Monday 2 March 2009

RBS and Lloyd's may sink Britannia

That can be the only conclusion upon reading this post at the superb naked Capitalism.
In effect, there has been to market for many of the 'toxic' assets that the banks around the world have held onto. yes they have been marked down, but with no market to sell into the assets have been marked down on 'book' values.

However, this research suggests that due to the highly leveraged nature of many of these loans, that somewhere between a 5% and 20% return on these assets. This is shocking stuff, as the study also looks at the long-term return, not just a distress sale.

To focus on the recent UK bank bailout. RBS has put £250 billion into the Government scheme. The bank will take 10% of the losses and the taxpayer 90%. Being generous and say that 20% is recoverable, then there could be an 80% loss. 70% to the taxpayer, this is £175 billion loss for the taxpayer. If we double this amount to include the prospective asset insurance for LLoyd's and Barclay's, then we get to £350 billion in UK government loss. That is a massive amount, nearly half of annual government spend.

This is what the Government is doing on our behalf and yet today the focus is on changing the law to prosecute/persecute one man.


Anonymous said...

That's because the MSM journalists by and large don't understand what's going on and can't handle the numbers. Far easier to attack one man - the public (and Mandelson) understand that.
To quote Stalin:

A single death is a tragedy; a million deaths is a

Anonymous said...

I get the feeling that we, the taxpayer, are being asked to write off many of the NINJA loans from the United State. Obama must be please.

CityUnslicker said...

Mick - yes, all spin and manipulation

Ken - We are indeed, these banks are global banks and we are underwriting their global losses.

Anonymous said...

I think we will end up defaulting. Our economy simply cannot support losses on that scale.

Houdini said...

I'm still amazed that the media hasn't made more of this as it is a disaster and scandal of epic proportions.

It wouldn't be so bad if it wasn't for the fact it was designed just to try and save some seats in Parliament for the Labour party, and that is the real scandal.

hatfield girl said...

'these banks are global banks and we are underwriting their global losses.'

Capitalists@Work feared long ago that the UK was being made the bad country, not just a bad bank for all this would be enough. It may have started in America but it will end here, and end in tears.

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