Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Friday, December 21, 2007

Government Running Out of Cash

It seems that the government's plans top raise much need money to plug holes in its budget have come somewhat unstuck, as privatisations worth £6BN have been delayed.

The reasons for the delays include market, regulatory and political concerns.

What are Gordon and Alastair going to do now then?

Thursday, December 20, 2007

Stable Houses

It seems that the UK housing market might experience some near term weakness, but house prices should remain broadly unchanged during 2008.

That at least is the optimistic message from the Royal Institution of Chartered Surveyors (RICS).

RICS expects the Bank of England to lower interest rates to 5% during the first half of 2008.

RICS expects repossessions to rise to 45,000 from 30,000 next year.

Some seasonal cheer at least.

Wednesday, December 19, 2007

Northern Rock

The sorry saga of Norther Rock, a once proud bank destroyed by its board, continues.

The Northern Rock crisis is threatening to cost every taxpayer up to £3,600, as it emerged Gordon Brown was warned a year ago (he's not exaclty fast to react is he?) that "urgent action" was needed to prevent a banking meltdown.

Ministers yesterday announced that public guarantees to the beleaguered bank could rise to £100BN, with a full-scale nationalisation now thought to be imminent.

The trouble is, Gordon Brown is now frozen with fear; he is incapable of "urgent action".

Someone needs to "step up to the plate" and take action.

Once again my congratulations to the previous board of Northern Rock, who not only destroyed the bank but also the financial reputation of the UK.

They must be very proud of themselves!

Tuesday, December 18, 2007

Norwich Union Fined

The Financial services Authority (FSA) fined Norwich Union (NU) £1.26M for failing to protect its customers against fraud. The fine is the largest ever issued by the FSA in relation to security lapses and fraud.

The Charges

Norwich Union Life failed to take reasonable care to both assess where its financial crime risks lay and establish adequate procedures and controls to manage those risks and respond to the frauds in an appropriate and timely manner once they had become apparent.

How many policyholders were affected

- Over 632 policies were targeted by the fraudsters.

- There were 74 fraudulent surrenders amounting to approximately £3.3M in total.

Fraudsters obtained publicly available information on people who were directors of a business from Companies House, including their full names, addresses and date of birth. They phoned NU's call centres and used the data to answer security questions, alter addresses and bank account details, and surrender the policies.

Will the FSA also be fining HMRC for losing data belonging to 25 million people, and putting their personal security at risk for the next 20 years?

Monday, December 17, 2007

Trouble In Store

It seems that there is something of a spat going on between the government (ie Gordon Brown and his sidekick Alistair Darling) and Mervyn King (Governor of The Bank of England).

King is reportedly becoming fed up with Brown's dithering and inaction over the credit crisis, and the inaction by the government over Northern Rock.

In fact King has become so fed up, that he has allowed his displeasure to be leaked to the media. See The Times.

Seemingly Brown is so demoralised at his waning popularity that, like a rabbit caught in the headlights, he has become frozen with fear and unable to take/make any decisions.

King, meanwhile, faces a grilling tomorrow by the Treasury Select Committee over his handling of the crisis and his about face last week when he joined other central banks in offering credit facilities to the beleaguered banks.

This of course bodes ill for the country, a frozen Prime Minister at loggerheads with the Governor of The Bank of England spells economic disaster.

Friday, December 14, 2007

HIP's

In a clear demonstration of pigheadedness and arrogance, the government has now extended Home Information Packs (Hips) to cover 1 and 2 bedroom properties put up for sale in England and Wales.

Needless to say, given the current credit crunch and ongoing decline in house prices, Hips will worsen the property market. The Royal Institution of Chartered Surveyors (Rics) said that spreading Hips to smaller properties would drive even more first-time buyers from the market.

Quote:

"Our research shows they knock speculative sellers from the market.

Twenty per cent of people put their homes on the market with no initial intention of selling, but then half of them change their minds when they get a good offer.

Hips will put an end to that and shrink the market
."

The packs cost between £300 and £350 each and are paid for by the seller.

A complete waste of time and money.

Thursday, December 13, 2007

Central Banks Act

The Bank of England together with the central banks of America, Europe, Canada and Switzerland have woken up to the credit crunch crisis, and the dangers that it poses to the world economy. They have finally clubbed together, and will pump in over $110BN into the international money markets in a desperate attempt to ease the credit crisis.

This of course is an admission of failure in as much as it shows that the financial markets are in meltdown, and that the previous individual actions of central banks to catch the falling sword have not worked.

Banks will be able to bid for the money, in the form of loans, to shore up their finances.

Around £20BN will be put into the UK markets.

This should help.

However, it is only one side of the coin, the current turmoil has been brought about by what can only be described as stupid greedy lending by US banks to those least able to afford to be able to repay the loans and the greed of European banks in buying up bundled US debt packages.

Having dug themselves into this mess, the banks then made it worse for themselves by showing a gutless approach to lending to each other; ie they stopped interbank lending.

Fear has gripped the banks and the money markets.

As I have repeated on this site many times, the only way out of this mess is for the banks to show leadership, courage and vision and to start lending to each other again.

The trouble is it seems that there are no banks with such leadership, courage or vision.

Wednesday, December 12, 2007

Rock To Be Dropped

In a fresh humiliation to the dying corpse of this once strong and respected institution, Northern Rock is set to be dropped from the FTSE 100.

This should come as no surprise, as the bank has been destroyed by the previous board.

Once kicked out of the FTSE 100, the share price will fall further as investment funds are forced to adjust their books and sell their holdings.

I have warned on numerous occasions that this stock will end up the play thing of speculators, nothing better than Marconi shares. The company is dead, yet to be buried, the sooner the sale is agreed and finalised the better for everyone.

Tuesday, December 11, 2007

Confusion Over Rock

There seems to be some confusion over what the Bank of England actually wants to happen to the decaying corpse of Northern Rock.

Channel 4 news reported that "senior sources" in the Bank of England believed that nationalisation was the best option for Northern Rock. However, the Bank of England then denied the report (almost) by saying:

"It is not a preference.

Of course, it is a workstream that is progressing
."

Whatever that means!

The Treasury, quite rightly, do not want to take this into public ownership; only the rather isolated and out of touch Liberal Democrats are openly calling for nationalisation (albeit it "temporary").

In the meantime, Northern Rock Chairman Bryan Sanderson said that a decision on the fate of the bank was unlikely before Christmas.

However, it should be noted that the Treasury has drawn up a draft nationalisation Bill in case all other options to sell the bank fail.

Monday, December 10, 2007

HMRC Is Shite

I am proud to announce the birth of new website.

HMRC Is Shite

Anyone with any stories about HMRC, or who know people with stories about HMRC, please send them in.

Thanks.

Ken

Credit Crunch Woes Continue

Last week the Bank of England finally came to its senses, and cut interest rates by 0.25%. Given that the fear factor has now firmly taken hold of the banking sector, and has rattled consumer confidence, it is likely that the Bank of England will have to cut rates further if recession is to be avoided.

To add to the country's woes, Lloyds TSB has announced that it has taken a £201M hit as a result of its exposure to the credit crunch. Analysts had expected a "mere" £150M.

Lloyds TSB wrote down the fair value of its holdings of asset-backed securities by £89M, it also wrote down £22M of its £100 million investments in structured investment vehicles (SIVs) and taken a £90M pre-tax loss in its corporate markets business.

Lloyds TSB claims that it has enough liquidity facilities to borrow in the short-term lending markets.

Eric Daniels, the chief executive, said that the impact of the credit crunch had been more than offset by profits from selling non-core businesses and the continued health of its retail bank.

Other well known banks are rather more exposed that Lloyds, it will be revealing to see what they report in the coming months.

Friday, December 07, 2007

Flowers Pulls Out

The US buyout firm J.C. Flowers has withdrawn from the auction process to buy Northern Rock, according to Reuters.

Seemingly Flowers has found it "impossible" to structure a deal that would deliver required value for Northern Rock shareholders alongside its own profitability criteria.

Doubtless their plans were not helped by the monumentally foolish and ill timed pay rise and bonus award announced earlier this week by Northern Rock.

Rock clearly has not yet learnt the lesson the it is finished.

Thursday, December 06, 2007

Systemic Failures of British Banks

Morgan Stanley has issued a warning note saying that it has removed Bradford & Bingley from its banking portfolio, and advises people to avoid British banks:

"Our UK banks analysts suggest international investors should avoid UK banks at the moment, given the structural and systemic issues."

To add to the gloom, the Financial Services Authority (FSA) said that lending conditions could get worse and that lenders should forgo profits to protect themselves against a collapse in liquidity similar to the Northern Rock fiasco.

Against this background of depression and gloom, the Bank of England Monetary Policy Committee (MPC) meets to day to set interest rates. Analysts, whether more out of desperation than sound reasoning, are predicting a cut from its current level of 5.75%.

Whatever the Bank of England may do, it does not excuse the other banks from their responsibility for creating the credit crunch and liquidity crisis which they are all bleating about. They have the means to resolve this by simply having the guts and cajones to start lending to each other again.

Who amongst the bankers has the courage and leadership to do that?

Wednesday, December 05, 2007

Mortgage Lenders Beg For Help

The Council of Mortgage Lenders (CML) are begging the government to "urgently" support homeowners who are struggling to pay their mortgage, and restore confidence in the financial system.

CML's director general, Michael Coogan, spoke at the annual conference and said that increasing support for struggling mortgage borrowers is one of the key issues the government must face to encourage home ownership as confidence continues to falter.

Quote:

"The government needs to recognise and act to address the shortfalls in the safety net of state support for mortgage borrowers in most financial difficulty.

Waiting nine months for partial support is simply not good enough to help sustain home ownership
."

The CML also noted that confidence in the mortgage market and wider financial system has been badly hit by the turmoil of recent months, and said that both lenders and the authorities must work to restore trust in the system.

Maybe so.

However, much of the confidence in the financial system has been eroded by the financial service providers themselves; viz:

-Excess bank charges
-Excess charges for credit and mortgage arrangement fees
-The endowment scandal
-Northern Rock
-PPI scandal
-Cold calling to sell unnecessary financial products and services
-Sub prime lending
-The self inflicted liquidity crisis etc

It is down to the financial service providers, who have destroyed the credibility of the financial services industry, to restore confidence in it.

Tuesday, December 04, 2007

Fiddling While Rome Burns

In a sure sign that both the board of Northern Rock and the union representing the staff there have collectively lost touch with reality, it has been agreed between the two bodies that Northern Rock will pay staff a bonus of £200 plus a one off payment of 2% this year together with a payrise of 4%.

No doubt, under normal circumstances, they might be deserving of a bonus and rise.

However, circumstances are very far from "normal" at the moment.

Northern Rock is relying on £30BN of public money to keep it afloat.

Seemingly Northern Rock was warned by Unite, the union representing the staff, that without its staff there would be no company left to rescue.

Well, here's a newsflash for the board and the union:

THERE IS NO COMPANY LEFT, THE PREVIOUS BOARD DESTROYED IT.

If Northern Rock is sold successfully, its name and loan book will be absorbed into the new company; it is as dead as the parrot in the Monty Python sketch.

No matter how delusional the union and the current board are about awarding pay rises, this simple reality cannot be ignored.

You do not reward people for failure.

PERIOD!

This agreement is beyond belief, and indicates that neither the board nor the union have any grasp on reality.

This sends a very bad message indeed to the customers, shareholders and prospective buyers. It may well scupper the sell off, and quite possibly the staff will find themselves without a job in less than a year.

What use then a pay rise?

Idiots!

Monday, December 03, 2007

Banks Show Fear

In a clear sign of fear, banks are asking their top UK corporate clients not to draw down their lending facilities as they approach the year end.

The banks claim this "advice" is to help the banks preserve their balance sheets. In reality the "advice" is being offered because the banks have precious little liquid funds to facilitate an extension of loans to their clients.

Citigroup was one bank that asked it clients not to use the drawdown facilities. A spokesman told CNN:

"Citigroup honours its commitments to its clients but, as part of our normal business, we discuss with clients the potential use of our balance sheet. This is standard industry practice."

The banks fail to recognise that they have got themselves into this mess, and are the only ones with the ability to get themselves out of it. They need to start lending to each other again.

The reason that they have cut back on interbank loans is because they are frozen with fear.

Roosevelt once warned:

"We have nothing to fear, but fear itself."

This crisis can be resolved if the banks show leadership, courage and backbone. They need to give history a nudge and make a bold move to increase interbank liquidity.

Who amongst the bankers has such courage and backbone?