ANOTHER £100BN BAIL-OUT FOR ‘INSOLVENT’ BANKS


The emergency bail-out will total more than £100 billion

GORDON Brown will announce a further emergency bank bail-out totalling more than £100billion next week, it emerged last night.

The desperate measure, which will raise the taxpayer’s liability to more than £250billion, came as a report warned that Britain’s banks are technically insolvent.

The report, from analysts at Royal Bank of Scotland, said the credit crunch showed little signs of easing. In an indication of the extent of the problem, the report was titled Living on a Prayer.

Banks had so little cap­ital to lend, they were effectively insolvent, it said. It was a situation “not unusual” in an economic downturn, but showed little sign of abating in the coming months.

The Treasury and Downing Street refused to discuss the bail-out plan yesterday.

But details leaked out after the Prime Minister met Bank of England governor Mervyn King and Financial Services Authority chairman Lord Turner at Number 10.

Treasury sources indicated that an extra £108billion of public money will be used to guarantee loans and mortgages. Officials will be hammering out details over the weekend.

Read moreANOTHER £100BN BAIL-OUT FOR ‘INSOLVENT’ BANKS

£100bn bid to end home loan misery: Darling to guarantee new mortgages


Alistair Darling is expected to back a plan to effectively underwrite the majority of new mortgages in the UK

ALISTAIR Darling is set to back a £100bn gamble with taxpayers’ cash in a desperate bid to kick-start the struggling mortgage market. The Chancellor’s plan involves effectively underwriting the majority of new mortgages in the UK to encourage big investors to give badly needed money to lending banks.

The proposed scheme means the UK Government would guarantee mortgage bonds, where banks parcel up individual home loans and sell them to investment firms. When the system works properly, banks have a source of money to loan to customers and investors get a return.

Related articles:
Darling closes in on plan to kick-start bank lending (Times)
Downturn escalates on both sides of the Atlantic (Telegraph)

But with many investors currently reluctant to risk their money on mortgages, Darling is preparing to guarantee the value of mortgage bonds to get the cash flowing again.

The total value of new mortgages involved has been estimated as up to £100bn, leading to claims last night that the scheme poses too many risks to taxpayers while offering too few rewards. And the new measures, coming on top of a £500bn scheme to guarantee banks’ borrowing and the £12bn cut in VAT announced in October, will raise further fears over the extent of the Government’s spending in the face of the credit crunch.

Read more£100bn bid to end home loan misery: Darling to guarantee new mortgages

The Great Credit-Crunch Hoax of 2008

Remember the credit crunch? Of course, you do. We’d never seen anything like it, or so the highest financial authorities and their lapdogs in the news media told us – not in a cool, calm, and collected way, either, but in a breathless delivery that suggested imminent economic doom unless the government immediately undertook to “do something.” Which it did, of course, on a scale never before witnessed in U.S. history.

So, looking back, as people are prone to do at this time of year, we can clearly see the telltale signs of the financial disaster that struck the financial markets last autumn: the terrible credit crunch, the “frozen” credit that portended a complete economic “meltdown” unless the government took drastic measures to head it off. (The government’s spokespersons and the media’s talking heads never got straight whether the thing was very cold or very hot, as they reached for horrifying metaphors in all directions at once.)

But, wait, something is terribly wrong in the statistical record! The devastating credit crunch, the greatest threat to this country since the Russians exploded an H-bomb, the most menacing economic event since the stock-market crash of 1929, the . . . (sputter) . . . (sputter) . . . (words fail me in the face of such terrors as it evoked in the minds of government ministers and financial titans of all stripes) . . . . Well, I am rather embarrassed, on behalf of all these giants of the ruling elite, to inform you that in retrospect the Monster from Lack-of-Liquidity Lagoon doesn’t really show up as such in the most relevant statistical series.

Probably the most important measure of credit-market conditions is the amount of commercial-bank credit outstanding. These figures show that although the middle part of 2008 does stand out in the long view, it does so not by virtue of credit’s frightening contraction, but only by virtue of its hitting a six-month plateau from April through September.


Click here or on the graph to enlarge

At no time during that interval, however, did the amount of commercial-bank credit outstanding fall below the amount outstanding at the beginning of the year. In short, credit was actually ample, indeed, at an all-time high; it simply stopped growing as usual for six months, stuck at about $9.4 trillion, while one Wall Street wizard after another told NPR that “no money is moving, the credit market is completely shut down” or some such cock-and-bull story.

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UK’s refinancing timebomb

CORPORATE BRITAIN is facing a refinancing timebomb this year as more than £50 billion of bank debt expires during the biggest credit crunch in global history.

The soaring cost of capital and the paucity of available debt financing will squeeze even blue-chip companies which need to renew or restructure existing loan facilities.

According to the ratings agency Standard & Poor’s, a £140 billion debt mountain needs to be refinanced in the UK between now and 2011. Meanwhile, a cumulative total of €1.6 trillion (£1.5 trillion) of debt rated by S&P will mature across Europe between now and then.

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Once Booming Dubai Goes Bust

CBS Evening News: Following Wave Of Speculation, Real Estate Collapses In Middle East’s Capital Of The Ultra-Rich


Downturn In Dubai: The worldwide economic crisis has even struck the once-booming oil city of Dubai. As Sheila MacVicar reports, developers and investors are now facing a financial standstill due to mass overexpansion.


The Palm Jumeirah, Dubai, the world’s biggest artificial island. Home prices there are down 40 percent in the last year.
Photo: ThePalmJumeirah.

(CBS) Over the years, booming oil prices helped turn Dubai into a land of opportunity and playground for the ultra rich.

But that was then and this is now. And as CBS News correspondent Sheila MacVicar reports, even Dubai is feeling the pinch of the worldwide economic crisis.

Related articles:
Dubai dream turns sour (The Straits Times)
Owner of Dubai landmarks eyes float (The Telegraph)
Dubai Bonds Signal Economic “Depression,” ING Says (Bloomberg)

The gulf city state’s property prices went up as fast and as high as the towering buildings. But reality has suddenly intruded.

One investor said it was as if someone had thrown a switch, as the global credit crunch slammed a city that was, in effect, the world’s biggest construction site

It took just 20 years for Dubai to go from a desert outpost with a handful of office towers to a world metropolis, where one fifth of the world’s cranes operate, and property became a very hot commodity, with some people playing real estate the way others play poker.

Read moreOnce Booming Dubai Goes Bust

British banks may face second credit crunch in the New Year

Rising unemployment may prompt new capital raisings

The worsening economic slowdown is increasing fears that Britain’s banks will have to raise still more capital next year in a market starved of investors.

Investment bankers are preparing for a second round of capital raising by UK lenders on top of the £65bn already declared. Having rebuilt their balance sheets after toxic debt writedowns, the banks face an increasingly dire economic outlook that threatens to take ordinary loan impairments from individuals and businesses to levels not seen since the early 1990s.

Under those worst-case conditions, impairment charges at the domestic banks – Barclays, Royal Bank of Scotland and the combined Lloyds Banking Group – could hit £60bn next year, according to Credit Suisse analysts.

“There could be a second credit crunch for banks, with a whole new round of writedowns late in 2009 as the economy filters back to banks,” a senior investment banker said. “They have so far only provisioned for the credit crunch – so they will need to undertake a whole new round of capital raising.”

A trading update earlier this year from HBOS, which will be bought by Lloyds next month, made grim reading for the sector. Impairments from commercial and residential property shot up, and the bank warned of more bad news to come as unemployment, the biggest driver of bad debts, continues to rise.

Read moreBritish banks may face second credit crunch in the New Year

Families turning to insurance fraud to beat credit crunch

Hard-up families are increasingly turning to insurance fraud to help see them through the credit crunch.

Insurers have seen an 80 per cent increase since last year in the number of bogus household and vehicle claims, many of which are being made by middle-class families struggling to pay their bills.

Typical scams include householders hiding their valuables and staging a burglary in an attempt to claim thousands of pounds in cash, or dropping their old television down the stairs so they can claim for a new flatscreen model.

In 2007 the insurance industry detected 91,000 frauds, which is set to rise to more than 160,000, in 2008.

Fraud costs the insurance industry an estimated £1.6 billion every year, adding £40 to the average annual household premium.

Read moreFamilies turning to insurance fraud to beat credit crunch

Hyperinflation and then The Second Great Depression

A future out of control, bankrupt financial institutions trying to hold on, limitation on credit severely limits ability of the economy to start up again, debt totally embraces our lives, handouts a state secret, soon cash infusions wont work for banks anymore, banks hold too much toxic garbage to even know if they are solvent. We are now 17 months into a credit crisis that continues to expose the corruption and incompetence of government, banking, Wall Street and transnational corporations. The situation has not stabilized and it won’t anytime soon. All we see are sweetheart deals for elitist corporations for which American taxpayers will pay for years to come. The future of our nation is totally out of control. For the last eight years our economy has been running on something for nothing, lies and deceit. The result will be hyperinflation and then the Second Great Depression.

Read moreHyperinflation and then The Second Great Depression

Fears of a million layoffs a month in corporate America

As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis.

November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday.

But Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.

Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds.

Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up – and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring.

‘The correlation is holding up all too well,’ he said. ‘It’s very disconcerting.’ He added that the pace of layoffs already happening in the US ‘is indicative of panic’. During the 1970s oil crisis the panic was relatively short-lived, he says. ‘But the worry now is that this will just roll on and on.’

Read moreFears of a million layoffs a month in corporate America