Small mercies and the Rock
Let’s not get carried away with woe about the Northern Rock mess and what it supposedly shows about the fragility of our banking system.
The – till recently the world’s biggest bank – provides useful context.
The loss of around £5bn it incurred in just the last three months of its financial year would have wiped Northern Rock from the face of the planet.
If Northern Rock’s loans were in as parlous a state as Citigroup’s, there would be no argy bargy about whether it would be right to nationalise the bank or whether shareholders should receive a penny.
The Rock would simply be in liquidation. The game would be well and truly up for shareholders and depositors.
And Citi is not an exception.
In the US, the assets of Merrill Lynch, Morgan Stanley and Bear Stearns have all suffered write-downs that would have been sufficient to topple any medium size British bank.
And in Germany, a number of banks are feeling very from their exposure to US sub-prime.
So by all means wring your hands about Northern Rock.
And don’t hesitate to point out that the Rock is a special case because of the sheer size of the financial support being provided to it by British taxpayers.
But please take some small comfort from the demonstrable truth that both the Rock and other British banks have been more astute lenders than many of their overseas counterparts.
As I’ve pointed out many times, the problem for the Rock is that it was a terrible borrower – which is a cardinal sin for any bank.
Its mistake was to be too reliant on money markets for its funding.
But although it may end up incurring substantial losses on some of its consumer and mortgage lending, especially on those loans made in the last 18 months or so – at the top of the UK’s housing bull market – there is no evidence as yet of crippling loan losses.
The other tragedy for the Rock is that because it is so narrowly focused on the UK housing market, it’s not terribly attractive to the Asian and Middle Eastern sovereign investors which are bailing out the US banks.
Citi and Merrill alone yesterday announced aggregate capital injections of more than £10bn from investors, much of it from the Government of Singapore Investment Corporation (which had earlier bailed out UBS of Switzerland), the Kuwait Investment Authority and the Korea Investment Corporation.
Sadly, even Goldman Sachs – the mighty investment bank advising the Treasury – cannot persuade these new financial superpowers to gobble up the Rock and thereby rescue the British taxpayer.
As I’ve already disclosed, Goldman has come up with a cunning plan to significantly reduce the taxpayers’ £55bn Rock exposure.
This would involve converting much of the £26bn of the Bank of England’s loans to the Rock into asset-backed bonds for sale to international investors.
The problem is that the deal would only fly if wrapped or guaranteed by a reinsurer.
And the cost of such reinsurance would be crippling.
Transferring the Rock-risk off the public-sector balance sheet would require the Treasury to make huge subsidies in the form of payments to the reinsurers for the five-year term of these loans.
That’s why the Rock is heading pretty fast towards nationalisation – because the costs of propping it up in the private sector are very large and would continue till well after the next general election (see yesterday on the Treasury’s contingency planning for emergency legislation to transfer the Rock’s shares into public ownership).
So long as nationalisation were predicated on a ruthless plan to sell assets, shrink the business and then privatise when market conditions became more benign, nationalisation could look better value to taxpayers.
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So the risk to the Taxpayer comes down to the quality of the assets.
Before the Government nationalises Northern Rock shouldn't someone do an audit, or are we the taxpayer buying blind to hid the government's incompetence?
We are entitled to know what we are being signed up for before we take on the liabilities.
How the mighty have fallen. Power has shifted from the West to the East when the big American Banks need to be bailed out like this.
We can't afford to gloat too much over the US's woes just yet.
Default only comes out of the woodwork once consumers can't refinance (on its way) and house prices fall (only just started).
We are 12-18 months behind the US on this issue. And by any account, UK house prices are more overpriced than even those in the US.
I'm not concerned about whether we have a downturn like the US, but how bad it will turn out to be.
Dear Robert
The Losses incurred by this sub prime fiasco, is wholly the problem of the Banks, it is their fault, and its their fault also that crying Wolf, ends up in the Public sector.The Only reason this bank was saved was because if you follow the money trail back, it will always lead to fianciers and bankers who are involved with government and can pull strings. This is what has happened at NR, some banker went cap in hand to the treasury and said HELP. knowing full well he would be ableto off set the losses into the public purse.The investors who are staying quiet are in Government????
" NO ONE SHOULD LOOSE THEIR HOME FOR THE BANKS FAILURES."
Maybe the Govt should take the opportunity to create something similar to Kiwibank..
Apparently the "Kiwis" - both people and businesses - are flocking to it.
However, there's no doubt now that the relationship here between banks, the people and the Govt has changed forever. This is a good thing.. NR has pricked that bubble of self satisfied smugness.
Now - I'm waiting to see if they have the nerve to announce the same level of bonuses this year. If they do then I'm taking to the streets.
Well explained Robert!
It proves that those blaming the Govt. for the Rock's problems are finally having to digest the fact that this is not just a UK problem, but a World wide problem!
This is the downturn in a Capitalist system, which happens every so often!
As Japanese banks have shown (Shinsei for example), nationalisation before re-float is not always a bad thing.
But Robert - can you please also start investigating how the govt are going to treat subordinated creditors, such as the holders of the Tier 1 debt and the also the Upper Tier 2 debt?
These bonds are trading at default levels - if the government gives shareholders something (however little), surely they must make good the substantial losses on the bonds?
Another key problem is that despite all the disclosures and reporting on the scale of the 'securitization' debacle, many financial institutions are still concealing the true extent of their exposure to all this junk. They are using every last trick in the (off-balance sheet) book to avoid facing the inevitable. This attitude can only prolong the pain for all of us.
Jim - post 4 - when NR "went cap in hand to the Treasury" as you put it they did not know that this would instantly be leaked to Mr Peston and the world, leading to the run which lead to the size of the current loan. With no media panic any support required would have been significantly smaller and we might not have this constant negative discussion about the beleagured/stricken/Rock-and-a-hard-place bank.
Well, well, well,..., more New Year's woes. From the start the stop-go rescue policies adopted towards NR have been ill-conceived. All thoughts about moral hazard were thrown out the window with a few weeks. What galls me about the affair is the cant about the need to save the depositors saving, etc. The borroweers are largely ok. Just keep paying. The shareholders have recevied little consideration in contrast. Why isn't the government mooting nationalising pension fund companies? Many funds are in deep trouble. Nationalisation is the worst of all worlds - economic and political. It would have been far better to have let NR find its own solution in the open market - even if that meant its collapse.
Scamp #5 refers to the 'Kiwi' bank, which is a subsidary of NZ Post.
Remember 'joined-up' thinking in Government?
It got lost.
Back here in the accursed Blighty, we have a Post Office too, and a few years ago there was going to be a Universal Bank run out of the Post Offices but the Government canned it.
Instead, the Government is closing Post Offices, one piece of genuine 'public space' that you would think a Labour Government would be all in favour of.
Just to twist the knife just a bit more, the Government refuses to let the managers of the Post Office and Royal Mail even consider inviting the workers in those enterprises to even properly participate via the sort of partnership that John Lewis so successfully does.
What does Labour really want - servile 'welfare' clients/voters or what?
Dee: We're already there. We already have a huge exposure to the quality of the Rock's assets. The bonus with privatisation is that the government are significantly more indifferent to the timing and manner of the return than the private investor - if we have to reposess and get paid rent, we're (in the long term) no less happy than if we get paid the cash, but the private investor wants the cash. Therefore, we DO NOT want to be selling off the mortgage book at a discount.
Harrry e: Interesting point you make. Basically, everyone's running around saying we're fine as we don't have as deep a sub-prime problem (no NINJA loans), but has anyone rune the figures? Self cert mortgages? Mortgages based on expected promotions and bonuses? Undeclared BTL mortgages, where payments are funded through rent (except there's a wee bit of a cashflow shortfall currently)? What happens when they don't come through? And as you rightly say, the price inflation in the UK has been considerably more severe. So I rather suspect we're in every bit as bad a place as the US, or will be onc we catch up.
Jim: Please get real. No-body forced your arm. You borrowed because you wanted to borrow. According to John Snow's programme on earnings, I'm top 10%, and I'm not even 4 years out of Uni. Do I own my own home? Do I heck. I rent a nice little 3 bedroom place for £1000 per month. To buy, I'd be looking at at least double that, and only £500 going on capital repayment. But what about all the capital growth you can expect says you. At these prices? Not likely, says I. And look what's happening in the market now.
No-one should lose their house because of bank failure. And no-one will. Your mortgage will just get transferred to a different provider. However, when you start defaulting on it, because your other expenses have gone up faster than your salary, or because the interest has gone up, thats not bank failure. That's your failure. That's what you lose your house for. If you don't get that, you shouldn't really be in the business of home ownership.
Scamp don't you read the papers!
The NR directors and Senior Managers have already awarded themselves loyalty bonuses of up to 100% of salary for staying with the bank during this turbulent time.
Robert
What interests me is that nobody has yet drawn a comparison between the injections of new capital that UBS, Citi, etc. have had and the "shares" that the banks have "issued" to get access to that capital and Northern Rock. If the UK government were an "investor" like the Singapore or Kuwait investment authorities, surely they would have ended up being a significant stakeholder in the Rock? I appreciate that the shares are not worth much but it would surely dilute any compensation the government might make to other shareholders? It would also give taxpayers the feeling that we had actually got something for our money.
A "tragedy for the Rock", eh? Somehow I can't begin to feel empathy with their plight that results from bad borrowing and excessive focus on the UK housing market, as you will have it. This was not some lack of foresight or unfortunate series of events: the NR business model was founded on borrowing cheaply on the international markets, then lending cheaply (120% mortgage anyone?) in the UK market and then securitising their dubious mortgages to reduce the debt on their balance sheet and post massive profits. It was quite the fashion at the time, I believe.
Yes, NR did have both high quality mortgages as well as its riskier subprime range but let's not forget that this was after all the bank that was advertising itself as "open for subprime business" shortly before the bank run - Deutsche Bank, it ain't. Please don't make apologies for NR's flawed and short-termist business model. The only reason they are not currently in administration is because of government support. Otherwise they would be much worse off than Citigroup.
Dee 7.56 a.m.
Bit late to be worrying about the quality of Northern Rock's loan book, we taxpayers are £50bn+ into them right now. At least with nationalisation, the government will be in cha....oh, of course, I forgot, that wonderful government of which Peter Hain, the Works and Pensions minister, is 'incompetent'.
Believe me, Northern Rock will bring this government down. NR has been lending up to 85% loan to value on 'non-verification' of income (of course, not 'self-certified'!) and 125% loans to anyone who can fog a mirror. Their loan book will be about as good as the US mortgage market in about 6 to 12 months.
And us taxpayers will be paying for the rest of our lives! But I look forward to seeing a government backed entity repossessing homeowners in the coming months and years.
"But please take some small comfort from the demonstrable truth that both the Rock and other British banks have been far more astute lenders than many of their overseas counterparts ... although it [Northern Rock] may end up incurring substantial losses on some of its consumer and mortgage lending, especially on those loans made in the last 18 months or so - at the top of the UK's housing bull market - there is no evidence as yet of crippling loan losses."
Where is this "demonstrable truth"? That there hasn't yet been a collision with the fan? Is it not much more likely that the overriding reason British banks are not currently suffering the "crippling loan losses" of their US counterparts is that, unlike in the US, UK property prices have yet to fall significantly from top-of-market values? What do you think will happen when (if?) millions of households are thrown into negative equity, and there's no longer sufficient collateral value to cover loan defaults?
Or do you think there's a way of maintaining property prices at market-top levels irrespective of changes in the pattern of speculative behaviour? They haven't managed to do this in the US, but perhaps the maestros at Numbers 10 and 11 have the keys to such a conjuring trick.
The efforts by Goldman Sach's appear synonymous to someone expecting to be buying a BMW actually finding out that they have signed up for a Mini on the order form. So with the customer not content, Goldman Sach's is retaining the money and replacing the mini badge with a BMW badge hoping the customer will not notice.
AAA rated bonds for less than AAA rated risk is what they are attempting to sell, the only way they can do this is if Joe public covers the difference in risk.
Sorry but Northern Rock is not liquid and the refusal by the Treasury and the Government to accept reality is going to cost Joe public a lot of money.
Oh dear .. Another mismanagement on the scale of ERM coming for the public accounts.
Is this going to be the turning point for the Government as the ERM fiasco was for the Conservatives ?
Chris #7: I would not have thought anyo0ne has to subsidise the issued debt, since debt holders have no ownership of the company. They could however demand repayment themselves, which might put the NR into liquidation anyway, if the Government did not extend its guarantees.
Seems like Goldman's plan (at the cost to the taxpayers of £100m apparently)is not so cunning after all, (perhaps more Baldrick?) if no-one wants anything other than sovereign guaranteed bonds. It is misleading to say: "But please take some small comfort from the demonstrable truth that both the Rock and other British banks have been more astute lenders than many of their overseas counterparts." Well, no they haven't - if these sovereign wealth funds and ME buyers want a lot of ML, JPM and Citi, then it must be worth something to them; if they don't want NR on nanything less than risk-free terms, then NR is worthless.
Robert
What interests me is that nobody has yet drawn a comparison between the injections of new capital that UBS, Citi, etc. have had and the "shares" that the banks have "issued" to get access to that capital and Northern Rock. If the UK government were an "investor" like the Singapore or Kuwait investment authorities, surely they would have ended up being a significant stakeholder in the Rock? I appreciate that the shares are not worth much but it would surely dilute any compensation the government might make to other shareholders? It would also give taxpayers the feeling that we had actually got something for our money.
Barack Obama made the comment that these woes were down to the current administration's reluctance to bring in legislation to control this lending.
It seems that the Americans love of freedom and liberty do not extend to freedom from exploitation.
I'm no economist but is it not true that these deals can be considered as non-zero-sum games that can be brought towards (Nash) equilibrium.
Does not the work of Maskin et. al. provide mechanisms to help achieve such equilibrium with the minimum of regulation.
It seems that any mechanisims that there were in these deals were all one sided.
The U.S.A's devotion to free markets is great in theory works extremely well up to a point but, they have ignored the real world of complex transactions and now the real world is biting back, hard.
Well put MB. The only reason they aren't in liquidation is because the government have bailed them out with our money to cover their bad decision-making and risk management. Banking - the win/win game.
MB at 10:36
Northern Rock did not / does not lend to sub-prime customers. If you'd bothered to read ALL the information that was displayed on that web page, you would have realised that NR only acted as an application processing house for Lehman Brothers. It was Lehman Brothers (actually a subsidiary of theirs named SPML), that were responsible for finding the funds that were lent out, and all the risk of these mortgages rests with them. They are not part of Northern Rocks mortgage book, and are not posing any risk to UK plc / Treasury / taxpayer.
What a strange comparison. It is nonsense to compare absolute losses of banks that are vastly different in size.
The fact that the balance sheets of some of the big investment banks can be fixed by relatively "minor" equity injections, whereas NR needs the Government to step in, means their problems are much bigger, relative to the size of the bank.
The fact that they cannot get financing is not just a problem of "bad borrowing (after all, investment banks don't rely much on retail depositors either). If this was the case, it would be a simple matter of refinancing using equity and long term debt.
The reason they cannot easily do this, is that the market sees the value of their *assets* (ie. loans) as being risky.
Hence, the main difference lies in the fact that the big investment banks have written down their assets and taken losses, while NR's expected losses have not yet hit the books.
It is not the UK focus of NR that is a problem for sovereign funds, they have had no such problems with other UK companies. It is the focus on UK residential property.
It's a good idea to nationalise Northern Rock since public money has been used to prop it up. It would work. It could be used to extend national savings and there might be efficiencies through combining products, etc with the Post Office.
Downside is that it's more competition for private sector banks.
#5 Scamp commented on the recent success of Kiwibank. This has more to do with the lack of NZ domestically owned banks than government run ones.
@16 "And us taxpayers will be paying for the rest of our lives! But I look forward to seeing a government backed entity repossessing homeowners in the coming months and years."
You are right, but Gordon Brown will try to put that day off until after the next election.
The main question is the quality of those Northern Rocks assets i.e. mortgages and simply the ability of UK mortgages holders to repay their mortgage.
This is a question that not only affects Northern Rock but every other bank in the UK that lends money for house purchases.
Do UK borrowers have the ability to repay their debts? If they do then Northern Rock becomes just a funding issue however if they don’t it becomes a bad debt issue like what’s happening with Citigroup & other major US banks.
Northern Rock and other UK Banks survived the recession of the 90’s with a property boom followed by sky high interest rates of up to 14%,
But is this case worse?
Did cheap money create massive sub prime borrowing in the UK like the US?
I feel borrowing in the UK is not as are bad as USA or certain countries in Euro land for the following reason, base rates for the dollar and euro remained at just 2% for up to 3 years , the UK low was 3.5% for a short period.
Where we go from here depends a lot on the Bank of England, they have done a good job over the last few weeks in bringing the 3 month libor rate to just 5.57%, 7 basis points over the base rate. Another few rate cuts, the UK should miss major parts of the US problems.
To answer the Northern Rock question, if the Bank of England think ‘No’ is the answer to the above question they should do everything in their power to recover there money and question why they give the money in the first place!
If however they think the answer is ‘Yes’ they should agree commercial terms for the repayment of the 25 billion.
That’s it black or white!
These blogs go to show that too much information is not necessarily good for you. I read yesterday in a newspaper that the Gov't needs to build 3 million new homes, and that net immigration will push up the population by 4 million over the next ten years. All these people need housing, and they come here because there are jobs a plenty, why does everyone presume property prices will fall. The propert market in the US is very different from the UK, and in addition there has been cavalier lending, confusing syndications, interest rate plunges followed soon after by a soaring, causing confusion and pain. These are not the reasons for NR problems. Stop this collective panic, and get out of the house more.
we're a few quarters behind the US. I think we're in for a whole world of pain.
Robert,
Another excellent article.
Nationalisation is inevitable in my opinion and when NR is in the financial stewardship of Brown the Clown, his Darling and ANOther political appointment anything can happen and probably will.
NR had a business model that failed to even consider the effect on the business when cheap easy money began to dry up which of course it did. This was at least three corners of their very existance in business and proof that buffoons were probably in charge at NR.
It is frightening to think about what other NR 'buffoon driven' failings have yet to emerge that those companies with privilged information have learned and decided not to fund a private sector takeover or merger.
Agreed CitiGroup is a bigger problem but it is NR that will impact directly on the UK taxpayers, just as the 11 years of this useless government has consistently impacted.
Its a healthy sign that international banks have admitted their losses. There is however a knock on effect in that tax revenues will fall short for their respective governments.
What is not a healthy sign is the denial that US politicians are placing upon a lop sided balance sheet and their national debt.
This debt has to be underwritten by insurance and some
are saying that the US may loose its triple A rating something that has never happened before.
The UK is vulnerable too by not being part of the Euro. If the UK balance sheet does not balance and government fails to cut government spending then Moody's may suggest our rating be revised too.
You are fundamentally wrong at so many levels is amazing
Reasons
Problems with Northern Rock
If Northern Rock has £100 billion mortgage assets they would also have £90-95 billion liabilities the loan they took out to give out.
Hence making 5-10% in the bargain.
So if the housing falls by the most conservative estimates by 5-10% (Check Evan Davis predictions) There is no value in Northern Rock's Mortgages as well.
You are fundamentally wrong at so many levels is amazing
Reasons
Problems with Northern Rock
If Northern Rock has £100 billion mortgage assets they would also have £90-95 billion liabilities the loan they took out to give out.
Hence making 5-10% in the bargain.
So if the housing falls by the most conservative estimates by 5-10% (Check Evan Davis predictions) There is no value in Northern Rock's Mortgages as well.
NR has been guilty of seriously overtrading and therefore the usual penalty is liquidation. In this, the Liquidator would cancel all contracts, including staff and the management who created this mess, and conduct an orderly sale of the assets. The Liquidator would need to retain a core staff on new temprary contracts for this purpose. Good loans would be sold at face value to other banks. Bad loans would be managed ie subject to the arrears process or after time written off. Branches and other offices would be sold or closed down thereby reducing costs. Income from these sales etc would be used to discharge the liabilities - secured creditors, tax, unsecured creditors eg depositors. Any surplus to be paid out to shareholders who should have been fully aware that this was the ulitimate risk when they invested or more likely received their shares on demutulisation.
NR is bust. This has been clear sice August. It is naive to believe there are no crippling losses just because "there is no evidence as yet". Citibank et al have taken steps to identify and deal with such losses. NR and the Government will have assessed the losses, but the outcome has not been shared with the public -- most probably because the information would quantify the cost accepted by the public purse.
NR should have been allowed to go into administration last August. The fact it could no longer borrow in the markets was not because of the credit crisis -- enough liquidity was pumped into the system to support institutions whose only problem was lack of liquidity -- but because no bank was prepared to go on lending to an outfit which was obviously insolvent (unlike Citibank et al).
With NR in administation, the Government should have guaranteed the retail depositors and left the institutional lenders to reap their deserts. No harm whatever would have been done to economic stability by this solution -- the reverse, in fact.
Official posturing since August has just been ducking and weaving to cover up gross incompetence and political embarassment. This is going to be be one of the biggest taxpayer-funded debacles ever.
Mad Max is spot on here, the real loss is in corporation tax, since any finance losses will be rolled on to minimise c-tax over the next few years. This of course is the real loss to any government; maybe Robert can investigate to find a good figure on that one.
When will politicians ever learn that you can't interfere in free markets. Either you have them or you don't and for some of the lead shhareholders of Northern Rock to suggest the shares are worth £4 begs the question why does no one believe them?
The game is up, depositors money is rightly protected and everyone else is quite frankly up the proverbial creek without a paddle.
That's how the system works and there can be no exceptions.
So please can we just get back to reality, accepting these things happen and move on.
Northern Rock deserves no more help than any other business in this country and that is a fact.
Robert, I have just been reading your recent articles on Northern Rock. I'd like to point out that it's plain wrong to say that if the subordinated debt is trading at a big discount to par then the shares should be worthless.
This is because these prices (of bonds and equities in Northern Rock) represent theoretically the average of many possible outcomes.
Think of it this way: a 35% discount to par on the debt means that investors' estimate of the likely outcome is zero for shareholders and less than 100% for bondholders; but it may also allow the possibility (but obviously not the probability) that the debt will be redeemed at par...and concomitantly that the shares are worth something.
Here, the outcomes are varied and pretty much discrete: private takeover (several have been mooted at various prices and various levels of guarantee), or public ownership. All have different outcomes, different likelihoods of occurring, and some but not all may lead to the shareholders receiving something.
All this doesn't change the fact that I am delighted not to be a NR shareholder...
In the final analysis, as a relatively financial layperson, you realise that these are not true 'free markets'.
In the sense that if a central bank can simply create huge amounts of money out-of-thin-air, without withdrawing an equal amount from the market, then that essentially constitutes a distortion of a 'free market'.
You begin to comprehend that the whole edifice is rather shaky.
Now I can see why some bloggers get such a bee-in-their-bonnet about 'fiat currencies'.
Now where is that gold, I'm sure I have some hidden away somewhere.
In response to Dee (comment 1), the government as well as the two preferred bidders have been looking at NR's books for the past four months so they know exactly what quality of assets the company has. Nobody outside of this has the slightest idea of how good/bad these are other than from speculation in the media.
In response to Rob (comment 16), NR assesses mortgage applicants far more thoroughly than many other high street banks. With my own mortgage, Halifax were prepared to offer £30k more than NR for an equivalent product. The 100% plus mortgages may appear irrational but NR are (or were) not the only company offering these. NR only secure a certain percentage (usually 95%) and the rest is arranged as an unsecured loan. The two, although paid off via mortgage re-payments, remain seperate and the USL can be repayed at any time. How many people have a mortgage and also take out unsecured loans? It is not unusual. In any case, this type of mortgage only makes up a small proportion of the companies business so don't assume that is all they have because its the only thing you have heard in the media.
Whether NR is nationalised or bought out the taxpayer will get the money back, it will just take a time for them to rebuild the business. Nobody other than those involved at the highest level understand what the situation is so don't assume absolutely everything is being reported in the media.
For a change it was good to read something positive about the credit crunch and to learn that you (Robert Preston) believe that the Rock and other British banks might have been more astute lenders than many of their oversees counterparts.
If this proves to be true then traditional British banking caution might just save us from the doomsday scenario that many people are predicting will happen. The one big concern is we might yet have a global recession, resulting in high levels of unemployement.
NOTE FOR Scamp (No5)
Just to let you know that in the nineteen sixties the goverment of the day did set did set up a bank similar to the Kiwibank and it was called the Giro bank. Unfortunately it was only partly successful and in the end it was gobbled up by one of the UK's big banks
I spent 40 years in the City and to my mind equities were always classed as risk assets (and to be avoided if you couldn't balance the potential loss). To have to listen day after day to the NR shareholders - particularly from TB's old constituency - bleeting about their situation is a real pain.I tried to mitigate risk by putting some of my pension into Equitable Life. No government came riding to our rescue in fact MPs were the first ones out the door at E.L. with a "special arrangement". NR should have been allowed to go the way of all failed businesses.
I must get this out for the sake of my blood pressure!
Rgds.Grumpy.
You know, I can not help thinking this is all a bit of a con, The Banks and financial groups seem to have lost billions, Did everyone in America stop paying their mortgage ? Perhaps all the money that was lost did not exist in the first place, Perhaps Old Joe Ashton, the former Labour MP was right years ago, when he said 'we are all living in a false economy' Joe's career ended when he was stitched up in a massage parlour scandal, perhaps the banks have been massaging the figures too.
"In the US, the assets of Merrill Lynch, Morgan Stanley and Bear Stearns have all suffered write-downs that would have been sufficient to topple any medium size British bank."
This (and your example of Citibank's £5bn losses) is true, but partially misses the point. No "medium size British bank" would have put suffered such large write-downs simply because they are medium-sized - the American banks you refer to are much larger and so had a larger exposure in absolute terms.
As we have recently seen in the US, the assets of Merrill Lynch, Morgan Stanley and Bear Stearns and others have all suffered write-downs resulting in/fuelling this global stockmarket crisis.
My question is given the losses of all major banks and investment firms, with Merrill reporting losses of 10bn, did any of the major companies decide to rethink their bonus schemes? The 5 major players in this industry gave a combined bonus of 39bn (Merrill gave 10bn!!!-just about what their reported losses are..)
I believe this is a fact at least worth mentioning.
regards,
Nicholas Douzinas
InterSec Greece
As we have recently seen in the US, the assets of Merrill Lynch, Morgan Stanley and Bear Stearns and others have all suffered write-downs resulting in/fuelling this global stockmarket crisis.
My question is given the losses of all major banks and investment firms, with Merrill reporting losses of 10bn, did any of the major companies decide to rethink their bonus schemes? The 5 major players in this industry gave a combined bonus of 39bn (Merrill gave 10bn!!!-just about what their reported losses are..)
I believe this is a fact at least worth mentioning.
regards,
Nicholas Douzinas
InterSec Greece
Maybe someone can explain why it is exactly that banks don't seem to be governed by the same rules as other businesses? If a bank can't cut the mustard, employs idiots in its top tier management and uses deposits in a fiscally irresponsible manner, shouldn't it be allowed to fail. as any other business would? Do management of banks know that markets go down as well as up? Free markets can regulate much better than any government. As I've mentioned before, the people of the UK will only get anything better by refusing to vote for any of our political parties. Spoil your vote. It's a more positive way to tell the political elite that you're not happy with the status quo. Stop using credit cards or use them as little as possible. Demand that your employer pay you in cash. That way at least you are the one in charge of your money. Demand an end to fractional reserve banking. Why is any bank allowed to lend out 90% of all cash deposited? Seems like an awful lot of lending to me. And who's regulating. Whoever it is, they're obviously not doing a very good job. Couldn't be a government department or government controlled body by any chance? Too much debt and too little savings. That'll be enough to bring any household, business, bank or even government down eventually. Get used to it. It's not over yet.