German guarantee lost in translation

Like I (and William Goldman) said - nobody knows anything!

See my post to the last blog.

Fractional Reserve Banking? Who wants to explain why it's a good idea?

if governments do decide to act unilaterally then it will belike the 1930s all over again and we know what happened at the end of that decade.

Why do you not delay posting your blog until you know what you are talking about? You are as much a speculator as the worst financial shysters.

Robert, thanks for continuing to post so often as it is a great help in getting clear, concise information about the situation.

The anti-Europeans in the newspapers have been almost gleeful that this could be the crisis that renders the EU asunder. The Federalists have realised that it would take a great crisis to bring Europe meaningfully together.

People, still, have not got over nationalism, and Europe has all too often been an arena where the nationalist game has been played out, instead of a cooperative bringing together. If Europe can keep its nerve and act in unison then I think there is a great deal of hope, both in the long and shorter term. Europe has the muscle and resources to compensate for what each of its individual member states lacks. On our own we are really going to struggle, especially against the giants.

I hope that Europe and a European consciousness can hang together in this...everyone knows how this line finishes.

Seems to me that our governments and central bankers are just doing the wrong thing all the time and exacerbating the crisis.

All of this was caused because interest rates were set too low for too long, and people were not aware of the risks they were taking when lending to banks. What should have happened was they learned from their mistakes when the banks they lent to went bust, and they were unable to get all of their money back. This is also know as Moral Hazard.

But because of the paranoia our government leaders have about letting banks go bust, every failure seems to have been met with a bailout so far in Europe, and only the shareholders have lost anything, well shareholders and taxpayers. It is wrong that the taxpayer should lose anything, because they never even knew that they were running a risk, they thought that the risk was being taken by the depositors and creditors, who after all profited from any gain.

And if you guarantee all creditors and depositors, it is like having free bets at the bookies. They will want banks to come up with all sorts of scams to allow them to profit at the expense of the state.

Lets hope this madness doesnt extend to the UK. Creditors of banks must know that they are taking risks when lending to banks, and the consequences of those risks must be felt when a bank goes under. That means no taxpayer bailouts. Depositors and creditors need to feel the pain, or else they wont learn to lend to banks responsibly in the first place.

An exception here is that I do agree with depositors should be insured up to a modest amount, and £50000 sounds about right. If you have more money than that, you should be responsible for managing that risk.

All of the problems caused by the credit crunch were caused by the separation of the borrower and risk bearer from the lending transaction. Now it seems that the separation is becoming even greater, with the completely uninvolved taxpayer bearing the risk of all European credit transactions. This is a recipe for an even greater disaster than the one now unfolding.

The Germans are apparently acting to preserve confidence in their banking system rather than saying they will and then nationalising banks as in the UK.

The Government's actions in allowing the incompetent BoE to destroy banks (NR and BB) is destroying our banking system - which foreign or UK investor will now invest in UK financial companies, let alone take up rights in any future rights issues?

The government may attempt to recapitalise banks and in effect steal more investors' shares (the investors are ultimately pension savers who are also taxpayers) but this will further destroy investor confidence and lead to less investment in the UK not only in the financial sector but also in many other sectors.

The Irish, Greeks and now apparently the Germans are being pragmatic and realise that wiping out shareholders after regulatory and governmental incompetence is not the answer - restoring both depositor and investor confidence is vital.

I hope the one million plus BB/NR shareholders remember when the election comes round that their shares have been stolen after governmental failure to ensure liquidity and confidence in the credit markets.

What poor journalism. Get your story straight before you report it.

If the Treasury/government were to recompense the shareholders from Bradford and Bingley and Northern Rock at ?2 or ?3 pound a share, but payable in shares in Barclays, Royal Bank of Scotland or Lloyds/TSB/HBoS, it would put a solid floor below the share price of those banks,preventing any self perpetuating downward spiral on the share price of these remaining banks.,(and prevent the certain litigation in the future, regarding B and B and N Rocks' nationalisations)
With this level of support , those same banks should be compelled to undertake huge rights issues, underwritten by the Treasury.
If you were an investment fund manager , surely you would want to take up your rights in a government backed bank rather than in any other sector about to be walloped by the credit crunch.
Private investors would see that the government were treating loyal bank shareholders almost generously and hence there would be demand for the new shares.
If the rights issue is fully subscribed without recourse to the Treasury underwriting, then immediately repeat the process.
If on either issue the Treasury is left with some stock, then that would only enhance the rock solid nature of the newly fully capitalised British banks.
Would then all the British banks be given AAA ratings by the wholesale money markets.
Perhaps then, our Banks would be in a position, like Santander, to be picking up bargains, rather than waiting for the vultures to pick off the next British bank victim.
Otherwise, we have only the option of a further British Bank nationalisation or the further consolidation down to just three big Banks.
I am sure that Gordon Brown would prefer to be seen as the clever Prime Minister who turned things to our advantage, rather than the man who "pinched" our shareholdings in Bradford and Bingley and Northern Rock.

I cannot see how Ms Merkel can reverse her assurances now.I have read the german version and it is clearly a state vouched assurance. She simply cannot go back it would cause a riot.

Don't worry everyone...........because MANDY will save us!!!

(more like lions led by donkeys)

The confusion is full and it is tempting to get in with the end of the world crew at this point.

No one knows the answer and it seems those in power know that a total meltdown of the system and with it the western world is perhaps just a breath away - hence the daily panicky measures.

I doubt people in the street realise the full gravity of the situation.

Dear me, we all are in quite a mess aren't we ?

German politicians, press and even Robert Peston confused about what's going on.

Looks like being another eventful week doesn't it ?

Does anyone have anything to say about RBS's situation, or is that being saved for next weekend ?

If all our banks go down the tubes perhaps we will have to finance our house purchases in accordance with shira law.

Even the BBC must take greater care about publishing rumours or uncertain stories in this feverish atmosphere.

I have doubted that the BRD would make such a commitment: to gaurantee all bank deposits in Germany. That would expose its national debt to an unacceptable new burden. Especially as German government debt is already much greater than UK national debt. Contrary to what the UK Conservatives claim!

This is a crisis caused by defaults on a small proportion of US mortgages. Some of those loans were bought by UK and European banks. Which has spread rumours and then short-selling everywhere.

No more rumours please. No matter what the potential headline.

The plot thickens. Agatha Christie would be proud of this one.

Imagine a murder mystery where murders occur every weekend, sometimes several in one weekend. The aim isn't to identify the murderer as much as the next victim.

Now, nothing happens during the week, but that lends a certain mystique to proceedings.

The lights go out on Friday and when they come back on Monday morning the first thing that happens is a body count. Who has gone this weekend? Who is still left.

During the week, fervent speculation takes place over who might not reappear the following Monday morning.

Sound familiar?

A couple of harsh emails on your latest report. I, for one, am very grateful for your speed of response to world changing events and your clear incise reporting.

We live in a global economy and are a part of a unified Europe. This crisis has been around for well over a year. If the German/Irish Chancellors are acting without prior discussion with the US, UK, France, etc, as suggested, then this would be incompetance of the highest order. I'm not sure I believe that this is the case, I suspect that there has been some communications.

There must be enough people looking at this, talking to each other and developing contingency plans to ensure the risks and scenarios are reasonably well understood.

One of the key deliverables in this situation is to demonstrate a sense of calm and that we know what we are doing to build confidence in the market.

Governments may take different views and decisions, but at least looking co-ordinated would be a help.

Good work Robert, this is gripping stuff. On the one hand I'm heartened to see that it's not only the British politicians who are running around like headless chickens but on the other hand of course it's more worrying.

'Guaranteeing the deposits of one, a few or a nations Banks is akin to harvesting a cloud with net......you may catch some icicles and soak the bindings.......however the vapour will slip into the ether to fall as rain.'
(DB 5/10/08)

The actual money, or to be precise, assets have long since started to disappear. The indebted are only the ones left in the assetless vaults.

Ask yourselves what individual nations are beginning to guarantee? Its not the Gold and Diamonds flowing back to Isreal.. its your meagre deposits that pay your monthly bills- a bet to nothing

When individual nations support the debt of the controllers of the fake money supply of the nation( debt) with debt itself it is no wonder that when the rain starts to fall Noah himself will look yonder at the highest mountain and sigh

#3

Perhaps the German govt. should postpone their announcement until they know what they are talking about / offering, the BBC were not the only media outlet to run this story, German, French and US media outlets ran it and they are just the ones I know of personally - I bet every media outlet in the EU and greater Europe ran it in one way or another, never mind the rest of the world.

Robert

Please refrain from posting until the facts are cleared..........

Otherwise keep up the good work

This seems to be getting really quite scary, are the implications of this that not only do banks not trust each other to lend but entering the realms of each country for itself and a lack of trust amongst the leading EU Nations? What happened to the outcome of yesterday's summit - to work collectively?

I've also read on other forums, the prospect that some countries in the Euro zone may go it alone.

Fair play for the update, this seems a big story in the making.

If the FTSE opens significantly lower, the continuing fear will eat itself and, perhaps, lead to further undermining of confidence in even our biggest banks with the Govt stepping in at the deepest end actually to save a bank. What does the Government lose by offering increased, temporary may be stated if necessary, deposit guarentees. They should combine this with a foreceful rate cut (with the medium term effect of limiting mortgage defaults and thus property fire sales and thus further decreases in value). This would allow some confidence in cross-border transactions as well as inter-banking lending to increase and allow some of the uncertainty caused by the Govt and BofE being re, rather than pro, -active.
We need a plan asap.

PS who remembers the vote on the Paulson plan now?

Robert,

On recent BBC news broadcasts, you made categoric statements that the Chancellor had no choice but to guarantee all desposits as the Germans were doing. Now you say they won't.

You are well aware how inappropriate media hysteria is at times like these. You have acted with totally irresponsible. You are losing the plot. Time for you to resign I suggest.

This crazy story, and not many explanations possible.

Either Mrs. Merkel say things she shouldn´t or British deliberately confusing things.

Either way it very clear to both German and British peoples that Governments do not want guarantee their money.

If guarantee eventually given then peoples can be certain that if time come to call guarantees then only thing that will come will be legal people saying that guarantee mean something other than people think.

I am working with both British and German peoples and think that German people generally know English at least the same as British people - so how is confusion possible?

Why are taxpayers like myself required to fund the debt but receive no shares in exchange for our generosity? Nationalising the banks adds no value to me. The profits, if any, will disappear into the same bottomless pit, which has gobbled the rest of my taxes. Next thing I will read of yet another African Aid package, or Immigrant initiative.
As far as I'm concerned, this government is just a band of common robbers. Stop slobbering over them as if they are doing something heroic. They are not. It was they who allowed this plunder to develop in the first place; them and all the rest of the thieving politicians in the West.

It really is about time the British Government put their money where their mouth is.

Instead of just talking about "decisive action" as Gordon Brown does, the Irish, Greek and German Governments are TAKING decisive action to protect Banks, savers and the whole financial system by guaranteeing all deposits.

It is a shame that the British Government are having to being dragged kicking and screaming into doing the proper thing to defend us all.

How dare they have temerity to criticise those countries who are ofering guarantees.

If Gordon Brown was at all effectual, he would have called an EU summit, and co-ordinated a trans-EU guarantee, thus stabilising the whole European Banking system at once. This is just the sort of situation where an organisation like the EU should be able to offer a real benefit to all its member states and its depositers

Mr Brown, Mr Darling - JUST GET ON WITH IT - give the guarantee now and stop prevaricating.

Re. 5
This banking problem was caused by the banks lending money that they hadn't got! Nothing to do with interest rates. They were using borrowed money simple as that! But not only were they using borrowed money they were lending for 25yrs but borrowing for 3mths!(please anyone in the know? I just read the papers am I wrong)

To all the people who are complaining about Roberts reports; please remember that this is a blog, it is supposed to be a step by step - minute by minute account of what is happening, if Robert waited for everything to be confirmed before posting then what would be the point in reading this high octane blog.

Robert, on a Friday post, you said:

Although HBOS is perceived in the market to be particularly strapped for cash, and is therefore a significant beneficiary of the Bank's new-found largesse, it isn't the bank that was having difficulty renewing credit in the money markets this morning.

That was another of our big banks.

Which one was it, please, Robert?




Many are arguing that the government guarantees are valueless because they exceed governments' capacity to deliver.

Some go further, that because of their risk exposure (backing banks) a few governments are already bankrupt.

What do you think, Robert.



Finally, is it true that there are already huge runs on the British banks via internet and phone transfer and what your hero Bagehot calls the external drain? (Hence HBOS's cash probs for example)

I do not claim to be a financial expert, but here is my laypersons view of these government interventions:

The financial institutions, and their employees, have taken huge risks, sometimes collecting huge rewards. Now they are facing huge losses, and so the governments of the world are stepping in to make sure they don't collapse.

Isn't this a huge distortion of the market? To me, this is sending out a message saying "it's fine to gamble recklessly with other people's money, because if it goes wrong, we'll save you". Isn't that just going to lead to more idiotic risk-taking in future? I think the financial institutions should face the consequences of the risks they took.

As for protecting individual investments... isn't it every investor's responsibility to thoroughly investigate who they are entrusting their money to? They, too, are taking a risk by putting their money in bank accounts and funds when they could stuff it under the mattress. They, too, should have to deal with the consequences of the risks they took.

What are the governments doing to make sure we never, ever get into a crisis like this again?

I know the consequences to the global economy would be massive, if the governments did not intervene and allowed these institutions to collapse. However, that would just the free market returning to normal. Many people would lose out, but some would gain.

Or am I missing something?

Sorry guys, but my money is on economic nationalism from here on in. The EU will struggle to survive this crisis. Bear in mind that the EU is little more than a monstrously bloated bureaucracy. It has virtually no accountability to the peoples of its individual nation states who are now about to find themselves on the receiving end of economic collapse and all of the serious social implications that will flow from that.

Are you seriously expecting me to support, at my further expense, actions designed to bail out not only the UK, but also France, Belgium, Germany, Italy etc etc etc?? And vice versa? No chance. Like virtually everyone else observing this chaos I've no idea where things will end up, but I do know that the fragility of the EU will be shown up for what it is: an economic, political and social mirage borne of good times and singularly incapable of surviving bad times.

I can't think of a better way to spook savers (and the market) than this nonsense. Either that or they are trying to engineer a run on our banks and a deep depression.

Th Chancellor, The FSA and the Bank of England do not seem to have much grasp on reality. They are acting like frightened rabbits in the headlights of an oncoming truck.

It matters not what the detail of the German offer is to the savers of its banks. British savers will be expecting similar treatment. That is to be assured that all their savings are entirely safe - nothing less will do.

In the German Online news of leading newspaper "Frankfurter Allgemeine Zeitung" the words of Ms. Merkel are unclear as well. FAZ writes "She is available to do what must be done". But additionally FAZ citates the ministry of finance: "That means that she gives a guarantee." And the headline contains this guarantee as well.

So German government claiming to make good European policy seems to have forgotten the European friends again. Confusion as usual during this crisis.
KFR / Glashuetten/Frankfurt am Main

I miss the old nationalised companies of the mid 20th century.

Just think, in 3 years time we will have British Telecommunications back instead of BT, British Gas, the GPO, British Steel and British Petroleum , trading as Company of Solar Trading (C.O.S.T., whoops I hated nationalised companies in those days!)

I love the idea, but hate the application. As we have no choice now other than to go back to basics as each domino topples

Damn, we might get Trade Unions back again!


Back to the Future here we go!!!

It looks like the Western governments will have to bail out the financial system in order the restore stability - but please can they also agree to 20 or 30 years of increased taxation on the financial sector in all their countries to pay back the long-suffering taxpayer; plus, in this country, a shrinking in the public sector and the client state. The off-book accounting of PFI and final-salary pensions at 60 for public employees (supported by our prudent 'leader'), quangos and dole-for-life, get-pregnant=and-get-a-flat lifestyle is WAY beyond the means of this middle-class engineer.

Let's be clear. Gordon and Angela have been stuck in the same room with Silvio and Nicky all weekend and they still don't understand what the other is doing? God help us all.

The June interim report of Hyper is interesting

1. Assets 395 B, 213 B of which are loans to customers.

2. Liabilities include 300B in certificates and loans from other banks

So if it goes bust, other banks/instituations have a 300B hole shared between them.

And any deposit insurance is NOT about the depositors of this bank (as there are very few) BUT but must be about depositors of other banks.

these are the banks that bought high grade hyper bonds so that hyper could lend long to customers whose ability to pay back does not seem to be mentioned.

Being Brit who has been living in Germany for a while, I can safely say this is good news :) However the German banking system is radically different to the UK, the various states and even towns have small banks known as Sparkasse. Additionally there are regional co-op type banks which form part of another federation. Add to that the national banks such as Deutsche Bank and Commerbank and you can see the system is much more fractured than in the UK. This has some disadvantages but the main benefit at this stage is that ignoring the large players like Deutsche bank if one bank fails then the effect on others will not be the same as in the UK, in effect it would be like a small bank in South Wales going bust and needing bailed out. Also I gather these smaller banks are much more conservative than the larger ones and also the banks in the UK. Hence although some will have got into hot water, the systematic risk to the whole system if one fails is minimal. However if it is Deutsche or Commerzbank who are in trouble then that is an entirely different ball game. For the time being though most Germans should be safe as the vast majority bank with the Sparkassen or Co-op type banks.

Robert,

Why do you believe that the Chancellor of the Exchequer would need to follow the example of the Germans and offer a full 100 per cent guarantee to protect the savings of ordinary retail savers?

I am not aware of an opportunity for Britsh savers to put their money into a German bank without taking a currency risk. Can you name one?

By raising the limit to 50,000 pounds the Government have now guaranteed all the funds of 98% of savers. The remaining 2% have had plenty of chance to switch their savings to Irish banks.

I cannot see the logic of your arguement. Could it be that you are just trying to be sensationalist again?

Le Monde is tonight saving "Berlin va garantir les dépôts des épargnants" which is direct enough and indicates that it is not only the British that are lost in translation! see [Unsuitable/Broken URL removed by Moderator] (Wonder if this will post?)

Reuters is running
"Germany insures savings amid bank rescue talks"

https://uk.reuters.com/article/topNews/idUKTRE48R0KS20081005

So where is the doubt? In the minds of a Treasury Mandarin - I wonder in which world they live?

Just ring-fence the sub-prime mortgages and recapitalise those banks which need it. If it means taking an equity stake, temporarily, then so be it. If the US remedy doesn't work, hope and liquidity may vanish altogether. The BoE should require the High Street banks and building societies to lodge the toxic loans with it after they have been written them down to fair value in exchange for gilt edged stock.

Further delay in clearing the wreckage away and continuing fear of default will turn an unavoidable recession into a slump. Perhaps the stocks could be named Gordos, so ensuring his deserved legacy.

Ireland - Greece-Germany.
Come on Gordy get your scates on

Bloomberg has been carrying a story for hours headed "German Government to Fully Guarantee Private Accounts". It also includes a quote from a Finance Minsitry spokesperson saying:

"Merkel proposed the blanket guarantee at a meeting of European leaders in Paris yesterday"

Seems pretty unequivocal to me.

Bloomberg story timestamped 15.27 EDT (20.27 BST).

As I said in response to your earlier post, you seem to have far too much faith in Brown and Darling acting decisively.

Mind you, can you please tell me what was the point of the EU ministers condemning Ireland for their actions, and promising to stand resolute, only for Germany to then immediately break ranks and seek to do the self-same thing within a day?

One alarming point - in your report on the 10pm news you suggested that Germany was only (only!) prepared to guarantee £400bn of savings and not the entire amount of savings. What you did not say was that this was itself as much, if not more than the Paulson plan to bail out the WHOLE American banking system!!!

This just goes to show that the Paulson plan is a sham and these subsequent actions by other nation states are just desperate and ultimately futile measures to forestall the coming world economic depression.

As for the calls to cut interest rates this is just nonsense. America did just that and look where they are. Indeed, if the economists were so concerned about issues other than inflation, why the hell didn't they raise interest rates to prevent the bubble that created this crisis in the first place?!

We are now at the stage of making up economic policy on the hoof and pretending as if everything will soon return to normal rather than admit that the capitalist system as we know it has failed and we are at the end of the line.

Re my post 41

It contains French language indicating the the French paper 'The World' (trans!) is also saying that the Germans are guaranteeing all savings.

(The auto moderating system that detects foreign languages is at work again - This story is all about European matters and it seems extremely sill not to be able to cite European sources!)

Another quote from the Bloomberg story, this time from the German Finance Minister himself:

"I want to emphasize that we are concerned that savers understand that they don't need to fear losing one single euro"

Again, don't see how there can be any doubt that this means there is a total guarantee of retail deposits. Maybe someone at the BBC can help Ally D out by referring him to Bloomberg or Reuters. Bit surprising the UK's Finance Minister doesn't seem to have access to either!

I agree with protogodzilla (no 43).

the govts should have preference shares with high interest (payable later) and take a stake so they make a profit when the patient is cured (as RP has suggested).

They should Kick out the current lunatics in charge. Dont allow the other bankers NOT to reach agreement when many of them lent to hyper irresponsibly in the first place.

Govts should overide the bankers. if they dont have the powers they should legislate to get them. Then put people with common sense who understand risk in charge.

There are many dominoes here

A mere engineers view

Incidentally, the same Bloomberg story is reporting that the EU competition authorities were in Dublin on Friday and Saturday and are happy they've got Ireland to make a few changes to their guarantee legislation so that it complies with EU competion rules. So the whole "is it-isn't it?" debate appears to be over.

The debate, therefore, is simply about how much ought to be guaranteed at each institution per person. I can't get excited by the fact Ally D doesn't feel the need to go higher than GBP 50,000. Most people will be covered, and if people have more than GBP 50,000, it would be prudent to spread it around a bit even in normal times.

Great up to the minute reporting, but it needs to be accurate. And do be careful with language. How can the BBC 10 pm news tonight report the German rescue plan as a worsening of the position? A rescue normally means things are getting better.

I just worked out why Brown wants Mandelson back in the cabinet!

He needs co-operation from the European Central Bank. Who better to help than the European Trade Commissioner!

Robert

Well done on posting - knowing that the situation is unclear is important news.

From the main bbc news webiste...

"We tell all savings account holders that your deposits are safe. The federal government assures it."

But BBC business editor Robert Peston says it is unclear if this is a 100% government guarantee of all savings deposits.


Even if the quote has been translated perfectly - the above could still be valid - because, you can't trust a word uttered by politicians...

However what is certainly true is that Gordon Brown said that other countries would be copying his approach to the crisis -- however given his track record it is far more likely that (following a period of ineffectual waffling, indecision and inaction) he will actually end up seeing what others do and then being forced to copy them, while concocting a 'narrative' that explains how he was right all along...

Utter confusion over Merkel's statement. Look forward to watching developments on Monday.

If Angela Merkel hasn't issued a guarantee, she certainly seems to have issued the promise of a guarantee if it turns out to be necessary. Does this make a difference? In particular, does it mean that other governments could follow suit and verbally undertake to guarantee deposits, without actually putting anything down on the balance sheet?

marimonster no 7 and marksevern no3 are obviously better financial journalists than Peston. No, forget that, I was being sarcastic ...

Sorry that there aren't any capable translators around to keep English-speakers updated about the rest of the world. Well, I just had a look and the German media say that the state will make sure savers will not loose a single Euro and that there will be a state guarantee to the tune of 568 billion Euros. The reason is that they don't want any run on the banks by silly people. The problem is that most Germans have no clue what this whole financial "crisis" is about. In contrast to some other people in and outside of Europe they have savings instead of debt. Hope that helps.

Did she or didn't she? The trouble is she can't very well come out now and say: "I'm sorry but in fact your deposits are not safe - I was speaking generally about my governments determination to assure these deposits"

Naive question related to my earlier post 38.

Why dont the bond/certificate holders just take over the bank in proportion to their bond holding?

They are effectively dependent on the mortgages anyway. They might as well own them outright.

Surely thats better than all the domino defaults

What am I missing?

I very much doubt that those who criticise you for reporting confusion are anywhere near as well informed as you appear to be on the basis of your reportage to date. Keep up the good work, after all you are the only BBC Web journalist who could pass a GCSE in English and who knows what he is writing about.

In answer to the ever-present question "why not just let the banks fold", retail depositors are only one part of the story.

The major problem for the future would be if the only players left with money to buy up the assets of the fallen banks were, for instance, sovereign wealth funds, Russian oligarchs or whatever.

The net outflow of money from the UK economy would be far, far worse than that caused by, for instance, all of the foreign nationals who live simply and send all their spare cash home, or the net import of manufactured goods, or the buying-up of so much of British business over the years by foreign players. It would be a de facto tax on a large proportion of the UK population by a foreign power, and an almost impossible situation to reverse in the future.

National interests are already firmly at play here and, frankly, so they should be. This is no time to play "we're all friends together".

As others have mentioned, what we need is a net inflow of money to recapitalise the UK banks. Destroying shareholder value by allowing runs on banks and forcing nationalisation is not going to achieve that, so the Germans seem to be taking a very sensible position here.

Slightly off-piste comment, but relevant in the context of bank rescues, government guarantees etc.

The SEC's ban on short selling financial stocks will be lifted on Wednesday. Several UK banks have listings in New York. Does anyone know if these ADRs can actually be shorted? I can't think of why it shouldn't be possible. And were they covered by the SEC restrictions in the first place?

#30 go back and study Friday's blog. All the clues are there if you want to see them.

Following my input on 38 and referencing 57.

If the Germans dont have 200B of the customer debt in the balance sheet, then who does?

Surely it cant be US subprime.

I have just checked Frankfurter Allgemeine which reports 'Staatsgarantie fur alle Spareinlagen'. Spareinlagen simply means savers or depositors but the inference is that this is individuals. It may be that this does not extend to corporate depositors.

That picture of the EU PMs' Press Conference is a gem, it said it all - Brown blethering about Europe working together to do whatever, Merkel looking in the opposite direction with a bit of a smirk and Berlusconi with his arms round Sarkozi's neck whispering in his ear.
A real dialog of the Deaf !

''We're doomed Mr Manwaring - WE'RE DOOMED !''

The guarantee I'm sure that we all want is that the eventual result will include a greatly diminished USA which will be forced off the back of the rest of the world.

What is the point of posting! Nobody knows, we are in uncharted territory.

Many people wiser than I are lost!

I have never believed in derivatives, or any of the other crazy games that bankers play nowadays. The senior bank management don't understand them, so how come they sanctioned them?

It used to be that banks could lend what they held in gold.

It seems it is not like that now.

Small wonder the dominoes are tumbling!

Personally I applaud protection, however in my heart of hearts I am not convinced that it will provide a solutiom to the enduring problem. It was due to happen, the 'sub prime' triggered it. It could have been anything else.

I have always believed that in business you have to 'keep running', if you slow down your past will catch up with you! This is now happening.

Capitalism is not wrong, unfortunately no-one understands the rules, or if they do they are unprepared to live by them.

We have changed the rules to facilitate 'convenience', and turned a blind eye to prudence and pragmatism. 'Spin' has ruled! Now we are reaping the harvest of what we have allowed to been sown. Can we return to 'The Darling Buds of May?'

Can we dump the PC rubbish, can we dump the ridiculous rules and regulations that make us uncompetitive, that the emergent world ignores, including large swathes of Europe! Can we get back to being homest people who do a good job at a reasonable price for a 'fair' return.

Then the problem might go away.

Neil Hewitt Bournemouth.

Iceland (and I'm talking about the republic rather than the high street chain) going bust!
USA banks failing and close to failing. European banks failing and close to failing.

The house of cards is falling!

There is no point in thinking how to stop it now. Just how the hell are we going to clear up all that mess!

BANKS AFRAID OF BEING SUED IF THEY FAIL TO GUARANTEE 100 PERCENT TO DEPOSITORS.

Banks are afraid that depositors might sue if the do not guarantee one hundred percent to protect the savings of ordinary retail savers.

Dear Mr. Peston:

Many thanks for all you have done to provide clear information, delivered with a sense of humor. Both are needed at a time like this.

Looking on this scene from the US, I assure you no one gets any joy from Europe's travails.

Pat Buchanan, a conservative champion here, is wrong about a few things, and right about many.

One cogent remark he did make is this:
'An economy is not a culture'. That is, we could all be rich and secure, and still have a culture not worth living in, much less defending, or transmitting to our children.

But upon reflection, Culture truly does shape Economy. Most people do not have time or energy to think deeply about arcane items such as Collateralized Debt Swaps, short selling, interest rate arbitrage plays, etc. They DO, however, need to know that the bank down the street where they deposit their paychecks will be there next week, that their cash is safely stowed away there, and (importantly) that the same set of faces and names will be greeting them as they walk in.

It's called Confidence, one of the glues that holds Culture together. That confidence has really been rattled of late, especially last week.

In an imperfect world, with many choices to make (none of them pleasant), decisions that legitimately increase the culture's sense of confidence will shorten the downturn and hopefully lessen the pain. I'm not advocating holding out false hopes, but real truth-telling about the situation, coupled with the commitment that small depositers will not be thrown overboard in the rush to save the 'too-big-to-fail' incompetents at Freddie, Fannie, AIG, WaMu, Merrill, etc.

Otherwise, every government could rescue every bank from its folly, and it will all be to no avail.

This has not been done yet in the US, even with the raising of depositor insurance in last week's legislation. We're not being told the truth, we fear, and we have seen both the Executive branch and Congress shred the Constitution in this mad rush.

Thanks again, Mr. Peston. You have a book to write about this madness at some point.

It seems to me the only ones keeping quiet at the moment are the Middle Eastern SWFs.

At least their system forbids them from getting into such a mess of debt.

What's the betting Europe and America will soon come running to them asking for their help. It will be interesting to see what conditions they place on helping!

"The UK Treasury is working on a proposal that could insure a staggering total of $4 trillion in deposits in UK banks and building societies, said officials."

"The Treasury is working on a proposal that could insure a staggering total of $4 trillion in deposits in UK banks and building societies, said officials."

#73, I wouldn't bet on SWFs coming to anyone's aid. Oil keeps falling in price and you'll see how much money they actually have.

Dubai already had to apply for a loan from it other half Abu Dhabi. If you think the West is having a hard time keep your eye on China when growth drops below 7% or the Middle East when oil is below 70USD.

Anyone who has passed through the Gulf or Shanghai or Bejing knows where the REAL property asset bubble is.

PRAISE THE LORD!

We have a commonwealth and a monarch.

Dont panic, AAAlistair Daaarling will be taking

"big steps"

To include ,one giant step for Mandleson and a leap for Bankind ...


All on behalf of the ministry of silly waaalks in preparation, for the 2012 dissabled bankolympics [the latest craze]...


going for gold ,silver and bronze


The main events being

1 The 100m silly wAAAlk in which central bankers will be competing with a line of non dominoes [Downing street to parlamment]


2 the maaaraaathon baaankrun arround the city

3 The three legged race for those bankerrs joined at the hype from rebirth

4 The golden Hanksheikh egg and spoon race
[one metre ]

5 The square [s]mile saaack race

6 The baaank vault
[nick leeson named the Itaaalian jog]


7 The hype skip and jump ship race

8 The Midass touch in reverse race for AAA 's sellers

9 The interbank relay race [postponed due to batton shortage and inability to find enough contestants willing to let go of their battons without BOE guarantease]


The dissabled bancolimpic comitee will off course be run by Snow white Merkel and the seven dwarfs with their hi ho....p/e less [subprime]mess 1sts theme song

I'm german.

I can tell you, that the short statement of Merkel and Steinbrueck in front of the cameras was and is confusing the germans too.

As I, and the most I spoke understand it:

At this point, it is not a law, so it is not sure, wether you could win a law suite with this statement.

But: It's a strong declaration of the will of the government, that one can believe - in normal times.


First you have to understand, that savings in Germany under 20.000 Euro are guaranteed by the state.
Additional to that, german Banks have several insurance funds making all customers under a saving account of 1.3 million Euro relatively save. (The only risk is: how long will it take until the risk fund is empty, if more than 2 or 3 banks go bankrupt in a hardcore world finance crisis.)


Yesterdays announcement is not guaranteeing all savings in Germany, because then we would talk about 4.5 Trillion Euros. (I'm not sure how you count in english, I mean million, billion, TRILLION)

The guarantee is only for private savings of ordinary people on ordinary bank accounts - that means around 570 billion Euro.

The sigle reason for the statement was the fear of german population queuing infront the bank counters this morning, to pick all their money from the banks.

The guarantee is not for company accounts.
The guarantee is not for saving plans or other more sophisticated products. And of course not for funds, stocks, fund or stock based saving plans, insurances etc.

Just your ordinary saving account, your wage account, your giro account, daily, 3-monthly, yearly accounts.

I think UK Government got right when they say (or have they?) that deposits upto a certain limit are guaranteed by the Government - the limit can be argued and reset if need be. This would guarantee the most needy get the benefit.

An unlimited guarantee is not acceptable or desireable in meeting the objectives - to mitigate suffering of the needy and the mainstream contributors to country's productivity.

Can we have some explanations, Robert, in simple terms:
a) To explain how the US govt intervention to prop up a bad bank by taking its bad debts will persuade a good bank to deal with the bad bank?
b) If the money supply has imploded due to de-leveraging then how does the US gov intervention alter this de-leveraging? AIUI, they are borrowing the money on the market and are therefore simply joining into a dysfunctional market by taking out and repackaging some existing money.

The graphics of cogs that have been used on the new bulletings to show how it will all be kept turning doesn't explain what has fundamentally changed.

I personally don't see how any of the US, UK or EU (individually or federal) actions changes the fundamental truth of deleveraging that occurred when the sub-primes were declared worthless.

I enjoy these articles, for me the critisiam is unfounded, interesting times, Peston is pearl in a sea of BBC mud.

Last night on German TV, the Business Minister (CSU) in a discussion programme was uncomfortable when questioned by other panel members. He gave the clear impression that he was not aware of Merkel's undertaking - or that she had thought through the details of that undertaking. Questioned further in relation to a saver with Lehman Bros via Citibank (DE) he was unclear to who the commitment on guarantees to depositors would be applied. The saver was told in no uncertain terms that his money, buying a Lehman Bros product was not covered by such a guarantee even though he had been sold the bond by a German bank. If the Business Minister didn't know to whom the undertaking applied, did the BundesKanzlerin?

Further to Robert Peston's blog above, it appears from the Business Minister and the ex-Finance Minister from Austria (who was also on the programme) that Merkel's undertaking only applies to 'small private depositors'. The SPD representative and the Green Party speaker were both adamant that no support or compensation should find its way into the pockets of the banker and that those at Hypo Real Estate who were at fault should appeal in a Criminal Court. The banker (ex Dresdner Bank) on the panel looked particularly uncomfortable at this point. The blame however for the whole mess was directed at New York and London Hedge Fund Managers ... Germany was merely a straw floating in the wind of international finance. Who has their heads buriedf in the sand? Can Merkel get such a measure through the Coalition?

#79

Insurance will be irrelevant, not worth the paper the certificate is printed on should the collateral of the insurance company/scheme be wiped out in a large banking crash - this was why the USA had to save AIG and why European countries had to stump up to save Fortis.

#40 spot on - the important aspect of the german announcement - whatever it was - is ints unilateralism- a Smoot Hawley moment? I hope our Government has its eye on more fundamental moves, e.g. taking equity stakes to recapitalise UK banks.

#76, laughingblacksheep wrote:

"Dubai already had to apply for a loan from it other half Abu Dhabi. If you think the West is having a hard time keep your eye on China when growth drops below 7% or the Middle East when oil is below 70USD."

Dubai has been essentially out of oil for a while now, and didn't have much to start with. Hence the massive investment in infrastructure, tourist facilities, and so on - that was their plan to replace oil revenues with tourism revenues.

Of course, if nobody in the rest of the world has any money (or doesn't want to spend it, even if they have it) then Dubai's going to have a bad case of tumbleweed fairly shortly...

I normally avoid posting "me toos" but I see Peston is getting stick for changing his opinion. Ignore them, Robert. As others said, this is a blog and we read it for current opinion in a quickly changing situation. Otherwise, I'd just wait to see the Beeb's news at 22:00 and Newsnight. Keep up the sterling work! :-)

Who now wants an ever closer union? Naked national self interest has replaced the solidarity of the EU. Watch the Euro unravel as Germany follows a path suited to itself which will offer Spain, Italy and France an option of being crippled economically or dropping out of the Euro to protect their failing economies...

#89, MysoniscalledHarry wrote:

Who now wants an ever closer union? Naked national self interest has replaced the solidarity of the EU. Watch the Euro unravel as Germany follows a path suited to itself which will offer Spain, Italy and France an option of being crippled economically or dropping out of the Euro to protect their failing economies...

As I posted elsewhere, greed, as Gordon Gecko told us, is good - at least it is a trait we should wish our governments have, in part, at least. They should be greedy to get the best deal for us, the most inward investment for us, the most protection for us.

If you take away "national self interest" then why have national governments at all?

At the extreme end of that spectrum, HMG could simply legislate to prevent any banks' money leaving the UK - no more repayments to foreign creditors. Clearly that's not very sensible, but neither is it very sensible for those same foreign creditors to pressure our institutions to such a degree that they fold.

Somewhere in the middle is the place HMG should be, acting as referee and regulator, trying to even out the conflicting demands of the various parties.

Our governments have all-too-often doled out aid to other parts of the world rather than investing at home. It is about time that we had a bit of "naked national self interest", don't you think?

#90
Thats the point, the European Union is a union only in name - who really thinks that if the EU decided - lets save the German banks rather than the French because they are more worthy that France would not take its own steps - even if it was against the wider interests of the so called Union?

One way to solve flight capital would be to remove taxation on interest on savings if the savings are held in UK bank for a year and a day.

#91: I'd be (relatively) happy with a variant of a US-style organisation, with strong states within a strong union. California, for instance, is more than big enough to bail out some of its own institutions on its own if it needs to, with or without federal assistance.

As I've posted elsewhere, I'm not against any European Union, just not this European Union. But then I've read the Treaty of Rome, I knew what it was meant to be, and - had I been present - I'd have voted no in 1974.

Frankly I don't see much wrong with the current situation viz-a-viz Eurozone nations being independent on this point. A little tension keeps any union on its toes :)

Anyone running a book on which country will be the first to leave the euro? Up to now the favourite has always been Italy. After the weekend the odds on it being Germany have shortened considerably.

And with all the money being pumped into the financial system just where will the funding for contributions to the EU budget come from? Can we now really afford to continue to subsidise French farmers through the CAP?

Labour and the FTSE....2nd May 19997 it was 4455.60 ------Today 4344.92

Labour and the FTSE....2nd May 19997 it was 4455.60 ------Today 4344.92

Labour and the FTSE....2nd May 19997 it was 4455.60 ------Today 4344.92

Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

I think people need to appreciate that, whatever action has been taken, it has been taken because there are fundamental issues that need resolving.

This is not the time for a blame game, but rather a chance to create an opportunity whereby we will be able to assess what went wrong, ie by creating confidence back in the markets that will allow us to move forward, whilst at the same time admitting and reasoning what mistakes have been made and learning from them.

Its time to be positive and stop worrying about what has happened. People need to realise that, OK markets have been fast moving and the government may not have all the answers as yet, but they have made a statement about their commitment to finding a way through the turmoil, and that should be supported 100% by the British taxpayer.

Maybe we should ask the Bilderberg Group what they planned when they met 2008 (June 5-8) at the Westfields Marriott in Chantilly, Virginia, United States? If you check the guest list it is surprising how many Financial Executives attended this year. hmmm is the Global crisis actually pre planned so that a Globalised Financial banking system is put in place? If the demise of the dollar is presented to the American people expect the Amero currency to be pronouced to save the economy.

Does anybody seriously believe that the lunatics currently running the asylum, have a clue what they are doing. Let me tell you this is the beginning of the unwinding of capitalism as we know it today. where will we be in a weeks time, a months time and by xmas?

Hi there,
I have a question or perhaps two. Over the past year we heard about a subprime problem in the USa which soon became a subprime problem around the world because banks sold their mortgages to each other. For a vast period of 2007 we were regularly informed that a abnk had just written off $umpteen billion for its exposure to the subprime market, next day it was another bank and another $umpteen billion. This became a regular occurence to the point where I question that there were enough mortgages in the world to justify these unbelieveable write-offs. Today we are in the midst of potential recession, we watch our most trusted banks come close to failure and sadly see some others go under.

Question 1: If the banks had already written of their potential bad debt in 2007 why are they still exposed to the mortgage crisis?
Question 2: Given that most of us are most aggrevated at the ridiculous sums being paid to executives in these banks, can anyone substantiate that they really know what they are doing??

This is a less flippant question than it seems since I spent many years interfacing to top execs in certain banks. All were true banking men, joined the bank at 16 and worked their way up via all the internal departments. This may give a great knowledge of how a bank workls but it does not give much street cred in terms of their general business knowledge.

Thanks for your time.

The BANKENSTEIN monster has wreaked havoc and has shown that it will not be controlled by any single government!!