Re: Bankers pocket billions of public bailout funds

Mel Rowing <mel.rowing@xxxxxxxxxxxxxx> wrote in
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"basho007" <basho@xxxxxxxxxxxxxxxx> wrote in message
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Mel Rowing <mel.rowing@xxxxxxxxxxxxxx> wrote in

So the subject of your thread is spurious before we start.

Expanding the thread does not change that fundamental fact.

hardly a "fundamental fact".

Oh but it is. Just look at it! "Bankers pocket billions of public
bailout funds" clearly is inaccurate to the point of being a
headline contender for the Mirror, Sun or Mail.

this is a political issue, including its accounting dimensions.

No it?s not! It?s a total misstatement of fact coined for its eye
catching attribute rather than its accuracy!



your view point beggars belief. You must have your head in the sand if
you have not been exposed to the political issues the bailout and
nationalisation have and continue to raise.


Do you meant to say the part nationalisation is not a political issue?


Banking incompetence, the causes of the nationalisation, are also
political issues and accounting issues.



Lloyds CEO praises staff for the 'terrific job this year' - having
just taken a £5 billion plus bailout of government money, thanks to
the taxpayer.

He went on 'f you think about it, the first restriction was not to
pay bonuses. Well Lloyds TSB is in fact going to pay bonuses.'

talk about biting the hand that feeds you.

Almost by definition, performance can only be assessed in the
historical context. Lloyds financial year ends December 31st


we can measure performance by their share price.


compare with other banks



According to their last Annual Report,

http://www.investorrelations.lloydstsb.com/media/pdf_irmc/ir/2007/AGM_2
007_LTSB_Group_R&A.pdf

http://tinyurl.com/696l4v

If we look at retail banking (Page 15)

Profits for the year ending 31 Dec 2007 were £1808m up 16.7% on the
same period in 2006. At the same time cost to income ratios were down
from 47% to 45.7%



and they still needed an over $5 billion "capital injection" nine months
later?


at the end of December management at the highest level should have been
aware of the bewing storm.


There are some notes about this in their report that paints a rosy
picture.


look also at comments made about Lloyds expectations for the coming year.


or the "Vision" about giving sustainable earnings growth to the
shareholder.


look at their share price from January to today. from close to £5 to
less than £2 in nine months.


and earnings for the shareholders suspended.



To me this smells of bonus entitlement.



I wouldn't make this assumption. when there is a "smell" or "whiff" of
something good or bad - it is a call for more investigation and research.


Accept your point in principle - up to 31 December.


The initial story was up to April 2008 - outside of the year end report.


All signs are that despite their deteriorating financial positions Lloyds
will continue to fling shareholder money around to shore up a company in
trouble - as well as possible flaunt the covenant attached to the
government shares.



The equivalent figures for this year will not be available until
December when presumably the question of bonus will be looked at
again.



From their CEO's comment yestyerday the decision has been made to pay out
bonuses for the "terrific year" Lloyds has had.


How could anyone in their right mind say Lloyds has had a terrific year?



You just don?t understand do you?


The comments you are making, assuming banks and markets operate
mechanically according rules and law, are unfathomable.


You seem unable to accept anything that is critical or inconsistent with
your rosy view of the banks.




It is spurious for at least 2 reasons.

You sound like a lecuturer in an FE MBA - all theory.

And how else is one to examine the performance of a bank if one
doesn?t apply the appropriate concepts. The socialist ?make it up as
you go along? method perhaps?


study the reality - not the theory.


sit in a remuneration committee, have lunch or after hours drinks with
key players, general, smooze.


you want to learn more about how deals are made in real life.


use the Lloyds HBOS merger as a case study - is still evolving and makes
a good example.


essential question here: has Lloyds done adeqaute due diligence?




First, the "bailout" takes the form of a capital injection. Salaries
are never met out of capital funds. These provide any company with a
contingency reserve with which to offset any operating loss. In the
meantime, they will be be invested in liquid securities thus over
time enhancing the reserve provision still more.

"bail out" means a capital injection to a bank that without would
have been insolvent. it is not a notion you can sanitize just by
making it abstract.

?bailout? is a journalistic term!


do you not understand what it means?


why, despite the glossy annual report did less than a year later their
financial condition deteriorate so much they when cup in hand to the
government?



It is by no means certain that all banks that accepted the government
capital injection would have indeed become insolvent. A financial
crisis is built as much on fear as figures. Capital injections were
necessary to stave off any possibility and hence fear of insolvency
as asset values fell.


the banks became afraid and mistrustful - of each other - because they
knew they all had dodgy assets on their books and could not figure out
what their true value is.



and you want to think about the relationship between balalnce ***
assets and liabilities along aside of income and expenses.

these all going together.

Gibbledigook!



you need both a balance *** and an operating statement to get even a
minimal handle on a company.


do you disagree with this?




you are confusing notional balance *** items with cash coming in -
and going out at the 12%.

12% of what?



do you not know what the 12% is being paid on?


it's the cash that has to be paid to government - the payments are a
condition of the shares that were issued.


it's an expense item - do you think the cost does or does not reach the
balance ***?


at any rate - the 12% is a sure sign Lloyds couldn't get the money they
needed on the open market. this is a better sign of their financial
condition than their glossy report (which talks positively about their
sources of funding).





the banks have and are taking money that should have been used to
shore up their capital base.

they did it when they should have known problems were afoot outside
of their ivory towers and at least one bank has promised to do it
again.

Bull***!


you're welcome to hold that opinion.


the unfolding of this crisis going back to the summer of 2007 is evidence
to the contrary.


Taking this into account, it appears as if you are in denial.



Foresight is an exceptionally rare gift. Those that possess it are
destined for great things.


one rationale for the bonuses is that the shareholders are buying
"foresight".

Unavailable! It does not exist as a quality in itself in anyone.


HSBC and Standard Charter did not do too badly in this department.


Foresight may well be 80% good analysis and experience. These are
measurable, not mystical.


a recurring theme in the critical financial press is that large
coprorations should have seen the crisis coming. It is not like there
are no precedents - three have arisen since the Regan era of de-
regulation, compounded by the Bush regime.



I, nor anyone else, can foresee the economic picture 12 months hence
any more than I can fly.

What shareholders buy in varying amounts and combinations depending on
the individual in question is experience, reputation and technical
expertise.



and good financial judgement and prudence.


again, use the Lloyds HBOS merger as an example of financial judgement
and prudence.


Read critical analyses of the deal and one must ask whether the Lloyds
chief was swept of his feet by Gordon.


we have seen no evidence of this foresight in our major banks -
except notably in HSBC and Standard Charter.

Nothing to do with foresight so much as circumstance!


your description of good banking pratice makes the game look like a crap
shoot - circumstance - the roll of dice.


I accept that even if you deny later having said it.


Llods people ran the company into the ground and executive bonus payments
were a part of this "waste" (a legal term) laid on their shareholders.



what makes these two banks special - aside from not needing
government bailout

HSBC (Itself largely the product of the old Midland Bank which had to
fall on its sword through over exposure to the Argentinean Financial
Crisis of around 20 years ago) Standard and indeed Barclays are very
different animals to those in receipt of government capital
injections.



very different, yes - they have managed to live without government funds.


Barclays seems to be hanging onto their pride by not taking the
government money.


It is still available to them and until they do their private placement
successfully we can't say they won't be asking for it later.


(a £3 billion euro bond issue in the news - it is guaranteed by the
government against failure) someone might describe it as shooting fish
in a barrel.



They are immense and would be more accurately described as financial
service groups rather than simple banks. They?re into everything and
their reach is global. This means they are diverse. Diversity means
that they are less exposed to any form of risk. As the insurance
companies found out 300 years ago, the way to minimise risk is to
share it out.



Shall we start discussing the insurance companies? AIG?



remember the "names" case arising from gigantic losses at Lloyds?






Even so all of them have found the need for significant write downs
and further capital injections but have sought/are seeking a capital
market solution.

you don't seem to have followed the credit crunch story from the
beginning.

It might interest you to know that I am one of that increasingly
rare breed of private investors. Not many days go by without me
reading the financial pages of one of the more serious news sheets.
For years 1/4 or thereabouts of our joint cash wealth has been
employed with varying success in security dealing.

avoiding the question that was asked.

What question was that then? I was responding to the bald statement
postulated.

Unlike some who pontificate on here my money goes where my mouth is.

you have no evidence for your assumption about others on this list.

What list was that?


"this" list


There have been Stock Exchange announcements regarding certain banks
making provision for bad debts. That doesn't mean that the bank is
about to go bust but rather that some of its reserves have been
liquidated to offset any assets that have turned bad.

the announcements originate with the companies themselves, not the
LSE.

Of course they do bit usually through the exchange.

considering what has happened this autumn banks should be in the
dock for witholding information it was their duty to provide as
publicly listed companies.

Now you really have to make your mind up. On the one hand you refer
to information released by the companies whilst on the other you
complain that they withhold information.

Which is it to be?

the stock market is not a place for anyone who sees the world in such
a black and white way.

It?s my money! I?m not complaining! That?s all you?re getting.

You think a choice can be made?!


No one knows which it was.

No I think both to be rubbish.

Banks are damned if they knew and didn't tell.

Banks are damned if they didn't know.

Phew ? you?ve even lost your own argument.



my point was "no one knows" - there needs to be an honest and critical
investagation of what banks knew and when.

Then perhaps the choice can be made.


a critical approach identifies areas that need further investigation.





Most of the banks and certainly the major ones are Plc's (or their
equivalent in other countries) This means that they are required to
deposit audited financial accounts with the DTI every year. These
reports are public documents. The same certified accounts form part
of the company's annual and interim statements presented to
shareholders at AGMs.

Heseltine's suggestion is good - banks should have their auditors
appointed by outsiders.

Don?t you think that a bit rich coming from someone who could once
claim up to £250 without even producing a receipt?


you really don't want to address the substance of his point: the
complicity of the auditors.


A prudent board of directors for any bank would be investigating the
quality of any audit that failed to signal problems that were known at
the time.


They would do this because of their fiduciary duties to the shareholder
and to save their own skins.


I wonder who appointed the auditors to Hesteltines companies?


Don't know. Is this relevant to our discussion of banks and auditors?


Were you on the verge of saying the appointment of auditors is a cosy
club that avoids serious issues?



The truth is that auditors do not work for Hestletine nor the general
public and certainly not for the government. They are appointed or
reappointed by the shareholders at the AGM. Their function is to
ensure that account are properly kept and that shareholders are not
duped.


I think there is enough public evidence to sustain an investigation that
proceeds on the basis that shareholders msy have been duped.


This is how it is being handled in the US. The City culture however is
very different and I doubt we will see any serious investigation here.


The English mentality seems to reward incompetence.


I have never heard of a case where shareholders of a large public company
refused to appoint the auditors proposed. Do you know of one?


It is a formality - devoid of substance - like so much of the formal
legal side of corporate governance you have been referring to.



In addition the shares of these companies are traded on exchanges
and bourses across the world. These are not dens of thieves as you
socialists prefer to see them but regulated markets. One of these
regulations requires companies to disclose information that they are
aware of and which is not already in the public domain that might
adversely affect their share price. They usually do this through
stock exchange/bourse announcements. In exceptional circumstances,
dealings may be temporarily suspended to await an announcement. The
nuclear option for non disclosure is the removal of the share
listing altogether after which holders would experience grave
difficulty in trading the shares.




why are you telling me these things? It's public knowledge for
anyone who follows financial matters.

Quite!


Indeed!


the point you should take about the baum of the "law" is that they
didn't work.

I don?t know what the ?baum of the "law"? is! Neither does my spell
checker nor my Oxford dictionary. My memory of German at school
suggests it?s a tree!



if you had a background in English law, you would either know or be able
to figure it out.



you're saying the banks knew full well what was on the horizon and
made one last leap at their pot of gold.

I say nor said any such thing!



I think it was a reasonable interprettion of what you said -

I?m sorry I just can?t stay with this rubbish any longer!


You are under no oligation to reply - I repeat - under no obligation to
reply.
.