How Dunfermline fell
Here are the important numbers that explain how Dunfermline lost its independence.
It has made £648m of commercial property loans in Scotland and the North of England. Of that, around £500m of these loans were made in the past three years - which means, in view of the collapse in commercial property prices, that losses on these later, top-of-the-market loans are likely to be very significant.
In addition, Dunfermline acquired £274m of buy-to-let and self-cert mortgages from the likes of defunct Lehman Bros and from GMAC.
All of these loans, or a bit more than £900m in total, have been hived off and put into what's called the Building Society Special Administration Process, where they'll be managed by KPMG as administrator.
Total losses on these impaired assets are expected to be in the range of £60m to £100m, according to an independent assessment for the Financial Services Authority that has been carried out by KPMG.
Now there are two big points to make about these unattractive loans.
First is that they destroyed Dunfermline as a going concern, because Dunfermline was not earning enough from its mainstream savings and mortgage business to absorb the losses - and it had no ability to raise additional capital from conventional, commercial sources.
Also, no private sector bank or building society wanted to touch these smelly loans with a barge poll. Which is why it was impossible to transfer the whole of Dunfermline as a going concern to another financial institution.
There was an attempt, under the auspices of the Building Societies Association, to come up with a collective industry solution, what's known as a lifeboat, to keep Dunfermline afloat as an independent entity.
But this flopped, because the societies in the putative consortium or lifeboat were not prepared to inject as much capital into Dunfermline as the FSA said was required.
In theory, the Treasury could have filled the gap, by putting in a few tens of millions of pounds of taxpayers' money, as happened on a much more substantial scale with the rescues of Royal Bank of Scotland and HBOS, for example.
The chancellor has not explained in detail why he considered Dunfermline to be so different from Royal Bank, but presumably it's to do with the alternatives that were actually available.
In the case of RBS, the choice was a stark one between a systemically important bank going bust - thus devastating our economy - and it being propped up by taxpayers.
In the case of much smaller Dunfermline, there was the opportunity to take advantage of the new Special Resolution Regime created by recent banking legislation to hive off the bad bits of Dunfermline and transfer the good bits to the UK's biggest building society, Nationwide.
It'll be controversial in Scotland that the chancellor took this route - because it means that a Scottish financial institution has lost its independence and there are bound to be significant job losses among the 289 people who work in Dunfermline's head office (though Nationwide would expect to retain the 245 who work in Dunfermline's branches).
But in a British context, the form of the rescue chosen for Dunfermline may be regarded as acceptable, since it probably minimises the potential losses for taxpayers.
Although the Treasury is transferring around £900m of taxpayers' funds to Nationwide to make good the difference between the assets and liabilities that Nationwide is acquiring from Dunfermline, very little of this money is a risk for taxpayers.
That money will be recouped from whatever can be realised over time from Dunfermline's lower quality loans that have been put into administration.
However, even if the losses on these loans turn out to be £100m, 90% of those losses will not fall on taxpayers.
They will fall principally on banks and building societies, under the Financial Services Compensation Scheme.
Probably only 10% of the losses would ultimately be carried by taxpayers, or up to £10m.
It may be a bit complicated, but this kind of private-sector solution may be seen by many as the best of some pretty dismal options.
There are three other important points to make.
1) The £500m of social housing loans that are being transferred temporarily to a "bridge bank" are good quality loans. Nationwide didn't want them because they don't fit with its other operations. But they are not to be confused with Dunfermline's imprudent loans - and they'll probably be picked up soonish by another building society or bank.
2) Dunfermline's collapse is no overnight affair. The FSA has been trying to find a solution to its woes for many months.
3) The rest of the building society sector is in pretty good shape. Barring an economic disaster, no other substantial building society is expected to need rescuing in this way. So it remains the case that the UK's building societies have weathered the recession better than our commercial banks.
And finally, for me perhaps the most shocking element of the Dunfermline debacle is what it has revealed about the uselessness of their 2007 annual accounts. It's impossible to identify in these the size or nature of its exposure to commercial property.
If Dunfermline's savers and borrowers were shareholders in this organisation, rather than members of a mutual, they would probably be incandescent about how little they were told about the risks being run by their society.
UPDATE, 11:10:
I made a little boo-boo in my calculation of how much cash the Treasury would put into Nationwide to cover the gap between the assets and liabilities of Dunfermline that are being transferred.
In fact, the Treasury is putting in £1.5bn.
What I stupidly ignored was the £500m of social-housing loans that are being put into a specially created "bridge" bank.
However my estimate of the potential losses for taxpayers remains in the right ballpark, I think - because there is supposed to be little risk of loss on these social-housing loans.
UPDATE, 16:15:
There's evidence that the authorities are confident that no other society is facing disaster - because there is only one significant building society whose new PIBs (capital issued by societies) the Treasury hasn't been prepared to guarantee through the credit guarantee scheme.
The sole society of any size categorised as too feeble to receive the guarantee was - you guessed - Dunfermline.
I'm 
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"In addition, Dunfermline acquired £274m of buy-to-let and self-cert mortgages from the likes of defunct Lehman Bros and from GMAC."
- Bad Move!
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As a Nationwide member and saver, I have to say I'm a little concerned by this. The Scottish financial institutions ( RBS, BOS) have a terrible track record in recent years of unwise expansion and we have all paid the price. It seems to be a cultural thing and has now brought down the Dunfermline.
The Nationwide is already propping up the banks to an unreasonable extent through the Government scheme and the building societies are getting very little back.
I do hope that there hasn't been Government arm twisting in the same way that HBOS was forced on Lloyds.
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So yet again we apparently have accounts that do not use plain english and apparently leave an impression things are better than they are. Yet again we have apparently reckless behaviour by a board. Then to cap it off we have protestations that if you give a bit more guv it would be alright. On what basis can anybody look around and say things look okay generally if statements and accounts cannot be viewed with any confidence. The only time the true situation appears to become presented is when it is not possible to obscure it any more. At what stage is action going to be taken on the issue of the presentation of apparently misleading information.
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This still FAILS to answer what the FSA and Alistair Darling said earlier that the Dunfermline Building Society had large American toxis debts, primarily sub-prime mortgages. THAT CLEARLY IS NOT THE CASE. The public are being MISLED.
The Dunfermline Building Society wanted a LOAN, not a bail-out, of £25 million because of liquidity problems. The FSA and the Treasury raised the bar to £100 million, and so scuppered a deal with other societies. WHY WAS THAT?
The Dunfermline Building Society has become prey to an underhand Nationwide Building Society takeover, ably assisted by government ministers.
THAT IS A SCANDAL THAT WILL COST HUNDREDS OF JOBS IN DUNFERMLINE.
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Robert Preston - Quote:
'Unless you believe that the FSA is run and staffed by reckless numpties, it's reassuring that the City watchdog believes that Barclays should be able to withstand more-or-less whatever the enfeebled global economy throws at it, without crumbling.
And, I suppose, if the economy were to perform even worse than the hypotheses for this financial war game, well we'd be worrying about a good deal more than just the health of Barclays. '
Whoa, here we go again.
Robert, like an Ostrich, you are saying that Barclay's must be OK, as if things go wrong enough for Barclay's to be hit we may as well just give up.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
But this is the exact thinking that got us into our current terrible position in the first place !!!
The thinking that, don't worry, we can keep increasing debt, because if the strategy ever stops working then we will have such a cataclysmic catastrophe to worry about that we need not worry about it !!
And here we are, that is exactly what happened.
So how can you repeat this same drivel that Barclays must be OK because it is inconceivable to think that more bad news might be around the corner ?
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All very superficial, Robert.
Why is the KPMG report still not in the public domain?
Why do you quote Capn. Darling's figures, which Faulds' claim he first heard on the Politics Show and say nothing of his disagreement with them?
Why do you mention nothing of the delays in communication from the FSA and the Treasury to DBS?
Should we dismiss everything Faulds had to say about other mutuals in trouble?
Post or reactive moderation for all except CBeebies, please!
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You say that the FSA has been trying to find a solution for months, yet the news only hit the headlines this week. How manay other banks and building societies are in the same boat?
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When will Darling answer the points raised by a very irrate Dunfermline boss on BBC? Or is he too busy sorting our various video fees?
http://news.bbc.co.uk/1/hi/uk/7970912.stm
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Let's face facts we all knew the banking system crash would happen at some point! There is no way that we could sustain this 'upward-trend' forever. House prices had been constanly rising up by ridiculous rates and in general peoples wages were hardly matching the increase. This was common sense....wasn't it?
The point is this, if the general public at large knew this then surely the bankers knew, didn't they? after all there are 'educated' in finance! How could the banks, especially the Bank of England and Federal Reserve allow this to happen? They were in complete control of events leading up to this disaster as they are holders the respective nations purse strings. They issued no clear warnings (at least not to my knowledge) of things becoming this bad!!
Now, It appears that things are likely to get a lot worse before they get any better. I'm predicting that there will be a lot more protests and possibly even martial law at some point....I think that this is spiralling out of control and the powers that be are still not sending out any convincing message of us soon being in calmer financial waters. Theres seems to be more of a 'papering over the cracks' mentality.
What do people think will be the outcome of London's G20 summit next week?
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Quote: 'Total losses on these impaired assets are expected to be in the range of £60m to £100m, according to an independent assessment for the Financial Services Authority that has been carried out by KPMG.'
Robert,
KPMG and the other three big auditors have been valuing assets at ridiculous multiples of their worth for about five years now.
The crash and depression we are now entering could only have taken place if the large auditors had built the bubble by valuing assets at stupidly high prices.
Which they did.
It is primarily their fault (and then the regulators).
And as it would damage their reputation (and lead many banks into immediate bankruptcy), these large auditors today continue to value assets at ridiculously high levels as anyone can see by looking at their current practice (only waiting for inflation in a year or two to come and spare their thieving blushes).
So telling us that KPMG values the losses at only a maximum of £100 million, to anyone with eyes in their head, is no comfort.
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Do I understand the situation correctly?
The DBS engaged in risky business and as a result has lost a lot of money.
The operation of the DBS was overseen by a board chaired by a Mr Faulds.
The board presumably received some form of remuneration to reflect both their responsibility and perceived competence.
The DBS has now gone belly-up, and without a word of apology for his failings as chairman, Mr Faulds criticises the government for not using our money to bail the DBS out.
Perhaps we should have a new bankers organisation called Bankers in Wonderland.
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Robert
Whatever the rights and wrongs of this particular situation as a loyal customer of the Nationwide I'm flabbergasted. I really hope that they have only taken the good bits eg the UK mortgages, and the government haven't stuck anything else inside the bundle that wasnt properly disclosed. I really hope that MY BUILDING SOCIETY hasn't been forced by Gordon & Co to become the next LloydsTSB !!!!!
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RP says:-
"Barring an economic disaster, no other substantial building society is expected to need rescuing in this way"
Good God man - where have you been for the past 18 months?
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Thank you for this clarification, Robert. It allows one to make a judgement; sadly a judgement that is all too familiar these days.
Why commercial property when anyone could see that this was on the slide three years ago? I know this will include retail units but these were clearly overstated at the time given the number of long-established independent retailers who were chucking in the towel rather than sign up to new leases at exaggerated rents.
Again buy-to-let need not be a disaster except for the irrational boom in city centre flats in the north of England. This was another example of inflated ideas current at that time. As for self-certified mortgages, well, what do you expect?
I think there is a clear pattern evident with the collapse of the Dunfermline Building Society, Bank of Scotland and the Royal Bank of Scotland. These were once excellent provincial institutions until they were given the idea that they were national institutions capable of taking on the world. This further bankruptcy is yet another example of the underside of the boom in Scottish nationalism engendered by the foolish Blair and his associates in the SNP. Never believe your own propaganda!
If Scotland wanted independence and was capable of such it would have never joined the Union in the first place. We know why that happened and now we can see why Scotland has never left. It is time to wrap up all this nonsense of provincial nationalism, close down the so-called national assemblies, devolve power to the county councils, and make Westminster work by shutting most of that down as well. This will force the political class to do some real work rather than looking for yet further reasons to spend our money and require the bankers to be boring once again.
As a country we are believed to be about GBP 3 trillion in debt if you include unfunded public sector pensions and PFI. This has to be sorted and we should start now.
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Truly am confused now
Are you saying that we have paid Nationwide £900m to take DBS, when in actual fact it could have only cost a few £10m's to actually keep it as a going concern until it could redeploy it's own business plan?
If this has been "going on for months" is it possible that it wasn't technically insolvent?
A 10% failure rate is probably business average during the recession.
More likely it is the demand for Brown's spending which is soaking up available credit and thus denying the banks access to those funds.
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Robert,
Why would the FSCS be liable for losses on the lower quality loans? I had thought the FSCS scheme was set up purely to protect individuals (e.g. depositors)?
CG
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I was quite surprised at the CEO of the Dunfermaline saying that he was not happy with the governments approach - until I realised that he had screwed up but still expected not to be accountable and be bailed out.
Lets tell the truth here
a) the savers have their deposits secured
b) the people responsible will loose their jobs
c) perhaps the managers should have thought of those people who will loose the head office jobs before they over expanded their loan book
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How many of us believe the statement,'The rest of the building society sector is in pretty good shape. Barring an economic disaster, no other substantial building society is expected to need rescuing in this way. So it remains the case that the UK's building societies have weathered the recession better than our commercial banks'?
How do we expect a company to be honest when the government use spin so much? How do we invest in a company when liabilities are hidden so well in accounts?
Start again. Get fresh people in to create a new system.
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What on earth was a building soceity from Scotland doing buying the most toxic mortgage assets in the country (the self cert and BTL loans from Lehamns and GMAC).
Amazing that the long held Scottish reputation for conservative money management has been totally destroyed over the past year.
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Barge pole not barge poll!!
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This comment was removed because the moderators found it broke the House Rules.
all of this assumes these loans will never be repaid which is a nonsense
even the commercial loans should have relatively good debt cover (or they should not have been lent on in the first place) so even with falling values the loans will be serviced so theoretically the smelly loans are not that bad
they overstretched and broke the rules, in that, their book should have been better managed from on high no matter what Jim Faulds has said
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Robert, this posting hits on a number of key issues and makes some good references to the new Special Resolution Regime as well as transparency.
First, we have no real idea as to how much the taxpayer will incur at the end of the day, but as you rightly identify the overall cost will ultimately be borne by the banks and building societies through the FSCS. The reason that the treasury has had to part fund the initial transfer to the Nationwide is because the Treasury no doubt wanted to protect the uninsured depositors as well as the insured depositors (especially in these tumultuous times) so as to protect financial stability. Also, the Bridge Bank will no doubt be sold at a later date and any profits from that will be accrued to the administration part of the sale making the overall losses less. In essence, without the New Special Resolution Regime the ultimate cost to the taxpayer would have been a lot higher, because the authorities would not have been able to split the bank up like this (the authorities have done a multiple sale/transfer with a partial sale to a private purchaser, a bridge bank for part of the transfer and insolvency for the final part).
Transparency of building societies is a good point that you raise – given their mutual, community credentials it is shocking how poorly building societies report their financial position (it is taking a considerable amount of time to get medium and smaller building societies to put their financial reports on their websites and looking for past reports on the web is often futile). We should be pushing for half-yearly reporting by the building societies and far more detailed information. I have no doubt that the Dunfermline is not the only Building society with rather less than ideal information on its businesses.
Finally, although this is the first building society to have to be rescued in this manner, we must remember that a number of smaller ones were dealt with last year. Although the losses in those cases were not as great, they had to be transferred to another building society because they had solvency or liquidity issues. We also have to remember that building societies have no shareholders and so this source of capital is missing from a building society. The depositors, however, are the “shareholders” in a building society and by transferring these deposits without any windfall gain then the depositors are being rightly treated in the same way as shareholders in Northern Rock and Bradford & Bingley. So it is wrong to think that building society depositors are not being penalised by poor management actions in the same way as bank shareholders have been. The building society model has been severely tarnished by the events of the past year more than people are currently recognising – no they have not been as problematic as the banks, but a number of societies have been just as reckless in their own way. It is about time that we identify this and begin to ask the building societies to be more transparent in their business operations.
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Can someone please explain to me how the government can protect savers with Northern Rock, Icelandic banks and now the Dunfermline BS but have done absolutely nothing to help savers with the Presbyterian Mutual Society (PMS) in Northern Ireland. Perhaps it is because savers in Northern Ireland are treated as second class citizens compared to eveyone else or perhaps it is because Northern Ireland mutual societies are not worth saving because the labour party have no seats to lose there?
Whatever the reason the government should be throughly ashamed of itself - many of the savers are elderly people with all their live savings in the PMS.
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Is the Nationwide Building Society now the de facto lender of last resort to all building societies in Britain?
Also, given the take-over of the Cheshire & Derbyshire Building Societies a few months ago and now the bail-out of the Dunfermline, isn't it about time that the Members of the Nationwide Building Society were consulted by their Board as to whether they want this course of action to continue? Sooner or later, there is a risk that the Nationwide will make one merger too many. Big isn't always beautiful - or a secure place for lifetime savings.
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i hate kpmg
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Updated my earlier response to add further information about the 2007 accounts:
http://www.knowingandmaking.com/2009/03/dunfermline-building-society-irrational.html
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another question needs answered in that from all reports it seems as though it was only the commercial and social housing areas that were actually making annual trading profits and if the rest of the business was making profit then these trading profits could have been available to cover any potential bad debts. However from what i can see the core business was actually loss making not helped by circa £40million being spent on an it system that failed. surely if these IT funds had not been spent but an off the shelf system which is being reported as costing between £5-10 million the Dunfermlines potential bad debts could have been covered from their own resources. There is too much speculation and not enough fact coming out.what is the breakdwon of the accounts for the last few years and 2008. What areas are actually making any money?
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It doesn't look like the Treasury were overly interested in working with DBS to help it survive. How is it possible that the chairman of DBS has been ignored by this Govt for 6 months even to the point that Alistair Darling has not even had the common courtesy to return that man's phone calls.
http://creditcrunchedoutinuk.blogspot.com/2009/03/chairmans-anger-is-dunfermline-building.html
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EdDixon @ 7 is right - how do we know ? As regards both Building Society management (and the government), "they would say that", wouldn't they ?!
And exactly what cred do bank managements have at present ? All these institutions are always doing just fine - right up until the day they're not.
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There are CLEAR differences in what the Dunfermline Building Society is saying in comparison to what the FSA and government ministers have said. Those differences have NOT been explained.
It is all very well for Robert Peston to toe the Treasury line on this, it has been the main source of his 'breaking' stories, but there is MUCH more to this story than meets the eye first time.
The Labour government and the FSA had decided to break up the Dunfermline Building Society, selling off its assets to the highest bidder, without ever informing the board of the Dunfermilne Building Society. WHY WAS THAT?
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Barge Pole or Poll ???
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The moral of this story is that is you GAMBLE big time you will be rewarded by HMG and get a massive pension too.
If you only gamble small time then you will be hung out to dry.
This further encourages Banks to go on a large bender as ALL the risk is underpined by HMG and the taxpayers. Taxpayers are customer too and they will also be paying via charges higher interest rates etc. Will the boards have run away with the swag long ago.
I woould be better that the HMG went after US gov to get the money out of them rather than UK PLC having to cough up the dough
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I have to say I'm absolutely gutted that a mutual has got in to difficulties. I am happy that they have been saved by a building society. I think finally the message is getting through that mutuals are the ethical alternative to the PLC banking model.
http://ethicaleconomy.blogspot.com/
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I think GBP 60 to GBP 100 million losses is being very very hopeful.
If, as you say, most of these loans were in the last three years and the sub prime were from Lehman & GMAC I would expect a 25 to 30% loss on the commercial loans plus anywhere between 20 and 25% on the sub prime mortgages.
I would expect a total loss of between GBP 200 and GBP 250 million on these. This explains why no one wanted them with a barge pole.
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Robert, something I have seen no comment on are the PIBs issued by Dunfermline.
According to an article in the Times, there were £320million of PIBs outstanding at the time of the 2007 accounts.
As PIB's are not risk free investments,and can be traded on the stockmarket, can you confirm whether the investors in those PIB's will lose their money, as shareholders would.
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No one appears to have asked questions about the roll of the accountants in this, and the other bank/building society collapses. What were the accountants doing? Obviously not looking after the shareholders or members interests and undertaking due diligence. Counting their ever increasing fees and bonuses perhaps?
It is about time Mr Preston undertook some investigative journalism into the roll of the accountants in this whole debacle. A new scandal perhaps?
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OK, first of all Jim Faulds wasn't CEO when the dodgy decisions were made - he only came in six months ago specifically to try to clean things up. That's why he's so angry at the government - they have refused to talk to him throughout all this.
I also think this will be politically very dangerous for Gordon Brown. Locally, he likes to portray himself as "looking after Fife." I don't think he will be able to do that now.
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Speaking as a Nationwide customer, this looks a reasonable deal since the exposure to risk taken over is very small.
Speaking as a Dunfermline self cert mortgage holder on a buy to let property that was purchased from GMAC by Dunfermline, I'm pretty insulted to be regarded as risky - every instalment has always been paid on time
As for a £600m little boo boo - its expressions like that that got us into this mess in the first place:-))
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hmmmm well sorry but this update from Peston reads like an OFFICIAL GOVERNMENT STATEMENT; plagiarism is frowned upon in journalism school
So come on, if you're saying that the CEO of Dunlendin' is fibbin' then spit it out man!
Or is the govt version of events highly spun? Or both?
And what does this Pandora's Box of tricks say about:
> the ability of the FSA to keep track of anything, let alone do bank stress tests?
> the situation at all the other BSs and Banks?
> the role of big auditors like KPMG?
> the fanciful values put on toxic assets, as pointed out by #10 basaltrocky
In the meantime a big Spanish regional bank has also finally gone under
And the much bigger news coming out of the US is that Obama has intervened to sack the head of GM and tell Chrylser that their time in the pedallo is just about up and they should return to shore now (ie the game is up for Chrysler as their Fiat lifejacket is made of lead; and GM will probably have to go into Chap 11 bankruptcy)
this has very bad implications for Vauxhall here, and the auto industry generally
but of course Robert never reports on non-bank stories, does he
wonder how he got to Dunfermline on his Lodon Zones 1-2 Travelcard
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Once again it is the ordinary working man who will be guarantor for the huge losses.
We have to find a way to protect the public from these dangerous institutions in future.
I believe we should break them up into many smaller companies, and the public should only be guarantor for UK current and savings accounts, and High-Street operations, nothing else.
All other business, including all overseas investments, mortgages and loans, and business loans CANNOT be guaranteed by the British public.
It's a recipe for disaster for us all, and our children.
"Do a Lehmans" with them.....the bits that go bust...go bust.
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It is important now that we have a public inquiry in Scotland and held by the Scottish Govt in order to determine what has gone wrong not just as the DBS but also RBS and HBOS.
Particular emphasis should be paid to the activity over the past few years of the FSA, the Treasury, the BoE and of course Govt Ministers and their role in the collapse of these organisations. There are serious questions to be answered over the quality and intensity of the oversight practiced by the authorities and politicians.
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Yes Robert I had a good laugh at the Dunfermline Annual Account of 2007. The reason everything has come to a head is that the 2008 accounts are due and the current management would have to come clean (or presumably, at long last, the auditors would refuse to sign the account off).
In the 2007 accounts the IT cock-up was identified at costing £9.4m (which for an organisation with total costs of £13m, after staff costs, was indeed spectacular). It was only because the Dunfermline was known to be in trouble that I guess the assets identified at "Loans fully secured on land" must be dodgy commercial property loans. Still the commercial property loans were only 15% of all assets. It proves the errors building societies can make on commercial properties and survive are tiny when compared with HBOS et al.
It was commercial property that brought the Derbyshire and Cheshire Building Societies down, albeit the Nationwide was prepared to take on both whole.
I wish I could share your optimism that "The rest of the building society sector is in pretty good shape". I can think of another middle england building society (in which I hold PIBS) that could follow the Cheshire.
I have recently liberated my cash ISA (paying a princely 1%), with the intention of playing the PIBS market - I think I'll wait until the next results are published for all the possible building societies.
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I worked at the Dunfermline 10 or so years ago; well before the appearance of Graham Dalziel. I can only say that the company I worked for is unrecognisable in comparison with the company that has so spectacularly failed in the last couple of years. Many of the people I worked with then are still there, and have been impotent passengers in this process. They are also the people who will lose their jobs. I feel very sorry that an organisation that was once a proud bastion of financial prudence has been unseated due to greed and over-extension. I do feel Alistair Darling has betrayed his lack of understanding of mutuals with his comments that they haven't made much profit - they're not supposed to! All in all, the whole thing is a tremendous shame and I feel for all innocent parties involved.
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The entire bailout of the banks plan only makes sense if the value of housing rises again, and rises rapidly. All the banks made the error of believing that positive equity was real, and any loans made to people with the equity in their homes used as backing could never fail. It therefor follows that it is in the interests of both the banks and government to flood the market with mortgages that are funded and insured by the taxpayer in order to put a glass floor under falling house prices and get them rising again. Is this wise I wonder, it obviously makes sense from the banks point of view, it is win win for them, they earn the interest while we take the risk, but remember it was only last September when mortgage lenders and estate agents were telling us that house prices were going to rise 25 per cent in the next two years, how close are we too that happening in the future, and if we are the ones taking the gamble what might it cost us in the long run?
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This is another awesome cock up, I know those in Dunfermline will complain, but if it were your money, would you take the chance and let them continue? I know if it were my hard earned readies I would be glad Nationwide has stepped in. The complaints are driven by the fact that they know that money in the Dunfermline BS is safe. But it is only safe because of the gaurantees of others. Would you lend Dumfurmline 100 million to continue?
They are small enough to fail. Le encouragement de I'autres.
And no wonder the Chairman is a little miffed, no more luncheon vouchers!
Keep up the good work Rabbie!
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The Dunfermline states absolutely categorically in its Dunfermline BS Members Review 2007 page 2, column 1, in bold font: 'Our Society has no exposure to sub-prime lending.'
In the USA these guys would be led out of the doors in handcuffs. There was clearly an intention to mislead.
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This comment was removed because the moderators found it broke the House Rules.
The forced collapse and takeover of the Dunfermline Building Society is political rather than economic. Less to do with 'toxic debts' than with the Scottish referendum on independence. At which time we shall be hearing from Westminster: 'How can you possibly expect to run an independent Scotland when you regularly have to be saved from your own mistakes with "English" money?'
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''And finally, for me perhaps the most shocking element of the Dunfermline debacle is what it has revealed about the uselessness of their 2007 annual accounts. It's impossible to identify in these the size or nature of its exposure to commercial property.''
Right, that is worrying. So how can we trust any of the accounts produced by our financial institutions? With that in mind, how can you also say:
''The rest of the building society sector is in pretty good shape. Barring an economic disaster, no other substantial building society is expected to need rescuing in this way.''
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For those that are clamouring for the head of the DBS CEO, please note that Mr Faulds only started in this position a few months ago.
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post 24 - can you explain the mutual bit in PMS?
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Robert said: "Barring an economic disaster, no other substantial building society is expected to need rescuing in this way."
Bob, are you on medication?
We happen to be in the middle of an economic disaster, if you hadn't noticed.
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I think the statement that the FSA is full of numpties understates the problem. The Treasury and the Government seem to be populated with numpties as well. Hence the brilliant stae we find ourselves in!
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The Scottish authorities were going to give DBS a loan to £26 million but the powers that be in London stopped it. They then give Nationwide £1.6 billion for taking DBS over.
When will this Govt wake up and realize they are they to serve our interests and not the fat cats in the City. The credit crunch/recession has shown all of us - regardless of your political views - that our political leaders serve the interests of the financial world elite first and foremost and the taxpayer really doesn't matter.
Simon Johnson - a former IMF Chief Economist - published a must read article on this very topic called The Quiet Coup
Well worth a read.
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One too many banking stories
Robert, we know why this BS failed - poor stategy, poor management, inevitable result, all covered in a tartan shroud. A couple of hundred people will lose their well paid and pensioned jobs, in a context of many 10's of 1000s of ordinary people in manufacturing or retail, having been put out of work because of the consequences of similar ineptitude in other banking boardrooms up and down the country. Remember these are people directly responsible for the failure of their business. They are the head office staff, supposedly working on behalf of their members. This is not proper, nationally important news.
The only significance is in the wider issue of the reporting requirements for mutuals. There is an easy solution, make them report as plcs.
Can we now move on? Come on Robert, deal with the real economy, real business, where many more of us are at risk and the pain will be substantially more difficult for the nation to bear.
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This comment was removed because the moderators found it broke the House Rules.
"Total losses on these impaired assets are expected to be in the range of £60m to £100m, according to an independent assessment for the Financial Services Authority that has been carried out by KPMG."
I wonder if KPMG would be prepared to lay me odds against the final cost to the taxpayer being in excess of GBP 600M. A loss of 40c in the $ on mortgage secured debt in a bankruptcy is a fairly conservative estimate in even a mildly depressed property market. Don't hold your breath. Supposed financial "experts" continue to offer their opinions readily but I don't see any of them putting their money where their mouths are.
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Who were the Auditors
Did they sign off accounts
Will they now be barred from practice !
Pigs my fly with this Government ands it cosy club
Hadenough
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#15: Am I right in saying that rather than giving £10m to DBS, the treasury (UKFS I presume) has given £900m to Nationwide instead? There's still money in the pot at the moment then?
As Nationwide has no shareholders, what interest does the government have in Nationwide now? (and/or is this to cover up something bigger?)
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I am surprised that the Dunfermline's rules allowed it to buy the self-cert mortgages especially as they were probably not UK based and secondly I cannot think why they extended so much into commercial property especially as this had been Bank of Scotland's achilles heel for years. Do people not learn?
Smacks of management incompetence in ignoring basic lending tenets and not knowing were to safely put excess liquidity
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Like the Chancellor, Mr Peston has clearly not bothered to check with the Board of the Dunfermline on their view of how the society could emerge from the mess. Are we to listen to nothing but his master's voice pontificating on the fact that there "really is no other option"?
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I wasn't surprised to hear that Nationwide had helped out here.
What amazes me is the attitude of the former chairman of Dunfermline, Jim Faulds, who accuses the government of sacrificing the institution and calling it a scandal that Dunfermline had to be broken up.
Mr Faulds, it was your board's reckless disregard of the risks in investing so heavily in commercial property and taking on US sub-prime loans, as listed by Robert Peston above. You cannot blame anyone else but you and your board for the mess that Dunfermline Building Society now has become.
Even a child could see that one day the cycle of property prices would dip, and that the longer it was put off, the deeper that dip would be. So why can't these so called money experts have seen this? And why don't these same people apologise to everyone for their mistakes, instead of so bitterly berating their rescuers? Surely recklessness on this scale is unlawful?
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London and Scottish Bank - failed
Halifax Bank of Scotland - failed
Royal Bank of Scotland - failed
Scotlands biggest Building Society - The Dunfermline - failed
Scottish Widows - struggling
BT - headed by a Scot - Livingstone -former finance chief - struggling
Post Office - Scot - Adam Crozier - struggling
HM Government - dominated by Scots - failing
There is a pattern here but I am struggling to put my finger on it.
Last few days.
Corporate banking is transferred from Bank of England to RBS. Hmmm..
Defence procurement is transferred to an account with RBS. Hmmm..
On top of Aircraft Carrier contract for Rosyth last year. Hmmm...
There is a pattern her but I am struggling to put my finger on it.
Perhaps Peston should do some proper Business work here as this effects English Businessness and Taxpayers on a massive scale.
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10. At 09:53am on 30 Mar 2009, BasaltRocky wrote:
.....KPMG and the other three big auditors have been valuing assets at ridiculous multiples of their worth for about five years now..... Large auditors today continue to value assets at ridiculously high levels ...
_________________________________________________________________________
Quite right. And if they continue, then we'll be having nasty stuff coming out of the woodwork for ages. EG, latest USB writedowns. Isn't it time these large auditor firms were quizzed seriously about the basis on which these inflated valuations continue to be made?
We're still in denial. We can't go on trying to talk OURSELVES into what is patently a LIE!
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Oh if only Gordon had been here instead of being away saving the world, the poor old Dunfermline would have been saved!
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4. At 09:41am on 30 Mar 2009, minuend wrote:
......The Dunfermline Building Society has become prey to an underhand Nationwide Building Society takeover, ably assisted by government ministers.
THAT IS A SCANDAL THAT WILL COST HUNDREDS OF JOBS IN DUNFERMLINE.
________________________________________________________________________
About time the Government called a halt to this bailout madness. The Dunfermline, it's staff and depositors should go bust and take the consequences - like all the banks should have done, and to hell with the consequences! Perhaps a few more brutal windups will pursuade senior management, investors and depositors to exercise a little prudence.
Nothing like a little ruin, hunger and grief to focus the mind.
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Your blog, Mr P, raises more questions than answers.
1. Will Mistress Credit be dead in Scotland before the next Burns Night ?
2. Should self-immolation rule north of the Border ?
3. Is Padora's Box just another brilliant Scottish Invention ?
4. Should Adam Smith 'deface' UK currency any longer ?
5. Will 'The Stealth of Nations', new edition, be published after the
next G20 meeting ? Pub. Brown & Obama.
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Just exactly who is telling lies?
The Auditors, Darling or Faulds ?
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I don't know what the definition of a building society is. Maybe something along the lines of a local organisation to help provide banking services and channel local savings to local borrows that need them.
I'd be pretty surprised if the definition included anything to do with dabbling in highly questionable mortgage backed securities from remote places.
I think the board have some questions to answer.
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An interesting piece. But what, pray, is a "barge poll"?
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#5 BasaltRocky -
"'Unless you believe that the FSA is run and staffed by reckless numpties"
And who'd believe that, eh?
Mr Peston (And/Or any other interested parties) could you find out what assurances were given by the FSA to the Dunfermline at the time that the DBS bought their shaore of the Lehman Bros and GMAC loan books?
An FOI request should do it. No rush. After all, the damage has already been done but it would be nice, eventaully, to find out who the real "reckless numpties" are.
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Gwyrangon wrote:
Spot on. The hand-ringing and fake indignation from the toom tabards and astroturfers has already started on The Scotsman's blogs.
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I'm a bit concerned that banks, building societies and other financial institutions seem to have a lot of discretion as to how they present their accounts. All local authorities have to keep to a standard form of accounts so it is possible to compare say Essex C.C. with Surrey CC. The same should happen with financial institutions. They should be compelled to produce their accounts in a standard form by the FSA with a non negotiable definition of what each item represents. Assets for example should be represented at their value on a fixed day in the financial year.
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#14 stanilic -
Either you're on the wind-up or you're just ignorant beyond hope of ever learning. I ought to just leave you be but I can't let comments like yours go by without a response.
"These were once excellent provincial institutions until they were given the idea that they were national institutions."
Given that the Bank of Scotland came into being before the Act of Union in 1707, it seems reasonable to suggest that it was a National Institution by default - given that it was the main clearing bank of an independent Nation
"If Scotland wanted independence and was capable of such it would have never joined the Union in the first place."
In terms of its rank stupidity, this has to be one of the most crass, ignorant statements I've ever read on these Boards.
Before the Act of Union in 1707; Scotland had been an independent nation since 1314 - nearly 400 years.
So, basically, what you're saying is "If Scotland wanted independence" - which being independent it clearly did - "or was capable of it" - which being independent it clearly was; it should never have joined the Union in the first place.
Which completely and utterly overlooks every significant factor in the signing of the Act of Union three (uncelebrated) hundred years ago.
Now, see if you can turn your enquring mind to something just a teeniest bit more complicated - if Scotland's such a terrible burden on the English a)Why did you propose the Union in the first place? and b)Why don't you acknowledge our Claim of Rights and allow us to be Independent again. (Couldn't be because your economy would sink without our oil, could it?)
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So essentially the Dunfermline was grossly imbalanced in terms of leveraged credit. Hardly a shock in light of other banking failures.
The real concern here is that the accounts again showed nothing. Without wishing to sound naieve as to standard and apparently previously acceptable "cooking of books", how can investors, insurers or anyone else analyse risk without accurate base information?
Reviews of banking and finance regulation are obviously on the table (though who knows if that will lead to any substantive changes), but are accountancy regulations also up for review?
If not, why not?!
Surely confidence can only return when risk can be assessed and information available with less bias, or at least confined to certain parameters.
The present system has been exposed for the farse that it is and confidence cannot not return until the issues on reporting and regulation have been addressed.
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This problem is no different from all other related ones un that an end party has made bad decisions and is now crying wolf.
But it has been exacerbated by bland generalities of property going down x or y percent.
Most right minded peopel appreciate that today more than ever its a case of horses for courses and not every commercial building or home will have 'collapsed' x per cent.
Property is all about yield and expectations of it. So for you Robert to go on in such a tabloid manner is ill becoming of you.
Harking on about downward pricing is ignoprant simply because you might as well say in x months every property will be worth zero which clearly wont be the case.
In truth the banks screwed up and they are being bailed out disproportionately, only when those who want to borrow not to bother will we see banks revert to their usual temptations.
How the FSA and the Bank of England allowed depositers money to be gambled for so long with no questions asked brings to doubt their very credibility as valued regulators.
As far as the then Chancellor was concerned, to have been promoted when he was an abject failure for not managing the economy is symptomatic of the british desease of promoting when sacking is usually the only way when a cause of a disaster has been sourced.
At least the end is nigh for GB and his team of phonies and spin doctors who think rhetoric will will the day.
After 12 years of it we are all truly sick and disbelieve each and every announcement and need a new and fresh approach.
By all means lets believe in a strong banking system but one wonders whether every company should apply to be a lending institution in order to guarantee taxpayers support and ave its neck by default not by design.
If ordinary companies are left to hang and die so must banks, and if any bank thinks passing the FSA stress test is a certificate of value they need to think again.
The FSA haven't a clue what to look for and have been led on a merry go round by the banks for years. There is absolutely nothoimng to suggest they know any more now about what eth banks have off balance sheet that they did a year ago.
Only by clearing out all the party's involved from senior management in the banks to the FSA will we ever get this problem credit problem addressed honestly and with the due diligence and judicious assessments it needs.
So Robert, thanks again for your histrionics,but please start commenting in a more balanced approach giving the full picture so the public who rely on you and others at the BBC can be well informed not palmed off with bullet points that only cover 10 per cent of the picture.
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So how did the Scots get a reputation for prudence? RBS, HBOS and the Dumfermline; One could make an argument that if it wasn't for the Scottish banks the UK would have escaped the worst of this crisis. Does Mr Salmond still want independance and will he be taking his 'world class' (his words) banking industry with him?
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Fortunately Robert Dunfermline BS did not have any PIBS. If it did, no doubt they would have also been parked out with the Subordinated Notes in the part under administration and investors would have got back nothing once the administration was settled. PIBS have small denominations so that they can be marketed to small investors and I would not be surprised if some so-called small insured depositors may also have PIBS in their building societies as well. In fact PIBS are the closest thing to shares in Building Societies and so in the case of a building society collapsing then PIBS holders should suffer losses, but it would have been ironic if larger uninsured depositors were protected by the Nationwide purchase, but PIBS holders (many of whom are small insured depositors) would have lost out. A potential scandal if a society that does have PIBS fails?
Also, your colleague Anthony Reuben and his report on "Building Societies: State of the Sector" is incorrect. Building Societies can raise new capital through an issue of PIBS in the same way that banks can issue new shares to increase their capital position.
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Post 52 - it is part of the name of the society. If you have further questions to ask then please do so clearly.
Alternatively if you do a search on the name Presbyterian Mutual Society then you will get plenty of background to the story.
Hopefully you not trying to make a political and/or religous point here when so many people are in danger of losing their savings.
If you are then please be aware that ALL political parties in Northern Ireland are asking the government to help and so far the response from the government has been sadly lacking depite the timeframes involved. Compare this to the action on the Dunfermline BS and on the Icelandic banks and you can see why many people in Northern Ireland are asking 'why is everyone being helped but us?'
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Robert, excellent article, as ever, although I think the phrase in para. seven should read "barge pole". It's not the same as, say, an opinion poll.
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Bailouts of mutual’s are surely not as easy as bailouts of banks. With the later there is some hope (no matter how distant) that the company will either earn its way out of the obligation and or be sold to the market with the bailout capital in full or significant part repaid
The latter is not an option for a mutual especially from the perspective of a Labour Government. While the earnings ability of the Dunfermline itself is such that a pay back out of profits would come sometime next century.
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The Britannia Building Society is proposing to merge with the Co-op.
This is another milestone in the contraction of a once great movement. Apart from the Nationwide (the former Co-op BS), there are no substantial players left.
The large societies (Halifax, Abbey, Woolwich etc) have all been merged with banks, reducing competition and restricting choice.
Britannia members have just 4 weeks left to vote against this merger and save the society.
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Post 59. This whole crisis was caused because Deloitte's apparently wouldn't sign off the 2008 results as they did not believe that DBS were a going concern. Or at least that was what the Mail on Sunday reckoned when they first broker this story.
In view of facts that have since come to light this wouldn't seem unreasonable.
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Post 33 the phrase alleged to Captain Bob was "Owe the banks a thousand pounds and you worry about the bank. Owe the bank a million pounds and the bank worries about you."
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Let's just hope that Lord Myners wasn't involved at any stage of the proceedings, otherwise we'll be funding more millions of pounds of bonuses for Dunfermline's directors.
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It's always so sad,
When the good times turn bad,
But this time it's not a bank as usual,
The credit crunch has affected a beloved mutual!
http://creditcrunchrhymes.blogspot.com/
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#64. At 1:31pm on 30 Mar 2009, niloc5959 wrote:
" .....On top of Aircraft Carrier contract for Rosyth last year. Hmmm..."
_________
Did anyone hear on R4 late last night, someone say: ' If we scrap the Army Navy and Airforces, NHS and cancel Unemployment Benefit, we may just be able to get out of this mess'?
It is getting clearer by the day that we are heading to the Abyss.
--------
So, RP, Did they have Toxic Debt or not?
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The "SFA "[as Lord Young twice referred to it in the interview with Andrew Neil]turned inksaknighty into the market norm that other banks had to follow in order to maintain "this little piggy went to market" share , by allowing the monumental "cock up" of Northern Rocks together mortgage book TO apear to STAND UNDER ITS OWN SELF DELUSIONAL POWER [with the TEMPORARY viAAAgrAAA OF TOXIC LOANS] AS THE MARKET LEADER in Blair/Brown boomerangue pied in the sky pipery ]
Labours attempts to build its own" banks" through desperately increasing risky market share of toxic waste[UNWRECKCOVERABLE DEBT] have backfired and virtually wiped out the banking industries tier won capital
The fact that banks willingly cooperated in the stiffing of themselves and eachother with their rigour mortgages, in the persuit of bonus sighs matters is a maaarvel to behold.
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Why did the government bail out the banks, but not the Dumfermline? The simple answer is that government ministers are unlikely to get jobs at the Dumfermline once they're out of office.
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#10 BasaltRocky:
"Robert,
KPMG and the other three big auditors have been valuing assets at ridiculous multiples of their worth for about five years now.
And as it would damage their reputation (and lead many banks into immediate bankruptcy), these large auditors today continue to value assets at ridiculously high levels as anyone can see by looking at their current practice (only waiting for inflation in a year or two to come and spare their thieving blushes)."
_______________
You have it! That is exactly what is happening.
'The Emporers New Clothes is the over valuing of what we ought not to call assets'
Everyone knows they are trash. Who will be the one to say it?
Will the first one suffer the least losses?
Will G20 cancel CDO's? As G Soros, says, it cannot continue this way.
G20 is going to discuss the stimulation of growth. Grow is over. We are out of food, fuel, water and space. Come to think of it, we are also out of time.
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It was a bad omen when Nationwide recently described itself as a "multi-brand financial services organisation".
When Nationwide took over the Derbyshire and Cheshire Building Societies, it said “Following the two transactions, the Core Tier 1 capital ratio will reduce by 34 basis points (bp), Total Tier 1 by 21 bp and Total Capital ratio by 16 bp. Nationwide expects to recover these reductions in the current financial year as a result of retained trading profits.” So, a cost to be borne by Nationwide's existing mutual members.
About the Dunfermline Building Society deal, under the heading Financial Impact, there is no information at all about the financial impact. Separately it says "the transaction will enhance the overall value to Nationwide’s membership over the medium term.” So one can only assume another immediate cost to Nationwide's existing mutual members.
http://www.nationwide.co.uk/mediacentre/PressRelease_this.asp?ID=1373
Nationwide claims "mutual status, which means that we are owned by and run for the benefit of our members." From these deals, would it please quantify that benefit?
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The Laybour banking suckcess story has more to do with finding AAAAAcountdraculants ready to support their cock up with the required lipo suction service now at taxipayerrs expence.
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All debts are just 'figures on a screen' - they are an illusion purely to keep mankind in abject slavery. All tangible assets in existence have been paid for through generations of 'unknowing individuals' by their labours and ego. So, if ALL 'manufactured' debts were forgiven there would be an unprecedented upsurge in mankind's' energies. There would be no need to have 'banks', these third party double entry bookkeeping criminals would be confined to the history books where they belong. Media of exchanges can be easily created by recognisable national government tokens of exchange. Never must the issue of currencies become the handiwork of private cartels and consortia. Our current global fiasco makes a perfect opportunity to effect this ONLY if our politicians have the bottle to carry this out. Keep our post office networks for this very purpose - these are the places to exchange tokens for ready local cash, again issued by government reserve and not by the 'private' central banks.
Nearly ALL debts are created out of thin air using 'agreement' signatures binding in so-called 'contracts' into promissory notes which are then sold on to other banks and institutions. I describe these banks as 'criminals' as they fraudulently 'double-bill' everyone. They get paid for the 'sale' and then additionally charge us again for the principal + interest ! Sleight of hand - eh what? -And we all fall for it!
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Post 64 niloc5959
Your right, a pattern only a blind man could miss.
What happened to prudence north of the border?
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#64 niloc5959:
Good post.
We must have an answer to the now urgent West Lothian Question.
Gordo and his team now look a tad biased.
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Is there any accountant or banker in the UK that can add 2 plus 2 and not make 5 ???????
I wounder how much money the Goverment has now taken from the taxpayers,
maybe they don't even know what the true figure is.
Not to worry GORDON'S 20 are on the way to London to sort this mess out...
DREAM ON !!!
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Time Now 16:13
Last moderated post #70 time 1:52
Not good enough.
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All these toxic debts rolled up and put in the B of E cellars will someday have to brought out into the daylight. Ofcourse NuLab will be nowhere to be seen. They will make a big noise from the opposition benches about the nasty Tories making a mess of the economy and taxing the poor people of the UK. Unions will be up in arms, all the hangers on and quangos put to the sword will be upset.
All that is needed is the usual high super inflation, that ALWAYS follows a Labour government. This same high inflation that Labour accuse the Tories of having after they have left the **** to be cleared up.
High inflation will solve the problem of high debts and will leave the Pound as a joke in the World.
Be nice to the people from the IMF when they arrive.
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like others of its ilk-it fell because of poor management-or to put it more directly-MISMANAGEMENT-simple as.
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This comment was removed because the moderators found it broke the House Rules.
Read the docs - I think you may also have missed the Dunfermline (closed) final salary pension scheme, which is not included in the transfer to Nationwide.
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It's interesting to see a lot of references, beyond my own, to the Dunlendin' Building Society opening a Pandora's Box for the govt
I understand that Pandora's Box was NOT the naughty video recently in question
Our Glorious Leader also reassures us that Jacqui is doing an excellent job helping to keep our streets safe etc
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L osses
I n
E very
S ector
At least Nero had the decency to stay at home while Rome was burning.
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Dunfermline Building Society has gone bust you say.
Until this weekend i had never heard of them.
Just a small Scottish extintction this time then. Only £1.5bn - well just beer money for the soon to be extinct Gordoon Broon.
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Gordons lipo suction opperation on the Northern Rock toxic waste was a suckcess story on behalf of the taxipayerrs butt the patient died
It all started out with "thigs can only get better "and "beam us up scottie"
Meanwhile back at the tranche
The clingons have taken over the startwreck enterprise and the beam is in scotties aye.
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#64 niloc5959 wrote:
"London and Scottish Bank - failed
Halifax Bank of Scotland - failed
Royal Bank of Scotland - failed
Scotlands biggest Building Society - The Dunfermline - failed
Scottish Widows - struggling
BT - headed by a Scot - Livingstone -former finance chief - struggling
Post Office - Scot - Adam Crozier - struggling
HM Government - dominated by Scots - failing
There is a pattern here but I am struggling to put my finger on it."
Pray allow me to help..
The banks were regulated by the London based FSA, Treasury and BoE and most of their main shareholders were City based.
The Post Office reports to both the Treasury - which is in London - and the Dept of Business and something which is also in London.
The common factor here is that ... oh well you work out it..
I wasn't aware BT was struggling but if that's the case then it's probably down to OFCOMM which I believe is also based in London...
British Government.....Dominated by Scots? That implies there are more Scots in the Govt than any other nationality. I don't think that's the case ...Anyway I didn't vote for them and you may have noticed that up here they are not actually in Government. So I'm afraid that's your problem not ours.
Hope this helps and thanks for having made it all so simple...
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#64 niloc5959
re your "I'm struggling to put my finger on it"
My partner has thought about this long running saga of events and he thinks Golem is trying to bankrupt England - but I have to say surely it can't be true, can it?
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Dunfermline fell on its own sword ,it seemed like a faescal stimulAAA's at the time for their way out way.
Now that they have decided to fall on the taxipayerrs as well, things can only get better for their hubble bubble toilet and trouble mortgage AAA'sset mountain
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"There's evidence that the authorities are confident that no other society is facing disaster"
There's quite a lot of evidence that the "authorities" have spent the last 12 months with a complete lack of understanding of the depth of the problems and how to deal with them. Personally I wouldn't take anything they say with more than a very large pinch of salt.
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I'm afraid I still don't quite see why DBS wasn't simply allowed to go to the wall. It was neither too big to fail - thankfully - nor of systemic importance. I wonder, is the key the political sensitivity that
£500m in social housing loans - where I wonder is this housing?
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By accident rather than design, Labour has discovered it is onto a vote wineer in Scotland.
By effectively nationalising RBS and Lloyds/HBOS, having first played a large part in the destruction of these banks through their incompetent handling of regulation, the economy and the credit crunch, Labour discovered that the SNP suffered because the Scots realised they were still dependent upon England, and did not have a thriving financial services sector to generate lots of taxes and jobs.
By destroying rather than supporting an independent Dunfermline, it is further reinforcing that the Scots can't survive with their present standard of living without England.
It's a bit like rubbing the Scots' noses in it to encourage more Scots to vote Labour rather than SNP.
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#79 adilbert:
"So how did the Scots get a reputation for prudence?"
_________________________
It was a series on TV: Dr Finlay's Cashbook
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76 Bandages for Konjic
Firstly, of course I am on a wind-up. I will cross the street to have a bash at a nationalist for the simple reason that such consider themselves better than other folk. This is where all our troubles start.
Secondly, I am a gal-Gaidheal exiled from the `runrig' and the `airigh' because better folk than us knew what was good for us so please do not accuse me of being English, whoever they might be. It was the mac-Suibhne who did not support King Robert when my folk did.
The simple reality is that once again the people of Scotland have been betrayed by a greedy and privileged ruling caste who knew the price of everything and the value of nothing.
There is something constant in all this and that has been self-delusion. A delusion that the realities of history can be reversed by some sort of act of will. You speak of nonsense but there is no bigger nonsense than thinking money can be made from nothing.
This country, and by that I mean Britain, has been ruled for the past ten years and more by a political class locked in a self-sustaining relationship with self-declared financiers with no perception of reality. This has been no more apparent than in the streets of London and Edinburgh. I have stood on the sidelines with my mouth open in astonishment at the quite absurd attitudes and values paraded there.
But then, I am just a silly fellow whose folk came from out of Sutherland, I know nothing about being the great and good. All I know is that I must work for my living as the soil is thin and the rain always hard.
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RP "The FSA has been trying to find a solution to its woes for many months."
__________________
As one of the regulators in place to prevent all these things happening the FSA has FAILED.
There are three types of people in the world:
1 Those that make it happen.
2 Those that watch what happens
3 Those that wonder what happened.
I put it to you that the FSA is category 3.
One could argue that they are category 1 because they did both 2 and 3.
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Not much from Alex on Axis these days.
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#71 OldSubeditor
A barge poll is a large wooden staff that was use by bargees who worked on the canals many years ago to propel their vessels through tunnels in the canal network.
They would lie on their backs on the deck of the vessel and use the barge poll against the roof to lever through the tunnel.
At the other end they would resort to horse power on the canal bank.
Regards
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As far as I can tell, no one is going to come out of this looking Squeeky clean.
Everyone involved appears to have made a major cockup, including the members and Auditors.
Are we now seeing a disaster in the Scottish (and UK) economy on a similar scale to the Darien project?
Is a Federal EU the only way out?
:-p
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,4. At 10:41am on 30 Mar 2009, minuend wrote:
This still FAILS to answer what the FSA and Alistair Darling said earlier that the Dunfermline Building Society had large American toxis debts, primarily sub-prime mortgages. THAT CLEARLY IS NOT THE CASE. The public are being MISLED.'
Hmmn, what part of THIS paragraph from Roberts blog have you overlooked?
'In addition, Dunfermline acquired £274m of buy-to-let and self-cert mortgages from the likes of defunct Lehman Bros and from GMAC.'
Perhaps those financial 'assets' aren't toxic enough for you, although seeing as they trade for about 35 pence in the pound right now, the actual 'value' is roughly £95m..imagine this years accounts trying to explain a £180m writedown in book value for a business that makes £5-6m a month...
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SPOT THE DIFFERENCE: LEADERSHIP
today Obama said, in relation to the impending end of Chrysler and bankruptcy of GM 'we, as a nation, cannot afford to shirk responsibility any longer.'
here in the UK, Darling said that aside from the Treasury covering 1.6 billion of risk at the Dunlendin' BS, any losses associated with the remaining assets which have not been bought by the Nationwide would be met firstly by the remaining capital in the society, and by the financial services compensation scheme, leaving a "small residual exposure" for the government.
So that's allright then
Our Glorious Leader doesn't appear to have a statment about Dunlendin just yet, but he is quoted as saying, in relation to Jacqui Smith's porn videos* 'The home secretary is doing a great job and in no way should this issue be allowed to detract from everything she is doing for the public in making our neighbourhoods safer.'
* I now understand that one of these videos may have been entitled 'A SMALL RESIDUAL EXPOSURE'
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#104 somali_pirate_SP500:
"Our Glorious Leader also reassures us that Jacqui is doing an excellent job helping to keep our streets safe etc"
-------
So safe she could be called FLaK Jacqui!
Dunlendin, LOL
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I see that the moderators didn't like my earlier post #102
which was about Tim Geithner, who he might lunch with, the continued bailing out of the Wall St banks and the contrast with the govt approach towards Chrysler, whose demise seems almost certain now, and GM, which is headed towards Chap 11 bankruptcy
I'm not saying that the automakers are necessarily much more deserving than the banks; they appear equally badly run, though they do at least make things; just commenting on the huge difference in treatment of banks and all the SMEs and BEs
obviously Mr Geithner buys his own lunch and pays all of his own expenses
I am presumably allowed to say that Timothy forgot to pay his taxes for several years in a row, since it is on the public record?
http://en.wikipedia.org/wiki/Timothy_F._Geithner#Tax_problems
Seems like Timothy and Jacqui have some things in common when it comes to remembering what to pay for themselves
after much deliberation, they therefore have to share my inaugural PIRATE OF THE DAY award
who do you suppose will be tomorrow's PIRATE OF THE DAY? there are so many to choose from; all suggestions welcomed
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Sounds more like a cash flow problem than a crisis and another panic move by the FSA
It stands to reason that government policies will cause many more of these mutuals to get into trouble
How can they possibly make sufficient margins to cover the inevitable write downs on their books as the recession deepens and house prices fall and repossessions increase.
Less savers because interest rates are virtually nil and mortgages with interest rates so low there are perhaps even negative margins on some.
This is the kind of distortion that doing something without knowing what you are doing can cause.
Get ready for even more ahead.
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Robert, you mention '....the uselessness of their 2007 annual accounts'.
Please keep pushing on this one.
The only way for the UK to defend any semblance of a financial services industry, while at the same time serving the interests of each and every ordinary hard working citizen of the UK, is for it to enact laws that force all companies that deal in money to adopt quite breathtaking levels of disclosure.
The City (i.e. the so called 'merchant banks' etc, the hedge funds, the closed inner circle of bankers and their mates who have been ripping us all off for the last thirty years) do not realise it, but this is the only route through the meltdown that will give the UK an advantage compared to the rest of the world.
London needs to be known for the highest global standards of transparency and disclosure, and consequently the most efficient market place.
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#71
Apologies.
On first reading I missed the irony in your posting.
Well spotted.
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Did Mr Faulds expect a benevolent tap on the head followed by Mr Darling saying "now here`s a couple of quid,go and try again" Get real Mr Faulds, apologise and then resign.
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#75 TheF1nn:
" They should be compelled to produce their accounts in a standard form by the FSA with a non negotiable definition of what each item represents. Assets for example should be represented at their value on a fixed day in the financial year. "
__________________
Yes, absolutely. There is a bijou snagette.
The Value of the toxic 'assets'.
I assume that in Accounts Rules and Practice ( whatever they call it ) there is a method to resolve the value.
This value is apparently influenced by the Credit Rating Agency who will have their own rules and conditions for this function.
Obviously the value of these assets will be taken into account by HMRC who will have a keen interest in assessing the profit made by examining said accounts.
No doubt Accountants and Credit Rating Agency experts will flood this blog to aprise us of their methods.
I do hope so because up to this point it seems they have all been consulting the entrails of a chicken to get these values.
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Robert,
What can we infer about Britannia Building Society's rush to be taken over by the Co-op?
They made some pretty huge losses on sub-prime loans and dodgy investments in Icelandic banks?
Are they in a worse situation than they are letting on?
Can't see anything in the proposals to make it worthwhile for Britannia members to vote in favour of the takeover. Best to stay indepedent as long as that is realistic.
Can you do some digging, Robert?
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#118 EBAHGUM:
Google search "barge poll" 3060
Google search "barge pole" 88100
You need the quotes to fix the phrase.
__________
Fellow at last Olympics: "Excuse me , are you a Pole Vaulter?"
Answer:" No, I am a German but how did you know my first name?"
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Sorry, but I've been sick and tired for five decades now of listening to Scots who, with little or no consideration, enjoy offending their English cousins by banging on about how much better they'd be as an independent state. Well, let them have their independence.
I would regret the impoverishment visited upon many decent Scots who had, probably, never wanted independence. And I'd be genuinely sorry to see more Scots joining the ranks of the unemployed.
But it has never made sense to prop up lame ducks, has it?
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At least we can express ourselves. Uncle Adolph would have had us in the khazi (German pronunciation of KZ) by now.
KZ - Concentration Camp.
Got to go, someone at the door.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
64. At 1:31pm on 30 Mar 2009, niloc5959 wrote:
London and Scottish Bank - failed
Halifax Bank of Scotland - failed
Royal Bank of Scotland - failed
Scotlands biggest Building Society - The Dunfermline - failed
Scottish Widows - struggling
BT - headed by a Scot - Livingstone -former finance chief - struggling
Post Office - Scot - Adam Crozier - struggling
HM Government - dominated by Scots - failing
There is a pattern here but I am struggling to put my finger on it.
Last few days.
Corporate banking is transferred from Bank of England to RBS. Hmmm..
Defence procurement is transferred to an account with RBS. Hmmm..
On top of Aircraft Carrier contract for Rosyth last year. Hmmm...
There is a pattern her but I am struggling to put my finger on it.
Perhaps Peston should do some proper Business work here as this effects English Businessness and Taxpayers on a massive scale.
There will always be an England, lol - Not if Gordy has his way ;-)
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Post 51 - You are confusing Jim Faulds(Chairman)with Jim Willens (CEO) who only took over 6 months ago.
But wait, where did Jim Willens come from. Why none other than the Nationwide Building Society.
The plot thickens........
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BREAKING NEWS: GLORIOUS LEADER SUGGESTS FUTURE SCRAPPING OF 2ND HOME ALLOWANCE, TO BE REPLACED WITH FLAT-RATE OVERNIGHT PAYMENTS
Our Glorious Leader, having returned home from his great world tour and overseen the successful rescue of Dunlendin' this morning, has noticed that the parliamentary horse-stable is empty, so he's sprung into action yet again
Two huge victories in one day; blimey! that G20 conference can't start soon enough for me
The overnight stay proposal gives me an idea for a potentially hugely profitable new business:
A BIJOU BOUTIQUE HOTEL FOR OUR MPs
features to include:
handy central London location in Soho
Pugin wallpaper
in room entertainment system with back catalogue of naughty DVDs
limo service to and from parliament
24 hr bar; motto: cheap booze for responsible drinkers
24 hr restaurant: specialising in green custard
Special Offers to include:
parliamentary assistants stay for free if related!
all credit cards accepted of course!
bills un-itemised and fully covered by the Official Secrets Act
assuming that the overnight allowance will be at least 200 poonds, it's a money-making dead cert
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Robert, the Treasury couldn't have briefed you better; they even supply you with bullet points so each can hit home with the right government message.
When are you going to do some real and meaningful investigative journalism? Any old fool (me included) can sit outside Number 10 or 11 and just wait for government copy to magic out of thin air or more likely passed from the ground floor window by AC and Lord M as it flies off the typewriter!
On Five Live tonight, the presenter said to Alec Salmond that "Robert Peston says.....". He replied, "With respect, Robert Peston receives his briefings from Number 10".
You are losing your credibility as are this government.
Please accept this as friendly advice because I believe in my heart of hearts that you are a good man who means well.
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Is a barge poll a method of canvassing the opinions of boats or is it where you push someone out of the way to find out how they will vote?
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Conspiracy Theory:
Having lost their grip on Scotland to the SNP who looked to build an independent country on their financial systems, New Labour have brought the devolution meisters to heel by relocating every Scottish bank south of the border. The Scots having no foundation upon which now to build throw in their lot with the SNP and are brought back into line supporting GB et al.
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Is it me?
You say "Probably only 10% of the losses would ultimately be carried by taxpayers, or up to £10m."
Directly or indirectly everybody pays for ALL the losses.
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#123 my suggestions are
for the return of Captain Pugwash are
1) El-Gordo as Captain Pugwash
2) Jakie Smith as Master bates
3) Jake Smith's husband as Sea Man Staines
4) Mr Darling as Roger the Cabin boy
5) labour Hq as the Black Pig
Now show at No 10
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It's Panto Time again! "He's behind you!"
We're all made to look in the wrong direction when they say "We are doing this to protect savers' deposits". What they really mean is "We're doing this to retain control of the outstanding debts", thereby protecting our shareholders and the insurance companies that have secured these debts.
Banks and building societies tend to lend a multiple of their actual deposits, so when they go bust, there should be more winners than losers. A few people won't get their 'spare' saved money back but many won't have to pay their loans or mortgages back, money they needed to run a business, buy a house to live in, etc.
The losers would be the banks' shareholders (who have invested 'spare' money) and the insurance companies. (parasites)
Let them go bust and the lack of debt will have us spending again in no time!
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Further to #108 Wee-Scamp and with particular regard to #64 niloc5959 -
Wee-Scamp's comments about the FSA should be a pointer for you but, just in case you're still struggling to work it all out here're another couple of hints -
Chelsea Building Society - Losses - GBP 36 million.
Newcastle Building Society - Losses - GBP 35 million
English Local Authorities - Losses over Icelandic Banks - GBP 50 million.
See the words "Scots" or "Scottish" in any of the above - nope, me neither.
Here are a few more questions for you - others might want to chip in, as many on here seem to think (Bizarrely, given the almost total absence of fact from most of what's being spouted) that they have some idea what they're talking about.
Question 1 - If the DBS was/is such a basket case why the the specially commissioned, External Auditors (KPMG) report delivered in October 2008 confirm that DBS had a viable business plan.
Question 1a - If the DBS is such a basket case that it would not be able to service any capital injection as a loan - how were they been managing to carry a GBP 20 million loan from the RBS up until January 2009.
Question 1c - Has that loan been repaid? If so what impact did this have on the DBS' liquidity and, further to this, whose decision was it to call that loan in?
Question 2 - Why does KPMGs evaluation of the risk, as shown in their report delivered last October and based on a forensic, line by line examination of the DBS commercial property book differ so much (GBP 26 million compared with GBP 60-100 million) from the FSA's evaluation of the same book and those same loans?
Question 3 - Why have the FSA not been more forthcoming with the fact that they approved the DBS' acquistion of the Lehman Brothers loans last year.
Question 4 - Why has it not been made clearer, in all coverage of the DBS collapse that the loans bought from Lehman Brothers were loans secured on properties in England not the USA.
Question 5 - Finally, when commenting on the DBS' ability to service any capital injection by way of loan why did the Secretary of State for Scotland (Deliberately, in my view) not clarify that DBS made GBP 2 million operating profit last year.
Loans are not serviced out of profits. They are serviced as costs, which are deducted from revenues and anything left over is a profit. The DBS (Like every other Building Society) serviced loans as part of its standard operating model. Obviously, it did so reasonably well, otherwise it would not have been making any profit at all
Question 6 - Other than Jim Faulds, can nobody else involved in this whole sorry affair tell the difference between profit and revenue?
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38.
I think looking after Fife-All would be better.
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MORE FISCAL IMPRUDENCE WITH OTHER PEOPLES MONEY?
RATHER LIKE OUR DEVALUED GOVERNMENT!!
ROLL ON REVOLUTION AT G20!! OH DEAR I AM NOW LIABLE TO ARREST?
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Nationwide is a great building sociey and is showing that it is a foundation stone within the UK financial services world. However, it's former employees are being shown not to be up to the mark.
Peter Richardson - former Derbyshire B Soc CEO
Colin Whittle - former Cheshire B Soc CEO
and recently appointed Jim Willens - Dunfermaline B Soc CEO.
Big players in small pools?
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This comment was removed because the moderators found it broke the House Rules.
Robert, like many I am about to commit £3600 into an ISA with a Building Society. I am sick to the stomach with doubt about making this step. Will my BS go bust...who knows, have they bought loads of toxic debt with our savings and called it assets...who knows. Are the board strengthening their employment clauses to ironclad their pensions and golden handshakes...who know. If the top auditors don't know what's going on, or are unwilling to tell, what chance does the ordinary bloke in the street have?
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Robert, there are a couple of other issues here that may be worthwhile looking at.
01) Nationwide has just made approx 40 staff redundant in Scotland. How does this acquisition fit with this cost cutting strategy?
02) The existing Dunfermline CEO was laid off from Nationwide approx 2 years ago with close to a £1m pay off (check 2004 or 2005 annual report). Is he now in line for another pay off from Nationwide, this one subsidised by the tax payer?
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Things must be bad with the Labour Parliamentary crowd, tis normal when a less than popular leader jets off around the world for a while the pack back home encourage someone to kick off some sort of coup or leadership challenge, not this time eh.
Seems no one wants to be landed with the job of clearing this mess up, even the tories are less than energetic with their attempts to gain popularity.
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Robert,
Is it embarrassing when you get something wrong then the man from No 10 has to phone and correct you, then you have to update your blog?
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#142 IR35_SURVIVOR:
My post No 134 was the same as yours but I was moderated because I also mentioned under the stairs.
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It isn't funny for a serious journalist to call a half a billion mistake a boo-boo. This is exactly the kind of attitude that has proved to be so deadly.
In addition to very detailed regulations concerning the signing off of company accounts, accountants also have their own very high professional standards to observe, and their own personal standards of integrity and honesty.
It seems to me, that the Serious Fraud Office needs to be given some tax payers money pretty quickly to recruit some forensic acountants who are given extraordinary powers to begin investigating just what has been going on. The goal should be vigorous prosecution of any and all who have broken the law. When will this happen?
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The domino game now falling in ever expanding circles round the world does not seem to have any possible end game until we have reached the plateau of the Great Leveller. Once there we can all walk or crawl to the tower of existence passing on the way the monuments of greed and inhumanity, where we can enter into a discussion with the Muslim, the Christian, the Jew and the Unnamed about our identity while the blind and the blinded serve fried fillets of fresh air with a bottle of sunlight filled with tears.
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Like lots of other posters / bloggers on here, I must admit that the G20 looks like being rather interesting.
If it goes well, we will all still be in recession
If it goes badly, we will enter depression........
Lucky us !!!
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dunfermline 1 darling 0 .brownwatch 428 days.
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Brownwatch 427 Days 2 Hours 27 mins!
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Several comments refer to Scottish institutions and their perceived financial conservatism. Were RBS, HBOS and DBS run solely by Scots? Or would it be more accurate to say that their boards and CEOs had, like those who sold their country for a mess of potage in the Act of Union, simply had their own tawdry interests at heart with no consideration for any other criterion than making a few more % on their 30 pieces of silver?
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(Dunfermline acquired £274m of buy-to-let and self-cert mortgages from the likes of defunct Lehman Bros and from GMAC)
This is highly suspicious to me. If this country were not so obsessed with the pedestrian non-financial crimes investigated by TV drivel such as Inspector Morse, then they would be able to imagine that:
if you are a Corporate Executive, if things are going bust, you might as well go bust in big style and make some trustworthy friends rich. Those friends will repay the favour some day.
This simple basic philosophy of abusive corporate governance is usually legal, and that's what makes the job of the Serious Fraud Office so difficult.
If we were more intelligent people properly scrutinizing corporate governors, and not a bunch of distracted journalists and academics squawking around in the pretence that Economics is a respectable field of study, (or that Financial Accounting has made any progres since Enron), we would at last have a worthwhile system of corporate oversight, and there would be far less of the nonsense we have had to witness from Scottish financial institutions, amongst others!
I've seen this in head offices before. If you're in power, you can make
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#144 Bandages_For_Kronjic
Re your Question 5.
If DBS needed a loan of 30-60million their costs would increase by between 3-5million in year on year comparative interest costs.
Thus the previous 2 million profit would be more than eradicated.
They may have serviced earlier loans reasonably well to maintain prior profitability but how was it going to do this with the additional debt burden to service?
Not being confrontational - just do not follow the logic of your argument.
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I've just heard Bob say on the box that it's all down to RBS, HBOS and DBS trying to grow out of a small domestic (Scottish) economy.
Poppycock...... The main shareholders in RBS and HBOS were not little old ladies in the Scottish highlands but brutish, bullying and greedy fund managers sitting in the City of London and determined to get their fat but generally undeserved bonuses.
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Look guys (and gals), beating up HMG over their failure to regulate the motley crew of incompetents, charlatans, chancers and rogues who have bought many fine financial institutions to their knees is more than justified, but before going to town on them for actually ensuring, as they have to date, that no depositor has yet lost any money is not only less than fair, it betrays a shallow analysis. What has been avoided to date are Northern Rock style queues around every single bank and building society in the UK, people being paid in script and a whole series of horrors as lived in Argentina not so long ago when the banks simply bolted their front doors and left people to barter. If anyone should doubt that the directors of the Dunfermline were the authors of their own misfortune, read this ...
[Unsuitable/Broken URL removed by Moderator]
I don't doubt that a little web surfing will reveal any number of self congratulatory, self delusional press releases for many of the deals that ended up sinking Northern Rock, B&B, HBOS, RBS.
Yours Aye,
Graucho
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So the draft final communique of the G20 has already been leaked?
I appreciate that these things take some organising but writing the minutes before the meeting takes place is not something we do even at my local golf club.
The secretary should be colour balled.
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Oh how the Dunfermline fell indeed.
Just as well the English taxpayer was there to catch the brown stuff as usual.
I for one am sick to death of bailing Scotland out.
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#161 EBAHGUM -
Firstly - you're assuming there's no equivalent drive to reduce costs to compensate. If the UK Government can suggest that Scotland can find GBP 500 million in 'efficiency savings' then why couldn't the Dunfermline reduce their spend.
Secondly - My question 1a. If the DBS have been carrying a GBP 20 million loan from RBS up until January 2008 and if that loan has been repaid. (I don't know if it has or not, that's what I'm asking)then all the recapitalisation would entail would be the Dunfermline taking up (Again) a level of debt that they'd been carrying whilst remaining in profit for some time.
My point being . . . the Dunfermline's sacrifice was a political decision by the UK Government, as enacted by the FSA and HMT. Any attempt to dress it up as being in the 'best financial interest' falls as soon as you're in possession of the facts.
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157. rvpisneverinjureds wrote:
"brownwatch 428 days"
428 days is a very, very long time in politics.
And to all those who have made the tired old points about Scotland... I don't recall any of you complaining when the tax money was pouring into the UK's coffers from the Scottish banks. Nor when the oil money was rolling in before that. If you don't like it, then leave the Union.
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Robert - I understood that two building societies failed the FSA stress tests recently. One was the Dunfermline. I can understand why people would want to keep quiet about the other, but it would presumably be of interest to know which the other one was? I'd keep the ears flapping on that one....
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#165 englandrise - see my #144 above -
Since when have Chelsea or Newcastle been in Scotland?
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A forecast for the G20 meeting:
Whether the weather be fine, or whether the weather be not, we'll whether the weather, whatever the weather, whether we like it or not.
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Hi Robert
Thanks for the update. One question I have is where was the FSA when
"In addition, Dunfermline acquired ?274m of buy-to-let and self-cert mortgages from the likes of defunct Lehman Bros and from GMAC."
What exactly was the FSA doing when a smallish building society was undertaking such transactions which were clearly likely to be beyond their capabilities in anything other than a raging bull market?
I would refer you to your own faith in the FSA's stress test on Barclays.
One of the lessons of this episode is that the FSA has been hopeless and clueless and much of its role should be given back to the Bank of England.
As to the Nationwide and Dunfermline I wish them all well in trying times....
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#166 Bandages_For_Kronjic
I'm sorry, but I have not read anywhere that such a drastic cost reduction exercise was ever contemplated.
The relative numbers do not add up. It could not have been achieved.
So my opinion stands.
I'm not into the anti Scottish or pro English argument as I find it terribly irritating and irrelevant.
I believe all the arguments that the ethnic origins of these incompetent managers are relevant to the debate is daft.
No offence. We'll have to agree to differ.
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#42 "It is important now that we have a public inquiry in Scotland and held by the Scottish Govt in order to determine what has gone wrong not just as the DBS but also RBS and HBOS.
Particular emphasis should be paid to the activity over the past few years of the FSA, the Treasury, the BoE and of course Govt Ministers and their role in the collapse of these organisations. There are serious questions to be answered over the quality and intensity of the oversight practiced by the authorities and politicians."
Add to that the question of why so many of the headline makers are Scottish and why are they expecting public funds from the rest of the UK to shore them up when they have their own local/national(??)assembly !!
Should the battle cry now be "Scottish toxic assets for Scottish people" ??
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#162 "The main shareholders in RBS and HBOS were not little old ladies in the Scottish highlands but brutish, bullying and greedy fund managers sitting in the City of London"
Oh dear - so Scots like Birt, Mathewson, Stevenson and Goodwin had nothing to do with it at all did they? When Alex Salmond said last year: "Scottish banks are amongst the most stable financial institutions in the world.", if not RBS and HBOS, who exactly DID he mean?
I am NOT anti Scot, but I am sick of paranoid nationalists trying to have it both ways - taking claim for any perceived success, but blaming someone else when it goes wrong. The Scots I know are more honest - and excellent company it must be said. So I'm also sick of some of the nasty and snide anti Scot comments on here too. Right at the moment in Britain we're all in the faecal matter together.
And now I'm going to go to have a nightcap - a Dalwhinnie - and dream sweet dreams of peace and harmony.
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#164 "The secretary should be colour balled."
Stop being a colourist !! What is wrong with black ?? It is just as good as any other colour !! Why discriminate against it ?? :-)
/end anti-PC rant
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#162 "Poppycock...... The main shareholders in RBS and HBOS were not little old ladies in the Scottish highlands but brutish, bullying and greedy fund managers sitting in the City of London and determined to get their fat but generally undeserved bonuses."
So they should have gone to the wall !! Then why was there such a wailing and gnashing of teeth in Scotland when that was suggested ?? Could it be that without this bunch of "brutish, bullying and greedy fund managers", a lot of Scots will be without jobs ?? If Scotland wanted the jobs without this bunch of "brutish, bullying and greedy fund managers", then it should have coughed up the money to buy them out, shouldn't they !!
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if only i had the magic lamp, and a genie, i would certainly wish this away, however i fear the worst is yet to come. The wind is picking up speed to take us all out! We talk about WWII and the great depression, however the depression was before the War (13 years in fact!). WWII got the americans out of it. What's going to happen next? lets have some bankruptcy figures! i bet they are geting worse! We sit we wait and we hear more bad news, time to get our heads out of the sand.
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Morning Robert,
in all this euphoria about Nationwide taking over the good bits of Dunfermline BS, perhaps one or two items are being deliberately overlooked.
Firstly, if DBS's new IT system was a failure and cost so much, who will pick up the pieces now and integrate the system of customer accounts with Nationwide? And who pays?
There seems to be chilling parallels in the commercial activities of HBOS and Dunfermline BS with regard to commercial property loans. Could RP provide some more insight here (please not the Treasury version again).
I would like to challenge your statement about other Building Societies being OK now. I predict that Nationwide will be the next BS to be taken over and probably sold to the Spanish. I thought it was odd that Nationwide raised 500m last year to help with lending. Integrating all these diverse IT systems will prove to be a heavy burden for Nationwide (and I doubt that they have the staff to do it or even if it is possible).
On a lighter note, If Gordon is proposing a flat rate overnight payment for MPs legitimate expenses then I challenge him to have the money paid by the Treasury directly to the companies involved and not in cash to the MPs accounts. In that way, it removes any temptation for creative accounting by the MPs concerned.
Back to DBS, one further thought, perhaps they should have become a bank and issued shares and windfalls to their members...oh hang on a minute I think that has already been tried with FSA approval.
Could Robert please explain why the G20 has to take place in the UK with the enormous additional costs for UK taxpayers for security and living it up in expensive hotels? Is it because our Dear Leader wants to feel that he is important in this crisis? Or is it really because the other G20 attendees partners wanted to go shopping at Harrods?
Mind how you go Robert, I think you are losing the plot as Business Editor (poll and pole, armageddon vs apocalypse, not checking your figures with a colleague, not reporting on business at all, presumably because the Treasury do not want you to).
Oh and have a nice day.
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Peston says that the private banks and building societies are not prepared to touch these smelly loans with a barge poll.Does he mean 'pole' or is 'poll' an American usage? Normally the word 'poll'is used ,I believe, in contexts such as opinion polls.Be that as it may,one wishes regretfully that the bankers had developed sensitive nostrils earlier.For they would not have then globally distributed beautifully dasigned and scented excremental packets in the guise of credit derivatives.Incidentally the use of the term 'derivative'--though it has now come to stay--which designates a beautiful mathematical concept to refer to the dubious finacial instruments is highly inappropriate.
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What amazes me is how everyone has forgotten about Graeme Dalziel, the former CEO who stepped down in December 2008. I think you'll find it was his ineptitude that set these wheels in motion years ago, not Jim Willens. And now GD joins the ranks of Fred Goodwin who have 'retired' from their posts sitting pretty with a large pension and grin.
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#177
watch the bankruptcy figures soar when the debt relief orders come into force on monday 6th april, qualification is undisclosed debt of under 15000k,less than 300 pounds in assets and no more than 50 pounds per week in dispsable income . four weeks ago i was in a job earning 27000k a year enoying life a week in france in jan weekend watching the rugby in dublin then bang made redundant. no package for me only been there 23 months income dropped from 1800 to 240 in the month. i now qualify for a DRO cant believe my fall has been so quick so beware bankers unsecured lending is the next sub-prime.
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sorry unsecured debt not undisclosed the sleepless nights are getting to me
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on the other hand, mortgage lending is up so let's be positive for a change. I know it is hard but go on - give it a try!
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I see the English - Scottish tension rising on here, looks like Labour did a right good job on breaking up the union. Now he wants to allow catholics to marry into the royal family, do I see a pattern here? A hidden agenda?
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There's evidence that the authorities are confident that no other society is facing disaster
I find it amusing how Peston tells us such statements as if this were the gospel truth! This information is coming from his inside sources which will be the same people who have failed the UK taxpayers on the regulation side and the banksters themselves.
For all that has been written and filmed in the months that the credit crunch/financial crisis really took hold - the banksters are still not coming fully clean over the magnitude of their reckless behaviour and the resulting loses.
As a country and the world as a whole we would be much better off if Govts had nationalized the banks early on, cleared out the fraudsters running them and had a properly look at the damage. As long as they (Govt) leave these people in charge and help them facilitate the cover up the more damage that is being done to the real economy and the further away any chances of recovery.
The article "Geithner`s Dirty Little Secret" highlights this very point.
http://creditcrunchedoutinuk.blogspot.com/
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So we still don't know why a £25 million request for loan by the Dunfermline Building Society ended up as £1.6 billion liability.
We still don't know why Labour ministers were briefing against the DBS claiming toxic debts, and American sub-prime mortgages when they knew this was not true.
We still don't know why Nationwide were allowed to buy the good bits of the DBS at a knock down price.
We don't know why a rival Scottish bid led by Scottish Friendly Assurance was prevented from talking to the DBS board. This would have saved hundreds of jobs.
The truth is the DBS was thrown to the wolves by Labour ministers in the same way that Lloyds took over HBOS, in the same way that a rival bid for the Bank of Scotland by a consortium led Scottish bankers was dumped.
Labour seem intent on trashing the Scottish financial sector. IT IS A SCANDAL.
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Everybody lost track of real wealth which is large amounts of savings
Not large amounts of investments and large amounts of possessions
From large amounts of credit borrowed against a continuous income
Homes became speculative investments and were traded like shares
Then the profit takers took all their profits and the markets crashed
Leaving blind risk takers with large exposures and less or no income
We've covered the banks immediate short term cash flow problems
But they did not tell us about the future failing large risk exposures
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#185 jd6969preston
Great Link. Explains a lot.
______________
So G20, this is what you have to do:
Make Worldwide Glass-Steagal Act (equivalent)
Seperate Investment Banking (gambling) from High Street Banks and BSocs.
Make Derivatives, CDO's and the like (bets on bets that something will happen) null and void and illegal.
Make people RESPONSIBLE. Some of this is fraud.
All these agencies that have failed need tightening up and retraining:
Auditors: Internal and external, Blind to it all
Credit Rating Agencies: Grossly overvaluing - still
Regulators: FSA ,SEC, HMT: Did not see anything untoward.
HMRC: Did not spot what was going on did they?
New Accountancy Rules, introduce new.
Banking Rules, new please and tighter.
Bonus Payments need sorting out.
Set a standard for inflation indexes that cannot be manipulated by countries internal politics.
In the UK the tripartite regulators have clearly failed so let us go back to BoE as sole regulator and strengthen her.
That will do for a start.
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Interesting to note that as Mr Peston berates the state of Dumfermaline's latest Accounts for their lack of transparency as contributing to the Society's demise, who is put in charge of administering the run off of toxic assets? .... The big four acounting firms who prepare the accounts of these organisations. I suspect they will be collecting a not insignificant cut of the amounts recovered for the tax payer.
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#172 EBAHGUM -
"I have not read anywhere that such a drastic cost reduction exercise was ever contemplated."
And just because you haven't read about it (In the same press that's been remarkably quiet about the FSA's explicit approval of the DBS' acquistion of the Lehmans Brothers' loans) - then it can't have happened.
The Dunfermline's been cutting staff for over a year - Fact!
Maybe you don't know everything.
"The relative numbers do not add up."
What numbers? The numbers that matter, which I haven't seen you or anyone else quote anywhere in this debate are actual revenue against actual costs in 2008/09 and forecast revenue against forecast costs for 2009/10- not actual and/or forecast profits.
Do you know how much revenue the DBS was expecting to generate in 2009/2010? I don't, but I don't think it wold be unreasonable to expect it to be into the GBP 100s of millions.
In percentage terms, therefore, the proportional increase in revenue or the off-set proportional decrease in costs is unlikely to have been as "drastic" as you're claiming.
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Possibly the Global Fiscal Stimulus is flawed
as it is repeating borrowing on a larger scale
The party is over, homes have been wrecked
Stop spending for more stuff that isn't needed
Use what we have already got and leave some
for the children
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Hi Robert
"The City watchdog was on Monday night under pressure to explain how it had monitored Dunfermline after the government unveiled a £1.6bn bail-out for the stricken Scottish building society.
Alistair Darling, chancellor, ordered the Financial Services Authority to produce a report on how the 12th biggest lending mutual in the UK had failed."
You seem to keep missing the FSAs failings Robert.Why is this? They fail fail and fail yet you take their pronouncements seriously re: things like Barclays stress test or Hector Sants statements.
They have utterly failed.....
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What a mess we're in - and with the BBC's assistance the Government is busily covering up all the mistakes it has made that brought us here.
Fake, fake, fake, fake - that's the world we live in now. Fake news, fake people and fake Government.
The collapse of the Dunfermline only raises 1 question - Why is this building society allowed to fail, but Northern Rock was saved by the tax payer? Who is making the decisions here? Have we slipped into a totalitarian nightmare with a single man - or set of men - making all the decisions for this country?
Isn't this the exact opposite of a Democracy?
There is a phrase - you reap what you sow - and I can tell you the years and years of lies, damned lies, statistics and now spin have left us in a pickle. BBC showed a story of a couple in britain, who since the sucessive interest rate cuts are now sitting pretty on an extra £1000 a month.
...The government needs them to start spending, and is telling them to 'trust us, the recovery will be here soon'
However these 'ordinary folk' have long since stopped having any confidence in what the Government says or that there is any reason for the HM Gov to believe that the recovery is coming.
Sadly - this is a downward spiral - and it's all made worse by the fact that the General public don't trust the elements involved in guiding them through this crisis (the Gov. The media and all the other 'advisory bodies)
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It continues to amaze me that judging from some of the comments on this site many people do not realise that ordinary people were the main shareholders in RBS, Lloyds etc through their pension funds, which collectively have lost some £200+ billion in RBS, Lloyds, HBOS, NR alone, due largely to the incompetent handling of regulation, interest rate policy and the credit crunch, as well as the negligence and incompetence of banks' managements.
When there is an eventual upturn the Government through their large dilutive stakes in RBS and Lloyds, obtained for relatively little cash invested, will reap the benefit, not our pension funds.
The greedy fund managers are not the real shareholders but are simply there to lose our money whilst collecting huge remuneration, and do not wish to rock the boat with company management on our behalf (as they clearly all have vested interests in rewarding themselves for failure as well as success), but will sometimes make the odd remark guaranteed to be ineffectual.
It is interesting to see that it is local authority pension funds, not the large fund managers, who are leading the charge (and in the US as the chances of success in British courts given the government involvement in the legal process here are not as good) against the management of RBS, and hopefully in due course of Lloyds, HBOS, B&B.
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See #95
All banks are guilty of "taking pecuniary advantage at our expense".
It is quite simple, really. We let them do it - and have been doing it for centuries !
Next time you walk into your bank, just ask them for you to have sight of your credit agreement (this is your right - anyway they should have given you a copy within 7 days of you signing) I mean the original and not just some kind of photocopy.
They will do anything to avoid supplying it - Yes ! - you've guessed it - they have sold it on - now they are expecting you to pay them again plus interest and other extraneous charges against a monthly statement.
DOUBLE BILLING eh what ? We should all get our money back as this is clearly ILLEGAL.
All our watchdogs, government agencies and ombudsmen will never tell your this - I wonder why ? THEY ARE ALL IN ON THE RACKET !! And, that includes the Courts - I know, I've been there !!
Take care Folks whenever you sign anything - you are giving away your human personality to that fictional corporation we call government, democracy and financial system.
Bless you all.
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#175 ishkandar
It seems I can't do right for going wrong.
Imagine the reaction if I'd actually written black-balled!
Take your point about PC - I'm becoming far too correct in my old age.
I used to refer to person-hole covers as man-hole covers when I was younger.
Happy days.
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Nothing suprises me regarding the FSA comments.
Ask over a thousand investors with a certain Edinburgh Firm.
Several months now without any answers as to why they have frozen their savings and worse still rumours that they have lost the investors monies through their actions.
Even worse rumours they can't even attend meetings because staff are to busy taking holidays.
The nightmare goes on.
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stanilic
Why the focus on the Scottish aspect of these institutions? Northern Rock and B&B both failed but we didn't hear Peston going on about the North of England having a number of failures.
As for provincial - RBS is still one of the biggest banks on the planet.
AS far as UK banks go it's the Egnlish ones who are provincial.
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Just how can there be anything other than total risk in the £900M of dodgy loans? Even if only £100M of them fail, that leaves KPMG with their grubby mitts on the management of receiving £800M. Even if all the debts were written off and then all were repaid, the likes of KPMG would simply absorb the windfall in their fees.
How can anybody give management of even the smallest amount of money to any auditors who have audited the books of any major bank in the last 10 years? Auditors signed off on the excesses of the banking world and took their millions in fees for the privilege. Didn't KPMG investigate HBOS (a client) on behalf of the FSA and found nothing wrong? If not them then one of their ilk. Talk about reward for failure.
Writing off all the dodgy loans would probably make fewer millionaires than just giving it to KPMG to milk, and at least the proceeds would be wider spread. Better still, why not just gives the dodgy stuff to one of the nationalised banks. There are enough of them.
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Has anyone ever thought that part of the crisis lies with all of the greedy customer who foolishly thought property prices would provide an endless cash cow for their dangerous borrowing.
Was it not Jefferson who said ..
'Never spend your money before you have earned it'
I have earned my money and now it is being spent propping up these feckless people.
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