Supuesta, por que a mediado de la semana, ocurren dos de los sucesos que mencionaba arriba, el primero es que por causas "privatizadoras" deciden suspender de nuevo las actividades académicas en toda la universidad, supuestamente reanudandolas el domingo 12... pero, salvo unos pocos individuos, casi nadie estudia el domingo...

El otro evento fue un encuentro que me tomó de sorpresa, pues nunca estoy enterado de las actividades que se realizan en el campus. ésta es el foro social de las américas, en donde toda la gloriosa universidad se convirtió en un desfíle de colores, sirviendo como punto de encuentro entre mucha gente de muchas nacionalidades, a pesar de la suspension de clases.

Estos encuentros siempre son buenos, pues promueven el encuentro de diversas culturas a nivel continental. y por ende, resulta en diversas actividades en donde se realiza intercambio de conocimientos entre los individuos. Uno de éstos, y que tuve oportunidad de asistir, fue el Freedom Not Fear Day, el cual, como su nombre lo indica, se trató de software libre.

Lo interesante de este encuentro fue que, aparte de ser personajes de diversas nacionalidades, eran personajes de diversas profesiones, dando diferente enfoque a las tecnologías libres según su ramo.  De lo más interesante que puedo reseñar en ese evento fue que presencié el OLPC que tanto había oido hablar desde hace mucho tiempo. la verdad me parecio un artilugio bastante bueno por sus capacidades y adecuado hacia el público que está enfocado.  Y a la vez, este aparato sirvió como punto de discusión entre Heinz (al cual por su apariencia y filosofía lo apodé Stallman Argentino) y la persona que llevaba a promocionar el OLPC (un gringo del cual no me recuerdo el nombre, pero hablaba bien el español, incluso mejor que yo).

Estuvo bastante bien el evento, sin embargo, como era de esperarse, y por los diferentes profesionales que estaban involucrados (muchos de ellos relacionados con ciencias sociales y políticas), tocaron un punto que prefiero evitar, la mezcla entre software libre y política.... algo que no me parece adecuado, y tuve que largarme del lugar lo antes posible. pero en fin, siempre es enriquecedor escuchar opiniones de gente de otras ramas hablando del modelo que está moviendo masas. el modelo de libertad.

As of 7th October 2008, the compensation limit for bank deposits is £50,000 (and £100,000 for customers with joint accounts), a substantial increase from the £35,000 limit set on 1st October 2007.

“As a financial solutions company, we welcome this move by the FSA (Financial Services Authority) to reinforce the financial stability of the UK,” a spokesperson for Think Money commented. “In today’s economic climate, it’s vital that consumers know their money is safe. As the case of Northern Rock demonstrated, any doubts about its security can rapidly lead to a self-perpetuating sense of crisis which benefits no-one.

“Furthermore, we also see consumer confidence as an end in itself. As individuals, the more we trust in the stability of our financial institutions, the more faith we have in the future health of our nation’s economy. Simply knowing that our money is secure gives us the confidence to act responsibly, saving for the future rather than living for today. Given the recent moves by the Irish and Greek governments, this move also serves to keep money in the country by simply removing the need to move it abroad.”

As a financial solutions provider, Think Money provides a range of debt, loan and mortgage solutions, as well as a unique managed bank account service.  Debt solutions include IVAs, trust deeds, debt consolidation & debt management.

“But we are also called on to advise individuals on a wide range of financial matters, from managing their debts to budgeting. This is a free service we provide, and the FSCS guarantee helps us carry it out effectively: effective money management is an essential part of avoiding debt in the future, and the FSA’s safeguard means the vast majority of the UK population can have confidence that any problems their bank or building society may encounter needn’t be a threat to their personal savings.”

In the near future, the FSA will also, as its website reports: ‘consult on further reforms, including considering whether the compensation limit should be higher still; the speed with which the FSCS can pay compensation; and the rules surrounding whether deposits are covered on a legal entity, a ‘brand’ or an ‘account’ basis’.

“These are important issues, even the ones which affect only a relatively small proportion of the population – there may not be many people with savings of over £50,000, for example, but it’s important they feel they can safely keep their money in the UK, rather than moving it abroad.

“After all, it’s in everyone’s interests to have a financial system we can all have faith in. Banks themselves are safer when people realise there’s no reason to panic – and fostering a greater sense of security among financial institutions is a fundamental part of bringing an end to the credit crunch, so lenders can get back to lending at levels which promote economic growth across the country.”

"The FSA pointed out when it published its survey on the effect of low income on diet that middle-class people were eating increasingly high levels of junk, too."

The middle classes  should know better seeing as though they can read and stuff.

Apparently it all started with Elizabeth David , according to these food facts who was the first pukka fukka to chukka olive our way..and we've been eating them ever since...enjoy.

[caption id="attachment_2207" align="alignleft" width="48" caption="From the desk of MD"][/caption]

ESSENTIALLY, the global economy is regulated under rules agreed at Bretton Woods in 1944. Given the state that the world is now in, following calamity within the world's financial markets, and the nature by which financial institutions are likely to become heavily regulated in the future, there is strong reason in believing that we must tear up the initial accord, and by starting again.

In July 1944 war waged across the globe: then, ministers from all 44 allied nations met at the Mount Washington Hotel in Bretton Woods (New Hampshire), in thrashing out a set of rules that has governed the world of finance since the fall of Hitler. Knowing that greater international trade would help to prevent future wars, and determined to avoid another Great Depression, the delegates then present signed the Bretton Woods Agreements which effectively created the International Monetary Fund (IMF) and the World Bank. The vision was big, driven by grand historical figures such as Winston Churchill, Franklin D Roosevelt and the great British economist John Maynard Keynes.

A system that was designed 64 years ago, though, has proved ill-equipped in dealing with the fiendishly complex practices of 21^st-century banking that has led to the current worldwide crisis. Neither the IMF, the World Bank nor any other institution has had the power in policing the global financial system in such a way that it might have prevented the excessive-risk taking which led to the sub-prime mortgage crisis and, in turn, the credit crunch.

A more recent created world body, the G8 group of industrialised nations, looks weak and hopelessly out of date. Without the emerging economic powers of Brazil, India and China amongst its ranks, decisions will always likely be skewed towards a Western agenda. And, the "beggar-thy-neighbour" policies of guaranteeing savings that have sprung up in Germany, Greece and Ireland in recent days have shown that even in Europe, co-ordinated economic policy is an allegory, or myth.

With the current system in crisis we have a financial environment in which dog eats dog, and man eats man; that I have no-doubt. The electorate will expect more regulation because of the colossal amount of money that has been used in bailing-out banks, and politicians will certainly push for it from virtually all corners of the political spectrum. Bonuses, for example, cannot be allowed to be paid when the banks are being shored-up with public money.

Last week, on the website of the Guardian Newspaper, the new Business Secretary, the Rt. Hon Peter Mandleson MP, argued that new global solutions are needed because:

... The machinery of global economic governance barely exists ... It is time for a Bretton Woods for this century.

The British Prime Minister, Rt Hon Gordon Brown MP, has argued as long ago as January 2007 that global regulation was:

... urgently in need of modernisation and reform.

So, as the world's central bankers gather this week in Washington for an IMF-World Bank conference to discuss the crisis, the big question that they will face is whether the time has come in establishing a global economic "policeman" to ensure that there is no repeat of the 2008 crash.

A priority for any new or reformed body would be the establishment of new rules to manage the level of risks that banks and financial institutions are allowed to take on. Major economies already have regulatory bodies designed to keep financial institutions in check, such as the Financial Services Authority (FSA) in the UK and the Securities and Exchange Commission (SEC) in the United States. Even if these bodies had done their job properly, opinions do differ wildly between different countries over what constitutes an acceptable risk.

BASLE II

Take, for example, the Basle II Accord, a voluntary international agreement which probably seemed a crushing bore when it was first published in 2004, but which just might have prevented the credit crunch if the world's major economies had realised it was actually a good idea.

In essence, Basle II, invented by the Basle Committee on Banking Supervision, set up by 10 leading economic nations, was designed to make sure that banks did not overstretch themselves by lending too much money in relation to the amount of capital they held.

If it had been implemented, the moment it was written, Basle II might have prevented the collapse of the Northern Rock Bank - which, as it has now transpired lent seven times the amount of money it held on deposit - and, perhaps, the likes of Lehman Brothers in the United States. Instead, motivated by national self-interest, not to mention insatiable greed, the world's major economies dithered, so that few, if any, had implemented the agreement by the start of 2008, with 95 countries only able to pledge adherence to it by 2015.

GLASS-STEAGALL ACT

We can only speculate whether a global policeman would have intervened in another seismic shift in economic policy: the abolition, in 1999, of the Glass-Steagall Act, by President Bill Clinton. That, since 1933, had separated retail banks from investment banks. The Act had been passed during the Great Depression to prevent banks from speculating with depositors' money, and its repeal by President Clinton has been blamed by some financial analysts for contributing greatly to the current financial crisis, which would have been limited to investment banks if Glass-Steagall had remained in place.

Whilst it is too late to remedy the missed opportunity of Basle II or to reinstate Glass-Steagall, there is obviously a pressing need to find a new global regulatory arrangement which might just come in time to address another issue troubling the world's financial watchdogs: mark-to-market accounting, about which we are likely to be hearing a great deal in the coming days and weeks.

Mark-to-market accounting is a system in which banks must declare the value of assets such as securities on a daily basis, forcing them to be transparent about their balance sheets. The assets must be valued in line with what they would fetch on the open market that day, and if their value has dropped, the banks must raise capital to make up for the shortfall, even if they have no intention of selling the assets for another 5 or 10 years.

Many banks will likely argue that this unfair, because those same assets will recover their value in the long-term, and marking them down will likely contribute to the current crisis in confidence. However, to stabilise financial markets, mark-to-market seems a logical accounting approach in dealing with a situation that is clearly out of hand.

GLOBAL ECONOMIC REGULATION

In essence, any organisation with the power to police the global economy would have to include representatives of every major country - a United Nations of economic regulation and enforcement. Robert Zoellick, President of the World Bank, identified the weaknesses of the current system when he said international organisations that excluded countries such as China, India, Brazil, Saudi Arabia, South Africa and Russia were outdated.

Gerard Lyons, too, a member of the International Council of the Bretton Woods Committee, a steering group for the IMF and World Bank, said:

... We need to look at the current crisis and decide what banks have been doing well and what went wrong.

Certainly, we do have an opportunity, now, in making changes within global banking that should ensure that we keep the good bits and eradicating the bad. For example, there is nothing wrong with young people borrowing money against their expected future income if they have genuinely good prospects, but we need to prevent the sort of irresponsible bank lending to people with poor credit ratings that led to the sham of the sub-prime mortgage crisis.

But, equally, what we mustn't do is to throw the baby out with the bathwater. The global banking system has helped increase living standards at a faster rate that at any point in history, and we are about to witness the emergence of two-thirds of the world's population into the developed world.

Historically, the IMF has always tended to couch economic warnings in very diplomatic and convoluted language; an independent body, such as the Bank for International Settlements (BIS), would seem better placed in dealing with any similar future crisis. Incidentally, it was the BIS that initially recommended the sensible Basle II accord.

The failures of modern global capitalism have been brutally exposed in recent weeks. Opinion is hardening around the case for a new global architecture to enforce new rules that will ensure lessons are learnt and the actions which have brought free markets to the brink of collapse are never repeated.

© Mark Dowe 2008: all rights protected

mark.dowe@googlemail.com

The writer is a management accountant by profession, also holding an M.Sc in Geography and is a former pupil of Professor John Struthers.

- Copyright is the currency by which information may be exchanged in certain instances. If you are unsure of your rights relating to digital communications in partial or complete form you should seek independent legal advice.

Supplementary:

On October 9, 2008, the Economist wrote:

... The passage of America's $700 billion banking bail-out by Congress on October 3rd did little to halt the crisis in the world's financial markets. On the first day of trading after the bill was signed into law, stockmarkets in America, Europe and Asia witnessed their steepest falls in two decades. The Dow Jones Industrial Average fell below the 10,000 mark, the FTSE 100 recorded its biggest one-day drop (in terms of points) and Russia's stockmarket plunged by almost 20%. On October 8th, Tokyo's benchmark index fell by 9.4% and Hong Kong's by 8.2%. [sic]

Actually, I knew what my options were and I knew exactly what I wanted to do with my money. And herein lies the problem. With less than half an hour before I had to leave for Heathrow, I wanted to nip in and nip out as quick as I possibly could. But those lovely regulators - I refer, of course, to the Financial Services Authority - just wouldn't let me.

I stared incredulously as I was told that I would have to endure an hour long interview before they would let me do what I wanted with my money. No amount of arguing, or explaining that I had studied finance for a number of years, made any difference. I could have been Chancellor of the Exchequor and I'd still have had to endure said interview. It was maddening and pointless - shouldn't one be allowed to sign a document or something, waving the bank's responsibility for one's own rash actions?

The outcome? I left without doing anything with being able to do anything with my money, leaving it in a low-interest current account until I had had this interview.

I fully appreciate the need for financial oversight, especially in these troubled times, but sometimes things are taken too far.

By Gordon Rayner, Chief Reporter Last Updated: 1:36AM BST 08 Oct 2008

With war raging across the globe in July 1944, ministers from all 44 Allied nations met at the imposing Mount Washington Hotel in Bretton Woods, New Hampshire, to thrash out a set of rules that would govern world finance once Hitler was defeated.

Knowing that greater international trade would help to prevent future wars, and determined to avoid another Great Depression, the delegates signed the Bretton Woods Agreements, creating the International Monetary Fund and the World Bank. It was a big vision, driven by grand historical figures: Winston Churchill, Franklin D Roosevelt and the British economist John Maynard Keynes.

But a system that was designed 64 years ago has, not surprisingly, proved ill equipped to deal with the fiendishly complex practices of 21st-century banking that led to the current worldwide crisis.

Neither the IMF, the World Bank nor any other institution has the power to police the global financial system in a way that might have prevented the excessive risk-taking which led to the sub-prime mortgage crisis and, in turn, the credit crunch.

A more recent creation, the G8 group of industrialised nations, looks hopelessly out of date without the emerging economic giants of Brazil, India and China among its ranks. And the "beggar-thy-neighbour" policies of guaranteeing savings that have sprung up in Germany, Greece and Ireland in recent days have shown that even in Europe, co-ordinated economic policy is a myth.

"The current system is in crisis and we have an environment where dog eats dog," said Bob McKee, of the economic consultancy Independent Strategy. "Electorates will expect more regulation, and politicians will push for it."

The new Business Secretary, Peter Mandelson, argued last week that new global solutions are needed because "the machinery of global economic governance barely exists", adding: "It is time for a Bretton Woods for this century."

Gordon Brown argued as long ago as January 2007 that global regulation was "urgently in need of modernisation and reform".

So, as the world's central bankers gather this week in Washington DC for an IMF-World Bank conference to discuss the crisis, the big question they face is whether it is time to establish a global economic "policeman" to ensure the crash of 2008 can never be repeated.

Top of the to-do list for any new or reformed body would be new rules to manage the level of risk that banks and financial institutions are allowed to take on.

Major economies already have regulatory bodies designed to keep financial institutions in check, such as the Financial Services Authority (FSA) in the UK and the Securities and Exchange Commission (SEC) in the US. But even if these bodies had done their job properly, opinions differ wildly between different countries over what constitutes an acceptable risk.

Take, for example, the Basle II Accord, a voluntary international agreement which might have seemed a crushing bore when it was published in 2004, but which just might have prevented the credit crunch if the world's major economies had realised it was actually a good idea.

In essence, Basle II, concocted by the Basle Committee on Banking Supervision, set up by 10 leading economic nations, was designed to make sure banks did not overstretch themselves by lending too much money in relation to the amount of capital they held.

If it had been implemented the moment it was written, Basle II might have prevented the collapse of Northern Rock – which had lent seven times the amount of money it held on deposit – and saved the likes of Lehman Brothers in America. Instead, motivated by national self-interest, not to mention greed, the world's major economies dithered, so that few, if any, had implemented the agreement by the start of 2008, with 95 countries only able to promise they would adhere to it by 2015.

We can only speculate whether a global policeman would have intervened in another seismic shift in economic policy: the abolition by the US president, Bill Clinton, in 1999 of the Glass-Steagall Act, which had, since 1933, separated retail banks from investment banks.

The Act had been passed during the Great Depression to prevent banks from speculating with depositors' money, and its repeal by Mr Clinton has been blamed by some commentators for contributing to the current financial crisis, which would have been limited to investment banks if Glass-Steagall had remained in place.

Too late, then, to remedy the missed opportunity of Basle II or to reinstate Glass-Steagall. But a new global regulatory arrangement might come just in time to address another issue troubling the world's financial watchdogs: mark-to-market accounting, about which we are likely to be hearing a great deal in coming weeks.

Mark to market is a system in which banks must declare the value of assets such as securities on a daily basis, forcing them to be transparent about their balance sheets. The assets must be valued in line with what they would fetch on the open market that day, and if their value has dropped, the banks must raise capital to make up the shortfall, even if they have no intention of selling the assets for another five or 10 years.

Many banks have argued that this is unfair, as those same assets will recover their value in the long term, and marking them down has, they claim, contributed to the current crisis of confidence.

Simon Ward, an economist at New Star Asset Management, said: "This kind of accounting is causing investors to see ghosts in banks' balance sheets which just don't exist. If we had suspended mark-to-market accounting a year ago, the current crisis may have been avoided."

Why has this become such a hot topic in recent days? Because banks in America have exerted such pressure on the SEC that rules on mark-to-market accounting may soon be relaxed, giving American companies an advantage over those in the UK, where the FSA has no intention of following suit.

As chaos reigns in the financial markets, the issue of regulatory reform is never far from the headlines. So what might a new architecture of global economic regulation look like?

In essence, any organisation with the power to police the global economy would have to include representatives of every major country – a United Nations of economic regulation. Robert Zoellick, president of the World Bank, identified the weakness of the current system this week when he said international organisations that excluded countries such as China, India, Brazil, Saudi Arabia, South Africa and Russia were outdated.

Gerard Lyons, a member of the International Council of the Bretton Woods Committee, a steering group for the IMF and World Bank, said: "We need to look at the current crisis and decide what banks have been doing well and what went wrong.

'The point we're at now is like the scene in Apollo 13 when one of the mission controllers says they're facing the worst disaster in Nasa's history, and his boss points out that it will turn out to be Nasa's finest hour if they get it right.

"We have an opportunity now to make changes in global banking that make sure we keep all the good bits and eradicate the bad. For example, there is nothing wrong with young people borrowing money against their expected future income if they have genuinely good prospects, but we need to prevent the sort of irresponsible lending to people with poor credit ratings that led to the sub-prime mortgage crisis.

"What we mustn't do is throw the baby out with the bathwater. The global banking system has helped increase living standards at a faster rate than at any point in history, and we are about to see the emergence of two-thirds of the world's population into the developed world."

Danny Gabay, a former Bank of England economist who now works for Fathom Consulting, suggested the answer might already be staring us in the face, in the form of the Bank for International Settlements (BIS), the umbrella organisation for the committee that came up with the sensible Basle II Accord.

"The BIS has been spot on throughout this," he said. "The problem is that it has no teeth. The IMF tends to couch its warnings about economic problems in very diplomatic language, but the BIS is more independent and much better placed to deal with this if it is given the power to do so."

The failures of modern global capitalism have been brutally exposed in recent months. Opinion is now hardening around the case for a new global architecture to enforce rules that ensure lessons are learnt and that the actions which have brought free markets to the brink of collapse are never repeated.

It remains to be seen whether the political leaders of 2008 are up to the task. If they are, the first foundations of that new world could be laid in Washington this week.

At the moment one day pretty much blends into another, but on one of the evening news programmes this week, another fat cat, fee-earner had the temerity to say, when questioned, that auditors had played no part in the financial mire that is the bane of every UK taxpayer. I have to admit, that I wanted to throw something at him, because I have been arguing for weeks that the auditors have failed in their duty to the shareholders and worst still, shall be one of the few ’industries’ that will make money out of this fiasco, through company administrations, receivership’s, consultancy fees and so on.

Lets look at the generally accepted definition of a Finance Audit:
The process of verifying a company’s financial information. Auditors are certified public accountants who are independent of the corporation. An auditor examines a company’s accounting books and records in order to determine whether the company is following appropriate account procedures. An auditor issues an opinion in a report that says whether the financial statements present fairly the company’s financial position and its operational results in accordance with Generally Accepted Accounting Principles (GAAP).

And here is a common definition of an Auditor
Auditor is the person appointed to conduct an examination of the records, to form an opinion about the authenticity and correctness of such records, by verifying the correctness and reliability of the recorded transactions from the evidences available, opinion and inference reachable based on his expertise.

Most, if not all, stock market listed companies in this country and, for that matter, around the world, use the services of one of the so called ‘Big Four’ accountancy firms. These big firms charge huge sums for their audits, often running into £millions, and the audit teams are lead by high ranking ‘fee earners’. In other words, as the businesses, banks and financial institutions they audited expanded, so have the fees earned by the auditors and yet, not one audit firm appears to have asked any questions about what is now being described as “questionable accounting” practices within the financial services and banking sectors.

For example, do we know of any audit firm that qualified a set of accounts within the banking sector because of the heavy reliance on a particular financial model, such as in the case of Northern Rock? Has an audit firm raised any prior concern over the way that ‘bundled’ mortgage debt was traded, sold and then re-sold, with each party taking a profit or commission, without really knowing the risks or true value of the asset.

You would think that after Enron and Worldcom, auditors would be even more cautious, especially given investors and business people alike, will have increasingly come to rely on the expertise and the independence of the auditors before they make financial investment decisions related to the company being audited. It is absolutely essential that the audits of company’s that rely on external investors for funding are wide-ranging, thorough and probing, a failure to do this and ask questions, is, in my impinion a dereliction of the auditors responsibility to the shareholders. If an audit is not indepependent, or in-depth, why on earth do so many companies pay so much money out every year for their audits?

I personally believe that, when the investigation begins, as it surely will, the part played by company auditors also needs investigating. Given they will be the only party to have profited in the ‘boom’ as well as profited out of the ‘bust’, yet they were also the only party, other that the regulatory authorities, that had a duty to ensure that they reported the facts, discovered questionable practices and reported their findings in an open, direct and a frank manner. I do not say that any of these accountancy firms are culpable, because I would have nothing to back this up with (other than logic of course), but I can say that, I believe they have failed, for the most part, in their duty to appropriately and competently assess the risks associated with some of the more questionable practices adopted by the banking and financial industries.

I also believe that shareholders that have lost money should consider individual or class actions against any audit firms that are left wanting in this current mess. For them to be preening themselves in front of the cameras, whilst rubbing their hands with glee, behind the scenes, is stomach churning. If there job was not to highlight risks, operating and reporting practices, asset values and profit claims, what on earth were they charging such massive audit fees for? The Audit Firms must not be allowed to extract themselves from any form of responsibility whilst the rest of us are left to pick up the tab and the pieces of what is left.

Article Source: Power to the People

Today, the UK part of the Icelandic bank IceSave announced by posting on it’s website that it was freezing all of its customer’s cash. No deposits or withdrawals were being permitted.

This, in retrospect is probably not much of a shock, but for me who wasn’t paying enough attention to the media around Iceland over the last 48hours the news is pretty scary.

I have the majority of my and my partner’s cash in a high interest IceSave account. Between the Icelandic government and the FSA there is an obligation to pay back up to £50k per person. The amount of money I have in the account is (luckily) less than this.

The first £16K approx per person of the claimable amount falls to the Icelandic government with the FSA making up the rest. My predicament is that we have about £30K in a joint account which means the Icelandic government should cover all of our money. However, there are stories that the government is unofficially bankrupt and the amount of debt the banks owe is many times greater than Iceland’s GDP.

Russia has supposedly lent Iceland $4Billion although this has not been confirmed, but will they use is to bail out the banks?

The situation at present is that I can’t get my money and I have no idea when, if at all, I will get it back. Pretty scary.

In Rich Dad, Poor Dad, one of the first books I read which started me on this journey, he talks about how when financial crisis hits, it is always the people who are not investors that get hit the hardest: the people with savings, with jobs and commercially bought investment deals. I am beginning to know what he was talking about.

From now on, I am going to pay more attention to the world news and not trust the banks at all. I’ll let you know what happens.

IN THE WAKE of the collapse of the Bank of Scotland, there are a whole series of questions that must be answered. Up until last Thursday, the Bank of Scotland was Scotland's second largest publicly quoted company. The consequences of the merger between Lloyds and the Halifax have repercussions that have left Scotland shell-shocked.

ISSUES WHICH MUST BE CLARIFIED

THE BANK OF SCOTLAND has had a proud history and tradition that stems back to 1695, but now, following the chaos in financial markets, has a future and identity that is in doubt.  Two previous episodes of "short-selling" - essentially, making money by short-term profiteering by deliberately forcing down a company's share price - had brought stocks to their knees. Essentially, short-selling smashed the bank's rights issue, yet why wasn't it tackled? A rights issue is made when banks are falling short in terms of liquidity. Overriding that with a continued spate of short-selling is a risk that has resulted in financial suicide. HBOS also had high exposure to mortgage markets and, amid widespread fears of falling house prices, there was loss in confidence.

How did Scotland lose its oldest banking institution and why was more not done to prevent it happening?

Who can answer: The Government, FSA and the Financial Markets. 

Fears about short-selling have been around for some time. Recently, Gordon Brown said he had concerns about "irresponsible behaviour" for a while, but it was not only until late last Thursday evening that the Financial Services Authority (FSA) finally acted in outlawing such practice in the UK - too little, too late for HBOS.

Why was action not taken earlier to prevent short-selling hijacking a sound financial institution?

Who can answer: The FSA, the Treasury and the Bank of England.

Last Wednesday morning, the FSA said HBOS was still "a well capitalised bank that continues to fund its business in a satisfactory way". But, in a clear contradictory statement, the Chancellor, Rt Hon Alastair Darling MP, said on Thursday that without the merger, the outlook was "very bleak indeed ... We were on to their (HBOS's) problem for several weeks. It didn't just suddenly happen".

Questions should now be asked as to whether the FSA should undergo a major overhaul to stop similar practices arising in the future.

Why has the FSA been so ineffectual?

Who can answer: The Treasury, FSA and HBOS.

The future shape and structure of the newly formed megabank is unclear but there are ‘fears' it may be called Lloyds-Halifax, losing the Bank of Scotland name altogether. There is some speculation that the name m ay stay over Scottish branches, with the Halifax name staying in northern England, and Lloyds elsewhere. Keeping the HQ in Edinburgh would maintain Scotland's reputation for fiscal rectitude - and the issue of significant levels of employment.

Why can't the Bank of Scotland be protected as a separate legal entity with a meaningful HQ in Edinburgh?

Who can answer: Lloyds TSB and HBOS.

The Bank of Scotland name above a branch, on cheque books and banknotes and a Scottish management mean little if real decisions are to be made in London. If Bank of Scotland is merely to be reduced to a brass plaque, when all key moves are made in London, Scotland's whole banking history and tradition will be shaken even more. The loss, as it is, of a FTSE 100 company is a grievous blow. It is not just the loss of the bank's functions within treasury and management that Scotland would lose, but many of the ancillary services that supported these operations - the flotilla of little boats that service the grand battleships.

The new megabank looks set to see the loss, too, of the "TSB" bit of Lloyds TSB, another loss for Scotland as the TSB (once the Trustee Savings Bank) began in Scotland.

Will the Bank of Scotland brand and banknotes carry any meaning without top-level decision-making?

Who can answer: Lloyds TSB and HBOS.

There has been criticism of a real absence of leadership from Hornby and Stevenson. Even after the rights issue debacle, they kept such a low profile that they were almost subterranean. Why were they not more robust in supporting the bank? Will their inaction force thousands of customers into the arms of great rival Royal Bank of Scotland?

Should HBOS Chief Executive Andy Hornby and Chairman Sir Dennis Stevenson have had a higher profile in trying to prevent lack of confidence among investors and depositors?

Who can answer: Hornby and Stevenson.

Under Peter Cummings, HBOS Corporate is a respected business in its own right with Scottish knowledge and expertise. If corporate business banking moves to London, will businesses in Scotland be subjected to more distant and slower decision-making?

Can the new company assure Scottish business customers that its service will be as professional and timely as it has been under HBOS Corporate?

Who can answer: Lloyds TSB Chief Executive Eric Daniels, Hornby, et al.

Major Job losses in the banks and the potential for many more in associated businesses present huge challenges. What is being done to boost business confidence and to mitigate against the impact of such major losses?

What is the government doing to protect and support the Scottish economy from the fall-out?

Who can answer: Westminster Government, First Minister in Scotland Alex Salmond, CBI and other business groups.

People are confused by the huge fall-out and want reassurance about their money - and whether their local branch will remain open.

What is being done to reassure retail customers and mortgage-holders that their investments are safe?

Who can answer: Daniels and Hornby.

© Mark Dowe 2008: all rights protected

- Copyright is the currency by which information may be exchanged in certain instances. If you are unsure of your rights relating to digital communications in partial or complete form you should seek independent legal advice.

The writer is a management accountant by profession having graduated in accountancy and holding an M.Sc in Geography

mark.dowe@googlemail.com

Related:

• Observer, Sunday September 21 2008: Brian Morton, "We haven't just lost a bank, we've lost a part of our identity"

Mr. Morton writes:

... The news that Scotland's oldest banking institution, the Bank of Scotland, and its partner Halifax, have been taken over by Lloyds is black indeed. Even though the hoof beats have been thudding closer for some time, it's rare that a takeover in the financial sector should provoke such a strong, emotional public reaction. Given how rarely any of us set foot inside a bank any more, even to organise a mortgage, why should the demise of HBOS resonate so powerfully?

Writing in response, alias "BritishAirman":

The loss of Bank of Scotland is a serious financial blow to Scotland but could have wider, as yet, unidentified consequences. With the Bank of Scotland being Scotland's second largest publicly quoted company, the seismic shock waves will only become clear once the merger between Lloyds and Halifax is finalised. Clearly, there will be political ramifications as the Scottish Government attempts to secure as many Scottish jobs as they are able.

What concerns me, though, is the colossal strength of market that Lloyds-Halifax will acquire as a result of this merger. On current information, it would appear that the new institution will hold 40% of all UK current accounts, a position that will likely create a playing field of anti-competitiveness with less flexibility in personal banking. Those days seem over as mergers, in general, seem an inevitable eventuality in attempt to correct global financial instability.

The boys were at it early today with pre-game team pictures and then the game.  Josiah was so excited all week!  His highlight real included stealing the ball, running all the way down field to have one of his team mates steal it at the last minute to kick it in the goal!

Josiah is such a team player that he still gave two thumbs up after it happened!  I am so proud of him.  He is really getting pretty good.

WHILST it is easy to cast bankers and hedge funds as the villains in the credit crisis, the fundamental weakness within the financial sector is that bank lending has seized up. But, in the view of some financial commentators more regulation will harm, not help, economic recovery.

BLAME?

In the previous journal posted to this site it was suggested that financial mathematics associated with derivative trading was similar, in essence, to scientific calculations found within the physical world.

Yet, Sir Isaac Newton was once asked his opinion on the financial mania known to history as the South Sea Bubble. The great and alluring scientist, famous for his gravitational experiments, responded that he could calculate the motions of celestial bodies, but not the madness of people.

Observers of this week's seismic shocks within the banking system will be tempted, no-doubt, to similar incredulity. The collapse of the Lehman Brothers, the private sector rescues of HBOS and Merrill Lynch, and the AIG bailout of $85 billion in public funds have a pattern. Vulnerable banks have seen their share prices collapse owing to the fears of institutional solvency. Regulators in the US having previously investigated "short selling" was taken up in Britain as being part of the problem. Such practice, meantime, anyway, has been blocked that would otherwise have created colossal wealth for some at the expense of weak and recessionary conditions. Gordon Brown speaks urgently of a need in cleaning up the financial system.

Financial crisis are not natural catastrophes. The obvious question is the right one: "Who is to blame?" The obvious answer is the bankers who have brought the Western economies to such a state - especially those economies characterised by low savings rates and high debt levels, the US and the UK.

There is some truth in that assertion, but it is not the whole story. The crisis is not the creation of a culture of so called ‘greedy bankers' or manipulative speculators: it is the result of too much debt, after governments and central banks failed to constrain the credit expansion of the early years of this decade. Bankers then irresponsibly and wilfully exploited the opportunities afforded by an easy credit regime. Wall Street fuelled the demand for high-yield investment products in an era of low interest rates - hence the phenomenal attraction of the sub-prime mortgage market.

Bankers operate by incentives. The real weakness in the banking system lies with those responsible for bankers' indemnity and compensation: the shareholders, who own the banks, and the boards, who manage them. Perverse incentives promised vast rewards for those who took risks in the hope of reaping short-term profits. Those same incentives did not penalise failure. Thankfully, now, bonuses will not crystallise until results have been known, a policy that was pushed and promoted by this site to various Members of Parliament.

Hedge funds are also a focus for criticism, owing to their short-selling of bank stocks (i.e. selling stocks they do not own, in the hope that the price will fall and thereby allow them to repurchase the shares, later, at a profit). Again, there is some justice in this, but it does not provide the whole picture. Short-selling has been a useful discipline within financial markets. A falling share price may signal that a company management is under achieving or has a poor business model. There are good reasons as to why the share prices of investment banks are being marked down: many are simply insolvent. Given the exceptional economic circumstances, short-sellers were exploiting weaknesses in the financial system with consequences that went way beyond their commercial calculation of risk and return. No banker could ever dare deny this practice. Subsequently, the Financial Services Authority (FSA) has introduced a ban on short sales of bank stocks.

But, is rushing to blame the bankers and speculators misplaced? Does blaming in this way not simply divert attention from the underlying problem? That seriousness is underpinned by the contention that, given the current economic circumstances, banks will not lend to each other: the inter-bank lending market has seized up, as banks in dire need of liquidity are facing the prospect of punitive rates. With regulation being an issue for the authorities, the ratings agencies, whose job it is to assess credit worthiness, are compounding the difficulties of those banks that need to borrow in order to survive. Crucially, the Western economy cannot recover without a resumption of inter-bank lending. That premise is the essence by which banks exist and operate. For that to happen, an important task for policymakers is to unfreeze the market and not necessarily to pour heavy bureaucratic rules and regulations upon a system that has stemmed directly from the US sub-prime fiasco.

FLATTENED WORLD

In the past weeks financial markets calamity, fear has chased capital into every corner of the globe. The globalisation of financial capitalism raises many difficult and serious questions.

Within the space of five breathless days, global capitalism teetered on the brink of a financial chasm, tipped over into systemic failure - and then, on the final day of trading last week, bounced back with share prices recovering some of their heavy losses.

The US Government has answered the banking panic with a pledge to take all the dangerous debts out of the American banking system. Potentially, it could become the biggest bail-out in the history of modern finance. By ring-fencing financial risk a degree of confidence has been restored because much of the fear pegged to financial markets has been mitigated. In a week that had seen the demise of HBOS, AIG and Lehman Brothers, more robust US direct intervention led to a £100 billion-plus rally on the London Stock Exchange by the end of the working work. Last Friday, the FTSE 100 index was just a mere 2% lower than it had been at the beginning of the week.

But, the shocks experienced by financial markets have profoundly changed the world. The chaos has claimed tens of thousands, potentially hundreds of thousands of victims: the employees, for example, of Lehman Brothers, the 158-year old investment bank that filed for bankruptcy under Chapter 11; the staff at AIG, which is now owned by the US Government, pending a piecemeal sell-off and the 70,000 people across the UK who are employed by HBOS. The question as to whether the merger between Lloyds TSB and HBOS (to be renamed Lloyds-Halifax) creates a field of anti-competiveness, given its colossal 40% share of all UK current accounts once the merger is complete, is an issue that could create more rigid and less flexible banking in the future.

The reputations of Wall Street and in London as financial centres of excellence have been fundamentally damaged. The collapse of the banks has revealed the depth of the public's distrust and, at times, revulsion, of bankers, many of whom do not understand their trade. This will, no-doubt, change the tone of politics and government policy, as it relates to the treatment of banks and bankers. The days are over in which politicians treat the Masters of the Universe with a certain awe and the world's capital court financial institutions with the promise of as little regulation as possible. Britain has rather liked to boost about its light-touch, risk-based regulatory system. Not any longer. The public are unlikely to accept a world in which bankers are left to their own devices and the people are left with the consequences, intended or otherwise. Expect further scrutiny and exposure. Where responsibilities were entrusted comes obligations and liability. The law should demand it.

More pertinent, is that a chapter of ungoverned globalisation has closed. Most people have become accustomed to the notion that the free movement of goods is levelling the commercial playing field between different parts of the world. This is certainly visible through the trading of mobile phones, for example. Motorola, a US company, has factories in Tianjin, China, where the phones eventually end up on sale throughout various locations in the UK. Globalisation, though, has involved not only the trading of products made by people around the world but also the much more discreet, but ultimately more powerful, flow of capital across the globe. New York Times columnist, Thomas L. Friedman, argued that cheap telecommunications, sophisticated software and the removal of trade barriers have brought India, China and other countries into what is now one global supply chain for everything from cars to shoes to new kinds of medicine. Friedman considers the world, now, as being flat: anything that can move will move. As we have discovered to our own peril this also includes money. Arguably, the world has very nearly been flattened.

IN MANY WAYS, the crisis was triggered by financial forces far from Wall Street. Asian banks, for instance, began to withdraw support from Fannie Mae and Freddie Mac, the two institutions that underpin the US housing market. The US Government's hands, essentially, were forced. Since then the international fall-out has escalated. Just by taking last week in isolation and alone, world markets gyrated: the Kuwait Stock Exchange fell to its lowest for nine months and two leading Russian stock markets were suspended. When panic struck, the fear chased capital to every corner of the globe.

That is why the efforts to resolve the credit crunch have taken place not just in New York and London but in Beijing. China's sovereign wealth fund, for example, China Investment Corporation, currently own 9% of Morgan Stanley and has been in talks to potentially increase that stake.

The contradiction in responding to this global problem has been singularly American. The US Government, headed by a still Republican President, has abandoned conservative economic doctrine by announcing a willingness to nationalise the banks bad debts. Putting economic hazard before moral hazard was rightly judged as the US has sought in putting financial pragmatism before theoretical principle. But, such a New Deal has been done in the absence of any alternative. It is an act of unilateral self-defence in the face of a global problem.

The US Treasury - headed by Henry Paulson - hopes to nationalise the global risks associated with America's sub-prime mortgages by setting-up a toxic relief fund to buy up the mortgage assets that are poisoning banks' balance sheets and sowing the widespread distrust that has prevented banks lending to each other.

Although the assets involved and the pricing of them will be even more complicated, the nearest equivalent financial model from the past in drawing lessons is the Resolution Trust Corporation. This operated from 1989 to 1995 in buying-up the toxic paper of almost 800 banks which failed in the US Savings and Loans crisis.

TOXIC RELIEF

A TOXIC RELIEF FUND would have the immediate effect of restoring liquidity, by removing the toxic assets that are in abundance within the credit markets. By holding them long enough, the US Government could eventually recover their true value, recouping some of the billions of taxpayers' money that is currently being used in correcting the markets. But, there are many hurdles to overcome before such a relief fund could be put into place. It did take more than 6-months to get legislation through in setting-up the Restoration Trust Corporation through Congress.

Mr. Paulson's plan does appear to have cross-party support, but an array of questions remain. For example, which assets will be considered toxic? How should assets be valued? When the value of an asset is low, there remains a greater risk that the rescue plan will fail; the higher the value, the higher cost and burden to the taxpayer.

The next chapter of globalisation will require addressing the imbalance of publicly funded bail-outs. Arguably, given the arguments, this could well be the last financial crisis that the US can seek to resolve alone. It attempts to do so, of course, because virtually all commodities around the world, including oil, are pegged to the value of the dollar. The world has come a long way since the night of 1907 when JP Morgan was able to call bankers together in New York in forcing a bail-out agreement over the failing Knickerbocker Trust.

GLOBALISATION & CAPITALISM

Most outward and proactive organisations have championed globalisation. Free trade has raised the living standards of millions of people far more swiftly and effectively than any international aid programme could ever have hoped for. Globalisation has unleashed the platform by which innovation and economic growth has sprung. But, it is right, too, that people challenge free-market principles given the calamity within the financial markets over past days. No-doubt, we will have to become more savoir-faire about the new and emerging webs of dependencies and international capital flows. Western capitalism certainly has a job to do in restoring public confidence which came close to obliteration following the collapse of major financial institutions. Trust is an important factor.

© Mark Dowe 2008: all rights protected

- Copyright is the currency by which information may be exchanged in certain instances. If you are unsure of your rights relating to digital communications in partial or complete form you should seek independent legal advice.

The writer is a management accountant by profession having graduated in accountancy and holding an M.Sc in Geography

mark.dowe@googlemail.com

Reference & attribution:

• Consideration for this article is attributed to the Editorial of the Times Newspaper, dated Friday September 19, 2008.

• "The World is Flattened", Times Newspaper, dated Saturday September 20, 2008.

... In this week's financial crisis, fear has chased capital into every corner of the world. The globalisation of capital raises many difficult questions

Under normal circumstances I wouldn't dream of writing about high finance. But these are not normal circumstances. In the past few days, it has become glaringly apparent that the Western economy is not, as I had always assumed, run by the finest minds of our generation; but by a bunch of testosterone-crazed delinquents with the strategic nous of my four-year-old (actually, that's an insult to my son - he at least knows the difference between play money and the real thing). As a result, I feel somewhat less inhibited than usual. After all, if these jokers can destroy the money markets, where's the harm in me pitching in?

Let's be honest: is anyone really that surprised at the scale of the destruction? None of this has felt right for years, and yet it's not just the FSA that has turned a blind eye. We all have.

From my own point of view, I have felt a warm glow as all around me my run-down neighbourhood houses were bought up, gutted, and turned into palaces. I have marvelled at the proliferation of Ferraris on streets where previously burnt-out Nissans were the norm. I have watched H&M yield to Hermès at the school gate. I have only vaguely wondered whether it is wise for a person on a childminder's salary to be driving around in £20,000-worth of hire-purchase Lexus.

Whatever else the guys at the sharp end may be guilty of (greed, ruthlessness, arrogance, deliberate malice), the rest of us are guilty of ignorance. I, for one, never really questioned this prosperity. I certainly took little interest in the activities of the City: all too complicated, all too technical. I never knew (still don't) the exact nature of a derivative. I imagine it as a squat, querulous creature with long ears and a short attention span; but for all I know it could be more like a small cat, all stealthy and sly. What does it eat? How often do you need to walk it? Can it be house-trained? The answers to these questions, and more, I never pursued. What a fool I was.

read more...

Deregulation of the Stock Markets made this 'practise' legal. Something else we can thank Maggie for. Mmm?

HBOS was hit twice by this once earlier in the year when the PC Plod from the FSA agreed that this had happened but couldn't actually name the culprits - the gleaming Maserati's and the records traders keep might have given a clue; and most recently on Wednesday morning when these corporate low life hammered mercilessly into the ailing bank.

Now don't get me wrong. HBOS was exposed. Its way of funding itself had become too reliant on investors/institutions hit hardest by the credit crunch. Its business model depended on these investors keeping them afloat BUT what it did not deserve and should not have experienced is the impact of cruel, greedy short selling.

40,000 ex-colleagues of mine will be impacted by this. Rather than prop up an entire banking system, the authorities could have used the same money to fund those banks impacted most by the credit crunch as they switched their funding models. Instead, we will loose a great High Street name, a lot of jobs and the careers and homestylesthat went with those jobs and probably a heap of tax payers money

 Short selling has now been suspended. Still legal but you can no longer short sell on banking stock. Watch out other sectors, the greedy boys are still at their desks and have you seen the price of a new Maserati!?

So to the FSA. Well done for moving on this. The other banks can rest a bit easier and concentrate on securing their mid and long term positions. I'd really like to know whether this was your move or Gordon's - I suspect the latter. So fare's fare - well done Gordon I sense your hand was behind the LLoyds deal and is behind this too. Sort out those robbers in the Power Companies and you could turn your fate around!

Finally though dear FSA...as you wave through the Lloyds deal have the decency to doff your cap to the corpse of the bank that you watched fall.

Tim Ocsko

Mortgage Lenders – The reason why they allowed these sub-prime mortgages is because of the increasing housing prices, it didn’t matter if they paid or not their repayments since they would get their money from the house from reselling the house if it went to that stage. This created a situation where they were happy to lend to anyone who used their house as capital and giving mortgages to people who could barely afford them.

Central banks – The low interest rates for so long promoted a housing boom with over the top borrowing and lots of credit and once the bubble popped they couldn’t do anything.  The bigger the slide in the housing market the bigger the problems in the financial markets since they are completely interlinked for now.  A bunch of central banks have just authorised an extra $180 billion to be made available for banks to borrow which clearly gives  them a bit more energy and that’s why stock markets slightly picked on Thursday but you need to give them time to process what has been happening and what it means but I do believe that they will be more positive on Friday.

Banks – Here you have banks deciding they could engineer assets and make money out of thin air by having the cake (high returns) and eating it too (low risk). They try to mix the tranches of sub-prime mortgagees with some with some low value real capital and then overall you have something that looks AAA rated and you sell it on. Now you have companies and banks that have this on their books but they don’t worry about it because of the rating. My favourite example for these kind of deals is this one:

"As an example I'll present you a deal which one client wanted my ex bank to agree to.
Client would plunk down $1 million and purchase $10mm worth of a supersenior tranche of a CDO. 
He then wanted the bank to accept the CDO as collateral @ 50% and take out another loan for $5mm with which he would buy a lesser quality tranche.
He then wanted the bank to accept THAT @ 30% collateral value and buy a capital guaranteed note on the equity tranche for $1.5mm.
The overall credit line was to be denominated in Japanese yen @ appx 3% and he was looking to make an average of 8-13% on the investment, leaving him with 5-10% net profit... on $16.5mm. Remember, he was starting w/ $1mm!”

When you have these kind of deals with these synthetic products, you create a situation just waiting for a spike somewhere in the system like the fall in house prices to get this snowball rolling down hill and getting bigger and now we just have to wait until it hits a plateau. In the UK I think we have hit it in terms of institutions failing (HBOS, which was the biggest concern got acquired, it probably could have survived it anyway but it’s good not to have to worry about it), I just hope it doesn’t roll on more still (Bradford & Bingley got downgraded). The US seems like could have some more room especially with WaMu which looks like a child that no one wants at the moment. News says that Morgan Stanley could get acquired by Wachovia, that will depend if they can get some cash from the Chinese banks or if the stock market will continue to view it negatively until Friday, if it does I think it will be the end of Morgan as well.

Rating Agencies – They severely misjudged the risk in these CDOs, which gave everyone a sense of confidence in what they were buying. Most companies don’t have the expertise to truly evaluate these products and their models and they put a great deal of trust in Standard & Poor and Moody’s which is suppose to have knowledge and confidence to give a rating they can use or what is the use of them.  The people who engineer these products were also given confidence by their rating since their products live or die on the agencies’ assessment.   They will never be trusted this much again since their opinion was sacrosanct and if risk managers inside companies contradicted their opinion they were asked not to be so “uncommercial”.

Regulators – The FSA (UK) and SEC (US) seemed like they didn’t understand these products properly and even though banks did put out a lot of variations, surely they must have understood that the models the financial engineers use are based on average historical prices and therefore would not be able to stand a real abnormal spike as a stress test.  I remember a while ago someone from the FSA saying that they didn’t have the expertise and capacity to be able to monitor the whole financial sector effectively which I found surprising since if they can’t understand some of the products that are put out, who can. Now they have to find a trade off between more regulation and so less liquidity and also between a bigger capital base for banks and less growth for the economy. 

Soros seems to have a more a more negative view then mine since I think we have pretty much escaped UK and US troubles in the financial sector in terms of other big institutions failing (only because governments were able to back their liabilities though) but unfortunately the effects on the real economy are going to start to be felt now in a way that we had escaped.  The credit crunch’s affect on the UK economy will last for a few years and it is going to intensify currently and there seems to be little doubt that at minimum we are going to face a technical recession which will probably end by the 2^nd or 3^rd quarter next year.  

The good story is that inflation will very likely start to go down, 4.7% in August is as high as it’s going to get.  The Bank of England announced that they would not reduce the interest rate in a 7-1 vote, that’s all down to the inflationary expectations that would build on top the current ones.  The recent news of an increase of 39000 new unemployed will do little to elevate their fears when the average expectation was of a 25000 increase and BOE as demonstrated by their recent announcement can do very little right now. You have to keep in mind that this turmoil has got rid of 113000 people from the financial sector worldwide so it has been a mess that keeps on giving for the sector. There are some expectations by some, not me, that BOE should reduce the interest rate when they see the recession, if we have some decimal points of negative growth for a while it might not be such a bad thing. That is of curse reliant on the financial sector not collapsing one after another but if they survive, it would be better if BOE kept the interest rates where they are and not stoke stagflation, then in February or March they will have more liberty.

For Barclays it hasn’t been a bad day they managed to pick the US arm of Lehman for £140 million cash and their headquarters and 2 data centres for £800 and that means that will have acquired Lehman’s trading platform which is worth over £40 billion but has liabilities of over £38 billion. That gives them a foot in the US

AIG faced some great news too, they were backed by the treasury with $85 billion in credit in what is a real surprise to everyone in the market since they let Lehman collapse, there was a feeling that an insurer had a lot less chance of making the save list. I and a lot of other people thought that unwinding of Lehman’s assets would cause a lot more problems then the financial arm of AIG. This has still produced a very weird situation where Republicans which stand for “as little government interference as possible” since the “market efficiency removes its own problems” having to effectively nationalise another company. AIG now will be broken off in different parts and sold as soon a possible since the government is not even set up to run an insurer. 

The statement reads: "Since the beginning of the current extreme difficulties in the financial markets, the Financial Services Authority has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans. We are satisfied that HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way."

HBOS's share price is currently down by over 40% this morning.

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]]> http://onlinemortgagesuk.wordpress.com/?p=1661 Tue, 09 Sep 2008 08:33:49 +0000 onlinemortgagesuk http://onlinemortgagesuk.it.wordpress.com/2008/09/09/fsa-issues-warning-on-leicestershire-adviser/ The FSA has issued an alert to consumers not to take mortgage or financial advice from Swati Patel from Leicestershire firm Mortgage Deals 4 U Ltd. Ms Patel is currently under investigation by the Leicestershire police.

In a statement, the FSA says: "We strongly advise customers not to take mortgage or financial advice from Swati Patel or to give her your personal and financial details."

Customers who took out a mortgage, remortgage, or a personal loan through Swati Patel, or are in the process of doing so, are strongly advised to contact Simon Boden at Leicestershire Police on 0116 222 2222 ext 5194.

They may also contact either Chris Walmsley or Arzoo Azizi at the Financial Services Authority on 0207 066 5894 or 020 7066 3512, or via email to chris.walmsley@fsa.gov.uk or arzoo.azizi@fsa.gov.uk

Worried clients can also call the FSA's Consumer Helpline on 0845 606 1234 (call rates may vary).

The FSA found various failings which exposed customers to the risk of being recommended mortgages which were unsuitable or they could not afford.

It found between 31 October 2004 and 11 January 2008 that Mr Habib failed to assess, or record that he had assessed, his customers’ ability to pay the mortgage he recommended. He also could not provide proof that self-certification mortgages he recommended were appropriate for the customer.

Finally, he recommended lending into retirement without assessing the customer’s ability to pay after retirement and did not record why he had made that recommendation.

Jonathan Phelan, FSA head of retail enforcement, says: “Customers need to be confident that when they seek mortgage advice they can trust the recommendations made to them. We will continue to take disciplinary action against mortgage brokers who cannot demonstrate that the products they recommend are affordable.

"Where we have concerns about the quality of the mortgage advice given, we will continue to require mortgage brokers to undertake reviews of past business, often at considerable cost to them, to identify and remedy any unsuitable advice.”

The FSA censured Mr Habib as he was unable to pay the proposed financial penalty of £22,500.

As part of the disciplinary action, Mr Habib must also have an independent compliance consultant carry out a past review of his business to assess whether there has been any customer detriment and provide redress where appropriate. It will also withdraw all of his permissions, which will result in him no longer being able to conduct any regulated mortgage business.

The mortgage broker’s failings were found during a series of visits by the FSA’s Small Firms and Contact Division which focused in particular on self-certification mortgages and affordability of mortgage advice.

So how’s an HSA different? First, there’s no use-it-or-lose it rule—you always keep your unspent funds. Secondly, you don’t have to go through your employer to get an HSA, but you can’t have an FSA if your employer doesn’t offer it. Thirdly, you can take the account with you when you change jobs. And lastly, money in your HSA earns interest.

FSAs are great if you know EXACTLY what you’ll spend each year in medical expenses, but they’ve definitely been trumped by the younger, savvier HSAs. Such is life.