Hampton for RBS
I have learned that Sir Philip Hampton, the chairman of Sainsbury, is to be the new chairman of Royal Bank of Scotland.
After a few days of negotiating, Sir Philip has agreed to take the post - which became available after RBS's woes led to the resignations of its senior management. He will replace Sir Tom McKillop.
His appointment to head the partly-nationalised bank comes as ministers and officials are working frantically to put in place measures to improve the provision of funds to banks and to limit their losses from the bad loans they have made.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~48~RS~)
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Quite imbecilic.
The Stock market has reacted in a predictable fashion. RBS share price nosedived since 4pm today to a now all time low. I foresee RBS being 100 pct nationalised at this rate.
Things just get dumb and dumber!
Barclays also down 24pct on the day, must have lost half its value this week? And the decision to allow short selling again is nothing short of visionary by the authorities!
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Whats going on at Barclays The share price is down 20% or so in the last hour.
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Round and round they go..
A new Chairman will now be able to face the Shareholders and the Savers with RBS and indicate the new tranche of vast billions of write offs and losses the last Board over saw.
Its old politics with few new solutions and I feel that we have yet to see the real rotton meat of write offs in the British Banking Industry. What with CDS's, new asset ratings, mortgage write downs and toxic assets covered in the USA housing market, I estimate that RBS may well be back for a further tax payer tranche of £20 Billion or so.
There should be a Parliamentary Election and New Government before such huge decisions are contemplated. Brown is acting as the British Economic Tsar and simply ignoring mistakes and consequences for our future. Its all about holding the headlines and keeping his job for as long as possible.
A new Chairman for RBS will make no difference whatsoever at this stage to confidence or the credit crunch as the Public trusts none of these people.
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I assume he will have to stand down from UKFI then?
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Looking at share price he might be working for govt by time he starts!
What's the Barclays story??
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Hey Robert.
Firstly to say, love your work; impressive and well-considered which is altogether too rare.
A question for you which on it's face may seem facile, but which I believe to be actually a very elusive obvious.
The current banking crisis: given wealth doesn't evaporate ( like matter and energy, it takes a new form when it's traded ), where have all these 100s of billions gone?
Quick example. I package up a Credit Default Swap. I sell it. Let's say I then buy gold with the proceeds. I now have gold, whereas the CDS perhaps now becomes worthless. I maintain the wealth from the sale of the initial asset.
Where has all this wealth gone?
I'd be most interested to hear your take on this seemingly simple riddle.
Thanks in advance for your time and insights.
~ JH
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I believe a lot of bankers will be returning the favour by working in supermarkets very shortly.
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Shortselling ban lifted all the Gamblers are pilling in.
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I have no moral criticism of short sellers; if it's legal for the financial system to be hijacked into a casino, anything goes: but it's crazy. It should be stopped for good!
The "make money not things" philosophy should be excised from our culture. Money should be earned by making something useful or doing something useful. I accept that the latter might include making us laugh - after all, man cannot live by bread alone - but bread comes first!
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1: The Gov't must surely be aware and complicit in the undermining of the Banks.
Leaks of Northern Rocks lender of last resort request.
Dragging their heels on stock lending and short selling.
Punitive rates of Interest on Preference Shares.
The Gov't is HAPPY to sink the Banks.
And our Pension Funds.
The Chinese example, poor workers/people are easier to control and accept less reward.
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I suppose when Flash starts printing money RBS will be offering 2 for 1.
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Post 1 and 2 (at least) Barclays is bombing as they were naughty, Gordy is cross with them, so is suggesting they are not going to be included in the septic bank idea.
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#6 - Its complicated but I think its gone where it came from - nowhere - the money never existed. Just somebody found out. Bit like what Madoff did except a lot more complex.
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6 jh
The 'disappeared' wealth has gone to:
(a) the Chinese, whose goods the west has 'consumed' using largely borrowed cash, lent largely by guess which country?
(b) Opec and the Russian raw materials oligarchs, that's why they can buy football clubs etc.
(c) drug and gun runners, and other crooks.
(d) bankers, hedge fund managers, and other crooks
(e) but a few pennies (relatively speaking) into western savings, mainly invested in the stock markets as advised by your friendly banker...
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This cannot be simple incompetence by Brown and Darling. They(via FSA) lift the ban on short selling a day before they plan to announce that they will be injecting more capital, capital required because they have raised the capital adequacy ratios. They probably leak info. about having a plan to inject more capital, spooking the markets sufficiently to cause a 20% fall in Barclays shareprice. Enabling them to obtain a much larger proportion of Barclays when they announce that it will finally have to take it's begging bowl to the treasury. Suprised it wasn't you Peston leaking the info. These actions quite clearly demonstrate the real agenda of Brown and Darling, the effective nationalisation of the financial system and hence the economy, I think this is called communism.
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7. At 5:00pm on 16 Jan 2009, steviefboy wrote:
I believe a lot of bankers will be returning the favour by working in supermarkets very shortly.
Got my belly hurting!
Excellent !
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Come on Robert - what about the news from Honda - this could be the beginning of the end for manufacturing which only last week you said was important!
If Honda leave the UK becasue no-one seem interested in manufacturing here anymore it will be the end of the UK as what remains of our manufacturing will be gone for good!
We can't all work for Tesco AND buy all our shopping at Tesco! We need manufacturing to add value!
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Re: The New Capitalism
Just thanks.
I sent it to my family and friends along with, "Robert Peston is the BBC's Chief Business Editor.
Over the past 18 months he’s provided some of the most honest, accurate, astute and even borderline prophetic economic analysis I’ve seen anywhere.
The next time you’re concerned with where we’re heading, definitely worth a look."
High praise, well deserved.
~ James
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RBS & Barclays share price dives
Short sellers in with a vengance presumably?
These hyenas would sell their granny, they MUST be shut out of the system.
They have no morals, no ethics, no value in times like these. Someone could argue that they might have a purpose in soporific, cozy times, but certainly not at this point.
Boat-rockers? Ship-sinkers more like!
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Regarding the late falls on the Stock Market prices in the banking sector, Reuters is plumping for short selling as the main reason.
http://uk.reuters.com/article/businessNews/idUKTRE50F59W20090116
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Clean house.
That is all.
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If:
The flawed tri-partite system for financial regulation had not been created.
Brown had addressed the structural problems with the UK's economy during his 10 year tenure as chancellor.
Lloyds had been allowed to and supported with a takeover of Northern Rock in early 2007.
The govenor of the BofE had not bleated on constantly about moral hazzard and made the decisions on liquidity injections ahead of the financial armagedon.
The govenor had also kept his gob shut over the valuation of sterling instead of constantly talking down our own currency leading to a huge devaluation.
Peston had not been so enthusiatic and egocentric in his reporting of sensitive financial news fueling the already fragile status of the financial system...
I wonder what situation we would be in today?
People to blame:
Brown, Darling, King, Investment bankers(particularily American) and over zealous financial journalists.
People who suffer:
The newly unemployed, home owners, shareholders, pensioners, the starving and poor of the third world.
NB. all the culprits get to keep their jobs, apart from a handful of investment bankers who probably weren't involved in the fraud that started this mess.
Heads need to start rolling and all those unjustified bonuses from every sector(public and private) need to be repatriated back to the unjustified loosers.
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Robert,
"His appointment to head the partly-nationalised bank comes as ministers and officials are working frantically to put in place measures
1. to improve the provision of funds to banks and
2. to limit their losses from the bad loans they have made."
(my numbering)
Aren't points 1 and 2 sort of mutually contradictory?
Put more money in banks and they will respond by seeing more of their losses as bad and palm them of on the government so that they make more (artificial) profits at the cost of the Tax Payer!
It is certainly contradictory to force banks to limit losses from bad loans at the same time of insisting that the balance sheets of banks are strengthened.
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#6 jhocutt
I'm no Peston, but here's my take on it.
(I think you mean CDO rather than CDS in this instance, but either way, much the same answer I suppose.)
The "wealth" in the CDO was what the buyer thought was a fair price for the return over time, from the cash flows coming in from the assets held as against the risk. Because of the intentional opacity that was probably harder to judge than it should have been. The market to sell the CDO onwards dries up and most of the value of the CDO disappears. There is some inherent value left as if you hold on to it not all the assets will default so you will get some return, just perhaps not as much as you expected and not when you may need it.
a more real-world example:-
I sell my 1million pound house and buy gold with the proceeds. But then the buyer finds out that it's going to be knocked down for say, a runway. They now can't sell it and it becomes pretty much worthless, again they can strip down the house and sell the bricks and tiles, and fittings etc. but they won't get their million back. The "value" has gone to the same place.
Ie the market's (misjudged) premium over the real worth of the assets was just an error in the original valuation.
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Dear GRIMUPNORTH77
Ref:
"#6 - Its complicated but I think its gone where it came from - nowhere - the money never existed. Just somebody found out. Bit like what Madoff did except a lot more complex."
... I would say in reply,
“The greatest trick the Devil ever pulled was convincing the world he didn't exist.” ~ The Usual Suspects
Wealth, like energy and matter, are not destroyed. They change form. There's a hell of a shell game being perpetrated upon us all. See the nefarious banker? See the evil Hedge fund manager? The biggest pea is under neither of them (some Hedge Funds have made billions, but very few billions relative to the amount of wealth that's been slight-of-handed from view).
I think MunichMadrid7980 strikes closer to the truth, but I would still ADORE Robert's analysis on this subject.
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6. At 4:58pm on 16 Jan 2009, jhocutt wrote:
….where have all these 100s of billions gone?….
I say TAG the money and follow it all by satellite every 5 10 20 and 50 pound note so we can see where it all is via the interweb.
If this was possible then we would see that there are far fewer real notes in existence it’s mostly electronic.
Nobody knows exactly how much there is or where it is.
This is especially true of the us dollar.
Printing more money doesn’t really involve printing at all just a few clicks on a pc and hey presto. A loan to a bank and a payment to xyz and new money enters the system,
It may have all disappeared in the inflation ether.
This is one of the financial worlds mysteries one of many financial mysteries just like the mystery of how the regulators didn’t see we were heading in credit crunch.
They don’t KNOW…
The tentacles are every where it’s like a Giant organism a virus a disease which has mutated and evolved into many many strains self replication unchecked and out of control.
Some fictitious some real.
The BANKS themselves have been efectivly printing the electronic money which was never really there. All done very cleverly via electronic trading systems gearing up the real money they actually did have.
Robert
Should be able to tell you but errrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
He CANT
No ONE CAN
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Interesting to note that Fred the Shred's punt on ABN was never allowed to go everywhere he wanted it to go. He only managed to spend 10 billion, and not 31 billion, because Bank of America snapped up Lasalle from under his nose for 21 billion, thus taking away RBS's "prize" of the venture.
And now look at Bank of America.
If Fred had been fully "successful"... Another vast mountain of sub-prime, etc, for RBS....
Blimey. This guy might be temporarily unemployed, but he's still a multi-millionaire Knight of the Realm, and the rest of us are paying for the folly, only nothing like as much as we might have been.
No wonder Phil and Steve want the jobs of McKillop and Goodwin; no matter what they do, they can only emerge looking good by comparison.
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I note that JCB a British Manufacturing company is finding it harder in the UK than in other countries because other countries provide more support during short working - that means foreign countries are supporting British companies better than Britain.
Everyone remember this when complaining about helping Honda; Jaguar Land Rover, Toyota and Nissan!
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# 7 steviefboy yes excellent comment; I'm expecting to see a former Master of the Universe stacking shelves in my local Morrison's soon
as for Barclay's this afternoon they could be described as FUBAR BUNDY, or as Robert would say 'mullered'......
this may have a bit to do with the return of the shortsellers but I think there is something more fundamental going on
which is that the big banks remain in deep trouble despite all the bail-out payments
in the US this afternoon Citibank admitted to a $9bn loss in the last quarter; BoA to nearly $2bn but we should note that that didn't include Merrill, whose merger into BoA formally took place on Jan 1st; Merrill Lynch lost a truly astounding $15bn last quarter; and then there's the Irish situation
it seems to me that the authorities must be very close to the point where they will have to proceed to full nationalisation of many of the banks; of course the Anglo-American gov'ts are hugely reluctant to do this because it goes against their free-market philosophies
BUT AT THIS STAGE IT SEEMS TO ME THEY REALLY SHOULD proceed to nationalisation, AS MANY OTHER POSTERS TODAY HAVE SAID
other options seem exhausted; can't see a BAD BANK working; too complicated and the banks will remain very reluctant to step forward with all of their toxic stuff as they don't want to admit how much they have; even if a fair price could be established for buying it - at say 10 cents to the $; can't see it somehow
Doubt that Brown will do either the nationalisation or the bad bank any time quickly; events are once again overtaking him, and he seems to have lost his nerve since the Christmas break and reverted to type: dithering about what to do and announcing small(ish) initiatives every couple of days
I suspect things will unravel quickly again in the banks though; the EU are going to have to relax or abandon their competition rules that discourage nationalisation aren't they?
And how long until the IMF have to do something to save some smaller eurozone members? Latvia and then the Irish?
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There's been a particularly nasty story doing the rounds about Barclays this afternoon, hence the share price fall.
The fact that this rumour has coincided with the ending of the ban on short selling is presumably just a huge coincidence.
The ban should be reintroduced on a permanent basis. The restriction of the opportunity for a few to make (or lose) a fortune this way is surely far outweighed by the broader public interest.
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As roubini has been saying for over a year, Triage is neccessary on the financial sector. In other words, save the few that are not too badly off and let the rest go. By continuing to pour taxpayers money and guarentees in to these bankrupt institutions we create zombie banks that continue to undermine confidence for years, that crowd out sound and new business', and waste billions of taxpayers money. It mignt not be palatable, but we'd do better taking the hit now on the bad banks and recovering, rather than the living death of the whole economy. This is exactly the mistake the Japanese made, by a slightly different means, but the same result.
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So can we expect some new innovations in banking from RBS's new chairman?
Banking Basics perhaps?
After all they already have a Sale on!
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IF:
The flawed tri-partite system for financial regulation had not been created.
Brown had addressed the structural problems with the UK's economy during his 10 year tenure as chancellor.
Lloyds had been allowed to and supported with a takeover of Northern Rock in early 2007.
The governor of the BofE had not bleated on constantly about moral hazard and made the decisions on liquidity injections ahead of the financial Armageddon.
The governor had also kept his gob shut over the valuation of sterling instead of constantly talking down our own currency leading to a huge devaluation.
Peston had not been so enthusiastic in his reporting of sensitive financial news fuelling the already fragile status of the financial system...
I wonder what situation we would be in today?
People to blame:
Brown, Darling, King, Investment bankers(particularly American) and over zealous financial journalists.
People who suffer:
The newly unemployed, home owners, shareholders, pensioners, the starving and poor of the third world.
NB. all the culprits get to keep their jobs, apart from a handful of investment bankers who probably weren't involved in the fraud that started this mess.
Heads need to start rolling and all those unjustified bonuses from every sector(public and private) need to be repatriated back to the unjustified losers.
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This really has nothing to do with the short ban being lifted and everything to do with what's going on in the US, Ireland, and the rest of the world. We have a government that is trying to tell us that there is nothing wrong with our bank sector and that they have pumped enough money in, and a bank sector that hasn't yet confessed to the full scale of its troubles.
If you read the Bank of England's stability report for, I think, Q3 last year, there is an extensive discussion of the bail-out. There was also, in that report, a hint that even then the Bank recognised that the banks might need more capital. That report was based on a rather more optimistic set of assumptions about the likely depth of the recession and the likelihood that the banks could generate some profits themselves than I think would be remotely credible today.
So...just as last time when the short-sellers were blamed for the woes of the bank sector, we should all recognise that sellers (whether short or not) are just messengers. People sell shares because they are overvalued. The bank shares remain overvalued, because the majority are slowly going bust. It's as simple as that.
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Ref: 24. BerkoParko:
Yes, agreed CDO is a better example, though as you say, both will work.
Thing is, you're still watching one side the equation:
1M Gold : House.
( It only 'equals' it at a given juncture. )
House declines to 500k relative to demand.
That in no way explains where 1M Gold got to, i.e. I agree the buyer of the house won't "get their million back." But the guy who got the 1M gold? Where'd that get to? Put another way, if you buy a house of cards for 1M, someone still got your Million.
To see the trick, don't see what the magician wants you to see. Still hoping Robert will explain the Trick for us all ;c)
All I'm say'n.
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This comment was removed because the moderators found it broke the House Rules.
This is a much more believable view on why Barclays is getting crushed today. From FT Alphaville site.
What’s rocking Barc?
Posted by Sam Jones on Jan 16 16:45.
BARC down 24.85 per cent. RBS down 13.03 per cent.
- On an afternoon when the market is up, and the next nearest faller is Lloyds, down 5 per cent.
A flurry of rumours abound. Talk that Barc won’t be included in the putative UK government bad bank scheme; talk of monoline exposure; and talk of the impact from the downgrades on credit card companies to which Barc is exposed.
None of which, as rumours, seem to have the mettle to force Barc to lose a quarter of its value on a Friday afternoon - by our judgment at least.
Mayfair’s finest must certainly be enjoying this. It certainly seems like there’s been a raid on the day the short selling ban on UK financials expired. (Though on the other hand, Barc’s performance has been dismal all week.)
But we would draw readers’ attention to one other set of facts - presumably not the proximate cause of this afternoon’s panic, but certainly worth bearing in mind.
Last week, Sir Nigel Rudd resigned as deputy chairman of Barclays amid rumours of a spat with chairman John Varley over the valuation of certain assets on the bank’s balance sheet (a notion which has been dismissed by friends of both Rudd himself and Barclays).
Barclays is an industry leader in synthetics - corporate CDOs, structured credit products, et cetera. Before Christmas, there were a number of warnings circulating about the potential for disaster in this market - on almost the same scale as that seen in ABS CDOs.
Yesterday, rating agency Moody’s issued this notice (emphasis ours):
New York, January 15, 2009 — Moody’s Investors Service announced today that it has revised and updated certain key assumptions that it uses to rate and monitor corporate synthetic CDOs, a type of collateralized debt obligation backed by a pool of credit default swaps referencing corporate credits.
Moody’s is revising its assumptions to reflect the expected stress of the global recession and tightened credit conditions on corporate default rates, which are likely to be more variable and extreme than those in other recent historical downturns. Specifically, the changes announced today include: (1) a 30% increase in the assumed likelihood of default for all corporate credits in synthetic CDOs, and (2) an increase in the degree to which ratings are adjusted according to other credit indicators such as rating Reviews and Outlooks. Moody’s also announced an increase in the default correlation it applies to corporate portfolios as generated through a combination of higher default rates and an increase in investment grade and financial sector asset correlations.
Based on initial assessment, Moody’s expects to lower the ratings of a large majority of corporate synthetic CDO tranches by three to seven notches on average. The actual magnitude of the downgrades will depend on transaction specific characteristics such as tranche subordination, vintage and portfolio composition.
Those kind of cuts could have disastrous implications for banks’ asset risk weightings under the Basel II regime. Although many banks use their own internal methods to calculate risk weightings, rather than relying on an external rating-based approach, it will be very hard for banks to justify to auditors the use of models that are out of line with the kind of assumptions the rating agencies are now adopting.
Conclusion: any bank with large holdings of synthetic CDOs may be forced to make large writedowns and more seriously, stump up huge extra amounts of regulatory capital.
And which UK banks are big with synthetics? Barc and RBS, by our memory. More info to follow.
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I suppose a grocer may be better at running this Bank than a banker.
I am not a regular reader of this blog and certainly not a prolific contributor.
I should be grateful if Mr. Curzon would accept my apologies; at least he gives out figures that can be checked.
I have in mind all the 'actual' and projected numbers regarding Global debt, GDP, economic shrinkage etc. Even the Chinese figures must have a margin of error [or should I moot, an error of margin?].
Would it be treasonable of me to ask whether our Sovereign can rescind the Honours that she has bestowed or are they purely politically motivated?
All contributions to this dialogue will be gratefully accepted and recognized.
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So watch out for BogOffs at RBS.
The Government ie us, should be able to get the banks for nothing now if this afternoon is anything to go by.
Not sure we would want them. How about letting them go and starting again with a clean sheet of paper and return to the old method of using deposits to fund loans.
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Why appoint another grocer to lead a bank?
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#30
Of course it's a coincidence surely not one of our profoundly honest and moral bankers would perpetrate such fraud knowingly.
No doubt as usual any investigation will get nowhere and it will all be just a strange coincidence.
Hopefully someone at the regulators will have the commonsense to look at this and very simply say "OK had your chance and you blew it, short selling is banned from now on (not just for financials)."
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Is it possible that the short selling of shares began again today after the ban was lifted?
Self fulfilling prophecy in a low volume market.
Not sure why it moots a blog entry unless it is to say "my personal mole handed me this document"
Hope you didn't get your feet wet after the yacht party
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Is it incompetence or corruption that has allowed the short selling ban to be lifted today?
To what extent have hedge fund managers' political contributions influenced this decision?
Or their "wining and dining" of politicians and senior civil servants?
Or their employment of former senior civil servants and politicians?
It is very clear that the massive falls in bank share prices in the final hour of trading was caused in the main by short-selling, which of course then prompts genuine shareholders to sell in panic.
Our pension funds, savings and the economy are further decimated - but don't worry at least a few people who have influence will make money.
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BBC, are your moderators changing shift or having a tea break?
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Ho-hum, another day on the SS Britannia rearranging deckchairs.
In an idle moment, I looked up the definition of 'Tier 1 Capital Ratio' on Wikipedia.
Yes, I know it sounds stunningly boring but a news item yesterday said that Barclays Tier 1 Capital Ratio was around 6%.
If I've figured this out properly then imagine 100 depositors open accounts at Barclays and each deposits a single pound.
A short time later, all one hundred people turn up and form an orderly queue to withdraw their pound.
As I understand it, only the first six people will get their money back there and then.
The other ninty-four people will be told that their money has been loaned out (along with a lot more that has been conjured up out-of-thin-air) and could they come back later/never.
Can't we all open banks, it sounds like a great scam.
PS. That was slightly tongue-in-cheek, nevertheless, I'll be sticking with a bank where the system is such that all depositers can get back all their money at any time, even in the rare event of them all turning up at once i.e. 'a run'. I suppose technically this is a bank that has a Tier 1 Capital Ratio of 100%.
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Did Sir Tom get his "Sir" for being a great banker and finacial expert???
Some of our great financial experts have suddennly realised that "final salary linked pensions" are not viable, especially the 60% ones.
As a lowly engineer I cancelled my company's scheme 20 years ago, I could see it was not sustainable then.
My Bank still thinks it knows better than me, treats me like a customer, although they are now employees of mine, as I now own part of it.
Cheers.
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#35
Absolutely right - the focus is on the debts now circulating but the original money mostly went somewhere, a few of the locations:
1: Bankers bonuses - after all this was highly profitable wasn't it.
2: Holidays, consumer goods, BTL property, funding GDP growth etc - all the remortgages got spent on something.
2a: Our houses - whilst they are not worth what once they were we still paid good money for them and need somewhere to live.
3: Private Equity Funds - banks got money back quickly so lent it back out to fund big ticket PE deals - as we see much of this debt got dumped back into the companies plus some. The original 'money' likely resides in Zurich, Monaco or some other tax haven. (much will be waiting for the original companies to fold before the money mysteriously appears to buy back the remains in prepacked deals at much lower costs - banks/pension funds/HMG pick up the loss).
4: Property developers pockets - someone built or owned all the properties that were funded with the original money.
5: Pension funds and private investors pockets - some of this debt was used to complete huge mergers so the money went back to the original shareholders.
Not all of it is sitting in a bank account waiting but is now the capital part of companies and individuals assets - these are literally devaluing and thus a proportion of this money is literally disappearing just as it magically appears when assets appreciate.
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#19 and others. Why all the vitriol with regard to short sellers.
These guys are simply putting their money where their mouths are and telling you that in their opinion these banks are a busted flush.
They´re also betting that the conscripted army of taxpayers will be unable to save the day.
They are taking on some formidable odds - you should admire them, not bemoan them.
If you really don´t like them tell Mr. Brown that you want to pay more tax and that you are prepared to take exactly the same risks as the short sellers.
You are many they are few - If you all volunteer to pay more tax you will win and the short sellers will be vanquished.
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excellant catblogger has said it, it is all crazy.
Where has all the money the Banks have lost gone, I have not got it.
They still have a safe mortgage on my home.
Will my pension fund collapse so I can't pay the mortgage so they will then take possession, then 1 year later sell at a great profit, is that the intent.
It's quite laughable if not so serious
Cheers.
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You know in future Historians could look back on this crisis, and see it as leading to social and economic changes as radical as when the Roman Legions withdrew from Britannia.
We are all going to see a lot of major changes in the next few years !
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#37 hrwilliams you have an impressive heap of detailed technical info which is beyond my Economics 101 level of understanding of synthetic CDOs etc, but what you say seems to confirm what I was suggesting in my post #29
which is that, simply put, several of the big, aggressive players like RBS, Barclays and several of the US banks (oh and whatever happened to the very unconservative Swiss banks BTW?) are hiding several more huge tranches of potentially toxic stuff
maybe #15 needaflip is right that HMG are involved in trying to push the shares down for devious reasons but I find it hard to believe they'd be that cunning
--------------------------
thinking of BIG BANKS and their TOXIC assets, I wonder if you have seen the marvellous Japanese animation
SPIRITED AWAY
remember the STINK SPIRIT who visits the bath house and CHIHIRO removes some junk from its side....... and then a huge wave of stinking toxic junk from the river sludge comes pouring out of it
well that's our marvellous banks
I'd recommend that you watch SPIRITED AWAY if you've never seen it; it is a lovely film; or watch it again; and when it gets to the STINK SPIRIT scene just think of a big bank; take your pick
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he should sell the bank for a profit like all his predecessors did as they were all jolly good fellows
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Just a figurehead & a sinecure of a job: He'll do exactly waht Crash tells him to.
He must be thicker than I thought, allowing himself to be suckered by these politicos !!
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Robert,
Could you, at some point, give us your take on the strange things going on with the Oil Market?.
WTI is dropping while Brent is steady at present . I've been told that the Cushing Oklahoma Hub storage is brim full and that the septic banks (Citi et al.)are scouring the world's shipping for spare tankers for the oil bought months ago with effectively no one buying for first quarter 2009 to sell on to. Apparently they have to store at sea waiting for the market to recover at some future date to sell above what has been paid!.They can't even unload the stuff. There is nowhere to put it.
One can only assume that in 2007 and until Sept 2008 the "players" realising that the end was nigh and realising the stock markets were on the edge, piled into commodities to extract a few more months of virtual solvency before crashing in flames. Our gas prices in Europe are linked to the oil price so our bills are the direct result of this and this money has already evaporated out of our economy even though we will still have to pay up.
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54 blefuscu:
There is indeed something pretty odd going on in oil markets. There is a huge overhang of surplus crude, and only today the IEA revised its 2009 demand forecast downwards by 1 mmb/d, a massive revision. Yet oil prices have remained comparatively robust, when they really ought to be below $30/b. It cannot all be attributed to the Gaza effect. Strange.
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Ref 47 : Whistling_Neil
Most plausible.
I'll be interested to see any proper investigative journalism done on the topic (dangerous work, m'thinks, as the Devil won't like anyone knowing he exists). I know... let's blame the short-sellers. Easy answers for hard questions. Perfek.
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37 HR Williams gives a plausible explanation of the short selling of Bank shares today. Could I suggest that the Govt was well aware of this possibility when it relaxed the rules. All the talk is of more bail outs on the back of the amount of tax payer money already invested. This week the Govt had to put up £xms more to fund the new Lloyds Group as the shares were shunned by investors. With such a volume of shares in RBS etc showing massive losses for the Govt 9 sorry taxpayer ) then Calamity sees the only solution as nationalisation - so what better way than drive down the share prices so much that capital values are lost and the Govt nationalises virtually for nothing. Calamity can then order the banks to lend East Germany style to encourage elector support as otherwise he is dead in the water if we have an election.
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Robert:
That is very sobering news, for the Royal Bank of Scotland that they will be getting an excellent advocate in the form of Sir Philip Hampton....
~Dennis Junior~
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I am sure the short sellers have been at the banking shares today- they could not resist it.
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People on the blog are still asking where money "lost" by banks has gone. I think it goes right back to the sub-prime mortgage issue, and the fact that house prices have fallen (initially in the US, and now here).
Suppose I own a house.
In 2007 people thought it was worth £200,000.
In 2009 people now think it is worth £175,000.
Where has the £25,000 gone? Who has got it?
The answer is: nobody has got it.
My personal wealth has gone down by £25,000 and no-one's has gone up.
If you added up the total wealth of everyone in the world it would be £25,000 less because of this.
People have just realised that the house is not worth as much as they originally thought.
Disappointing for me, but not a major problem. But it would be a major problem if I had to repay my £190,000 mortgage right now - I'd be bankrupt!
And that is the situation the banks are in - having to find money at short notice effectively to cover debts they thought they had covered by assets, but now don't have covered because the assets have gone down in value.
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#48
My objection to short sellers is purely a moral judgement on the practice.
If you sell something you don't actually own this is immoral to my view.
If I borrow your car for a small fee, then sell it to a boy racer who takes it stock car racing after which I buy it back (at new market value - a few dents and so dependiong less) and then give it back to you. What would you think?
Would you thank me for revealing your car wasn't that good at stock car racing (the short sellers we're doing yo a favour for exposing weakness in your shares argement) or would you have the police called?
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Following on from excellentcatblogger, how for are we from a communist state.
What is the divide now between Labour ,Conservatives and Communists
We brivatised our railways, a dissater, now taking Banks in to public ownership.
Cheers.
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Yes, its all down to the Satanic short sellers.
The usual demonisation of the market by the prejudiced left wingers.
A short sale is essentially a bet that something is going to happen. You gamble when your information is better than the rest of the market. As #37 mentioned there is good reason to devalue Barclays.
In the market the first one to get his hands on the info will make a killing. This is why a stock market is essential. It permits the flow of information driven by greed.
The short sellers have been right before. HBOS fell because it was full of toxic debt, not because of the market.
If the market was able to take care of this and let failing companies go bust then we would perhaps not have the truly reckless gambles the banks have made safe in the knowledge that the government will bail them out.
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# 48 (short sellers)
My point was that they are going to manipulate the market, they are not passive gamblers trusting just their instincts on it's likely direction.
At times like this, they will wilfully cause a disproportionate amount of turbulance and chaos (and damage), to further their own ends.
Regards,
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#6 and others. I would also like to know where the money has gone. The total amount of physical assets in the world (houses, factories, roads etc) is still the same, but the nominal value of those assets has reduced. What does that mean? We're not actually any poorer overall in terms of those physical assets (though the effects of the recession might change that), but presumably the distribution of that wealth has changed.
So people with large outstanding mortgages on houses which have diminished in value have a smaller slice of the overall pie. Pension funds that put their money in the stock market have a smaller slice of the pie. But who's slice has got larger? It would be really good to know.
Another question I would really like to know is "who is all the debt owed to". All debt has to be owed to someone. A lot of us owe money to the banks, but the banks themselves owe money to others (like the "international money markets" which Robert has often mentioned). So who are the net creditors in the system? An if we can find them and persuade them to write off the debt, will this whole mess go away?
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'Where has all the money gone?'
A very valid question, not all of it has evapourated as optimistic valuations for the buyers benefit. The sellers have wound up with the other part of the transaction. A lot of cash has gone into buying US gov. treasury bonds which has forced the yield right down, and quite a lot of it is just sitting on deposit in the US fed reserve
http://www.federalreserve.gov/releases/h3/Current/
as a lot of people are quite scared for their money and are buying things that appear safe. Unfortunately I think the next big blow up after bank nationalisation here and in US will be gov. bonds, as the controllers of huge amounts of global capital suddenly realise that the unpayable size of the bonds written by various governments including the US and our own are exactly that, unpayable. This will start when the US gov. defaults on a bond. At that point, anything could happen but most likely will be some sort of martial law and suspension of forex/stock markets.
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Robert,
When will you post a blog and explain fully to everyone fractional reserve banking?
When everyone understands who creates the money, how it's created and the implication of the system real debate can begin.
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Didn't HBOS appoint some ex-supermarket bloke to run that bank? How did that work out in the end?
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To all the fellow warmongers out there,
Why don't we declare war on all of the tax havens:
Andorra
Anguilla
Antigua and Barbuda
Aruba
Bahamas
Bahrain
Barbados
Belize
British Virgin Islands
Cayman Islands
Cook Islands
Costa Rica
Dominica
Dominican Republic
Dubai
Gibraltar
Grenada
Guernsey
Isle of Man
Isle of Wight
Jersey
Liberia
Liechtenstein
Luxembourg
Maldives
Marshall Islands
Mauritius
Monaco
Montserrat
Nauru
Netherland Antilles
Niue
Panama
Samoa
San Marino
Seychelles
Sri Lanka
St Lucia
St Kitts and Nevis
St Vincent and the Grenadines
Switzerland
Tonga
Turks and Caicos
Virgin Islands
Vanuatu
It's 'funny' innit....that so many have ties to UK....dontcha think?
BTW ....as Jasper Carrot once mused, I don't care if they burn all the money....now there's a thought eh!
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# 66 rogcay
"At that point, anything could happen but most likely will be some sort of martial law and suspension of forex/stock markets"
I have a close friend connected to the highest echelons of Goldman Sachs. He holds a similar view to yours. Small wonder our political elite (ha!) are running around like headless chickens trying to figure out what's happening. That's why their remedies are so risible; they haven't got a clue what's really going on.
My philosophy these days: self-reliance is the future. Whatever you do, don't rely on the current generation of politicians to get us out of this one; they're idiots.
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#60 sal196
"Disappointing for me, but not a major problem. But it would be a major problem if I had to repay my ?190,000 mortgage right now - I'd be bankrupt!"
we bought a house in 1989 for 165k putting down a deposit of 100k
in 1994 we sold it to move jobs - but the market had crashed - we got just 110k for the house
the mortgage was paid off in full - every penny of the 65k we owed the bank, the bank got back
and we walked off with 45k - lost 55k in five years
how come we got to take all the loss and the banks just rode out the crash?
now we are in another crash - and still the banks get bailed out and we - who have managed to save a bit - still take the loss
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I can't believe this appointment. It was an ex employee of Asda who brought HBOS to its knees and now we have another grocer heading the RBS.
First thing Monday I'm withdrawing my savings from RBS. There's something going on between London labour and the banks that stinks.
Where are all these highly qualified accountants/bankers? Are they of the wrong political colour for Westminster.
Scarey stuff here, Third World right enough.
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For a really good explanation of fractional reserve banking, look up a video called 'money as debt'
http://video.google.com/videoplay?docid=-9050474362583451279
It is really easy to understand and walks you through it.
For some reasonably sensible discussion on whether we are due a decade of Depression or some sort of Zimbabwe style hyperinflation check out Karl Denninger on 'The market ticker'
http://market-ticker.org/archives/725-On-Hyperinflation.html
For an introduction to the causes of this mess and current thinking on ways out, also very sensible check out Chris Martensons 'Crash Course'
http://www.chrismartenson.com/crashcourse
I actually found a great graph yesterday which explained why the banks seem to be swimming as fast as they can but getting washed away by the current.
http://www.chrismartenson.com/blog/crisis-explained-one-chart-debt-gdp/11570#comment-12461
How this helps us all to prepare for a different world over the next 5 years, I have not exactly figured out yet! Suffice to say I am not investing any money in the stock market at the moment!
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55 Friendlycard
I've done a bit of research on an american site:
"hedgefund implode o meter" crude situation.
Apparently WTI normally trades at a premium to Brent being easier to refine with a lower sulphur content but the current price reverses this massively. Apparently anything that floats and can limp to a terminal is being chartered to store oil because our septic friends have spotted a 'contango' opportunity which will enable them to make a tasty arbitrage profit if the price rises to $50 by late spring/early summer. The oil majors are on board, of course, they are flush but the usual suspects Citi, Merrill, Goldman-Sachs etc are on board together with a string of hedgies.They are all bidding against each other for what they believe to be rock-bottom oil!
It could all head south though if demand continues to fall. They'll run out of storage and balances will frazzle further!
What do they say in Monte Carlo when the wheel is about to be spun?
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# 73 rogcay
What one needs to do right now is rapidly develop self-sufficiency skills and knowledge (I'm not joking); figure out how to live without cheap, fossil-fuelled energy (especially motor transport); develop strong community ties; ignore politicians (they've reached the pinnacle of self-serving spin and deceit); be wary of bad guys taking advantage of the forthcoming mess (I'm talking about social breakdown here ...); understand that when we get though this, the world could well be a better, sustainable place. But steel yourself for a very rough ride meantime.
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#48 short sellers
Dont be surprised to find -when the dust settles- that the usual suspects have been behind a late Friday afternoon hit on Barclays and RBS shares to foment a crisis and make money for themselves.
That Moodys or Standard & Poors were likely to announce a re-appraisal of their credit rating principles was well overdue, and entirely unsurprising. There is other mischief afoot.
Do you also think that getting the oil price to 150 USD/barrel last year was on the basis of world demand? Not a bit of it.
That was a concert party too.
The short-sellers want turbulence, they have no interest in the companies they play with. Lock em in a small room for the next couple of years I reckon.
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Does the fall in bank shares have anything to do with the end of the ban on short selling? That combined with the news on Citi Group will help feed the fire of chaos
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#67 anvil13
Oh dear!......You have just mentioned the one subject in your post that dare not be mentioned!
This is the one subject that Robbo daren't go near.
The last poster that raised this subject has had all his posts erased and his name obliterated from this site. It's a shame cos he saw through the greatest of Ponzi schemes known as FRB (and its inherently unstable exponential characteristic/flaw).
It's the only subject that Robbo's sworn to secrecy on....you know Free Masons n stuff, nudge, nudge, wink, wink....funny handshake etc.
He was probably visited by MI5 in the middle of the night.
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72 quietscotsmac - isn't Hampton an ex Finance Director of LLoydsTSB Group and a well qualified accountant so his appointment is not that far fetched.
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60. sal196 see 35. (i.e. your post also focuses on the more obvious side of the equation, to the exclusion of the other.)
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No: 76 Allmyfault
Spot on (if you'll pardon the expression)!
It was not just oil but all comodities. Just find the charts in market data on this site. Stocks went down as the commodities went sky high. Look at where they are now.
The speculative greed bubble fixed on anything it could. Look at cereal prices and the havoc it wrought in the third world. The septics needed liquidity. They knew what was coming. They tried anything to stave off if only for a few months what was obvious in the boardrooms and the central banks and governments knew.
The market now consists of looters after the massacre.
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I logged on hoping to read about whether there is a connection with the fall in Barclays share price and the top level meeting at no 10 this afternoon. Come on Robert, where are you?
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BankSlickerminustheR
Ha! I'll expect my call from the men upstairs shortly.
Of course once you understand fractional reserve banking (which it appears you do) everthing else is just noise.
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50. At 7:15pm on 16 Jan 2009, supercalmdown wrote:
You know in future Historians could look back on this crisis, and see it as leading to social and economic changes as radical as when the Roman Legions withdrew from Britannia.
We are all going to see a lot of major changes in the next few years !
Yeah mate, in our tax bills!!!
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#29 somali pirate
Good post, I agree Barclays are a dead bank walking and with announcements in the states today the tipping point for nationalisation has been reached. It is only a matter of time, Barclays is the UK's Citygroup in waiting, the rest will follow as night follows day.
If the government is in a small sector of banking ok, above a certain point, especially in a crisis, it becomes unbalanced. The people will get very angry with banks soon, the banks may all run willingly into the security of politics in the end.
They just need to get on with it now and be ahead of the game for once rather than forever playing catch up. the tipping point has been reached...deal with it.
Jericoa
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I'm only pottering about the web at this time of night cos I bust a gut this week and nearly cleared my action list.
Too tired to go out and spend spend spend as required by the saviour of the world, the noble Gordo.
UK plc is basically bust, needs a hawkish venture capitalist to clean out the Augean stables.
I give you Jon Moulton of Alchmey. I think he should be told to come to his country's aid in its hour of need......... install him as head of the FSA and gove him carte blanche to write his terms of reference.
Someone who doesn't need to be loved by his quarry and isn't looking for a cushy job back in the financial industry when his is done.
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Hampton is not a grocer. He went to Sainsburys in 2004 from being finance director at Lloyds TSB.
He has reportedly dropped the UKFI gig, but remains chairman of Sainsbury - half owner of Sainsbury's Bank in a JV with HBOS.
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'Britain is a nation of shopkeepers ' Napoleon
If in doubt appoint a grocer.
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#86 Moultons's just another asset stripper....hence his company's misnomer.
I wan't somebody who has grown something from humbe beginnings and who has lasted the distance i.e. somebody who's not 'flighty' i.e. loyal to company and country!
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#89 (asset stripper)
actually he isn't.
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#89 (Moulton)
Moulton would have saved Rover, instead they got a real asset-stripper.
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FRB is easy.
YOu go to a bank and pledge an asset (house, car, your future earnings) and the bank creates some money and gives it to you - so you can pay the person who previously owned the asset.
Where did the money come from - nowhere!
The money, though has now entered the economy - the person you gave the money to can buy goods and services.
However - when you pay back the loan (5 years, 30 or whatever) you pay BACK more than you were given - the difference is the bank's gross profit BUT the rest of the money you paid to the bank disappears - like through a bank hole.
Thus virtually all money in circulation has been provided by banks - if everyone in the world repaid their debts then there would be hardly any money left in the world.
Occasionally, however, banks get it wrong and they don't get their money back - this is a disaster as they have to write off the balance of the loan. This has a knock on effect as the amount they can lend is, say 10 times the assets they have.
Work it out. The bank has £1,000,000 assets - it creates £10,000,000 - however the loan goes bad - is worthless - literally 'written off' the asset column. The bank has to reduce its assets by £10,000,000 - which means it has to reduce its lending by £100,000,000 i.e. 100 times the original assets.
Obviously if the percentage of bad debts is sufficiently low (less than 10%) there is no problem for the bank - it just reduces the rate of growth. But a higher figure sets in train positive feedback of asset destruction - loans must be called in - but borrowers cannot repay the loan, thus increasing the amounts that must be written off, thus forcing the banks to reduce the amount the have lent, thus forcing them to call in loans . . .
The Government saved the world (banks) initially by giving them capital - however this destruction of ability to lend is still continuing . . .
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OK....maybe I'm being a bit harsh on JM ....he did raise the alarm bells on the CDS merde about 18 months ago (probably a good while longer, though fell on deaf ears). He did give a pretty good performance in the HoP the other day.....though like every other 'so called exspert'...sounded a little like he was 'shooting from the hip'....must have been a little bit daunting though. From what I've seen of him on TV...he seems reasonable enough.
BUT as we all know.... (hate the phrase now) the 'elephant in the room' is the great secret ....the bank's balance sheets.
Oh 'It's a Wonderful Life' ;-)
I have to mention AGAIN a certain Mr Peter Montagnon on Radio 4 this morning trying to justify fat cat bonuses. This 'bloke' was by far the most irritating and pompous person I have EVER had the misfortune to listen to on radio. For the sake of repetition (again)....I am completely unsure how this 'man' will ever extract his cranium from his anus.
Yours in anticipation (not constipation).
BankRSlicker
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#76 Of course short sellers are trying to make money for themselves. But they could be wrong in which case they will lose money - no special pleading for these guys, no bail outs, no public sympathy, no nothing they take the hit.
Like I said you want to beat them, step up to the plate, pay more tax, let ´em know that you won´t lose.
Why do you think oil went to $150/bbl? Just a bunch of spivs manipulating markets, or the market trying to tell you something?
I´m aware of no mechanism whereby the oil markets can be manipulated to the extent necessary to drive oil from its long term average (1873-2002) of $17/bbl to $150/bbl If you know different tell me exactly how this is achieved.
On the other hand if you prosecute unsuccesful wars against Iraq, prop up Wahabbi extremists in Saudi Arabia, try to threaten Russia, fail to overthrow Chavez and watch his influence extend to Bolivia, Ecuador and Brazil, and witness exponential Chinese demand growth then maybe the market might try and tell you something.
Equally if you think you are going to see demand destruction (as the IEA belatedly does) on a suddden an unparrelled scale then maybe the market will also try and tell you something.
You are a free man, you can choose to believe either the market or Gordon Brown. Believe who you want - and place your bets accordingly. Basically that´s all hedge funds or short sellers do.
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Testing comms - sorry, folks
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#74 I think you will find shipping markets and national oil companies are also involved in this.
Freight rates a very low - zero in some cases. This means ships have no business, so may as well become floating storage. After all some money is better than no money.
Once you tie up enough tonnage freight rates rise. This is good for shipping companies. It´s also good for national oil companies as oil prices rise. Supply and demand is the long term price setting mechanism, but deliverability is important short term.
Oil traders/speculators know this and also join in.
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Short selling should be banned.
I can see why in a free market, short selling is a healthy thing, but the way it is working in the real world - an imperfect information market - it is causing real damage.
You only have to look at this blog to see different sources showing claims of why Barclays is in trouble - rumours of it not being part of the government plans for help with bad banks, plus other rumours of hidden liabilities etcetera. Funny how detailed explanations suddenly turn up on the day that short selling is unbanned,...
The market consists of traders looking for volatility, with short term volatility being particularly attractive. If you can panic/scare the market, particularly when it is already jittery, then under normal conditions you can spread rumours, watch the price fall, and then buy the stock low. If you held the stock in the first place you could have sold high.
However, with shortselling, you can sell high on your chosen target without even owning any shares to start with, flood the airwaves/forums with false information, watch the market panic, and then buy back low.
I would be amazed if Barclays does not regain most if not all of the 25% it lost today by this time next week.
We've seen the damage that having swathes of traders looking for quick profits made from trading instead of manufacturing or making something has done, with the gains privatised and the losses socialised. The reality is that the UK and the world economies will innovate and (probably) grow over the next few centuries, depending on whether new fossil fuels are found or other alternative energy sources.
Today even if you knew nothing about Barclays, nor had any interest in the company or holding shares long term, if you got the 'news' early it was easy to spot which way the wind was blowing, join in the queue of people shorting it, and crash the shares for a tidy profit. The real game is to not be last in the queue when there is a bubble, either upwards or downwards. Dont' get left carrying the baby.
Short-selling does need to go as the ability of people to convincingly spread false information quickly, preying on people's fears, is more powerful than the availability of information to the market. Many banks/pension funds have stop losses as values in a stock or the market plummet, and by law have to dispose of their shares once the price reaches a certain level, in order to maintain the value of their capital. Many of the people today will have had their positions in Barclays closed out as the share price fell, and if indeed Barclays shares are back up this time next week by the 25% they fell today, these people will have been mugged.
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#27"Interesting to note that Fred the Shred's......etc..........Blimey. This guy might be temporarily unemployed...."
No he's not, unfortunately: he's chairman of The Prince's Trust. "Helping Young People to Help Themselves". Obviously something that bank executives are rather good at.
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#61 Lots of things are immoral. I guess the definition of immoral is something of a personal judgement, but in my opinion lots of things (war, famine, the destruction of the environment etc. etc.) would rank a long way ahead of short selling.
With regard to your analogy I couldn´t care less what you do to my car just so long as the fee charged covered all damage. If the fee didn´t cover the damage then maybe I should find another business.
No need to call the police under any circumstances. Anyway from what I read the police are fully occupied dealing with death rates made by illiterates by way of text messaging.
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#92 "YOu go to a bank and pledge an asset (house, car, your future earnings) and the bank creates some money and gives it to you - so you can pay the person who previously owned the asset.
Where did the money come from - nowhere!"
this has to be wrong. the bank will take deposits from savers, and then lend them out to borrowers.
i don't think any bank can just 'create' money from nothing, and if they could, why are they not paying every banking employee bonuses of a trillion pounds each per day?
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#74 You misunderstand. The current game is about tying up shipping tonnage. Nothing to do with supply demand - other than the control of shipping chokes of both supply and demand.
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Don't be fooled, Brown knows how this works now. Create enough stink around a bank and it's creditors will start calling their loans in, from the retail customers to the soveriegn wealth funds(he is no doubt unhappy with the Abu Dhabi ownership as well). Stuff the shareholders, the capitalists. Don't forget Mandy is back in the fold and Cambell is hiding in the shadows, spinning bad news about a bank is childs play for them. He wants to be seen as a reluctant nationaliser of companies, look back into his history as a politician he was directly involved in previous Labour policies proposing nationalisation of the banking system.
I hear he is calling for the banks to 'come clean' over all liabilities, you first Gordon, can we get the real figures for national debt including the off balance sheet PFI liabilities.
The only way out of this is a period of relatively high inflation, about 10% per annum for 4-5 years. You may as well spend your cash now, it will be worth at least 40% less in 5 years time.
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This problem is easier to resolve than it's being made to be.
Credit markets will unfreeze as and when house prices start to rise again (albeit in a much more moderate fashion).
In the UK this is easy to achieve. Knock down all those ugly 60s tower blocks built during the previous labour governments and create a real supply/demand imbalance. Build more appropriate family homes, creating more jobs across all sectors, and allow inflation to go up to about 5%(the pound is already trashed, and there is no foreign capital inflows to speak of now). Invest heavily in industrial infrastructre in high value added manufacturing, to take advantage of the devalued pound and create real economic growth, not this pseudo growth through shuffling money about and walking dogs.
Simple!
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I really do hope that Barclays are not in the mess this share price fall would suggest, that this is just a case of short selling speculation, and that on Monday if this becomes clear as a speculative attack, that, like what happened with the VW shares a few months ago, those Hedge Funds get their fingers seriously burnt!
Come on Peston do your bit for Britain and write an objective report on the financial position of Barclays giving them the all clear. Let's toast some hedgies!
http://www.ft.com/cms/s/0/363de5c4-e400-11dd-8274-0000779fd2ac.html
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#97 Your argument is basically an argument to protect the terminally weak.
Warren Buffet for example is on record as saying he would welcome the attention of short sellers. That´s because he knows that if they moved against him then he´d rip them apart.
Why don´t Barclays rip the short sellers apart? They clearly fancy themselves as some kind of cool operators - after all it was only weeks ago that they were picking over the carcass of Lehmans.
Think how cool they would be if they saw of the short selling hyenas. But they don´t step up to the plate do they? I´m sure they´re real cool moving dudes when it comes to repossessing the houses of the poor, but suddenly they want to be victims when it comes to playing with the big boys.
If you don´t agree then that´s fine - just buy Barclays shares - they´re available to anyone with money.
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I know better still before the market opens again on Monday, lets get the FSA to reinstate the ban on short selling! It was mindless to remove the ban today anyway, we are no where near out of the woods in terms of stability in the banking system. Why impose the ban in the first place if you are just going to lift it whilst we are still in the middle of the storm. These muppets really need to start doing the opposite of what their instincts are telling them.
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# 79
It appears you're right. Thanks for pointing it out. Mind you, anyone who's had anything to do with Lloyds TSB in recent years is suspect in my book.
There's so much more to rise to the surface regarding the financial sector in the UK and I've a feeling none of it will e pleasant.
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Why didn't they wait until the new measures for getting the banks lending again were announced before lifting the ban on short selling. This really stinks, Brown is just picking off the banking system like some unscrupulous hedge fund manager.
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Re Sir Philip Hampton.
Trained as an auditor at Coopers, he took an MBA at the French INSEAD administrative college before joining Lazards through most of the 1980s. He then moved through a series of Finance Directorships with British Steel, British Gas, British Telecom and Lloyds TSB, before becoming chairman of Sainsburys in 2004, simultaneously producing the Hampton report into regulatory enforcement which led to the Regulatory Enforcement and Sanctions Act 2008. In June 2008, he was sounded out in for the RBS post by institutional shareholders. On November 3, he was appointed chairman of UK Financial Investments Limited, in charge of the HMG's shareholdings in banks drawing down the Recapitalisation Fund.
The Hampton Report opens: "Dear Chancellor, In Budget 2004, you asked me to consider the scope for reducing administrative burdens by promoting more efficient approaches to regulatory inspection and enforcement, without compromising regulatory standards or outcomes...businesses are concerned...the cumulative burden of regulation..remains one of the principal challenges of business." Really? One would have thought that foreign competition and an already impending energy crisis might have been larger matters in their line of sight.
The Regulatory Enforcement and Sanctions Act 2008 consists of four parts: three decentralise regulation, and the fourth imposes a duty on regulators not to "impose burdens which that [regulator] considers to be unnecessary". Any legal constraint in the performance, the appointment or function of such a Regulator was thereby at one stroke rendered void. Is it any wonder we're in Alice in Wonderland? We have the Mad Hatter in charge of the party!
It is also to be noted that the team who produced the Hampden Report included a certain Mr Will Straw - surely this cannot also be the same Will Straw who is the son of the Secretary of State for Justice and who as President of the Oxford Student Union was found protesting "Labour are turning into Tory bar-stewards" complaining about top-up fees in 2003, having just passed the Civil Service fast-track Graduate Training Scheme exams, can it? It appears that he spoke with insider knowledge. Five members of the Oxford Union council Executive resigned, accusing him of a dictatorial style.
We therefore have in Philip Hampden someone who significantly weakened regulation immediately before this crash which was caused, I hardly need to remind our readers, by a failure in regulation. Having run an office where a member of his staff appears to have had a certain conflict of interest, he now finds himself in a not dissimilar position, being entrusted with the surveillance of himself under a remit where he has the duty not to impose on himself any regulatory burdens which he himself considers unnecessary.
William Schwenk Gilbert considered a similar circumstance in the case of Pooh-bah, Lord High Everything Else in The Mikado:
Ko-Ko: Pooh-Bah, it seems that the festivities in connection with my approaching marriage must last a week. I should like to do it handsomely, and I want to consult you as to the amount I ought to spend upon them.
Pooh-Bah: Certainly. In which of my capacities? As First Lord of the Treasury, Lord Chamberlain, Attorney General, Chancellor of the Exchequer, Privy Purse, or Private Secretary?
Ko-Ko. Suppose we say as Private Secretary.
Pooh-Bah. Speaking as your Private Secretary, I should say that, as the city will have to pay for it, don't stint yourself, do it well.
Ko-Ko. Exactly — as the city will have to pay for it. That is your advice.
Pooh-Bah. As Private Secretary. Of course you will understand that, as Chancellor of the Exchequer, I am bound to see that due economy is observed.
Ko-Ko. Oh! But you said just now "Don't stint yourself, do it well".
Pooh-Bah. As Private Secretary.
Ko-Ko. And now you say that due economy must be observed.
Pooh-Bah. As Chancellor of the Exchequer.
Ko-Ko. I see. Come over here, where the Chancellor can't hear us. (They cross the stage.) Now, as my Solicitor, how do you advise me to deal with this difficulty?
Pooh-Bah. Oh, as your Solicitor, I should have no hesitation in saying "Chance it —"
Ko-Ko. Thank you. (Shaking his hand.) I will.
Pooh-Bah. If it were not that, as Lord Chief Justice, I am bound to see that the law isn't violated.
Ko-Ko. I see. Come over here where the Chief Justice can't hear us. (They cross the stage.) Now, then, as First Lord of the Treasury?
Pooh-Bah. Of course, as First Lord of the Treasury, I could propose a special vote that would cover all expenses, if it were not that, as Leader of the Opposition, it would be my duty to resist it, tooth and nail. Or, as Paymaster General, I could so cook the accounts that, as Lord High Auditor, I should never discover the fraud. But then, as Archbishop of Titipu, it would be my duty to denounce my dishonesty and give myself into my own custody as first Commissioner of Police.
Ko-Ko. That's extremely awkward.
Pooh-Bah. I don't say that all these distinguished people couldn't be squared; but it is right to tell you that they wouldn't be sufficiently degraded in their own estimation unless they were insulted with a very considerable....
I leave it to you to research the last word.
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#50
I recall not so very long ago you called me out on that one, on the basis of the original choice for your cognomen.
To enlarge your conception, the withdrawal of the Roman legions was not the disaster it is traditionally reported as having been, as the locals took their self-defense in hand quite competently. If you research the Anglo-Saxon Chronicle against the Norse sagas, you'll discover that something like three hundred and fifty years of relative calm ensued until the Norse attacks of the late eighth century began - and these were to a certain extent internally motivated into the bargain, as studies of the genealogy of my revered ancestor Eric Bloodaxe reveal.
On the other hand, what we now face is more like the events which happened after the Black Death wiped out between half and two-thirds of the population of Europe between 1348 and 1350 - one further disaster might have wiped the population out completely. Hopefully we will not be reduced to that level of population, but the problem remains that a complete collapse of the economy may have not dissimilar consequences. It behoves us each to practice such manual skills as we may have without the use of power tools in the case of the worst possible scenarios. For example, how many blacksmiths are there? Forty or fifty? That's about one in a million head of population...
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#105 After thought, I don't agree with you. There have been a growing number of examples of markets being scared/panicked by deliberate false information, and the trend for exploitation of the rapid growth of instant web media, presents massive opportunities for the unscrupulous.
Short-selling doubles the advantages of skulduggery - you don't have to own the share in the first place to sell it high, and you can trade out once you have crashed it.
When the FTSE dropped about 2/3 months ago to around the 3500 mark, a lot of that was companies hitting their stop losses and having to dump their stocks. This then self-fulfilled.
Warren Buffet is also a media manipulator. His stake in Goldman Sachs was widely trumpeted - informing everyone that he believed it was a good investment. Given his track record, his voice is very powerful, and by saying that he was behind a substantial investment in GS stock, it strengthened the stock in the eyes of all investors. There wasn't any point in shorting it or selling it as there is the real prospect WB could go back in for more. The advantages of spreading false muck about GS are therefore hugely reduced.
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Short Selling. Thank you very much. You are in the process of eliminating all my savings by destroying the price of Barclays shares. Like many thousands of ordinary hard working loyal employees of the bank I had built up savings over the years of shares to be used to help my children through their university years. Yeah I fully appreciate shares can go up or down but not to the extent that these games have been played with our lives.
When prices began to fall were the shares too high 18 months ago - whose fault was that. Have the banks billions of pounds of profit been the result of trading in bonds created out of the toxic waste of the US sub-prime market and the various SIV's, conduits and insurances also dealt. By the very nature and route of the ultimate/initial risk of these products disaster had to be looming. The market was sure to implode at some time.
Did the dealers and their bosses know what they were dealing in. If they did was this fraud on the grandest scale. If they didn't is this incompetence and negligence on the grandest scale. If I didn't know what I was doing in my job people would suffer and I would pay the consequences.
Are these purveyors of financial disaster and meltdown still in the employ of the Bank. I bet they are and earning massive sums for their efforts. As a result of their greed thousands, like me, in the bank will lose their jobs, savings, future and hopes for themselves and their families. Elsewhere, businesses will not get the working capital to survive as the economic downturn grips even harder over the coming 18 months. More will lose out enormously.
Of course the social injustice is massive as no action will be taken against those who have created this mess. Yet Boy George gets 15 months in prison for slapping and chaining up a gay drug riddled escort. A crime no doubt but a huge inequality seen in the crime and the punishment. I suppose the prisons are too full to allow all these "fraudsters" (refer to the Madoff Lord of Fraud situation.). No, instead they will be earnestly working to help rectify the situation at great reward and passing the blame to the anonymous. They already have enough money not to worry anyway.
What about Private Equity Funds. Should they be searching their consciences as well as the bankers that kept backing them with lower interest rate margins and weaker covenants. Is the Bank going to see more losses as large companies exposed to PEF dealings go to the wall in the next 18 months.
Come on guys hold your hands up, have a conscience. We are losing our jobs as a direct result of YOU surely its time for you to be held to account in one way or another.
From one very disappointed person striving to find a reason for it all.
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post 112
Boy George ?? 5 years would be more
appropriate
Derelict Bankers?? 10 years,Criminal
Bankruptcy & 25 year Director Disqualifications.
Short selling?? Ive done it to HBOS its
the system thats at fault although the
PUNTERS/HEDGE FUNDS ETC take the
PROFIT/LOSS.Not the shareholder people forget the "SHORTER" has to
borrow the shares at a cost.So shareholders are involved TOO!
RE HBOS IT WAS GREAT FUN.
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Re Hamptons NEW JOB??
I feel all nationalised banks should have
their Boards of Directors replaced by
MEMBERS OF THE PUBLIC on the same
basis as jury service.
The member could serve for say 18 months at circa 30K pa.
THERE MUST BE AN END TO CHIEF EXECUTIVES PICKING UP HUGE SALARIES IN PUBLIC/STATE CONTROLLED CONCERNS.
I believe the average Bank Chief Exec
pay is circa 4,000,000.
Average earnings in the UK are 26,600.
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No-one can complain about short selling - its a bit rich to create a system where anything goes and then complain when people utilise that to make money. So what if its not moral - morals don't count in the city. Its not the bankers fault, its the system and banks fault and the requirement to make money by whatever means. People can see short selling and its effects so they are getting themselves all wound up. What about all the insider trading etc... that is all over the place - that is just as bad (and actually illegal) but not as transparent.
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#40 "Why appoint another grocer to lead a bank?"
Give you just one guess which sector is doing very well right now !! Meanwhile, I'm off to do my weekly shopping !!
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#114 "The member could serve for say 18 months at circa 30K pa."
Wonderful idea !! We could start by restricting MP's pay to 30K !! And no John Lewis lists too !!
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Hey Mystery Babylon your body guard
Is going to need some body guards
'Cause the ghetto youths won't take no more card
Can't you see the cup is running over
And any time they could turn you over
Robbery with aggravation
Shooting with intent
The ghetto youths are not comfortable
Because the dollars not worth a cent
Inflation in the economy
It is making my people paranoid
And there is only one solution
Is to be governed by Rastafari
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This may be very naive but as the banks are now pretty much nationalised, how about writing off all mortgages and borrowing that the banks have given to the people of the UK: After all they gave us this money under false pretences that they had it in the first place (when they didn't), and were responsible for stoking up house prices by making credit so easily available. Now we the taxpayers, are going to pay a very high price for it in future.
What purpose do the banks have anyway if the rotten stuff could be cut out and new micro-banks on a community level (friendly societies) could take over future lending under very strict rules?
If everyone was freed from debt, the economy could really move forward and higher taxes for higher earners (who will be the immediate winners from writing off their debts) could compensate those who have lost out from savings etc. Of course in the end we all win as the economy starts moving again , new jobs are created & others secured. Tax revenues will rise etc.
I know this will get shot down in flames by other posters but it just seems fairer this way.
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What I'd like to know is why all this hoo-haa about failing and failed banks and nothing about those still surviving and doing business (almost) as usual ??
Is this more of the "man bites dog" syndrome ??
Can we have a few more shreds of news about banks that have successfully beaten off the attacks of the current recession !!
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Terrible in Armagideon
But I will not be their slave
I would rather die as a brave
Rather be buried in my grave
You see the battle as good over evil
they are giving me a trample
evil get dismantled
Fire start to blaze
Heathen rage
Turn another page
we worked hard on the sugar plantation for so long
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Friends, Rahere has now referred the Moderators to the Second stage of the BBC Trust complaints procedure.
In December, they refused to post an important posting because it used Mediaeval Flemish, which at that time was very close to Mediaeval English (they were both parts of the same Kingdom), and again because they refused to allow the anglicised script version of one of the most important Haiku . They had an option to accept these things, but chose to act authoritarnianly.
Two days ago, they edited out a reference to a National Statistics Office study into the socioeconomics of the income of the UK, found on the NSO website and dated December 2008, on the grounds that it is irrelevant. Since when is an NSO report irrelevant on an economics blog?
They have now referred some research into Philip Hampden's relationship with a member of Jack Straw's family, taking #4's point into a whole new realm of insider dealing.
The gentleman in question is overtly thanked in the Hampden Report for his work, and when you Google his track record, one realises that we begin to have a dynastic government appearing.
However, it is not the Moderator's responsibility to allow #4 and deny something as obvious as this. He may refuse something libellous, but he has the evidence in front of him what's happened, it's all one degree of imputation and so clear as a pane of glass what's been going on. With ten thousand unemployed bankers out there, they have to choose this one...
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Rahere 122
YES THEY LEAVE ME STUNNED AT
TIMES.
MEANWHILE LABOUR OUT OUT OUT!
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#6:
The answer to where the money is gone is simple. It's gone mainly to people and companies who sold houses at the height of the housing bubble.
The banks got into trouble by making "bad loans". That means a loan that is not paid back. So, at the simplest level, the people they made the loans to have our money. As most of these loans were mortgages, the money was used to buy a house, so the money now resides with the people who sold these houses to people who could not afford them. The banks then repossess the houses, but because the price has gone down since purchase they lose money on the deal, and the person who sold the house makes the money.
Not all of it's like this; some of the bad loans were made to companies that went bust, so the money is now with the creditors of those companies, for example. But the idea is the same - find out who the loans were made to and what they did with the money and you get your answer.
For what it's worth, money and wealth are not conserved like matter and energy - if they were you wouldn't be able to pay interest on money.
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rahere good research and post there!
I'm confused, Gordon Brown has 'begged' the banks to come clean on their balance sheets.
Hold on a minute, is Gordon saying that he did not perform due diligence on them prior to wading my tax payers cash in?
This government’s incompetence knows no bounds!!!
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Nepotism , Labour (or new labour, no difference)
Two words that go hand in hand, can’t wait to see the look on their faces when the decimation occurs at the next election. I think David Cameron mentioned ‘retribution’ and ‘enquiries’ and ‘accountability’, wonder who he means ;-)
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We've been down in the valley much too long
We've been down in segregation oh so long
But we are going to rise and shine
For now is the time
Restore your strength and power
Waste no more time
We've been down in humiliation much too long
But we are going to rise and shine
As the morning sound surrounds you
It's International morality time
For the sake of the younger generation
To win their hearts and minds
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Ladies and Gentlemen, my work is now published on Nick Robinson's blog, Green Shoots (2) 16.1.09 0130pm, #190, as the Regulators here can't take the hint.
#125
Refer to Section 72 of the 2008 Regulatory Enforcement and Sanctions Act 2008 , the direct product of the Hampden Report, for the answer to that one.
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65, Random thought asks who are all the creditors.
I watched the recent BBC program and it looks like NRK, B&B and possibly other british institutions were packaging up mortgages and (in the case of NRK) sending them to Lehman Brothers.
Perhaps Lehman Brothers was allowed to collapse as it has the largest foreign debts and that the American taxpayer would be livid if it had to pay up for bad UK / Europe loans?
In our case we have RBS which is sitting with 1.8trn liabilities, now as a UK taxpayer I certainly don’t want this bank nationalised – Any further problems there and I think it should be allowed to go to the wall.
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#17
Everyone is focused on doom and gloom, when will the successful companies who are riding the storm get a mention?
There are over 700 SME's who work in Photonics industry in the UK. Business on the whole is pretty good. My company has just had a record quarter and the order books are full going forward.
The production staff cannot work enough overtime and the company cannot make enough products to satisfy the world market. We sell over 90% of our product abroad.
R@D which is my field is snowed under with new product development as customers demand more applications from our product. We have never had it so good. It may be tough for some but the world has not stopped trading.
They say you do your R@D during a recession but a cash rich company like mine has in spite of the recession made hay while the sun shined before the storm approached. It’s a pity the Government did not do likewise!
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Here here...Rahere
Moderators - You are not the intrenet police. Rahere is one of the most informed posters across any of the BBC blogs.
Gonna quickly get me over to Nick Robinsons for this little Gem.....
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#100 "Where did the money come from - nowhere!"
this has to be wrong. the bank will take deposits from savers, and then lend them out to borrowers."
Sorry Annette - that's the way banking works and you get a flexible money supply - but they also take a rake-off, a "tax" on all money so created. The deposit system also allows two people to spend the same money at the same time.
In "Money, Whence It Came, Where It Went", the economist JK Galbraith said: "The process by which banks create money is so simple that the mind is repelled."
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110 rahere
Sorry not sure I agree with part of this interpretation.
The Black Death and successive plagues culled the population not jobs.
This drove up labour costs. There is a need for a certain number of jobs however small a population goes. It is not a linear relationship. You can see it in low population areas of the UK. There are infrastructure maintenance concerns.
The Great Depression culled jobs not the population, this slump will do the same. The Depression in the US was 'solved' by war and stimulating house ownership, house ownership at that time a minority activity. House ownership is a big economic driver because of the budgets involved. The UK government of any colour will return to housing asap, it is limited by the overbearing expectation of price decline in 2009. Anybody who thinks this desire will not happen is likely to be disappointed.
The problem with the current Great Recession, as it is being referred to in the US is the lack of work activity to follow and the simple fact that a modern industrial society is too efficient in labour terms and products have a increasing long functional life. All you are left with as a motivation to consume is fashion, which while a strong motivator goes to one side when times get tough. Well documented. The situation is exacerbated by the low labour cost countries but that is not just the problem.
The most basic of needs, food, is covered by about 2+ percent of the population working, I know there are imports of food but if it was all brought home and imports stopped it would not make much difference.
Contrast that with 10+ percent on the land at the start of the 20th Century. (I would need to look up the accurate figure, but it is certainly a great deal more than 2 percent)
Improved efficency in other sectors have impacts also. The problem has been hidden to some extent by WW2 (which reduced working populations (including some of my family) and stimulated output demand (but can also come with massive debt as the UK found after WW2)). Addittionally the flywheel of manufacturing export to the old empire - commonwealth helped - and domestically the mid 1970s onwards fantasy of property related domestic 'wealth' provoking massive debt. However the fundimental underlying problem remains.
You do not now need the workers but still have the population. Those who have bet heavily on the oversupply of highly paid highly industrialised jobs to provide them with lifelong careers and comfort have got it wrong. At least some of them, not all will disappear, it is reduction not elimination. It is interesting that HMG now are pushing for more skilled workers by 2020. As I see it that is just a mechanism to make sure there is an further continuation of oversupply to keep wages down, and the economy efficient, therefore competitive. The unskilled not forecast to be wanted, stated as such. You still have to feed them, they will not suddenly become skilled. Hence the drive to actually make being unemployed a job. a new social class working but not working.
The fact some well paid work activities lapse does not mean the residual economy is not robust, it is driven by more basic desires and needs. There is bound to be a high tech element, that is just a work tool. All work tools are used if effective. Well rewarded jobs will remain but in reduced numbers.
You can see part of the problem is recognised, but not voiced for what it is, by the latest government idea floated to pay people to scrap functioning secondhand cars if they buy a new one. This is simple an attempt to accelerate obsolescence and therefore artifically create work. It is directly opposite to what is needed as it props up a failing system. None of these type of action ultimately can work because they are all about artifical demand.
Post industrial society has to reorganise and reprioritise, that is what this is all about. It is laughable to think the process can be stopped. Absolutely hilarious.
Generally all this focus on failing buisinesses is wrong. It should be viewed as the majority of jobs continuing, not talking about a minority failing as though it is the end of society. But those with vested interests are shouting and trying to dominate the media and influence government action.
Sorry, but it will be very simple. Provide something somebody is prepared to make themselves poorer to buy. That is what you are asking them ot do.
------------------------------
As for the ground swell of complaint about short selling. If you want to stop the hedgies then you buy the shares at a low price and they are stuffed, as happened with the VW bash. But people who complain about markets seldom want to act in them. People who stay out of markets are risk averse and basically want the profits of a market without the risk. That is partially where this current catalyst has come from, risk averse people self blinding themselves to the risk element of being in a market. You buy shares or get your pension based on shares there is risk. It isnt a one way bet. Even HMG seems to have forgotten this eg Childrens Trust leaflets issued to novices effectively advising stock market investment rather than fixed rate deposits. Nuff said as to how HMG got here.
Apologies for the length of the post.
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It makes me mad when Gorden says the banks should be honest about their bad investments; their bad investment was the UK housing market! How bad that investment turns out, depends on how far the prices drop, and Gordon is doing anything he can to prop up the market (thus rewarding those who overextended themselves, and further punishing first time buyers). The main policy failure while he was at the helm was to let prices bubble so much in the first place - which he took to be testament to his economic success. But if I was an international investor with cash to invest right now, I would do anything but lend money to a UK bank who would then lend on for a mortgage. Similarly as the short-term liabilities of UK banks for money that they have lent on as mortgages fall due, nobody is willing to give them any more loans. Hence the government has to step in and inject money into the banks to make up for their 'bad investments'. But then the gov't has to borrow that same money. And at that stage the UK is looking a lot like Iceland: Can international investors be sure that Gordon will honor his debts rather than printing more money? The answer is clear. I had once thought parity between GBP and EUR would be an opportunity to invest in the UK, now I'd like to get 2GBP for 1EUR.
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128 rahere
Had a read before any risk of modding. Interesting but regretably not uncharacteristic brown behaviour.
It doesnt matter what they do. The bottom line has to crystallise at sometime. The great prop up goes on. Napoleon - History is a set of lies agree on.
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#114 "THERE MUST BE AN END TO CHIEF EXECUTIVES PICKING UP HUGE SALARIES IN PUBLIC/STATE CONTROLLED CONCERNS."
Absolutely - an example is Sir James Crosby, deputy chairman of the FSA, but until July 2006 CEO of HBOS. In fact, according to the FSA website, he was appointed to the FSA in Jan 2004, whilst still CEO of HBOS. How many more conflicts of interest have there been in regulatory bodies? They might as well have appointed Buster Edwards to the Parole Board.
The Wikipedia entry states:
"James Crosby has been accredited with the over zealous lending practices within HBOS which ultimately led to its market failure in 2008.
In April 2008, Crosby was appointed by Chancellor Alastair Darling to head up a Working Group of mortgage industry experts to advise the Government on how to improve the functioning of the mortgage market."
I seem to remember that just before Crimbo he recommended the restarting of the mortgage securitisation market.
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#129
Several years ago I worked as a mortgage adviser. The most 'non conforming' or 'sub prime' mortgage I ever had to source was a council house right to buy remortgage that was still in its pre-emption period. The occupants had to rely on tax credits to make the income multiples fit. IIRC there may also have been previous arrears.
The only lender in the country (?) that would take the risk was SPML. These were owned by Lehman Brothers. It actually stands for Southern Pacific Mortgage Lenders so there is likely to be a deeper story.
Lehman Brothers were also heavily involved with Northern Rock and some of my friends worked as underwriters on a new market they were loking to get into in Britain. This market was heavy adverse or sub prime. One marketing strategy was to pay brokers 1% commission instead of the usual 0.5%
Seems they just loved the bad stuff.
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"We own the banks"...
Is that in the same way that we own:
1. The roads - what colour would you like the road marking on your square cm of the M4 sir?
2. The schools - yes sir, you want another try at an education? Of course, come on in.
3. The hospitals - Of course sir, we'll give you a replacement kidney at your convenience.
Like it or lump it, GB and co. have decided what to spend taxpayer's money on, just as every other government has done.
Oh, and nationalise the banks please.
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is it not fraud to sell something you don't have ?
or is the dealing in shares different ?
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134,
You are correct GB will do anthing to prop the housing market up, as will any other PM.
There are many reasons for this, see post 133.
Also consider what would happen to our banks capital reserve ratio requirements should house prices really fall ;-)
You've guess it, the tax payer would have to bail that out too!
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Re: 139. At 10:38am on 17 Jan 2009, spetmologer wrote:
is it not fraud to sell something you don't have ?
or is the dealing in shares different ?
+
you and me cannot sell short it's only brokers / hedge funds etc who do stock lending and short selling etc
it's probably at this point individual investors realise the games is biased or unfair and have to get out the kitchen
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Nice to get the first day in yesterday. Barclays and HSBC merger anyone ??
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134. HousePricesWillFall
'It makes me mad when Gorden says the banks should be honest about their bad investments'
El Gordos request (which should have come from Comical Ali surely) (amazing how El Gordo whose policies got us here has to keep butting in on Comical Ali to try and bluster his way out of history) is meaningless, just more posture. Most of the 'bad' has value depending on market outcome. If relating to a property it depends on property values and critically to the exposure to negative equity. Property always has some value - as long as there are enough people to inhabit them. The problem is further compounded because whilst in this country the exhousholder can be pursued and usually has insurance covering the failure to redeem, in the US where much of the muck grew - under 1930s law a householder can walk away with no pursuit. Throw the keys in. Quite why illjudged investment packages bought by UK based multinational banks should be the problem of UK taxpayers is not apparent to me but the banks wont talk, I wonder why. Because of the complexity of the financial instruments, er fiddles, my bet is you do not know the really bad stuff until it manifests itself as a debt collector. So it is very difficult to quatify bad stuff, it depends on outcomes. I have repeatedly asked for UK banking comment to confirm that in fact losses against mortgages are not the banks problem but the insurance policy issuers. Continual silence. Basically there should be NO loss for banks on UK mortgages unless the mortgage was issued fraudulently. The losses are transfers to the insurance company who then pursues the exhouseholder for the shortfall. That is why even small negative equities cause problems. There is NO discussion or negociation simply a desire to foreclose and claim against the insurance policy. Problem exacerbation not dilution.
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139.
... is it not fraud to sell something you don't have ?
or is the dealing in shares different ? ....
You buy the right to do anything you want pretty much with the share providing you return it at the end of the prescribed period. If you sell and can by back lower the providing you cover costs you make a profit. If you sell low and have to buy back high you lose money. Not the same as lending somebody something.
If there is a big enough group of you then you can supress the market. If you believe you have a better opinion than the market then you can make money. Potentially high risk but potentially high profit, ie gambling.
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#139
"is it not fraud to sell something you don't have ?
or is the dealing in shares different ?"
It seems that the financial industry is above the law. After all, what's the point of becoming a Master of the Universe if it doesn't confer some privileges?
Take the situation where numerous billions of tax payers money has recently been poured into the banking system. And now they want more, which of course they'll get, despite their dishonesty about the exact financial difficulties they are in.
Gordon Brown is saying that the banks must be honest about the extent of their toxic assets but of course they wont know how to do that, it's not in their nature.
It's not much use asking Gordon or the "Labour" party to show them an example of how it's done either.
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#132 sashaclarkson
Yes, the banking system can create money out of nothing by making loans. However the money is only destroyed again when the loans are repaid or written off. There seems very little sign of the huge mass of debt in our economy having been written off yet (if it had been then we'd be in much less of a mess than we are), so presumably much of the money is actually still around somewhere.
Does anyone actually know where? Obviously a lot has been loaned to Governments who have then loaned it back to the banks again to keep them afloat - if so then not much has actually changed except that the Goverments are effectively guaranteeing the loans made by the end-creditors (whoever they are).
Meanwhile other forms of wealth like stock market investments and houses have simply lost value - hence the Arabs saying today that they have lost 2.5 trillion. I suppose that's one way of correcting some of the imbalances that have built up over the last 10 to 20 years.
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#133 glenafon
On good form today, a good summary of underlying causes.
We only need a very small workforce to provide our basic needs now, the rest is all 'enterteainment' of some sort or 'fashion' as you say that keeps people busy.
Hence the mountains of tat we have generated in the last 10 years which is totally unsustainable and does not make people happy anyway, its just like a drug ( see one of my earlier post about the potential irony of the of the opium wars... pay back time !).
The huge imbalance between what we need to survive and the amount of jobs that generates requires a massive shift.
The gap has temporarily been filled by the mass production of 'tat' ..fashion , entertainment..call it what you will. Even that is not enough now to keep the world busy and is not sustainable in the long term anyway.
What on earth are we all going to do with ourselves?
We are all just going to have to work much less or drown in a mountain of plastic toys and ever bigger flat screen TV's produced ever more efficiently.
It does rather point to a much deeper philosophical and cultural shift being required, those do not tend to happen by conscious decision though unfortunately, they tend to happen via massive social upheaval of some kind.
As a nation we will be in the front line of that as if things do start to deteriorate rapidly we are neither self sufficinet in food or energy in a relatively cold country. Only Japan have an issue on a similar scale except they have afew foreign reserves and a huge manufacturing base for basic items which will still be in demand. We dont even have that.
On a seperate note on our favourite off subject topic here Gordon Brown.
I could barely believe what I was reading...Gordon telling the banks to come clean....!!!
The bankers must be rolling about in the aisles in fits of hilarity over that one!
The man is utterly deluded. I think if you asked him who was chancellor for 10 years during the formation of this assest and debt bubble he would say it was his twin brother!
Come clean yourself Gordon before you demand that of others.
Jericoa
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Dear 112
I am sorry for your loss and what has gone on. It must be disappointing and upsetting.
However surely the guilty are those who were in charge of the banks which have hit trouble. They paid themselves big salaries and bonuses for investing in products which they did not understand and which have caused big losses.They are the cause of current problems and should as a minimum lose their jobs. If you think that they shouldn't I would like you to tell me on what grounds you would sack a director? They are the guilty not the short-sellers who are a consequence not a cause.
Secondly politicians have much to answer for particularly our current leader who set up our regulatory system. This plainly failed. Now he is telling us that several months after investing £37 billion in various banks he is unaware of the level of toxic debts they are carrying. When you are a big investor surely the first thing you do is an audit.
I am afraid we have a ruling class in both categories who have proved to be incompetent and they are the cause of your losses.
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#111 - You are wrong on almost every count.
It is true that markets are panicked by false information. A lot of that false informatiojn emanates from the companies themselves by pretending that their financial position is better than it is. It also emanates from Governments who are pretending that they can rescue the entire system. If you are looking to nail the purveyors of flase information then that is where I would start.
Sure Warren Buffet is a media manipulator, but it does not alter the fact that short sellers have not moved against him. Neither have they moved against BP, Exxon Mobil, large pharma companies and a whole host of others. Why is this, do you think?
Short sellers are trying to tell you that in their opinion there is something seriously wrong with the financial services sector, and others such as car manufacturers. Why would you not want to be aware of that information? Not knowing about something will not make it go away.
It was short sellers that exposed the criminal fraud that was Enron. Plenty of other people could have done this - competitors, regulators, accountants, ratings agencies, investment banks, employees, but they didn´t only short sellers did.
Short sellers did not make Enron collapse. Enron made Enron collapse. Short sellers simply forced the issue. Had they not done so the whole thing would have limped on a while longer and more people would have lost more money.
Like I said before if you really don´t like short sellers of Barclays - buy Barclays shares, and lobby the Government to raise your taxes further and step up the commitments to shoring up the banking sector. These people can be beaten - they are just betting that people will moan about them but refuse to get down in the trenches and fight them.
Personally I think short sellers are pretty much the purset purveyors of truth in this whole ongoing mess.
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#139 Why would you think its fraud to sell something you don´t have?
If you get a loan then you are essentially selling part of your future income stream to the loan provider. If you already had the future income stream then you would not need a loan.
How do you think companies are valued? - in part it is an assessment of their future profitibility. If you buy shares in a compnay then you are buying into the future which by definition is not the present.
Peoples irrational hatred of short sellers is in danger of warping reason and common sense.
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If you start from the assumption that GB and AD would like, for ideological reasons, to see the banking system nationalised, an interesting sequence emerges.
First, and in a climate of international banking crisis, short-selling delivers several banks into state hands on the cheap (with Barclays and HSBC alone obstinately turning down government capital).
Then, short selling is temporarily suspended, because the whole system is coming close to collapse. After a pause for breath, short selling is reinstated, and the market rumour-mill can be relied upon to bring down the share price of Barclays, possibly undermining confidence to the point where that bank, too, falls cheaply into state hands.
Along the way, expensive state capital, tightened capital ratios, and an insistence that banks lend at the (irresponsible) 2007 level, help to accelerate the process.
Next, twist the knife by demanding that banks come clean about their liabilities (BTW, it would be interesting to see pension obligations and PFI marked to market, but I am not going to hold my breath on this one).
HSBC is probably too strong and too multinational to fall in this way but, this aside, the government will end up owning the whole banking system on the cheap.
Put one way, this is no doubt a daft conspiracy thesis, to which we should attach no credence. Put another, it is the "commanding heights of the economy" which a certain Mr Marx (Karl, not Groucho) thought the proletariat ought to seize.
It could not have happened this way, could it?
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146 random
There is no need to write off the vast majority of debt. It is only debt which cannot be serviced which is the problem.
Wealth is not asset, wealth only really exists when the asset is made liquid. Asset re evaluation is meaningless. Claiming loss is just baloney. A protest at the idea of being poorer by asset measurement by rich man. There is nothing, but nothing that beefs more about being poorer than a very rich man or business.
The real problem is the mechanism of debt. You borrow today from the future to make yourself wealthier today. That is fact. You have the use of liquid funds today, fact. You then have debt repayments, fact. You are then poorer in the future as result, fact. The only way to return to having the same liquid wealth in the future when you get there is to again get more debt, ie borrow from the future again. As there are costs the debt has to expand, fact. If you stop this process you remain poorer in the future when you get there. We have got there, or some have. The only way forward is to accept being poorer until the debt is repaid or restart the debt process from a lower level. HMG wish to see the later. Having stopped access to credit due to system siezure those in debt are suddenly very poor. This impacts on the economy and makes others poorer to some extent but not as poor as the heavily indebted. As much of the debt has been spent over a period of 5 years and the repayment period is typically 25 years ther is something of a problem. Higher inflation gets rid of approx half in say 10 years but it still remains a problem. particularly as people are suddenly risk adverse and debt adverse. The main problem has been the marketing of asset as wealth when it can only be made liquid by sale of asset. That debt has no consquence because it is preceded by asset 'wealth' growth. Of course those benefiting from debt do not always advise of the consquence.
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#112: You remember when you bought those shares? The part where it said "prices may go down as well as up"? They just did.
You say you appreciate it, but you don't. There's no magical limit on how fast a stock can fall or rise. There's no reason why losses should be small and gains large. So, if you've put all of your savings into a single stock, you took on a disproportionate risk. Were the gains from your gamble worth it?
There's also no evidence that this fall is as a result of market manipulation/insider short selling rather than, say, Moodys' change in grading criteria (see the FT quote from #37). If Barclays' assets are worth less than they thought then, yes, the market price is overvalued and should fall. Interfering with that is a guaranteed way to lose money.
Here's something to think about: in what currency is the 14% coupon on their Middle East debt payable? With Sterling falling significantly against most currencies, that could make a huge difference in the cost of not taking Gordon's Shilling...
As others have said, an institution-sized purchase of Barclays shares would cause a short squeeze and bankrupt any hedge funds trying to drive the price down. But that's not happened. Why? Could it be that the people with the cash to buy don't think that the price is low enough yet?
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#133 I guess your conclusions depend on how you define and understand the Great Depression. At one level you are correct, however if you include WW2 as being a direct and unavoidable consequence of the Great Depression then maybe you are less correct.
I generally agree with your broad disrtinction between the real economy and the bubble economy, and as you say there are plenty of old school types around who can be expected to survive pretty severe squeezes.
The real problem is in seeking to understand and predict the reactions of the soon to be dispossessed. You have already seen civil unrest in Mexico and more recently there are early signs of problems in Greece and Lithuania.
In the UK the Govt. seems to be banking on CCTV and a lethargic population addicted to burgers and reality TV.
A test of your optimistic view will be whether or not we see material activity from the mob, and if we do then how the authorities will respond.
Old school people may not be admired by members of the mob, and this may prove a squeeze to many for some.
Will anyone emerge to give direction to the mob? If it gets to this stage the signs are not encouraging - you´ve had a good few years of "enemies" being discovered around every corner.
Even reading the BBC you can see the development of a visceral hatred of short sellers, even though few people actually understand their true role in this whole sad process.
Maybe Orwell should be understood as a prophet.
The species is unlikely to withstand WW3 - so lets hope your implied distinction between the Great Depression and WW2 is correct.
There is always another enemy waiting to be discovered somewhere.
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73. At 9:27pm on 16 Jan 2009, rogcay wrote:
For a really good explanation of fractional reserve banking, look up a video called 'money as debt'
http://video.google.com/videoplay?docid=-9050474362583451279
It is really easy to understand and walks you through it.
rogcay - this is an interesting video at first but soon descends into la la hippiedom with its ideas of charging money without interest.
It's got its subtle it all the fault of the Goldsmiths (any guesses who they mean here?) and NWO message.
Will have a look at your other links though.
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OK, let's start looking foe some way forward.
If you accept glenafon's analysis then we have a problem of a large unemployed and unemployable underclass.
Whilst in the next few years as more and more people lose their jobs this will appear to be the case. Those still in employment will have to be more productive and more technologically innovative.
However, I predict a number of things that will help to offset some of the job lossess:
A repair market will re-appear. People will be employed actually repairing components (both industrial and domestic) rather than replacing them. I can see a time when even components on circuitboards are replaced. These firms will probably employ small numbers and work on a local level.
There will be a slow but steady re-emergence of the old heavy industries. I know the climate change lobby will jump up in horror but China, India, the USA and some parts of the EU will defend their polluting industries on the basis of economic necessity and we will do the same. As an aside this could also help with the psychology of those (mainly men) who's physical skills have been so downgraded over the last 30 years.
As part of the government investment programme in shipbuilding, the re-emergence of a British mercantile fleet manned by British sailors and engineers.
The general government investment programme in infrastructure will also mop-up a large protion of the unemployed - particularly if the contract commits employers to use a set % of unemployed people.
Training will also mop-up a %. We now have many years of re-training experience and should by now be able to judgewhat is and is not effective.
Finally, and unfortunately, the security services will require far more manpower. none of the above will come about overnight. In the meantime there is a great danger that our towns and cities will suffer very badly from civil unrest.
The above scnenario assumes that we have regained the true spirit of the nation state and that cost/profit is no longer the only paramiter of economic value.
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rogcay earlier you said:
For an introduction to the causes of this mess and current thinking on ways out, also very sensible check out Chris Martensons 'Crash Course'
http://www.chrismartenson.com/crashcourse
I actually found a great graph yesterday which explained why the banks seem to be swimming as fast as they can but getting washed away by the current.
Another revival of hippie ideas from the 1970s backed by oil is going to run out soon and money isnt real maann type arguments.
Its good to see Socialism reinventing itself post Marx!
Onto your next one and thanks for the links btw, but I would suggest signing up for Economics 101 at your local college instead of listening to a very good salesman who uses NLP to draw you in. 101 is what I am going to do!
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#133
No apologies, length is inevitable in contingent conditions.
Crisis managers tend to hold fire until we know what's in front of us - that's half the probem with HMG, in passing - and there's some sense here.
I'm not talking about 1890 circumstances, though, but 1360, because that's what happens if we lose our modern powered plant - the difference is that in 1890, they had working horses bred from Percherons and the Flemish Heavy horse. In 1400, they did the ploughing mostly by hand - see the Très Riches Heures du Duc de Berry for examples. The difference is that one man could work an acre in the couple of months he had free if he was lucky in 1360 - in 1890 it took a man and a horse a day. Now, it takes about ten minutes. There's a couple of hundred heavy horses in the country, to which you could add the hunters and racers as breeding stock, so we're in roughly the same state as we have in tool manufacture if we face Survivors conditions.
The post-Black Death social change was the rise of the Town Guilds promoting craft specialisation - no longer was the serf tioed to the land, but many had no other marketable skills and stayed. Those who could, though, moved to towns and we saw the first steps in industrial organisation, including the development of R&D in the Journeyman traveller taking local skills across Europe and bringing their knowledge back again The risk now is we're over-specialised - after all, what use is a hedge-fund dealer in such circumstances? I'd set him to work hedging and ditching.
I've edited out my thinking further in that direction as like you say it's premature, we should concentrate on hitting the ground running when we hit the bottom. That means an abandonment of speculative and inflatory policies such as ever-increasing growth and concentrate on increasing the real value of things. As there will still be the flim-flam merchants preaching never mind the quality, feel the width, we'll also need to reintroduce the pillory, the ASBO of its day.
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#149 - I disagree with your analysis.
The fact is I am in favour of shortselling in theory, for the very reasons you have put forward. Shortselling a bad company is absolutely fair game.
However, you try to deflect away as unimportant any suggestion that certain short sellers have the ability to put out misleading dishonest information designed to manipulate markets. This is somehow excused because in your view governments and companies do it as well. This is actually no excuse at all.
The system/markets are based on imperfect information, that is how the real world operates, and you have the real problem - whether you like it or not - that there are some very convincing liars out there, plus many people whose financial positions are suited to the way the liars try to push the market in certain shares.
The effectiveness of short selling is strengthened by panicking people/targetting vulnerable stocks. We all knew full well once the ban on short selling was lifted it was banking stocks which people were most frightened about, and lo and behold we get two sets of horror stories about Barclays being widely permeated.
This causes an inverse bubble, where a share price is walloped downwards. If you saw the fake news, it made sense to hammer the share price whether you believed it or not, as it was obvious which way the wind was blowing.
This is not healthy for the efficient operation of the markets, and drives down the reliability of the markets as a barometer for which company is worth investing capital into. It is damaging, and it is preying on the weak. Yes there are times when short selling is healthy, but there are numerous times when it isn't, and despite being in favour of it under perfect information - for the very reasons you have listed - it needs to be banned, in my considered opinion.
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#158 rahere
It can't get as bad as that (but it is going to horrible). What will happen is we just get enslaved to whoever has the money (from parts foreign). We still have a skilled workforce and creative engineers etc, they are just badly governed, de-motivated and over-taxed.
Our best industries will be bought up for a song, London properties will all belong to Russians and Chinese, Indians and Columbian or Afghan warlords.
Worst case is the suburban population would have to go back to the countryside, give every family an acre as an alottment. Might change our values for the better. *
* Nicola Horlick wants to buy farmland options in Peru, she might be smarter buying closer to home.
If inflation starts in earnest, buy a farm cheap mate.
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#152 glanafon
I think we're broadly in agreement. Most debt isn't a bad thing. However a lot of the debt in recent years is - for example debt used to buy over-priced assets, or debt used for current expenditure when there is no realistic hope of higher income in the future. There has also been a lot of bad accountancy where firms milked their capiital reserves, based on the false assumption that credit would always be cheaply available.
These "bad" sorts of debt need to be removed from the system again, either by paying them off or writing them off. The trick is how to do this without a massive drop in overall spending power and therefore recession.
Personally, I think the only way out of this is allowing some individuals and companies to got bankrupt so their debts are written off, whilst at the same time actively redistrubiuting wealth from the rich to the poor (which roughly equates to redistributing from the creditors to the debtors, thus also writing off debts).
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Gb has just given a press conference about the banking crisis........ dont hold your breath all he said was it was "an international problem" and he is talking to world leaders to find a "global solution".......
the man really is in denial!
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jolo13 @ #162
depends how you interpret GB's words:
perhaps he has been desperately talking to world leaders to implore them to give the UK a bit more breathing space, financially, so that we can get back on our feet... that is completely consistent with the phrases of 'international problem' and 'global solution'
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Does being a "Sir" make you a better bank chairman?
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154 arm and a leg -ion times
No I dont see WW2 as a direct follow on from the Gt Depressn. It simply reduced the population (lost 4 out of 5 in my family tree) and boosted production.
Re population unrest. Unemployed can be controlled up to a point via no benefits if no behave. Army and police on streets if mobs. Anti terrorist law and cctv etc etc mean Big Bro here already.
Trad activity is to flee country eg emigrate but boundaries now up if not desirable. Some members of my family emigrated following depression to US. doubt welcome now. desertification of swathes of S America Africa Asia bigger problem than here. The climate change model may be correct in forcasting change but the actual effect is far harder to forecast.
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161 random
Debt cystalises when it cannot be serviced. It is not easy to identify then. Until then it is a statistical forecast and cannot really be acted upon. Thats the problem. It is not the debt in the system which is the problem it is the step discontiunity of the shut off supply of new debt crystalising debt due to a lack of liquidity. The process brings all debt which may have been serviced in the future onto todays balance sheet. As I see it.
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158 rahere
The posting system is shortform so it is difficult to be global. I know the problem.
If you think there are that many heavy horses in the UK you are optomistic. The suffolk punch is I believe is effectively on the endangered list as last I heard there where less than 60.
The trade guilds were a way of protecting the personal investment an apprentice made in a trade. The nearest protection today is health and safety restrictions. which is why one of my sons who did not wish to pursue academia is under that cover. There is no point in investing in training whether degree or apprenticship and then having a job which is open to all comers.
regards, your posts are always worth reading whether you are right or wrong.
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156. foredeckdave
And you accuse me of being an optomist dave. Good post though.
I have never said there will not be substantial employment just that those squeezed out will have a problem, worse than ever before. I just write saying what forces may be at play so people should be wary. For some it will be like being a load of penguins on an iceberg drifting south. Some will end in the water. The penguins on the iceberg will not you get back on top easily, not when there are sharks about.
On some of the things you nominate you will face the existing problem of low labour costs restricting what can be done here. The only way to make that work is to have trade barriers, illegal at the moment.
The supply chain is - whatever is said, cumbersome - Country File last Sunday. Cauliflowers 25p paid to farmer for those accepted. Plus he had to pay for supermarket wrappers. Cost farmer 39p ea to grow (all on BBC Country File broadcast), cheapest cauli I could find in the same supermarket in the week a multiple. I know that is veg but the same is going on all over the place. Farmer to quit caulis. Market forces break down I no longer have any choice. No UK caulis due. I cannot buy what is not available. I would pay a premium for a UK cauli.
The money is being made in distribution and retail not producing anything. If you are not a big player the only way to compete is to reduce overheads and that leads you to the internet.
Some of your suggestions -
'Mercantile fleet '- same cheap labour problem, not many British sailors. Quite funny really the Mary Rose, King Henry flagship is now thought to have gone down due to having to many conscript non British sailors (teeth trace analysis, place of birth, plus foreign sailors known to have been shipwrecked and starving so likely hopped on board), communication problems in a crisis, hatches left open. Ship takes on water. So not a new problem.
'Government investment programme in infrastructure will also mop-up a large protion of the unemployed' - needs public money, likely to be in short supply in near future. You are assuning that the unemployed can do some of the work, some clearly cannot.
'Training will also mop-up a %'.- Needs public money. Retraining is curently in my opinion pretty much useless for the unemployed, very short periods of training, therefore does not provide special skills needed for a job. Obviously some exceptions before somebody shouts.
'Finally, and unfortunately, the security services will require far more manpower '- more public money.
The way forward is for individuals to try to ensure that they can offer some skills that are needed - and wherever possible protected - eg by H and S or the difficulty of getting the skills etc etc, and to preferably migrate to safe ground asap, and if that is not possible to try to monitor and plan.
There will be, and in fact are, all sorts of odd businesses that give an income. Plus there will be conventional jobs. Anybody who remains in work does not have the problem it is the ones dumped, at all levels that will have problems.
In the 90s I met an unemployed bank manager, problem getting a job due to an oversupply of bank managers. He said nobody could think of a job for him. He made himself redundant by introducing IT, did it too well. lol. He ended up (part time I think) assessing unemployed business startup proposals that wanted grants. Take that away and he could find absolutely nothing. He told me his collegues wouldnt even let him handle the tea kitty at the job club.
We have a business here which is ok, designed as much as possible to cope with this sort of situation, seems to be fine. I got hit in the nineties and have been considering what is/was going on since. I am not saying I am right. I am just saying what I have observed. If you dont happen to like it pass me by. I am quite happy.
I am not trying to knock you, you are trying to address a difficult problem. The solutions I think are small scale.
Regards
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As I see it the so called toxic mortgages were bundled into packages together with reasonably granted ones. These were then sold on, say, from the US banks to UK and other banks. Perhaps the UK banks caught the bug and created their own domestic tainted packages but also mixed them with partial exposure to the US packages and sold them back to the US. AND backwards and forwards between all the countries that the international banks operate in.
Then add in follow on fashion: commercial and industrial debt joins this world merry-go-round.
It already becomes obvious that one single country cannot 'bail out' its domestic banking system in any way. Guaranteeing domestic mortgage principals or interest payments may help the beleaguered families indebted but would be unworkable: no lender would be individually saved.
International concert?. Done and ongoing but not so far good enough to unravel the complex interbank ball of string.
So banks withhold from starting new balls. Great! Economic activity falls leading towards global slump. Decreasing confidence and unemployment follow and even previously non-toxic loans join the merry-go-round. People with honestly earned, taxed and saved balances do not know which bank to trust to hold them let alone which currencies to use.
Firms do not trust each others' credit. Insolvency practitioners and lawyers get busy but even they have to bill in money.
Global social unrest is now a potentially more pressing problem than it's sibling, warming.
Nuff said. Where is the Silver Surfer when we need a Saviour, Gord.
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There has to be some inevitable conclusion that RBoS has to be taken completely under the taxpayers wing now.
To all intents and purposes the bank is bust and unable to bank the only true asset a bank has - that of confidence.
The bank employs (iirc) about 100,000 people. Let this bank go under and that would put about 250,000 people out of work, as the bank must employ a host of support business's.
Whilst the reality of the bail out being no more than a loan, the inevitable conclusion is the tax payer ain't buying the package.
I'm afraid Alistair it's time to do your business or get off the pot.
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brown is stumbling around in the dark without a clue what to do..what a shambles...where are our leaders when we need them?for god sake brown go and take your crowd with you and give us a break before we are all skint.
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#159 Your position lacks logic and is in error
I did not offer any analysis, merely an explanation
I did not deflect away as unimportant the fact that short sellers may lie and misinform. I merely observed that others so the same. I do not understand why it would be reasonable to hold hedge funds or other short sellers to higher standards than those which apply to the management of public companies or members of the Government.
Liars have always been with us and always will be with us. You cannot regulate them away. In general liars don´t cause me much of a problem as I simply don´t believe them. Maybe you should adopt the same strategy - it seems to work for me.
You can´t be definitive with Barclays at the moment as its an ongoing situation. However my bet (metaphorically not literally)is that their share price is being hit because they are a business with some pretty nasty undisclosed problems. Why aren´t they disclosed? Answer that and you begin to close the circle on the issue of liars.
I don´t care whether short selling is banned or not. It makes no diference to me and it will also make no difference to the solvency issues facing many of the largest financial institutions.
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I heard that RBS retail staff were offered the opportunity to invest in a 'Save As You Earn' scheme @ 38p. Three, 5 or 7 year options. Very generous at todays close!
Having been encouraged to take up their 'Rights' @ £2.00 per share not 12 months ago, many will 'plunge in' now.
Will there be a Bank in 7 years? Or 3, for that matter? (And I mean months....)
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So, RBSG sponsor:
The Cricket (NatWest) - spattered all over the TV during international matches
The Rugby (Six Nations) - again splattered all over the grass, posts, advertising hoardings...
Motor Racing - spattered all over the place
Tennis - Does Andy Murray really need the 'dosh'?
Golf - If anybody hits another golf ball of one of these skyscrappers and hits somebody, there will be 'hell' to pay!
Hester got rid of the personalised Jet.
Can we also get this advertising 'off' our screens...
The sums squandered are grotesque.
Just, 'Make it Happen'!!!!!
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149:
It is true that markets are panicked by false information.
A lot of that false information emanates from the companies themselves by pretending that their financial position is better than it is.
It also emanates from Governments who are pretending that they can rescue the entire system.
If you are looking to nail the purveyors of flase information then that is where I would start.
Surely, you're not suggesting...
I'm sure the staff at RBS would never consider that their own Board and Line Managers would ever be 'panicked' by false information either - certainly not if they believed all that they were told/ sold when they invested their savings into the £12Bn Rights Issue not gone these past 12 months.
Perhaps Prudence should have more than just a quiet 'man chat' with The Board, The Government via Treasury, FSA, & Bank of England... She may also like to invite The External Auditors, The Group Internal Auditors, The Risk Management Teams, and their (bullying? for there must have been somewhere?) cohort to do a little explaining...
Oh, we were such fools, to be taken by these charlatans... ho ho ho... We knew the Risks - didn't we?
A little to much Scotch Mist down the 'Jampot', and the truth will be sure to come...
Time to say 'Sorry' Sir Phillip... before there is nothing left - and without the SpecSaver encore from your 'Senior Managers' this time, please!
Time for Leadership, Sir Phillip... You'll find it's sadly lacking...
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Re 174
RBSG Advertising
I hope this does not mean that RBSG will now sponsor the Olymic Games in 2012!
We should be told!!!!
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? ? ?
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Another over-paid knight to the rescue.
Still, at least this one knows what he's doing.
But all bankers should have a big plaque on their office wall showing the national average wage....25k.
Not the 125k that they are all convinced that we earn.
They should also be reminded that the value of a simple house is related to the wage figure.
How does a UK banker value a house?...
Think of a telephone number, double it, and then lend 125% on it. A recipe for disaster that is now going to impoverish all of us. (except the bankers, who are loaded, and couldn't care less).
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Has all the money well number crunching gone to were Robert Maxwell put his? should we not have a few words with the Maxwell Brothers and Shirley Porter of Tesco fame and Thatchers mate funny how all this took off just as Bling Blair left the party to make himself a billionaire and we have Lord Mandy back and the first thing he does is buy a £2.4 million pound house what were we paying him? what ever it was to much and now we have some slaphead from a supermarket what will we be getting buy two pounds and get one free?who owns this supermarket? most of us have not the money to shop in any of these places no matter how cheap they are but that does not matter, Gordon can give the poor people of Gazza a couple of pounds towards rebuilding and the Israelis more arms so that is okay then? mad as hatters.
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Philip Hampton's finance experience is as a wheeler dealer - buying and selling parts of the companies where he works.
In the case of RBS, expect him to be involved in selling parts of the business when he tales ober the chairmanship.
After the sale of the RBS holding in China, expect the sale of Citizens Bank in the USA. If the worst comes to the worst, the UK general insurance business will be sold but ideally should be retained as it fits well with the UK bank assurance model.
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Robert - just remind yourself who the govt are helping here - not some myterious organisation but institutions who have as their investors millions of pensioners and savers - those self same people who are taxpayers - so back on the story that there is a big handout to someone onther than the people of this country. Just think what a mess we would be in with banks all out of busniess. Get of your arrogant pedestal.
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Have now had a look at Hampton's CV - I dont see a single situation where he has actually run a busniess. He has changed jobs many times and he has been the bean counter in all of those situations - but actually been responsible for running something - I cant see it. God help RBS.
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re 153Thanks for your judgement. Shares purchased as part of a save as you earn scheme. However, the decline in the share price has been caused by a stream of extraordinary circumstances exacerbated by a system that was banned for a short period. Why was it banned - because I assume it was creating more and more problems. If so why was it allowed to start up again. Of course if you are a player and winner out of short selling then you won't see any harm it appears to have created. Social injustice won't matter to you and never will.Barclays as an overvalued stock. Probably not. If profits are said to be in excess of £5.3bn then at todays share price of 90p the value of approx £7.5bn is more likely to be a significant undervalue. Those driving down the share price know this but create the fear and confidence drain so that they may be able to pick up the bank on the cheap. The greed of the few.
Once again i repeat we are faced with a set of extraordinary circumstances that would not have been reflected in normal trading practices. Yeah these have been created by the irresponsible behaviour of people being either negligent, fraudulant or incompetent and the regulators (FSA, the govt and govts elsewhere) who have been non-existant. All parties are to blame for the lack of confidence in the banking sector due to the rumours, lies and mis-information that circulates and continues to circulate. It won't end because the purveyors have too much to lose themselves. We will all pay the consequences but some more so than others and mainly those who can ill-afford to with their businesses, jobs, livelihoods, homes and futures. I feel for these people. I may be bucking the trend of the majority who write in but the social injustice of this collapse is wrong and we are all at fault through our own greed
I've had to all but write off my shares and will forget about them for the next 10 years or so as it may take this long for the price to recover to any reasonable level (and I don't mean anything like the peak it achieved some 14/15 months ago). My only hope is that the bank still exists in 10 years and in more or less the same form.
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