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From The Sunday TimesJanuary 11, 2009

Gordon Brown calls in top bank bosses

Treasury prepares new lending package as prime minister hosts high-level talks at ChequersIain Dey and David Smith

GORDON BROWN has invited the heads of Britain’s biggest banks to Chequers today as Treasury officials work on the final details of a multi-billion-pound plan to kick-start bank lending.

Marcus Agius, Barclays’ chairman, Mervyn Davies, Standard Chartered’s chairman, and Eric Daniels, Lloyds TSB’s chief executive, are among guests invited to the prime minister’s weekend home. Chris Gibson-Smith, the London Stock Exchange chairman, is also attending, along with City minister Lord Myners and Alistair Darling, the chancellor.

The lunch is taking place alongside detailed negotiations on the new scheme in the Treasury this weekend, co-ordinated by senior civil servant Tom Scholar.

Since the Treasury unveiled its bank rescue in October, it has injected £37 billion into the sector and guaranteed about £100 billion out of a proposed £250 billion of lending under the credit-guarantee scheme.

.

It will involve creating a so-called “bad bank” to take toxic debt off banks’ books, in line with the Paulson plan in America. The car industry will be helped with, among other things, credit assistance for buyers.

Further aid for the banking industry also follows warnings from Britain’s most senior accountants.

In a secret meeting with Myners before Christmas, senior partners from KPMG, Deloitte, Price Waterhouse Coopers and Ernst & Young warned they might not be able to sign off the accounts of Britain’s biggest banks. The auditors were not certain they could state that banks and building societies were “going concerns” under the terms of international accounting rules.

They warned that they might have to add qualifications to the accounts — with the potential to scare both shareholders and savers.

The accountants said they might have to add “emphasis of matter” paragraphs to the accounts, which would draw attention to continuing funding pressures.

The rest of corporate Britain is also concerned about auditors questioning accounts as the reporting season begins. “We want auditors to be extremely robust in their assessments of every company’s accounts,” said Michael McKersie at the Association of British Insurers.

“But we don’t want the auditors to second-guess the macro-economic environment to the extent where they start adding qualifications to company accounts without due cause.”

The government continues to recruit more advisers to help deal with the crisis. Four non-executive directors are this week expected to be appointed to the board of UK Financial Investments, the body set up to manage the taxpayer’s holdings in banks, including Glen Moreno, the chairman of Pearson, the media and education group.

Industry is warning that urgent action is needed. Manufacturers say the sector’s downturn will last for another 18 months and will see sound businesses fail in the absence of government help. The Engineering Employers’ Federation will release its annual manufacturing report this week and warn that output will drop by at least another 5% this year and show no recovery until the second half of 2010.

It follows official figures on Friday showing manufacturing output falling at its fastest rate since the deep industrial recession in 1981 and down more than 7% on a year ago.

The federation will this week urge a six-point plan on the government to save jobs, protect key sectors and preserve supply chains in the wake of the accelerating downturn.

“This year was already going to be challenging for manufacturing, but the combination of the global downturn and continued sclerosis in the financial markets means the downturn will now be longer and deeper than expected,” said Steve Radley, the federation’s chief economist.

“While reductions in interest rates will kick in at some point, we cannot afford to wait. The unprecedented speed of the downturn since last autumn is hampering companies’ ability to adjust and government must put measures in place as a matter of urgency.”

Its proposals include measures to minimise the effect on supply chains if credit insurance is withdrawn or reduced. It also wants the Bank of England to introduce “quantitative easing”, or increasing the money supply, though with caution, as an additional monetary weapon as Bank rate, cut to 1.5% last week, nears zero.

The federation also wants specific measures that include more flexible and generous short-time working allowances to enable manufacturers to keep staff; the restoration of empty-property relief, coupled with a 12-month freeze on business rates; and an increase in the annual investment allowance to £250,000, to ease cash-flow problems.

No 10 refused to comment on the guest list for the Chequers lunch.

Well looks like Brown is having one more roll of the dice to win the election and paying for it by mortgaging all our futures and childrens futures.

I am interested to hear peoples opnions on what the result of all these measures being in the next few years.

I personally cannot see a return to pre 2007 levels of madness and I think his attempts to get us back to those times or try and pull the economy out of it nose dive will compound our problems.

His efforts to restart the mortgage market through government guarantees on MBS will fail as few investors will want to touch UK housing market with a barge pole.Everyone knows how far it is overvalued,how fast it is falling and that unemployment is going to be horrific.Also the amount guaranteed by the goverment is a drop in the ocean compared with the size of the market and is to small to support prices.

For the housing market to even stagnate it requires a big jump in approvals which means alot of new entrants onto the housing ladder and the appetite to take on debt is not going to increase while we are seeing unemployment climb and bad economic news reported daily across our screens. Sentiment is the biggest driver of the housing market as well we all know.Fear is now replacing greed.

Any QE will go into the black hole. The money printed will be used to zombify unproductive and bankrupt business that should be let go to the wall. If they want printed money to enter the economy they will require people to take on more debt which again will not happen due to sentiment.Tax breaks will be used to pay down debt or be saved.

A toxic bank creation scheme? Hmm haven't the American tried that and found they did not have enough money to buy up all the bad debt? The amount of toxic rubbish that they would have to purchase is alot larger than than could afford.

All this really ads upto is a huge waste of tax payers money with a debt overhang for years. A collapse in sterling. High inflation on imports and goods generally.Low wage inflation and high unemployment.

Oh yes and house prices will continue to fall even in a higher inflation enviroment as wages will stagnate.

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From The Sunday TimesJanuary 11, 2009

Gordon Brown calls in top bank bosses

Treasury prepares new lending package as prime minister hosts high-level talks at ChequersIain Dey and David Smith

GORDON BROWN has invited the heads of Britain’s biggest banks to Chequers today as Treasury officials work on the final details of a multi-billion-pound plan to kick-start bank lending.

Marcus Agius, Barclays’ chairman, Mervyn Davies, Standard Chartered’s chairman, and Eric Daniels, Lloyds TSB’s chief executive, are among guests invited to the prime minister’s weekend home. Chris Gibson-Smith, the London Stock Exchange chairman, is also attending, along with City minister Lord Myners and Alistair Darling, the chancellor.

The lunch is taking place alongside detailed negotiations on the new scheme in the Treasury this weekend, co-ordinated by senior civil servant Tom Scholar.

Since the Treasury unveiled its bank rescue in October, it has injected £37 billion into the sector and guaranteed about £100 billion out of a proposed £250 billion of lending under the credit-guarantee scheme.

.

It will involve creating a so-called “bad bank” to take toxic debt off banks’ books, in line with the Paulson plan in America. The car industry will be helped with, among other things, credit assistance for buyers.

Further aid for the banking industry also follows warnings from Britain’s most senior accountants.

In a secret meeting with Myners before Christmas, senior partners from KPMG, Deloitte, Price Waterhouse Coopers and Ernst & Young warned they might not be able to sign off the accounts of Britain’s biggest banks. The auditors were not certain they could state that banks and building societies were “going concerns” under the terms of international accounting rules.

They warned that they might have to add qualifications to the accounts — with the potential to scare both shareholders and savers.

The accountants said they might have to add “emphasis of matter” paragraphs to the accounts, which would draw attention to continuing funding pressures.

The rest of corporate Britain is also concerned about auditors questioning accounts as the reporting season begins. “We want auditors to be extremely robust in their assessments of every company’s accounts,” said Michael McKersie at the Association of British Insurers.

“But we don’t want the auditors to second-guess the macro-economic environment to the extent where they start adding qualifications to company accounts without due cause.”

The government continues to recruit more advisers to help deal with the crisis. Four non-executive directors are this week expected to be appointed to the board of UK Financial Investments, the body set up to manage the taxpayer’s holdings in banks, including Glen Moreno, the chairman of Pearson, the media and education group.

Industry is warning that urgent action is needed. Manufacturers say the sector’s downturn will last for another 18 months and will see sound businesses fail in the absence of government help. The Engineering Employers’ Federation will release its annual manufacturing report this week and warn that output will drop by at least another 5% this year and show no recovery until the second half of 2010.

It follows official figures on Friday showing manufacturing output falling at its fastest rate since the deep industrial recession in 1981 and down more than 7% on a year ago.

The federation will this week urge a six-point plan on the government to save jobs, protect key sectors and preserve supply chains in the wake of the accelerating downturn.

“This year was already going to be challenging for manufacturing, but the combination of the global downturn and continued sclerosis in the financial markets means the downturn will now be longer and deeper than expected,” said Steve Radley, the federation’s chief economist.

“While reductions in interest rates will kick in at some point, we cannot afford to wait. The unprecedented speed of the downturn since last autumn is hampering companies’ ability to adjust and government must put measures in place as a matter of urgency.”

Its proposals include measures to minimise the effect on supply chains if credit insurance is withdrawn or reduced. It also wants the Bank of England to introduce “quantitative easing”, or increasing the money supply, though with caution, as an additional monetary weapon as Bank rate, cut to 1.5% last week, nears zero.

The federation also wants specific measures that include more flexible and generous short-time working allowances to enable manufacturers to keep staff; the restoration of empty-property relief, coupled with a 12-month freeze on business rates; and an increase in the annual investment allowance to £250,000, to ease cash-flow problems.

No 10 refused to comment on the guest list for the Chequers lunch.

Well looks like Brown is having one more roll of the dice to win the election and paying for it by mortgaging all our futures and childrens futures.

I am interested to hear peoples opnions on what the result of all these measures being in the next few years.

I personally cannot see a return to pre 2007 levels of madness and I think his attempts to get us back to those times or try and pull the economy out of it nose dive will compound our problems.

His efforts to restart the mortgage market through government guarantees on MBS will fail as few investors will want to touch UK housing market with a barge pole.Everyone knows how far it is overvalued,how fast it is falling and that unemployment is going to be horrific.Also the amount guaranteed by the goverment is a drop in the ocean compared with the size of the market and is to small to support prices.

For the housing market to even stagnate it requires a big jump in approvals which means alot of new entrants onto the housing ladder and the appetite to take on debt is not going to increase while we are seeing unemployment climb and bad economic news reported daily across our screens. Sentiment is the biggest driver of the housing market as well we all know.Fear is now replacing greed.

Any QE will go into the black hole. The money printed will be used to zombify unproductive and bankrupt business that should be let go to the wall. If they want printed money to enter the economy they will require people to take on more debt which again will not happen due to sentiment.Tax breaks will be used to pay down debt or be saved.

A toxic bank creation scheme? Hmm haven't the American tried that and found they did not have enough money to buy up all the bad debt? The amount of toxic rubbish that they would have to purchase is alot larger than than could afford.

All this really ads upto is a huge waste of tax payers money with a debt overhang for years. A collapse in sterling. High inflation on imports and goods generally.Low wage inflation and high unemployment.

Oh yes and house prices will continue to fall even in a higher inflation enviroment as wages will stagnate.

Good post. Thanks

Yeah. Looks like McBroon is going for the scorched earth policy.

It's going to be a long, drawn out affair. The UK is going to be a very miserable place to live for a very long time.

I truly sympathise with anyone raising kids in this country. What a legacy

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From The Sunday TimesJanuary 11, 2009

A toxic bank creation scheme? Hmm haven't the American tried that and found they did not have enough money to buy up all the bad debt? The amount of toxic rubbish that they would have to purchase is alot larger than than could afford.

Quantitative Easing. The banks would be allowed to swap their toxic debt for government paper. The BoE will then buy up Teasuries with freshly printed money.

Edited by thirdwave
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http://www.telegraph.co.uk/finance/newsbys...nk-secrecy.html

Reform plan raises fears of Bank secrecy

The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.

By Edmund Conway, Economics Editor

Last Updated: 9:59PM GMT 10 Jan 2009

The Bank of England will be able to print extra money

The Bank of England will be able to print extra money

The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.

The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.

However, some have warned that it means: "there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses."

It comes after the Bank's Monetary Policy Committee cut interest rates by half a percentage point, leaving them at the lowest level since the bank's foundation in 1694.

With the Bank rate now at 1.5pc, most economists suspect the Government and Bank will soon be forced to start quantitative easing – directly increasing the quantity of money in the economy – in a drastic attempt to prevent a recession of unprecedented depth.

Although the amount of easing is likely to be limited, news of this increased secrecy will spark comparisons with Weimar Germany and Zimbabwe, where uncontrolled use of the central banks' printing presses ultimately caused hyperinflation.

The Bank said it will still publish details of its balance sheet, but, significantly, the data – the main indicator of the extent of quantitative easing – will not be presented until more than a month has elapsed. For instance, under the new terms of the law, if the Bank were to have embarked on a policy of quantitative easing last month, the figures on this would not be published until the end of this month.

The reforms, which are likely to be implemented later this year, will make the Bank of England by far the most secretive major central in the world, experts said.

In the US, where the Federal Reserve has already cut rates to close to zero and started quantitative easing, the main way to track its purchases of securities and the expansion of its balance sheet is through precisely these same weekly accounts.

"Quite why the Bank has to keep its operations so shrouded in secrecy is a mystery to me," said Simon Ward, economist at New Star. "This [reform] will make it much more difficult to track what the Bank is doing."

Among the details which will no longer be published are those revealing the extent to which London's banks are using the Bank's deposit facilities – a yardstick of pressure in the financial system.

Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: "Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.

"If we went down that path we would be following a road which starts in Weimar, goes on through Harare and must not end in Westminster and London. That is the great fear that the abolition of that section will bring about – but the Bill abolishes it."

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None of this will have any great effect, he's simply turning the steering wheel, applying the brakes and activating the handbrake in a car in freefall after it's been driven off the edge of a cliff!

That is true, but the trouble is Mr Gordon Brown has the power to put everyone in the passenger seat with him. How would you like it If you looked out your frontroom window and watched a car drive along the road for 10 miles , go straight off a cliff, then half way down you were suddenly transported into the car to look at his sneering face for the last 10 seconds of your life!

He's a quim.

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These bad debts are tied to the shadow banking system and derivatives market, are they not?

I assume, following the Enron model, that Gordon Brown and the bankers are planning on taking this 'bad debt' off the books to show profit. How much of that bad debt is tied up in pension schemes?

My taxes are already not going into the system I want to retire into, the hospitals are dirty and dysfunctional, state housing is a right mess, Britain's energy infrastructure is rotting, an the police will have near Stasi-like powers. With 2million already on incapacity benefit, and three to four million added to the dole queues in the coming years, what is the point of my working and paying taxes?

Why the hell do I have to bail out bankers!!!!

Gordon Brown, you scuking fumbag, I want to see you hang from the gallows.

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Very good analogy.

As far as I am aware all of these measures have been tried time and again throughout history, yet history is littered with massive slumps.

You have to have the slumps, if tesco have a 2% year on year growth they will eventually own the world. The figures blow up after quite a short time. We just have to take the medicine. Can Gordon Brown through black magic make Great Britain the only country in the world not go through this? The way the world is set up now, no way!

Just give it up........ :(

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Is it me, or is it as plain as egg on your face?

Indebtedness is the phrase, “I am willing to work to pay the” So pay my taxes, so pay my debt, the bigger the debt, the more they make, the longer the term, the more they make?

Make cheap money available, really cheap, they take it, loads of it, so then it feeds into asset prices. They inflate and inflate and inflate?

The winners = Governments/taxation – Banks/interest

Sooner or later it all falls over; they know this will happen, so guess what, all the bad debts, the debt where it will never be repaid, where they are unwilling to slave 24/7 to pay the debt back. Well this is bought back from the banks, by the BIG BANK, the government bank!

In return, this bad debt has gone forever, well it is now held by the government bank, will it chase it, will they want it repaid?

But in return the for this bad debt, they offer freshly brand new printed money, so now the bad debt is gone, the bank balance sheets are replenished!

But lets not forget, there are sh!t loads of people out there trying to pay there debt off still. These are genuine hard working people who bought into this ponzi scheme. The banks now own their @rses, as they have over inflated assets, and massive debts, they will be the last to default if ever?

So we have a government who boast of boom boom boom, tax revenue, very nice! The banks, well they tell the government what to do, so they are very nicely placed pulling the strings. The banks just cannot lose can they?

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Am i missing something here, over past 18-months interest rates peaked at a colossal 5.75%, oil was trading at $145 a barrel resulting in the price of petrol being £1.32 at the pump and food inflation when through the roof. This brought Britain to it knees. How will high inflation help? Unless of course wages go up to match inflation.

Can some one please explain.

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Am i missing something here, over past 18-months interest rates peaked at a colossal 5.75%, oil was trading at $145 a barrel resulting in the price of petrol being £1.32 at the pump and food inflation when through the roof. This brought Britain to it knees. How will high inflation help? Unless of course wages go up to match inflation.

Can some one please explain.

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Am i missing something here, over past 18-months interest rates peaked at a colossal 5.75%, oil was trading at $145 a barrel resulting in the price of petrol being £1.32 at the pump and food inflation when through the roof. This brought Britain to it knees. How will high inflation help? Unless of course wages go up to match inflation.

Can some one please explain.

You and yours starve/go without heat/transport so the bankers can carry on as they were.

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You and yours starve/go without heat/transport so the bankers can carry on as they were.

There are only 1200 people worldwide who has my skills in Cisco network security. Highly in demand and we will be off like a shot. Starve no, Fxxk off yes.

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There are only 1200 people worldwide who has my skills in Cisco network security. Highly in demand and we will be off like a shot. Starve no, Fxxk off yes.

People will by HP or any of the other systems if you get too cocky.

Last time I looked at Cisco stats, there were twice as many Cisco qualified people in the Uk than there were in the US.

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There are only 1200 people worldwide who has my skills in Cisco network security. Highly in demand and we will be off like a shot. Starve no, Fxxk off yes.

You seem to have high level skills in something that needs constant electricity to operate. Lets see how you do once your paper money is worthless and there are rolling blackouts everywhere at random intervals.

Good luck. :)

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There are only 1200 people worldwide who has my skills in Cisco network security. Highly in demand and we will be off like a shot. Starve no, Fxxk off yes.

Is there any risk that the rapid growth that we have seen in network engineering requirements has arisen primarily from the increasing complexity of financial products?

We are now entering an era of massively simplified financial instruments which will mean that our demands for computational power and security is falling rather than rising.

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the losses have to be owned up to and declared

which is why a "bad bank" never works, it's just an attempt to hide the losses for a few years but they're still there in the system and they still have an effect

if they print billions they need they will just destroy the currency and we will see Zimbabwe style hyper-inflation in goods and services, it would take a while to come though maybe 12-18 months before people notice it and it accelerates which by then he can blame on something else

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Hmm. The banks had the opportunity to swap as much toxic crap with the BoE as they wanted in the six months period up to October. Iirc this was then extended for a further three months (?). So I'm not sure what the purpose of the "bad bank" is, unless it is to be a repository for fresh toxic crap lending being forced upon the banks by Gordon now?

The balance sheet reporting seems a little hysterical. The proposed change, which is likely to be implemented later in the year seems to add three weeks to the reporting time. i.e. from weekly to monthly. We're 18 months into this and haven't had hyperinflation so I'm not sure why people are getting all giddy about having to wait a further three weeks to see the BoE b/s. What do they imagine will happen in this three week window? Silly.

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All this really ads upto is a huge waste of tax payers money with a debt overhang for years. A collapse in sterling. High inflation on imports and goods generally.Low wage inflation and high unemployment.

Oh yes and house prices will continue to fall even in a higher inflation enviroment as wages will stagnate.

Perhaps this has been Labour's gameplan all along. A socialist party relies on there being a large poor underclass to elect it. Too many Brits have been doing well so to keep their electorate they needed to make as many of us poor and bankrupt as possible.

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Hmm. The banks had the opportunity to swap as much toxic crap with the BoE as they wanted in the six months period up to October. Iirc this was then extended for a further three months (?). So I'm not sure what the purpose of the "bad bank" is, unless it is to be a repository for fresh toxic crap lending being forced upon the banks by Gordon now?

The balance sheet reporting seems a little hysterical. The proposed change, which is likely to be implemented later in the year seems to add three weeks to the reporting time. i.e. from weekly to monthly. We're 18 months into this and haven't had hyperinflation so I'm not sure why people are getting all giddy about having to wait a further three weeks to see the BoE b/s. What do they imagine will happen in this three week window? Silly.

what you dont understand is the losses are not being owned up to and they're getting bigger all the time, we're talking trillions here. inevitably government gets deeper into the problem as they borrow and bailout more and the amounts become ever more mind boggling which is why we're hearing all this "QE" nonesense, one way or another we will see the effects sooner or later

we cannot fund banks because the government doesn't have any money so the bailouts and "swapping" is phoney, which means they have to print phoney cash. the pound has fallen 30% in the last 6 months it's just the start and sooner or later it works its way into the system.

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Hmm. The banks had the opportunity to swap as much toxic crap with the BoE as they wanted in the six months period up to October. Iirc this was then extended for a further three months (?). So I'm not sure what the purpose of the "bad bank" is, unless it is to be a repository for fresh toxic crap lending being forced upon the banks by Gordon now?

The balance sheet reporting seems a little hysterical. The proposed change, which is likely to be implemented later in the year seems to add three weeks to the reporting time. i.e. from weekly to monthly. We're 18 months into this and haven't had hyperinflation so I'm not sure why people are getting all giddy about having to wait a further three weeks to see the BoE b/s. What do they imagine will happen in this three week window? Silly.

they dont seem to have realised what Merv meant when he said "the debt is real"

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