Loans and Finance

Loans and Finance

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

Friday, August 28, 2009

Shrinkage Less Than Expected

Britain's economy shrank by 0.7% in Q2 2009, confounding the "experts" who had predicted a shrinkage of 0.8%.

However, whatever the "experts" feel about this, the reality for those who are unemployed/due to become unemployed is that the recovery is still a very long way off.

Thursday, August 27, 2009

FSA Plays Politics

Fearful of being shut down by the incoming Tory government, the FSA has indulged in popular policies and made some suggestions wrt taxing bankers' bonuses.

Lord Turner, the chairman of the FSA, has stated in a discussion in Prospect magazine that he would be happy to consider the use of a new tax on banks to prevent excessive bonus payments.

He was quick to point out that the FSA was "not setting out any new policy", a that of course is a matter for the chancellor.

Lord Turner wants a tax on financial transactions that would cut banks' profits, thus reducing the funds available for bonuses.

Lord Turner's, and the FSA's conversion to cutting bankers' bonuses, may well play well to the gallery. However, it was during the watch of the FSA that the banking crisis (allegedly a result of greed and high bonus payments) occurred.

Where were the FSA then?

Unless there is a unified worldwide tax on banks, all that will happen (in the event that such a tax is introduced in the UK) is that the banks will move elsewhere.

This suggestion is a non starter, as Britain (like it or not) needs a robust financial services industry, given that we have no manufacturing base to speak of.

Wednesday, August 26, 2009

Reality Bites

The government and councils are finally waking up to the burden that they have imposed on the taxpayer, wrt the burgeoning public sector and its defined benefit pension schemes.

It seems that millions of public sector workers will face having their pensions reduced, as politicians battle to save the public sector from financial meltdown and avoid a middle class tax revolt.

The Times reports that John Denham, the Communities Secretary, is drawing up plans to downsize the public sector pensions which face a shortfall of at least £60BN.

The Department for Communities and Local Government, keen to avoid a winter of strife, have said that it would ensure that council pensions were fair, solvent and affordable.

The reality is that whatever the promises made, the current level of pension benefits for the public sector is unsustainable and cuts will be made.

The public sector workers will not react well to the cuts, and the country will be in for a very rocky ride as the industrial action taken will doubtless mirror that of the dying days of the last Labour government in 1979.

Funny how history repeats itself!

Tuesday, August 25, 2009

Mortgage Approvals Rise

The British Bankers's Association (BBA) has released figures that show that overall mortgage lending has declined month on month in July, in spite of the fact that there has been an increase in the number of mortgage approvals.

Mortgage approvals for house purchases in July have hit a 17-month high of 38,181, up from 35,564 in June.

BBA figures also show that net consumer borrowing fell by an annual amount of £0.2BN. However, outstanding balances rose by 8.7% (to £24.7BN) as a result of interest debt.

The sword hanging over the "economic recovery" is the level of consumer debt, not the strength or otherwise of the housing market.

The BBA may do well to remind its members that by profiteering from excess charges and extortionate rates of interest, the banks are threatening the economic recovery.

Monday, August 24, 2009

FSA Award Themselves Payrise

The Financial Services Authority (FSA) has awarded itself, or rather 20% of its staff, a 10% pay rise.

Despite the fact that its expenditure exceeds its income, by around £23M, the FSA justifies this largess as "necessary" compensation for the closure of its final salary scheme to existing members.

This is the same FSA that, as an organ of the state, presided over the collapse of Northern Rock and the near collapse of the entire banking system.

This is also the same FSA that lectures banks etc against bonuses and unrealistic pay awards.

Given that they have less than two years before they are abolished by the Conservatives, they appear to be trying to make the most of their remaining time on earth.

Friday, August 21, 2009

The Banking Rip Off

As I have noted before, the financial services industry in the UK has an unfailing knack for digging itself deeper into its own shit.

Not content with foisting endowment mortgages, PPI, excess credit card rates, bank charges and other insults on its hapless customers it now seeks to milk them further by "imaginative" and outrageous profiteering charges on mortgage arrears.

Many thousands of homebuyers, many of whom are unemployed, face profiteering penalty charges on top of their regular monthly mortgage repayments.

The Council of Mortgage Lenders (CML) report that the number of mortgages in arrears by three months or more has reached 270,400 (compared with 152,700 at the end of the second quarter of 2008).

Moneysupermarket.com report that Lloyds Group is charging £206 for repayments three months or more in arrears.

GMAC and Abbey charge penalties of £50 and £40, respectively, when the borrower is only one month in arrears.

Halifax charges £35 for every call/letter wrt mortgage arrears, and then has the barefaced cheek to charge £100 for debt advice.

The FSA has a Code of Conduct that requires that lenders treat customers fairly sympathetically.

Evidently the banks haven't read that code, or simply do not care about it.

The Treasury Select Committee is not impressed with either the banks, or the hapless and hopeless FSA. It has attacked the FSA for sitting on its hands.

Britain's financial services industry is rotten to its core.

Until the FSA is expunged from history, and replaced with a more pro active assertive regulatory body, the hapless British consumer can only expect more of the same and continue to be ripped off.

Those who currently are enjoying the fruits of their profiteering should bear in mind the wise adage:

"What goes around, comes around".

Thursday, August 20, 2009

Brown's Bankrupt Britain

True to form, under Brown's "leadership" and Chancellorship, Labour have managed to bankrupt Britain again.

The Times reports that public sector net borrowing was £8BN in July.

This is the highest level of borrowing in July since records began, the irony being that July usually reaps a good harvest of tax receipts.

Net debt hit £800BN (57% of GDP).

So called "experts" had predicted a mere £500M PSBR.

Quite how the government (be it Tory or Labour) can balance the books, without dragging the economy further into the mire remains to be seen.

Brown has bankrupted Britain, what legacy!

Wednesday, August 19, 2009

King Outvoted

Mervyn King, Governor of the Bank of England, wss outvoted (6-3) by fellow members of the Monetary Policy Committee on 6 August when he and two others argued for a £75BN injection of cash into the economy via quantitative easing.

Instead the Committee settled for £50BN.

Given that the injection in itself came as a surprise to many, it is clear that the Bank has greater concerns about the economy than it may be stating in public.

Tuesday, August 18, 2009

Inflation Steady

Analysts were surprised to day to learn that the Consumer Price Index (CPI) measure of inflation for July has remained steady at 1.8%.

The "experts" had predicted a further fall, indeed the Bank of England are expecting it to fall below 1% at some stage.

However, reality is a cruel mistress and the figure remains stuck at 1.8%.

The Retail Price Index (RPI) measure of inflation (which includes housing costs) rose from -1.6% to -1.4%.

Monday, August 17, 2009

RBS Under Investigation

The beleaguered Royal Bank of Scotland (RBS), having been destroyed by its previous board, now faces further humiliation and potential value destruction.

The Financial Services Authority (FSA) is investigating RBS's ill fated acquisition of ABN Amro, and the subsequent £12BN rights issue.

The FSA are looking at whether the management of RBS knew that the rights issue would not be enough to cover its debts.

Following the rights issue, RBS received a further £20BN injection courtesy of the hapless British taxpayers (who have been saddled with bailing out Brown's bankrupt Britain).

Sir Fred "The Shred" then left, in the mode of Ronnie Biggs, the company and the country having secured himself a hefty £16M pension pot.

Given the passive nature of the FSA, in the event they find fault with the management of RBS, we cannot expect much more than a fine to be levied on RBS; there most certainly won't be any jail sentences.

I would note that the timing of the FSA investigation is "interesting", to say the least, coming as it does hot on the heels of a class action by local government pension funds who are trying to sue RBS.

The case focuses on two key issues:

– whether RBS misrepresented its financial status, specifically its mortgage book

- the effectiveness of RBS's due diligence process when it bought ABN Amro.

Could it be that the FSA investigation is a whitewash?

Friday, August 14, 2009

Germany and France Return to Growth

Germany and France have surprised the markets and have returned to growth in Q2 this year, whilst the UK remains stuck in recession.

How has this come about?

1 The UK economy is far more closely tied to the fate of the financial markets than France and Germany.

2 France and Germany have spent far more money propping up their domestic economies via "cash for clunker" payments and job support schemes.

However, before the champagne corks are popped in Berlin and Paris, a word of caution. The government support schemes are coming to a close, both Germany and France will need to increase their exports if the upturn is to be maintained.

One positive quarter does not necessarily make a trend.

Thursday, August 13, 2009

Sants Fights His Corner

The embattled CEO of the Financial Services Authority (FSA), Hector Sants, fought his corner on BBC radio this morning.

In response to criticisms that the FSA's new remuneration code is too soft on bankers, he stated that politicians have "ducked" the issue and have passed "the buck to the FSA".

He quite correctly noted that the FSA was not set up to take a "moral view" on the scale of payouts. However, its role is to ensure that pay packages did not encourage inappropriate risk-taking.

He also, rather wisely, noted that it was "reasonable" for the government, as a shareholder in some institutions (ie Royal Bank of Scotland and Lloyds) to set parameters on how the companies were run. Thereby neatly reminding the government that, at least in those two cases, they really are in charge and do have a say.

Doubtless that suggestion will fall on deaf ears, as the government would very much like to pretend that it has no control over these two institutions; to admit that it does would mean that it would be blamed for the poor results.

Demonising bankers is all very well. However, like it or not, the country needs banks and bankers in order to function.

Short of returning to a primitive barter society, we will have to continue to endure seeing a handful of people making large sums of money for apparently doing very little.

Wednesday, August 12, 2009

Young Jobless Close To 1M

Official data shows that youth unemployment has risen, over 700,000 18-24 year-olds and 206,000 16-17-year-olds are now jobless.

These of course are the official figures.

Given that the government has long been "hiding" youth unemployment via numerous schemes (such as pushing youths into long term quasi "eduction" which has no real benefit to the youth), it can safely be assumed that the reality is much worse.

Tuesday, August 11, 2009

Mortgage Approvals Up 23%

The Council of Mortgage Lenders (CML) report that the number of mortgages for homebuyers granted in June was 45,000, and increase of 23% compared with May.

CML are of the view that the mortgage market had stabilised. However, they correctly caution that this is not the beginning of a new housing boom.

Monday, August 10, 2009

Squeezing The Balloon

As the tide of public opinion turns against mega bonuses, Citywire reports that the City has come up with a "novel" wheeze for ensuring that their "star" players are not inconvenienced by having to cut back on their lifestyles.

Salaries are being increased to sop up the shortfall on bonuses.

Those of you with even a rudimentary intelligence will have probably guessed that would have happened anyway, you squeeze a balloon at one end it will expand at another.

The FSA have tried to direct people's attention to their "pro active" (albeit many years a coming) actions wrt bonuses. Hector Sants claims that the FSA would not allow any "new" multi-year guaranteed bonus payments to be made.

However, as the article points out:

"The FSA fears that if base salaries were low, it would make it difficult for a bank to eliminate or cut bonuses in a poor financial year."

In other words, in order for the FSA to show that it has actually done something (ie cut bonuses) it has to allow (nay force) companies to increase base salaries.

The FSA truly is a creation of Brown!

I look forward to its demise in the next 18 months.

Thursday, August 06, 2009

The Last Post

I see that there is more trouble for the beleaguered Royal Mail, as over 25,000 postal workers strike this this weekend in an ongoing row over pay and jobs.

The Times notes that in 2007, 60% of days lost in the whole UK economy through industrial action were accounted for by Royal Mail strike action.

Doubtless "the brothers" feel suitably empowered at being able to exercise their right to strike. However, they may care to consider this during their days of self imposed leisure:

1 The Royal Mail is in financial difficulties, and cannot be maintained for much longer in its present shape and form (whatever the Queen may wish).

2 There are many ways to communicate these days, outwith sending a letter (eg, email, phone, fax etc). The strike will simply push customers to seek alternatives to "snail mail".

3 There are other companies that provide a fast reliable delivery service for parcels, packages and letters. Customers will simply use these, if the Royal Mail workers continue to act up.

4 Britain is facing its worst recession for decades. Striking now is idiotic, to say the least.

The Royal Mail will be a shadow of its former self within the next 3 years, helped on its way by its own staff.

Wednesday, August 05, 2009

Lloyds Loses £4BN

Gordon Brown's state sponsored merger of Lloyds and HBOS has shown that he has the direct opposite of the "Midas Touch", as today the semi nationalised bank reported pre tax losses of £4BN for the first half of this year.

Sir Victor Blank, ex Chairman of Lloyds, who was conned by Brown into merging with HSBC has also paid a price as he was forced to stand down as chairman.

The lesson here is never trust Brown, and always perform a thorough due diligence before taking on anything offered by Brown/Labour.

Tuesday, August 04, 2009

Northern Wreck - A Monument To The Failure of The FSA

Northern Rock (the 100% state owned bank) announced a 24% increase in half year losses to £724M today.

Seemingly the number of bad loans tripled in six months. Maybe enticing people into borrowing 125% of a property's value wasn't such a good idea?

It reported that 3.92% of its mortgages are in arrears. The national average of mortgages in arrears is 2.39%.

Quite where the FSA was, and what it was doing, whilst the then board of Northern Rock were destroying value is anyone's guess.

Northern Rock remains a monument to the failure of the FSA and the tripartite regulatory system created by Brown.

Monday, August 03, 2009

Welcome To Boom Times

It would seem that the financial crisis is over, that at least is the conclusion one might be tempted to draw from the fact that both HSBC and Barclays (not government owned) posted multi-billion pound profits today for the first six months of the year.

Barclays and HSBC both posted pre-tax first half profits of £2.98BN.

As a result, Barclays Capital's 23,000 staff will see their average pay and bonuses double to almost £200K for the full year, if results remain on track.

The Centre for Economic and Business Research, predicts that bonus payments by all banks could rise to £4BN this year, up from £3.3BN last year.

Whilst the government and others may moan about the banks that are state controlled increasing their bonuses, they have no right to comment on HSBC or Barclays; as these two banks did not go cap in hand the to the taxpayer asking to be bailed out.

Good management deserves good rewards!