On R4 PM there has been a report that the structure of the banks stopped govt taking as many prefs as they originally wanted.
If the Credit Default Swap contracts, CDS, liabilities of these banks are not covered, then bank re-capitalisation may still fail. Since these are essentially gambling debts, then these contracts should be declared unenforceable and void under English Law at the very least. It will then be academic whether the taxpayer should have had warrants or not. Do you have any thoughts on this, Wat?
ECG: your point about gambling law is an interesting tack.
Sackerson. Thanks for the links.
From the Guardian:
http://www.guardian.co.uk/
busine...ofscotlandgroup
"Chen described the prospect of mass payment failures as "key drivers of the current apocalypse". He singled out Barclays and Royal Bank of Scotland as being most exposed among the UK banks to the credit derivatives market. Both have bought and sold, in roughly equal measure, £2.4 trillion of such contracts.
Chen believes Barclays and RBS are highly likely to be prominent among those required to pay out on Lehman CDSs. Meanwhile, counterparties failing to meet their payout obligations to the two banks could lead to big writedowns."
"Against this, tangible shareholders' equity bases of £20bn to £30bn seem like cloth tents in a hurricane," Chen said. !!!
How's NuLabour doing on its first day of trading in bankshares?
On the underwriting alone
Share Market Price Government Price Size Profit
LON:HBOS 90 113.6 8,500 -1,766
LON:RBS 65.7 65.5 15,000 46
LON:LLOY 162 173.3 4,500 -293
-2,013
i.e. A loss in one day of 2 billion.
If that's a trader on their first day, they are going to be sacked.
The Scottish Banks are basket cases because each started a takeover war - for NatWest then Abbey then Halifax....and went mad on disintermediated money.
Lloyds stayed solid until it looked at HBOS. It stayed out of investment banking and its only exposure is to UK domestic mortgages. Why it got involved with HBOS is unclear.
12% coupon on Prefs without any tax-deductibility basically cleans out the Dividend Pool and expropriates shareholders holding an income stock.
So how many pensioners will face income cuts and need to file for benefits ? How many pension funds will suffer a second Brown Raid ? How many loans will default as personal collateral is frozen in a Government-controlled bank.
The Regulators failed - then set huge levels of capital Tier I as a precondition of BoE liquidity so that Banks fell into Government hands...Vladimir Putin must have been giving them lessons
"Lloyds stayed solid until it looked at HBOS"
Lloyds *is* still solid. It could walk away from HBOS tomorrow and avoid taking the government package. Rather, it's going through with the deal because it thinks it's a once-in-a-generation opportunity to generate serious returns.
Commenting by HaloScan
