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UK government takes over £325 bn RBS toxic assets
#1
Oh, okay. Move along folks. Nothing new to see here.

Btw, the RBS as an entity is the biggest bank in the world and is even bigger than the UK economy. Last year it announced record profits of $8.1 billion.

PS, although the government is bailing the Royal Jock out it is not acquiring any more voting shares. It could've done but didn't. It cannot, as a result, influence board decisions.

Nice eh.

http://news.bbc.co.uk/1/hi/business/7911722.stm

RBS reports record corporate loss
Royal Bank of Scotland (RBS) has announced the largest annual loss in UK corporate history.

RBS, which had to be bailed out by the government last year, said that its 2008 loss totalled £24.1bn ($34.2bn).

It also said it would put £325bn of toxic assets into a scheme that offers insurance for any further losses.

RBS is under fire over the pension of former boss Sir Fred Goodwin and the chancellor said the government had asked him to forego some of it.

Speaking at a news conference, RBS chief executive Stephen Hester said the bank was "under no illusions" about the scale of the losses.

He added that it was important "to think about the past, to know what went wrong, to disclose it and to address those issues".

The day's key developments include:

RBS said it would make "sweeping" changes to its structure following the loss and did not rule out substantial job cuts
It will put £325bn of toxic assets into a new government insurance program. RBS will be responsible for the first £19.5bn of any losses on the insured assets and pay £6.5bn to take part in the scheme
The government will inject £13bn into RBS to strengthen its balance sheet on top of the £20bn the government already injected into RBS last year. The bank will have access to another £6bn should it need it.
The bulk of RBS's £24.1bn loss for 2008 stemmed from a £16.2bn write-down of assets, which was mainly linked to its purchase of ABN Amro.
'Unprecendent turbulence'

RBS, which runs NatWest, said it would pay £6.5bn to the Treasury to take part in the Asset Protection Scheme.

"The main thing we are trying to do is cleaning up the banking industry of our country," said Prime Minister Gordon Brown.

"We need to clean up to ensure banks lend to ordinary citizens."

He warned that 2009 would be another tough year for the 282-year-old bank.


“ We are extremely frustrated by the lack of clarity over the company's restructuring proposals ”

Derek Simpson, Unite's joint general secretary
The bulk of the losses came as RBS made a £16.2bn write-down on poorly performing assets, mainly resulting from expensive acquisitions made during the height of the boom.
RBS's former chairman has acknowledged that its 2007 decision to buy Dutch bank ABN Amro, which was heavily exposed to the sub-prime crisis, was a "bad mistake".

US bank Charter One, which it bought in 2004, has also experienced problems.

It said underlying losses totalled £7.9bn.

Prior to RBS's announcement, the biggest annual loss of any UK corporation was the £14.9bn loss reported by Vodafone in 2006.

Pension controversy

RBS is under heavy criticism after the BBC learned that Sir Fred Goodwin, the bank's former chief executive, is already drawing a pension of £650,000 a year, despite only being 50.

Stephen Hester, RBS's new chief executive, said that the pension arrangements for his predecessor came under a legal agreement that the government was part of.

"I understand this is legally binding on all parties," he said.

WHAT IS A WRITE-DOWN?
Reducing the value of an asset on a company's accounts to reflect a fall in its market value

However, Chancellor Alistair Darling said that government lawyers were looking to see what could be done to claw back some or all of the pension.
"You cannot justify these excesses when you have a failure of this magnitude," he said.

" On a voluntary basis Sir Fred could resolve this," he added.

Shadow chancellor George Osborne called for the government to reveal how much it knew about Sir Fred's pension deal.

"Whichever way one looks at it, this obscene pension is unacceptable and the government is on the hook," Mr Osborne said.

"Either they did know and failed to act, or didn't know and failed to ask the right questions.

'Increased certainty'

The Asset Protection Scheme, backed by taxpayers, aims to strengthen bank balance sheets and encourage banks to lend more to firms and individuals.

RBS MILESTONES
Founded by Royal Charter in Edinburgh in 1727
Owns Direct Line insurance
Took over NatWest in 2000
Acquired ABN Amro in 2007
Bailed out by government in 2008
RBS said it would be liable for the first £19.5bn in losses on the assets insured as part of the scheme, with the government shouldering the remainder.

In exchange for the government guarantee, RBS has committed to lending £25bn in 2009 - £9bn of mortgage lending and £16bn of business lending.

"Participation in this scheme would assist us in reducing risk for shareholders whilst providing greater support for UK customers via increased lending," said Mr Hester.

"It would provide increased certainty to the market by limiting potential losses on a significant proportion of our balance sheet."

Lloyds Banking Group is also expected to take part in the scheme, which could see taxpayers guaranteeing up to £600bn worth of toxic debt.

RBS said the Treasury was also injecting a further £13bn into the bank, in exchange for shares, to further support lending. It said that another £6bn would be available should RBS need it.

BBC business editor Robert Peston says that RBS is being shored up in what some will see as Britain's biggest ever bailout.

He adds that the losses borne by taxpayers as a result of the new scheme could be substantial in a prolonged, severe recession.

Shake-up

£24.1bn RBS 2009
£14.9bn Vodafone Group 2006
£13.5bn Vodafone Group 2002
£10bn Lloyds (HBOS) 2009
£6.4bn Cable & Wireless 2003
Mr Hester also announced a "sweeping" shake-up of the group's business as it aims to cut costs by £2.5bn a year.
He said that the bank would be separated into two arms, with the bank's riskier assets and operations grouped together.

The bank's overseas business would be cut back, with its operations to be reduced or sold in 36 of the 54 countries it works in.

He said that job cuts would be substantial but gave few details, angering union representatives.

Reports had suggested job losses could total 20,000.

"We are extremely frustrated by the lack of clarity over the company's restructuring proposals with no firm detail on jobs," said Unite's joint general secretary, Derek Simpson.

"The uncertainty hanging over the heads of these workers is unacceptable."
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
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#2
Does the State [in this case the UK] have sovereignty over the RBS, or is it the other way around?....never mind, I know the answer - its the same in the US.
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#3
:top:
The shadow is a moral problem that challenges the whole ego-personality, for no one can become conscious of the shadow without considerable moral effort. To become conscious of it involves recognizing the dark aspects of the personality as present and real. This act is the essential condition for any kind of self-knowledge.
Carl Jung - Aion (1951). CW 9, Part II: P.14
Reply
#4
So, RBS pays £25 billion to dump £300 billion (or a major part thereof) on the taxpayer.

Quote:Lib Dem's Vince Cable said the toxic debt deal showed that the Government had 'almost completely lost the plot'.

'This proposal for asset protection is a real disgrace," he said. 'It is a complete betrayal of the taxpayer's interest.

'This is a classic case of privatising profits and socialising loss.'

Mr Cable said the Government would have been much better buying up more shares in the banks and taking them in to full temporary public ownership, rather than dabbling with 'feeble agreements'.

He also said demands from Barclays that they would not deal with the Government unless their bonus arrangements were protected amounted to "blackmail".

Even Alan Greenspan, former chairman of the US Federal Reserve, had urged the Government not to be afraid of nationalisation saying that they could not keep funding 'zombie banks'.

He said it would take 'many months' to establish the scale of toxic assets held by banks, and the scale of problems would change depending on the international economic outlook.

http://www.dailymail.co.uk/news/article-...andal.html

Cable is speaking the truth.

I left the Greenspan quote in there because his heroine, Ayn Rand, would be disgusted at Big Al's rank hypocrisy.
"It means this War was never political at all, the politics was all theatre, all just to keep the people distracted...."
"Proverbs for Paranoids 4: You hide, They seek."
"They are in Love. Fuck the War."

Gravity's Rainbow, Thomas Pynchon

"Ccollanan Pachacamac ricuy auccacunac yahuarniy hichascancuta."
The last words of the last Inka, Tupac Amaru, led to the gallows by men of god & dogs of war
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