Monday, Jan 19, 2009
Royal Bank of Scotland (RBS) will this morning unveil up to £25bn of losses for 2008 from increasing
telegraph: RBS suffers biggest loss in UK history
Greece no longer dares sell long bonds to fund its debt. It sold €2.5bn last week at short rates, mostly 3-months and 6-months. This is a dangerous game. It stores up "roll-over risk" for later in the year. Hedge funds are circling. Traders suspect that investors are dumping their Club Med and Irish debt immediately on the European Central Bank in "repo" actions. n other words, the ECB is already providing a stealth bail-out for Europe's governments – though secrecy veils all. An EU debt union is being created, in breach of EU law. Liabilities are being shifted quietly on to German taxpayers. What happens when Germany's hard-working citizens find out?
Posted by chris @ 01:52 AM (861 views) Add Comment
21 Comments
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1. paul said...
That's not the biggest loss in RBS history, that's the biggest loss in UK history.
No wonder its been nationalised - these people are far too incompetent to run a bank themselves.
2. 51ck-6-51x said...
That's mahoosive! No wonder their shares were down so far on Friday. £25bn writedown on ABN purchase - they led a consortium that spent £49.2bn on it. I bet Barclays are relieved that RBS piped them to the post.
RBS consortium seals ABN Amro takeover, as chairman quits:
RBS chief executive Fred Goodwin rejoiced in the victory but acknowledged that much work lay ahead.
"It is good to get to the end of what has been a very long road," Goodwin told reporters on a conference call. "There is still a huge amount of work out there to do," ... "The next two years will be crucial in that respect and it is only then that we will able to fully evaluate the final outcome."
Looks like they have evaluated it a bit early ;p
Chris - where is the article summary text from? Consider adding a comment in the future rather than using the article summary field.
3. mrmickey said...
What gets me is the general public aren't getting angry about this they don't seem to think this is their problem. Some of RBS's activity is bordering on criminal.
4. 51ck-6-51x said...
@mrmickey - most of them either don't care or don't understand. Quite happy to watch Celebrity Big Brother or whatever.
What specifically is bordering on criminal? Making a purchase at the top of the market (ABN), getting involved in the same markets as their competitors (sub-prime / securitisation) or setting their aim to high (trying to compete with the investment banks)? I think these are just bad business decisions rather than fraudulent.
5. mrmickey said...
Lending £2.5 billion to a Russian Oligarch then just writing the loan off, then expecting the tax payer to fund their incompetence, it may not be a crime but it's immoral.
6. techieman said...
Aha morals and justice Mr M? I think you may have occassioned an Input here on ETHICS. To be fair a business decison is just that. Banks were encouraged to be lax with lending to compete. Its not the banks its actually the capitalist system. Im not passing judgement (i couldnt really!) im just saying that its not really that surprising. As for lending $2.5Bn to anyone we dont really know the details, the price (IR) and or who else was up for the deal etc. Unless we do and I have missed it.
7. letthemfall said...
I just wish some of these bankers, who collectively made bad decisions in a kind of mass hysteria - that's markets for you - had to pay for their mistakes. Some of them have been disgraced, but they are still very rich. The old excuse about wealth creators has been shown to be completely false.
8. rm96696 said...
techieman: it's not just the capitalist system that wants to encourage banks to be lax with lending. look at gordon brown for instance. he wants to take control of the banks in order to kick start this laxness (laxative?). especially with regard to mortgage lending.
9. need-a-crash said...
Goodwin should certainly be in the dock for this. Trouble is, if he should, so should Gordon Brown! I really have lost all faith in our political and economic system.
10. 51ck-6-51x said...
Yes techieman - As usual it boils down to this, if one thinks such practices are immoral, then one is anti-capitalist.
If you want a £2.5bn loan for a project should you not be able to bid for it? If someone is in the market for £2.5bn and you have it to hand is it wrong to offer it (assuming you have performed due diligence on the prospective debtor)? If you have lent £2.5bn and see no hope of getting it back is it wrong to write it down?
Furthermore I do not agree that RBS *expected* the taxpayer to step in, rather once there is a threat to stability the state do what the state does. We often confuse correlation and causation.
My opinion is that democracy and capitalism do not play well together on many levels - without capitalism democracy works well, without democracy there is no need for regulation of markets, however when both co-exist there is a constant tug-of-war that must be kept in play - if either side fall both get covered in mud.
Also note that it was not RBS who made the loan but ABN, prior to takeover, so I'm not sure why Brown is angry about that loan. I do see why he is angry about the ABN takeover though - but bubbles are bubbles, and without the fool there is no bubble.
11. Fagui said...
im sure HSBC & Barclays can easily beat that !!!
12. techieman said...
..... 51ck - Moving on from your point the question then is what then instead of capitalism? This is the question that demands a serious debate at this time IMO. I have no answer i think it should just be the subject of a debate, or is it "controlled" capitalism that we want, where parameters are put in place eg by controlling the amount of leverage utilised by the banks to increase the money supply?
As for RBS - i remember someone on here saying they were a bargin because of their P/E s and Div yields. My response was that they "looked cheap" for a reason.... I hope however it was didnt buy too many.
13. techieman said...
whoever even how stupid of me!
14. rm96696 said...
Interesting that the government is complaining about reckless lending "abroad". What about reckless lending at home? And were RBS the only ones? How about HBOS and northern rock? You don't have to go abroad to lend recklessly. But talking about reckless lending at home would be politcally embarassing.
15. unplugged said...
Techieman,
Perhaps this is going too far but for what its worth I'll suggest that an in depth debate on any socio-economic system, if it were ever to take place should focus first on the foundations on which the system - capitalism or its alternatives are built upon... the liberal conception of freedom? Survival of the fittest/Darwinism? Equality? Natural law? God/Religion vs Chance?.... As you mentioned, ethics.
Personally it is the profound aspects of any topic that I find most interesting and perhaps most valuable or revealing. As far as I can make out the various systems and ideals that have come and gone can trace their roots to the various philosophical and religious developments that have occurred over the ages, especially since the enlightenment. I'm thinking along the lines of universal laws and principals which must retain ethical integrity. Its not an easy subject to approach here and is often absract... and I'm certainly no expert, but recognising and exploring these foundations should be the first step in understanding a systems underlying justification and logic, and perhaps its potential - IMO. Whether it is for the purposes of debate or just personal understanding I think its important, as far as is possible to start at the beginning.
An interesting series of vids for anyone who has the time and inclination.
http://uk.youtube.com/watch?v=IxjnG1X510A
http://uk.youtube.com/watch?v=tu-16Wz347g&feature=related
http://uk.youtube.com/watch?v=GmbGbo-oyKc&feature=related
16. techieman said...
Thanks very much unplugged - I will view with interest. I think there are alot of clever people that blog on here and i would find a lively debate of interest. Having said that i personally just feel that an understanding of the things you outline would (if nothing else) aid my personal development.
Thanks Again.
17. unplugged said...
Agreed techieman a debate would be interesting. I've learned a lot from the blog over the years... everyone offers a unique perspective. I find the diverse views and insights facinating, including yours, and they often aid my personal development also.
18. shipbuilder said...
Any system should be based on liberty, fairness and equality of opportunity. However the eternal debate seems to be how do we achieve that. The very heart of the debate is man's nature - on the most basic level, free market capitalism is based on the idea that man is self-interested and individualistic, socialism is based on the idea that man works better as part of a community and is altruistic. Unfortunately both these labels have very negative connotations for 'the other side' because they have been corrupted by the greed/psychopathy of the power systems that implemented them.
Surely the best solution is a combination of both.
However, the most fundamental element that seems to be missed so often and is so keenly illustrated by the current situation is that all systems are run to benefit those with power and wealth i.e. by themselves, for themselves. So the first element that must be sorted out is how to prevent this.
19. shipbuilder said...
To illustrate my point about those in power, already the debate is framed in their terms. Darwinism does not mean 'looking after number 1/survival of the fittest'. So why is that the widely held interpretation? Essentially, because it fits with the mindset and purposes of those in power.
One of the cornerstones of capitalism as we know it is private property rights. Indeed the right to the product of one's labour or exchange is natural. However our current interpretation lumps land and natural resources in there as well, yet surely land and natural resources are separate, the birthright of us all? So why the current interpretation? Could it be that it suits those in power, the landowners?
Socialism is assumed to mean state control. It need not be, but again, why do we think this is so? Because it hands our rulers even more power?
For any debate to be valid, we need to reject the terms and meanings handed down to us and start from first principles.
20. unplugged said...
Got distracted so I'm a bit late on this.
Agree with many of your observations shipbuilder. The private property rights/concept of ownership is certainly one of the big ones and played a large part in Marx's conclusions. Marx's philosophy incidently was heavily influenced by Hegel - see link above. I also get the impression that Marx (true motivations aside) is misinterpreted in the common understanding. An interesting and apropriate quote from Auther Shopenhauer:
"Governments make of Philosophy a means of serving their State interests, and scholars make of it a trade".
Another consideration perhaps is that the behaviour of people (whatever might determine it) can often reinforce and hence justify the application of ethics in the organisation of society.... we all wittingly or unwittingly reiforce the system that may or may not oppress us, as it were. ie. Many of us exploit each other and in turn get exploited. Which involves many considerations such as free will, circumstance, opportunity and universal implications etc.
A really productive debate requires many considerations along the lines of your last point. Parameters need to be considered etc. Thats no simple thing and the whole subject is potentially huge.... it's perhaps not well suited to the nature of this newsblog and better suited to the forum as an ongoing dialogue? Its not often I see many references to forum debates and its not somewhere I spend much time... a lot gets discussed here and is valuable IMO, but it can only go so far. Any thoughts?
21. 51ck-6-51x said...
The nub of the problem in my mind is the lust for power, as shipbuilder also notes. Any econo-political system should aim to minimise the effect of those who attempt to attain and abuse power. When push comes to shove is a phrase I think is fitting since the last bastillion of power is always brute force, and under any system acquiring a loyal tribe and weapons is always easy for those who set their mind to it. Hence the underlying cause of the turmoil must be addressed; greed must be banished. How do we go about this whilst upholding liberty? The answer is unfortunate; there seems to have to be pain for us to learn. Maybe we are about to witness this revolution.
For the moment I think our current system of a struggle between a short-term democratic system and capitalism works quite well, albeit with the occasional hiccup from lack of foresight on behalf of the state (possibly due to the short tenure) or hysteria on behalf of the markets. I hope we can make a slow transition to a superior system, but maybe we need to learn.