Friday, Mar 21, 2008
HBOS and others ask B of E for Extra Cash
Independent: High street banks ask for extra cash
Cash strapped UK banks asked for extra financial support from the Bank of England yesterday. HBOS sticks out amongst the others especially after their bleating during the week about their ample liquid resources!
Posted by enuii @ 10:22 AM (1746 views) Add Comment
20 Comments
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1. mark said...
i think there is a big cover up, we are not being told the real truth, I really do think HBOS is in the sh**
2. mrmickey said...
What worries me most is that the HPC hasn't really got going in this country yet, when it does start building up a head of steam then we'll really see the sparks flying with the banks & building societies as they get thumped with bigger & bigger bad debts. I've got a NS&I account set up to dump my savings into at short notice when things really go pear shaped.
3. paul said...
I think so too. HBOS has made a little bit too much of being grossly wronged by the rumour, and the Bank of England (which is not above market manipulation by any stretch) has been quick to pile on the opprobrium.
As Shakespeare said "Methinks she doth protest too much".
4. mrmickey said...
Things are going belly up without anything really happening, we haven't had high interest rates we haven't got a crumbling economy with high levels of unemployment and no HPC as yet, so it's anybodies guess what this current crisis will look like with these factors thrown in as well.
5. A Saver said...
mrmickey - agree with everything you say. I decided some time back to do set up some accounts with "safer" banks and put some cash in the NSI account yesterday. I also gritted my teeth and opened a NR account, thinking good interest rate at theoretically low risk and I'm subsidising it as a taxpayer so may as well get something out of it.
Things can happen very fast and it's best to be prepared. It''s just an appalling situation and it chilled me to the bone to hear GB say trust us to get the country through this - I mean the guy who made things SO much worse than they would have been?? Does ANYBODY trust him??
6. plato said...
As fate would have it, I'm with HBOS and have been for many years. This in itself spells disaster as I am not the luckiest of people.
But seriously: paul makes a good point here with both logical and intuitive views.
7. Icarus said...
@mrmickey - If there hasn't been a HPC it's because of the TVC (Transaction Volume Crash). A would-be buyer cannot get his hands on the £300,000 he would need to complete the transaction that would take a house price down from £350,000 to £300,000.
8. japanese uncle said...
At the very least we should like to expect the BoE to have the decency to tell those 'begging' banks to cancel all bonuses and dividends which were hardly justifiable in consideration of the potential problems so imminent/apparent for quite a while to any reasonably informed minds, and that on retroactive basis back to say 2005.
9. new user 2007 said...
The irritation for myself is that these bankers and their lobby groups have spent the last decade lobbying to be allowed to do as much they like and with miminimal monitoring. The FSA (a government controlled body) "kindly" listened to them. Now they want the BoE (officially, allegedly, independent) to bail them out after having taken the mickey and used that lack of monitoring to destabilise the economy. At least Mervyn King appears to be looking at tbhe moral hazard issue. Doubt that will last.
10. jack c said...
"we haven't had high interest rates we haven't got a crumbling economy with high levels of unemployment and no HPC as yet, so it's anybodies guess what this current crisis will look like with these factors thrown in as well" - S2R1 mega gloom "predictions" might be near the mark !
11. Prestigebridging said...
Interesting and useful, thanks.
12. techieman said...
bystander take note - d'oh looks like we may not have been that far off the mark after all. Lets see what more comment there is over the w/end, what happens with the Dow and how the market opens tues.
13. bystander said...
Thanks for the advice techieman and I will be the first to put up my hands and say 'fair cop' if they are proved to be illiquid after all ( and not just because through rumours they found themselves undervalued and therefore under capitalised), but MS took the begging bowl to the Fed, just after they bought BS for twopence, and thats with Fed backing all risks. Again I say sticky situations like BS and HBOS can and are exacerbated by the criminal activities of 'some' backstabbing self-serving bacteria, dressed in suits, to give them some sort of respectability. Time will tell, but ,as always on this site we are airing our views, whether or not they are acceptable by all. Personnally I will stick with a quote by Kemal Dervis, from an earlier post "He added that herd-minded financiers profit hugely from the inflation of asset bubbles, “but pay very little personal penalty when the bubble bursts”. Instead, ordinary people bear the costs through government bailouts and higher inflation stoked by aggressive cuts to interest rates". There are parasites in all walks of life, but it would appear the parasites in the financial world have a far broader destructive reach than others. I read today that a London based hedge fund is being investigated for setting up fake offices masquerading as Press and economic advisors so they could spread, apparently, believable information about banks, and investment houses, and then short them. Again we are fed information by the press, but when you look at the unregulated growth of this sector in such a short time, you wonder what they are capable of. What a wonderful world we live in.
14. renting2 said...
Not only on this site but in a lot of the press today .... calls for Ethics over VI. Now where have I heard that before ............. S2R1?
15. Readyforthefall said...
Hi, first post. Can someone more enlightened about the 'funding crisis' than me tell me why there is one? My thinking is that if none of the banks are prepared to lend to each other, then they're all hoarding their own money and if there's only a finite amount of money in the system (ignoring the BoE handouts) then none of the banks should have liquidity issues, because they've all got their own cash stockpiled and they shouldn't be any worse off than before the whole cross-lending practice dried up. Stinks to me of a cover-up of a much greater issue, which is that, rather than stockpiling, they've all ran out of money so don't have enough to write new mortgage business and certainly don't have any to lend to other outfits?!
16. Daringsneakybeaver said...
The Credit Default swap market rates "the bank with no problem" (i.e. HBOS) as the worst of all UK banks; not quite as bad as the Icelandic banks, but certainly somewhere up the "worry scale". Lloyds is basically the "best" or maybe "least bad".
So if HBOS was at the meeting, then what do we make of "good old traditional banking" Lloyds also being there?
Credit Default swaps for ALL UK banks are WAY above where they were just one year ago - people couldn't sell protection fast enough back then. Now they can't buy it fast enough.
And yet all we get in public is ridiculously implausible assurances that there is no problem at HBOS.
Sure Halifax and Bank of Scotland independently were extremely conservative institutions, but HBOS is now the UK's biggest lender. How do you get to be the biggest lender and NOT have any dodgy loans on your book? Or without depending on the money markets?
What I just don't get, most of all, is why we the people are just lamely accepting all of this. Why are we not calling our leaders to account? Is commenting on lame internet message boards the best we can do? It feels like throwing darts into a black hole at times. For all our commentary, what are we actually achieving by doing this? Anyone?
17. bystander said...
I forgot to add, that these bacteria consider themselves better than the rest because they are 'considerably richer than yow". Look at the way the world holds that Berkshire hathaway chap (Buffet) in such high esteem, when all he has ever made is money, that is all, at least Gates was part of a company that creates a proper service that really does benefit many rather than a few. I think you can tell that this is a little bug-bear of mine, made worse by the way the corruption in the financial world has caused such distress to so many, and yet those responsible will not be punished and may well get solid platinum handshakes as a fairwell. The banks taking the begging bowl to the central banks is a symptom of the overal unregulated corruption, but you will still get the "medical' insurance salesmen (traders. hedge funds, etc. trying to screw the last pennies from those seriously ill, either in reality or because they have been told they are)
18. techieman said...
Bystander - well put. I have - what i obviously think is - an interesting take on the "He added that herd-minded financiers profit hugely from the inflation of asset bubbles, “but pay very little personal penalty when the bubble bursts”. This is very true, although mr lewis and Jimmy might disagree. My point is this and its one i have raised before, this happens because the recipe of add two teaspoons of relaxation of the deposits needed to finance the credit to a saucepan of FDIC insured / FSCS supported deposits and you get the possibility of moral hazard. The best example of this is the S&L crises of the late 80s. Since the first 100k of deposit was federally insured, AND since there was very little regulation re investments if the S&L was liquidated there would be no problem for the public. I remember reading of one S&L operator who had invested in guns and had enough arms to support a small army!
The final ingredient is a lack of transparency.
IF you had no scheme to cover people against their losses, but you had complete transparency and you had an effective rgulatory environment then the depositors would vote with their feet. This point takes some thinking through and i know we live in a compensation culture AND i realise there is an argument for compensation on deposits etc. But really my whole point on this stuff is we should be more worried about how we got here so that we dont get here in the future. The FSA and Tresury should make their mind up who does what and put in place some effective safeguards but they should have done this pro actively years ago. Now the genie is out of the bottle, and the bottle will get smaller before the genie will be put back in.
So in general yes i agree with your sentiments BUT in this case i still think there is probably more to this story about HBOS than meets the eye. Re Buffet I would only comment that both he and Gates are contributors to society via their Philanthropy. People can be as cynical as they like but they dont HAVE to do this. Also its a bit of a generalisation i mean Buffet is really into insurance and reinsurance. I suppose that industry is on Bystander's hit list too? :-). http://en.wikipedia.org/wiki/Berkshire_Hathaway. Best not to get into the pros and cons of insurance, cons you may feel being the operative word........You'll be bringing up Lloyd's names and asbestos and equitas next.:-).
19. Maihem said...
techieman, agree with the guaranteed deposits thing. I think, instead of playing with interest rates, deposits should be guaranteed to a greater or lesser degree, set by the government. When banks are generally cautious, guarantee 90% of deposits - when they are gambling, guarantee 50% of deposits. Let people tell the banks what to do by moving around.
If all banks are terrible and everybodys deposits are in just a couple of banks, guarantee 1% of deposits and let people use safe deposit boxes and insure their cash.
20. techieman said...
Fameous five? - I KNEW i'd seen John McCain before.....
http://en.wikipedia.org/wiki/Keating_Five
"Following the deregulation of the banking industry in the 1980s, savings and loan associations (also known as thrifts) were given the flexibility to invest their depositors' funds in commercial real estate. (Previously, they had been restricted to investing in residential real estate.) Many savings and loan associations began making risky investments. As a result, the Federal Home Loan Bank Board, the federal agency that regulates the industry, tried to clamp down on the trend. In so doing, however, the FHLBB clashed with the Reagan administration, whose policy was deregulation of many industries, including the thrift industry. The administration declined to submit budgets to Congress that would request more funding for the FHLBB's regulatory efforts."