Will HBOS stay independent?
Some 2m small shareholders in HBOS and many thousands of HBOS employees may hope the two Scottish banking knights' plans to preserve the bank's independence receive a proper hearing - although there is no guarantee that what they propose will enhance the wealth of HBOS investors or the job prospects of HBOS staff.
But it's impossible to ignore the very formidable obstacles faced by Sir Peter Burt and Sir George Mathewson. The odds of them pulling it off are pretty slim (see my earlier note, HBOS takeover challenged, for the relevant background).
First there is the question of whether a bank with HBOS's exposure to the battered British housing market and with its dependence on flighty wholesale funding can be seen as a terribly attractive standalone business: whether it is viable in a very basic sense.
This is what Alistair Darling, the Chancellor, said last week to MPs about what would happen to HBOS if it wasn't taken over by Lloyds TSB:
"HBOS...both will have to go back to the FSA and we will have to recalculate the capital requirements and proceed accordingly. However, you should look at what the OFT report says about HBOS because it makes it clear that the most likely outcome without the merger would not be a strong, independent HBOS continuing to exist and exerting the same competitive pressures as it was in the past, because it recognizes that HBOS has a number of problems...You should look at the OFT report because it did make the point that if this does not go ahead, it does not mean that HBOS is out of the woods. Far from it; it still has very substantial problems we need to resolve."
Those are not the words of a Chancellor enthusiastic about HBOS's future as a standalone business.
Then there is the matter of how much additional capital HBOS would have to raise from taxpayers if it remained independent.
Mathewson and Burt think it would be not be very much, a few hundred million pounds (not trivial for most of us, but smallish relative to the £11.5bn that HBOS is already being forced to raise from the Treasury).
My Government sources say that the Financial Services Authority, the City watchdog, would probably require an independent HBOS to raise considerably more than Mathewson and Burt appear to believe to be the case.
And my sense is that the Treasury is not keen to put more taxpayers' money into HBOS.
In that context, it is relevant that Burt and Mathewson have not raised a bean of new capital to inject into HBOS.
Finally there is the unseemly issue of politics. In March of last year, Mathewson wrote this to the Scotsman newspaper: "I do not share the fear of independence which is currently being fostered by those who have most to lose by a change in the status quo and those who see Scotland as a source of safe seats thus guaranteeing their rule over the UK."
That is the sort of thing that the UK's pro-Union Prime Minister tends to notice. And Gordon Brown has been very publicly pro another union, that of Lloyds and HBOS.
The chances of the Prime Minister abandoning his backing for the takeover by Lloyds of HBOS are, I would estimate, slim to none.
UPDATE 17:00
Lord Stevenson, HBOS's chairman, has now replied formally to Mathewson and Burt, He has written to them that his board sees "no basis for future discussion" - which can be paraphrased as "hop off".
I'm 
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The decision about HBOS's future is in the hands of its shareholders not in the Government. I would place little value on the opinions of the Chancellor whose knowledge of finance is insignificant. The bankers opinion is similar to that formed by the former treasurer of the Deutsche Bank and any shareholder would trust three experienced Bankers before the incompetent duo of Gordon Brown and Alastair Darling.
The Bankers assessment suggests that Lloyds is in a bigger mess than HBOS. That means if the deal falls through, LLoyds will be the next piece of prey. Both banks may end up being owned by foreigners. And it looks as though there are sharks waiting to pounce.
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Hbos wouldnt survive as an independent when you have the PM backing the takeover for reasons of his own.
and the damage has been done so if lloyds rejects takeover some european giant will step in and snap Hbos up.
so it looks like the deal from lloyds is the only option left no matter how bad.
sadly the british banking sector is so weak it will end up being swallowed up by overseas investors and the government will have no say at all over banking policy.
this government stated they saved the bradford and bingley when in all reality the profitable arm was given to a big spanish bank that already has its claws into the british market by buying up abbey.
we are no longer great britian under this governments banking policy we are reduced to overseas owned banks,power companies, even major ship building / repair. globaly this country has become a joke and that is the saddest mark on all of us.
Hbos is just another casualty of inept and irratic government.
its our own fault we allowed them to do the running of this country there way and have done nothing to stop them.
but why did the government lend so much to these two banks knowing they were joining up????
how is the take over being paid if lloyds needed public funds to survive the recent crisis???
is there a con going on where the public will loose out yet again??
what did these banks do with there recent reported massive profits before the crisis to cause them to plead poverty?
a neutral investigation is required and those guilty brought to book if only to rebuild public confidence in banks and government.
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I think the Financial Times had it right this morning - if you get a letter marked Edinburgh concerning banking put it in the bin!
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I thought until the credit crunch really started to bite HBOS was seen as a highly profitable solvent bank. Even then it was only damaged by the short sellers unfairly targeting the bank - or so the Treasury had everyone believe.
I thought Gordon Brown claimed he had saved the world with his bail out plan, so solving the credit crunch?
Why should HBOS, with the aid of GB's plan to solve the credit crunch, not be able to return to the highly profitable organisation it was only recently?
You talk of exposure to the "battered British housing market". Again the Government has told us that the housing bust will not be as bad as the early 90's. The Halifax easily got through that - why not this time.
It appears that the Goverment has been spinning lies and misinformation. The truth must be one of the following:
1. HBOS could survive independantly with the Government liquidity bail out.
2. The Government liquidity bail out is not the panacea that Gordon Brown has made it out to be.
or
3. The Government, for it's own reasons that it has not divulged, want the merger with Lloyds to go ahead come what may.
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talk about greed and stupidity of shareholders.
the public should withdraw all it funds let it go into administration then pick up the good part of the loan book and the savings for next to nothing.
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Two words - Toxic Debt -- HBOS is (supposed(?)) to be full of it.
If HBOS needs no public money to have a realistic chance of not going bust than why did it want 15bn last week?
My guess is that with the USA's 3 major car companies (Form, Chrysler and GM) having to the saved in the next 100 days that the World's liquidity situation is actually so appalling that even the rescued Banks will need further rescues in a month or two.
Buckle down and merge the UK's banks quickly.
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It shows again how wrong the government was when instead of first writing off the recalculated assets against risk provisions and against equity (or forcing the bailed out banks, among them HBOS to accumulate sufficient risk provision and if they were not able, then from equity), hence eliminating exisisting shareholders and recapitalising the bank fresh. The Banking Act is pretty clear about this, but it was shelved in the panick.
Then all these lovely shareholders whose money was exlusively saved by the government cash and capital injection would not be in the position to claim to be a victim of the government.
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Another obstacle Burt & Mathewson apparently face is learning to spell. Their letter talks about 'the rescue of a bank in dire straights'.
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Strange that Sir George Mathewson should put his head above the parapet at this particular time, two days after the SNP got a whipping at Glenrothes.
Could it be that Sir George, one of the Scottish Nationalist Parties more prominent supporters, and a close friend of Alex Salmon is more interested in playing politics than in helping HBOS shareholders. These same shareholders who were happy to benefit from the obscene profits that HBOS made from their dodgy dealings.
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#1 "The Bankers assessment suggests that Lloyds is in a bigger mess than HBOS"
Oh come off it!! The markets say otherwise: since May 2007, the value of a LTSB share has dropped from £6 to £2, that on an HBOS share has dropped from £10 to £1. HBOS shares are worth consistently less than the LTSB takeover offer, meaning that the market regards HBOS as the weaker bank.
LTSB is the one major British bank which hasn't helped cause this banking disaster, whereas RBS and HBOS are in the biggest doo-doo, and, to an extent, have dragged the whole British economy with them. Burt's creation HBOS borrowed billions from the US to help pump up the house price bubble.
Mathewson's chosen successor, Goodwin exposed RBS to the US sup-prime market, AND compounded this with the ABN Amro fiasco.
Both Burt and Mathewson are partly responsible for getting Scotland and the UK to where we are now. I might not trust Gordon Brown, but nor would I trust the "Experienced Bankers" who created this problem, but are looking to the taxpayers to give them a second chance without having either their own financial backing or a business plan.
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Why did not these two people tried to step in when the crisis was hitting the bank. All of a sudden they are proposing their name for the top job at the bank and want everyone to believe that they would be able to sustain the business? The question is why should anyone trust them and are they willing to put their own money or planning to raise investment from other sources? It seems unlikely as they are relying on government and tax payers for the money. What happens if the bank runs in trouble again after the deal does no go through or some overseas bank makes an approach? With the current economic climate it would require a lot more than their word for making people who made this merger decision to change their minds and rightly so, cause if the bank fails after they take the top spot they will not have a anything to lose and the government will have to step in once again.
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The Scottish Sirs are living in dreamland if they think HBOS can somehow a) carry on as it did before, and b) remain independant i.e Scottish.
The merger with Lloyds is the only way it can survive, otherwise, as stated by others, it will just be swallowed by Santander, and they've pillaged enough of our banking sector as is acceptable.
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The 'unseemly politics',: the PM's tactical political consideration in this matter (no rewards for Mathewson) will surely be outweighed by his capacity for strategic calculation.
If HBOS goes down to LLoyds on account of government manipulation (a threat to withhold support to a stand alone HBOS) thousands of jobs will be lost in Scotland and Yorkshire. Blame for this unecessary contribution to the numbers of unemployed will rightly be laid at the door of Gordon Brown.
If the proposed Lloyds TSB/HBOS deal was a good one from the point of view of HBOS shareholders, Loyds shareholders and employees both banks and consumers Gordon might get away with it. But, the fact is it is a poor deal from the perspective of all of the above. Whatever rationale for the deal existed on 18th September surely evaporated with the multi bank crisis of early October. The public are not fools and will come to see this.
The government has done a good job on the broader banking crisis. It is baffling that they would want to manoevre themselves onto the wrong side of the argument in respect of Lloyds TSB/HBOS 'subset' of the bigger issue. In the end I don't believe they will.
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"11. At 5:46pm on 08 Nov 2008, lets_debate wrote:
Why did not these two people tried to step in when the crisis was hitting the bank. All of a sudden they are proposing their name for the top job at the bank and want everyone to believe that they would be able to sustain the business?"
Yes. But then, the level of slime in banking is fairly high.
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Come on Robert Peston, and most of you who've commented so far...
I am no lover of rich ex-bankers. But I know plenty of them, having been an institutional investor covering the banking sector for many years.
George Mathewson and Peter Burt are probably Britain's best bankers of the past 20 years. They know what the heck they're talking about.
So I find it odd how their opinions are so easily dismissed by Robert and others. For example, Robert trots out the unthinking line: 'HBOS' dependence on wholesale funding..'. Didn't you read these two bankers' letter? Why not do some digging into their claims that actually Lloyds is worse-off in that respect?
Interesting stuff. These two will carry great weight with HBOS shareholders. This is not a done deal yet.
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Good to see you are stil spinning the Labour Party line Mr Peston. It is amazing how many times your views link closely to the ones the Labour party wants to push.
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At number 10. Yes LTSB's shares have fallen less, doesn't mean it is a beter bank. HBOS's shares fell due to short selling and a nasty rumour several months ago about the company going to the bank of england.
It wasn't due to their business plan that their shares fell initially but due to external factors that HBOS had no control over
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“I am no lover of rich ex-bankers. But I know plenty of them, having been an institutional investor covering the banking sector for many years”
Roberts opinion is certianly just as valid as yours!
The opinions of institutional investors, analysts and brokers are not worth tuppence.
We are in uncharted terriotory – they know nothing.
There is no realistic alternative bid for HBOS because its bsiness model is no longer relevant. Its shareholders will have to accept the only bid on the table, from Lloyds TSB, or go into administartion.
As a tax payer I will loose no sleep if HBOS shareholders are left with nothing.
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Who cares if they stay independent? Jobs are going to have to go, so it might as well be those from HBOS. They got themselves into the position they are in and they can only blame themselves. Sad but Darwinian...
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Robert - Have you asked Burt and/or Mathewson for an interview yet?
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Good point #15.
Over-dependence on wholesale funding comes about because a bank grows its balance sheet too quickly - the amount lent grows increases disproportionately to the underlying deposit base.
This is the problem HBOS faced when they fired the real bankers and replaced them with marketing men.
It is resolved by allowing an orderly reduction in the loan book over a period of a year or two during which time the Central Bank steps in with liquidity support and appropriate temporary guarantees.
Takeover by another bank is the right answer to a different problem altogether, namely, a collapse in the credit quality of the loan portfolio.
It is clear from the various statements and disclosures by HBOS and Lloyds TSB that the HBOS problem is of the first variety, not the second.
The LloydsTSB/HBOS deal is quite simply the wrong answer for the wrong problem: it will wreck the livelihoods of thousands, screw the consumer and does not serve the shareholder interests of either bank (except if the Treasury vetoes the alternatives).
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Lloyds and Barclays (of Qatar and the UAE) are in a worse state than RBS and HBOS, although the Government lies would have us believe otherwise. RBS is still a formidable money making machine and the ABN Amro integration is progressing ahead of schedule. Lloyds is a capital deficient disaster with a poorer record of profitability than either bank. Barclays is is a part owned Arab bank which is stuffed with toxic assests (mostly off balance sheet, although the French know where they are and are suing them in New York).
HBOS can survive and it looks as though the French or Germans will buy it. There is nothing the Government can do to stop that. Forcing the current incompetent management out is a good way to facilitate the deal and Stevenson's response means nothing. The Shareholders will boot him out at the EGM.
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The goverment has said that HBOS can only have funds if the Lloyds TSB deal goes through..In the hands of sharesholders I don't think so!! The major shareholders are Fund managers not Joe Bloggs on the street, who a year ago just did what the Money Mail told them to do and now they are all experts in money matters..At the end of the day if we did not live in a buy now pay later culture this would not of happened to HBOS or any other bank..
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Robert
What many Scots want back is the real Bank of Scotland. I moved my money from the BoS not long after the HBOS merger.
So I for one cannot support HBOS. I want (but won't get I suspect) the bank that survived Darien, Culloden, Yorktown, Ypres, Dunkirk and even Dr. Beeching!
The Auld Bank (est, 1695) straddled the gap between the old Scots Parliament (1707) and the new(Scotland Act 1998) only to be dissolved by those who knew the value of nothing.
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#18 Rubbish!
The Government has agreed not to allow any major financial institution to fail. Administration is not an option, and nationalisation is not required.
HBOS either gets bailed out or sold for a better offer. Ultimately the shareholders decide.
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There are two explanations for this chaos, which is dragging on much longer than it should.
Either the bankers are stuck in a dream world, where they still call all the shots without let or hinderance from the authorities.
Or, despite all Brown's rhetoric, the authorities are just floundering in reactive mode, showing indecision and lack of command.
None of which gives grounds for any confidence. And this is just the banking sector: the rest of industry is now headed for the morass. What price bailing that lot out ?
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This comment was removed because the moderators found it broke the House Rules.
The more that comes out about this deal, the more it stinks. HBOS has been the victim of dirty share dealings, & the poison poured on it by Peston, & other financial hacks.
How interesting to read the Mathewson-Burt letter, which must certainly give the shareholders of both banks, food for thought.
Gordon Brown, & his new chum, Mandelson, must have been jumping for joy after 'sorting' this deal. 300year old Scottish institution, a basket case; comparing Scotland's situation to Iceland. And what happens? Glenrothes voters roll over, & Gordon Brown 'bounces' (quite a feat, in his case! )his unionist credentials reinforced
Both Mathewson & Burt are still highly respected bankers (not many of those around!!!) and I look forward to the removal of Stevenson & Hornby.
Only then will the shareholders have a better idea, than they have had for the last month, of what the possibilities are.
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“Rubbish! The Government has agreed not to allow any major financial institution to fail. Administration is not an option, and nationalisation is not required.”
Oh really?
HBOS savers, like those of Norther Rock may vote with their feet.
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When I heard one of those protectionist cronies defend their comments it was because HBOS is far better shape that it was when the merger was agreed
Well of course it is, it has billions of our money running around its veins to keep it alive.
Thankfully, not even the arabs would be stupid enough to bail out an old Scottish bank that has the majority of the UK's falling housing stock on its books and has still not worked out how much it has lost in the CDS debarcle.
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Robert Peston - I keep reading posts regarding your affinity to New Labour.
I personally dont give a tosh about political affiliations and your comments do not seem to me to be biased in anyway.
However, as a consequence of the looming Depression, and the consensus now is that there will be one, how will your New Labour leanings cope with the consequences of having to rebuild the worlds economies with a real socialist government?
Who do you think will jump out of the box to spur a New Old Labour party fit for running a nationalised nation?
Do you think that the political change that will occur as a result of the people wanting to take back control will occur within two years and prevent the resurgent Tory Party?
I know its off topic, but you must stay ahead of the curve, dont you think?
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HBOS were always an incompetent bank with their internal systems totally out of date.
The old duck metaphor, about things looking calm on the surface but an awful lot of paddling going on underneath, comes to mind.
It was time someone came in to move them, at least, into the 20th century from the 19th...
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Quick question, has HMG actually bought these shares? Or is this yet another assumption being floated about?
I know they have **talked** about it but have they actually done it? How is HMG buying 11.5bn GBP worth of HBOS.L stock if the current market cap is 5.4bnGBP? Or is this yet another mickey-mouse figure that includes face values of guarantees for borrowing?
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#30, what CDS "debacle" is that?
So far despite some of the largest credit events in history, the CDS market has run perfectly smoothly.
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#21, overreliance on the wholesale markets comes about when interest rates are kept artificially low. People don't save so you can get money from deposits. Wierd that Mr RP hasn't mentioned that.....
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I frankly think these two Scottish,titled ex bank managers have got a nerve.
They personally flushed the HBOS down the toilet through their incompetence,left with their tails between their legs but with huge pay-offs and now have got the nerve to claim they are best fit to manage an independant scottish bank revival.
Somebody need them they are not fit to run the local Spar never mind a bank
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#18 - "Roberts opinion is certianly[sic] just as valid as yours!" - er, why? It certainly isn't because of his command of the basics of modern finance - savings accounts aren't "assets" for banks.... More educated people just have more educated views. Just because someone parrots the Treasury line doesn't make his view "valid"
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The strength of LTSB is something of an unknown, but it will hardly be stronger for the taking on of HBOS's problems. LTSB's shareholders may yet vote down a merger but that does not mean that they would see the two Scottish knights as a solution.
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34
The CDS market has run smoothly has it?
Well of course it has why the repayment of these insurances are being covered by our money.
Divide 13 trillion ( the amount held by commercial banks alone) by the bail out and add in the fact that the balance sheets are already hammered. Then factor in further losses through lack of lending ( no lending means no bank) and you get what we call in a trade bankruptcy.
Hmmm, and there is the other 30 trillion worth of insurances not held by the banks that is pending.
But hey, no problama mi amigo
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Hi
I am not particularly in agreement with the merger of Lloyds TSB and HBOS. I think that it fitted political expediency more than it did real finance.
However these two sirs seem to want to rush in now that the situation has stabilised a little. Also if their idea is so good why do they not have any backing? If they are the banking geniuses they claim to be surely people would be rushing to back them.
Sir George only left RBS in 2006, so he appears to be one of the people involved in creating the mess that they are in. After all it did not start overnight. On that basis he is one of the last people who should be allowed to take charge.
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With regards to Messrs Burt & Matthewson if they think they can run the bank better than the current management fine but in the words from that excellent film Jerry Maguire
Show me the money!
Surely they both could go out and spend some of their pensions buying HBOS shares and call for a vote of no confidence in the present board and their proposal to be taken over by Lloyds TSB.
Put themselves up for the board and then either raise the cash to bail it out or shut up and go away.
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34
Decreasing the interest rate has only protected the Bond and therefore the margin calls for a short period.
As the rate gets nearer to Zero the Bonds become true junk instead of artificial junk and then on payout time the insured or the insurer go bust together with the 'thingy' they bet on
But hey, its all running smoothly mi amigo
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Darling expects reaction in pulling accountancy strings - keen actor!
Need I say more - there are 5.4 billion reasons why the Lloyds merger need to go through, and the above sentence spells it out.
There's an agenda behind this, and a man who loves Brazilians knows what it is, even if it isn't clear to the rest of us.
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What does (sic) mean?
It means 'so', or 'thus'. It implies that the use or grammar is wrong. Employed when quoting another and being pedantic, usualy (sic).
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"no basis for future discussion"
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#37 etc
Why oh why do you and your ilk continue to read Robert Peston's blog - and post comments to it - when your knowledge is apparently so superior to his?
If all he is doing is parroting the Treasury why don't you engage with something more challenging?
Meanwhile in order to find considered comment as I try to keep up with this extremely complicated story, I have to wade through your streams of invective which would be put to better use at Hyde Park Corner - with all the other nutters.
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Lot of ill informed comments flying about, usually from those supporting the Bunglers line.
Sir Peter Burt was Governor of BOS until merger with HBOS at which point he became Deputy Governor up until 2003. i fail to see how he can be blamed for the actions of the grocer who blew it big style, with his ill considered stack it high sell it cheap approach to banking.
If you have to make things up to support your argument, googling Jackanory might be a better idea.
This merger could see us all losers in the long run. i believe every avenue should be explored to come up with the best solution for all but primarily the tax payer. I don't trust anyone who has a closed mind they rarely have anyones interests at heart but their own
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I think post 40 summed it up pretty well.
This latest bid seems to offer nothing of real substance. There is no new money on offer. The only thing these two ex-bankers seem to be offering is an intention to create a detailed alternatve plan. But without sight of that plan, how on earth are shareholders expected to be able to judge its potential effectiveness. And if they really do have a viable plan for a sound, independent HBOS then why not seek a financial backer?
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Now hang on a minute. George Mathewson was Chief Executive of Royal Bank of Scotland when they took over Nat West and the BBC reported that 18000 jobs would go then. So, it's OK for a Scottish Bank to take over and English one when it's in trouble but not the other way around. Any comment Mr Peston
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Burt and Mathewson's plan, while open to much debate has at least one solid and irrefutable proposal ... the immediate resignation (or sacking) of the egotistical grocer Hornby.
His arrogant refusal to go having brought a solid financial institution to its knees is beyond my meagre wits to comprehend. Just what he believes he will deliver to HBOS shareholders by participating in the cut-price bargain takeover beggars’ belief.
Hornby's crimes against the British public and the very fabric of our once proud financial system are surely beyond compare. HE and his managerial acolytes should return to their Harvard intellectual exercises in down-market supermarkets where they can do less damage to the prosperity of this nation and its hard-working tax payers.
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no its not going to happen Lloyds will take over and massive jobs cuts will happen...
All north of the border for now....
This is what happens when a bank gambles they sometimes lose.....
I have moved savings from both as i regard neither as a decent run company......
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Personallly:
These gents build two world beating organisations prior to the overstretching and over leveraging of the last 7 years under different management.
As an HBOS shareholder I would rather take my chances with them than the current proposal. 90% of my investment has gone, I am betting that they can recover more for me than the combination with Lloyds. Lloyds is no silver bullet. It is a bank that has lost its way and been a terrible investment for all its shareholders prior to this debacle which has humbled all banks. Look at Lloyds returns from 2000 to 2007 and tell me that you believe that management is going to create any value for you. No thank you, I would take my chances with Burt anyday!
Economically:
Yes, I get it that the Treasury doesn't want to put out anymore tax payers money ... we as he taxpayers don't want them to either. But surely it must be more beneficial to keep competition healthy and keep the 10,000+ employees working and paying tax rather than claiming benefits, missing their mortgage payments, reducing their consumption and compounding the misery.
This is not a Scotland issue (technically both banks are Scottish as Lloyds is registered in Glasgow) as the majority of the job cuts are going to be in England where there is overlap. Scotland HQ, will suffer but no where near as much as the highstreet employees.
Show me some economic numbers that quantify job losses, lost tax etc. to prove that this deal is better for the taxpayers, as so far I haven't seen anything.
All I see is a Government who made a prudent deal, only to change the rules and then stick its head in the sand.
Come on Gordon, you are leading the world in the recapitalization of banks, don't stub your toe in your own back yard!
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The Glenrothes result is barely inked in and now we will soon see significant redundancies in Scotland. That will have a political impact. If investors pick up on the signals - and they may not have the cash - then maybe there is a deal to be done.
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ok-more evidence of politics and banking holding hands then?
We should all go back to old fashioned trade and cash only transactions-leave the banks out of any business dealings for just a week and see how they like being ignored!
All this wheeling and dealing is of no interest whatsover-while all this is going on, GB is not been called to account for treating the electorate like muppets.
Real life beyond banking exists-currently is harsh-if GB wants to avoid revolution he'd better start looking after his electorate and not himself and the banks.
Bring back Oliver Cromwell-NOW!
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Re: 4.
Because the perception of serious trouble can and does create actual problems where there are none, and make existing problems much worse. The short-selling run on the basis of perceived trouble therefore turned into a self-fulfilling prophecy.
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Peters Kitchen, what "taxpayer's money" was used to settle CDSs?
As far as i can tell your post #42 is pure unadulterated nonsense - maybe you are confusing CDOs, which have had some issues, with CDSs? What have INTEREST rates got to do with CREDIT Default Swaps?
And again you clearly have no idea what you are talking about. Just like RP, you can't tell the difference between face value and actually amount at risk. Look at the Lehmans bankruptcy, face value was well into the hundreds of billions of USD but only a few billion changed hands( from recollection about 4). Most of these swaps are collateralised and netted.
As for reading the blog, there are two reasons:
1) It is quicker than reading a treasury press release - which is essentially what this "service" is.
2) Occasionally someone posts something interesting and/or educational.
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#27. M_London
wrote:
"company's accounts and understand ALL of its holdings before you make comments such as:
"Two words - Toxic Debt -- HBOS is (supposed(?)) to be full of it.""
Several points you may like to consider before making the accusation that you have made:
1. The accounts of Banks (and most financial institutions) have become less representative of the true assets and liabilities of the organisations because of off-balance sheet financing and liabilities.
2. I am sceptical of the content of the toxicity you will note my use of the word SUPPOSED. We just can't tell.
3. If HBOS was in such a good position why did they take 15 billion pounds from the Treasury? Or are you suggesting that it is all one giant conspiracy by the English against the Scots!
4. The perception of HBOS rightly of wrongly is that they have large contingent losses on their books because of their activities and aggressive lending into the British housing market.
5. The position of a bank is about confidence and it is apparent as the share price has shown that there is very little confidence in HBOS at present. The market has almost no confidence in HBOS. If you know something that is not apparent from the accounts and not apparent to anyone else then you can make your choice.
6. The accounts and the general accounting methodologies pertaining to banks and many other companies have been so open to having an artificial gloss added in recent years that I am afraid to say that if you rely on the accounts you will come unstuck - this is a major contributory factor in the decline in confidence in all financial institutions - that are the agents of their own destruction (along with the auditors and governments that permitted such a decline in openness and truthfulness).
7. In a market where liquidity has dried up if you are a financial institution that relies on external sources that have dried up then you are unable to continue in business, just like Northern Rock was unable to continue trading because it found it impossible to raise funds on the wholesale market through securitisation of bundled mortgages. Generally it is liquidity that kills businesses and if as you say HBOS has a liquidity problem then the answer seems obvious.
8. If your business model requires that in order to continue in business (have liquidity to do so) you need to trade in (in this case) bundled debt, and even if it is the widely held perception that this is the case, then you are in trouble.
9. If you believe or rely on historic accounts in this rapidly changing (deteriorating - as my insertion of the news about the US car giants indicated) environment when confidence and safety is all important you are in for a fall.
10. All of the forgoing confidence related issues are quite apart from the loans still on the books of HBOS and if these are performing or not. The other major problem in the finance sector generally is the trading in CDS's and related 'synthetic' instruments and the almost total inability of anyone to evaluate these at any point in time before their maturity or expiry.
I could go on but instead I prefer the words 'Toxic Debt' to encapsulate the difficulties of the banking sector. So the problem is that the sector has filled itself with the excrement you talk of. The accounts are almost a worthless waste of trees. If you have confidence when all about you do not you had better have a very very good reason to do so. Everyone else is in the lifeboat! You want to stay on board - that is your choice.
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I banked with Johnson Matthey at the time they gambled and withdrew our overdraught overnight.
At that time on JM were affected so Barclays came to our aid.
Now ALL *ankers are affected by their gambling much like the rest of the financial market.
These people hate it when you say 'I am in the electronics business and you are in the money business so please give your best quote'.
In the end there is no competition so one less bank is neither here nor there. The only competition was to lend more with less collateral and to offer silly spreads on savings.
RP is to be commended for doing his job, even though his 'exclusive' stuff gets up everone's nose except his editor.
All the comments here about RP knowing nothing seem to support the bubble concept and we all know where that goes (Bremer et all recently summed it up nicely)
Pip pip
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#29 "...Gordon Brown 'bounces'... "
Personally, I think he rather "thuds"...
Large lad, our Gordon...
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Presumably pre crisis our competition laws had some point and were there to protect the public interest.
If a solution can be found which does not require setting a side a law designed to ensure that no one bank gets a near monoply then is it not in the public interest for this to be pursued.
The public, I am sure would be better served with smaller institutions not larger ones. So if Scotland's banking knights can come up with a viable solution they should be encouraged to do so.
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What a shame they could not have sorted something out for Bradford and Bingley !
But lets take a sledgehammer to all the problems - why not ?
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Have you checked your pension yet ?
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The Govt will go for the option that costs the most jobs and damages Pension Funds the most.
Thats their policy.
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With the BBC looking into Housebuilding soon, which Housebuilder will the Gov't try to nationalize first and will they get away with it ?
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Before these two came along, I too thought it no longer made sense to put HBOS and Lloyds together - given that it is the government that is saving HBOS, not Lloyds.
But Burt and Mathewson have now turned this into a nationalistic issue.
I would prefer the Halifax and Natwest head offices come back to England where they belong, and leave the RBS and BoS rumps with their disastrous corporate lending to the SNP.
I despair there is no equivalent English grouping to match the Scotish mafia.
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56. At 02:15am on 09 Nov 2008, laughingblacksheep wrote:
Peters Kitchen, what "taxpayer's money" was used to settle CDSs?
I think you will find, like the bail out of AIG, the first tranches of taxpayers money has been used to repay the margin calls of these insurances
As far as i can tell your post #42 is pure unadulterated nonsense - maybe you are confusing CDOs, which have had some issues, with CDSs? What have INTEREST rates got to do with CREDIT Default Swaps?
If you own a bond from BA, you are lending them money for a set interest rate for a specified length of time. You have two risks when buying this bond. The first is that BA go bankrupt and don’t pay you back. The second is that interest rates rise and the bond falls in value.
The price you pay for a bond goes down if interest rates go up and if rates go down the bond value goes up.
The seller of a CDS will have pay off on the BA bond if the company goes belly up. If rates go way down (like they have) the value of the bond goes up and the therefore the risk.
I suggest you get to know your subject before making judgement on your peers
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Be realistic and wake up, HBOS cannot sustain itself and needs a lifeline rescue. Rejecting merge for the sake of Scottish identity is an irresponsible gesture. The problems of bank not only occur in Scotland but globally. History comes and goes. Take a step before the change or it changes us.
If the identity crisis is top of the agenda, then perhaps they should create a HBOS football club instead.
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Bear in mind that Lloyds TSB's shareholders already own more than 60% of HBOS's shares. It's a done deal.
The economies of scale within the combined bank are the overwhelming incentive. Jobs, branch closures, Scottish banking traditions-it's all irrelevant, I'm afraid.
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"The public, I am sure, would be better served with smaller institutions not larger ones" says alphaptarmigan.
Yes, but, can you see our alphaturkeys voting for that? Takeovers and mergers lavish largesse on London lawyers, bankers and stockbrokers and majestic salaries upon building society lightweights. Civil Service and BBC salary scales (and pensions...) must then keep pace.
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#57
Responses:
1) that is simply not true. All of the liabilities and assets are reported in the annual accounts. If the "assets" have been truly securitised, ie the mortgages are put completely in to a pass-through CMO then there are NO liabilities to the Bank - and they are in a separate trust. If they have given extra covenants then they must be reported. Maybe you are confusing private accounts with the nonsense HMG puts out which makes Harry Potter look like a documentary.
2. Yes we can, look at the above.
3. It didn't.
4. This contradicts the concern about "off-balance sheet financing", because then the CMOs based on their mortgages would be facing losses not them.
5. True, but on the other hand the government and media have been taking non-stop about HBOS's non-viability and in today's environment you don't want to be the guy who took the punt and lost. Better to follow the herd.
6. Really? What exactly is "misrepresented"?
7. All financial institutions rely on external sources of funding whether it is deposits or wholesale markets. What you neglect to mention is this turn to the wholesale markets and it's subsequent decline is WHOLELY the fault of the UK government. It is the one that lowered interest rates so low that it killed retail and wholesale deposits, forcing the banks to turn to securitisation that was being driven by the same desire for yield and when that market turned down the uk gov put the knife in by flooding the market with risk free liquidity making the ABS market unattractive.
8. Really why?
9. you think institutions are relying on quarterly accounts? Or HMG?
10. Whats CDS's got to do with HBOS and it is not a "synthetic instrument". Again you seem to have your acronyms mixed up. You mean CMOs or CDOs.
You use "toxic debt" because it is the jargon de jour, clearly with no understanding of it's meaning.
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#66, thanks for the lecture...
Firstly, the bond price is relevant if you are not holding to maturity.
Secondly, you clearly don't understand the mechanism of CDSs. CDS pays out the coupons that a defaulted bond doesn't. So if BA is paying 10% coupon and the risk-free interest rate goes down to 0% then BA defaults then the buyer of the CDS hands over the bond and the CDS seller pays out 10% coupons instead. The price of the bond is irrelevant as is the base rate.
There are two ways that interest rates going down COULD affect a CDS - make it less likely a variable coupon bond will default, and also to increase the NPV of any possible payouts. So if interest rates go down then on a fixed rate bond the value of the CDS goes UP. The price of the bond is not a factor.
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#52
Why do you think the LTSB profitability has underperformed the rest of the sector these last few years?
Could it be that their profit was real (interest and charges received - interest paid and costs) rather than the illusionary profitability which comes from the financial engineering of their peers?
Just a thought but maybe the management that stuck with what it knew is worth backing in all of these
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The combination of Burt and Mathewson is what HBOS needs - Stevenson and Hornby are clearly incapable of delivering the best deal for the bank...they should stand aside now.
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John_From_Hendon:
1. The off-balance sheet financing you are referring to is not hidden and can be seen from the accounts.
2. I have seen first-hand, claims such as yours take banks down for no other reason than fear. In the market if you were to say such a thing it may be construed as manipulation
3. I will re-iterate, 'toxic' relates to credit quality. The injection required has come from mark-to-market writedowns all due to a re-pricing of the assets because of de-levering, liquidity. Yes there have been some impairments but not enough to require GBP15bn. Again, its to do with funding.
4. If you look into the loss levels on UK Prime Mortgages you will see that they are less than 2%. Yes they will trend higher but there are many factors in play such as margin that protects against these losses. There is far more to working how much a bank will be affected than saying the UK housing market is crashing so therefore the bank must be troubled. If you lend on average against 45% equity you have afforded yourself decent protection.
5. The HBOS share price initially took a hammering because the firm can be seen as a proxy for the UK economy given its lending to consumers and corporates specifically in the UK. As a result hedge funds who had finished shorting the US turned their attention to shorting the UK and found HBOS an excellent starting point. Furthermore, (and this relates to the following point) HBOS were very clear in describing the nature of their holdings with the hope this would calm people but seemingly more information scared them because they didn't understand it. Other UK banks have hidden the real depth of the problems they have and have faired better. Thus begun the reduction in confidence in the HBOS name.
6. See above.
7. I have not said HBOS has a liquidity problem, I said the entire market has a liquidity problem. Northern Rock had over 70% of its operations funded through wholesale markets. HBOS does use the wholesale funding markets but not to that extent and also benefits from a massive retail deposit base. This is part of the attraction for Lloyds as they need to increase the deposit base and also take the negative goodwill to tier 1 capital to offset further write-downs that they have avoided showing because of lack of clarity in their accounts.
8. HBOS do not trade in 'bundled debt'. They have financed it at the highest level in the capital structure and avoided the asset classes that are taking true credit impairments. Perception is created by your aforementioned comments.
9. Simply by referring to GM and Ford in the same sentence as HBOS will scare people and such comments are so irrelevant. Historic accounts are also irrelevant because we all know cash-flows will alter drastically going forward. But the balance sheet shows assets and will guide you far better than not looking at them at all. All the accounts are rigorously audited and the auditors are also liable for any errors.
10. I take it from this point that you have no clue about what CDS actually is and that you are latching on to yet another point that the media are gripping on to in order to sell stories. Fear of the unknown is great. These are insurance contracts, are you scared about the insurance industry now? When you take car insurance you are going short a car accident/theft and the insurance company is going long. The Lehman CDS auction went smoothly and there were no issues despite the face amount written against the name. Netting and collateralisation of mark-to-market changes are in place as there are believe it or not contracts between trading counterparts to ensure a further layer of protection on the instruments.
Using the word 'toxic' to cover all the issues in banking is complete and utter nonsense. You clearly do not understand the industry and if I were you it would be a good use of your money to hire a money manager to work out how you are going to invest because investors with the understanding you have are a great part of the reason we are where we are. It tires me to hear people complain about banks and their willingness to lend to people. How many of the people complaining have levered off of their paper gains made on house price increases and spent the money improving their standard of living? You weren't complaining then. All of the sudden people complain about irresponsible lending, how about irresponsible borrowing. How about investing in funds that fuelled all this leverage, did you REALLY know what you were investing in? Pure hypocrisy.
p.s. PetersKitchen: you are making ridiculous comments, please stop.
p.p.s. laughingblacksheep: I am glad you are talking sense this message board was starting to fill with clueless loud-mouths itching to blame someone else for their own irresponsible borrowing/investing.
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70. laughingblacksheep
I fear I must disagree with you in nearly every particular.
1. Off balance sheet accounting: Over the years it has become more and more fashionable not to present every last asset or liability in a company's accounts. Mortgage securitisation is not well tested in Court as yet. Whilst it may appear that these assets and liabilities are nothing to do with the creator of the securitisation product, if there is outright fraud in creating the product, or the product was misrepresented, then the whole edifice has the possibility of failing. Thus the creating or trading in these products (what ever they are called) is fine so long as nobody defaults on a grand scale, however if they do then the whole product sector becomes toxic. Whoever bought or sold these products may well have contingent liabilities even if they no longer appear on their books or in their ownership (serial historic trading/counter-party risk). Thus, your position of saying that these are NOT liabilities on the bank is open to legal question. If a product passed through you hands some time ago and in so doing you misrepresented the product you may, like any used car dealer be liable, even if you traded in it in good faith.
2. see above.
3. Oh yes it did. If it didn't then why didn't the company have any truck with the Treasury, Bank of England or the FSA. Of course it did. HBOS HAD to repair its capital adequacy and nobody else would lend them any money.
4. Sorry NO, see 1 above.
5. Live in the real World, nobody (few) would touch HBOS shares - that is a fact or history - it does not matter why, it is simply a fact.
6. Ever since and well before the scandals of Enron, Worldcom etc. came to light the idea of a 'true and fair view' of a company's balance sheet and profit and loss has been eroded. All of the off-balance sheet constructs are just there to whitewash a company's accounts. They generally serve no other purpose. These misrepresented balance sheets were then use to get a false credit rating. This is a fact of history. For if this had not happened we would have had no credit crunch. Get used to it.
7. You say that the decline in sources of external funding is "WHOLLY the fault of the UK government" this is nonsense. Whilst I agree that interest rates were too low for too long in the last decade, it was the banks and financial institutions that chose to construct a means of manufacturing synthetic financial instruments to create extra money so that they could continue with their profligate lending. The collapse of the edifice that cause the crunch.
8. Here is why. Banks and financial institutions trade in debt. If you are unable to borrow then you cannot lend. If you cannot lend (and indeed increase your lending) you decline as a business. [This is compounded if interest rates are lowered - then you need to lend ever more.] One of the few pieces of financial information that is more reliable in the accounts of any business is the cash flow (liquidity). If this declines you are generally in deep 'do do'.
9. All accounts are historic; the rest is speculation and projections and far less reliable. The problem with all forecasts is in their nature they rely on unforeseeable external factors. The stress testing of the projections includes flexing the assumptions behind a forecast within best and worst cases. It is quite obvious that the Bank of England is unable to do this itself with any degree of accuracy (see the change in outlook from one month ago) so why do you think that HBOS will be any better?
10. The whole edifice of the synthetic instruments constructed on top of securitised loans is the unknown. Further many of these instruments are not regulated or traded and many have subtly different wordings which are untested in law of many different legislations and thus they are extremely difficult to evaluate - leaving aside the ripple effect of progressive failure that may occur when the underlying mortgages default. The issue of counter-party failure.
Thus the Toxic nature of the nonsense in the financial trading community - so long as the parcel is passed everyone thinks it is OK, but it isn't and it never was. This extreme credit mountain has to fail, and it will fail - but which banks or financial companies end up holding the baby is unknown and un-knowable, anybody who suggests that it is not is living in cloud cuckoo land. It will take decades for the toxicity to abate and the losses and profits to have crystallised.
The foregoing may or may not relate, in full or in part to HBOS I don't think it is possible for anyone to tell. It is certain that the market price of the shares reflects the perception of the quality of HBOS, right or wrong.
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74. M_London
see #75
also There is little point discussing whether 'toxic debt' is a sensible description of the unwise edifice of synthetic financial instruments - it is the one being used.
I will add that the perception of the World's financial situation is coloured by events - the Ford ,GM, Chrysler situation as well as the astonishing cuts in interest rates changes perceptions for the worse. In that the Bank, that usually says that it takes 18 months for interest rate changes to work through, has panicked - it looks like blind panic. Things must therefore be far more serious that we are being told or we see at present.
If you have confidence in your understanding then so be it. I do not see the evidence and you have been unable to provide any evidence. This is not the place to go through the legal wording of credit default swaps and in any case the cases are as yet undecided as are most of those relating to the whole securitisation businesses and the 'insuring' of these instruments.
The issue is confidence. That is why HBOS shares fell. Facts are of little importance. Speculation is of little importance. Confidence and liquidity ratios matter.
If you a fifty billion or so to invest buy the bank if you wish, but don't expect the taxpayer to prop you up.
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#17 "...Yes LTSB's shares have fallen less, doesn't mean it is a beter bank. HBOS's shares fell due to short selling.."
I have no brief for short sellers, I believe that, together with many other "investment" practices which add no value to the economy, it should be banned completely. However, the short sellers were right: HBOS was hedding down the pan. Since short selling has been banned, HBOS shares have not recovered, they have got worse. The "nasty" rumours were nowhere near as bad as the truth. In my view they are only worth anything at all because investors see a chance of getting a piece of a better bank on the cheap.
Brodick1: Have you understood any of the background to th credit crunch, or are you just posting misinformation to support a political agenda? "Lloyds is a capital deficient disaster with a poorer record of profitability than either bank (HBOS or RBS)"
If Lloyds is so capital deficient, why has it needed far less capital than the other banks? Remember all the rights issues where the money went straight into a black hole? As for the "poorer record of profitability", LTSB took a more cautious, longer term view. Specifically, it did not lend money it didn't have, borrowing from abroad to fuel a speculative bubble which is now collapsing.
RBS and HBOS have been like Titanic1 and Titanic2. The captains are gone or going, but I certainly don't want the architects, Mathewson and Burt, to have anything to do with a so called rescue.
The final point is this: Uncertainty about this deal is likely to cause HBOS shares to head for the floor tomorrow. If the deal does fall through, HMG will end up as the majority shareholder anyway and call all the shots. What it will want to do then is get the best deal for the taxpayer by selling it off or merging it with some other firm. The HBOS business model is dead.
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Robert - What I would like to know is this. In the apparent good times, we were told not to worry about trade deficits, because "invisible earning" from banking and financial service would bridge the gap.
in the next couple of years will there be any net "invisible earnings "at all, or is the banking and financial services sector now adding to the deficit?
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GOSH YOUVE GOT TO LAUGH:
'NO BASIS FOR FUTURE DISCUSSION'
STEVENSON NEEDS TO GROW UP,I WISH I HAD ADOPTED THAT ATTITUDE RE HALIFAX PLC AND PETITIONED FOR WINDING UP.. . .
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Greed greed greed greed. From Knight hoods to bonuses to patriotic nonsense. The world is moving on. Banks should only make money from interest and lending, not from the City, fining people, dodgy currency dealings, hedge funding and financing risky financial instruments. A bank is there to secure money, provide loans, nothing else. The world is now "global" so the priority is with those people with accounts and loans, not you greedy bank employees, CEO's, Knights etc- It's not about Scotland or England either, its simply about people LIVES!
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THE GREAT NATIONALISATION PLAN IS ALL PART OF NEW LABOURS AIMS.
REMEMBER THE FALL OF TROY AND THE TROJAN HORSE?
FRAU J SMITH WILL BE THERE TO BRAND US ALL WITH BAR CODES & TRACKER CHIPS!
SO WHO WILL YOU LOT VOTE FOR NEXT TIME?
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RE POST NO 80:
COOL GUY YOUVE GOT 100%
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HBOS
Who are the biggest individual losers here?
Small shareholders like me?
Pension funds holding banking stocks?
Staff of HBOS who could lose their jobs?
The tax payer whose tax funds are being put at risk By Gordon Brown?
There are some who fit into all categories.
Are the biggest individual losers those recently retired, or about to retire senior executives of HBOS whose wealth was invested in thousands of shares granted as performance bonus over their years of employment?
They at least should have had knowlege and control over the quality and type of business written to achieve their bonus.
Get the merger done, and at least protect the depositors of HBOS and prevent further uncertainty
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No 80
Agree with the sentiment of your comment 100%
Thanks for saving me the chore of writing my own.
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THE MAJORITY OF SENIOR BANK DIRECTORS COULD DO WITH BEING EXAMINED BY SHRINKS.
MEGALOMANIA IS A SERIOUS CHARACTER FLAW/ILLNESS.
SEEMS SO MANY OF OUR POLITICIANS HAVE THE SAME PROBLEM.
MIGHT BE A GOOD IDEA TO TEST THEM ALL AND LOCK THEM UP IF THEY ARE CONTAMINATED.
GET IN THE QUEUE CLUNKING FISTER!!
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74 and 71
Ridiculous comments and lecture eh?
Taking BA as an example again, and lets throw in commodity prices as well as interest rates.
If these prices go down (as they have) the chances are BA can continue to make a profit and the trades in CDS in its bonds is relatively safe and the trades continue and premiums are paid. The interest rates, particularly in the states have been lowered to near zero to try to insure companies do not default and therefore, the insurers having to make collateral calls to the tune of bankrupting them. Thats fact, not a stupid comment and I refer you to AIG whose demise was brought upon by these calls. They did not have enough collateral.
Now if interest rates were to rise or the cost of oil went as high as it did, BA could struggle, would struggle. It may even go bankrupt. The collateral calls of insurers would be very big and possible big enough to make them insolvent.
Now, the effect of forcing rates down will ultimately cause inflation which means the rates will go up, maybe hyperinflation, as I predict.
So by turning the heat down on this now wont stop the pot from boiling dry next year.
Clearer now?
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addendum
Thats why against logic the Detroit car industry will be bailed out. The consequences of the GM or Ford going bust will be 100 fold the amount of the bail out
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it took only 7 years for Halifax to ruin one of Europe's oldest and respected Banking institutions that was Bank of Scotland.
Between Hornby and Stevenson taking the Bank to the brink of collapse shows their total ineptitude in how to run a Bank -go back to the beans!!!!
Any point discussing the concept of overtrading and whether they will be held accountable for it.
I would welcome the input of Burt and Mathewson because they would take HBOS back to core values.
please note that HBOS nor TSB will receive any Government funding until the merger is completed (unlike RBS, B&B, et al)- it will be a disaster for Scotland and anyone who holds HBOS shares.
Robert - fantastic to see that you keep this spinning - is it helping your book sales?
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This comment was removed because the moderators found it broke the House Rules.
SORRY MISSED THE R: GOVERNOR !!!!!
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alexandercurzon:
"MEGALOMANIA IS A SERIOUS CHARACTER FLAW/ILLNESS. ....etc"
Why everything in block capitals? This blogging equivalent of shouting does not add weight to your arguments - au contraire. Physician heal thyself!
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"Some 2m small shareholders..."
I didn't know there was a height restriction for holding shares.!
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Sashaclarkson no 91
Sorry i like using capitals!
DO YOU SUFFER from MEGLOMANIA?
P.S. I AM NOT SHOUTING I JUST FIND CAPS EASIER TO READ ON SCREEN.
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Ha. Three experienced bankers who helped create these monolithic failing banks. I put it to all of us that top bankers of our retail banks have made this mess, whilst they were trying to speculate sexiness into their acquisition bonuses. Raise a glass to the bankers!
Let the bankers run Scotland. Oh no better not as you'll have to be bailed out again. Scottish bankers do have a good history of bankrupting Scotland. HBOS is a basket case that over the next few years will have severe problems in the mortgage market. Lloyds TSB is not focused that way, has been run on a much sounder footing and is much more highly capitalised. Lloyds being saved by HBOS! You must be drunk on nationalism.
Where do you get your ideas from Brodick? Blindly trusting bankers who loved a bit of insane leverage? Yeah they got us into this mess and now they want to earn themselves some more risky bonuses by playing with our capital. Trust the bankers, they don't seek mammon or personal gain.
Scotland being robbed of it's capital? Couldn't someone say Scotland gambled on the English mortgage market now you want us to back you again to gamble with it again. That's a fair offer! Is it the truth? More so than your jaundiced view.
Trust Scottish bankers? I don't think so, they've been proved to be as greedy and useless as everyone else.
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Robert
I read that mandleson has started to admit to discussing tariffs with Oleg.
So far he confesses to discussing 'wood tariffs', not yet confessing to discussing 'aluminium tariffs'.
Also in his normal duplicitious way, Mandleson says that when he has previously said had 'never' done such a thing, 'never' only referred to the time on the yacht in corfu.
Will you be following this up at all? This lack of transparency is clearly in breach of the ministerial code.
Is it just the tories that you are after (maybe connected with some FSA enquiry they may have triggered against you?).
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I am going to vote AGAINST the HBOS/Lloyds TSB merger. It ia appalling value for the HBOS shareholders, a nightmare for the employees and a disaster for banking competition in the UK. I urge all other clear thinking shareholders to do the same. Gordon Brown and Alistair Darling must have had a senior moment when they approved the merger! The government says they will not support an independent HBOS. This is nonsense: they will have no choice but to do it if they want to avoid another banking crisis. So there IS a future for an independent HBOS!
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alexandercurzon "P.S. I AM NOT SHOUTING I JUST FIND CAPS EASIER TO READ ON SCREEN."
I too am a little "ocularly challenged" - I use the Ctrl + option in Firefox to increase the size of the print. :-)
#94 "Trust Scottish bankers? I don't think so, they've been proved to be as greedy and useless as everyone else."
True, but not because they are Scottish, but are like all the rest of us, human and fallible. Financial crises are no longer respecters of borders, if they ever were. Fortis in Belgium had to be baled by the Netherlands, Belgium and France working together.
Today is not only Remembrance Sunday, but also the anniversary of Kristallnacht. Looking at Britain and Europe now, what unites us should be far more important than what divides us. We must try collectively to protect our economic future. This does not mean we can or should protect every institution or job, but where necessary we should pool our resources (ie pay enough tax) to give people enough of an economic cushion to be able to have an alternative future. For example, protecting people against reposession, by a mortgage to rent scheme might make good enonomic sense compared to the alternatives.
Above all, we must also try to base our analyses on the facts, not upon what we would like to be true. That doesn't mean that we will agree, but attempting rational debate will hopefully make all of us better informed at the end of it. I have certainly learned a considerable amount by participating in these blogs and then doing more research in the light of others' comments.
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Re. 72
I agree with you - LTSB has delivered sustainable profits rather than the smoke and mirrors seen elsewhere in the banking sector.
I also note that Burt and Mathewson seem seduced by the supposed superior profitability of HBOS even when the figures suggest otherwise. They say in their letter:
"HBOS is larger than Lloyds (£681bn of total assets against £368bn of total assets), has more equity capital than Lloyds (£21.1bn against £11.1bn), historically has been much more profitable than Lloyds (in 2007 HBOS earned £5.47bn before tax against Lloyds' £4.0bn)."
You do not need to be an 'experienced banker' to see that on these figures Lloyds had by far the better return on equity.
What banking does not need at the moment is more 'cult of the personality' - particularly when the personalities seem to show little understanding of the figures they put forward.
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"94. At 3:12pm on 09 Nov 2008, Tatruth wrote:
Let the bankers run Scotland. Oh no better not as you'll have to be bailed out again. Scottish bankers do have a good history of bankrupting Scotland."
Sorry to break the news to you old chap, but the UK is technically insolvent. It is only through exponentially growing loans that it continues to function at all...
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#95 - see my post #43 above.
Every time I mention the M-word in a comment, it is moderated out of existence as 'potentially defamatory'.
That's why I've taken to making cryptic remarks about certain political figures and the obviously squeaky-clean company they keep.
Your comment obviously hasn't reached the ears of MiniTrue yet, otherwise it would be in the memory hole.
Bri.
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RE POST 97:Sashaclarkson.
Golly gosh i thought you were going to claim total perfection.
To be serious on this special day of remembering all those who gave their lives in conflict.
The current economic mess has increased the chance of war by a considerable margin.
What depresses me is that the people in charge both financially and politically have been so totally irresponsible.
The government just blamed the yanks,its not our fault honest.
The financiers just dont give a stuff as they have banked their fat cheques.
Meantime we will all pay. . .
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RE 99.
YOU MEAN NEW LABOURS FINANCIAL MIRAGE.
YES WE AS UK PLC ARE BUST.
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BRAZILIAN WOMEN CAN BE INTERESTING NOT SURE ABOUT THE GUYS?
BEST ASK A PERSON IN AUTHORITY BUT SOMEHOW I DOUBT YOU'D GET A STRAIGHT ANSWER.
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I am left wondering at the point of this alternative proposal.
The proposers have not put up any money and so one is left puzzled at the intervention.
No doubt they have some political motive, obscure to the rest of us, but very relevant to them.
I do get a sense that this is just some posturing left over from the Blair-period when self-important people asserted all over the place in the expectation that a queue of sycophants would line up before them to bask in their obvious splendour.
The question I have is why wasn't this mentioned three weeks ago when HBOS was going down the toilet with only the taxpayer to bail it out?
I smell treasure hunters. Where is Sarah Palin and her moose-gun when you want her?
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'Sir Peter said there may be pressure on the board to reconsider its position.
He added: "They are a busted flush, I'm afraid. It's very sad, but that is a reality of it." '
Well at least the guy admits the obvious, dont know why he thinks he can mend a broken model.
Maybe its more to do with Scotland losing its financial status and a broken heart instead of a broken bank
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RE POST 105
POST BLAIR POSTURING?
WHAT HAVE THE CLUNKING FISTER & DARLING SCOTTY BEEN DOING??
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Reality check needed.
Where pray are the banks getting their money from?
Not "just" their capitalization but the money needed to fund their running costs. If lending is down and also their margins are being kept low then the banks must be burning up capital.
In the absence of mass redundancies in the banking sector then there can be no other answer.
Burt and Mathewson are not offering any magic pot of money to keep these banks afloat so they are in effect just posturing. Meanwhile the UK government amongst others are required to keep the banks going.
And where is that money coming from?
Borrowed from the future earnings of the "real" economy. That's where.
When will it dawn on folk that the finance sector is a millstone too many?
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HBoS employees are the best judge of where things went wrong. Having witnessed the shambles that was senior management at NatWest, it was no surprise to HBoS come to a similar sticky end. Senior Management (especially CEOs of the Corporate and Treasury divisions) are entirely culparable for the mess that has transpired. Hornby's key weakness was exactly that, weakness. The Corporate division was run as a one-man business, by an egotistical maniac who was simply, out of control.
If the Scottish Knights think that the Lloyds takeover (yes thats takeover with a capital T) represents poor shareholder value, then wait until they try to do it standalone! Their underestimation of what is wrong at HBoS is beyond incredulity - there are simply too many "bulls" that have no comprehension as to how to run a bank in such "bear-ish" times.
There will be more jobs preserved by the proposed takeover, than if the "Blue & White Knights" maintain independence.
HBoS is in serious need of a high level blood-letting - only the Lloyds takeover can remove the cancerous apathy that has controlled this institution for too long.
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HBoS employees are the best judge of where things went wrong. Having witnessed the shambles that was senior management at NatWest, it was no surprise to HBoS come to a similar sticky end. Senior Management (especially CEOs of the Corporate and Treasury divisions) are entirely culparable for the mess that has transpired. Hornby's key weakness was exactly that, weakness. The Corporate division was run as a one-man business, by an egotistical maniac who was simply, out of control.
If the Scottish Knights think that the Lloyds takeover (yes thats takeover with a capital T) represents poor shareholder value, then wait until they try to do it standalone! Their underestimation of what is wrong at HBoS is beyond incredulity - there are simply too many bulls that have no comprehension as to how to run a bank in such bear-ish times.
There will be more jobs preserved by the proposed takeover, than if the Blue & White Knights maintain independence.
HBoS is in serious need of a high level blood-letting - only the Lloyds takeover can remove the cancerous apathy that has controlled this institution for too long.
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I am a BOS girl, one of the good customer service types. Disaster started when we 'merged' with Halifax. They sold to everyone - we were choosy. By the way, I work in England.
Now I'm losing my job from HBOS, and all my shares (which I bought) are worth zip.
For all of your info, Bank of Scotland was started by an Englishman, and Bank of England was started by an Scotsman.
Whilst I agree that our Directors are overpaid & have no idea about the real world - please stop linking the workers with them! We're suffering while they are counting their bonuses - well the Barclays Directors are with their Qatar money!
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Its reassuring that it looks like taxes will be slashed to get people saving or spending again - its the way to go
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Remember the Darien venture?
That too ended up with the Scots being bailed out and subsumed within English institutions.
Oh and the debts being paid off by the English too!
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As a Cockney of predominantly Scots origin - all from north of the Highland line - I am getting mighty tedious about all this bitching at the Scots. It is unnecessary.
Whether we are Scots, English, Irish, Icelandic, French, American or whatever we are all in this mess together and we can only deal with it by hanging together.
I can appreciate there are some with personal, political and emotional luggage on their back but we need to keep clear heads.
I agree this government and others have a lot to answer for, but that judgement comes at the proper time.
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On a wider aspect of the current banking crisis, I (and others I have asked about this who cannot give me a sound explanantion, even some who have worked in the finance industry) would benefit from a better explanation of 'inter-bank lending'. Could something be put together either online or broadcast on TV.
You see, I don't think I am totally financially dumb, but the way 'inter-bank lending' has been portrayed in the media, it seems a mystical but necessary function, end of story.
For instance, is there one set of banks who are always the lenders and another who are always the borrowers. If not, then it seems like a merry-go-round of 'funny money' fuelling a credit crisis.
If there are not two distinct sets of banks, then why would e.g. Barclays lend to HSBC so that HSBC can lend to us (businesses and individuals). Aren't they supposed to be in competition, so that if HSBC don't have the funds to lend to us, we have to go to Barclays who do (in this imagined scenario).
I thought that the general idea was that banks attracted deposits at one rate, and lent this money at a higher rate, so earning a margin and a profit.
If much of their 'deposits' are in fact loans from other banks, who are themselves getting their funds via loans from yet other banks, then there is a ready made scenario for over heating and eventual collapse.
Surely I must be mistaken in my understanding; could we not have a clear explanation, showing graphically the flow of funds from start to finish.
I had assumed the start was deposits from investors, large and small, and the finish being loans to businesses and individuals. Eventually these prosper and so can become net depositors and so it goes on.
Help!!!
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This is where it all begins to go protectionist. English blaming the Scots and vice versa. Before you know Obama will add 40% import taxes and other countries fill follow.
Global Companies contracting will retreat to home ground to keep their overheads in kilter and 'help' repair the nation.
We are on the brink ladies and gentleman of the biggest catastrophe ever where the world goes into recession at the same time
Oh well, lets discuss to grumpy old protectionist Scots and the crock bank they want to save with hot air. Which funny enough is the same hot air they both used to produce the funny money.
its time to get back to agenda, isnt it?
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#116, PetersKitchen, while I share your
concern, I don't think that Obama can
do what he promised (or threatened)
to do.
In fact, his tax plans seem destined to
drive more jobs offshore. Perhaps
some will wind up in your neck of
the woods.
As for myself, I intend to become a
citizen of the world, for as long as the
Democrats are in control of my country.
(oops, I meant "Demokrats")
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It is interesting that the great majority of comments focus solely on the presumed "bottom-line"
for shareholders and investors, and care nothing for the history and traditions of the Bank of Scotland and the Halifax Building Society, as was.
Actually, Peter Burt is quite right..... Why shold anyone have any faith in the HBOS Board that cheerfully got the Bank into this mess in the first place ??
Their collective judgement is quite obviously seriously flawed.
There should be an EGM called within which there shold be a vote-of-no confidence in the present Board.
The other interesting experience in my banking career, is that the most successful companies are those in which the Owners and Management share a passionate belief in the brand, and fight for it in hard times.
What we see in the case of HBOS is a bunch of dipassionate Directors pretending to "do what is best for the investors"
What a lily-livered bunch of useless individuals.
The Scottish tradition is to fight for what you believe in. Not cave in to some prattish ill-considered, short-term panic-driven plan.
This cultural trait is perhaps the reason why so many members of the SAS hail from north of the border !
Derek Farmer FCIBS
Kiev
Ukraine
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Sir Peter Burt and Sir George Mathewson should have learnt in their respective long and illustrious careers that you can't ever go back!
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#9 I agree that this is purely political.
I guarantee that at some point in the future the SNP will use this pitiful failed effort by Mathewson in some sort of anti-Westminster propaganda.
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well, well, well! So much fuss and bother!
Won't dear old Gordy be pleased-the spotlight is firmly elsewhere at the moment-he can breath a sigh of relief-this has brought him a brief repreve from the national desire to see his head on the proverbial block (mind you, we would need to hire the whole kit and caboodle from France and we're not their flavour of the month!).
I am in awe of the massive amount of technical expertise and argument going on here-sorry folks, but knowing all that fancy stuff doesn't alter the facts-the country and it's banks are bust!
Please bear in mind that not everyone listed craved and sought more debt as some here suggest, and yet are, or will become victims of the crisis.
Yes, folks are scared-many on here may not have a job next week. Frankly, a discussion of financial terms is not particularly appropriate on a blog about whether HBOS should or should not take the advice of a couple of highly practiced gentlemen, whose motivation and potential success are questionable.
Arrogance and belittling of people is the domain of bullies, politicians and bankers-I wonder which of these the 'conscientious objectors' are?
Knowing your stuff and expressing your opinion is one thing, trying to 'lord' it over others is quite another.
Time gentle people, please!
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over the past few weeks andy hornby has been on the hbos intranet trying to re-assure staff (most of whom are shareholders) how 'right' this Lloyds TSB deal is for them, and in turn is trying to gain support for the upcoming vote on the deal. This is the same man who regularly posted on the intranet for staff to hold on to their shares as they fell from £10 to £6 to £4.40 (at which point the directors invested their massive bonuses), then urged support for the rights issue at £2.75 (further de-valuing the shares).
Mr Hornby has cost me and many of my share holidng colleagues a lot of money.
His words now mean nothing and to many of us seem the last act of a desperate man trying to recoup some of his own personal massive losses...
it is clear from thos of us that read the Hbos staff intranet that Mr Hornby's word means nothing, as does that of Mr Daniels.
The same Mr Daniels who stated "we have a gentlemans agreement with HBOS and we will not be devalueing our all share offer of 0.83 HBOS shares to 1 Lloyds shares".
Again many people kept HBOS shares on that value only to see Mr Daniels renege on his word and off the paltry 0.605 all share offer 3 weeks later.
ARE THESE MEN REALLY TO BE TRUSTED INTRODUCING THE BIGGEST BANKING HYBRID INTO THE UK????
Anything has to be better than this government led merger?
Why may i ask, on recent admissions from Andy Hornby, were himself and Mr Daniels allowed to discuss a proposed merger before the banking crisis of recent months whent the monopoly's and mergers commission would never allow it 6 months back?
what did they know at the time?
finally to add insult Mr Daniels has hi-jacked the HBOS staff Intranet as his platfrom for the LLoyds merger.
Why have HBOS allowed Lloyds access to the HBOS Intranet. Why are we getting updates from another business's director?
Why are the HBOS board so subservient. Do the honourable thing and resign Mr Hornby and let real men with real pedigree run the business.
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my apologies all-repreve should read 'reprieve' -I have a bit of a problem with the keyboard on my phone!
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I must say there seems to be so many that base their "knowledge" on the newspapers/television/blogs etc and take peacemeal quotes and buzz words and suddenly become banking experts when the most knowledge they ever had about banking was their 4 digit pin number. The salient points of the HBoS takeover are;
1. The shareholders WILL decide the future of their investment and thus the future of HBoS. If the majority required does not vote for the Lloyds takeover then the future remains to be seen, but administration would seem an unlikely event. I for one dont think the Lloyds merger is the worst option available for the employees and shareholders of HBoS.
2. Until HBoS publishes its year accounts, nobody will really know the true state of its books apart from the financial due diligence advisers that have been enlisted to advise on the takeover. Any bad press that leaks in the mean time will be controlled release to sway people (and shareholders) to believe that the takeover needs to go through. So don't believe everything you hear/read.
3. The Scottish bankers supporting an alternative idea about the future of HBoS, may actually know a little bit more about banking than many of you give them credit for, lets face it, i'm sure they've been in the game long enough to know what a good or bad financial institution's balance sheet should look like and whether it can be rescued or not - or does anybody else here believe they can do a better job?
The Banks have taken quite a pounding recently, driven by the media, and consequently have found themselves starved of cash to fund their ongoing business and keep their heads above water. Who really are the bad guys in all of this? Would it be the 10's of thousands of everyday people earning average salaries in a retail bank (HBoS don't employ fat cat bankers driving flash cars you know) Is it the Government for not regulating the industry better and taking action sooner? Is it the media for hyping the stories and scaring people to create runs on our banks and worsening the situation? Or is it the untold amounts of people who seem to live in a "buy now pay later" culture and mortgage themselves beyond their means thus creating the "toxic debts" just to keep up with the Jones and now can't afford to repay, do they away with being irresponsible borrowers?
Its not all about the banks, we're all to blame for this mess we now find ourselves in...
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As shares are given to banking staff as a way of getting out of paying bonuses, then the staff should be allowed to sell their shares back to the bank at the price they were before all this dirty stuff hit the fan.
This applies to all banks, not just HBOS.
It is the least that can be done as these staff are currently at risk of being made redundant DESPITE their staunch loyalty in recent weeks. If necessary, the fat cats should buy them themselves.
Talk about undervaluing staff-it's disgusting! Safeguarding staff should have been the first condition of any government assistance, yet it looks as though this has been completely overlooked.
Why am I not surprised!
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POST 123 TIGERJAYJ
YES WE NEED AN ELECTION NOW.
REGRETFULLY OUR CURRENT GOVERNMENT WILL NOT DO THE HONOURABLE THING AND RESIGN,AFTER ALL THEY WOULD BE FACING THE DOLE QUEUE LIKE MANY CITIZENS.
SO AS IN 1979 LABOUR IS NOT WORKING.
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So predictably (as I suggested) the answer is no, go away.
Robert, you seem to suggest that our chancellor knows what he's doing-so far his track record recently suggests otherwise! The same could be said of our prime minister. So why on earth should anything they say be given credence?
I thought shareholders wee required to vote on such magnificently crucial and fundamental proposals? I am given to understand that no shareholders meeting has taken place, but do please correct me if I'm wrong!
A merger is a massive undertaking, so any and all options should be considered, surely? The various merits should be evaluated carefully.
Of course The board said no-the letter called for the whole sorry lot to resign, along with the boss of Lloyds! Who, on earth, would agree to walk away meekly from such a position of guaranteed bonuses, huge salaries and, of course, power!
PS- I note that you may have passed on the info from the blogs as I suggested as tax cuts may be a possibility?! Can I expect a televised appointment to grill GB and AD any time now?
Pin them down and get the answers the country desperately wants and needs. If not, there are many here who can do it for you!
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BEANOIR POST 124
HBOS DONT PAY BIG MONEY?
I SUGGEST YOU PAT TO DOWNLOAD THEIR ACCOUNTS AND SEE WHAT THE BOARD GET!
ITS SHOCKING!
I got the accounts prior to serving a Statutory Demand in November 2006 on Halifax Plc
BTW Halifax was insolvent then.
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alexandercurzon
"What depresses me is that the people in charge both financially and politically have been so totally irresponsible.
The government just blamed the yanks,its not our fault honest."
I'm afraid that you're right here - our home grown credit bubble had to burst: as it happens it took the American crisis to burst it. Our chief bankers and politicians did not see this coming and now too many of those responsible, including the PM and the two knights, are in denial. Nonetheless, others have warned of this for years, including Vince Cable. And I remember other pundits piously hoping for a "soft Landing" for the housing market as far back as 2004.
#114 I agree with you - I am totally sick of the cross-border sniping - this family squabble is in danger of damging all of us.
#100 "Every time I mention the M-word in a comment, it is moderated out of existence as 'potentially defamatory'."
I have a theory here - a nasty Machiavellian conspiracy theory. I suspect that our supreme leader made peace offerings to Lord Voldemort (as Ian Hislop calls him) in order to remove him from a key position in the city of frites, mayonnaise and chocolate. He did this in the belief that the said Voldemort would be bound to get himself in more hot water sooner rather than later. Then the supreme one, crying crocodile tears, will "reluctantly" let him depart into the wilderness for ever. - Should I be ashamed of my sick suspicious mind?
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POST 129 sashaclarkson
Crumbs youre such a STAR.
Good night.
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This comment was removed because the moderators found it broke the House Rules.
Sorry Alexandercurzon, let me be more specific. I was referring to the average "bankers" that work for our banks that are little different to workers in many other retail companies. The executives, yes i agree they are remunerated rather well, but lets not forget they are not really the "bankers" they are just policy makers, and are rewarded in a fairly similar way to the the executives of any other large institution be it a bank or supermarket chain. I'm not saying it's right, but they are not alone as the "fat cats"...should we not refer to them all as executives rather than just bankers?
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post 132 beanoir
Sorry to be over the top.
HBOS has been out of control for some 6 or 7 years.
The senior/board management have taken out all they could,like stealing the fittings while the ship sank,leaving the shareholders to take the big hit.
This situation was the only conclusion.They were begging UBS for access to wealthy client back in 2002 just to boost the balance sheet,naturally i ran a mile.
I asked the guy from UBS not to bother me telling him that the UK clearers were all in trouble( back then).
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HBOS was fated to end up following a self destructive and delusional buisness model , when it rejected the buisiness of Pat Robertson the evangelist 10 years ago
Their tracker mortgage book,without a minimum ,was the millstone confused with water wings they put arround their own and "shareholder" necks
and with Rock in hand ,thinking it the latest fasion statement from the fat cat walk, they plunged into the seaaa of debt refinancing ,oblivious of the inevitability of the BOE having to cut base rates to save "the economy" when the credit bubble inevitably burst..lol and ha
Not surprisingly , Labours blessings on their banking civil union clownes , are unlikely to produce the patter of" little" feet ....only the sound of slapsticks hitting on whats left of their mperror genes purchased from the respectacled tailerrs now that their invisible earnings are in decline
When my children were young i used to hand them invisible sweets ,on occasions when i had failed to purchase real ones ,if i witheld an invisible sweet due to reports of bad behaviour they would cry .
Banking is now like that, reciepts [monthly statements]handed out for reciepts [fiat currency]for wealth long since dissipated in unrecoverable debt, to encourage depositerrs to continue to pay bankerrs bonuses in exchange for a piece of their worthless AAA's
A circular paper chase ,not disimilar to the Laurel and Hardy french foreign legion scene in a desert sandstorm
where they found themselves having inadvertantly formed a circle ,the blind having lead the blind ,after the sandstorm abated
Baring[s] in mind that the latest circle has been formed by those with PHD'S in computing ,buisness studies ,aaacounting etc ....lol
Shadenfreude [ guaranteed to pay out in the long run ]should be taaaxed
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This takeover of a Scottish Banking institution by a once west Yorkshire car leasing company is a blight on Scottish history and will not be forgotton.
The Synergies with the Lloyds takeover will mean the loss of 3000 I.T jobs in Edinburgh, Halifax and Chester as Lloyds are another of these UK institutions which have governmental authority to denationalise the UK workforce via outsourcing I.T jobs to India.
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94:
Bank of Scotland is run by an English Car Leasing company come pretentious mortgage seller, Halifax.
Its new child in play Andy Hornby was nothing more than a clothes seller in a superstore.
The real Scottish Bankers were deposed along with other experienced managers across Scotland it what was nothing more than denationalising of the Scottish workforce in favour of less experienced ENGLISH substitutes.
Trust me i was there and saw it with my own eyes.
A disgrace.
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#75,
1. The assets and liabilities are there, if not as easily in plain sight. Mortgage securitisation has been around for 30 years and is a well tested product. As for the claims of "fraud", the only thing that would defend from a charge of defamation is that you are so ignorant that you clearly are not aware of what you are saying is false( note that BBC.com might not be able to claim the same ). Whilst I am sure there will be a spat of spurious lawsuits - just like after every single other bubble, where people claim they were too dumb to realise there was any risk in a product paying 50% more than the risk-free rate - in terms of actual fraud... I doubt there will be any cases ( just like the other bubbles ). In fact the only likely victims of fraud are going to be the banks who have been lied to by borrowers.
In a vanilla pass-through CMO, there are no contingent liabilities to the bank. The mortgages are legally owned by a trust who collects the incoming payments and makes outgoing coupon payments. The end, again this is an ancient financial product.
3. Really? When exactly did HBOS take "15 billion"? I know we hear about an OFFER by the government to invest but to date that money has not been taken up - despite the erroneous use of present and past tense.
4. Before lecturing people please bother to learn the very basics of what you are lecturing on. If not try and look up the hissy fit about the higher qualities mortgages that were securitised by NRK.L and not accessible to the government.
6. Cobblers. It was hedge funds and analysts that uncovered Enron and Worldcom working off their declared accounts and investor relations calls. The off-balance sheet entities with which Enron had a relationship were there in plain site. The fact that most people ignored it is due to the bubble years. The credit crisis is due to poorly collateralised overlending.
7. Again these products have been around for decades. CDSs in the early 90s, CDOs earlier, mortgage bonds in the 70s. The banks "created" these products because after the government did targeted attacks on dividend paying stocks, pension funds, long term bond rates and decimated retail and wholesale depositors with unrealistically low saving rates whilst priming the pump of the bubble in property in the UK.
8. ok now you are contradicting yourself. So you are claiming if you trade in debt like banks and if your business model requires this then you are screwed, but banks have been around since the Renaissance, I guess you must be the first to have this revelation.
9. I thought accounts were speculative - according to you? Forecasting is part of the skill of being an investor. If dumb people could do it then you'd be richer than Buffet.
10. The vast, overwhelming majority of these products are standardised. The reason people use them is because they are standardised and well tested legally. Again CDSs have been SEVERELY tested under the collapse of various large names and have past all of these hurdles. 10 years ago you might, just might, be able to make this claim. Today you are talking out your backside.
Finally if all this nonsense you have spouted has nothing whatsoever to do with HBOS.L then why claim it?
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Of course they could just confiscate all the Shares (ala Bradford and Bingley) and give the best bits to their dodgy Spanish friends.
Oh is Santander coping well with the Spanish property crash ?
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So which big Housebuilder will go bust first ?
No ones talking about the obvious problems in the housebuilding sector.......
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#86, sorry but again you are wrong.
Commodity prices have zero direct effect on CREDIT **DEFAULT** Swaps.
Here are three scenarios:
1) BA decided this year to hedge out it's oil exposure by buying 10 years worth of oil futures at 100USD. As prices collapse, it is forced to make ever larger margin calls and goes bankrupt
2) BA doesn't hedge, Israel attacks Iran. Oil skyrockets to 300USD and BA goes bankrupt.
3) Clever treasurer at BA believing oil is going to whipsaw up and down as it has in the past buys a leveraged vol swap on oil. Oil stays the same price, BA loses billions and goes bankrupt.( Admittedly this is a tenuous example )
Even in companies with seemingly obvious commodity liabilities it doesn't affect the DEFAULT risk of their debt.
As for you example, if a company is less likely to default then the collateral the insurer has to pay goes DOWN not up. I would have thought this is obvious as there is less risk the insurer will have to pay out hence less need for reserves. What happened with AIG is **THEY** were considered a default risk and so THEY had to post more collateral which is why THEY had to borrow money. Nothing to do with interest rate risk.
"Now, the effect of forcing rates down will ultimately cause inflation which means the rates will go up, maybe hyperinflation, as I predict.
So by turning the heat down on this now wont stop the pot from boiling dry next year." - this at least we can partially agree on, i think. Basically the government are trying to inflate away these debts which will lead to stagflation as per the 70s.
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Before the two gentlemen of Scottish banking try to make the argument that, because Lloyds will need an extra £1.5Bn of additinal tier 1 capital if the merger doesn't go through, and that Lloyds are therefore the weaker of the two and HBOS can survive as an independent, they would do well to consider why Lloyds will need £1.5Bn of extra Tier 1 capital.
It might just be something to do with how they will have to treat the £10Bn loan facility that Lloyds have extended to HBOS, which, although it will be covered by the Government's guarantee on inter-bank lending, would have to be considered as a loan if the merger does not go through.
Given this, they might wish to consider the following:
1. if the merger does not go through, Lloyds could always avoid the need for the additional £1.5bn of Tier 1 capital by withdrawing or, at least not extending, the facility.
2. what therefore are they going to do if Lloyds announce that the facility is temporary, has been granted in order to allow the business to trade prior to the merger, is conditional on the merger proceeding and will not be extended if the merger does not proceed.
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Sir Peter Burt on Radio4's Today Programme admitted that he has no money and no plan.
That should be an end to it.
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I really don't think we should take very much notice of two people who helped to foster a culture in their respective organisations that led to the gratest failure of corporate governance in our history.
They should return to their baronial mansions in Scotland and 'haud their wheesht!'
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This sums up the entire situation rather well.
http://tinyurl.com/5jhmem
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Lets just beg to differ on the CDS
However, AIG's rating cut was based on the number of collateral calls against its assets (new accounting rules pre-Enron) not the downgrading itself.
More importantly, the decision on the Detroit 3 these coming weeks is what is going to define this crisis. The first of many cammercial businesses also too big to fail? 100 million direct or indirect jobs in jeapody either way and surely a pivotable moment in Capitalist society.
Bail them out or let them fold? That is the question. The inexorable collapse of the Fractional Reserve Banking model will not be the only casualty of this seismic world changing event. The political lanscape will be much different over the next 2 years.
Scary but exciting events and so much more important than a crock Scottish Bank. We are just about to tear up the capatalist hand book
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Of course it will not stay independent, has anyone ever known HMG keep it's nose out of anything.
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Sorry AIG's demise was because of.......
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In an earlier post, I had mentioned that the two guarantees in life are *death and taxes*.
Now, it appears that is no escape from taxes and negative equity even after death !!
Because inheritance tax is calculated at the point of death but the payment of the taxes can be quite some time after that, the assets involved in that estate could have fallen considerably in the intervening period. This is especially true when the estate consist, in part, of a house and some shares !!
Will this government cut the taxes on these estates or will the dead have to rise up from their graves to vote them out ??
"REVOLT of the ZOMBIE VOTERS" could be the next big Hollywood blockbuster !!
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#146 "has anyone ever known HMG keep it's nose out of anything."
Yes !! Their responsibility for their part in this mess !!
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Message 136 JOsh Randall
I would wish to refer you to the message in my post Message 114.
The issue in this instance is not Scottish bankers versus English substitutes it is about simple competence.
Over the past 25 years we have seen a process in senior management both here and across the Pond in which experienced, tried and tested managers have been passed over for promotion in favour of less experienced but more ambitious dissimulators.
As an example, I refer you to the demise of Equity Life as a case in point where very experienced insurance managers were eased out to be replaced by salesmen. I am trying to be polite in my definitions at this juncture.
The consequence has been that a superstructure based on leverage was erected which most in senior management did not understand. Those who were critical of these insane policies were actively purged from businesses as they were deemed to have a negative attitude.
Rather than engage in Scots versus the English we need to devote our energies into understanding how we got here and set about rectifying the manifest management failings the consequences of which now beset us each day.
Yes, there needs to be change, even a purge of senior management, but it has to be based on measured principles rather then on the same old feeble subjectivity which got us here in the first place.
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It's probably woeth remembering that Peter Burt was in charge of The Bank of Scotland when it needed rescuing by the Halifax.
All that Scottish MPs are ever interested in is that the HQ of the bank is in Scotland......they have no real regard for the economics of the situation.
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The Scottish government should make an offer to buy the Bank of Scotland name, the building on the Mound and the right to issue banknotes. Those are the psychologically important things and the govt can look after them for a few years until some less tainted organisation offers to buy them or the SNP take Scotland independent. After that HBOS, with its 330K parties for 300 bankers after getting bailed out, can fend for itself.
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I have to say with the strategy that they have followed over the past few years they deserve to get swallowed up. There is absolutely no chance that they could survice as an independant unless they go through some form of insolvency process!
They started their Integrated Finance operation a number of years ago effectively providing equity at the price of debt (a monumentally flawed strategy), they then increased their risk by buying companies in auction processes (in the process out bidding trade buyers - a stupid thing for a financial buyer to do). The result is that their Integrated Finance portfolio of investments is bust. Add this to the fact that HBOS is the largest mortgage provider in the UK, they have the largest exposure to property developers and housebuilders (via Integrated Finance investments in Crest Nicholson, Keepmoat, Stone & McCarthy, MacCann Homes etc etc, their direct investments in the likes of Taylor Wimpey, and their loans to the property sector secured by land bank), and their expsoure to the retail sector where they have been major lenders to the likes of Bauger etc.
They deserve what has happened to them for their sheer stupidity in moving into investments and investment types that they knew nothing about!
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Couple of chancer's! Who would believe they have the answers, they profitted handsomely from their previous roles with HBOS and RBS. The responsibility of the mess these banks are in is their own greed.
Get some perspective this is NOT a Scottish issue, it will affect Scotland but that's what happens when you are part of the world, do they want to make us in Scotland an antiquated insular protectionist nation?
Political brainwashing abounds in Scotland but there are those of us who don't buy it, just like Burt and Mathewson and their political agenda.
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I am a small shre holder in HBOS. Over recent weeks HBOS has been trading albeit with some government help the amount being unknown to us. If today and yesterday it is capable of trading why is there any doubt it can not continue to meet the interest cost of the borrowings and continue tomorrow and the day after to trade. Every month mortgage repayments are arriving in to the Bank surely it is only a matter of time before these build up surplus cash to restart lending and future growth? I support any attempts to keep HBOS independant it has served me well for 40+years
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Puffing on my pipe in my one man gentleman's club.. puff, puff.
Hmmmm. Insolvent are we mr true-liberal eh? So we can't pay off debt and our debt doesn't cover assets? Hate to say it you silver foxed liberal but raising 500 odd billion points to China thinking we're not insolvent. Insolvency would see us running to the IMF a la Iceland and Hungary. But technically old boy I think if the UK were perceived insolvent then they wouldn't be able to raise this debt. I'm not saying it's not in the future, who know's in this mess? Always thought an old boy liberal struggled in the world of international finance. No more tax!
Of course this mess is non-national. It comes from the laissez-faire regulation and easy credit of Thatchernomics and Reagenomics. If anyone is to blame it's our English and American economic geniuses. For Scottish bankers to expect us to back them on their next leveraged assault for their pension funds and egos, is so based on the paradigm of the past as to make you question their sanity. This isn't an equity crash that will bounce like LTCM and the dot-com crash. HBOS has barely written down it's mortgage debt in this country, whilst the ability to pay for most of it's mortgage clients is just about to fall through it's badly built Barrat's floor.
These guys built their empires on cheap credit and would have been washed away by the credit crunch like Russian Generals facing Barbarossa if it happened on their watch. They have no faith in the HBOS board! Makes me laugh. All that'll happen is their failure and HBOSs'whilst increasing their pension funds. Saving HBOS for Scotland! Then see it fully nationalised for the United Kingdom!
All that we can ask is that the government will attempt to encourage Tesco's and others to increase their boring retail banking. And hope that competition comes from less greedy for leverage industries.
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Is this the same George Mathewson who, as Chairman of RBS, colluded with Fred Goodwin to achieve profits at any cost and involved RBS in what could be described as imprudent lending?
This man's credibility to attempt to lead a Bank such as HBOS is beyond belief - he must either be arrogant or naive, or both.
To date, neither Mr Burt or Mr Mathewson have come up with any tangible ideas, far less cash, for rescuing HBOS - one could be forgiven for thinking that this is just another nationalist "stunt" by Mr Mathewson.
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The idea that Edinburgh (read, Rekyavik) can become the centre of some financial superpower is pure Scot Nat wish-fantasy.
Those who bought into the 'Originate & Distribute' scamming imported from Wall Street are very persons responsible for much of the present financial debacle.
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#135 "This takeover of a Scottish Banking institution by a once west Yorkshire car leasing company is a blight on Scottish history and will not be forgotton."
Oh dear, what does such a stupid and inaccurate insult like this achieve? Really? Demutualisation was the tragedy for Halifax - and plenty of Scots voted for that too. However - "this takeover" was engineered by Sir Peter Burt, after he had failed to take over the much larger NatWest. He now claims HBOS is bigger than Lloyds and shouldn't be taken over by it. What a hypocrite!
As for Scottish history - why is English spoken is Scotland at all? Why do so many "Scots" have English surnames? Surely that's because the Lothian, always the most prosperous and populous part of the Scottish kingdom, was originally part of the Angle kingdom of Northumbria, which stretched from the Humber to the Forth. The place names confirm it. North of that the place names are a mixture of Angle, Scottish (q-Celtic) and Welsh (p-Celtic) - eg Aberdeen. Nationalism in in the melting pot that is Britain is at best based on a series of half truths. There was never any great ethnic cleansing anyway, just new genes in the mix and new rulers. Genetically, much of the original stock, especially in Wales and Scotland is not Celtic at all, but more akin to Basque. Most of us are from the same pot but with a local flavour, speaking the language of some conqueror or other. So let's have rational debate and not racist slurs.
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Sir Peter Burt was the man who led BOS into HBOS and no doubt had a say in the appointment of the current board.
If anyone is to blame it is him and the people he recommended to take over form him i.e. the current board.
Why should we listen to him?
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#157 "one could be forgiven for thinking that this is just another nationalist "stunt" by Mr Mathewson."
Of course it is, Salmond weighed into the "debate" this morning. He is an ex-RBS man anyway. I have no evidence, except circumstantial, but I believe the letter from the two knights was cooked up with Salmond in advance so he could "respond" to it. This issue has now officially become a political football.
The economic argument is clear. HBOS got too big by aggressively lending money it didn't have to fuel an unsustainable asset bubble. Without Lloyds help it would have been insolvent already and the assets worthless. Whatever the future, The HBOS organisation has to shrink because there is no longer the demand for its "services"; nor will this demand recover in the foreseeable future under any rescue scenario.
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"Without Lloyds help it would have been insolvent already and the assets worthless"
HBOS was stabilised with the Government guarantee in a similar way to that which Lloyds was stabilised. Lloyds has no money to offer HBOS and indeed is in need of Government financial aid itself to the tune of several billion pounds. The news of a loan to HBOS is just spin. Lloyds TSB would not confirm that it was true this morning to journalists who sought clarification.
Lloyds has no cash with which to buy HBOS and is offering shares only- not a good deal for HBOS shareholders. In fact grand larceny might be a better way of putting it.
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According to Radio 4 theres 58 billion outstanding on credit cards in the UK.
Another example of the lunacy,average limit is 6K.
Average salary circa 26K.
No wonder so many people are having problems.
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Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Oh what a surprise, while they are before the senate trying to get the $700 billion bail out passed, they are secretly dishing out 2 trillion to all and sundry.
Maybe the two Scottish Knights have asked for some!
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As No 68 said, 50-60% of HBOS is now owned by Lloyds shareholders. They are interested in cutting the costs associated with merger. So, unfortunately, it is a done deal unless something dramatic happens - like rival bid that is significantly better.
I, as a HBOS shareholder only, oppose the deal on its current terms.
Unfortunately, HBOS board seem not to be interested to look at other options. They just do now what Lloyds say.
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post 164 PetersKitchen
WOW PETER YOU ARE ALMOST AS CYNICAL AS ME.
LOVE YOUR INCISIVE COMMENTS.
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RE 165 VitaliG
HBOS Directors are just desperate to avoid disqualification proceedings. .
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I don't know much about banking, but i can smell a rat a mile away, and this whole takeover stinks!
Someone should calculate the cost to the Scottish economy of all the associated unemployment and hence the cost to the taxpayer.
If all the banks need bailing and are going to get bailed why not this one?
This seems to have a lot more to do with unionist politics than anything else, and if for no other reason should not be allowed to happen, there s a long and well documented history of subduing colonies by keeping them on their knees, here we go again!
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#158
Hang on a minty... One of the big problems Scotland has is that in recent years financial services has dominated the business scene in Scotland without actually contributing much to Scotland's long term strategic development... To be fair the same thing can be said of the City and Englandshire..
One of the consequences of that is that within the energy sector where I work Scottish and indeed British ownership of companies of strategic importance to oil and gas is extremely low, investment in renewables technology is utterly pathetic and now four of the six power utilities (incl Scottish Power of course) are foreign owned.
So frankly, if you want the Scottish banks you're welcome to them cos they ain't no darn use to us!
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WE HAVE HAD TWO MORE CUSTOMERS GO INTO ADMINISTRATION SINCE FRIDAY.
SO ITS A FEW DAYS IN POLAND & CZECH REPUBLIC CLOSING DOWN THEIR PRODUCTION ORDERS.
THIS IS THE RESULT OF ALL THIS TROUBLE,JOBS GOING ALL OVER.
BY GODS GRACE I CAN DEAL WITH IT AND KEEP OUR LOT IN WORK.
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#162 "....not a good deal for HBOS shareholders. In fact grand larceny might be a better way of putting it."
Although there is some convergence, HBOS shares are still worth less than the LLoyds offer. HBOS shares have never been worth more than any Lloyds offer. How can offering more than something is worth on the open market be called larceny?
The HBOS share value has been inflated by the chance of getting a piece of a better run bank. The LTSB share price has been depressed by the prospect of merging with a basket-case. It may well be a good long term prospect, but short to medium term the merger is not good news for LTSB shareholders. However, I would rather place my trust in Blank and Daniels than in anyone else in the banking industry (or in Gordon Brown). But time will tell; as we are all too painfully aware, past results are certainly no guide to future performance.
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The big question (or worry) if Sir Peter and Sir George can convince the shareholders to ditch the present two incumbents and agree for them to takeover, is will they then go cap in hand to the middle east sovereign funds in the same way that Barclay's did.
Being a pair of hard nosed bankers I have no doubts that they would be prepared to sell their souls in order to keep the bank independent from the government interference and more importantly to reward themsevles with a huge payout for doing so.
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Well i never knew the BBC news channel could be so funny................
This morning they have reported on obesity , binge drinking, and post office closures.
Also on 271 employers not employing anybody over the last few weeks, the main 3 parties adapting the keynesian theroy. and HSBC losing £3.1 billion in the last quarter.
So what so funny you may say.....
Well why on earth are our mp,s looking at cutting binge drinking when know one in the near future is going to have anymoney to spend on drinking.
And obesity is going to grow over the next 40 years. i think not and in the near future stravation is more likely to be on the agenda
And as for the post office there is know need to worry, because with less money and less people being able to drive a car due to the lack of money. Our post offices once again will became very much more apart of our local communities
So why will this be.................
Well as the BBC reports show no one is employing and umployment is rising fast, faster then poeple thought it would, look at the usa job losses in sept 159,000 revised up to 284,000 and oct job losses 240,000 so they should get revised upto 360,000 and by the time barack obama is in office the number per month will be well over 500,000. usa economy is set to shrink by 0.7 percent as the uk is to shrink by 1.3.percent even though i think the imf numbers may well be revised up
HSBC is one of are better of our banks in this crises and still shows losses of 3 billion in last quarter, that show just how bad our banks are at the moment.
And the worst thing is, all of the main 3 parties want to prime the pump and spend spend spend,
This they call the Keynesian theory
adopted at the last great depression. without going into to greater detail there is one main differance between the 10 years prior to the last depression and the 10 years leading upto this one.
The keynesian theory was adapted by Roosevelt in 1933 after the usa economy was already in a depression.
the keynesian theory was adopted in 1997 by GB. the last ten years the goverment and its people have spent ,spent ,spent. Roosevelt was concerned bye over priming the pump and believed it could well be possible to do so.
Well we have our answer now. so bye spending more will make things much worse. Unmployment was at 24.9% in the usa in the depression.
i believe this will rise even higher this time if the spending does,nt stop.
Our country as no foresight and no plans for our future.
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I feel BLANKs cheque could turn out to be a bounced cheque.
But what payoff has Clunking Fister promised him.
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173.
There is a policy.
The policy is to drive most of us into the gutter except the chosen few.
Once the rest of us have been driven into the gutter,New Labour can in their arrogant and pious way micromanage us all into the dark ages.
Yes you are right,but they do have one vision.
ITS CALLED ABSOLUTE POWER OVER A SUBDUED AND BANKRUPT POPULATION.
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Should that not be bounced czech Mr Curzon? I hope you enjoy your stay here in Cz, the weather is 15 degrees and blue skies near Ostrava - I was in UK last week - I not wish to go back there for a long time, grey, rainy and really miserable people around.
Here in Cz the exposure to debt is small (so we are told) and so it is only the collapse of your companies that is going to get me fired. Thank you.
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#168 "Someone should calculate the cost to the Scottish economy of all the associated unemployment and hence the cost to the taxpayer.
If all the banks need bailing and are going to get bailed why not this one?
This seems to have a lot more to do with unionist politics than anything else, and if for no other reason should not be allowed to happen, there s a long and well documented history of subduing colonies by keeping them on their knees"
It's true that all unemployment has a cost to the taxpayer - in principle* that's why there are employers' and employess' National Insurance contributions. However, paying people, and - even worse - management structures, for jobs that don't need doing makes no economic sense, especially in an economy which consumes more than it produces. It diverts resources from potentially productive activity.
HBOS employs too many people because of its, now redundant, failed expansionary business model. If it were not for the political and economic fallout, under the normal rules of capitalism it would have been declared insolvent and broken up. The viable bits like esure would have been sold off to pay the bills.
HBOS as a whole is no longer viable as an independent going concern. That's why it has to raise the £15 billion plus from the treasury even to be worth taking over.
As for the paranoid comment suggesting that Scotland is a colony, neglecting the apparent ignorance of history, consider this: The biggest disasters in our banking system, RBS and HBOS, occurred because, led by Birt and Mathewson, two small Scottish banks attempted the economic colonisation of England and beyond (ABN )and failed. Now we all must pick up the bill for them trying to punch above their weight.
*"in principle" from the French: "en principe Oui" meaning "Non!"
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Why is this such a Scottish vs English issue? HBOS is about as Scottish as the new Mini is British!!!.
It stopped being Scottish when it merged with a Halifax and thus became British, and now it could well be argued that it is a global organisation anyway.
The statements by the two former heads of RBS and BOS strike me in the same way as all the other so called Scottish Business heads that were reeled out for Mr Salmond during the Scottish Elections. The SNP seems to think that if they wheel out their donors and say that this industry chief or that industry chief says Scotland should be independent, the fact that they all run companies based in London or at least floated in London is neither her nort there. As for these 2 if they want it then why don't they start buying up shares to block the move and call a vote of no confidence?
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So Santander says it going to make a record profit this year.
Not out of any cheaply acquire UK Banks I hope.
However despite that, they need to raise over 7 billion euros from their shareholders.
Not really made a profit have they ?
The land of fantasy accountancy alive and well in Spain.
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Our Prime Minister and Chancellor are Scots. The leader of the Tories is a Cameron. Who is being colonised by whom?
As a half-Northumbrian English half Russian living in Wales I don't care so long as they do their job honestly with a view to promoting the greater good ... unless of course they are all under the spell of the evil Lord Voldemort "He whose name may not be spoken". In which case the end of the world may be at hand. What do YOU think alexanderC?
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Traducer 176.
The cheque is the LTSB' PAYMENT 'FOR HBOS.
Im not sacking anybody by gods grace our orders exceed production capacity both in Poland,The Czech Republic and our factories in China.
And thankfully we dont owe any banks,our problem is a few banks owe us and we dont trust any of them anymore.
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175. You appear to be a tad paranoid.
159. Great exposure of the nonsense that is (especially Scottish) nationalism in the UK.
Lloyds and HBOS, both would be out of existence now without part-nationalisation.
Same goes for Citibank and UBS, to name but two others.
It's time for free-market purists to return to the Bullingdon for a while. During their time in charge of global finance they have caused rather a stink, what.
Banks have forked us all. Their shareholders must all pay first, unfortunately. I would be for us paying nothing for bank shares, in return for saving their skins.
The road back to safe capitalism is very rocky, and I personally would be very wary of tax-cuts, with a few exceptions.
How about the abolition of National Insurance, which is basically a tax on employment, paid for by much higher taxes on consumption of non-essentials?
VAT of 30 % on electronic goods?
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AlexanderC thinks Messrs Blair Brown Darling & the thing V have an unhealthy interest in all things Brazilian in trunks with a dash of Italian designer fluff.
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#171
Share prices reflect short to medium term perceptions and expectations, are subject to market manipulation and often do not reflect the true value of a company. The current share price can significantly under value or over value a company. Likewise with other asset prices which is why the mark to market rule has been suspended.
If HBOS was a basket case, Lloyds TSB would not be buying it. Indeed an analysis of LLoyds TSB's financials will reveal that it is in serious difficulty itself. Far from the black horse coming to the rescue of HBOS, inflating its share price, the black horse has broken legs and is at risk of being taken over itself.
RBS and HBOS are not disasters. They are highly profitable banks which have run into the same type of difficulties all of the larger banks have run into. RBS is a formidable money making machine.
Their "demise" is a distraction from the real story which is the disastrous state of Barclays and Lloyds TSB. The fomer has been part nationalised by Arabs with political rather than commerical aims. The latter may become an accessory to a European bank. The EU (soon to be Eurabia)has long aimed (and indeed conspired) to destroy the City of London and turn the UK into a fractured colony. EU companies own the airports and most of the power companies. The Germans recently hammered the hedge funds. The EU will not miss a chance to seize the UK banks.
Whilst this Government dithers, the 2 pronged Eurabian conquest continues unchecked. The vital question - is Brown naive or a conspirator? I tend to think the latter.
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POST 175 Munich Madrid
A TAD PARANOID??????????
Have you ever met any of the Gang??
The only interest is deluded self interest & the cost is anything.
They used to plague us for cash for the Party.
The resultant fiasco says it all.
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If people take off the Scottish blinkers for a while they'll see reality. Peter Burt was part of the board that sold out BoS in the first place. He favoured the Halifax takeover, because it kept BoS out of foreign hands. He should now back the Lloyds TSB takeover. Oh and by the way, don't accuse the HBoS Board of looking after their own interests. If you look at the proposed new board you'll see no HBOS names there. The merger gives the shareholders, many of whom are staff, the best chance of getting some money back in the future.
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I really don't understand why Bankers are getting bonuses , the ones we keep reading about almost every week....or those having a £330K Christmas Party' (Really--whoever set up that party has to be sacked surely!!) using tax payers money.
The arguments that "it's in their contracts so nothing can be done..."or "we're rewarding the star performers" just beggar belief.
The people involved aren't necessarily bad people...they didn't all necessarily turn a blind eye knowingly to some very amoral decisions (let alone make those decisions) but none of them...not one, should be given a bonus whatever year it's meant to relate to, after what has happened--------and what will now happen.
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#145, if you enjoy pontificating in smug ignorance feel free. The fact is the only things that have a direct effect on the price of a CDS is:
a) Default risk
b) Expected recovery rate
with an important secondary effect of liquidity
QED.
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#187, yeah that's right we should tear up legally binding documents whenever they are inconvenient....
Of the real villains of the piece - the governments and personal consumers addicted to leverage - are to be the ones who dress themselves up as the victims!
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188
Its not the price, stupid, its the payout
As we begin to see the true exent ($2trillion in the States alone) of under the counter bailouts, its the payouts.
Are you really not a Banker or a Hedge fund mamager? For only they would be so delusional at a time like this, wouldnt they?
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Speaking as a fully paid up member of the tartan army may I add something to this thread?
I don't care whether or not HBOS or RBS remain "Scottish." They are commercial organisations that exist to generate shareholder return. They are not Edinburgh Castle.
If these two old soldiers want to place themselves on the board shouldn't they first:
Persuade a shed load of shareholders to vote them on, or
Buy up a reasonable amount of the available shares (they are cheap right now).
I'd like to be appointed to the Board of Directors of Alloa Athletic Football Club but I think it would take (a bit) more than me just asking for it.
Or am I missimg the point?
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"Lord Stevenson, HBOS's chairman, has now replied formally to Mathewson and Burt, He has written to them that his board sees "no basis for future discussion" - which can be paraphrased as "hop off"."
A Hostile Embattered Response, for what New Investment Streams does Lord Stevenson have in the Pipeline to Assist in the Government Bailout Rescue...... to Repay Distress Help?
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Brown and Sarkozy have been pontificating at length about how they want this and that to be done *their* way.
If neither the Arabs nor the Far Easterners pay them any attention, then all that is just more hot air !!
No amount of primping and posturing is going to make either of them a world leader. Britain is bankrupt and France isn't doing all that well either. The US of A is up past its collective eyeballs in debt and sinking fast.
As I said earlier, I wish Obama all the luck he can get because his is damn hard row to hoe !!
In the coming few days, we'll see how the Arabs and the Far Easterners want to play this game and this is how thing will be for the foreseeable future !!
All this squabbling about English vs Scottish may turn out to be a knife fight in a lifeboat while SS Britainic goes glug, glug, glug !!
Either you guys wake up to reality PDQ or you'll be forced to speak Mandarin and/or Arabic only and soon !!
As for those conspiracy theorists, I notice that they are the first with the accusations and the very last with their own money !! If you don't like "foreigners" to take over, just put your money where your mouth is !! Then again, it might make that money really, seriously pong !!
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#21 Winblog
You are describing Northern Rock exactly (especially the Marketing), but the reduction in the loan book will leave it with lower quality assets, so the two aren't mutually exclusive.
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#186
BOS was not taken over by Halifax. It was a highly profitable, innovative and well run bank which merged with Halifax, after it failed to beat RBS to buy NatWest. Peter Burt ran it well and it is upon his departure and eventual replacement by Horby/Stevenson that the HBOS started its terminal decline.
The current board have been discredited but depsite this want to hang on to get as much out of the bank as they can. Certainly none are due to take up positions in the hypothetical merged bank but they have been offered lucrative short term contracts which they don't want to lose.
It is manifest that they are not acting in shareholders interests and there is also a possibility that they may have been involved in fraudulent actions. It is thus mandatory that an independent assessment is made and if indicated a forensic assessment with a view to referral to the Serious Fraud Office.
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laughingblacksheep
Golly you seem to have the needle.
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I dont why Sir Peter Burt and Sir George Mathewson comments made headline news.
My take is that two bankers are just looking for a job.
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185.
More than a tad paranoid, you see reds under every bed.
I suppose the same 'gang' coerced the poor old investment banks into packaging up dud securitised loans, and I suppose the gang's hidden minions in New York and Zurich forced Citibank and UBS to get involved. Funny, I too always knew they were commies...
Pray tell, how far does the Brown conspiracy go? Is the Duke of Edinburgh involved? Or is Maxwell running the show, from the back of Shergar?
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#165, none of HBOS.L is "owned" by LTSB.L. the deal hasn't completed. You should know more as a shareholder. The general meeting is in Dec 2008.
[Unsuitable/Broken URL removed by Moderator]
Still time to vote no if you feel strongly or voice your opinions at the EGM.
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#193, far east and the Gulf have their own very serious issues. I wouldn't hold my breath for them to bail the UK out. Remember unlike the USD they don't need to worry so much about GBP being at an uncompetitive rate.
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MunichMadrid
No the very same Gang claimed credit for an economic miracle because they dont understand how to run a country,then when the ***t hit the fan they blamed the yanks.
The regulators didnt regulate,these guys n gals all party together thinking they are in on the Big Game.
Its a shocking truth that the control freakery gets directed at the poorest members of our society.
Whilst the big hitters take ALL.
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#190, one last attempt....
In the event of default:
Buyer of insurance hands over bond, seller of insurance makes interest payments that bond should have made. Therefore if we are talking about payouts then the money that changes hand in a default is the coupon on the bond and the principal at maturity. Obviously if there is no default the payout is zero. So payout has even less to do with with risk-free rates or anything else.
When in hole, stop digging.
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#199, i posted the link to HBOS investor relations site. They have an interim presentation. Goto their site and pick investor relations. Or as a shareholder you can demand they send all this info to you.
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in case anyone is interested, there is a detailed ACCURATE explaination of MBS bonds here:
http://calculatedrisk.blogspot.com/2007/04/mbs-for-ubernerds-i-gse-pass-throughs.html
http://calculatedrisk.blogspot.com/2007/04/mbs-for-ubernerds-ii-remics-dogs-tails.html
http://calculatedrisk.blogspot.com/2007/05/mbs-for-ubernerds-iii-credit-risk.html
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If these two guys want a job running HBOS, shouldn't they send in their CVs to human resources?
Perhaps I'll go to the press tomorrow and say I should be made of XYZ company.
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204, not your last chance as I am a teacher so I have this inbuilt guilt regarding any lack of peerage I provide
A credit default swap is akin to insurance against default. If you want to buy a a local councils bond or a corporate bond but not take risk that it may default you have been able to buy a credit default swap. You pay a fee, and in exchange for that fee the insurer of the swap will have to pay you the whole amount if the council or corporation goes belly up.
This in its most basic mode, however, entities will have many different hedges against different outcomes to minimise the risk. This, along with the secretive nature leads to the mess we are in because all the hedging has gone (or probably will) go belly up and nobody knows the extent of what needs to be paid back.
I can't be more simple than that.
Can someone else comment as to whether this is clear to help laughingblacksheep out?
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201
Funny how the last refuge of a the free market is always regulation.
Had any western country decided to go it alone and regulate heavily before 2008, eg by banning securitisation of mortgages etc, that country's financial centre would have been bypassed, and it's not clear that that country would be any better off now than either the UK or the US.
No-one has yet been able to answer the question as to why senior bankers (whose shareholders have rightly carried maximum pain thus far) did not rein in their institutions' uber-leveraging behaviour before the tipping point, apart from to say that those who controlled them were blinded by greed.
Now, are you seriously saying that, from Zurich to New York, all those trillions of excessive leveraging by banks was all arranged by the UK government?
If you're not saying that, are you saying that the UK govt. had a major say in arranging the excessive leveraging of eg. Lehmans and UBS, as well as HBOS' mortgages- which, let's face it, are pretty small-fry in the global banking world?
If you're not saying that Brown etc had a controlling influence over Swiss and US bankers' excesses, are you saying that the poor fellows at the top of HBOS, RBS, Northern Rock, B&B etc. were incapable of spotting that they were overlent to the tune of hundreds of billions? Or are you saying that it is your honest opinion that UK's top bankers were only following (Brown's) orders, the poor dears?
If Brown etc did not have any controlling influence over the UK's bankers, that's because he's running what was until recently a pretty free market country. If he had wanted to nationalise the UK banking industry I dare say he'd have moved a bit swifter on NR last year, unless it was all part of his evil commie plan.
Your conspiracy would be quite amusing in an Austin Powers kind of way (imagine Brown as No.2, who is Blofeld?) but, as with most paranoid delusions, it doesn't bear much scrutiny.
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MunichMadrid
The powers that be have the regulatory powers they didnt use them because they appeared not to care.
As a business i frequently pass up bad business theres nowt clever about being a busy fool.
In my industry which is part manufacturing part venture capital/private equity part property development its been well known that the economy was held together by straw.
Every function/meeting etc the topic of insolvent banks has been on the agenda for years(last 6/7 years).
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munichmadrid
I feel you mistake sarcasm for paranoia. . .
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Is the stuff in capitals the sarcastic bit?
I agree it's been well-known that asset inflation, especially property, was a bubble for a while, but, just as when oil was $140 a barrel not so long ago there were plenty saying it would soon reach $200, the bursting point of bubbles is quite hard to recognise. That does not absolve banks from not knowing how much risk they were taking- hardly the government's job.
The MPC should really have intervened earlier and hiked rates in say 2003, but I don't recall too many people calling for rate hikes at the time- nor higher taxes which would have had a similar effect- in fact the great British public prefer to have their cake and eat it, then bleat when the larder is empty. We are largely a nation of bingers, but that shouldn't let the banks off the hook- sometimes mummy and daddy have to say no, instead of offering us an alcopop, and guzzling single malts themselves.
Shame we can't now refuse to give the banks access to the inexhaustible taxpayer minibar, but if we did I fear things would get really ugly.
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im not a banker so maybe someone could help me out with this. with the current state of affairs i.e. money markets frozen,high rates e.t.c. why would LTSB want any part of this 156 billion that HBOS needs refinancing in 8 months that just doesnt add up?
secondly post #10 sasha correctly pointed out the banks plumped up the house prices. i have many friends who bypassed the usual first step on the property ladder (flats,massionettese.t.c.) and jumped straight into 3/4 bedroomed houses saddled with giant mortages that kept me awake at night!!! taking this into account along with redundancies equity releases and all that jazz along with a downturn in the economy whats going to happen to the banks when these bad debts start coming along which they will?
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#206, man buy a book and come back when you have a clue.
You are utterly, utterly wrong.
Read the description of the vanilla swap. The seller of the insurance pays the coupons - when the coupons are due - and the principal when the principal is due. Hence the payout is SOLELY determined by the cash flow of the bond. For a fixed rate that is length of time left and the coupon rate or sometimes the NPV of those payments. The price of the bond for obvious reasons has not relation to the PAYOUT.
Yes many things may affect the probability of default but none of the ones you have quoted do so deterministically. I gave you an example for BA where default risk can go up if the price of oil climbs, falls or stays the same.
CDSs also aren't "secretive", there are publicly available data on all the vanilla swaps. You can see the quotes on Bloomberg screens, there is a publicly available set of indices. It is no more "secretive" than stocks or bonds and it is far more regulated and standardised than the FX market. You can see the **face** value of the CDSs outstanding on the DTCC website.
However, I would be more than happy to put you in touch with some ex-colleagues of mine if you really want to put your probably not so ample wallet where your over-ample mouth is. Everyone loves dumb money.
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#211, simple because they have a government guarantee so no downside risk.
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laughingblacksheep
Perhaps you would like to tell us what the total liabilites are then?
vanilla cake rather than vanilla swap me thinks
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#214, would be glad to if you can manage to put "total liabilities" into a complete sentence.
I'll give you a start:
"The total liabilities of the...."
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PetersKitchen, I am serious you are such an expert and so brilliant you must surely want to make some easy money.
We'll buy a CDS off you on BA and sell you some oil and interest rate futures and you'll make a bundle off us ignorant pupils. Then we can learn from the master, instead of all us ignorant fools who merely structure, trade and settle these products.
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# 206 : PetersKitchen
"... entities will have many different hedges against different outcomes to minimise the risk. This, along with the secretive nature leads to the mess we are in because all the hedging has gone (or probably will) go belly up and nobody knows the extent of what needs to be paid back."
You're a teacher, right? OK, imagine you're marking the above statement, written by one of your pupils.
1. " ... entities will have many different hedges against different outcomes to minimise the risk"
Minimise is not correct. Most, if not all, positions can be hedged to reduce risk even further, but this comes at a cost. When the cost of additional hedging exceeds its perceived benefit there will be positions taken at below minimum risk.
2. "This, along with the secretive nature leads to the mess we are in because all the hedging has gone (or probably will) go belly up"
All what hedging? Every hedge in the entire market?
What do you mean by belly up? That an unpredicted event has occurred, and many of the hedge "insurers" are being asked to pay up? This happens all the time - it's the whole principle behind insurance.
3. " ... nobody knows the extent of what needs to be paid back."
Well no, because many of the eventualities against which the hedges were written are in the future - and therefore, to be honest, it's impossible at this stage to know what the future payments will be.
Believe me, I'm not suggesting that we don't have problems, very severe problems, but the use of hedging isn't the cause of them.
If you want my opinion, the root cause of our problems was the political creation of an environment in which the only workable commercial practice was to assume that governments would not allow downswings to run their course - and that therefore it was imperative to participate fully in the upswing if one was not to be left behind. In simple terms, if there is no risk of failure, the losers will be those who gamble the least.
Don't read "political" as being "devised by politicians". Basically, the quality of political decision-making is determined by the parameters within which the people require politicians to work. What we have done is to prioritise the present to such an extent that serious consequences in the medium/long term have been made irrelevant to the decision-making process.
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#217, I didn't get the bit about being an actual teacher. Explains a lot, probably worried about not getting the respect that two Es and an N at A-level commands....
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As an alternative to the Lloyds/HBOsS merger, why can't we go the whole hog and see HBOS merged with Northern Rock as a nationalised superbank. With products offered through the Post Office network.
Jobs saved, a trusted brand, and one part of the financial services industry for which we can get rid of marketing, adverts, and dubious small print.
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