Britannia Radio

EXTRACTS ------  18.9.08
As things are working towards a climax one must cast one’s mind back 
a year to Northerrn Rock.  The HBoS collapse would have been much 
less likely if Brown-Darling had done the right thing with the Rock 
and let it go bust.  Bailing it out to save votes (that didn’t work 
either) has made every other financial institution ripe for the picking.

Meanwhile Cameron launches a philosophical discussion on the defence 
of capitalism.  A very worthy topic no doubt.  But somehow the 
people's clear determination to get rid of Brown must not be 
endlessly frustrated. Will Cameron table a motion of "No confidence" 
when parliament reassembles - If not, Why not?

xxxxxxxxxxxxxx cs

EXTRACTS ------  18.9.08

TELEGRAPH
1. (Leader)  The takeover of HBOS by Lloyds TSB augurs hard times to 
come.(- - - - - - - - - - -)
If the deal goes ahead, HBOS's two million shareholders could suffer, 
but its savers and mortgage holders should be safe. While we are 
instinctively squeamish about any state meddling in the banking 
system, the alternative would have been a taxpayer-backed rescue 
similar to Northern Rock's. It is no contest.

If only it had happened in an orderly way. In the event, the issue 
was forced by yet another alarmingly ill-judged performance from 
Alistair Darling, whose unsuitability for the office of Chancellor of 
the Exchequer becomes more apparent by the day.

His implicit warning to speculators on Tuesday morning not to sell 
HBOS stock short and his failure to back up the threat with action 
(in contrast, the US authorities have now suspended short selling in 
bank stocks) was an irresistible invitation to speculators to plough 
right back in.

And they did, sending HBOS shares through the floor and bringing the 
bank to the edge of the abyss. Mr Darling should have been held to 
account for his ineptitude - why no demand from opposition parties 
for an emergency recall of Parliament to debate these cataclysmic 
events?

It is hard to avoid the suspicion that the political classes simply 
cannot grasp the enormity of what is happening. While it is to Gordon 
Brown's credit that he has moved quickly to effect a private sector 
clear-up of this mess, he has not been well served by the clumsiness 
of the Chancellor.

But in acting in the way he has, the Prime Minister has effectively 
conceded that the regulatory regime he created in 1997 is not up to 
the job. Set up in the fifth year of a 15-year boom, the longest in 
our history, its unsuitability was not really apparent as long as the 
times were good.

Now the times are bad, and getting worse, and the tripartite 
structure that divides responsibility between the Bank of England, 
the Treasury and the Financial Services Authority is clumsy, 
unresponsive, and lacking in real authority. As Mr Darling so 
painfully demonstrated, it leaves no one in charge of the clattering 
train.
=-=-=-=-=-=-=-=-=-=-=-=-=
2. Global credit system suffers cardiac arrest on US crash
    By Ambrose Evans-Pritchard
The global credit system came close to total seizure yesterday. Key 
parts of the derivatives market shut down and a panic flight to 
safety depressed the yield on three-month US Treasury bills to almost 
zero for the first since the Great Depression in 1934. (- - - - - - -)

The collapse in investor confidence is a harsh verdict on the 
judgment of the US Federal Reserve, which chose to ignore market 
pleas for a rate cut to halt what amounts to a modern-era run on the 
banking system. Almost none of the current Fed governors have market 
experience. Most are academic theorists. (- - - - - - -)

Bernard Connolly, global strategist at Banque AIG, said the Fed and 
the Treasury were doing too little, too late, to stave off disaster. 
Interest rates need to be cut immediately and dramatically, while 
Washington must prepare for a wholesale takeover of large parts of 
the lending system along the lines of the Scandinavian bank rescues 
in the early 1990s.

"Unless there is a very rapid change of mind, depression - with all 
its horrors and consequences - will be inevitable. The judgment that 
letting Lehmans go would not create systemic risk depended, if it was 
ever going to be anything other than ludicrous, on very rapid action 
to shore up the financial system. Instead, Hank Paulson seems to be 
adding to the risk in the system," he said.
"We fear that a virtual nationalisation of the financial system will 
now be necessary," he said.
(- - - - - - -)
Russia suspended trading the Moscow bourse after the Micex index 
crashed 24pc in two days. Officials promised $44bn to support the 
banking system.
(- - - - - - -)
The Treasury's rescue of the mortgage giants Fannie Mae and Freddie 
Mac has added $5.3 trillion in liabilities to the US government. It 
almost doubles the national debt (under IMF definitions), at least on 
paper.

The Fed has now added a further $85bn in debt for AIG. While the sums 
are manageable so far, what worries investors is the likely avalanche 
of insolvencies yet to come.
(- - - - - - -)
Hans Redeker, currency chief at BNP Paribas, says the US debt scare 
is vastly overblown. America's total government debt is 48pc of GDP 
on IMF measures, compared to 57pc for Germany, 94pc for Japan and 
108pc for Italy.

"The debt levels are nothing compared to Europe, even after Fannie 
and Freddie. America still has great leeway," he said.
"We think the next phase of this crisis is going to be a repatriation 
story as American investors bring their money back from frontier 
markets. (- - - - - -)."

Albert Edwards, global strategist at Société Générale, said 
Washington's serial bail-outs are the inevitable result of the credit 
bubble of preceding years. "This was all baked in the cake long ago. 
What we have seen so far is just a dress rehearsal for the deep 
recession that is coming. America is going to be losing 500,000 jobs 
a month. That is when we will see interest rates go to zero. The 
deficit will be covered with printed money as it was in Japan. The 
endgame will be helicopters full of cash dropped by Ben Bernanke," he 
said.
=-=-=-=-=-=-=-=-=-=-=-=-=
3. Why Brown was in need of a Blank cheque
    By James Kirkup, Political Correspondent
For Gordon Brown and his Chancellor Alistair Darling, the stark 
prospect of a banking crisis far greater than the near collapse of 
Northern Rock was unpalatable.

With HBOS, Britain's biggest savings and mortgage bank, under 
sustained assault on the stock market, they knew urgent action had to 
be taken.

They knew that the collapse of the bank would have catastrophic 
economic consequences and deliver a potentially fatal blow to Mr 
Brown's premiership.  [He got that long ago - it’s just Cameron 
refusing to call in the undertakers -cs]
(- - - - - -)
Exaggerating the extent of Mr Brown's role in the HBOS deal also 
carries risks. As one Treasury official noted: "There's a long way to 
go yet."
The HBOS deal could still fall apart, possibly dooming HBOS and 
leaving Mr Brown's fingerprints on the biggest financial disaster in 
British history.
= = = = = = = = = = = = = = = =
The Times
1.If this fails, it will take down all Britain's banks
If the Lloyd's-HBOS merger does not protect shareholders' interests, 
wholesale nationalisation of banks is inevitable
    Anatole Kaletsky
The wonder of financial crises is how events can move straight from 
impossible to inevitable, without ever passing through improbable.

Two weeks ago nobody would have imagined that, before the end of the 
month, the Bush Administration would have nationalised the world's 
biggest insurance company, that two of the four biggest global 
investment banks would be out of business and that the US Government 
would take responsibility for three quarters of the country's new 
mortgage loans.

Sadly, the events of the past two weeks may be only the prelude, not 
the climax, of this amazing crisis. Even the apparent rescue of 
Halifax Bank of Scotland may result in a bigger crisis, if the 
drowning HBOS drags down its rescuer, Lloyds TSB. If this happens, 
every big bank in Britain, except possibly HSBC, will have to be 
nationalised, Northern Rock-style.

The same would become inevitable in the US if market speculators who 
have been richly rewarded by the US Government for taking down Fannie 
Mae, Lehman Brothers and AIG, turn their attention to the next group 
of stumbling financial institutions in the firing line: Washington 
Mutual, Wachovia, Bank of America, Morgan Stanley and Citibank. If 
any of these wounded giants collapses, the others will fall like 
dominoes and the entire US financial system will have to be 
nationalised. In a financial crisis, the impossible can become 
inevitable in one day, as we saw in Britain on Black Wednesday.
(- - - - - - - - -)
If the Lloyds-HBOS merger offers the enlarged bank some kind of firm 
government safety net - not just for depositors, but crucially also 
for shareholders - it will probably succeed and act as a firebreak 
against the financial crisis on this side of the Atlantic. If, 
however, the merger is presented as a “pure private sector solution”, 
with no government support for shareholders, market attacks against 
HBOS will soon be revived and redirected against the merged bank.

This will leave only one solution - nationalisation of the entire 
British banking system. The impossible will suddenly become inevitable.
= = = = = = = = = = = = = = = =
Financial Times
Headlines
Changing the rules of the game
Two days after an investment bank was allowed to fail as a statement 
of market discipline, Ben Bernanke and Hank Paulson in effect 
nationalised AIG -

Creating a home loans leviathan
HBOS’s share price fall after Lehman Brothers’s implosion meant time 
was running out for Britain’s biggest mortgage lender -

Where has the trust gone?
So far, the government’s response to the crisis has been on an ad-hoc 
basis, with each case – Bear Stearns, Lehman, AIG – judged on its own 
merits - 20:41

HBOS
Who has the credibility problem here: Halifax Bank of Scotland or the 
UK’s Financial Services Authority? The answer, sadly, is both

Why America will need a $1,000bn bail-out
It is hard to see how the US can create a firewall against further 
contagion without spending five to 10 times more than it has, writes 
Kenneth Rogoff

Taxpayers will fund another run on the casino
The next crisis will be different in origin – the rules that will 
have been introduced by regulators will prove irrelevant

Modern history’s greatest regulatory failure
Roger Altman warns that America will be climbing out of a financial 
hole for a long time. The economy will not have access to all of the 
credit it need
come.(- - - - - - - - - - -)
If the deal goes ahead, HBOS's two million shareholders could suffer, 
but its savers and mortgage holders should be safe. While we are 
instinctively squeamish about any state meddling in the banking 
system, the alternative would have been a taxpayer-backed rescue 
similar to Northern Rock's. It is no contest.

If only it had happened in an orderly way. In the event, the issue 
was forced by yet another alarmingly ill-judged performance from 
Alistair Darling, whose unsuitability for the office of Chancellor of 
the Exchequer becomes more apparent by the day.

His implicit warning to speculators on Tuesday morning not to sell 
HBOS stock short and his failure to back up the threat with action 
(in contrast, the US authorities have now suspended short selling in 
bank stocks) was an irresistible invitation to speculators to plough 
right back in.

And they did, sending HBOS shares through the floor and bringing the 
bank to the edge of the abyss. Mr Darling should have been held to 
account for his ineptitude - why no demand from opposition parties 
for an emergency recall of Parliament to debate these cataclysmic 
events?

It is hard to avoid the suspicion that the political classes simply 
cannot grasp the enormity of what is happening. While it is to Gordon 
Brown's credit that he has moved quickly to effect a private sector 
clear-up of this mess, he has not been well served by the clumsiness 
of the Chancellor.

But in acting in the way he has, the Prime Minister has effectively 
conceded that the regulatory regime he created in 1997 is not up to 
the job. Set up in the fifth year of a 15-year boom, the longest in 
our history, its unsuitability was not really apparent as long as the 
times were good.

Now the times are bad, and getting worse, and the tripartite 
structure that divides responsibility between the Bank of England, 
the Treasury and the Financial Services Authority is clumsy, 
unresponsive, and lacking in real authority. As Mr Darling so 
painfully demonstrated, it leaves no one in charge of the clattering 
train.
=-=-=-=-=-=-=-=-=-=-=-=-=
2. Global credit system suffers cardiac arrest on US crash
    By Ambrose Evans-Pritchard
The global credit system came close to total seizure yesterday. Key 
parts of the derivatives market shut down and a panic flight to 
safety depressed the yield on three-month US Treasury bills to almost 
zero for the first since the Great Depression in 1934. (- - - - - - -)

The collapse in investor confidence is a harsh verdict on the 
judgment of the US Federal Reserve, which chose to ignore market 
pleas for a rate cut to halt what amounts to a modern-era run on the 
banking system. Almost none of the current Fed governors have market 
experience. Most are academic theorists. (- - - - - - -)

Bernard Connolly, global strategist at Banque AIG, said the Fed and 
the Treasury were doing too little, too late, to stave off disaster. 
Interest rates need to be cut immediately and dramatically, while 
Washington must prepare for a wholesale takeover of large parts of 
the lending system along the lines of the Scandinavian bank rescues 
in the early 1990s.

"Unless there is a very rapid change of mind, depression - with all 
its horrors and consequences - will be inevitable. The judgment that 
letting Lehmans go would not create systemic risk depended, if it was 
ever going to be anything other than ludicrous, on very rapid action 
to shore up the financial system. Instead, Hank Paulson seems to be 
adding to the risk in the system," he said.
"We fear that a virtual nationalisation of the financial system will 
now be necessary," he said.
(- - - - - - -)
Russia suspended trading the Moscow bourse after the Micex index 
crashed 24pc in two days. Officials promised $44bn to support the 
banking system.
(- - - - - - -)
The Treasury's rescue of the mortgage giants Fannie Mae and Freddie 
Mac has added $5.3 trillion in liabilities to the US government. It 
almost doubles the national debt (under IMF definitions), at least on 
paper.

The Fed has now added a further $85bn in debt for AIG. While the sums 
are manageable so far, what worries investors is the likely avalanche 
of insolvencies yet to come.
(- - - - - - -)
Hans Redeker, currency chief at BNP Paribas, says the US debt scare 
is vastly overblown. America's total government debt is 48pc of GDP 
on IMF measures, compared to 57pc for Germany, 94pc for Japan and 
108pc for Italy.

"The debt levels are nothing compared to Europe, even after Fannie 
and Freddie. America still has great leeway," he said.
"We think the next phase of this crisis is going to be a repatriation 
story as American investors bring their money back from frontier 
markets. (- - - - - -)."

Albert Edwards, global strategist at Société Générale, said 
Washington's serial bail-outs are the inevitable result of the credit 
bubble of preceding years. "This was all baked in the cake long ago. 
What we have seen so far is just a dress rehearsal for the deep 
recession that is coming. America is going to be losing 500,000 jobs 
a month. That is when we will see interest rates go to zero. The 
deficit will be covered with printed money as it was in Japan. The 
endgame will be helicopters full of cash dropped by Ben Bernanke," he 
said.
=-=-=-=-=-=-=-=-=-=-=-=-=
3. Why Brown was in need of a Blank cheque
    By James Kirkup, Political Correspondent
For Gordon Brown and his Chancellor Alistair Darling, the stark 
prospect of a banking crisis far greater than the near collapse of 
Northern Rock was unpalatable.

With HBOS, Britain's biggest savings and mortgage bank, under 
sustained assault on the stock market, they knew urgent action had to 
be taken.

They knew that the collapse of the bank would have catastrophic 
economic consequences and deliver a potentially fatal blow to Mr 
Brown's premiership.  [He got that long ago - it’s just Cameron 
refusing to call in the undertakers -cs]
(- - - - - -)
Exaggerating the extent of Mr Brown's role in the HBOS deal also 
carries risks. As one Treasury official noted: "There's a long way to 
go yet."
The HBOS deal could still fall apart, possibly dooming HBOS and 
leaving Mr Brown's fingerprints on the biggest financial disaster in 
British history.
= = = = = = = = = = = = = = = =
The Times
1.If this fails, it will take down all Britain's banks
If the Lloyd's-HBOS merger does not protect shareholders' interests, 
wholesale nationalisation of banks is inevitable
    Anatole Kaletsky
The wonder of financial crises is how events can move straight from 
impossible to inevitable, without ever passing through improbable.

Two weeks ago nobody would have imagined that, before the end of the 
month, the Bush Administration would have nationalised the world's 
biggest insurance company, that two of the four biggest global 
investment banks would be out of business and that the US Government 
would take responsibility for three quarters of the country's new 
mortgage loans.

Sadly, the events of the past two weeks may be only the prelude, not 
the climax, of this amazing crisis. Even the apparent rescue of 
Halifax Bank of Scotland may result in a bigger crisis, if the 
drowning HBOS drags down its rescuer, Lloyds TSB. If this happens, 
every big bank in Britain, except possibly HSBC, will have to be 
nationalised, Northern Rock-style.

The same would become inevitable in the US if market speculators who 
have been richly rewarded by the US Government for taking down Fannie 
Mae, Lehman Brothers and AIG, turn their attention to the next group 
of stumbling financial institutions in the firing line: Washington 
Mutual, Wachovia, Bank of America, Morgan Stanley and Citibank. If 
any of these wounded giants collapses, the others will fall like 
dominoes and the entire US financial system will have to be 
nationalised. In a financial crisis, the impossible can become 
inevitable in one day, as we saw in Britain on Black Wednesday.
(- - - - - - - - -)
If the Lloyds-HBOS merger offers the enlarged bank some kind of firm 
government safety net - not just for depositors, but crucially also 
for shareholders - it will probably succeed and act as a firebreak 
against the financial crisis on this side of the Atlantic. If, 
however, the merger is presented as a “pure private sector solution”, 
with no government support for shareholders, market attacks against 
HBOS will soon be revived and redirected against the merged bank.

This will leave only one solution - nationalisation of the entire 
British banking system. The impossible will suddenly become inevitable.
= = = = = = = = = = = = = = = =
Financial Times
Headlines
Changing the rules of the game
Two days after an investment bank was allowed to fail as a statement 
of market discipline, Ben Bernanke and Hank Paulson in effect 
nationalised AIG -

Creating a home loans leviathan
HBOS’s share price fall after Lehman Brothers’s implosion meant time 
was running out for Britain’s biggest mortgage lender -

Where has the trust gone?
So far, the government’s response to the crisis has been on an ad-hoc 
basis, with each case – Bear Stearns, Lehman, AIG – judged on its own 
merits - 20:41

HBOS
Who has the credibility problem here: Halifax Bank of Scotland or the 
UK’s Financial Services Authority? The answer, sadly, is both

Why America will need a $1,000bn bail-out
It is hard to see how the US can create a firewall against further 
contagion without spending five to 10 times more than it has, writes 
Kenneth Rogoff

Taxpayers will fund another run on the casino
The next crisis will be different in origin – the rules that will 
have been introduced by regulators will prove irrelevant

Modern history’s greatest regulatory failure
Roger Altman warns that America will be climbing out of a financial 
hole for a long time. The economy will not have access to all of the 
credit it need