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How Dunfermline fell

Robert Peston | 10:18 UK time, Monday, 30 March 2009

Here are the important numbers that explain how Dunfermline lost its independence.

Dumfermline logoIt 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.


Page 1 of 2

  • Comment number 1.

    "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!

  • Comment number 2.

    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.

  • Comment number 3.

    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.

  • Comment number 4.

    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.


  • Comment number 5.

    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 ?

  • Comment number 6.

    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!

  • Comment number 7.

    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?

  • Comment number 8.

    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?

  • Comment number 9.

    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?

  • Comment number 10.

    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.'

    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.

  • Comment number 11.

    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.

  • Comment number 12.


    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 !!!!!

  • Comment number 13.

    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?

  • Comment number 14.

    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.

  • Comment number 15.

    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.

  • Comment number 16.


    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)?


  • Comment number 17.

    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

  • Comment number 18.

    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.

  • Comment number 19.

    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.

  • Comment number 20.

    Barge pole not barge poll!!

  • Comment number 21.

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

  • Comment number 22.

    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

  • Comment number 23.

    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.

  • Comment number 24.

    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.

  • Comment number 25.

    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.

  • Comment number 26.

    i hate kpmg

  • Comment number 27.

    Updated my earlier response to add further information about the 2007 accounts:

  • Comment number 28.

    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?

  • Comment number 29.

    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.

  • Comment number 30.

    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.

  • Comment number 31.

    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?

  • Comment number 32.

    Barge Pole or Poll ???

  • Comment number 33.

    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

  • Comment number 34.

    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.

  • Comment number 35.

    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.

  • Comment number 36.

    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.

  • Comment number 37.

    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?

  • Comment number 38.

    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.

  • Comment number 39.

    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:-))

  • Comment number 40.

    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

  • Comment number 41.

    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.

  • Comment number 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.

  • Comment number 43.

    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.

  • Comment number 44.

    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.

  • Comment number 45.

    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?

  • Comment number 46.

    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!

  • Comment number 47.

    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.

  • Comment number 48.

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

  • Comment number 49.

    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?'

  • Comment number 50.

    ''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.''

  • Comment number 51.

    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.

  • Comment number 52.

    post 24 - can you explain the mutual bit in PMS?

  • Comment number 53.

    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.

  • Comment number 54.

    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!

  • Comment number 55.

    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.

  • Comment number 56.

    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.

  • Comment number 57.

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

  • Comment number 58.

    "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.

  • Comment number 59.

    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


  • Comment number 60.

    #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?)

  • Comment number 61.

    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

  • Comment number 62.

    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"?

  • Comment number 63.

    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?

  • Comment number 64.

    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.

  • Comment number 65.

    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!

  • Comment number 66.

    Oh if only Gordon had been here instead of being away saving the world, the poor old Dunfermline would have been saved!

  • Comment number 67.

    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.


    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.

  • Comment number 68.

    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.

  • Comment number 69.

    Just exactly who is telling lies?

    The Auditors, Darling or Faulds ?

  • Comment number 70.

    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.

  • Comment number 71.

    An interesting piece. But what, pray, is a "barge poll"?

  • Comment number 72.

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

  • Comment number 73.

    #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.

  • Comment number 74.

    Gwyrangon wrote:

    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?'

    Spot on. The hand-ringing and fake indignation from the toom tabards and astroturfers has already started on The Scotsman's blogs.
  • Comment number 75.

    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.

  • Comment number 76.

    #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?)

  • Comment number 77.

    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.

  • Comment number 78.

    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.

  • Comment number 79.

    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?

  • Comment number 80.

    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.

  • Comment number 81.

    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?'

  • Comment number 82.

    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.

  • Comment number 83.

    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.

  • Comment number 84.

    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.

  • Comment number 85.

    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.

  • Comment number 86.

    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."

  • Comment number 87.

    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.

  • Comment number 88.

    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!

  • Comment number 89.

    #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?

  • Comment number 90.

    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.

  • Comment number 91.

    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.

  • Comment number 92.

    #10 BasaltRocky:

    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.

  • Comment number 93.

    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.

    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?

  • Comment number 94.

    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.

  • Comment number 95.

    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!

  • Comment number 96.

    Post 64 niloc5959
    Your right, a pattern only a blind man could miss.
    What happened to prudence north of the border?

  • Comment number 97.

    #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.

  • Comment number 98.

    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 !!!

  • Comment number 99.

    Time Now 16:13

    Last moderated post #70 time 1:52

    Not good enough.

  • Comment number 100.

    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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