Defaulting banks - where will it stop?

[Paul Rigby]

David Guyatt and Peter Presland's research on the looted "black gold" shows that the wildcard in the trading of gold is the potential ability of intelligence and financial elites miraculously to pluck physical gold out of thin air, and magic it into the market. The elites possess a master wildcard which They can use to alter the groundrules fundamentally at their whim.

Have I misread Russo-Chinese strategy when I wonder whether it is designed to compel the deployment of the "master wildcard"? The thinking being, presumably, that rather like the British military in the late 19th century, the threat of deployment is the real card, and that it's utilisation either terminates its utility and/or reveals the threat as hollow (in the circumstances)?

Yet another Twlight Zone is North Carolina, particularly in the area of black scientific research...

Don't hesitate to tell us more...

[Jan Klimkowski]

Citibank about to blow up? mokin:

Market Ticker's Karl Denninger is predicting it could be heading for a big fat zero:

Sunday, November 1. 2009
Posted by Karl Denninger in Company Specific at 16:05

Citi-Citi-BANG-BANG! ©
Oh boy, it appears that I may have hit the mark here....

http://www.nytimes.com/2009/11/01/busine...?_r=1&8dpc

Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines.

And the charge-off rate on those things is over 10%!

Here's what I wrote:

Both of these "results" have a high probability of decimating Citibank's card business and the latter behavior could literally blow them up. That the firm is willing to risk this outcome - an outcome that, to me at least, appears to have a very high probability - means that Citibank has to be crazily-desperate and willing to place an "all-in" bet that they will be able to either (1) book unpaid "interest" as "earnings" and "assets" (much as banks did with negative amortization loans) prior to final disposition via bankruptcy for those consumers or (2) there are enough people who both can't pay off or transfer the balance AND can continue to pay to make this strategy worthwhile even given the intensely negative public opinion reaction this move is guaranteed to generate.

In short, this looks to me like a "Hail Mary" pass. So long as this remains a Citibank-only story my interpretation is that Citibank is in a lot worse financial shape than is being let on - perhaps poor enough that they're at risk of imploding anyway, "too big to fail" or not.

Good luck Citibank; I'll keep my telescope trained in your direction from beyond "minimum safe distance" looking for this....

http://market-ticker.org/archives/1565-C...NG!-C.html

Below is the official version, in NYT speak:

http://www.nytimes.com/2009/11/01/busine...&8dpc&_r=1

Can Citigroup Carry Its Own Weight?

OVER the past 80 years, the United States government has engineered not one, not two, not three, but at least four rescues of the institution now known as Citigroup. In previous instances, the bank came back from the crisis and prospered.

Will Citigroup rise again from its recent near-death experience?

The answer to that question concerns not only the 276,000 employees who work at what was once the world’s largest bank, but the nation’s taxpayers as well. Even as Citigroup’s stock has soared from a low of $1.02 to its current $4.09 — and the company has eked out a $101 million profit in the third quarter along the way — it’s still unclear whether it can climb out of the hole that its former leaders dug before and during the mortgage mania. If Citigroup remains stuck, taxpayers will be on the hook for outsize losses.

Citigroup remains a sprawling, complex enterprise, with 200 million customer accounts and operations in more than 100 countries. And when people talk about institutions that have grown so large and entwined in the economy that regulators have deemed them too big to be allowed to fail, Citigroup is the premier example.

As a result, the government has handed Citigroup $45 billion under the Troubled Asset Relief Program over the last year. Through the Federal Deposit Insurance Corporation, a major bank regulator, the government has also agreed to back roughly $300 billion in soured assets that sit on Citigroup’s books. Even as other troubled institutions recently curtailed their use of another F.D.I.C. program that backs new debt issued by banks, Citigroup has continued to tap the arrangement.

Citigroup is also one of only two TARP recipients so desperate for capital that they’ve swapped government-issued shares into common stock, diluting existing shareholders. (GMAC, the troubled auto lender that may receive another government infusion, is the other.)

While Citigroup has written down tens of billions of dollars’ worth of mortgages on its books, there are looming problems in its huge credit card portfolio. Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines. A measure of the bank’s efforts to wrestle that problem to the ground is the interest it charges customers: in October, Citigroup raised interest rates on some credit card holders to 29.99 percent.

Chris Whalen, editor of the Institutional Risk Analyst, calls Citigroup “the queen of the zombie dance,” referring to the group of financial institutions that the government has on life support.

“They are hoping that a combination of bank assistance and maximizing revenue and buying time will let them survive,” he said. “When I look at the whole picture, Citigroup is in the process of resolution. I continue to believe the equity is worth zero and that the company will have to go to bondholders for some kind of money to make the bank stable.”

VIKRAM S. PANDIT, Citigroup’s C.E.O., said in an interview that he was confident that Citigroup was on the right course, focusing on global banking and shedding segments of the company — like insurance and the brokerage business — that aren’t part of that mission. To date, he said Citigroup had sharply reduced its expenses, improved how it monitors risk, and established a management team that he said would return the bank to sustained profitability.

“Our distinctiveness is we connect the world better than anyone else,” he said, noting Citigroup’s global reach. “We have a great capability of building a business around that. And we are in the process of building a culture around that.”

Mr. Pandit said he was working with federal regulators on a schedule for paying back TARP funds, which he said was crucial to restoring Citigroup’s image among consumers. “It’s very hard to change perceptions in this marketplace,” he said. “We are not a troubled bank. We have a lot of assistance from the government. We can’t fight that.”

In trying to right itself, Citigroup plans to undo much of what it did during a period some insiders call the lost decade — with events that included merging with Travelers Group in 1998 and a huge, dizzying expansion of its asset base. To untangle the company, Mr. Pandit has split Citigroup in half. One part consists of operations that Citigroup executives consider central to the bank’s future; these include retail banking worldwide, investment banking and transaction services for institutional clients.

The other part contains businesses that Citigroup executives hope to exit or unload. This includes asset management and consumer lending, such as residential and commercial real estate, as well as auto loans and student loans. Citigroup is also selling some of the many companies it acquired in recent years. In the weak economy, however, buyers are few.

To be sure, Citigroup’s financial cushion has fattened significantly, thanks in large part to taxpayer relief — prompting some banking analysts to be relatively optimistic about the bank’s prospects.

One is Matt O’Connor, an analyst at Deutsche Bank. He says that Citigroup is still saddled with potential risks, but that it’s well positioned for an economic recovery, in that it can sell off assets more quickly, or for another downturn, since it has government protection and relatively little commercial real estate exposure.

“We find Citi shares could reach $10,” Mr. O’Connor wrote in a recent report to investors. “However this may be several years away and many uncertainties remain — both to Citi and banks over all.”

Yet compared with other big banks like JPMorgan Chase or the Goldman Sachs Group, Citigroup’s operations are not yet generating enough profits to cover potentially devastating write-downs to come. In the third quarter, none of the units upon which Citigroup has pinned its hopes showed a jump in revenue.

Analysts at Fitch Ratings project that Citigroup will continue to be plagued with hefty loan loss provisions and that its operations will remain weak into 2010. The primary reason for Citigroup’s woes, of course, is relatively straightforward. The bank simply placed too large a bet on risky consumer loans, especially mortgages. These were often repackaged into complex financial instruments that went sour when the economy collapsed. Citigroup ended up eating these losses.

Citigroup also sank deeper into the swamp of troubled loans than its peers, according to interviews with more than a dozen former employees and analysts, because of a number of other factors: a culture of deal-making that trumped efforts to help existing businesses grow on their own; constant churn among the executive ranks; the sapping of top talent; the blunting of dissent; and a drive to mimic competitors’ risk-taking while failing to assess when those gambles were becoming perilous.

A byproduct of these flaws is now smoldering on taxpayers’ doorstep, causing worries on Capitol Hill that the United States may never get back the bailout money it gave to Citigroup. Representative Lloyd Doggett, a Texas Democrat on the House Ways and Means Committee, recently registered unease about the government’s guarantee of $300 billion in Citigroup assets and how effectively the Treasury secretary, Timothy F. Geithner, was monitoring the bank.

“We cannot know the full scope of the taxpayers’ potential cost from these hasty guarantees,” Mr. Doggett said last week in an e-mail message. “Inexplicably, Secretary Geithner appears unwilling to commit to conduct an analysis, despite my specific request to him in March. A critical and transparent examination of the response to the financial crisis is essential not only to learn from past mistakes, but also to prevent further erosion of the public’s trust in government.”

The Treasury secretary declined to comment.

Neil M. Barofsky, special inspector general of TARP, has assembled a team to examine how Citigroup is using taxpayer funds. In a Sept. 21 letter to Mr. Doggett, he said: “The Citigroup guarantees raise important oversight concerns.”

Those concerns are shared by others, particularly financial analysts.

“Traditional banking is still in a recession, and the situation is very tenuous,” said Janet Tavakoli, founder of Tavakoli Structured Finance, a consulting firm. “If we do get our money back from Citi, some of it will be the money we printed to give to them.”

ALTHOUGH history does not repeat, now and then, as Mark Twain famously proclaimed, it rhymes. Nowhere in the financial world, perhaps, is that more true than for Citigroup.

During the 1920s, the institution then known as National City Bank opened stores around the country to encourage the burgeoning middle class to invest in stocks and bonds. With little money down — 10 percent of the cost of a trade was all an investor needed to buy shares — investors poured into the stock market. Charles E. Mitchell, C.E.O. of National City, hyped these sales throughout the period. His nickname was “Sunshine Charley.”

Then came the Great Crash of 1929. Vilified as a “bankster” in the aftermath of the crash, Mr. Mitchell testified to Congress that banks “were too ready to loan, too ready to meet the competition of neighbors, too willing to cut down their margins to a point of encouraging excessive bargaining.”

Before the crash, industry practice allowed National City not only to underwrite securities but also to employ a sales army to peddle them to depositors. After Congressional hearings determined that this conflict of interest was a major cause of the debacle, lawmakers passed the Glass-Steagall Act, separating activities of commercial banks (which offered plain old savings accounts and loans) from those of investment firms (which trafficked in more highflying endeavors like stock trading and underwriting).

Although thousands of smaller banks failed, government policies to prop up the banking sector helped National City and other major banks weather the Depression.

Fifty years later, what was then known as Citicorp found itself in trouble again as huge loans to developing countries in Latin America soured. The federal government weakened capital and accounting requirements to allow big American banks to survive the crisis. Still, in the early 1990s, the bank was in a precarious state because of its problems in Latin America, coupled with losses in commercial real estate and a weak economy.

Citicorp survived this crisis with an infusion of cash from a Saudi Arabian prince and a gift from Alan Greenspan, then the chairman of the Federal Reserve. Mr. Greenspan’s Fed kept interest rates unusually low, allowing Citicorp and other troubled banks to borrow money cheaply and lend at higher rates to their customers.

By 1998, Citicorp had more than regained its footing and was willing to take a more aggressive stance. At the direction of its chief executive, John S. Reed, Citicorp agreed to join forces with the Travelers Group, an amalgam of insurance, brokerage and investment banking services run by a brash dealmaker named Sanford I. Weill. The largest merger in history followed, creating a colossus named Citigroup with $700 billion in assets.

Because Travelers had an investment firm under its umbrella, the creation of Citigroup prompted Congress to eliminate what remained of the Depression-era separation between Main Street banking and Wall Street trading. Mr. Reed and Mr. Weill argued persuasively for the change, and, along with the rest of the financial industry, deployed an armada of lobbyists in Washington. In 1999, Congress overturned Glass-Steagall.

“By liberating our financial companies from an antiquated regulatory structure, this legislation will unleash the creativity of our industry and insure our global competitiveness,” Mr. Weill and Mr. Reed, Citigroup’s co-chairmen and co-chief executives, said in a statement after Congress repealed the law. “As a result, all Americans — investors, savers, insureds — will be better served.”

Former employees wax nostalgic about the early days of the merger.

“Across the board, it was clearly No. 1,” said one former top executive who requested anonymity to maintain relationships with former colleagues. “You had franchises that were the envy of the world. It was a remarkably powerful institution.”

Profits soared, and by 2003, Citigroup was generating nearly $18 billion a year in them. But even as the money flowed, the euphoria over earnings was tempered by personnel upheaval, recurrent scandals and the realities of managing such a behemoth.

Mr. Weill’s longtime sidekick and heir apparent, Jamie Dimon, was ousted eight months after the merger. (He now runs JPMorgan, a bank that has weathered the financial downturn much better than most of its large rivals.) A steady exodus of top talent followed Mr. Dimon’s departure from Citigroup; it has only accelerated since the financial crisis began in 2007.

In the last decade, for instance, Citigroup has had four chief executives, six chief financial officers, seven heads of consumer banking and eight investment banking chiefs.

Bank of America, by contrast, has had two C.E.O.’s, four chief financial officers and one chief operating officer during the same period — though that relative stability didn’t spare the bank from mistakes and pain in the crisis.

After a series of financial scandals that tarnished the bank’s reputation, Mr. Weill announced his retirement as chief executive at the end of 2003, handing the reins to Charles O. Prince III, his longtime general counsel who had navigated the company through its various legal and regulatory crises but had never run a major financial institution. Mr. Prince did not return several phone calls seeking comment.

Deal-making largely continued unabated under Mr. Prince, while the bank’s myriad parts were never effectively knit together. During his three-and-a-half-year reign, Citigroup bought five large mortgage lenders or loan servicers and four credit card lenders or portfolios. This buying spree would almost certainly have been larger had the Federal Reserve Bank of New York not barred Citigroup from making acquisitions for 12 months between the spring of 2005 and 2006 — a ban that followed complaints by foreign regulators that Citigroup’s risk management practices were dangerously lax.

Even with occasional regulatory restraints, Citigroup’s assets ballooned from $1.49 trillion to $2.19 trillion from 2005 to 2007, an increase of 46.9 percent (and three times the size of Citigroup’s balance sheet when the merger that created it occurred).

But amid that impressive growth, dubious mortgage loans and questionable trading in mortgage and other debt-related securities began to undermine Citigroup’s finances. One ugly class of securities continues to haunt the bank: collateralized debt obligations, or C.D.O.’s.

From 2004 to the beginning of 2008, Citigroup underwrote $70 billion in C.D.O.’s but had to keep $57 billion of that amount on its own books when it couldn’t find buyers, according to a class-action lawsuit filed in federal court in Manhattan, on behalf of disgruntled Citigroup investors. The suit contends that by late 2006, Citigroup’s C.D.O. operations “had devolved into a Ponzi scheme where unsold portions of older C.D.O. securitizations were recycled as the asset base for new C.D.O. securitizations.”

Furthermore, the lawsuit says, Citigroup executives engaged in various accounting gimmicks to conceal the bank’s ownership of assets that eventually soured. Citigroup denies the allegations and says it will vigorously fight the suit.

Still, the unfortunate truth about the bank during the last several years, according to analysts and former insiders, is that it was managed horribly. “They just blew it,” said one former Citigroup executive, who like many others interviewed for this article requested anonymity because of pending lawsuits and a desire to preserve relationships with former colleagues. “It’s really hard to drive the car if you don’t have the headlights on.”

If Citigroup was driving blind, regulators seem to have been unaware. Officials at the Office of Comptroller of the Currency and the New York Fed — overseen at the time by Mr. Geithner, who has since become the Treasury secretary — stood by as Citigroup amassed a portfolio that would ultimately generate losses of more than $35 billion.

CITIGROUP’S financial architecture remains rickety. One reason is that it relies much more heavily than most other large domestic banks on uninsured deposits in overseas locales, where customers are quick to pull their money at the first sign of trouble. Also, some of the accounting machinery it put in place to temporarily move assets off of its balance sheet (and make the bank look financially healthier) has backfired.

Mr. Pandit maintained that Citigroup’s strategy would take some time and depended in part on how the economy fared. Should the economy continue to improve, for instance, he said the bank would snare handsome returns when it sells off assets. Other assets, like some mortgages, for example, will simply be paid off over time, he said.

“We have time,” he said. “If markets do turn around, these are going to be very valuable businesses. This is going to take awhile.” Yet analysts say that for Citigroup to survive, it must quickly sell the businesses it wants to exit. And that is especially hard to do given that it is shopping its wares at a time when few people appear to want them, particularly Citigroup’s middle-tier operations in far-flung regions around the globe.

That means the plan to offload the orphan businesses is likely to take much longer than Citigroup’s management had hoped. In January 2009, two years was an estimate for this wind-down, but that is looking more improbable by the day, according to analysts and others familiar with the bank’s operations.

Mr. Whalen, the bank analyst, thinks that squaring away Citigroup’s problems will take more than low interest rates and taxpayer assistance.

“Citigroup will need future capital injections,” he said. “Eventually what happens with Citigroup is the government is going to turn to the bondholders and say we can’t put any more money into this. You own the company now.”

[Jan Klimkowski]

Goldman Sachs boss: 'bankers do God's work'

Lloyd Blankfein, the chairman and chief executive, of Goldman Sachs, has claimed that bankers do "God's work".

By Chris Irvine
Published: 12:51PM GMT 08 Nov 2009

Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Photo: BLOOMBERG

Mr Blankfein, the son of a Brooklyn postal worker, believes that banks serve a "social purpose" and argues that the return of big profits and bonuses should be welcomed as proof the economy is recovering.

Speaking to The Sunday Times, he argued: "We're very important. We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. We have a social purpose."

While he says he understands people are angry at banker's actions, he continued: "Everybody should be happy. Companies are looking to grow again and raise money. That's where we come in. The financial system may have led us into the crisis but it will lead us out."

Goldman Sachs is exempt from President Barack Obama's cap on bonuses because it paid back its £6 billion loan from the US government. As a result the average pay this year for the bank's UK staff will be around £440,000.

Last month, Goldman Sachs said it had performed so well that its pay and bonus pot for the first nine months was up 46 per cent at £10.2 billion. It was reported that they were considering donating in excess of £627 million to charity in an attempt to quell the furore over the likely size of the pot.

Mr Blankfein recently topped Vanity Fair's power players in the information age, for Goldman's ability to weather the economic crisis

http://www.telegraph.co.uk/finance/newsb...-work.html

[David Guyatt]

Goldman Sachs boss: 'bankers do God's work'

Lloyd Blankfein, the chairman and chief executive, of Goldman Sachs, has claimed that bankers do "God's work".

By Chris Irvine
Published: 12:51PM GMT 08 Nov 2009

Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Photo: BLOOMBERG

Mr Blankfein, the son of a Brooklyn postal worker, believes that banks serve a "social purpose" and argues that the return of big profits and bonuses should be welcomed as proof the economy is recovering.

Speaking to The Sunday Times, he argued: "We're very important. We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. We have a social purpose."

While he says he understands people are angry at banker's actions, he continued: "Everybody should be happy. Companies are looking to grow again and raise money. That's where we come in. The financial system may have led us into the crisis but it will lead us out."

Goldman Sachs is exempt from President Barack Obama's cap on bonuses because it paid back its £6 billion loan from the US government. As a result the average pay this year for the bank's UK staff will be around £440,000.

Last month, Goldman Sachs said it had performed so well that its pay and bonus pot for the first nine months was up 46 per cent at £10.2 billion. It was reported that they were considering donating in excess of £627 million to charity in an attempt to quell the furore over the likely size of the pot.

Mr Blankfein recently topped Vanity Fair's power players in the information age, for Goldman's ability to weather the economic crisis

http://www.telegraph.co.uk/finance/newsb...-work.html

I hate it when greedy hypocritical bastards lie to us and themselves by claiming they are doing something for the good of mankind when all they do is serve their own sodding greedy interests.

Harking back to my childhood somewhat, didn't "God" toss the money-changers out of the temple for defiling it? Sounds like this cleansing is well overdue again.

[Magda Hassan]

They're not doing God's work. They think they are God All Bloody Mighty. They certainly play God over people's lives. But they are the scum of the universe. Bottom feeders but even lower and less useful. :puke:
If they had any conscience they would be mortally ashamed of themselves but they are a bunch of sociopathic parasites.

[David Guyatt]

They're not doing God's work. They think they are God All Bloody Mighty. They certainly play God over people's lives. But they are the scum of the universe. Bottom feeders but even lower and less useful. :puke:
If they had any conscience they would be mortally ashamed of themselves but they are a bunch of sociopathic parasites.

Now now Magda, don't go pulling your punches heh....
:dancing2:

[Jan Klimkowski]

Great. The Bank of England spends £61 billion of British taxpayer money propping up British banks, and doesn't tell taxpayers. In fact, the Bank of England claims it doesn't have to tell Parliament either.

What a crock.

The most important bank in the world, the American Federal Reserve, does not have transparent accounts, and Congress is debating whether to force it to allow a proper, independent, audit.

Now we learn that the Bank of England doesn't even believe it has to tell us how it's spending our taxpayer money.

Who's the Daddy now?

The taxpayer? Parliament?

Nah, unelected bankers.

Bank of England reveals £61.1bn spent propping up RBS and HBOS

Mervyn King tells Treasury select committee of emergency loans issued at the height of the financial crisis

Mervyn King detailed the Bank of England's 'extraordinary' responses to the financial crisis.

The figure had been known to only a handful of people until today when the authorities concluded that the banking system had stabilised enough to admit the scale of the intervention that was needed to prop up the banks in the days after Lehman filed for bankruptcy.

The revelation before the Treasury select committee of MPs sparked a furious reaction from Liberal Democrat treasury spokesman, Vince Cable, who intends to table a question to demand the chancellor explain the circumstances surrounding the emergency lending.

John McFall MP, chairman of the committee, admitted that there was an "intake of breath" amongst his colleagues over the figure, thinking about "how many universities, how many colleges, how many jobs could you support with this".

There was also confusion in the City about why the banks had not been forced to disclose their reliance on the Bank of England in documentation issued to shareholders last October when they were embarking on emergency rights issues. But both banks insisted they had made sufficient general statements about central bank funding at the time.

As King spoke of the dramatic events of the past year and the "extraordinary" responses required from the Bank in its role as "lender of the last resort", the new parent company of HBOS was asking investors to support a record-breaking £13.5bn cash call.

Lloyds is now planning to issue 36bn new shares at 37p each to try to bolster its balance sheet weakened by its rescue takeover of HBOS during the financial crisis. The taxpayer is being asked to spend another £5.8bn to buy the shares.

The 2.8m private investors in Lloyds will this weekend begin to receive documents asking them to spend, on average, an extra £366 to back the rights issue.

HBOS was receiving secret government support last year even though it had agreed to be taken over by Lloyds.

King caused surprise when he told the committee: "I have sent a letter to you to explain more fully one aspect of the Bank's operations that was prompted by those events: lending facilities that we put in place at the height of the crisis for two individual institutions that we are now able to disclose."

Alistair Darling, who also wrote a letter to the committee, said that the figure was kept a secret because knowledge of its existence could "jeopardise the financial stability of the system as a whole".

King said that the loans to HBOS and RBS, which were extended in October 2008, were fully repaid – one in December 2008 and the other in January 2009.

The two banks put up collateral worth more than £100bn in return for the loans as the financial system was rocked by the failure of US investment bank, Lehman Brothers.

The combined borrowings of both banks – which were charged a fee for the facilities – peaked on 17 October last year, the Bank said. The fee was 1.7 percentage points over the usual lending rate.

The Bank said use of the emergency facilities peaked at £36.6bn for RBS, on 17 October 2008, and at £25.4bn for HBOS, on 13 December 2008. RBS repaid the cash by 16 December 2008, and HBOS by 16 January 2009. The collateral provided by the two banks included residential mortgages, personal and commercial loans and UK government debt with a total value in excess of £100bn.

King reiterated his belief that no bank should be too big to fail and also used the opportunity to wade into the row over how to deal with Britain's huge budget deficit, which erupted earlier this week between Gordon Brown and Conservative leader David Cameron. Brown said that turning off the life support measures, implemented in the midst of the financial crisis, too soon could damage any hopes of recovery, but Cameron said the deficit needed to be dealt with much sooner.

King called on whichever party who wins the general election to make an aggressive plan to eliminate the structural deficit over the next five-year parliamentary term. He said the proposals should set out different measures depending on the strength of the economic recovery.

King gave a gloomy assessment on the ability of the UK to return to pre-recession levels of gross domestic product (GDP).

He said figures from the International Monetary Fund (IMF) and those underpinning the Bank's own inflation report suggest that from pre-recession levels between 5% and 10% of the UK's entire economic output – around £100bn – will be be lost for the "indefinite future".

"I suspect eventually we will claw it back and get back to that level but it will take many years, so it will be a considerable period of output well below the level that we would otherwise have attained," he said

http://www.guardian.co.uk/business/2009/...hbos-loans

[David Guyatt]

Ah, the British penchant for secrecy.

The clinging perfume to dispel the otherwise all pervading smell of illegality and corruption.

[Jan Klimkowski]

Ah, the British penchant for secrecy.

The clinging perfume to dispel the otherwise all pervading smell of illegality and corruption.

So much too for Their oft-repeated claims that free market capitalism is transparent and fair, and guarantees proper "Darwinian" competition.

Free market economics is now revealed as a Big Whopping Lie.

Presumably shareholders who made choices about buying and selling shares without knowing that the Bank of England was making massive illegal loans, and that the books of RBS and HBOS were entirely untrue (in fact, a lie), have prima facie been defrauded.

TPTB will spin this somehow so that small shareholders have no legal recourse. But this a huge pile of steaming manure.

:vollkommenauf:

[Jan Klimkowski]

A Thanksgiving gift from Wall Street to the American people.

From Karl Denninger's Market Ticker site:

The FDIC Is Broke

Yes, really.

Off the wire this morning:

FDIC Deposit fund had negative $8.2B balance in Q3

That's broke. Bankrupt. Kaput. Gone. Poof. Dead. Rotting. A corpse.

Yes, yes, I know, Treasury has their back. But let's not forget - The FDIC does not have a legal "full faith and credit" guarantee from the US Federal Government and Treasury.

It has a "sense of Congress" resolution, but not a formal, legally-binding guarantee.

I am not, by the way, predicting an actual FDIC failure to pay. Should such an event happen it would be tantamount to a declaration of revolutionary war (by the government about to be deposed!) as if there is one thing that would cause Granny to reach for her shotgun, it would be getting screwed out of her life savings after Sheila Bair and everyone else in our government has trotted out how their money is "fully safe" and that "nobody has ever lost a penny of insured deposits and never will" for more than 20 years, including lots of pronouncements of exactly that mantra over the last year.

Nonetheless this outlines the underlying problem the FDIC has - it has willfully and intentionally ignored the fact that banks have mismarked their "assets" to overstate their values, it has refused to demand that accounting be done on a strict "mark to market" basis by bank examiners, and indeed, it has backed the "extend and pretend" commercial real estate "rollover" provisions of recent months, all of which is manifestly unsound, intentionally misleading, a consequence of willful refusal to enforce 12 USC Ch 16 Sec 1831o ("Prompt Corrective Action"), and has led to enormous losses being absorbed by the Deposit Insurance Fund that should have never happened.

The result?

THE FDIC IS BROKE.

Let's put this in common-man terms:

YOUR SO-CALLED "DEPOSIT INSURANCE" AND THE SEVERAL TRILLION IN CITIZEN BANK DEPOSITS ARE BACKED BY THE SAME AMOUNT OF CAPITAL THAT AIG HAD TO BACK THEIR CREDIT DEFAULT SWAPS: BUPKIS.

Congratulations Sheila - is that your resignation I see in your hand or is that your promotion from Obama - after all, we all know that in Government the more you screw up and screw the taxpayer, the better the job you're offered.

One final question: Is the only thing preventing panic and bank runs the sheer stupidity of The American People?

http://market-ticker.org/archives/1660-T...Broke.html