Barclays and British investors

Robert,

You underestimate the squeemishness of the british public when it comes to risk.

Even at 14%, they would squeal like pigs if there was the slightest risk that their capital might actually be lost.

They suddenly pretend that the didn't understand that the higher rate of interest was based on additional risk.

And if the additional interest was based on additional risk, then it is wrong for the taxpayer to reduce that risk to zero.

p.s. When will you be chasing mandleson over his confirmed discussion of EEC tariffs with Oleg - I am starting to wonder if you ever will...

cripes Robert, you're working late!

I know the overseas funds may be unpalatable to many-but I'd like to just think out loud for a mo-

Selfishly I'm glad cos it means the tax payer (me) won't be bailing out another bank

The rate to pay it back is eye watering, but since the deal was struck, won't the value of the loan be lower cos of sterling tumbling against the dollar and euro? If that's the case then those against can rub their hands with glee!

And finally, I vote the Bloggers party in now to replace GB, AD and MK-as a consumer they seem totally unfit for purpose-propping up the banks thinking this will help the common man! How much more daft drivel will they come up with until they realise, too late, that they have done precisely the wrong thing? Perhaps their next move will be to find some piece of legislation to stop Barclays clinching the deal?

Last random thoughts-look where the money is coming from-oil. It may be plummeting at the moment, but I'm certain oil countries are making more than enough-just not as much as they would like.

At least it's bringing outside investment in when we need it most. Barclays won't go bust, and neither will HSBC. And given the amount of chaos GB's actions have caused, I'm glad some banks have not taken the money. I suspect these two banks are strongly placed and don't need interbank lending. No point quoting LIBOR-link everone's lending to the bank base rates.

"stonkingly" ?

Collins English Dictionary: Complete and Unabridged New Edition gives:

stonk: to bombard (soldiers, buildings, etc) with artillery

stonkered: completely exhausted or beaten; whacked

What means "a stonkingly good deal"?

I understand the choice was to borrow at 14% APR from Qatar and Abu Dhabi or borrow at 12% APR from the British government and become subject to its whims and domestic political imperatives.

If you ask me, 2% APR is a pretty poor discount to receive as compensation for running the risk of being co-opted into a public relations exercise, potentially being sacrificed out of political expediency.

I believe Barclays exercised due diligence and did the sensible thing in looking elsewhere for capital. As a Barclays customer, I am happy with their decision and hope they have the guts to hold firm.

I like the last night post, I have this image of you sitting at a massive multi-screen computer with wires carrying economic data directly into your brain.

Robert please start another blog quickly this outfit and its board does not merit our time and effort in discussion.

Give bankers a large room, a can of paint, and a set of brushes....and they'll paint themselves into a corner every time!

Looking forward to the vote, as the common shareholders realize they have been shafted by management.

@2

Nice to know at least 2 banks will be ok. i can go to bed now and sleep, haha

@5

Funny

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The psychology of this is fascinating. Is it just a poker game between the Treasury and Barclays management, with shareholders sitting on the sidelines hoping to get dealt in on the next hand? Or is it more subtle than that?

I have written more about this at https://www.knowingandmaking.com/2008/11/bounded-rationality-and-agency.html

Comments welcome.

Barclays has a choice between the Arabs and the Ayerob's ,by giving the Arabs a juicy piece of the aaaction they will receive stable long term capital injections of oil dosh ,to give to Debt Junkies hanging arround outside [AND IN]branches before and after closing hours like seagulls following an ocean liner

If Barclays accepts government money it will have to pay it back before paying dividends ,which means it cannot pay dividends without ruining or diminishing its capital base .

It is worth remembering that Barclays will be able to create potentialy 10 times as much credit from any increased base deposits, to give the DJ'S which should be a great hit for them .

Warren Buffet got a good deal with his bank so why shouldnt the Arabs ,and the 2% difference can be recovered everytime they use their gold to infinity and beyond credit cards to buy a disposable car or bank [difficult now that our localy run car industry has gone].

Once upon a time[before the big bad shanghai motor co. existed] barclays gave me £10 too much change ,when i realized the error and tried to return it 2 weeks later they refused to accept it, despite repeated and irritable insistance on my part ,they said they had sorted it out ! [Its true after all ,money is created from thin air just like it says on U tube]

I wont go back next time,even if they beg me not to .

It wasnt until the latest credit crunch that i realized how time consuming reaccountancy could be in the magical world of double [re] entry bookeeping

To end off topic

a quote from Peter Warburtons book "Dept and Delusion"written 1999


"What is clear is that when the next global bear market in equities and bonds arrives, the unwinding of highly geared derivatives positions will trigger financial explosions in every corner of the developed world."

[CAN YOU READ? PAULSON]

After one year of credit crunch and not one" i told you so" from PW, he must be English .if you listen you can hear him smile every time Gordon says "prudence and stability "or "no return to boom and buzt"or "the world should follow my plan"as if it had ignored his bagpipes version of amazing uninterupted grace for a decade....Where's the cliff?

I like Barclays despite they refusing me a loan ,when I HAD 80%deposit down [yes80%]in the good old days when bankers were w.......BANKERS

Simple facts

Houseoweners cannot pay off their loans

Governments cannot pay off their loans

Banks cannot pay off there loans

Students cannot pay off their loans

Because there is not enough fiat money available to earn ,to pay off ALL loans PLUS fiat interest ,irrespective of how hard we work ,

Hard work cannot get a quart out of a pint pot


But there is no harm in trying



Trust me im an economist

If Banks would just accept used bottle tops as interest ...then theoreticaly all interest could be payed off and all debt cleared ,ultimately .

Im from the milton keynes used bottletops school of economics of course.
keynesiian economics is just a carrot on a stick that prolongs the folly long enough for hamsters to get heart attacks in their wheels and encourages the economic equivalent of the Roman practice of decimation or the more ancient practice of canibalism now making a come back under the guise of Keynes by giving the right to the state to chose which taxipayerrs to decimate and eat or remove their organs ,even if they are yet to be born . Interest payments must not be fiat ,only "in kind "fiat interest is unkind

Which brings us back to Barkleys about which i have nothing say .

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Mr Peston, one does rather wonder what our Eastern friends are thinking about this. Whilst they may be looking at a failed bank, I would sense that a viable institution would be more to their liking.

Note to all: A read of the Association of British Insurers website has them reassuring all and sundsy that in fact the UK insurance market is NOT overly exposed to toxic debt as has been supposed due to tight regulation over the past 6 years demanding sufficieant capitalisation for exotic instruments.

Thus, my view has changed regarding the position of UK plc. We are likely to come out of the doo doo faster than other countries.

The main problem is still lines of credit. Not just to manufacturing to keep the factories running, but to consumers to cover the financing to buy the goods and to the shippers to get the stuff off the docks and onto the ships.

This is where Asia is most vulnerable, they have money, they can produce goods but without letters of credit cant ship.

So, UK is a small island with large population, property values, no matter what the situation, do have a floor. UK insurers are not so precariously balanced of exposed as once thought. People are still consuming (Westfield centre opening).

Northern Rock has been in the hands of the Govt for some time now. BOS and RBS have had to allow SOME scrutiny of books to access credit from HMG. So, unless HMG is VERY VERY stupid the levels of exposure to toxicity must be known or can be estimated.

So why are no figures forthcoming....

Why did HMG insist some banks increase the levels of credit HMG provided? To cover eventuality OR to get greater foothold in these banks. (At that time HMG must have known the real value of NR exposure).

Same thing for the USA, time has passed and the Fed must be able to accurately estimate debt, is this why Paulson changed direction so rapidly?

"BBC business editor Robert Peston said RREV's comments would be "an embarrassment" for Barclays."

In the first place, what have PREV to say about their role in the current crisis since the very people they purportedly "advised" are the biggest sufferers, having lost twice - once by being looted by Gormless Gordon and again by his nationalisation of the various banks ??

Secondly, just how sure are they that the people they advice will have any effect on this deal no matter how they vote ?? In other words, what percentage of the total Barclays voting shareholding do they advice ??

If I remember rightly, a significant chunk of Barclays voting shares are in Far and Middle Eastern hands, not merely owned by their Sovereign Wealth Funds but in the hands of various (very?) rich individuals as well !!

The roar of a lion may cause Barclays embarrassment and concern but the yappings of a poodle are just annoying !!

" Barclays' Gulf cash move attacked" - BBC headline

Wow !! Attack poodles !! What's next ?? Suicide hamsters ?? Kamikase canaries ??

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Lets all wish Prince Charles a Happy Birthday.

Whether you like him or not,Prince Charles has served the Nation created his own Institution and done a great deal for many people with the best of intentions.

Perhaps all these Knights/SPIVs who seem to run our banks could learn a lesson or two.

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#14 "This is where Asia is most vulnerable, they have money, they can produce goods but without letters of credit cant ship."

Extend your line of reasoning a little further especially in light of this blog and you may find the answer to your question.

HSBC - an international bank with predominantly Far Eastern operations

Barclays - an international bank with major Middle and Far Eastern shareholders and growing operations in those areas

HBOS - a localised bank with access to the City that can be turned into a Letter of Credit (and Scottish banknote) issuing shell subsidiary of a Chinese bank

Need I say more ??

As for Poulson, could it be that now that the various US banks have paid the bonuses to their senior management, the "bailout funds" are used to buy the soon-to-be-useless shares from the shareholders (many of whom are the senior management because of bonuses in the form of share options) !! When the *real* extent of the toxicity is known and the banks are *REALLY* bust, it will be the government who will own the majority or all of the shares !!

I know I am paranoid but am I paranoid enough ??

Gordon Brown wants to persuade the rest of the world to borrow money as US and UK have done, to boost the world economy. My question is, if every country borrows huge amounts, who is there to lend these astronomic sums? Is that what the Mars probe is all about? Looking for a new civilization to borrow from?

#3 Strangely enough, the Ultra-Complete
Maximegalon Dictionary of Every Language Ever omits the word "floopily", which simply means "in the manner of something which is floopy".

#14 Re - UK insurers - The only time to worry is when the Names are packing their remaining belongings into their last Rolls Royce and heading for the hills !!

Until then, Lloyds of London is still the most highly respected, 300+ year old insurance operation in the world !!

Insurance companies come, insurance companies go but Lloyds of London had been and are still doing business as usual.

"Sterling has been one of the biggest victims of the global financial meltdown - losing more than a quarter of its value since July."

However, no mention was made about the perpetrator who caused it GBH (Grievous Bodily Harm, for our American cousins reading this). Could that be our Glorious Leader ??

Katie Hunt, BBC journalist further advises -

"And if you really want to maximise your hard-earned pounds, Iceland's financial crisis has made the notoriously expensive country more affordable.

The pound has gained about 25% against the Icelandic crown since the end of June, when Iceland's economy began to hit the rocks. "

Excellent idea if your family and friends would love a packet of cod and a bunch of bananas for Christmas !! FYI, Iceland is the Northernmost banana-growing country in the world !!

Methinks, Hungary would be a better bet especially as their wine industry has a smidgen of trouble selling their excellent wines and their forint has gone down too !! Cheap *tax-paid* booze and fags !! What more could you ask for, for Christmas ??

" New recession fears ahead of G20" - also called Bretton Woods Two by some.

Methinks, it would be more like "55 days in Washington" with the BRIC diplomatic staff desperately defending their legations against the rioting Washingtonians(?) until they are bombarded into submission by tons of US debt !!

Hey, this sounds like the script for a good movie !! I wonder if Charlton Heston, wherever he may be, would like to come back and take part in it. He could be "The Ghost of Depression yet to come" !! Two movies for the price of one. Surely a good deal for Christmas !!

#23 I trust you mean Lloyd's as in Lloyd's of London and not Lloyds as in Lloyds TSB (soon to be Lloyds Banking Group plc)

The San Mateo County Investment Fund, California, is suing Lehman Brothers executives and auditor in an attempt to reclaim 101mil pounds. The lawsuit cites the executives were fraudulent in repeated public statements about the bank’s good health while desperate to avoid collapse - allegedly. (from the Times).

Hundreds of bankers and hedge fund mgrs today meet in the O2 arena to discuss(?) Lehmans losses. (Where is semtex when you need it {joke})

So the US can go after their banks and auditors, but can UK investors, bank staff and sundry subsidiary elements (inc taxpayers) attempt at least to exert some form of justice?

Why is the answer to this question a big NO?

Why does every HMG bury its head in the sand regarding personal and corporate liability?

There is only one answer, fat dangly carrot directorships outside government. So does this make HMG and the civil sevice, more moral and less corrupt than say A.N. Other 2nd world govt that is acknowledged as being dishonest?

#26 Yes, Lloyd's of London. I stand corrected, sir. Blame it on a shortage of caffeine and nicotine coursing through my alcohol stream !!

> its cap out-stretched

Is that where the term "capitalism" comes from?

Robert....I cannot say I have followed the fortunes of Barclays very closely in recent weeks but correct me if I am wrong. Are the not board of Barclays the same board who got the bank into the mess its in the first place ? If so how and why are they still in a job, never mind borrowing even expensive cash ?

It seems to me as a person who spent the bulk of his working life employed by others that should one not do ones job properly one got the sack and that was it. So why are all the people who got the company, country, world (take your pick) still in jobs and telling us how we can get out the mess they created, yet those who did their jobs well are being laid off in thousands around the world ?

The old saw of trying explaining to an alien from another planet how to make a cup of tea should now be replaced with, try explaining why the very people who made the worlds largest cock-up are the very people we are supposed to believe can get us out of said cock-up !

Who cares if Barclays go down the pan. Nobody likes them anyway. It's the shareholders (and pension funds) that I feel sorry for. They should sell while they can.

I am surprised that GB nose isnt like pinocchio

https://www.youtube.com/watch?v=kKZfLZWaV_Q

#27 "Where is semtex when you need it"

No need for such drastic measures, sir !! Just dangle a bunch of hard cash and gently lead them into the Thames. If it worked in Hamelin, I'm sure it'll work here !!

An irrelevant discussion really, Barclays along with Lloyds and HBOS will go the way of Northern Rock in due course.

Whilst the return paid to the Middle Eastern investors looks high, they might as well sit around a table and burn £50 notes.

The full impact of the credit crunch and the shrinking economy that is starting to take place is not fully reflected in Barclay's balance sheet.

Why is it you don't like Barclays' shareholders?

I am sure very few of them are revolting people but most surely are relatively nice normal people we'd like to have for dinner.

If the deal was blocked by shareholders in barclays revolting this would be a different matter.

Just a couple of observations on the Treasury's latest Press Release, masquerading as BBC impartial reporting.

Firstly, if GB, Ally D (and RP) really want a debate with Barclays over accepting taxpayer investment into Barclays, the first thing we need is clarification as to what the government's position would be on Barclays' Lehman acquisition. This is clearly a major strategic investment by Barclays, but the government in other cases, most notably RBS, appears to want to divest business of this type, ie investment banking. If there is a major difference of opinion on strategy, then there is little point in bringing on a major shareholder that doesn't support the management's business plans. That can ony end in tears.

Secondly, there is a great deal of confusion as to precisely how the government will manage these stakes in banks. On the one hand we have Hampson saying that they'll be managed at arm's length, no direct appointment of Directors for instance, his job is to manage the government's investments not manage the banks etc. On the other hand we have GB and Ally D saying banks have to lend at 2007 levels, restrict remuneration, be more understanding on home repossessions etc, which sounds like managing the banks to me. Therefore, who wouldn't try and avoid taking the government onto the share register if it can possibly be avoided given these mixed messages? The investors Barclays has tapped have a long history of investment, and their philosophy in terms of corporate engagement is well understood. That's worth paying an extra couple of percent in dividends for the certainty.

Thirdly, keep in mind that the banks' effective shareholder will almost certainly change sometime before mid-2010, assuming Labour has little chance of winning the next election. A further cause of uncertainty, therefore, is whether and if so how, a Conservative government would treat State shareholdings in the banks.

"Ms Pelosi has suggested that $25bn for the three carmakers could come from the $700bn bail-out package for the financial sector.

However US Treasury Sectary Henry Paulson has appeared to rule out such a move, saying the funds are only for financial firms. "

At least Paulson is loyal to his mates to the very end. He just might need his old job back when Dubya departs the White House.

Will we soon see a Lord Brown, Duke of Northern Rock ??

Does anyone know if Barclays were actually offered Taxpayer funds??

Maybe they werre not and had to go to elsewhere.

Is there something lurking in Barclays we don't know about. We have all assumed they walked away, but were they asked to leave . . .

Just a thought. Trust no-one and nothing at this stage!!!!

But Barclays would have known the scale of the fees etc from the start.

Which just goes to show how much they value the ability to carry on with their 'tax schemes' !

#3 "Stonking"

I have heard it used in the Forest of Dean area in a context such as terrific or great.

#36

"Thirdly, keep in mind that the banks' effective shareholder will almost certainly change sometime before mid-2010, assuming Labour has little chance of winning the next election. A further cause of uncertainty, therefore, is whether and if so how, a Conservative government would treat State shareholdings in the banks."

-The Conservatives should be asked!

Barclays have not been a British institution for many a long year - they attempted to sell out Cadbury Schweppes, as it was then, to the Americans something like twenty years ago during the Cola Wars, a matter of of pure betrayal as they were formally advisers of Cadbury's Treasury and destroyed a long-standing relationship in the process. I know, I was there during the discussion, having discovered myself what they had done and subverted their dawn raid by some nifty footwork - their man of straw heading the attack eventually ended in jail, if I recall correctly.
To this extent, then, this becomes a conflict between a pan-National and a State, and there's a certain risk the pan-National could go overseas. However, the complement to that question is whether HMG should stand behind this unaccountable body in any way, even down to allowing it to operate in the UK as a British retail bank: not only the shareholders, but more imoprtantly given the current state of Government support, the account holders as well cannot have any confidence under these circumstances that their rights under UK Law will be respected if push comes to shove.
Selling England by the Pound, indeed...

Re No.12 I cannot believe that someone actually said "trust me I am an economist". There is still a sense of humour out there

There's a great article by Mark Gilbert on Bloomberg this morning. It's a light-hearted, but nonetheless informative, look at who is to blame for the credit crisis etc. Actually, it gives a good insight into the pressures to which various players have been subject over the years leading up to the crash. There's a good twist at the end too.

The article is in the Opinion section of bloomberg.com, entitled "Credit-Crunch Villains Pass the Buck, Party On"

I think Barclays just want to keep the grasping hands of The Treasury off their private parts.

I can sympathise with that sentiment.

Whether this is a good deal or not won't be known for some years so as far as the current board of Barclays are concerned this deal washes its own face.

#1 & 9 You guys exhibit a particularly jaundiced view of the intelligence of the average man in the street.

In general people don´t have much of a problem in correlating risk/reward. Relative to population very few individuals went after the super normal returns alleged to be available in Iceland - and this despite an expensive and sophisticated PR campaign designed to get everyone subliminally signed up to the joys of Iceland.

Only someone from the banking sector would have the nerve to sneer at people who may dare to raise a timorous voice of complaint should they find they have lost money due to "fraud" or"criminal"activity.

What do you expect people to do if they lose money? Of course they are going to whine, whinge and complain. What do you GM, Ford and Chrysler are doing, what do think all the banks were (and still are) up to?

Everybody is getting into the whining and whinging business - because they are not stupid and they can see that it´s a business that pays.

Why pick on the average Joe in the street? Why not reserve your invective for the corporate whingers.

#14

"Not just to manufacturing to keep the factories running...."

What factories? what manufacturing?

Uk plc is just one big call centre. Manufacturing was last seen in the UK co-existing with bears and wolves. It died along with Evelyn Waugh, the Railway Children and Postman Pat.

Germany, the world's largest exporter and one of the largest manufacturers is now officially in recession. What chance does this abused island have in the face of such an economic onslaught. Nil.

Where did it all go wrong?

Dear Robert
This is not a case of going cap in hand for a Bail out, its to do with who you know, The Chief Excutive and his wife are close friends of The kingdoms Sheiks and are often seen together. This is too close for good business pratise, s it can lead to impropieties in handling the Finanaces of the Bank.

Amazing how things turn around!

In the 1970's I was working in Qatar and I went shopping in Doha with a friend. He bought something on his Barclaycard and we were arrested and taken to the police station.

We were told that Barclays had loaned nnn million to Israel and the Arabs were not pleased. After a lecture in a like manner we were released. It was all very civil.

I was very impressed with the smartness of the uniforms, pressed razor sharp.

Now Qatar is going to invest in Barclays.

All's well that ends well.

40 'Stonking' refers to mortaring an enemy position ( I was a mortarman in the Infantry). Because mortaring the enemy is a good and enjoyable thing (unless you happen to be the enemy) then 'stonking' is also used to mean great or brilliant.

#12 "keynesiian economics is just a carrot on a stick that prolongs the folly long enough for hamsters to get heart attacks in their wheels and encourages the economic equivalent of the Roman practice of decimation or the more ancient practice of canibalism now making a come back under the guise of Keynes"

Have you read any Keynes at all? Or JK Galbraith who developed his ideas? If so, I would be grateful if you gave me the references which justify your assertions so I can look them up. (I have most of the relevant books in my collection.) Certainly, I do not recall any reference to cannibalism in "The General Theory".

Also, in which sense are you using the Word "decimation"? In ancient Rome, this was a practice whereby lots were drawn and one tenth of a legion was executed for cowardice or mutiny. In modern, incorrect, parlance it tends to mean that 90% of something is destroyed.

as far as I understand it, HMG offered bailout monies to all the banks-Barclays and HSBC said no thanks we'll go elsewhere if we need to, and they did!

If memory serves me correctly, the reported reason for them turning down the offer was that bonuses etc wouldn't be allowed for shareholders-that may have reporters speak for they don't was government interference and oversight nor to have to come at least partially clean about their misdeeds of recent times!

At least it's not tax payers money!

Hope this helps!

It's blindingly obvious that Barclays' preference for expensive private investment over cheaper taxpayer cash is due to a desire to prevent regulation, of both remuneration and risk-taking, and there is an obvious link between the two.

What the government should now do is to allow the private investors to put their money in, and then regulate the %^"* out of Barclays anyway.

The bottom line has been demonstrated- that no major UK bank can be allowed to fail, and so we taxpayers and ultimate undrwriters need to see what UK banks are holding. Send in the SAS if necessary.

#44. stanilic wrote:

"Barclay's just want to keep the grasping hands of The Treasury off their private parts"

I was wondering if it was keeping the prying eyes from their books that was the problem?

I just do not understand the logic of paying over the market price for money unless there is a good reason to do so.

There are two reasons that I can think of:

1. by getting money from the Middle East they hope to do more business in the area

2. by not taking the Treasury shilling they avoid its scrutiny.

But why no do both? Take the cheaper money from HMG AND the Middle Eastern money too? Why offend the Treasury in the country in which you are regulated?

PS haven't they been loosing senior people recently?

Post 13 and pretty much everyone else has missed the blindingly obvious reason why Barclays board wants to pay the Arabs 14% and not the UK Government 12%.

It allows them to keep paying themselves and their bankers huge salaries and bonuses.

The following is a long but very informative read from their 2007 annual report

https://www.barclaysannualreport.com/governance/remuneration_report

If you ever wanted to know how much the board earned and how much they got in bonuses, share options etc.

I think it is only fair now that being as Barclays have walked away from Treasury help, they be allowed to sink or swim and no further offers of help be made to them.

Decimation?

If we applied this to all insolvent bank board directors it would obviously only do a 10% job.

So lets do ANNIHILATION 100%.

Once again do the decent thing fall on your swords and resign.

@36

I will tell you why GB and Ally D, wanted the banks to lend at levels of 2007.

Its been labours policy since they came to power to relaxe our boarders, reason being it help inflat house prices. if you take a look at optimum population trust you can clearly see that house prices rise faster if poplation grows qiucker, robert pointed out that the gap between rich and poor grow wider than ever from 2002-3 up until the burst. you can also see that back in the last eighties and early ninties population grew, it was only by 150,000 but house prices doubled and then 92 we had the crass and the population fell.
You see if you always keep housing stock lower than demand then the house price will never fall,
keeps going up. but something happened that GB and Ally d never expected, and you have to go to the usa to find out what.

G bush adapted the same policy when he came to power, population rose from 266,000 to 300,000 in 7 years the highest growth in usa history. house prices went up threw the roof just like here.

dont forget both the uk and usa let the banks lose, everyone happy and spend spend spend. great...............

just one problem the house prices where growing to fast and then came the risk, so the yanks packed these risks up and flog them hoping they would be ok. but as we know now it wasnt, thing is it was northern rock who fell first, and in doing so shortly after uk house prices began to fall. the very fact that just that one bank may go to the wall triggered alarm bells, so now you have the crash of 2008, thing is this is ten time worse than 92

there is nothing wrong with the free market
the transporting of goods from one country to another, but when it comes to people its a little different. take france 2004 to 2006 thousands of brits moved there and the average price of a flat rose by 16.4% and a house by 12.5%. poor germany there poplution as stayed the same over the last few years they dont have a housing problem
But they do have a uk and usa problem. we have spent up so we cant buy there goods anymore.


GB AND BUSH KNOW EXACTLY WHATS GOING OFF THEY GREATED THIS MESS.

wow!

After reading lots of blogs over the last couple of months I am still amazed at the amount of knowledge and info that appears on here! These should be required reading for anyone studying Economics-top of the list should be would-be prime ministers, treasury ministers and bank CEO's!

Keep it coming folks! If only knowledge was a bankable asset....

Would I be alone in feeling that a brand new British bank, with purely British money would find a lot of customers?

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The apparently very attractive terms on which Barclays has sold its Reserve Capital Instruments to the feudal rulers of Qatar and Abu Dhabi suggest that they are indeed very risky. Either that or the directors of Barclays are stupid or corrupt.

Whichever of these three possibilities is true, it is a good reason for keeping clear of Barclays.

# 59

Before you get customers you need capital. All the evidence right now is that there is very little appetite for investing in banks. In the UK, there appears to be just one willing investor, namely the government. Just about all the private investment into bank shares for much of 2008 has come from overseas sources, a lot of it Asian and Middle East sovereign wealth funds. So, basically, you're all-British bank is a non-starter.

Hey everyone-I have to whisper this cos I don't want say something loudly in case it is a figment of my imagination or wishful thinking...draw closer my friends...

I was just looking at MSN money-in their headlines (not Reuters) I thought I saw the following:

'bank chiefs under increasing pressure to resign'

And

'Barclays mortgage rate below 4%'

I looked at another headline, and when I returned to the page both of these had vanished!

I was either seeing things or MSN put old news headlines up!

How peculiar!

@ #11: Once again, a misrepresentation of how fractional reserve banking works. You are assuming that *all* money created through the process is reinvested into Barclays; in reality, it won't be - it wil be re-invested into and created by a wide range of downstream banks. The initial deposit may well start at Barclays, but Barclays itself will not "create 10 times as much credit".

I made a model to help people understand how fractional reserve banking works, as too many people seem to have watched a video on youtube and become convinced that some evil magic is being performed. Try putting your own numbers in (and try a reserve ratio of 100% to see what happens when you "stop the practice of fractional reserve banking!") : https://www.novapoly.com/articles/finance/federal-reserve-banking-model/

and what's this about the government not putting directors on the boards of bailed out banks?

The cynic in me says 'no surprise'

I am however gobsmacked!

Talk about a black comedy.

There are no words to describe this that can be published on a blog!

How much more will GB NOT do before the people snap completely?

Absolutely no chance of confidence in banks returning any time soon. Any chance we can exile him to America?!

While it’s obviously difficult amongst so much gloom, I hope some policy makers are looking beyond the short term. As day follows night and night follows day, at some indeterminate point in the future we will come out of the present situation.

What happens then? Can the world sustain its current financial system based on high leverage that requires growing gdp to keep the ball rolling? Back in the 70s, each $1000 of gdp required about 1.3 barrels of oil. Since then, efficiency has increased and substitution by other forms of energy has occurred, but only to the point that each $1000 of gdp now requires about 0.8 barrel of oil. We can’t escape the fact that growing gdp requires growing oil production. Unfortunately, oil production is a depleting resource management proposition. The 86 million bpd of current production would be expected to decline by about 45 million bpd by 2020. The oil industry will need to speed up enhanced oil recovery projects and start up new fields to replace this amount of decline before even attempting to meet the increased demand driven by ever higher gdp growth. The oil industry will probably be able to achieve the production needed through 2020, but it has to run faster all the time as the current set of easy to find and produce fields deplete. The situation will only get worse as we go out to 2030 and beyond. Electric vehicles you all cry, well yes for a while but the problem then switches to lithium production and the salt flats of Bolivia and uranium supply.

The fundamental issue is that for our current fractional reserve banking system to function it theoretically requires constantly growing output from an infinite raw material availability. It is increasingly likely to hit up against the painful truth that the world is finite and growing output is getting progressively more difficult. Over the past century, the boom and bust cycle appears to have produced arguably about 10 good years for every couple of bad ones (obviously Gormless Gordon was full of **** when he said he’d banished it), but the future under an unchanged fractional reserve system is more likely to have progressively fewer good years and more frequent busts. What is the future for our children and grandchildren if we do not get rid of fractional reserve banking and revert to a more sustainable full reserve system?

Interesting that the bbc website included an article about Columbians rioting yesterday over a fraudulent pyramid investment scheme. At some point, will the average member of the public realise that the current fractional reserve banking system is essentially a complex pyramid scheme maintained and kept running by strong vested interest from private bankers, central bankers, politicians of all complexions, the highly populous Keynesian economic community and the media? And is one that will be increasingly unstable in the future.

Anyone interested in a more rigorous description of the current financial system should read the many books and articles available from the Austrian school of economists on the www.mises.org website. They may be too libertarian and anti-statist for many readers, but their arguments on the theory of money and economic cycles appear logical and compelling for this engineer.

Ladies, Gentlemen and Journalists.
I, as regular readers will be aware, am unconnected with the world of finance.

However, the current situation is and will continue impact my expat life severely for some time so I seek solutions.

As an Engineer I tend to be a reductionist, thus my simplistic question...

IGNORING inflation, the effect of the availability of credit on consumers & other factors..... Would reducing the interest rate to 0.5% pull down the interbank lending rate LIBOR to sufficiently low level whereby manufacturing, commerce and shipping could thus resume normal operation??

If this is a stupid question then I apologise, but to me the economy is too complex to micromanage thus certain elements must go hang and the underlying core of the system must be supported.

"That said, Barclays wouldn't be at risk of going bust if shareholders forced it to cancel the deal - because the Treasury has promised that all major British banks can raise the capital they need from taxpayers."

Yes exactly. Why then can HBOS not do the same instead of being forced into an absurd takeover which will create a market dominating bank which will eventually be required to break up?

Bob,

Can you lend me a tenner until pay day? Go on, there's a good chap.

Barclays doesn't want to take British Government money because it doesn't want the Government scrutinising its books.
Barclays has become an investment bank with a smaller low profit retail arm and if the truth was revealed regarding its derivatives contracts, the bail out required may be larger than UK Treasury could cope with.

Accepting bailouts from Arab Governments is risky. Their aims are not purely commercial. Their overriding consideration is the Islamification of Britain and they will use Barclays for that end. Wait for Sharia Banking (nothing to do with the Koran, just a 20th Century inventon for furthering Islamic cultural expansion) in Britain and Europe via Barclay's branches.

Comment 36 : JayPee28bpr

Yes. What's the purpose of journalism? To inform or to persuade?

If it's to inform, then its central feature must be intellectual honesty. It must override the personal accomodations the writer has made within his own belief system, because these are individual to him. If the purpose is to inform, then presuppositions must be recognised and declared as such, not built into the framework of the argument as accepted truths.

If on the other hand the purpose is to persuade then it's acceptable to treat presuppositions as truths. After all, as long as the readership is aware that the writer is acting as an advocate, not an informant, it can make its own mind up as to how convincing, or otherwise, the arguments are.

To my mind, what is not acceptable is for advocates to pass themselves off as informants. The BBC has no mandate to act as a faux informant and its editorial powers to prevent this should be watertight.

Are they?

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#4, quite right, a 2% discount is not enough to risk being quasi-nationalised, and Barclays are only protecting their shareholders in this. Barclays might (retrospectively) reconsider if they believe today's statements that UK Financial Investments (the holding company for government stakes in the banks) will be ultra hands-off.

This is one step in the game of copy-thy-neighbor where the Americans made a better move than us: they strongarmed all their major banks into taking the government cash, whether they 'needed it' or not. This showed a lot of foresight (more than Brown) as it avoided any excessive stigma attaching to the welfare-recipient banks. Instead we saw cash flowing out of the deposits and equity of our welfare recipients, and into the deposits and equity of go-it-alone Barclays and HSBC. So again, from the Barclays shareholders' point of view it was a good move. Just a dumb move by our government.


However if Barclays had been smarter they might have foreseen how this was all going to play out (and maybe they did foresee it). It is more or less inevitable that the UKFI holding company will take an extremely hands off role, despite daily front page bleating by the media to micromanage this that and the other. The $64,000 reason is the Public Sector Borrowing Requirement and Brown's Tarnished Rule. Ultra-hands off is the only way to ensure the wopping amounts of debt exposure poured into the banks by the government are kept off the PSBR. This is why the wise men have been briefed to make UKFI as hands-off as possible, and why they are constantly briefing the media to this effect. Don't believe a work of what they say, it's all about protecting the PSBR.

RP, get stuck in and blow the whistle on the scam, please.

Bert - when there is only one horse in town ...........

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#70 Brodick1

"Barclays doesn't want to take British Government money because it doesn't want the Government scrutinising its books.
Barclays has become an investment bank with a smaller low profit retail arm and if the truth was revealed regarding its derivatives contracts, the bail out required may be larger than UK Treasury could cope with."

Never mind what Barclays want. The FSA should be going round all the banks checking this out. They should have been doing this a year ago. They do have the authority to do this don't they?

Go on FSA, get into these places and measure the depth we are in. Then gp around the Credit Rating Agencies and ask them how the valued these instruments.

I offer a new term: SIVilitic

Can you put up a warning when site is not working.

thanks

#68 ""...the Treasury has promised that all major British banks can raise the capital they need from taxpayers."

Yes exactly. Why then can HBOS not do the same...?"

It is very naive to think that the treasury would give any bank a blank cheque to keep it going without conditions. The Barclays board didn't like the conditions. In the case of HBOS, the condition for the getting the money would be a sustainable and realistic business plan. None is available apart from the Lloyds takeover. Mr Darling is slightly disingenuous when he says the shareholders can decide. Yes, the present HBOS shareholders can veto the existing plan, but unless investors are prepared to stump up the 12 billion plus which HMG has agreed to provide, the HMG will end up being the majority shareholder anyway. Then it will decide: It already has: The HBOS business model is not sustainable. No one else has come along with any proposal other than "Give us taxpayers money and let us do what we like - we'll muddle along somehow!"

Time to get real!

Have we all been UKFI'd ?

It feels like it doesn't it?

The Barclays directors took this course of action for one reason (and one reason only).....PURE GREED. They simply wanted to guarantee their huge salaries and bonus payments well into the future. Any chump can see that's why.
THESE BANKSTERS COULDN'T GIVE A STUFF ABOUT SHARE-HOLDER VALUE.

I wonder how long it will be before Barclays' HQ is re-located to Abu Dhabi?

Re PSBR:

Its all the off balance sheet stuff,Brown has never stuck to his rule due to the fact that the books do not reflect the true position.

PFI debt is HUMUNGOUS (as R.P. would say) the snag is despite numerous request Clunking Fister wont release the true figures.

Weve asked and asked again.

Remember the mortgaged parking meters,this time its our souls.

Moderators please dont censor this?

#68
When HBOS is gone GB can finish his chapter on the demise of the converted building societies in his book without having to add the caveat - converting was dumb and illadvised (except for HBOS). It is a far better arguement to show the whole conversion process was flawed and irresponsible if all the societies which did it are gone.

It is also probably a reflection that seems generally realised that HBOS cannot stand on it's own two left feet in the current climate. So better it is taken over by a nominally UK bank than flogged to BOC or another soverign wealth funded entity.

With Barclays one has to wonder how badly damaged their balance sheet really is - want to place a bet on them having, after the Quatar/Dubai deal is done they have to go cap in hand to the treasury anyway?
Afterall this will guarantee a large coupon with warrant which insulates the Middle East current investors from lack of dividends and dilution of their shareholding in the event HM treasury imposes the advertised restriction on bonuses/divi's as the price for the cash.
The "sorry we have knackered your investment your highness so here's an idea to make up for it and look the treasury in the UK will pay for it too." approach.

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Back To HBOS.

The answer is Administration and run out the loan book.

Start again with a clean sheet.

Fund the depositors via us all.

It would be the cheapest solution in the long run.

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#81 alexander "Remember the mortgaged parking meters,this time its our souls."

Well - we've had the gold standard and silver standard. Terry Pratchett in "Making Money" proposed the Golem standard. Why not the "soul standard"?

Or will that currency be debased too by people trying to serve many masters?
;-)

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The answer to all of this seems simple to me, but will take time to implement. Never, ever again must any business be allowed to grow to a position where it is "too big to fail".

We need reformed banking laws such that whilst they are subject to existing regulation they must be made easier to set up in the first place. I would love a small local bank looking after the local community needs but plugged into the global banking system, but nobody can start one because the entry hurdles are way to high.

I guess the Barclays situation could be oversimplified and compared to football. What I mean is that there are four clubs at the top of the premier league who have the wherewithall not only to buy all the top players, but also to pay their extortionate wages. In theory, could this put Barclays and HSBC in a position to snap up all the best "Intellectual Capital" in the Banking industry?

The other interesting part of the analogy, which extends to the wider picture as well, is how much success / failure is due to the players (bankers); how much to the backroom staff (back office) and how much to the manager (Board)? Depending on your views on this, are the parties accountable or not accountable all being treated fairly?

What I am getting at here is the discussion around bonuses, salaries, "obscene" Christmas subsidies of £10 tax deductible per person, recognition events?

I guess my own personal view is thus:

Management - those that have signed up for gov't money have effectively said goodbye to any bonus they might have been due. Probably fair though there may be one or two exceptions. From what I have seen this has largely been accepted by all concerned.

Players - I think the press treatment of the "players" is a bit harsh. These are set objectives and I think they are within their rights to expect what is promised to them if they achieve their targets - it seems to me (with the benefit of 20:20 hindsight) that the targets are what was wrong, not the players striving to achieve them.

In terms of recognition, I think it's hard to run a commercial organisation if you are not allowed to recognise and reward success. It has a big impact on morale and morale can be very important - just ask any Tottenham Fan!

I think the Christmas subsidy reporting was some of the worst journalism I have ever seen. At least this blog is clearly researched and seeks to address genuine issues, whether you agree with the analysis or not, but to label a £10 subsidy "obscene" seems red top at best. The £10 figure is largely used since this is the amount that is tax deductible, which implies that this is the amount the government thinks is acceptable.

On that basis, I would expect similar subsidies exist in many government departments so M(S)P's should be very careful when they act outraged at the news. The people this will affect most are those that work in branches or lower paid roles, effectively the youth team - how can they be held responsible for the actions of the first team? It's not like the amount in question will even be noticeable in the final P&L of any big bank.

Regrettably there will of course be redundancies and this is unfortunate for those concerned as well as for the knock on effect on the wider economy. I guess there is also a nkock on effect of all the events that are currently being cancelled by the banks since these events themselves contribute to employment (hotels, catering, taxis, etc).

Can't comment on back office since I am too closely connected but would still welcome views.

In summary, it would be nice to see someone take the time to write a properly researched article on where responsibility lies, what part the press play in this (esp. re Northern Rock), what the big picture is - rather than jumping on the populist bandwagon and shouting "obscene" every time a bank employee has a pint or a burger for Christmas!

Fix the site already.

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#64 tam_fb - nice model good to play around with, is the reserve lower than 10%? Weren't Northern rock at 44times when the government stepped in? I don't know what levels the banks currently are at, are they building to a level or hording for a cut in their assets and so a hike in their ratio? or another scenario?

What happens when you have two levels of fractional reserve? fractional reserve in the federal reserve and fractional reserve in the banks? surely a huge increase in real money to perceived money.

#78
!It is very naive to think that the treasury would give any bank a blank cheque to keep it going without conditions"

That's over simplistic. You haven't understood what the bail out is actually doing. It is not offering blank cheques. It is a Government guarantee with a recapitalisation.

"In the case of HBOS, the condition for the getting the money would be a sustainable and realistic business plan"

ALL of the banks business plans are not viable and that is why they require Government support (and Qatar and UAE are Government funds too), Lloyds TSB included. They are all over leveraged (13 times tier 1 capital, on average). Barclays may not like the British Governments terms, but will they like the constraints the Arabs will put on them either?

Comment 78 : sashaclarkson wrote:

"In the case of HBOS, the [Treasury]condition for the getting the money would be a sustainable and realistic business plan. None is available apart from the Lloyds takeover"

You're obviously intimately acquainted with the workings of HBOS and the future prospects for the UK economy to be able to make such an uncompromising statement as that there is no realistic business plan available to HBOS that doesn't involve joining with Lloyds.

I see no other way of understanding the absolute nature of your statement other than there must be something about the Lloyds merger that holds out a lifeline to HBOS that no other arrangement for the future of HBOS offers.

Perhaps you'ld be good enough to put us all out of our misery and let us know what this is?

#94 "That's over simplistic. You haven't understood what the bail out is actually doing. ... "


Hmph! I haven't understood?

"It is a Government guarantee with a recapitalisation."

But subject to conditions, and approval. NOT "business as usual but here's a bit of cash to tide you over, use it as you see fit."

re sashaclarkson no 87

ZERO STANDARD for ZERO MORALITY IN PUBLIC LIFE & ZERO FIDUCIARY DUTY WHEN HANDLING OTHER PEOPLES MONEY.

#95 "You're obviously intimately acquainted with the workings of HBOS and the future prospects for the UK economy to be able to make such an uncompromising statement as that there is no realistic business plan available to HBOS that doesn't involve joining with Lloyds."

Pistols at dawn!!! :-)

There may be an alternative plan in some fantasy world, but nothing which has been put to shareholders by anyone with cash backing.

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