Sunday, January 18, 2009

80% of taxpayer-funded bailout to cover losses on overseas debt!

80 per cent of bank lending 'went overseas'

Futures generations of UK taxpayers will have to foot a huge bill from lending to overseas Ponzi schemes. "Whitehall sources said that they had discovered that some major UK lenders - including RBS, HSBC and Barclays - have had only 20 per cent of their balance sheets made up of "traditional" loans to UK households and firms. Meanwhile, up to 80 per cent is tied up in loans to foreign nationals and companies, bond issues and other investments"

Posted by confused76 @ 09:20 AM (1393 views)
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19 thoughts on “80% of taxpayer-funded bailout to cover losses on overseas debt!

  • tyrellcorporation says:

    With Sterling hammered against other currencies won’t the bill for this mess be that much greater as they have to pay off these foreign debts?

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  • GB is crossing fingers that a big flush of inflation will solve all problems

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  • Hellhasnofury says:

    Yet another attempt by Gordon to shift the blame. On one hand he lectures everybody on the wonders of globalisation, cuddles up to big business, kisses Yankee butt (where most of the problems originated) and then, on the other hand, when the economy he helped ruin actually collapses through appalling mismanagement he goes into overdrive blaming everyone and anyone but himself. Face facts Gordon and do the honourable thing. A 9mm bullet will solve your problems.

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  • What worries me is that the uk’s prosperity has supposedly come from our dynamic financial services industry – which has been exposed as a complete joke. Another entry in the catalogue of great british business disasters.

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  • tyrellcorporation says:

    Well I think that’s it for me now. The NZD is falling against Sterling after their IRs are coming down too. When it gets to about 3NZD to the Pound I’m off. The next 5 years or so will be crazy in the UK. We’ll have a very serious recession followed by rampant inflation and the tax-payer will be crippled by these bailout charges for years to come. Also where will future tax revenue come from and what will the UK actually produce? Who’s gonna pay for the unfunded public sector pensions and the 6 million plus now employed by the State? We don’t produce anything to speak of and the Financial sector has been castrated. It’s bluddy bleak folks IMO!

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  • all above ~~~ absolutely ~~ bar stewards they are
    except

    TC ~~~ “WE DESERVE EVERYTHING WE GET BECAUSE WE DO NOTHING ABOUT THE THINGS WE DISLIKE”

    sorry completely don’t agree ‘we’ deserve it

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  • If I think things get as bad as I think they will it seems almost certain to me that we will end up with some sort of dictatorship in this country, democracies always decend in to chaos because at the end of the day a democracy is just mob rule.

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  • TC ~~~ but the situation does beg the question “are we REALLY this stupid and complacent?”

    sadly, I think the answer has to be yes

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  • I think that the residue of this childhood denial can be found in the last-ditch psychic efforts of many of the people I know and treat to continue to believe in the goodness of our political and financial institutions. Our public outrage at being betrayed by the greed, mismanagement and political shenanigans that created the current crisis is compromised by all the subtle and secret ways that we irrationally hold ourselves accountable.

    Our real responsibility to change the world — something we can do — is undermined by our false and self-blaming feelings of responsibility for things that we didn’t and can’t do.

    The system has been rigged against us, but it doesn’t have to be. Our culpability is not in having trusted this system, but in not seeing that — unlike children in a family — we currently have the freedom to change it. The paradox is that we have to face the ways that we’re really helpless in order to own the ways that we’re not.

    (Michael Bader, Economic PTSD)

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  • stillthinking says:

    In other words, our external losses are so catastrophically country sinkingly huge, the government guarantee appears ridiculous, hence the rush to gilts (hide amongst UK pensioners just in case you get shafted at the bank), and also the inability to kickstart domestic UK lending, simply not a believable proposition given the bank losses. The domestic mortgage market, which we are all so focused on, appears to be a relatively small disaster. Also, this makes our situation totally and utterly different from Japan, which had an -internal- banking crisis, whereas ours is external.
    We have been collectively robbed by foreigners and our domestic banking system was the conduit.

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  • Wall Street investment banks increasingly traded on their own account (punted) from the late 1980s. For this punting they needed huge funding (there wasn’t much in savings and deposit accounts and the commercial banks weren’t creating enough credit to supply this funding) in order to shift markets and prices in the punters’ favour. (This punting was greatly facilitated by the banks’ inside, real-time market information gleaned from their tradtional, commission-based brokerage and wealth management activities.) In order to create profitable bubbles (in eastern European stock and bond markets in the 1990s,then dotcom, housing, oil and commodity price bubbles) the investment banks (followed by commercial banks, who had to make similar profits in order to attract investment) had to find new sources of betting money. This involved transforming all corners of the financial system – drawing in and expanding wholesale money markets and commercial paper markets, pension and mutual funds as sources of betting money (pension and mutual funds bought the banks’ asset-backed securities as well).

    A key ingredient of the creation of this big betting pool was balance sheet expansion and leverage, and a key ingredient of this was the shadow banking system (hedge funds, conduits, SIVs, private equity groups) created by the investment banks. These were largely unregulated and opaque and short on capital and their function was to expand leverage e.g. they obtain funds from the banks by putting up collateral and the bank uses this collateral for raising its funds, creating betting money with no extra commitment of the banks’ capital. Shadow banking’s shadowy OTC trading in credit derivatives was also leverage-enhancing since these products did not require the backing of appropriate amounts of capital.

    Wall Street had to find ways of avoiding regulatory restriction on all this activity and this is where London came in. US investment banks had wiped out their UK equivalents before 1995 and dominated London’s asset markets. In 1997 Brown and Blair realised that in order to get elected they needed to woo the City, expand activity and jobs there and thereby bring the south-east into the New Labour camp. This meant providing US investment banks with the regulatory bliss they required. Hence Brown’s creation of a Financial Services Authority which operated according to ‘principles’ rather than binding rules. The main principle was that US banks could regulate themselves. This is why London has been compared to Wimbledon (a place where foreigners do their business with the Brits as facilitators and onlookers) or Guantanamo Bay ( a place where the US can do its dirty business abroad).

    Miliband’s statement that problems have been caused by ‘lack of effective regulation, especially in the US’, should be looked at in this context.

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  • 9. troy said…

    “I think that the residue of this childhood denial can be found in the last-ditch psychic efforts of many of the people I know and treat to continue to believe in the goodness of our political and financial institutions. Our public outrage at being betrayed by the greed, mismanagement and political shenanigans that created the current crisis is compromised by all the subtle and secret ways that we irrationally hold ourselves accountable.

    Our real responsibility to change the world — something we can do — is undermined by our false and self-blaming feelings of responsibility for things that we didn’t and can’t do.

    The system has been rigged against us, but it doesn’t have to be. Our culpability is not in having trusted this system, but in not seeing that — unlike children in a family — we currently have the freedom to change it. The paradox is that we have to face the ways that we’re really helpless in order to own the ways that we’re not.

    (Michael Bader, Economic PTSD)”

    Those are good points, although they need to be taken in the context of an entire system, from economics to education to business that has evolved to the extent that we are utterly reliant on it for our health, wealth and wellbeing and that we are constantly, sub-consciously, through use of phrasing and language and consciously, told that it cannot change and is the best system for us. Our relationship with ‘the system’ is like an abuser and the abused – we have been convinced that there is no other way.
    It needs to be made clear that this is not just our economic system, but our education system and other fundamentals, such as the way we see work, that have been unchanged for centuries. For example, pre-industrial revolution, people (mainly in their own businesses) worked as they wished and needed to earn money. Now, that is seen as the utopian ideal.
    Report at 9am, no later, wear a uniform, half hour for lunch, reports and castigations from those in authority. School and working life no different, one conditioning for the other, a life of subservience.
    We have come that far from what is natural that things need to be turned upside down for change – it is also important that we realise that.

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  • mark wadsworth says:

    I’m not a big fan of regulations, but Spain nailed this problem – their banks are simply not allowed to invest in bonds etc issued by other banks. Apart from the fact that their property market is crashing as well, their banks are in relatively good shape.

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  • Dibble Dibble says:

    Really? Our banks have been trading money with foreigners? I thought that the our oversized “City” that we were all so proud of had been funding the expansion of regional Fish and Chip shops and Knitwear outlets. Can you imagine the shock to Gordon Brown when he discovered this wasn’t the case?

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  • shippy ~~~ here’s Bader’s full article on alternet (it’s all over the web anyway) but here with some interesting contradictory, and sadly some typical isolationist american, comments.

    http://www.alternet.org/workplace/117762/economic_ptsd%3A_the_psychological_effects_of_the_recession/

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  • it_is_going_with_a_bang says:

    It’s easy to see why its a no questions asked loan.
    Can you imagine all those big banks going at once?

    The equivalent effect on day to day life would be similar to the police deciding not to turn up for work and the subsequent loss of law and order on society.

    The fact is that with so many high street banks going at once the country would indeed grind to a halt.
    How would banks accounts of individuals and businesses survive???

    It would be a aweful infact I dread to think of what would happen.

    What I find unacceptable is that nobody has been held to account for this situation – that is the failure of the rescue plan.
    Banks CEO’s etc should all have been fired and bonuses of ALL bank staff reduced to NIL until the debt has been repaid in full with interest. Looking after the ‘banking system’ is one thing, but looking after fat cat bosses and city slickers is quite another – they should be punished.

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  • mountain goat says:

    Are UK’s banks too important to allow them to fail?

    You could argue that if the banks want to invest in toxic slime that is their right. Let them reap their reward and go bust. Healthy banks will take their place soon enough. There would be a difficult transition period, but we have a dysfunctional banking system now anyway.

    However, would letting banks fail damage the UK economy too much? Finance is the main industry we have. Letting banks fail would effectively end London as a global hub of finance. So perhaps they are worth their £1 Trillion bailout?

    I don’t know the answer, just wondering what people think.

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  • if “Finance is the main industry we have.” it’s already too late

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