jumping Ships' - where did all the money go! Libderty Row indeed. Liberty was allowed and liberties were taken!!
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154#
"Government borrowing" is there not a cap of 3% of GDP set on EU countries borrowings? Does anyone know how much UK is borrowing at the moment and how does it measure up to Germany and France's iondebtedness?
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#157
I think this info is is the same place as the true financial position of our banks-in a safe, locked in a time delay-locked room, guarded by armed guards underground. Also in another country where tax, NI and pay rates are much lower than here!
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Surely interest cannot go down much further than 3%? A massive PSBR must be funded and this government will never be able to raise that sort of money from say gilts unless interest rates are attractive. Historically high PSBR = high interest rates.
Therefore this is good news for the pound - bad news for the economy.
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Bob,
Saw your piece on 10 O'clock news last night. Do yourself and the viewers a favour and get help to stop that irritating habit of yours. I am referring of course to patronising arm and hand waving that you practice. You're not conducting Mahler you know. To be honest, it looks a little, well, gay.
You talk a lot of sense but your gestures detract from that and you lose some credibility as a result. (IMO)
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