£50 billion BOE rescue vs unlawful charges refund

[Mistermind]

£50 billion treasury bonds rescue for high street banks today, described as but the first tranche with much bigger to come. Makes you wonder in this dark hour for UK banks, whether the executive branch might have had a quiet word already with the judiciary, to go easy on the test case verdict. This situation would also shorten the odds against banks appealing against the verdict all the way to the Lords, if for no other reason than to buy time and breathing space before making universal refunds for six years of charges ruled as unlawful.

[nufsaid]

Yep agreed as this popped up today as well...

RBS confirms rights issue plans - MSN News UK - news & weather

 

Hmmm interesting.

[ncf355]

Taking the P really, isnt it?

[Mistermind]

Banks brought this upon themselves, chopping up their mortgage lending portfolio into unrecognizable fragments then trading them as securities just like company shares. In troubled times when nobody knows what's inside the package nobody is going to buy it or lend against it. Tens of millions of pounds have been spent on Basel 2 Compliance to prevent situations just like this. No doubt Northern Rock and Bear Sterns were both Basel 2 compliant or close to it, or they would have had their licences suspended. Some use Basel 2.

 

When a customer goes to his bank manager cap in hand the customer gets a lecture on feckless behaviour. Who is feckless now? It is customers, as victims of unlawful charges and as tax payers who are rescuing high street banks.

[dave]

When a customer goes to his bank manager cap in hand the customer gets a lecture on feckless behaviour. Who is feckless now? It is customers, as victims of unlawful charges and as tax payers who are rescuing high street banks.

 

Precisely that. Somehow though, I don't remember them actually asking me to lend them the money. I don't have a bank account as I don't want to give any of them my money; yet, the fact that I choose not to do business with a particular 'industry' seems to matter not - I (we) still end up giving them our money through tax.

 

Let them all burn I say - they made their bed, they should lie on it - to hell with the consequences.

 

We pay a government to to just that: govern. Not help their mates out when they should have been keeping an eye on them because of the position they were in, and the consequences of people in that position making these sorts of decisions.

[Mistermind]

Barings Bank could have been rescued with just £1 billion. This is £50 billion, the first tranche. Could it rise to £200 billion before the crisis is stabilised?

[steven4064]

Just think of all those poor bank shareholders not knowing where the next G&T is going to come from

[Mistermind]

Outstanding US subprime mortgage loans are estimated to total £500 billion, of which £100-£200 billion is estimated to have defaulted or are going to default if the US economy heads south. As subprime house prices continue to plummet, owners of negative equity hand in their keys and walk away leaving banks with loans unrepaid and houses unsaleable except at a big loss.

 

That in itself is bad enough, but over recent years subprime mortgages have been chopped up and packaged into bonds and derivatives traded among banks worldwide. When crisis broke last year it became very difficult to work out which bank was exposed to what extent. Unsure which bank could suddenly do a Northern Rock or Bear Sterns, this mortgage lending crisis spiralled into a wider banking crisis with no bank now willing or able to make risky loans.

 

On 18 DEC 2007 the European Central Bank made £250 billion available to European banks. This month George W Bush goes to the extremity of sending a $400-$600 "tax rebate" cheque to every US tax payer to stimulate consumer spending - assuming 150 million US tax payers this giveaway would total £40 billion. The UK Treasury made £100 billion available to Northern Rock as loans and deposit guarantees, at a stroke inflating the National Debt of £537 billion by 18%. Now the Treasury has made available, for starters, £50 billion of rock-solid Treasury bonds in a swap for dubious subprime mortgage bonds.

 

The worst-case scenario would be a crisis of liquidity and confidence leading to a fall in UK property prices (some have suggested 20%), a drop in plastic debt repayment and rise in defaults, a decline in consumer spending, then recession and unemployment. Inflation could join the pot following repeated floods of ineffective rescue cash into the money market.

 

The following is but a sample list of widespread asset devaluation writedowns made by banks since 2007 as they desperately seek financial reinforcement from governments and shareholders.

 

£12 billion - Citigroup (9,000 job cuts)

£12 billion - Merrill Lynch (4,000 job cuts)

£ 9 billion - UBS (5,500 job cuts)

£14 billion - HSBC

£ 7 billion - RBS (£12 billion rights issue)

£ 3 billion - Barclays

£ 3 billion - HBOS (£4 billion rights issue, share price down 42% in past year)

£ 2 billion - Credit Suisse

£ 2 billion - Deutsche Bank

 

 

IMF warns that worst of credit crunch yet to come - World ...

 

The International Monetary Fund warned yesterday that losses from the financial crisis could approach $1 trillion (€637bn, £500 bn) as the turmoil spreads and threatens global economic growth.

 

The IMF's estimate of the losses from the crisis is the biggest yet and raises fears that the worst of the credit crunch is yet to come. So far banks have reported about $230bn in losses and write-downs.

 

Global banks are likely to shoulder about half of the potential losses, with insurance companies, pension funds, hedge funds, and other institutional investors accounting for the balance, the IMF said. But losses at other institutions such as "monoline" bond insurers could reverberate back to the banking system, causing further carnage.

 

Strain is spreading from US sub-prime mortgages to other sectors such as commercial property, consumer credit and loans to companies, the IMF said, adding that there had been a "collective failure" to understand the dangerous levels of debt built up in the financial system.

……..

At the start of the crisis, the impact was limited to financial institutions as banks hoarded cash to meet obligations caused by falling asset values. But central bankers are now worrying that the squeeze is spreading to the wider economy as cash-strapped banks rein in lending to consumers and companies, choking off the financial oil that keeps the economy working.

"It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep-seated balance sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper and more protracted," the IMF said in its Global Financial Stability Report.

 

Yesterday's report came ahead of a gathering of world financial leaders, including the IMF and the World Bank, in Washington DC this weekend.

 

The report warned that the impact of the crisis, so far largely confined to the US and other western economies, could spread to emerging markets through funding channels and trade.

The IMF is expected to reduce its growth forecast sharply today as the US slowdown takes its toll on the global economy. The report blamed slack regulation by governments and "excessive risk-taking" by banks for the crisis. (©The Independent, London)

 

IMF cuts global forecast on worst crisis since 1930s

April 2 (Bloomberg) -- The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression

 

Credit crunch spells 20000 City job losses | Business | Reuters.co.uk

Sun Apr 13, 2008 1:54 PM BST LONDON (Reuters) -

Almost 20,000 City jobs will be lost this year and next as the credit crunch takes its toll, a leading economics think-tank said on Sunday.

 

The Centre for Economics and Business Research (CEBR) forecast 11,000 City job losses in 2008, up from a previous estimate of 7,000, and 8,200 in 2009, giving a total 19,200 -- a headcount cull worse than that when the dotcom bubble burst.

…..

"Furthermore, the outlook for 2009 has deteriorated; there is little sign of light at the end of the tunnel for the City."

 

Subprime mortgage crisis - Wikipedia, the free encyclopedia

Edited May 12, 2008 by Mistermind
HSBC raises writedowns

[mailmannz]

whether the executive branch might have had a quiet word already with the judiciary, to go easy on the test case verdict. This situation would also shorten the odds against banks appealing against the verdict all the way to the Lords, if for no other reason than to buy time and breathing space before making universal refunds for six years of charges ruled as unlawful.

 

And you base this absurd opinion on what?

 

Time and time again the judiciary has proven without a doubt that it is not in cahoots with the government.

 

Honestly, your line of thought makes about as much sense as claiming 9/11 was carried out by the US government

 

Mailman

[mailmannz]

Just think of all those poor bank shareholders not knowing where the next G&T is going to come from

 

The vast majority of "poor" bank shareholders are small people just like you and me.

 

So while on the one hand its nice to see some of these faceless corporations getting their arses kicked, the reality is that at the end of the day the pain will be felt by the little people who work in these establishments (while those responsible for getting their banks in the sh1t will continue to earn millions) or have invested in the company they work for (after all, what higher loyalty can your staff show in your company than to invest in it).

 

Mailman

[mailmannz]

Banks brought this upon themselves

 

Absolutely! The banks, through their shear greed to make a profit, have got themselves in to this sh1t!

 

When a customer goes to his bank manager cap in hand the customer gets a lecture on feckless behaviour. Who is feckless now? It is customers, as victims of unlawful charges and as tax payers who are rescuing high street banks.

 

One would hope these institutions are getting a good telling off from the government BUT I suspect that those arranging these payments are more concerned with looking at the bigger picture of how much damage a bank folding would do to the economy.

 

Mailman

[noomill060]

"Honestly, your line of thought makes about as much sense as claiming 9/11 was carried out by the US government"

 

Absolutely- everyone knows it was carried out by David Ike's shape shifting alien reptiles.

[mfpa]

I don't have a bank account as I don't want to give any of them my money

 

How do you manage that?

[Mistermind]

dave has many mattresses and space under many floorboards.

[TideTurner]

Are we witnessing the beginning of re-nationalisation? If the Government takes a share in each of these banks it will not be without terms, which could regain control of the UK financial system. Also, where is this bail-out money coming from?

[Mistermind]

Gordon Brown is printing Treasury bonds.

 

The idea is to give UK banks breathing space so they can carry on lending and borrowing the way retail banks need to do in a well-oiled economy. To allow time for US subprime houseowners to find work and earn enough to restart their mortgage repayments priced high in better times. Then after US subprime bonds have recovered some of their market value, for UK banks to hand back their gilt-edged Treasury bonds in exchange for their original junky bonds.

 

But if US recovery does not occur, if UK house prices fall from a great height taking jobs and confidence with them, if the UK's unique plastic debt mountain slides into mass default, then how on earth can UK banks hand back their Treasury bonds? How can the Treasury extract blood from a stone if a bank fails, owing everybody money?

 

The government will be stuck with subprime junk paper, as they try at yearend to find substantial cash to pay out Treasury bond dividends. Eventually redemption date arrives, and the bond holder needs to be paid the face value in full. Overseas holders of sterling reserves will no doubt nervously review the value of sterling.

 

The worst-case scenario does not bear thinking of. All this because many banks, not all, followed Gordon Gekko's advice:

 

"....The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.

Greed is right.

Greed works.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit...."

[TideTurner]

Sounds like we are selling the remainder of the family silver, but to have a Prime Minister with a financial background does give a bit of relief, although it's blatantly clear the UK economy is completely dependent upon what happens in the US

[mailmannz]

Are we witnessing the beginning of re-nationalisation? If the Government takes a share in each of these banks it will not be without terms, which could regain control of the UK financial system. Also, where is this bail-out money coming from?

 

I think you give too much credit to the government if you think their money will come with terms!

 

And...the bail out money comes from our taxes!

 

Mailman

[Mistermind]

Media response to the verdict, and the lapsing of 6-year-old bank charge reclaims:

 

http://www.consumeractiongroup.co.uk/forum/egg/53376-e-day-victory-over-5.html#post1492437

[Mistermind]

Latest City bonuses down by 1% -- the shareout totals only £13 billion now.

Dear oh dear, time for another 50 billionpound sub from the Treasury to top up bankers' bonuses........

What credit crunch? City bankers receive £13bn bonuses this year | Business | The Guardian

City workers have been awarded £13.2bn in bonuses so far this year, suggesting that the credit crunch has yet to be felt in the pockets of most bankers. The figure is down a modest 1% on the same stage a year ago, when a little over £13.3bn in bonuses had been paid out. The bonus season begins in December, with the full picture only emerging when data for April is released.

…………..

Richard Lambert, director general of the CBI, has also singled out the bonus culture that has turned thousands of bankers into millionaires as one of the main causes of the financial problems at the world's banks. He said the bonus culture "has encouraged some employees to take spectacular short-term risks, confident that if things work out well they will reap huge rewards, and that if they don't they won't be around to pay the price".

[photoman]

This is an interesting point also.

 

Why, are the banks currently handing out the biggest bonuses ever to it's senior staff (around £12bn) , whilst simultaneously asking the BOE for this money?

 

Is the BOE bail-out being used in part to fund the bonuses, that are in actual fact just going to those who have evidently failed ?

 

Perhaps they should have looked closer to home before turning cap in hand to the government and taxpayers.

 

Here's one journalists view.

 

Unions demand inquiry as City bonuses hit a record £12.6bn - despite credit crunch | Mail Online

[Mistermind]

 

Why, are the banks currently handing out the biggest bonuses ever to it's senior staff (around £12bn)

 

You have to hand it to bankers -- for otherwise they will grab it from you. The Lloyds TSB banker who dreamed up a £200 penalty charge slapped on an account £2 overdrawn, has to be in line for a millionpound bonus for his imagination without limit, for his freedom from shame.

[Mistermind]

One notable beneficiary has been Barclays investment banking chief Bob Diamond, who earned nearly £22million last year despite the bank writing off more than £1.6billion off credit crunch-related investments.

 

Even as Bob Diamond picks up £22 million, humble UK employees of Barclays Bank are methodically thrown out of work as lower-paid UK jobs are outsourced to India, who can charge one-fifth as much as Indian rents are one-fifth of UK rents.

 

There is no way the brits can compete. UK employees thus thrown out will not find a job easily, not now. Barclays Bank has outsourced to India for years, now Lloyds TSB is going for it in a big way.

 

Yes, big bonuses are good for the bosses.

[steven4064]

If they outsourced the senior management to India they would only have to pay them £4.4million

[star_scream]

50 Billion. How many other privately owned companies could stump up this kind of money?