Bank Bail Outs - The Guessing Game

As the world's intelligentsia stay on for the World Economic Forum in Davos, we get more of a picture that the global financial bail outs are not much more than guessing games.

'No Clear Map'

Perhaps for the first time, Gordon Brown, admitted that there was 'No Clear Map' for this crisis, but he was swift to defend himself by saying this was the 'first financial crisis of the global age' and therefore there was no historical precedent for tackling it. It comes as cold comfort to taxpayers generally who really look to senior Politicians and their vast rafts of economic advisers to be showing not just leadership but knowledge of how to solve these problems, particularly when such vast sums of money are at stake.

I do not think I am alone in saying that when a Government throws £900bn of money we do not actually have at a problem of this magnitude, you would like to think that either they know what they are doing or they can be accountable for every penny.

It seems Brown is getting his excuses in early, after the first bank bail out did not work and the second seems to be just good money thrown after bad.

At the same Forum, John Monks, General Secretary for the European Trade Union Confederation, told the audience that Governments were, 'close to straining the patience of the public and voters'. I am glad to hear that there is someone in a significant position who is standing up and saying this.

Use of Money

It comes as further cold comfort that newly elected US President, Barack Obama, who is not attending the Forum, is concerned that much of the monies used in the bail out is actually going to fund bonuses for banks. He seemed shocked that some $18bn had been paid to New York bank executives for performance last year SINCE the start of the crisis and the subsequent bail outs. He criticised these executives heavily for such use of the money particularly when the world's eyes are upon the outcome and more importantly US taxpayers are funding the liability for bank excesses which caused the situation. He even had to step in to cancel Citigroup's $50m private jet order as executives there did not seem to have enough morals to work out it was not the time for corporate toys having laid off over 70,000 staff as a response to the crisis.

Bankers Solving Problems

It really comes back to central point I have been making. The crisis, and I think there is a global consensus here, was caused by the over-zealous money-making activities of banks which went unregulated and unchecked. Now, Governments are turning to the very same people to try and plot their ways out of the incredible mess they created - poachers turned gamekeepers.

I have a fundamental problem with this. Yes, I agree that credit, capital raising and lending fuel business and the economy and this is fundamental to the solution, but I do not believe that bankers have all the answers to the problems.

Here are some obvious outcomes that we see - $5 trillion globally has been put up to solve the problem yet there was zero caveat for any bank to stop paying bonuses, the absolute very heart of why the situation got as bad as it did. It almost is too stupid to think about and anyone with a mere thread of moral fabric would have had the sense to have made any bail out contingent on no bonuses.

But this is what you get when you ask bankers to solve the problems - they will tell you that you NEED to have this money-making hunger in the system in order to start up the engine again as it is essential 'oil to the machine'.

That Barack Obama is upset by this is indicative that the last President allowed banking executives to lead his thinking, led by former Goldman Sachs CEO, Hank Paulson. The heads of the Feds have similar problems. In the last week or so, a company bearing the Paulson name but we understand is not connected to Hank, made £90m shorting RBS shares.

Here's the rub - on the Board of Directors of this Hedge Fund is none other that Dr. Alan Greenspan - yes, the very man who dictated US Fiscal Policy for so long.

It comes as no surprise that after 10 years at the top of Government, driving policies that made a thin percentage of the world's population rich beyond all comprehension, that Tony Blair is rewarded with a £1.5m per year Non-Executive Directorship at Morgan Stanley to advise on 'Globalisation' - the very subject that Gordon Brown says we don't have enough experience on.

Breaking Links

It is way, way too common to see senior career Politicians and Civil Servants getting involved with banks, watchdogs, lobby groups and consultancies whose very purpose is to exploit their current or future positions. It is at the heart of the problems we have seen in the House of Lords recently which came as no surprise to the public just as the whole sordid Deripaska affair seems to slip by the moral attention of Government. It seems it goes with the job.

The bank bail outs are sums of monies far outside the understanding of common people yet we know that these bail outs are the supposed salvation of our way of life. So it is not too much to ask for that when such incredible amounts of money are spent it is a) done with our best interests at heart b) that none of the money is paid to any individual for bonus purposes and c) that the people who make the decisions are held accountable for every single penny.

Legacy

The legacy of these bails out, and there are likely to be more yet, is that the UK debt burden will last around 20 years according to the independent Institute for Fiscal Studies (IFS). Gordon Brown may scoff at such numbers but there is enough intelligent, independent thought that questions much of the global response to the crisis. Joseph Stiglitz, the Nobel Laureate for Economics, at the Forum has said that creating a Bad Bank is just 'Good money chasing after bad', labelling it 'cash for trash' and would leave economies picking up the bill for years of excess lending by the banks, depriving spending on other social needs.

So while Gordon Brown tells us blandly that he has no real idea how this crisis will pan out and be solved and he commits more and more cash to the whole business on our behalf, while others in the world have actually challenged the thinking so that the legacy to the world's taxpayers might actually be more manageable.

While taking the bad debt out of the system theoretically sidelines the problem so banks can again lend more freely is one way to solve the problem, it does mean that all that toxic debt is to be paid for by the taxpayers. There is zero long term clawback of bank future profits other than some kind of insurance premium to pay it back. It is 100% assumed the public will pick up the tab.

So I ask one question - what is going to stop banks doing all it again? For all the 'New World Order' and increased regulations promised, we did not even have enough sense to stop any bail out money being used as bonuses.

Sorry, Gordon Can't Answer The Phone Right Now.....

Well I ask you. All I was trying to do was to call and tell him to stop wittering on about 'Global Confidence' and Gordon wouldn't even take my call. But at least it brought a smile to his otherwise dour face.

As GB gibbered on about 'It is time for the world to face the crisis as one', having just muttered something about 2009 being the year when the world 'came together' to tackle the economic crisis, my head was starting to spin. As he then went on to warn about 'creeping protectionism' I began to lose the will to live and so I decided to call him. Thankfully the call interrupted his drone and brought a smile to everyone's face - even his.

Word Games

Protectionism seems to be in the 'in' word at the moment. The Chinese Premier used it in his speech which upset GB as he had laid first claim on it and threatened to impose sanctions on China if the word was not retracted with a formal apology before his speech. In rushed behind the scenes diplomacy, it was decided that the country with a budget surplus could use the word first, although those with borrowing higher than 57% of GDP could have second use.

There are further talks going on to agree on the meaning of the word after Japan and China had imposed tariffs on imports to keep their local products first in sales yet were using the word liberally. There was vague agreement that 'protectionism' could be applied to banks only lending to companies and consumers in their own country which was seen to harm global trade and exacerbate the problems. Most nodded ascent on this point and so Mr. Brown ploughed on with the point, "The thing we know about protectionism is that it protects nobody and least of all the poor."

Many nodded their heads sagely before saying, 'Eh?'

Protecting Jobs

GB's point was that it was high priority for political and business leaders to rise to the economic challenges and act to help those worried about losing their jobs. I may be a bit thick here but isn't that part of the point about protectionism? Anyway, the PM pushed on regardless to applaud the US in the main for pumping money into the economy as part of 'The largest ever Fiscal Stimulus' to which there were many in the audience who tittered at the economic innuendo, several were openly embarrassed and at least one Financier shouted 'This is outright financial pornography' before storming out throwing his papers in the air in revulsion.

"We have a choice what happens next," GB said stridently. "It is time for action and it is a time for having the confidence to act......It is trust that we have to rebuild as a result of the credit crisis and the failure of the banking system."

I love it - as usual GB was distancing himself from the cause of all this which he has put down to the sub-prime scenario in smalltown America. The fact that Governments and Regulatory bodies just sat by doing nothing does not seem to enter his mind or his conscience. Once again, we see fingers pointing solely at the banks, yet hardly a bank in the last 10 years could have survived the most simple test of liquidity if the derivative scam had suddenly ground to a halt. Trust, I would argue has to be rebuilt in the Political system too - the one that told us we had a rock solid economy that would not be affected by a recession, would survive better than others if it did and had a bedrock built on the value of people's homes.

It would be just nice to see Brown just show a bit of humility, puff out his jowls and admit he blew it.

G20 and Away!

So it is all eyes on the G20, the global economics equivalent of the Olympics and coincidentally being held in London, probably at some hastily erected new building to keep in spirit of the Government bringing forward large spending projects because we are short of a few. There seems to scepticism about whether there can be a collective, global action to tackle the economic problems.

If Brown is anything to go by, his blatant protectionism was shown when he threatened to launch law suits on Icelandic banks if they did return savers' money. As noble as that may have seemed, it was hardly a nice gesture to a country that was quite literally going bankrupt and equally if you are prepared to allow foreign banks to lend you must allow them to take deposits if they need to - and if they hit problems well that's the rough and the smooth surely?

I have great sympathy for private savers but what on earth were Local Authorities doing putting money into foreign, less protected accounts just to earn a shaving of a percent of interest more? Who allowed them to do this in the first place and who in these Local Authorities is qualified to make such investment decisions? And it wasn't just a few spare quid it was nearly £1bn of rate-payers' money? Why was it not paid back to the rate payer to invest themselves and asked for only when they actually needed it?

I don't know - I'm no expert but I can't help feeling Brown's rallying calls are signs of a growing desperation to help Britain out as our economy is so dependent on foreign investment in the City particularly, without it Britain could well be a spent force in the world of high finance. It also seems it's pretty much one way - GB seems to be saying invest in us but we are not going to do anything for you, but I may be wrong.

One last line of hope from GB was a touching reminder of the global commitments to climate change policy and helping Third World countries. Well, the wasted money put into propping up the fat cats in the banks might have been much more happily received in parts of starving Africa. Once again, epitomising the New Labour years, we see wasted opportunity.

Davos Snub

I rang the organisers at Davos yesterday and apparently my invite got sent to Will Young by mistake although I did give my opinion on the global banking situation which they kindly said they would pass on.

Heartened

I was not the only person to miss out on Davos this year. Apparently Chancellor Alistair Darling isn't going as when the team in the US realised that they had to sit in a meeting with him they all feigned illness, cars did not start and many found clashes of diaries with the nail specialist. Rumours were that the PM had refused to sign his travel docket as he was still too pessimistic and until he realises the world is fine he is not allowed out of his office.

US Fed Chief Tim Geithner allegedly pulled out when he heard I would not be attending and when told he would meet Darling remarked 'Alistair who?'. Barack Obama is not going this year, he is too busy choosing a dog for his kids - they are now down to the last five in a voting format not dissimilar to 'X Factor'. This week there will be an ice skating dance off and the Canadian Huskie is expected to win although the rat-like dog from Peru named 'Juan Sargeante' was once again unexpectedly voted back on by the public.

You Haven't Missed Much

Gordon Brown will fly in later and is expected to lay down his thoughts in anticipation of the G20 in London some time later, though he has yet to find a bank to sponsor the event or suitable venue. They may have to use Ron Sandler's shed which currently holds all his money from his consulting at Northern Rock but is plenty big enough. Thesaurus and Dictionary sales have sky-rocketed in anticipation of Brown's speech and the pre-session synopsis printers sent out for lots of tippex as they thought 'deleveraging' was not a real word and put in de-icing instead as it sounded more appropriate. The talk will not actually be the sell-out Brown anticipated as most delegates don't want to be bored to death by half-baked drivel delivered with all the monotony of an undertaker - it will be chaired by Jet Li and Will Young will be question master, I understand.

Bookmakers have been laying spread bets on which words will be used most often and 'New World Order', 'Pangs', 'Deleveraging', 'sub-prime', 'protectionism', 'Saved the world', 'Fiscal Stimulus', 'help, I'm sinking' and 'Deglobalisation' are hot favourites to be most used while 'stable economy', 'recession-proof', 'can't happen to us' and '10 years of steady growth', and 'VAT giveaway really worked' are expected to be used least while 'Tony Blair' is red hot favourite not to be mentioned.

Blame Culture

Tim Geithner, while staying at home, was quick to hurl insults blaming the world economic situation on China for 'Currency Manipulation' that led to US trade deficits. I have to say I have heard of a great many excuses for the current financial woes of the world but this was a first - and many are checking as to whether he was talking about something completely different like the Superbowl.

Perhaps Tim wasn't feeling too well as the retort from the Chinese Premier Wen Jiabao who is at Davos was 'Inappropriate macro-economics policies of some economies and their unsustainable model of development', 'failure of financial supervision and regulation', and 'lack of self discipline' which landed the world economy 'in the most difficult situation since the Great Depression' which he made clear was not the name of a Chinese restaurant in Hammersmith. It's clear that Mr. Jiabao is more on the ball but he actually may enjoy sitting in on Gordon Brown's talk as they have similar prowess on econo-speak.

Vladimir Putin, Russia's democratically elected Prime Minister, put the boot in too saying, 'Poor quality financial regulation' led to 'the collapses of the existing financial system'. He was also hard on the dollar saying, 'Excessive dependence on what is basically the only reserve currency is dangerous for the world economy' which resulted in 'a serious malfunction in the very system of global economic growth' and that 'whole regions of the world including Europe found themselves at the periphery of global economic processes' and so 'were outside the framework of the key economic and financial decisions.' A clear reference that Russia wants more of the profits next time around.

Putin and Jet Li put on a Martial Arts demonstration before a short exhibition of bear shooting got a little out of hand when Putin started taking pot shots at Investment Bankers.

Bankers Missed

Apart from executives at Barclays pulling out as they are working on the Annual Accounts and so Bob Diamond is attending a Microsoft workshop entitled 'How to use Excel to help save your company from Middle East investors' which involves simply changing all the red cells to black.

The delegation from Citigroup are still at the airport awaiting their aircraft - no one had the heart to tell them the order was cancelled. Easyjet has offered to take them instead.

Generally bankers have been fair game at the event with small sideshows on offer to entertain delegates. John Thain, ex CEO of Merrills, has a 'Bake your own cake' stall, Dick Fuld has a Real Estate stall entitled, 'Properties going cheap - only one left, buyer already found, honey', while there are pillories and stocks for delegates to pelt their least favourite banker.

New World Order

The Davos song will be sung by the group of the same name and the song, 'I saved the world' written by G. Brown is expected to reach number one later this year. Meanwhile, a new league table or world order is being constructed with the US still at number one and then countries like China and India moving up the table. The UK is a little way back behind Mauritius but ahead of Iceland thanks to the threatened law suits by 'Big Bad I want my money back Gordon'.

Nasty Bankers

Barack Obama, fresh from signing the new lease on Guantanamo Bay Camp and renaming it 'Bankers Boot Camp', has laid into Wall St bonuses calling them the 'Height of irresponsibility' after finding out that employees of New York banks collected bonuses of $18bn last year. Obama adopted a Head Teacher approach and told banks 'It is shameful, and part of what we are going to need is for the folks on Wall St who are asking for help to show some restraint and discipline and some sense of responsibility.'

No doubt the bankers were standing in corridors with ear-rings in their ears, shirts hanging out, collars undone and ties pulled down and saying, 'Whatever' and 'Do I look bovvered?' Obama continued his tirade, 'The American people understand that we have got a bog hole we have got to dig ourselves out of but they don't like the idea that people are digging a bigger hole.'

Gordon Brown commented. 'I think President Obama needs elocution lessons as there is a real danger that people will understand what he is talking about and that means he may have to do something. It is far better to sound as if you know what you are talking about by using words not yet invented and unintelligible and then do nothing. People appreciate big words and no action.'

I am still unsure what purpose Davos serves but as the world pours billions into the financial system and then watches Citigroup order a private jet and bank executives pay themselves bonuses, it seems that we have all lost our sense of perspective. It would be a good idea to ask the views of the bewildered people of Africa who must surely have a problem with the 'intelligent' comments of people like Gordon Brown about how to save his Political neck and the bank balances of a small number of financial executives while millions wonder if the world will ever remember they exist and are starving.

In its voracious appetite to kick start economic growth, the world has forgotten about the starving people who aren't included in the jamboree. Just imagine what those $18bn bonus payments would have done for those people - I dare say the bankers who received them will not lose a wink's sleep.

Billions And Billions

There was a time when a billion was a big number.

Orders of Magnitude

I worked at a Computer Distributor called Frontline many years ago and when I left there, the revenues were around £100m per annum. That year the company got taken over by a larger German Distributor called Computer 2000 and when I arrived back at the company just a few years later they were celebrating breaking the £1bn per annum in sales in the UK for the first time. It had been a tenfold increase in sales in a short space of time and the company became one of a handful of UK companies at the time with revenues over £1bn a year.

Even today, even though the FTSE250 is going up and down like a yo-yo, the 100th company on the list has revenues less than £1bn per annum. So from a point of view of product or service sales, to have a turnover of over £1bn a year in the UK you would be part of a relatively small and elite group of companies.

Billion Becomes Old Hat

One of the consequences of the Credit Crunch and recession is that the word 'billion' is being used in almost every other sentence. Suddenly, it has become the only number that expresses the order of scale of the extent of our economic woes and the monies required to put it right. We are even beginning to use 'trillion' to describe the scale as billion no longer seem to cut it. The current estimate of the scale of the global bank bail outs are around $5 trillion and rising. This is measured against an annual global output of around $50 trillion.

The numbers are immense and they are being flung at us so nonchalantly these days that we are beginning to lose all sense of proportion. The fact is, £1bn is an awful lot of money.

So when we are told that £2.3bn to bail out the car industry is not enough, it no longer strikes us as a big number when compared to the fact that we have had two bank bail outs in the last few months at £600bn and £300bn a piece.

We are no longer impressed or depressed that £30bn was pumped into just one bank, RBS, in order to save it. But the worrying thing is that RBS has a funding gap of around £161bn and total liabilities of £1.3 trillion - larger than the UK's GDP, yet its market worth is around £7-8bn in total.

Making Sense of It All

This week's Euromillions Lotto Jackpot is around £26m and I think you would agree that's an awful lot of money. It could buy you several houses, nice cars for everyone in the family and you would still have plenty of money left over in order to live in luxury for the rest of your life and probably leave a sizable legacy to your offspring.

So imagine if you had £1bn. This is 1,000 times £1m or around 40 times greater than this week's Euromillions. It's more money than you could imagine.

Well so far around £900bn has been pumped into the banking system to shore it up and only yesterday a Treasury committee thinks it is not enough claiming that the Government is acting in a piecemeal fashion to tackle the problems in the financial system.

£900bn is 900 times that £1bn I talked of and 36,000 times the Euromillions Jackpot this week. It is a stupendous amount of money.

But it's not enough. Over the course of the last few years, the value of the open derivative positions in global markets is over £500 trillion and rising and there is a further £400 trillion of associated insurance positions and £1 trillion is 1,000 times £1bn. This derivative value is the approximate roll up of all the idiotic trades of debts between institutions that amounts to the total liability the world faces for the mess that the banks have put us in. Unpicking the complex web of bargains and trades is the nightmare associated with this and although a good proportion of all this is underpinned by assets of some value, no one any longer has any idea what the true position is. And as markets and asset values fall, the problem is getting worse and worse.

Equity for Debt

As Governments in the US and UK underwrite bad or toxic debts with the bail outs and take equity positions in banks, there is a belief in financial circles that this is somehow good for all of us who have allowed our tax money to be used as collateral for the borrowing required to do this. The belief is that companies like RBS will recover and that the money we have pumped in will be repaid handsomely as the company grows in value.

Today. RBS is valued at around £8bn and we have pumped around £50bn into it so far for around a 70% shareholding. My maths may be rusty but it would mean that in order to break even from this current position, RBS would have to grow around tenfold in value as a company.

Do Not Be Fooled By Numbers

As everyone throws around numbers like a billion pounds as if it were pocket money, do not be fooled - it's a very serious sum of money.

But if you think that the £26m Euromillions Jackpot is too large a sum for one individual to be given, then just chew on this. In the last year alone, this was no more than double the annual gross monies received by the lowest paid CEO of a UK Bank. In the last week, a single Hedge Fund made £90m on betting that RBS shares would fall on the announcement of the second bail out. In a single day, Hedge Funds and Banks lost $30bn on single share (VW) on betting the wrong way.

If nothing else comes of this financial crisis, I hope that we get some perspective on the real earnings of a very thin slice of the population of this world that has squandered our savings, pensions and future. I hope also we get some perspective of the amount of money it will cost each one of us in future tax payments each time a Government Minister glibly announces some new 'Financial Stimulus' package or bail out.

You would have to win this week's Euromillions Jackpot over 1,200 times over just to have enough money to have propped up RBS that second time. I guess my point is that the executives of these banks were earning Euromillion scale Lotto wins EVERY year while we have to pay thousands of times that much in order to just stop their companies going bust.

For every £1 billion mentioned, think that there are only around 30m taxpayers in this country which means that we are each liable for around £33 - not much, eh? Well, at £900bn so far in bail outs, each of us are liable for around £30,000 and that does not include the liabilities of £1.3 trillion should just one bank like RBS actually fail.

This week at the Davos Summit bankers are getting vilified for their greedy stupidity in building up these kinds of liabilities. I think Governments are the stupid ones for allowing it and then exposing us all to the cost.

Business As Usual

Spital Square was always a busy place. It's where a small fleet of very smart private taxis wait for RBS staff to give them a ride to wherever they may be going - home presumably. You may think such little luxuries go by the wayside when their company has collapsed in value but not these good fellows.

Last night, the little fleet of smart cars were ferrying evening-dressed managers from RBS to a swanky City dinner so they could blow some expenses, I dare say, and congratulate themselves on another terrific year. It appears there is little scope for consideration of bail out monies or public scrutiny - the business of the City must go on, come what may. Perhaps it may have been Cava not Champers this year. I doubt it, must keep up appearances, eh?

Revulsion

As the banking system staggers after each explosion, it does not sound like the glamorous career it used to be with the potential of somewhat less bonuses in the future. A further advert on why such a career is pretty revolting was last night's TV documentary called 'Million Pound Traders' which was yet another show designed to satisfy our seemingly unending appetite for 'Reality TV'. This time a foreign investor gave some money to a group of would-be traders who proceeded to spend it in a series of trades designed to show how good they were in making profit. They were headed by the seemingly hard-nosed 'Anton' who said for the camera's benefit that 'It's time to press the brutality switch'. All sense of Employment Law naturally goes out the window in such environments as we saw in the excellent docu-drama last week called 'Sex, the City and Me' which acted out an amalgam of real stories set around a successful woman who became a mother and her career in a fictional trading house.

What it illustrated was that the City is so single-minded about greed as to make the people who do it at best seedy and at worst down-right revolting. Coupled with the lack of guilt displayed by people at the top like John Thain, Fred Goodwin, Dick Fuld and others it shows that it comes from the top down.

Once again, it really does not inspire confidence that Gordon Brown surrounds himself with the flannel-talking, obsequious Investment Bankers as his Advisers at this time.

Bail Out, Bail Out

'No, this is not a bail out', stressed Lord Mandelson yesterday as the newly enlightened Business Secretary outlined the basis for around £2.3bn of loans designed to save the car industry. I have blogged on this before and at stake are around 850,000 jobs associated, directly or indirectly, with the car industry as production has collapsed by 49%, sales by over 35% and acres of unsold cars litter our countryside.

He was right - according to the Tony Woodley of Union Unite, it falls short of what is required to save tens of thousands of jobs. Mandelson is hosting a summit for the industry today but there will be calls to extend the £1.3bn of loan guarantees and offer of £1bn of lending for car makers in order to safeguard their industry and attempt to stimulate demand. A whole raft of car makers have downgraded or stopped production and the immediate effect was felt by steelmakers, Corus, who announced 2,500 lay offs this week.

Once again, it seems the Government has come up with a half-baked, knee jerk solution which has been devised by unskilled Advisers and not listened to the views of the carmakers themselves.

What is the Point of The FSA?

"Highly paid bunch of layabouts," spat my source close to the FSA. "Cushy jobs for former mandarins or retired City types, combined with tons of Non-Executive Directorships - it's just a nice place to have an office, get rich and play online games all day."

Well my source had nothing to with the FSA but was making an irritated observation at the apparent lack of action by the FSA in the lead up to and since the banking collapse. No heads have rolled, no explanation as to why no one spotted that the whole system was at risk and no comment or insight as to how the future of banking will shape up. It really is time we got some people in the FSA who are actually going to do something in these key roles rather than former names who just collect the cheques and ignore the obvious.

If the FSA is to survive going forward, it needs to start dictating the rules Brown's 'New World Order' and get some sense of proportion into banking that removes the blind avarice that causes the problems we face today.

Dive, Dive, Dive

The Commercial Property market paid out record bonuses last year and whooped it up at the tail end of the property boom. Many claim they have set aside plenty of funds to ride out the downturn in their defence but I sure hope it's going to be enough.

I will lay a small wager that we will see plenty of job cuts in this sector before the year's out and not a penny of all those whacking bonuses will be repaid.

The share prices of the barometer companies in this industry have dived at an alarming rate. In the last 12 months shares in British Land have collapsed by 58%, Hammerson by 65%, Land Securities by 60% and Liberty International by 63%. The predicted fall in capital values from 2007 to 2010 will be 45% and it is now anticipated that rental values will collapse in 2009.

Bonus well-earned then.

Financial Stimulus to Defibrillation

The rather salaciously termed 'Financial Stimulus' package we know as 'bail out' is already in its second iteration. What started as silky stroking of the poorly patient, the Economy, had little effect. It now seems the patient has been rushed to A&E where a team of 'Advisers' are now administering rapid pulses of electricity to its chest. We had the second bail out and now we have the car industry bail out - pretty soon we shall be having more. That is, if the views of a body of influential MPs are to be believed.

A report from a Treasury Committee has expressed what most of the country felt that the bank recapitalisation program announced in October did diddly squat and because of the 'onerous' terms may actually be hampering them, the poor lambs. Credit, or lack of it, to consumers is seen as the biggest threat.

Erm, haven't we got around £1 trillion of it unsecured on our credit cards already?

While the report talks of the £12.4bn VAT giveaway having about as much effect as attacking a tiger with a bottled fart, it warns of a 'self-reinforcing deflationary cycle' occurring if we aren't careful. I dare say they have either looked in Gordon Brown's Terminology Booklet for Gobbledygook or this is a new type of carbon-friendly bike as yet not available at Halfords.

I still think it's cuckoo land expecting consumers to go and clock up more debt to get Britain out of this mess. We are going to have to take a lot on the chin before things get bright enough to start loaning again.

The Mortgage Scam

I need to be careful here. Why is it that it is extremely hard to get a tracker mortgage that is not some way above Bank Base Rate now?

My current one, taken out around 2 years ago is 0.49% above base rate. Most UK banks now have access to money from the Bank of England at base rates and are no longer worrying about having to borrow at the inter-bank lending rate which went sky high in the Credit Crunch as no-one wanted to lend to one another.

Well here's a thought. If all these banks can borrow at 1.5% and have their borrowing guaranteed under the generous schemes by the Government, then they can lend this out at the LIBOR rates to foreign banks who are struggling to get credit and also make an absolute mint on lending for mortgages. Trackers have absolutely no reason to be so high in particular as they are directly linked to base rates - if it goes up, so do they offering a consistent margin to the lenders. It should be the fixed rates which should be the premium products when you think about it as base rates must rise again some time in the future and so decreasing the margins.

I bet there are an awful lot of lenders rubbing their hands at the very, very easy money they are making, completely underwritten by the very people they are lending to - us! Nice one, Gordon - as usual make sure the banking boys get their bonuses next year at taxpayers' expense.

Lordy, Lordy

I couldn't let the day go by without taking a poke at the scandal in the House of Lords. Again, there is widespread surprise that some Lords are claiming massive expenses, as much as £400,000 per annum in some cases. That's nothing - now Lord Mandelson is on the scene, we should see some real growth here. Further, the Evening Standard reports that Ministers like Jack Straw have received donations from companies associated with Lord Taylor.

I am so glad that Brown and his cronies got turned over on MP Expenses transparency. It really is time that whole political expenses, donations and backhander gravy train got really looked into by real people who care about how the money is being spent rather than by Government-appointed stooges who themselves are on the train.

Exterminate!

Ah, I thought it said Davros, not Davos - apologies but the word springs to mind.

I am delighted such luminaries as the well-paid Bob Diamond, CEO of Barclays Capital which recently bought part of Lehmans Bros and then caringly laid off a load of their staff to part-pay for it which I am sure they were all suitably grateful for, will not be attending to the Davos Summit this year. I believe he has more pressing matters like the bank's earnings announcement after it was feared Barclays could fall into the clutches of the Middle Eastern investors who bailed it out in preference to the Government's largesse.

Things must be tough for bank executives to miss a freebie like this and hobnob with the likes of Jet Li, whose insight on world matters is legendary, I'm sure.

The World's Favourite Debt - Not!

Fresh-footed back from India having secured new routes there, BA CEO Willie Walsh might be choking at the headline in the Telegraph which warns that Standard & Poor could rate the airline's debt as junk. Willie must have been delighted that in a year which saw the Terminal 5 fiasco show his skills at its best that his company announced a £150m loss for the year. S&P have now put BA's rating as BBB which does not stand for 'Bad, Bad, Bad' but isn't far off. In a comment of blinding decisiveness, S&P analyst, Andreas Kindahl, said "There is a 50:50 chance the next move could be down."

Poor Willie - he did so want 65% of the merged new airline between BA and Iberian but at current market prices, Iberian is actually worth more than BA. If that's the case, maybe the Armada did not die in vain.

From Jet Li to No Jet

As Jet Li prepares to take his place at the Davos summit, spare a thought for the executives at Citigroup who have had to cancel their order for a private jet. As they were not prepared to cancel the order themselves, new US Treasury Secretary, Tim Giethner, stepped in and did it for them.

Let's get things into perspective, Tim, it was only $50m. Compared to the bonuses paid out by these fellows to themselves last year, this was just a snip.

Thain Update

Poor JT - the billions of dollars paid in bonuses to executives at Merrills just days before the merger with BoA and the recent announcement of a mere $15.3bn loss in the quarter are beginning to get blown out of proportion as he has now been called before the real beaks as part of a legal investigation into the matter.

Aw, how dare they harass the poor chap.

Maybe they should look more closely at Dick Fuld, the glassy-eyed ex-CEO of Lehman Bros who got hauled up before a Senate committee to explain how, after paying handsome bonuses to himself and his executives, that he managed to bust the company.

Poor Dick had to sell his house at a knock down price, you know. The $13m Florida mansion had to be sold for just $100 which shows the terrible extent of the property market.

The new owner of the 3.3 acre site on Jupiter Island, where Tiger Woods and Celine Dion live, is a certain Kathleen Fuld who by happy coincidence is his wife.

At least they won't be needing their $21m Manhattan apartment right now as Dick is out of work and having to defend his good name - and his $20m art collection.

Bad News For Kids

Everyone gets hit by the recession, even kids. The news is that Hornby will be raising the prices of its train sets and scaletrix products pretty soon despite the recent success at Christmas thanks to their brands like Corgi and Airfix but they also own franchises for Batman, The Simpsons, Harry Potter and The Italian Job.

See, now look what your 'Deleveraging and deglobalisation' has done, Gordon? You've made the kids cry.