Loans and Finance

Loans and Finance

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

Friday, October 30, 2009

Brown's Clunking Fist Caused The Financial Meltdown

It would appear, from extracts of memoirs published about the dying days of Lehman Brothers, that aside from the US Administration pulling the plug on Lehman (the collapse of which then caused the meltdown of the global financial system) our dithering Prime Minister had a hand in it too.

Seemingly Barclays was on the cusp of sealing the deal, subject to approval from the UK government.

At the eleventh hour, out of the blue, Darling (having spoken to Brown) refused to give permission, despite being warned by the US that Lehman collapsing would cause global financial meltdown.

Is it not ironic that Brown, who claims to have saved the UK from even worse economic turmoil, is in fact more than partially responsible for causing the crisis in the first place?

Thursday, October 29, 2009

Eager To Repossess

The Financial Services Authority (FSA) has fined GMAC-RFC, a mortgage lender, £2.8M for mistreating customers who fell into arrears.

GMAC-RFC also has to repay £7.7M, plus interest, to 46,000 borrowers.

The FSA said that the company levied unfair charges on borrowers who fell into arrears with their repayments, and was too eager to repossess their customers' homes.

GMAC-RFC, having been fined, is quoted by the BBC:

"In hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required.

We will be writing to customers who incurred these specific charges when in arrears and will re credit the charges plus interest
."

So that's alright then!

Wednesday, October 28, 2009

Santander's Market Dominance

Santander, the Spanish banking group that owns Abbey, Alliance & Leicester and Bradford & Bingley, has announced a 58% rise in Sterling profits for the first 9 months of this year to £1.2BN.

Abbey's gross lending of £19BN represented 20.5% of the UK market, although it is 37% less than last year.

Santander is the eurozone's largest bank by market capitalisation.

However, Bradford & Bingley is going to split its good and bad assets (its balance sheet being £50BN), and sell the good assets to private buyers, in order to pay off its £18.4BN loan early.

The question is, what exactly is a "good" asset and what is a "bad" asset?

Tuesday, October 27, 2009

A Gnat's Piss On The Dung Heap of Debt

The government, in attempt to shut the stable door long after the horse has bolted, has come up with some proposals theoretically designed to force credit card companies to help customers reduce their debt.

Card companies will be forced to allow customers to pay off their most expensive debts first, rather than pay off the cheaper debts and allow charges to accrue for higher interest debt.

The minimum monthly repayment level would also be increased, to encourage people to pay off their debt faster.

The government said:

"Around one-third of people who don't pay off their credit card bill in full each month make only the minimum repayment. This can mean consumers take decades to pay off the debt."

Indeed so, but this is most likely due to the fact that they cannot afford to pay off much more than the minimum.

By forcing those already in debt to pay a greater amount, the government is in danger of pushing many hard pressed families over the "financial edge".

The government also proposes to ban the practice of credit card companies automatically increasing credit limits, without specific authorisation from their customers.

Will they also ban card companies from arbitrarily cutting credit limits on those card holders with good credit records, who clear their debts each month?

The government also wants tighter rules imposed on increasing the interest rate on existing debt without "proper explanation".

That will not make not one jot of difference to this rip off practices employed by card companies. They will continue to increase rates based on the "explanation" that they are finding their margins squeezed by "difficult trading conditions".

Until there is a thorough independent investigation of the make up/rationale of companies' charges, and the quasi "price fixing" scheme of arrangement wrt this practice operated by the companies, they will continue to charge what they like, because they know that they can get away with it.

The proposals are open to consultation until January 19 2010.

This particular horse has long since bolted and the British consumer is hopelessly mired in debt, these proposals are little more than a "gnat's piss" on the dung heap of debt that has been created by the Faustian collusion between greedy consumers and lenders.

Monday, October 26, 2009

Banking Bonuses

The Conservative Shadow Chancellor, George Osborne, is calling on the government and the Financial Services Authority to ban large cash bonuses for retail bankers; he wants cash bonuses capped at £2K, with the rest of the bonus paid in the form of shares.

The theory being that the £20BN saved could be lent to consumers and businesses.

Fat chance!

Osborne laid out his views at a Reuters, in Canary Wharf.

The cap would only apply to High Street retail banks, and the investment arms of banks that also lend to consumers.

All very well.

However, the dilution of shareholdings (as a result of the issuance of new shares in lieu of bonuses) will not necessarily please the shareholders.

I would also remind the Tories that one of the route causes of well publicised spectacular frauds, such as Enron, was rewarding executives with shares in the company. This provided them with a massive incentive to talk/manipulate the performance of the company up, in order to increase the value of their shares.

Saturday, October 24, 2009

FSA Talking Nonsense

Hector Sants, CEO of the FSA, seems to have been talking nonsense when it comes to self certification mortgages.

Ray Boulger of mortgage broker Charcols noted that Sants said on the BBC Today programme that, in the boom times, self cert mortgages were around half of those offered.

"This claim is complete nonsense and it is very worrying that the FSA is trying to set policy on the basis of such a serious misunderstanding.

It is true that about 50% of mortgages were 'income non-verified' - but only about 10% were self cert
."

It seems that Sants is so concerned about trying to save the FSA from being shut down under a forthcoming Tory administration, that he is prepared to ignore the facts in order to garner a media soundbite.

Friday, October 23, 2009

The Longest Recession on Record

Figures released this morning show that GDP fell by 0.4% in Q3, making this the longest recession on record.

Pundits had been expecting, and Gordon "no more boom and bust" Brown had been hoping for, a small increase in GDP. Indeed the BBC "Ceefax" news this morning briefly reported that we had pulled out of recession (so much for reporting real news, real time!).

Undaunted, Alistair Darling claimed that growth will return by the end of the year. However, his prediction was dismissed by others as being nonsense.

Clearly the Bank of England will have to continue with its policy of quantitative easing, having used up its other weapons by reaching near zero interest rates.

Any recovery will be slow and patchy.

Thursday, October 22, 2009

The Death of The Royal Mail

As the series of "rolling" strikes starts today, we see the final death throes of the Royal Mail.

An organisation that will most certainly be privatised and aggressively restructured now that the government (led by a ditherer), management and union (led by a man who has delusions of being another Arthur Scargill) have failed in their responsibility to the customers and workforce.

If only there were private courier companies and electronic messaging...oh, wait a minute!

Wednesday, October 21, 2009

The Governor of the Bank of England, Mervyn King, has lambasted Britain's banks and described the £1TN government support given to them as "breathtaking".

King, who warned that the British people would be paying for the bankers' folly for a generation, went on to call for the banks to be broken up.

"To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform. "

By coincidence the Office for National Statistics reported a record deficit of £77BN for the first six months of the fiscal year.

Total net debt rose to £824.8BN at the end of September, 59% of GDP.

Tuesday, October 20, 2009

Brown Bottles It

Unsurprisingly Gordon Brown has bottled it when it comes to subjecting the banks to a windfall tax to punish them for paying excessive bonuses.

Lawyers have warned the government that any legislation passed would be unworkable. Hardly unexpected advice, given the fact that much of the legalisation passed by Labour since it came to power has been poorly drafted and full of holes; which in itself is rather ironic given the number of layers in the party.

Brown has pulled his normal "McCafferty's cat" act and told the banks that it is up to them to ensure that they were acting appropriately.

The government and taxpayer should not be too peeved at the bonuses, given the 50% rate of tax coming in next year the Treasury is expecting a "bonus" of its own of around £2BN from the tax raised on bankers' bonuses.

Pay caps and pay freezes, as Labour should remember from its previous times in office don't work. Any attempt to impose pay limits on bankers would simply push them offshore, to the detriment of the economy.

Like it or not, the economy needs the bankers.

Monday, October 19, 2009

New Mortgage Rules

The FSA intends to firmly slam the door after the horse has bolted on "risky" lending, and is advocating new rules that will ban self-certified mortgages and impose rigorous new checks on homebuyers applying for mortgages.

Seemingly borrowers may even be asked how much they spend on booze and shoes (how does the FSA think that the banks can check up on that?).

Hector Sants, CEO of the Financial Services Authority (FSA), said that the FSA was going to "get rid of the irresponsible practices that put banks and consumers at risk".

All very well. However, the FSA has been in existence for well over a decade and these "irresponsible" practices have been well reported for many years.

Why, only now, do they seek to reform these practices?

The FSA will make banks and other lenders liable for loans that cannot be repaid.

The trouble is that the economy, during Brown's "no return to boom and bust" years, has been built up on lending made to eg self employed, those with risky credit ratings etc etc. To take lending practices back to the 70's will inevitably take the economy backwards as well.

Like it or not, the genie is out of the bottle and will be very difficult to put it back in without causing further damage to the economy.

Friday, October 16, 2009

Bargain Basement

Lloyds Banking Group has sold the Halifax estate agency business for £1 to LSL Property Services. The 460 staff who currently work there are expected to be made redundant.

The government, or rather the taxpayer, owns 43% of Lloyds; and it is for this very reason that Lloyds has offloaded this lossmaking business.

Were the group to keep it on its books, it would be forced to participate in the Government's Asset Protection Scheme (APS) which would cost Lloyds £15.6BN and an increase in public ownership to 63%, in exchange for the government underwriting £260BN of assets.

It is not clear as to whether it will be Lloyds or LSL that picks up the bill for the redundancy costs.

Thursday, October 15, 2009

Let The Good Times Roll!

It is heartening to know that the green shoots of recovery are sprouting in the world of investment banking.

A mere 12 months after the near collapse of the global financial system (the UK came close to people not being able to draw cash from their own bank accounts), investment bankers are about to enjoy a record bonus season.

Stock markets in London and New York are enjoying one of the strongest bull runs in decades, and investment banks are preparing to announce huge profits.

The Times reports, for example, that the average London worker at Goldman Sachs will receive approximately £467K in salary and bonuses (a 13% rise compared with 2007 and double the average in 2008).

So that's good news then!

Wednesday, October 14, 2009

Postman Prat

Postman Prat
It seems likely that there will be a post strike on or after 22 October.

Whether or not one occurs, the damage to Royal Mail's brand and the long term job prospects of those who claim to be striking for an "improved" postal service has already been done.

Royal Mail customers are already seeking alternatives to the increasingly erratic service, and will never return to the Royal Mail.

Mail volumes are already falling at around 10% a year.

Business Post says it anticipates a 10% rise, while Parcel2Go says a strike will lead to a 20% increase in turnover.

The strikers will soon be looking for alternative employment. They have not seemingly understood the precariousness of their situation.

Tuesday, October 13, 2009

Inflation Falls

Inflation has hit a five year low, as it fell from 1.6% to 1.1% in September, mainly as a result of falling energy prices.

Monday, October 12, 2009

Brown's Bargain Basement Clearance Sale

Gordon Brown, desperate for cash, has announced a £16BN programme of asset sales in order to bring down the massive state debt built up during the recession.

£3BN of assets are planned to be sold off over the next two years including; the Tote, the Dartford crossing, the Channel Tunnel rail link, and the Student Loan book.

Much like when he sold Britain's reserves of gold at the bottom of the market, his timing is lousy.

Friday, October 09, 2009

The Curate's Egg

The World Economic Forum has ranked the UK as the world's number one financial centre, overtaking the US.

However, it has also ranked the UK as 37th out of 55 for financial stability, placing us behind Panama, Bangladesh, Nigeria, Poland and Colombia.

The number one ranking will doubtless give the government an excuse to use it for their own political ends. However, the poor showing wrt financial stability means that this "success" may well be very fleeting.

Thursday, October 08, 2009

Postal Strike

It looks likely that we are going to be lumbered with a post strike this Christmas.

The Communication Workers Union (CWU) claims that it is confident that its 120,000 members voting on the ballot will support industrial action, the results are expected at 12:30 today.

Billy Hayes, the CWU's general secretary, said that workers had little choice.

Nonsense!

No one is forcing them to go on strike.

As I have noted before, there are many alternatives to the Royal Mail. This action will result in future job losses for those who strike, as they push the Royal Mail into oblivion.

Wednesday, October 07, 2009

Ripping Off The Over Fifties

The Times reports that building societies are ripping off the over fifties wrt interest rates offered on ISA accounts.

As from yesterday anyone over 50 will be able to invest an extra £1,500 into their cash Isas, as their allowance will rise from £3,600 to £5,100.

However, "institutions have launched a wealth of accounts to attract older savers' cash — but some are offering poorer rates than their 'mainstream' deals".

Fair comment.

However, as we know, the financial services industry does not discriminate when it comes to ripping people off. The British consumer has been, and continues to be, ripped off by the financial services industry viz:

- bank charges
- PPI
- endowment mortgages
- interest rates
- mortgage charges etc etc

In the eyes of the financial services industry we are all "prostrate cows" ready for slaughter.

Tuesday, October 06, 2009

House Prices Rise

The Halifax report that there was a 1.6% increase in house prices for September, this being the third consecutive month in which prices rose.

However, before champagne corks are popped, it should be noted that prices are still down by 7.4% year-on-year.

It is likely that the value of property will be subject to some unnerving bounces over the coming months. Anyone hoping for return to the unfettered rises of the boom years will be sorely disappointed.

As I have noted before, houses are for living in; those who try to use them as an investment vehicle, to fund their lifestyles/retirement, may be sorely disappointed.

Monday, October 05, 2009

Growth

It seems that the green shoots of economic recovery, at least in the service sector, are returning. Q3 2009 saw the first period of growth in the financial sector in two years.

PricewaterhouseCoopers and the Confederation of British Industry (CBI) report that the number of firms reporting rising business volumes outweighed fallers by 31% to 24% (a positive skew of 7%).

However, the report predicts that up to 60,000 financial services jobs could be lost this year.

Friday, October 02, 2009

Advice To The Co-operative Bank III

Despite sending the Co-operative Bank several emails and going through the tortuous phone menu to try to remove my number from their database, it would seem that the Co-operative Bank is either asleep or remarkably incompetent.

I am still being plagued by calls from their computerised call centre, asking for a woman who is unknown for me.

Today I have emailed them again, this time using the email addresses of several members of their PR department.

Suffice to say, my experience of this bank leads me to conclude that it is very poorly run.

Here are few emails addresses for their "PR" people. Those of you are also experiencing harassment from the Co-operative Bank may find them useful:

cfsinvestorrelations@cfs.coop
public.relations@britannia.co.uk
duncan.bowker@cfs.coop
catherine.laycock@cfs.coop
andy.hammerton@cfs.coop
russell.brady@cfs.coop

Here is the email of David Anderson, the CEO of Co-op Financial Services david.anderson@cfs.coop

UPDATE

Third call received today from these idiots.

Thursday, October 01, 2009

The Great British Fire Sale

Labour, in a dash to halve the country's debt, plan sweeping spending cuts and asset sales of up to £75BN.

In theory, according to Labour (the election is looming), this will negate the need to increase taxes.

Labour are conducting an inventory of assets that could be sold off at rock bottom "recession" prices, including Ordnance Survey.

It is ironic that we will see a return to the heady days of Tory privatisation, under a Labour administration. However, the key difference being this time that the assets are being sold at rock bottom prices and under duress.