It's official. Government policy isn't working. As bank shares collapse amid renewed carnage on global markets, we now know the worst isn't over. This crisis just entered a whole new phase. Gordon Brown's "rescue plan" lies in tatters. Perhaps now the Prime Minister – and his counterparts across the Western world – will do what needs to be done. Regular readers know what's coming next. I've been writing the same thing for months. But I make no apologies – for this ghastly episode will only end once senior bank executives are forced, under threat of custodial sentence, to FULLY DISCLOSE to one another and the authorities, on the basis of all available evidence, the extent of their sub-prime liabilities...Apocalyptic enough for you? The Government will throw billions more taxpayers'money at the banks next week. The Conservatives should think very carefull before supporting yet another bank bailout. They should also be ready with alternative proposals. They could do worse than speak to Liam Halligan.
... Bank shares collapsed on Friday because of renewed fears that said banks have simply enormous liabilities on their books that they're still trying to hide. In the US, Citigroup, Bank of America and Merrill Lynch unveiled a $25bn combined loss for the final quarter of 2008. But what was really shocking was that $15bn was sustained at Merrill Lynch – and the Bank of America, which bought the brokerage last year, didn't even know. In a bid to save his job, Ken Lewis, Bank of America's boss, admitted he hadn't foreseen such a "significant deterioration" in Merrill's finances. But his words lifted the lid on the extent to which financial institutions are disguising the true state of their balance sheets – even to their own parent companies.
No wonder rumours then swirled of vast buried losses at Barclays and Royal Bank of Scotland. No wonder their prices collapsed. And such fears will fester and keep bursting to the surface until our banks "fess it all up" – and a credible number is put on potential losses at each of our major banks. Yes, those numbers will be horrific. Yes, bank shares will be hit once more. But until we do the maths and swallow the write-offs, the rumours will continue and trust will remain elusive – to say nothing of long-term financial stability...
... Last week, any remaining hope the eurozone had escaped the worst of this crisis was blown out of the water. Economic sentiment is now at a post-war low. Even the European Central Bank, admirably restrained until now, could resist the political pressure no longer and cut its interest rate to 2pc. This column has long questioned the eurozone's long-term survival. Now global markets are doing the same. At the start of last year, the average 10-year government bond yield among the weaker member states (Portugal, Greece, Spain, Ireland and Italy) was just 25 basis points above the comparable number in Germany. That spread is now six times bigger.
Credit default swaps (the cost of insuring against a government default) among the most feckless eurozone members have reached Latin American levels. Would French and German taxpayers bail out another eurozone member? The longer this crisis goes on, the larger that incendiary question looms.
Read the whole article HERE.
24 comments:
The euro will fail, as Nigel Farage pointed out yet again this week in the European Parliament.
We cannot go on with the bail outs, but I fear Brown is not going to stop. These are dark days ahead indeed.
Turn your savings into something solid. Anything.
When forecast keep deterioration and actual results are worse than forecast, and the banks have no idea of what losses they may have:
depression lies ahead.
Bankers base loss calculations on current valuations.
Property prices are falling: and are likely to fall up to 50% more.
Banks will base losses on current prices.
So they ignore future losses which any sensible person can see coming.
(Not that bankers are sensible).
Note how banks are clsoing down their investment arms cos they are losing money hand over fist in these markets.
It's is going to take a while to realise that the last 15 years economic activity and profits are all unravelling as it is built on a giant ponzi scheme.
Time to jail a few hundred UK bankers and fine them all their boonuses for the past 10 years: gross of course.
I expect a depression, have planned for one and it looks like we will have one: worse than 1929 (UK GDP only fell 5% from 1929 to 1932. This time it will be imo 7 to 10%).
The truth is........the Banks in the UK have toxic assets in excess of 10x GDP.
In the European Union, if the real truth were out...the euro is ****ed as the toxic assets of the finacial institutions are in excess of 100,000% total EU income
This might get deleted because of the swearing, but here goes. To borrow (and edit slightly) a phrase that Richard Mottram used a few years ago now:
"We're all f***ed. I'm f***ed. You're f***ed. The whole [country] is f***ed. It's the biggest cock-up ever. We're all completely f***ed."
Agree?
Isn't there a wall somewhere not being used for anything at the moment. Isn't the rationale that we all apply to Brown, namely, he's the chump who got us into this bloody hellhole equally able to be levelled againnst bankers.
Can't we apply retrospective taxes, insist that they're fired and apply some 'negligence' quotient upon them?
Yeah, I know the answer but there's loads of Youtube vids knocking about with bankers laughing their tits off.
Unlike Blair, you can be 99.9% sure that Brown hasn't made a penny yet we're quite happy to nail 'em both. So why not bankers, if bankers are dishonest, can't count, incompetent, etc then....
Iain, are the highly intellectual comments in this thread the evidence you cite in support of your argument on Radio 4 earlier that moderation has led to a significant improvement in comment quality on your blog? Just wondering.
Indeed. Imagine what it would have been like before!
Despairing - 11pm on a Saturday eve - if people can spell correctly it's a bonus!
Registration was probably the best thing this blog ever introduced. Far easier to follow debates now than when half the people were anonymous Labour-supporting trolls here to cause trouble.
Word verification: mance (one letter out, son of the?)
Hmmmm...Brown will blame this all on America again.
Yes, Oliver, he probably will. Or he might go for the "blame the Tories option", again.
I think we should stop bailing out the banks and allow them to fail then buy them up, fully nationalise them, with a view to selling them off in 5 yrs.
I would also announce an Old Testament Jubilee and allow any intra-Britain to be discounted 30%.
This would get rid of negative equity and restart the housing market.
I would rather lose the bad banks than risk Britain as a property owning democracy. Shareholders might take their duties more seriously if they were reminded that businesses fail when they make bad choices.
I meant intra-Britain debt
Time to treat some of the useless politicians and greedy City types to Chinese style justice. There's some nice walls around the Tower for backstops! Hell, bring back the Tyburn tree, make a party of it.
Then restore Hadrian's Wall and expel all Scottish Labour MPs.
I made a serious proposal on this blog in November (ignored by Iain), and I now repeat it; namely that Cameron should hire a hall and every morning for as long as it takes hold open hearings into the banking mess.
He should invite anyone with any knowledge or insight, including bankers, Kommentariat, academics, politicians, civil servants, insiders, etc, to spill their guts and answer his questions.
Preferably, of course, there should be a public enquiry, but Brown both controls Parliament and created the mess so will ensure there isn't one.
So step forward HM's Loyal Opposition, to try and find out what has happened.
Until the extent of the problem is exposed, all talk of correcting it is eyewash and political point-scoring.
By not holding such a public enquiry outside Parliament, the Conservative leadership is missing an opportunity of seizing the agenda and getting the whole country on their side.
What can anyone have against this proposal?
Tony
Quite simply Labour isn't working.
It is impossible for banks to be exact on the level of bad debts - those bad debts are increasing every day as house prices fall and companies go under. All the banks can do is estimate the amount of bad debt.
John Redwood says much the same in the Sunday Mail. It is quite frightening that the UK taxpayer will have to pick up the tab if international projects fail and default on their loans from UK banks.
We can't even afford our own Olympic games let alone every major project around the world. Gordon is shafting us good and proper for generations to come.
The problem is our banks are bigger than we are
Some of you seem to have a touching but irrational feeling that the Tories will be hard on the bankers.
The reality is of course that Cameron's people are (very much in the Conservative tradition) closely aligned, friendly or related to bankers, hedge funders and brokers.
I don't think you will see much in the way of punishment of the wicked from that quarter.
I like the idea of enquiries. I don't see why some of the actions of the mortgage repackagers and securitizers are not deception for example; similarly, why shorting on inside information (the basis of Hedge Funds) is not a criminal act.
Yet serious investigations into both of the latter are not being called for by any party that I know of, nor (as far as we know) have any serious SFO investigations produced any results so far. Not to mention the public deviousness of bank boards refusing repeatedly to admit their exposures to subprime. Itself probably an offense or at the very least justification for them to be struck off as directors.
As usual, the crooks appear to be getting away with it provided they wear a collar and tie and work for a big and prestigious company. If crooks rob a bank using guns they get 10 years. If they use lies, they get a parting golden handshake.
The Federal Reserve on the other hand has made huge gains by secretly trading derivatives.
When oil shot up to $150 a barrel and rice trebled in price, not for one minute was there any shortage anywhere in the world. By allowing the banks etc to trade futures by depositing a mere 1.5% of the contract values, enormous gambles were allowed to raise prices into the stratosphere. Someone somewhere made megabucks.
Normally governments intervene in rapid speculations and raise futures contract deposits to 10% but the US government and others did nothing.
If the losses are held by the losing banks, the profits are held by the American government and its favourite banking buddy Goldman Sachs.
Estimates of the total gains by the US government to date are $1 trillion. Europe has been cleaned out, suckered three times over.
First was the sub-prime. Then the derivatives game. And finally third world banking debt which is 85% held by European banks.
The Euro hasn't got a chance. The US has won the game.
Oh no! Does this mean the world has not been saved by Super Gord? I cannot wait for his attempt write his legacy as our glorious leader.
Despairing - I think if we chart the life path of new labour it is easy to see how they have been beguiled by wealth, overcome by its lustre, fawned at its apparent righteousness. I don't know why other than they wanted it. Sure they had to calm the nerves of business to carry them into a stable government but they didn't have to adore it so much.
Conversley the Tories have never been blinded by wealth, not just because they may have it (the schoolboy analysis) but because they know how to earn it and that it can be bloody vulgar.
I think the Rothschild Osborne summer saga highlights this in that Rothschild sold his buddy down the river for the trade subsidies that Mandleson had given Deripraska. Sure George made a huge mistake trusting an old boy but he wasn't bothered about the squillions that scummy Rothschild had. I think you may be surprised how easy it is for a proper Tory to scare the pants off millionaires, we've done it for centuries - you give them a choice they can't possibly refuse and they'll understand it's the cost of doing business.
You want to be a non dom? Cool, no probs, get your family out of Blighty, cappiche?
Why do talking heads (like Vince Cable) get so agitated about short sellers?
Surely if he thought the price of Barclays shares were too low he would just fill his boots (or are his boots already filled at the previous high prices?).
WV: crock (nice one wv elves!)
Yes, I'm looking forward to those alternative proposals. And of course the identification of any Tory economies that have escaped le crunch.
So, when will Brown admit his first bailout failed? (Not holding my breath!)
Why exactly should UK taxpayers underwrite the extensive dodgy overseas lendings of our banks?
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