Today's economic news starts with a monstrous example of economic
illiteracy. The British gocvernment doesn't set the value of the
pound - the market does. The pound floats freely and the world
collectively decides on its value. So do all the major currencies
including the euro. All Darling has to say is simply - "That's why
we didn't join the euro, so that the pound could float freely and
find its true value. Spain, Italy, Greece, Portugal and Ireland
wouldn't be in such deep trouble if they too had stayed out of the
euro, So put your own house in order!" But he won't say that,
he's too craven
Then still with Europe, the EU Commission itself paints a dire
picture of a collapsing European industrial base even blaming an
overvalued euro!! Both articles can't be right about the currencies
anyway!
Then we have Paul Moore returning to the attack by questioning (as I
did earlier!) the 'independent' status of the HBOS auditors
especially when Crosby was at the very top of both HBOS and the FSA!
Finally we have an account of the Committee's meeting with Brown and
comments on his performance there.
xxxxxxxxxxxx cs
========================
TELEGRAPH 13.2.09
1. European finance ministers to attack Alistair Darling over
sterling's slide
European finance ministers are planning to round on Alistair Darling
and tell him to bring the pound back under control, in what many fear
could represent the opening salvo of a "currency war".
By Edmund Conway, Economics Editor
French and German ministers are expected to confront the Chancellor
over sterling's weakness at the opening dinner for the Group of Seven
finance summit in Rome tonight. They will ask him to consider direct
action to increase the value of the pound, which has suffered its
worst devaluation since at least the final breakdown of the Bretton
Woods agreement in the early 1970s.
It came as the pound dropped further against a range of currencies,
following the Bank of England's unexpected acknowledgement earlier
this week that it plans to start buying gilts imminently as part of
its quantitative easing efforts. Sterling fell more than a cent
against the dollar to $1.4248, although it did strengthen marginally
against the euro.
The Rome G7, which will mark US Treasury Secretary Tim Geithner's
first international outing, is likely to focus not merely on the
financial crisis but on the growing gaps opening up between different
currencies. In particular, companies in Europe have complained that
the pound's recent devaluation has left their exporters suffering, as
businesses are switching to cheaper British goods.
The pound has weakened by about a quarter over the past year as it
has become increasingly apparent that the UK faces a worse recession
than most other developed nations, and that the Bank's Monetary
Policy Committee will be forced to slash interest rates as a result.
The Bank's Governor Mervyn King signalled this week that rates would
have to fall even further in coming months, and that the Bank would
soon embark on plans to pump cash directly into the economy. He also
said the Bank would probably start buying government securities -
something even the Federal Reserve has so far refrained from doing,
and generally regarded as a particularly powerful means of
stimulating the economy.
The fall in the pound has incurred the wrath of Mr Darling's
continental counterparts, with French finance minister Christine
Lagarde urging the Bank to intervene in foreign exchange markets and
the Germans pledging to put the issue of currencies high on the agenda.
==============
2. Europe's industrial base may never recover from crisis
The European Commission has issued a red alert over the unprecedented
collapse of industrial production, warning that EU states are running
out of money for rescue packages.
By Ambrose Evans-Pritchard
Factory output plunged by a record 12pc in December year-on-year.
Spain suffered the steepest fall of countries in the Eurozone with a
20pc drop. Among non-euro countries, the biggest declines were led by
Latvia (-21pc), Sweden (-18pc) , and Romania (-17pc).
"What's completely new is the extent and speed of this crisis. The
credit crunch is a reality, and even member states are having trouble
financing their debts," said industry commissioner Gunther Verheugen.
"Blind activism is not going to help. EU states and the commission
must not take on the role of white knights. We don't have a single
euro in our budget to save companies. The financial options of the EU
and member states are reaching their limits."
Julian Callow, from Barclays Capital, said an over-valued euro
[compare THAT remark with the previous article. An'overvalued euro'
is one side of the coin, with the other side being a 'weaker pound' -
cs] had slowly "hollowed out" Europe's manufacturing core over the
last two or three years. "It takes time for currency effects to feed
through. The damage was concealed during the global boom but the
collapse in demand has exposed the vulnerabilities. We going to see a
prolonged period of de-industrialisation," he said.
The commission said core sectors such as shipbuilding might never
recover from the slump as Asian competitors lock up the next round of
orders by offering "unfairly low prices". "European yards do not have
the means to withstand a price war or to operate at below costs for
long", it said. Europe still has 150 ship yards supporting almost
450,000 workers, and control 35pc of the global market.
The car and truck industry are in dire straits. Orders for heavy duty
vehicles collapsed from 38,000 last January to 600 in November. The
report said car sales may fall a further 18pc this year, cutting
output by 2.5m vehicles. This has led to knock-on effects across
industries. Flat steel orders have dropped 57pc. Ominously, Europe's
steel output (-19pc) is falling at twice the global rate (-10pc).
While Daimler is still able to raise capital at a penal rate of
around 9pc or 10pc, both PSA Peugeot Citroen and Renault have been
unable to place bond issues. Renault said its car division had lost
?873m (£783m) in the second half of 2008.
French president Nicolas Sarkozy has come to the rescue with a ?6bn
package of soft loans for France's car industry, provided it promises
not to fire workers or shift plant abroad.
Brussels is examining whether this breaches EU law. Jose Barroso, the
Commission's president, said it was imperative aid packages by
different EU states do not degenerate into beggar-thy-neighbour
protectionism.
He said: "We will be studying aid plans to ensure that there are no
harmful collateral effects in other countries. If one country takes
unilateral measures, the others could do it as well. We would lose
Europe's greatest resource: the single market"
========================
THE TIMES 13.2.09
HBOS whistleblower questions KMPG independence0
Ian King, Deputy Business Editor
HBOS whistleblower Paul Moore has spectacularly reignited the row
over his sacking by the bank's former chief executive Sir James Crosby.
Mr Moore, whose written evidence to the Treasury Select Committee
this week helped force Sir James's resignation as deputy chairman of
the Financial Services Authority (FSA), has questioned the
independence of KPMG - the auditors called in by HBOS to investigate
his allegations that the bank was not paying enough attention to risk.
KPMG investigated claims by Mr Moore, the former head of group risk
at HBOS between 2002 and 2005, that the bank was growing too rapidly
- later telling the FSA and the HBOS audit committee it was satisfied
there was no foundation to the claims.
Its report largely dismissed Mr Moore's claims and said the main
reason for his departure was the "personal differences" between him
and other HBOS executives.
Now, Mr Moore's barrister, Peter Hamilton, has written to the
committee to question whether KPMG's report could genuinely be
described as independent.
He said: "In my view, since KPMG were the auditors of HBOS, KPMG
could not have been regarded as independent of HBOS. It follows that
the FSA should not have regarded it as independent.
"The report was not only of limited scope but reached conclusions
that a properly independent tribunal would not have reached. For both
those reasons it is disappointing that the FSA have appeared to
accept it.
"In the light of these points the significance of Sir James Crosby's
position at the time as both chief executive officer HBOS and non
executive director of the FSA should be investigated."
KMPG has worked as HBOS' auditor since 2001, and in the last two
years alone has earned nearly £23 million in fees for auditing, tax
advice, information technology work and compliance advice.
In a separate letter to the committee, Mr Moore's solicitors have
said the KPMG report was relied on by HBOS and the FSA to justify his
dismissal.
It adds: "We do not accept that the report should have been. KPMG
wrote the report at the same time as they were acting as auditors of
HBOS. That immediately raises issues of potential conflict."
Mr Moore said: "I am not interested in blame even though many people
will think that this is what my agenda is. People who know me will
testify to this but I have to say that I do find it sad that people
in such important fiduciary positions find it so difficult to admit
their mistakes and to say that they are sorry. Fighting to the bitter
end is always worse for all concerned."
========================
DAILY MAIL 13.2.09
'I was NOT warned about banks crisis': Brown denies he knew FSA had
raised alarm about risk to HBOS. [shortened]
By NICOLA BODEN and JAMES CHAPMAN
Gordon Brown started off joking with the MPs but soon became angry
when they were incredulous the Treasury was not told about fears for
HBOSn
Gordon Brown today denied he was aware banks were being warned as
early as 2002 that they were running out of control.
The Prime Minister - who was then the Chancellor - insisted he was
never told of the Financial Services Authority's concerns about risky
practices at HBOS. He also sought to distance himself from Sir
James Crosby, the key Government adviser who stood down as deputy
chairman of the FSA yesterday.
Mr Brown, in a grilling by senior MPs, denied he had hand-picked Sir
James to be on the FSA board 2003 and said he was selected by an
independent panel.
However, the Tories claimed the 'net is closing in' on him and
Alistair Darling over the banking crisis and that their argument they
knew nothing has been shattered.
The Government's handling of the economic crisis was in even more
disarray as a key adviser announced his plans to step down.
American Glen Moreno was brought in to manage taxpayers' multi-
billion pound interests in High Street lenders.
But the chairman of UK Financial Investments Ltd was until last April
a trustee of a secretive Liechtenstein-based fund at the centre of a
row over tax evasion.
Mr Darling stressed his appointment was only temporary today -
prompting a Tory taunt that the Government was 'about to lose its
second key banking adviser'.
[- - - - - - -]
The row has dragged the Prime Minister to the heart of the
controversy over banks' behaviour and left Opposition MPs questioning
his judgement.
Today, he insisted that he had not personally chosen Sir James to go
onto the board of the FSA and that he had been picked by an
independent panel.
The assessors had concluded he was a 'leading industry practitioner
with broad experience' and an 'outstanding individual with a strong
intellect', he told MPs.
He said he believed the 'right decisions' had been made but said that
as chancellor at the time he 'took responsibility' for what happened.
The Prime Minister also dismissed the idea HBOS had failed because Mr
Moore's warnings were not heeded and said 'its whole business model'
had been wrong. [Which is excatly what Moore had warned! -cs]
The FSA had concluded there was no systemic risk at the bank so
decided there was no need to inform the Government, he said.
But MPs were incredulous the tripartite authority made up of the FSA,
Bank of England and Treasury officials was never made aware of the
issue.
George Osborne declared Labour either knew exactly what was going on
or was 'entirely ignorant', adding that neither was 'much of a defence'.
The shadow chancellor told Mr Darling in the Commons: 'The net is
closing in on the Prime Minister and you. Their accomplices are
resigning.
'Their alibi that nobody knew what was going on has been blown apart.
And their fingerprints are all over the mistakes that were made
during the age of irresponsibility.'
[- - - - - - -]'
The FSA first warned HBOS about its risk assessment in 2002, it
revealed in a shock statement last night after Sir James' resignation.
The bank then made changes, including upgrading the post of senior
risk manager to board level, the regulator said. Mr Moore was sacked
and replaced in 2004.
By December that year, the situation had improved but the bank was
still told it needed to increase the ability of its risk experts to
influence the business.
Mr Moore subsequently claimed he had been sacked for questioning the
approach of the bank and replaced with someone without risk experience.
The FSA said last night that it had taken his allegations seriously
but backed the findings of an inquiry in 2005 which ruled they were
unfounded. However, in 2006, it still had concerns about HBOS and
warned its growth strategy 'posed risks to the whole group' which
'needed to be managed and mitigated'.
Today's meeting was already going to be uncomfortable for Mr Brown,
coming at a time when his handling of the financial meltdown is in
disarray.
Labour has slumped in the opinion polls in recent weeks and now, with
the row over Sir James, critics can link the Premier even closer to
the banking crisis.
As he resigned yesterday, the former HBOS chief insisted that the
claims made against him had 'no substance' but that stepping down was
'the right course of action'.
There was widespread speculation that Number Ten had forced his hand
to limit Mr Brown's embarrassment at Prime Minister's Questions. But
Sir James said last night that his resignation was 'solely inspired
by the desire not to make life more difficult for colleagues... under
relentless pressure at the FSA'.
[- - - - - - -]
========================
ECONOMIC and other 'Shorts' 13.2.09
TIMES
=5,450 jobs at risk as owner of Barratts Shoes fails
Stylo, owner of Barratts and Priceless Shoes, is forced into
administration as creditors reject restructuring plan
=Banker backlash: Brown to 'claw back' bonuses
The Prime Minister said that banks should be able to recover bonuses
from executives who ended up losing them money. [He keeps talking
tough but never does anything! -cs]
=UK's £7.5bn train order lost to Japan's Hitachi
The promise of new jobs is not enough to placate critics who wanted
the deal to go to Hitachi's Derby rival Bombardier
TELEGRAPH
=German economy shrinks most in 22 years
The German economy shrank the most in 22 years in the final three
months of last year, as the global slowdown hit demand for the
country's manufacturing exports.
=It's not 'reasonable' to believe oil will return to $75 a barrel and
stay there
Opec is doing all it can to talk the price of oil back up to what it
calls a "reasonable" $75 a barrel
FINANCIAL TIMES
=Signs of slowing in UK house price falls
The average price of a home in England and Wales fell for the
eleventh consecutive month in January, according to data from the
latest FT House Price Index, wiping out the gains earned since April
2006
=House purchase loans at lowest since 1974
The number of mortgages granted to buy homes fell to its lowest level
since 1974 last year, the Council of Mortgage Lender
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