Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. RBoS To Become UK's Enron?From The Observer:RBS faces probe over 'threats' to directors Peer's criminal inquiry warning on bank Toby Helm and Jamie Doward The Observer, Sunday 22 March 2009 The scandal engulfing the Royal Bank of Scotland reaches new heights today with serious allegations from a senior Labour politician that at least three of its former non-executive directors may have been intimidated and threatened with the sack for asking searching questions about its financial affairs. The Observer can reveal that a former government minister, Lord Foulkes of Cumnock, who has been extensively briefed by former bank insiders, has written to the Financial Services Authority, the City watchdog, asking it to pursue the claims which, if true, could trigger a criminal investigation. The intervention by Foulkes, who is also a member of the Scottish parliament and sits on the Commons security and intelligence committee, comes amid fears that the bank will be exposed as the UK's equivalent of Enron--the US trader that collapsed amid systemic fraud. Last night Foulkes said there was "widespread public anger among the public and Parliament that bankers in the midst of this financial crisis appear to be profiting and no action is being taken in relation to action which could constitute criminal offences". In relation to claims of intimidation, Foulkes said: "If it were to transpire that executives were pressured in such a way, then that is a most serious matter indeed that needs urgent action." Read the rest of the article Labels: bailout, financial crisis, Labour Party, Royal Bank of Scotland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Essential Reading from Yesterday's FTIn case you missed it, due to Friday night carousing, or whatever...--Whistleblower contacted US regulators (should they even be called this anymore?) on fraudster Sir Allen Stanford five years ago. --Banking editor Peter Thal Larson writes that the UK plan for Royal Bank of Scotland amounts to nationalization in all but name, "maintaining the fiction that the ailing bank is anything other than fully state-owned." This certainly has relevance in light of US policy with regard to Citi. --The excellent Gillian Tett on how CDOs may be worth even less than the pitiful estimates bandied about these days. And, in a point too rarely rarely made in the financial press, "as the zeroes relating to writedowns multiply, a peculiar--and bitter-- irony continues to hang over these numbers. Notwithstanding the fact that bankers used to promote CDOs as a tool to create more "complete" capital markets, very few of those instruments ever traded in a real market sense before the crisis--and fewer still have changed hands since then." Labels: bailout, CDOs, financial crisis, Financial Times, Gillian Tett, Peter Thal Larsen, Royal Bank of Scotland, Sir Allen Stanford Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). US and UK Increase Stakes in BanksFrom Reuters, again:Governments tighten grip on banksFri Feb 27, 2009 11:55am EST Reuters By Steven C. JohnsonNEW YORK (Reuters) Governments on both sides of the Atlantic moved to tighten their grip over banks on Friday to stem a financial crisis that has pushed the U.S. economy into its deepest contraction in more than a quarter century. U.S. stocks sank to a 12-year low after Washington struck a deal in which it could end up with more than a third of crisis-hit Citigroup. The World Bank and other development banks launched a $32 billion lending plan to help east European banks and businesses survive a deepening recession. Citigroup (C.N) shares tumbled some 30 percent after the U.S. Treasury struck a deal to convert $25 billion of its preferred stock to common shares, which could give it a stake of up to 36 percent in the bank by diluting existing investors. While the government will not add to the $45 billion it has already invested in what was once the world's largest bank, the stock conversion will shore up the most conservative gauge of the bank's health. The U.S. government is struggling to shore up its banks as part of its approach to restoring growth. Data showed the U.S. economy shrank a staggering 6.2 percent in the last three months of 2008, its biggest slide since the first quarter of 1982, as exports fell and consumers cut spending. "The fear is the government having a big stake in the company will create obstacles for Citigroup to be competitive, and there remain questions about the viability of the financial system," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York. "The (gross domestic product) number," he added, "just threw gasoline on the fire." Across the Atlantic, investors were eyeing Lloyd's Banking Group (LLOY.L) as the second major British financial firm lining up to tap a government-backed insurance scheme. The bank, which revealed a 10 billion pound ($14.28 billion) loss for 2008, said it had not finalized a plan yet but said talks with the UK government were "well advanced." On Thursday, Britain agreed to insure 500 billion pounds ($715 billion) of risky bank assets and struck a deal that could raise the government holding in Royal Bank of Scotland (RBS.L) to 95 percent. Global development banks also launched a two-year plan to lend up to 25 billion euros to shore up troubled banks and businesses in eastern and central Europe. The crisis has dried up credit and capital flows into the once-booming region, pressuring exchange rates and forcing some countries to seek help from the International Monetary Fund. Fannie Mae (FNM.P), the government-controlled company seen by the U.S. administration as a key conduit to stabilize the housing market, reported a $25.2 billion fourth-quarter loss, forcing it to ask for $15.2 billion from the U.S. Treasury Read the rest of the article Labels: bailout, banking crisis, banking system, Citibank, Fannie Mae, financial crisis, Royal Bank of Scotland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Thanks for Nothing....From Bloomberg:RBS Taxes, Hailed as Contribution to Society, Erased by Rescue By Simon Clark Jan. 23 (Bloomberg) -- Fred Goodwin, Royal Bank of Scotland Group Plc's former chief executive officer, once said that taxes were part of his bank's contribution to society. "The benefits of our success stretch far outside the company," Goodwin, 50, wrote in RBS’s 2006 corporate responsibility report. "We continued to be the largest corporate taxpayer in the U.K.," he wrote. That helped in "supporting the government in the provision of public services such as schools, hospitals and state pensions." As Goodwin's RBS contract expires next week, after more than a decade at the bank, the 20 billion-pound ($28 billion) cost of bailing out the bank surpasses the corporate taxes paid by the Edinburgh-based lender during his tenure. The shortfall shows how Goodwin's ambitions for RBS spiraled as he expanded the lender's balance sheet more than 20 times in a decade to 1.73 trillion pounds, making it bigger than the U.K. economy. Read the rest of the article Labels: bailout, financial crisis, Royal Bank of Scotland, Sir Fred Goodwin Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). This Just In...From (I haven't seen this story reproduced elsewhere yet, even in the British press. This is strange, considering it's 8.00 pm in the UK as I post) the International Herald Tribune:U.K. takes over Royal Bank of Scotland By Julia Werdigier International Herald Tribune Friday, November 28, 2008 LONDON: The British government took majority control of Royal Bank of Scotland on Friday after investors shunned the lender's share sale, paving the way for a larger government role in Britain's banking sector. Investors only signed up for 0.24 percent of the shares, which were offered as part of a plan to bolster the bank's capital, and the government had to take up the rest, leaving it with a 57.9 percent stake in RBS. The government agreed to buy a separate block of preferred shares bringing its investment in RBS to about 20 billion pounds, or $31 billion. The investment leaves taxpayers already with a paper loss of more than $3 billion, based on the closing share price Thursday. RBS was one of three British financial services companies that tapped government help to fulfill stricter capital requirements intended to help them survive the credit crisis. Lloyds TSB and the mortgage lender HBOS, which have recently agreed to combine, also relied on the government to take up any shares they could not sell to investors as part of a banking bailout plan orchestrated by Prime Minister Gordon Brown. But some analysts warned that even those stricter capital rules might not guarantee the stability of Britain's banks as the turmoil in the financial markets continued. Read the rest of the article Labels: bailout, financial crisis, HBOS, International Herald Tribune, Lloyd's TSB, Royal Bank of Scotland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Not Just an American ProblemFrom today's Guardian:Rescued bank to pay millions in bonuses RBS 'making monkeys' out of the government, says Vince Cable Simon Bowers The Guardian, Saturday November 1 2008 Royal Bank of Scotland, which is being bailed out with 20bn pounds of taxpayers' money, has signalled it is preparing to pay bonuses to thousands of staff despite government pledges to crack down on City pay. The bank has set aside 1.79bn pounds to cover "staff costs" - including discretionary bonuses - at its investment banking division for the first six months of the year alone. The same division caused a 5.9bn pound writedown that wiped out the bank's profits for the same period. The government had demanded that boardroom directors at RBS should not receive bonuses this year and the chief executive, Sir Fred Goodwin, is walking away without a pay-off. But below boardroom level, RBS and other groups are preparing to pay bonuses to investment bankers who continue to generate profits. Read the rest of the article Labels: executive pay, financial crisis bailout, Liberal Democrats, Royal Bank of Scotland, Vince Cable Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
