Britannia Radio

The global situation remains volatile.  Today's news is dominated by  
EDF'\s puchase of British Energy, one of the world's richest men 
prepared to put up to $10 billion into Goldman Sachs and the fall-out 
in US Congress and the stock markets over the Paulson rescue plan.

But first, who's to blame here in Britain?

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TELEGRAPH Business News   24.9.08
Financial crisis: The Government is to blame, not those global fat cats
It is easy to understand the alacrity with which Alistair Darling, 
the UK Chancellor, in a speech to the Labour Party conference, 
depicted the UK as an island assailed by an international plague - of 
globalized financial terrorist fat cats.

By Ian Campbell, breakingviews.com

If, as Darling said, "no government on its own can combat global 
terrorism," then no government could be expected to protect the UK 
economy from a greedy cat-provoked downturn either. How jolly 
convenient! But false.

The blame for the UK's predicament and its now ultra-vulnerable 
economy - not "strong," as Darling repeatedly said - cannot so easily 
be deflected. The Government messed up, and so did the Bank of England.

Fiscally and monetarily, the UK got it wrong. In both cases policy 
was far too loose, allowing the government deficit to soar even as 
house prices trebled.
The fat cats liked it. Sloppy money was like milk to them. Booming 
property and equity markets supplied juicy bonuses.

And the Government did not even come to grips with how to tax them, 
so many of the cats slipped away Scot-free, as cats tend to do.

Nor did the Government mind. It applauded the City and was a fat cat 
itself, lolling in all that fluffy tax revenue and the plumped-up 
cushion of stamp duties on inflated houses.

But the real question is how the UK can recover when the City, houses 
and fat cats are all flattened. Darling's answer is to run abroad 
with Gordon Brown, the prime minister, to consult on how to put a 
regulatory collar on global fat cats. But the cats are fewer now, and 
some so far from fat they're dead.

This left Darling's speech with only one meaningful tidbit. "Enabling 
us now to let borrowing rise" indicated what is to come: a lot of 
borrowing. The Government's deficit is heading toward a Maastricht-
collar ripping 4.5pc of gross domestic product - and the nation's 
debt will soar.

Just as in the US, taxpayers will in the end bear the cost of a burst 
house-price bubble. Still, legalizing hunting (of fat cats) may be 
enough to distract some for a while
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ECONOMIC HEADLINES
EDF seals British Energy deal
EDF will take the lead role in the development of nuclear power in 
Britain with the £12.4bn (?15.7bn) agreed takeover of British Energy, 
the nuclear generator    (Financial Times 24.9.08)

EDF confirms £12.5bn British Energy bid
Merrill Lynch goes into the market to buy a third of British Energy 
after French state-controlled EDF tweaks offer terms   (Times 24.9.08)

EdF buys British Energy for £12.5bn
France's EdF agreed to buy nuclear power company British Energy for 
£12.5bn, and aims to sell a stake to Centrica, paving the way for a 
new generation of nuclear reactors.
EdF already has the approval of the government and Invesco, British 
Energy's largest shareholders. with a combined stake of more than 
45pc. The government is set to make £4.5bn from selling its 35.6pc 
holding.
The French power company is offering investors 774p a share in cash 
or 700p in cash plus a ``contingent value right'' of one so-called 
nuclear power note for each share they hold.   ( (Telegraph  24.9.08)

Price hike fears as EDF buys British Energy for £12.5bn
Consumer groups concerned deal could lead to higher energy prices.   
(Guardian  24.9.08)
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Buffett to take $5bn stake in Goldman
Goldman Sachs is to raise $7.5bn from Warren Buffett and other 
investors, fortifying its financial base as it begins its transition 
from Wall Street broker to Federal Reserve-regulated bank holding 
company.  (Financial Times 24.9.08)

Warren Buffett derails Mitsui Sumitomo plans for Goldman Sachs stake
Lloyd Blankfein, chief executive of Goldman Sachs, last night said he 
planned to raise up to $12.5 billion (£6.74 billion) of new funds by 
selling a stake to Warren Buffett and tapping other institutional 
shareholders.
The surprise move by Mr Buffett, - - - - -, is understood to have 
derailed a big stakebuilding exercise by Sumitomo Mitsui Financial 
Group, the Japanese megabank    (Times 24.9.08)

Buffett to invest in Goldman
"Sage of Omaha" to buy an initial $5bn holding in the Wall Street 
bank (plus) warrants to buy up to another $5bn at a later date  
(Telegraph  24.9.08)

Markets boosted as Buffett invests $5bn in Goldman Sachs
Buffett's $5bn investment in Goldman Sachs gives the bank a strong 
vote of confidence following the tumultuous events of the past few 
weeks  (Guardian  24.9.08)
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Dollar rally halted on debt concerns
The US dollar weathered the financial storm surprisingly well last 
week. This is no longer the case, it seems. Investors are questioning 
the longer-term outlook for the US. The fiscal position, in 
particular, has come under closer scrutiny.
The de facto nationalisation of Fannie Mae and Freddie Mac made 
implicit guarantees explicit and doubled the US government's gross 
liabilities, to just over 80 per cent of gross domestic product. This 
is substantial, even compared with highly indebted Europe and Japan.
A huge budget deficit is set to raise federal debt further. Among 
other rescue measures, the $85bn cost for the American International 
Group bail-out and the $700bn for the proposed fund to buy up toxic 
assets will weigh on federal debt. Yet the overall cost of the crisis 
to US taxpayers is not known, nor is there any alternative to 
government intervention at this juncture. An enormous bill looks 
likely.  (Financial Times 24.9.08)

Paulson bailout: seizing moral high ground can be hazardous
They are at it again, the moral hazard fundamentalists. Critics of 
the Paulson bailout plan insist that the banks must pay for having 
their toxic assets removed. Otherwise, the proposal "completely 
eviscerates the concept of moral hazard", according to Henry Waxman, 
a leading Democratic congressman. This is because it would enrich the 
Wall Street executives whose reckless investments caused the 
financial crisis.

Of course, there is a danger of delay as Congress seeks to hang 
irrelevant ornaments on to the Christmas tree, but the dangers in 
rushing something through without proper consideration seem greater. 
This Bill is important not just for the people paying for it, but for 
all of us.  (Times 24.9.08)

FBI investigates major US finance firms
The FBI is examining possible fraud involving insurer AIG, Lehman 
Brothers, Fannie Mae and Freddie Mac.    (Telegraph  24.9.08)

Paulson under pressure to toughen bail-out plan
Capitol Hill critics demand more detail, more safeguards and Wall 
Street pay curb   (Guardian  24.9.08)
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SHORTS
Dollar extends losses vs euro after home sales data
. (Reuters,  24.9.08)
EU says doesn't need U.S.-style toxic asset plan
(Reuters,  24.9.08)