The great interest rate rip off part 1

[interestrateripoff]

Gordon Brown to meet banks in summit over mortgage crisis - Telegraph

 

Britain's most senior banking executives will meet Gordon Brown for crucial talks in Downing Street this week as one of the country's biggest mortgage lenders prepares to tap shareholders for hundreds of millions of pounds in fresh capital.

Bosses at Nationwide and Britain's largest high-street lenders will hold a summit meeting with Brown and Alistair Darling, the Chancellor, on Tuesday morning to discuss new ways of halting the paralysis in the mortgage market.

As the banks prepare to convene at No 10, The Sunday Telegraph has learned that Bradford & Bingley, Britain's biggest buy-to-let lender, is plotting a rights issue to try to bolster its ailing balance sheet.

People close to B&B said last night that Citigroup has been asked to assist with a capital-raising that could occur before the bank's annual meeting on April 22. The decision to press ahead with the rights issue has not yet been formally taken by B&B's board and its possible extent has also yet to be decided. It is thought likely, however, that it would attempt to raise several hundred million pounds.B&B's talks about raising new capital will provide a gloomy backdrop to the Downing Street meeting, which will be attended by executives including John Varley, the chief executive of Barclays; Sir Fred Goodwin, of Royal Bank of Scotland; Graham Beale, boss of Nationwide; Andy Hornby, chief executive of HBOS; and representatives from HSBC, Abbey and Lloyds TSB.

The talks will focus on the state of the housing and interbank borrowing markets and a potential "kitemarking" solution that would help to identify the highest-grade mortgages for money-market investors. They are also likely to discuss the mandate of Sir James Crosby, the former chief executive of HBOS, who was last week given a brief by the Government to promote ways of addressing the funding shortage in the mortgage market.

Crosby is expected to report back in June, and some lenders are understood to be concerned that his findings will not be able to be implemented with sufficient speed to assist hundreds of thousands of homeowners who need to secure immediate borrowing packages.

B&B has faced punishing conditions as the mortgage-lending environment has deteriorated, and has significantly scaled back its operations in recent months. Moody's Investors Service, the rating agency, downgraded B&B's long-term ratings last month to reflect a deterioration in the bank's asset quality, a weaker capital position after asset writedowns and the probability of slower business growth. So far this year, B&B's share price has fallen by more than 35 per cent. On Friday the stock closed at 167.3p.

Will there be a run on the Bradford and Bingly next!!!!

 

If I had money the bank I'd certainly move it out.

 

Question is if the B&B suffers the same run as the Rock what will the govt do????

 

I do get the impression of sheer panic from No 10 and 11!!!!

[interestrateripoff]

Spain's gain from wind power is plain to see - Telegraph

 

Windmills pay. On a breezy Saturday at the end of March, Aeolian Parks scattered across the hill-top ridges and off-shore sandbanks of Spain produced 40.8pc of the country's electricity needs - 9,862 megawatts to be precise.

The much-derided turbines produced enough wattage to power the great cities of Madrid, Barcelona, Seville, Valencia, Toledo, Cordoba, Granada, Santander, Bilbao, and Zaragoza combined. The workday record on a Tuesday, March 5, was 28pc.

Years of nurture by the Spanish government have paid off. Spain is a global superpower in the wind race, with 15,000 MW of capacity. The region of Navarra is 70pc green, shielded against gas-shocks, Russian politics and soaring oil prices.

Today's wind turbines are a far cry from the archaic mini-mills that scar the landscape for little return, and provoke such fury in the English shires. They are vast. Each mast can power a neighbourhood.

 

In Sheffield the council is replacing all street lighting. Now the question is why don't they put a 1m square solar cell on top of each lamp post? I'm certain this would generate more electricity than the light uses. We'd all get free street lighting, lower council tax bills and the extra generated could be put back into the national grid.

 

Instead the council is putting in lighting that is only going to cost us more money to run!!!!

 

Brainless.

[interestrateripoff]

Mortgage malaise spells tough times ahead for middle-class Britain - Telegraph

 

The fat years for bankers, hedge fund managers and financiers of most hues may now be coming to an end, but you could argue that they never actually began for middle-class Britain. The growth in disposable incomes for the vast majority of the population has ground to the slowest rate in half a century in recent years, as people face up to a rising tax burden, record rises in the cost of living, out-of-control energy bills and thin salary increases.

One of the few bright spots on the landscape was that house prices had almost tripled over the past decade - apparently adding greatly to the wealth of homeowners. Yet the credit crunch and the recent slump in house prices has proved that even this final idea was illusory.

Property values are now on the slide at the fastest rate since the early 1990s, the wider economy is weakening and hundreds of thousands of jobs are likely to go - and not just in the Square Mile.

The credit crunch has, in short, been the final straw for homeowners.

Already squeezed by so many other factors, there is now another to contend with: a mortgage malaise. The crisis has added an effective premium of 1.25 per cent to mortgage rates, so families are facing the same costs as they were when official bank rates were at 6.25 per cent. This is why the Bank of England's decision to cut interest rates to 5 per cent on Thursday is unlikely to make much difference - rates will have to come down to 4per cent before the actual effect on the mortgage market is the same as with rates at 5.25per cent.

Rates are heading even further south, that is certain; the real question is at what stage the rate cuts start to make a real difference to the mortgage rates families pay.

The truth is that the Bank's Monetary Policy Committee has lost control of monetary policy. Before the credit crunch began, a cut in Bank rates would have been immediately reflected in mortgage rates.

More specifically, rates in the interbank lending market would have fallen ahead of the official rate cut, and then dropped to close to the Bank rate. Instead, Libor rates have stayed at a significant premium to the Bank rate, and - far from falling ahead of last week's rate cut - they actually rose in the run-up. The spread between Libor and the Bank rate is the biggest since December, when the crisis was last at its height.

Right now these markets are living in a world of their own. Frozen in the face of the credit crunch, intensely paranoid about which of the City's big banks are facing losses, their behaviour reflects what has gone wrong with the global financial system: fear has replaced greed as the main motivator for traders and investors.

As a result, lenders have raised both their fixed-rate and floating-rate mortgages for new customers. This is before you even consider stealth increases in mortgage costs - higher arrangement and exit fees for instance - or the fact that anyone without a flawless credit rating and a chunky deposit will struggle to find anyone who will lend to them these days.

Eventually the credit crunch will come to an end, banks will become more confident, the money markets will recover and mortgages will start to become cheap again - perhaps very cheap. But there is no telling how long that will take. Even in Washington, where the world's finance ministers met this weekend for crisis talks on the financial situation, few insiders were confident that there could be a silver bullet for the credit crunch.

 

Continues at the link.

 

As I keep saying the BoE has lost control it's no longer relevant the MCP have failed in their jobs. If they had any honour any pride in their jobs they would all RESIGN.

 

If you want to complain about the Bank of Englands poor economic management write a letter to Mervyn King, Bank of England Threadneedle Street, London EC2R 8AH or email [email protected] remembering to address with FAO Mervyn King Private and Confidential.

[interestrateripoff]

Carry OnTaking the Blame, central bankers - Times Online

 

“INFAMY, INFAMY, they’ve all got it in for me.” That most famous of lines from the Carry On series of British comedy films might now be heard in the offices of most of the world’s key central bankers. Former Federal Reserve Board chairman Alan Greenspan is being blamed for America’s house-price bubble. It seems he kept interest rates too low, too long, and failed to target asset prices. Never mind that similar bubbles foamed up in Spain, Ireland and Britain, to name just a few countries in which house prices soared and which are far beyond Greenspan’s jurisdiction.

Greenspan’s successor, Ben Bernanke, is being criticised both for being too slow to cut interest rates, and for cutting them so much that he will trigger inflation. His charge sheet also includes an entry alleging that he was too slow to understand the gravity of the liquidity squeeze and too quick to bail out investment banks caught in it.

Worse still, former chairman Paul Volcker, Greenspan’s predecessor, told the Economics Club of New York that Bernanke has gone to “the very edge” of the Fed’s legal authority, and that “out of perceived necessity, sweeping powers have been exercised in a manner that is neither natural nor comfortable for a central bank”. Volcker is one of Barack Obama’s advisers, so should the senator from Illinois end up in the White House, Bernanke cannot bank on reappointment.

At the Bank of England, governor Mervyn King’s infamy stems from his continued insistence that moral hazard is so great a problem that he has to go slow in lowering interest rates lest he encourage foolish borrowers and lenders to repeat their folly, and also trigger inflation. Critics want him to lower rates to give a boost to a flagging economy. Never mind that unlike his American counterpart, King has no remit to maintain growth, and is mandated by law to focus solely on containing inflation, which is already 0.5 points above the government’s 2% target.

 

So the life of central bankers is not an easy one these days. But they can take solace from an important fact: when they have piloted their economies through the current rough waters, they will leave the capitalist market system in better shape than it was when they inherited it.

The most important changes will stem from the realisation that it makes no sense to distinguish between ordinary commercial banks and investment banks. Many of the former are too big to fail, and many of the latter too interconnected to be allowed to fail. Which is why the generally antiinterventionist Bush administration approved the use of taxpayers’ money to make it possible for JP Morgan to take over Bear Stearns before it went bust. And why the Fed has opened its discount window to investment banks so they can trade in their often less-than-safe, illiquid paper for cash.

So from now on these once-lightly regulated institutions will have to meet capital requirements and other constraints on their operations that the Fed will deem appropriate for firms able to tap Fed cash. In essence, we are witnessing a retreat from the age of deregulation that culminated in the 1999 repeal of the 1933 Glass-Steagall Act, ending tight government control of investment banks’ operations.

We are also about to see the end of, or at least big changes in, the model that has come to predominate in some markets for debt, and most particularly in the mortgage market: the originate-to-distribute chain. Firms that originated loans, vetted borrowers and approved mortgages often had an incentive never to say “no”. For one thing, their commissions depended on the volume of loans they originated, rather than the quality of those loans. For another, having sold the loan to others, they risked no loss should a borrower default.

The protection against these perverse incentives was to be the rating agencies. Their job was to look at the quality of the loans underlying the securities in which they were bundled, and provide investors with a rating of the safety of those securities. Problem: like originators, rating agencies get paid only if a deal is consummated. And that takes a high rating – AAA being the best. So either they said: “Yes, these are lovely AAA-rated bits of paper” or they received no fee. The saintly can be trusted to overlook such an incentive, mere mortals cannot.

 

This story will not end for a long time.

[interestrateripoff]

Gloom reigns but world is not about to go pop - Times Online

 

GLOOM, gloom and more gloom. Gloom from Washington and the International Monetary Fund (IMF). Gloom from Halifax, West Yorkshire, on the housing market, of which more below.

Even the Bank of England’s quarter-point cut in interest rates was gloomy, given it was forced into this by what it described as “worsening” credit conditions. Seldom has a rate cut been greeted with more of a shrug, or such a widespread perception that it will make no difference.

Can I say anything to lift the gloom? Let me start with the IMF. Its latest world economic outlook, published to coincide with the spring meetings it co-hosts with the World Bank, did indeed have some scary language.

“The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression,” it said, and there was now a one-in-four chance of a global recession, something it had dismissed last year as barely worth mentioning. It calculates that global losses from the credit crisis will hit $945 billion (£480 billion).

 

This is enough to give anybody nightmares. The losses, equivalent to more than a third of Britain’s annual gross domestic product, are significantly up on earlier estimates. Talk of the Great Depression is, if not alarmist, certainly alarming.

Let us be clear, however, that the IMF is not predicting such an outcome for the world economy. America’s economy shrank by some 32% over the 1929-32 period. In contrast, its prediction for the next couple of years is growth of 0.5% and 0.6% respectively. That is uncomfortably weak for Americans, but implies only a mild recession.

This is also true of the IMF’s global forecast. Five years ago, when the Iraq invasion appeared to have gone well, its world economic outlook was upbeat. The global economy, it suggested, would grow by about 4% a year over the following three to four years.

It was not a bad forecast but it was too cautious. In the event, the world economy managed 5% annual growth over the 2004-7 period, the best for three-and-a-half decades.

But keep that 4% in mind – it’s close to what the IMF predicts for the next couple of years (3.7% and 3.8% respectively).

What was strong a few years ago looks weak in the context of the global economy’s recent performance. But 3.5% to 4% growth is still pretty good, and far stronger than during recent world recessions, around the turn of the millennium and in the early 1990s.

It feels gloomy because the balance of global growth has shifted away from the advanced economies. Divergence rather than decoupling is the new buzz word and it is also the new reality.

While advanced economies will grow by 1.3% this year and next, emerging and developing economies will expand by 6.7% and 6.6% respectively.

The fact is that the credit crisis is hitting the West hard, while China, India, Russia, sub-Saharan Africa and the Middle East are all booming.

If you are in America, with barely any growth, or Italy, with today’s election being fought in an economy predicted to grow by only 0.3%, things feel grim. In China, 9.3% growth, or Russia, 6.8%, policymakers are more worried about inflation than recession.

As for Britain, the IMF’s forecast of 1.6% growth for this year and next is stronger than America, plainly, but also outstrips Germany, France, Italy and Japan.

It may not be a great prize to win, but over the next two years Britain will vie with Canada to be the strongest-growing economy in the G7. That does not fit the description of a country acutely vulnerable to the credit crisis. The fact that Britain is seen to be growing more strongly than Europe is also hard to square with sterling’s slide against the euro, though the single currency’s strength will be a constraint on euroland growth.

All guess work and relies on the hope that the UK doesn't go tits up.

 

I certainly wouldn't put money on this nor would I hope the rapid growth in the developing countries will continue.

 

But as I keep saying it's all guess work all time will reveal the truth.

[interestrateripoff]

More turmoil feared as G7 ducks credit crunch - Times Online

 

FINANCIAL MARKETS face more pressure after this weekend’s Washington meeting of the Group of Seven finance ministers and central bankers failed to agree measures to tackle the global credit crunch.

The G7 gave a downbeat assessment of the world economy, but stopped short of declaring America was in recession.

“We remain positive about the long-term resilience of our economies, but near-term global economic prospects have weakened,” the group said in a communiqué. “The turmoil in global financial markets remains challenging and more protracted than we had anticipated.”

The G7 also warned that further currency instability could be risky, with “possible implications for economic and financial stability”. This will be interpreted as evidence that the authorities are worried about the dollar’s continued slide.

 

The finance ministers and central bankers endorsed a report by the Financial Stability Forum that set out measures to improve supervision of banks and markets and prevent a recurrence of the present crisis.

It also called for tougher capital requirements for banks to ensure that they can withstand periods of financial-market stress, and urged closer international co-operation between central banks and regulators.

The G7 called on banks and other firms to disclose within the next 100 days “their risk exposures, write-downs, and fair value estimates for complex and illiquid instruments.”

Banks should do this in their mid-year reporting, it said.

Equity markets were already spooked when the G7 gathered in Washington late on Friday, the Dow Jones industrial average dropping by 257 points, or 2%, to 12,325, on disappointing first quarter earnings from GE.

Experts warned that, unless backed up by concrete measures, the G7’s statement was likely to be given the thumbs down by financial markets.

“The markets will interpret this as evidence that no G7 accord has come out of this and that most of it will be left to the United States,” said Gerard Lyons, head of research at Standard Chartered, the bank. “There will be disappointment that they are not responding more to what they acknowledge to be a deteriorating situation.”

As I said it was hot air to be spun by the spin doctors that the politicians are actually doing something when in reality they've done nothing.

[interestrateripoff]

US banks Citigroup and Merrill Lynch reveal fresh $15bn loss - Times Online

 

CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

 

It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.

The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.

The world’s biggest banks have suffered losses and write-downs totalling almost $250 billion since the beginning of 2007, according to analysts. Last week the IMF shocked markets by saying that global losses from the credit crisis could rise to $945 billion.

JP Morgan is expected to offer the only glimmer of hope from this week’s results, posting a small profit, in spite of huge exposures to leveraged loans.

Some of the world’s biggest banks are beginning to work on new solutions to relieve tension in the financial markets.

Deutsche Bank is understood to be talking to a number of private-equity funds about a disposal of some of its backlog of loans to venture-capital firms.

The value of leveraged loans sitting on Deutsche’s balance sheet is greater than its shareholder equity. The bank is planning to sell on the loans to the private-equity funds at a loss to free up its balance sheet, according to market sources.

The plan mirrors a similar move by Citi to sell $12 billion of its leveraged-loan portfolio to private-equity firms including Blackstone, Apollo and Texas Pacific Group.

As I've said if a Bank doesn't go bust in this I'll be amazed.

[interestrateripoff]

Bloomberg.com: Worldwide

 

April 13 (Bloomberg) -- Finance chiefs from the U.S. and Europe said the eight-month credit squeeze is still festering and urged banks to take steps to relieve it.

``The chain of bad news may not have come to an end,'' Italian Finance Minister Tommaso Padoa-Schioppa said yesterday as the International Monetary Fund held its semi-annual meetings in Washington.

The collapse of the U.S. subprime-mortgage market led to a seizing up in capital markets and has triggered $245 billion in asset writedowns and losses since the start of 2007. Finance ministers and central bankers from the Group of Seven are trying to strengthen market regulation and want banks to speed disclosure of losses and improve the way they value assets.

``The market is still adjusting, the turmoil has not yet settled down,'' Federal Reserve Vice Chairman Donald Kohn told reporters in Washington. ``It's still a fragile situation out there.''

The G-7 on April 11 endorsed proposals by the Basel, Switzerland-based Financial Stability Forum to impose tougher oversight on financial markets. The cost of borrowing in euros and dollars for three months was still at the highest since December in the past week.

New York Fed President Timothy Geithner indicated that regulators may have relied too much on financial companies and investors to police themselves.

 

What a great system perhaps we should try that with criminals. Are you burgling that house sir?? No it's mine I've lost my keys and I need my stereo for work.

[interestrateripoff]

Bloomberg.com: Worldwide

 

April 13 (Bloomberg) -- China will stick with a ``tight'' monetary policy as the nation faces increasing pressures of inflation and over-investment amid global market turmoil, said central bank chief Zhou Xiaochuan.

China needs to correctly handle the ``pace, focus and magnitude of macro-economic controls to avoid large fluctuations and maintain stable and relatively fast economic growth,'' Zhou, governor of People's Bank of China, said during the International Monetary Fund meeting in Washington, according to a statement posted on the central bank's Web site.

China, the world's fastest-growing major economy, is trying to prevent a flood of cash from the trade surplus and foreign investment from fanning inflation that is already at an 11-year high. The nation has accelerated the yuan's appreciation this year to ease pressure on inflation.

The currency has strengthened 4 percent against the dollar this year, bringing the yuan's advance to 18.4 percent since the end of its peg to the dollar in 2005. The currency closed in Shanghai on April 11 at 7.0065 per U.S. dollar.

``The exchange-rate has limited impact on adjusting the trade imbalance,'' Zhou said. ``Over-exaggeration of its function is not only impractical but will also misguide the course of such an adjustment.''

U.S. Treasury Secretary Henry Paulson said last week in Beijing it was ``dangerous'' for the exchange rate not to reflect the fundamentals of the world's fourth-largest economy.

 

It will be interest to see how China develops, especially after the Olympics.

[jackpot007]

April 13 (Bloomberg) -- China will stick with a ``tight'' monetary policy as the nation faces increasing pressures of inflation and over-investment amid global market turmoil, said central bank chief Zhou Xiaochuan.

China needs to correctly handle the ``pace, focus and magnitude of macro-economic controls to avoid large fluctuations and maintain stable and relatively fast economic growth,'' Zhou, governor of People's Bank of China, said during the International Monetary Fund meeting in Washington, according to a statement posted on the central bank's Web site.

China, the world's fastest-growing major economy, is trying to prevent a flood of cash from the trade surplus and foreign investment from fanning inflation that is already at an 11-year high. The nation has accelerated the yuan's appreciation this year to ease pressure on inflation.

The currency has strengthened 4 percent against the dollar this year, bringing the yuan's advance to 18.4 percent since the end of its peg to the dollar in 2005. The currency closed in Shanghai on April 11 at 7.0065 per U.S. dollar.

``The exchange-rate has limited impact on adjusting the trade imbalance,'' Zhou said. ``Over-exaggeration of its function is not only impractical but will also misguide the course of such an adjustment.''

U.S. Treasury Secretary Henry Paulson said last week in Beijing it was ``dangerous'' for the exchange rate not to reflect the fundamentals of the world's fourth-largest economy.

 

but i have a feeling that it will turn out for the best. they will all get this exposure and everything and surely there will be more tourists who would want to visit the country.

 

[interestrateripoff]

BBC NEWS | Business | World Bank echoes food cost alarm

 

The rapid rise in food prices could push 100 million people in poor countries deeper into poverty, World Bank head, Robert Zoellick, has said.

His warning follows that from the leader of the International Monetary Fund, who said hundreds of thousands of people are at risk of starvation.

Mr Zoellick proposed an action plan to boost long-run agricultural production.

There have been food riots recently in a number of countries, including Haiti, the Philippines and Egypt.

"Based on a rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty," Mr Zoellick said.

His proposal for a "new deal" to tackle the international food crisis was endorsed by the World Bank's steering committee of finance and development ministers at a meeting in Washington.

The World Bank and its sister organisation, the IMF have held a weekend of meetings that addressed rising food and energy prices as well as the credit crisis upsetting global financial markets.

 

The low incomes take the brunt of monetary policy, they are meant to starve.

[interestrateripoff]

BBC NEWS | Business | Profit warnings 'most since 2001'

 

Profit warnings have hit their highest level since the end of the dotcom boom.

The number of profit warnings from UK listed companies in the first three months of 2008 hit the highest level for a first quarter since 2001.

There were 114 profit warnings in that period, which is 11% up on the same period of 2007, Ernst & Young said.

The sector that made the largest number of warnings was retailers, as consumers worried about their mortgages cut-back on their spending.

"It would be reasonable to expect more of the same, if not worst, for the rest of 2008," said Andrew Wollaston from Ernst & Young.

 

I wonder how long it will be before job cuts follow?

[interestrateripoff]

BBC NEWS | Business | Bank denies cash-raising reports

 

Bradford & Bingley has denied reports that it is planning to go to the market to raise extra cash to see it through the credit crisis.

Sunday papers said Citigroup had been asked to help with a rights issue to raise hundreds of millions of pounds.

But a statement from the bank said that it had a strong capital base and, "had funded its business activities through 2008 and into 2009".

Bradford & Bingley is Britain's biggest buy-to-let lender.

Its share price has fallen by more than 35% so far this year as one of the lenders that took a higher proportion of its funding from wholesale money markets rather than savers.

But recently it has been concentrating on attracting savers.

Its statement said, "Contrary to press speculation today, Bradford & Bingley announces that it is not intending to issue equity capital by way of a rights issue or otherwise.

 

You can bet the B&B is panicking that this story got out I wonder if this was another attempt to undermine a bank for profit?

[interestrateripoff]

Ministers say bonus culture has to end - Telegraph

 

Bumper annual cash bonuses for bankers could soon be outlawed after finance ministers from around the world ordered a major overhaul of the industry's pay system.

In a move which may foreshadow new legislation over compensation in the City and Wall Street, ministers meeting in Washington threw their weight behind a report which said banks' generous compensation structure was partly to blame for the credit crisis.

The Financial Stability Forum, a union of regulators from around the world, said the current system - in which bankers are frequently paid million pound-plus bonuses based on their annual performance - needed urgent reform.

Amid a raft of other recommendations, including an overhaul of the way ratings agencies work and a beefing up of the Basel rules on banks' accounts, the FSF said remuneration should be tied to performance over credit cycles, which last five or more years.

This could raise the prospect of bankers having to wait many years for bonuses, or even be forced to forfeit them if the bank's performance later disappoints.

Any such change will outrage the industry. Bankers said the matter was not an issue for regulators. Angela Knight, chief executive of the British Bankers' Association, said: "Remuneration is a matter for shareholders and the industry only, which is where it should stay."

However, the authors of the FSF report said: "One of the striking features of recent events has been firms' sizeable payouts to staff in areas in which the firms have subsequently incurred very large losses as risks materialised. Compensation arrangements often encouraged disproportionate risk-taking with insufficient regard to longer-term risks.

"The financial industry should align compensation models with long-term, firm-wide profitability."

 

This will be interesting.

[interestrateripoff]

Caught in the crunch - 4,000 estate agents could be forced to close - Times Online

 

Mortgage lenders are to be told to pass on interest-rate cuts to their customers in return for easier and longer loans from the Bank of England as it tries to restore order to the housing market, The Times has learnt.

In a radical move to pour liquidity into the blocked lending markets, the Bank is preparing to tell banks and building societies that they will be able to use a wider range of assets as security for loans, and no longer have to rely on top-rated mortgage securities.

The move comes amid fears that a third of British estate agents could close their doors within 12 months because of the downturn.

The Bank will also follow the US Federal Reserve in offering more three-month loans to banks rather than concentrating on shorter terms.

 

Should we have a collection for the estate agents?

[interestrateripoff]

Companies face cash squeeze as late payment of bills grows - Times Online

 

Companies are suffering a cash squeeze from delayed invoice payments as the credit crunch begins to hit the “real” economy. Smaller businesses are complaining that some large customers have begun to extend their payment periods arbitrarily, putting a strain on their cashflows.

 

The Times has learnt that small business groups will press the Department for Business to take steps to put more pressure on big customers to pay on time. However, the issue is hard to resolve because it hinges on the relationship between the supplier and the customer and most small businesses feel dependent on their customers.

 

If late payment is becoming a trend it could have serious implications for the state of the economy, indicating that cash is becoming an issue for big customer companies and their suppliers.

 

Research from Ernst & Young (E&Y), the accountant, showed that profit warnings from British companies hit a seven-year high in the first quarter. E&Y said companies issued 114 alerts in the first three months of 2008, mainly in the retail sector, as the credit crunch hit customer demand.

 

The Federation of Small Businesses estimates that 10 per cent of small business collapses are triggered by late or nonpayment of bills. Stephen Alambritis, head of government affairs at the federation, said: “A number of big customers have raised their payment terms because of the credit crunch. It is becoming an area of concern. Normally businesses would go to their banks when they need more cash but that is not easy at the moment.”

 

More businesses are being forced to raise cash by invoice discounting - borrowing from banks based on the money they expect to receive from invoiced work. However, Mr Alambritis said that this was not an option for the smallest companies because it and factoring, another form of borrowing based on invoices, can be expensive. The British Chambers of Commerce said: “We are hearing from our members that late payments are becoming a growing problem. Larger companies have a responsibility in a slowing economy to pay suppliers promptly. Smaller firms need to know when they will be paid and should not be mucked around by having payment schedules arbitrarily changed.”

[interestrateripoff]

Philips sends shudders through Europe - Times Online

 

Philips, Europe’s biggest consumer electronics manufacturer, suffered a 28 per cent drop in its core profits as its key TV business was hit by deepening losses.

The group, which makes a wide range of consumer goods, warned that it would feel more impact from the global credit crunch with a softening in “mature economies”. The fall in the Dutch-based group’s first quarter profits to €265 million (£219 million) follows last week’s sharp profits drop at Philips’ US rival General Electric.

Gerard Kleisterlee, the chief executive of Philips, said: “Unfortunately our results are clouded, more than we like, by the adverse situation in our TV business, significantly lower incidental licence income and some acquisition-related charges.”

Operating losses in the television division deepened to €95 million compared with €51 million for the same period last year. Philips recently said it would stop making televisions for the North American market following continued losses. It has given its TV brand name in the US to Funai Electric.

The company said that it had no plans “for the time being” to take similar action in its European television operation. It described that as a “stronger business”.

Philips' sharp drop in core profits comes against a backdrop of a 75 per cent fall in overall profits after the electronics group pulled out of much of its electronic chip interests last year. The company is trying to refocus on areas which offer more stable earnings.

 

Another day another profits warning.

[interestrateripoff]

Fuel leads to 20% rise in manufacturers' costs - Times Online

 

Rocketing fuel expenses sent both manufacturers' costs and factory gate prices to record highs, dampening hopes of another interest rate cut next month as the Bank of England attempts to control inflation.

Manufacturers' costs rose by an all-time record of 20.4 per cent in March while factory gate prices spiked at a 17-year high.

According to the Office for National Statistics (ONS), the output price index rose by 6.2 per cent in the 12 months to March — the highest since May 1991.

Over the same period in the 12 months to March, the input price index, that monitors the costs that companies pay to manufacture their goods, accelerated primarily because of rising fuel costs. Last week, oil touched a record high of $112.21 a barrel.

 

The spike in manufacturing costs and pass-on effect of higher prices on British consumers makes it highly unlikely that the Bank of England's Monetary Policy Committee will reduce the interest rate again in May after cutting the borrowing cost by a quarter percentage point from 5.25 per cent to 5 per cent last week.

Consumers are also being hit by the full charges of the increased tax on tobacco and alcohol announced in the Budget last month.

Chancellor Alistair Darling increased duty on a bottle of spirit by 55p, on wine by 14p, on a pint of beer by 4p more and on a litre of cider by 3p. He also added 11p to tax on a packet of 20 cigarettes while a packet of five cigars became 4p more expensive.

Howard Archer, chief UK & European economist at Global Insight, said: "Going forward, the Bank of England will be desperately hoping that manufacturers' pricing power will be diluted by likely weaker activity and intensifying competition."

 

If it's not what is the BoE going to do?

 

Interest rate rises are no longer an option, but that's the only tool the BoE users and has.

 

Interest rates simply do not work.

 

“There’s little central banks around the world can do to prevent food prices from rising,” Mexico’s central-bank governor, Guillermo Ortiz

[interestrateripoff]

World Bank president calls for action as food prices cause rioting - Times Online

 

The president of the World Bank has called for immediate action to deal with rapidly rising food prices that have caused hunger and deadly violence and threatened the economic stability of the world's poorest countries.

A doubling of food prices over the last two years was potentially pushing 100 million people deeper into long-term poverty, said Robert Zoellick.

“We have to put our money where our mouth is now, so that we can put food into hungry mouths. It is as stark as that,” Mr Zoellick said after a meeting of the IMF and World Bank’s Development Committee yesterday.

"This is not just a question about short-term needs, as important as those are. This is about ensuring that future generations don't pay a price too."

 

Mr Zoellick criticised a lack of urgency at the highest political levels in tackling the issue, which has provoked rioting in Haiti in which a UN peacekeeper and four other people died.

Gordon Brown has promised to raise the issue of skyrocketing food prices at the next meeting of the Group of Eight industrialised nations, but Mr Zoellick said that that would be too late.

“Frankly speaking, that G8 meeting is in June and we cannot wait,” he told a news conference, calling on governments to honour their promises to provide the UN World Food Programme with $500 million (£255 million) in emergency aid by May 1.

“It is critical that governments confirm their commitments as soon as possible and others begin to commit,” the World Bank president added.

 

“Northern unemployment is an acceptable price to pay for curbing southern inflation” Eddie George former Governor of the Bank of England

 

I said before in this thread the hedge funds will let people starve to make a profit. The profit is all that matters.

[interestrateripoff]

Wachovia Bank confirms $8bn emergency funding - Times Online

 

Wachovia, the fifth-largest US bank by market value, has confirmed that it is engaged in a new round of emergency fund raising of up to $8 billion (£4 billion) after the group slashed its dividend on first-quarter losses of $350 million. It made a $2.3 billion profit in the same quarter a year ago.

The bank has cut its quarterly dividend by 41 per cent to 37.5 cents, saving $2 billion of capital annually “to build capital ratios and provide more operational flexibility".

Wachovia also reported $2.8 billion in credit loss provisions in the quarter. The group said that its general banking operations, capital management division and wealth management unit were "overwhelmed by credit costs and continued market disruption".

"The provision largely reflected more severe deterioration in the residential housing market, particularly in specific markets in California and Florida," it said.

 

The bank revealed that it plans to raise new funds through a public offering of common stock and perpetual convertible preferred stock but provided no further details.

It has been expected to raise the funds from a group of investors likely to receive shares priced at about $23 to $24 each, a 15 per cent discount to Wachovia's share price of $27.81 last Friday.

No sovereign wealth funds are understood to be among the investors injecting capital into Wachovia. Warburg Pincus, the buyout firm, has been named in media reports as one of the potential investors.

The bank's move follows its raising of $3.5 billion through a preferred-stock sale only two months ago which G. Kennedy Thompson, Wachovia's chairman and chief executive, said would "provide greater certainty that we are well positioned in 2008".

It is believed that Wachovia's latest deal is similar in structure to the $7 billion infusion announced by Washington Mutual last week.

If this bank gets into trouble has the Fed got the reserves to bail this one out. You do get the impression it's a ticking time bomb and at some point one will go off. Bear Stearns and the Rock got bailed out, can the system cope with another?

[interestrateripoff]

Inflation surges as Tories attack Gordon Brown's economic record - Telegraph

 

Gordon Brown's economic woes have been compounded by figures showing that the costs of raw materials are climbing at a record pace.

Rising prices faced by businesses are likely to be passed on to consumers and will also make it harder for the Bank of England to justify aggressive cuts in interest rates.

Factory gate prices, the prices manufacturers charge for goods and services, rose by 6.2 per cent in the year to March, and 0.9 per cent from February to March alone.

 

The amount that manufacturers paid for their raw materials and fuel also rose by a record 20.6 per cent in the past year according to the figures from the Office of National Statistics.

George Osborne, the shadow chancellor, will today seek to exploit the financial crisis with a personal attack on Mr Brown's economic policies.

In a speech to the Policy Exchange he will launch what is described as an all-out "assault" on Mr Brown's claims to have been the most successful chancellor in history

Mr Osborne will mock the Prime Minister's recent attempts to improve his popularity by appearing on television shows, comparing him to a losing contestant on the BBC business reality competition The Apprentice.

 

e will go on: "Gordon Brown rested his claim to competence on three pillars - stability, prudence and competitiveness. Instead, after a decade of worldwide growth, we have ended up with housing boom followed by bust, spending followed by debt, and a country finding it more and more difficult to compete.

"Gordon Brown has been found out. His economic reputation is in tatters.

"Last week he paraded himself on American Idol. But given his current performance, even his colleagues now think he wouldn't make it past the first round of The Apprentice."

 

“There’s little central banks around the world can do to prevent food prices from rising,” Mexico’s central-bank governor, Guillermo Ortiz

 

And interest rates will do what exactly???

[interestrateripoff]

Our global warming rage lets global hunger grow - Telegraph

 

We drive, they starve. The mass diversion of the North American grain harvest into ethanol plants for fuel is reaching its political and moral limits.

 

"The reality is that people are dying already," said Jacques Diouf, of the UN's Food and Agriculture Organization (FAO). "Naturally people won't be sitting dying of starvation, they will react," he said.

 

The UN says it takes 232kg of corn to fill a 50-litre car tank with ethanol. That is enough to feed a child for a year. Last week, the UN predicted "massacres" unless the biofuel policy is halted.

 

We are all part of this drama whether we fill up with petrol or ethanol. The substitution effect across global markets makes the two morally identical.

 

Mr Diouf says world grain stocks have fallen to a quarter-century low of 5m tonnes, rations for eight to 12 weeks. America - the world's food superpower - will divert 18pc of its grain output for ethanol this year, chiefly to break dependency on oil imports. It has a 45pc biofuel target for corn by 2015.

 

Argentina, Canada, and Eastern Europe are joining the race.

 

The EU has targeted a 5.75pc biofuel share by 2010, though that may change. Europe's farm ministers are to debate a measure this week ensuring "absolute priority" for food output.

 

"The world food situation is very serious: we have seen riots in Egypt, Cameroon, Haiti and Burkina Faso," said Mr Diouf. "There is a risk that this unrest will spread in countries where 50pc to 60pc of income goes to food," he said.

 

Haiti's government fell over the weekend following rice and bean riots. Five died.

 

The global food bill has risen 57pc in the last year. Soaring freight rates make it worse. The cost of food "on the table" has jumped by 74pc in poor countries that rely on imports, according to the FAO.

 

Roughly 100m people are tipping over the survival line. The import ratio for grains is: Eritrea (88pc), Sierra Leone (85pc), Niger (81pc), Liberia (75pc), Botswana (72pc), Haiti (67pc), and Bangladesh (65pc).

 

This Malthusian crunch has been building for a long time. We are adding 73m mouths a year. The global population will grow from 6.5bn to 9.5bn before peaking near mid-century.

 

Asia's bourgeoisie is switching to an animal-based diet. If they follow the Japanese, protein-intake will rise by nine times. It takes 8.3 grams of corn feed to produce a 1g of beef, or 3.1g for pork.

 

China's meat demand has risen to 50kg per capita from 20kg in 1980, but this has been gradual. The FAO insists that this dietary shift is "not the cause of the sudden food price spike that began in 2005".

[interestrateripoff]

House prices face threat from wave of buy-to-let selling - Telegraph

 

Buy-to-let landlords will have to raid their savings and inject extra capital into their homes, under an obscure clause in their mortgage contracts, if house prices continue to fall.

Both Bradford & Bingley and HBOS-owned Birmingham Midshires, the two largest buy-to-let mortgage providers, each with 20pc of the market, require customers to top up their initial deposits if falling house prices mean the size of their mortgage rises above 85pc of the value of the home.

In a decade of rising house prices, the clause has been largely irrelevant but analysts are concerned that it may now convince landlords, who are already facing higher mortgage costs, to sell large chunks of their portfolios.

Housing experts have long worried that a flood of buy-to-let properties on the market could have a devastating effect on house prices. The International Monetary Fund is already predicting a 10pc fall this year.

Under the terms of the contract, if a £100,000 home with an £85,000 mortgage falls in value by 10pc the landlord has to find another £8,500 to maintain the lender's maximum 85pc loan-to-value rate - even though there is still £5,000 of equity in the property.

The revaluation is done when the borrower remortgages and, unlike the mainstream market, is required even if the landlord does not change lenders.

Mike Trippitt, an analyst at Oriel Securities, said: "People right at the edge and highly geared are going to be forced to liquidate."

A large number of buy-to-let mortgage deals renew this year and next. Data from the Council of Mortgage Lenders shows 329,100 buy-to-let mortgages were taken in 2006 and 350,900 in 2007.

Many are around 85pc loan-to-value. Ray Boulger, of brokers John Charcol, said a popular deal two years ago was a 5.25pc two-year fixed rate. Borrowers are now facing rates of at least 6.5pc.

In total, there are over 1m outstanding buy-to-let mortgages in the UK accounting for 11pc of the market, giving buy-to-let a huge influence over prices. Ten years ago, there were just 28,000.

 

It really does seem unlikely that house prices can be sustained at present levels.

 

Will a market correction come and how big will it be?

[interestrateripoff]

BBC NEWS | Politics | Brown 'standing firm' on economy

 

Gordon Brown has said he will not be diverted from the "right long-term decisions" for the UK's economy even if they are "unpopular in the short term".

The prime minister told the BBC he wanted to show people worried about homes and jobs the economy was "safe for them over the next few months".

He spoke after a Downing Street meeting with bank chiefs to discuss way to boost confidence in the housing market.

The Bank of England has also put £15bn more into the banking system.

Downing Street said the talks - with bosses from Lloyds, Barclays, HSBC, Royal Bank of Scotland and Nationwide - were not a crisis summit and had been in the prime minister's diary for some time.

Mr Brown said discussion included measures to ensure lenders pass on the Bank of England's interest rate cuts to mortgage borrowers.

 

Perhaps the PM should read this thread then he might have a clue as to what to do.

[interestrateripoff]

BBC NEWS | Business | UK inflation held steady in March

 

UK consumer inflation held steady at 2.5% in March, the same level as the previous month.

The Office for National Statistics said the Consumer Prices Index (CPI) was unchanged at 2.5% on an annual basis last month, slightly below forecasts.

This is the highest level in nine months, due to a new method for calculating energy bills.

Retail Prices Index inflation, which includes mortgage interest payments, fell to 3.8%, from 4.1% in February.

The below-forecast figures are likely to boost calls for further interest rate cuts from the Bank of England to help lift the flagging UK economy.

Analysts had been expecting a rate of 2.6%.

UK interest rates have been reduced to 5% after last week's Bank of England decision.