TheNorthernRock.com

Madoff (with your money) sentenced to 150 years in Prison :)

2009-06-29T23:26:00.000+01:00

Madoff sentenced to 150 years in prison
By Joanna Chung and Alan Rappeport in New York and Brooke Masters in London
FT.com

Cheers erupted in the Manhattan federal courthouse on Monday as Bernard Madoff was sentenced to 150 years in prison, the maximum possible under law, for running a $65bn Ponzi scheme that has devastated thousands of investors around the world.

The sentence came after an emotional hearing in which Mr Madoff, 71, conceded he could offer no excuses for decades-long fraud that may be the biggest in history.

“I leave a legacy of shame, as many of my victims have pointed out, for my children and grandchildren. That is something I will have to live with the rest of my life,” Mr Madoff said before the sentence was handed down. The former Nasdaq chairman also turned briefly to the victims in the courtroom, saying: “I’m sorry, I know that doesn’t help you.”

But his victims were not appeased. Nine of them testified at the hearing. Several had to pause as they were overcome with emotion, while others sat in the benches behind them, weeping.

“Underneath that facade, there truly is a beast. He has fed upon us,” said Sheryl Weinstein, the former finance chief of Hadassah, a Jewish women’s organisation.

Michael Schwartz, who lost a family trust fund and is supporting a disabled brother told the judge: “I only hope that his jail sentence is long enough so that his prison becomes a coffin.”

Mr Madoff’s attorney Ira Sorkin had asked for a 12 year sentence and the probation service had recommended 50 years. But Judge Denny Chin opted for the statutory maximum for the 11 charges to which Mr Madoff pleaded guilty.

Noting that he had not received a single letter in support of Mr Madoff, Judge Chin said: “Mr Madoff’s crimes were extraordinarily evil ... Not merely a bloodless financial crime ... [but] one that takes a staggering human toll.”

The White House said Judge Chin had sent a “loud and clear” signal to investors who handle other people’s money.

Mr Madoff’s family did not attend the hearing, but afterwards his wife Ruth broke her silence, releasing a statement saying she felt “embarrassed and ashamed” and “betrayed and confused” by the revelation of her husband’s crimes.

“Nothing I can say seems sufficient regarding the daily suffering that all those innocent people are enduring because of my husband. But if it matters to them at all, please know that not a day goes by when I don’t ache over the stories that I have heard and read,” she wrote.

While this case is unusual because of Mr Madoff’s age, a sentence of that length would ordinarily lead to Mr Madoff being sent to a maximum security prison.

In recent years, judges have handed down increasingly harsh sentences to high-profile white collar criminals. Bernie Ebbers, former chief executive of WorldCom, was given a 25-year term and Jeffrey Skilling, former head of Enron, more than 24 years, although that sentence was overturned on appeal.

There are still many unanswered questions about Mr Madoff’s decades-long scheme and what happened to the money. Mr Madoff has always insisted he committed the crime alone, but many believe he had accomplices.

David Friehling, Mr Madoff’s long-time accountant, has been charged with falsely certifying that he audited Mr Madoff’s firm and with enabling the investment fraud.

Mr Friehling, who has denied wrongdoing, is scheduled to appear in court next month. No one else has been criminally charged in the case.

The US Securities and Exchange Commission and the trustee leading the effort to recover money for victims have begun filing civil lawsuits, seeking to force some of Mr Madoff’s early backers to return some of the withdrawals they received from him. They have denied wrongdoing.

“What happens after the sentencing will be crucial,’’ said Dan Nardello, former federal prosecutor and chief executive of investigative firm Nardello & Co. ‘’The investigation is clearly not over. Although Madoff confessed and pleaded guilty, there is still much to learn. The government will continue to pursue other responsible individuals and assets belonging to the victims. $65bn ... does not just disappear.’’

Mr Madoff’s investors had $65bn on paper, most of it in fictitious profits, when federal authorities arrested him on December 11. The trustee has so far identified more than 1,341 account holders with collective real losses of about $13bn.

Mr Madoff and his wife have been stripped of most of their assets, including their homes and boats, according to court documents filed last week. Mrs Madoff, who has not been accused of any wrongdoing, will be allowed to keep $2.5m in cash, according to an agreement with prosecutors.

Reckless decisions’ sink Dunfermline!

2009-03-31T11:34:00.000+01:00

‘Reckless decisions’ sink Dunfermline
By Andrew Bolger and Jim Pickard
Published: March 29 2009 22:56 | Last updated: March 29 2009 22:56
FT.com

An extraordinary expansion in commercial lending lies behind the collapse of Dunfermline Building Society, which has cast another pall over Scotland’s beleaguered financial sector.

At the end of 2007, when prices in commercial property had already started to fall, the group had £270m worth of commercial loans on its books.

In spite of signs of an impending property market collapse, the building society ramped up its lending to the sector to £650m – a sevenfold increase over just three-and-a-half years.

A spokesman for Dunfermline said on Sunday that the mutual’s problems were almost entirely concentrated in its commercial property lending book.

It would appear that the institution, founded in 1869, had been swept up by property mania just as the cycle turned. It also emerged the group had significant exposure to bonds based on non-conforming UK mortgages.

Only last year, Graeme Dalziel – who was ousted in January after eight years as chief executive – had boasted that Dunfermline had “absolutely no exposure to subprime lending”.

It is also thought likely that several institutional investors will abstain or vote against.

Yet the mortgage-backed securities on Dunfermline’s books were bought from GMAC and Lehman Brothers, renowned as two of the most aggressive subprime lenders in Britain.

Jim Murphy, Scotland secretary, said the previous management had made “reckless decisions” because of its over-exposure to commercial loans, involvement in the subprime market and unfortunate decisions on technology. Dunfermline was forced to make a £9.5m write-off on last year’s £11m profits because of a failed IT system.

Much of that exposure will now be taken on by taxpayers, although Treasury officials hope the value of the loans will recover in the medium term. Any loss to the state will depend on default levels in the loan book.

The frantic negotiations over the weekend came as the building society prepares to publish its annual accounts later this week.

The figures are expected to show a substantial loss, worsened by Dunfermline having to contribute £7m last year to the government’s Financial Services Compensation scheme.

A new Fred?

The deposit insurance scheme has been hit by the troubles of the banking sector, in particular the collapse of Bradford & Bingley and the Icelandic banks, and building societies have complained they have been asked to bear a disproportionate share of the costs.

The Treasury’s decision to force a break-up sale of Dunfermline is an embarrassing distraction for the prime minister, whose constituency lies near the mutual’s headquarters.

On Sunday night Downing Street refused to say whether Mr Brown held an account at the building society.

The failure of the group is a setback for government plans to use the mutual model to rebuild the UK lending system. A Treasury white paper next month will lay out plans for an expansion of the sector, based on the premise that it is generally a safer system than the plc banking model.

But the rescue of Dunfermline – the fifth “benevolent takeover” in the sector in one year – may undermine that premise.

Dunfermline’s chairman, Jim Faulds, revealed on Sunday that the group had been in touch with the Financial Services Authority for the past six months. In the past fortnight there have been rounds of discussions to try to find another group to rescue the building society.

The Treasury finally acted after being told on Saturday that no individual group was prepared to take on Dunfermline as a single entity.

Alex Salmond, Scotland’s first minister, expressed disappointment that Dunfermline could not continue as a going concern. The Scottish National party leader said the Holyrood government had offered money to support the mutual, but this would have required Treasury approval.

Dunfermline, which has 500 staff, is a strong supporter of social housing and has loaned hundreds of millions of pounds to housing associations in recent years.

Copyright The Financial Times Limited 2009

Nationwide takes over Dunfermline

Reported in the Scotsman

Vince Cable, the Liberal Democrats' Treasury spokesman, told MPs the Dunfermline board had been guilty of "disastrous management" and a failure of oversight in allowing it to run up a £24 million loss for 2008.

That required the Treasury, Bank of England and FSA to put the rescue package in place which has resulted in the Dunfermline's staff, retail and wholesale deposits, branches, head office and original residential mortgages being transferred to the Nationwide.

A "bridge bank" has been set up to oversee its social housing portfolio in Scotland, while accountancy firm KPMG has been appointed to sell off commercial loans, which will be used to help repay the £1.6 billion to the taxpayer.

Mr Cable told the Commons DBS made a £10 million loan two years ago to Lancashire property firm In House plc – a company that was "loss-making, insolvent and had never filed any accounts".

He added: "There were substantial numbers of loans of this kind taking place. Is this not an absolutely gross failure of regulation by the FSA? It's very difficult to see how this could have happened under the old building society regime, which kept a much closer eye on the conduct of these societies."

Papers seen by The Scotsman suggest that In House used the 2007 loan to provide 100 per cent mortgages on multi- occupancy or rundown terraced homes in Hull, Stockton and Lancashire, and an industrial unit in Scotland.

A year later, it obtained a second £10 million loan from the Dunfermline, and it has withdrawn some £3 million to £4 million for similar lending. About 25 of the properties are said to be uninhabitable because of the amount of repairs required. The firm could not be reached for comment last night.

Mr Cable, Mr Darling and George Osborne, the shadow chancellor, were united in condemning the failures of the mutual's board and its decision to purchase more than £150 million of self-certified loans from the two US firms – GMAC and the Lehman subsidiary – and embark on £650 million of commercial property lending.

Mr Darling said the Dunfermline's toxic investments were made shortly before the credit crunch that led to the collapse of the residential and commercial markets. He added that the Dunfermline was now losing money as a result of firms collapsing or defaulting on repayments.

Mr Darling said Nationwide had promised there would be no compulsory redundancies for the next three years for the 345 staff of the Dunfermline's 34 branches in Scotland. However, he could give no guarantee for head office staff.

UK set for 70% economic stake in Lloyds

2009-03-06T13:10:00.001Z

Financial Times UK
By George Parker and Jane Croft
Published: March 5 2009 23:49 | Last updated: March 6 2009 09:22

The enormity of Lloyds’ ill-fated takeover of HBOS will be exposed on Friday, as the bank’s board considers a Treasury rescue plan that could see the taxpayer take an economic stake of about 70 per cent in the merged bank.

Alistair Darling, chancellor, has agreed an outline deal that would see the government insure toxic assets of £258bn, but it would come at a heavy price.

EDITOR’S CHOICE
Martin Wolf: Big risks for the insurer of last resort - Mar-05

Bank pumps £75bn into economy - Mar-05

Notebook: Tesco banks on a modest HQ - Mar-05

Capital base solid, says Nationwide - Mar-05

Mr Darling’s officials have peered into the HBOS loan book and concluded that the final insurance fee charged by the taxpayer must reflect the high-risk nature of many of its investments.

After more than a week of negotiations, Mr Darling’s officials have proposed a fee that would see the government’s economic stake in the Lloyds Banking Group rise to about 70 per cent, through the issue of non-voting, but dividend-paying, B shares.

If the government were to increase its economic interest it would be a blow to the bank’s chief executive, Eric Daniels, and the chairman, Sir Victor Blank.

Mr Daniels said last year that he regarded the government as just another name on the share register but he did not wish state ownership to rise above 43 per cent.

One big investor suggested that Sir Victor’s head should roll. “His move to buy HBOS has blown the bank up.”

The Lloyds board is also considering a separate – but related – proposal that could see the government’s £4bn in preference shares converted into ordinary shares, a move that would also give the taxpayer majority voting control of the company.

The preference shares are an expensive form of capital for the bank, carrying a 12 per cent annual coupon and incurring an interest charge of £480m.

But a conversion of those shares into ordinary shares – as Mr Darling may insist – would take the taxpayer’s voting stake in the company up from 43 per cent to closer to 60 per cent. The additional block of non-voting B shares – the fee for the insurance scheme – would take the government’s economic interest to about 70 per cent.

Shares in Lloyds gained 4.7 per cent in early trading on Friday to 42.2p.

The Lloyds board has resisted handing over direct voting control to the taxpayer and the bank insisted on Thursday night that negotiations were continuing, but it may conclude it has little choice.

Mr Darling’s officials say they are “relaxed” over whether Lloyds converts the preference shares, but point out that when the Treasury struck a similar deal with RBS it insisted on turning them into ordinary shares.

“There are still extensive negotiations and the Lloyds board still has to get their head around this and agree to it,” said one person with knowledge of the situation, who suggested there was a 60 per cent chance of a deal being struck on Friday.

Peter Mandelson, business secretary, said on Friday that talks over Lloyds’ participation in the scheme were difficult.

”Obviously when you’re making a change like this, introducing new measures or instruments to enable the banks to to recover, it involves a negotiation about the terms, the pricing and all sorts of conditions that are attached and that involves a fairly difficult, tough negotiation between the government and the banks,” he told Sky News.

If the preference shares were converted into non-voting but dividend-paying B shares, the bank could use those to bolster its capital ratios but the voting stake of the government could remain at 43 per cent.

Last week, RBS announced it was putting £325bn of assets into the government’s asset insurance scheme, where the bank agreed to pay a “first loss” on bad loans while the taxpayer agreed to underwrite 90 per cent of remaining losses. The government could end up with a 95 per cent economic stake.

Another big investor said: “It is a great pity that Lloyds’ management got itself into this mess by agreeing to buy HBOS and there are investors who might be unhappy with Eric Daniels.”

Lloyds said its position had not changed and talks continued with the Treasury.

Copyright The Financial Times Limited 2009

------------------

Cost of UK Bank Bailout - Bloomberg!

Launching AlbaIM * Social Network for Internet Marketing!

2009-03-04T12:19:00.000Z

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Jim Rodgers on Financial Crisis

2009-03-04T12:06:00.003Z

Common Sense from Jim!

Browns Banrupt Britian

2009-01-25T19:25:00.001Z

Browns Bankrupt Britain!

It's January 2012 ... one year after Britain joined the Euro. Iain Macwhirter looks at the disastrous financial crisis which led to the historic decision

WITH HINDSIGHT, the most astonishing thing is that Britain thought it could remain outside the euro for as long as it did. As a vulnerable island, dependent on a bloated financial services sector, without any significant exports and lacking a reserve currency, there was no way that Britain was ever going to ride out the crisis of 2009-10 on its own. City of London types used to say that the only difference between Iceland and Ireland was one letter and six months. Well, the UK was a year behind and had nothing to write home about either.

As delinquent banks such as Royal Bank of Scotland, Barclays and Lloyds ended up being taken into state ownership, Britain's finances were trashed. The combined liabilities of the UK banks was £4.4 trillion, three times Britain's GDP, so public debt rocketed. Moreover, before the formation of the National Government in 2010, the then prime minister, Gordon Brown, had handed the banks over £1 trillion in loans, guarantees, buy-backs and shameless bungs. The national accounts became as a reliable as a sub-prime mortgage.

Borrowing as a proportion of GDP reached 10% in 2009 and was heading into the stratosphere as the country collapsed into economic recession.

Nearly a quarter of the government's revenue - which had come in the form of stamp duty on houses, corporate taxes and income taxes - simply evaporated as house sales plummeted, businesses collapsed and workers became unemployed. The welfare bill soared as unemployment rose to 3.5 million in spring 2010. Britain's public debt was further burdened by new international accounting rules which required that the government own up to tens of billions in PFI schemes and place them on the public books.

The unfunded cost of public sector pensions added another trillion to the British accounts, leading to an astonishing projected public sector combined debt approaching £3.5 trillion. This could never realistically have been repaid and the international markets soon started selling sterling as fast as they could. Even before the recession began, the pound had lost a third of its value, but as it plummeted below parity with the dollar, the government suddenly realised that the stability of the national currency still mattered. Import prices shot up; public debt could not be financed; banks registered ever greater write-downs as the value of their overseas loans increased as sterling fell.

Perhaps Britain might have still been able to muddle through, had it not been for the Bank of England's decision to indulge in "quantitative easing" - or printing money. In desperation, the government urged Mervyn King to introduce a crash programme of expanding the money supply by direct purchasing of bonds and assets, underfunding government spending and other measures which had the effect of pouring trillions of pounds into the economy. The government was hoping to create inflation to reduce the value of public and private debts - but the international markets aren't stupid and they dumped sterling in record amounts. As the printing presses hummed and pensioners saw their savings evaporate, the government insisted there was light at the end of the tunnel. Trouble is, it was the light of an oncoming train.

The true causes of the sterling crisis of 2010 will be argued over for decades, but what is not in doubt is that the so-called "benign neglect" of sterling was a foolish policy. The government and the Bank of England had hoped that a fall in the value of sterling would lead to an export-led recovery, just as it had in 1992, when the pound dropped out of the European Exchange Rate Mechanism, and in 1932, when Britain left the gold standard and devalued the pound. On both occasions, British manufacturing rose to the challenge and took advantage of the low pound to sell in overseas markets. But the difference this time was that British manufacturing had largely ceased to exist, having fallen to 14% of GDP even before the crisis hit. Moreover, so indebted were many British companies that the collapse of sterling led to a wave of corporate defaults as firms could no longer rely on foreign lenders.

Finally, the global depression and the re-appearance of protectionism shrank opportunities for foreign trade.

Britain had become over-dependent on financial services, and while there was still demand for banking services, many of the more profitable activities of the City, like hedge funds, securitisation, mergers and acquisitions, and private equity deals were destroyed by the credit crunch.

The image and reputation of British banking had become irremediably tarnished by the activities of banks such as Royal Bank of Scotland and HBOS, which became a by-word for irresponsible and imprudent banking practice.

The continuing collapse of the housing market wiped out much of the rest of the financial services sector and led to mass redundancies in lawyers' offices, estate agents and even surveyors. Only the auction houses experienced a boom.

By 2010 it was clear that Britain was in a very serious decline. The choice facing the government was: default on its loans - like Russia in 1998, calling in the International Monetary Fund - which would have led to massive public spending cuts and huge increases in interest rates; or joining the euro. Default was unthinkable, the IMF route would have made the recession 10 times worse by throwing millions of public sector workers on the dole and introducing Icelandic interest rates of 15%. So the government saw no option but to enter negotiations for joining the euro.

At first, there was resistance from Eastern European and Mediterranean states which felt Britain was getting a get-out-of-jail-free card. But the French and Germans were so keen to complete the jigsaw of European Union that they agreed to Britain entering on a generous exchange rate. Instead of 15% interest rates, the UK adopted the European Central Bank rate of 2.5%. Britain's debts didn't go away, but since they were now underwritten by the entire EU, confidence was restored in the UK's finances. There were still millions unemployed, but membership of the euro boosted exports.

Britain's crisis is not over, and there are major problems, especially in Scotland where the economy has been devastated. But the UK heaved a collective sigh of relief in January 2011 when the pound, and all its history, was finally put to rest.

***

Meanwhile, back in 2009 ... what are the government's other options? By Westminster Editor James Cusick It will take "four to six weeks" for the government to work out the details of its last bank bailout scheme. According to the new Treasury minister, Lord Myners, the government could then be facing another crisis in early March if it miscalculates the premiums on the insurance scheme to cover the banks' toxic assets.

With the economy contracting at its fastest rate since 1980, the pound at a 23-year low against the dollar, unemployment heading past two million and predicted to pass three million before the end of the year, and no sector of the UK economy seemingly immune from the slump, the government options look to be narrowing.

However, apart from petitionary prayer, there are other key options that are being considered.

1 Stabilisation: Predictions by Myners that more bail-outs remain a possibility indicate one of the government's more immediate hopes is for any sign of stability rather than outright recovery, which will be far off.

The Bank of England has left itself little choice but to cut interest rates again. On February 5, a further cut of half a percentage point, at least, is likely. Inflation, already at an all-time low, will fall again. Inside the Treasury there remains firm hope that the fiscal stimulus packages will finally begin to take effect. But falling demand and a reluctance by banks to return to old, and discredited, levels of international lending, makes stabilisation still an item on an economic wish list.

2 Reform of the global financial system: This may be the golden key needed to open the door for a return of confidence. The G20 meeting in London in April, which Brown will chair, is the opportunity for him to demonstrate his now much-repeated mantra that the recession wasn't his fault, but was a global financial failure, and therefore a different kind of "boom and bust" than anything dealt with before.

3 Obama as the new Roosevelt: It may be as high as a trillion dollars, though Congress in Washington DC is already getting cold feet about the scale of Barack Obama's version of the "new deal". But whatever the final numbers are, Downing Street and the Treasury will be hoping the trickle-down effect turns into a quantifiable rescue-laden tsunami that will boost UK recovery.

4 The return of "old style" conservative banking: Brown wants to see a return to basic banking, free of the sophisticated gung-ho practices that became part of the unregulated boom. But to deliver back-to-basics banks, Britain still needs its banks to survive. Lord Myners has let it be known that "nationalisation" is not the answer. Brown soon has to put our faith back in the banks and the banks' faith back in themselves. In what time frame can this begin to happen? Ask around, but no-one has an answer to this.

5 Quantitative easing: Britain's best hope of recovery may yet lie in simply printing money to boost a potentially deflationary economy in recession. If money markets remain frozen, property prices stagnant and the banks still unwilling to risk their capital, quantitative easing - the professional economists' definition of switching on the printing presses - will be the government's final weapon. This is happening in the US already and it can't be far off from happening here. It has long-term implications, but then, as Keynes said, the long-term is for other generations when recovery is needed now.

Sunday Herald , Scotland

25/01/2009

http://www.sundayherald.com

Royal Bank of Scotland * £28 Billion Loss for 2008 *

2009-01-22T11:31:00.004Z

ENRON were called

"The Smartest Guys in the Room"

Now we have Scotlands ENRON its called

The Royal Bank of Scotland

(The Daftest Jocks in the World)

RBS shares collapse as bank warns of record loss

Published Date: 19 January 2009

By ALLAN MACKIE

SHARES in Royal Bank of Scotland plummeted today after the beleaguered lender revealed it was on course for a record annual loss for a UK company.

RBS shocked the City as it estimated bad debts and the lower value of its acquisitions could leave it as much as £28 billion in the red for 2008. This is higher than the £15 billion set by mobile phone group Vodafone in 2006.

Shares in the firm, which is 58% owned by the Government, slumped by more than 40% at one stage today, leaving the stock at a 23-year low.
RBS said a review of past acquisitions, most notably its share of Dutch bank ABN Amro, would result in a non-cash hit of between £15 billion and £20 billion. It also expects core losses of between £7 billion and £8 billion as a result of credit and market conditions in the fourth quarter of the year.

Asked about the record losses, Prime Minister Gordon Brown voiced his anger about the bank's decision-making, in particular international investments "that were clearly wrong investments".

He added: "Today's write-off by the Royal Bank of Scotland is for irresponsible losses accumulated in American sub-prime markets that partly derive from the acquisition of the Dutch bank ABN Amro."

However, he refused to say whether action should be taken against former chief executive Sir Fred Goodwin or other senior figures over "irresponsible" behaviour.

RBS also revealed today that the Government would increase its stake in the bank – likely to be around 70% – after the Treasury agreed to replace £5 billion of preference shares with new ordinary shares.

The move, which takes RBS a step closer to full-blown nationalisation, removes the annual cost of preference share dividends of £600 million and is expected to bolster the group's cashflow.

It said it intended to increase lending across its UK businesses by £6 billion, extending the lending commitment it gave in October in respect of UK mortgage and corporate customers.

Chief executive Stephen Hester, who took over from Sir Fred last year, said the dislocation of credit markets and the economic conditions continued to hit the bank hard.

He added: "We are making progress in recognising excess risk and dealing with it. In this context, the support we are receiving from Government benefits all our stakeholders and enables us to provide more customer support in return."

The group owns the Citizens commercial bank in the US and has a large investment banking presence in America, while it also operates across Asia and provides a wealth management service, through its private bank Coutts.

It gained a chunk of ABN Amro's European and global assets when it led a consortium takeover of the Dutch bank last year.

Jim Rogers: ‘UK has nothing to sell’

2009-01-22T11:20:00.000Z

Jim Rogers: ‘UK has nothing to sell’

By Peter Garnham

Published: January 21 2009 10:45 | Last updated: January 21 2009 16:07

The pound is a currency with no underpinning and should fall against the dollar and the euro, says Jim Rogers, chairman of Rogers Holdings and co-founder of the Quantum Fund with George Soros.

He says his view reflects the UK’s dire economic situation: “It’s simple, the UK has nothing to sell.”

Have your say:
The pound is set to fall much further according to Jim Rogers, chairman of Rogers Holdings. Is he right?

Mr Rogers says the two main pillars of support for sterling have been North Sea oil and the strength of the UK financial services sector, in particular, the City of London’s role.

But Mr Rogers says just as North Sea oil is running out, so London’s standing as a major financial centre is set to suffer.

EDITOR’S CHOICE

BoE’s Tucker defends bank bail-out - Jan-21

Lex: UK banks - Jan-21

Opinion: Let us have public ownership of Lloyds and RBS- Jan-20

Willem Buiter: Can the UK banking system be stopped from going down the snyrting? - Jan-21

Markets insight: The risks of nationalisation - Jan-20

Lombard: Bad reasons to nationalise are plenty - Jan-20

“I don’t think there is a sound UK bank now, at least, if there is one I don’t know about it,” he says.

“The City of London is finished, the financial centre of the world is moving east. All the money is in Asia. Why would it go back to the west? You don’t need London,” says Mr Rogers.

Mr Rogers thinks the pound is more vulnerable than the dollar or the euro. He says the UK housing market is arguably in a worse state than that of the US, given pockets of strength in the US and prices that are sliding across the board in the UK.

Meanwhile, he says, the UK is in worse shape economically than the eurozone, where most countries are not big debtors and do not run huge trade deficits. “If the UK discovers more North Sea oil, I might change this view,” he says. “But I don’t see that happening.”

The controversial comments from the investor and author came as fresh evidence emerged that the UK’s economy is falling deeper into recession.

UK unemployment rose to its highest level since 1997 in the three months to November, while mortgage lending fell to a fresh record low in December.

New figures released on Wednesday also showed UK public finances were deteriorating. December’s budget deficit – tax receipts minus expenditure – totalled £11.4bn against a shortfall of £4bn a year earlier, partly because of the £20bn state recapitalisation of the Royal Bank of Scotland which swelled the government’s net cash requirement to £44.2bn.

The pound, which on Monday was trading as high as $1.4909 against the dollar, dropped to a low of $1.3713. This was its lowest level in more than seven years and just above the 23-year low of $1.3682 it hit in June 2001.

The pound recovered some ground to stand down 1.3 per cent at $1.3730 by late morning in New York.

Sterling also fell 1.1 per cent to £0.9370 against the euro and lost 3.8 per cent to a record low of Y120.16 against the yen.

Meanwhile, the minutes of the Bank of England’s January meeting did nothing to support sterling, showing that eight members of its nine-strong Monetary Policy Committee voted for a 50 basis point cut in interest rates with the one dissenter voting for a more aggressive 100 basis-point move.

The pound has fallen sharply this week, losing more than 7 per cent against the dollar, amid uncertainty over government attempts to bail out UK banks and fears of a creeping nationalisation of the sector.

Analysts said given the UK bank bail-out had failed to help lift investor sentiment, unorthodox monetary policy steps looked more likely from the Bank of England now that interest rates were approaching zero.

Indeed, this was underlined by comments from Mervyn King, governor of the Bank of England, who said that the UK economy was likely to shrink significantly in the first half of the year, and that policymakers needed to consider more than just using interest rates to stimulate demand.

Mr King said the Bank was set to start buying billions of pounds in high-grade corporate bonds within weeks to attempt to head off a deep recession.

Maurice Pomery at IDEAGlobal said the comments suggested UK interest rates were set to fall at least 50 basis points to 1 per cent at the Bank’s February meeting, and that now that buying of corporate bonds had been sanctioned, it raised the possibility of the central bank buying UK government debt at some point.

He said sterling was in trouble, despite the sharp slide already seen so far this week.

“The surprise is still to the downside and I fear that international investors maybe turning their back on the UK,” said Mr Pomery. “The whole structure of the UK and its global presence is at risk here in the longer run and sterling could see a loss of confidence not seen for many years.”

Financial Times

http://www.ft.com

* WebProsperity * explode your income in 2009!

2008-12-29T11:44:00.000Z

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Madoff with Yer Money - Where is the money?

2008-12-14T15:46:00.001Z

Madeoff with Yer Money! - Warning Signs

2008-12-14T15:37:00.001Z

Bernard Madoff Hit with $50 Billion Securities Fraud Charge

2008-12-14T15:02:00.004Z

Giant Ponzi Scheme" - If Allegations are True, This Fraud is on Enron Scale, But by One Man; Madoff Freed on $10 Million Bail; According to Wall Street Journal, Madoff was turned in by his sons!

More Coming (this is huge)

Sunday Times UK

Some of America’s wealthiest socialites were facing ruin last night after the arrest of a Wall Street big hitter accused of the largest investor swindle perpetrated by one man.

Shock and panic spread through the country clubs of Palm Beach and Long Island after Bernard Madoff, a trading powerbroker for more than four decades, allegedly confessed to a fraud that will cost his wealthy investors at least $50 billion – perhaps the largest swindle in Wall Street history.

Mr Madoff, 70, a former Nasdaq stock chairman, was apparently turned in by his two sons and arrested on Thursday morning at his Manhattan apartment by the FBI. Andrew Calamari, a senior enforcement official at the US Securities and Exchange Commission, described the scheme as “a stunning fraud that appears to be of epic proportions”.

The FBI’s criminal complaint states that when two federal agents arrived at Mr Madoff’s apartment, he told them: “There is no innocent explanation.” The agents say that he told them “he paid investors with money that wasn’t there”, that he was “broke” and that he expected to go to jail.

Madoff's high-profile ‘victims’ Many of his investors came from the enormously wealthy enclaves of Palm Beach, Florida and Long Island, New York, where people had invested billions in Mr Madoff’s firm for decades. He was a fixture on the Palm Beach social scene, and was a member of some of its most exclusive clubs, including the Palm Beach Country Club and Boca Rio Golf Club, where he drummed up much of his business.

The FBI claims that three senior employees of Mr Madoff’s investment firm turned up at his apartment on Wednesday to ask questions about the company’s solvency. Two of them are believed to be his sons, Andrew and Mark, who have worked for their father for two decades.
Mr Madoff told them that he was “finished”, that he had “absolutely nothing”, and that “it’s all just one big lie”. He said the investment arm of his firm was “basically a giant Ponzi scheme”, and that it had been insolvent for years.

A Ponzi scheme, named after the swindler Charles Ponzi, is a fraudulent investment operation that pays abnormally high returns to investors out of money put into the scheme by subsequent investors, rather than from real profits generated by share trading.

The FBI complaint states that Mr Madoff told his sons that he believed the losses from his scheme could exceed $50 billion. If that is the case, his fraud would be far greater than past Ponzi schemes and easily the greatest swindle blamed on a single individual.

There has been scepticism for years on Wall Street over how Mr Madoff managed to pay such consistently high returns. Ponzi schemes inevitably collapse, and Mr Madoff found himself to be no exception. This month, clients asked for $7 billion to be returned, the FBI says.

Mr Madoff ran the scheme separately from his main business and his sons had no involvement in it.

Mr Madoff has been charged with a single count of securities fraud. He declined to enter a plea in Manhattan’s US District Court and was released on $10 million bail. He faces up to 20 years in jail and a $5 million fine if convicted. His lawyer, Dan Horwitz, said that his client was “a person of integrity. He intends to fight to get through this unfortunate event.”

One investor told The Wall Street Journal: “This is going to kill so many people. It’s absolutely awful.” Ira Roth, from New Jersey, said that his family had $1 million invested, and that he was in a state of panic.

Tim Reid in Washington

The Times Online

http://www.timesonline.co.uk/

The Rolling Stones - It's only Rock n Roll

2008-12-13T22:07:00.001Z

lc in

Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Cri

2008-12-13T15:36:00.001Z

Sovereign wealth funds explained - Newsnight video

2008-12-13T15:18:00.001Z

George Par * The Investment Banker!

2008-12-12T00:38:00.001Z

Comedy Video from Bird and Fortune -
(very funny But true!)

Enjoy!

Help Burma - Donate Now!

2008-05-08T18:11:00.000+01:00

How the Fed avoided the Northern Rock trap (FT.com)

2008-03-17T11:19:00.002Z

Go back a few weeks and the idea that JP Morgan Chase would have been able to snap up Bear Stearns for $230m - a big discount to the value of its Manhattan headquarters, never mind the remainder of its business, would have been laughable. But that is what has just happened.
The reason that JP Morgan could get such a bargain deal is, of course, that Bear would have collapsed last week without the intervention of the US Federal Reserve, which gave Bear an emergency funding guarantee.

The Fed followed up on Sunday by guaranteeing funding for about $30bn of Bear’s less liquid balance sheet assets, which gave JP Morgan comfort that it can de-leverage Bear’s balance sheet without too much pain. More pain, that is, than it is pricing in with its low-ball offer.

Any time that a central bank steps in to rescue a financial institution, it had better have a good defence to those who argue that it is interfering wrongly in markets and promoting moral hazard.

The case against the Fed doing so was put by Gretchen Morgenson in the Sunday New York Times:
Regulators must do whatever they can to keep the markets open and operating, and much of that relies upon the confidence of investors. But by offering to backstop firms like Bear, who were the very architects of their own — and the market’s — current problems, overseers like the Fed undermine a little bit more of that confidence.

Meanwhile, my fellow FT blogger Willem Buiter put it thus:
While the bail-out of Bear Stearns is still a very young, thus far at any rate I have heard not a single convincing argument for why this financial business should be assisted by the Fed, rather than the ball bearings company in Cleveland, Ohio.

The economists, including Prof Buiter and Nouriel Roubini, generally favour the view that the Fed ought not to have intervened to prop up a non-bank institution and, if it was not able to hold back, should have proceeded straight to nationalisation. Prof Roubini argued this last month and restated it on Friday:

First fully wipe out those shareholders, then fire all the senior management and have the government take over such a bankrupt institution before a penny of public money is wasted in bailing it out.

But I think the different outcomes in the cases of Northern Rock and Bear Stearns at least help to justify the Fed action. They perhaps explain it too, since Ben Bernanke, chairman of the Fed and Tim Geithner, head of the New York Fed, no doubt wanted to avoid getting caught out like Mervyn King, the Bank of England’s governor.

In the Northern Rock case, the Bank of England and the Treasury were asked to provide temporary liquidity guarantees last August to give Lloyds TSB the confidence to acquire Northern Rock and its fragile balance sheet. The UK authorities refused to do so, and wound up having to nationalise the bank instead several months later.

In other words, the Bank failed to act in a decisive but contained fashion at the start, then had to guarantee Northern Rock’s deposits and finally had to buy it outright with public money because the alternative on offer from the private sector was (in the Treasury’s view) inadequate.
In contrast, the Fed committed emergency funding on Friday in order to give breathing space for a private sector deal to be engineered over the weekend. It then helped push Bear into selling for a knock-down price to JP Morgan and assisted the sale with a $30bn funding guarantee.
That is not a perfect outcome and it is possible to argue that the Fed should simply have let Bear go down, along with its mortgage book. But that would have risked turmoil in the mortgage and other credit markets and would not have made Bear’s shareholders much worse off than they are now.

Nor do I think it is inferior to nationalising Bear in the manner advocated by Prof Roubini and others and placing it in the same position as Northern Rock.

This way, the shareholders have been nearly wiped out, the bondholders remain at risk until the takeover is approved, JP Morgan is assuming all operational risk, and the Fed simply has to guarantee funding for $30bn of assets. The last part is unfortunate but I can think of worse results.

enron the smartest guys in the room

2008-02-26T16:24:00.003Z

The Smartest Guys In the Room chronicles one of the most chilling business scandals in history, when top executives of America's seventh largest company walked away with more than one billion dollars, while investors and employees lost everything.

Is Northern Rock the UKs Enron?

Northern Rock nationalisation runs into £49bn Granite barrier

2008-02-21T17:09:00.003Z

An offshore fund with charitable status to raise money for Down’s syndrome sufferers in the North East has emerged as the first potential barrier to the smooth nationalisation of Northern Rock.

The fund, called Granite, owns £49 billion of mortgages that were sold by Northern Rock and moved off-shore to the tax haven of Jersey. Granite, which was set up by Northern Rock to raise cheap money, sold bonds to investors and used the proceeds to issue new mortgages.

But The Times understands that the fund could be in danger if Northern Rock fails to win the new mortgage business needed to keep Granite running smoothly. One source said last night: “If you stop writing new mortgages then Granite dissolves and you have to pay back all the Granite bonds, so that would be the Government shooting itself right in the foot.”

It is understood that if Northern Rock does not keep supplying Granite with new mortgages, the trustees of the fund could call for a “rapid amortisation” of Granite, which would require bondholders to be paid back in full. In that instance it is believed that neither Northern Rock nor the Government would be liable to return the funds. However, at least £6 billion of Granite’s money is understood to have been invested directly into Northern Rock, meaning that the bank — or the Government after nationalisation — would have to repay this debt immediately.

Granite dominated a parliamentary debate on the legislation needed to enable the Government to nationalise the stricken bank yesterday. Liberal Democrat and Conservative MPs demanded that Granite, although a separate company to Northern Rock, be brought into public ownership as well.

They fear that Northern Rock has transferred its best mortgage assets to Granite, leaving the Government’s estimated £25 billion loan to the bank secured only on riskier lending. Alistair Darling, the Chancellor, said that there would be no benefit to the taxpayer in bringing the trust into public ownership and its existence was no barrier to the sale of the bank. He added that the bank owned no shares in Granite and the Government had provided no guarantees to its bondholders.

Mr Darling also hit back at suggestions that the taxpayer had been handed the “rubbish” assets of Northern Rock and the best had gone elsewhere. He said that its balance sheet included high-quality mortgage assets.

The Chancellor’s assurances appeared last night to have saved the whole Bill from possible defeat after a meeting with Vince Cable, whose Lib Dem support is vital to its passage, and appeared to have placated him.

The issue overshadows Gordon Brown’s official visit to Brussels today. He is to lunch with leading EU officials including Neelie Kroes, the Dutch Commissioner in charge of deciding whether the imminent business plan for Northern Rock is lawful.

Northern Rock sold half its mortgages to the Jersey-based trust to fund its expansion, including some of its profitable and high-value loans. But the arrangement was suspended when the Government stepped in to rescue the bank — and Mr Darling said that it would be up to Ron Sandler, the man appointed to run Northern Rock, to decide whether it should continue.
Mr Cable wrote earlier to Mr Darling demanding to know why Granite was not being nationalised. He accused the Government of supporting an “asset-stripping” operation and threatened to withdraw his party’s support for nationalisation. Mr Darling emphasised that Granite was entirely independent of Northern Rock, that its mortgage book was “of good quality and its assets exceed its liabilities”, and that Granite had no claim on the bank’s assets. Even so, ministers face a trial of strength with peers as the Tories and Liberal Democrats insist on greater safeguards to stop Northern Rock from undercutting other banks and building societies. They will also demand greater parliamentary oversight of the bank’s strategy and call for it to be subject to freedom of information laws.

Labour peers were being urged by government whips to attend the Lords and be ready to sit late into the night if Mr Brown uses his Commons majority to overturn defeats in the Lords in a bout of parliamentary “ping pong” between the two Houses.

Lord Lawson of Blaby, the former Chancellor, said that the Rock should be closed to new business and its mortgage book sold off when market conditions improve. He said the Government had chosen to continue running it as a business because it was “sensitive about feelings in the North East”.

Hard facts
What is Granite? Granite is a company set up in 1999 by Northern Rock in the offshore tax haven of Jersey. Its technical name is a special purpose vehicle. Granite was used by the Rock to make extra cash from the mortgages that the bank had sold to UK homeowners. Northern Rock transfers mortgages to Granite, which packages them together to make a financial instrument called a security. Investors buy these securities, which provide them with regular interest payments.

How does Granite operate?Granite uses the interest payments made by the mortgages that it obtained from Northern Rock to cover its payments to the investors. Some of the money that the investors paid for the securities is passed from Granite to the Rock. As people pay off their mortgages regularly, the Rock must keep supplying Granite with new mortgages so that Granite has enough cash to cover its interest payments to investors.

Do other banks have these companies? Many other banks have these vehicles, including Halifax, Bank of Scotland and Barclays. It is particularly common in the US, where almost all mortgages are held within special-purpose vehicles such as Granite. Northern Rock has two other offshore companies, called Dollarite, which holds some of the loans that the Rock has sold to businesses, and Whinstone, a much smaller vehicle.

Who owns Granite? Although the Rock has a legal responsibility to provide Granite with regular infusions of mortgages, it does not own or run the vehicle. They are separate legal entities. In theory the vehicle is owned by a charitible trust that was set up to raise money for a Down’s syndrome charity in the North East.

Why is it causing such concern? There are fears that Northern Rock has moved its least-risky mortgages to Granite, leaving the most risky lending on its own balance sheet. Because Granite is a separate company, if the Rock defaulted on its estimated £25 billion government loan, the Government would not be able to access Granite’s mortgages to sell to pay off the debt. If no new mortgages are put into Granite, the bondholders will have to be repaid.

Philip Webster, Greg Hurst and Siobhan Kennedy
The Times online
http://www.timesonline.co.uk/

Abba "Money*Money"Money!

Northern Rocks Granite (Jersey) under Charity Commission Investigation!

2008-02-21T12:26:00.004Z

A twisty trail: from Northern Rock to Jersey to a tiny charity

Northern Rock is facing a Charity Commission investigation after it emerged that the bank exploited the name of a charity for disabled children while creating an elaborate financial arrangement for maximising profits from home loans.

The inquiries will centre on the bank's unusual structure. For while Northern Rock appeared to be a uncomplicated mortgage lender employing thousands of people in the north of England, three-quarters of its key assets are owned by a Jersey-based offshore trust called Granite.
And at the heart of Granite's operations is a rather peculiar fact: on paper, at least, it had been set up to benefit charities, and in particular a small organisation for children with Down's Syndrome, and their families, which was being run from a semi-detached house on the outskirts of Newcastle.

Even more peculiar, perhaps, is the fact that nobody at Northern Rock bothered to tell the children's charity that it was a beneficiary, and the charity never received a penny from Granite.
For seven years, Down's Syndrome North East (DSNE) raised small sums of money as best it could. There was £125 from a man who cycled across the United States, children at a primary school in Middlesbrough chipped in £100, and the North East Ladies' Luncheon raised £750. And the whole time, the volunteers who kept the charity running were unaware that it was supposed to be the beneficiary of a trust which had raised £71bn on the international financial markets and which enjoyed a turnover of £1.8bn last year.

After the Guardian asked Northern Rock for an explanation, the bank apologised to DSNE for what it described as an "oversight" and promised the charity that it would receive a donation in the future. The bank then told the Guardian that the charity might receive a payment - but only if its trust was wound up.

The extraordinary arrangement which saw one of Britain's fastest-growing banks help itself to the name of a tiny charity began in December 2000, when Northern Rock set up a network of trusts called Granite.

The network's labyrinthine structure allowed Northern Rock to take advantage of the British public's growing hunger for cheap home loans - although it was a structure that was eventually to splinter and almost collapse under the weight of the worldwide credit squeeze.
Before that happened, however, Granite raised £71bn of funds for the bank through 24 separate bond issues, all backed by the bank's £58bn worth of residential mortgages.

The Granite trusts were not owned by Northern Rock, but were nevertheless controlled by the bank. This meant the bank could include the billions of mortgage assets on its balance sheet - making it appear that much bigger and more profitable - while having no direct responsibilities to the bond holders who bought the securities backed by those mortgages.

But it appears that Granite's trust status may hinge upon a charitable purpose. And this is where DSNE came in. By May 2005, a Granite prospectus was telling potential investors from Wall Street, the City and the rest of the financial world: "The entire issued share capital of (Granite Finance) Holdings is held on trust by a professional trust company under the terms of a discretionary trust for the benefit of one or more charities.

Any profits received by Holdings, after payment of the costs and expenses of Holdings, will be paid for the benefit of the Down's Syndrome North East Association (UK) and for other charitable purposes selected at the discretion of the professional trust company. The payments on your notes will not be affected by this arrangement."

The Charity Commission said yesterday that it would attempt to establish why DSNE's name was used by Northern Rock. "We need to get to the bottom of exactly what has happened here," a spokeswoman said.

Last night, with Sir Richard Branson's attempt to rescue Northern Rock still hanging in the balance, the bank was bracing itself for accusations that it had committed an act of corporate identity theft by making use of DSNE's name without the charity's knowledge.

There was anger among MPs, with one describing Northern Rock's actions as "unforgivable". Jim Cousins, Labour MP for Newcastle upon Tyne Central and a member of the Treasury select committee, said: "It is clearly right that the Charity Commission investigates. It is completely unforgivable that when the charity was nominated as a potential beneficiary, somebody didn't go to them explaining the whole situation, and reassuring them that the charity was not at risk in some way."

DSNE operates from a semi-detached house in Hazlerigg, two miles from Gosforth, the Newcastle suburb where Northern Rock is developing its new £35m headquarters. During the year ending March 31 2006 it had an income of £85,997. On the other hand, two operating companies owned by Granite Finance Holdings had a combined turnover of £1.8bn during 2006, although its net profits were recorded as just £28,000.

There is nothing illegal about the Granite operation, but the trustees of DSNE were surprised when they discovered how Northern Rock had used its name. Approached by the Guardian on Monday afternoon, the trustees issued a statement which read: "We are investigating why our charity appears to have been named as a beneficiary of a trust without our consent. We have definitely not received any money from Northern Rock or affiliated companies, except for a one-off donation from a staff collection in 2001. Currently we have not received notification that any funds are being raised or collected by Northern Rock or affiliated companies on our behalf."

By Monday evening, after being asked by the Guardian for an explanation, Northern Rock had assured DSNE that it would receive a donation at some point in the future. The charity issued a fresh statement which repeated that it had not received a penny from Granite, although it did receive a one-off donation of £40,000 from Northern Rock staff following a fund-raising initiative six years ago.

It added: "The charity was picked as beneficiary through its position as one of Northern Rock's named corporate charities in 2001. The company failed to inform us of this future beneficiary status at the time, but has since apologised for the oversight and fully assured us that this nomination was made for genuine charitable reasons only."

Although the statement added that no money is likely to be forthcoming from Granite "until some time in the future" the trustees "are reassured by the explanations that there was a genuine communication oversight".

Despite this assurance, it appears that the charity will receive nothing until Granite is wound up. A spokesman for Northern Rock said the charity would be paid only "at a point in the future when the programme ends, should any income remain in Granite after the payment of costs and expenses".

The bank said the naming of a charity was a standard part of securitisation, the process which the bank had employed to raise funds through Granite. "Any notion of inappropriate use of the charity's name, or impression that the charity may be exploited, is entirely without substance," a spokesman said.

Ian Cobain and Ian Griffiths
The Guardian,
Wednesday November 28 2007

Its Only Fools and Horses!

Sandler faces Northern Rock funding quandary

2008-02-21T11:54:00.003Z

The nationalisation of Northern Rock will not include the £50bn off-balance sheet vehicle called Granite which funds half of the Newcastle-based lender's mortgages.

The latest news and analysis from the banking and financial services sectorIf Granite were to go under, the state-owned Northern Rock would be at the bottom of the queue of creditors, meaning taxpayers could face a £5.5bn loss. The Government yesterday confirmed that Granite, which is a Jersey-based trust, would not be covered by the nationalisation legislation.

Mr Sandler could decide to liquidate Granite, which funds half of Northern Rock's mortgages
The Conservatives warned the revelation meant the move was risky for the taxpayer.
Northern Rock set up Granite to fund about half its mortgage book. It owns an 11.5pc stake worth about £5.5bn.

As the bank is set to pass into public hands as early as Friday, that liability will pass to the taxpayer, the Conservatives pointed out.

Granite is unlikely to collapse but its existence puts Northern Rock's incoming executive chairman, Ron Sandler, in a difficult position. He has to strike a balance between shrinking the bank fast so assets can be freed up to repay the Government's £25bn loan, and keeping Granite funded.

Investors in Granite have bought bonds which mature at certain points and are invested in mortgage assets.

Mortgages which get paid off or moved to a rival company have to be replaced in a process known as "feeding the beast". Granite's bonds range in quality from triple A through to below B, but most of the vehicle is invested in high quality mortgages.

Therefore, as mortgages in Granite are paid off, Northern Rock must either replace them with the good mortgages from the rest of its portfolio, or go out into the market to win new customers with a low risk profile.

Alternatively, Mr Sandler could decide to liquidate Granite. Sandy Chen, an analyst at Panmure, said the move might make sense. "It would shrink the size of the book and if you are bearish about the UK mortgage market, it might make sense to sell now rather than later." Liquidation would only work if Northern Rock thought it could make enough money to repay all the bondholders and cover its own shareholding.

Separately, Northern Rock will scrap its Together mortgage, the 125pc loan it used to ramp-up its new lending in 2006 and the first half of 2007.

Meanwhile, Northern Rock has yet to publish its 2007 results.
The bank had said they would be published by the end of March, but it is now unclear whether, as a nationalised entity, it will have to unveil its performance during the crisis period of the past six months.

By Katherine Griffiths, Financial Services EditorLast Updated: 1:05am GMT 21/02/2008Telegraph telegraph.co.uk

The Jersey Enron!

UK denies it nationalised ‘rubbish’ mortgages

2008-02-21T11:09:00.004Z

UK denies it nationalised ‘rubbish’ mortgagesBy George Parker and Peter Thal Larsen
Published: February 20 2008 22:01 Last updated: February 20 2008 22:01

Financial Times,London,UK, ft.com

Gordon Brown on Wednesday denied the government was nationalising “rubbish” mortgages at Northern Rock after it became clear that over a third of the bank’s assets will remain outside state control in Granite, its Jersey-based trust.

Conservatives claimed Granite’s assets of £45bn included some of the best quality Northern Rock mortgages, leaving the taxpayer exposed to more risky loans on the remainder of the bank’s £110bn balance sheet.

The exclusion of Granite, Northern Rock’s special purpose financing vehicle, from the nationalisation stunned many MPs and left the government scrabbling to explain the relationship between the nationalised Rock and its Jersey offshoot.

Mr Brown argues the government is not exposed to Granite, a separate legal entity, and denies the special vehicle has creamed off the best Northern Rock mortgages to raise finance on the bond market.

“This will have no effect on the sale of Northern Rock to a private buyer,” Mr Brown told the Commons.

Available data do not support opposition claims Granite has the Rock’s best mortgages. They show its mortgages have an average loan size of £117,263, while the weighted average size of the loan to the value of the property is 77.05 per cent.

That is higher than Northern Rock’s last reported average ratio of 60 per cent, suggesting the rest of the bank’s book is of higher quality than the mortgages in Granite, although the figures could be distorted by the Rock’s rapid expansion.

On Wednesday, George Osborne, shadow chancellor, insisted that Northern Rock would have sold on its best mortgages, leaving the taxpayer with what critics have called “rubbish” loans.
Alistair Darling, chancellor, wrote to Vincent Cable, Liberal Democrat Treasury spokesman, to try to maintain his support for nationalisation. “The government has not provided any guarantee arrangements to Granite bondholders,” Mr Darling told him. “Contrary to some suggestions, the Financial Services Authority advises that Northern Rock’s mortgage book is of good quality and its assets exceed its liabilities.”

Mr Cable said he was satisfied it would be legally impossible to nationalise Granite, but said it was highly likely Northern Rock would have hived off its best mortgages to the Jersey trust to raise finance at the cheapest rate.

The Lib Dem deputy leader also questioned government assurances that Northern Rock was not obliged to replenish Granite with new mortgages in future.

The complexities of Northern Rock’s financing arrangements provided further ammunition for Mr Osborne’s claim that parliament needs more time to study the emergency bill to nationalise the bank.

That bill could become law tonight, but Tories and Liberal Democrats are pressing for amendments to ensure a nationalised Rock does not distort banking competition.

The Treasury indicated it could accept that amendment, but will resist an amendment to subject the bank to scrutiny under the Freedom of Information Act.

Shareholders in Northern Rock on Wednesday expressed dismay at the basis on which their compensation will be calculated. A draft order published by the Treasury says an independent valuer will calculate a price based on the assumption that the bank is unable to continue as a going concern and is in administration. That implies shareholders will receive little or nothing.

Its not Northern Rock but Jersey Rock!

The Northern Rocks Theme Song!

2008-02-18T12:54:00.002Z

Elvis Presley,Jailhouse Rock!

The Northern Rock

2008-01-26T11:31:00.006Z

17/2/2008

British Government Nationalises Northern Rock

The British Rock is born!

More Coming!

ENRON?

-------------------------------

Firstly lets talk about the Northern Rock, a UK bank and former building society owned by its shareholders, who literally ran out of money, after the American sub-prime scandal, and whom now the British Government ,have supported by nearly 60 Billion Pounds sterling, thats $120 Billion USA Dollars!

The Money Program (BBC) The Northern Rock

Part 1

Part 2

Part 3

This a complete and utter mess, which should have been dealt with immediately and probably secretly at the time,by organising a private sale to another bank.

Instead it looks like the British taxpayer will end up the loser! -
but the not the board of Northern Rock who have just voted
themselves a BONUS of over £2 Million ******

Initially it looked like the Bank would be nationalised, but now
the British Government are talking about converting the loan
(which was supposed to be paid back quickly) - being turned
into some sort of bond which they guarnteee, and sold to
investors on the open market - this being the same sort of
people who would not lend to the bank in the first place!

This sounds like a dodgy financial instrument of the type
that caused the American sub- prime crisis!

The quicker the Northern Rock is nationalised and becomes
the British Rock the better; the British taxpayer has taken all
the liabilties, with no control and none of the assets.

The administrators can then clean up the company and sell
whats left to a proper financial institution.

Any more dithering , will cost the British taxpayer, many more
billions of ££££££.

And now a "French Farce" at Societe General !

Watch the TV News Report;

How can a 30 year old dealer with a bank, trade nearly £30 Billion
in trades and incur losses of £3 to £4 Billion without anyone knowing?

Maybe a French "Northern Rock"