Darling v Mathewson and Burt
The chancellor has this morning delivered a swingeing kick to Sir George Mathewson, Sir Peter Burt and any HBOS shareholders who may think the battered mortgage bank has an exciting future as a state-supported independent bank.
The context is the proposed takeover of HBOS by Lloyds TSB, which has the blessing of the government, but which the veteran Scottish bankers, Burt and Mathewson, wish to blow up - as does the Scottish National Party.
Alistair Darling makes a number of pertinent points which will make many HBOS shareholders curse, but may persuade them that they have no alternative but to vote for the takeover.
First, he says that "there is no automatic right of access to the recapitalisation scheme" - which is not what Burt and Mathewson have believed to be the case.
Darling says that any institution applying for an injection of capital from taxpayers "must have a sustainable business model and delivery plan" and its "funding profile, sources and mix must be clear, broad-based and sustainable."
HBOS's own board determined that it flunked those tests, that the probable alternative to being taken over by Lloyds was full-scale nationalisation - hence its decision to agree to be taken over by Lloyds TSB.
The onus is therefore on Burt and Mathewson to prove that the HBOS board is wrong, that HBOS has a sustainable future as an independent organisation - in spite of its exposure to the tumbling British housing and commercial property markets, and in spite of its reliance on funding from the collapsed asset-backed securities market.
Mathewson and Burt may be right, and the HBOS board may be wrong.
But it's courageous of them to battle on in the teeth of the conspicuous doubts of HM Treasury.
Even if Mathewson and Burt were right, Darling has given HBOS shareholders a second reason for holding their noses and backing the takeover by Lloyds.
The chancellor has consistently made it clear that the terms of the capital injection for HBOS were agreed by him on the basis of the business plan presented by Lloyds and HBOS as a single, merged entity.
If that takeover were no longer to take place, he would wish to re-open the negotiation.
What does that mean?
Today's statement from the chancellor says that even if he were to agree to inject capital into an independent HBOS, that capital would be hugely more expensive.
All the new ordinary shares required by HBOS would be priced at an 8.5% discount to the prevailing market price. As of today, that would mean that the new capital would be priced at 61p, compared with 113.6p under the current recapitalisation plan (the plan that would collapse if the deal with Lloyds collapsed).
The implication is that taxpayers could end up with a stake of more than 70% in HBOS, on the conservative assumption that the FSA, the City watchdog, determined that HBOS only required £500m of additional capital (which HBOS's own board fears may be unrealistically low).
Many would see a 70% taxpayer shareholding as de facto nationalisation.
What's more, the Treasury has also said that the coupon or interest rate on the preference shares which HBOS is selling to taxpayers, along with the ordinary shares, would be re-set.
The new interest rate would be based on "the rate at which eligible institutions have announced the issue of such instruments recently" - which is a pointed reference to Barclays paying 14% on the "instruments" sold to the state funds and royals of Qatar and Abu Dhabi (see this morning's earlier note).
In other words, an independent HBOS - if it were allowed to remain in the private sector at all by the Treasury - would be paying a stonking 14% interest on the prefs, not the 12% negotiated as a bank being taken over by Lloyds.
So what do you get when you crunch the chancellor's technocratic statement into a single sentiment?
Hmmm.
It looks like a pretty blunt warning to HBOS's beleaguered shareholders that they would vote down the takeover by Lloyds at their severe potential peril.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~02~RS~)
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40,000 jobs plus many tens of thousands more that rely on the spending of those workers are at stake.
Maybe our short sighted government should think again.
If they keep the banks seperate until the financial markets get better they will save a countless number of jobs totalling at least into 6 figures.
It will also mean less people unemployed and people having to be retrained because there is one less major bank on the highstreet.
It will also mean more long term competition on the high street if HBOS stays seperate which is better for consumers.
Everyone should write to their local MP, when they realise their job is on the line in the next election if HBOS isn't kept seperate then maybe they will act for everyone in the best interest.
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Whats new?
New Labours bully tactics,as both institutions have massive problems,there is probably a better chance of rebuilding them as separate organisations.
BIG is not always BEST?
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No automatic right of access to recapitalisation followed by, we won't let a UK retail bank fail full stop.
I actually stopped reading there, the words are meaningless.
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Alistair Darling should legislate the merger under the Banking Act that handled Northern Rock and stop all this nonsense.
This spoiling tactics from Mathewson and Burt seems to have no substance and is diverting the legislators and regulators from tackling the major problems of the economy (as it the Barclays farrago). Get the job done.
If it is to be done it is best that it is done now so that we can all move on and fix the looming depression.
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HBOS stopped being a bank a few years ago when they became mortgage brokers.
They are in no position to borrow hundreds of billions of other peoples money to sustain their busted model.
HBOS shareholders need to move to the 5th and final stage of grief quickly; that of acceptance.
The the other 4 stages have been seen on this blog regularly:
Denial
Anger
Bargaining
Depression
Move on nothing to see here.
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An interesting comparison is Fortis Bank in Belgium, rather further down this road than HBOS: the court hearing is this afternoon, and if the Paribas deal fails, PM Leterme has said he'll wash his hands of the entire thing, refuse governmental support, and watch the depositors string the board up from the nearest lamp-post by their cojones.
There's a statue on the green just outside the Fortis Brussels HQ which has long been nicknamed "the man stripped bare by his bank". This begins to be more than somewhat relevant...
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That disposes of HBOS, but what is it in HBOS, apart from size for size' sake, that makes it appealing to Lloyds?
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There appears to be more leaks from the sinking treasury than first thought.
Mr Murphy is not flavour of the month.
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Am I the only person who doesnt trust AD and GB to make the correct decision, I understand that they have spent alot of time brokering the present deal, but these veiled threats to shareholders smack of a lack of open mindedness.
Let GM and PB try to put together a package that could save a scottish institution. Im not a scot, btw.
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This is more Do As We Say Government. Whether or not HBOS is getting a good deal is utterly secondary to Gordon Brown getting his 'cudos' for arranging the deal with LLoyds.
Politics trumps economics, for now...
Behaviour such as this will unravel Labour in time for sure.
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This is simply scaremongering by an incompetent Government determined to push an unsatisfactory deal through at all costs in order to save face.
As with the "weapons of mass destruction" in Iraq, when Governments have no case and no evidence, they resort to scare tactics. Most people won't buy it.
It is in the interests of shareholders, employees and the British consumer that HBOS remains independent.
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So now the Barclays' deal is not so bad after all. If the Chancellor is demanding 14% for the preference shares, then the same "deal" may also apply to the other "Scottish" bank !!
And everyone wondered why Barclays' board was so "stupid" as to accept a "more expensive" capital injection from the Arabs !!
Then again, there will always those who shoot from the lip first and ask questions a long time afterwards !!
Dick Turpin is alive and well and rides the High Road to Scotland !!
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If I were being cynical then I might wonder out loud whether Messrs Brown & Darling can afford, politically, to be undermined by their bank rescue scheme being picked apart.
Is there any independent view from anyone else as to whether Mr Darling's statement of the conditions and costs for the government's rescue money is a fair set of terms, or just created in order to stymie this brave attempt by the Scottish establishment to propose a decent alternative to the government's presentation of itself as the saviour of the UK economy ?
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It would be helpful if those keen to spend money - and by default ascribe value - in supporting banks define some kind of view as to what they will actual be like as profit generating machines in the future. Clearly if any lessons are to be learned from the current crisis a return to the recent past should be avoided so just where will future performance come from? In another article on the BBC website it is mentioned that Northern Rock et. al. have not been included in debt calculations because they are assumed to have some future value - maybe but what? Perhaps the government and the wealth funds are picking up bargains but perhaps not. Certainly if future profits are to be driven by vanilla banking operations rather than esoteric financial instruments then margins will inevitably be driven lower. Not a game to play in unless you have the deepest of pockets and a prepared to stand the potential losses. As from the taxpayers point of view these losses would in large part be picked up by the next generation, who had no part in the creation of the current problems. We seem to be at risk of visiting the sins of the parents on their children. The same can be said of current tax cutting plans. Seems like a very slippery slope to me.Great caution would seem to be advisable.
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Dear Robert,
Talk about a government panicking, me thinks there is now a rethink on Natianalisation by top bankers, is it that they see their profits disappearing after repayemts to the tax payer.
and 57,000 jobs going at citi bank, just goes to prove profitscome before jobs.
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#5 daytrader
Spot on.
Seeing other contributors talking about saving HBOS jobs reminds me of the 1970's when Labour attempted to save mining jobs by spending thousands of pounds per tonne digging up UK coal from miles below the surface when Poland was selling it for a few hundred.
If the job has no value then why pay someone to do it.
HBOS is history and so is its business model, many its employees and most of the shareholders investment.
Its a tough old world for those relying on an ever lasting virtuous circle of first time buyers taking on even more fantastic amounts of debt so they can kick back.
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I'm surprised to not read any "nothing new labour" stock quotes here:-
"we're listening"
"it won't happen again"
And other such promises which simply should not be made - and if they are, the should be held accountable should they fail to stick to their promise.
Otherwise, what's their promise worth? From what I've seen/read/heard of late, the answer is "NOTHING".
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This is released the day before the Lloyds Shareholders vote
Mmmnn... No coincidence there then.
Hope Darling has another job lined up after the next election and his safe Labour seat aint gonna be there after this debacle.
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#7
1. Size. Lloyds was previously a target for being small enough to be a tasty morcel.
2. Removal from the firing line. Now HMG owes them big-time.
3. Probably a Lordship or two in due course. Outdoes a knighthood anyday. When do the laddies hand theirs back, by the way?
4. Cleanliness. It'll take their kind of surgical excision to save this patient.
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I'm sorry, but all this article tells me is that Mr Darling wants the original arrangements to go ahead, and he uses as justification for this that the obstacles he has put in the way of any alternative arrangements are so high as to make there to be only one rational option for HBoS shareholders - to accept what's on the table.
Isn't it time that he was made to explain why the deal is objectively superior to any alternative arrangement? Surely, the HBoS problems are there whether they are incorporated into Lloyds or not? If Darling is unwilling to accept HBoS has the capability of remaining afloat on its own, why should he expect Lloyds shareholders to take it on? Has he made Lloyds support conditional on swallowing the "poison pill" that, apparently, is HBoS? What are the synergies, if any, that are uniquely available to a Lloyds-HBoS marriage? Has Lloyds acquiescence been bought by a promise to allow over-exploitation of market share post-takeover?
Why does the BBC not raise these unanswered questions, instead of reporting on the basis that what the government wants us to believe must be right? Are these concerns so inconsequential that it is frivolous to expect them to be dealt with?
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What is remarkable is that so many still don't get it - the 40,000 "jobs" that will be lost when HBOS gets sorted out are no longer valid jobs - the jobs were created by an imbalance in the economy (caused by cheap credit and the maniac marketing departments of HBOS & co) which is being corrected and unwound painfully.
The measures needed are:
(1) to speed up the correction by supporting the redeployment of those unemployed
(2) protect the hardest hit from sinking if possible
(3) establishing a credible financial system for the post-2008 crash world
(4) ensure liquidity injected to get us over the crisis is genuinely a temporary measure
we're broadly headed inthe right direction but recovery will take a while.
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Be careful very careful,if you opinion does not concur with New Labours outlook.
You will be subject to DELETION.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I think ive been deleted over 30 times in less than a week now.
Guess my posts got up somebody's NOSE.
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12. At 1:01pm on 18 Nov 2008, Brodick1 wrote:
This is simply scaremongering by an incompetent Government determined to push an unsatisfactory deal through at all costs in order to save face. ........
What utter nonsense!
Its an ultimatum to the Greedy beggars and any small following that they may have basically saying
Oi you, stop it, we hold the purse strings now (with no real money in it, but never mind) and if you push this any further it will cost you dear at best and maybe your little Scottish bank at worse.
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well you should sell your shares in HBOS and LTSB. What is not being mentioned much is that part of the deal is they go back to making a lending spree which means they will burn through that capital in no time and then be insolvent.
Would you rather own part of state-supported bankrupt bank or a battered independent bank?
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It is just as well for the stunningly successful (NOT) HBOS board that they are not social workers in an Inner London Borough.
The fact that the existing board does have a "sustainable business model" ought to have the shareholders demanding their resignation without compensation.
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"there is no automatic right of access to the recapitalisation scheme" - does anyone really believe that they will let HBOS fail?
This is a ridiculous deal. Shareholders love monopolies but it is the consumers and employees who will suffer.
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No. 1, Andrew Knight makes a good case that HBOS should be preserved in order to preserve jobs in a recession.
As I understand it, this is not what Mathewson and Burt are arguing. They claim that HBOS is financially viable. (It has been said that HBOS is a "formidable money-making machine".)
It would be great if they are right. But I doubt it.
I suspect that GB and AD would much rather have an independent HBOS if they thought that it was financially viable. I can't see that there is any political pay-off in being associated with the demise of the Bank of Scotland, and with causing mass unemployment.
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Clearly the Lloyds deal has political favour, and he who pays the piper --------
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#7, #21
Also the fact that HBOS Banking Licence allows them to actually PRINT Banknotes.
Then LLOYDS can join in with the FIAT Paper kite scemes, so beloved of Golman Sachs, and thier Whitehouse shills, Henry Paulson and Neel Kashkari.
#11, #14
There is the small matter of European Competition Legislation however, which Gordon & Alistair seem to have overlooked.
I explained this on another of Peston's Blog entries previously, but briefly Article 82 of the EC Treaty, forbids these actions of HMG on several different levels.
Darling and Brown have stated that the 1998 Competition Act of the UK Parliament reserves this authority to HM Government.
This IS NOT the case. Article 86 of the EC Treaty ( Old Article 90 of the Rome Treaty ), actually pre-empts this by making provision seperately for regulation of individual Meber States, being subject to the provisions of Articles 81 and 82, even if those States might legislate internally.
Brussels has the authority to squash this deal, even after the fact. The UK Government will then simply receive a Directive from the Commisssion. Swinging fines will follow.
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#25 assuming you are a consumer, you will be the one who suffers. Lloyds executives will be the main beneficiaries as they exert their pricing power over the market.
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Take a step back to the day the Lloyds - HBOS deal was announced.
HBOS shares were down something like 60 per cent in 2 days. All the evidence was that their funding lines were all being cut and that they'd be bankrupt within a week. A takeover of HBOS by Lloyds was announced, and seemed to be something that had been under discussion for several weeks, but had to be hastily announced in light of the pressure on HBOS, itself caused by the bankruptcy of Lehman's. That event caused investors generally to conclude that banks would be allowed to go broke.
Where are we today? We have rumours of interest from Bank of China, and two former bank executives saying let us run an independent HBOS.
The BoC deal looks like a red herring. There's no evidence they're buying shares in the market to build a stake, no announcement of contact with BoC by HBOS itself, therefore very unlikely that a bid will emerge. On this one I think BoC if interested at all, may buy parts of the HBOS business off Lloyds after they take over. That could help alleviate some competition concerns as well as reduce the cost in terms of job losses.
As for M and B, they seem to think government capital injections are some kind of right. They're not. Though I think GB and Ally D have hardly covered themselves in glory through this crisis, Ally D is definitely entitled to suggest that HBOS has to have a robust business model if it is to receive a government injection. Its current business clearly isn't robust. Without the consolidation with Lloyds, we can be fairly sure that HBOS's funding lines would again come under pressure. Since the pressure in October, HBOS's position has got worse not better, with a worsening UK housing market, and much worse general economic news. M&B have not put up anyone suggesting they'd invest a single penny into an independent HBOS.
So HBOS shareholders have only this choice at present: the acquisition by Lloyds, which gives them some share in any recovery in the banking sector, or the bankruptcy and destruction of 100 per cent of their HBOS shareholding.
One final point. Much of the stirring around M and B appears to have the support of the Scottish government. If Alex Salmond feels so strongly about this, why doesn't he promise Scottish government resources to invest in HBOS? He could offer the difference between the current level of promised UK government injection assuming consolidation with Lloyds, and whatever FSA calculates as the required capital if HBOS remains independent.
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The fundamental question the directors of HBOS should be asking themselves is as follows:
Is this proposed merger deal with Lloyds most likely to promote the success of the company for the benefit of its members as a whole?
The HBOS directors have a statutory duty under Section 172 (1) of the Companies Act 2006 to ask this simple question.
The directors should decide the answer to this simple question and respond urgently.
Delaying and being caught up in all the media spin is most definitely not benefiting shareholders.
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I should point out that HBOS like Northern Rock would have to undergo downsizing of its mortgage books but it would still leave many more jobs intact that simply handing over the company to Llyods.
Remember HBOS isn't just a bank, it has many divisions and jobs at stake.
The government is happy in the short term to borrow its way out of debt with its plan to increase consumer spending by targeting tax cuts at those it thinks will go out and spend the money although in the long term everyone will have to pay higher taxes to cover this.
So it raises the question of why don't they borrow to save HBOS and many jobs from being lost. It would also mean there would be more high street competition from banks in the long term.
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Try this for a reckless bank fix-it plan.
Hand wheelbarrows of taxpayers' money to two huge banks, then allow them to merge so they can use their outsized market power to clobber what little competition remains.
It sounds crazy but this is exactly what is happening with two of the biggest banks in Britain, Halifax Bank of Scotland and Lloyds TSB.
Read on. . .
http://www.theglobeandmail.com/servlet/story/LAC.20081117.IBREGULY17/TPStory/Business
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Well HBOS is shot to bits, obvious. There should be no automatic access to taxpayer money, yes. Jobs to go, inevitable. Never any assessment about consumer in all of this which is the most important issue. Why am I not surprised.
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37. At 2:44pm on 18 Nov 2008, macdone wrote:
Try this for a reckless bank fix-it plan....? Reckless?
A big bank handing out sensible money is going to be better any day than the mess those idiots got that HBOS into.
Get over it.
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This is an extract from the stimulus package being announced on Monday, just swap Texas with Britain. Now there's a great idea.
Nov. 18 (Bloomberg) -- Homeowners fleeing underwater mortgages in California and Florida know where to come up for air: Texas.
``Texas is an extremely friendly place to live if you owe money and do not want to pay,'' said Marjorie Britt, a bankruptcy attorney with Britt & Catrett PC in Houston. ``If you have a lot of money and even more debt and want to shelter your assets, you can live fairly normally.''
Distressed borrowers can hang on to luxury cars, a primary residence, paychecks, retirement accounts, and even jewelry that creditors might claim elsewhere, Britt said.
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# 37
Your link is to a Press release from the two financiers, I suggest. Interesting that it's from a Canadian media outlet, though, given the large Scottish diaspora there. Perhaps Mathewson and Burt see scope for capital raising there?
The Canadian link is what makes me suggest that it's just a Press release. There's no way the Globe and Mail would have looked at this story without such prodding.
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The whole point of recapitalising the banks was surely just a short term measure to give them time to restructure and downsize.
What seemed a sensible thing for any government to do during the panic in the world banking system a few short weeks ago is turning into another full scale cock up by this government.
What on earth are they trying to achieve?
The last thing any business truly needs is government interference on a long term basis.
These are businesses who are capable given the right conditions of turning themselves around. They can never do this as long as this government continues to tell them what they should do.
After all what does Gordon Brown and his cronies know about banking or business?
They've never run a business in the whole of their lives let alone run a bank.
Pity because running a country is the same as running a business. The books have to balance or it goes bust.
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I can't help agreeing with Globalrep. This Government will be sat back, isolated from the dreadful and scary mess they've created for my generation as we struggle with their legacy. They've taken us to war with an entire region and religion, signed up for a greater nuclear arsenal, driven the economy into ruin and handed most of what's left of our assets to an even smaller percentage of the elite, whilst saddling the rest of us with crippling debt and tax burden and ensuring that we'll very probably never agian be able to heat or feed ourselves
Labour - power to the people. Cheers
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43. At 3:06pm on 18 Nov 2008, virtualsilverlady wrote:
The whole point of recapitalising the banks was surely just a short term measure to give them time to restructure and downsize.
Hmm was it? Was not also to ensure the taxpayers money invested would not be lost and even turn a profit?
HBOS has a failed business model. It will not meet the criteria of the bailout on its own. As for the Government running a Bank, those two cronies and their greedy lot hardly can be called bank managers, can they?
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#39
I agree HBOS have been idiots - get new management in.
Excessive pricing power will not lead to sensible money. The public WILL suffer!
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#36. At 2:39pm on 18 Nov 2008, -Thoth-
This comment has been referred to the moderators. Explain.
#42. At 3:03pm on 18 Nov 2008, -Thoth-
This comment has been referred to the moderators. Explain
Free Speech ?
Come on Peston & BBC play fair.
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Over the past few weeks, various people on these blogs have made categorical statements about "what would be in the best interests of shareholders in XYZ.plc".
As shareholder in a number of these companies, I am not sure at all what would be in my best interests, although I have a fair idea of what would not - ie insolvency.
I do wonder whether some of these advocates of shareholders interests are actually shareholders - that is (and you know who you are): is your money where your mouth is?
On the broader point, given that jobs will (inevitably?) be lost in the economy as a whole, IF money is to be spent on saving some of them, would it not be better to support manufacturing, technology, Research and Development rather than the failed industry which has landed us all in this dire mess.
I know where I want MY money to go - even if that means that I lose out on some/all of my banking investments.
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The more expensive the banks become the better it will be for all of us.
Easy money must never be allowed to return
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What amuses me, is how the takeover was agreed at a certain price a month or so ago, and since then it has repeatedly been re-valued until I wonder if could actually pick up HBOS for the price of a bag of chips and a pickled gherkin the next time I go to my local car-boot sale...
I'm not surprised certain people want to keep it independent if they possibly can.
Surely, once the takeover was agreed the price is agreed. Well, in in ordinary world that's usually the case. How has the repeated devaluation happened in this crazy world we're currently experiencing.
Lloyds TSB seem to be getting a bargain. What's actually driving this devaluation process ?
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There are 2 types of blogger on here - as there are 2 types of people interested in this story.
The shareholders of HBOS and non-shareholders of HBOS.
The shareholders will try and blame the Government, the board, the country, the system for what is going to amount to a large loss of investment.
The non-shareholders will quote the small print and laugh at the predicament the shareholders face.
So depending on which one you are, you will find this whole episode either highly amusing, or a tragedy in the making.
This situation has made me consider the problem with shareholding. The issue is investors are far too far removed from the actual running of the business. The dillution of the shares means very few people actually have control of the company and it comes down to a few major shareholders.
If you want to invest in the future, find a small business, a local one, and invest in that. The the disassociation of risk in exchange traded stock is where it all goes wrong. The assumption is they are low risk - where as the opposite is true.
If you want to gamble your money based on the 'buy' or 'sell' of a broker, then you may as well go to the bookies and see if you can get any tips on the 4:30 at Kempton.
Reward is, and will always be the product of hard work and effort. Don't believe anyone that tells you differently.
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#43 "After all what does Gordon Brown and his cronies know about banking or business?
They've never run a business in the whole of their lives let alone run a bank.
Pity because running a country is the same as running a business...... "
Isn't this a bit self-contradictory?
The cronies certainly have plenty of experience now, even if much of it is in making mistakes. The question is - can they learn from them? My own instinct is that Brown's ego makes this difficult, but that the jury is out on Ally D. Looking around at the rest of the politcical spectrum, I have some time for Vince C and maybe David D. Others, even if intelligent, seem too bound to vested interests.
Can we have nominations for a "Ministry of all the Talents"? (And I don't mean just Lord High Executioner and Lord High Everything Else!)
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#51 "If you want to gamble your money based on the 'buy' or 'sell' of a broker, then you may as well go to the bookies and see if you can get any tips on the 4:30 at Kempton."
I disagree very strongly - I'd rather buy shares in the bookie! (I have!)
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#44 - ejswede.
...you forgot the banning of protests around 2 miles of parliment to ensure that the angry public cannot burn the place down.
These anti-terror laws are for the Government to protect itself FROM THE PEOPLE.
No two bit band of rebels in Afghanistan are going to threaten the houses of parliment.
...think about it. What are the chance of Al Queda bombing the HoP - very slim indeed. However what are the chances that this recession creates enough poverty for the masses to get off their backsides and do something about it and want to take revenge? - more and more likely by the day I would propose.....
That's when it really becomes power to the people.
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45 Peter's kitchen
It is not clever to pick out only a part of someone's blog and turn it around to suit yourself.
If you quote someone else you should use the whole context as this does not give a balanced opinion of what was said.
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#53 - ...and you would be doing well.
In the City AM it noted that if you had done the OPPOSITE to the broker recommendations over the last 12 months, you would have made less of a loss (if that can be viewed as a good thing!) than if you went with their recommendations.
When all the un-employed have plenty of time on their hands over the next 4 years - read up about Brownian motion and then you will understand why making money in shares is about probability rather than skill or knowledge.
It's like me telling everyone I'm better than magic johnson because once I managed to get 6 3-pointers in a row with my eyes shut.
I think Magic Johnson would laugh at me...
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# 55
I totally agree with you, do you want to apologise to #43 now?
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Anyone else wonder what Thoth posted?
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#47 Thoth - as this is a public forum subject to the laws of defamation, you can't do a Claude Cockburn and ask "Why are these lying B****s lying to me?"
You have to express yourself more obliquely: ie "Not withstanding their undoubted moral probity, it might be mistakenly construed by a cynic that these lying B****s are ..... etc.
Or perhaps euphemistically: "It appears that the cat who stole the cream wants to be put back in charge of the dairy?"
As the fictional Scottish Tory is alleged to have said: "You might think that - I couldn't possibly comment!" ;-)
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Robert,
Is it just a coincidence that leaks from the Treasury regularly appear in your blogs, or something more sinister.
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#55, hmm, should be a sign "Don't feed the trolls"....
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#56, well analysts for a while have basically been an adjunct to the sales team. Most fund managers have their own analysts - who may or may not be any good.
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#60, how dare you imply that there is nothing but biased, ignorant quasi-Treasury press releases? When is the review of the BBC's charter? I am sure that now is not the time for the BBC to have to be "self-supporting"....
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thoth???????????????????????
The words
Mortgage
Mandelson
Lie
Resignation
All these words seem to be defamatory despite the fact a certain combination is true.
As an aside my name linked to HBOS cause problems.
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This Gov't wants high unemployment.
Which Housebuilder will they Nationalize first in their power trip ?
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#62 - yeah that's what they tell you!
So what is the 'formula' that accurately predicts human behaviour?
I've never seen it, but apparently all these analysts know it off by heart.
I think it goes something like this in boom times:
E / (I+(F*G)) = P
Economic strength (Growth) / (Income + (Greed*Foolishness)) = Profit
So when the Economic strength increases the Profits are bigger, but the greed and Foolishness increase to maintain a steady profit as a balance - i.e. it's never enough
However when the Economic stability decreases (or worse, goes negative - recession) then the profit is decreased, and by a greater amount if the Greed and Foolishness is large (which is often is at the end of a boom)
Eventually Growth goes negative and so does the profit.
I had better be careful here - I don't want to get into trouble with the FSA for giving poor legal advice - even though I just made it up, there will be people out there who start investing on this principle.
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@64 Alexander Curzon.
The problem is that when someone complians about a comment it's removed irrespective of whether the complaint is true or not.
What tends to happen is that party activists then complain about things they just generally do not like as opposed to not like or object to for a specific reason.
I know this to be true because I used to be a party activist for the Labour Party but I'm alright now thanks.
Personally, I don't think a post should be pulled unless it contains unacceptable bad language or is directly insulting to a named person AND the insult has nothing to do with the subject of the blog.
Sadly, control freaks think otherwise.
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Now everyone must admit Labour has done its level best to create an equal Society.
We all are equally up the creek !
Hyperinflation on its way, Pension Funds losing huge sums of money.
Massive job losses in whats left of the economy.
International investors running from the UK Stockmarket as though it had the Plague!
What next ?
A decent pay rise for the Public Sector ?
One that takes into account the surging cost of living ?
Hardly likely !
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This Lloyds/HBOS debate is really little to do with finance but more about Gordon Brown.
Mr Brown is driven by his own ego and nothing else appears to matter. The most obvious illustration is the 10p tax fiasco when he repeatedly refused to accept that there were any losers. Only acceding when the increasing criticism from the Labour benches became a threat to his personal position.
At the time negotiations began on the Lloyds/HBOS deal, such a deal was illegal; against the law on monopolies. Difficult not to imagine government were complicit.
Subsequently there appears to have been a series of controlled leaks promoting the merger and villifying a stand-alone HBOS.
Now we are in recession, worried by the threat of depression. Job losses are announced daily and government are readying to add billions more to the billions of debt already accrued in an attempt to alleviate those losses.
It seems contradictory, therefore, to change the law and refuse a trivial amount - relative to current and future commitments - in order to sacrifice the large number of jobs that this merger will precipitate.
For me, this debacle has the hand - or clunking fist :) - of Gordon written all over it.
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#66, reminds of Warren Buffet's 3 Is. In any investment there are three stages:
1) The innovator
2) The imitator
3) The idiot
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HBOS is a busted flush. The started out as a good operator in corporate banking, got into bed with Halifax, and wanted to take over the UK's banking market. Towards the end their Integrated Finance team were effectively buying companies, with equity risk priced as debt, out bidding trade buyers in the auctions. The most stupid thing to do from a banks perspective. HBOS deserve to collapse, I just feel sorry for Lloyds TSB, who if it wasn't for the HBOS takeover would not require any funding from the government.
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#64 alexander - that's brilliant! All you need to do is toss in a few well chosen words at random: rather like a verbal jigsaw puzzle.
Anyone with any intelligence can then solve the puzzle and rebuild the picture. They haven't found a reliable way to detect thoughtcrime yet!
Rearrange the following words to get a different meaning: (Various solutions possible)
should
Brown
resign
he
is
not
incompetent?
Then subsequent posts could suggest alternative words. No-one need be defamed.
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I have a good solution for the economy and the tax payer. How about we sack the majority of civil servants (particularly any job advertised in the Grauniad) and put them on the dole - it would be cheaper for the economy taxpeyers pay their inflated salaries and pensions, cheaper to pay them dole. They can then go and get a productive job in the private sector, work the same hours that we do, have the same self funded pension that we do etc etc.
The result would be we could cut income tax by 5p and slashing council tax. That would be a good start.
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hbos cannot fall any further or will drop off the radar
Why not cut to the chase & take them into national ownership and see how the mop flops check the books and see what can be salvaged at half the price.
As we stand you are just throwing good money after bad.
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So what do you get when you crunch the chancellor's technocratic statement into a single sentiment?
Hmmm.
It looks like a pretty blunt warning to HBOS's beleaguered shareholders that they would vote down the takeover by Lloyds at their severe potential peril.
= = = = = =
Sounds to me like:
He's asking for a vote of confidence from people who are all standing over a trap-door ..... and he's the one holding the 'drop' lever!
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sorry about the language used in 74 been in a meeting all afternoon with saluting flags and pushing envelope people.
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#74, i agree it should either be complete nationalisation - with the requisite wiping out of shareholders or no intervention at all. Partial nationalisation was always going to be a pig's ear.
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Lets go back to....
Thursday September 18 2008 16.25 BST
http://www.guardian.co.uk/business/2008/sep/18/lloydstsbgroup.firsttimebuyers
Paragraph five...
In a statement rushed out immediately after the 7am merger news, the FSA said it was "satisfied that HBOS is a well-capitalised bank .........."
Oh dear...
What has gone wrong I wonder?
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Do you notice that once you get past 5.00pm all the cushy job people go home ie civil servants
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Just wondering why the Govenment is putting so much into this and it strikes me that it must mean that there is some political advantage to be had for pushing the merger through.
If it is not too simplistic, I assume that the whole idea is to undermine the Bank of Scotland as the major financial plank of an independent Scotland and therefore hamstring the Scottish Nationalists who until Glenrothes where looking like wiping out Labour in Scotland.
Nothing would annoy Salmond more than BOS being run by sassanachs!
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#31
The EU Competition Directorate got a message when Mandy was booted upstairs. I wouldn't count on that one, not least because the Commissioners are up for replacement before any such constraint can possibly be brought to fruition, so the boys in that particular back room are highly motivated not to make any waves twixt now and then.
Further news on the Fortis front: the judge is allowing the takeover to go ahead, but forcing a review of the price. Talk about judicial suicide, if she forces it up, Paribas walk away, she takes the drop for everyone., must have had an offer she couldn't refuse....
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I'm not to sure what all the fuss is about!
On the one hand we have a government who agreed to bail out HBOS using taxpayers money on terms that were considered to be fair to the taxpayers (who was unwittingly being asked to take a risk) and the the shareholders. Since then and even though matters appear to have worsened the government remains steadfast in saying that it will honour its terms of the original agreement.
Now we have a couple of well respected bankers, albeit retired, stepping forward to say that they can resurrect the banks fortunes without the need for taxpayers money, so the bank can remain completely independent. Quite how they are able to do this remains a mystery but one suspects that since they are a couple of bankers with an eye for easy pickings, they are simply trying to stall or frustrate the governments plan long enough for it to fail. Then they will hope to force the government into offering them better terms and conditions.
If these two respected bankers really do believe they can resurrect the banks fortunes and save countless thousands of jobs, without the help of the taxpayers money then let them do ahead. Also since they by now they will have made more than enough money to live off and do need any extra money then let them offer to do so without any reward or remuneration. Let them return a favour to the banking industry that has served them so well and generously in past years.
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Given that in recent weeks we've seen many Banks publish job loss figures (RBS, JP Morgan, Morgan Stanley, Citi etc) I am curious as to why no job losses have been announced for either Lloyds TSB or HBOS. We can all speculate at the extent, but when is it likely the market will hear the figures and when would these commence?
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It seems generally accepted that HBust is not an viable entity on it's own after this mess has been sorted. So RP is right surely Burt and Matthewson need to prove they have a better plan than the current board. Afterall as part of the deal this board ceasses to exist, their own shareholdings are dimished greatly and they get no bonuses or obscene pay-offs. If they could have engineered any other outcome which would have better profited themselves and theri shareholders I am sure we would have heard about it now.
UK Plc cannot afford it take it on like Northern Wreck - just what % of the nations mortgages would then be directly controlled. Even the conservative estimate of a bailout direct to HBOS would place 70% in public ownership to get the funding it required - de facto control and hence presumably the same issues of 'competition'. Imagine NR and HBOS combined mortgage books at increasing rates and customers trying to remortgage.
It also serves to tweak Alex Salmonds nose which is probably a political plus point for GB/AD from the proposal.
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Why don't those two bankers offer to buy N/rock and use their talented model to revive that institution - it would still have the northern feel to, if not dressed in tartan?
I know they must feel that the take over is akin to Elizabeth taking Mary's throne, but they have not exactly elected the future in King Alex, have they?
This is not just a Bank takeover going on, its stealing the crown of the Alex the first and Labour dearly want that neck, dont they?
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Presumably HBOS total exposure to housing market losses doesn't change by its merging with Lloyds, nor does the amount of funding required from the securities market (unless Lloyds has lots of uncommitted deposits laying around..) So the only valid argument is the amplification of the risk if left without Lloyds broader based assets and funding.
But this risk has been priced by the FSA as requiring an additional 500m, presumably factoring in the housing and funding risk. "Not so", says Darling, and slaps a huge risk premium on top, to "get the best deal for the taxpayer". Astonishing.
Isn't the real story here about how the Chancellor is overriding his own regulator and making up his own rules as to who should and shouldn't be given taxpayer funding, and at what price? Is that Gordon's scribbles I can see on the back of an envelope?
If I were cynical I'd say he's hopeful that such a banking giant may still relent to pressure and lend more to the housing sector than the two would have done independently, in a desperate attempt to make taxpayers borrow to boost the economy and their election chances. I'd also like to see if Lloyds would still require taxpayer funding if they stay independent, and how much.
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Robert
After his handling of this affair. I would expect the people of Edinburgh South to 'get rid of Darling at the next election.
The HBOS affair just stinks.
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#80 An interesting conspiracy theory - not totally implausible; but I favour a multiple rooster up theory.
BOS was moved out of Scottish ownership by Burt et al when they engineered the merger with Halifax. The housing boom and HBOS policies then busted the Bank. HMG thought it couldn't take the political flak, especially in Scotland, that would result from letting it go to the wall, and therefore "incentived" LTSB to "rescue" HBOS. However, it has slowly dawned that this rescue is really scrapping and cannibalisation, rather like a car which has been written off.
One way or another HBOS is now fiinished. Some are trying to make political capital, others are trying to rescue their reputations by finger pointing. Yet others are just hoping that this issue can be buried in some way. I do not think it was ever remotely in HMGs interest for this issue to arise in the first place. This is like the story that, when asked what represented the greatest challenge for a statesman, Harold Macmillan replied: “Events, my dear boy, events”.
I think this has become a "lose-lose" situation for HMG and probably always was.
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#85 The irony of all this is that BOE was founded by a Scot, William Paterson and that BOS was founded by an Englishman, John Holland.
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This comment was removed because the moderators found it broke the House Rules.
There has been a problem...
Your comment contains some HTML that has been mistyped.
Data at the root level is invalid on line 1
............. could have been true..... if I'd inserted ANY html, which I had not!!
You've got a problem, Peston!!
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So, HM Treasury has fired off it's big guns at HBoS shareholders, but what happens if the Lloyds TSB shareholders reject this merger????
Many of these people have asked, 'whats to be gained from taking over the mass of toxic so called assets that HBoS have'
Can not for the life of me see what Lloyds TSB shareholders have to gain in the short/medium term.
Perhaps in 10 years time, this MIGHT look like a good deal for them.
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Dear moderators. Please just remove the phone numbers of the BoC and PBoC, I guess it was pretty stupid to include them.. despite the relevance.
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I'm unhappy about the proposed Lloyds/HBOS simply because it seems likely that it will restrict the ability that Lloyds would otherwise have had to provide loans to businesses to help see them through this recession. Without the merger Lloyds were one of the few banks in a strong enough position to do so.
HBOS's problems relate to the mortgage market. The mortgage market is dead, and it would be for the best if it remained so until house prices hit bottom (i.e. return to affordable levels) - probably in another 12 months time. The Government should be urging what's left of the banking sector to direct their limited funding towards those things that keep the economy afloat rather than trying to resurrect the mortgage market.
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I’m not a HBOS shareholder but I guess there are plenty who have already written off their investment and who would be prepared to vote down the merger because they see it as a government stitch up and a shareholder rip off just like Gordon Brown’s stealth tax on all pension funds in 1997 which has left most of us worse off.
Maybe a nice protest vote but unlikely to count! I would be surprised if institutional shareholders behaved in a reckless manner as this could cause a run on the bank by ordinary depositors’ leading to an even greater funding gap and pushing HBOS to the brink.
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The Chancellor's unusually brusque comments are all too redolent to those of us living North of the Border, of the usual partisanship showed in any issue that involves Labour and the S.N.P.: unfortunate, for those of us who would wish to hear reasoned argument and see sound decision making. I do not single out the Labour Party as most politicians are hewed from the same quarry. Whilst not in any way seeking to censor democratic argument surely politicians must be beholdent to more than narrow party interest when dealing with a situation like the future of HBOS.
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Oh what a difference a few months make!
Everybody has forgotten that what we have here is a bust bank being taken over by another bust bank.
Has or has not Lloyds TSB taken advantage of the BoE's lender of last resort facility?
And yet they have the outrageous cheek to extend their hand. Wanting more, a better deal. No talk of moral hazard. These bankers have no shame. They now see the paying business model to be getting wads of money from the taxpayer.
And where pray will the taxpayers get the money from?
Banks of course!
Foreign banks, perhaps the odd sovereign wealth fund. All to be paid back sometime in the future.
But hey, once Bretton Woods +n is agreed then we will be off again.
Everthing will be OK. The banks will be fine. Job done.
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44. sounds like you've had a bad day in your bunker, with your tins and weapon stash. What reading material have you got down there?
54. the masses will, if necessary, go to Mayfair, Bank and Canary Wharf first to take grim revenge.
80. Lloyds are not Sassenachs, they're Breatnachs (Welsh)
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51#
Too simplistic, ther are four types of bloggers who post here:-
30% think everything is the government's fault.
30% think everything is GB's fault.
30% think it is GB's & AD's fault.
10% actually try to post a comment on Robert's blog which actually makes sense!
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This whole HBOS situation stinks. Have a look at the Facebook group "Against the Lloyds TSB takeover of HBOS".
I do not understand why Brown and Darling are pushing this deal through. They are trying to reflate the UK economy - how will adding an extra 40,000+ people to the Benefits queue, closing branches, creating a super-bank which will diminish competition for customers help reflate the economy? This move is very bad news for the UK economy and will cause serious problems in Scotland, Halifax and elsewhere. Why has David Cameron got nothing to say on this? I hope the shareholders haven't been duped and scared into voting for this deal - it is bad news for them too.
Alistair Darling and Gordon Brown will have their names on every P45 issued as a result of this takeover - along with the boards of Lloyds TSB and Halifax Bank of Scotland.
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Mr Robert Peston
I respectfully request that you concentrate your talents on the results of the Banking failure instead of the men that caused it.
The sons of the Hooray Henry's of the eighties are being rewarded for failure and the leaders of the 'free' world are taking a back seat in their Board room, taking instructions in order to save their wealth.
The withdrawal of the ability to borrow is as fantastic as the lie it uncovers. Do not let the cover of lost jobs deter you from the the plan fact that the perceived growth of the last decade and its fake jobs has been built upon the ruins of non-productive world.
The banks in their current form are dead, concentrate on the ability of the people to survive without a conveyor belt and the pursuit service of non-production.
When the coffee shops have gone where are the people going to get their fix?
Identify the probable leaders, the new methodology and possible projects to get us from hereto there with as few casualties as possible.
Address the issues please as your last posts have been more political and banking diatribe.
The market can not be allowed to dictate the preservation of failed processes and the so called leaders can not be allowed to let them try.
The media, especially the public service media must play their part in preventing ruin -
and that is where you and your colleagues come in.
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#86,
what's in it for Lloyds TSB shareholders....nothing.
What's in it for HBOS shareholders.... swap equity.
The real winners are of course the Government...who are remunerated with political capital.
The real savings come from the merger and removal of surplus jobs.....the Stock Market always likes to hear that and will mark the shares of the new merged entity up!
This deal will be forced through, not by the Government, but by the large Institutional shareholders, (Insurance companies, Pension funds) because they cannot afford to take the loss that a collapse of HBOS would entail (remember no bank will be allowed to fail).
One thing that the Government hasn't considered is how to merge the two operations (computer systems wise).
Given the Governments record on all computer initiatives, I would say that this is impossible (technically).
So where does that leave us (the taxpayer).
I would suggest that many more billions than are currently forecast will have to be poured in because "no bank will be allowed to fail".
My guess for job losses on the combined entity is somewhere north of 60000.
Hey it's not all bad news...the Baltic Dry Index has risen for the last four days. A return of confidence perhaps?
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Tobyjudd asks why no comment by LloydsTSB re job losses. Purely that there are employment laws governing the release of such info involving the need for union/staff consultation. Any formal announcement would allow the unions to claim that the bank had made a decision without consultation. Sometimes companies want to persuade the city with prospective figures but the political nature of this deal suggests that a jobs announcement would not be wise especially given the Scottish lobby.
Incidentally, I wonder how GB/AD view the saving of RBS when Sir George is trying to scupper the LTSB/HBOS deal and yet is still on the RBS payroll?
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Uncertainty as to the future of HBOS is not helping to restore confidence in the UK banking system.
There is a good measure of SNP politicking in Burt and Mathewson's job application. I hope that HBOS shareholders see through it and sign up to the Lloyds deal.
I am not a shareholder in either bank but the merger will give Lloyds/HBOS a fair old slice of the market. Charge borrowers as much and savers as little as they can get away with and surely they can make money out of such a strong position in years to come. I'm almost tempted to take a punt on it with a few quid of my savings! Better still I'll do a Burt and Mathewson and apply for a job at HBOS. At least I've got a money making business model and my bonus expectations are very reasonable.
The sooner we get back to having some trust in the UK banking system the better for all of us.
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Some interesting points being raised but as a happy member of staff i thought i would point out some points not yet raised on these jobs cuts.
Now am i worried, for my job, not really for what will happen will happen.
But, lets look at a few stats shall we.
Between the call centre's alone they answer approx 300k of calls a day at present between them. Every got fed up waiting with that fantastic " your call is important to us" message. I would suggest you get used to it.
The problems staff have finding the information you want. Might take a little longer after the cost cutting exercise.
Stood waiting in a branch in your lunch time wondering if you will have the time to actual get lunch. Not only will your wait be longer get ready for staff not 100% sure what your account terms actually are.
In some cities you have an HBOS and Lloyds within throwing distances of each other. Logic would dictate that these branches will merge as part of the cost cutting process. Think of the above and get ready for your services levels to crashing down.
Hbos board have allot to answer for, the lack of any clue on how much funding is required is laughable, especially considering the fsa had declared them a capital sound bank in the summer. The risk element is missing but amazingly HBOS has not been fined by the FSA for mis-selling. Sadly the same can not be said about Lloyds. Lets hope they have learned from these.
Lastly, Andy Hornby will be paid approx £720k over one year to ask as a consultant. The same pay could keep 50-60 cashiers jobs. Which would you rather have?
Anyway, enjoy the chaos that will occur with the merger, and for those that say that the bank employees are getting what was coming to them. No one deserves to loss their job because some foolish board members were too busy to keep a check on growth and instead pushed for profits to keep the share holders happy with the massive returns.
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Yet again Robert Peston is acting as a more than willing mouth-piece for Alastair Darling's political project to override UK competition policy in order to sink the SNP. It wont work and come on Robert, we see through you so at least try and be neutral
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Alexander and Sasha, a poem to help your cause.
Brown and Darling:
a pair of chance(llo)rs.
Simple, honest, men.
Taught the rest of the world
a lesson in prudence.
Rescued the banks,
dealt with the sharks, and
saved the rest of the world.
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Halifax PLC
Statutory Demand
November 2006
Ignored
lord Stevenson
Board of Directors
Informed
Draft Winding Up Petition
Panic
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#99
There are only 2 types.
Those who blame Thatcher and those who are wrong
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Please take vthat last on with a pinch of salt
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Till
Big Pay
Fingers
Big Bonus
Other Peoples Money
Greed
Underperforming
Bad business
Chop
Caught
Round ankles
Whoops
No paper
The smallest room
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YES GORDON
I MUST REPEAT 1500 TIMES
I AM A REJECT. I AM A BAD PERSON IAM DISLOYAL TO NEW LABOUR.I AM WRONG FOR NOT BEING LOYAL.I MUST AMEND MY WAYS.I MUST BELIEVE THE BBC.
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I must admit I can't figure out what's going on. RBS is to remain independent even though it clearly committed the most egregious SNAFU of paying full-whack for ABN even after the clear warning of Northern Rock. Their CEO has to, rightly, fall on his sword for a monumental foul-up. Oh, and the UK tax-payer is in the hole for 20bn quid.
Meanwhile most of HBoS's present problems turn out to be not, as you would think, dodgy oldco Halifax Northern Rock-style 125% loans but oldco Bank of Scotland Corporate deals. Many suicidal deals made as recently as spring this year. All such facts conveniently brushed aside by the Little Scotlanders who have still not got over the original HBoS merger.
Anyway, it seems they need 10bn of taxpayer's cash. And their board too must fall on their sword. Aye, whatever.
But Lloyds. What's going on there? They've had to get their begging bowl out to the tax-payer too. Why is their CEO still in situ? Why is he uniquely placed to manage HBoS. Particularly since he reneged on the original deal and shafted 30,000 of his future employees by reducing the value of their shares. What kind of working relationship do you think that's going to establish?
What's going on?
Who did Andy Hornby annoy at university? Milliband? Did he pin a tail on Milliband's girlfriend or something in first year?
Why has HBoS got to be merged with a bank that also has its hand out for taxpayer cash but is allowed to fire the entire board of HBoS instead of some more equitable merger. After all, they're both in the hole.
I can see what Lloyds get out of this. They get a free bank subsidised by the taxpayer, PLUS, by firing the HBoS board they get nobody looking too closely at the skeletons in their own closet.
Why is RBS given a 20bn float but gets to remain independent but a bank with 'only' a 10bn sub has to get 'merged' with another bank that also needs a sub albeit a smaller one.
Who is separating the sheep from the goats here?
And what's the criteria?
Something absolutely reeks about this.
The only theory I can come up with is that Gordon Brown has claimed that he was instrumental in brokering the deal. A deal that was being discussed months before Brown ever got to hear about it. And so now it has to happen regardless. Otherwise Brown will be exposed as an opportunist who only tagged himself on to the 'merger' after it was done and dusted.
Sounds par for the course with the Maximum Leader. Stick with a rubbish plan even after it has been exposed as such.
10p tax debacle anybody?
Yet another daft decision he championed in haste without thinking it through and now lacks the nous to untangle himself.
Meanwhile Daniels has used Brown's psychological flaws to renege on the deal and shaft all 60,000 of his future HBoS employees by lowering the initial deal and, for good measure, got 15bn quids worth of taxpayers money and a free bank.
Nice one!
Nope. It stinks.
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u9461192 do you have a name?
Whats going on?
Brown
Payoff
Title
Envelope
Tin
String in ball
Blank
Cheque
After
Resignation
Election
abuse
money
ours
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
JOIN THE DOTS IN REVERSE MODE ACTION
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#66 "So what is the 'formula' that accurately predicts human behaviour?"
Actually, P. T. Barnum put it much more succinctly. He said - There is a sucker born every minute !! So far, he has not been wrong !!
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#68 "International investors running from the UK Stockmarket as though it had the Plague!"
Not true !! Plague is now curable. This financial nightmare is *NOT* !!
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#102 "the Baltic Dry Index has risen for the last four days. A return of confidence perhaps?"
...or that the Somali pirates are getting too successful and there is a shortage of shipping willing to take the risks !!
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#91 "There has been a problem...Your comment contains some HTML that has been mistyped."
I had this trouble too once. The system didn't like an a naked ampersand as in B&B.
Perhaps "Mandelson" is an obscure html command which keeps getting Alexander's comments blocked?
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Go.......Alex!
Next instalment after panic please!
Did the draft become a full blown gale?
The continued loss of your blog comments is obviously because you are too close to the truth
OR
Someone on here doesn't agree with your comments and makes a spurious complaint to get it upheld.
We should form a task force or committee of enquiry, forcibly remove all directors and become administrators of the banks. Then we could declare the true positions of it all!
GB has created employment in these darkest hours-a new group (a quango maybe) who will observe from a distance as the banks take their handouts - souch for putting a representative of the people on the boards! One giant step backwards already-what next?
HBOS and proposed new best mates may or may not be a good thing, but how can anyone say one way or another without full disclosure and analysis?
Does any believe ANY of the banks have told all their secrets-even to the government?
The peasants are revolting, but there appears to be no actual mechanism for us to blow all the smoke away and smash the mirrors!
Alex (or do you prefer Alexander-don't wish to be rude) suggest you start your own blog/web page-just make sure I know-I'd love to know what you have said to prompt posting removals!
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Is the word swingeing an actual word-or ahoyld have been swinging or whingeing?
Please enlighten me Robert-I dread this being a new word in the jargonese dictionary!
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#99, why don't we do this deal. Gordon Brown accepts that nothing to do with the economy for the last 11 years had anything to do with him, it was all "greedy banks" under "free markets" who enabled a property bubble, it was the dot.com bubble that gave him his initial boost alone with a low inflation, high [real] growth economy inherited from the Tories and in return we'll agree that the current crash has nothing to do with him either.
I mean blaming it on Thatcher - that's just pathetic. She stopped being PM 18 years ago and Labour has been in power longer than her but yet somehow it is all her fault.
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#120: Swingeing IS a real word, you don't need Mr. Peston to enlighten you, any English dictionary would suffice.
OED: "Swingeing: forcible, daunting, huge".
As for the matter at hand, where were the whining HBOS "stakeholders" when the directors of their precious little bank were running it into the ground with their reckless business model? I don't recall hearing any complaints then.
And as for the SNP, I'd be quite happy to see a refinancing come entirely from within Scotland and for Scotland to take full responsibility for it's very own failed bank, but somehow I can't quite see it happening...
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#121 It just shows the extent of Mrs. Thatcher's success that even the pathetic are trying to blame her for things that they have caused !!
There isn't a single politician of any stripe in this current bunch that can come anywhere near her. The best that they can do is to wriggle and squirm and try to dodge responsibility.
It took a person of great courage to grasp the nettle and do the *right thing* even if it cost her everything !!
And "No more boom and bust" Brown is.....
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#121 laugingblacksheep
Did you mean 109 in which case I was being deliberately stupid and provokative at a slow time of night, my post 110 was meant to point that out. #99 seemed to be pointing out that many of the bloggers oversimplify - so I was oversimplifying.
In the words of the Jilted John song "Gordon is a m.....", read also the initial letters of the lines in post #107.
However, as an advocate of free markets (i think) I would like to get your opinion on something. Please do NOT think I am accusing you of any of the thoughts or behaviours I may describe, I don't want this to get personal I simply ask for information.
In engineering we factor in risk to our projects as follows. We take the cost of an adverse event and multiply it by the (estimated) probability of occurrence to form the factored risk exposure. The sum of all factored risk exposures is the contingency we hold. The plan is that with no active management we spend the contingency by the end of the project.
This system only works if one particular risk doesn't dominate (in the limit the unfactored cost is larger than the total contingency) or if some risks are not independent (such as happens if a single risk is broken into several smaller, apparently independent events to prevent the first situation. In practice if one happens they all happen.
Applying this to markets if any one company or sector (collection of companies) dominates the available contingency (central banks) such then surely this invalidates the assumptions on which the theory of markets operates. If it is too big/important to fail then it distorts the market.
So when the G20 look at things which are too important to fail they should be breaking these up into indepenent (in the statistical sense) entities and asking the question "What if this company / sector disapperared tomorrow, how would the system cope ?".
I am deliberately excluding the social dimension, industries which employ too many people to be allowed to let fail. In terms of the market I'm sure that the removal of car companires would have very little overall impact, when the upturn comes prices will rise and many of us would be forced to rething our attitude towards the car.
The problem with markets is that someone has to ensure that the underlying assumptions are adhered to, no company/sector can be allowed to become too important to fail. Surely the current regulatory mechanisms have not worked. It isn't just about preventing cartels to fix prices, large dominant players actually seem to distory the market they pretent to be operating in. In that sense many of the free market advocates are just using the term as a smokescreen for the creation of effective monopolies.
Going back to a response to one of my earlier posts you said (and I paraphrase) the only function of government is to ensure sound money. Who then is the guardian of the underlying assumptions which markets need to operate and what teeth do they have.
Regards,
Dave
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#123
For Christ's sake lighten up a bit, I think I was rather too successful at being provocative.
If you took you head out of her arse you too might stop oversimplifying things.
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#123
Please lighten up a bit. I didn't mean to bring up the whole Thatcher thing again, just sort of got carried away.
I know some of you think she should be nominated for sainthood and don't have any humour as far as she is concerned
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#123
I tried to object to 125 but my complaint was not upheld, apparently that was neither offensive language or personal abuse.
Sorry for it anyway
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As usual, the Onion has nailed it
http://www.theonion.com/content//node/90029?utm_source=embedded_video_2
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#124, I meant #99.
Well, firstly there are risk models that don't assume the risks are independent. There is stress testing but it usually tells you you are either going to end up owning the world or going bankrupt which is not terribly helpful.
Secondly there are a huge number of assumptions that go into what is the probability of that risk and usually it is based on an assumption that the future is pretty much going to look like the past.
In terms of banks, I am not convinced that letting NRK go to the wall is not the best move. It would have caused a fair amount of chaos but it might have prodded the banks to raise more capital more quickly and I see no reason to bail out these high streets banks. They made a bet and lost, their shareholders should be wiped out, their debt holders mostly wiped out and you can be pretty certain that it would force other banks to be extremely conservative there after.
The issue with the above "solution" is that it would cause an extreme stress on the banking system and the wider economy. New lending would probably shut down for a while and the country would enter recession, opposition would jump up and down, Brown couldn't [bizarrely] take credit for "action" and the press would presumably get very agitated about "why something isn't done" and "how can we fix it". But not doing it simply stores up more problems for later. We could have had a short, shallowish recession in 2002 but then Brown would have had to admit talking out his backside about boom and bust and wouldn't be able to blame it on the US or some speech Osborne made.
12 billion may sound like alot but if the market has no confidence then it will burn through that in seconds. Then what is the HMG plan?
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#97
Lloyds on its own was sufficiently solvent not to need refinancing - it was close to the wind, true, but its profits accruing during the accounting period to date covered the exposure (that's the thing about a reporting cycle, you're hopefully actually worth more than the market valuation until you report).
It was having to take on, somewhat unexpectedly, the huge weight of HBOS debt which changed the balance of their portfolio, debt which was not fully disclosed when Lloyds first accepted the deal - I can imagine there was some ripe language between their Boardroom and the Treasury when that was discovered. There may yet be lawsuits headed in the direction of the past and present directors of HBOS - anything from malfeasance misprision to downright fraud, at a guess. After all, anyone buying into these operations just before the crash has serious cause to complain about accounting practices more reminiscent of the RB211 fiasco than sober, prudent, conservative behaviour. Just look back at some of the prospectuses issued in early September...all was well with the world, when it clearly wasn't. I guess you can find a number of weasel clauses buried in the depths which could be construed to mean they weren't worth the paper they were printed on, but that misses the point, they generally presented an image of businesses which the management must by then have known was incorrect. And that's fraud. Mind you (if they can include weasel let-outs, so can I), HBOS was not the first one to spring to mind, nor the worst...
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#124, also one has to remember the roles regulations have had in this:
1) There is some blurb about ratings agencies. These people are obsolete. They don't need to be "strengthened" they need to be abolished. We have a perfectly good way today of measuring credit risk - CDSs.
2) Having an arbitrary differentiation between credit risk ( bad!! ) and other risks ( ok... ) is crazy. What is a CDO except a product whose sole purpose is to turn credit risk into interest rate risk. Your losses are still the same but now that risk has a different, prettier name.
3) The regulations on capital adequacy. What would make more sense is a real-time view of assets being placed as reserves, let the market decide if Alt-A MBSs really are worth that much as capital. Defining "safe" and "cash" is near impossible and if the product is too illiquid to get prices then people should draw their own conclusions. The capital inadequacy being highlighted now shows how any regulations are just invitations to be gamed.
4) Make sure people realise that they are responsible for their investments - and inform them that they ARE making investments. Also have general education on basic finance at school, in particular drum into people's head that you can't make excess returns without excess risk especially as a retail investor.
5) Have a central clearing house for OTC derivatives.
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It is better if the government takes over the banks and run it at arms length with tight control over salaries and bonus. I do own share in banks but its worth losing the money as running the banks recklessly in the past has damaged the country.
At-least some banks should be state run to have stability.
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Is Brown a dictator now? What happened to capitalism? Let the board of directors decide and stay out of the market before you do more damage, Brown
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Just read the news on BNP; if this crises is not resolved this is where the country will go. Some will go to the far right and some others to the far left.
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This comment was removed because the moderators found it broke the House Rules.
Now that my Mind has been reformed.
I must state my ADORATION for the Big Brown & his gang,the BBC and all our Financial bank wizards,they are all fine upstanding citizens.
I must fall on my knees in AWE.
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Another comment referred to Moderators what a surprise.
Moderators i have formally complained to the BBC.
I have booked to see my local MP to discuss this policy of censorship.
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No need to worry about HBoS future, just a few more weeks and we will be allowed to short financials again, HBoS gone in a heartbeat.
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#122
Thanks for that-I didn't have a dictionary to hand at the time-I suffer from insomnia and at that time of night only have a stupid dyslexic phone to use!
We'll have to see what the voters say today-whatever happens, someone's nose will be put out of joint and there will no doubt be boundless recriminations!
A word of warning about nationalised banks-I read yesterday that NR hold over 4,000 repossessed properties on its books. They are now saddled with properties which are unlikely to sell at a high enough price to repay the debt. What next I wonder?
More important, is the thought that over 4,000 families are now lost somewhere in bed and breakfast accommodation. Maybe not that many, but even if they were buy to let properties, what happened to the families renting?
A truly sobering thought-there but for the grace of God......
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Alexander C
Right behind you with this one! Start your own blog!
What the running total now?
You must be a true visionary. Take heart in the fact that your seemed persecution must mean you're spot on!
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#125, 126, 127 No harm done. Just my personal opinion !! No apologies needed but thanks anyway !!
Re. your risk modeling, in business modeling, some people will also factor in the Murphy Effect, and double the contingency after all the calculations are made. This leaves a reasonable margin that is there when needed and is not used when not needed.
From what I can gather, those that were worst hit in this crisis are the very ones who have pushed the envelope to the maximum with total disregard to any contingency, let alone the Murphy Effect. When "Murphy's product" happened, they had no safety net to fall back on.
Those that have factored in this Effect, e.g. Lloyds TSB, were in a much better position to weather that storm by, dare I say it, saving for the rainy day.
The importance of factoring in the Murphy Effect is that finance, unlike engineering, is *NOT* a science !! In fact, it is more akin to crystal-ball gazing !! Many have tried to predict the future trends using the Chaos Theory, etc. but none have done so successfully. As proof of this, if any one had successfully predicted this crisis, s/he would have made a killing by now.
Even Warren Buffet, the great Oracle of Omaha, could not have predicted the recent events !! And he is the most successful investor that I know of !!
As for the saving of banks, etc. My opinion is that it would be better for financial Darwinism to occur since we may all come out of this stronger and leaner and meaner. Pampering for political reasons can only mean digging deeper into the hole and a longer, deeper and more painful recession.
As an engineer, you may know that weakening parts of a machine for aesthetic reasons will mean an earlier failure. And the more weakened the machine, the more down time there will be !!
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Whatever happens, jobs have to go at HBOS HQ. Why don't the directors of HBOS offer their resignation live on TV in an emotional display of embarrassement like they do in the Far East. I want to see them begging for forgiveness on their knees, weeping pathetically to show how sorry they are.
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Weeeeellll Robert, Imagine that Alastair Darling is a Banana, soft on the inside with a waxy coating, resistant to the latest allegations of driving the country intooo unssailable debt.
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Bank rate??
MPC now there on about 2%??????????
This is all about reducing the cost of government borrowing which as we all Know is out of control.
Gordon? The PFI stuff we did is at fixed rate or lets say MLR of 6.75 Plus 1% not MLR 3% or 2%.
Check your figures Great Clunking Fist.
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#122
Why should the SNP and Scotland bail out HBOS?
It was Gordon Brown, the FSA, the City of London and HBOS's management that are jointly responsible for the mess that HBOS now finds itself in. The SNP had nothing to do with it.
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Only 4000 repo i thought it would be more?
A storm to come?
I guess next year overall repo's will hit 70000 or so possibly more.
New blog is an option.
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The bank recapitalisation package will be paid for by taxes from throughout the UK and should not be restricted to London based or orientated companies. If there is any chance to keep HBOS as an independent bank then the Government should be supporting it, instead they are desperate to push through a bad deal for shareholders as they think it will weaken the case for Scottish independence if Scotland has no national bank.
At the same time thousands of jobs are at risk in Edinburgh. Alistair Darling's desperation to push through this deal - which will have the effect of killing the banking sector in Scotland is the ultimate proof that the British union does not benefit our country.
If he succeeds Labour will be dead in the water for a generation. The Tories paid the price for thumbing their nose at Scotland's interests and for Scottish MP's to try and undermine our most important bank beggars belief.
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Did someone mention Bananas?
We will be a Banana Republic soon without a staple crop.
Bust Broke Bankrupt Paying off our Crown Debts.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Tigerjayj
Doing the research to sort it.
IT guy is costing it at 3% interest Ha Ha
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#122 "And as for the SNP, I'd be quite happy to see a refinancing come entirely from within Scotland and for Scotland to take full responsibility for it's very own failed bank, but somehow I can't quite see it happening..."
It couldn't even if it had the money, HBOS isn't Scotland's bank. Burt ensured that. After the failed hostile bid for the much bigger Natwest, he merged BOS with Halifax in such a way that Halifax shareholders had 2/3 of the company. That's why his protests now are contemptible posturing. This is a British problem with a Scottish political dimension. Unfortunately that extra dimension is making rational analysis and consensus much more difficult.
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Come on Mr Peston.
Lets have a new article ,what about one on true inflation impact of exchange rates currency options etc. ...
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Whether HBOS has an exciting future or not will depend on its owners and the management assigned to run the company. P
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Whether or not HBOS has an exciting future will depend on the attitude of its owners and the management style of its operations. The owners the tax payers who are represented by the government will have the ultimate say in how things are run and managed. The track record of the present government is not an encouraging sign that HBOS will have an exciting future. If anything HBOS will be engulfed in regulation and red tape which in turn will transform the bank in another bureaucratic institution.
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# 144
The link between Bank Rate and government borrowing is about zero. In fact one of the big challenges central banks have faced in the credit crisis is gaining any traction over interest rates longer than overnight. Just check 3 month interest rates. They're miles above Bank Rate (overnight).
The impact of large increases in government borrowing is almost certainly going to be an increase in long term rates. I haven't checked, but I'll bet rates on 10-year gilts are probably already higher than they were a couple of months ago. If Ally D does not announce on Monday how he plans to reduce expected government borrowing 2-3 years out, as well as how much extra he's going to borrow immediately, then it will cause an issue in the gilts market. That's the ral concern here.
As for Bank Rate of 2%, I think you'll find a growing consensus that we'll get to that number by January, and perhaps even lower (1.5%) by March. Expect a quick reversal from that position as soon as there's a glimmer of economic improvement. My bet is for rate rises back to 3% by end-2009, which is still very low but no longer indicative of a crisis.
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It is unfortunate that the Banks were nationalized instead of supported (with punitive loans).
All those jobs will not be restored by sitting on ones hands hoping.
All that Pension Fund money will not return, lost is lost.
Investor confidence will not return.
The knock on effect on the rest of the economy will take years to settle down.
The Pound is unlikely to remain where it is, expect to see it falling to one Dollar one Pound over the next two years, or sooner.
Things have happened very fast indeed.
Do the people within Parliament have a plan to rebuild Britains economy, protect the property rights and lifestyles of British people ?
I would like to hear how Britain will work its way out of this crisis.
These men claim to lead us, let them lead!
So Mr Brown whats the plan ?
For some reason I just had a vision of Laurel and Hardy.
Another fine mess.......
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If it were me, I would invite the major British business people to form a think tank, to decide the best way forward to revitalise Britains economy.
People like Alan Sugar, Richard Branson, all top men in business.
Civilization is based on specialization.
If one is ignorant on a subject one goes out and finds someone who knows how.
Come on, go out and get some help.
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I've rechecked my personal Inflation rate, and it's still running at over eleven percent.
The Great Lie of statistical Inflation continues.
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Just wondering if we have been missing the point and the Lloyds/HBOS creation is a way to reduce competion in such a way that the most competitive the mortgage market would recover to would be 90% LTV and sustainable interest rate margins.
(i.e. the end of unsustainably cheap rates and 125% LTV)
It would therefore retain the largely cheaper and easier passive management and avoid the cost and problems of active management of mortgage lenders by the FSA etc. and the complaints that would come from potential customers that the FSA etc was interfering and not allowing borrowing as cheap as they might want fro risk and stability reasons.
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Alexander C
As always, words of wisdom!
Can't wait to vote for you as next prime minister!
T
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The government is right to only lend vast amounts of our money to HBOS if they are likely to get it back, which it seems for a stand alone HBOS is not going to happen as they don't have sustainable business, hence their pushing for a merger. Its easy to knock the government and say things like "ask Richard Branson and Alan Sugar" (Alan Sugar sells cut price electronic equipment doesn't he?, whats that got to with saving our economy), but why should the government lend money to an independent HBOS when a bank wouldn't?
I agree - force through the merger to giove the koney the best chance of being returned one day.
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Re 153
The PFI rate i quoted was for the money i have out on PFI which is MLR 6.75 plus 1%
which is 7.75%.
Current rates have no bearing on our PFI funding,i cant be on my own.
I lent on 20 year terms at MLR6.75 plus 1%.
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#155 "If it were me, I would invite the major British business people to form a think tank, to decide the best way forward to revitalise Britains economy.
People like Alan Sugar, Richard Branson, all top men in business."
In principle I agree, but there are aspects of both mentioned gentlemen's business history which do not inspire me with confidence. There would need to be serious scrutiny of the "talents" and history of anyone involved. I would favour a scrutiny process by Parliamentary committee.
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Various Bloggers ask whats the plan?
Their only Plan is to cling to power,heard Frau Smith on Radio 4.
DISGUSTING CONCEIT.
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#145 "It was Gordon Brown, the FSA, the City of London and HBOS's management that are jointly responsible for the mess that HBOS now finds itself in. The SNP had nothing to do with it."
Technically true, but it did not see the problem coming; nor has it offered any constructive solution other than throwing govt money to "save jobs". Salmond is an economist with a background in banking. In February 2008 he said "The Scottish banks are among the most stable financial institutions in the world." So much for his judgement.
His SNP chum Mathewson on the other hand cannot escape scrutiny for his role in creating the banking crisis. He was after all Chairman of RBS 'til 2006 and prior to that was instrumental in Goodwin succeeding him as CEO.
Apart from Vince Cable , (and I mean him rather than his party), no-one in the British political establishment comes out of this crisis with any credit at all. They can only redeem themselves in the future if they are prepared to be honest about their past mistakes, as well as thinking about the future in a constructive, open and non-ideological way.
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Business people involved with Politicians??
No Titles
No donations over £50 pounds
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#157, given that virtually all the growth of the last 11 years has been due to an asset bubble in property and an inflationary spend by the public sector and this was brought to an end by banks cutting back on reckless spending, do you honestly believe Crash Gordon isn't going to force the banks to go back to the irresponsible lending of the past in order to buy one last election? No, neither do I.
PS the above isn't a hypothetical, Darling already has stated that the banks who take capital need to resume lending growth at Summer 2007 - ie top of the bubble. I guess in bonkers, Nulab world that is a "sustainable plan".....
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I sit here and wonder why people are blaming the Government for these economic ills?
I am of no political persuasion but for me the problems have all been created by the private sector, who now want the Government to bail them out. When things were bouyant they actively discouraged any interference what so ever.
Whether it is the financial sector, the retail sector, the manufacturing sector, the food sector, all have brought this country to its knees by 'selling the family silver' Their insatiable appetite for more and more profits, cheaper and cheaper goods have meant, as a nation we can no longer support our selves, feed ourselves, provide ourselves with basic energy needs and the Government of the day has no power to stop the private sector doing whatever it pleases. There is nothing anyone can do to stop them sourcing anything and everything abroad. They are the ones that have killed off all the skills this country used to have, not the Government. Greed is their only motivation.
I agree that past Governments have possibly made it easier for the private sector, just to appease them i.e Ted Heath removed the retail price maintainence, Mrs T privatised our gas, electricity, water, transport, introduced competitive tendering etc. (much of which is now in foreign hands)They also allowed Council tenants to purchase their own property, which was a great idea but the money received should have been ring fenced to build more affordable housing then we wouldn't have such a huge problem now. They also made it OK for a generation to accept debt is OK by bringing in student loans. The rich have just got richer and the poor poorer.
This Governement has done nothing to change or alter any of those policies, so one assumes they agree with them too.
All Governments are afraid of the private sector and the bigger the business the more clout they have and its only now, in a crisis that the Government can call the shots.
What everyone fails to appreciate is that we inhabit this World for an incredibly short space of time, we don't actually own anything, we cannot take anything with us ( that is if you believe in an afterlife) we only rent the space for the time we live on this planet but we do have an enormous responsibility to ensure we don't destroy it for the generations that follow.This generation has done more to destroy the planet than any other generation, since man first walked the earth and our children and grandchildren will not thank us for it.
The private sector puts profits before people and the planet every time. They may pay lip service to the rights of workers and saving the planet but in reality they only do it if there is something it it for them. Yet the irony is the decision makers in these companies are mere mortals too and will also leave with nothing!!
We are at a cross roads and the Government could and should be really radical and not pussyfoot around, tinkering at the edges, playing politics etc.
If the Government is considering spending money to get us out of the problem created by the private sector ( and I like everyone else have no idea if it will work or not. No-one predicted this crisis before it was too late, so why are they any better at predicting a solution) then they should
look at ways of making life better and more sustainable for all.
We need to be far more self sufficient as a nation, we need to take pride and responsibility in what we do in our personal lives but also collectively. We need to encourage people to become skilled and to take pride in the work they do. Pay needs to be on a more equal footing i.e it takes a whole team from the manager down to the person who cleans to ensure the smooth running of any organisation. Sweden has an elgalitarian society and it works! (I noted that Mr Cameron likes much of what Sweden does but he didn't mention their pay structure)
We need to help young people to realise they too can play a full part in the community in which they live.
Why not social conscription for all 16-20 year olds? Give them life skills and open their eyes. Might even give them pride in their local surroundings and make them want to look after it??
Why not help people who have been unemployed to set up their own businesses?
They could receive financial support until such a time as their business can support them. At the moment you are either employed or unemployed, why is there no half way?
The unemployed could give some of their time to use their skills in their community i.e there must be many elderly people who need their homes re-wiring, insulating, decorating, repairing etc. A skilled electrician could give say 4-8 hours per week to do a very worthwhile job. You would not be taking anything away from the private sector because these people can not afford it anyway. There can be nothing worse than not being gainfully employed when you have worked so hard to acquire those skills. To see that you have helped improve the life of someone would be a huge moral boost.
I do have one gripe about Governments and that is all the Health & safety, risk assesments they impose on all of us.
I just wish we could bring back commonsense, personal and social responsibility. Life is dangerous and you cannot legislate for every eventuality but once you start this slippery slope you cannot stop because once you have legislated for something, you then find something else that gives cause for concern.
I am sure most people are capable of being responsible citizens. We just need to sort out the few that are not!!!
The press and the media could play their part too, as they have been instrumental too in exacerbating this crisis and also seem to enjoy highlighting the ills of this nation rather than praising the good. Other nations take a pride in who they are, not this Country!!
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#129, #131 Laughingblacksheep
#141 Ishkandar
Thanks for the detailed replies, I will have a bit of a ponder about these and come back to you on a later thread.
As a soft left winger (so I thought) it is strange to me that in so many respects I find myself agreeing with your analysis and even the solution - let a bank fail. I would like to make it clear that I detest Nulabour.
The problem I see is that in solving the crisis there is a very real risk that the whole economy could be brought down (and by the way I think this is just as likely with the current set of policies).
In think what I am groping towards is how do we set up the economy so that businesses (or sectors) can be left to die without too much risk to the rest of the economy, i.e. create a shallow recession but not an all out crisis.
My own experience is that rigid rules (imposed by Quality Assurance) lead to box ticking compliance but no real assurance that the real risks are being managed.
I think there is far too much reliance on the future looking like the past (as you say). The simple control mechanisms were based on an economy which didn't include this whole CDS/CDO system, there was no adaptation (or realisation that there was the need for adaptation).
The real control mechanisms need to be strong but not overconstraining of innovation, adaptive and very responsive. They need to be staffed by the very best people and given real clout. That would be an intersting organisation and one in which I would be glad to make the tea.
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#166 Timetoponder
The other side of the coin, the human dimension. Very well said.
I work full time and do voluntary work at a local school, this is intensely rewarding.
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#167 and linked posts. No doubt risk models vary by industry - but the one´s that I´ve seen have very little to do with risk and an awful lot to do with creating a complex largely impenetrable struture that allows "stakeholders" to justify their participation in any venture on the basis of the model (the structure of which they tend to neither understand nor want to understand). Risk models also have a happy consequence of facilitating the calculation of NPV (i.e. the profitability of the venture) on the basis of mark to model.
Maybe you have a model whose outputs are a partial function of a 25 year forward price curve for Peruvian electricity. Who knows what are the right numbers? - Answer no-one. So numbers are made up. But the people making them up know that below a certain point the venture makes no sense and hence they have no job. So the numbers are always high enough to justify an ongoing participation. To simplify if you get the numbers at the high end of any sensible range then you also get bigger bonus and fee payments - which go to both individuals and institutions, so no-one asks too many questions.
Financial engineering is not like real engineering. Real engineers design bridges and things to last for years - financial engineers design deals to last just long enough to ensure the extraction of value. That´s why so many financially engineered projects have collapsed and why so few bridges have collapsed.
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I fully understand what the Chancellor is saying and its quite simple, not that Tavish Scott or Messrs Mathewson and Burt seem to be able to comprehend.
"A combined Lloyds TSB/HBOS is a different business model to an independent HBOS"
How hard is that to understand?
Mr Scott is being interviewed outside the Lloyds Shareholder meeting and criticising the chancellor for promoting job losses, I didn't see that mentioned in the full transcript of his speech, he merely pointed out that as things have moved on (something that Messrs Mathewson and Burt were only too happy to point out) so would the terms of any renegotiated deal based on a new business model.
I think I would have a little more faith in the concept of an independent HBOS if I saw Salmond, Burt Mathewson etc all buying large stakes to support their ideas, I would have more time for those protesting against job losses if they had done the same (and yes I am aware that many HBOS staff are shareholders). I look at the news at all those protesting that others should save their jobs (potentially, and who can say for definite what the future holds, to their own detriment). there are supposed to be 140,000 employees between the two banks if each owned just 10 shares that would be a sizeable vote that they would have. Instead they are outside protesting. Surely if they are that worried they would want to be busy in the office demonstratign that they earn their salaries.
Now I have no doubt that this view will anger many but I am growing tired of listening to people complain without at least trying some of the avenues that are open to them, that do allow them to take a proactive approach.
To those that are not shareholders but are mortgage holders with HBOS I would note that since nationalisation Northern Rock has increased the number of foreclosures on mortgages and repossessions, while having the highest of all high street banks for SVR and being one of the last to pass on the cuts. Do we really want this to happen to the largest number of mortgages too?
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Interesting piece of research out today from JPMorgan on UK banks prospects, and courtesy to Barclays Stockbrokers for the summary. Per the Barclays summary:
"Banking profitability will not be the same for a long while, according to JP Morgan, which has issued a downbeat assessment of the prospects for UK banks.
JP Morgan (JPM) is sceptical over the government’s assurances that it will be an “arm’s length investor” and believes that “as the economy deteriorates the government is likely to be pressed to exert more influence.”
Though JPM confesses it does not know what impact the government’s involvement will have on earnings, it is assuming that there will be less significant margin growth in the low interest rate environment, while the fixed cost of writing business will be more expensive.
The US bank has cut its earnings estimates for the UK banking sector by 31% for 2009 and by 34% in 2010. It expects sector Return on Equity to fall in the range of 6-10%.
JP Morgan remains underweight on the sector and has reduced its price targets for the major players as follows: post-merger Lloyds Banking from 180p to 110p (pro-forma); Barclays (from 210p to 150p), Royal Bank of Scotland (from 120p to 50p) and HSBC (from 720p to 675p).
Lloyds TSB remains its least preferred stock in the sector, with HSBC the best of a bad bunch. JP Morgan believes the synergy targets after the Lloyds TSB and HBOS merger will be hard to achieve and capital shortages remain. The possibility of HBOS continuing as an independent entity is discounted, as the cost of preference capital and government debts guarantees, combined with rising impairments, would wipe out profitability.
Meanwhile Broker Panmure Gordon has also been sticking the boot into HSBC, dropping its rating from “neutral” to “sell” and scything its price target from 810p to 615p in recognition of the worsening global economic outlook. The broker observes that although it has avoided the need to ask for a government hand-out, its Tier 1 capital ratio has eased to 8.9%, which is below the 10% average for the European banking industry."
UBS has also been looking at European banks, and described earnings prospects for next year as "dreadful".
In short, anyone who thinks that any bank is currently a good investment probably needs a good shaking to help them wake up from their strange dream.
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#171
I'm sure you weren't trying to make me laugh, but there is a certain comedy to the idea that banks that have had financial trouble are able to come out deter people from buying into their competitors when each of those mentioned have had their own form of problems.
Only in banking is this possible!!!!
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#169
A very interesting take on risk, perhaps that explains an earlier comment from Laughingblacksheep about dependecies in risks - we may not actually be talking about the same thing.
Another example is coupon, for me it is something that irritating people use in Tesco for the purpose of holding up the queue and annoying everyone behind.
Thanks
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#130 rahere
As I understand it all the High Street banks have had to use the lender of last resort facility offered by the BoE.
They all stopped lending to each other and they were all in the poo.
I quite imagined that Lloyds TSB were told they could access BoE (Taxpayers) funds with the proviso that they had to take HBOS.
At the time I would see Lloyds TSB agreeing to just about anything.
Hobson's choice.
They have made their bed, now they must lie in it.
But they don't like it..
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#145 and #149:
Precisely. You clearly failed to detect my ironic tone.
Of course HBOS is not a Scottish bank, any more than HSBC belongs to Hong Kong and Shanghai. But if the SNP wants to play stupid political games just because the bank has the word "Scotland" in it's name then I say fine, have it and good luck. After all, no-one else wants it.
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I am really sorry but I have carefully read all the comments on this and still believe it is an attempt to discredit the Scottish Banking system in order to prevent the SNP from making a real go of things.
The fact that two so called Scots (Darling and Brown) are behind this sticks in my throat.
Brown is a dicredited member of a system that showed no control of personal or fiscal borrowing. He has been allowed to bankrupt the country as his lack of actions to control the banks over the last 11 years is nothing other than gross incompetance.
Yet again the ordinary bank workers will suffer whilst their bosses will escape Scot Free...if I had my way they should be put on trial and have their assets ceased.
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This is the same Chancellor that in the March Budget Statement said "I am able to report that the British economy will continue to grow through this year and beyond."
Either lying or stupid, take your pick.
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Personally, I would have liked to have seen China buy HBOS.
And then put its mortage rates back UP to levels consistent with market interest rates.
That would have brought into sharp focus the real situation regarding the current demand-supply balance for money in this country, rather than the artificial one (slash Bank Rate then force the banks to drop their mortgage rates) that the Govt seems to think can be a solution to over-indebtedness.
They never seem to learn.
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I was amazed to hear in March when a friend who is dating a Sales Director at HBOS said he was paid a £300K bonus. No idea what he was selling, but it opens the question - when times get this bad, why can't they make these guys payback? Chances are he may still have a job once they've identified the Lloyds TSB overlaps and it'll be the branch and call centre staff hit hardest....
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