If Your Granny Has Bonds In The Coop-Read This.

[wonderpup]

I can't guarantee it's veracity-but I do trust this guy so worth a read if anyone you know has any coop bonds and is able to get out quick.

http://hat4uk.wordpress.com/2013/07/24/coop-bank-exclusive-how-westminster-mps-are-stealing-small-bondholders-life-savings-to-save-their-necks/

[The Knimbies who say No]

I can't guarantee it's veracity-but I do trust this guy so worth a read if anyone you know has any coop bonds and is able to get out quick.

http://hat4uk.wordpress.com/2013/07/24/coop-bank-exclusive-how-westminster-mps-are-stealing-small-bondholders-life-savings-to-save-their-necks/

Too late now the vultures have turned up. The article is a bit sensationalist and inconsistent- there is no defensible course of action that involves junior debt being honoured in preference of or on an equal footing with more senior debt, however old the holders of it are. If they didn't want risk, they should have accepted lower returns and stuck to the deposit accounts rather than bonds.

Edited July 25, 2013 by cheeznbreed

[Bland Unsight]

I can't guarantee it's veracity-but I do trust this guy so worth a read if anyone you know has any coop bonds and is able to get out quick.

http://hat4uk.wordpress.com/2013/07/24/coop-bank-exclusive-how-westminster-mps-are-stealing-small-bondholders-life-savings-to-save-their-necks/

"[G]et out quick" in the sense of wait 5 years after a global financial crisis before dumping unsecured lending to a crap bank?

The game is afoot - it has been for 5 years. The government didn't give us the Financial Services Compensation Scheme for no reason. They did it to prevent a run on the banks and a Brave New World of cash in mattresses and Joe Schmoe moving out of cash and into gold, or baked beans, or maybe baked beans in gold cans. Anyone who wanted to have their face ripped off in exchange for a promise of 6% when the non-ripped-off face option was only paying 2% is about to get to grips with the idea of risk and reward.

[wonderpup]

If they didn't want risk, they should have accepted lower returns and stuck to the deposit accounts rather than bonds.

I'm sure the nice man at the bank explained the risks to them when they took out the bonds- after all, it's highly unlikely that a bank employee would ever behave with anything less than total honesty and transparency at all times.

Lets at least be honest here and accept the reality that the powers that be have since the dawn of banking done everything in their power to obfuscate and conceal the reality of how banks work and the true risks involved in dealing with them.

So to expect little old ladies to penetrate this fog of outright lies and deception is laughable in my opinion- I suspect if you stopped a thousand people at random on the street and asked them how banking works they would not have a clue.

Banking is a lie- it only works because so few people understand it's a lie. To prove it conduct this simple experiment;

Ask almost anyone where their bank gets the money it lends out and they will most likely say from other people's deposits.

Then ask them if they would agree to have the money in their account lent out to someone who might not pay it back and they would say no- and would be outraged by the idea.

That's how incoherent most people's view of banking are. And that's exactly the level of understanding that the people in control want them to have.

[wonderpup]

"[G]et out quick" in the sense of wait 5 years after a global financial crisis before dumping unsecured lending to a crap bank?

How many little old ladies do you know who are aware that purchasing a bond from the Coop is making an unsecured loan to a crap bank?

If more people understood this stuff bankers would be hanging from lamposts by now.

I thought it worth posting the article just in case anyone was in a position to exit before the deed was done-if it ever is.

I'm not sure the political fallout would be worth it- and what would the impact be on the bonds issued by other banks?

[SNACR]

I thought cooperatives were the cuddly wuddly caring sharing business model of your dreams?

[Bloo Loo]

A Bond is a tie...handcuffs....manacles...shackles....

banks say BUY a bond paying 6% for five years....they call them "issues" as if they are a straightforward account...they even give you a statement...probably call it a Series 10 Bond Account Statement.

All nice and secure and safe and trustworthy in a banky sort of way.

Now where did those bonuses come from while rates are so low?

[winkie]

And the word 'bond' sounds so nice too. My word is my bond. Trustworthy and solid.

It's an equitable life.

[stormymonday_2011]

I thought cooperatives were the cuddly wuddly caring sharing business model of your dreams?

The Coop Bank is not strictly a mutual. It is a PLC. The mutual is the wider Coop Group which owns the bulk but not all of the banks shares through a holding company

http://en.m.wikipedia.org/wiki/The_Co-operative_Bank

Edited July 26, 2013 by stormymonday_2011

[The Knimbies who say No]

I'm sure the nice man at the bank explained the risks to them when they took out the bonds- after all, it's highly unlikely that a bank employee would ever behave with anything less than total honesty and transparency at all times.

Lets at least be honest here and accept the reality that the powers that be have since the dawn of banking done everything in their power to obfuscate and conceal the reality of how banks work and the true risks involved in dealing with them.

So to expect little old ladies to penetrate this fog of outright lies and deception is laughable in my opinion- I suspect if you stopped a thousand people at random on the street and asked them how banking works they would not have a clue.

Banking is a lie- it only works because so few people understand it's a lie. To prove it conduct this simple experiment;

Ask almost anyone where their bank gets the money it lends out and they will most likely say from other people's deposits.

Then ask them if they would agree to have the money in their account lent out to someone who might not pay it back and they would say no- and would be outraged by the idea.

That's how incoherent most people's view of banking are. And that's exactly the level of understanding that the people in control want them to have.

If they were mislead at the point of sale, or in the literature, they have avenues to pursue that complaint irrespective of the fate of the Co-op.

Your argument cuts both ways- bank's long 'istry of screwing people doesn't exactly strengthen the argument.

Plus it's perfectly possible that many of these investors, like interest only borrowers approching term, decide that when it comes to the crunch they'd rather welsh on the deal.

[Venger]

I'm sure the nice man at the bank explained the risks to them when they took out the bonds- after all, it's highly unlikely that a bank employee would ever behave with anything less than total honesty and transparency at all times.

Lets at least be honest here and accept the reality that the powers that be have since the dawn of banking done everything in their power to obfuscate and conceal the reality of how banks work and the true risks involved in dealing with them.

So to expect little old ladies to penetrate this fog of outright lies and deception is laughable in my opinion- I suspect if you stopped a thousand people at random on the street and asked them how banking works they would not have a clue.

Why are their there always people who plead victim status for investors? They didn't know what they were doing, missold and all the other excuses, whilst they somehow found their way to PIBs and double-digit yields.

Let them try and sell their homes, reduce the asking price, and downsize. Never a tragedy for those of us who waited for value, only for HPI to continue to zoom, and never a tragedy during all the years of reflation when there should have been a HPC. Where is our compensation?

Edit: mistake; their to there

Edited July 26, 2013 by Venger

[davidg]

I read the article but he didn't really make clear what the problem was beyond the coop bank being bust.

[Bland Unsight]

How many little old ladies do you know who are aware that purchasing a bond from the Coop is making an unsecured loan to a crap bank?

Here's a few who understood that making a large enough deposit was the same as making an unsecured loan to a crap bank.

Everyone should understand the nature of banks. But they may need to be motivated to learn. The problem with suggesting that some people should not have to suffer losses when losses occur is that it ignores the fact that in the real world losses will occur and therefore someone must bear the cost.

Whilst it might be politically expedient in the short term to pretend otherwise at first, another plain fact is that in the long term the state does not have deep enough pockets to soak up all the losses that might be incurred if the great unwashed are allowed to direct their meagre capital into risky ventures in pursuit of rewards.

We need to stop acting like babies, our history indicates that we can tolerate some rough treatment, after all it was regarding the conduct of the English navy that Voltaire wrote

"Dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres"

Trans: "In this country, it is good to kill an admiral from time to time, in order to encourage the others"

Source: Candide and, of course, wiki!

Unless a miracle comes along, a lot of grannies aregoing to be between a rock and a hard place when they realise that no adequate provision has been made (by them or on their behalf by the state) to feed, house and care for them for the lengthy period of time between when they are to decrepit to work and not yet dead. I don't revel in that, but the mainstream media certainly are not crowing about it from the roof tops in the way that they were when the debt boom that has laid the groundwork for so many almost intractable problems was celebrated because houses were getting more expensive relative to wages.

The misfortunes of people with crap bonds from the Co-op are most definitely the thin end of the wedge. Save your sympathy for later, save it for people who didn't take needless risks and still got their faces ripped off. There is plenty worse than this down the track - and there needs to be.

The pre-boom model for house prices was really

• find a house

• find the most incautious borrower interested in the house

• find the most incautious lender willing to lend to the borrower

• set the size of the loan against the greatest amount of interest that the borrower is willing to pretend they can service

• ignore the capital repayment

The lack of cautiousness of the lender was unduly influenced by an apparent collective belief in the minds of the financial sector employees and their creditors that if it all went tits up then the government would step in and creditors to the banks would be made whole. We need to burn some creditors to encourage the others.

Anything that dismantles any part of the above insane house pricing model is a good thing. Further any step like these Co-op investors taking a hit is not the cause of the losses, it is simply the allocation of the losses. The losses are already there - what people could really afford to pay for UK houses didn't triple under Blair, anyone who has a financial interest in the gap between the level that prices reached and the level that can be sustained is looking at losses.

The government appears to be struggling to digest the portion of pie that it cut for itself. QE and FLS are making sure that all savers are eating a fair share too. This Co-op story is just the reality that it's time for unsecured creditors to start eating their share. An individual tragedy may be sad, but the idea that they can be avoided is a dog that won't hunt.

[crashmonitor]

How many little old ladies do you know who are aware that purchasing a bond from the Coop is making an unsecured loan to a crap bank?

The Torygraph agrees......

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10178293/Pensioners-misled-by-Co-op-Bank.html

[Executive Sadman]

Theres that word again. "Misled"

DYOR. If I had a pound for everytime my bank has these 'meetings' to try and sell me something, the salesman says one thing, the small print quite another, id be a rich man. Banks lie.

[Venger]

The Torygraph agrees......

http://www.telegraph...Co-op-Bank.html

The time to worry is before you invest. Not towards the because some branch manager from Royton with 5 GCSEs replies with a personal opinion. Why did they not notice Northern Rock, B&B and all the other wobblers since 2007, and withdraw from PIBs to savings accounts. Because they wanted the yield.

Saturday 13 November 1993

After reading about permanent interest bearing shares (Pibs) in Money last month, John Patmore, an economist and active private investor, decided to find out more about them, with a view to investing up to pounds 50,000. However, the in-house brokers at his bank could only suggest that he consult the Standard & Poors credit ratings for an indication of soundness. Building societies that issue Pibs were of little help, though a couple eventually sent him 40-page, highly technical offer documents. He kept being referred to the brokers who sponsor the issues, but they are not allowed to deal direct with the public.

The best place for this sort of help is a private client stockbroker who specialises in Pibs. Robin Boyle of Dunbar, Boyle & Kingsley recently studied the accounts of all the main issuers, and concluded that some issues were much more secure than others. Stockbrokers like him can give information and views on specific issues over the telephone and then put a deal through for a standard charge. But without a full interview and fact-find they cannot advise an investor on the suitability of Pibs in his or her circumstances.

Should private investors try to buy Pibs on their own behalf? The brokers we spoke to all made the point that you have to know what you are buying. Pibs are shares in the building society itself with a fixed dividend. If the society went bust, the Pib holders would be at the back of the queue for repayment.

The price goes up and down like a gilt, largely reflecting changes in interest rates. Because of the steep fall in interest rates since its launch in September 1991, the Bradford & Bingley Pibs has gone up in price from its nominal pounds 1.02 at issue to pounds 1.403 4 this week. This means that investors who bought at the issue date have received a dividend at the coupon rate of 13 per cent and capital growth of about 40 per cent.

http://www.independent.co.uk/money/getting-to-grips-with-the-mysteries-of-pibs-buyers-should-be-sure-what-they-are-getting-says-christine-stopp-1504068.html

[Ah-so]

Theres that word again. "Misled"

DYOR. If I had a pound for everytime my bank has these 'meetings' to try and sell me something, the salesman says one thing, the small print quite another, id be a rich man. Banks lie.

Can you give us an example?

[Saving For a Space Ship]

The Torygraph agrees......

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10178293/Pensioners-misled-by-Co-op-Bank.html

Edited July 26, 2013 by Saving For a Space Ship

[wonderpup]

Why are their there always people who plead victim status for investors? They didn't know what they were doing, missold and all the other excuses, whilst they somehow found their way to PIBs and double-digit yields.

When you sit down to a meal in a restaurant do you personally check out the hygiene levels in the kitchens- or do you feel entitled to rely on the expertise of the people who work there?

Or when you fly do you check out the plane first for any technical problems- or do you feel that the airline should be doing that for you?

The truth is that when it comes to the 'retail' investor the banks do obfuscate risks and have always done so for obvious reasons. The entirely false impression is conveyed that the products sold by banks to the general public are 100% safe.

Yes-in theory- we should all be in the kitchens checking how clean they are, or inspecting the plane on the runway or digging into the guts of the banking system to see how safe that is- but that's not real life. In real life people rely on 'experts' to guide them. You yourself do this almost every day of your life- every time you get in a lift, or eat fast food or get on a bus- you place you well being in the hands of other people you have never met and whose honesty and abilities you know nothing about.

[porca misèria]

In the real world, someone with credibility has been persuaded to head a campaign: http://www.fixedincomeinvestments.org.uk/home/co-op-bank-retail-investors-campaign

[wonderpup]

Here's a few who understood that making a large enough deposit was the same as making an unsecured loan to a crap bank.

That's disingenuous- at no time did the vast majority of depositors of Northern Rock understand that by making those deposits they were making an unsecured loan- they were queing to get their money- not to register an interest as a creditor in a bankrupt institution.

Is this irrational- of course- but it's an irrationalality that has been carefully fosterd for hundreds of years.

Everyone should understand the nature of banks. But they may need to be motivated to learn. The problem with suggesting that some people should not have to suffer losses when losses occur is that it ignores the fact that in the real world losses will occur and therefore someone must bear the cost.

The problem is that the losses always seem to land on the least sophisticated and least well informed- while those who might have been expected to know better seem to mysteriously walk away unscathed.

So this realpolitik of loss allocation is oddly weighted in favour of the insiders- which makes it highly suspect to my eyes.

Whilst it might be politically expedient in the short term to pretend otherwise at first, another plain fact is that in the long term the state does not have deep enough pockets to soak up all the losses that might be incurred if the great unwashed are allowed to direct their meagre capital into risky ventures in pursuit of rewards.

Unless a miracle comes along, a lot of grannies aregoing to be between a rock and a hard place when they realise that no adequate provision has been made (by them or on their behalf by the state) to feed, house and care for them for the lengthy period of time between when they are to decrepit to work and not yet dead. I don't revel in that, but the mainstream media certainly are not crowing about it from the roof tops in the way that they were when the debt boom that has laid the groundwork for so many almost intractable problems was celebrated because houses were getting more expensive relative to wages.

The misfortunes of people with crap bonds from the Co-op are most definitely the thin end of the wedge. Save your sympathy for later, save it for people who didn't take needless risks and still got their faces ripped off. There is plenty worse than this down the track - and there needs to be.

The pre-boom model for house prices was really

find a house

find the most incautious borrower interested in the house

find the most incautious lender willing to lend to the borrower

set the size of the loan against the greatest amount of interest that the borrower is willing to pretend they can service

ignore the capital repayment

The lack of cautiousness of the lender was unduly influenced by an apparent collective belief in the minds of the financial sector employees and their creditors that if it all went tits up then the government would step in and creditors to the banks would be made whole. We need to burn some creditors to encourage the others.

Anything that dismantles any part of the above insane house pricing model is a good thing. Further any step like these Co-op investors taking a hit is not the cause of the losses, it is simply the allocation of the losses. The losses are already there - what people could really afford to pay for UK houses didn't triple under Blair, anyone who has a financial interest in the gap between the level that prices reached and the level that can be sustained is looking at losses.

The government appears to be struggling to digest the portion of pie that it cut for itself. QE and FLS are making sure that all savers are eating a fair share too. This Co-op story is just the reality that it's time for unsecured creditors to start eating their share. An individual tragedy may be sad, but the idea that they can be avoided is a dog that won't hunt.

That's fine- but until those losses start to come out of the hides of the 1% as well as the poor the legitimacy of the exercise will be highly suspect.

What we have at the moment is a grand attempt to preserve the wealth at the top by strip mining the bottom.

[Venger]

When you sit down to a meal in a restaurant do you personally check out the hygiene levels in the kitchens- or do you feel entitled to rely on the expertise of the people who work there?

Or when you fly do you check out the plane first for any technical problems- or do you feel that the airline should be doing that for you?

The truth is that when it comes to the 'retail' investor the banks do obfuscate risks and have always done so for obvious reasons. The entirely false impression is conveyed that the products sold by banks to the general public are 100% safe.

To some extent, yes, in advance, and intermittently, for anything involving my money. Relying on research, expert opinion, references, on all sort of matters, including where we source food from especially. With flights, I might prefer BA to low cost carriers, including 'Runonair', but I might still decide to go with a lower-cost carrier to save money. Risk assessment, and not expecting gubbermint authority to protect me from everything. Government should advise on major risks and regulate where necessary, but allowing some freewill for the individual.

It doesn't wash that these investors just thought PIBs high yielding savings accounts, and incapable of seeking any advice before committing, or unable to assess risk and withdraw funds to safer deposit accounts when the UK/global financial system still at risk of significant shocks. I can't accept there was any conspiracy selling PIBs as 100% safe, and that there are masses of innocents who've somehow been ripped off, given their investment has gone bad.

26 July 2013

The stability of the financial system is more important than the losses faced by savers who invested money in the Co-operative Bank, regulators have declared.

Although to me they are investors first, rather than savers.

http://www.thisismon...regulators.html

Edited July 27, 2013 by Venger

[MrPin]

It's an equitable life.

An equitable lie?

[wonderpup]

To some extent, yes, in advance, and intermittently, for anything involving my money. Relying on research, expert opinion, references, on all sort of matters, including where we source food from especially. With flights, I might prefer BA to low cost carriers, including 'Runonair', but I might still decide to go with a lower-cost carrier to save money. Risk assessment, and not expecting gubbermint authority to protect me from everything. Government should advise on major risks and regulate where necessary, but allowing some freewill for the individual.

It doesn't wash that these investors just thought PIBs high yielding savings accounts, and incapable of seeking any advice before committing, or unable to assess risk and withdraw funds to safer deposit accounts when the UK/global financial system still at risk of significant shocks. I can't accept there was any conspiracy selling PIBs as 100% safe, and that there are masses of innocents who've somehow been ripped off, given their investment has gone bad.

When you get on that plane you are literally trusting your life to the organisation that runs that airline- you have no way to check the safety of the planes or the people who fly them- the best you can do is take the historical safety record of the airline and base your trust on that.

The same thing applies to people who purchased savings bonds from the Coop in the High street- they trusted their savings to an organisation that had a long track record of safe operation over a very long period of time.

So you saying that they should somehow have known that the Coop bank was in fact fatally damaged behind the scenes would be like blaming the passengers in an air crash because they failed to inspect the airline safety data regarding the failed component that lead to their deaths.

In the real world we are obliged to trust those who claim to be honest experts in their fields- because we have no choice. PIBs were sold as implicitly 100% safe- an impression fostered and amplified by every presentational trick and lie of omission the bankers could muster.

The reality is that Banking itself is a lie- there's no way a bank could meet it's obligations to it's creditors if they all showed up on the same day demanding their money- that money does not really exist.

[The Knimbies who say No]

When you get on that plane you are literally trusting your life to the organisation that runs that airline- you have no way to check the safety of the planes or the people who fly them- the best you can do is take the historical safety record of the airline and base your trust on that.

The same thing applies to people who purchased savings bonds from the Coop in the High street- they trusted their savings to an organisation that had a long track record of safe operation over a very long period of time.

So you saying that they should somehow have known that the Coop bank was in fact fatally damaged behind the scenes would be like blaming the passengers in an air crash because they failed to inspect the airline safety data regarding the failed component that lead to their deaths.

In the real world we are obliged to trust those who claim to be honest experts in their fields- because we have no choice. PIBs were sold as implicitly 100% safe- an impression fostered and amplified by every presentational trick and lie of omission the bankers could muster.

The reality is that Banking itself is a lie- there's no way a bank could meet it's obligations to it's creditors if they all showed up on the same day demanding their money- that money does not really exist.

Strawman central. Give it up.