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Barclays Accounting Practices Likened To Enron

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http://ftalphaville.ft.com/blog/2011/04/28/555611/protiums-acid-reflux/

First it likens the Protium deal to some of the off-balance sheet manoeuvres performed at Enron:
Barclays’ Protium deal bears some remarkable similarities to the off-balance sheet vehicles it helped structure for Enron.
Between 1997 and 2000, Barclays put together three companies for the collapsed energy giant called Chewco, JT Holdings and Nikita. To qualify as off-balance sheet under US accounting standards, the entities had to be backed by at least 3pc of external equity.
In all three cases, according to the official report into Enron’s collapse by Neal Batson, Barclays provided some or all of the equity as well as structuring the vehicles. Barclays only did so on the understanding that Enron would ensure the money was repaid “under all circumstances”.
Mr Batson said this was evidence Barclays had “aided and abetted” Enron in misleading the auditors.
Similarly, Protium – 96.5pc financed by a Barclays loan – only qualified as a separate company because 3.5pc of the assets were held by external investors.
And, in much the same way as Barclays secured a guarantee against losses at Enron, the Protium investors received almost cast-iron protection.

Perhaps Lord 'All mouth an no trousers' Turner at the FSA would like to remind us why he thinks it is valid to permit Barclays to continue to receive the priveledge of a UK bankstering licence and the attendant lender of last resort and discount window benefits?

On the other hand perhaps he wouldn't!

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Yes - but the loan to the 'new owners' with which they were able to 'buy' the assets off of Barclays helped to re-capitalise the bank when they needed it. Don't you understand anything? B)

and with the Poor Wilsons now having to compete with banks getting into BTL...what is the UK coming to?

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Yes - but the loan to the 'new owners' with which they were able to 'buy' the assets off of Barclays helped to re-capitalise the bank when they needed it. Don't you understand anything? B)

You mean like a sort of govt. sponsored 'scam'?

Nice. Where do I sign?

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The real reason Barclays created Protium was the last explanation it gave in the original press release, to secure “long term access to an experienced team specialising in managing credit market assets”. The 45 structured credit experts were threatening to quit to set up their own fund, and Barclays feared the worst. A new team would not know where the bodies were buried and a fall of just 10pc in the value of the “monoline wrapped CMBS”, “Alt-A” and “US sub-prime” assets would translate into an ugly $1.2bn loss – on top of those already sustained. Better to pay the bankers to continue managing the poisonous assets than risk a big loss.

I like this, even the bankers hold bankers to ransom it would appear.

Still at least everyone will have got a bonus.

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I like this, even the bankers hold bankers to ransom it would appear.

Still at least everyone will have got a bonus.

should a bank have any bodies buried?

And if they fear there are some...shouldnt they declare them to investors?

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In summary from the Daily Telegraph:

...a devastating unmasking of how Barclays was held hostage by 45 of its own investment bankers

who were managing its exposure to sub-prime toxic waste. ...

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8478846/Toxic-Barclays-bankers-bag-85m.html

The revelation that the former Barclays investment bankers have been paid roughly $1.75m each for just a year-and-a-half's work came as the lender disclosed it will be bringing the assets back on balance sheet, ending an episode that is estimated to have cost shareholders $130m.

Barclays disclosed on Wednesday that it will be "acquiring control" of Protium, a company founded in September 2009 with a $12.6bn Barclays loan to take $12.3bn of toxic waste off its books. As part of the deal, about 45 Barclays bankers transferred to a US company, C12 Capital, to manage the assets – receiving an annual $40m fee and a share of any profits. Their number has since swelled to about 80.

....

To extricate itself from the agreement, Barclays has repaid Protium's investors their $450m, as well as about $50m in interest, and awarded the C12 bankers $83m "in accordance with the performance fees that would have been due under the original agreement, based on investment performance to date".

The "performance fees" come on top of the $60m in management fees already earned.

It must be very hard work watching all that paper in the office....

How nice they are extrapolating out from previous "good" performance to make payments to the bankers.

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I like this, even the bankers hold bankers to ransom it would appear.

Still at least everyone will have got a bonus.

Well I never, looks like there's no honour amongst bankster thieves these days.

What an utterly mercenary, money-grabbing, back-stabbing, amoral bunch of crooks. :angry:

... and that group threatening to break away are even worse. :lol:

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http://www.telegraph...rs-bag-85m.html

It must be very hard work watching all that paper in the office....

How nice they are extrapolating out from previous "good" performance to make payments to the bankers.

All with our wonderful FSA regulatory stamp of approval and BoE and treasury backing.

Says it all really. Financial scamming is what the UK does best.

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All with our wonderful FSA regulatory stamp of approval and BoE and treasury backing.

Says it all really. Financial scamming is what the UK does best.

Barclays shareholders must be thrilled.

The share price has plunged in recent years. Shareholder returns are now just a fraction of what they compared to bank bonuses. Then we have this C12 and Helix doing rather nicely

Inside Barclays’ latest IMS:

In April 2011, Barclays entered into agreements to acquire the third party investments in Protium for their carrying value of $270m. From this time, Barclays is exposed to the majority of risks and rewards of Protium, which will be consolidated by the Group. An associated restructuring of the management arrangements is also at an advanced stage of negotiation. Under this restructuring, the general partner interest will be acquired by Barclays for a nominal consideration and the remaining interest in Protium held by C12, Protium’s investment manager, will be redeemed for consideration of $83m, which is in accordance with the performance fees that would have been due under the original agreement, based on investment performance to date. Barclays will then become the sole owner of Protium. Completion is expected before the end of April. C12 will continue to provide management services to Barclays in relation to these assets.

(With that $83m pay-out, it’s hard to argue that C12 aren’t the ones getting the best out of Protium)

As for risks and rewards, we aren’t sure about that. Barclays is not giving itself too long to wind down the ex-Protium assets, within three years in fact:

The transactions will also result in the shortening of the maturity of the loan to Protium to 15th June 2014. Acquiring control of Protium will assist the Group in facilitating an early exit from the underlying Protium exposures and improving returns. Since impairment on the loan is already calculated by reference to Protium’s net asset value, there will be no gain or loss and no goodwill arising. As part of this transaction, $750m of the proceeds from the Protium loan redemption will be invested into Helix, an existing fund managed by C12. This represents a majority interest in the fund, which will also be consolidated by the Group on completion.

Therefore we’re unsure how much benefit there’ll be to Barclays from a possible recovery in the market values of Protium assets, even if the markets are recovering.

Maybe the real reward is just to get shot of Protium for good. After all, this was a deal the City never liked and never understood. And then there’s the FSA which is reportedly unhappy with its non consolidation and the treatment of the vehicle under Basel III.

http://ftalphaville.ft.com/blog/2011/04/27/554381/protiums-coming-home/

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8481845/Lord-Oakeshott-asks-HMRC-to-investigate-Barclays-Protium-deal-in-Parliamentary-question.html

Lord Oakeshott, the former Treasury spokesman and Liberal Democrat peer, is putting down Parliamentary questions about the lender's Protium deal in September 2009 over concerns that it may have involved "a substantial tax avoidance element".

Under the arrangement, Barclays sold $12.3bn of toxic assets to Protium, a Cayman Islands company founded with a $12.6bn loan from the bank.

Questions about the deal have been raised on numerous occasions. Arturo de Frias, banks analyst at Evolution Securities, said: "We never understood why they passed over all the upside when they didn't get capital relief and they didn't transfer risk. Why did they put this structure together in the first place?"

So they got a Northern Rock "together deal" then to buy the toxic crap with? So what happened to the $300m in spare cash?

Amazing that you can sell what you already own, to another company and then lend them the money to buy it off you, which no doubt creates some sort of profit. It just appears to smell of fraud and dodgy accounting.

It's just like the sale of the HSBC building where the bank lent the money to the buyer and ended up repossessing it, although with Barclay's the figures are just bigger.

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http://ftalphaville.ft.com/blog/2011/04/28/555611/protiums-acid-reflux/

Perhaps Lord 'All mouth an no trousers' Turner of the FSA and Bank of England would like to remind us why he thinks it is valid to permit Barclays to continue to receive the priveledge of a UK bankstering licence and the attendant lender of last resort and discount window benefits?

On the other hand perhaps he wouldn't!

Slightly embellished for you.

http://www.bankofengland.co.uk/about/people/court.htm

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The real reason Barclays created Protium was the last explanation it gave in the original press release, to secure “long term access to an experienced team specialising in managing credit market assets”. The 45 structured credit experts were threatening to quit to set up their own fund, and Barclays feared the worst. A new team would not know where the bodies were buried and a fall of just 10pc in the value of the “monoline wrapped CMBS”, “Alt-A” and “US sub-prime” assets would translate into an ugly $1.2bn loss – on top of those already sustained. Better to pay the bankers to continue managing the poisonous assets than risk a big loss.

Either they've lost control of their operations or else there's possibly a dodgier "real reason" such as more tax avoidance or just wanting to mislead shareholders etc etc.

Either way it's high time they kept their promise to move off to Dubai or the US or wherever.

Edited by billybong

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Slightly embellished for you.

http://www.bankofeng...eople/court.htm

I've come to the conclusion the Court of the Bank of England is the 'effective' government (at least from a financial perspective) as distinct from the charade that plays out down the road.

No doubt Turner will end up succeeding Merv at some point too.

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I've come to the conclusion the Court of the Bank of England is the 'effective' government (at least from a financial perspective) as distinct from the charade that plays out down the road.

No doubt Turner will end up succeeding Merv at some point too.

Tweedle dee or tweedle dum?

Chief Executive, FSA Hector Sants

Hector was appointed FSA Chief Executive at the end of July 2007 and in July 2010 was appointed Deputy Governor Designate of the Bank of England and CEO designate of the Prudential Regulation Authority which will be the subsidiary of the Bank of England responsible for prudential regulation of Banks and Insurers. He is also a member of the interim Financial Policy Committee of the Bank of England.

http://www.fsa.gov.uk/Pages/About/Who/board/index.shtml

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  • 285 Brexit, House prices and Summer 2020

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