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How HBOS escaped closure

Robert Peston | 09:35 UK time, Friday, 4 December 2009

According to the National Audit Office, the Treasury believed at the beginning of October 2008 that Royal Bank of Scotland's "capital position was reasonably strong but noted that the bank was increasingly dependent on short-term wholesale funding".

nao_hbos226.jpgThe implication is that the Treasury was a benighted passenger on the good ship Titanic, as it ploughed inexorably towards the iceberg.

Hmm. If that were so, it would be profoundly shocking.

Because at that stage of last autumn, a few weeks after Lehman Bros went down, financial markets were in meltdown.

I know that by then even the myopic Financial Services Authority, the City watchdog, was aware that Royal Bank's dependence on short-term funding - which was the consequence of its ill-judged takeover of the rump of ABN - was potentially lethal.

And the FSA would also have calculated that RBS had far too little capital: the bank had lent and invested a perilous 50 times its capital resources, well over twice what most would deem to be the prudent leverage multiple.

So RBS wasn't just vulnerable to falling apart if it hit an iceberg. If someone sneezed on it, the bank might have collapsed.

That said, I have a clear recollection that the Treasury was in secret already working on a recapitalisation plan for the big banks. In other words, the internal Treasury paper alluded to by the NAO seems inconsistent with the work going on at the Treasury at that moment.

It's all a bit odd.

But maybe in all the fog and mayhem, it was not by then clear to Treasury ministers and officials which of Barclays and RBS was the more rickety.

Certainly it took quite some time for ministers to be persuaded that Barclays would be able to raise the capital it needed from commercial sources, and would not require a substantial investment from taxpayers.

nao_hbos226b.jpgSomewhat less jarring - but still shocking - is the NAO's disclosure that "as HBOS's position weakened on 16 September [2008], the Treasury considered informing HBOS that it would be closed to new business, unless a rescue could be arranged".

Closing a bank to new business is curtains.

Guess what? On the night of 16 September, HBOS went into panic mode in its negotiations with Lloyds on a takeover.

And (for the record) it was on the morning of 17 September 2008 that I disclosed Lloyds was in advanced merger talks with HBOS (see my note of that morning, Lloyds to buy HBOS).

It was obvious at the time that HBOS was in a desperate hurry to agree a deal. But it was impossible to know quite how desperate it was.

For Lloyds' shareholders, the NAO's disclosure is another bitter pill.

If they weren't asking it already - which of course they have been - Lloyds' shareholders will today ask why their board agreed to pay a penny for a bank, HBOS, which was apparently just hours from being banned from doing any new business.


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  • Comment number 1.

    Where do you go to get a HIP on your house of cards?

  • Comment number 2.

    So do we read into this that actually the meltdown at HBOS was partly caused by the treasury?!

    This just keeps getting better and better.

    And as for Lloyds- you almost feel sorry for their plight. They didn't realise what they were buying or the risks involved...but oh, hang on a minute- isn't the confusion caused by 'products' such as CDO's part of the cause of all this in the first place? And weren't they also trading such products?

    Nobody seems to remember but Gordon and Victor are close- and for about 2 days Victor was the white knight. There must have been political pressure there.

  • Comment number 3.

    Do the Directors of RBS want to fund the £1.5 billion in bonuses they're currently planning out of short term wholesale funding ? Or are they going to pay for them with their rip-off arrangement fees and their disgracefully high interest charges ? Caledonian Comment

  • Comment number 4.

    I remain amazed that the Lloyds Board isn't in jail as the more that comes out the more any sane individual must ask about the competence of the board that signed up to buy HBOS.

    Since the shareholders signed up the deal so much has come out about how poor the situation was at HBOS that someone somewhere must have committed an offence in the concealment of all of this information.

    Where is the Lloyds shareholders lawsuit against the board?

  • Comment number 5.

    Is it not amazing how many bogs we have had recently, especially after the Banking bonus SCANDAL was revealed.

    Is Labour panicking Robert?

  • Comment number 6.

    It was Benjamin Disraeli who once remarked that there was nothing ever so quite revealing as a patrician in a panic. And boy, were the panicking. It was the end of boom and bust as there would never be another boom because everything was bust.

    Then the cavalry in the shape of the UK taxpayer came charging over the hill. The bankers cheered as here came another load of idiots to be fleeced alive.

    The entire episode displays what happens when the brown stuff hits the wind turbine: the great and good, the very talented and the exceptionally talented run for cover and `not me, guv' becomes the process standard. When the rich coward quit the scene of their gross incompetence it is left to the little folk, the disregarded, the poor, the halt and the lame to bail out the stinking rich! The parable of St. Lawrence all over again!

    Looking back on it all with hindsight I cannot help wondering if we would have actually been better off letting the banks go down. At least the bankers would be begging on street corners along with the rest of us rather than rubbing the noses of the taxpayers in the dirt. At least we would be equal and equally broke.

    Never before in the field of human economics has so much been owed to so many by so few who couldn't give a damn!

    Time for a revolution!

  • Comment number 7.

    So Lloyds watched RBS destroy itself by bying the toxic dump that was ABN, and then decided to copy them by bying HBOS??????

    I agree with #4, someone should be talking to plod!

  • Comment number 8.

    Fiscal prudence does not figure in Gordon Brown's, the Chancellor's or the FSA's actions in this fiasco.

    Due diligence and full disclosure have escaped.

    It is chilling, Robert.

    The government and its architects got us into this with the false sense of security, end of boom and bust, and flogging the gold for a song whilst raiding the pensions pots to the brink of extinction.

    This government will go down in history as the one that bankrupted the UK with its profligacy and spent its time chasing magic bullets and bubbles whilst raiding anything of value that any of us had.

    A legacy of profligacy and reckless disregard of the very people it is meant to serve.

    A revolution against party political power may be the only way.

  • Comment number 9.


    Can you please do a blog updating us all on what stages, if any, the legal actions are at ?

    There must potentially be so many of them against the directors and the advisers (accountants, lawyers, investment bankers) of various banks.

    Why do we hear so little about this ?

    Surely it is the shareholders (UK plc/the government) who should pursue this ?

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    And these bank directors have still got jobs?
    Just who gave them a job, they are the ones without any sense.

    But never mind, in my view of the city it looks like it all went well in the end. They still have an income and a nice house somewhere and will be offered a place on some board. Me? house going in Feb. Or else the bank will come round and take it

    On word bitter

  • Comment number 12.

    pawns_or_players, the idea that Lloyds took over HBOS out of political pressure is so utterly ludicrous and dangerous that it must be vigourously quashed.

    What attention have bankers paid to political pressure as regards providing credit to business? How about paying 8-figure bonuses? Or unfair overdraft charges? The truth is that banks have continuously thumbed their noses at the Government ever since it became apparent that the Government had no choice but to support them. It is laughable to suggest that the board of Lloyds suddenly and temporarily came over all altruistic when making this one decision.

    So why did Lloyds agree to the deal? The answer, indeed the answer to any question relating to the motivations of bankers, is simply this: greed. Pure and unadulterated.

  • Comment number 13.

    It would appear that directors of banks have only recently discovered their fiduciary duties. Worth musing on the definition - person bound to act for another's benefit, as a trustee in relation to his beneficiary - !!!

  • Comment number 14.

    The whole thing has become an arms race, with all the bankers running round in ever-decreasing circles, shrieking that they must have bonuses because everyone else does.

    The answer is simple, and annoyingly the French seem to be right, if everyone agrees that huge bonuses are unsupportable, then put in a system across the board that prevents them.

    Of course the bankers will squeal about leaving, but they can't ALL leave the country. After all if a gap is created in the market by whatever means, the free market will evolve to fill it - even if that shortage is highly paid bankers being replaced by less highly paid bankers.

  • Comment number 15.

    I’m with many on here, I’d put ALL the bankers / pollyLiars and LAWYERS in JAIL. Revolution however will not come, until folk are literally on the streets starving – Then watch a race war kick off BIG TIME!

  • Comment number 16.

    6 - Stanilic
    Yep, pretty much spot on and particularly so on a day when 2,000 people on Teesside lose their jobs with consequential job losses yet to follow.
    Certainly I'd like to see the tumbrils rolling but for all that I don't think you'll get your revolution.
    For all that there must be a few skeletons rattling with mirth within the Kremlin walls, even as we speak.

  • Comment number 17.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 18.

    I hear in the news that if these people aren't paid massive bonuses then they will simply walk away and be lost to the U.K. financial industry. I look as though I'm bothered?

  • Comment number 19.

    6. At 10:14am on 04 Dec 2009, stanilic

    I beg to differ but only marginally

    Never in the field of finance have so many been completely stiffed by so few.

  • Comment number 20.

    16 Fingertapper

    I know we won't get a revolution and looking at how most revolutions turn out (meet the new boss, same as the old boss)it is probably best that we don't; but things have to change somehow.

    What has been going on and, as you indicate, is still going on, is so utterly unacceptable that it has become intolerable.

    If the anger I feel is being reciprocated across the country then there will be some sort of disturbance before long, although one hopes that most people will seek to eat their revenge cold.

  • Comment number 21.

    Interesting article, and thanks for this Robert. Come to think of it the government don't want to listen to the Treasury on bonuses either. Shouldn't they be listening to them rather more? They are in a funny frame of mind. Pre-election jitters or losing the plot?

  • Comment number 22.

    #4 Totally agree.
    #9 -- Surely it is the shareholders (UK plc/the government) who should pursue this ? -- No it is Brown and Darling who pushed Lloyd's into taking over HBOS that should be facing legal action. Interesting that they seem very quiet. Too busy making smart remarks about educated peoples schooling rather than acknowledging their failure to manage the UK economy over the past 12 years.
    The NAO report really highlights how bad things were/are. Very scary stuff.

  • Comment number 23.

    The world revolution is being mentioned too often, a sign that people have lost their trust in government processes altogether. I wonder if there is anything, but anything a politician of any political party can now say and be believed.

  • Comment number 24.

    Mr Peston wrote:
    'If that were so, it would be profoundly shocking'

    Profoundly shocking, its a bit more than that isn't it. Profoundly ******* ridiculous, that what it is.

  • Comment number 25.

    RBS insists on paying it's staff market rate bonuses. It states the case that free market forces cannot and should not be contained. Very well, as a business it has spectacularly failed. Market forces cannot and should not be contained. Let it fail. Alternatively, if it is such a pillar to the UK economy, it should remain under government control, not just ownership. Job security comes at a price. RBS staff needs to pay that price.

  • Comment number 26.

    This just catalogues the first stage of the grieving process for Lehmans the banks were collectively going through at the time:

    - Denial and isolation : they all denied they had a problem and refused to believe it had anything to do with them individually and went into isolation (seizing up the markets at the time)
    - Anger : there were many angry statements made and lashing out at others they thought responsible, they called this market movements but it was just angry lashing out.
    - Bargaining : when that didn;t solve anything they moved to bargaining for their lives with the massive bailouts.

    the next two stages are depression and acceptance - however I can't see any evidence for either in the behaviour of the sector in general, they still seem to be obsessively bargaining, though they seem to have made a large number of others depressed on their behalf.

    Sadly the process of grieveing cannot be resolved by outsourcing it.

  • Comment number 27.

    on An EARlier BLog peoplE queriEd where ALExCurzon et al had gone - I presume they just got tired of reading this stuff day after day after day.

    The developed world is rotten and the bankers, politicians and lawyers are feasting at the table.

    It gets reported every day in lots of places.

    What does the UK population do - we write about it on blogs like this.

    Meanwhile the bankers keep feeding at the trough and the politicians help them with their cutlery waiting for their one day a month £100k appointment once they are kicked out of office.

    Today we are all rich in comparison to people in Third World.
    In the future if we want the Third World to get richer we will have to get a little poorer - there are not enough resources to go round.
    However if we as a country get poorer but a small % gets a whole lot richer then that doesn't look good for the rest of us.

    And the trouble will only really kick off once the tax rises and public spending cuts come in.

    At the moment noone is really effected - we're just running at a loss.

  • Comment number 28.

    If you are looking for ways to beat bankers, then why no look at the way tommy (the loonie leftie) Sheridan (himself a bent pollyLiar) deal with getting rid of warrant sales.

    Basically, when a bank moves to repossess a property (owned by the TAXPAYER I may add), all the neighbours gather round the property and prevent the repossession take place. Alternatively, EVERYONE in the UK with a mortgage STOPS paying it immediately ;-)

    The result, would need to be a chance in repossession or dispossession law……………..We have a housing crisis alright, but it is not what you think it is.

  • Comment number 29.

    Lloyds shareholders probably need some compensation of some sort as they have been misled by government action and their not departed directors. That our government misleads people is no surprise (they have something of a history for it). That the directors misled shareholders is what happens in business too often. So compensation or something will probably happen and probably should. However, I cannot see why taxpayers should pay out for such compensation. They (taxpayers) did nothing wrong so why their hard earnt cash should go to compensate seems very unfair. Similarly, errors by directors are normally covered by insurance and insurance is about spreading the risk so if there is a claim, we all end up paying through higher bank charges as premiums adjust.

    Dealing is shares carries a risk. However, being a taxpayer seems riskier as you pay for everybody else's mistakes.

  • Comment number 30.


    'And the trouble will only really kick off once the tax rises and public spending cuts come in.'

    Bang On the Money, Labour politicians will be in hiding come Q3 2010.

  • Comment number 31.

    One odd thing about all of this is why did Lloyds go ahead with the purchase of HBOS?

    The year before they had said no to Northern Rock. So they knew how to say no to a bad deal.

    They would have known that HBOS was worthless, and that they would be breaking the law by offering a price for it. The law requires that they act in the best interests of their shareholders, and paying a penny for something known to be worthless is against the law. Indeed, they would have been breaking the law by even buying it for nothing as it had less than zero value to Lloyds shareholders, given they would have had to take on the HBOS debt as well.

    So why did they do it?

    One can only assume that there was coercion.

    I am sure that the story will come out sooner rather than later.

  • Comment number 32.

    ... and to achieve all this, I see our government required £ 100 M of crisis advice from another bunch of bankers.

    I have such severe reservations about the intellectual competence of bankers and our government that I do not believe them capable of judging if traders deserve a bonus of £ 20 M or 20 p.

    I apologise to the moderators for use of a stronger expression than 'reservations about intellectual competence' in my original submission at 10.

  • Comment number 33.

    Post 25 you really are being a little but naiive.

    Bankers and the government are experts at "don't do as I do do as I say."

    You may remember the grilling and muddle Angela Knight from the British bankers Association got on radio 4 over saying it was OK for banks to charge us huge penalty payments when we go overdrawn yet doesn't seem to think the banks having to be bailed out by us was in any way anything similar to that.

  • Comment number 34.

    Anyway Mr Peston, I haven’t finished talking about this bonus issue yet, you’ve clearly moved on too quickly.

    I John Dempster post again:

    The average cost of heart by pass surgery in the UK is around £20,000.

    The bank bonus payments are £1,500,000,000. The RBS directors do not want to give back to the Government, they want to pay it out in bonus payments to themselves.
    £1,500,000,000 (£1.5 billion) = 75,000 peoples lives.

    And even if that doesn’t wake you up, how about NHS dentistry, or more to the point what’s left of it.

    To those who can no longer obtain dental treatment on the NHS, well you could if they didn’t pay out a £1.5 billion bonus at The RBS.

    All this talk about The RBS has to be competitive
    Exactly what competition are they in?
    Who can loose the most amount of money in the shortest time competition?
    And even if they were in that competition it looks like they lost that one to HBOS.

  • Comment number 35.

    #25 - you have made me think. Surely we are now in a big poker game with the bankers.

    Their bluff goes like this (being carried out through the board of RBS)- if you don't pay us our bonuses we will leave and take all our business to some other bank and RBS will be stuffed unless the government bail it out again with more of our money.

    So what's in our hand as the Government - if you don't accept no bonuses and leave and this results in RBS failing then, despite the cost to UK taxpayer we will let RBS fail - the knock on effect in the financial world (not just UK) will be horrendous and you won't be getting any bonuses for a while whatever bankers you are working for.

    The problem is that at the moment the Government has shown its hand - save the banks at all costs - so the bankers think they have a sure fire winning hand - tactically the Government need to start playing the game a little differently and add an element of doubt into the bankers minds.

  • Comment number 36.

    Personally I have to agree with #19 rather than #2 on this. Pure greed and ego lead to plus 50 time capital lending with a reliance on short term lending to borrowing to support long term lending. to some extent we all knew of this problem but went along with it when we thought we were making out if it. We certainly could all see ABN Ambro as a poison chalice.

    It was greed and ego which forced HBOS to go to Lloyds and Greed and ego which forced them to buy. We have all learnt that if LloydsTSB directors felt forced to by HBOS against the interest of their shareholders then they had a legal obligation to resign.

    ps the solution to high paid forex traders and investment bankers came to me yesterday, make a playstation game out of it and within a few months most of the country’s youth could have a job

  • Comment number 37.

    #12 U9678684

    You're wrong. As I said- memories fade.

    Check R.P's update on 17th Sept 08 which reads;

    UPDATE 10:32AM: I am hearing that this deal has been negotiated at a very high pay grade level, with the Prime Minister, Gordon Brown, talking to Sir Victor Blank, chairman of Lloyds TSB, about how helpful it would be if Sir Victor could bring himself to end the uncertainty hanging over HBOS by buying it.

    How is that not political pressure? Similarly how is the treasury telling HBOS they're going to shut them out unless they agree to a fire sale not polical pressure? Similarly how is Darling saying bonuses can't/shouldn't be paid not political pressure?

    Try to see the wood for the trees.

  • Comment number 38.

    Mr Peston, Sir : Were there ANY exTREASURY bigwigs or advisors on the Board of RBS when the ABN-Amro deal went through ?

    When Sir Fred was challenged about financing the deal he said words approximating to 'I think our credit would be good for that'.... implying that the Board would not seek funding from existing shareholders ? Any challenge from the Government or the Treasury at that time ?

    Is it not high time that you investigated the interconnectedness of Persons and Institutions in this House of Cards ? As was said by one of the Protagonists in the Enron scandal...Enron was a House of Cards built above a Gasometer. What has underpinned the UK Banking Structure... FSA/Treasury/BoE Methane ?

    NOW is the time for you to speak the whole truth.

    How about your getting your hands dirty ? Name those who are to share the historical responsibility...who are those who REALLY made the mess and are now clearing it up ? Name Names, Names, paths and pension entitlements ! Please tell ALL.

    You could make a start at a relatively lowly level with, say, the Investor Relations Dept at RBS.

    And move on to the former Civil Sevants who went from No.1 Horseguards to plum Banking Jobs.

    And then on to the PERSONS who were representing the Institutional Investors when they held private meeting with RBS upto November 2008?

    Perhaps you'll need to protect your you may find an open sewer. And please, no partying for you this Christmas...

  • Comment number 39.

    The ill-judged takeover of ABN is very intriguing. Who made what out of the deal?

  • Comment number 40.

    #36 KUDOS

    You're also wrong.

    The atmosphere in September was tense. There was little or no suggestion that HBOS was a juicy cherry ripe for picking. This was not Barclays Capital and Lehman and we all knew that at the time. Lloyds knew they were potentially taking a hit in buying HBOS. Sure- they hoped it wouldn't be that bad but they knew it wasn't great.

    So why didn't the Lloyd's board have to resign? Because they're greed was in nabbing MARKET SHARE which in other circumstances they'd never have got approval for, their greed was not related to the risk or quality of the HBOS debt book.

    The issue of competition was utterly ignored at the time. Why? Because it was a politically approved deal. How is there any other conclusion?

    Really really important to put this in perspective. Banks are in the business of making money so of course they aimed to profit, just not in the way suggested.

  • Comment number 41.

    The comments of the brain drain from Banking are laughable,the sooner they go the better, they should think themselves lucky, they dont work for me because they would all have been sacked with no bonus's.

    To any one from the wholesale banking trade who would like to argue the bonus's get down to any job centre in the country and tell the people who's lives YOU have destroyed,why you should be worth it.

  • Comment number 42.

    Which is more concerning? The fact that the Government to this drastic and ultimately reckless action - or the fact that it has been deliberately hidden from public view for so long?

    How can you have confidence in the market Economy when vital information like this is being subdued by the Government. How do we know that Government employees linked to the treasury didn't manipulate this information and use it for their financial gain? - The straight answer is you cannot - and that's why we're in such a mess.

    I did feel sorry for one of the audience in the QT audience last night when he made the point that "if we don't allow RBS to pay bonuses then we will damage the business - which we have a large stake in - and we will not make money from this deal"

    ....tragically it hasn't dawned on some people that we will never, ever come out of this better off - it's not going to happen

    Panic rescues are not where profits come from. RBS will go the same way as LTCM did in the 90's.

  • Comment number 43.

    At 50 times capital resources it was surely inevitable a small breeze would topple RBS ..

    I have a solution for Darling, split off the merchant bank and flog it as a going concern to A N Other. This will ;

    1. Give the tax payer some money back.
    2. Allow RBS to pay the gamblers their bonus for their hard earned deeds.
    3. Allow the tax payer to reduce its future liabilities
    4. Provide a bit of clarity on what the retail part of the business is worth.

    I suspect it won't happen because the merchant bank part of RBS is WORTHLESS....

  • Comment number 44.

    31 is absolutely right. There is a lot more we still don't know, and we won't as long as Gordon is controlling what is released. Why is it that to a labour government, top bankers' jobs and income are protected, but 1,700 steelworkers can go whistle when a contract falls through? I'm not saying we should throw money at Corus, but we really need to separate casino banking from retail banking, so that the casino side can be allowed to fail in future. And bankers' bonuses need to be more long term,so that they are exposed to the full risks of any decisions they make. But there is no sign of the government doing any of this.

  • Comment number 45.

    The original Lloyds Bank plc shareholders are perhaps now realising that one person's definition of "Due Diligence" is another person's idea of doing a personal favour to Gordon Brown and his ricketty government!

  • Comment number 46.

    38. At 12:21pm on 04 Dec 2009, Amused2Death

    Good point however I draw your attention to

    UPF advisory note 11

    The following is an advisory note previously issued by the United Peoples Front

    Now we at the UPF having noted that some have raised concerns over various comments and articles written by those purporting to understand economics and business, and we advise our members as follows:

    A person engaged in the production and presentation of articles on economics and business for public consumption hereinafter referred to as a journalist, is a member of the public who by virtue of their literary excellence and political leaning has been appointed to put forward a view on a given subject matter.

    Members should note that political leaning does not necessarily indicate a definite pre-disposition to follow, support or vote for any given political party, it refers to the angle of repose that any given journalist may occupy on any given day

    The angle of repose can be calculated by the sum of all the said journalist’s pre-tax earnings in the past five years divided by the sum of all the projected pre-tax earnings for the next five years.

    If the calculation reveals a figure less than one, the journalist will have an angle of repose to the right, and if greater than one to the left.

    A figure exactly equal to one, indicates that the journalist is in fact an alien.

    Now according to the Office of National Statistics previous data and projections for the next five years, it does appear that projected business journalist’s earnings are likely to be equal to that which they were in the previous five years, having taken into account inflation and the devaluation of sterling.

    And therefore by calculation it would appear that they are indeed aliens, or if not such exactly, certainly alien to us.

  • Comment number 47.

    #42 WOTW

    I also watched Qtime and was slightly concerned at some of the misconceptions- though not the one you refer to...

    There is no reason why we shouldn't be able to take our money out of RBS in the future. No reason at all. There are many successful SME's out there who are weathering the storm well and who will be ideally placed when the recession turns the corner.

    It isn't the whole economy which is down the spout here- the financial industy is but one (very important granted) part of the bigger picture and as long as the rest keeps ticking along- we should really be able to get our money out of RBS. There will however be a further correction before that happens- politically and economically speaking.

  • Comment number 48.

    42. At 12:42pm on 04 Dec 2009, writingsonthewall wrote:
    'Which is more concerning? The fact that the Government took this drastic and ultimately reckless action - or the fact that it has been deliberately hidden from public view for so long?'

    Answer: Neither they are both equally concerning, and both now equally expected by us the public.

  • Comment number 49.

  • Comment number 50.

    Have I got this right? The banks have to pay huge bonuses to keep the best brains. Are these different brains from those who created this mess in the first place? And if we dont keep them they'll leave. Where to? We cant restrict bonuses cos the yanks won't restrict theirs. So? Did I miss something or was it their sub prime mortgage market everyone bought into which triggered the meltdown?

  • Comment number 51.


    Your equating of the sums of money to more tangible social effects are very evocative and few would find them objectionable goals/alternate uses for it but are illustrative of the con job all our politicans do on us.

    This £1,5 billion is not new money or extra income - we have borrowed huge sums we cannot afford to pump into RBS to generate this nominal profit.
    Also don't forget we are in the process of pumping a further huge sum into it of borrowed money - which kind of indicates that it really doesn't exist.

    Even assuming it is real the money has already been spent - we are borrowing massive sums to keep paying out benefits (unemployment, the services we already enjoy etc) which we cannot actually fund from tax revenues, so we become more and more in debt. The point where we are unable to borrow more is visible - hence the mutterings of cuts and tax rises just.
    It would be economically irresponsible to spend it as you suggest.

  • Comment number 52.

    40. At 12:39pm on 04 Dec 2009, pawns_or_players

    I do tend to agree with your analysis - whilst it would be nice to think the 'sheep' of the Lloyds board were bullied into the takeover by the 'wolves' of Government, I agree the biggest motivation was the greed of increasing market share - knowing the M&M commission would be rode over in order to complete it.

    You see - bankers cannot help being greedy. Oh they're full of sorrow now - but they ill go back to their greedy ways as soon as the opportunity arises.

  • Comment number 53.

    If I were a shareholder I would be annoyed. Class action anyone?

  • Comment number 54.

    47. At 12:59pm on 04 Dec 2009, pawns_or_players

    ...and now I disgagree (how fickle am I?)

    Mainly with this:

    "It isn't the whole economy which is down the spout here- the financial industy is but one (very important granted) part of the bigger picture and as long as the rest keeps ticking along"

    If you look up the history of 'credit crunches' - or as they were referred to in the past 'credit squeezes', 'banking crises' or 'financial crises' - you will see they all preceed the longest and hardest recessions (or depressions).

    This is because the effects of your financial world coming to a halt created medium term damage, and not short term damage as you might get in a manufacturing or service led recession.

    Credit crunches are not new phenomenon - it's just the media has tagged this line to the currenct scenario - because they like to make everything glossy and 'fun'.

    The 1929 depression was started with a financial crisis - this is why this type of crisis is most feared. A freeze in this area effects all areas of the Economy - whereas the other types of recession - usually only one or two - the others can pull you out.

    In summary - the Economy is spinning around about to go down the plughole. The Government knows it can only fix this once the financial crsisis has been resolved - and they haven't even done that yet!

    The is a long, long, long way to go in this current crisis - the media are becoming bored - but we will have anohter 8 years of this I reckon.

  • Comment number 55.

    51. At 1:18pm on 04 Dec 2009, U13245485 wrote:
    It would be economically irresponsible to spend it as you suggest.

    Economically irresponsible, why? it's going to go back into the economy.

    The question is: Should the directors and traders at the RBS be allowed to use the money to pay a £1.5 billion bonus to themselves or should we get back the money having already lent it to them and spend it how we feel fit.

    The question is what to do with £1.5 billion of a state owned company's money, it's as simple as that.

    Imagine it's you or a member of your family waiting for a life saving drug or operation.

    The problem with much of what is going on, is that politicians and those in finance want to cloud the true moral issues. Because if they don't it will cost them.

  • Comment number 56.

    I thought all bank trades and transactions were done by computers these days. Skilled or un-skilled, bankers are obsolete.

    Replace all the bankers with recent IT graduates on a fraction of the salary.

  • Comment number 57.

    #51 - sorry but if you were talking about a loan to the bank to be repaid in future that would be one thing.

    But we are not - we are talking about paying £1.5billion into the hands of individuals who work for the bank - RBS have charitable programmes and also sponsor sport - rather than give the money to the individuals they could donate it to the NHS & all Dempsters dodgy heart people would be saved.

    I think the UPF party could probably start a 'Have a Heart' appeal to RBS as to how they should spend their £1.5billion!!

  • Comment number 58.

    #37 and #40 pawns or players.

    I dont think i am wrong.

    In #37 you infer it was political pressure making the deal, because a phone call which took place between Gordon Brown and Sir Victor Blank on 17th Sept 08, then in #40 you talk of the lloyds directors wanting the deal and it being politically approved .

    Frankly it would have been a lot more suspicious if a conversation had not taken place, RP was hearing of the call after reporting that talks were in and advanced stage, government was pumping money to support the banks, the FSA were also wanted the deal to take place to regain stability in the markets, LloydsTSB needed an assurance that the idiot Mervyn King would accept mortgages as collateral. In terms of pressure, it seems that a call was in both sides interests, if anything Sir Victor held a strong hand, it did not say who sought the conversation with the other.

    as far as yor anaylysis that : " The atmosphere in September was tense. There was little or no suggestion that HBOS was a juicy cherry ripe for picking " has to be understatement of the year. HBOS shares fell 40% on 16th September alone.

    it was in everybodies interest that a deal took place.

    The Lloyds Board invited the shareholders to approve the deal which 96% (ammitedly in holding value) voted in favour of.

    as for your comment "The issue of competition was utterly ignored at the time. Why? Because it was a politically approved deal. How is there any other conclusion?"

    Is totally untrue The government were completely open that in the interests of financial stability it would legislate to over-ride the powers of the Office of Fair Trading and the Competition Commission to block the deal. This was in RP's report of 19th Sept that you invited us to read!.

    If it "really really is important to keep this in perspective", then instead of only wanting to try and find a GB and AD to blame angle, you may wish to refer to the front page of business news today where a report has the opion that the government's support of the banks was justified.

    This may seem argumentative, but if you are going to call people wrong who disagree with your opinion and use phrases such as see the wood for the trees to fellow bloggers i feel this is getting a little abusive.

  • Comment number 59.

    55. Dempster & 51. U13245485

    ....may I interject....

    The most important thing to do when trying to restart the Economy is to ensure the 'tax payer money' you feed in is distributed evenly. This is because whilst some will be wasted - across the average you will get a smooth rise everywhere - a little bit in every sector.

    In contrast to this, when you inject huge sums into specifc areas (lets say QE and Gilts) all you do is create an unsustainable short term bubble - as we are in the Bond / Equity markets.

    So the answer for the 1.5Billion (as I said yesterday) is not to divide it between 50 bankers but to create 50,000 30k a year jobs from it. It doesn't matter if it's in RBS or in another field - it's the effect it has that's important.

    However the Government is operating in the opposite manner - it's allowing a couple of thousand jobs to go at Corus - whilst allowing the bubble money to be distributed amongst the few.

    This is a recipie for disaster - why? because a few flush bankers might buy a new villa in Monaco, a new Ferrari or a new diamond ring for his girlfriend - but that won't help the man in the corner shop in Leeds who is at most risk of bankruptcy (unlike Ferrari, Monaco estate agents and Debeers)

    It doesn't really matter 'who owes who' in this scenario anymore, but rather how you get money flowing in our Economy again.

    The realities of 'getting paid back' are long gone I'm afraid - we're into 'damage limitation' now - and even that's going badly.

  • Comment number 60.

    Another month - another reminder from writingsonthewall

    I'm sure someone said something about 'green shoots' earlier this year - I poured scorn on the idea and I was shouted down on this very blog by people saying I was negative.

    I don't want to claim I am more intelligent than our 'ex-business minister', but seeing as Baroness Vadera was wrong and I was right - why is she now advising the G20 finance ministers and I am not?

    Is this a good idea? - where do you think a reverse meritocracy will get us?

    Why are Journalists not asking these questions of our leaders? They have been wrong on just about everything - so why should we allow them to continue to lead us?

    Their fundamental failure to understand Economics is almost as bad as the banks failure to understand Economics - oh and of course the Economists failure to understand Economics.

    If these were premiershp football managers they would have been sacked a long time ago.
    Why are they afforded rewards for their failures?

  • Comment number 61.

    RBS board ******** themselves because they have lots of finance out on instruments they and their managers don't understand - these products should be documented in detail in plain english by their authors for all to see. Secondly, if bonuses not paid, the oleaginous salesmen (oops sorry investment bankers) will up and leave and TAKE THEIR CLIENTS WITH THEM. This is the nub of the problem. The clients (wealthy arab sheiks etc) are loyal to the individual investment banker NOT to RBS. This explains why another investment bank will pay humungous sums to get them on board - its their client list / personal relationship stupid - the clients move their money to new the bank (hundreds of millions or even billions).

    The Government needs to stop this by changing the law and promising to jail for a long time anyone found using contacts obtained while employed at one bank at another within say 5 years. That would stop all this wholly unjustified bonus nonsense in its tracks.

  • Comment number 62.

    60 WOTW - I agree with the principle of what you are saying I just think the emphasis on the green shoots comment is a bit harsh.

    From memory she was in an interview and the questionning was a little leading and she fell into a difficult place in the ocnversation where whatever she said she would be wrong and the media leapt on it - typical of the media.

    You could say politicians should be able to deal with this but IMHO this is exactly what is wrong with politics - you need to be able to hide the truth to get round the media whereas what we need is politicians who can tell the truth and the media report it fairly - dream on!

  • Comment number 63.

    59. At 2:16pm on 04 Dec 2009, writingsonthewall wrote:
    So the answer for the 1.5Billion (as I said yesterday) is not to divide it between 50 bankers but to create 50,000 30k a year jobs from it.

    Ok build a hospital

    In fact build a few hospitals

    £2,250 per sqm x 20,000 sqm = £45,000,000 each

    You could in fact build 33 and still have £15,000,000 spare

  • Comment number 64.

    60. At 2:19pm on 04 Dec 2009, writingsonthewall wrote:
    'I don't want to claim I am more intelligent than our 'ex-business minister', but seeing as Baroness Vadera was wrong and I was right - why is she now advising the G20 finance ministers and I am not?'

    Well she's got a more sensible name than you have.

  • Comment number 65.

    I just get confused by news these days!

    The US employment "rate" has dropped to 10%.

    Now, are we talking an absolute percentage of the population, are we talking the rate of increase of unemployment, or are we talking the decreasing rate at which the rate of unemployment is increasing?

    They don't even bother telling you these days. They just want you to read "GOOD NEWS"!

  • Comment number 66.

    Post 61. Those rich Sheikhs wouldn't be the ones that borrowed the money to build all the "castles in the air" in Dubai would they?

  • Comment number 67.

    #wotw 60

    agree with the principle but, imo, the baroness Vardera reference is actually an example of why we don't have journalists asking the right challenging questions. Virtually anyone who read what Baroness Vardera said IN FULL, would admit the green shoot reference was taken totally out of context. Unfortunatelty the public only wants sound bits, and at the time, to be angry with anyone (possibly the only one ( i jest)) loyal to Gordon Brown.

  • Comment number 68.

    What would Lloyds be worth per share now if HBOS had not been purchased? Also bear in mind two rights issues have been made for under 40p per share.

    I figure it as about £5 a share.

    I had about 2700 such shares now worth about 55p. So I am down about £4.45 a share.

    So is every other shareholder. The line forms on the left. I reckon I am owed about £12,000. Who is going to lead the class action?

    Sadly, the personal fortunes of the people who signed the deal for Lloyds will not be enough to cover what they owe the shareholders and if they were adequately insured against the peril of acting stupidly in the Lloyds insurance market, a different (and possibly overlapping) set of people would be bankrupted. It would make asbestos claims look like pocket money.

    I agree with #4. They deserve criminal prosecution. The trouble is they would probably get off on the grounds of diminished responsibility.

  • Comment number 69.

    In the very same way then heavy Industry then high tech manufacturing left these shores, so too will our 'world financial' centre of excellence in Banking.

    Mark my words.

  • Comment number 70.

    Great posts WOTW and Dempster and others. Thanks.
    The leaching of information on the details surrounding the flying buttress construction for RBS and the saving from the drop of HBOS, get more and more shocking as well as more interesting.

    Does it look clearer that the motivation of the government was not to 'save the financial system' but to buy themselves time to try and gloss over their misdemeanours in driving the economy relentlessly in the wrong direction?

    Whilst Gordon Bully Brown was shouting,'Tally Ho! The end of boom and bust! Stick with us chaps, it's a level playing field of fiscal prudence!'

    All the time they were actually going the wrong way and looking more like hapless Captain Nolan in the Charge of the Light Brigade..until the crunch came.

    Sadly, they are all incompetent but dare not admit it.

  • Comment number 71.

    Another example of why the bonus extortion scheme of the bankers is completely inappropriate. One bad investment decision after another and they want to reward those who made these decisions. Maybe some jail time would wake the bankers up to reality as it is apparent they have no connection to reality and assume no responsbility for what they have caused. Some time in the prison showers may provide them with the expereinces the public feels about how they have been treated by the bank.

  • Comment number 72.

    #66 mmmmmm ... interesting thought!

    #69 when the chinese and indians get fed up of paying rip off banking fees, they will ask themselves "just what is it that they do for their money". Then as you say, it'll be curtains. There was the "white heat of technology" which was going to save us - french nuclear reactors, american warplanes. Then it was going to be IT ... oops, companies found it was cheaper to outsource call-centres to India .. but then they took the analysis and programming and testing too.

    The Indians and chinese will occasionally buy our companies or more likely just simply out-compete them with their vast population and cheap labour (notice I said cheap not stupid 2M graduates a year). No need to do the financial bit here shortly. Who needs the current big four accountancy firms? - They rarely seem to spot much wrong on the auditing front do they when its a serious issue and charge unbelievable dosh to produce their glossy reports?

  • Comment number 73.


    You may have missed the point somewhat,

    My point is your question is a false question - should we let the bankers have it or should we spend it ourselves?

    My answer to your question is simple - neither should spend it.

    The bankers should show some recognition of their situation - a bonus of 10% over basic seems reasonable to me where performance warrants it. As those RBS employees who posted have noted - these will be in deferred shares split over 3 years and related to the performance of the shares so some incentive there. So this will not be cash anyway.

    Even if this is cash (which it isn't since we are giving RBS even more cash now hence the stake rises from 70-85% shortly) and a nice cheque were to be sent to HMG for £1.5 billion (or even £6 billion) then we still should not spend it as you suggest. We are paying interest on the loans we have taken out to 'invest' in RBS - so the dividend would be used to A: pay the interest on the loans and B: pay down the capital amount.

    Unpalatable as it is, if the bonuses are scrapped then the value of RBS will be damaged and it will reduce significantly the prospect of us ever getting back all the money invested - let alone gaining some profit on the deal to offset the additional expenditure in benefits, interest payments etc that which we have had to pay out. Then we get to pay higher taxes in future and face even greater service cuts than the 1.5Bn benefit for nothing and the sad fact is many of the bankers will still be employed and taking hoem even larger bonuses from other banks. Who lost ?

    As I noted - what you propose are nice ideas,on a human level they are impossible to disagree with, and to answer your point what if it was me or a relative waiting - I have a close relative who is waiting for medical treatment (not your specific but I'll take it as a general point), and my answer is still the same. Head over heart I am afraid.

    However if the choice was : pay extra taxes to fund these or not have them what would the electorate vote for? Yes or No. (I have no difficulty with an unambiguous yes )
    Our political process offers voters many alternative options to this simple question.e.g.
    a: yes but provided it is someone else who is paying.
    b: no unless it is me who benefits directly
    c: yes I want them and no I don't want to pay extra for it

    So your original point and question are for me no different to these false alternatives as well meant as it was.

  • Comment number 74.

    I bet the shredding machines inside No.10 and No.11 are red hot.

  • Comment number 75.

    # 57

    The right or wrong of the proposed bonuses is moot, click back on my postings and you will find I am not exactly chuffed with the sheer scale of the payouts however living in the real world recognise there is much more to be lost by mounting the morally high horse which would in short order be repossesed but would be nice to ride for a while.

    The only win win is where the morally nice people at RBS voluntarily donate the procedes of any bonus to the public good in recognition. Nice idea but will it happen?

    And it is not RBSs' money it is the shareholders - how RBSs' board use it for the protection of the shareholders interests is the point. They beleive the shareholders will be better served with bonuses (in the form of deferred shares) in the longer term than by risking destroying the value of the bank by losing it's star performers. That's hard economic reality of it, a campaign such as you suggest may be worth a try but it really will depend on what backs it up - if the public and RBS customers in particular would all stand together and say do this and we walk then the damage may be less by not paying. A it woudl be nice if you did this with the money will fall on deaf ears.

    Moral high ground will cost 'us' a lot more in the long term than compromise. May be paying for this moral ground is worthwhile for you - I would prefer to pay for the NHS and other current services for the future with the same money.

  • Comment number 76.

    #73. U13245485

    Spot on.

    Unpalatable but unavoidable.

  • Comment number 77.

    62. At 2:38pm on 04 Dec 2009, U13457721 wrote:

    "60 WOTW - I agree with the principle of what you are saying I just think the emphasis on the green shoots comment is a bit harsh."

    I saw the interview too - and no-one made her say there were signs of green shoots - no gun held to her head.

    The point is the appointed 'experts' who advise our Government don't actually understand the Economy -because anyone who does would know that a credit crisis of that magnitude would not be 'over' in 4 months.

    You may think it's acceptable that the country pays for advice from these experts - but I do not.

    It's not unfair - what is unfair is the thousands who may well have believed her expert analysis and then changed their business plan accordingly.

    ....and don't forget - after this 'faux pas' she was promoted into another - even more crucial position.

    If you want the country to be run by fools - then you will be happy with the current system. However I do not.

  • Comment number 78.

    I see we are back to bonuses again...

    #75 and others,

    I fail to see where the talent is. I fail to see where the 'profit' is.

    Can some one explain why they need another £25 billion?

    They will have received a total of £45 billion by February from us they and estimate they will have £6 billion left????

  • Comment number 79.


    Absolutely agree with what should have happened to pump prime the economy in the first place - however it wasn't and instead of some being wasted most was wasted.

    That would have been a better way to use a stimulus - almost Keynesian I am led to beleive. I live with the picture of the local authority houses and infrastructure we could have had for the cash - it would have got more people working and primed the real economy.
    However sadly it was not done that way and as you say it is damage limitation now.

    IN the context of RBS and bonus which the comments are made though - we have a bet on the horse, right or wrong, shooting the horse because it bit you part way through the race is not sensible. Even if you could use the horsemeat to feed your beloved pets once, you still lose the race and the bet. Your pets still need feeding but you have no money left to buy them food - you shoot the pets.

  • Comment number 80.

    67. At 3:03pm on 04 Dec 2009, Kudospeter

    I'm not having that.

    Firstly the baroness talks about 'tackling the root causes' - but doesn't once mention CAPITALISM - the root cause.

    Secondly the Baroness claims that recapitalisation has allowed the banks to lend - and that it went up last month. So how good an expert opinion does that look like now? At the time lending was at a record low it couldn't go anywhere but up!!

    Thirdly she talks about a 'global financial crisis' and says there's nothing 'we could do on our own' - what about Australia? Only the countries with low central bank interest rates really got hit (us and the US)

    Finally she said
    "it's a very uncertain time at the moment, and I wouldn't want to be the one to predict it - but I am seeing green shoots but it's a little to early to say...."

    The point is not to have a go at the Baroness - but she is the epitomy of the lies that have been told about this financial crisis.

    Where are Darling's growth predictions?
    Where is the return to growth?

    The largest credit crunch in history and you seriously believed it would be over by Christmas?

    As long as the Government continues to deny the fundamental cause of the crisis I shall continue to point out the lie after lie after lie that is being told.

    Read JK Galbraiths "the great crash" and you will see where I am coming from.

  • Comment number 81.

    #61 U5705963

    Exactly. Hence the lack of qualifications in banking. It isn't what you know but who ou know, what golf club you, your dad and your mates are members of, what school you went to etc, etc. There will be the odd filing assistant given a chance, but on the whole it is one big party for the select few group of pals and their ilk.

    What really horrifies me, is the mercenary nature of these people. We should all be thankful the men who fought on the fronts during WWI and WWII were made of much preferable stuff.

  • Comment number 82.

    The strange notion that we have "no alternative", "in the real world " , as opposed to acting "morally" , but to meet every banker's demand on conditions and structures, seems to be based on several assumptions

    1) Cross-border regulation of the type that would make this kind of situation impossible is itself impossible to econtemplate. This is completely untrue - even the recent, watered-down G20 and recent EU initiatives give the lie to that. ( Witness our media's way of recently reporting the new EU regulator, and how bizarrely little it focused on the actual benefits of the new role's scope, or the substance or relevance to us of any of it all ).

    2) That there is already enough short-term stablisation to make points such as WOTW's about the desirability of injecting further sums into one sector of the economy, rather than applying the kind of broad -based stimulus other nations have done, no longer the priority. Given the level of uncertainty we are in, this is almost as bizarre as point 1).

  • Comment number 83.

    lets get a few things straight..

    a) The recession is going to last for much longer.
    b) Small growth off the back of a £200Bn QE programme is not growth, nor is it a sign of recovery.
    c) Throwing money into specific areas of the Economy merely creates short term bubbles - not sustained recovery.
    d) The Government has given us all a huge pay cut - and nobody has even noticed.
    e) 0.5% is the lowest rate by the BoE for a long time (if not forever). A clear indication that the situation is far worse than being admitted to by the Treasury and BoE.
    f) Overproduction has occurred and as a result capital needs to be destroyed.
    g) The Government will tell any bare faced lie in order to save it's own skin. It's not operating for you - it's operating for it's own success - to be elected. They don't care two hoots about the people.
    h) We will not make any real and tangible profit from our banking stakes - not a penny.

    I have been predicting a long recession since this started in 2008 - I also claimed the depression has started about a month ago, and I stick by it. I am not alone in these predictions either.

    Don't forget, ministers and Government have been talking about recovery since the start of this year - so where is it? Not even a sign out there - despite the media's best attempts to 'make stuff look good'

    So far I have not been too far off the mark with my predictions.

    I am no genius, nor am I Nostrodamus - I have simply read a few Economic history books and Marx's Das Capital - far less than your average Economist - and yet my predictions are more accurate than theirs? - why is that?

    They told you the war was for WMD's - and now it's clear it was for regime change.
    They told you we were 45 minutes from Saddam's rocketry - and yet we weren't
    They told you the cause of the crisis was from the US - and yet it wasn't.
    They told you HBOS was passed to Lloyds as a 'going concern' - and yet we now know different.
    They told you the crisis had been averted - and yet it's only just begun.
    They told you there would be a return to growth - and yet there is none.
    They told you they would kerb banking excesses - and yet they won't.
    They told you they were in control and yet they never have been

    You cannot lie your way out of recession.

    I am clearly angry about the blatant lies from Government and a population which does not seem to be bothered about it. I won't get any satisfaction saying "I told you so" when I see poverty and disarray in Britain in the next 5-10 years....none whatsoever.

  • Comment number 84.

    73. At 3:43pm on 04 Dec 2009, U13245485 wrote:
    You may have missed the point somewhat, & We are paying interest on the loans we have taken out to 'invest' in RBS - so the dividend would be used to A: pay the interest on the loans and B: pay down the capital amount.

    Interesting point, but given the avoidance of Section 104.1 of the Maastricht treaty, is it that relevant.

    An explanation, I owe you one.

    So far this year all the usual large net buyers of gilts (Insurance companies, pension funds, overseas investors etc.) were all net sellers of gilts, and the only large net buyer was the Bank of England.

    The Maastricht Treaty Article 104(1) forbids Governments borrowing directly from central banks, and the Bank of England has so far spent 99% on pre-issued gilts and only 1% commercial debt.

    It is now crystal clear that Quantitative Easing is a method of funding Government without officially breaking the rules.

    Robert Stheeman (The Chief Executive of the Debt Management Office) gave evidence to the Treasury Select Committee in early November and confirmed that they were cooperating with the Bank of England in the gilt market, but that when Q.E. stops, there could be a problem selling gilts.

    In short the BOE may have to print more money, or the Government may have to sharpen up a very large axe.

    Now given that the Bank of England is currently creating money and it is unlikely that its gilt purchases will ever come back onto the market.

    The £1.5 billion that is going to be paid as bonus money to RBS staff, can either be so paid, or it can be used to redeem gilts not currently held by the BOE, or it can be used to service the interest on gilts currently held by others than the BOE.

    Or alternatively it can be spent saving peoples lives via the NHS.

    Now given that the BOE is creating a whopping £200 billion this year, why not spend the money in the NHS.

    What I object to is the money being spent on bonus payments to bankers.

    If it is to be spent surely we can think of better ways of spending it.

  • Comment number 85.

    Final thought for the day...

    Here's the next 'con trick' by the Government that will be coming along soon. making profits from our bank stakes.

    I have noticed that Goldman's and BoA have paid back their TARP money to the Government and that they are claiming 'profit was made'. correct me if I'm wrong, but the TARP money was allocated before the dollar collapsed - so claims of a profit are in fact false.

    If I borrow £100k from you one year, then I pay back £125k the next as capital plus interest - but in the meantime the value of the currency has fallen by a third - who's made a profit there? Doesn't anyone know about opportunity cost anymore? - or is that yet another economic principle consigned to the dustbin by a 'master of the universe'?

    This is what I suspect the UK Government will attempt here too.

    Have a good weekend - and don't forget to watch the summit in Copenhagen where our illustrious world leaders will consign us to Environmental doom in order to prevent Economic disaster.

  • Comment number 86.

    80. At 5:04pm on 04 Dec 2009, writingsonthewall wrote:
    I'm not having that….. etc.

    To Baroness writingsonthewall; Shadow adviser to the G20, don’t hold back now, let ‘em have it.

  • Comment number 87.

    79. At 5:04pm on 04 Dec 2009, U13245485

    ...have you never heard of 'cutting your losses while you can'?

    This is how I see both RBS and to a lesser extent, Lloyds. Northern Rock is already firmly a nationalised bank and bit by bit their moving the losses onto the taxpayer so they can claim their miracle and the public will call them heroes (in their minds anyway).

    Nobody has considered what is going to happen if the Asset Protection Scheme is actually needed in full. Remember this is the amount (I believe) the Government has assessed the 'likely to default' debts are worth.
    Therefore there is a possibility all the debts to that value will default.

    The Government is planning on this not being the case ...but this is the same Government who planned on not having to rescue the banks and that other banks would rescue them - i.e. Lloyds + HBOS.

    I don't believe the APT is included in the current outstanding debt of 822 Billion (ish) we're currently sitting on as it's an insurance and not yet realised.

  • Comment number 88.

    Afternoon Robert,
    you may like to go to the BBC archives and re-run the video of the Treasury Select Committee meeting of 3rd November 2008.
    With apologies to the other bloggers here, I add a small extract:-

    4:47pm: Lord Thurso reads out a question about why HBOS and Lloyds should be merged. "What are the pressing matters of financial stability which means [Lord] Mandelson has pushed aside competitive practices to let this go through?" he adds.

    The only alternative was full scale nationalisation, which would have had very big consequences, King says. The merger was in the public interest and now that it's there on the table, you can't undo it, he says.

    Thurso asks the chancellor why it has now become a commercial decision which doesn't need any intervention any more?

    Darling says HBOS had to engage in a rights issue, which wasn't without its problems, and it became clear that the best thing to do was get involved with Lloyds TSB. He decided to allow this to happen in the interests of financial stability. It's up to the shareholders to decide if they want to vote for the merger, Darling says.

    "It's open to anyone else to put in a bid," he says, "But I say to you that so far no one else has come forward."

    The chancellor urges the committee to look at the Office of Fair Trading report into HBOS's financial situation and suggests that, even if the deal goes ahead, it is not necessarily out of the woods.

    This would imply that an OFT report was available at the time which gave the true extent of the shortfall.
    Was this report ever made available to Lloyds/HBOS shareholders to make an informed decision?

    By the way, there are many other gems in this transcript but I don't know how to reference it (is it in Hansard or something)?

  • Comment number 89.

    Right that’s it……… I know who should be running the RBS…………me.

    I’ll sort these bonus payments out, I think I’d be very good at it, and then when I finished that, I’d go sort out Westminster as well.

    Sorting out bonus payments and expenses,………… is right up my street, I think I’d be very good at this, very good indeed.

  • Comment number 90.

    I do not think you could make all this stuff up. It is beyond belief that so many knew so little about so much - talk about not seeing the elephant in the room- there was a whole herd running straight at them. And the problem is most of them are still there!!

  • Comment number 91.

    I am a lowly Chartered Accountant and had worked out in April 08 that HBOS and RBS were in trouble from exactly the same problems as Northern Rock.

    We pay so called experts at the treasury and Bank of England vast amounts of money and they could not see the problem until the banks are only hours from running out of money.

    The problem was ignorance and pretending that Northern Rock was a one off when it clearly wasn't.

  • Comment number 92.

    Yip, you told us and you are right.

    What you have done is what many should have done. You have a brain, can read and access to history, philosophy and economic texts. Plus a bucket of common sense.

    Yes, there will be massive poverty in this country - poverty has always been here, but many, too many pretend it won't happen to them, it only happens to those who are lazy, fickle and stupid. It does not. It happens to anyone, and will happen to many.

    We've been here before. Hundreds of thousands of skilled tradesmen thrown out of work, and then lablled lazy chancers by the lucky ones in the 80s.

    We have never corrected those problems. We bribe the middle classes with tax credits for kids, and send their kids to University for a few years to avoid keeping them off the dole. 50% graduates sounds better than 50% youth unemployment, doesn't it? All those graduates expecting high salaries - hardly sustainable in any economy.

    It matters not a jot who you vote for - it is always the same game, the game of staying in power and maintaining influence

    This time it will be worse. People will wake up one day and blame anyone but themselves, just as the tidal wave of environmental hell appears above our heads.

    #28 JavaMan
    Check out wiki for Red Clydeside Rent Strikes on wiki. Current housing problems in the UK are a deliberate means to convince people they are rich at the expense of their own children. We are heading back into the land of private landlords. Something to be dreaded for too many.

  • Comment number 93.


    interesting reasoning, can't say I had considered linking the two together in precisely that way.

    So if I understand it right: because the government is basically inventing much of the money it is spending and shortly will run out of it , it would be better to take the money from RBS now and do something positive with it before it all goes pete tong and we have nothing to spend on the NHS.

    The may as well be hung for sheep as a lamb for we will be hung anyway.

  • Comment number 94.

    #91: Was not the problem that HBOS & RBS had gone out of their way to conceal the extent of the problem; they may not even have realised it themselves. At the same time HBOS had got rid of their troublesome Compliance Director (or whatever his job description was) for sticking his neck out and telling the truth. Then of course both the BoE and the Treasury may have been adopting the position of "If the answer is likely to be unpalatable then don't ask the question".

    Funny that yesterday we were talking about the RBS board worrying about fiducary duty; clearly this small matter was clearly of no concern to either them or the board of HBOS before the **** hit the fan.

  • Comment number 95.

    93. At 6:40pm on 04 Dec 2009, Whistling Neil

    Imagine you are an investor. The Debt Management Office offers you a 5% fixed interest gilt over five years.

    You know that the BOE has just magically created an extra £200 billion.

    You also know that sterling has tanked in recent times and that the cumulative debt mountain of the UK Government is enormous and growing at an alarming rate.

    Would you really risk placing your investment in sterling on a fixed interest over five years? If the BOE starts to print more money again Sterling will fall and you’re stuffed aren’t you.

    The Bank of England and the Debt Management Office will likely already know this, having consulted with the GEMM’s (Gilt Edged Market Makers), and right now as we sit here blogging, they are probably planning what to do next.

    Do they stop QE and risk a very likely shortfall in the take up of gilts?
    Do they continue QE in the hope that the Government will dramatically reduce its expenditure in the near future?

    My guess they’ll be too nervous of risking the failure of gilt auction and QE will continue.

    As regards the UK’s AAA rating:

    The first is A is given because you pay back the capital.
    The second A is given because you honour the interest payments
    The third A is given because you don’t water down the value of the gilt by printing more money.

    The third 'A' is likley long gone, but not admitted to.

  • Comment number 96.

    93. At 6:40pm on 04 Dec 2009, Whistling Neil

    But you what I think is the biggest worry, world confidence in UK fiat currency. Excessive government debt and printing money push us ever nearer to the tipping point.

  • Comment number 97.

    Our small business sets aside some funds for tax, unexpected events etc.
    For every £100.00 we get approx 15 pence interest annually, would reckon the bank can then lend the money and probably get something like £8.00 in interest, difference £7.85

    Do you have to be an 'exceptionally talented' person to turn a profit with those sorts of figures?

  • Comment number 98.

    I'm getting sick of the game of bash the banker (Note: I am not one, am not married to one). There are a number of things we need to help recovery:-

    1. Strong financial system - i.e one where banks have readily ascertainable exposure to risk.

    2. A banking system where the banks are NOT too big to fail - depositers money is guaranteed up to the limit as present but if they do fail then it wipes out the shareholders (like what happens with SMALL businesses).

    3. REAL competition between banks and REAL regulation of their activities. Them let them pay their people what they like - the ones that pay too much will fail as will the ones that pay too little. Some people will get mega bucks but SO WHAT? So long as we (The taxpayer) dont have to bail them out then that's fine.

    Anyway, I have composed an anthem for banks:


    P O O

  • Comment number 99.

    why can't we indict and impeach Gordon for criminal mismanagement and corporate homicide and failure in fiduciary responsibility.
    Plundered pension funds, sold gold very cheaply, allowed banks light touch, oversaw crazy lending policies, allowed MPs to fiddle expenses, never voted against war in Iraq or Afghanistan- surely he should have resigned by now in shame but surely we can fire him for incompetence? He would get a decent pension!

  • Comment number 100.

    99. Frank Kydd

    Probably because he gave the UK public the growth they wanted. We won't accpet anything else so he had to do something, moral or not. Do you honestly think the tories would have done anything so different we wouldn't be in the same, or worse mess?


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