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.

A Cold Day In Hell

I never thought I would read this but the recession has finally hit the greatest bastion of Britishness - beer sales are down. This hot on the back of the announcement last month that Britain is the biggest importer of wine in the world.

Hard To Believe Facts

It really is a day for shocks.

Beer sales are over 8% down compared to the same quarter last year, 5.5% for the whole year, and much of it is blamed on the 18% increase in duty announced in the budget; pubs are closing at the rate of 6 per day. Nope, nothing to do with the fact loads of people are losing their jobs and watching the pennies at all. Have lily-livered British people gone all limp-wristed and started quaffing wine rather our national brew? What has happened to the odd pint of Brain's SA 'Skull Attack', the legendary Felinfoel or 'Feeling Foul', Stella Artois 'Wife Beater', Speckled Hen and Scruttock's 'Old Scrotum'? (OK, I made the last one up).

Are we really swapping en masse to sipping wines and iced ciders while discussing the merits of Martin Corry's alleged eye-gouging or watching Mickey Skinner's 'Greatest Hits' or the 'Beautiful Game'? What is the matter with us? Have we actually swapped over to the much dreamed of Continental Cafe Culture that President Blair thought up? Now we are open all hours to drink ourselves stupid, it's apparent we are becoming a nation of wine-sipping, cider quaffing nancies.

Hey, Buddy - Don't Blame Me!

It's John Thain again - the now ex-CEO of Merrill Lynch who recently left his post at the new parent Bank of America is back in the news and fighting back. Flatly accused of lying in relation to the 'surprise' $15.3bn fourth quarter losses everyone forgot about at Merrills at the time of the BoA takeover, it is apparent that Mr. Thain and the Merrills Board signed off on $3bn to $4bn 'early bonuses' at roughly the same time. In fact, Mr. Thain complained he had been 'completely transparent' with the new parent, BoA, and that bonuses paid 3 days before the merger were paid in the full knowledge of the BoA Chairman, Ken Lewis.

Transparent he may well be and I think Ken Lewis knows exactly what this kind of transparency means. Good to know that BoA, having petitioned for a Fed bung to help it out in the light of these surprise losses, have had to use US taxpayers money to once again pay for a pile of bonuses that were completely unwarranted.

Quite how Thain can justify any bonuses at all in the light of the trading mess Merrills was in is a mystery. But I suppose the only surprise in the whole story is that John Thain was ever given a job in the first place. At least he has had the hindsight to go back and pay for the $1.22m cost of redecorating his office in which the wastepaper basket alone cost over a $1,000 calling it a 'mistake'.

The mistake was someone putting him in charge of a company let alone a bank.

Eat My Shorts!

The spookily named Paulson & Co is a US hedge fund that has made a few bob of late - just a cool £100m or so for a fair week's work. After somehow foreseeing that Royal Bank of Scotland shares would plummet on Monday, it had taken a short position a little earlier to thankfully see the shares dive 67% in a single day after the second bail out announcement. On Friday it reduced its short position just one day before the shares rallied upward by 19.8%.

There's no story, here. Nothing to read into this, move along please.

Seven Days That Created The World

Front page of this week's 'New Scientist' reveals that, on the 200th anniversary on Charles Darwin's birth and the day David Attenborough launched a new series about the value of Darwin's Theory of Evolution, the Theory is actually hokum and that the 'Tree of Life has been uprooted'. Creationists will be chucking a few parties bearing banners with misquotes but certainly it looks that at least the theory itself has evolved.

To get the context right, Newton's Theory of Gravity and Motion led the way to modern day thinking on the motion of celestial bodies thanks to his radical ideas. In the same way, Darwin's theory was the ground breaking thought process that leads to the modern views of evolution. The Tree of Life, as it is termed, was a very good way of expressing what was observed and, much like quantum mechanics changed physics, so too the new works on genomes, bioinformatics and other disciplines have transformed biology.

Still, having travelled into London this morning by car, I would like to have a chat with the theorist that said that by charging £8 to each vehicle per day for entering London would actually reduce congestion or carbon emissions. That is a theory WORTH debunking.

G'day and B'bye, Andy

Silly us. After two wins over Roger Federer and one over Nadal already this year, Andy Murray entered the Australian Open as favourite to win the title. It came as a stunning shock then that the Scot got beaten by Fernando Verdasco yesterday. We Brits are perennial losers when it comes to tennis but the good news is that Greg Rudeski has come out of retirement for our next challenge in the Isthmian Part-Timers Division of the Davis Cup where we play Liechtenstein's Extra A's Veterans in March. Should be a cracker.

The Banking Crisis Explained

Dyscalculia.

No, I have not made this up and, no, it is not a sexually transmitted disease in cats. This the term applied to those individuals who fail to see the connection between a set of objects and the numerical symbols they represent, such as a set of 5 walnuts being represented by the word five or the numeral 5. However, equally these individuals may have still have high IQs, be highly intelligent, articulate and be able to grasp conceptual mathematics.

Remind you of anyone?

Wild Thain

It is with a heavy heart that I bring you the news that John Thain, the superb CEO who saved Merrill Lynch from going bankrupt, has sadly resigned his new position as Head of Bank of America's Global Banking arm after just 3 weeks.

A Lousy $10m Bucks!

"Goddam it," cried one of Thain's former senior staff at Merrills, Buck Paasser. "He was a good CEO. No, scrub that - he was a great CEO. The best of the best. He saved our company from bankruptcy by palming us off to Bank of America within seconds of the bank going belly up. That takes guts, acumen and sleight of hand, I tell you."

Paasser wept openly. "All he wanted was a lousy $10m bucks of bonus," he whimpered. "What has the world come to when you take over a bank for $19bn and you can't find enough spare change to give the guy who saved the company a little pocket money? Hell, the man is practically desitute - he gave everything to that company and he made what it is today."

Unexpected Losses

I pointed out that there was the minor issue of some large losses at Merrills that might have been 'played down' at the time of the buy out by Bank of America.

"What?" screamed Paasser. "Are you trying to tell me John Thain was dishonest? Get out of here. The man was practically a saint. You can't tell me that someone that has the kind of attention to detail that redecorates his office for $1.22m would cover up excessive losses - no, sir. He should not be blamed for the price of wood, paint and fine art."

"Look, yeah so we had trouble with the calculator and Excel was playing up," continued Paasser. "We couldn't seem to make the numbers work and we kept coming up with a spare minus $15.3bn which we couldn't account for last quarter. So we just rounded the numbers up. Hey, it's not our fault BoA have to go to the Fed and ask for an extra $20bn maybe if they paid the bonus we might have wondered more where that $15bn had gone. Anyways, BoA had already used up $25bn in October so what's another $20bn here and there - as if that's going to really save the bank."

Spare A Thought

I asked Paasser if he thought of John Thain asking his Board for $10m bonus in the light of $15.3bn losses last quarter was a particularly wise or good thing to do and perhaps it had some contribution to his departure.

"Are you joshing me, buddy," screamed Paasser. "Just because the whole Finance system failed a great man does not mean he should be able to go home and feed his family, buy a new car, dig a new pool or buy a small island in the Caribbean. Jeez, where is your humanity? The guy was only asking for $10m - you make him sound like he didn't care. He did - and that was the poor guy's failing. He cared a lot about how the heck he was going to get rich again, particularly now that guy Madoff has got all us Finance guys a bad name."

In the murky world of banking, John Thain was some guy. After selling Merrills to BoA just before breaking point for $19.4bn, the last quarter figures surprised everyone but him at a walloping $15.3bn loss. And he was the man who had the chin to ask for a $10m bonus from his Board for saving Merrills.

Still, I'll lay a bet he'll be back and at it again somewhere soon. Racking up losses seems to be a marque of credibility in the World of Finance.