British Bank Bradford & Bingley Goes Bellyup

[David Guyatt]

Toxic mortgages - a.k.a "Wall Street wrapped-crap" - take another taxpayer scalp. And do we continue on the path of nationalizing losses and bad debts
whilst remaining supine about the privatization of profits.

The foregoing criticism should not be construed as a leftist protest, but is simply a statement of intense frustration that the 1980's banking regulatory system - or rather the overwhelming lack of it - which was summated in that famous gloating twaddle phrase of the Prime Minister Margaret Thatchler that: "markets will regulate themselves", has been the key to recent events. Sheer greed cannot be expected to, nor will it ever regulate itself.

My money remains on the probability that whatever regulation is forced into existence following the recent "Shock & Awe" events, is likely to be more cosmetic than clout.

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http://news.sky.com/skynews/Home/Busines...9415108531

High St Bank To Be Nationalised

Sunday September 28, 2008

Troubled mortgage lender Bradford and Bingley is to be nationalised, with the bank split up and its assets sold off, Sky sources say.

Bank will be broken up and sold to several buyers
The deal is expected to be confirmed before the London Stock Exchange opens on Monday morning.

But with around £40bn of loans being bought up by the Government, the taxpayer will be footing the bill.

The bank looks set to become the latest victim of the global credit crunch, which has paralysed the world financial system.

A move to cut 370 B&B jobs and sell off most of the toxic mortgage-backed investments hit by the crunch failed to stop its shares sliding this week.
The share price has plunged from around £2 a share two years ago to about 20p now.

B&B is in discussions with the so-called Tripartite Authority - the Treasury, Financial Services Authority and the Bank of England - over the potential bail-out.

The Government is reportedly set to nationalise B&B's loans, which include home loans of £41bn.

It is thought the Treasury will sell B&B's 200 branches and its savings business to other banks. That is set to mean more job losses.
Around 3,000 people currently work for the lender.

[David Guyatt]

So, today we learn that the profitable part of B&B has been sold off to Santander, and the unprofitable/troublesome part has been bought by the taxpayers. The old rubric of nationalizing costs whilst privatizing profits.

THis was always the way the Pentagon/Ministry of Defence system operated -- the taxpayer picks p the cost for weapons R&D and thereafter the companies get to lap up the on-stream profits.

I find I get highly annoyed when Alistair Darling states on the radio (today's Jeremy Vine show - Radio 2) that very "few people could have foreseen this problem ten years ago". Bollocks! I saw the leveraging catastrophe-in-waiting 10 years ago - it was that obvious - and therefore most bankers saw it that far back -- and many much further back than that.

I even phoned the Bank of England back then (circa 1995) following the collapse of Barings, to ask what measures the Old Lady was going to take to toughen up oversight and regulation in the ight of that disaster (another cover-up btw). The spokesman said that regulation was not an option as the fear was that the banks would simply relocate to another centre (say Paris or Frankfurt) if the authorities tried to impose tougher regulation on them. This was stated quite openly. Having seen similar empty threats delivered to the authorities during my time in the City I sincerely doubt the veracity of such threats.

The bottom-line is that the fraternity of bankers know - as the governments also know - that the banking system holds governments and everyone else to ransom and that a taxpayer funded rescue is accepted as the only alternative in cases of systemic risk.

There is no reason for this as central banks and governments cold easily form a cohesive body to insist on far tighter regulation to protect the interests of citizens and taxpayers alike. But that is never viewed with enthusiasm in the corridors of power and therefore, the question we need to ask ourselves is why this is?