Britannia Radio

Here we have the sorry tale of how by forcing through the merger of 
Lloyds and HBOS , Gordon Brown ensured that a reasonably sound bank 
would be dragged down into the abyss.

As an aside it's worth noting that the two most dodgy banks,  RBS and 
HBOS, were essentially Scottish companies and that Scotland, but for 
the Union, would be as desperate as Ireland and Iceland.  The only 
question is  to what extent their collapse has dragged Britain too 
down into the mire.

Then we have the effects of the pound's slide (halted today) at 
Portugal's downgrading (That's 3 down - how many to go?)

xxxxxxxxx cs
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TELEGRAPH    22.1.09
1. Instead of curing the desperately-ill HBOS, Lloyds has fallen sick 
as well.

Lloyds TSB's takeover of rival HBOS is proving a disaster
Don't be surprised. The merger was founded on the dubious udea that 
the best way to cure a desperately-ill patient is to force him into 
bed with as healthy one. Instead both UK banks look sick as dogs.

The acquirer's shares have fallen 85% since the deal was struck and 
the cure may mean investors' worst fear : nationalisation . The 
source of HBOS ills lies in the loan book it built too aggressively 
before the credit crunch.

In December HBOS revealed £3.2bn of new write downs - and said 
corporate loans had deteriorated 5 times faster than they did in the 
first of the year.  Since then its £118bn of loans have deteriorated 
further - only now they are dragging down a relatively healthy bank 
rather than just a sick one.

Shareholders in the former Lloyds can blame three constituencies.
One is Gordon Brown , who pushed for the idea of a merger, and gave 
the go-ahead for a waiver of normal competition rules.  [This is 
totally correct though not emphasised enough.  When the deal was 
being discussed it was suggested in many financial columns that Brown 
had close ties to  Sir Victor Blank of Lloyds and that he put great 
pressure on him for the takeover -cs]   The public interest would 
have been better served by nationalising HBOS, keeping Lloyds 
healthy  and maintaining competition,

The second culprit is Lloyds board led by Sir Victor Blank. who 
planned the merger.

Finally the shareholders can blame themselves for voting through the 
deal.

True, a £5.5bn recapitalisation from the government was presented as 
conditional on the merger going through but that alone wasn't what 
won the vote.

Lloyds 50 biggest investors [also] owned 40% of HBOS and  probably 
reckoned that they had more to lose from HBOS failing outright than 
they would gain from Lloyds remaining independent.

If the wehole lot is nationalised for pennies, that bet will have 
backfired horribly.
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2. Pound slides to lowest level since the Plaza Accord of 1985
The falling pound threatened to spark a diplomatic row last night as 
the French economic minister attacked the Bank of England for letting 
sterling slide to 1985 lows.   [nb rates at 1630 hrs 22/1 slightly 
firmer]

By Edmund Conway and Angela Monaghan

Sterling dipped to just above $1.36 against the dollar in late 
trading last night and hit a record low against the yen, as fears 
grew over the British economy's stability.

French minister Christine Lagarde urged the Bank to step in and 
support sterling in response. "I note the Bank of England is doing 
what it can, but its monetary policy and management of rates... have 
not been particularly efficient for supporting the currency," she 
said. "It would be in their interest to support it a bit."

Yesterday was the first time the pound has fallen to such lows since 
the historic Plaza Accord - the 1985 G7 currency statement 
responsible for helping prevent sterling hitting dollar parity.

Whereas falls earlier this week were associated with fears over the 
Government's creditworthiness, the latest drop came after Bank of 
England Governor Mervyn King signalled that he will soon start buying 
corporate bonds in an unprecedented departure from regular monetary 
policy.

Sterling has fallen by about a third against a basket of other 
currencies, with this devaluation greater than any other in modern 
history. The pound dropped by almost 2? cents against the dollar to 
$1.3733, but, after London markets closed, fell further still to 
beneath the previous recent low of 2001. Sterling also fell by more 
than a penny against the euro to 93.73 pence.
However, there was a glimmer of hope for the Government given that 
the yield on the benchmark gilt fell, suggesting a renewed appetite 
for government securities.

Nevertheless, a growing band of economists have warned that the UK's 
creditworthiness has suffered after the Treasury decided to insure an 
open-ended number of banks' bad debts. They fear that the Government 
will have to nationalise remaining UK banks, including Royal Bank of 
Scotland and Lloyds, or face their complete implosion. Such a move 
would leave the taxpayer exposed to major foreign liabilities 
previously held by those banks.

Britain's national debt hit the highest level in more than 30 years 
after the Government's stake in Royal Bank of Scotland was included. 
UK net debt reached £697.5bn at the end of December, equivalent to 
47.5pc of GDP - the biggest proportion since 1978, said the Office 
for National Statistics.
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ECONOMIC 'Shorts'   22.1.09

TELEGRAPH
=One home repossessed every seven minutes
The number of home repossessions has almost doubled in a year, with 
one family losing their house every seven minutes.

WALL STREET JOURNAL
=Downgrade In Portugal Fans Worries
Portugal became the third euro-zone country this month to have its 
credit rating cut by Standard & Poor's, as worries about ballooning 
fiscal burdens across the bloc pushed the premiums that some 
governments pay on their debt to new highs.
The deepening euro-zone recession and the trouble some countries may 
have spending their way out of it continue to fuel market bets that 
the 16-nation euro zone could eventually splinter. European Central 
Bank President Jean-Claude Trichet said Wednesday that concerns about 
any countries dropping out of the pact were "unfounded." ..

TIMES
=Microsoft slashes 5,000 jobs as recession hits
Software giant will make first company-wide job cuts in its history 
as economic downturn hits consumers and second-quarter profits

=BT reveals new pain at troubled arm
Shares dive as charges from the telecoms group's global services 
division reach £340m and profits are set to plunge

=BA risks angering cabin crew with 1% pay rise
Airline's chief executive says pay deal to be negotiated this month 
will be based on December RPI of 0.9%  [There'll be many pay CUTS in 
2009]

=Fiat share trading halted on Peugeot rumour
Italian carmaker's profits crash and shares are suspended on 
speculation it is seeking ?5bn to finance a tie-up

=Japan tears up growth forecast
Central bank raises deflation spectre again, saying CPI will fall by 
1%, GDP could shrink by 1.8% and it will buy bonds
. Sony predicts first loss for 14 years

=China's economic growth slows dramatically
The world's third largest economy grew by just nine percent last 
year, its slowest annual pace in seven years
FINANCIAL TIMES
=Manufacturing outlook plummets
Demand for UK manufactured goods has plummetted over the last three 
months and is weaker than at any time since July 1991, according to 
the CBI employers' group

=French and British stay away from Spain
Fresh blow to Spanish economy as foreign tourist visits drop

BBC ONLINE
=Dubai hit hard
The credit crunch is hitting Dubai's fragile economy  [Fragile? An 
oil producer!  Whatever next? -cs]

SKY NEWS
=Car production was down by nearly half last month.
Figures from the Society of Motor Manufacturers and Traders show the 
number of cars made in December fell 47.5% compared with December 
2007, while commercial vehicle (CV) production was down 56.7%.
[CARE!  Many plants are on 'shut-down' -cs] .
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POLITICS HOME    22.1 09
COMMENTS
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Sky News at 11:10
Repossessions figures only "the tip of the iceberg" warns Grant Shapps

Grant Shapps, Shadow Housing minister

Mr Shapps warned that today's repossession figures were only "the tip 
of the iceberg" and blamed government policy

"This is I'm afraid the tip of the iceberg, it is before the real 
financial crisis hit in October"

"I fear the Government measures are too little too late, they thought 
they had ended boom and bust. Gordon Brown said it time and time 
again," he said. "Because of that they weren't prepared for what 
happened"

He also criticised the government for failing to regulate the 
mortgage market correctly, allowing a dangerous housing bubble to 
develop.

"If you wanted to live somewhere and we all do you almost had no 
choice but to borrow sufficient money to do that in housing market 
that was booming"

"There was this huge house price spike this big bubble that occurred. 
A lot of the reason but not the only reason for that occurring was 
Gordon Brown removing the ability of Bank of Engand to call time on 
these lenders"
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BBC News at 14:42
Cable: Northern Rock bonuses "send absolutely the wrong signal"

Vince Cable, Liberal Democrat Treasury spokesman

Mr Cable described the decision to award bonuses to Northern Rock 
staff as "rather crass", and said that it "sends absolutely the wrong 
signal".

"I think it is frankly rather crass to give people bonuses for doing 
their jobs. A lot of the beneficiaries are low paid staff, and some 
may think I'm being mean spirited, but there are some   [? sic ?]

"All of this is paid for by the taxpayer. In a crisis environment as 
we are in the moment this not appropriate or proper."

He added that "it is the job of the government to set the direction", 
and said the decision to grant bonuses "sets absolutely the wrong 
signal".