A bank insurer, not a toxic bank

Hurrah!! I finally got first post!

Can anyone explain why Broon is PLEADING with the banks to come clean on their exposure when

a) he doesn't want anyone to know the answer

b) he should be instructing them legally to do so (and if that needs a new law - which I doubt) to pass it next week!

This is surely not spin to ensure no blame attaches to the architect (Broon) of most of our woes is it??

Where are all the 'new' losses coming from in the banking sector?

It cannot be that they continued to invest in (toxic) synthetic investment instruments as the market for these ceased last year.

So these 'new' losses must in fact be 'old' losses. Now this raises a pair of tricky alternatives either: the banks did not come clean last autumn or: the accounting systems in the banks are so poor that they were unable to properly add up their losses last autumn? I cannot logically see any other alternatives.

In the first case the banks deliberately misled the authorities and in the second case it cannot be acceptable that such large organisation keep such poor records and if so that the management managed their business in such a way as not to know what was going on.

I fear the answer is the second case, and if I am right, what were the auditors doing to not insist that the management deficiencies were made good, and further why were the accounts unqualified as the auditors owe a duty to the shareholders which they do not appear to have met. This shouts Enron yet again and on an unimaginable larger scale.

Nice stuff Robert. Just read your book, some of your sentiments here tie in nicely with what you wrote. It's a difficult thing: should we subsidise, bail-out, buy-up ec. etc. I just wish many of these bank and finance people could be punished. I doubt they will be though. One thing is certain, one way or the other, we, Joe and Jane public, are likely to be the worse of for this proposed insurance scheme. Have you seen this morning, looks like we have another scandal about to break. Some guy may well have been a bit naughty with his investors' money. Looks like Barclays'll have to run to the government soon too. Something they did not want to do. It's going to be a bruising week ahead.

Red Lenin 1:

Congratulations.

This is the precursor to moving to easing the mortgage supply.

I think Robert is rather too locked into / facinated by the financial aspects of all this.

As I have said before the financial system is the servant of the real economy not the other way around. It is not the economy itself (although you would hardly know that from the media and government coverage).

It is a reflection of how we are living our lives and tells us when something is not working or unsustainable. It is telling us something is badly wrong in the real world.

All this proping up of the banks in various forms is all well and good but it does not create demand in itself or generate any wealth for individuals or the country to buy things, even basic things like food and energy. It only serves to cushion the blow. You can not borrow your way out of debt.

As business editor I would expect a broader focus than just the financial markets and banks, facinating though it is business encapsulates much more than that. A bit of diversity would be good in your posts and journalism generally in line with your title.


Jericoa

shut down the markets for a while that'll teach them to be so volatile. we need to quantify the losses to rationalise and fully understand what's going on (cue marvin gaye)

All these initiatives and complicated tinkering on a non-stop daily basis is just causing confusion and thus causes a loss of confidence in the minds of consumers and business. This is typical Gordon Brown. Tinker and dither.

What we need is the "nuclear option" and then a period of stability...thus creating a for recovery.

It is simple. Firstly, temporarily nationalise ALL the UK banks for a 5 year period and then once we are back to growth return the shares to the shareholders. Then authorise lending. Stuff the shareholders interests....the economy is far more important. Secondly, print money!

All we have at the moment is a mish-mash of civil service devised initiatives piled one on top of the other! None of which are working!

Someone needs to press the nuclear button and have done with it!

THIS CONTINUAL GORDY OBSESSION

WITH LENDING AND BORROWING IS

BEYOND ME.

ITS LIKE GIVING AN ALCHOLIC A CASE

OF WHISKY A DAY.

I RUN A BUSINESS WISH IS CASH

RICH TO THE POINT EVERY TIME I

DISCUSS UK CASH DEPOSITS I GET

ACCUSED OF MONEY LAUNDERING,

AS FAR AS I AM CONCERNED THE UK

BANKING SYSTEM IS FINISHED AND

THE BLAME LIES IN THE BOARD

ROOMS,DOWNING STREET,THE FSA &

THE BANK OF ENGLAND.



WELL DONE NEW LABOUR YOUVE

TRASHED THE LOT!!

YOU ALL MUST BE SO PLEASED?

The world's T Accounts (debits and credits) show the bleedin' obvious (measured in foreign currency reserves)

Credits

China, Japan, Germany, OPEC Producers.

Debits

Everyone else (especially US and UK).

Hidden bombs

Every major western bank and financial institution with derivatives. No one knows the true scale of the losses here and may not do so for many years. These are fractional bets on fractional capital and reserves, supported by shed loads of central bank note paper.

Blame Culture

All of us. Banks for greed, politicians for ego, regulators for stupidity, auditors for self preservation and greed, and all of us for enjoying something that is too good to be true (cheap, easily available credit).

Change

The Government. Politicians fear real democracy, i.e. when the people really work together to force change. Perhaps that time is coming. Democracy as we know it is not real, but shallow as change is made for the sake of political expediency. We all know it, but unless we act as a nation decisively, the status quo will prevail.

Remedy

Pay back what you owe, if you can, and look after your own (family, friends etc). Shift work/life balance towards life. Enjoy the smaller things more. Money can buy many things, but can never buy health, happiness and time!

Robert, you have a particular style of reporting, but keep going. It may feel gloomy, but in times like this there are always opportunities to change and make things better. Eventually, life as we know it will calm down. What is more, the REAL trouble will start when food, water and raw materials start to run short. If you think times are bad now, just wait. In the meantime, make every day count!

Robert, you say "the priority is to restore the strength of the banking and financial systems, to stem the remorseless contraction of credit that's caused our awful recession."

Whilst the contraction of credit was the catalyst to the recession, is it not likely that consumers have now recognised that they cannot go on borrowing ever larger sums of money to sustain their lifestyle, indefinitely.

That the economy we have had over the last 5 years has been simply as a result of ever increasing debt; and that without that ever increasing debt the economy would have been much smaller than it was.

That the economy must now shrink to reflect what will be a smaller appetite for debt, as well as less spending on goods and services and instead spending on debt repayment.

So whilst the Government is trying to "stem the remorseless contraction of credit", that in itself will not return us to the position we were in two years ago.

It will be beneficial for companies that need to borrow to invest, but many of those companies will be investing to service a market that is much smaller than it once was.

This begs the question as to whether lending to companies facing a smaller market is prudent.

Gordon Brown claimed he had ended Boom and Bust, in fact the economy was booming, he just didn't realise it.

Now he wants to return it to the boom - unfortunately, for quite some period of time. he may now truly have ended Boom - but bust could last quite a while.

It isn't JUST the fault of the banks. To echo a point John Redwood has been making - when the Government shoved billions of our money into RBS and Lloyds -HBOS did they have any clear idea of the magnitude of the problems? Just how much "due diligence" had they done?

If they didn't really know how bad the problems were then they clearly chose the wrong way of addressing them!

THis has been a disaster of historical proportions for the UK economy and I look forward to an in depth high level tribunal to look at the financial management of the UK in the last decade and the panicky responses since last September.

Why not nationalise the banks anyway? They are not like other ordinary commercial businesses. As we have seen they are too important to the functioning of our society to fail and therefore wouldn't they be better off as part of the state? They have also demonstrated so clearly that they can't be trusted. With enough governetment support they will return to profit and why shouldn't we, as taxpayers, benefit from that.

Why should banks, with their liscence to print money, be privately owned? Why should we see those with money be given the privaledged opportunity to make money from money?

Any thoughts on why the FSA has allowed the resumption of Short-Trading - surely it can only weaken the stability of an already volatile market? Presumably it helped the Barclays share price collapse on Friday?

This comment was removed because the moderators found it broke the house rules. Explain.

Is not the 'poisoned debt' crisis a very finite thing? If we assume that hardly any more 'Ninja' (No Income, No Job) type mortgages were sold in the USA after September last year (ie after the whistle was blown), then we are probably looking at a timespan of say three years max in which it will become apparent what percentage of these sub-prime mortgagees will default.
Most 'sub-primers' enjoyed a year's grace because the 'come-on' first year's mortgage repayments were charged at discounted - and often unrealistically low-interest rates. For many the pain began/begins in year 2 when market rate (and more) rates kicked in. Surely on this basis, most of those who will default will have defaulted by the end of year three, if not before.
By the end of next year therefore, the number crunchers should be able to begin to quantify the true default/risk factor in much of the poisoned debt on bank books and hence quantity the residual value in the bulk of these poisoned debt loans.
We may yet be surprised at the percentage of current sub-prime loans which have in fact NOT gone bad by September 2011, given that interest rates have tumbled.

So Gordon Brown has decided who he is going to made public enemy No 1 and its the banks and not him. Yes they behaved badly, but who's been in charge of our economy for 11 years, did he not see it coming when others did. Was he not the one who changed the regulation of the banks.

He knows very well the public want someone to blame and that someone is the banks. For goodness sake the reason the banks can not balance their books is because all the wrong action has been taken from day one. Toxic debt should have been removed from the banks on day one of the crisis, thats simple banking. Its Browns slow action which is to blame, a bad bank is the key but its much too late now. All these silly schemes he keeps coming out with to prop up the peoples mortgages, and lending schemes for this that and the other, are just putting more pressure on the banks and stopping their ability to re balance their books. So tax payers money keeps being needed to help them out. The amount the Government charges the banks for all these daft schemes and the 12% they charge for the money lent is bringing the banks down further.

The whole future of the banking system and our economy is being put at risk because of Brown desire to keep votes.

Someone needs to point this out to the public before its too late, it cannot be the Conservatives because then they would be accused by Labour of looking after their own, and the public would jump on this band wagon as well.

There is a price to pay for all this debt and at the moment its people who have saved hard and behaved properly with regard to their finances. The ones that have been irresponsible are being propped up by this Government. But the chickens will come home to roost, and it seems the distruction of our country is the price Brown is prepared to pay.

Insolvency of the Population

The way I see it - banks do not lend their own money, they lend depositors money. They are suppose to keep a cushion of capital to absorb bad debts. That cushion seems to well under 2 percent, given capital rules requiring 4 percent, but fancy off balance sheet financing etc gets the banks down to a much lower capital base in actual substance.

The depositors are the only ones who can pay - after all its their money. Options - negative interest rates (run on the entire system), a wealth tax of some sort, kind write down the bad loans directly against depositors balances, rather than through the reserves and capital side if the balance sheet, a tax payer bailout (taxpayers buy back their own deposits through higher taxation).

Hugh political problem - nothing is acceptable, but there is no other way. The depositors pay.

Ultimately, it'll be done by a stealth tax called inflation. Devaluation of both the debts and the deposits in real terms.

But bailing out the banks does not hit the problem, that of insolvency in the population.

Just taking unsecured personal borrowing. B of E figures suggest the average amount owed on credit cards, store cards, personal loans is £30,000 per household that has debt of this sort - half of all households. At 20% interest, the interest cost is £6,000 per year. They have a morgage on top of this.

Thats why nobodys got any money to spend. Peoples total income and then some is already precommitted to mortgages and debt interest. For the last 10 years people have been living by borrowing for ever more capital to spend and to make the minimum loan repayments. No new borrowing means no more spending.

Then there is corporate debt. Then there is the funding gap. Then there is investment, hedge fund and speculators debt.

Can we please wake up here. The population, as a combined group, is totally insolvent.

How long before all trade credit ceases? How long before money (or the promise to pay tomorrow) is not accepted in exchange for goods and services? How long before there is no food on the shelves?

Get the banks to come clean? We know. The figure will be well over £1 trillion, maybe £2 trillion.

The sooner money is printed helicopter style and given to those in debt the better. You then take it straight back off them to repay their loans - it goes to the banks. Then jack up both liquidity and capital ratios imposed on the banks which means the printed cash goes back to the B of E on deposit.

Then ban all consumer debt.

Mortgages maximum 3 times income.

Banks will then not be able to earn an acceptable return on capital - nationalise the lot.

Having fixed the banks, there'll be inflation like we've not seen before. Oh and then a more normal recession caused by global trade inbalances. A bit of a fib. A big recession. But thats better than a collapse of all economic activity.

Countries with deficits (trade) will have domestic inflation and a trashed currency. Countries with surpluses will have domestic deflation and rapidly appreciating currencies. Thats assuming countries don't fix their exchange rates and make things worse. China and others are standing in the shoes of America in 1930. I think a prolonged trade surplus is more damaging than a trade deficit. ie be wary of getting too rich.

Greed.

A pile of paper dollars is just a pile of paper when all is said and done.

Either way, the balance of payments has to balance. Let it go on for too long and the whole lot crashes.

Given where we are now, the consequences are unavoidedable. The world will have to get use to permanently high levels of unemployment. Technology takes jobs. Yet the population grows.

Me. Ive had enough of ranting on for now. Its best off my chest.

I'm catching the first train to Mars.
See you folks. I'm out of here.

Post 12 egrid1

Your comments are very insightful.

The reality is that demand has been pumped up on plentiful piles of cheap false money. Pull the rug on that and demand falls back to it's natural level as does the size of the economy. Once that process stops we'll return to REAL growth not discretionary growth based on discretionary debt.

Living standards are at a standstill or in decline for the next 5 years.

The public sectorwill become far too burdonsome for the private sector to finance. Who will have the courage to issue a 5 year pay frees to public workers? Or even cut the public sector workforce by 10-20%.................or as Digby Jones suggests...........50%!

Straight forward question....when will the Government and the Financial institutes tell this country the truth?........If this country is heading for financial 'meltdown', we should be given the facts and not patronised by people who think we won't 'understand!

While the Mods (who are as Gods) ponder whether I've given too long a "taster " quote, a simple link to an excellent column - A Parade of the Basket Cases...

;-)
ed

What on earth is Gordy playing at now?

Every expert/blogger/pundit that has been questioned or has offered an opinion for the last 12 months has said much the same thing; the banks cannot tell us how bad their assets are because they DON'T know.

If all the "bundles" of toxic assets that they bought had been stamped with a big black skull'n'crossbones they could tell us, but they won't know until things go individually wrong which ones to mark off.

Now HeeBeeG.B. is insisting, publicly, that they tell all; so, the bankers either own up thay they don't know or pull a figure out of the air.

Either way all kinds of ##it will hit the fan, markets will knee-jerk react, currencies will soar/plunge and we will all be even more depresssed than we are now.

Hold on ....... Robert, are you writing Gordon's speeches for him??

The results of this seem like perfect fodder for your next doom-laden article ! !

These plans are all very well, but how can anyone actually place a value on these assets ? And therefore price the "insurance". After all, it was only three months ago that the Banks, the Government, the Bank of England and the FSA worked out what extra capital was needed to safeguard the Banks under a domesday scenario. I guess they got their sums wrong then. So what chance they'll get them right this time.

I'd love to sit in when the Banks' directors are trying to put a value on these things, even assuming they know how many of them they've got. "Your turn to roll the dice Eric !"

There was a story going around this week ( strongly denied by all parties of course ) that Nigel Rudd had stood down from the Barclays Board because his view of the bank's potential losses differed from that of his Chairman. If the two of them can't agree, what hope have the Regulators got ? And as for taking account of the later domino effect . . .

The auditors will presumably just say " no one can know ", and allow the uncertainty over the banks' solvency to drift along.

What an incalculable mess !

I have regularly reviewed the published

accounts of the main UK clearers since

2001.

In my view there have been SOLVENCY

issues since 2002.

IF I COULD SEE THIS (I AM NOT AN ACCOUNTANT NOR DO I HAVE A DEGREE).

WHY DID THE SO CALLED EXPERTS

AND REGULATORS NOT SEE IT????


THERE WERE TELL TALE SIGNS OF THIS SITUATION AS FAR BACK AS 1999.



THERE IS NO QUESTION THAT THERE

SHOULD BE PROSECUTIONS AND

RECOVERY OF ASSETS ETC.

As a taxpayer I'm OK with saying we'll insure the banks so that they can start doing what there modus operandi is, taking money, investing, lending, charging interest, making obscene profits, and enjoying things that the rest of the population can not (million pound houses, boats, private planes, 7 star hotels, etc. etc. etc.) BUT they better bloody well remember that they are forever indebted to us and what it the idea of saying we might loose money on this deal, write the contract to make sure we bloody don't, who is doing who a favour here?

RE WHITEHALL CIVIL SERVANTS


A CULL OF 60%

NO SALARIES OVER 40K

WE ARE ALL PAYING TO KEEP THIS LOT IN CLOVER.

REDUCED PENSION BENEFITS.

State insurance seems a much better option than setting up a bad bank and converting the preference shares to ordinary shares would also be help free up additional lending. However, all this just shows how quick moving the credit crunch situation and governent's response to it needs to be. The Treasury which always takes its time, looks at things in depth, weighs up the pros and cons seems always to be behind the times and playing catch-up

Incidently WHY DO CERTAIN BLOGGERS FEEL THE NEED TO POST IN CAPITAL LETTERS, ESPECIALLY WHEN BRAGGING ABOUT THEIR ENORMOUS CASH ASSETS? You know what they say, HUGE CASH ASSETS, tiny.................

Cos what this country really needs is another organisation setup like AIG but just on a bigger scale ! cos THAT WORKS... Darling/Gordon can sell CDS swaps all round....

This is your life, good to the last drop it doesn't get any better than this, this is your life and it's ending one minute at a time, this isn't a seminar and it isn't a weekend retreat, where you are now you can't even imagine what the bottom will be like. Only after disaster can we be resurrected, only after you have lost everything are we free to do anything. Nothing is static, everything is evolving, everything is falling apart

25 ac

You dont need a degree or smart bean counter to smell bull all you need is a nose. You do make me laugh.

: )

Post 27. Alexandercurzon.

Spot on!

It will have to happen...and soon.

By Xmas there will, including me, be another 1.25 Million unemployed.

Let's make the public sector share the burden....

So let start by culling 500,000 public sector non-jobs..........like the one I saw a few days ago.......a part-time, job share arts development officer!!!!!!!!!!!!!!

Then with these multibillion pound savings lets give the private wealth creating sector massive tax and regulation cuts to spur the growth of REAL jobs in the year ahead.

What we need is Thatcherism on STEROIDS given the magnitude of our economic problems which are going to crashing our economy day by day......and which will carry on for many years until someone launches an ECONOMIC revolution Thatcher-style!

Some sense.

Thank you to John from Hendon, Jericoa, BankruptbritainRIP, Prisionernumber6 and egrid1 for their contributions to this discussion.

If the penny has not dropped yet regarding the extreme gravity of the current worlds predicament then we are truely stuffed.

You just have to have faith in the policy makers - there is no one else!

But they seem to be delaying - going through steps that cannot work, steps that are politically acceptable.

Avoiding the necessary and politically unacceptable.

Hey. These trains to Mars don't seem to run on time. Fix the transport system. Something else for the to do list.

Brown urges banks to 'come clean'

It beggars belief. It should read

Brown orders stable door shut as horse has bolted.

WHAT HAVE THEY BEEN DOING FOR THE LAST YEAR SINCE NORTHERN ROCK?

I really don't think they know what they are doing.

Wouldn't you have thought that at the time of NR they would have realised that before offering tax payer money to any other bank they would have insisted on full disclosure of the risks and gone through the books? THIS IS CALLED DUE DILLIGENCE!

At the time of NR Darling said "it has a strong mortgage book" At the top of the biggest housing bubble in history.

The only explanation is they really believed their own publicity that we would not suffer recession.

Every forecast this government comes out with turns to dust within months. They are completely and utterly incompetent.

They have to go!

10 ac

You might think you have to move large amounts of money (even around the UK let alone over national boundaries to) be accused of money laundering. I can assure you this is not the case. Everyway you turn there is red tape and and concern with crime and terrorism.

GB is surely right in wanting the banks to come clean on the true scale of their liabilities.

And he will, no doubt, lead by example. To set a good example, his government will come clean on the true, mark-to-market values of:

a. Future public sector pension obligations
b. Future old age pension obligations
c. Future PFI obligations

Anything less than full disclosure would, in this situation, represent total hypocrisy.

I am very sure he will come clean. (Woops! Just looked out of the window and saw a pink four-legged creature with a curly tail fly past...... )

Although in principle I agree with most people on here about the terrible state of UK finances I think we are probably missing the most important point.

The vast numbers quoted regarding the cost of 'bailing out' or 'recapitalising' financial institutions does not represent any tangible pile of money that actually exists anywhere. The government can pull out any number it likes, they just need to tread a fine line between a number which is 'frightening' in its implications of how bad the underlying financial state of Banks are and which could unsettle the markets and a number which is deemed insufficient to deal with the problem.

As long as people believe that this 'money' actually exists and can be put to work then the Capitalist system will endure, contrary to what a few nihilists on here think (or hope probably). It isn't in anyone's interests to call the Governments bluff on this therefore they will in all likelihood get away with it and the recession will not be as deep or prolonged as being forecast.

The much derided Northern Rock depositors who were not quite as cynical or politically motivated and therefore demanded to be 'shown the money' and are blamed for setting the banking crisis in motion in this country are a frightening example to Governments everywhere of what happens when this belief system breaks down. That sort of thing just cannot be allowed to happen again, thus the 'bail out'...

Public sector will not have to take any flack. NOT until after the next election. They will want to protect their jobs, pensions etc. Nu Lab is hoping they all will vote for GB to continue the trashing of the country.

Soon everyone will work in the public sector, have houses owned by the state, benefits paid by the state. That is until there is no one left out there to pick up the tab.

NuLab can call a Nationial Emergency and ban elections.

12% is not expensive for the Prefs, given the state these banks are in.

For example, the RBS 6.6% issue (nominal $25) closed yesterday at $10.80, which gives a yield of 15.3% - and that's with UK government support ! (It's been higher - over 30% in October)

To swap debt for equity is to give them a(nother) massive subsidy.

Isn't it about time that Gordon Brown came clean as well?
What is the cost of Public sector Pensions?
What is the cost of PFI deals?

All this shambles happened on Gordon Brown's watch as Chancellor. He should go and take his mates with him. Its not that he is a do nothing chancellor, more that he has been a do everything wrong Chancellor and Prime Minister. His irresponsibility and incompetence is breathtaking only overtaken in size by his inability to see how bad he has been for Britain.
Welcome to the world of ZaNulabour.

hmmm!

Toxic debt was rolled up with good debt, and the value used as security or sold on at a specified general value. Bit like giving someone a bundle of notes backed with a couple of tenners and saying it's £100, but really just £40.

Spoof played by bankers!

Now the good debt is gaining in toxicity as defaults and plunging property prices hit the original package, it's total guess work as to the value of toxic debt held! What is £100m today could well be £200m tomorrow!

Even if the £100m is insured now, then claimed for, what happens as the good stuff goes bad too?

Effectively, insuring this debt means the debt is paid off to the bank. So again, surely this means the government would be better of paying every defaulted mortgage instantly! Why not go one step further, and pay of the mortgage of every person or company in arrears because of redundancy or company collapse!

How Bloomin' ridiculous!

Put the money in people's pockets through massive tax cuts-then there will be more money in the system altogether!

And while you're at it, Gordon, get those investigations and prosecutions going to restore confidence (just like the USA).

Why not force all the banks etc to include their debts in their balance sheets and stop this off book rubbish! Do the same yourself with our nation's finance and TELL IT LIKE IT IS!

Won't happen, I know. But a great thought!
If GB did this he'd have to call an election as the country would be in absolute uproar! Better we know facts than ponder on rumour

Off to make some seriously yummy ice cream now!

Citygambler,

" As long as people believe"

"
that this 'money' actually exists and can be put to work then the Capitalist system will endure, contrary to what a few nihilists on here think (or hope probably). It isn't in anyone's interests to call the Governments bluff on this therefore they will in all likelihood get away with it and the recession will not be as deep or prolonged as being forecast."

#25 and #27ac

Simple, they could not see it because they ARE professional accountants, experts and regulators.

They are incapable of seeing the woods for the trees. What kind of person becomes an accountant do you think or a government regulator?

Well rounded, dynamic, grounded people who learned thier trade from the bottom up and engaged with the real world and real people of all classes?

or

Top of the class graduates who came straight out of academia, looked around to see what payed the best, offered the most security and a gold plated pension as long as they kept thier heads down. They then spent their careers crunching the numbers and not rocking the boat ensuring the numbers they came up with reflected their bosses ambitions.


Jericoa

Media headlines feature Brown demanding that the banks " come clean " on the amount of bad debt they have. This from the man who either cannot or will not tell the British people exactly how much debt this incompetent government has accrued in the name of the taxpayrer. Each and every day he comes out with a stupid initiative or statement designed to take attention away from the state of the economy. Everybody and anybody is blamed for the state of the country's finances from our own to the rest of the world's finance houses. No doubt foreign banks were the first to explode, but Brown had already sown the seeds which led to the disaster in Britain's financial sector. The only way confidence can be restored is for a general election to be held and for this awful government to be consigned to history.

Barclays announcing yesterday that it will make a profit of more than £5.3bn in 2008 when it announces its results on 17th Feb doesn't strike me as the results of a bank that either wants or needs any UK taxpayers money. Not only that if you read the press release Barclays also says that its key capital ratios will strengthen.

My expectation is that HSBC's results will also be similarly strong.

Robert - you have mentioned Barclays statement in your article. Unfortunately virtually no other commentator has in any reporting I have read today. As most of the media reporting hitherto about the recession has been hysterical often by people who have never been through a recession before, we should not be surprised that yet again the facts have been ignored.

This recession is a function of the economic cycle. One of the impacts of an economic downturn is that it weeds out those businesses that are sound, quality well run businesses from those that are not. In the latter category some will fail. Banks are no different.

37. penshawdave:

"Public sector will not have to take any flack. NOT until after the next election. They will want to protect their jobs, pensions etc.2

Whilst I fear you may be right, there could be one significant exception - local government.

There are persistent reports that local authorities may be about to cull 7000 posts, perhaps concentrated in those authorities which were daft enough to have money invested in Icelandic banks.

Welcome though such cutbacks would be, my fear is that the cuts will target front-line workers rather than, as is surely more desirable, back-office staff.

"But it seems unlikely that this will be a very popular policy. Readers of this blog have repeatedly asked why we as taxpayers should bail out the banks for the consequences of their greed and recklessness. The question I'm always asked is whatever happened to the old-fashioned idea that we should pay for our mistakes?"


VERY WELL SAID INDEED RP - proof you DO read the feedback.


THANKS TONS

GC

Been reading the excellent blogs for 3 or 4 months now and decided to post.

Surely banks need a whole new model now and 1080 million of foregone dividend payments should not allow 27 billion of loans!? Otherwise we'll be right back where we started with more toxic debts a few years down the line.

Gordon Brown is quite right in asking the banks to own up to everything, but the regulators should be monitoring this on his behalf all along! The regulators need to get tough on regulation and remuneration, bankers need to take significant salary reductions (perhaps based on the value of their share price or asset value reductions so they earn a fair wage like the rest of society) with bonuses clawed back until the banks address their toxicity issues. Insurance policies, much as I hate them, sound a better way than a toxic bank. The banks need to be responsible for their toxicity not just palm it off. Lets see the bankers sitting this out for the long term like any other person would have to and showing some responsibility for their actions. And while we're at it lets put an end to all this short selling malarkey by banning it completely. We need to give industry as a whole (including banks) a fighting chance and all this paper based speculation from people who haven't got the assets to put their money where their mouth is by actually buying shares. They would be far better putting their (likely to be) mildly intelligent brains into action for something more worthwhile for UK society - like these much talked about future industries that we could be leading the way in.

An outbreak of common sense at the treasury – Bwahahahaha, good one Roberto!

36 citygambler

Business is based on trust. The one thing you should never do is jepodise trust or there is cessession on business. That is exactly what they have done. The point is there is business pending, it is hibernating. The longer this panto goes on the later the restart and inevitably the greater the damage to those that fail to hibernate alongside.

Generally - I would like somebody to explain to me how the public sector can survive, other than via means testing in its current form. The economy has to contract therefore the tax take has to contract. It may be deferred but it has to happen. Pressure will result on fringe jobs. Funds will be cut to LG. The private sector will move to avoidance of business rates wherever possible, the trend is already there, reducing tax take further.

Really? In a pig's ear will the banks play, they've not done so until now despite the Chancellor's threats and they won't do so even at death's door. They've lived with 800 years of having the whip hand and they're in total denial that the world's changed, they'd rather play Lear and bring it down around their ears than be men and realise they lost. You've seen my logic for why they're not lending, it's a dissociation between the compensation and the front-line lender, amounting effectively to a subjective junk-bond rating on HMG at that level.

This weekend's meeting is the Last Chance Saloon, every single throw of the dice thus far having come up snakes-eyes for the above reason. The thought the dice are loaded might not have entered into Ally's noddle, however, and that wonderful circle of failed bankers advising him on how to dig his way out must be a joy to behold. The only people he forgot to invite are the IMF, and that might be very costly to him in the long run.

The idea of UK Financial Investments making an offer to Royal Bank gives me a peculiar vision of games of round-the-table whiff-waff in my younger days, as we see Sir Philip dashing from one side of the table to negotiate better terms with himself on the other side, while his old chums from Lloyds and Sir Fred ye Shredde heckling from the sidelines. In the old days they used to stage a tourney afterwards so anyone who made real enemies could have a convenient accident.

Alexander, were you referring to the Moderators point or the real payload of my earlier comments? How Sir Philip undid the regulatory regime before taking the above position where he can play all ends against the middle, with the entire knowledge of the Men of Straw?

Now, #17, whatever makes you think such practices as the Ninja operation has finished? Absolutely nothing has been done to tackle the underlying causes of this crash, and now the short market has been reopened they'll sell the skivvies off your bum given half a chance. We already see what's been happening to the supplier of most of the said skivvies...

Robert, you asked about whatever happened to the old-fashioned idea we should pay for our mistakes? The average citizen owes 10k in his own right, making the citizen debt around 250 billion. By comparison, the banks have swallowed soemthing like three times that simply to plug their wounds so far, and that's clearly not the end of the story yet by a long stretch. So don't start preaching to people who were offered credit by ostensibly clean retail banks who failed to disclose they were packaging it up for resale through the CDO market, and who are now pulling the plug on people who have no bad track record simply to cover their own bums. The thought they could sell the skivvies off their own posteriors would, however, be the cream of the crop... Personally, I think its time their details were submitted to the CRO.
That being said, there's a deal of repayment to be done, and it seems to be starting, to the angst of the High Street. You can't use the same doish to pay down debt and spend it on the High Street, so Ally's got to make up his mind who he's going to support, retail or electors. Either way, his puddn's dry.

Still, not to worry, Tom McKillop, having been stopped from making a right McKillop of RBS, can now concentrate on planting the seeds of recovery in his other post as President of the Science Council, if someone could teach him which way's up. At 65, it's time he took up gardening.

I wonder if Plodder still thinks being PM is the 'best job in the world'.


Pity he's not the best man in the world for that job.



Pity so many folk are losing their own jobs (which may well not have been the best jobs in the world) and chucked on the scrapheap.


Funny how some banks don't want to lend, that's how they make money innit?



Repossessions and foreclosures up and nobody came..


GC

That seems a very valiant effort Robert, though I hardly believe that Crash will follow an unpopular line. A very stark outline, but I fear that efforts are once more travelling faster that Crash and Insolvent Ali can comprehend in their war room.

Since this is just part of the discussion are we to be lead to believe that there is a Third way?

If we change the ideas of accountancy such that these toxic debts can be ring fenced and the banks can write them off over a number of years why can't this be then applied to the rest of the economy?

Surely if these same rules had been applied to Woolies it might well have managed to trade it 's way out of its difficulty and the initial "insolvency" would have been a dire wake up call to the management to change direction.

Under these rules will anything be allowed to go to the wall? Or just anything but a bank will go?

The bad investment decisions are the problems. the people who made those decisions are still not accountable, and thus the process must include an extraction of the actual pure assets to allow continual trading and restore confidence.

Meanwhile a bank has no intention of trading in an atmosphere where you don't know who is telling the truth. The banking code needs to be introduced, and it might be as simple as introducing "my word is my bond" and a simple straw poll will quickly indicate the current reputation of anyone who would like to be termed a "banker".

One of these will be an extension of the timetable for Northern Rock, the fully nationalised mortgage bank, to repay what it's borrowed from the Bank of England and the Treasury. This would put less pressure on the Rock to shrink the amount that it is prepared to lend.
Which at a time when the problem for the economy is a shortage of credit sounds a bit like an outbreak of common sense at the Treasury.

Another much more cynical way of looking at it is that the current Business Plan is flawed

Brown should send in the fruad squad to each and every bank that the government has a holding in to find out what the hell has been going on.

It's his job to ensure that any corruption or mis-management within the banks that the government has ploughed money into is stopped.

As for Evan Davis report on clever people making mistakes..........................Mr Davis, it's called "obsene greed" thats all.

Even if the government manages to stabalise the banking system in this way (and stabilising the banking system is very necessary) and puts them in a position where they are able to lend, how are they going to make them actually do so?

With such huge ecomonic uncertainties about the business environment many businesses has become high risk. The business I work in (consumer electronics) can't predict its sales and margin figures for 2009 with anywhere near the certainty it has done in previous years. We don't know how big the market will be anywhere in the world or how much changing exchange rates will effect our competitiveness against foreign competitors.

So to a bank we are much higher risk than at any time over the last 10 years. If we ask a bank for a loan its computer will say no - well if the computer has any sense and is trying to protect the interests of its shareholders, it will say no.

I think many businesses are in the same position.

Commercial banks should not be lending to the many newly high risk customers until the business environment stabilises. It would be bad banking to lend.

If the government intends to underwrite new loans to the newly high risk customers it will need to control (in quite some detail) the remuneration policy of the banks (if the banks don't stand much of the loss but can pay bonuses upfront they will lend to anyone - see bank lending policies in 2006 - and the tax payer will pick up the huge losses).

If the government is not prepared to intervene in the remuneration policies of a commercial bank but still wants them to lend to high risk customers with government guarantees it will have to set up its own bank / nationalise one.

However the banks do need stabilising for when the economic environment does improve to be ready to lend. I don't think that will be anytime soon. This move won't prevent the Depression.

Robert

can you ask what safeguards will be in place that will stop the banks forcing these dodgy assets to go bad so as to claim the money and recapitalise themselves.
I would not trust this bunch of halfwits to negotiate a restaurant bill.

They have already been taken to the cleaners by the banks handing out billions when no even knowing the extent of the risk. They are only starting to ask the banks to come clean 1 year after Northern Rock.

It’s like taking candy from a baby dealing with Brown.

The banks dont know who is holding the toxic debt? Gerraway!

You can bet your bottom dollar that the minute I decide not to pay my self-certified HBoS mortgage (fixed-rate for another 12 months you mug you -I thought interest rates should have gone up not down) my bank would know exactly who had to cough up.............

the flaw in the argument is ......how do you insure something you dont know the value of? how do you decide the risk/premium? Once again GB comes up with a headline grab with little chance of it actually working, just like every other initiative he has come up with in an attempt to hang on to power no matter what!

As for asking the banks to come clean....what a joke, he can just ask his treasury mates just to look at the due diligence carried out before the billions of taxpayers money was given to the banks.

Re AC and money laundering, i have been with the same bank for nearly fifty years yet i still have to fill out a form when transferring money, either from france or to france, they must have thousands of these pieces of paper..... and how does this stop laundering? if i really wanted to launder money i would hardly transfer it from one of my accounts to another!

#42
If you'd followed our posts when we covered this ground months ago, the Regulators are headed by failed bankers whose sole purpose in life appears to be to cover their posteriors.
I have now added to that thesis the deregulation of regulation in the form of Section IV of the Regulatory Enforcement And Sanctions Act, which gives regulators carte blanche to be asleep at the wheel. An Act created by Flash using Hampton as his puppet, aided and abetted by a certain Will Straw, whose relationship with Jack Straw's eldest one can wonder about.
To this we can add a number of jobs added to reinforce the FSA supervision, given out to a handpicked crop of recently-dismissed bankers. They don't pick the best, but the worst, for this job...
No sane man could dream that lot up if he tried. The trouble is, someone out there did, and we're going to pick up the tab.

At the end of the day, therefore, the ultimate answer to RP's question why shouldn't we pay for our mistakes is that these weren't our mistakes, but those of a Government which is acting without any kind of mandate. Nobody asked to be saddled with the Bank debt boosting their personal average indebtedness from 10k to upwards of 50k, simply to preserve the shell of a banking system whose fundamental rottenness has caused it to collapse internally, and much of which relates to debt not incurred in this country but in the US. My original thoughts of collapsing the entire thing into a single Public Retail Bank now turn to starting said PRB from scratch, so it isn't saddled with the wreckage of the past.

And while we're on the subject, of course the corollary is that we'll end up owning large chunks of God's Own Country. Perhaps we should exercise our rights and reclaim our property...should be an interesting exercise in seeing how many times they've sold us the Brooklyn Bridge...seems only just after we sold them London Bridge...

"The question I'm always asked is whatever happened to the old-fashioned idea that we should pay for our mistakes?"

Wouldn't it be wonderful to have an answer from someone?

The sooner action is taken, people are held to account the better. Many professionals are held to account for their inability to perform (police, medics, military, nursing, lawyers etc).

Why not those in the financial industry?

I have the distinct impression that the toxic debts are so tangled that no one knows which is which! Until the bad debts can be easily identified it is hard to see what can be done to sort them out.

Hopefully interest rates will start to rise soon to encourage saving. If not I can see issues ahead!

Well that's that, then. It is only a matter of time.

A few points:

- Attempts to correctly estimate losses will fail.

- The loss threshold will leave the bulk of losses with the taxpayer.

- The conversion of the taxpayer's stakes from preferred to common equity is a gift. No "outflow" or "burden", no repayment. Was this a bait-and-switch all along?

- If the taxpayer is to subsidise credit creation, why do it through existing banks? Why not set up new "clean" banks with no legacy debt and IPO them? But of course - legacy powerbrokers.

Time to exit gilts and re-enter when they yield 15%.

I do not see how you can have individuals in trouble failing on one system and have another sweetened system for multinational businesses - in trouble due to their poor judgement - without subsequent public discord and a resultant lack of trust and suspicion. It may well be the 'right' thing to do but it will have repercusions. I would personally look at the behaviour of these businesses when looking for a purchase or service. I point blank will not be dealing with some of them.

Looking at matters, the Wall's accelerating. I was expecting it to hit in about six weeks' time, HMG reckons three weeks. They're in the markets and I'd tend to believe them as they can see what the banks haven't told us.
Reviewing the Thunderer's write-up on the first night of BBC's Hole in the Wall, I note that they write off the double-speed Mega-Wall as Ducking Stool Maths. That reminds me of something here...Time to get into position, folks - but oh dear, that'll send the Wall into overdrive as a proper run on the Banks ensues.
And of course, the most worrisome thought is that there's another Wall lining up down the track...
Elections in April, anyone?

Isn't it time the government turned its attention to the initial cause of the credit crisis - the falling values of assets upon which 'toxic' loans or securities are based...the plummiting domestic housing market?
One of the few examples worldwide of a government initiative that has delivered tangible sucesses is the Australian government's modest (~A$10bn) stimulus package (admittedly addressing [so far ]more modest issues) which included a doubling or tripling of an existing government grant to fist time property buyers, to A$14k or A$21k (~£10k) for purchasers of new-build property.
The package appears to have stimulated the market to the extent that house price falls have been reversed, and the market stabilised.
In the UK this would help put a floor under mortgage related 'toxic' debt, and improve confidence in the banking sector by reducing their exposure to further negative equity. It benefits the wider economy by engendering confidence in the housing market generally, encouraging those many tracker mortgaged homeowners in secure employment (public sector, and other downturn-resilient industries) to spend some of the money saved from reduced mortgage payments, boosting the retail sector. Increased activity in the housing market also prompts expenditure in furniture, appliances etc.
It allows hard pressed housebuilders to offload some of their stock, improving their liquidity, and bring forward the day when new developments are considered, boosting the beleaguered construction industry, and addressing a fundimental and growing shortfall in housing in this country.
Given the previously unthinkible interventions in the markets the government has rightly already made, manipulating the housing market to attempt to stabilise it (but not return it to significant growth) would appear to bring benefits to the banks, public confidence, homeowners, home-seekers, and the housing and construction industries - a far better targetting of resources than some previous initiatives.

55 - TimBJones

Excellent piece full of common sense

The recession will take time to work through. Eventually confidence will return to people and businesses and the economy will improve - that process needs to happen, the lessons of history, in this respect, need to be learned and followed.

Yes Robert, the public DO want to know why these incompetent and greedy people should not pay for this disaster?
Otherwise they will do it all again in 30 years time, making themselves multi-millionaires in the process.
All those lottery-jackpot bonuses were paid on the premise that the banks were making big profits.
Wrong...they were brewing up huge losses.
The bonuses were paid under false pretences.
How do you explain it to a redundant person or someone with a destroyed pension when they see an upper-level financial worker cruising around in his Ferrari on his way home to his luxury pad?
What injustice. These are the people responsible for the wreck.
Property-based madness must stop.
Fuelled by hopeless bankers, it is destroying us.

A bank is a glorified collection of clients money in separate accounts, if the government could guarantee every ones cash deposits could be transferred into a 'clean bank' we would be quids in. Debts and mortgages need consolidation into single accounts to be offset against savings with variable repayments allowed based on circumstances.

62 werrington silent

I tend to agree it is dodgey. You cannot accurately value losses related to a future market. Remove the need to project values or carry losses to a date when the losses can be quantifed in a recovery position and the simple recourse is simply to declare a loss. If the banks have bought coupons at too high a price to stay afloat that was their mistake. The government continues try to both to intervene but at the same time protect taxpayer money. It cannot do it. The next step is to intervene and not to protect taxpayer money via some fixed deal. But the only way this can be done is to take control of the business. Better to let fail and buy from the administrators. I know it is all very clever and whatnot but at the end it just a game of monopoly.

40, TigerJayJ,

Excellent post and I agree, why not just pay the mortgages off?

Robert, why not just pay the mortgages off?

TO KEEP THE PONZI SCHEME GOING, and to further ENSALAVE the population !!!

Dear fellow blog-trotters,
Please get a few things into your heads.
1 Whether you like it or not, it is almost a certainty Gordon Brown will remain in office for as long as he can legally.
2 This Government will not disclose all the “off balance sheet” liabilities and the next lot will want to but when they discover how deep the hole is they won’t be totally open either.
3 The banks cannot come clean for a number of reasons not least being that they cannot value the so called toxic assets and they cannot value them at nil against cost, as the system really will collapse.
4 Inflation will rise
5 Interest rates will rise
6Taxes will rise
7 No one will be held to account
8 When you take Santa Claus out of his red suit, you will find it was Gordon Brown in disguise.

Folk on here keep on talking about bad debts, and how they can never estimate what they will be. This is true as the bad debts are a function of time, this caused by joblessness and resultant repossessions.

Why not underpin the housing market Robert, by buying houses and renting them back to the occupants? Its incompetent what’s happening, as more people are made redundant, repossessions will rise as will the bad debts!

The government are going about this whole thing the wrong way, and did I mention the JAIL?

You know, for folk who commit FRAUD !!!

64 rahere

GE odds heavily on for Conservatives. Last minute in 2010 fav month. The bookies have the best network. Cannot see any desire by brown to call an election. Surely wants to sweeten history as a trier against the odds.

I wish Brown would get a perspective on things.


GC

Real words from rela people( Tony Blair!)

https://www.ft.com/cms/s/0/b095c3ee-ddef-11dd-87dc-000077b07658.html?nclick_check=1

On the subject of Mr Brown's demand that the banks "come-clean", perhaps Messrs Cameron and Cable should start forcing HMG to do the same on its PFI and other liabililities, including public sector pensions and those that they have manufactured by trying to underwrite various Banks in recent months? This should be in the public domain ahead of any election so that the country can see what its leaders have created.

G Brown is a one-man disaster area, and he should not be let off the hook for one moment from the mess he has dropped us in.

The logical conclusion of discouraging the default of bad debt and acceptance of losses and bankruptcy is people and companies spending all disposable income after necessities and taxes on interest payments. Long before that point is reached, there is no aggregate spending power to make an economy viable. No demand for exchange of goods and services, just the basics. Then the pyramid breaks.

That event horizon is now coming into view.

New credit demand is dropping, the pleas for assistance are from the already indebted out of their depth. The unburdened are cutting back out of self-preservation, having seen the writing on the wall. Much economic activity is no longer called upon, yet there is denial that capital injections will turn around lack of trade and fixed cost cash burn.

Most disturbingly, the government is treating bond markets like a bottomless money pit - issue interest-bearing paper and they will come, and the taxpayers as the same - show them the coupon and they will find enough cash in their pockets.

It will not work.

There is insufficient surplus globally to fund this (stuff) when the base accumulating interest is prevented from contracting.

"For those working around the clock this weekend at the Treasury, in Downing Street, at the Bank of England and at the Financial Services Authority, the priority is to restore the strength of the banking and financial systems, to stem the remorseless contraction of credit that's caused our awful recession." - Robert Peston

They don't see it. They want to add to the pyramid now. They don't see how it looks extrapolated.

#3 Absolutely right.

It is about time we stop calling these people stupid, brain dead or anything similar. They are not and it is all part of a ploy to rob the taxpaying slaves. It is so obvious now we are on the brink of massive social unrest, but that is exactly what we are being set up for to implement martial law. Same with the US.

Obama is in place to keep in check the most likely group to protest/riot as the people will not like the decisions he is about to make.

Your point John is as good as a gold plated, index linked, civil servants pension...
Enron, Arthur Anderson, Deloitte, Cerberus Capital Management. One big incestrial happy finance family. There are more to include but what is the point. It is quite clear to anyone not on the payroll who takes the time to look. This information online wont be around forever, even more so as we expose the fraud.


A superpost is in order of a compiled list that this government has had a hand in doing that has landed us where we are today.

There really isnt that much time left.


Further reading.
Bernard Madoff. Ronald L Ellis. Theodore Katz. Gabriel Gorenstein.

More further reading.
NHS is a Ponzi scheme.

Robert,

You wonder why the Treasury isnt knocking the the bad bank idea on the head. Could that be because they are telling the Telegraph ( see 17 January edition) that it is their favoured option. The Telegraph speculate that a potential compulsory seizure of assets could be on the cards to facilitate this. The PM and his office make angry noises about bad bank loans and major forthcoming losses. Now the Government are part owners and talking to regulators, they might be privy to some pretty detailed stuff.

Barclays' shares take a big tumble with large volumes traded and they are forced to make an extraordinary impromptu disclosure to avoid them being coshed further in the markets and left weaker. They didnt take the Queen's shilling last October.

I am no apologists for the Banks nor do I own their shares, but what happened to the need for an orderly and fair market environment for investment in these securities, especially when the Government can brief here and there as to what they might or might not do which could have fundamental outcomes for the businesses involved.

If there are concerns about undisclosed liabilities on these 'toxic' assets ( and there must have been full disclosure last October when the Government sunk billions into them ) , why not suspend share trading pending investigations.... I forgot something here - the need to protect the taxpayer's equity. The mess gets worse.

Regarding the cap for the insured risk, how will we know whether the capped insured liability will restore confidence, if more bad stuff comes out later ? The board members of the Banks wanting or forced to take the insurance should individually sign the disclosure warranties fully identifying all the bad stuff on the 'insurance' application form.

4. doctor-gloom

There was a time when these people would have been hung in the local square.

#72 regarding repossessions..

And what happens when they can'teven pay the rent? Chucked out of course like a slum tenant. No. I say put a stop to the repossessions altogether!

And yes there will be the usual righteous squeals of horror, outrage and indignation to my view, along the lines of the usual: "Why should I, who have always been prudent with my finances subsidise irresponsible people who have been greedy and overstretched themselves.?'


Oh - hang on, greedy and overstretched, that remind you of anything under discussion here?


Banks - headline grabbing stuff!!!!!!!! Repossessions and foreclosures, personal misery, just not newsworthy, yes very unfortunate blah blah so sorry, nothing we can do I'm afraid. Ho hum.

GC

BankruptBritainRIP post 9 says print more money - great for those on low incomes and with savings who will see their money devalued by inflation. Tried before in Zimbabwe and Germany with bad results ! New money should be created by government, not by private banks through debt, say increasing at 3% per year. Existing money then holds value, and faith can be restored in saving, pensions and buying shares. Real wealth can be created to replace the casino economy of recent years. House prices to come back to 3 times income, then overall debt is hugely reduced and housing is affordable. Housing need not be expensive with nearly 1 million empty properties in the UK.

"77. At 4:01pm on 17 Jan 2009, WerringtonSilent wrote:

(snipped lots of good stuff)

. . . . Most disturbingly, the government is treating bond markets like a bottomless money pit - issue interest-bearing paper and they will come, and the taxpayers as the same - show them the coupon and they will find enough cash in their pockets.

It will not work. . . . ."

No - it won't - why can't they see this?

re #3 'Where are all the 'new' losses coming from in the banking sector?

Well, as the recession bites, 1) more businesses go bust and 2) mortgages that were once 'prime' become the new sub-prime.

It's not rocket science, and it will get a whole lot worse the longer the recession goes on!! Remenber, the initial banking crisis arose before we were even in recession.

Hold tight everybody.

72 java

Takes money they do not have.

The issue is what can be done to give confidence. There are steps but the scenery has to fall down a bit first. The widespread forecast of a 10 percent fall in house values in 2009 means that it will happen. The forecast of a lack of credit in the system in 2009 means it will happen. Next quarter interesting. End of quarter plus end of financial year. No hiding place. No financial instruments to play a tune on. Left with a barbers quartet singing givus a dime.

I think it is time to ban short selling for ever, it brings nothing but misery and why should anybody gain from hype, manipulation and gambling.
Send the short sellers to the bookmakers.

Yet more fiddling and the problem is'nt fixed, in fact it looks like its getting worse.

Wondering if fixed in reality means reconstructing the credit bubble that's maybe generated most of our economic growth for many years?

Also given the debt burden is it sensible to try to rebuild a mechanism that's got us in this situation in the first place?

I am beginning to believe the eventual outturn might be a lot healthier to just let the recession/depression take its course and wait to use what resources we have left later on when we start to emerge from this mess.

#84. yukapataya wrote:

"Well, as the recession bites, 1) more businesses go bust and 2) mortgages that were once 'prime' become the new sub-prime."

But not I think to the tune of 100 billion pounds in about 6-8 weeks! Most of it has to be "old".

We all know the difficulties of separating toxic debt, but it is the first step to be done. A bad bank is necessary for the recovery of the banks. Otherwise bail outs will not work, you will have bail 2,3,4, etc all will not work. At the time of N. Rock which in my oppinion should not have been nationalised, it should have been underpinned and continued to trade as a bank properly, instead of being run into the ground as it has, the bad bank should have been set up. Next interest rates should have gone up to encourage investment. This would have meant the recession would be painful but a lot shorter. An economy that works properly is the only answer to unemployment and fully functioning businesses and banks are an important part of this recovery no matter how much you hate them.

All Brown is doing is slowing the recession up, putting off the inevitable to keep votes.

The private sector is taking all the hit at the moment which is crazy, they are the wealth producers. The public sector in fact is gloating with its ring fenced pensions and secure jobs and thinking the bankers etc are getting their just deserts. Brown is protecting the bloated public sector to ensure he stays in power after the election. But we will have to come full circle when the private sector is on its knees and no longer able to fund the public and who ever is in power will have to address this problem and cut their jobs.

Until a whole lot of people start talking about green shoots the economy and banks will carry on down the pan.
So lets all talk about green shoots and help the economy and be happy. Well done Baroness Vadera if only we had more like you.

I see the headline today is 'Brown urges banks to come clean'.

Surely as regulated and listed entities they have a responsibility to shareholders and market watchers to be honest and to reflect their true economic status via their accounts.

Surely to do otherwise would be illegal.

Why does Brown need to make this appeal unless the Banks are being deceptive and are not informing thier stock holders of their true position.

And Brown is supposed to be in charge and wants to assist these bank managers to continue the way they are going.

Err .. No .. Sack the lot and bring in people who will do their duty.

It seems to me watching the events of the last year that the fiscal stability of our banks is shot and that the more money thrown at them, the more will disappear.

71. sosraboc

.... When you take Santa Claus out of his red suit, you will find it was Gordon Brown in disguise.....

Yes but what will we find when we take Gordon Brown out of his suit and out of his disguise.

You always know your onto something when your post gets referred. My #78.

Well it cant break house rules, so I guess it will appear when the volume of traffic is reduced.

89 susan

You cannot seperate toxic debt. It is a myth until it is realised by the debt collector calling. You cannot value it. It is a variable. To deal with it now HMG have to create another financial instrument and play a tune on it which is how we got here the bankers playing a tune and HMG dancing along and saying I am lord of the dance join in. The banks cannot sell toxic debt and nobody can buy it because you cannot value it. It has some inherent value at some point but cannot be valued today other than written off. Something about sympathy for the devil. And everybody is supposed to join the dance. Well he who pays the piper calls the tune. About time that was realised.

Here are a few question for Robert as I need some understanding and clarification.

How can Barclays says its profits are going to be so good , around£5 billion and yet its share price crashes?
Is this due to speculators or are there hidden losses?

Are Barclays taking a different view on potential losses to other banks and is this accurate or deluded?

How are the losses calculated ?
is this due to provision for bad debts and then this depends on the valuation of the security?
or is this down to actual bad debts and the loss after sale of security?

Is it right and proper for potential bad debts to be cleared out now when the actual figures will depend on the severity of the downturn? how can a true and accurate figure be made now ?

The Government fails to see that the more they intervene to prop up the banks and engender "confidence", the more that both the public and business lose confidence in the banking system.

Ysidant 90

We do not need people from the Labour Party, giving us propaganda messages thank you.

Peston will, I hope continue to talk about how dire our economy is until people get the message.

Baroness Vadera has cost the tax payer a fortune by bad business decisions. She is also one of a growing number of members of this Government who are unelected and should not be speaking for the Government anyway.

However if you sincerely believe that just saying everything is wonderful makes it so, then Im afraid your just plain...................................

Nevertheless if you could provide me with actual examples of green shoots I would be happy to be proved wrong.

Slightly off message but Robert you seem to be channel for HMG to communicate with us. This is how it is done in Espana

www.plane.gob.es/

The PM explains Plan E , don't ask, for the english translation go the right hand corner tab on welcome.

I do believe in the small print at the end it says copyright G Brown

Read and weep, three years of Government surplus before the Kingdom of Modor came upon us.

PS. No banking problems as yet, unemployment high but a true figure

#89 Susan Croft

''The private sector is taking all the hit at the moment which is crazy''

You make some good points there on a topic that appears frequently.

Gordons obsesssion with big government ( among other things) is VERY counterproductive at this stage.

They must feel a similar pain to the private sector, but you are quite right he willl not make that 'prudent' decision now with an election looming. No chance.

It is in fact even worse than that, big government and the associated tangle of red tape they oversee is strangling any attempts for government to put money directly into the real economy by infrastructure or other direct spending of any type.

Even if Gordon pushed the button tommorrow on any multitude of mothballed schemes which could help companies by the time it was spat out of the other end of the civil service regulatory machine and got past all the proceedures it would be many months before a single contract is awarded.

Already too late basically, most companies I know do not have that long to wait.

I remember a project I was working on, it had taken 6 years to get through numerous consultations and planning, everything from EU protected newts to an alledged 16th century church noboddy could find (but spend alot of money looking for its foundations!!). It was quite a simple scheme...then it was mothballed...too expensive...not enough costs benefits to the local economy somebody decided.

Nothing was built yet millions and years had already been spent at that point. I remember an 'old school' colleague said at the time.

'' If a war was on we could have designed and built the whole ****** scheme in 6 months for not much more than has been spent getting it this far''

He was not exagerating.

If Gordon had specifically gone out to consciously design a government and civil service structure to be utterly helpless in the face of the emerging crisis he could not have done much better than what we have today.

If he does have a decent bone left in his body he should 'come clean' himself and do what needs to be done.

That would start with a general election and a government with a mandate to sort out this mess over the next 5 years. A government at the end of its term in this crisis prevents them from making good decisions (forgetting about their track record).

Lets not forget the people NEVER voted for this guy to lead us

Its a terrible developing situation in the real economy and it is speeding up very quickly now.

Jericoa

The real excitement will start when the audited reports and accounts for 2008 are published.

The anagrammatical profession will be squirming to word their qualifications and going concern get out clauses to avoid joining the great Arthur Anderson in the sky.

Any bets on how many notes to the accounts refer to fair value and best judgement.

Watch very carefully the investments held to maturity figures and be very suspicious of securities passing from the trading to the HTM unless there are very clear explanations as to how values were calculated.

Also be wary of comments that exposure has been hedged because the hedging instruments themselves are open to doubt.

92 Glenafon

The invisible man of course, it will only be the lingering stench of Pestons stinky assets that will confirm GB has been there