We own Royal Bank
It's official. We the taxpayer own one of the world's biggest banks, Royal Bank of Scotland, or 58% of it.
Only a tiny number of RBS's shareholders chose to buy any of the new shares in Royal Bank that were being sold in order to strengthen its balance sheet - which was inevitable, since the new shares were more expensive than the price of the existing shares on the stock market.
So the Treasury, on behalf of taxpayers, bought up the remaining 23bn shares at 65.5p each.
And, with last night's market price at 55p, we as taxpayers are already sitting on a loss of £2.4bn on this stake.
But the share price may rise.
What's more important is that this huge bank - which has just under £2,000bn of assets - is now majority controlled by the state.
Its shares will be in the hands of a special new company, UK Financial Investments Limited, owned by the Treasury, but described as being at arms length from it (see my earlier note, "a new taxpayer-owned mega-bank").
This is intended to demonstrate that ministers will not meddle in Royal Bank's day to day operations.
That said, it is utterly implausible that ministers and officials will be able to stand by idly as and when Royal Bank takes actions that affect millions of voters.
The commercial judgements of Royal Bank's management will inevitably be conditioned by the inescapable fact that we the taxpayers now own the bank.
That's about a great deal more than whether it pays bonuses to senior executives or how much it lends to small business and homeowners (which is where the government has already exerted explicit pressure).
It's about fundamental questions of culture and about how much risk the bank is prepared to take or is allowed to take by the new proprietor.
Those who run banks such as Royal Bank have for years seen themselves as creators and manufacturers of financial products, companies that can generate incremental wealth and can grow faster than the underlying rate of the economy.
They didn't want to see themselves as the infrastructure of the economy, that couldn't and shouldn't attempt to push up their profits at an accelerating rate. Somehow it was a bit too humiliating to be no more than the pipework for the real generators of wealth, companies with genuinely new services, real products and real technology.
So bankers created and exploited new "financial technology" that enriched themselves (for a while, at least) and was supposedly benefiting all of us by providing unlimited quantities of credit at astonishingly cheap rates.
Much of that technology - the collateralised debt obligations, the collateralised loan obligations, the credit default swaps, the structured investment vehicles - generated colossal losses, hobbled the global banking system, and is part of the reason why taxpayers all over the world are now propping up wounded banks on a mindboggling scale.
So whether they like it or not, most banks and bankers are destined to lead a quieter, duller life for many years.
Which, many taxpayers would say, isn't such a terrible thing.
If our banks simply concentrated on the very basics - taking deposits, providing simple loans to customers they actually know, moving our money to where we want it to go - would that be so disastrous?
Throughout the entire history of banking there's always been a tension between their core function as public-service utilities and the desire of the bankers themselves to earn super-normal returns by speculating with their depositors' cash.
Whether they like it or not, all our banks will for the next few years look a lot more like building societies and a lot less like Goldman Sachs.
UPDATE, 09:45AM: Sorry. I forgot the elephant in the room, Royal Bank of Scotland's £1900bn of borrowings, deposits and other liabilities.
I'm sure these will be kept off the formal public sector balance sheet. The public finances really wouldn't look pretty if another 140% of GDP was added to the national debt.
But now that taxpayers own 58% of Royal Bank, we are explicitly and formally standing behind its entire, gargantuan balance sheet, its assets and its liabilities.
That was always true in an implicit sense, because Royal Bank was too big to be allowed by the government to fail.
But we shouldn't pretend that the liability isn't real. The assessment of Royal Bank's credit-worthiness is now closely linked to an assessment of the credit-worthiness of the UK state.
That cuts both ways. Royal Bank is benefitting from having the financial support of the state (which is why it really does have to behave itself).
But the fact that Royal Bank has this conspicuous support also shines quite a bright light on the huge and growing liabilities of the state, which will have an impact on the perceived credit-worthiness of Britain - and not in a nice way.
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Should I move my current account out of Nat West?
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Robert:
Good points well made. Now, if the FSA could either be scrapped or made to work, then we might be getting somewhere. The "light touch" regulation (ie virtually non existant) has been a contributory factor to the current mess, both here and in the US.
One thing we're not clear on though.. although the institution will be run by yet another quango at arms length - shouldnt F.I.L actually be an active board member rather than just the majority shareholder? Or is the Treasury not bothered about how the bank conducts itself providing it gets its money back (as can be seen from the current behavioural patterns of N.R???
I'd be interested to hear what you and everyone thinks.
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So the Treasury, on behalf of taxpayers, bought up the remaining 23bn shares at 65.5p each.
And, with last night's market price at 55p, we as taxpayers are already sitting on a loss of £2.4bn on this stake.
Caveat: Share prices may go down as well as up.
As 'the buyer of last resort' is there not some mechanism where the treasury could have gone to market and bought at market rates?
or renegotiated?
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And looking at the technicals for RBS it would seem that more mark to market losses are coming. The stock is putting in a huge bear flag and momentum is topping out. When the next wave of selling hits and momentum turns back down with trend it could be very nasty.
Why oh why has the government decided to play trader with the public finances? With credit card defaults the next bubble to pop there are huge losses to come still.
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UK Financial Investments Limited also "owns" Northern Rock and Bradford and Bingley, so together they truly are a formidable bank!
What "pressure" has government exerted over executives bonuses, exactly? It was my understanding that Northern Rock managers and upwards had granted themselves 30% bonuses this year, agreed by the Treasury?
I'm sorry, did I say "agreed" - I just meant "greed"!
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It will be interesting if it becomes easier or cheaper to borrow from RBS (unlike NR).
If it does, the state will most likely be taking on more bad debt. If it doesn't then how will this sit against the government telling banks they must lend...
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"Somehow it was a bit too humiliating to be no more than the pipework for the real generators of wealth, companies with genuinely new services, real products and real technology. "
Take heed all you bankers out there who haven't yet seen the change in your perceived role.
You're probably still thinking of a return to the good ole days of being the top of the pile, lording it over and holding to ransom the real wealth creators.
In reality you are a cog, albeit a large and integral one, but still a cog.
Please take your responsibilities seriously from now on.
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Right, now we own the bank, time for it to pop along to the High Court in London to withdraw the case against people who have asked for all those illegal bank charges back.
If we own the bank, why would want the bank to behave illegally?
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We can weep over bankers but retail accounts for just as much GDP as banking, ie 9%. But it employs 300% more staff.
The government should make some attempt to rescue Woolworths (WLW). If they do not, there are 30,000 people unemployed and add on ancilliary staff, suppliers and distribitors etc, it comes to 120,000. Employees made redundant by WLW can claim from the National Insurance Fund back pay for up to eight weeks, capped at £310 a week and holiday pay of up to six weeks with the same limit. They can also claim for failure to receive statutory minimum notice up to £310 per week. Where relevant, staff can claim unfair dismissal, statutory sick pay and maternity pay.
PULL YOUF FAT FINGER OUT MR BROWN.
WHY DONT THEY GIVE THE FOOD RETAILERS SOME CONCESSIONS IF THEY TAKE OVER WOOLWORTHS STORES AND SOME EMPLOYEES
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The question now surely is when will the taxpayer see something in return for all these billions spent bailing out the banks?
Personally, I do not think we ever will. If the banks stop lending then we get no benefit. However, if they lend recklessly as the government wants, then it will create more bad debt that the taxpayer will also have to foot the cost for.
Surely it would have been better to just put the money into tax cuts rather than spend it bailing out yet another bank!?
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Slightly off topic, I’m afraid, but relevant to your blogs in general.
Northern Rock, Bradford & Bingley nationalisation Lloyds takeover of HBOS, the Government’s announcement of the intention to recapitalise the banks, followed by Friday’s accurate account of what the Chancellor was going to say on Monday in the PBS all predicting Government statements with an accuracy which cannot be explained by clairvoyance. Clearly someone is leaking information to you ahead of government statements and you are putting it in the public domain in advance of those statements.
So, unless you have been granted some form of immunity, the evidence against you is clear.
Are you expecting a home visit from the counter terrorism branch?
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Oh dear, we all now, each and every one of us, owns by proxy, a part of a bank, an organisation which many if not most ordinary people hold in contempt.
It seems ludicrous that we are bailing these creators of misery, they have made billions from the tears and pain of people who have literally had to sell their souls to them in order to have a roof over their heads. Im not talking about the ones who take out loans for huge tv's or the second car, but people who took out a mortgage to put a roof over their heads, not to make a profit, or who found themselves a little short at the end of the month and got hit with a huge penalty fee.
Personally, I think all the banks should have been allowed to go to the wall, and then the Govt. could have bought up the assets for cheap, and re-opened them as fully nationalised companies, there to be a part of the national infrastructure, not as a profit making concern. If Europe didn't like it, well, tough on Europe, let them go examine some bananas for the correct curvature.
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the £2,000 billion valuation of assets is based on what price ?
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THE single MOST important thing is that government do whatever they possibly can to allow as little bank capital as possible to leave in the form of bonuses this bonus round.
Not just at RBS but all banks.
I know a lot of city people, and there is an implicit understanding that austere times are ahead and that they should extract whatever last loot they can from the sinking ships this year.
They are relying on the sloth of government and, in Vince Cables words, "making monkeys" of the taxpayer.
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Well, why doesn't he ruddy well finish the job and allow Corporate Treasurers alarmed at the Woolies precedent time to find a port to ride out the storm? Otherwise we'll face a lot more shipwrecks.
He can always undo it later.
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Robert - what do you mean 'public service utilities' - this was a commercial international bank operating in a very competitive environment. It should not be pressured by Brown/Darling to make unprofitable loans to business/ homeowners who can't repay them. It had/ should have no duty of public service. We should allow competitive forces to decide how much risk a bank should take (and at what price) but have tighter regulations to ensure the overall appetite for risk is not excessive with the consequences we are now seeing. The government has no place interfering. The banks have paid wit their lives for the mistakes they made. What punishments should we expect for the Government appointed regulators who allowed those mistakes. Ultimately the regulators and this government have to carry the can too. The buck stops with Gordon Brown.
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This comment was removed because the moderators found it broke the House Rules.
Cup definitely more than half full!
There is an opportunity here for the government to showcase how a responsible bank should conduct itself. That will not happen if Darling carries on mumbling about the need for commercial management of the state owned banks.
'Commercial management' is why we got into this position in the first place.
While the day to day management of the bank should be left to the experts (who hopefully will now emerge) there is at policy and public affairs level the need for a supervisory board for corporate and social responsibility.
Radical is appointing government, Trade Union and small shareholder board members to broaden the interests in decision making and thereby construct a model for social enterprise.
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if the Government wants to interfere then it already has the means to do so in the banks it already owns; Northern Wreck and Bungle & Bingo. lThis may even be the right thing to do.
The huge risk Robert does not mention here is that there are further huge losses on RBS' two thousand billion balance sheet.
This would bankrupt the bank at the very least and cause a taxpayer loss of tens of billions. Instead we would no doubt end up with full nationalisation.
That very much will be the story of next year. The new CEO will hopefully clear out all the bad news by the time of his first set of results
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Wow what a bargain!
Spend 15bn and we get 58% of a company with 2000bn of assets we can presumably get UKFIL to flog off. So we can get back what around 1200bn for an outlay of only 15bn.
Brilliant, we can now pay off the national debt and fill the holes in public spending, buy all the PFI deals off and what have a few quid spare for a new aircraft carrier or two?
Might we also get lower taxes from teh interest on the balance remaining in perpetuity also, is there is enough left?
Surely a master stroke by Alistair Darling to have engineered this financial miracle.
Or have I missed something?
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Quote:
'We the taxpayer own one of the world's biggest banks, Royal Bank of Scotland, or 58% of it.'
In (economic) principle, it may be right to say so.
Politically speaking, it is rather misleading.
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So the Government appears to promise not to 'interfere' in day-on-day management of RBS tlc.
Just like they don't micro-manage rail....
Don't forget AD is well practised in making sure that once its in his grip, he does not let go (Railtrack rip).
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Over recent months many contributors mentioned the BOE failure to recognise the property price boom as inflationary. Are the same authorities now failing to see that with house price collapse and share price collapse we have already had a year of massive DEFLATION. Perhaps the Government does have an opportunity to print a rapid cash injection without risk of inflation. This would help weak commercial cash flow that is a current widespread problem threatenig failure of healthy business.
And to all those worrying about government intervention and spreading socialism perhaps a history lesson is valid. The only major economy to grow throughout the thirties depression was soviet Russia.
Who is for a spell of command economy and the smack of strong government with Uncle Gordon in place of Uncle Joe.
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Come on, Mathewson and Burt.
Act now to prevent RBS from being taken over by the UKFI ltd. or have you guys lost all credibility in London?
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I've been reading this blog for some time now and i've finally decided to pitch in - thankyou sashaclarkson
what i want to say is, there are an awful lot of good, intelligent folk reading and commenting here, i'm sure concerned for the well being of themselves, their families, their country and their common man.
Perhaps we all have good cause to be concerned. It certainly looks, sounds and feels that way.
Sashaclarkson is right i feel, a rebuild britain party is what we need, so we can have government of the people, by the people - a proper democracy, i think some would call it
That way, whatever transpires, it can be dealt with equitably and compassionately. Rebuild a better britain for everyone
I would certainly like to be involved, so my first step is pitching up here, making contact. From what i've read there are enough well informed, intelligent people here to make a difference - so lets start doing it, organising, spreading the word - we can use the lessons of obama's campaign (i dont think we know for sure what he's actually going to be like in power)
Change. For the better. A better Britain
Rebuild Britain 2010
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Capitalism and democracy are two separate things - I would add that Capitalism is anti-democratic by nature. So having the biggest banks under the control of the State may end in tears.
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UK Financial Investments Ltd...maybe should be called "British Leyland Finance Corporation". Can anyone really believe it will be "independent" of government? Will it be able to make job losses if necessary? Will it only lend to businesses and individuals that are credit-worthy? Or wil it be used as a tool of government policy, as BLMC was?
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If one imagines an olympic swimming pool being filled with pound notes representing the amount of debt and interest owed in the UK and then imagine a 'small spa' sized pool filled with notes actually representing the amount of money in circulation one can visualise the problem.
By owning RBS at least a gov agency can inflate the economy by the back door - or am I being too cynical?
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I predict the UK will be going to the IMF cap in hand again within 24 months and Labour will be consigned to the opposition for 12 years minimum.
Well done Brown, I hope you are proud.
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Its mismanagement caused its downfall but heaven help us now if the new "Owners" manage the business like they have managed the Country.
However, after yesterdays disgraceful episode with an Opposition Cabinet Member will this blog and others be finished because contributors dont wish to have their collars felt by the A T Squad !
A sad time for democracy, what was left of it anyway in this Country.
Seriously worried
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As I was walking past 2 very large RBS buildings at about 10 last night, I was struck as to how brightly lit they were.
Obviously our hard pressed bankers were still hard at work on our behalf.
If not, perhaps I should have demanded that they switch off some of the lights.
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Isn't it instructive that the only banks that appear to be in a healthy state are the ones that have eschewed the high-risk gambling approach and concentrated on the nuts and bolts activity of banking, obeying the age-old customs and practices developed over centuries. I personally feel much more confident now that banks like Santander are in charge of more of the UK's banking capacity. Coming from a family of merchant bankers I have less than zero sympathy for the feckless financial spivs who by their reckless behaviour have driven the world in to a global recession. The senior executives and directors of these institutions that have now required vast sums of public money to prevent their collapse should have their personal assets, buolt up on the back of their awful behaviour, taken in to public ownership as well.
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BBC
!Breaking News!
Government to own majority of RBS
Other Top News stories:
Sheffield mum has triplets
Cricketers still going to make plenty of money despite Indian Terror attack
Waitrose sales down 4%
Police Chief vacates office
We can still afford the Olympic village
Repossessions up 12%
GC
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Terrible times, truely terrible times!
Firstly I'm not a Brown/Darling fan. Brown got us in this mess - Sorry but I don't subscribe to him not knowing the trouble the banks had got themselves into - if he didn't then it's incompitance
Also I don't agree with the 2.5% VAT reduction (2.1%, our money could have been better spent. However
I am however (with a touch of schedenfreud) looking forward to the next election.
Watch as we get closer and closer for ever more desperate vote winning tricks
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alexandercurzon
Are you out there, no sign of you this morning, and I am worried you have been arrested!!!
Block caps is the new crime apparently.
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Why would I, a taxpayer, buy shares at above the market price? I've been had.
Who gave me this investment advice?
Can I report GB and AD to the FSA for poor investment advice?
The argument that it might still go up doesn't wash; if I had bought it at the prevailing market rate it would have been even cheaper and I would have the potential to make even more profit.
Can we all get a new set of financial advisers please?
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Perhaps we now should look at Bosses of the banks/Hedge funds etc who have made extraordinary large amounts of money, assess whether they have acted irresponsibily and if they have, do a "Drugs Lord" style asset seizure to help pay for this mess.
For those of you that think this wont happen, it is already being looked at in the US where as we all know, they will demand their revenge.
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Robert,
Your best post in a while. Thank you for calling things as you see them.
All,
I got my wish for a state-owned bank!
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# 2
If "light touch" regulation hasn't worked, why do you think no regualtion would be better? That's the implication of your suggestion of scrapping FSA.
Incidentally, the FSA rule book runs to about 8,000 pages, and they've introduced about 4,000 pages of new/revised regulation this year alone, just to put "light touch" into some kind of perspective.
The problem with financial services regulation is simply that the wrong things are regulated and punished. We actually need less regulation, but with a much clearer focus on areas of real systemic risk to the financial system.
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Rebuild Britain 2010
A place at the table for Mr Damian Green and Mr Vincent Cable perhaps?
I don't think we should exclude responsible politicians - it would do no harm to have good, knowledgeable people with transparent, honourable intentions working in tandem with the intelligent, hard working, normal folk of the UK for the good of everyone.
Change?
Hope?
Excuse me if that all sounds a little utopian, i've got a phrase ringing in my ears but I can't for the life of me remember who said it:
Yes we can!
I wonder if that slogan would ever resonate with people in a political campaign?
Rebuild Britain 2010
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1. Stop all Sunday Trading.
2. Stop Supermarkets selling anything other than groceries.
3. Stop car manufacturers making cars, which do less than and avg of 25mpg.
4. Build Modern Nuclear power plants.
5. Introduce Educational systems linked to benefits for the long-term unemployed.
6. Stop Banks and lenders lending to those who can’t show how they will pay back the debt.
7. Cut down on the size of local government. –50%. At least.
8. Force massive improvements on insulation for every property in the country.
9. Boot out anyone who does not believe in democracy and who does not respect our country and our society.
10. At least 2 new national holidays.
My plan for 2009 and a way out of the mess we are in.
Not Rocket Science.
Rather easier than pumping billions into the system.
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It's always astonished me that despite having in RBS one of the most profitable - in the good old days at least - banks on the planet based in its capital Scotland has lower growth than the rest of the UK and an appallingly low new company birth rate.
RBS also played it's role in the sell off of numerous Scottish companies to foreign entities including I believe Scottish Power. It also lent heavily to private equity companies which as we all know don't actually create anything new either.
It begs the question doesn't it as to what the point of RBS actually is? However, if it continues with its previous strategy then there is no doubt the Govt will find it a useful tool in its ongoing efforts to deindustrialise the entire UK and to make Scotland an economic desert always in need of big brother Union to keep it going!
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I do not understand the "political correctness" about "arms lenght" or "no meddling in the management of the banks we own". If as private investor I had the luxory of owing 58% of RBS I would jolly well be looking to meddle in their management, I would appoint my nominated directors, I would ensure that I get a good vote on the remuneration committee, I would network for the bank and build its business, I would organise merger and acquisitions to improve efficiency and I would ensure that incompetent and irresponsible managers are fired and cost shed. After all, I would want the best return for my money invested.
So why not when I own the same bank via my tax money.
Let us not forget the RBS is where it today due to the improper and irresponsible actions of its management. So why give them a further vote of confidence by promising not to meddle in their affairs.
I agree running of banks should be away from day to day and politically motivated meddling in running a bank but I think Govt should not just become a passive shareholder.
Govt should appoint someone "independent" with knowledge and experience of turning around industries as in charge of UK financial investment ltd and
UK Financial Investments Limited should operate like an activist hedge fund, looking after best returns on the investment made on behalf of UK tax payers.
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Again, from the BBC website
'Iceland's government seized control.. 3 of the nation's major banks in a bid to keep the country's financial system afloat.'
'annual rate of inflation in Iceland has escalated to a record high of 17.1%'
'Food prices increased fastest, up 30.6% over the year, as the country's currency plummeted'
The pound is overvalued with respect to the debt burden held here.
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But what does this mean for PFI and the government's balance sheet?
I thought RBS (along with HBOS) was one of the biggest backers of PFI projects, so now the government is paying above the odds in PFI payments to PCI partners backed by a bank that it owns.
Makes you think that the government might as well have paid for those projects directly!
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#8
your wrote"
Right, now we own the bank, time for it to pop along to the High Court in London to withdraw the case against people who have asked for all those illegal bank charges back."
Or alternatively time to claim a crown immunity and make the incompetents (not those who suffered charges due to a bank error only) who incurred charges through their own financial mismanagement and are just seeking to avoid their obligations on a legal technicality.
Part of the mess as a whole in the UK is the trend we have in this country to seeking clever legalistic loopholes to avoid obligations or the consequences of our own actions (in all walks of life). (It doesn't excuse incompetent drafting in the first place but two wrongs do not make a right (in both common and legal senses).
I applauded the judge who, whilst forced to legally wipe the debt of the couple seeking to avoid paying it, pointedly didn't award costs thus leaving them with a new unavoidable bill of roughly the same amount. Well done that judge.
As ever more 'clever' ways were sought to avoid responsibility the greater common sense and 'moral' position which existed where everyone understood their obligations has been undermined. When the NR fiasco first came to light I remember the vox pop reports where some of the borrowers were under the impression it was good since if it failed they wouldn't have to pay the money back. Whilst they are to be pitied - stupidity should never be rewarded. We should not applaud those who have or seek to use loopholes to avoid consequences of their actions - ok rule of law says they win - but they are not heroes or good people.
Many are just clever greedy ones and they are to be despised for contributing to the decline of this country.
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The Treasury has not acted in the best interests of the taxpayer.
Buying the remaining 23 billion shares at 65.5p each is madness.
The current share price is 53.80.
The Treasury holds all the cards in this negotiation.
Surely, the Treasury should have renegotiated the terms of this "investment".
Should the bank change its name - removing "Scotland" and substituting "Britain"?
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No. 20, whistling-neil.
Excellent comment, I laughed my socks off.
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Does no one get it? Now Flash Gordon (saviour of the universe) has control of a big bank he can get the debt building again, you watch RBS will be pumping out mortgages like they are going out of fashion along with credit cards given away with petrol.
We will all feel rich again, vote Flash Gordon back in, so he will not go down in history as a prime minister who never won an election, just one who distroyed the UK.
If only Woolies could have hung on a few more days Direct Line (or one of many other insurance companies RBS owns) would have insured their suppliers.
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So, as I have my mortgage with RBS, will my tax share net me some form of discount?
No?
Didn't think so.
Shoring it up from both ends then!! Giving to them with one hand and giving to them with the other. At least it's a balanced relationship.
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Will this new ownership now mean that cheques will clear in less than 5 days?
Ownership is one thing but if the same management and culture is unchanged then there is no hope.
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"Somehow it was a bit too humiliating to be no more than the pipework for the real generators of wealth, companies with genuinely new services, real products and real technology."
Sums it up in a nutshell - banks should NEVER be more than enablers of the real economy.
So far as the real economy and real technology is concerned, I would ask bloggers to spare a moment to look at my comment #330 on the previous (Woolies) thread and consider signing the no 10 e petition on science education. This is vital for our future generations.
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Terrible times, truly terrible times!
Firstly I'm not a Brown/Darling fan. Brown got us in this mess - Sorry but I don't subscribe to him not knowing the trouble the banks had got themselves into - if he didn't then its incompetence. A couple of hundred million lost I can forgive, but the whole banking system collapsing, come on Gordon, just what were you doing for 10 years?
Also I don't agree with the 2.5% VAT reduction (2.1% net effect), our money could have been better spent. However this isn't about one off purchases, it's about the cumulative effect over a month or year. As 2.5% comes off all VAT purchases there is more money in our pockets - yes not enough to save, but that's the point. If 30 million of us are 1 pound a week better off, it's the sort of money that gets frittered... but that's a 30 million a week frittered a month.
I can see the logic, just don't think it'll work!
Despite Labour barracking the Tories with cries of Do Nothing, I'm beginning to subscribe to the idea that maybe just battening down the hatches and doing nothing is not such a bad idea.
Yes there will be unemployment, house repositions and hardship. But the start of that is already with us and who's to say the Gov actions are helping (I know we will be hearing a lot of - Think how bad it would have been if not for our action - from the politicians over the next year)
In addition to this, is now seems that the Gov knows we have reached the bottom, surprising since they seem to have been oblivious on a month by month basis up to now. But there is nothing in the budget that seems to suggest anymore black holes appearing - don't forget up until only a couple of months ago no one would have guesses the scale of the Bank bailout.
Taking all this into account, I say save our money (loss of tax rev and benefits will run up enough of a debt) and wait for the first sign of Spring and then SPEND!
At the moment the plan seems to be, wait for the first signs of Spring then TAX!
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I'm not a financial expert, just a "hard working, hard pressed family man", careful where my money goes, so may have misunderstood the situation, and if so I apologise to those more knowledgeable.
As I see it, I am now an (unwilling) shareholder in a Bank.
Can I at a time of my choosing withdraw the "prudent investment" which has been made on my behalf?
Alternatively, as G. Brown & Co. are acting as de facto trustees, can I sack the whole lot of them when they fail to come up to the mark?
The answer to both questions will almost certainly be "NO". Something tells me I've been "conned", with no redress available.
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Robert,
I think you miss a major point. Bankers "behaving" themselves means a reduction in tax revenues of about £40bn a year which creates a huge structural deficit for the UK. Gordon Brown has (almost) been able to afford the ridiculous increases in Govt expenditure over the last few years because of his very substantial cut of these "exhorbitant" bonuses and profits. The restraint imposed on the City will mean cuts in Govt expenditure on a massive scale. The PBR had hidden cuts in the reduction of future growth of expenditure to 1.1%. That is as credible as the rest of the projections. Just look at the tax paid by RBS over the last few years.
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I think the concept of banks having a "core function as public-service utilities" is a good one. Indeed some of the really core functions, such as providing current accounts, cash machines, cheque clearing, direct debits etc are indeed just the plumbing of the system. In a highly computerised world, these aspects presumably cost very little to run - it's not all that different from what internet service providers do, often for free.
Perhaps we should look at forcibly moving these aspects out of the banks and into a separate non-profit making entity (a sort of Railtrack of the financial world), leaving the banks to just do savings and loans? This "public service" would not be allowed to take part in risky investing and so would be required to keep its funds in Government bonds etc, but given low runnning costs that would probably still provide a better rate of interest on current accounts than the banks currently provide.
The current system is broken. We need to seriously think about radical ways of reforming it.
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A capitalist society thrives on risk. An excessively conservative lending stance would be in no one's interest.
I am not talking about financial induced risk, I am talking about risk in the real economy since innovation and product development are inherently risky ventures. Eight out of 10 new products fail. Society benefits more from the two products that succeed then they lose from the 8 products that fail.
It would be disastrous if necessary attempts to constrain the worst impulses of the financial engineers were to also constrain the innovation needed to further the interests of society.
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The FUNDAMENTAL problem with the UK NOW is the mis-allocation of resources - intellectual, financial and industrial - to entire sectors like banking, retail, housing (and all associated construction for e.g.) where there never was any fundamental growth, just trading of asset price appreciation between bankers / agents / advisors who then supported a false retail sector with phantom purchasing power spent on imported goods.
Banking is and should remain a simple utility-like function. Turning metal into cars adds value, and money should REFLECT that value. Bankers should not try to CREATE value by financial re-engineering, because no such value exists. This is why every decade taxpayers have to bal them out.
We need our smart people going more into skilled sectors, whether manufacruting / services which add real value and create exports that re-balance our nonsensical trade deficit...and less into banking / estate agency / retail / government and any other bubble that this insane level of borrowing creates or perpetuates.
This mis-allocation is very harmful. We have lost our technical base, and instead focussed our energies on housing /retail led 'regeneration' of entire areas (including the Olympics) which are fundamentall unviable.
The high street HAS to change dramatically, with less estate agents / bank branches and less shops pushing chinese goods which we cannot really afford any more. The million+ dwelings for sale make a mockery of the wise experts who insist on the presence of a housing 'shortage'. The banking sector has to shrink dramatically. The government owned RBS could lead the way by slashing its headcount, raising rates for savers, measured lending at a cost that reflects risk and NO MORE Investment Banking.
This is just the beginning, and RBS will have at least 2 more bailouts. HBOS is under water several times over. The world's bond marketsw will decide if the UK is like Iceland or not, whatever GB and AD may like to believe.
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Does this mean I can just make my mortgage payments, credit cards to myself and cancel my overdraft?
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Well, after the way the markets shortsold RBS , Bradford and Bingley and Northern Rock, of course no ordinary Investors would buy.
But the Gov't knew this and I'm inclined to think, planned it this way.
If the Bank of England had properly supported the Banks, with penalty rate loans, they and thousands of jobs would still exist in the private sector.
Now the City is scarred by its own folly and also by the machinations of Gov't.
Why would any investor buy into this snakepit of a Stockexchange in any way now?
By the way its Pension Funds who have lost out in this massive Share swindle.
So when your Pension matures, you may find you have far less to live on than you thought.
Its worth checking now, in case there is anything you can do to protect your future.
Sadly for those Pensioners with only a few years left to go before retirement it may be too late.
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I suspect that this will, in time, be a very profitable investment by govt - the only issue is how long will it take to be profitable 2 years, 5 years, 10 years?
As for not meddling I understand from friends in the RBS group that the bank has already withdrawn from lending on "politically sensitive" matters even where the lending has historically been very profitable. Whether that is self-censorship or responding to strong hints from govt I do not know - however, it is a sign of things to come at RBS.
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I've just purchased the domain names
rebuildbritain2010.org.uk
rebuildbritain2010.co.uk
And hereby donate them to the movement
We must have some decent web designers out there - or someone must at least know one - any takers?
Sorry if i'm getting too involved people - quiet happy to subordinate if we've got some good organisers already going on this movement, but if not I would like to put myself forward as initial organiser for northants - quite happy to step aside and just assist if someone else would prefer the role
Who's up for it? - nominate yourself for your
area
sashaclarkson?
tigerj?
alex curzon?
Everyone's needed, this should be the broadest of broad churches
Come on people, yes we can!!
Rebuild Britain 2010
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#51 - cheques will always take longer to clear ...
Why not use the Faster Payments service which RBS has been the main player in from the start
http://news.bbc.co.uk/1/hi/programmes/moneybox/7417826.stm
The culture of the new Peoples Bank of RBS has been to improve the technology ... take a look at the "private" banks (Barclays etc.) and the cautious banks like Lloyds and compare the speed of processing payments!
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Of course the huge lump of Inflation to come will make the Gov't Shares worth more or less depending on how you look at it.
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I put the RBS 'cats arse' logo on their Contract Notes back in the day
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Is Alexander Curzon really Damien Green? That would explain his absence.
Mysteriously no news from Nick Robinson re the first steps to a totalitarian state. Perhaps he is waiting to be told what the givernment want him to say.
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So we've all bought a large SLICE of A VERY
LARGE ROTTEN PIE.
GORDY/ALLY D,have you any idea how much
TOXIC lending this lot have on the books?
I know of one account a mere 900 million
facility to a bunch of gangsters dressed
in suits.
NATURALLY WE NO LONGER BANK WITH
RBS/NAT WEST
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44: Yes the Pound will collapse and Inflation will inevitably take off.
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Robert
The taxpayer is proping up the banks on a mindboggling scale. I think nobody expected the banks to lend on the 2007 scale. but at this moment they are lending at about 10% of that. not only that i hear some people saying that even there over dafts are now being realed in. so the question surely now was it right to save lame duck banks.
You also say that the banks will be concentrating on the basics and would it be such a disaster. Well i refur to a previous blog you wrote about a fairer society. To the 2% the megger and supper rich no, and nor will it be for the bottom 5% of society. but for 93% of society it will be a vast change of life style.
If i may refur to my brother. He as for the last 30 years building is small empire. he lives in a six bedroom house that was worth 380,000 and the money he thought he had made on his previous houses over the years will go if the prices of his home falls by 60%.And he was to lose is job. In other words he as payed a mortgage for the passed 30 years for nothing.
So whats the chances of losing is job? I would at this moment in time say as long as no other banks hand out the begging bowl its about 50%. yes 50% of people thats 15 million job losses.What i dont understand is why parliment are not planning the future for us all. REMEMBER we are not in recession yet
and the talk will be soon the mother of all depressions will be upon us. you have only to see whats happening in china and the usa to see what is really going to happen. as where placed the worst then to future looks really bleak.
But it wouldnt be so bleak if the banks where to start lending at 50% of what the where doing, but i really think they are in no postion to.
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Yesterday on this blog many people were saying that the Treasury should not bail out Woolworths, as they had a defunct business model and had been babdly mismanaged.
Doesnt this sound Familiar? The Govt has now created a rod for its own back by saving these institutions, and we will no doubt have calls to save all kinds of Business in the coming months.
There have always been recessions and many business fail, however this is the first one that has been proceeded by a major catastrophe in a banking sector, that has effectively saved from Bankruptcy by the Govt.
Surely all this bail out money could have been then used to guarantee depositors savings. We have enough Administrators in this country who could have then taken the job of retrieving what was owed to the banks. The likes of Deloitte and KPMG would have enjoyed taking these jobs on and charging their extortionate fees.
Banks are integral to our economy, but they wouldnt have all disappeared, and other financial institutions would have taken their place, because there is still a lot of money around, it just isnt held by the Banks.
Just like Vinyl/tape/CD/MP3 things evolve. If something has faults it is eventually replace by something with less faults. Banking is no Different.
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Day in day out you blame the banks alone for this mess, but who was it who deregulated the banks and encourage them to trade in these riskier areas? The government.
Who failed to rein them in when things looked unsustainable for fear of threatening the tax revenue from both the banks and their wealthy employees? The government.
Who failed to tighten the regulations for fear of damaging the City's competitiveness and driving all this lucrative business abroad? Oh yes, the government.
It's simplistic to continue blaming the banks when they were doing precisely what the government and the regulatory bodies had encouraged them to do.
If you are going to be an impartial journalist then blame all three.
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In the long term owning property will turn out to be the best bet afterall!
We aren't Japan.
We do not have a strong manufacturing base to fall back on.
High Inflation is inevitable, to cover the record debts taken on by this Gov't.
Deposit accounts are a waste of time.
If you have debts pay them off, otherwise enjoy your money whilst it is worth something.
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This could be a great opportunity to clean up the banks once and for all.
I agree with roberdmarshall. waiting 5 days for a cheque to clear is 5 days of yours and mine interest. In Israel you can pay a check in and access the funds same day, as you can in Sweden where the Govt got heavy with banks and forced them into it.
Just think what else we could do.
Set a maximum interest rate that anyone could charge based on a multiple of the bank rate, As this i set once a month by the BOE
You would do away with loan shark practices ie store cards etc straight away.
Reasonable charges for going overdrawn etc.
Limit the number of credit cards a person can own, Legally set credit limits based on earnings/ability to pay back.
If the Govt thought about it they could really do some good, they should not leave it upto the markets.
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My impression is that politicians have left the central bankers with the freedom to make decisions based upon their mandate and not superimpose "a mandate of the day" on them.
With that experience as a guide, there should be reason to hope that decision-making in the banks will be indeed arm's-length.
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I wonder what the Dutch people thought this morning, waking up to find one of their biggest banks nationalised - by the Brits!
OK, so it's all the rage these days, our main electricity supplier is French government owned, and our main railfreight company is German state railways owned. But it does still feel wrong.
I still wouldn't be surprised to hear that Amro is to be sold back. The IT project to merge the 2 companies together is 100% over budget and not even close to complete, so selling would not involve huge unpicking of merged systems.
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Robert says "But the share price may rise" - hope springs eternal !!
Update on terminology :-
"Your Bank shares can go down as well as PLUMMET" !!!!
We now have a Government who are not only good at spending our money but also now gambling with it !! Is this because they couldn't have their way with all of the casinos they wanted ? We are all now gambling in the super super casino - Red or Black which do you prefer ?? !!!!
With all of these 'Nationalised' Banks does this mean "Sid" will be coming out of mothballs at a future date (10 years time ?) to 'sell' these shares back to the Market - if/when (?) the trading position/share price has improved ??!!
More seriously - other questions:-
Will the Government's value of their shareholding be offset against the overall Government borrowings to improve the balance sheet ?
Could HBOS have gone the same way rather than go to LloydsTSB ?
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Robert, I think you've said it all.
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Whilst you say "we are explicitly and formally standing behind its entire, gargantuan balance sheet, its assets and its liabilities." by the figures provided in your post that is actually a balance sheet showing a positive £100bn (£2000bn assets - £1900bn liabilities). But because you juxtaposed the statement following just mention of the £1900bn liabilities it presents the situation as being that we are risking the whole £1900bn. More clarity required perhaps than scaremongering. Naturally the asssets may not be realisable in the current market but equally the debt can be paid down from trading profits. So only if RBS was wound up, which the government has shown will not be allowed, would we actiually know the true liability to the public purse.
The government is quite right to leave the debt of companies they are shareholders in off their balance sheet. I as a shareholder of a company don't show any debt for a company I invest in against me personally! For public information sake it would be useful though if any public reporting of government debt showed a separate figure for the level of government guarantees against 3rd party debt.
Despite my criticism keep up this excellent blog. I may not agree with it all the time but it is always thought provoking.
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Regards GB and AD stitching us up by paying over the odds on our behalf for RBS, may I just say...
...........gold!
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Its a fascinating situation.
And a highly undesireable one...
I don't run my household on Monopoly money. How on earth can the Government continue to get away with it ?
At what point does the UK go bust ?
And will this point change, as it did for Woolworths - who were OK to borrow £380m earlier in the year but have now had that debt called in.
The numbers being bandied around this week, are a few hundred billion here, a couple of trillion there.
It seems I'm participating in the International Fantasy Financial League and the UK and the USA are somewhere near the bottom of the table at the moment.
Whilst Iceland have already been relegated...
When the Westernised nations are all finally bankrupt, the next country to have a go at running the world will presumably be Saudia Arabia, and its wealthy oil-rich neighbours...
Which would mean what exactly. Perhaps the licensing laws would change and we'd lose the binge-drinking culture. And to be honest that particular change might not be such a bad thing...
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I would urge all Public sector workers to go on a spending strike until they receive a proper pay rise.
Only buy essentials until you get a ten percent pay rise !
Holding peoples pay rises below Inflation has helped to get us all in this mess in the first place.
Secondly write to you MP (whatever party) and ask them what plans do they have to help rebuild Britains economy.
One useful plan would be to contract Housebuilders to build Social Housing on a big scale.
That would be a useful application of Public money with a clear Public benefit attached.
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Mass social Housebuilding would cost Billions but far less than manipulating the UK Banking sector hasa cost.
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"But now that taxpayers own 58% of Royal Bank, we are explicitly and formally standing behind its entire, gargantuan balance sheet, its assets and its liabilities."
Since when has the owner of a limited company been liable for its debts? We're not any more liable now than we were before (although that's still pretty liable, implicitly, due to the whole "too big to fail" thing).
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#20
I guess we own 58% of the £1,900M debt as well though.
I suspect the debt is more accurately valued than the "assets" though.
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Should we change the name to Royal Bank of Great Britain?
Is there an arguement now for splitting it up? I know that size gives strength but it also seems to have led to inneficiency and higher costs to the Nat West account holders.
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58% = controlling interest rather than ownership as far as my maths go Robert. Another sensationalist comment.
With RBS employing c100,000 people in the UK, do we really want this bank to go down and further depress an already depressing job market. No mention either of the multi billions in Corporation tax these big banks have paid over the boom years that has allowed the govt. to spend on all the thigs we love to moan about, police, nursing, education etc.
The sooner this bail out happens the better and we return to a stable economy, return to profits and start the cycle over again.
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'Uncle Joe's Thirties and Uncle Gord's Noughties'. Compare and contrast.
We better not trust in our Executive politicians . Some as G Brown and the whole Govt team in the Treasury seem to mismanage overseeing UK Banking plc...and then take over what they have mismanaged. The other Parties seemed to mismanage overseeing Govt.
Put not your trust in the upper echelons of the Civil Service....possibily more inept than they are given credit (smile)...paid stellar salaries and even more stellar pensions. Some, such as Sir Peter Middleton, go on to run banks such as Barclays.
Put not your trust in Haughty Bankers such as Sir Fred-the Shred who refused and refused and refused through his Investor Relations Department to answer my questions as a retail shareholder . Questions not only from 2008 but many others asked ever since HSBC first announced difficulties with sub-prime back in Feb of 2007.
But above all put not your trust in Parliament and especially the Treasury Select Committee and even more especially John McFall-en. I wonder if civil servants, Central Banker(s) and other witnesses feel any twinge of contempt before going to give evidence.
Perhaps it is only in our individual selves we can trust ?
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On the subject of the role of banks, I quite agree that many of them will become quasi-utilities. I was at a conference a few weeks ago and the themes that kept being repeated were that financial firms needed to:
- make products simpler
- explain them better
- accept that banks' historical returns on equity were unsustainable
This from a group comprising predominantly financial services providers, so I'm not sure there will be as much resistance as suggested from many players (Barclays is the UK exception, given its clear intentions in investment banking with the Lehman acquisition).
I don't think it takes much to bring about a change in bank behaviour. Basing regulation on that of other consumer utilities such as energy providers will do much of what's needed. For example, cap banks' return on equity. Result? Much lower gearing, as "super-returns" earned via use of debt will be taxed away or otherwise precluded. What we don't need is an extension of FSA's rule book. 8,000 pages of regulation haven't worked, so why should 10,000 pages?
There's also a need to improve education of consumers of financial products as to how products work, and the risk they carry. What this doesn't mean is that we need yet more small print associated with financial products. Frankly, that's the lazy way out that we've used for 20 years and its failed miserably. Just think of pensions mis-selling, endowment-linked mortgages, and others, never mind what's happened recently. Instead, we need something that makes the risk/reward discussion meaningful. Most consumers have very simply requirements, ie keep my money safe and make it grow a bit faster than inflation. It really should not be beyond the ability of the financial services industry to describe how various products do this, how each product meets particular consumer requirements, and the techniques used to deliver what consumers are asking for. If providers cannot explain these things simply, then they shouldn't be selling them.
If State ownership leads to a situation of better understanding of financial products (not least in the Board rooms of the entities providing them), then it will prove to be a valuable benefit to everyone. One thing we can all agree on is that too many senior bank executives were absolutely clueless as to the risks their organisations were taking. I suspect there is little appetite to return to that position, with or without State ownership.
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Post 67 DELETED
I suggested that we had all just purchased
a VERY rotten pie.
Amongst other NASTY things.
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As Robert Preston makes clear, the RBS shares being sold (and bought by the government) are new shares, the proceeds of which are being used to recapitalise the bank. What is interesting is the apparent asset value of RBS of £2,000 bn. On the face of it paying £23bn for 58% of a business with £2,000 bn of assets seems a really good deal, even taking into account the £1,900 bn of liabilities. The real question is are the assets real and are the liabilities understated?
In a few years' time, the government will no doubt seek to sell the shares back to the private sector. It is only then that we will know what the real value of RBS.
The question that is being posed is what are banks for? Getting the right answer to this question, and getting the regulatory and legislative rules in place to stop any future credit crunch is essential, and is something that will need to be done not only in the UK, but internationally.
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RP is serving the Gov't with every breath.
Thats obvious.
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1) Why would you take your money out of NatWest - surely now it is safer than ever!
Worth remembering that in turning banks into cogs and removing those supernormal profits (which many seem to think is no bad thing) we will of course be leaving a gaping hole in our pension funds and tax revenues (both direct and indirect).
Personally, I think that in the medium to long term - 5 yrs + - the government will make a big profit out of it's share underwriting. We have already seen that these banks are too big for the government to allow them to go bust and, to be honest, if they don't show some sort of recovery then we as a nation are in a lot of trouble. Government is getting 12% return on the £5bn of pref shares - not a bad deal if you ask me.
I think it's time for people to get off their moral high horses and accept that we as a nation benefitted in tax revenues, jobs, pensions, etc from the growth in the Financial Services Sector so rather than sitting here bleating about people who were creating wealth and jobs we should get off our backsides (after all, if the banks just made pretend profits like Robert says then does, for example) the journalist who writes about these pretend profits really add any more value)?
I am sure we could all find moral flaws in ourselves if we look below the surface so rather than screaming about everyone else's, just accept that it is part of human nature - some questions of morality are more serious than others.
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In my humble opinion Labour are truly "selling Britain (sic) by the pound".
What's really sad is that most of the Labour party are so wrapped up in themselves that they cannot (or do not wish to) see the damage they continue to do to the soul of the country I was once so proud of.
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Given the scale of the disaster that is and will be the UK economy for years to come, isn't it amazing that Brown is being given 'credit' by the electorate for being the right man to sort it out?
The economic record for the last 10 years - Brown's tenure as Chancellor - is now exposed as a sham with unsustainable debt-driven expenditure (corporate, govt and personal) concealing the weakness of the UK economy.
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The new range of LAVATORY Paper is
ready for RETAIL DISTRIBUTION.
FISCAL PRUDENCE design
FISCAL IMPRUDENCE design
Cash with order to all UK retailers
Free samples to every UK household
The choice is yours
THE NEW BALLOT
That will just FLUSH AWAY with your used
CASH.
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#62 Well done Mark!!
Your previous comment "A place at the table for Mr Damian Green and Mr Vincent Cable perhaps?
I don't think we should exclude responsible politicians etc"
I agree with this. That is why I think we should frame a set of minimal principles and ask ALL candidates to sign up to them. Those who don't we vote against. Those who do, we, as individuals, choose between based on their other ideas and track record.
I need a week or so and then I'll put up a dummy page on my own (obsoleteish) site for comment. I haven't updated it for 18 months as I've been busy with house renovations and sorting out my late mother's stuff.
my site: livemind.org.uk
I have my own web design template, as I run two websites tenbymalechoir.org, and another little commercial one as a favour for a friend.
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mmmm
I wonder, will the several hundred pounds in penalty bank charges which I am disputing with RBS now be repaid.
As majority shareholder surely the treasurey should lean on RBS to end the more despicable aspects of personal banking..
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This could prove to be a worthwhile experiment.
To see how well this bank (RBS) that is bound to be more tightly controlled and regulated and less prone to reckless risk taking, can perform against the more traditional banks that are less tightly controlled and regulated and more prone to reckelss risk taking.
Also because in the past ordinary account holders have had such a lousy deal from the more traditional banks, now might be a good time for them to transfer their accounts to a better controlled and regulated bank.
Ordinary account holders now have the power to vote with their feet against some of the past injustices they have had to endure from those banks whose main interest was the pursuit of big bonus payouts for the bankers and shareholders. Now we can leave the risk taking to those who benefit from it the most, the bankers and shareholders.
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Can somebody confirm if my thoughts are correct?
If we bought £23bn at 65.5p that's approx. 35 billions shares.
Now if the government was to divest themselves from RBS, they would have to do it gradually, so not to affect the share price.
If they sold 1m shares each trading day (not sure what a resonable number would be per day - any suggestions?), I worked out it would take 135 years to sell the entire holding!
This is for the long term, no?
Are my calculations correct?
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Roughets, on the subject of blame, agree on gov't and regulators but what about journalists (esp. re Northern Rock), Hedge Funds (short selling) and
Consumers (whose aspirations drive the required returns for companies). Surely, in reality, there is virtually no-one who is blameless?
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Because I think we are all now living in a state devised by Joseph Heller I have to ask if anyone knows the answers to the following.
How much will the government pick up of RBS
credit swap losses it caused on Kaupthing?Will it have to show share value losses under market accounting?.How much PFI debt does the govt
now own and does that mean it is paying itself or making a profit out of itself and can they net these off against each other? Oh the creative accounting opportunities abound!
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# 75
... interested by your opinion ... "The IT project to merge the 2 companies together is 100% over budget and not even close to complete" ?
The project can not complete until after legal separation - which isn't until 3Q2009 - and even then it is a seperation project (due to Dutch legal requirements), then integration of the systems and customers starts. So your guess that it is 100% over budget must also be based on (at best) shaky disinformation.
Did you think it would be done by yesterday? "unpicking" would be huge and involve Santander and Fortis (and now all the banks involved in the Fortis split-up)
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Perhaps the Government of the day should use Anti- Terrorists laws to make our new banking empire start lending. After all, they seem to be using this very worrying law in all other aspects of their leadership.
I hope I am one of the lucky ones to get one of the forced loans as I would have no way of paying it back (please force me to loan), but need not worry as a percentage of my tax would be used to pay it off anyway and there the circle of disintegration will continue.
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#71 roughets
The Capitalist State is nothing more than an institution managing the affairs of the bourgeoisie for the bourgeoisie. Blame the bourgeoisie!
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Don't panic, amongst all this gloom and economic turmoil we needn't worry about Gordon Brown interfering in the running of the banks. According to other web pages he has written to all the X factor finalists.
Presuambly continuing the obsession with celebrity he is more than likely writing to the Strictly Come Dancing contestants too, or maybe filling out his application to be in the next series.
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marksmith1981 tigerjayj Lady sasha
ian the chopper.
LOOKS LIKE A DAY OF CENSORSHIP FOR ME.
So keep up the good work for the cause
REBUILD BRITAIN.
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Re #38
Nice of Gordon Brown to contribute to the blog today.
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85. keepsmilingeveryone
meet #48 traducer.
However seriously - I suspect based on recent performance 'we' functionally own 100% of the liabilities and still only 58% of the assets.
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This example shows what idiots we have in Westminster, trade unions and the BoE who are suggesting full nationalisation of british banking.
Nearly £2 trillion of debt taken on with RBS alone. Imagine how much with Lloyds/HBOS, Barclays, HSBC and Standard Chartered.
It would have been far better to have put in place more preference shares at a lower coupon and more comprehensive interbank lending guarantees, rather than take on so many ordinary shares.
Apart from an industry which earns billions from international activities being largely wiped out, international confidence in the UK would totally evaporate - then don't worry about deflation - worry about hyperinflation.
Asset wealth is about confidence - after all what practical use has gold to justify its price, and a country's ability to finance itself is about confidence and its productivity - both of which would be decimated if the banks were nationalised.
The Government ought to shut the idiots up in their own ranks immediately who are talking about full nationalisation and take steps to restore confidence not further destroy it.
In that way the Government would make a profit on its investment rather than see it totally wiped out.
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More tan this, I want government to get the money back from excess salary and bonus paid to RBS staff. These people were paid a lot saying that, otherwise they will move out; now it looks like it would have been better if they have moved out.
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Not being a UK national and not fully understanding its banking system, I don't usually comment of articles dealing with specific government decisions in your country.
And I usually don't pick on RP for his articles: at the very least they stimulate a lot of informative discussion.
But I have to protest RP's statement:
"So bankers created and exploited new "financial technology" that enriched themselves (for a while, at least) and was supposedly benefiting all of us by providing unlimited quantities of credit at astonishingly cheap rates.
Much of that technology - the collateralised debt obligations, the collateralised loan obligations, the credit default swaps, the structured investment vehicles - generated colossal losses, hobbled the global banking system, and is part of the reason why taxpayers all over the world are now propping up wounded banks on a mindboggling scale."
This starts off fine, but a subtle twist occurs in the second paragraph. RP allows that the bankers "enriched" themselves with "technology" that has now generated "colossal losses" and "hobbled the global banking system". But this implies that "technology" is responsible. It's not -- the bankers are responsible! I wish people would stop trying to shift responsibility from individuals to "the system"! Systems and technology can not be held accountable -- only people can be blamed. Unless people change they will continue to abuse both technology and systems.
But there is an even more egregious distortion in the final sentence where it's stated that taxpayers are propping up the banks. Taxpayers are NOT propping up "wounded" banks! Their money is being used by governments to prop up the banks. And calling banks "wounded" makes it sound like they are the victims! Give me a break!
I pay taxes in the US and in Canada. My tax dollars are being used for much the same thing many of you complain about in the UK (less, so far in Canada, thank goodness).
Two months of informing myself about the global financial crisis has convinced me beyond any doubt that the banking/government cartel exists for the benefit of the already very wealthy financiers. One has only to look at Obama's economic advisors to see whose interests are likely to be served. The US Federal Reserve Banking system is the fourth branch of the US government, and corporate lobbyists are part of the fifth branch. Neither is an elected body. I can't speak about the Bank of England or how lobbying works in the UK, but if it's anything like the American model it's a sad commentary on "democratic" government "for the people".
Good luck to the Rebuild Britain party! I'd like to believe that the new administration in Washington will rebuild America, but I'm skeptical.
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Oh yes.
Interest rates will go lower.
Except Mortgage borrowers of Northern Rock, whose rates remain high.
Controlled by Gov't too.
Funny that.
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No 58 has it right. There has been a huge misallocation of human capital. If only all those high flyers had gone into manufacturing instead of the City.
The fact is that the banks have to shrink, hugely, and the longer it's delayed by bailouts, etc, the more painful it will eventually be.
And as other have said, future budgets will be decided by the market and not by the Brown/Darling fantasy projections released on Monday. So if you're feeling smug with the promise of a public sector pension, don't be. Sooner or later (2011?) the govt is going to have to cut spending --- probably after a visit from the IMF, as in 1978 -- and it will renege on those public sector pension promises.
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I'm still furious that the person who ran RBS (into the ground) will be making off with a £500K p.a. pension.
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The taxpayer now owns all the brands under the RBS Group banner and perhaps some pressure can be put on RBS to treat customers of the various brands fairly.
For example RBS own the One Account brand who has still not passed on the recent interest rate cuts.
Robert, please help by investigating whether RBS are disadvantaging their customers at a time when it is virtually impossible to move to alternative lenders.
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Look out for the short sellers now....This is banking sector v people economic war.
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Some people have commented that the country has benefited from the growth of the financial services sector due to the tax revenue that this has provided to the Goverment.
While this may be true, I can't help but feel that the entire financial services industry should itself really be looked on as a form of tax on the real wealth producing sectors of the economy. It's an overhead, not wealth creation - like having a finance department in a large manufacturing company eating up 10 or 20% of turnover. The whole sector needs to shrink back in size as a proportion of GDP to what it was 15 years ago.
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#73 alanfrench
"In Israel you can pay a check in and access the funds same day, as you can in Sweden where the Govt got heavy with banks and forced them into it. "
-As you can in Portugal. They Chip and pin about five years before us.
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Many thanks, Robert, for a really very excellent posting.
I'd like to hear the views on this of Gordon Brown, Alistair Darling, Hector Sants, Adair Turner and Mervyn King
No question that we do need to claim back control over the countries monetary system, rather than leave it in the hands of the bankers.
These guys (and I'm talking about the boards, executives and senior management who have been taking the key decisions, not the hard working employees who have been simply doing what they get told) have, while declaring ad infinitum that their banks have very strong positions, leaders in the industry, huge levels of capital adequacy bla bla bla, have in fact been stringing us along and conning us, having hijacked the whole system in their own self interest (... with those all important bonuses in mind).
It's clear after this debacle that the banks absolutely, totally and completely cannot be trusted. One of the key issues, therefore, in a new system must be a much higher level of transparency.
Could I suggest we insist on "open book" (except for removing the names) banking? Meaning banks will have to publish (after strikiing out actual names of lenders/borrowers) their actual management accounts.
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At 09:40am on 28 Nov 2008, trevst wrote:
"And to all those worrying about government intervention and spreading socialism perhaps a history lesson is valid. The only major economy to grow throughout the thirties depression was soviet Russia.
Who is for a spell of command economy and the smack of strong government with Uncle Gordon in place of Uncle Joe."
Sorry, trevst; there's far too many people in the UK now, and far too little room for a Gulag. Anyway, the Brits won't relish being starved to death like the Ukranians!
Solovetsky was small, but soon led to greater things ----- but will, for example, a UK version of the Aral Sea scheme help our economy to grow? Somehow Uncle Joe's "socialism" doesn't seem to be quite the right solution!
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# 55
Good points. I think a lot of what's gone wrong recently arises from the conflicts of interest around financial services. Government relied on them for 25% of all corporation tax receipts, and a good chunk of income tax courtesy of high salaries and bonuses. Then there's the second round effects: CGT on crystalising stock option profits, stamp duty on purchases of other assets with the proceeds, VAT on financiers' conspicuous consumption.
In turn, that resulted in a regulatory system which, at its heart, had the unwritten objective of not derailing this tax-generating gravy train.
The dependence of government on financial services for so much of its own income is, I think, at the heart of why we've had this crisis. It's a bigger version of the Barings' collapse. In that case, everyone senior at Barings knew Nick Leeson was in breach of his dealing limits etc, but ignored it. Why? Because he was such a big contributor to Barings' profits and reining Leeson in would have been a very negative career move. Equally, GB in his Chancellor days doing something similar to financiers here would simply have driven down tax revenues, growth etc and driven the business offshore. Nobody would have thanked him for it, because nobody would have given him credit for preventing a crisis like we've experienced. It's only with hindsight that we see the impact of allowing banks to drift too far away from their primary purpose is a rather higher price than we'd really like to pay.
We now have the added challenge of what sectors we can grow, and quickly enough, to compensate for the lost financial services tax revenue.
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As usual, mostly a bunch of deluded bank-apologists on here, parroting Central Office codswallop (or whatever posh people have instead of codswallop, perhaps caviarwallop?) that it's all Brown's fault- boo hoo, he made the poor old banks blow their loot on dodgy loans...
Wake up, get your noses out of the Mail and the Telegraph. This is far bigger than Brwon and Darling.
The banks have forked us all by profligate lending. This is true all over the world, and the worst culprits are not even British. We're coming off among the worst at the moment because investors want to 'short' the global economy, especially the financial sector, and UK banks, and therefore the pound, is as good a place as any to start, now that they've finished shorting the US Dollar and US bankstocks.
If the citizens of the world knew how much they will be paying to support banks over the next twenty years, there'd probably be riots.
The lucky thing for us is that our major banks seem to have exposure to the domestic housing market above all, and not things like cds.
My guess is that low interest rates and weak pound for a year will be enough to keep our wolf from the door, and next year the 'shorters' will move on, probably to mainland Europe, which has far larger structural problems (and debts) than us.
It's pointless making stuff when no-one can afford to buy your products. Look at the UK prices of German-built cars in Euro terms. They cost too much for us to buy, but the manufacturers cannot be making a cent at 1.19 Euro to the £.
Trying to return to large-scale manufacturing here would be a waste of time, unless we want to be paid Chinese wages.
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Since you were so keen to move into political territory with George Osbourne's antics on the infamous yacht perhaps you will now inform us of the government's decision to arrest a member of the Shadow front bench? Nick Robinson doesn't seem to be bothering to comment (over 500 comments and counting on his last thread, yet no response).
Perhaps you could tell us if you are expecting the boys in blue to lock you up for 7 hours over the leaks you've recently received?
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Robert, great column/comment as usual.
Not sure if my Q is relevant here but can you answer why its so important that banks HAVE to lend to each other?
Surely they're in competition with each other so if one bank is unable to meet its short term needs, the customer will walk.
By forcing them to inta lend it covers up bad banks/practices.
Yes?
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#35. Overqualified wrote:
"alexandercurzon
Are you out there, no sign of you this morning, and I am worried you have been arrested!!!"
No. the Thought Police got him on post #67.
I see he is back now.
Welcome
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Re D Green
As David Davis said.
Mugabe treatment,
lock up your opponents.
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It was £15bn (or just under) so roughly £22.5bn shares which would take c.100yrs (working days) to sell off at 1m shares per day (though I am sure they would be in bigger tranches than that or the commissions would be inefficient).
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101. At 11:12am on 28 Nov 2008, balfralf wrote:
Can somebody confirm if my thoughts are correct?
Your math is out - 'we' bought 23bn shares @65.6p as stated in the original piece.
However if sold as you suggest (with math corrected), yes it would take a very long time but this is not how it would happen.
It would be either a privatisation as of old - offer the lot for tender - remember Sid? or a trade sale in very big chunks or whole (assuming anyone can raise the cash to do it at the time and HMG don't swap it for other shares/instruments - i.e. invest in other countries institutions and use the divi to pay pensions/reduce taxes/pay off debt etc.)
By the time this happens perhaps President Alexander 1st will want to buy it as his new central bank ;-)
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Anyone want to Bank with a New Bank
(subject to FSA application licence etc)?
A bank that lends no money takes no risks
but runs current accounts at 10 pounds per
month.
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Robert Peston, please call yourself a Business Reporter and not a business analyst.
I don't see any analysis in the whole of your articles. Even the information is a month old.
You didn't know this was not meant to happen.
Now for the analysis (all figures in £ Billions)
Total market cap: 23 / .58 = 39.65 billion
Total assets: 1900 billion
Multiple of asset to capitalisation: 47.92
This is not a bank, this is a hedge fund we have invested in.
Now you can compare us to Iceland if not worse because we have more Hedge funds so called banks coming up.
And that is called analysis.
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Let's be clear about what's being taken on here.
RBS is an organisation with a market-assessed balance sheet showing assets of about GBP2,000billion and liabilities(debts) of about GBP1,975billion. The liabilities are real, fixed - they are not subject to revaluation. Whatever happens to the value of the assets, the liabilities will remain the same. As Mervyn King remarked, debt is real, house prices are a matter of opinion.
It's the valuation of the assets that is key. How highly for example should one value a loan to Woolworths? Or MFI, or any of the other retailers currently telling tales of woe? Or their suppliers, dependent upon the high street to sell their product? Should we really work on the basis that all these loans will be repaid in full, inculding interest, at the right time? Or, if we have already downgraded our asset value slightly to take account of anticipated defaults, have we downgraded it enough? How intellectually honest is our forecast of what's really going to happen?
It only requires a relatively minor (1%) further downgrade of the RBS assets before the entire taxpayer/shareholder investment is wiped out. And a further huge dollop will be required if the government is going to fulfill its pledge not to let any major financial institution fail. This applies, of course, to all the other UK institutions as well.
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Robert
UK Financial Investments Limited (UKFI)
Chancellor of the Exchequer, Alistair Darling today announced that the Government’s investments will be managed on a commercial basis by a new arm’s-length company, ‘UK Financial Investments Limited’ (UKFI), which is wholly owned by the Government. Its overarching objectives will be to protect and create value for the taxpayer as shareholder, with due regard to financial stability and acting in a way that promotes competition.
The last sentence is key to determining the fate of our new finance empire. Stabilising the banks is happening with NR, disembowelling the mortgage book, forcing repossessions on terminal loans, rebuilding the capital position, reducing overheads and ensuring that it promotes the competition within the banking sector by hiking mortgage and loan rates to such a punitive level the other banks get the business.
This rating structure allows the UKFI to offer better saving rates expanding balance sheets. We are left with severely downsized operations, but stable and in a condition to sell off hopefully breaking even and maybe a profit.
However, in order for this to work, the higher rates offered must not be so headline so as to reduce the balance sheets of the other commercial banks being diminished by savers transferring accounts to UKFI.
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#113 papanca
What ever gave you the impression the UK was a democracy? Its used the same model as the US for many years: The public vote and whover gets in is 'advised' on policy by business.
Many are trying to blame G Brown for the current crisis. He, like the rest of us with 20-20 vision all of a sudden, was led to believe that the financial sector was actually doing something something useful when it was just bleeding everyone for anything it could get.
Anyone who still thinks the financial sector had anything to with wealth creation should wake up and smell the burnt out shell of a failed economic fantasy.
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#101
Average volume in RBS shares over the last few months has been closer to 135 million shares than 1 milliion.
In practice, as and when the government wants to sell its shares, it will probably do it via a placing - a bit like the privatisations of the 1980s, though whether everyone gets a chance to buy a few or it's limited to institutional investors is a question I can't answer. The government wouldn't drip feed shares into the market. There's no point. As you suggest, it would take ages and they'd have to disclose it anyway.
Keep in mind that, even with the huge fall in value recently, RBS is still the 29th largest company by market cap listed on the London Stock Exchange. Shifting large parcels of stock in companies like this isn't hard in normal market conditions.
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post 124 munichmadrid
We are heading towards Chinese wages
Queues for food
No power
Back to 1945 to 1957
For a decade plus called
THE PAYBACK DECADE
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Have we missed the supreme irony of the taxpayer now owning the group that owns the Queen's bank, Coutts & Co., and that of many of the landed gentry?
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As long as the Government doesn't interfere with the off-shoring policies of these banks I will be happy.
I want UK unemployment to rise to 50% because it will prove, once and for all, that we "can't buck the market".
(I am intensely relaxed about it).
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How do I apply for a job at "UK Financial Investments Limited" I'd like to get a big fat bonus for Christmas please.
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Who is going to tell the Masters of the Universe that the going pay increase in the public sector is 2%? I hope there are going to be no double standards.
I am concerned that, whilst it is proper for RBS to return to being a financial institution as opposed to a fruit machine, we do not get into a situation where the government expects the taxpayer to take on all the liabilities of private sector debt.
Post credit-crunch I have no problem with paying to keep people in work and in their homes on condition that firstly their job is otherwise viable and their debts are the product of misfortune rather than stupidity.
I would not like to get into a situation where the taxpayer is left to fund the profligate. It is bad enough having to support a profligate government.
Given that this government seems prepared to go to any length to get re-elected I see a lot of trouble ahead.
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Post 116 re the failed bankers retiring on huge pension pots rather than resting at Her Majesties pleasure for fraud.
If Gordon and Alistair get their way they will be paying 45% income tax on it. I know it is till not fair.
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132. alexandercurzon wrote:
Will I get anything else for my 10 quid?
NatWest will offer me travel insurance, money off vouchers on stuff I don;t need and send me loads of junk mail for a fee. I'm sure there's more but I lost the will to live about 2 pages into the sales leaflet.
If you promise to forget I exist once the account is opened I might very well be interested.
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post 134 excellencefirst
You are correct in your conclusion.
In my view state ownership is not the solution.
Clearing the board rooms is.
Replace the boards with members of the public rather like Jury Service.
Trade out over time relax the capital ratios during the trade out period,with intermitent
Bank of England support.
Restrict lending to all sectors return to MANAGED BANKING.
IE KNOW YOUR PUNTER/CUSTOMER
Would that be so hard to do??
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#29.
"I predict the UK will be going to the IMF cap in hand again within 24 months... ".
All very well but who are the IMF going to go to for the money. Last I read, the IMF is almost broke.
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Another sham.
When will it finally sink in that until every board member of every major bank is investigated for fraud nothing will really change.
Current levels of regulation have failed and until there is proper financial control and associated legal penalty the same situation will arise again over time.
It is seen time and time again. (I recommend the book "Mania's, Panics and Crashes by C.P. Kindleberger and R. Aliber for an interesting historical perspective.)
These individuals happily sat by and accepted enormous sums of money in salaries, bonuses and share options.
The situation say's to me that they were either complicit in deception or if they honestly thought that all was well and were ignorant of what was going on underneath them they were not fully executing the responsibilities of their position. Either position is indefensible.
Even with Government control the idea that they will leave the bank alone to manage itself, this "arm's length" nonsense, is utter folly. There NEEDS to be proper government representation on the board of every bank that we the taxpayer is supporting.
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It would be more accurate to say the taxpayer is now responsible for at least 58% of RBS massive liabilities. Whilst long term there is the hope of selling the shares at break even or a profit, that is the chilling situation at present.
There is no clear case for bust banks, NR, RBS, B and B, HBoS, being in a good position to lend substantially into the house market, or into businesses. This is simply propping up the bust companies. The issue of lending still has not effectively been addressed.
With the long list of large businesses already forming an orderly queue for taxpayer prop ups just what is the extent of taxpayer potential ownership of lame ducks. Many of these large businesses are in trouble due to their own failures to have sound strategic policies. There is clearly oversupply in car production globally for example. The same can be said of the UK Finance Services, oversupply, de facto the collapse. Propping up a business in a sector with oversupply is a black hole for the taxpayer. There are already reports of taxpayer money in the US being abused by banks. I am in favour of essential strategic intervention, I am not in favour of being taken for a ride or generating structural imbalance.
It would appear there are considerable longterm imbalances being created right now. Individuals or small businesses do not appear to part of the party. They are being left to hang. The Private Sector is in considerable shrinkage. Large businesses, including banks are being 'helped' despite the fact they are inevitably due to downsize. Just what is this 'help' supposed to be doing, the current deals appear to be simple to put money into the businesses in return for part ownership. The appear to be little demanded in return, in fact 'hands off' is the motto.
There is apparently great reluctance to reduce a greatly expanded Public Sector. There are also proposals afoot to convert benefit claimants into a quasi commercial service workforce, eg loft lagging and conscript community work, which like it or not will have an impact on other providers if it becomes permanent. Just where is the tax revenue to be generated. Just what encouragement is being give to that part of the Private Sector which has to grow to pay the tax in future. It is very doubtful the large monolithic businesses currently in trouble are due to provide any dynamic growth. Their models as bust.
A great deal of noise is coming out of Westminster at present, along with a very great deal of taxpayer money. However haste is the word, and there is very little effort in presenting a longterm economic programme - is that because there is no underlying longterm strategy. If so it is extremely dangerous.
Part of the strategy would appear to be short term political - spend up and get the credit for it before the GE and leave the Conservatives with a difficult manifesto problem, eg trying to sell the bill to the voter with the implicit structured reduction of Public Debt, and the associated reduction in Public Services. I have seen little in longterm advantage with the last 5 years activity and at present cannot see any projected longterm benefit detailed for the current 'help', it is all a story of - we must do this or the bogeyman will get us. Scaremongering. Much the same sort of scaremongering that was used to push for the botched war on terror and invasion of Iraq and Afghanistan. All policies from the same source, and you would have to say questionable source in at least two of the three instances, the last instance to be proven.
Much of the current policy is polarising. inclusionist for establishment type organisations, public and private, exclusionist for all else. This was also the underlying ethos with the war on terror, inclusionist for groups favoured by the government, exclusionist for others, this had the effect of making the situation worse, and will take a generation to fix domestically and with the Islamic world. It is a flawed approach.
If there is one outstanding fact with recessions it is that businesses limping along, on the cusp of decline, are culled. The growth in that type of operation virtually never returns. Collapsed sectors never return. With successive recessions sector by sector has been eliminated. The question therefore, and it is a critical one, is where is the growth going to come from. Without growth, and shortly, we are not leaping the gap, which is the entire basis of the current strategy, we are jumping off a cliff. Some serious questions need answering.
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According to Wednesdays commentary on the daily reckoning web page:
http://dailyreckoning.com/
(bottom half of the page)
the US banks are taking the Federal Reserve handouts and going on a huge buying spree rather than sort out their balance sheets. As such behaviour would probably be frowned upon by UKFI Ltd, I wonder if this is why Barclays didn't want to take the Queens shilling?
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OK, fine, but can the government please stop moaning that the banks need to go back to lending like demented people?
We can't have it both ways, prudence and spendthrift; Gordon has proven that by his own conduct.
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in them good old days you could buy a bank and sell it for a profit.
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It seems to me that we as taxpayers may own rather a lot of land and property.
People borrowed money for purchasing property, amongst other things. The loans were repackaged and sold on to banks. Then the debts went bad and we taxpayers bought the banks, so in principle we should be taking over the property.
Given the scale of these problems that could be a lot of property, located all over the world.
Which parts of America do we own, please??
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#137
Sorry, but it's not all hindsight. I have the letters from Ministers to prove it.
They knew their policies could never create a vibrant, wealth creating society so settled for a thick, lazy consumerist one bostered by a financial services industry. Opps.
I hear the RCS is testing current successful A Level students with old papers going back to the '60's and proving beyond question how dumbed down the current standards are. How exactly do you conquer the world with that raw material?
Idealogy and targets won out over common sense and pragmatism; that isn't hindsight - maybe you didn't see it coming but many of us did, don't tar us with your own lack of foresight.
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So does this mean if I owe any money to this bank in the form of bank charges etc I can pay myself
hahahaha
or the other side of the coin, if they owe me money for unlawful bank charges I can apply to the government to get them paid back
Well as long as St Gordo keeps bailing these institues out, why should we the British Put upon public care!!
After all it's only MY Money he is squandering
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30, Grumpy Bob
Agree 100%, what happened yesterday was a disgrace and the first high profile sign of what Gordon 'stalin' Brown is all about!
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#47
"Should the bank change its name - removing "Scotland" and substituting "Britain"? "
How about just "Bank", as this is the overriding entity in all this mess.
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I would love to know excatly how much foreign money has been advanced to the UK banking sector by the wholesale sector. The estimates we hear seem to change all of the time. It start at £600 billion and the latest figure given by RP was £700bn. It is certainly more than the Govt has put into the banking system by way of investment in the banks and the provision of loans and guarantees. Take into account the bad debt provisions which the banks are incurring and it seems to me that there is a huge amount of cash which is being sucked out of the UK economy over a short period of time. The recent VAT reduction amounts to a drop in the ocean by comparison. I just can't see that all of this wil result in only a 1% drop in GDP next year. I think that the shock to the economy will be far more severe.
The Govt has also not explained to me why the UK will come out recession at the end of next year. There seems to be an assumption that because this has happened with previous recessions, it will happen automatically this time around; as though the treasury gets out a piece of tracing paper with the graph of the recovery last time round and traces it onto the graph this time round. I just can't see what the driver will be to get us out of recession this time. Can someone please enlighten me?
My fear is that the recession will be far worse than expected and Govt. borrowing will be much higher and go on for much longer. There will reach a point at which the Govt. will have to slash public services and raise taxes massively to prevent the devaluation of sterling and massive inflation. The tax rises promised for future years are miniscule compared to the predicted size of the national debt. For example, 1% on VAT (if it was to be introduced) will raise around £5 billion per year; the changes to higher rate tax and personal allowances for higher rate tax payers will raise leass than £1bn. The national debt in 5 years time is predicted by the Treasury's hugely optimistic predictions to exceed £1,000 bn. The interest on this alone per annum will be several tens of billions on pounds (assuming the Govt. pays 5% interest, it will be £50 bn or almost 10% of the current annual Govt tax take). God only kbows how the country wil be able to service and repay the debt and pay of the obligations under PFI and meet all of the unfunded public sector pension liabilities.
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technical point - the UK doesn't own RBS, it is a majority shareholder. It needs to break the 75% level or 90% level to be able to unilaterally enforce it's will.
Question remains as to why RBS simply didn't cut it's asking price for the capital. How many people think BARCL was still stupid?
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RBS employees needn't worry about being made redundant, as I would expect many of the large offices/call centres are in marginal labour constituencies...happy days!
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#alexandercurzon You may get censored, but the message gets across.
PS I haint no Lady - my true name IS Alexander too, but I had a Russian mum. Sasha is the standard Russian diminuative, like Misha for Mikhail, etc.
If leaking be a crime, why is the entire government not in GAOL?
Or is is just a crime to leak the truth?
Pesto dear boy, watch out! We don't want to lose you.
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@ #137 MadTom1999, who wrote:
#113 papanca
What ever gave you the impression the UK was a democracy? Its used the same model as the US for many years: The public vote and whover gets in is 'advised' on policy by business.
Ah, so it does work the same way on your side of the pond! Well, I said I didn't know.
Seriously: good luck to us all (especially those to whom our approaching financial misery still looks like prosperity; their situation is set to worsen too.)
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Over the pond:
Message to HR.
Your majesty, as a percentage shareholder in your bank, RBS= Royal yes?
I think we should get together and buy lots of other entities at these incredible bargain basement prices.
One concern I have is that you and C have had very little input into the country you run.
I have seen at first hand the demise in Europe caused by massive and calamitous profitmongering and am now set to rescue our colonies.
Please:
1. Keep driving on the left.
2. Ignore the Eurozone.
3. Keep pints as a measure.
4. Holiday in Turkey. ( still cheap )
5. Sack the lot
Alan
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post145 whistlingneil
The promise is NEVER to lend out any money
never to bomb you with junk mail.
The 10 pounds a month is to cover admin
cash point charges clearing house charges
etc etc.
Never play the money markets or gamble
customer funds in any way whatsoever.
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> So whether they like it or not, most banks and
> bankers are destined to lead a quieter, duller life
> for many years.
A while ago, we were fretting about adjusting the tax
rate in case we drove "genius" bankers away - if only they'd gone sooner. Now, more than ever, a rich man is a burden on the rest of us.
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As a customer of RBOS for more than 30 years, and someone who bought and failed to sell a house through the fun period and was assured by the Bank Manager that everything was ok, what strikes me is the gross ignorance of all in that bank.
I've read this blog for a few weeks now, and really it's not customers fault for taking out huge mortgages, it's the bank for offering.
I mean how can an institution make a profit every year of its existence, make billions of profit one year, and then the following year collapse. Idiots.
Under the circumstances it's time to stop printing Scottish RBOS notes!
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#124, and I thought this was satire...:
http://www.thedailymash.co.uk/politics/politics-headlines/brown-to-gamble-on-you-being-retarded-200811241415/
Turns out there really are retarded people out there making exactly these arguments.
Brown didn't complain about banks because the sole sources of "growth" in the UK were Financial services, housing and a bloated public sector. Take out the contribution of the banks and this country would have been in a recession probably around 2002. You claim that this is a "global problem" - glad to see that Brown's attempts to palm this off to someone else has hit at least one target - but despite the banks being of a multinational hue, the players in the CDO and CDS space were mostly based in London. It was AIG London that bankrupted the rest of AIG.
I guess you are walking talking proof that you can fool some of the people ALL of the time....
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Can I just cash in my 0.00000125% worth of shares now so I can pay some of my energy bills this xmas please.
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#71
"It's simplistic to continue blaming the banks when they were doing precisely what the government and the regulatory bodies had encouraged them to do."
Not if you then ask the further question:
Who was encouraging the government and the regulatory bodies?
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This comment was removed because the moderators found it broke the House Rules.
#144, think you must be confusing them with public sector workers who are the only people left with inflation linked final salary pensions.
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Comment 111
I see no signs of a lack of international confidence in other states that have greater state controls in their financial sector such as China.
Read the NIC Global Trends report as this predicts that many states around the world will increasingly view having a controlled market such as China as a better option than the free market in the West.
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Well said the posting from Wotmenah!
Robert Peston has announced a series of scoops prior to Government announcement. Many stories (but not this one) could only have come from within Governemnt.
Will he be arrested by the Anti-Terrorist Police? No. I strongly suspect none of these leaks have even been reported to the Police.
Am I the only person who sees that stories negative to the Labour Party bring in the lethal Anti-Terrorist Police, while Labour positive stories will probably bring Robert a knighthood? Oh and we pay Robert's wages through the Government imposed licence fee.
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Does this all now mean that we get a coherent government policy going forward?
Note the use of the word coherent.
We now have
a) A state controlled bank called Northern Rock which is winding down its loan book / business.
b) A state controlled bank called RBOS which is going to be encouraged to provide as much credit as possible.
Maybe I'm wrong.
If not, can somebody please let me know what the hell the strategy is? - Im lost.
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#147
Excellent
However 2 months ago from a car park in a petrol station near Sofia on my way to see my Mum I told the world that the IMF was without enough funds to save the whale never mind the rest of us.
Over the pond and landing in 20 minutes so maybe O can help the ONE.
A.
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153. jcamerton wrote:
Which parts of America do we own, please??
Whilst is doesn't work that way I'm sure but if it did with prevailing luck it would probably be Cleveland.
(or for those not familiar with Cleveland - think stereotypically about Hull, Middlesborough etc.)
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I'm based in Brighton and would be very interested in supporting the Rebuild Britain 2010 movement. For too long we have suffered at the hands of the ruling elite and their hidden masters and the time has come for change. If someone out there has the knowledge to launch a website / discussion forums / meetings of like mindeds I'm there.
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123. JayPee28bpr
If your percents are correct, then I think you have just provided a concise explanation for why we (i.e. UK plc) are where we find ourselves.
After all, maybe for the MBA-worshipping gong-chasers (aka our financial and political decision-makers), to act to rein in short-term excess is not only a negative career move but like admitting to being deficient in the trouser department.
marksmith1981, sashaclarkson et al.
Laudable intentions and if someone is to do it, well, you have the enthusiasm so why not you? I happen to think that yet another Political Party is not the answer - just think of Galloway, Kilroy-Silk etc. Even Blair seemed so very...normal at first. Little do we understand how easily power corrupts, as it inevitably always does.
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good post / suggestion by 62, I know a bit about web design.
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moderators??
Youve missed the point of the two posts NOW deleted.
The WHOPPER cheque is the Treasury Investment/GAMBLE
To suggest pass going to jail/goal is not defamation.
Monopoly is not defamation.
Downing St is not defamation.
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Landed.
Greeted by Chinese man who own this Continent apparantly.
Take off belt and any bits and bobs pertaining to acts of t................
Taxi driver wants payment in potatoes as he reads my column and the pound is ounces as far as he is concerned.
Hotel here I come...........
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One WONDERS if The Queen will be banking
elsewhere?
Hands OFF GORDY.
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This comment was removed because the moderators found it broke the House Rules.
I think the activities of the Government in supplying funds to prop up or take a stake in UK banks using foreign money backed buy government bonds maybe illegal under the Anti-money laundering regulations.
Due diligence may not have been comprehensive enough recently and as such I have instigated a complaint to the relevant authorities.
Within half an hour of registering my concern, 12 anti terrorists police seem to have surrounded my house, very concerning.
13:10 Update:
OK on the anti-terrorist front they turned out to be Jehovah Witnesses, keep you posted on the Anti-money laundering complaint
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RobKirton 175
The STRATEGY is PANIC.
Each day proves they havnt a CLUE.
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So RBS has £2,000 billion of assets and £1900 billion of liabilities.
Making a net worth of £100 billion
We have paid £15 billion for 58% of the group, which on the face of it looks like a reasonable deal (if we omit the fact that in theory we could have paid £2.4 billion less - but what's a few billion amongst friends?)
However: Are the assets/ liabilites stated correctly? How much of the 'assets' are toxic? Could RBS realise the other of the assets?- This is a very fine margin.
If RBS can reduce its liabilities we could be on a good thing.
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Most contributors seem absorbed with issues of how we got here rather than the current threat which is the artificial boom in the value of cash, particularly the US dollar.
If you do not believe me just calculate what $100k can buy now in terms of a house, a share portfolio, barrels of oil or tons of copper and compare with last year. Cash has no intrinsic value, it is just another form of credit. It may seem good for now if you have savings but in the long term this cash value boom is just as damaging as the house price and share value booms have been. Shortage of cash flow in the real economy is damaging jobs and commerce now and threatens further damage to the physical economy in the months ahead.
There is a brief opportunity for governments to inject cash now - without inflation risk.
So let the presses roll.
Oops! - I nearly forgot "Exchange Rates" you all cry.
Thats only a problem if countries such as UK and USA inflate in isolation. A co-ordinated bout of inflation for the $, £, Euro, Yen and other major currencies could keep exchange rates in balance.
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Dear Moderator and in the end maybe RP.
It is a fundamental fact that we as commentators can only interpret the totally outlandish events of the past few weeks as best we can.
As a extremely well behaved commentator with a sense of humour can I say that all in all we need to kill a few sacred cows.
1. Stop the making of money from ...........
2. Help people who need help
3. Banks are dead if they ignore us.
4. Inshallah
Out of airport and soon at hotel to save the WORLD.
A
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#145
definitely sounds interesting, need to ask the keeper of the purse strings (assuming it's not all in the tills already).
can I reserve account 0000001 just in case I'm allowed.
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So should RBS and its subsidiaries be passing on the interest rate cut of 1.5%. As a one-Account holder they are still deliberating on this and hide behind 'contracutally we have no obligation to pass it on'. Even their tel line states that no decision has been made.
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Lets not forget your contribution to the share price. I find it amazing that your offices were not raided by the police, unlike a certain MP, given the unethical leaks you made contributing to the decline in the share price. As takeovers go using your blog to leak information was an absolute coup for the govt virtually ceiling the takeover for the company at a bargain basement price.
It shows that "friends of Labour" are rewarded handsomely!
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178 newsNigelCollins
My IT guy is sorting the kit getting quotes to
facilitate it.
I think sasha is going to Chair.
my email is on google search first entry join
that you will see it.
On profile
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#178
Based in Istanbul but in an apple at the moment.
Join you anytime
Alan
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Hopefully the unnecessary negative reporting and comments made about this company will now stop.
RBS did not overpay for ABN, they put together one of the best take-over deals ever seen to out play all other bidders and pick up a jewel in world banking for a good price. You can say a year later it looks like they overpaid, but we are in a different market now, one that nobody saw coming. Pretty much everyone who holds bank stocks "overpaid" at the moment.
Secondly the current situation is the product of markets being unduly concerned about the banks capital ratios. Whilst it is obvious all banks been caught out with global market trades the core risk profile of RBS has not changed. They have and always will be a sensible lender much more than any other uk lender. They only hold a small % of the uk residential mortgage book.
To roughashlar RBS only have a tiny credit card book, you should have no concerns there.
To Paul Nash why would you move your current account ? comments like that worry me about people in this country !
Underlying profits for RBS will rise this year and continue to rise. The "loan" from the govenrment will be paid back in 12months.
RBS are and always will be an independant commercial business and will not be under govt control. They will however make the uk tax payer a lot of money and soon return to being the biggest uk contributer of corporate tax.
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179 thortonheathen
Country before EGO
Thats what the political class have forgot.
So the moto might be?
NATION FIRST.
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As a private shareholder of RBS, (as well as a public shareholder now), i do not understand why the share the government has taken is so great given the following:
1, The poisonous debt on RBS books from America, as with others, is only 25% default which means the other 75%, if paid, will still be profitable unlike the 10 cents in the dollar it is supposedly worth and being written off to. (Someone is still going to make a killing here at some point).
2, The Dutch bank ABN should be contributing profits at some point, shouldn't it?
and lastly 3, If the sale goes ahead of Churchill and Direct line shouldn't the sale realise enough monies to pay the government back for at least the pref shares?? Thereby allowing dividends to start to be paid again and the market to reinvest? (Uplifting the capital base once again)
Perhaps i am too simple - any thoughts would be appreciated.
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"REAL QUESTIONS FOR GORDON BROWN
ONE LAW FOR LABOUR
ONE LAW FOR EVERYONE ELSE"
Quote Michael Howard.
Go on GORDY come clean TELL US
Do we still have a Democracy or NOT.
Arrested a senior Member of Parliament
questioned for 9 hours.
Welcome to GORDYs britain.
GORDY YOU MUST BE SO PROUD.
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#177 "Which parts of America do we own, please??"
We actually do own one small piece of the US: the Captain Cook deathplace memorial at Kealakekua bay in Hawaii is sovereign British Territory. Beautifu1! (But, like me, he was born in Middlesbrough: well, Marton, now a suburb thereof.)
#178 Good: Mark has bought the domain names, I can do a website and I'll investgate the rest.
A suggestion: we launch the website in the new year, and launch an e petition at the same time, DEMANDING that the government and MPs adopt the principles. Then we use the press etc in our local areas to put pressure on local prospective candidates.
After today, I have to disappear from the blogosphere for a week or so, but I promise I'll be back.
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Taxi driver..............
40 dollars = 40 pounds
Wish we had a government
A
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#179 "I happen to think that yet another Political Party is not the answer"
If possible I agree - that's why I propose to pressurise candidates, unless there is no-one prepared to accept the principles. Cheaper that way too! ;-)
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Anyone else waiting with baited breath for the run up to the next election?
You think the VAT thing was potty, wait for the crap they'll throw at it to win some last ditch votes....... or maybe they are considering sitting out the next 5 years hoping we'll all forget - I know I would like to sort this lot out!
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This comment was removed because the moderators found it broke the House Rules.
So the question is not such why does the government throw more and more of our money at the banks, only to state that it doesn't actually want to control their lending actions, it just wants them changed (!).
The question is why doesn't the government form a people's bank - a retail outlet where Joe Public can draw out what remains of his hard earned cash.
There could be a branch in every town and every village. It could be nationalised bank called, for example, The Post Office. Oh hang on, aren't they dismantling that as we speak?
Talk about the left hand not knowing that the right hand is doing. Integrated policy my elbow!
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Please can we now change the the name of our newly acquired Bank to The Royal Bank of Britain...
The Home Secretary wants to force airport workers to carry compulsory ID cards (... Hmmm, that sounds fair...), so why not also make all RBS Risk Managers carry compulsory ID cards too...
These days Scottish MPs can vote on English matters, but English second-class MPs cannot vote on many Scottish matters - yet somehow we all have to pick up the tab when Scottish Banks run short on cash.
PS - RBS PFI debt can now hardly be regarded as off balance sheet for reporting purposes - even with the biggest squinting of eyes... so at least there is 1 silver lining.
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#160 laughingblacksheep - well said.
It astonishes me that, having spent the last two weeks barking up the wrong tree, all the Barclays-bashers are now silent when the answer is staring them in the face. Whatever happened to accountability?
The miserable take-up of the new RBS shares by those same 'ordinary' investors who were up in arms over Barclays decision to seek funding in the Middle East is PRECISELY the situation the Barclays board were determined to avoid by taking the route they did.
It would seem that some (ahem, Mr Peston?) are quite willing to whip up emotion when it suits their purposes, but are not so willing to acknowledge the flaws in their arguments.
For the sake of transparency, I should point out that I am a Barclays employee. I do not give them blind loyalty - I believe in calling a spade a spade - but in this case, credit is due.
P.S. Alexander Curzon - your posts are almost poetry.
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Government Credit Insurance Company to be formed to provide guarantees for institutions lending money.
The idea is that the banks can return to lending at 2007 levels to sub prime consumers knowing that the tax payer will pay out any losses on default.
You couldn't make it up if you tried.
Fiction?
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the name of the new bank should definitely reflect the make up of all of the british political establishment.......so bank of scotland it is then!
or maybe bank of west lothian :o)
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As an engineer I find it quite offensive that banks refer to their activities as 'product development' and 'financial engineering'. It's not engineering - what they were doing was dilettantish and negligent and would get you fired in any respectable engineering organisation.
The difference is that engineers doing product development care about safety and reliability. Engineer's don't release products without simulating them and testing them and they don't design for the average case or best case, they design for the worst case. If some aspect can't be quantified then an engineer would put in a big margin for error: thats why bridges and buildings don't fall down that often.
What the banks were doing to push up the ratio's in fractional reserve banking and create more cash is akin to an engineer in charge of a nuclear power plant deciding to disable the safety mechanisms and pump up the power as far as it would go.
Its not that difficult to create money with fractional reserve banking just like its not that difficult to create electricity with a nuclear reactor. The trick is to do it safely. An engineer who neglected safety to get themselves a bigger bonus and ended up covering half the country in radioactive waste would get jailed.
There are lots of engineers in this country and throughout the world designing products which are far more complex than anything the bankers are involved with and doing it in a responsible manner. Unlike banks successful engineering organisations have a safety culture and don't give people bonuses for designing unsafe and unreliable systems.
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# 29 lovelytim
Yes, I agree that the almost incomprehensible level of liabilities now taken on by the UK government, coupled with the complexity, fragility and opacity of the inherited mess, topped off with the international inter-dependency of today's financial systems means that sooner or later we're going to be party to the mother of all chickens coming home to roost.
Let's be clear. Gordon Brown has sought simply to buy time here; that's all. He'll be hoping and praying that he's out of office before the titanic mess he's created of the UK economy sinks ... with the clueless Tories at the helm.
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#39
My apologies for having taken so long to reply.
If I may clarify: The point I was hoping to make was not so much the fact that the regulatory framework was missing - clearly with a rule book of 8000 pages, the framework was obviously there - the "light touch" I was referring to was more about enforcement of those rules.
I suppose you could say it was similar to the speed limit: the law is quite clear as to what it is. But, unless it is enforced, how many people are actually going to abide by it? How many actually DO abide by it?
Having a partner who has worked in Treasury for 30 years and another relative who has been in the BoE since the age of 17, I've very much been given the impression that what appears to have happened from a regulatory point of view is that too many things fell between the cracks between HM Treasury, the BoE and the FSA. Now, what the reasons for that are, I'm not privy to. Was it not enough synergy and interaction between the three bodies, was it just inadequate planning and enforcement, the wrong personnel for the wrong jobs, who knows. Some others, not myself have even been unkind enough to suggest that in staffing the majority of the jobs in the FSA with civil servants (who'se motivation, lets face it, is not the most dynamic in the world) was part of the problem - it wasnt particularly difficult for the self appointed "Masters Of The Universe" to run rings around the Keystone Cops.
For my own part, my info sources who I trust implicitly have said that their encounters with the FSA certainly led to a lot of rules being drawn up, but then not enforced; maybe with a view towards the Financial Services sector being self policing.
Unfortunately, as can be seen from the results now the balloon has burst, this has plainly not worked.
That was what I was alluding to by "light touch". The call for the FSA to be either made fit for purpose or disbanded would certainly be echo'd by my two relatives who have much deeper experience than I and I have no reason to disbeleive them.
Thanks for your comments, makes a change to the stuff on Nick's blog :-)
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Pity the existing shareholders.
A government run bank will be just that.
It will certainly be a very long time before it is in profit if it has to service the political whims of government. Especially this one.
Like every nationalised company before it it will forever be a loss making business subsidised by the taxpayer.
Leopards don't change their spots.
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188 trevst
'If you dont know where you are going any road will take you there'. Geore Harrison.
It is fair to consider how we go here as the incompetent chump involved is supposed to be leading us onwards. As usual it is unlikely we are hearing the whole story from a government in love with spin.
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oh yes!
We knew it was going to happen, but if ever there was evidence of a nation raising it's head and squaring it's shoulders for a fight, this is it!
Just look at this blog!
Someone bring it to GB's attention please!
Just a quiet word of warning, don't fall more than 2 months behind on RBS mortgage payments, you'll be repossesed!
Alex C-what a great day you're having-your comments are obviously too close for comfort again! Well done old chap! Send me the papers to open an account -several actually-I need 4 each of commercial current and deposit accounts, and 1 each the same for personal. Ta!
Sasha C and Mark S-I'm no good at designing web stuff, so please go ahead. Anything else, please let me know.
What's going to be the next company to fall under government back seat control? Will UK plc now get a 'junk' credit rating like Romania?
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# 175
I agree! What we're seeing is the result of a series of panicked government responses as the crisis unfolded. We're also seeing how various government diktats conflict.
In allowing NR to fail and replacing lost deposit funding with BoE funding at above market rates, the obvious commercial response was to reduce the need for that funding asap. Easiest way to achieve it? Get rid of assets. What's happened? Good lending risks have been encouraged to move to other lenders via above market lending rates, increasingly leaving an unattractive rump of poorer risks, but with a large chunk of BoE funding repaid.
Then we had HBOS. Different response here, namely facilitate a merger that runs contrary to UK competition law.
Bradford and Bingley. Another different response. Steer the savings business into a larger entity (Abbey/Santander), ie the HBOS approach, but take the assets onto the Treasury balance sheet (ie the NR approach).
Then there's the bank recapitalisation, the first piece of which we've seen today with RBS. The purpose of this is confused. First we're told (by government) that it will help free up the credit market. Then we're told (by the government spokesperson resident at the BBC), that it was to stop the banks failing and had nothing to do with freeing up credit. Then the BoE Governor says it was intended to free up credit markets.
Perhaps the confusion arises because part of the recapitalisation takes the form of pref shares with large divis attached. In RP's brave new world of utility banks, they cannot earn a return anything like equal to the cost. Therefore, they will reduce assets, consequently reduce the need for capital, and seek to redeem the prefs as early as possible. In short, the structure of part of the recapitalisation runs exactly counter to the government's apprent greatest wish that banks start to lend again.
Basically, the government hasn't had a strategy. it's just responded to each crisis as it occurred. When it finally decided on a strategy (recapitalisation) it doesn't appear to have fully thought through all the objectives of the strategy and come up with a solution that would encourage its preferred behaviours.
Overall, government performance has been poor: slow, confusing, not properly explained, inconsistent in terms of objectives and how these are encouraged by its policies.
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#188 I tend to agree. The global deleveraging of the banking system is highly deflationary. The correct response is for each country to print sufficient money to compensate.
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Rebuild Britain 2010
The Phoenix Party!
Could we have that as a logo do you think? Out of the ashes and all that?
Or maybe it would look too much like a certain bank's logo?
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Surely, if we think about things seriously, Mr G brown should take over the helm at RBS'd ? His place in governance could in turn be taken by 'Lord' F Goodwin (exCEO of RBS).
It is an age since we have had a member of the Lords as PM. Salisbury was perhaps the last.
The UK then really would have a dream team.
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Mark Smith, count me in!! Lets all pray it's not too late to bring this country back from the brink....
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Robert,
"Now taxpayers own RBS, will the banks be run differently?".
Let's hope so, as the following is a salutary tale from South Warwickshire, where a long established company of eighty years standing has just been put into administration with the loss of 300 jobs:
The company had a full order book into the new year and was the largest employer in the small market town of Shipston on Stour. Many other local firms were dependant on this company and no doubt some will be dragged down by the administration process, causing bankrupcy and further job losses. The company was a well run contract building firm that had weathered many past recessions, but now required the assistance of the bank to carry it through to the new year....but the plug was pulled by guess who??.....RBS.
This is in microcosm could be applied to any small market town across the country and any company connected to the building industry at the present time. Those on this blog supporting a campaign to rebuild Britain have my full support, but I think the above demonstrates that it may already be too late.
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Robert,
You say " we should pretend the liabilities are not real". Why did you not also say the same for the assets ? Lert's be balanced shall we.
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I heard a rumour that the banks are being lent government money at 12%. If that is true it is no wonder that the banks are not lending to customers.
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195 dugit2008
Come on who are you kidding??
The ABN deal was one big TRIP for the previous Chief Exec.
NO MORE NO LESS.
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poor old Auntie!
Need to draft in more moderators!
Bet these ones haven't even had a cuppa.
Bless!
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Looks as though the Scottish will get injections of English money in the way that the English got injections of Scottish OIL
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Dear Robert Montague Normans Govenor of the Bank of England, Hlajamar Schacts, german Fianacier, and Prescot Bush all have one thing in common, they created the Great Depression of 1929, as told in the book The Secrets of the Federal Reserve. but, there is a reference to a banking system, that is called the alternative Bank, where VVIPs, and Royalty etc, are Guarnteed all their money,
"Who IS and where is this Bank/"
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Lady Sasha Clarkson
I hope its a holiday & not an illness break.
Take Care
From THE CURSE.
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# 195
Don't disagree with anything you say about RBS, but in the interest of balance I think you should also have acknowledged that RBS had the worst Tier 1 capital ratio of any UK quoted bank per its 2008 financials. It also has a very large derivatives book. Those reasons, along with the ABN deal, which was at a high price even at the time, is why RBS got battered.
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Have we reached one pound one dollar yet ?
Or is that next week ?
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For all those who are serious about Rebuild Britain 2010....
First, I hope you're serious about it. I kind of get the impression you are.
Second, watch your backs. I wouldnt put anything past the current incumbents.
Thirdly, Good luck. The other parties arent going to do anything apart from pursue their own vested interests...
I sincerely mean it. Good luck. Dont let us down.
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Paulson bought loads of mortgage-backed securities before it became apparent it was doing no good, and Gordon Brown went over to the States and said he should buy shares in the afflicted institutions instead, just like we had already done. So he did, and everyone thought things would now get on the right track worldwide. But it is questionable if anything tangible regarding lending to small business is actually happening, and CitiBank has since been rescued, which, if anything, would have knocked confidence further. I have two questions, therefore, and I genuinely would appreciate clear answers, if available:
a) Has buying shares done anything to restore confidence in inter-bank lending?
b) If buying shares doesn't do the trick, what can we do next?
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# 197
Dead right on point 3, repayment of prefs and divis being paid on ord shares from 2009. RBS wants to repay the prefs within 12 months.
Re 1, it might sound good that "only" 25% of the MBS are in default. Unfortunately those things were priced up with an expectation of about 0.1% default, so they're performing 250x worse than expected. And banks only have about 8% capital, ie for every GBP 100 they lend, they only have GBP 8 of shareholders' funds to cover losses. So, if the asset you refer to is down 25%, that implies the bank needs a further GBP 16 to cover the loss. That's a bit simplistic, but it give an idea of why apparently small losses can destroy a bank.
The fact they're trading at about 10c on the dollar reflects a number of things. Primarily, the risk of further defaults, but also the fact that people selling them are distressed sellers. You're right someone may make a killing. Some of those bonds are carrying a 20%+ yield right now.
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post 206
No poetry intended?
Just anger and frustration at the pass the
BUCK STUFF.
OH dear i may be liable for ARREST.
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today 200 RBS Shares = £100
last year 200 RBS Shares = £1,000
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Post207
Utter LUNATICS thats all they ARE.
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Re 188....trevst
Followng on your point--- the only bit of the Note that means anything is the "To promise to pay the bearer on demand the sum of £20" (The rest is just trying to make sure you didn't just write these promises yourself ).
Credit has the same root as credible, credulity, credance...ie Honest well founded belief/foolish, misplaced belief----
That's why this whole thing has become, always was, and in History , always is a crisis; of confidence... now even foreign exchange spreads are beginning to signal a lack of belief in Govts themselves... or rather their actions, in addressing the crisis of confidence.
Lack of confidence...maybe it's just something to do with us all being able to track the contradictions that are all over the place now.
Like the "now we own the Banks that lend to us..and want them to pay us back by lending more to us......er...." one.
Still we'll always be able to rely on that promise to pay the bearer on demand thing.... even if the £20 may be £19 within a year or two...
Because as is implicit in trevst post, I agree that one way or the other we have to pay for all this...and it will be either by having less, valuable money...or less valuable money.
The pervasive impression of confidence still bleeding away in all areas probably arises from the fact that by watching what the political leaders are doing and saying, people, especially as regards the UK, can clearly see there is more chance of us suffering both the above bad outcomes at the same time as anything else.
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Mandelson must be due to play a HAND of
ACES and a JOKER.
He's working up his PROFILE for that
LETHAL DARK moment.
So it will be the JOKER.
Watch out BATMAN youre stuffed,i forgot
you,ve stuffed your self all on your Little
OWN.
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@ 209.
It was lovely to read some sanity. Thank you.
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post 209 tom edinburgh
Its called being a SPIV,
thats the Long & the Short of it all.
Why the senior directors have not been
subjected to a full investigation is beyond
me.
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209:
Well said, and to those involved in Rebuild Britain 2010 ... I'm in!
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Although as a serving officer many years ago I took an oath of alliegance to Her Majesty in later years I have come to question that thing. I am not sure I'd do it again. I don'treally know what Royal means anymore and I certainly would like to see 'Royal' dropped from this bank. If a pretigious (?) Royal Appointment was part of this bank's heritage, those days are surely over.
Why? I don't know if it's ever happened in UK history but I think a Monarch's job is to speak up his/her people at time of crisis. It is a time of crisis too!But the entire Royal Family are being lamentably silent on the issue of how their subjects are being treated - repossessions, foreclosures, court orders, enforcements. Were they not ever silent?
This is deplorable, worse I think than even MPs being silent on the issue. Yet again today I have counselled and helped out a poor fellow - ordinary hard working guy - in despair about his mortgage and credit card payments, modest sums all in all. I don't have to do this, though I feel a duty - does no-one else? Among the Great and the Good?
Repossessions up 12% and nobody came.
GC
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198,
HERE HERE !!!
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Robert, I was recently talking to both the CEO of Northern Rock and Coventry Building Society and they were talking abou the balancing act between Govt pressure to increase lending and FSA pressure to increase Tier 1 capital on their balance sheets.
I have heard a rumour that any bank can lend to the government without impacting on their Tier 1 capital requirements. This sounds a bit of a con trick but if true could be the light at the end of the tunnel for the banks i.e. in terms of creating an asset that is interest bearing with a guaranteed covenant.
Now although i don't agree with the keynesian splurge of public sector construction funded through borrowing, if they're going to do it anyway, does this help the banking sector get out of its current property driven asset value reduction mess?
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I just wonder how much of the share price fall was orchestrated by the government and the LloydsTSB. Seems to me that the short selling came at just the right time for Brown and Darling. My reason is that they need to raise more revenue and tax is now a falling comodity as peiple find their incomes being streached by the massive price rises in basic commodities. What better way for the government to have a pleantiful supply of money than taking over the Banks, and as they have more than half they get more than half the profits as a dividend.
Watch out now that Brown has got his hands on your bank what will be next?
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Since the banks still have private shareholders they are obliged to behave in a way which is in the best interests of those shareholders. This means that they must take advantage of the current shortage of credit to charge a high price, that is a high interest rate, for any credit that they put on offer. Even with nearly 60% ownership, the government cannot order the banks to behave in a way which is against the interests of the other shareholders.
It would have been better if the government had just let these banks go into administration and then bought them from the administrator as a going concern, without their debts and toxic assets. Leaving the administrator to sort these out.
The government could have then recapitalised the banks and, with 100% ownership, run them with a new board and managers instructed to implement lending practices in the interests of the new shareholders, that is us.
Once the "credit crunch" is over the banks could be sold back into private hands, probably with a profit for the taxpayer.
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# 211
Interesting comments, especially given your inside knowledge!
The point you make about Treasury, BoE and FSA not quite gelling together is one reason why GB brought them all together in one super-regulator. Previously there were about 7 different ones for various branches of financial services.
I think it's a bit unfair to say that FSA does not enforce rules. It does, but remember that rules allow the regulated to argue that they should be allowed to do things just as easily as they allow FSA to argue they shouldn't. If rules do not explicitly preclude something, then a rules based approach cannot stop a firm from undertaking an activity. The US is worse than the UK in this regard. The SEC rule book makes the FSA's look like a short story.
There are a lot of conflicts of interest within financial services regulation. It's ironic that the regulated firms all have to have conflict policies, showing what the conflicts are, and how they're managed. Pity government and regulators didn't do the same thing!
Government has relied on financial services for very large amounts of tax (eg 25% of all corporation tax). That creates a conflict when what's driving those tax revenues is perhaps a little too risky. It doesn't encourage regulatory prudence in relation to various activities, especially when such activities are undertaken elsewhere and competition is intense. Financial services is notorious for having "me too" products. It's hard to stop anyone copying products, and nobody wants to be too far away from the perceived "norm": the risks of underperforming competitors is too great.
In addition, a lot of people working in FSA have a desire to get themselves a job in a firm they regulate: better pay, more glamour, more creative/interesting etc. That in itself is a conflict.
The result of all this is that FSA is great at cracking down on pretty trivial stuff, but doesn't have a good handle on the big stuff. A couple of examples. It was only after the NR collapse that FSA decided it would be a good idea if at least one of the CEO or Chair of a bank's Board of Directors had relevant financial qualifications. neither office holder at NR had any such qualifications. Also, regulation is focused exclusively on regulated firms. It does not appear that anyone was looking at systemic risk, even though many signals were being given off (and commented on) over a period of years, eg on the emergence of unregulated "shadow banks", increased levels of gearing, asset price inflation etc.
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Count me in Mark Smith 1981.
Post your email
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Bob Dylan was nearly 50 years too early -The Times They Are A Changing.
I don't know if the State owning banks is a good or a bad thing. It may however by a necessary thing if we are to survive this crisis in any shape.
The old order is rapidly changing. Up to now we have tried to fix the system - to return things to some form of norm. But it's gone too far. We need to develop a new national and international financial system. If the State and the financial system are wedded this may be more possible than if we leave the controls in the hands of the very people who got us into this mess - the bankers and finance whores.
Before Obhama's new team can even get their bums into their new seats the tidal wave of latest bad news will have crashed into the US economy. Today they started their prime retail selling period with overstocking, 40-70% discounts and 'customers' with already maxed-out credit cards. It will not be surprising to see the Maceys and JC Penny's of this world running for insolvency protection before Christmas.
If the US economy fails this season then we will be talking more truly about a slump. In that case we will need a new type of economic structure for our national, let alone economic, survival.
It used to be said that bankers were good bankers but poor businessmen. However, they infested business with their bean-counters. now we find that they were not even good bankers and even worse gamblers!!
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Just decided to register after a few days reading.
Did nobody consider using the Post Office to house the NR/HBOS/RBS personal banking and mortgage books? Surely it would have been well funded enough to cope, and could have transferred staff under contract to their employ.
The "failing banks" would then have been able to continue trading risks and funding as the government wishes of them without risking everybody's current savings and housing. As it stands, have we not just (as tax payers, through the government) just purchased history's biggest CDO with no idea of the toxicity contained therein?
#188; interesting post re the cash value boom. If it's true that banks are not "creators" of wealth and just a cog, then unless the government starts to roll the printing presses, maybe we should start considering money in the same way as energy, we can't create it, we can only change it's form.
Sorry if I'm incoherent, I can go on sometimes, and I'm not a very concise writer.
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What I find difficult to follow is if the taxpayer owes 58% of R.B.S and sits on a loss of £ 2.4 Billion how on earth can the taxpayer recover any money through an increase in share price. Are we as taxpayers likely to benefit from the stockmarket fluctuations on the remaining private 42% shareholding or is the government likely to buy more shares on behalf of the taxpayer in order to increase the remaining private share value. The taxpayer is bailing out a bank that was incompetently managed which resulted in its near bankruptcy and it would farcical to expect the same bank to return value for money to the taxpayer. What on earth is this Government hoping to achieve. Saving another Bank at an enormous costs to what benefit so the media headlines look good.Unbelievable
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#47
Royal Bank of Britain sounds good but would not accuratley reflect the companies history nor its legal status.
However what about the Bank of England..
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Great to hear that WE ALL now own RBS. As an existing shareholder I have done so for many years. Yes, I've received decent dividends and, at times, seen the value of my shares increase significantly. However, I am now sitting on shares which I imagine will not earn any dividends for many years to come and how long will it take for the share price to recover?
Like everyone else during the 'boom' time of recent years I was happy to stand back and let the banks get on with it. I only wish I had sold my shares at a time when they would have earned me a decent profit.
However, can we entirely blame the banks and financial institutions for all these problems? I worked for NatWest for nearly 30 years and I can remember a time when loans were REFUSED because after credit scoring the applicant it was obvious that a customer COULD NOT AFFORD IT. However, following the increased competition from building societies who turned themselves into banks and started lending at more competitive rates, the 'big four' came under a lot of pressure from the government, media AND the public to be 'softer' in their lending . The upshot of all this seems to have been to allow customers to borrow way beyond what they can really afford.
So, we should ALL share the blame for getting into this position - whatever happened to saving up for something before being able to afford to buy it??
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No 89. Jaypee.
Whilst I agree with your sentiments, I disagree with your facts.
---IF--- there was a corporate responsibility law in the UK (as has been promised by successive governments) then real prosecutions --COULD-- proceed under various differing legal statutes, probably fraud against the articles of association.
There would be a whole raft of SIMPLE CLEAR laws to curb excesses rather than 8000 pages of legalese jargon fron the FSA that would take 10o professors with IQ over 160 ten years to interpret to a jury
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'If our banks simply concentrated on the very basics - taking deposits, providing simple loans to customers they actually know, moving our money to where we want it to go - would that be so disastrous?'
******
Here in the US, within the past couple of weeks, we were treated to public House/Senate hearings with Paulson, Bernanke et al very much on the hot seat.
After their appearance, there was a second set who gave testimony. Amongst them was a sweet Southern lady, representing the organization of local community banks. She was smiling sweetly, and reassuring the GreatAndGood that no, they probably won't need any of the bailout money, because they've been doing good business at the local level, taking deposits from and lending money to the people they know locally.
It's good to see Mr. Peston's insights reinforcing those of the Sweet Southern Lady.
What if RBS's operations were 'atomized' at the local level, with local branch managers rewarded or sanctioned for local performance?
The branches with growth in total local depositors within the local postal codes, and average growth in their deposits, successful loans within the local postal codes, growth of local small businesses, and community involvment, etc. win! The more stable and prosperous the customers are, the bigger the reward for the branch.
Those managers and employees should get the bonuses, not the fools at the top.
It's great for RBS to sponsor The Open, and issue a bank note bearing Jack Nicklaus's image. The local branches should follow up by placing the RBS logo on the jerseys purchased for the local children's golf, tennis, and soccer teams, sponsoring the local oratorio society, art fair, community landscaping project, etc. Think how much marketing money could be effectively deployed at the village level--and make no mistake, it's marketing for RBS, not just charity for the neighbors.
Both our economies need to be rebuilt, from the ground up, one neighborhood and village at a time. Let's take advantage of the opportunity the current travail affords us.
It's time for a return to sanity, to thrift, to the production of real goods and services at the local level.
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I saw prime ministers question time the other day.
Am i the only person who thinks they were out of order all laughing and joking?
Our country is in a hell of a mess & they are basically taking the mickey out of us!
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#217 Tigerjay1 "Rebuild Britain 2010
The Phoenix Party!"
The emblem is great! The name is unfortunately tainted by association with the infamous "Phoenix 4". Of course, they were birds of a different feather: more of the vulture variety, feeding on the dying carcass of Rover - with help from the grateful taxpayer.
But perhaps something like "Rebuild Britain 2010 Let us rise from the ashes!".
#227 Alexander Curzon: No it's not illness - (Though I have to stay next to a loo mornings anyway). I've just got a long list of things I've promised to do.
Here is a link to an old news story which is funny, but NO JOKE! It makes you think again about the nature of money - and about how in dire straits no resource should be wasted.
A thought about the censorship. It is very often possible to avoid it by using "Parliamentary Language". A master of this was the late Robin Cook (hated by Gordon!) Here is a quote from Hansard - an attack on Guy Croft's mate Douglas Hogg back in 1996:
"The Government also revealed their incompetence by promising an action plan to eradicate BSE and then turning up at the meeting with a four-page sketch that the Spanish Agriculture Minister described as "mierda"; a term which, if literally translated, I am sure you would rule unparliamentary, Madam Speaker, but which was paraphrased by The Daily Mail as "clearly insufficient".
"mierda" = faeces (vulgar)
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#209: Bravo!!
I've forwarded your wise words to my engineer friends!
Fellow readers, I urge you to read this gent's post.
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#209 tom_edinburgh
I am with you on this one.
However you have to take it further.
The reality is that the government's job is to keep people happy.
The government has realised that not everyone can be an engineer or involved in manufacturing or proper industries or services where they knock off at 5 and consider they have done a real days work.
Banking and FRB in particular enables whole classes of people to think they are doing a worthwhile job and it keeps them happy.
More to the point it keeps them off the street. In turn that keeps the government in power.
We have got a big imbalance in the UK at the moment where the economy has been driven by FRB for many decades. The government's job is to try to use the "real" economy to balance the rest. Not easy.
FRB has enabled government to expand universities and the like.
Again keeping folk happy and off the street.
Meanwhile those people doing the real work are suffering.
They have been dragging a big ball for a long time and it is getting heavier and heavier...
As service industries blossomed in this country real jobs in engineering have got priced out by competition in other countries.
The very people that could not do engineering have got into management and are busy outsourcing engineering to cheaper countries.
And they get thanked for it.
The only reason it is cheaper abroad is that we have inflated opinions of ourselves. Courtesy of FRB.
Will the worm turn?
Will we become a country of engineers again?
I doubt it. We do not have the skills.
Universities are only capable of turning out engineering students that fill in grant application forms.
The grant application forms are necessary to outcompete existing firms at getting government funding.
Which is where the money is.
Rant mode off.
The question is do I go to the Chippy before the Pub or vice versa?
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Robert - you might want to pay attention to what's been happening in the latest gilt auctions - Treasury is already having to offer higher interest rates than they intended. Still, I guess that's £4bn down, another £142bn to go. This year.
And at least we didn't have to cut back the offer, unlike the Italians.
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This comment was removed because the moderators found it broke the House Rules.
# 253
Very unlikely to have the result you expect actually. We've had insider trading laws since 1976, and only about 3 successful prosecutions. Everyone knows it goes on, but the criminal law doesn't work well in these matters, as the burden of proof is too high.
Regulation is the way to do it. It's just a question of regulating the right things. Easier said than done, though, I'm afraid.
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242. At 3:24pm on 28 Nov 2008, JavaMan1984 wrote:
198, HERE HERE !!!
Where exactly??
By the way, Alexander Curzon is beginning to worry me, especially quoting Michael Howard and Democracy in the same post. In no way am I defending our current shambolic excuse for a Government, but don't you shiver when recalling Howard's Way as Home Secretary?
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There is an old saying which explains political systems which goes something like this
SOCIALISM
You have 2 cows.
You give one to your neighbour.
COMMUNISM
You have 2 cows.
The State takes both and gives you some milk.
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.
The email is doing the rounds at the moment. Well we now have the 2008 addition...
NU-LABOUR FREE MARKET CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The government commends you as an example of British success.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The government gives you an honour in the new years list.
The annual report says the company owns eight cows, with an option on one more.
You sell one cow to make a donation to Nu-Labour, leaving you with nine cows.
No balance sheet provided with the release.
The public then buys your bull.
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"I forgot the elephant in the room, Royal Bank of Scotland's £1900bn of borrowings, deposits and other liabilities. I'm sure these will be kept off the formal public sector balance sheet. The public finances really wouldn't look pretty if another 140% of GDP was added to the national debt."
It is irrelevant. The bond market is the ultimate arbitrator of which off-balance sheet entities are or are not on the public balance sheet. If it decides UKFI must enter into Gilt pricing considerations, the millstone will go into the water with a splash.
The assessment of the credit-worthiness of the UK state is now closely linked to the credit-worthiness of RBS, BB, NRK and every other company whose obligations it guarantees in future.
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marksmith1981.....web programmer offering services and a few good ideas...but the mods won't let me put my email address on the posts. So put yours on the homepage of the website.
Cheers
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209- spot on.
As for the Rebuild Britain Party- Where do I sign?
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It's totally out of control, a media fuelled panic is taking us into the depths of the deepest recession in a generation.
The biggest laugh is the calls from the Government for the public to 'go out and spend'.
Oh yeah, I can see that happening with every journalist peddling the stories of Doom.
RBS will just be the first - who in their right mind would take up an investment in a bank when a rights issue happens at the moment?
I certainly won't, all my dosh is spread over several bank accounts in small amounts for safety - and it's staying there for the time being.
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#258 prudeboy
"FRB"
- Federation of Racecours Bookmakers?
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The Curse, Sasha et al
Rebuild Britain sounds like a great idea count me in and let us all know to get involved
Will garner a lot of support as people begin to wake up to just what a fix their 'masters' have landed them in. Major changes are required to the whole system and the current govt do not have the vision or courage to do more than ineffectually tinker with the vat rate. Surprising really as they must by now realise they are a busted flush and so can be bold without worrying about losing the next election or upsetting the vested interests that normally dictate policy. Who was it said politics is the shadow cast on society by big business? Maybe its time that changed.
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RP
#13, #85, #91, #187 et al
#133 webdeepak
"Total assets: 1900 billion"
Oh, I did not realize that toxic debt can now be quantified!
If we can do this we can work out the way ahead.
Hmmm, wonder where you get the calculators with all those zeros on?
- Probably use wide screen laptops.
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#25 et al
Rebuild Britain
Can I offer a few suggestions to help flesh out the manifesto. Here is something posted on Paul Mason's blog a month back:
http://www.bbc.co.uk/blogs/newsnight/paulmason/2008/10/new_world_financial_order_what.html#comment12
Maybe this needs toning down a bit. But would welcome feedback on whether this is "aligned" with the current groundswell.
Hawkeye
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#267. TheresOnly1Soupey
"It's totally out of control, a media fuelled panic is taking us into the depths of the deepest recession in a generation."
I think the media may have put a few logs on what is turning out tb the second Great Fire of London.
However, we would expect the media to report if a bank had run out of money, would we not?
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#209 I second the earlier Bravo!
So how do we incentivise the bankers to design products that won't lead to meltdown? If we consider this question are we like old generals, planning to fight the last war, when we should be planning for the next?
Recession is obviously going to hit us all harder. How to we incentivise the banks to lend to small businesses, and so prevent a huge leap in unemployment?
Incentivise the bankers by linking their income tax to unemployment - with no upper limit, a 100% income tax rate will soon free up small business loans and thus prevent unemployment rising so sharply.
A 1% rise per 30,000 people unemployed would mean 100% income tax if the unemployed total reaches 3 million, as it is predicted.
Perhaps a similar linkage to share dividends would be an even more effective means.
Primary legislation may be needed, but if it saves the world, give it a spin!
Other high earners might be similarly taxed, with a lesser percentage.
I'm really warming to my own theme here!! How about linking the high earners to child poverty levels?
Surely that kind of linkage would have more powerful, far reaching and subtle effects than any government, direct attempts at reducing unemployment and child poverty?
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168 Blacksheep
Still trying to pin it all on bogeyman Gordon, like so many on this blog.
Just like all the other sheep, it seems the truth is just to painful for some to bear.
The Free-market model of global capitalism is bust.
It went bust because banks took it to its logical conclusion.
Every time any politician in any country tried to regulate it (over the last five hundred years) they were called a heretic, commie, or trot, etc, and were only listened to after it had blown up- like after '29.
As for AIG's troubles being the fault of AIG London, and therefore Gordon, talk about clutching at straws.
I suppose it was Citibank London too...
And UBS London...
And Fortis London...
And Lehman's London...
And Fannie Mae London???
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No. 146, Alexander Curzon.
You post. 'Replace the boards with members of the public rather like Jury Service'
How interesting this is to me. Here in CZ we have completely autonomous teams in the factory. They elect their own supervisors.
On the board are several 'workers representatives' (Quote marks because it is not such a hard definition as would be understood in GB...) i.e.
If there is a management meeting on a subject matter, any worker can wander into the meeting at any time and state their viewpoint.
It works as a process because unlike England the workforce is intelligent, literate, polite and not beligerant, despite being very poor.
It is extremely valuable input.
However, I suspect that at the time a decade or so ago, you (and most reading this blog) would have protested severely against HMG signing up to the 'Social Chapter'........?
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@ #215 JayPee28bpr who wrote:
"# 175
I agree! What we're seeing is the result of a series of panicked government responses as the crisis unfolded. We're also seeing how various government diktats conflict."
Obviously your government needs to attend Hank Paulson's course in "Financial Crises and How to Manage Them".
Maybe electronicTurkey could audit the course while in the USA and report back.
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Errr, have I got this right?
I work hard.
I pay tax to the government
My wages get paid to the government bank
The government bank then lends my money and earns taxable interest.
If I need a loan then I must pay interest on a loan based on my savings
My backside is very sore.
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FRB is no part of the problem. For decades until the late 'seventies, banks operated perfectly safely with debt to capital ratios far higher than today. (i.e. more than double). The problem is purely one of putrid assets and additions to capital will not rectify things.
The origin of the real problem, rank bad lending, was the Wilson government's changing the rules under which banks declared their profits, after "transfers to hidden reserves". Wilson and his lads wanted the true profits revealed to all, not just to the tax man.
The results were akin to those that one has seen with the conversion of mutual building societies to public companies. Previously bank shares were regarded as a safe and very dull investment, of interest only to Widows and Orphans' funds. Post Wilson, bank shares became widely owned, and the shareholders expected returns comparable with industrials.
What happened? The banks replaced their qualified bankers with salesmen, stopped employing career bankers replacing them with young, bright but green graduates, and started paying bonuses to those who best wound up the lending. Proper lending went out of the window, too labour intensive; securitisation was quick and easy. The professional risk asset managers, the real lenders, became sidelined: they were bonus inhibitors. The prime lending consideration became the bonus outlook.
If I suppose for a moment that my view that the system cannot be fixed, is too harsh, then the road to fixing things should start with the following absolutes:-
1. An outright ban on any concern with a banking licence paying any bonus whatever.
2. A ban on any bank paying staff or directors by way of a share option.
3. A return to the old Scottish style banking apprenticeships.
The system since the mid seventies has produced no bankers. It has produced used car salesmen. Every time that I see the press refer to these inadequates as "bankers" I cringe.
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All, you may want to rethink the Rebuild Britain Party.
Rebuild Britain is a current tag line of the British Communist party magazine, Workers.
Yes I'm bored and playing with a well know search engine on
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Rebuilding Britain marksmith1981, tigerjayj, steve_webprogrammer, maroon3 AlexC et al
This is positively my last post until 8th December.
If you Google me you can find my email via my (very out of date) website, and I'll enable contact between those who need it. Spell my name correctly, and, as it's unusual, it comes top of the search list.
All the best everyone,
S
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Why keep blaming the banks, this country is drowning in debt all the sensible responses on this blogg tell everyone to pay off the loans as fast as you can.
Except Flash Gordon (saviour of the universe) who wants us to continue spending with what? borrowed money of course, that he is desperate for the banks to lend us, why?
So the debt bubble starts to re-inflate and Flash gets voted back in because he saved the universe. After that he dosen't care, if the bubble bursts He just does not want to be a PM who only got the job because Blair packed it in.
Ironically Blair only kept the job so long because Flash built his debt mountain.
So why is Cameron not shouting this from the hilltops, maybe because he wants to start his own ten year debt bubble, if he ever gets in.
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Sorry
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#282 joeplumber
There is no real difference between the parties.
They are politicians.
They are running franchises.
The red party and the blue party.
Once they get into power then the franchise holders get to pay back the folk that they got to invest.
The losing party (franchise) then snipes for the next n years.
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It's all very well buying shares in a bank to provide more capital, but what is this new capital to be used for?
As the USA are finding out, providing capital to banks doesn't solve the underlying problem.
Here is my understanding...
The banks have toxic items on the balance sheet that they don't know how to value.
So any new capital is reserved to the bank to underwrite expected losses.
The bank doesn't lend (because they have nothing to lend) so the toxic items devalue further which requires the bank to raise more cash to meet the Governments requirements for T1 capital.
Isn't that what is really happening?
The banks are playing for time, hoping against hope, that these toxic items will go up in value or at least stop falling.
As has been mentioned several times on this board, nobody knows the extent or assumed valuation of these toxic items and they need to be identified, sold off, at whatever price they can get for them, and only then can Banks get back to the business of lending.
The mechanism of selling off these toxic items requires anonimity of the owner to prevent more shorting of the financial stock.
It is not beyond the wit of man to devise a mechanism which would achieve this objective.
Unless and until this is done, no amount of capital injection will provide relief because the banks cannot lend, the wholesale markets will not advance the capital required.
I have the greatest respect for Mervyn King who I think alone understands this mess better than the Treasury and the politicians but even he is being driven to rubber stamp political decisions which he knows will make no difference.
We need to solve the underlying problem first not treat the symptoms.
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You see robert i always knew you should of been running the country, All hell as broke out on nicks blog
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George O. is right. Government should guarantee loans - but only to companies that pass certian criteria. Are they part of a value chain that leads to public works such as transport, energy, education infratsructure or service etc.
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#258 prudeboy
"FRB"
- Forth Road Bridge?
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Only after the counter pens are free of their chains, can we be sure that the banks we now own are truly ours.
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Robert,
Do you recall that government have nationalised businessess in the past?
1) Coal Industry - lead to strikes and a huge loss of jobs.
2) Car Industry - lead to strikes and a huge loss of jobs. Remnants now largely foreign owned.
3) Steel Industry - lead to strikes and a huge loss of jobs. Remnants now largely foreign owned.
4) Railways - lead to strikes and a huge loss of jobs. Remnants now privatised or
run be steam enthusiats.
What do you think bank nationalisation will eventually lead to?
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34#
Ushould think b4 u post,if you want to use a German word you should at the very least get the the spelling right. I too am looking forward to the next election as I can smell the fear emanating from the' usual suspects' to which your post ID has been added.Bring 2010 on!!!!!!!!!!!
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@ GLOSTAR1
Barclays didn't need to be nationalised to sellout overseas.
It's only globalistaion; I wouldn't worry about it.
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This is, presumably, a honeymoon period between a nationalised bank the goverment and the taxpayer.
Nationalised industries in the past had a terrible record of industrial relations, productivity and profits. I'm not sure why we are viewing the takeover of banks in the glowing terms we seem to be.
The government will try to control what the bank as a business has to do, otherwise their actions look bad for the government. If they have to make redundancies, reposess homes etc. etc. then the public cannot walk away from the bank as it belongs to them.
If the government intervenes to prevent redundacies and reposessions etc. then the bank can't make profits so it's shares remain very low. The government is then never in the position to get their (our) money back by selling shares.
I think the morass we are now in for saving the banks has yet to emerge, but the warning signs are already there.
There is something truly unnerving about all this. If a bank is too big to fail, then surely it has to have a business plan and regulation which prevents failure - otherwise the state is forced to intervene again in the future. If a bank is big enough its failure could bankrupt a nation - as with Iceland.
Do we really trust this government to create a banking system that is invulnerable to failure? Personally, I have my doubts.
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#290
I was writing while your comment was being moderated...thanks for the illustration.
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"Rebuild Britain 2010"
By all means throw yourselves into the party political fray but don't have any illusions that it's easy to change the political and economic system (see no. 123 JayPee28bpr and no. 179 ThorntonHeathen for sound advice).
Rebuilding is going to take generations and has to be done to a large extent from the bottom up, creating a constituency for a genuinely sustainable economy. Expecting credit junkies and property speculators to vote for reforms to the system is naive.
We need to demonstrate to people that there is such a thing as society, that we need it in order to flourish, that there is an attractive alternative to selfish individualism, that strong civil society institutions can protect us from the ravages of the state/market Thing. These institutions include forms of mutual/co-operative finance such as building societies and credit unions.
In the meantime we are likely to be hit by other crises that make the credit crunch look like a tea party in Eastbourne, e.g. peak oil, global warming, desperate refugees from climate change.
Remember the Benedictines. Their response to the fall of the Roman Empire was not to enter into negotiations with the barbarians, but to to build communities that preserved the old learning, did useful work, and offered hospitality to needy people (oh yes, and prayed too). The difference today, as the philosopher Alasdair MacIntyre observed, is that the barbarians aren't at the gates, they've been ruling us for some time...
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This comment was removed because the moderators found it broke the House Rules.
#202
"Anyone else waiting with baited breath for the run up to the next election?"
We should only have to wait 2 years...but my breath has never been so baited.
Why? Well, I think Ali D gave us the good news, if all goes to plan (stop laughing).
NI up a half %, Higher rate of inc. tax up to 45% for those on £150,000.
He neglected to say what VAT will be. He also neglected to say what the lower rate of inc. tax will be - I have a little theory that the only reason the upper rate of inc. tax is going up to 45% is because: if it did not then the new secret proposed lower rate of inc. tax going to 44% would be illogical.
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Funnily enough, this could be a fantastic opportunity to replace our monetary system with something not based on a pyramid selling scheme. Where it doesn't all end in the hands of the few who are allowed to manipulate the value of money.
http://petitions.number10.gov.uk/frb-reform/
If he is really a believer, Gordon just might be able to change the world.
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@ StreetcornerJeremiah
Most excellent post.
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"118. At 11:31am on 28 Nov 2008, bodgitt wrote:
Look out for the short sellers now....This is banking sector v people economic war."
You'll like this quote:
"The issue which has swept down the centuries and which will have to be fought sooner or later is The People vs. The Banks." - Lord Acton, Historian, 1834 - 1902
First thing is somewhere for like minded people to organise:
For monetary reform
http://moneyredeemer.webs.com/
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Hang on... This is important.. RBS is a major sponsor of Formula 1 motor racing and a certain German team.
Are we all now going to get free tickets to the races? If so I'd like three for the British Grand Prix please.
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streetcornerjeremiah
JayPee28bp
ThorntonHeathen
Thank you for your advice, i feel they are wise words indeed, we would all do well to heed
I would like to add that Good things have been achieved in history, and the sort of change we need is worth fighting/working for. I feel sure from your words you would agree with that sentiment
The wrong action, for the right reasons, is surely better than no action, and the words I have read from everyone over the last few days give me hope. I hope and feel that others are similarly inspired, and we have seen evidence of that on this page today.
Everyone who has an interest or desire in seeing a better britain, and i humbly suggest most commenters on this page fall into that category, get involved or stick around at least, and i particularly appeal to streetcornerjeremiah, JayPee28bp and ThorntonHeathen - we certainly need all the wisdom we can get
Rebuild Britain 2010
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#298 true-liberal
"Funnily enough, this could be a fantastic opportunity to replace our monetary system with something not based on a pyramid selling scheme. Where it doesn't all end in the hands of the few who are allowed to manipulate the value of money."
I agree. But when I followed the link to the petition, and saw the huge groundswell of support (6 signatures), I burst out laughing (in despair). I'm not a UK citizen, and the petitionclosed on November 25, or I would have made it 7 signatures.
Is it that hopeless? Would the new party (tentatively called "Rebuild Britain 2010") put it in their platform?
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Here's a question for you all.
Who should be allowed to create and destroy our money?
1: The government?
2: The mint?
3: The treasury?
3: The Bank of England?
4: Any bank?
Now explain why.
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Only when farmers and food growers earn more than bankers can we say that we have reached an age of sanity. The growers might need the banks in order to run a business, however the banks have fouled us all into believing that they are more valuable than anybody else. So long as the banks control the money supply, we are wasting our time.
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sashaclarkson
alexandercurzon
papance
newsnigelcollins
tigerjayj
u13719742
fubar_saunders
selfevidenttruths
joeplumber
steve_webprogrammer
maroon3
bowboy75
hawkeye_pierce
whistling neil
Anybody ive missed - my apologies
Thanks for having me on board everybody!
Rebuild Britain 2010
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Robert
This is not about RBS, but... I'm a small HBOS shareholder. I've received a brick of information from HBOS about the takeover by Lloyds TSB. Hidden amongst it was the information that Mr Andy Hornby, after he resigns as CEO, is to provide his services "to aid the transition"(to the new structure) on a consultancy basis and his "remuneration" will be £67,000 per month. No, your eyes are not deceiving you.
This is outrageous!! Mr Hornby's stewardship has brought HBOS to the disaster it is now suffering and even on the highly implausible assumption that his "aid"would be worth anything at all, he ought to be providing it free. He has his unearned and undeserved salary and bonuses of former years to "get by" on. a shareholders' revolt is needed, and I invite any who are readers of your blog to get one going. The Board and Directors of HBOS just don't get it, do they? They're still behaving as if they and Hornby are geniuses, when the facts show that they are cretins.
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Robert
Was the previous RBS rights issue (the £2 per share one) not a fraud on the public? Can it be that the Board did not know that their exposure was way beyond they amount they sought? If they were not rogues, they must have been fools. can they be held to account in the courts for their criminality or criminal folly, whichever it was?
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Some wise words here today, and we may need to change strategy/slogan/name of this burgeoning movement as we go, but one step at a time
I feel further inspired by what i've read today, and i'd like to thank you all for giving me hope and having me along for the ride
As a first step, i've followed messers clarkson and curzons instructions and contacted them away from this blog - sashaclarkson has my email address if anyone wants it i'm sure he'd be happy to pass it on
My previous comment was referred, i guess for me posting contact details. So i won't do that again, but I do have a business website. Google ardent industrial recruitment and you should be able to figure it from there
Lets go!
Rebuild Britain 2010
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I've asked the question of Northern Wreck and Bungle and Balderdash,
The same question is now pertinent to RBS.
Did the Government do a Due Diligence before buying RBS? If so are we the new shareholders allowed into the secret? We are after all buying into the debt on the balance sheet as well.
I see in today's papers that the wreck is looking less watertight every day due to the Together mortgages, something highlighted by your bloggers at the time of going aground.
Any chance of an answer Robert?
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Well RBS Advanta have just raised my interest rate from 7.99% to 27.10% as a i was a day late on a payment in August.
CitiCard have just raised my rate from 9.99% to 16.99% and I have never been late. They said that it was costing them more to borrow money and they had a lot of defaulters.
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Mark Smith count me in, I am desperate for the movement to begin before our country is irreparably destroyed.
The fact that we can be governed by a pool of people with the combined brain power of a toadstool is terrifying.
Rebuilding britain cannot come soon enough for those of us whose precious tax contributions are thrown at the least deservng.
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We're now just about into Day 2 of HMG's majority ownership of RBS. How long before the embarrassment of RBS (through their variable rate One Account mortgage) being one of the very few lenders still to have refused to pass on any of the recent 1.5% base rate cut, becomes just too much for Mr Darling et al to bear? Tens of thousands of customers are waiting with baited breath to see whether, having applied pressure on lenders in which they DIDN'T have a financial stake to pass on the full rate cut, the gov't will be prepared to do the business with a bank on which it CAN exert direct influence.
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Why was the take-up of the RBS offering so low ?? Could it be that the shareholders could have done much better buying from the open market ??
Could it also be that the foreigners are truly frightened off from investing in a Union of Soviet Socialist Britain that can send its goon squad to arrest a Member of Parliament for saying nasty but truthful things about it ??
If a minister, Ms. Frozen-Rabbit-in-the-Headlights, can claim that she has no knowledge of such a high profile arrest authorised by someone high in her own ministry, what will foreigners think about just *WHO* is running this country ?? Does any of this give them any confidence to invest in or even *lend money* to just such a country ??
Now that RBS is partly nationalised and soon to be looted by the government by being forced to lend at ridiculously low rates of interest while being charged ridiculously high rates of interest for "borrowing" that money by the very same government, who else is next on the firing line.
Do I hear anything from those self-proclaimed Barclays shareholders who were calling for the rejection of the Arab bailout and insist that the money should come from "British" sources ?? Or did Barclays catch the last helicopter to leave the embassy roof (see iconic photograph of the Fall of South Vietnam) ??
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I apologise in advance, this may be a long one.
To the 'rebuild britain party'.
Ladies and Gentlemen, here post some very erudite and intelligent people. I always read the comments and assimilate or discard the information therein dependant on relevance. I wish you well in your endeavours, I really do, but I wish to reflect some realism to you.
So if you dont like, or want to hear the negative, (or understand that -ve can be +ve) then dont read any further.
The basics:
Politics is power.
Power is corrupting and ultimate power corrupts ultimately.
A political party functions on top down leadership, pyramid style (in the UK).
The aims of the party:
Come from the leader at the top. I would suggest that simply from what I have read from many of you, that your individual thoughts regarding the direction in which to take the UK are in reality dissimilar.
The 3 'styles' of political party:
Spectrum politics. Right-Centre-Left.
Single Issue. Green. UKIP. Rebuild Britain.
Extremist. BNP. Communist
Single issue politics:
Whilst riding the populist wave, can be quickly drowned in the froth and spray of: media questioning, mainstream party verbal attacks against individual members or simple internal dissent.
Splurge cash:
UKIP spent 2.3 million fighting the 2004 european elections.
The alternatives to politics.. protest:
ONCE UPON A TIME, we in this country had the right to protest against our 'democratically' elected leaders.
ONCE UPON A TIME, they did not hide away in fear of the electorate.
ÖNCE UPON A TIME, the electorate could stand outside parliament and harangue the intellectually challenged among the MP.s.
ONCEUPON A TIME, the voice of the people could be heard.
ONCE UPON A TIME, the electorate in this 'democratic' country were not videoed by special branch during legitimate protesting and had 'files generated' on them.
This was all possible long long ago, in the 1970.s - how we have become 'securitised' eh?
I personally feel that the intelligensia of this country would serve better to modify the thinking & paradigms of the media.
Governments are symbiotic with media now. Spin and leakage is how information is disseminated, why? because it is a form of meme transmission. people are more receptive to indirect suggestion than direct (government) pronouncements.
If you really wish to rebuild Britain then why not start to change the brick wall attitude of politicians to legitimate protest. Lobby for referendums on all major or even minor issues, the Uk can just about afford it -and that will be true democracy.
And if you do form a political party, do not get sucked into this brick-wall attitude yourselves - you will be attacked from all directions - think you can handle it?
End of verbalisation.
I tend to reduct eveything so my simple brain understands it. I hope I have managed to put my thoughts across with a little clarity this morning, generally I precis too much here.
As I said before, I wish you well and if you do proceed with this I will send you my postal vote.
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Ishkandar,
Dont you think it deliciously ironic that having introduced draconian anti-terror legislation that give every lowly gov. functionary the right to invade our privacy, for the most mundane matters that lie WAYYY outside the spectrum of said laws - the said government then gets their own privacy invaded for the first time since 1642....
I cant stop smiling - really - the bungling idiots in the commons have absolutely no clue what they are doing.
Good for the police I say. Three cheers.
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Traducer - thank you for your thoughts, you speak a lot of truth. Why not join us in discussion? Your suggestion may indeed be a better direction for our efforts
312 - follow sashaclarksons instructions above for contact away from this page. Glad your on board
Have a good weekend everybody
Rebuild Britain 2010
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I fail to understand all this foolish froth around this issue. I run a business and have NO trouble nor any problems with my Bank.
However large the salaries/bonuses of a miniscule number of top bankers - the figures are totally insignificant when placed in context of the value of the banking industry.
It would appear from the posts that the fault lies in
High interest rates
Low interest rates
Greedy Bankers
In reality the issue is one pf personal greed - or did anyone sell their house in the last ten years at a loss or breakeven?
But why take personal reponsibilty when you can blame someone else?
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318- I agree entirely that the individuals (and businesses, of course) who went on a borrowing and spending spree over recent years have nothing whatsoever to complain about. You bought a house you clearly couldn't afford, and it gets repossessed when you can't pay the mortgage? Well that's just a lesson in life, I'm afraid, long overdue in most cases. The idea, prominently aired on this blog, that these people should be rescued from the consequences of their own stupidity, using other people's money, of course, takes a bit of beating for sheer brass neck. And of course the posters don't want it to stop there- how about the credit card debts of these poor souls, their car loans, the HP for the big telly? Get the taxpayer to repay it all, because it can't in any way be their fault, can it? However your comments on bankers miss the point, I feel. A relatively small number of people were paid huge sums to run the banks. They were paid huge sums because they were felt (on what basis, I have no idea) to be clever, talented individuals who would serve the interests of the shareholders well. In fact they were the usual "blow your own trumpet" brigade well known to me from my dealings with "city types" over many years, a bunch of arrogant clowns who were experts only at destroying the institutions they had a duty to protect. Now what annoys most people most is that these people have adversely affected the finances of millions by their arrogant stupidity, and nothing highlights their overwhelming arrogance than their assumption that they should keep both their positions and their level of remuneration. Can't you see why that makes most people very angry indeed, when we are all now paying these clowns directly, as well as paying indirectly for their mistakes?
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"explicitly and formally standing behind its entire, gargantuan balance sheet, its assets and its liabilities."
I thought RBS was a PLC - i.e. limited liability? Bit of hyperbole surely?
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*306
Count me in.
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321 goldseal
See sashaclarksons comments for how to get further involved
i_despise_labour
Whilst it is not my place to admonish anybody's views, i personally advocate peaceful, intelligent, active participation in the democratic process.
I envision, and hope, that will require involvement with the many good, well intentioned politicians in this country.
Whatever your political views, and I can definately appreciate people may feel strongly about some of the decisions our politicians make, i think rational debate is called for, and whatever the leading politicians of the day may or may not be, I think most of us would agree they are certainly intelligent.
Just wanted to add that
Rebuild Britain 2010
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...and if you cannot run a bank, you cannot run an economy.
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What I wrote in Comment 134 yesterday seems to have been reinforced somewhat by Patrick Hosking's column in this morning's Times:-
http://business.timesonline.co.uk/tol/business/columnists/article5254333.ece
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traducer@316,
If you're talking about the arrest of Damian Green, he's an opposition politician. Opposition, as in "not the government".
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traducer@315,
However I agree with you here about the naivete of the "Rebuild Britain 2010" crew. I predict it's fizzle out quickly without result.
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"Remember the Benedictines. Their response to the fall of the Roman Empire was not to enter into negotiations with the barbarians, but to to build communities" - StreetCornerJeremiah@295
St Benedict himself negotiated with barbarians: while at Monte Cassino he received a visit from Totila, king of the Ostrogoths, perhaps in 543. Are you suggesting building quasi-monastic communities as an alternative to political involvement?
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re comment 325, I think you've missed the point entirely!
re 326,
I believe this type of response is the epitome of what’s wrong in this country today. Either you are devout labour person or a defeatist IM(Humble)O
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Good old Labour working again I see....
http://news.bbc.co.uk/1/hi/uk/7756144.stm
'keep the closures quiet ', now where have I heard that before?
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I don't know anything about the government's monetary policy, I'm afraid, but aren't puppies lovely?
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On an individual basis let's not start blaming the government for the problems that face us now.
Many people have exacerbated their financial position by not only purchasing houses that they could not afford but by financing their life styles by continuously re-mortgaging. Add to that the maxing of credit cards and we have a barrel load of contagious debt that individuals took on without any compulsion from the government.
Now we can point fingers at the financial services industry for facilitating this debt spree without any checks or balances. BUT the great British public have to accept responsibility for their financial decisions.
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Nick Gotts
Thank you for your comments. I also agree that there is a certain naivete about some of the things that we have put forward.
What has happened, however, is that a group of people have gathered on a blog and talked. Some of that group have now deepened contact, and discussed possible further action. Whatever transpires, and you may indeed be proven correct, how can it be a bad thing that some people are now more, to whatever degree, involved and connected with each other and the democratic process. I can't for the life of me see any negatives in that.
So thank you for your prediction. I for one welcome everyone's input, as positive or as cynical as it may be.
I feel that any right minded person cannot be against a better country for themselves, their children, and their childrens children. Would anyone here vote for a worse, more unfair country?
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I know it's difficult, but we've just got to find the lighter side to this. RBS owns Coutts, so... we welcome you as our customer, your majesty.
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#332
"Would anyone here vote for a worse, more unfair country?"
No, nobody would vote for that. They'd vote for something else entirely.
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#331 - what are you like?!
Ever heard of mutuality?
Lenders and Borrowers should share the risk, unless borrowing is de facto 'irresponsible'. The whole idea of being interviewed and assessed over borrowing is so that the lender can satisfy himself that you are worth lending to. Worth the 'risk' of lending? Well that is another story. Strip away the entire fabric of the countries economic substrate and everyone's a risk. This isn't quite getting thru to some lenders is it?
Every few days someone like you checks in here and reminds us all it's our fault. 'We the great British Public have got to take responsibilty' blah blah. Get off! Those cocky bankers et alia who got themselves in toxic situations and ballsed up the entire economy belong in gaol! Go talk to them!
Repossessions up 12% and nobody came..
GC
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"But now that taxpayers own 58% of Royal Bank, we are explicitly and formally standing behind its entire, gargantuan balance sheet, its assets and its liabilities."
Err, no. You have forgotten the existence of a little thing called limited liability, of which there are several layers between the treasury and the liabilities. As you say "That was always true in an implicit sense, because Royal Bank was too big to be allowed by the government to fail.", but the fact that the taxpayer now has a majority shareholding makes no difference whatsoever.
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Recession - temporary decline in economic activity or prosperity.
Cure- get temporary job and await return to growth.
Jump on bandwagon.
Stash cash in bank.
Job done.
Retire.
So simple the cat could do it!
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Comment 332 : marksmith1981
"Whatever transpires ... how can it be a bad thing that some people are now more, to whatever degree, involved and connected with each other and the democratic process. I can't for the life of me see any negatives in that."
It would be a negative, surely, if the formation of such a discussion group gave added legitimacy to false presuppositions. At one time, the mainstream belief was that the world was flat, and it's a racing certainty that Rebuild Britain 1410 would have based all its discussion around this presumption.
It's equally probable that the consensus of Rebuild Britain 2010 will be that there can be no solution to our problems that is not an authoritarian one. And that therefore any recommendation that embodies increased individual autonomy will be ruled out of court before it starts, because it runs directly contrary to the received wisdom that only a collective solution can succeed.
It may seem counter-intuitive, but it could be the case that the rise of individualistic behaviour is directly proportionate to the level at which the State imposes the primacy of the collective over the individual.
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#316 traducer - Something about hoisting and petards, if I remember rightly !! LOL !!
And think of the number of times when this and other governments pointed fingers at "tin-pot dictatorships" (Nick Clegg's own words, no less) for their denial of civil rights !!
The media made such a big to-do about the Malaysian government arresting an anti-government blogger and here is the arrest of an MP from inside Parliament !!
And what was his great crime ?? Was he a new Guy Fawkes ?? Did he consort and conspire with enemy states to destroy Britain ?? Or did he just spoke the truth that the government tried desperately to hide from the people ??
He killed no one; nor did he destroy anything. Yet *counter-terrorist officers* were sent to arrest him as if he was some Al-Queda terrorist !! Surely a panda car would have sufficed ??
This is the government that openly accused George Osborne of "talking down the Sterling" !! Does this government expect this incident to encourage the foreigners to invest more money in Britain after this fiasco ??
And for a minister to deny all knowledge and responsibility will send a message out, loudly and clearly, to the world that this government *CANNOT* govern !! Where petty officials can twist the Law to satisfy their petty personal vendettas !!
I truly hope that once this has been accepted as norm, *ALL* government ministers and their henchmen should be subjected to the same rigourous scrutiny !! That they all be arrested by the counter-terrorist officers and grilled for at least 9 hours !!
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#330 "I don't know anything about the government's monetary policy, I'm afraid, but aren't puppies lovely?"
Yes, especially when they are well cooked !!
- Ming the Merciless !!
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Excellencefirst, thank you and nice to hear from you.
Agree to a large extent with your first paragraph. However, on what are you basing your supposition re: the probable consensus of a group of near-random people who have just engaged and started discussing issues. Please don't think me rude, but on what grounds are you basing your thoughts?
I would not see myself as authoritarian on principle, and unless i have missed something, in which case i would appreciate you putting me straight, I have not heard/read that from anyone else here.
Re: collectivism, forgive me for being basic perhaps, but we do live in a country together, and are all governed by a state that affects our lives to a lesser or greater extent. So, like it or not, the must rugged individualist must accept, conciously or otherwise, a certain degree of collectivism. To me, that in no way diminishes the need for individual responsibility, quite the contrary, it enhances that need.
Forgive my naivety, but I would be very interested to hear your viewpoint on that?
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No. 325 Nick_Gotts.
I thank you for the correction, however i may prehaps disagree with you on a matter of detail.
Please define government. (if you have the time for a bit of banter).
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No.339 Iskandar.
You have too much time on your hands if you read this AND all the other blogs as well :)
This one blog takes most of my spare time to keep up with :)
Have a good weekend.
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If the Rebuild Britain 2010 group have now exchanged their details etc could they please set up an email group and exit from this BBC economics blog? I don't wish them ill but would rather not have to pick through 341 comments looking for the ones that are actually related to this economics blog; free speech is generally good but looking at this string of comments is giving me second thoughts; so please desist, I beg you, before the moderators have to intervene to save us from being buried alive by an avalanche of UKIP-style postings and Politics 101 debate!
Rather than spend all your time staring at computer screens and sending messages to this blog, could I suggest that you get some fresh air and test your popular support by getting out on the stump. You could buy some yellow T-shirts and head out to Heathrow T5 to stage a sit-down protest demanding the rebuilding of Britain now, or else.....
marksmith1981 you wouldn't be Mark E Smith would you? the lead singer of the Fall and ex-Salford docker? excellent band
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No. 325 Nick-Gotts.
Wikipedia.
A government is "the organization, that is the governing authority of a political unit'
Dictionary.com
the political direction and control exercised over the actions of the members, citizens, or inhabitants of communities, societies, and states
I could go on.
The point being that i did not state HMG, just used the word government.
HMO, Her Majesties Opposition are elected by their community - and thus are part of government.
HMG, Her Majesties Government are the overuling party of government for the state.
If you read back over any of my posts you will see I class myself as a subject and not a citizen of this country.
e view of many I am sure.
if I refer to government it generally refers to any member of the upper or lower houses.
If I refer to HMG it will mean the labour government.
Minor word-splitting in the view of many I am sure.
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335. guycroft
Don't blind yourself. Nobody FORCED the great unwashed to take on such burdens of debt - they did that of their own volition. So this "we was robbed by the bankers" is just not right.
Over 5 years ago, we took the decision to become and remain debt free. Instead of feeling virtuous, I feel really uncertain as to what the future will hold. You may call me a prophet of doom but I really think we are in for a long and deep recession if not a true slump.
Yes we need to put responsibility on the whole of the financial services industry for getting us into this mess. However we ALL have to take responsibility for our individual financial decisions
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#334
"#332
"Would anyone here vote for a worse, more unfair country?"
No, nobody would vote for that. They'd vote for something else entirely."
__________
All this talk of voting and democracy!
No one voted for:
Expansion of EU
Iraq War
Afghanistan War
Wholesale Immigration
Lisbon Treaty
ID Cards
- yet here we are.
The elected politicians do not actually REPRESENT you. They do what they like without consulting you.
Democracy is not working in the UK.
While we sort out banking regulation why not sort out the political system?
BTW, we will not have to worry about ID cards because it will be another IT fiasco for HMG.
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# 335
Stock market up 5 successive days, first time for 6 months. Nobody, including you, has mentioned that either like your repo number.
You're going to have such a sad life when the economy recovers and the world hasn't ended and nobody with an EC or E14 business address has been publicly beheaded.
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somali_pirate_SP500
Thats what we're doing, apologies for the inconvenience!
BTW if you ever heard me sing you would say more foul than fall :)
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347 toldyouitwould
You've hit the nail on the head mate, well in
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No.331 foredeckdave.
I agree that blaming HMG for the current crisis is probably wrong,
But......
Tony Blair: 1997 Conference Speech
I want this to be the New Labour Government that ended Tory boom and bust forever
Tony Blair: 2005 Conference Speech
In the first two terms we corrected the weaknesses of the Tory years: boom-and-bust economics
Alistair Darling: June 2007
...acknowledges the outstanding performance of the economy under this Government with the longest unbroken
Gordon Brown: November 1999
Indeed, Britain was set to repeat the old, familiar cycle of boom and bust. Since then, we have created and rigorously adhered to a new framework of modern economic managementeconomic expansion
on record, in contrast to the boom and bust of the previous Government
There are 30 references from both HMG leaders & AD on this subject...
http://www.cllrmattwright.com/news/106/
So now you can see why people are annoyed - they were lied to. It was stated that the basic precepts of capitalism had been overcome and all would be rosy pink in the rose gardens for ever onwards....
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'
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'ministers will not meddle in Royal Bank's day to day operations.'
We need someone to meddle, look what happens when they're left to their own devices!
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#343 traducer - This is what comes of a bad upbringing that caused me to slave away to produce a little nest egg, safely stashed away from the grubby paws of HM Vampires, and semi-retire to a life of scanning blogs and writing sarcastic, cynical comments !!
Besides all these blogs keep me being a very well balanced person ; I have a chip on BOTH shoulders !!
Well, a nice weekend to you, too, and try not to spend all your massive tax cuts at once !!
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Robert
Do we own 58% of RBS OR
will we own 58% of RBS once HMG stumps up £5bn for preference shares and and the remaining £15bn.
Until the money transfer is made in a legal sense, then the ownership issue is still being processed.
Is this not the reason that the bailed out banks are still not lending "willy-nilly" to all and sundry as they do not yet possess the means to do so. Politicians have been a bit disingenuous on the issue.
It is a bit like saying to the estate agent - look the mortgage is in the bag but I do not have it yet. May I please have the keys to the house a couple of weeks early?
I am also a bit confused as Merv King has stated that the bailed out banks are under capitalised. The take up by RBS shareholders have shown that the UK domestic market is not an option; HMG will do its bit; but the Sovereign wealth Funds like Dubai etc have now said that they will move from the west to the east. Their only option as I see it is not to lend irresponsibly so as not to increase bad debt which would lead to further capital write downs!
Yet the Treasury preaches the opposite! Only one can be correct. Only one can remain in office. Am i missing something?
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There is much talk here of blaming people for borrowing too much. But you have to live somewhere. The consumer borrowing postponed the recession. The Government is trying to postpone it further by telling us all to spend more.
This entire problem has a simple root cause. Unlike here, land in the US is plentiful (and mostly worthless). Buildings in the US are shoddy (and mostly worthless). Lending money to people with no income secured on a worthless house on worthless land is dumb. Packaging the bad debt up as something worthwhile and duping our banks with it is fraud. Brown should send the bill to Bush now, and withdraw from Iraq and Afghanistan if Bush does not pay.
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No. 354 Ishkandar.
You have money where the tax people of any country cant get it? Tell me where...
In the mattress?
I will come steal it :)
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No 344 Somali_pirate.
Just to keep you happy - on topic...
'The number of Britain’s 4.7 million small businesses set to collapse before Christmas is expected to rise to 100 a day as the Government and high street banks clash over the cost and extent of keeping small and medium-sized enterprises fully funded.'
'Next week, AD, is expected to outline the options the Government is considering to MAKE banks free up lending. He and Lord Mandelson (voldemort the black - he of the eternal boomerang), have already threatened to use legal action against the banks and are looking into putting the voluntary code of practice onto a statutory footing.
The Government’s £1 billion lifeline to industry, unveiled in the PreBudget Report, will not be effective until the new year.
http://business.timesonline.co.uk/tol/business/industry_sectors/industrials/article5254332.ece
Threatened to use legal action - tell me Somali Pirate, what legal action would that be?
We have laws that can make banks lend? wow, news to me.
'We' or should that be 'Lord mandelson' owns a bank, so the rules of competition means that we can just undercut the market.
But no, seems there are laws now....
OOPS - no, theres only a voluntary code....
Thats nice, for the 100 businesses a day that go under until the code becomes law - after the commons Christmas holiday of course..
Cant interrupt the revels dont yer know old boy.
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Advice to the Labour Party heirarchy from one of their own. If you are in a hole... stop digging.
Brownie and his team have promised too much to too many people.....best one is the promise to guarantee 0.4 trillion of bank debts.....just suppose for one short moment that...no I'm just being silly...no surely never
I also liked the one about government debts equalling no more than 57% of GDP in 2016....add in 100 billion for PFI and 500 billion for public sector pensions and you get somewhere in the region of 110%...assumes GDP holds up and that UKFI doesn't have to write down its assets....
Collectively, we Brits have no choice other than to earn our way out of this mess.....wishful thinking and funny money scams will make the situation worse....we need to acknowledge the severity of our predicament and make a believable recovery plan and then promote the plan assiduously
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I recommend post 159
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Mark.
Look, talk is fine, but it is cheap.
I have run as a canditate for an established party (as has Mr Croft I understand), and have run my own business with my own website (prolly why I went bust :) )
I have visited the livemind website.. and so what?
It is no fun, hard work. REALLY hard work if you are serious. it is tough enough to get a business going let alone a political party.
1) You need a REAL website. In the USA these come cheap with domain names.
2) Plan finances for increased bandwith
3) Garner support. Get support registered on the website.
4) Marketing... how do you get your message out?
(I suggest spam actually... but then you would have to know the people that fight this, that can manipulate the 'post offices' whose messages you get when an e-mail goes wrong - do you have access to white hats? These are real but very paranoid normal people in fear of their lives - spam is a 2.5 billion dollar business.
5) Failing the above comes REAL marketing - this costs. This costs. I repeat THIS COSTS.
Once you have a REAL website going, I will post further there, for now this is intellectual warm up exercise.
I suspect Mr Curzon would not disagree with my above comments.
Again. Good luck, but I am not an activist, i would only protest against the government if they disbanded the monarchy or introduced torture as a legitimate torture technique........ (oh crikey, maybe thay have already).
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MarkSmith1981
I agree with what you are doing and will look you up.
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#357 traducer "In the mattress?"
Naw !! I hate lumpy mattresses !! Anyway, it wouldn't be much good as a hiding place if I told everyone, would it ?? :-)
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pardon, Its Saturday night and I am an hour ahead of you all and further into the champagne stock.
....protest against the government if they disbanded the monarchy or introduced torture as a legitimate INTERROGATION technique........
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346 foredeckdave
What a load of complacent tripe you talk.
How do you expect people to buy a house.
I suppose you also include students up to their ears in debt trying to get an education in your sweeping assessment.
Debt is not avoidable for most.
All that they ask is that the economy is managed reasonably well so they know where they are.
They know where they are now, and they dont have a paddle and the canoe has been taken away.
And please do not start the refrain that this problem is entirely due to external forces becasue it is not.
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The failure of all businesses both large and small illustrates how irrationally dependent our economy is on debt.
We have had a number of boom years and any prudent person (in a non-Gordon Brown sense) would have thought that businesses would have built up large cash reserves to weather this storm. Surely this fattening up would have seen them through the economic winter.
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Thanks traducer, good to speak with you
Couple of points though
livemind is sashaclarksons own website (in his own words, its a little dated). He directed people there so they could get hold of his email address.
Talk is cheap. agreed. I didnt want to be impolite to people when i joined the overall discussion on this site, but if you read my posts i'm sure you will decide that i share that particular sentiment. Thats why i bought the domains, and within 24 hours we have people in different parts of the country working together to develop the actual site.
We also have a google groups discussion board set up. Email sasha through his site to get added to the discussion. That goes for any other interested party. JOIN IN - what harm could it do?
Re business: I'm a 27 year old small business owner who has done and is doing OK. Started on my own with only a small overdraft and consistent hard graft, have previously built a decent business for someone else from scratch before i set up myself so i know its tough to get a business off the ground and make it successful.
Through these endevours i also know its possible, anything is possible, with enough hard work, passion, and commitment.
Having good people on your team helps enormously, and i personally have been inspired by the number of people we already have on board, after 24 hours and in reality, very little effort.
Traducer, and also Guy Croft, I have read many of your posts with interest, but now you have shared the fact you have actual political experience, i'm even more keen to have you join what is at the moment a loose knit group of interested, well intentioned individuals having a discussion.
And that goes for anyone on this blog. Go to sashas personal site, or read my posts and contact me through my businesses website (all enquiries hit my email account and i have and will continue to respond)
There is always a place for realism, but lets not confuse that with cynicism, which last time i checked, and im sure you would agree traducer, has never really got anyone very far.
thank you for your points traducer, visit sashas site again, email him, and i look forward to discussing this in further detail with you there
enjoy the rest of your weekend everybody :)
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glanfon - My thoughts may be garbled but are far from being complacent tripe!
I agree that debt is not avoidable for most. However, the level of debt is a personal decision. Over the last 5 years the highest rate of growth was not in new mortgages or even buy to let mortgages but in re-mortgaging.
The evidence is quite clear that many people re-mortgaed their house and used the increased finance to pay for new cars, computers, furniture and holidays.
Look at the statistics from the credit card companies. You will see that the proportion of people maxing their cards and/or paying minimums increased incrementally.
Not ALL of this indebtedness was necessary. People did pander to their wants rather than focusing on their needs.
As for students I couldn't agree more. My university education was funded by the State. If not for the grant I could not have gone. From the start of the Labour government I have railed against the loan system. Investment in our people (of all ages) is I believe as vital for our wellbeing as our investment in health.
I do not see any long term future in this country trying to repair the financial system. When i started to study economics we were taught about the Circular Flow of Money. This put finance in its true place as merely an oil for the whole economic activity. We, politically, socially, and economically have allowed it become the beast that we see today - still feeding on the corpse of the country. It is the whole finacial system that needs to be beaten back into its box and made to perform its true function.
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362 iwanttoscream
contact instructions above. good to have you on board :)
traducer, enjoy the champagne. good choice ;)
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It would appear to me to be a matter of "levels of debt". Simply put - if you are granted a credit, you will use that money to hopefully expand. If that credit is withdrawn then you have to re-structure your expansion. In many cases the expansion has been extremely greedy or questionably illegal, therefore it's those companies who naturally be unable to re-structure> Hence the massive inevitable selling of DSGI group shares on friday. Black Monday may be worse!
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Insolvency means all your assets get converted to legal costs and written off. Creditors have sold the debt off to third parties who refuse to negotiate any settlement.
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A colleague of mine, when he was running a help-desk, had a notice set to face those who came in person. It read:
"Have you come with the solution, or are you part of the problem?"
If these quoted increases in interest rates: "7.99% to 27.10% ... and ... 9.99% to 16.99%" are significant, then the writer is surely part of the problem?
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traducer
I'd like to join with Mark Smith and thank you for your wise counsel.
I am a director of my own business and am of the same ilk-I listen to everone's comments, think them through, then put my comments forward. I am naturally cautious by nature and this works well combined with the different qualities of the other directors on the board. Through the discussion which ensues we find the right path forward. Basic democracy I believe!
What a shame banks and governments don't appear to work the same way!
Perhaps they need more contrasting personalities to produce more appropriate business models. The bull headed approach is generally doomed to failure, as is failure to learn from past mistakes.
Diversity is a strength of democracy and any successful company.
It will be good to have further conversations 'off blog' with you
Re advertising costs-my companies may well be able to help with this.
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Oh, and for those of you complaining that we should all get a life....
I have a very busy life off blog, and I find it a bit daft - like moaning about your neighbour sunbathing nude in their own back garden!
Why complain? If it offends you, you shouldn't look!
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Although pollytitians were trype cast by spittings immages they could soon find themselves sued for breach of intelectual copywright
Can the taxipayers look foorward to their latest bank investments being sold in pound shops as was the millenium dome.?
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Sexual promiscuity lies at the bottom of the colapse of the politico/financyall system
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I cant help feeling that most of you have missed the main point in this.
The government barely owns this bank.
The bank misstepped, not all the toxic debt that it had underwritten because it wasnt really in that game, but on poor due diligence of the assets and the value of the assets of ABN Amro. If they hadn't done that acquisition they would have survived without the government, no question. They have the classic winners curse, except in this case the down side was far more than dilution to the shareholders given the economic downturn.
When the bank returns to profitability, they will start buying back government shares and the government will become a minority again ... just as they were in all the privatization in the Thatcher government.
There was a post that mentioned bankers not doing their apprenticeship and acting more like second hand car salesmen. To a large extent I agree, however I would say that it systematic of any industry now .... show me someone at Kwik-Fit that actually knows how an engine works, as opposed to just fitting exhaust pipes! In RBS case, they have some toxic debt ... likely nearer the newbies or the oldies knew what was in it. The Risk management function clearly didn't. They likely, like the rest of the world, just trusted the rating agencies .. who proved to be the worst second hand car salesman of all.
Lastly, not one person has actually mentioned how much this bank does for the UK. Look at the last few years. In corporate tax alone RBS has paid over 2 billion a year for the last few years. Indirectly the salaries segment of their income statement is about 6-7 billion, so the government are getting at least another 2 billion there. At 4 billion a year of the last 4-5 years, is it any wonder that the government is stepping in .... they need the golden goose to start producing again to help their balance sheet which is now getting more bloated.
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This feels like the modern day equivalent of Culloden. I feel so sorry for Alex Salmond, don't you?
Here we are with the whole of Scotland's economy - RBS and HBOS - (apart from its twee kilted tourist trade) now in, or soon to be in, the hands of the, largely, English, taxpaying community. And I trust the the Westminster Government will now take more of strong line over tolerating some quite ludicrous public spending policies that have been allowed to go unchecked in Scotland over recent years.
There's now no longer any need for the great majority of us in the UK to indulge Salmond and his political fantasies.
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I am disgusted at those who seem to believe that the Official Secrets Act was intended to protect Govts and their Ministers from their stupid actions and incompetencies. The Official Secrets Act was designed and INTENDED to protect information that was vital to the Nations Security and Safety. In fact the employment of ILLEGAL immigrants in the security sector and the House of Commons was a far greater risk to national security than the leaks.
Get with it BBC
I have been trying to get this on BBC HYS
No luck - to much polical bias by the BBC
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This Government has failed
to secure an agreement that included, that the banks should exercise reasonableness in the way they are conducting themselves toward business and private lending in these very difficult times.
This Government has failed
, to ensure that banks use these funds to lend to each other, in order to revive the banking system again.
This Government has failed
to ensure that the Bonuses at the very top and intermediary are bought to some reasonableness across the whole banking industry not just RBS.
This Government has failed
the ordinary taxpayer, who by NO fault of his own may now face sever difficulty in repaying their mortgage, following the banks irresponsible behaviour in prior times. Banks should ensure that they can put together a package that will not result in repossession.
This Government is the cause of the excessive borrowing by business and individuals by increasing the cost of tax and Excise Duty, which in turn has caused REAL LIVING COSTS to inflate, whilst individual earnings ( up to £50k) increased by the rate of inflation which was for years less than 2%. Earnings are out of sink by over 35% by real living costs (power, food, housing, rated, council tax, road tax, fuel). i am not talking about luxury holidays etc.
Cost for "Labours" so called luxury items, such as Toasters, Computers and other electronics actually deflated in costs, thanks to China's low production costs.
We can not eat a toaster or pc, neither can we live in one. Housing, heating and food are essentials, which a large population of this country find difficult to afford.
This Government has failed
to ensure that Public transport prices are affordable. I have to take the car, as I cn afford the hideous prices British Rail are demanding.
This Government has failed
the people fo this country and are still failing to do so.
THIS GOVERNMENT HAS FAILED AT THE COST AND MISERY OF EVERY BRITISH CITIZEN.
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I wonder when the penny will drop that the reason why we are in this mess is that the government actually spends more than the Country can afford.
The only way out of it is to reduce the cost of government. When I read about the way that money is spent and wasted in the NHS I start to wonder what has happened in the last 10 years.
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how strange-sorry about this, but is there a limit of 500 blog comments?
Nick's parliamentary blog has 660 listed, but I can only get 500. I've posted twice, but nothing showing to 30th November.
Advice would be much appreciated!
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#376
Or perhaps poor spelling?
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TJ, Do you mean the blog about the nazi-jackbooted totalitarian policemen invading the privacy and sanctity of the poor soft innocent MP.s who have done nothing more than work to make this country the best in the world for standards of living and self-respect. Who have engendered only the highest slevels of integrity and probity? And who clearly should be well above the laws that they make and expect us to follow because they are such nice people and do not need to lead by example?
Or some other blog? :)
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And back on the subject of RBS and banking...
'On Friday, the Financial Services Authority warned lenders they must repossess properties only as a last resort. Nevertheless, the numbers are set to rise. Repossessions are up 24% on a year ago, with 29,516 orders issued in the third quarter of 2008. The Council for Mortgage Lenders estimates that by the end of the year more than 170,000 borrowers will be three months in arrears.'
From the times.
Really, the banks are just sticking 2 finges up at us the taxpayer, HMG and the FSA (whilst dipping the hand in our pockets and stealing our cash).
Is there no end to this blatent mockery of us by these usurous **********
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I think we can see from these blog entries why it is that a Popular Movement for the Restoration of Good Old Blighty or whatever would end up as just another quasi-fascist populist mess. when you read stuff like this you realise why it is we have professional politicians, weak and lilly-livered though they may be.
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384 Traducer
Yes - That's the one!
I thought blog entries were limitless - I'm sure I remember one of Robert's blogs back in October being as long, but all entries listed!
Re RBS -
The couple of billion already lost by the tax payer cos of the share price differential will no doubt be recouped when the economy bounces back next month and share prices rocket!
BTW - anyone know where I can find the uptodate LIBOR rate?
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The scam is all about property. If the value of properties could be realised it would prevent insolvency.
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JINGS CRIVVENS AND HELP MA BOAB
Great we now own the RBS and we can look forward therefore to some fair treatment or can we. I have just received a letter from the RBS advising that their base rate has decreased to 3% in line with the Bank of England.
As my mortgage tracks their base rate my monthly payments will change. (Great I thought here is something coming back to the average punter i.e. me.)
My payments will therefore RISE by £29.45.
EH?
should the acronym for this bank be
ROBS.
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I think we've discovered the way in which the government will pay off the debts which will be incurred by their attempts to reinvigorate the economy. Once the current crisis begins to ease, shares in the banking sector should recover a substantial part of their value and we can look forward to the government returning these shares to the private sector at between two and three times the price the tax payers paid for them. Thank you Alistair and Gordon.
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Seems to me that Darling has managed to do what Brown never menaged to do and that is introduce a stealth tax with no waves of moaning. Well this is a stealth tax as the governemnt will now take 50% of all dividends from RBS, and what ever % they have of all the other banks until the loan is paid off. Seems to me that the problem may have been helped politically.
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Update re posting limits
It would appear that the max amount of posts on any blog is 500 - I guess I was seeing things!
How frustrating!
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Ask the law society and family courts about equitable interest and legal charges against properties, ask the legal services commission and ask the insolvency practitioners association, because they are experts in the theft of property and thrive on the process of making a little work seem like a big deal to accrue costs.
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# 387
LIBOR rates are published on the BBA website, with a one-week delay (unless you pay for current rates).
http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=141&a=11948
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It's time to initiate some more Re-branding projects to give the impression of positive action
(better keep the same addresses though)
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Does this superficial, cheap-shot type of article really qualify as journalism? After several months I would have thought Robert Peston could have looked at the causes in slighlty more depth, including the role of government, regulators in permitting the ramp up of asset prices, failure of liquidity, lax lending on PC grounds and so on. But then I guess that would offend his 'friends' in government.
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JayPee
Thank you - you've explained things very well.
I did find the site before, but couldn't understand why it wasn't current.
Now I know!
Reason being, I have an RBS Advantage mortgage (having been packaged and sold twice we landed up with them! - Please note, I am not a toxic debt! I guess I was a sweetener....!)
My mortgage is linked to the LIBOR rate, but the letter doesn't say how much above or below - I'll get researching!
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some further praise for Brown's economic policy!!! This time from Zimbabwe:
"As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.
That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide."
[Unsuitable/Broken URL removed by Moderator] - is the original link in case you think it is a wind-up....
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Why did Andrew Marr not ask The Home Sec why Darling, his Treasury staff, & Peston have not been arrested by the anti terror squad for all their leaks during the financial crisis?
Leaks are obviously OK as long as they are not to the Opposition?
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382. At 11:18am on 30 Nov 2008, Tigerjayj wrote:
how strange-sorry about this, but is there a limit of 500 blog comments?
Simple answer, at the top and bottom of the comments there is a hyperlink word "more". Click on that and the post 500 comments are brought up.
Happy to help.
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Tigerjay
Sorry small mistake the hyperlink word is "Next"
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So the Government managed to overpay for RBS shares on Friday 28th Nov 2008 by the small amount of GBP 2300000000 (2.3Bn) -think what they coud have done with that to help the economy!
The FSA costs taxpayers GBP 323000000 (323million) per year so that's more good value.
I, for one, am sick of the cost to the taxpayer of all of the Government appointed Quangos.
They do not produce anything, they do not protect the public and they are unaccountable to anyone.
Quangos cost you and me GBP 64000000000
(64Bn) PER YEAR. Think of what better use that money could be put to.
We have been battered into a numerical coma where the numbers are so large, nobody understands them and therefore nobody cares!
What a society we have become.
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Power corrupts, so are fear and greed.
Let us hope it will be the best of both worlds of private enterprise and public ownership. May some public servants and private citizens act in genuine diligence and integrity, perhaps for the fist time in their lives, for the long interest of all UK citizens.
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the credit crunch is a bit like a divorce scam to drain away funds. if you plan ahead you can divert money in advance.
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#380 Foxfire69
Far from failing this government has performed in the only way it could.
My reasoning:
Politicians need to stay in power.
That is what they do.
In order to do so they have to pander to the electorates needs.
There is NO way any government would stay in power if it was to raise taxes.
That means no direct taxation increases. However the government does actually need to raise taxation in order to keep folk at work. And also of course to keep some members of society just above the poverty line.
That means indirect, stealth taxes.
And loads of them.
What better way of implementing a stealth tax than to get others to do the dirty work and tax the populace without any government intervention?
Energy prices are just one example.
Would a nationalised industry have got away with the recent increases?
But banking is by far and away the most insidious stealth tax.
Like it or not we are supporting a vast army of bankers.
We were doing so before the recent bail outs and will continue to do so.
The nature of the beast is that any failure actually means the taxpayer pays!
And the way out of this mess?
Not pleasant. We need to accept increases in direct taxation.
Some time we will need to accept that we need to compete in a global economy. That means we will need to make things we use. And of course we will need to make them cheaply. That in turn means our standard of living needs to drop.
We need to get rid of the banker hangers on.
And the alternative?
Get the rest of the world to support our bankers.
Yeah, right..
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335
I see you have finally grasped the concept of risk and the fact that lenders and borrowers should and do take a risk, so when you continue your campaign for risk free investment and your multiple rants about repossessions don’t forget when you place your money on deposit or take out a mortgagee your are taking a risk, taking the riskier road to increase your return by going to the IOM with your cash or mortgaging yourself to the hilt both have potential higher upsides and lower downsides, blaming the system is just an excuse for those who don’t give a dam.
By the way I assume you will be campaigning for Kerry Katona and her like when she gets repossessed, after all by your standards its not her fault.
There may be a few cocky bankers out there but it seems to me there are quite a few on these boards who claim to have run for office, be a good Samaritan and run a small business yet they still find time to on a daily basis contribute multiple posts to this site, I wonder where they get the time, maybe their time would be better spent looking after their own business
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sadbloke - let the lenders hang.
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As an RBS customer- I am pleased that the bank now has the backing of HMG. I do not see that HMG could do anything other than what it has with the banks and when things are settled perhaps we can redraw the rules so that they can never again take on liabilities that make them too big to fail. I get somewhat irritated by folk who think this was about saving middle class jobs-this was about avoiding a collapse of our economy like that of Germany in the late 1920's- and the end result could well have been the same- wholesale misery and unrest leading to catastrophe.
But we are in a dreadful conundrum. We need to consume less- it would be great if there were fewer cars and we stopped consuming the Earth's resources at an unsustainable rate. However, if we do our economies go into meltdown and we just do not know what to do to bring this about in a democracy- and I am certainly not advocating any tyrrany in its place. But I also think it may be dangerous to try and ease the pain by baling out strategic industries and putting such a heavy burden on us all for the foreseeable future. There are no pat answers and I do not believe any of us know whether what has been done will work- but it is the right thing to do for now.
The next big thing is for the world's economists to develop a different model- one that looks at how we can survive without exhausting the planet and causing calamatous climate change. I think the stakes are too high for this to be dealt with other than by setting up a world task force and they will have about 5 years to come up with a sustainable ecomonic model for the world- the alternative is that we will at some time in the next 20 years have even bigger crises as oil goes to $300 a barrel- water begins to run out- there are regular environmental catastrophes that cause many deaths and wholesale displacement of people- and all this will of course involve social unrest and conflict possibly on a scale not seen.
This sounds pessimist but never has humankind been given such an opportunity to set in motion a sutainable economic model that will enable all humankind to live with shelter, food and without fear but also without the guff that is clogging our planet and blighting so many lives- let's go for it.
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If the Government had not insisted that no dividends were to be paid the share price would have remained at £1.00 and the open offer would have worked. This would have meant the Government could have invested this cash elsewhere. Once again the government paniced failing to grasp the basics of how markets work. The sooner they go the better.
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#378 bishoplatimer
Happy St Andrew's Day to you!
Displaying ignorance of both Scottish history, and Scotland's economy in one post is quite an achievement. I look forward to your future displays of ignorance.
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the first rule of indebtedness is:
1. it's much easier to get into debt than it is to get out of it. (e.g. 20-50 years)
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Just as a marker for the record. Radio 4 MoneyBox reports that Lord David Lipsey has quit the Financial Services Consumer Panel after a tenure of less than 6 months because the FSA, to which it reports, has refused to reinforce its voice as a representative of the consumer.
Which is a very peculiar action for a regulator to do, in my opinion, given the circumstances.
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#306
Your Rebuild Britain 2010 sounds more like a builder's slogan, perhaps you should give it a new name.How about taking part of one of your prospective member's post ID and call it:-
Fubar RBP 2010
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No post from RP for nearly 3 days now!
Shall we stay up for the 12 midnight bombshell as a delay for this long normally precipitates something major
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# 412
I think you'll find the Financial Services Consumer Panel itself did not support Lipsey's approach, hence he resigned. His proposed approach seemed to require much higher levels of funding. As all financial services regulation is paid for via a levy on regulated firms, what this would seem to mean in practice is higher costs as, ultimately, the consumer pays.
So, the question is, would you be prepared to pay more (eg higher bank charges) in return for an expanded role for the FSCP?
Personally, I think reform of regulation in light of recent events is going to have to be a bit more comprehensive than giving the FSCP a bit more money. There are bigger things to dwell on than Lipsey's dummy throwing.
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I start to wonder whether the failure of Lehman and the credit crunch for most of us are means to some ends. One of the end is to intimate the public and give governments a convincing cloak to give away $£ trillions and put us, collectively, into more debt.
If financiers and bankers can invent financial instrucments so complicated that even the regulators do not fully understand and able to control, then the same people is more than capable to an effective scheme to take trillions from us.
The timing is also very interesting ...
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re : 416 above
the crisis was due to incompetence or fraud,
or a combination of the two.
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"We the taxpayer own .... RBS ... 58% of it" R. Preston
See telling comment by president of the European Commission, said with regard to joining the Euro, but no doubt applicable to anything to do with UK / EU politicians, bureaucrats and big business. [UK 'closer' to adopting the euro – BBC, 30 Nov 2008]
"I know that the majority in Britain are still opposed (to joining Euro), but there is a period of consideration under way and the people who matter in Britain are currently thinking about it" Jose Manuel Barroso.
The people who matter! i.e. YOU the plebs don't matter, nver have, never will!
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I only had time to read the first 100 posts or so, but isn't this a great opportunity for the government (as long as we hold it to account).
When financial distress hits companies or individuals, there is often some 3rd party that steps in to purchase assets at "fire sale" prices because they have deep pockets and a long term view, and eventually make a very handsome return.
Government can take a longer view, and has deeper pockets (because they can make us pay). So they should really be holding the whip at the moment.
Is not now the time to make sure we all constrain government to strike a hard bargain with the people it is bailing out?
Sorry if that sounds a bit Socialist or something, but if we are all able to elect governments, perhaps we should expect them to do something in all of our interests.
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Robert, I agree with your analysis.Are we on the way to having a "Swedish" banking system? If so bank shares will never pay dividends as they have in the past. With the loss of the entrepreneurial element in one of our biggest banks what does the future hold for financial services in general as a major earner for this country? Was Sir Fred Goodwin more of an accountant than a banker?Are Barclays in the last chance saloon too?
I wish I was younger. I would emigrate!
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No home should or need to be repossessed. Now we own the bank that holds the mortgage, I for one do not want anyone thrown out onto the street. The loan could be restructured and the defaulters pay what they can towards the loan. The mounting deficit between value of the loan and the property would mount and be taken into account against the equity of the property. It may be that negative equity could mount but as it is against a notional equity this could be irrelevant as long as the individuals are in their homes. Pause a moment to think who has really benefitted from the unreasonable increase in house prices. Where has that difference in value gone? If it has been used to finance a second 'home' then this could be offset against the loan. Perhaps the governement may end up owning a chunk of the Costas!
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#418 pauljap
"The people who matter! i.e. YOU the plebs don't matter, never have, never will!"
Did you see my #347 ?
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421
The loan could be restructured and the defaulters pay what they can towards the loan. The mounting deficit between value of the loan and the property would mount and be taken into account against the equity of the property.
Nice idea it just doesn’t work, you talk about offsetting deficit against the equity, well firstly you are assuming there is positive equity in the problem mortgages, where and when are you going to fix the value of the property? are you going to change the partial ownership (land registry)of the property to the bank every time the deficit gets larger? What do you do when there is no longer any equity for the bank to take and they own the whole property? The irresponsible will just see this as a way of living free and when the whole value has gone will look for someone else to bail them out.
Banks have no wish nor would it be a good idea for them to become landlords, when you enter into a loan secured by any asset (in this case a mortgage) you know at the outset what the risks are, allowing people to ignore the terms will only encourage more to be irresponsible and at the end of the day what you are proposing will end in repossession eventually.
Finally a change to the system in the way loans are secured will only end in increased risks for the banks for which they would be justified in charging more for, it has always been the case that an unsecured loan will be charged at a higher rate than a secured loan as the lender has the option of recouping its money by selling the asset, your proposal takes this option away.
You may have a point about second homes but the property market is no better on the costas, there may well be equity in these property but equity is useless in the current situation the only thing that counts is cash so unless these properties can be sold it doesn’t really help.
Yet again it seems to me that those who were prudent and didn’t splash out their equity on second homes, buy to let properties, luxury cars, or bigger houses will be made to pay while those who “geared up” will get of scot free for the increased risk they took.
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#419 "Sorry if that sounds a bit Socialist or something, but if we are all able to elect governments, perhaps we should expect them to do something in all of our interests."
Eh ?? What was that about *elected* governments and *all out interests* ?? Something seems "Lost in Translation" !!
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#420 "I wish I was younger. I would emigrate!"
Age is no bar to emigration if you have the will, the skill(s) and the capital to start again !! The main bars to emigration is ingrained pre-conceptions/misconceptions and perceived wisdom !!
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The Nationalised Westminster Bank anyone ?
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Oh Dear me, I have just realised the government have got it wrong again.
based spurely on conspiracy theory, if they really want a new world order AND a way out of this crisis they need to 'Windfall Tax' every solvent company in the UK at 80% earnings for two years.
There, Job done GB.
/joke
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421 & 423
The bank owns the assets, and the taxpayer mostly owns the bank.
The tenant is now in the latest addition to the social housing register. Now paying rent.
And probaby on benefits anyway, as if he'd retained his job he'd most likely not have defaulted on the mortgage.
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There may be a chink of light.
I have had a few quid on a rolling deposit with Nat West for a few years.
From the start of this year, they have been paying me at base rate plus about 0.5% for 1 month periods. This, even when base rates were about to be cut.
Now, I get the shock news today that they're only going to pay 2.2% even tho it goes over the end of the year when it's normally higher.
Green shoots of the beginning of the end to the credit crunch?
I think we are at or near the base now with RBS stock. The hedgies who are short will buy them back before Xmas. Perhaps another comment by George Osbourne that sterling is about to collapse would help them buy them back a bit cheaper.
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I just got a mortgage from RBS does this mean i have a "state Mortgage" its at a high fixed rate,so this will probably support those 6 month defaulters. Was this the idea?
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#275, the major CDO and credit derivatives arms of those banks were in London. take the little money you have and whilst the GBP is still worth something buy a clue. Worse comes to worst, get RBS to lend you the money...
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432.
Thanks for the suggestion, I'm sure that you have so much more than the 'little money' I have, and that this makes you correct and it was therefore all Gordy's fault, but:
Of course the banks main derivative centres are / were in London, as it was and is the biggest financial centre. Not Fannie and Freddie though.
Blaming 'Gordy' for the world's banks' monumentous strategic error is like blaming the Singaporeans for Nick Leeson's behaviour.
Those who run banks and other lending institutions should have been far more careful about how much they were exposed, directly and indirectly, to the global property market. It is the banks' directors' fault if they made such a basic error, and followed each other like sheep.
For this almighty mistake, we should first blame the banks themselves, second the credit agencies, and third the regulators.
What the banks were doing was to apply free-market rules to extreme. For regulation to have worked it would have had to be global- only now are we seeing some semblance of mumblings that this should happen.
What many bloggers on this forum have suggested is that, in order to 'rebuild Britain' or the like, we need to adopt a policy which closely resembles...
Free-market capitalism in its purest, most brutal, form.
The alternative is for them, and the rest of us, to accept that state intervention on a massive scale is going to be needed for some time to come.
I hope it does not come to printing money, but the first country to do so, if this happens, will undoubtedly be the US. I am sure that if the US does print money, the UK and everyone else will follow. Bloggers on this forum will doubtless then continue to blame 'Gordy', 'Mandy' and or perhaps the Democrats, as they scramble for food.
It would never occur to them that the banks' extreme application of their own beloved free-market capitalism