ROYAL BANK OF SCOTLAND is preparing a grand slamming of the barn door after the horses are gone. This is no ordinary exercise of the age old ploy, in his one Royal Bank of Scotland has seen to it that the stalls have been cleared and there's time enough for odor to waft away.
The Royal Bank of Scotland is getting ready to clear out their boardroom, purging the business of directors that are linked with Sir Fred Goodwin, the bank’s former Chief Executive. The change comes while the bank is getting ready to put between £50 billion and £100 billion in loans into the new bank insurance scheme of the government.
The so-called purge is pure window dressing, coming too late to prevent the 70% government take over of the Royal Bank, but soon enough to effectively nationalize the remaining banks. as Peter Thal Larsen of the financial Times puts it.
The British government is about to write a huge insurance contract for the banking sector. For ministers, the gamble is that their willingness to protect banks against big losses will in itself make it less likely the insurance will ever be needed.
Is Peter kidding us? I suggest that the Britts and Hank Paulson play with that bazooka together, you know the one, that did not save Fannie or Freddy.
In July, Congress gave [Paulson] authority to come to the aid of Fannie Mae and Freddie Mac. "If you have a squirt gun in your pocket you may have to take it out. If you've got a bazooka, and people know you've got it, you may not have to take it out," Paulson said. (Translation: if the market knew the companies had a federal backstop, investors would be more likely to give them more time to work out their troubles.) Paulson was forced to use the bazooka sooner rather than later. By the end of August, the weakened financial state of the two giants was threatening both domestic mortgage markets and the value of hundreds of billions of dollars' worth of bonds they had issued that were owned by central banks around the world.
(Daniel Gross, "The Captain of the Street," Newsweek, September 20, 2008)
But back to the other side of the pond consider
...for example, it is unclear how the banks would compensate the government for providing the insurance. This could be done by banks paying a fee, or by issuing equity to the state so that it benefits from any recovery in share prices. Either way, some kind of compensation is necessary. “The taxpayer has to see that this is not a gift to the banks,” one UK bank executive said on Sunday.
It is absolutely clear that the banks do not desire to compensate the government. The taxpayer has to see that this is a ripoff and do anything in their power to stop it.
The big question, however, is whether the insurance scheme – and the other measures the government is planning to unveil – will work in restoring the flow of credit to the economy.
There's no question at all that it will not work. What we call the credit crisis is really the end of Ponzi finance when MasterCard will no longer pay the Visa bill and debts cannot repay debts.
Bank executives point out that even if large British banks increase their lending this will not make up for the withdrawal of foreign banks from the UK, and the reduced appetite for risk in the wholesale markets.
Bank executives should point out that Minsky has had his moment and only the sour combination of liquidation, deleveraging and time will instill virtuosity back into the markets.
The best that ministers can probably hope for is that the necessary deleveraging in the UK economy will take place on a more gradual and controlled basis.
The last chance for that are what the ministers are throwing away, these moves only lift it higher making it land harder.
If the scheme does not work, the government will have little choice but to take the banks into full national ownership.
The scheme won't work because it can't work and the government now has no choice. So the boardroom distraction heats up, first to go is CEO Fred Goodwin. Fred has hung on for five years anyone serious about righting the bank would have fired him at least two years ago and certainly before the dangerous purchase of Dutch bank ABN Amro. It was that purchase and the associated fees which made Goodwin and board members fat and happy, but shortly thereafter the serfs in the serfdom saw their wages nationalized as they all became 70% owners in the Royal Bank of Scotland. But now that blood is drawn the damage is done and there's no fixing the mess the Prince of Wales feigns indignity to do for his charity what should have been done by the bank already.
The Prince of Wales was asked him as chairman of his personal charity, the Prince's trust, a position Goodwin (pictured) took up five years ago, because it was felt that his tarnished was proving too much of an embarrassment.
"Sir Fred's position has become untenable. The Prince initially decided to stick by him, but that's become impossible," a palace source told the Daily Mail. "The bank is in such straits Prince Charles had no option but to part company with him quickly. It is out of the question for a business or charity to have as its figurehead and role model who has caused such economic damage."
Oh those palace sources how they talk, the poor Prince had no option but to part company with him quickly. Quickly would have been two years ago dear Prince. Anyone who really believes that the good Prince and his palace pals weren't aware of Sir Fred's antics back when the bloggers did should clear their sinuses and smell the bacon. Goodwin alone can take as much credit as any single person for the banking crisis and will make off with billions while 10,000 jobs have already been lost and up to 170,000 more fiefs lose their income. Part company with him quickly indeed my Prince. Or good prince you could have shot him for treason, instead you speak poorly of poor ole Fred. When Goodwin made billions for billionaire insiders in the bank by flying the bank like a kamakazi pilot, making deals like AMRO that made no sense except for Royal Ransom the fees brought home, which he no doubt kicked some of into the Prince's charity and was knighted, now only when he is an embarrassment does the former CEO see a princely removal.
As for the rest of the board and cabal as realization that the gig is up sets in the heat comes on, but when the regulatory watchdogs stop barking and start biting you know that the body is cold. Finally the watchdogs are beginning to hunt.
Calls for an investigation into the Royal Bank of Scotland's (RBS)£12 billion rights issue have been stepped up following complaints by members of the Scottish Parliament.
The Lothian and Borders force has confirmed that it is conducting inquiries into claims the bank fraudulently sought investment from shareholders in full knowledge that the bank was insolvent.
Former chief executive officer Sir Fred Goodwin and his team of executives who led the bank's debt-driven surge to become the world's fifth-largest bank before its spectacular fall from grace will reportedly be at the heart of the investigation.
Ouch! That could sting, sounds like it's a good time for chief executive officer Sir Fred Goodwin and his team of executives to split town, er I mean boardroom purge. So which is it, a shakeup or a sham? Easy, just ask yourself who went to jail and how much money did they give back and that narrows the choices down to something manageable. The lame lapdog agencies may finding someone to throw to the wolves, but you can bet that the worst is that happen to Goodwin and hisband of merry men has, but for the taxpayers this is as good as it gets.
No comments:
Post a Comment